Teradyne Reports Fourth Quarter and Fiscal Year 2022 Results


TERADYNE, INC. REPORT FOR FOURTH FISCAL QUARTER OF 2022

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


				Quarter Ended									Twelve Months Ended
				December 31, 2022			October 2, 2022			December 31, 2021			December 31, 2022			December 31, 2021

Net revenues				$	731,836		$	827,073		$	885,047		$	3,155,045		$	3,702,881
	Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)				311,387			341,694			357,998			1,287,894			1,496,225

Gross profit					420,449			485,379			527,049			1,867,151			2,206,656

Operating expenses:
	Selling and administrative				142,752			135,632			142,747			558,103			547,559
	Engineering and development				108,810			111,715			109,965			440,591			427,609
	Acquired intangible assets amortization				4,670			4,729			5,163			19,333			21,456
	Restructuring and other (2)				(2,369	)		1,796			12,738			17,185			9,312
			Operating expenses		253,863			253,872			270,613			1,035,212			1,005,936

Income from operations					166,586			231,507			256,436			831,939			1,200,720

	Interest and other (income) expense (3)				(28,651	)		5,310			1,256			(8,446	)		39,765

Income before income taxes					195,237			226,197			255,180			840,385			1,160,955
	Income tax provision				22,936			42,712			31,140			124,884			146,366
Net income				$	172,301		$	183,485		$	224,040		$	715,501		$	1,014,589

Net income per common share:
Basic				$	1.11		$	1.17		$	1.38		$	4.52		$	6.15
Diluted				$	1.04		$	1.10		$	1.26		$	4.22		$	5.53

Weighted average common shares - basic					155,762			156,364			162,769			158,434			164,960

Weighted average common shares - diluted (4)					165,468			166,733			178,020			169,734			183,625


Cash dividend declared per common share				$	0.11		$	0.11		$	0.10		$	0.44		$	0.40



(1)	Cost of revenues includes:			Quarter Ended									Twelve Months Ended
				December 31, 2022			October 2, 2022			December 31, 2021			December 31, 2022			December 31, 2021
			Provision for excess and obsolete inventory	$	11,787		$	12,234		$	3,700		$	31,452		$	15,475
			Sale of previously written down inventory		(828	)		(269	)		(434	)		(1,808	)		(2,477	)
				$	10,959		$	11,965		$	3,266		$	29,644		$	12,998

(2)	Restructuring and other consists of:			Quarter Ended									Twelve Months Ended
				December 31, 2022			October 2, 2022			December 31, 2021			December 31, 2022			December 31, 2021
			Employee severance	$	775		$	1,215		$	284		$	2,924		$	1,525
			Gain on sale of asset		(3,410	)		-			-			(3,410	)		-
			Litigation settlement		-			-			12,000			14,700			12,000
			Contingent consideration fair value adjustment		-			-			-			-			(7,227	)
			Other		266			581			454			2,971			3,014
				$	(2,369	)	$	1,796		$	12,738		$	17,185		$	9,312

(3)	Interest and other includes:			Quarter Ended									Twelve Months Ended
				December 31, 2022			October 2, 2022			December 31, 2021			December 31, 2022			December 31, 2021
			Pension actuarial gains	$	(25,592	)	$	-		$	(1,590	)	$	(25,584	)	$	(2,217	)
			Loss on convertible debt conversions		-			-			3,431			-			28,828
			Non-cash convertible debt interest		-			-			1,166			-			10,286
				$	(25,592	)	$	-		$	3,007		$	(25,584	)	$	36,897

(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 December 31, 2022, October 2, 2022, and December 31, 2021, 1.2 million, 1.5 million and 3.4 million shares, respectively, have been included in diluted shares. For the twelve months ended December 31, 2022 and December 31, 2021, 1.8 million and 7.4 million shares, respectively, have been included in diluted shares. For the quarters ended December 31, 2022, October 2, 2022 and December 31, 2021, diluted shares also included 7.9 million, 8.3 million and 10.5 million shares, respectively, from the convertible note hedge transaction. For the twelve months ended December 31, 2022 and December 31, 2021, diluted shares included 8.8 million and 10.0 million shares, respectively, from the convertible note hedge transaction.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

				December 31, 2022			December 31, 2021
Assets
	Cash and cash equivalents			$	854,773		$	1,122,199
	Marketable securities				39,612			244,231
	Accounts receivable, net				491,145			550,749
	Inventories, net				325,019			243,330
	Prepayments				532,962			406,266
	Other current assets				14,404			9,452
			Total current assets		2,257,915			2,576,227

	Property, plant and equipment, net				418,683			387,240
	Operating lease right-of-use assets, net				73,734			68,807
	Marketable securities				110,777			133,858
	Deferred tax assets				142,784			102,428
	Retirement plans assets				11,761			15,110
	Other assets				28,925			24,096
	Acquired intangible assets, net				53,478			75,635
	Goodwill				403,195			426,024
			Total assets	$	3,501,252		$	3,809,425

Liabilities
	Accounts payable			$	139,722		$	153,133
	Accrued employees' compensation and withholdings				212,266			253,667
	Deferred revenue and customer advances				148,285			146,185
	Other accrued liabilities				112,271			124,187
	Operating lease liabilities				18,594			19,977
	Income taxes payable				65,010			88,789
	Current debt				50,115			19,182

			Total current liabilities		746,263			805,120

	Retirement plans liabilities				116,005			151,141
	Long-term deferred revenue and customer advances				45,131			54,921
	Long-term other accrued liabilities				15,981			15,497
	Deferred tax liabilities				3,267			6,327
	Long-term operating lease liabilities				64,176			56,178
	Long-term income taxes payable				59,135			67,041
	Debt				-			89,244
			Total liabilities		1,049,958			1,245,469

Mezzanine equity					-			1,512
Shareholders' equity					2,451,294			2,562,444
			Total liabilities, convertible common shares and shareholders’ equity	$	3,501,252		$	3,809,425



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

				Quarter Ended						Twelve Months Ended
				December 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Cash flows from operating activities:
	Net income			$	172,301		$	224,040		$	715,501		$	1,014,589
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation			22,861			23,207			90,763			91,073
		Stock-based compensation			10,808			10,994			48,228			45,643
		Provision for excess and obsolete inventory			11,787			3,700			31,452			15,475
		Amortization			4,900			6,786			19,912			34,412
		Retirement plans actuarial gains			(25,592	)		(1,590	)		(25,584	)		(2,217	)
		Deferred taxes			(10,320	)		(6,573	)		(38,693	)		(17,305	)
		Gains on sale of asset			(3,410	)		-			(3,410	)		-
		(Gains) losses on investments			(1,451	)		(1,660	)		9,985			(6,410	)
		Contingent consideration fair value adjustment			-			-			-			(7,227	)
		Loss on convertible debt conversions			-			3,431			-			28,828
		Other			1,621			28			2,353			271

		Changes in operating assets and liabilities
			Accounts receivable		46,380			45,521			50,628			(57,778	)
			Inventories		(11,992	)		(15,448	)		(80,809	)		6,495
			Prepayments and other assets		(46,382	)		(37,282	)		(140,713	)		(175,846	)
			Accounts payable and other liabilities		11,911			64,435			(60,507	)		129,499
			Deferred revenue and customer advances		(337	)		1,174			(6,233	)		9,873
			Retirement plans contributions		(1,219	)		(1,282	)		(5,116	)		(5,405	)
			Income taxes		1,536			11,802			(29,834	)		(5,604	)
Net cash provided by operating activities					183,402			331,283			577,923			1,098,366

Cash flows from investing activities:
	Purchases of property, plant and equipment				(34,577	)		(29,310	)		(163,249	)		(132,472	)
	Purchases of marketable securities				(20,234	)		(152,311	)		(287,409	)		(661,781	)
	Proceeds from sales of marketable securities				8,858			57,029			268,058			266,466
	Proceeds from maturities of marketable securities				40,849			88,871			222,941			660,148
	Proceeds from sale of asset				3,410			-			3,410			-
	Purchase of investment				-			-			-			(12,000	)
Net cash (used for) provided by investing activities					(1,694	)		(35,721	)		43,751			120,361

Cash flows from financing activities:
	Dividend payments				(17,133	)		(16,266	)		(69,711	)		(65,977	)
	Payments of convertible debt principal				(14,754	)		(40,993	)		(66,759	)		(342,990	)
	Repurchase of common stock				(2,082	)		(193,820	)		(752,082	)		(600,000	)
	Payments related to net settlement of employee stock compensation awards				(183	)		(258	)		(33,170	)		(32,303	)
	Issuance of common stock under stock purchase and stock option plans				-			96			28,733			32,686
Net cash used for financing activities					(34,152	)		(251,241	)		(892,989	)		(1,008,584	)

Effects of exchange rate changes on cash and cash equivalents					(3,529	)		(1,576	)		3,889			(2,065	)
Increase (decrease) in cash and cash equivalents					144,027			42,745			(267,426	)		208,078
Cash and cash equivalents at beginning of period					710,746			1,079,454			1,122,199			914,121
Cash and cash equivalents at end of period				$	854,773		$	1,122,199		$	854,773		$	1,122,199

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