Teradyne Reports Revenue and Earnings Growth in First Quarter 2018
Teradyne Reports Revenue and Earnings Growth in First Quarter 2018
  • Roberta Chan
  • 승인 2018.04.25 10:09
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Q1’18 Revenue of $487 million, up 7% from Q1’17
•Record Memory Test sales, up 210% from Q1’17
•Universal Robots sales up 34% from Q1’17, expect 50%+ full year growth
•Decline in demand outlook for mobile device test equipment in 2018

Q1’18 Q1’17 Q4’17
Revenue (mil) $487 $457 $479
GAAP EPS $0.43 $0.42 ($0.54)
Non-GAAP EPS $0.45 $0.44 $0.46

NORTH READING, Mass., April 24, 2018 (GLOBE NEWSWIRE) -- Teradyne, Inc. (NYSE:TER) reported revenue of $487 million for the first quarter of 2018 of which $373 million was in Semiconductor Test, $49 million in Industrial Automation, $43 million in System Test, and $23 million in Wireless Test. GAAP net profit for the first quarter was $87.0 million or $0.43 per share. On a non-GAAP basis, Teradyne’s net income in the first quarter was $89.4 million, or $0.45 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.

"Despite the strong first quarter results, the demand outlook for 2018 mobile device test capacity declined sharply in the quarter and our second quarter guidance reflects that revised outlook. Those strong first quarter results included record Nextest memory shipments and the highest Eagle analog test shipments in over two years reflecting healthy demand in the automotive, industrial, and NAND Flash markets,” said CEO and President Mark Jagiela. “Universal Robots’ high growth continued in the quarter driven by broad based demand for UR’s easy to use collaborative robots and the group is on-track for 50%+ full year growth."

Guidance for the second quarter of 2018 is revenue of $490 million to $520 million, with GAAP net income of $0.39 to $0.46 per diluted share and non-GAAP net income of $0.45 to $0.52 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization, non-cash convertible debt interest, restructuring and other charges 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 8:00 a.m. ET, Wednesday, April 25. 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 8:00 a.m. ET.

A replay will be available on the Teradyne website at www.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. 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 and 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 gross margin excludes pension actuarial gains and losses. GAAP requires that these items be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP performance measures that management believes provide useful supplemental information for management and the investor. Management uses non-GAAP gross margin as a performance measure for Teradyne’s current core business and future outlook and for comparison with Teradyne’s business plan, historical gross margin results and the gross margin 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 (NYSE:TER) is a leading supplier of automation equipment for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems, which serve consumer, communications, industrial and government customers. Our Industrial Automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2017, Teradyne had revenue of $2.14 billion and currently employs approximately 4,500 people worldwide. For more information, visit www.teradyne.com. Teradyne(R) 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 law. 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 law. 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 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, 2017. 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 2018              
                     
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)          
                     
          Quarter Ended  
          April 1, 2018   December 31,
2017 (1)
  April 2, 2017 (1)  
                     
Net revenues   $ 487,467     $ 479,415     $ 456,913    
                     
  Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)     217,635       208,485       191,897    
                     
Gross profit     269,832       270,930       265,016    
                     
Operating expenses:              
  Selling and administrative     90,505       87,880       84,792    
  Engineering and development     74,408       72,070       75,978    
  Acquired intangible assets amortization     7,698       7,384       7,952    
  Restructuring and other (3)     (313 )     8,970       2,511    
      Operating expenses     172,298       176,304       171,233    
                     
Income from operations     97,534       94,626       93,783    
                     
  Interest and other (4)     (1,714 )     3,458       (1,767 )  
                     
Income before income taxes     95,820       98,084       92,016    
  Income tax provision (5)     8,846       204,007       6,795    
Net income (loss)   $ 86,974     $ (105,923 )   $ 85,221    
                     
Net income (loss) per common share:              
Basic       $ 0.45     $ (0.54 )   $ 0.43    
Diluted       $ 0.43     $ (0.54 )   $ 0.42    
                     
Weighted average common shares - basic     195,255       196,010       200,005    
                     
Weighted average common shares - diluted (6)     203,484       196,010       201,936    
                     
                     
Cash dividend declared per common share   $ 0.09     $ 0.07     $ 0.07    
                     
                     
(1) Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.  
                     
(2) Cost of revenues includes:   Quarter Ended  
          April 1, 2018   December 31,
2017
  April 2, 2017  
      Provision for excess and obsolete inventory   $ 3,522     $ 1,690     $ 2,726    
      Sale of previously written down inventory     (2,243 )     (1,048 )     (1,134 )  
          $ 1,279     $ 642     $ 1,592    
                     
(3) Restructuring and other consists of:   Quarter Ended  
          April 1, 2018   December 31,
2017
  April 2, 2017  
      Employee severance   $ 3,881     $ 1,801     $ 583    
      Acquisition costs     774       -       -    
      Contingent consideration fair value adjustment     (4,968 )     5,973       634    
      Impairment of fixed assets     -       1,124       -    
      Facility related     -       72       1,294    
          $ (313 )   $ 8,970     $ 2,511    
                     
                     
(4) Interest and other includes:   Quarter Ended  
          April 1, 2018   December 31,
2017
  April 2, 2017  
      Non-cash convertible debt interest expense   $ 3,206     $ 3,166     $ 3,050    
      Pension actuarial (gains) losses     -       (3,786 )     -    
          $ 3,206     $ (620 )   $ 3,050    
                     
(5) For the quarter ended December 31, 2017, income tax provision includes an expense of $186 million related to the estimated impact of U.S. tax law changes.  
                     
(6) 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 quarter ended April 1, 2018, 4.4 million shares 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)              
                     
          April 1, 2018   December 31,
2017
     
                     
Assets                  
  Cash and cash equivalents   $ 637,873     $ 429,843        
  Marketable securities     860,526       1,347,979        
  Accounts receivable, net     413,978       272,783        
  Inventories, net     131,857       107,525        
  Prepayments and other current assets     112,191       112,151        
      Total current assets     2,156,425       2,270,281        
                     
  Property, plant and equipment, net     281,284       268,447        
  Marketable securities     89,259       125,926        
  Deferred tax assets     77,705       84,026        
  Other assets     12,479       12,275        
  Retirement plans assets     17,928       17,491        
  Acquired intangible assets, net     84,413       79,088        
  Goodwill     275,700       252,011        
                     
      Total assets   $ 2,995,193     $ 3,109,545        
                     
Liabilities                
  Accounts payable   $ 103,950     $ 86,393        
  Accrued employees' compensation and withholdings     86,292       141,694        
  Deferred revenue and customer advances     85,892       83,614        
  Other accrued liabilities     58,387       59,083        
  Contingent consideration     15,581       24,497        
  Income taxes payable     34,828       59,055        
                     
      Total current liabilities     384,930       454,336        
                     
  Retirement plans liabilities     124,689       119,776        
  Long-term deferred revenue and customer advances     21,726       30,127        
  Deferred tax liabilities     6,185       6,720        
  Long-term other accrued liabilities     16,683       10,273        
  Long-term contingent consideration     -       20,605        
  Long-term income taxes payable     160,181       148,075        
  Long-term debt     369,421       365,987        
                     
      Total liabilities     1,083,815       1,155,899        
                     
Shareholders' equity     1,911,378       1,953,646        
                     
      Total liabilities and shareholders' equity   $ 2,995,193     $ 3,109,545        
                     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)              
                     
          Quarter Ended      
          April 1, 2018   April 2, 2017      
Cash flows from operating activities:              
  Net income   $ 86,974     $ 85,221        
  Adjustments to reconcile net income to net cash used for operating activities:              
    Depreciation     16,336       16,143        
    Amortization     9,204       11,070        
    Stock-based compensation     9,544       8,945        
    Provision for excess and obsolete inventory     3,522       2,726        
    Contingent consideration fair value adjustment     (4,968 )     634        
    Deferred taxes     8,696       (3,477 )      
    Other     1,393       2        
    Changes in operating assets and liabilities, net of business acquired:            
      Accounts receivable     (140,747 )     (123,792 )      
      Inventories     (21,017 )     (62,152 )      
      Prepayments and other assets     (679 )     1,104        
      Accounts payable and accrued expenses     (46,706 )     (7,553 )      
      Deferred revenue and customer advances     9,644       (3,333 )      
      Retirement plans contributions     (1,020 )     (947 )      
      Income taxes     (12,106 )     14,288        
Net cash used for operating activities     (81,930 )     (61,121 )      
                     
Cash flows from investing activities:              
  Purchases of property, plant and equipment     (34,797 )     (22,066 )      
  Purchases of available-for-sale marketable securities     (490,324 )     (153,317 )      
  Proceeds from sales of available-for-sale marketable securities     800,671       213,593        
  Proceeds from maturities of available-for-sale marketable securities     212,698       88,184        
  Acquisition of business, net of cash acquired     (25,356 )     -        
Net cash provided by investing activities     462,892       126,394        
                     
Cash flows from financing activities:              
  Issuance of common stock under stock purchase and stock option plans     10,654       15,084        
  Repurchase of common stock     (134,276 )     (37,730 )      
  Dividend payments     (17,588 )     (14,021 )      
  Payment related to net settlement of employee stock compensation awards     (19,629 )     (12,289 )      
  Payment of contingent consideration     (13,571 )     (1,050 )      
Net cash used for financing activities     (174,410 )     (50,006 )      
                     
Effects of exchange rate changes on cash and cash equivalents     1,478       1,595        
                     
Increase in cash and cash equivalents     208,030       16,862        
Cash and cash equivalents at beginning of period     429,843       307,884        
Cash and cash equivalents at end of period   $ 637,873     $ 324,746        
                     

 

GAAP to Non-GAAP Earnings Reconciliation                                              
                                                     
(In millions, except per share amounts)                                              
                        Quarter Ended                        
        April 1,
2018
  % of Net
Revenues
          December 31,
2017 (1)
  % of Net
Revenues
          April 2,
2017 (1)
  % of Net
Revenues
       
                                                     
Net revenues   $ 487.5                 $ 479.4                 $ 456.9              
                                                     
Gross profit   $ 269.8       55.3 %           $ 270.9     56.5 %           $ 265.0     58.0 %        
                                                     
Income from operations - GAAP $ 97.5       20.0 %           $ 94.6     19.7 %           $ 93.8     20.5 %        
  Acquired intangible assets amortization   7.7       1.6 %             7.4     1.5 %             8.0     1.8 %        
  Restructuring and other (2)   (0.3 )     -0.1 %             9.0     1.9 %             2.5     0.5 %        
Income from operations - non-GAAP $ 104.9       21.5 %           $ 111.0     23.2 %           $ 104.3     22.8 %        
                                                     
                Net Income
per Common Share
          Net (Loss) Income
per Common Share
          Net Income
per Common Share
        April 1,
2018
  % of Net
Revenues
  Basic   Diluted   December 31,
2017
  % of Net
Revenues
  Basic   Diluted   April 2,
2017
  % of Net
Revenues
  Basic   Diluted
Net income (loss) - GAAP $ 87.0       17.8 %   $ 0.45     $ 0.43     $ (105.9 )   -22.1 %   $ (0.54 )   $ (0.54 )   $ 85.2     18.6 %   $ 0.43     $ 0.42  
  Acquired intangible assets amortization   7.7       1.6 %     0.04       0.04       7.4     1.5 %     0.04       0.04       8.0     1.8 %     0.04       0.04  
  Interest and other (3)   3.2       0.7 %     0.02       0.02       (0.6 )   -0.1 %     (0.00 )     (0.00 )     3.1     0.7 %     0.02       0.02  
  Restructuring and other (2)   (0.3 )     -0.1 %     -       -       9.0     1.9 %     0.05       0.05       2.5     0.5 %     0.01       0.01  
  Exclude discrete tax adjustments (4)   (6.3 )     -1.3 %     (0.03 )     (0.03 )     184.4     38.5 %     0.94       0.93       (7.0 )   -1.5 %     (0.04 )     (0.03 )
  Non-GAAP tax adjustments   (1.9 )     -0.4 %     (0.01 )     (0.01 )     (2.9 )   -0.6 %     (0.01 )     (0.01 )     (3.1 )   -0.7 %     (0.02 )     (0.02 )
  Convertible share adjustment   -       -       -       0.01       -     -       -       -       -     -       -       -  
Net income - non-GAAP $ 89.4       18.3 %   $ 0.46     $ 0.45     $ 91.4     19.1 %   $ 0.47     $ 0.46     $ 88.7     19.4 %   $ 0.44     $ 0.44  
                                                     
GAAP and non-GAAP weighted average common shares - basic   195.3                   196.0                   200.0              
GAAP weighted average common shares - diluted   203.5                   196.0                   201.9              
  Exclude dilutive shares related to convertible note transaction   (6.2 )                 -                   -              
  Include dilutive shares   -                   3.0                   -              
Non-GAAP weighted average common shares - diluted   197.3                   199.0                   201.9              
                                                     
                                                     
(1) Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.
                                                     
(2) Restructuring and other consists of:                                              
        Quarter Ended            
        April 1,
2018
              December 31,
2017
              April 2,
2017
           
    Employee severance $ 3.9                 $ 1.8                 $ 0.6              
    Acquisition costs   0.8                   -                   -              
    Contingent consideration fair value adjustment   (5.0 )                 6.0                   0.6              
    Impairment of fixed assets   -                   1.1                   -              
    Facility related   -                   0.1                   1.3              
        $ (0.3 )               $ 9.0                 $ 2.5              
                                                     
(3) For the quarters ended April 1, 2018, December 31, 2017 and April 2, 2017, adjustment to exclude non-cash convertible debt interest expense. For the quarter ended December 31, 2017, adjustment to exclude actuarial (gains) losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.
                                                     
(4) For the quarters ended April 1, 2018, December 31, 2017 and April 2, 2017, adjustment to exclude discrete income tax items. For the quarter ended December 31, 2017, adjustment to treat $186 million expense related to the estimated impact of U.S. tax law changes as a discrete item.
                                                     
                                                     
GAAP to Non-GAAP Reconciliation of Second Quarter 2018 guidance:                                              
                                                     
GAAP and non-GAAP second quarter revenue guidance:     $490 million to $520 million                                    
GAAP net income per diluted share     $ 0.39     $ 0.46                                      
  Exclude acquired intangible assets amortization       0.04       0.04                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Exclude restructuring and other       0.01       0.01                                      
  Tax effect of non-GAAP adjustments       (0.01 )     (0.01 )                                    
  Convertible share adjustment       0.01       0.01                                      
Non-GAAP net income per diluted share     $ 0.45     $ 0.52                                      
                                                     
For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com.
  Contact: Teradyne, Inc.                                              
    Andy Blanchard 978-370-2425                                              
    Vice President of Corporate Relations                                              
                                                     

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