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Teradyne Reports Second Quarter 2020 Results Nasdaq:TER - GlobeNewswire

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  • Revenue of $839 million in Q2’20 grew 49% from Q2’19
  • Q2’20 GAAP earnings per share grew 91% and Non-GAAP earnings per share grew 102% from Q2’19
  • Test revenue grew 59% from Q2’19 on Semiconductor Test strength
  • Industrial Automation revenue declined 21% from Q2’19 on global manufacturing weakness
  • Q3’20 Revenue guidance at mid-point represents 33% growth from Q3’19
  Q2'20
  Q2'19
  Q1'20
  1H’20
  1H’19
Revenue (mil) $  839   $  564   $ 704   $ 1,543   $ 1,058
GAAP EPS $  1.05   $  0.55   $ 0.97   $ 2.02   $ 1.16
Non-GAAP EPS $  1.33   $  0.66   $ 1.00   $ 2.34   $ 1.20

NORTH READING, Mass., July 21, 2020 (GLOBE NEWSWIRE) -- Teradyne, Inc. (NASDAQ: TER) reported revenue of $839 million for the second quarter of 2020 of which $659 million was in Semiconductor Test, $72 million in System Test, $49 million in Wireless Test and $59 million in Industrial Automation (IA). GAAP net income for the second quarter was $188.9 million or $1.05 per diluted share. On a non-GAAP basis, Teradyne’s net income in the second quarter was $229.2 million, or $1.33 per diluted share, which excluded restructuring and other charges, acquired intangible asset amortization, non-cash convertible debt interest, discrete tax adjustments and included the related tax impact on non-GAAP adjustments.

“Stronger than expected System on a Chip (SOC) test shipments driven by accelerated demand for mobility-related test capacity, combined with success in navigating supply constraints, led to revenue and profits above the high end of our guidance range in the second quarter,” said CEO and President Mark Jagiela. “Industrial Automation sales, while down from the year ago period due to the global slowdown in business activity, improved monthly through the quarter.

“Guidance for the third quarter reflects increased memory and storage test shipments along with production ramps of new product design wins in SOC test.”

Guidance for the third quarter of 2020 is revenue of $745 million to $805 million, with GAAP net income of $0.91 to $1.06 per diluted share and non-GAAP net income of $1.01 to $1.17 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 second quarter results, along with management's business outlook, will follow at 8:30 a.m. ET, Wednesday, July 22. 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 8:30 a.m. ET. A replay will be available on Teradyne’s Investor Relations site at investors.teradyne.com.

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, fair value inventory step-up, and restructuring and other, and includes 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 gross margin excludes fair value inventory step-up. GAAP requires that this item 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 “Investor Relations” and then selecting “Financials” and 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 (NASDAQ: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 2019, Teradyne had revenue of $2.3 billion and today employs 5,500 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, the impact of the COVID-19 outbreak, 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, and the impact of U.S. 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, the impact of the COVID-19 outbreak, or the impact of U.S. 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 program may be modified, suspended or discontinued at any time.

On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under U.S. Export Administration Regulations (the “EAR”). This action by the U.S. Department of Commerce imposed new export licensing requirements on exports, re-exports, and in-country transfers of all U.S. - regulated products, software and technology to the designated Huawei entities.  While most of Teradyne’s products are not subject to the EAR and therefore not affected by the Entity List restrictions, some of its products are currently manufactured in the U.S. and thus subject to the Entity List restrictions. Compliance with the current Entity List restrictions has not significantly impacted Teradyne’s sales.

On May 15, 2020, the U.S. Department of Commerce published new regulations expanding the scope of the U.S. EAR to include additional products that would become subject to the Entity List restrictions relating to Huawei and the designated Huawei entities including HiSilicon. The comment period for the new regulations ended on July 14, 2020. These new regulations restrict the sale to Huawei and the designated Huawei entities of items, such as semiconductor devices, manufactured by Huawei’s contract manufacturers under specific, detailed conditions set forth in the new regulations. While the new regulations do not impose any new restrictions on Teradyne directly, the new regulations may impact Teradyne’s sales to third party contract manufacturers used by Huawei and HiSilicon to manufacture and test semiconductor and other electronic devices. Because the impact of these new regulations on Huawei’s business is both fluid and uncertain, at this time, Teradyne does not know the potential extent of the impact of the new regulations on its business with Huawei, HiSilicon and their contract manufacturers. However, it is possible that these new regulations and any other additional regulations that may be implemented by the U.S. Department of Commerce or other government agency could have a material impact on Teradyne’s business and financial results.

On April 28, 2020, the Department of Commerce published new export control regulations for certain U.S. products and technology sold to military and civilian end users in China.  The regulations went into effect on June 29, 2020. Teradyne does not expect that compliance with the new export controls will significantly impact its ability to sell products to its customers in China or to manufacture products in China.  The new export controls, however, could disrupt the Company’s supply chain, increase compliance costs and impact the demand for the Company’s products in China and, thus, have a material adverse impact on Teradyne’s business, financial condition or results of operations. In addition, while the Company maintains an export compliance program, its compliance controls could be circumvented, exposing the Company to legal liabilities.  Teradyne will continue to assess the potential impact of the new export controls on its business and operations and take appropriate actions, including filing for licenses with the Department of Commerce, to minimize any disruption. However, Teradyne cannot be certain that the actions it takes will mitigate all of the risks associated with the new export controls that may impact its business.

The global outbreak of the recent novel strain of the coronavirus (COVID-19) has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.  These measures have impacted and may further impact Teradyne’s workforce and operations, the operations of its customers, and those of its contract manufacturers and suppliers.  The COVID-19 pandemic has adversely impacted the Company’s results of operations, including increased costs company-wide and decreased sales in its industrial automation businesses.  At this time, the Company cannot accurately estimate the amount of the impact for Teradyne’s 2020 financial results and to its future financial results. There is considerable uncertainty regarding the impact on Teradyne’s business from the measures in place and potential future measures, and restrictions on Teradyne’s access to its manufacturing facilities or on its support operations or workforce, or similar limitations for its contractor manufacturers and suppliers, and restrictions or disruptions of transportation, such as reduced availability of transportation and increased border controls or closures, could limit Teradyne’s capacity to meet customer demand and have a material adverse effect on its financial condition and results of operations. The COVID-19 outbreak has significantly increased economic and demand uncertainty in Teradyne’s markets. This uncertainty could result in a significant decrease in demand for Teradyne’s products for an uncertain period of time. The spread of COVID-19 has caused Teradyne to modify its business practices (including employee travel, employees working remotely, and cancellation of physical participation in meetings, events and conferences), and the Company may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, contract manufacturers and suppliers. There is uncertainty that such measures will be sufficient to mitigate the risks posed by the virus, and Teradyne’s ability to perform critical functions could be impacted. Due to the uncertainty regarding the length, severity and potential business impact of the COVID-19 pandemic, Teradyne has suspended its stock repurchase program announced in January 2020. At this time, Teradyne does not know whether or when it will continue its 2020 repurchase plan or authorize future stock repurchase programs. The degree to which COVID-19 impacts Teradyne’s results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and continued spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, or payment of the senior convertible notes 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 impact of the COVID-19 outbreak and related government responses on the market and demand for Teradyne’s products, on its contract manufacturers and supply chain, and on its workforce; 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 or the repurchase of common stock 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; compliance with trade protection measures or export restrictions; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei and HiSilicon; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” sections of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020. 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 SECOND FISCAL QUARTER OF 2020
                           
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                           
          Quarter Ended   Six Months Ended
          June 28, 2020   March 29, 2020   June 30, 2019   June 28, 2020   June 30, 2019
                           
Net revenues   $ 838,661     $ 704,355     $ 564,178     $ 1,543,016 $ 1,058,277  
                           
  Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)     367,188       298,805       240,260       665,993       446,724  
                           
Gross profit     471,473       405,550       323,918       877,023       611,553  
                           
Operating expenses:                    
  Selling and administrative     113,259       111,388       108,811       224,647       210,824  
  Engineering and development     94,102       85,159       81,434       179,261       158,225  
  Acquired intangible assets amortization     8,941       9,891       10,083       18,832       20,717  
  Restructuring and other (2)     37,222       (7,606 )     (10,404 )     29,616       (5,292 )
      Operating expenses     253,524       198,832       189,924       452,356       384,474  
                           
Income from operations     217,949       206,718       133,994       424,667       227,079  
                           
  Interest and other expense (3)     658       9,649       2,817       10,308       1,923  
                           
Income before income taxes     217,291       197,069       131,177       414,359       225,156  
  Income tax provision     28,383       20,878       33,780       49,261       18,621  
Net income   $ 188,908     $ 176,191     $ 97,397     $ 365,098     $ 206,535  
                           
Net income per common share:                    
Basic       $ 1.14     $ 1.06     $ 0.57     $ 2.20     $ 1.20  
Diluted       $ 1.05     $ 0.97     $ 0.55     $ 2.02     $ 1.16  
                           
Weighted average common shares - basic     165,789       166,589       171,241       166,189       172,387  
                           
Weighted average common shares - diluted (4)     180,257       180,736       178,590       180,497       177,781  
                           
                           
Cash dividend declared per common share   $ 0.10     $ 0.10     $ 0.09     $ 0.20     $ 0.18  
                           
                           
                           
(1 ) Cost of revenues includes:   Quarter Ended   Six Months Ended
          June 28, 2020   March 29, 2020   June 30, 2019   June 28, 2020   June 30, 2019
      Provision for excess and obsolete inventory   $ 5,580     $ 4,057     $ 3,402     $ 9,637     $ 5,799  
      Sale of previously written down inventory     (337 )     (1,077 )     (363 )     (1,414 )     (1,141 )
      Inventory step-up     121       118       383       239       383  
          $ 5,364     $ 3,098     $ 3,422     $ 8,462     $ 5,041  
                           
                           
(2 ) Restructuring and other consists of:   Quarter Ended   Six Months Ended
          June 28, 2020   March 29, 2020   June 30, 2019   June 28, 2020   June 30, 2019
      Contingent consideration fair value adjustment   $ 29,259     $ (10,020 )   $ (11,671 ) $ 19,239     $ (8,701 )
      Contract termination settlement fee     4,000       -       -       4,000       -  
      Acquisition related expenses and compensation     3,145       1,358       464       4,503       1,807  
      Employee severance     36       728       803       764       1,602  
      Other     782       328       -       1,110       -  
          $ 37,222     $ (7,606 )   $ (10,404 )   $ 29,616     $ (5,292 )
                           
                           
(3 ) Interest and other includes:   Quarter Ended   Six Months Ended
          June 28, 2020   March 29, 2020   June 30, 2019   June 28, 2020   June 30, 2019
      Non-cash convertible debt interest   $ 3,584     $ 3,540     $ 3,410     $ 7,124     $ 6,778  
      Pension actuarial (gains) losses     (99 )     -       448       (99 )     448  
          $ 3,485     $ 3,540     $ 3,858     $ 7,025     $ 7,226  
                           
(4 ) 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 June 28, 2020, March 29, 2020 and June 30, 2019, 7.6 million, 7.3 million and 4.4 million shares, respectively, have been included in diluted shares. For the six months ended June 28, 2020 and June 30, 2019, 7.5 million and 3.3 million shares, respectively, have been included in diluted shares. For the quarters ended June 28, 2020, March 29, 2020 and June 30, 2019, diluted shares also included 5.8 million, 5.5 million and 1.8 million shares, respectively from the convertible note hedge transaction. For the six months ended June 28, 2020 and June 30, 2019, diluted shares also included 5.7 million and 0.9 million shares, respectively, from the convertible note hedge transaction.
                     
                     
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)                    
                           
          June 28, 2020   December 31, 2019            
                           
Assets                        
  Cash and cash equivalents   $ 728,306     $ 773,924              
  Marketable securities     229,791       137,303              
  Accounts receivable, net     694,521       362,368              
  Inventories, net     206,088       196,691              
  Prepayments and other current assets     238,176       188,598              
      Total current assets     2,096,882       1,658,884              
                           
  Property, plant and equipment, net     353,595       320,216              
  Operating lease right-of-use assets, net     56,172       57,539              
  Marketable securities     106,968       104,490              
  Deferred tax assets     79,210       75,185              
  Retirement plans assets     17,817       18,457              
  Other assets     11,854       10,332              
  Acquired intangible assets, net     107,563       125,480              
  Goodwill     422,003       416,431              
                           
      Total assets   $ 3,252,064     $ 2,787,014              
                           
Liabilities                      
  Accounts payable   $ 184,163     $ 126,617              
  Accrued employees' compensation and withholdings     175,589       163,883              
  Deferred revenue and customer advances     124,224       104,876              
  Other accrued liabilities     122,607       70,871              
  Operating lease liabilities     20,000       19,476              
  Contingent consideration     16,789       9,106              
  Income taxes payable     89,216       44,200              
                           
      Total current liabilities     732,588       539,029              
                           
  Retirement plans liabilities     130,826       134,471              
  Long-term deferred revenue and customer advances     55,634       45,974              
  Long-term contingent consideration     32,948       30,599              
  Long-term other accrued liabilities     22,703       19,535              
  Deferred tax liabilities     11,997       14,070              
  Long-term operating lease liabilities     43,582       45,849              
  Long-term income taxes payable     74,930       82,642              
  Debt       402,305       394,687              
                           
      Total liabilities     1,507,513       1,306,856              
                           
Shareholders' equity     1,744,551       1,480,158              
                           
      Total liabilities and shareholders' equity   $ 3,252,064     $ 2,787,014              
                           
                           
                           
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)                
                           
          Quarter Ended   Six Months Ended    
          June 28, 2020   June 30, 2019   June 28, 2020   June 30, 2019    
Cash flows from operating activities:                    
  Net income   $ 188,908     $ 97,397     $ 365,098     $ 206,535      
  Adjustments to reconcile net income to net cash provided by operating activities:                    
    Contingent consideration fair value adjustment     29,259       (11,671 )     19,239       (8,701 )    
    Depreciation     19,816       17,231       38,305       33,882      
    Amortization     12,843       12,034       26,234       24,976      
    Stock-based compensation     10,907       8,635       21,367       18,109      
    Provision for excess and obsolete inventory     5,580       3,402       9,637       5,799      
    Gains on investments     (5,126 )     (913 )     (469 )     (3,741 )    
    Deferred taxes     (5,338 )     (691 )     (7,163 )     515      
    Retirement plan actuarial (gains) losses     (99 )     448       (99 )     448      
    Other     19       210       523       429      
                           
    Changes in operating assets and liabilities, net of businesses acquired:                  
      Accounts receivable     (204,261 )     (37,772 )     (331,040 )     (79,478 )    
      Inventories     (19,546 )     470       (3,728 )     (2,447 )    
      Prepayments and other assets     (9,859 )     1,581       (49,479 )     (17,067 )    
      Accounts payable and other liabilities     151,776       38,887       116,453       (14,424 )    
      Deferred revenue and customer advances     29,568       9,371       28,655       15,826      
      Retirement plans contributions     (1,239 )     (1,204 )     (2,501 )     (2,414 )    
      Income taxes     22,564       7,831       37,842       (14,973 )    
Net cash provided by operating activities     225,772       145,246       268,874       163,274      
                           
Cash flows from investing activities:                    
  Purchases of property, plant and equipment     (47,314 )     (33,245 )     (84,014 )     (58,956 )    
  Purchases of marketable securities     (112,429 )     (108,997 )     (299,548 )     (484,181 )    
  Proceeds from maturities of marketable securities     84,527       91,992       182,984       233,193      
  Proceeds from sales of marketable securities     11,656       37,014       26,661       42,454      
  Proceeds from life insurance     546       -       546       273      
  Purchase of investments and acquisition of businesses, net of cash acquired      -       (15,000 )     149       (21,970 )    
Net cash used for investing activities     (63,014 )     (28,236 )     (173,222 )     (289,187 )    
                           
Cash flows from financing activities:                    
  Issuance of common stock under stock purchase and stock option plans   5       833       12,757       15,089      
  Repurchase of common stock     (9,426 )     (90,754 )     (88,465 )     (247,222 )    
  Dividend payments     (16,580 )     (15,392 )     (33,266 )     (31,019 )    
  Payments related to net settlement of employee stock compensation awards      (449 )     (128 )     (22,519 )     (14,446 )    
  Payments of contingent consideration     -       -       (8,852 )     (27,615 )    
Net cash used for financing activities     (26,450 )     (105,441 )     (140,345 )     (305,213 )    
                           
Effects of exchange rate changes on cash and cash equivalents     (1,496 )     (190 )     (925 )     (519 )    
Increase (decrease) in cash and cash equivalents -   134,812       11,379       (45,618 )     (431,645 )    
Cash and cash equivalents at beginning of period     593,494       483,728       773,924       926,752      
Cash and cash equivalents at end of period   $ 728,306     $ 495,107     $ 728,306     $ 495,107      
                           
GAAP to Non-GAAP Earnings Reconciliation 
                                                     
(In millions, except per share amounts)                                              
                        Quarter Ended                        
        June 28, 2020   % of Net Revenues           March 29, 2020   % of Net Revenues           June 30, 2019   % of Net Revenues        
                                                     
Net revenues   $ 838.7                 $ 704.4                 $ 564.2              
                                                     
Gross profit GAAP $ 471.5       56.2 %           $ 405.6     57.6 %           $ 323.9     57.4 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             0.4     0.1 %        
Gross profit non-GAAP $ 471.6       56.2 %           $ 405.7     57.6 %           $ 324.3     57.5 %        
                                                     
Income from operations - GAAP $ 217.9       26.0 %           $ 206.7     29.3 %           $ 134.0     23.8 %        
  Restructuring and other (1)   37.2       4.4 %             (7.6 )   -1.1 %             (10.4 )   -1.8 %        
  Acquired intangible assets amortization   8.9       1.1 %             9.9     1.4 %             10.1     1.8 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             0.4     0.1 %        
Income from operations - non-GAAP $ 264.1       31.5 %           $ 209.1     29.7 %           $ 134.1     23.8 %        
                                                     
                Net Income per
Common Share
          Net Income per Common Share           Net Income per Common Share
        June 28, 2020   % of Net Revenues   Basic   Diluted   March 29, 2020   % of Net Revenues   Basic   Diluted   June 30, 2019   % of Net Revenues   Basic   Diluted
Net income - GAAP $ 188.9       22.5 %   $ 1.14     $ 1.05     $ 176.2     25.0 %   $ 1.06     $ 0.97     $ 97.4     17.3 %   $ 0.57     $ 0.55  
  Restructuring and other (1)   37.2       4.4 %     0.22       0.21       (7.6 )   -1.1 %     (0.05 )     (0.04 )     (10.4 )   -1.8 %     (0.06 )     (0.06 )
  Acquired intangible assets amortization   8.9       1.1 %     0.05       0.05       9.9     1.4 %     0.06       0.05       10.1     1.8 %     0.06       0.06  
  Interest and other (2)   3.6       0.4 %     0.02       0.02       3.5     0.5 %     0.02       0.02       3.4     0.6 %     0.02       0.02  
  Inventory step-up   0.1       0.0 %     0.00       0.00       0.1     0.0 %     0.00       0.00       0.4     0.1 %     0.00       0.00  
  Pension mark-to-market adjustment (2)   (0.1 )     -0.0 %     (0.00 )     (0.00 )     -     -       -       -       0.4     0.1 %     0.00       0.00  
  Exclude discrete tax adjustments (3)   (1.1 )     -0.1 %     (0.01 )     (0.01 )     (7.7 )   -1.1 %     (0.05 )     (0.04 )     13.9     2.5 %     0.08       0.08  
  Non-GAAP tax adjustments   (8.3 )     -1.0 %     (0.05 )     (0.05 )     (1.9 )   -0.3 %     (0.01 )     (0.01 )     (2.0 )   -0.4 %     (0.01 )     (0.01 )
  Convertible share adjustment (4)   -       -       -       0.06       -     -       -       0.04       -     -       -       0.02  
Net income - non-GAAP $ 229.2       27.3 %   $ 1.38     $ 1.33     $ 172.5     24.5 %   $ 1.04     $ 1.00     $ 113.2     20.1 %   $ 0.66     $ 0.66  
                                                     
GAAP and non-GAAP weighted average common shares - basic   165.8                   166.6                   171.2              
GAAP weighted average common shares - diluted   180.3                   180.7                   178.6              
  Exclude dilutive shares related to convertible note transaction      (7.6 )                 (7.3 )                 (6.2 )            
Non-GAAP weighted average common shares - diluted   172.7                   173.4                   172.4              
                                                     
                                                     
(1 ) Restructuring and other consists of: 
        Quarter Ended            
        June 28, 2020               March 29, 2020               June 30, 2019            
    Contingent consideration fair value adjustment $ 29.3                 $ (10.0 )               $ (11.7 )            
    Contract termination settlement fee   4.0                   -                   -              
    Acquisition related expenses and compensation   3.1                   1.4                   0.5              
    Employee severance   -                   0.7                   0.8              
    Other     0.8                   0.3                   -              
        $ 37.2                 $ (7.6 )               $ (10.4 )            
                                                     
(2 ) For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 28, 2020 and June 30, 2019, adjustment to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting. 
                                                     
(3 ) For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, income tax (benefit) provision includes a $15 million tax provision related to the finalization of our toll tax charge. 
(4 ) For the quarters ended June 28, 2020 and March 29, 2020, the non-GAAP diluted EPS calculation adds back $1.3 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.8 million and 5.5 million shares, respectively, related to the convertible debt hedge transaction. 
        Six Months Ended                
        June 28, 2020   % of Net Revenues           June 30, 2019   % of Net Revenues                        
                                                     
Net Revenues   $ 1,543.0                 $ 1,058.3                              
                                                     
Gross profit GAAP $ 877.0       56.8 %           $ 611.6     57.8 %                        
  Inventory step-up   0.2       0.0 %             0.4     0.0 %                        
Gross profit non-GAAP $ 877.2       56.9 %           $ 612.0     57.8 %                        
                                                     
Income from operations - GAAP $ 424.7       27.5 %           $ 227.1     21.5 %                        
  Restructuring and other (1)   29.6       1.9 %             (5.3 )   -0.5 %                        
  Acquired intangible assets amortization   18.8       1.2 %             20.7     2.0 %                        
  Inventory step-up   0.2       0.0 %             0.4     0.0 %                        
Income from operations - non-GAAP $ 473.3       30.7 %           $ 242.9     23.0 %                        
                                                     
                Net Income per Common Share           Net Income per Common Share                
        June 28, 2020   % of Net Revenues   Basic   Diluted   June 30, 2019   % of Net Revenues   Basic   Diluted                
Net income - GAAP $ 365.1       23.7 %   $ 2.20     $ 2.02     $ 206.5     19.5 %   $ 1.20     $ 1.16                  
  Restructuring and other (1)   29.6       1.9 %     0.18       0.16       (5.3 )   -0.5 %     (0.03 )     (0.03 )                
  Acquired intangible assets amortization   18.8       1.2 %     0.11       0.10       20.7     2.0 %     0.12       0.12                  
  Interest and other (2)   7.1       0.5 %     0.04       0.04       6.8     0.6 %     0.04       0.04                  
  Inventory step-up   0.2       0.0 %     0.00       0.00       0.4     0.0 %     0.00       0.00                  
  Pension mark-to-market adjustment (2)   (0.1 )     -0.0 %     (0.00 )     (0.00 )     0.4     0.0 %     0.00       0.00                  
  Exclude discrete tax adjustments (3)   (8.7 )     -0.6 %     (0.05 )     (0.05 )     (16.2 )   -1.5 %     (0.09 )     (0.09 )                
  Non-GAAP tax adjustments   (10.1 )     -0.7 %     (0.06 )     (0.06 )     (5.5 )   -0.5 %     (0.03 )     (0.03 )                
  Convertible share adjustment (4)   -       -       -       0.10       -     -       -       0.03                  
Net income - non-GAAP $ 401.9       26.0 %   $ 2.42     $ 2.34     $ 207.8     19.6 %   $ 1.21     $ 1.20                  
                                                     
GAAP and non-GAAP weighted average common shares - basic   166.2                   172.4                              
GAAP weighted average common shares - diluted   180.5                   177.8                              
  Exclude dilutive shares from convertible note   (7.5 )                 (4.2 )                            
Non-GAAP weighted average common shares - diluted   173.0                   173.6                              
                                                     
(1 ) Restructuring and other consists of: 
        Six Months Ended                            
        June 28, 2020               June 30, 2019                            
    Contingent consideration fair value adjustment $ 19.2                 $ (8.7 )                            
    Acquisition related expenses and compensation   4.5                   1.8                              
    Contract termination settlement fee   4.0                   -                              
    Employee severance   0.8                   1.6                              
    Other     1.1                   -                   -              
        $ 29.6                 $ (5.3 )                            
                                                     
(2 ) For the six months ended June 28, 2020 and June 30, 2019, interest and other included non-cash convertible debt interest expense. For the six months ended June 28, 2020 and June 30, 2019, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting. 
                                                     
(3 ) For the six months ended June 28, 2020 and June 30, 2019, adjustment to exclude discrete income tax items. For the six months ended June 30, 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 and includes a $15 million tax provision related to the finalization of our toll tax charge. 
                                                     
(4 ) For the six months ended June 28, 2020, the non-GAAP diluted EPS calculation adds back $2.6 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.7 million shares related to the convertible debt hedge transaction. 
                                                     
GAAP to Non-GAAP Reconciliation of Third Quarter 2020 guidance:                                            
                                                     
GAAP and non-GAAP third quarter revenue guidance:       $745 million   to   $805 million                                      
GAAP net income per diluted share     $ 0.91     $ 1.06                                      
  Exclude acquired intangible assets amortization       0.03       0.03                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Tax effect of non-GAAP adjustments       0.01       0.01                                      
  Convertible share adjustment       0.04       0.04                                      
Non-GAAP net income per diluted share     $ 1.01     $ 1.17                                      
                                                     

For press releases and other information of interest to investors, please visit Teradyne's homepage at teradyne.com.
Contact: Teradyne, Inc.
Andy Blanchard 978-370-2425
Vice President of Corporate Relations


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