Teradyne Reports Third Quarter 2019 Results

GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)
																Quarter Ended
			September 29, 2019			% of Net Revenues										June 30, 2019			% of Net Revenues								September 30, 2018			% of Net Revenues

Net revenues			$	582.0												$	564.2										$	566.8

Gross profit GAAP			$	345.0			59.3	%								$	323.9		57.4	%							$	333.7		58.9	%
	Inventory step-up			-			-										0.4		0.1	%								-		-
Gross profit non-GAAP			$	345.0			59.3	%								$	324.3		57.5	%							$	333.7		58.9	%

Income from operations - GAAP			$	154.9			26.6	%								$	134.0		23.8	%							$	143.6		25.3	%
	Acquired intangible assets amortization			9.6			1.6	%									10.1		1.8	%								11.1		2.0	%
	Equity modification charge (1)			2.1			0.4	%									-		-									-		-
	Restructuring and other (2)			(6.5	)		-1.1	%									(10.4	)	-1.8	%								1.7		0.3	%
	Inventory step-up			-			-										0.4		0.1	%								-		-
Income from operations - non-GAAP			$	160.1			27.5	%								$	134.1		23.8	%							$	156.4		27.6	%

										Net Income per Common Share											Net Income per Common Share											Net Income per Common Share
			September 29, 2019			% of Net Revenues				Basic			Diluted			June 30, 2019			% of Net Revenues		Basic			Diluted			September 30, 2018			% of Net Revenues		Basic			Diluted
Net income - GAAP			$	135.9			23.4	%		$	0.80		$	0.75		$	97.4		17.3	%	$	0.57		$	0.55		$	120.0		21.2	%	$	0.65		$	0.63
	Acquired intangible assets amortization			9.6			1.6	%			0.06			0.05			10.1		1.8	%		0.06			0.06			11.1		2.0	%		0.06			0.06
	Interest and other (3)			3.5			0.6	%			0.02			0.02			3.4		0.6	%		0.02			0.02			3.3		0.6	%		0.02			0.02
	Equity modification charge (1)			2.1			0.4	%			0.01			0.01			-		-			-			-			-		-			-			-
	Restructuring and other (2)			(6.5	)		-1.1	%			(0.04	)		(0.04	)		(10.4	)	-1.8	%		(0.06	)		(0.06	)		1.7		0.3	%		0.01			0.01
	Pension mark-to-market adjustment (3)			-			-				-			-			0.4		0.1	%		0.00			0.00			0.3		0.1	%		0.00			0.00
	Inventory step-up			-			-				-			-			0.4		0.1	%		0.00			0.00			-		-			-			-
	Exclude discrete tax adjustments (4)			(7.7	)		-1.3	%			(0.05	)		(0.04	)		13.9		2.5	%		0.08			0.08			0.3		0.1	%		0.00			0.00
	Non-GAAP tax adjustments			(3.5	)		-0.6	%			(0.02	)		(0.02	)		(2.0	)	-0.4	%		(0.01	)		(0.01	)		(3.4	)	-0.6	%		(0.02	)		(0.02	)
	Convertible share adjustment			-			-				-			0.02			-		-			-			0.02			-		-			-			0.01
Net income - non-GAAP			$	133.4			22.9	%		$	0.79		$	0.77		$	113.2		20.1	%	$	0.66		$	0.66		$	133.3		23.5	%	$	0.72		$	0.71

GAAP and non-GAAP weighted average common shares - basic				169.6													171.2											185.7
GAAP weighted average common shares - diluted				180.5													178.6											190.5
	Exclude dilutive shares related to convertible note transaction			(5.8	)												(6.2	)										(3.1	)
Non-GAAP weighted average common shares - diluted				174.7													172.4											187.4


(1)		For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.

(2)	Restructuring and other consists of:
			Quarter Ended
			September 29, 2019													June 30, 2019											September 30, 2018
		Contingent consideration fair value adjustment	$	(7.8	)											$	(11.7	)									$	(0.8	)
		Acquisition related expenses and compensation		0.5													0.5											0.8
		Employee severance		0.8													0.8											1.7
			$	(6.5	)											$	(10.4	)									$	1.7

(3)	For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 30, 2019 and September 30, 2018, adjustment to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(4)	For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, GAAP income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge.

			Nine Months Ended
			September 29, 2019			% of Net Revenues										September 30, 2018			% of Net Revenues

Net Revenues			$	1,640.3												$	1,581.2

Gross profit GAAP			$	956.6			58.3	%								$	910.9		57.6	%
	Inventory step-up			0.4			0.0	%									0.4		0.0	%
Gross profit non-GAAP			$	957.0			58.3	%								$	911.3		57.6	%

Income from operations - GAAP			$	382.0			23.3	%								$	361.5		22.9	%
	Acquired intangible assets amortization			30.4			1.9	%									28.6		1.8	%
	Equity modification charge (1)			2.1			0.1	%									-		-
	Restructuring and other (2)			(11.8	)		-0.7	%									3.8		0.2	%
	Inventory step-up			0.4			0.0	%									0.4		0.0	%
Income from operations - non-GAAP			$	403.1			24.6	%								$	394.3		24.9	%

										Net Income per Common Share											Net Income per Common Share
			September 29, 2019			% of Net Revenues				Basic			Diluted			September 30, 2018			% of Net Revenues		Basic			Diluted
Net income - GAAP			$	342.4			20.9	%		$	2.00		$	1.92		$	308.0		19.5	%	$	1.62		$	1.57
	Acquired intangible assets amortization			30.4			1.9	%			0.18			0.17			28.6		1.8	%		0.15			0.15
	Interest and other (3)			10.2			0.6	%			0.06			0.06			9.7		0.6	%		0.05			0.05
	Equity modification charge (1)			2.1			0.1	%			0.01			0.01			-		-			-			-
	Restructuring and other (2)			(11.8	)		-0.7	%			(0.07	)		(0.07	)		3.8		0.2	%		0.02			0.02
	Inventory step-up			0.4			0.0	%			0.00			0.00			0.4		0.0	%		0.00			0.00
	Pension mark-to-market adjustment (3)			0.4			0.0	%			0.00			0.00			0.2		0.0	%		0.00			0.00
	Exclude discrete tax adjustments (4)			(23.9	)		-1.5	%			(0.14	)		(0.13	)		(6.5	)	-0.4	%		(0.03	)		(0.03	)
	Non-GAAP tax adjustments			(9.0	)		-0.5	%			(0.05	)		(0.05	)		(8.7	)	-0.6	%		(0.05	)		(0.04	)
	Convertible share adjustment			-			-				-			0.06			-		-			-			0.03
Net income - non-GAAP			$	341.2			20.8	%		$	1.99		$	1.97		$	335.5		21.2	%	$	1.76		$	1.74

GAAP and non-GAAP weighted average common shares - basic				171.5													190.6
GAAP weighted average common shares - diluted				178.7													196.3
	Exclude dilutive shares from convertible note			(5.9	)												(4.0	)
Non-GAAP weighted average common shares - diluted				172.8													192.3

(1)		For the nine months ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.

(2)	Restructuring and other consists of:
			Nine Months Ended
			September 29, 2019													September 30, 2018
		Contingent consideration fair value adjustment	$	(16.5	)											$	(9.2	)
		Acquisition related expenses and compensation		2.3													4.1
		Employee severance		2.4													7.9
		Other		-													0.9
			$	(11.8	)											$	3.8

(3)	For the nine months ended September 29, 2019 and September 30, 2018, interest and other included non-cash convertible debt interest expense. For the nine months ended September 29, 2019 and September 30, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(4)	For the nine months ended September 29, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the nine months ended September 29, 2019, GAAP income tax 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.

GAAP to Non-GAAP Reconciliation of Fourth Quarter 2019 guidance:

GAAP and non-GAAP fourth quarter revenue guidance:						$590 million			to	$630 million
GAAP net income per diluted share						$	0.63			$	0.74
	Exclude acquired intangible assets amortization						0.06				0.06
	Exclude non-cash convertible debt interest						0.02				0.02
	Tax effect of non-GAAP adjustments						(0.01	)			(0.01	)
	Convertible share adjustment						0.03				0.03
Non-GAAP net income per diluted share						$	0.73			$	0.84

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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