10-QPeriod: Q3 FY2022

TERADYNE, INC Quarterly Report for Q3 Ended Jul 3, 2022

Filed August 5, 2022For Securities:TER

Summary

Teradyne, Inc. reported revenues of $840.8 million for the second quarter of 2022, a decrease of 22.1% compared to the same period in 2021, largely driven by a significant decline in its Semiconductor Test segment. Despite the revenue drop, gross profit margin remained strong at 60.2%, a slight increase from the prior year's 59.6%, attributed to a favorable product mix. However, operating expenses increased as a percentage of revenue, impacting net income, which fell to $197.8 million from $328.3 million year-over-year. The company cited ongoing supply chain constraints, particularly impacting its test businesses, as a key factor for projected revenue shortfalls in the next quarter. Teradyne continued its capital allocation strategies, repurchasing $532.8 million of its stock and paying dividends. The company maintains a solid balance sheet with $572.0 million in cash and cash equivalents and $321.8 million in marketable securities, and has undrawn credit facilities available.

Financial Highlights

50 data points
Beta

Revenue

$840.77M

60.2% Gross Margin

Net Income

$197.79M

23.5% Net Margin

EPS (Diluted)

$1.16

Total Assets

$3.49B

Cash & Equivalents

$572.02M

Free Cash Flow

$69.71M

Financial Statements
Beta
Revenue$840.77M
Cost of Revenue$334.38M
Gross Profit$506.39M
SG&A Expenses$139.53M
Operating Expenses$258.40M
Operating Income$247.99M
Interest Expense$913K
Net Income$197.79M
EPS (Basic)$1.24
EPS (Diluted)$1.16
Shares Outstanding (Basic)159.56M
Shares Outstanding (Diluted)171.16M

Key Highlights

  • 1Total revenues for Q2 2022 decreased by 22.1% to $840.8 million compared to $1,085.7 million in Q2 2021.
  • 2Semiconductor Test revenue significantly declined by 35.1% ($292.7 million) due to lower tester sales in high-performance compute processor and mobile applications.
  • 3Gross profit margin improved slightly to 60.2% from 59.6% in the prior year, driven by a favorable product mix.
  • 4Net income for Q2 2022 was $197.8 million ($1.16 per diluted share), down from $328.3 million ($1.76 per diluted share) in Q2 2021.
  • 5The company experienced significant share repurchases totaling $532.8 million in the first six months of 2022.
  • 6Supply chain constraints are projected to impact Q3 2022 revenue by approximately $50 million, primarily in test businesses.
  • 7Cash and cash equivalents decreased to $572.0 million at July 3, 2022, from $1,122.2 million at December 31, 2021.

Frequently Asked Questions

The primary driver for the revenue decrease was a substantial 35.1% drop in the Semiconductor Test segment, which was negatively impacted by lower sales of testers for high-performance compute processors and mobile applications, as well as reduced demand for memory test products.

Supply chain constraints, particularly for electrical components like semiconductor chips, are increasing lead times and costs. This has resulted in Teradyne being unable to fulfill approximately $40 million in revenue demand in Q2 2022 and is expected to impact Q3 2022 revenue by an estimated $50 million. The company is investing in supply chain resiliency and has entered into non-cancellable purchase commitments to mitigate these issues, though this introduces inventory risk.

Teradyne maintained a strong balance sheet with $572.0 million in cash and cash equivalents and $321.8 million in marketable securities as of July 3, 2022. The company actively returned capital to shareholders through $532.8 million in stock repurchases and dividend payments in the first six months of 2022. They also have an undrawn $400 million revolving credit facility available.

The adoption of ASU 2020-06 on January 1, 2022, changed the accounting for convertible debt. It resulted in accounting for the debt as a single liability at amortized cost, eliminating the recognition of debt discount previously amortized to interest expense. This adoption led to adjustments in debt, deferred tax assets, and retained earnings, and notably reduced interest expense due to the elimination of discount amortization.