Teradyne Reports Second Quarter 2020 Results
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Teradyne Reports Second Quarter 2020 Results

 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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