Teradyne Reports Third Quarter 2021 Results

Tuesday, 26. October 2021 23:01
  • Revenue of $951 million in Q3’21 grew 16% from Q3’20 and 63% from Q3’19
  • GAAP Gross Margin 60% in Q3’21, up from 56% in Q3’20 and 59% in Q3’19
  • Q3’21 GAAP earnings per share grew 17% from Q3’20 and 88% from Q3’19
  • Q3’21 non-GAAP earnings per share grew 35% from Q3’20 and 106% from Q3’19
  • Test revenue grew 14% from Q3’20 and 67% from Q3’19 on Semiconductor Test and Wireless Test strength
  • Industrial Automation revenue grew 32% from Q3’20 and 32% from Q3’19 on global demand growth at Universal Robots
  • Q4’21 Revenue guidance at mid-point represents 13% growth from Q4’20 and 31% from Q4’19
 Q3'21Q3'20 Q2'21Q1-Q3’21Q1-Q3’20
Revenue (mil)$ 951$ 819  $1,086$2,818$2,363
GAAP EPS$ 1.41$ 1.21 $1.76 $4.26$3.23
Non-GAAP EPS$ 1.59$ 1.18 $1.91 $4.61$3.52

NORTH READING, Mass., Oct. 26, 2021 (GLOBE NEWSWIRE) -- Teradyne, Inc. (NASDAQ: TER) reported revenue of $951 million for the third quarter of 2021 of which $688 million was in Semiconductor Test, $103 million in System Test, $69 million in Wireless Test and $91 million in Industrial Automation (IA). GAAP net income for the third quarter was $256.7 million or $1.41 per diluted share. On a non-GAAP basis, Teradyne’s net income in the third quarter was $278.6 million, or $1.59 per diluted share, which excluded losses on convertible debt conversions, acquired intangible asset amortization, restructuring and other charges, non-cash convertible debt interest, discrete tax adjustments and included the related tax impact on non-GAAP adjustments.

“Demand for both our Test and Industrial Automation products remained strong in Q3 and we delivered our eighth consecutive quarter of double-digit, year on year revenue and profit growth,” said Teradyne CEO and President Mark Jagiela. “Higher than expected test shipments balanced lower than planned shipments from our Industrial Automation businesses as we encountered supply constraints in those product lines in the quarter.”

“Q4’21 sales are expected to increase over 10% from Q4 2020’s record level on growing demand in Industrial/Automotive Test, Storage Test, and Industrial Automation. Full year company sales, GAAP EPS and non-GAAP EPS are expected to grow 18%, 28% and 27%, respectively, at the mid-point of our guidance.”

Guidance for the fourth quarter of 2021 is revenue of $820 million to $900 million, with GAAP net income of $1.08 to $1.33 per diluted share and non-GAAP net income of $1.14 to $1.40 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 third quarter results, along with management's business outlook, is scheduled at 8:30 a.m. ET, Wednesday, October 27. Interested investors should access the webcast at www.teradyne.com/investors, scroll to the Events section and click View All 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 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 losses on convertible debt conversions, 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 2020, Teradyne had revenue of $3.1 billion and today employs over 5,700 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 pandemic, 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. and Chinese 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 pandemic, or the impact of U.S. and Chinese 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.

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 were 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.

On August 17, 2020, the U.S. Department of Commerce published final regulations expanding the scope of the U.S. EAR to include additional products that became subject to export restrictions relating to Huawei entities including HiSilicon. These new regulations restrict the sale to Huawei and the designated Huawei entities of certain non-U.S. made items, such as semiconductor devices, manufactured for or sold to Huawei entities including HiSilicon under specific, detailed conditions set forth in the new regulations. These new regulations have impacted our sales to Huawei, HiSilicon and their suppliers. Teradyne is taking appropriate actions, including filing for licenses with the U.S. Department of Commerce. However, Teradyne cannot be certain that the actions it takes will mitigate the risks associated with the new export controls that impact its business. It is uncertain the extent these new regulations and any other additional regulations that may be implemented by the U.S. Department of Commerce or other government agency may have on Teradyne’s business and financial results.

On April 28, 2020, the U.S. Department of Commerce published new export control regulations for certain U.S. products and technology sold to military end users or for military end-use in China, Russia and Venezuela. The definition of military end user is broad. The regulations went into effect on June 29, 2020. In December 2020, the U.S. Department of Commerce issued a list of companies in China and other countries that it considered to be military end users. 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 continues to assess the impact of the new export controls on its business and operations and take appropriate actions, including filing for licenses with the U.S. Department of Commerce, to minimize any disruption. However, Teradyne cannot be certain that the actions it takes will mitigate all the risks associated with the new export controls that may impact its business.

In response to the regulations issued by the U.S. Department of Commerce, the Chinese government has passed new laws that may impact Teradyne’s business activities in China. The Company is assessing the potential impact of these new Chinese laws and monitoring relevant laws and regulations issued by the Chinese government.

The global pandemic of the 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, shutdowns, and vaccination mandates. 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. Most recently, on September 9, 2021, President Biden issued Executive Order 14042 requiring covered employees of certain Federal contractors and subcontractors to be “fully vaccinated,” unless legally entitled to an accommodation due to a disability or religious belief, practice, or observance. Additionally, on September 9, 2021, President Biden announced that he has directed the Occupational Safety and Health Administration (OSHA) to develop a rule mandating vaccination or weekly testing for employers with 100+ employees.  As Teradyne implements measures to comply with these new regulations, the Company may experience increased compliance costs, increased risk of non-compliance and increased risk of employee attrition.

The COVID-19 pandemic has adversely impacted the Company’s results of operations, including increased costs company-wide. The Company cannot accurately estimate the amount of the impact on Teradyne’s 2021 financial results and to its future financial results. The COVID-19 outbreak has significantly increased economic and demand uncertainty in Teradyne’s markets. This uncertainty resulted in a significant decrease in demand for certain Teradyne products and could continue to impact demand 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. 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 of the virus, its severity, the actions to contain the virus or the availability and impact of vaccines in countries where the Company does business, 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 continued impact of the COVID-19 pandemic 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 impact of the global semiconductor supply shortage on our supply chain and contract manufacturers; 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, 2020 and Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2021. 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 THIRD FISCAL QUARTER OF 2021          
              
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   
    
              
     Quarter Ended Nine Months Ended
     October 3,
2021
 July 4,
2021
 September 27,
2020
 October 3,
2021
 September 27,
2020
              
Net revenues $950,501  $1,085,728  $819,484  $2,817,835  $2,362,500 
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)  379,500   438,739   360,556   1,138,227   1,026,549 
              
Gross profit  571,001   646,989   458,928   1,679,608   1,335,951 
              
Operating expenses:          
 Selling and administrative  134,829   140,187   115,840   404,812   340,488 
 Engineering and development  107,220   110,021   94,909   317,644   274,170 
 Acquired intangible assets amortization  5,355   5,402   6,219   16,293   25,052 
 Restructuring and other (2)  1,197   2,507   (27,701)  (3,426)  1,915 
   Operating expenses  248,601   258,117   189,267   735,323   641,625 
              
Income from operations  322,400   388,872   269,661   944,285   694,326 
              
 Interest and other expense (3)  24,645   4,846   5,930   38,511   16,237 
              
Income before income taxes  297,755   384,026   263,731   905,774   678,089 
 Income tax provision  41,037   55,707   41,013   115,225   90,274 
Net income $256,718  $328,319  $222,718  $790,549  $587,815 
              
Net income per common share:          
Basic   $1.56  $1.98  $1.34  $4.77  $3.54 
Diluted   $1.41  $1.76  $1.21  $4.26  $3.23 
              
Weighted average common shares - basic  164,583   165,995   166,014   165,690   166,131 
              
Weighted average common shares - diluted (4)  181,987   186,750   184,338   185,492   181,777 
              
              
Cash dividend declared per common share $0.10  $0.10  $0.10  $0.30  $0.30 
              
              
              
(1)Cost of revenues includes: Quarter Ended Nine Months Ended
     October 3,
2021
 July 4,
2021
 September 27,
2020
 October 3,
2021
 September 27,
2020
   Provision for excess and obsolete inventory $8,149  $798  $3,479  $11,775  $13,116 
   Sale of previously written down inventory  (824)  (428)  (310)  (2,043)  (1,722)
   Inventory step-up  -   -   121   -   360 
     $7,325  $370  $3,290  $9,732  $11,754 
              
(2)Restructuring and other consists of: Quarter Ended Nine Months Ended
     October 3,
2021
 July 4,
2021
 September 27,
2020
 October 3,
2021
 September 27,
2020
   Employee severance $617  $436  $456  $1,242  $1,220 
   Acquisition related expenses and compensation  275   275   (1,086)  313   3,418 
   Contingent consideration fair value adjustment  -   -   (27,206)  (7,227)  (7,967)
   Contract termination settlement fee  -   -   -   -   4,000 
   Other  305   1,796   135   2,246   1,244 
     $1,197  $2,507  $(27,701) $(3,426) $1,915 
              
(3)Interest and other expense includes: Quarter Ended Nine Months Ended
     October 3,
2021
 July 4,
2021
 September 27,
2020
 October 3,
2021
 September 27,
2020
   Loss on convertible debt conversions $20,153  $1,175  $-  $25,397  $- 
   Non-cash convertible debt interest  2,262   3,277   3,629   9,120   10,752 
   Pension actuarial (gains) losses  -   (627)  2,688   (627)  2,589 
     $22,415  $3,825  $6,317  $33,890  $13,341 
              
(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 October 3, 2021, July 4, 2021 and September 27, 2020, 6.5 million, 9.6 million and 9.2 million shares, respectively, have been included in diluted shares. For the nine months ended October 3, 2021 and September 27, 2020, 8.8 million and 8.0 million shares, respectively, have been included in diluted shares. For the quarters ended October 3, 2021, July 4, 2021 and September 27, 2020, diluted shares also included 9.8 million, 10.1 million and 7.8 million shares, respectively, from the convertible note hedge transaction. For the nine months ended October 3, 2021 and September 27, 2020, diluted shares included 9.8 million and 6.4 million shares, respectively, from the convertible note hedge transaction.


CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)    
        
     October 3,
2021
 December 31,
2020
Assets      
 Cash and cash equivalents $1,079,454  $914,121 
 Marketable securities  233,397   522,280 
 Accounts receivable, net  597,124   497,506 
 Inventories, net  224,242   222,189 
 Prepayments and other current assets  386,967   259,338 
   Total current assets  2,521,184   2,415,434 
        
 Property, plant and equipment, net  390,545   394,800 
 Operating lease right-of-use assets, net  61,608   54,569 
 Marketable securities  136,664   117,980 
 Deferred tax assets  96,808   87,913 
 Retirement plans assets  16,958   17,468 
 Other assets  23,340   9,384 
 Acquired intangible assets, net  81,677   100,939 
 Goodwill  433,398   453,859 
        
   Total assets $3,762,182  $3,652,346 
        
Liabilities     
 Accounts payable $154,912  $133,663 
 Accrued employees' compensation and withholdings  196,928   220,321 
 Deferred revenue and customer advances  140,380   134,662 
 Other accrued liabilities  135,492   77,581 
 Operating lease liabilities  20,601   20,573 
 Income taxes payable  73,077   80,728 
 Current debt  32,219   33,343 
        
   Total current liabilities  753,609   700,871 
        
 Retirement plans liabilities  153,249   151,140 
 Long-term deferred revenue and customer advances  60,022   58,359 
 Long-term contingent consideration  -   7,227 
 Long-term other accrued liabilities  19,704   19,352 
 Deferred tax liabilities  6,907   10,821 
 Long-term operating lease liabilities  48,492   42,073 
 Long-term income taxes payable  67,041   74,930 
 Debt   112,784   376,768 
        
   Total liabilities  1,221,808   1,441,541 
        
Mezzanine equity  2,881   3,787 
        
Shareholders' equity  2,537,493   2,207,018 
        
   Total liabilities, convertible common shares and shareholders’ equity $3,762,182  $3,652,346 
        


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)        
            
     Quarter Ended Nine Months Ended
     October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020
Cash flows from operating activities:        
 Net income $256,718  $222,718  $790,549  $587,815 
 Adjustments to reconcile net income to net cash provided by operating activities:        
  Depreciation  22,018   19,806   67,866   58,111 
  Stock-based compensation  11,418   11,661   34,649   33,028 
  Amortization  8,283   10,343   27,626   36,577 
  Loss on convertible debt conversions  20,153   -   25,397   - 
  Provision for excess and obsolete inventory  8,149   3,479   11,775   13,116 
  Deferred taxes  (9,932)  2,616   (10,732)  (4,547)
  Gains on investments  (100)  (3,046)  (4,750)  (3,515)
  Retirement plans actuarial losses (gains)  -   2,688   (627)  2,589 
  Contingent consideration fair value adjustment  -   (27,206)  (7,227)  (7,967)
  Other  45   225   243   750 
            
  Changes in operating assets and liabilities, net of businesses acquired:       
   Accounts receivable  269,399   109,025   (103,299)  (222,015)
   Inventories  2,035   20,726   21,943   16,998 
   Prepayments and other assets  (21,148)  8,728   (138,564)  (40,751)
   Accounts payable and other liabilities  (21,726)  (32,020)  65,064   81,557 
   Deferred revenue and customer advances  (6,490)  7,934   8,699   36,589 
   Retirement plans contributions  (1,384)  (1,383)  (4,123)  (3,884)
   Income taxes  (14,778)  (13,782)  (17,406)  24,060 
Net cash provided by operating activities  522,660   342,512   767,083   608,511 
            
Cash flows from investing activities:        
 Purchases of property, plant and equipment  (29,205)  (62,858)  (103,162)  (146,872)
 Purchases of marketable securities  (111,384)  (188,880)  (509,470)  (488,428)
 Proceeds from maturities of marketable securities  111,064   126,423   571,277   309,407 
 Proceeds from sales of marketable securities  93,325   5,950   209,437   32,611 
 Purchase of investment and acquisition of businesses, net of cash acquired  -   -   (12,000)  149 
 Proceeds from life insurance  -   -   -   546 
Net cash provided by (used for) investing activities  63,800   (119,365)  156,082   (292,587)
            
Cash flows from financing activities:        
 Payments of convertible debt principal  (235,169)  -   (301,997)  - 
 Repurchase of common stock  (209,596)  -   (406,180)  (88,465)
 Dividend payments  (16,440)  (16,604)  (49,711)  (49,870)
 Payments related to net settlement of employee stock compensation awards  (251)  (216)  (32,045)  (22,735)
 Issuance of common stock under stock purchase and stock option plans  9   13,771   32,590   26,528 
 Payments of contingent consideration  -   -   -   (8,852)
Net cash used for financing activities  (461,447)  (3,049)  (757,343)  (143,394)
            
Effects of exchange rate changes on cash and cash equivalents  -   (349)  (489)  (1,274)
Increase in cash and cash equivalents  125,013   219,749   165,333   171,256 
Cash and cash equivalents at beginning of period  954,441   725,431   914,121   773,924 
Cash and cash equivalents at end of period $1,079,454  $945,180  $1,079,454  $945,180 
            


 

GAAP to Non-GAAP Earnings Reconciliation           
               
(In millions, except per share amounts)           
        Quarter Ended    
    October 3, 2021 % of Net Revenues July 4, 2021 % of Net Revenues September 27, 2020 % of Net Revenues
               
Net revenues $950.5    $1,085.7    $819.5   
               
Gross profit GAAP$571.0   60.1% $647.0  59.6% $458.9  56.0%
 Inventory step-up -   -   -  -   0.1  0.0%
Gross profit non-GAAP$571.0   60.1% $647.0  59.6% $459.0  56.0%
               
Income from operations - GAAP$322.4   33.9% $388.9  35.8% $269.7  32.9%
 Restructuring and other (1) 1.2   0.1%  2.5  0.2%  (27.7) -3.4%
 Acquired intangible assets amortization 5.4   0.6%  5.4  0.5%  6.2  0.8%
 Inventory step-up -   -   -  -   0.1  0.0%
Income from operations - non-GAAP$329.0   34.6% $396.8  36.5% $248.3  30.3%


      Net Income per Common Share     Net Income per Common Share     Net Income per Common Share
  October 3, 2021 % of Net Revenues Basic  Diluted July 4, 2021 % of Net Revenues Basic  Diluted September 27, 2020 % of Net Revenues Basic  Diluted
Net income - GAAP$256.7   27.0% $1.56  $1.41  $328.3  30.2% $1.98  $1.76  $222.7  27.2% $1.34  $1.21 
 Restructuring and other (1) 1.2   0.1%  0.01   0.01   2.5  0.2%  0.02   0.01   (27.7) -3.4%  (0.17)  (0.15)
 Acquired intangible assets amortization 5.4   0.6%  0.03   0.03   5.4  0.5%  0.03   0.03   6.2  0.8%  0.04   0.03 
 Loss on convertible debt conversions (2) 20.2   2.1%  0.12   0.11   1.2  0.1%  0.01   0.01   -  -   -   - 
 Interest and other (2) 2.3   0.2%  0.01   0.01   3.3  0.3%  0.02   0.02   3.6  0.4%  0.02   0.02 
 Pension mark-to-market adjustment (2) -   -   -   -   (0.6) -0.1%  (0.00)  (0.00)  2.7  0.3%  0.02   0.01 
 Inventory step-up -   -   -   -   -  -   -   -   0.1  0.0%  0.00   0.00 
 Exclude discrete tax adjustments (5.9)  -0.6%  (0.04)  (0.03)  (1.1) -0.1%  (0.01)  (0.01)  (4.4) -0.5%  (0.03)  (0.02)
 Non-GAAP tax adjustments (1.3)  -0.1%  (0.01)  (0.01)  (1.5) -0.1%  (0.01)  (0.01)  2.2  0.3%  0.01   0.01 
 Convertible share adjustment (3) -   -   -   0.06   -  -   -   0.10   -  -   -   0.06 
Net income - non-GAAP$278.6   29.3% $1.69  $1.59  $337.5  31.1% $2.03  $1.91  $205.4  25.1% $1.24  $1.18 
                         
GAAP and non-GAAP weighted average common shares - basic 164.6         166.0         166.0       
GAAP weighted average common shares - diluted 182.0         186.8         184.3       
 Exclude dilutive shares related to convertible note transaction (6.5)        (9.6)        (9.2)      
Non-GAAP weighted average common shares - diluted 175.5         177.2         175.2       
                         
(1)Restructuring and other consists of:                       
  Quarter Ended      
  October 3, 2021       July 4, 2021       September 27, 2020      
 Employee severance$0.6        $0.4        $0.5       
 Acquisition related expenses and compensation 0.3         0.3         (1.1)      
 Contingent consideration fair value adjustment -         -         (27.2)      
 Contract termination settlement fee -         -         -       
 Other 0.3         1.8         0.1       
  $1.2        $2.5        $(27.7)      
                         
                         
(2)For the quarters ended October 3, 2021, July 4, 2021, and September 27, 2020, Interest and other included non-cash convertible debt interest expense. For the quarters ended October 3, 2021 and July 4, 2021, adjustment to exclude loss on convertible debt conversions. For the quarters ended July 4, 2021 and September 27, 2020, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.     
                         
(3)For the quarters ended October 3, 2021, July 4, 2021, and September 27, 2020, the non-GAAP diluted EPS calculation adds back $0.4 million, $0.9 million, and $1.3 million, respectively, of convertible debt interest expense to non-GAAP net income, and non-GAAP weighted average diluted common shares include 9.8 million, 10.1 million and 7.8 million shares, respectively, from the convertible note hedge transaction.     


 

    Nine Months Ended
    October 3, 2021 % of Net Revenues September 27, 2020 % of Net Revenues
           
Net Revenues $2,817.8    $2,362.5   
           
Gross profit GAAP$1,679.6   59.6% $1,336.0  56.6%
 Inventory step-up -   -   0.4  0.0%
Gross profit non-GAAP$1,679.6   59.6% $1,336.4  56.6%
           
Income from operations - GAAP$944.3   33.5% $694.3  29.4%
 Restructuring and other (1) (3.4)  -0.1%  1.9  0.1%
 Acquired intangible assets amortization 16.3   0.6%  25.1  1.1%
 Inventory step-up -   -   0.4  0.0%
Income from operations - non-GAAP$957.2   34.0% $721.7  30.5%


        Net Income per Common Share     Net Income per Common Share
    October 3, 2021 % of Net Revenues Basic  Diluted September 27, 2020 % of Net Revenues Basic  Diluted
Net income - GAAP$790.5   28.1% $4.77  $4.26  $587.8  24.9% $3.54  $3.23 
 Restructuring and other (1) (3.4)  -0.1%  (0.02)  (0.02)  1.9  0.1%  0.01   0.01 
 Acquired intangible assets amortization 16.3   0.6%  0.10   0.09   25.1  1.1%  0.15   0.14 
 Loss on convertible debt conversions (2) 25.4   0.9%  0.15   0.14   -  -   -   - 
 Interest and other (2) 9.1   0.3%  0.05   0.05   10.8  0.5%  0.07   0.06 
 Pension mark-to-market adjustment (2) (0.6)  -0.0%  (0.00)  (0.00)  2.6  0.1%  0.02   0.01 
 Inventory step-up -   -   -   -   0.4  0.0%  0.00   0.00 
 Exclude discrete tax adjustments (22.1)  -0.8%  (0.13)  (0.12)  (13.1) -0.6%  (0.08)  (0.07)
 Non-GAAP tax adjustments (3.2)  -0.1%  (0.02)  (0.02)  (8.0) -0.3%  (0.05)  (0.04)
 Convertible share adjustment (3) -   -   -   0.22   -  -   -   0.16 
Net income - non-GAAP$812.0   28.8% $4.90  $4.61  $607.5  25.7% $3.66  $3.52 
                   
GAAP and non-GAAP weighted average common shares - basic 165.7         166.1       
GAAP weighted average common shares - diluted 185.5         181.8       
 Exclude dilutive shares from convertible note (8.8)        (8.0)      
Non-GAAP weighted average common shares - diluted 176.7         173.8       
                   
(1)Restructuring and other consists of:               
    Nine Months Ended      
    October 3, 2021       September 27, 2020      
  Contingent consideration fair value adjustment$(7.2)       $(8.0)      
  Employee severance 1.2         1.2       
  Acquisition related expenses and compensation 0.3         3.4       
  Contract termination settlement fee -         4.0       
  Other  2.2         1.2       
    $(3.4)       $1.9       
                   
(2)For the nine months ended October 3, 2021 and September 27, 2020, Interest and other included non-cash convertible debt interest expense. For the nine months ended October 3, 2021, adjustment to exclude loss on convertible debt conversions. For the nine months ended October 3, 2021 and September 27, 2020, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.
                   
(3)For the nine months ended October 3, 2021 and September 27, 2020, the non-GAAP diluted EPS calculation adds back $2.6 million and $3.9 million, respectively, of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 9.8 million and 6.4 million shares, respectively, related to the convertible debt hedge transaction.


GAAP to Non-GAAP Reconciliation of Fourth Quarter 2021 guidance:   
       
GAAP and non-GAAP four quarter revenue guidance:$820 millionto$900 million
GAAP net income per diluted share$1.08  $1.33 
 Exclude acquired intangible assets amortization 0.03   0.03 
 Exclude non-cash convertible debt interest 0.01   0.01 
 Tax effect of non-GAAP adjustments (0.01)  (0.01)
 Convertible share adjustment 0.02   0.03 
Non-GAAP net income per diluted share$1.14  $1.40 

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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