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Teradyne Reports First Quarter 2019 Results

  • Q1’19 GAAP earnings per share grew 44% and Non-GAAP earnings per share grew 20% from Q1’18
  • Industrial Automation revenue up 35% from Q1’18 on Universal Robots growth of 16% and the addition of Mobile Industrial Robots (MiR)
  • Expect 8% sequential revenue growth in Q2’19 at mid-point of guidance
  Q1’19 Q1’18 Q4’18
Revenue (mil) $494 $487 $520
GAAP EPS $0.62 $0.43 $0.79
Non-GAAP EPS $0.54 $0.45 $0.63

NORTH READING, Mass., April 23, 2019 (GLOBE NEWSWIRE) --  Teradyne, Inc. (TER) reported revenue of $494 million for the first quarter of 2019 of which $341 million was in Semiconductor Test, $66 million in Industrial Automation, $58 million in System Test and $29 million in Wireless Test. GAAP net income for the first quarter was $109.1 million or $0.62 per share. On a non-GAAP basis, Teradyne’s net income in the first quarter was $94.6 million, or $0.54 per diluted share, which excluded acquired intangible asset amortization, restructuring and other charges, non-cash convertible debt interest, discrete income tax adjustments, and included the related tax impact on non-GAAP adjustments.

"First quarter sales and earnings were above our January guidance as test shipments were slightly stronger with favorable product mix, resulting in higher margins than expected," said Teradyne President and CEO Mark Jagiela. "Pockets of strength, such as 5G test, have been balanced by softness in areas, such as automotive test, so our full year outlook remains essentially unchanged from our January view."

Guidance for the second quarter of 2019 is revenue of $520 million to $550 million, with GAAP net income of $0.48 to $0.56 per diluted share and non-GAAP net income of $0.56 to $0.65 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization, non-cash convertible debt interest and includes the related tax impact on non-GAAP adjustments.

Webcast
A conference call to discuss the first quarter results, along with management's business outlook, will follow at 10 a.m. ET, Wednesday, April 24. Interested investors should access the webcast at investors.teradyne.com/events-presentations at least five minutes before the call begins. Presentation materials will be available starting at 10 a.m. ET. A replay will be available on the Teradyne website at teradyne.com/investors.

Non-GAAP Results
In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible assets amortization, non-cash convertible debt interest, pension actuarial gains and losses, discrete income tax adjustments, and restructuring and other, and include the related tax impact on non-GAAP adjustments. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations as a percentage of revenue, non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP performance measures presented to provide meaningful supplemental information regarding Teradyne’s baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP performance measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on “Investors” and then selecting the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne
Teradyne (TER) brings high-quality innovations such as smart devices, life-saving medical equipment and data storage systems to market, faster. Its advanced test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. Its Industrial Automation offerings include collaborative and mobile robots that help manufacturers of all sizes improve productivity and lower costs. In 2018, Teradyne had revenue of $2.1 billion and today employs 5,000 people worldwide. For more information, visit teradyne.com. Teradyne® is a registered trademark of Teradyne, Inc. in the U.S. and other countries.

Safe Harbor Statement
This release contains forward-looking statements regarding Teradyne’s future business prospects, results of operations, market conditions, earnings per share, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program, use of proceeds and potential dilution from the senior convertible notes offering, potential borrowings under a senior secured credit facility, and the impact of the U.S. tax reform, export and tariff laws. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, events, earnings per share, use of cash, payment of dividends, repurchases of common stock, payment of the senior convertible notes, availability of, or borrowing under, the credit facility, or the impact of the U.S. tax reform, export and tariff laws. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time. Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, payment of the senior convertible notes or borrowings under the credit facility to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Industrial Automation business; increased research and development spending; deterioration of Teradyne’s financial condition; the consummation and success of any mergers or acquisitions; unexpected cash needs; insufficient cash flow to make required payments and pay the principal amount on the senior convertible notes; the business judgment of the board of directors that a declaration of a dividend, the repurchase of common stock or borrowing under the credit facility is not in the company’s best interests; additional U.S. tax regulations or IRS guidance; the impact of any tariffs or export controls imposed in the U.S. or China; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. The forward-looking statements provided by Teradyne in this press release represent management’s views as of the date of this release. Teradyne anticipates that subsequent events and developments may cause management’s views to change. However, while Teradyne may elect to update these forward-looking statements at some point in the future, Teradyne specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Teradyne’s views as of any date subsequent to the date of this release.

                 
TERADYNE, INC. REPORT FOR FIRST FISCAL QUARTER OF 2019                
                       
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS    
(In thousands, except per share amounts)            
                       
          Quarter Ended    
          March 31,
2019
  December 31,
2018
  April 1,
2018
   
                       
Net revenues   $ 494,099     $ 519,558     $ 487,467      
                       
  Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)     206,464       210,023       217,635      
                       
Gross profit     287,635       309,535       269,832      
                       
Operating expenses:                
  Selling and administrative     102,013       100,552       90,505      
  Engineering and development     76,791       74,706       74,408      
  Acquired intangible assets amortization     10,634       10,558       7,698      
  Restructuring and other (2)     5,112       11,446       (313 )    
      Operating expenses     194,550       197,262       172,298      
                       
Income from operations     93,085       112,273       97,534      
                       
  Interest and other (income) expense (3)     (894 )     1,145       1,714      
                       
Income before income taxes     93,979       111,128       95,820      
  Income tax (benefit) provision (4)     (15,159 )     (32,662 )     8,846      
Net income   $ 109,138     $ 143,790     $ 86,974      
                       
Net income per common share:                
Basic       $ 0.63     $ 0.80     $ 0.45      
Diluted       $ 0.62     $ 0.79     $ 0.43      
                       
Weighted average common shares - basic     173,532       178,958       195,255      
                       
Weighted average common shares - diluted (5)     176,972       181,520       203,484      
                       
                       
Cash dividend declared per common share   $ 0.09     $ 0.09     $ 0.09      
                       
                       
(1 ) Cost of revenues includes:   Quarter Ended    
          March 31,
2019
  December 31,
2018
  April 1,
2018
   
      Provision for excess and obsolete inventory   $ 2,397     $ 1,720     $ 3,522      
      Sale of previously written down inventory     (778 )     (1,501 )     (2,243 )    
          $ 1,619     $ 219     $ 1,279      
                       
                       
(2 ) Restructuring and other consists of:   Quarter Ended    
          March 31,
2019
  December 31,
2018
  April 1,
2018
   
      Contingent consideration fair value adjustment   $ 2,970     $ 10,223     $ (4,968 )    
      Acquisition related expenses and compensation     1,343       455       774      
      Employee severance     799       768       3,881      
          $ 5,112     $ 11,446     $ (313 )    
                       
                       
(3 ) Interest and other (income) expense, includes:   Quarter Ended    
          March 31,
2019
  December 31,
2018
  April 1,
2018
   
      Non-cash convertible debt interest   $ 3,368     $ 3,327     $ 3,206      
      Pension actuarial gain     -       (3,512 )     -      
          $ 3,368     $ (185 )   $ 3,206      
                       
                       
(4 ) For the quarter ended Mach 31, 2019, income tax (benefit) provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return. For the quarter ended December 31, 2018, income tax (benefit) provision includes a $52 million tax benefit related to the finalization of our toll tax charge.    
                       
(5 ) Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarters ended March 31, 2019, December 31, 2018, and April 1, 2018, 2.2 million, 0.9 million and 4.4 million shares, respectively, have been included in diluted shares. For the quarter ended April 1, 2018, diluted shares also included 1.8 million shares from the convertible note hedge transaction.  


CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (In thousands)        
               
          March 31,
2019
  December 31,
2018
Assets            
  Cash and cash equivalents   $ 483,728   $ 926,752
  Marketable securities     421,088     190,096
  Accounts receivable, net     333,840     291,267
  Inventories, net     161,342     153,541
  Prepayments and other current assets     194,044     170,826
      Total current assets     1,594,042     1,732,482
               
  Property, plant and equipment, net     283,300     279,821
  Operating lease right-of-use assets, net     50,733     -
  Marketable securities     91,926     87,731
  Deferred tax assets     69,687     70,848
  Other assets     11,279     11,509
  Retirement plans assets     16,791     16,883
  Acquired intangible assets, net     119,372     125,482
  Goodwill     379,513     381,850
               
      Total assets   $ 2,616,643   $ 2,706,606
               
Liabilities          
  Accounts payable   $ 118,816   $ 100,688
  Accrued employees' compensation and withholdings     89,089     148,566
  Deferred revenue and customer advances     84,764     77,711
  Other accrued liabilities     67,422     78,272
  Contingent consideration     22,803     34,865
  Operating lease liabilities     17,176     -
  Income taxes payable     41,898     36,185
               
      Total current liabilities     441,968     476,287
               
  Retirement plans liabilities     121,205     117,456
  Long-term deferred revenue and customer advances     32,843     32,750
  Deferred tax liabilities     19,614     20,662
  Long-term other accrued liabilities     9,732     37,547
  Long-term contingent consideration     15,510     35,678
  Long-term operating lease liabilities     38,062     -
  Long-term income taxes payable     83,891     83,891
  Long-term debt     383,590     379,981
               
      Total liabilities     1,146,415     1,184,252
               
Shareholders' equity     1,470,228     1,522,354
               
      Total liabilities and shareholders' equity   $ 2,616,643   $ 2,706,606
               


CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS (In thousands)        
               
          Quarter Ended
          March 31,
2019
  April 1,
2018
Cash flows from operating activities:        
  Net income   $ 109,138     $ 86,974  
  Adjustments to reconcile net income to net cash provided by operating activities:        
    Depreciation     16,651       16,336  
    Amortization     12,942       9,204  
    Stock-based compensation     9,474       9,544  
    Deferred taxes     1,206       8,696  
    Provision for excess and obsolete inventory     2,397       3,522  
    Contingent consideration fair value adjustment     2,970       (4,968 )
    (Gains) losses on investments     (2,828 )     1,241  
    Other     (349 )     152  
    Changes in operating assets and liabilities, net of businesses acquired:      
      Accounts receivable     (41,706 )     (140,747 )
      Inventories     (2,917 )     (21,017 )
      Prepayments and other assets     (19,165 )     (679 )
      Accounts payable and accrued expenses     (52,806 )     (46,706 )
      Deferred revenue and customer advances     6,455       9,644  
      Retirement plans contributions     (1,210 )     (1,020 )
      Income taxes     (22,236 )     (12,106 )
Net cash provided by (used for) operating activities     18,016       (81,930 )
               
Cash flows from investing activities:        
  Purchases of property, plant and equipment     (25,711 )     (34,797 )
  Purchases of marketable securities     (375,184 )     (490,324 )
  Proceeds from sales of marketable securities     5,440       800,671  
  Proceeds from maturities of marketable securities     141,201       212,698  
  Proceeds from life insurance     273       -  
  Acquisition of businesses, net of cash acquired     (6,970 )     (25,356 )
Net cash (used for) provided by investing activities     (260,951 )     462,892  
               
Cash flows from financing activities:        
  Issuance of common stock under stock purchase and stock option plans     14,122       10,654  
  Repurchase of common stock     (156,468 )     (134,276 )
  Dividend payments     (15,627 )     (17,588 )
  Payment related to net settlement of employee stock compensation awards     (14,172 )     (19,629 )
  Payment of contingent consideration     (27,615 )     (13,571 )
Net cash used for financing activities     (199,760 )     (174,410 )
               
Effects of exchange rate changes on cash and cash equivalents     (329 )     1,478  
               
(Decrease) increase in cash and cash equivalents     (443,024 )     208,030  
Cash and cash equivalents at beginning of period     926,752       429,843  
Cash and cash equivalents at end of period   $ 483,728     $ 637,873  
               


GAAP to Non-GAAP Earnings Reconciliation                                              
                                                     
(In millions, except per share amounts)                                              
                        Quarter Ended                        
        March 31,
2019
  % of Net
Revenues
          December 31,
2018
  % of Net
Revenues
          April 1,
2018
  % of Net Revenues        
                                                     
Net revenues   $ 494.1                 $ 519.6                 $ 487.5              
                                                     
Gross profit GAAP and non-GAAP $ 287.6       58.2 %           $ 309.5     59.6 %           $ 269.8     55.3 %        
                                                     
Income from operations - GAAP $ 93.1       18.8 %           $ 112.3     21.6 %           $ 97.5     20.0 %        
  Acquired intangible assets amortization   10.6       2.1 %             10.6     2.0 %             7.7     1.6 %        
  Restructuring and other (1)   5.1       1.0 %             11.4     2.2 %             (0.3 )   -0.1 %        
Income from operations - non-GAAP $ 108.8       22.0 %           $ 134.3     25.8 %           $ 104.9     21.5 %        
                                                     
                Net Income
per Common Share
          Net Income
per Common Share
          Net Income
per Common Share
        March 31,
2019
  % of Net
Revenues
  Basic   Diluted   December 31,
2018
  % of Net
Revenues
  Basic   Diluted   April 1,
2018
  % of Net Revenues   Basic   Diluted
Net income - GAAP $ 109.1       22.1 %   $ 0.63     $ 0.62     $ 143.8     27.7 %   $ 0.80     $ 0.79     $ 87.0     17.8 %   $ 0.45     $ 0.43  
  Acquired intangible assets amortization   10.6       2.1 %     0.06       0.06       10.6     2.0 %     0.06       0.06       7.7     1.6 %     0.04       0.04  
  Interest and other (2)   3.4       0.7 %     0.02       0.02       3.3     0.6 %     0.02       0.02       3.2     0.7 %     0.02       0.02  
  Restructuring and other (1)   5.1       1.0 %     0.03       0.03       11.4     2.2 %     0.06       0.06       (0.3 )   -0.1 %     -       -  
  Pension mark-to-market adjustment (2)   -             -       -       (3.5 )   -0.7 %     (0.02 )     (0.02 )     -           -       -  
  Exclude discrete tax adjustments (3)   (30.1 )     -6.1 %     (0.17 )     (0.17 )     (52.9 )   -10.2 %     (0.30 )     (0.29 )     (6.3 )   -1.3 %     (0.03 )     (0.03 )
  Non-GAAP tax adjustments   (3.5 )     -0.7 %     (0.02 )     (0.02 )     0.3     0.1 %     0.00       0.00       (1.9 )   -0.4 %     (0.01 )     (0.01 )
  Convertible share adjustment   -       -       -       0.01       -           -       -       -     -       -       0.01  
Net income - non-GAAP $ 94.6       19.1 %   $ 0.55     $ 0.54     $ 113.0     21.7 %   $ 0.63     $ 0.63     $ 89.4     18.3 %   $ 0.46     $ 0.45  
                                                     
GAAP and non-GAAP weighted average common shares - basic   173.5                   179.0                   195.3              
GAAP weighted average common shares - diluted   177.0                   181.5                   203.5              
  Exclude dilutive shares related to convertible note transaction   (2.2 )                 (0.9 )                 (6.2 )            
Non-GAAP weighted average common shares - diluted   174.8                   180.6                   197.3              
                                                     
                                                     
(1 ) Restructuring and other consists of:                                              
        Quarter Ended            
        March 31,
2019
              December 31,
2018
              April 1,
2018
           
    Contingent consideration fair value adjustment $ 3.0                 $ 10.2                 $ (5.0 )            
    Acquisition related expenses and compensation   1.3                   0.8                   0.8              
    Employee severance   0.8                   0.5                   3.9              
        $ 5.1                 $ 11.4                 $ (0.3 )            
                                                     
(2 ) For the quarters ended March 31, 2019, December 31, 2018, and April 1, 2018,  adjustment to exclude non-cash convertible debt interest expense and adjustment to exclude actuarial gains recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.
                                                     
(3 ) For the quarters ended March 31, 2019, December 31, 2018, and April 1, 2018, adjustment to exclude discrete income tax items. For the quarter ended Mach 31, 2019, income tax (benefit) provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return. For the quarter ended December 31, 2018, adjustment to treat the $52 million tax benefit related to the finalization of our toll tax charge as a discrete item.
                                                     
                                                     
GAAP to Non-GAAP Reconciliation of Second Quarter 2019 guidance:                                            
                                                     
GAAP and non-GAAP second quarter revenue guidance:     $520 million   to $550 million                                      
GAAP net income per diluted share     $ 0.48     $ 0.56                                      
  Exclude acquired intangible assets amortization       0.06       0.06                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Exclude restructuring and other       0.01       0.01                                      
  Tax effect of non-GAAP adjustments       (0.02 )     (0.02 )                                    
  Convertible share adjustment       0.02       0.02                                      
Non-GAAP net income per diluted share     $ 0.56     $ 0.65                                      
                                                     
For press releases and other information of interest to investors, please visit Teradyne's investor site at investors.teradyne.com.                                    
  Contact: Teradyne, Inc.                                              
    Andy Blanchard 978-370-2425                                              
    Vice President of Corporate Relations