Financial Instruments

9 Months Ended

Sep. 29, 2024

Fair Value Disclosures [Abstract]

Financial Instruments

H. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with original maturities of 90 days or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne’s equity and debt mutual funds are classified as Level 1 and available-for-sale debt securities are classified as Level 2. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

During the three and nine months ended September 29, 2024, and October 1, 2023, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Realized gains recorded in the three and nine months ended September 29, 2024, were $0.8 million and $2.1 million, respectively. Realized gains recorded in the three and nine months ended October 1, 2023, were $0.1 million and $0.6 million,

respectively. Realized losses recorded in the three and nine months ended September 29, 2024, were $0.0 million and $0.3 million, respectively. Realized losses recorded in the three and nine months ended October 1, 2023, were $0.0 million and $0.3 million, respectively. Realized gains and losses are included in 'Other (income) expense, net' in the consolidated statement of operations.

Unrealized gains on equity securities recorded in the three and nine months ended September 29, 2024, were $2.2 million and $5.4 million, respectively. Unrealized gains on equity securities recorded in the three and nine months ended October 1, 2023, were $0.0 million and $4.6 million, respectively. There were no unrealized losses on equity securities recorded in the three and nine months ended September 29, 2024. Unrealized losses on equity securities recorded in the three and nine months ended October 1, 2023, were $1.7 million. Unrealized gains and losses on equity securities are included in 'Other (income) expense, net' in the consolidated statement of operations.

Unrealized gains and losses on available-for-sale debt securities are included in 'Accumulated other comprehensive income (loss)' in the consolidated balance sheet.

The cost of securities sold is based on average cost.

The following tables set forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of September 29, 2024, and December 31, 2023.

	September 29, 2024
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	198,946	$	—	$	—	$	198,946
Cash equivalents		308,000		3,090		—		311,090
Available-for-sale securities:
U.S. Treasury securities		—		41,833		—		41,833
Corporate debt securities		—		37,149		—		37,149
Certificates of deposit and time deposits		—		21,741		—		21,741
Debt mutual funds		8,640		—		—		8,640
U.S. government agency securities		—		3,931		—		3,931
Non-U.S. government securities		—		801		—		801
Equity securities:
Mutual funds		53,480		—		—		53,480
	$	569,066	$	108,545	$	—	$	677,611
Derivative assets		—		332		—		332
Total	$	569,066	$	108,877	$	—	$	677,943
Liabilities
Derivative liabilities		—		1,435		—	$	1,435
Total	$	—	$	1,435	$	—	$	1,435
Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	506,946	$	3,090	$	—	$	510,036
Marketable securities		—		41,631		—		41,631
Long-term marketable securities		62,120		63,824		—		125,944
Other current assets		—		332		—		332
Total	$	569,066	$	108,877	$	—	$	677,943
Liabilities
Other current liabilities		—		1,435		—		1,435
Total	$	—	$	1,435	$	—	$	1,435

	December 31, 2023
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	298,156	$	—	$	—	$	298,156
Cash equivalents		453,298		6,117		—		459,415
Available-for-sale securities:
Corporate debt securities		—		52,734		—		52,734
U.S. Treasury securities		—		41,808		—		41,808
Certificates of deposit and time deposits		—		21,772		—		21,772
Debt mutual funds		8,773		—		—		8,773
U.S. government agency securities		—		4,892		—		4,892
Commercial paper		—		1,667		—		1,667
Non-U.S. government securities		—		810		—		810
Equity securities:
Mutual Funds		47,132		—		—		47,132
	$	807,359	$	129,800	$	—	$	937,159
Derivative assets		—		18,746		—		18,746
Total	$	807,359	$	148,546	$	—	$	955,905
Liabilities
Derivative liabilities		—		2,545		—		2,545
Total	$	—	$	2,545	$	—	$	2,545
Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	751,454	$	6,117	$	—	$	757,571
Marketable securities		—		62,154		—		62,154
Long-term marketable securities		55,905		61,529		—		117,434
Other current assets		—		18,746		—		18,746
Total	$	807,359	$	148,546	$	—	$	955,905
Liabilities
Other current liabilities	$	—	$	2,545	$	—	$	2,545
Total	$	—	$	2,545	$	—	$	2,545

The carrying amounts and fair values of Teradyne’s financial instruments at September 29, 2024, and December 31, 2023, were as follows:

	September 29, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	510,036	$	510,036	$	757,571	$	757,571
Marketable securities		167,575		167,575		179,588		179,588
Derivative assets		332		332		18,746		18,746
Liabilities
Derivative liabilities		1,435		1,435		2,545		2,545

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

The following table summarizes the composition of available-for-sale marketable securities at September 29, 2024:

	September 29, 2024
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	45,522	$	106	$	(3,795	)	$	41,833	$	22,985
Corporate debt securities	$	39,986	$	323	$	(3,160	)	$	37,149	$	25,248
Certificates of deposit and time deposits		21,741		—		—			21,741		—
Debt mutual funds		8,846		—		(206	)		8,640		3,319
U.S. government agency securities		3,921		11		(1	)		3,931		876
Non-U.S. government securities		801		—		—			801		—
	$	120,817	$	440	$	(7,162	)	$	114,095	$	52,428

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	41,673		20	$	(62	)	$	41,631	$	9,973
Long-term marketable securities		79,144		420		(7,100	)		72,464		42,455
	$	120,817	$	440	$	(7,162	)	$	114,095	$	52,428

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2023:

	December 31, 2023
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Corporate debt securities	$	56,458	$	201	$	(3,925	)	$	52,734	$	44,263
U.S. Treasury securities		45,725		14		(3,931	)		41,808		35,080
Certificates of deposit and time deposits		21,772		—		—			21,772		—
Debt mutual funds		9,081		—		(308	)		8,773		3,303
U.S. government agency securities		4,898		—		(6	)		4,892		4,892
Commercial paper		1,633		34		—			1,667		—
Non-U.S. government securities		810		—		—			810		—
	$	140,377	$	249	$	(8,170	)	$	132,456	$	87,538

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	62,385	$	36	$	(267	)		62,154	$	34,844
Long-term marketable securities		77,992		213		(7,903	)		70,302		52,694
	$	140,377	$	249	$	(8,170	)	$	132,456	$	87,538

As of September 29, 2024, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $8.3 million and $44.1 million, respectively. As of December 31, 2023, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $22.3 million and $65.2 million, respectively.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at September 29, 2024, and December 31, 2023, were not other than temporary.

The contractual maturities of investments in available-for-sale securities held at September 29, 2024, were as follows:

	September 29, 2024
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	41,673	$	41,631
Due after 1 year through 5 years		25,690		25,729
Due after 5 years through 10 years		7,950		7,908
Due after 10 years		36,658		30,187
Total	$	111,971	$	105,455

Contractual maturities of investments in available-for-sale securities held at September 29, 2024, exclude debt mutual funds with a fair market value of $8.6 million as they do not have a contractual maturity date.

Derivatives

Teradyne conducts business in various foreign countries, with certain transactions denominated in local currencies. As a result, Teradyne is exposed to risks relating to changes in foreign currency exchange rates. Teradyne’s foreign currency risk management objective is to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, and changes in its cash inflows attributable to the forecasted cash flows from certain foreign currency denominated revenues.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.

Teradyne also enters into foreign currency forward and option contracts designated as cash flow hedges to hedge the risk of changes in its cash inflows attributable to changes in foreign currency exchange rates. The cash flow hedges have maturities of less than six months and mature in the period of revenue recognition for certain products and services in backlog and forecasted to be recognized in a future period. Teradyne evaluates cash flow hedges for effectiveness at inception based on the critical terms match method. The hedges are not expected to incur any ineffectiveness however a quarterly qualitative assessment of effectiveness is done to determine if the critical terms match method remains appropriate to use. The change in fair value of the contracts is recorded in accumulated other comprehensive income (loss) and reclassified to earnings at maturity date.

Teradyne does not use derivative financial instruments for speculative purposes.

At September 29, 2024, and December 31, 2023, Teradyne had the following contracts to buy and sell non-U.S. currencies for U.S. dollars and other non-U.S. currencies with the following notional amounts:

	Net Notional Value
	September 29, 2024		December 31, 2023
	(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Taiwan dollar		29.6		42.7
U.S. dollar/Japanese yen		21.7		11.0
U.S. dollar/Korean won		8.9		7.2
U.S. dollar/British pound sterling		1.0		1.5
U.S. dollar/Danish krone		—		36.0
Danish krone/U.S. dollar		25.7		0.7
Euro/U.S. dollar		24.8		25.3
Singapore dollar/U.S. dollar		23.0		16.6
Philippine peso/U.S. dollar		9.7		10.1
Chinese yuan/U.S. dollar		1.7		1.0
Total	$	146.1	$	152.1

The fair value of the outstanding contracts was a net loss of $0.8 million and a net loss of $1.8 million at September 29, 2024, and December 31, 2023, respectively.

Unrealized gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in 'Other (income) expense, net' in the consolidated statement of operations.

At September 29, 2024, and December 31, 2023, Teradyne had the following cash flow hedge contracts to buy and sell non-U.S. currencies for U.S. dollars with the following notional amounts:

	Net Notional Value
	September 29, 2024		December 31, 2023
	(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen	$	12.1	$	35.5
Total	$	12.1	$	35.5

The fair value of the outstanding cash flow hedge contracts was a loss of $0.3 million and a gain of $0.6 million at September 29, 2024, and December 31, 2023, respectively.

Unrealized gains and losses on foreign currency cash flow hedge contracts are included in accumulated other comprehensive income (loss). At maturity, the gains or losses associated with cash flow hedge contracts are recorded to revenue.

On November 7, 2023, in connection with Teradyne's agreement to acquire 10% investment in Technoprobe S.p.A, Teradyne purchased a call option to buy 481.0 million Euros. The expiration date of the option was April 26, 2024. On April 12, 2024, Teradyne entered into a forward to buy 481.0 million Euros which expired on May 23, 2024. At December 31, 2023, the fair value of the outstanding contract was $17.4 million. For the nine months ended September 29, 2024, a realized loss of $9.8 million was recorded in 'Other (income) expense, net' in the consolidated statement of operations.

The following table summarizes the fair value of derivative instruments as of September 29, 2024, and December 31, 2023:

	Balance Sheet Location	September 29, 2024			December 31, 2023
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		332			733
Foreign exchange forward contracts	Other current liabilities		(1,102	)		(2,545	)
Foreign exchange option contracts	Other current assets		—			17,364
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		—			648
Foreign exchange forward contracts	Other current liabilities		(333	)		—
Total derivatives		$	(1,103	)	$	16,200

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and nine months ended September 29, 2024, and October 1, 2023:

		For the Three Months  Ended					For the Nine Months  Ended
	Location of (Gains) Losses Recognized in Statement of Operations	September 29, 2024		October 1, 2023			September 29, 2024			October 1, 2023
		(in thousands)					(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts (1)	Other (income) expense, net	$	4,829	$	(1,886	)	$	686		$	(4,667	)
Foreign exchange option contracts	Other (income) expense, net		—		—			9,764			—
Derivatives designated as hedging instruments:
Foreign exchange forward and option contracts	Revenue		—		(3,960	)		(2,280	)		(2,008	)
Total Derivatives		$	4,829	$	(5,846	)	$	8,170		$	(6,675	)

(1)The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three and nine months ended September 29, 2024, net losses (gains) from remeasurement of monetary assets and liabilities denominated in foreign currencies were $(2.9) million and $3.1 million, respectively. For the three and nine months ended October 1, 2023, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $5.3 million and $12.3 million, respectively.

See Note I: “Debt” regarding derivatives related to the convertible senior notes.