UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-06462

TERADYNE, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2272148
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
600 Riverpark Drive, North Reading, Massachusetts	01864
(Address of Principal Executive Offices)	(Zip Code)

978-370-2700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.125 per share	TER	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Emerging growth company	☐
Smaller reporting company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares outstanding of the registrant’s only class of Common Stock as of August 1, 2022 was 156,781,680 shares.

TERADYNE, INC.

INDEX

		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of July 3, 2022 and December 31, 2021		1
	Condensed Consolidated Statements of Operations for the Three and Six Months ended July 3, 2022 and July 4, 2021		2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended July 3, 2022 and July 4, 2021		3
	Condensed Consolidated Statements of Convertible Common Shares and Shareholders’ Equity for the Three and Six Months ended July 3, 2022 and July 4, 2021		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 3, 2022 and July 4, 2021		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		38
Item 4.	Controls and Procedures		39
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		39
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 4.	Mine Safety Disclosures		40
Item 6.	Exhibits		40

PART I

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 3, 2022			December 31, 2021
	(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents	$	572,023		$	1,122,199
Marketable securities		209,846			244,231
Accounts receivable, less allowance for credit losses of $1,849 and $2,012 at July 3, 2022 and December 31, 2021, respectively		683,739			550,749
Inventories, net		295,625			243,330
Prepayments		498,093			406,266
Other current assets		11,109			9,452
Total current assets		2,270,435			2,576,227
Property, plant and equipment, net		411,263			387,240
Operating lease right-of-use assets, net		66,661			68,807
Marketable securities		111,999			133,858
Deferred tax assets		126,639			102,428
Retirement plans assets		14,245			15,110
Other assets		26,942			24,096
Acquired intangible assets, net		62,509			75,635
Goodwill		397,733			426,024
Total assets	$	3,488,426		$	3,809,425
LIABILITIES
Current liabilities:
Accounts payable	$	175,606		$	153,133
Accrued employees’ compensation and withholdings		190,506			253,667
Deferred revenue and customer advances		163,127			146,185
Other accrued liabilities		133,881			124,187
Operating lease liabilities		17,770			19,977
Income taxes payable		106,863			88,789
Current debt		9,632			19,182
Total current liabilities		797,385			805,120
Retirement plans liabilities		141,884			151,141
Long-term deferred revenue and customer advances		50,357			54,921
Long-term other accrued liabilities		15,530			15,497
Deferred tax liabilities		3,143			6,327
Long-term operating lease liabilities		57,600			56,178
Long-term incomes taxes payable		59,135			67,041
Debt		64,796			89,244
Total liabilities		1,189,830			1,245,469
Commitments and contingencies (Note Q)
Mezzanine equity:
Convertible common shares		—			1,512
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 157,880 and 162,251 shares issued and outstanding at July 3, 2022 and December 31, 2021, respectively		19,735			20,281
Additional paid-in capital		1,721,586			1,811,545
Accumulated other comprehensive loss		(52,959	)		(5,948	)
Retained earnings		610,234			736,566
Total shareholders’ equity		2,298,596			2,562,444
Total liabilities, convertible common shares and shareholders’ equity	$	3,488,426		$	3,809,425

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report

on Form 10-K for the year ended December 31, 2021, are an integral part of the condensed consolidated financial statements.

1

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2022			2021			2022			2021
	(in thousands, except per share amount)
Revenues:
Products	$	697,954		$	951,945		$	1,323,829		$	1,612,453
Services		142,812			133,783			272,307			254,881
Total revenues		840,766			1,085,728			1,596,136			1,867,334
Cost of revenues:
Cost of products		274,674			388,845			517,690			656,629
Cost of services		59,703			49,894			117,124			102,098
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		334,377			438,739			634,814			758,727
Gross profit		506,389			646,989			961,322			1,108,607
Operating expenses:
Selling and administrative		139,533			140,187			279,718			269,984
Engineering and development		111,951			110,021			220,067			210,423
Acquired intangible assets amortization		4,871			5,402			9,934			10,938
Restructuring and other		2,044			2,507			17,758			(4,623	)
Total operating expenses		258,399			258,117			527,477			486,722
Income from operations		247,990			388,872			433,845			621,885
Non-operating (income) expense:
Interest income		(951	)		(633	)		(1,653	)		(1,441	)
Interest expense		913			5,566			1,925			11,569
Other (income) expense, net		9,436			(87	)		14,622			3,738
Income before income taxes		238,592			384,026			418,951			608,019
Income tax provision		40,805			55,707			59,236			74,188
Net income	$	197,787		$	328,319		$	359,715		$	533,831
Net income per common share:
Basic	$	1.24		$	1.98		$	2.24		$	3.21
Diluted	$	1.16		$	1.76		$	2.07		$	2.85
Weighted average common shares—basic		159,563			165,995			160,805			166,243
Weighted average common shares—diluted		171,159			186,750			173,367			187,245

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form 10-K for the year ended December 31, 2021, are an integral part of the condensed

consolidated financial statements.

2

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2022			2021			2022			2021
	(in thousands)
Net income	$	197,787		$	328,319		$	359,715		$	533,831
Other comprehensive income, net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively		(29,230	)		5,150			(37,307	)		(15,974	)
Available-for-sale marketable securities:
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(1,240), $436, $(2,573), and $(472), respectively		(4,522	)		1,494			(9,910	)		(1,776	)
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $77, $2, $59, $(121), respectively		274			3			209			(441	)
		(4,248	)		1,497			(9,701	)		(2,217	)
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(1), $(1), respectively		(2	)		(2	)		(3	)		(3	)
Other comprehensive (loss) income		(33,480	)		6,645			(47,011	)		(18,194	)
Comprehensive income	$	164,307		$	334,964		$	312,704		$	515,637

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form 10-K for the year ended December 31, 2021, are an integral part of the condensed

consolidated financial statements.

3

TERADYNE, INC.

CONDENSED STATEMENTS OF CONVERTIBLE COMMON SHARES

AND SHAREHOLDERS’ EQUITY

(Unaudited)

				Shareholders’ Equity
	Convertible Common Shares Value			Common Stock Shares			Common Stock Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Shareholders’ Equity
				(in thousands)
For the Three Months Ended July 3, 2022
Balance, April 3, 2022	$	—			161,053		$	20,132		$	1,711,690		$	(19,479	)	$	762,189		$	2,474,532
Net issuance of common stock under stock-based plans					33			4			(1,675	)								(1,671	)
Stock-based compensation expense											11,658									11,658
Repurchase of common stock					(3,206	)		(401	)								(333,933	)		(334,334	)
Cash dividends ($0.11 per share)																	(17,561	)		(17,561	)
Settlements of convertible notes					495			62			(149	)								(87	)
Exercise of convertible notes hedge call options					(495	)		(62	)		62									—
Cumulative-effect of change in accounting principle related to convertible debt																	1,752			1,752
Net income																	197,787			197,787
Other comprehensive loss														(33,480	)					(33,480	)
Balance, July 3, 2022	$	—			157,880		$	19,735		$	1,721,586		$	(52,959	)	$	610,234		$	2,298,596
For the Three Months Ended July 4, 2021
Balance, April 4, 2021	$	1,233			166,419		$	20,802		$	1,765,971		$	8,677		$	529,103		$	2,324,553
Net issuance of common stock under stock-based plans					215			27			14,283									14,310
Stock-based compensation expense											12,515									12,515
Repurchase of common stock					(1,190	)		(149	)								(155,846	)		(155,995	)
Cash dividends ($0.10 per share)																	(16,624	)		(16,624	)
Settlements of convertible notes					367			46			45,977									46,023
Exercise of convertible notes hedge call options					(367	)		(46	)		(46,291	)								(46,337	)
Convertible common shares		20,153									(20,153	)								(20,153	)
Net income																	328,319			328,319
Other comprehensive income														6,645						6,645
Balance, July 4, 2021	$	21,386			165,444		$	20,680		$	1,772,302		$	15,322		$	684,952		$	2,493,256
For the Six Months Ended July 3, 2022
Balance, December 31, 2021	$	1,512			162,251		$	20,281		$	1,811,545		$	(5,948	)	$	736,566		$	2,562,444
Net issuance of common stock under stock-based plans					585			73			(16,318	)								(16,245	)
Stock-based compensation expense											25,862									25,862
Repurchase of common stock					(4,956	)		(619	)								(545,179	)		(545,798	)
Cash dividends ($0.22 per share)																	(35,470	)		(35,470	)
Settlements of convertible notes					1,004			125			(306	)								(181	)
Exercise of convertible notes hedge call options					(1,004	)		(125	)		125									—
Cumulative-effect of change in accounting principle related to convertible debt		(1,512	)								(99,322	)					94,602			(4,720	)
Net income																	359,715			359,715
Other comprehensive loss														(47,011	)					(47,011	)
Balance, July 3, 2022	$	—			157,880		$	19,735		$	1,721,586		$	(52,959	)	$	610,234		$	2,298,596
For the Six Months Ended July 4, 2021
Balance, December 31, 2020	$	3,787			166,123		$	20,765		$	1,765,323		$	33,516		$	387,414		$	2,207,018
Net issuance of common stock under stock-based plans					885			111			211									322
Stock-based compensation expense											25,874									25,874
Repurchase of common stock					(1,564	)		(196	)								(202,988	)		(203,184	)
Cash dividends ($0.20 per share)																	(33,305	)		(33,305	)
Settlements of convertible notes					1,589			199			203,507									203,706
Exercise of convertible notes hedge call options					(1,589	)		(199	)		(205,014	)								(205,213	)
Convertible common shares		17,599									(17,599	)								(17,599	)
Net income																	533,831			533,831
Other comprehensive loss														(18,194	)					(18,194	)
Balance, July 4, 2021	$	21,386			165,444		$	20,680		$	1,772,302		$	15,322		$	684,952		$	2,493,256

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form 10-K for the year ended December 31, 2021, are an integral part of the condensed

consolidated financial statements.

4

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	July 3,			July 4,
	2022			2021
	(in thousands)
Cash flows from operating activities:
Net income	$	359,715		$	533,831
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation		44,460			45,848
Stock-based compensation		25,122			23,231
Amortization		10,095			19,343
Losses (gains) on investments		8,973			(4,650	)
Provision for excess and obsolete inventory		6,695			3,625
Deferred taxes		(23,597	)		(800	)
Contingent consideration fair value adjustments		—			(7,227	)
Loss on convertible debt conversions		—			5,244
Retirement plans actuarial gains		—			(627	)
Other		522			199
Changes in operating assets and liabilities
Accounts receivable		(146,384	)		(372,698	)
Inventories		(46,682	)		19,908
Prepayments and other assets		(94,751	)		(117,416	)
Accounts payable and other liabilities		(43,611	)		86,790
Deferred revenue and customer advances		14,163			15,189
Retirement plans contributions		(2,618	)		(2,739	)
Income taxes		10,815			(2,628	)
Net cash provided by operating activities		122,917			244,423
Cash flows from investing activities:
Purchases of property, plant and equipment		(89,743	)		(73,957	)
Purchases of marketable securities		(247,881	)		(398,086	)
Proceeds from maturities of marketable securities		139,652			460,213
Proceeds from sales of marketable securities		143,642			116,112
Purchase of investment		—			(12,000	)
Net cash (used for) provided by investing activities		(54,330	)		92,282
Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans		16,536			32,581
Repurchase of common stock		(532,799	)		(196,584	)
Payments of convertible debt principal		(42,292	)		(66,828	)
Dividend payments		(35,442	)		(33,271	)
Payments related to net settlement of employee stock compensation awards		(32,780	)		(31,794	)
Net cash used for financing activities		(626,777	)		(295,896	)
Effects of exchange rate changes on cash and cash equivalents		8,014			(489	)
(Decrease) increase in cash and cash equivalents		(550,176	)		40,320
Cash and cash equivalents at beginning of period		1,122,199			914,121
Cash and cash equivalents at end of period	$	572,023		$	954,441
Non-cash investing activities:
Capital expenditures incurred but not yet paid:	$	1,855		$	4,503

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form 10-K for the year ended December 31, 2021, are an integral part of the condensed

consolidated financial statements.

5

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. THE COMPANY

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s industrial automation products include collaborative robotic arms, autonomous mobile robots, and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Teradyne’s automatic test equipment and industrial automation products and services include:

• semiconductor test (“Semiconductor Test”) systems;

• storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

• wireless test (“Wireless Test”) systems; and

• industrial automation (“Industrial Automation”) products.

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts may have been reclassified to conform to the current year presentation. The December 31, 2021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 23, 2022, for the year ended December 31, 2021.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived assets, accounts receivable, income taxes, deferred tax assets and liabilities, pensions, warranties, and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and our markets. Management is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.

Convertible Debt

Teradyne adopted Accounting Standards Update (“ASU”) ASU 2020-06 – “Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity,” on January 1, 2022 using the modified retrospective method of adoption. Under ASU 2020-06, Teradyne accounts for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to interest expense. Teradyne uses the if-converted method in the diluted earnings per share (“EPS”) calculation for convertible instruments. As a result of adoption, Teradyne recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $6.6 million to long-term debt for unamortized debt discount, an increase of $1.8 million to deferred tax assets and an increase to retained earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was reduced to zero and additional paid-in capital was reduced by $99.3 million.

6

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For the six months ended July 3, 2022, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne’s consolidated financial statements.

D. INVESTMENT IN OTHER COMPANY

On June 1, 2021, Teradyne invested $12.0 million in MachineMetrics, Inc. (“MachineMetrics”), a private company that develops and sells products to improve manufacturing performance through automated machine data collection, alerting, and analytics. Teradyne’s investment in MachineMetrics aligns with its strategy of providing and investing in leading edge products for automating industrial production processes in growing markets. The investment was recorded at cost and is evaluated for impairment or an indication of changes in fair value resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on a quarterly basis. At July 3, 2022, the value of the investment was $12.0 million, and there were no changes during the three and six months ended July 3, 2022.

7

E. REVENUE

Disaggregation of Revenue

The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.

	Semiconductor Test						Industrial Automation
	System on-a-Chip		Memory		System Test		Universal Robots		Mobile Industrial Robots		AutoGuide		Wireless Test		Corporate and Eliminations			Total
	(in thousands)
For the Three Months Ended July 3, 2022 (1)
Timing of Revenue Recognition
Point in Time	$	395,211	$	74,790	$	118,692	$	80,409	$	16,730	$	1,071	$	60,765	$	(193	)	$	747,475
Over Time		64,253		7,094		16,010		2,104		668		73		3,089		—			93,291
Total	$	459,464	$	81,884	$	134,702	$	82,513	$	17,398	$	1,144	$	63,854	$	(193	)	$	840,766
Geographical Market
Asia Pacific	$	413,537	$	78,996	$	95,584	$	17,357	$	5,317	$	—	$	44,106	$	—		$	654,897
Americas		28,714		2,552		33,409		27,732		6,085		1,144		17,460		(193	)		116,903
Europe, Middle East and Africa		17,213		336		5,709		37,424		5,996		—		2,288		—			68,966
Total	$	459,464	$	81,884	$	134,702	$	82,513	$	17,398	$	1,144	$	63,854	$	(193	)	$	840,766
For the Three Months Ended July 4, 2021 (1)
Timing of Revenue Recognition
Point in Time	$	675,958	$	84,232	$	88,197	$	74,412	$	15,091	$	—	$	51,619	$	(146	)	$	989,363
Over Time		65,712		8,074		16,622		1,665		809		209		3,274		—			96,365
Total	$	741,670	$	92,306	$	104,819	$	76,077	$	15,900	$	209	$	54,893	$