Table of Contents

 
 
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, 2022April 2, 2023
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 AugustMay 1, 20222023 was 156,781,680
155,038,743
shares.
 
 
Table of Contents
TERADYNE, INC.

TERADYNE, INC.

INDEX

     
Page No.
 
PART I. FINANCIAL INFORMATION

Item 1.

 

Financial Statements (Unaudited):

  

Condensed Consolidated Balance Sheets as of July 3, 2022April 2, 2023 and December 31, 20212022

   1 

Condensed Consolidated Statements of Operations for the Three and Six Months ended JulyApril 2, 2023 and April 3, 2022 and July 4, 2021

   2 

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended JulyApril 2, 2023 and April 3, 2022 and July 4, 2021

   3 

Condensed Consolidated Statements of Convertible Common Shares and Shareholders’ Equity for the Three Months Ended April 2, 2023 and Six Months ended JulyApril 3, 2022 and July 4, 2021

   4 

Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended JulyApril 2, 2023 and April 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

   2826 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

   38
Item 4.
Controls and Procedures
3932 

Item 4.

Controls and Procedures

33
PART II. OTHER INFORMATION

Item 1.

 

Legal Proceedings

   3933 

Item 1A.

 

Risk Factors

   3933 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

   4034 

Item 4.

 

Mine Safety Disclosures

   4034 

Item 6.

 

Exhibits

   4035 

Table of Contents
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)   0    0  
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 
          
   
April 2,
2023
  
December 31,
2022
 
        
   
(in thousands,
except per share amount)
 
ASSETS
         
Current assets:         
Cash and cash equivalents  $649,208  $854,773 
Marketable securities   92,895   39,612 
Accounts receivable, less allowance for credit losses of $1,973 and $1,955 at April 2, 2023 and December 31, 2022, respectively   455,334   491,145 
Inventories, net   352,058   325,019 
Prepayments   549,114   532,962 
Other current assets   13,367   14,404 
          
Total current assets   2,111,976   2,257,915 
Property, plant and equipment, net   432,381   418,683 
Operating lease
right-of-use
assets, net
   74,939   73,734 
Marketable securities   116,938   110,777 
Deferred tax assets   148,527   142,784 
Retirement plans assets   11,650   11,761 
Other assets   27,922   28,925 
Acquired intangible assets, net   49,246   53,478 
Goodwill   409,828   403,195 
          
Total assets  $3,383,407  $3,501,252 
          
LIABILITIES
         
Current liabilities:         
Accounts payable  $142,382  $139,722 
Accrued employees’ compensation and withholdings   119,433   212,266 
Deferred revenue and customer advances   119,355   148,285 
Other accrued liabilities   114,739   112,271 
Operating lease liabilities   19,985   18,594 
Income taxes payable   77,089   65,010 
Current debt   35,109   50,115 
          
Total current liabilities   628,092   746,263 
Retirement plans liabilities   121,303   116,005 
Long-term deferred revenue and customer advances   41,797   45,131 
Long-term other accrued liabilities   16,211   15,981 
Deferred tax liabilities   2,325   3,267 
Long-term operating lease liabilities   65,082   64,176 
Long-term incomes taxes payable   59,135   59,135 
          
Total liabilities   933,945   1,049,958 
          
Commitments and contingencies (Note P)         
SHAREHOLDERS’ EQUITY
         
Common stock, $0.125 par value, 1,000,000 shares authorized; 155,445 and 155,759 shares issued and outstanding at April 2, 2023 and December 31, 2022, respectively   19,431   19,470 
Additional
paid-in
capital
   1,772,352   1,755,963 
Accumulated other comprehensive loss   (36,466)   (49,868) 
Retained earnings   694,145   725,729 
          
Total shareholders’ equity   2,449,462   2,451,294 
          
Total liabilities and shareholders’ equity  $3,383,407  $3,501,252 
          
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, 2021,2022, are an integral part of the condensed consolidated financial statements.
 
1
Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
            
  
For the Three Months

Ended
 
For the Six Months

Ended
   
For the Three Months

Ended
 
  
July 3,
 
July 4,
 
July 3,
 
July 4,
   
April 2,
 
April 3,
 
  
2022
 
2021
 
2022
 
2021
   
2023
 
2022
 
                
  
(in thousands, except per share amount)
   
(in thousands, except per share
amount)
 
Revenues:      
Products  $697,954  $951,945  $1,323,829  $1,612,453   $473,418  $625,875 
Services   142,812   133,783   272,307   254,881    144,111   129,495 
                    
Total revenues   840,766   1,085,728   1,596,136   1,867,334    617,529   755,370 
Cost of revenues:      
Cost of products   274,674   388,845   517,690   656,629    198,665   243,016 
Cost of services   59,703   49,894   117,124   102,098    62,444   57,421 
                    
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)   334,377   438,739   634,814   758,727    261,109   300,437 
                    
Gross profit   506,389   646,989   961,322   1,108,607    356,420   454,933 
Operating expenses:      
Selling and administrative   139,533   140,187   279,718   269,984    150,955   140,185 
Engineering and development   111,951   110,021   220,067   210,423    105,762   108,116 
Acquired intangible assets amortization   4,871   5,402   9,934   10,938    4,802   5,063 
Restructuring and other   2,044   2,507   17,758   (4,623)    2,037   15,714 
                    
Total operating expenses   258,399   258,117   527,477   486,722    263,556   269,078 
                    
Income from operations   247,990   388,872   433,845   621,885    92,864   185,855 
Non-operating
(income) expense:
      
Interest income   (951)   (633)   (1,653)   (1,441)    (5,258)   (703) 
Interest expense   913   5,566   1,925   11,569    987   1,012 
Other (income) expense, net   9,436   (87)   14,622   3,738    51   5,187 
                    
Income before income taxes   238,592   384,026   418,951   608,019    97,084   180,359 
Income tax provision   40,805   55,707   59,236   74,188    13,553   18,431 
                    
Net income  $197,787  $328,319  $359,715  $533,831   $83,531  $161,928 
                    
Net income per common share:      
Basic  $1.24  $1.98  $2.24  $3.21   $0.54  $1.00 
                    
Diluted  $1.16  $1.76  $2.07  $2.85   $0.50  $0.92 
                    
Weighted average common shares—basic   159,563   165,995   160,805   166,243    155,904   162,048 
                    
Weighted average common shares—diluted   171,159   186,750   173,367   187,245    166,308   175,575 
                    
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, 2021,2022, are an integral part of the condensed
consolidated financial statements.
 
2
Table of Contents
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 
                  
   
For the Three Months

Ended
 
   
April 2,
  
April 3,
 
   
2023
  
2022
 
        
   
(in thousands)
 
Net income  $83,531  $161,928 
Other comprehensive income
 (loss)
, net of tax:
         
Foreign currency translation adjustment, net of tax of $0 and $0, respectively   9,309   (8,076) 
Available-for-sale
marketable securities:
         
Unrealized gains (losses) on marketable securities arising during period, net of tax of $503 and $(1,333), respectively   2,294   (5,388) 
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $2 and $(18), respectively   5   (65) 
          
    2,299   (5,453) 
Cash flow hedges:         
Unrealized gains arising during period, net
of
tax of $167, $0, respectively
   596   —   
Less: Reclassification adjustment for losses included in net income, net of tax of $338 and $0, respectively   1,200   —   
          
    1,796   —   
Defined benefit post-retirement plan:         
Amortization of prior service credit, net of tax of $0 and $0, respectively   (2)   (2) 
          
Other comprehensive income (loss)   13,402   (13,531) 
          
Comprehensive income  $96,933  $148,397 
          
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, 2021,2022, are an integral part of the condensed
consolidated financial statements.
 
3
Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE COMMON SHARES
AND SHAREHOLDERS’ EQUITY
(Unaudited)
 
    
Shareholders’ Equity
     
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
   
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)
     
(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 
For the Three Months Ended April 2, 2023
   
Balance, December 31, 2022  $—     155,759  $19,470  $1,755,963  $(49,868)  $725,729  $2,451,294 
Net issuance of common stock under stock-based plans    579   73   (3,943)   (3,870) 
Stock-based compensation expense    20,332   20,332 
Repurchase of common stock    (893)   (112)   (97,936)   (98,048) 
Cash dividends ($0.11 per share)    (17,179)   (17,179) 
Settlements of convertible notes    324   41   (41)   —   
Exercise of convertible notes hedge call options    (324)   (41)   41   —   
Net income    83,531   83,531 
Other comprehensive income    13,402   13,402 
                      
Balance, April 2, 2023  $—     155,445  $19,431  $1,772,352  $(36,466)  $694,145  $2,449,462 
                      
For the Three Months Ended April 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      33   4   (1,675)   (1,671)     552   70   (14,644)   (14,574) 
Stock-based compensation expense       11,658   11,658     14,204   14,204 
Repurchase of common stock      (3,206)   (401)   (333,933)   (334,334)     (1,750)   (219)   (211,247)   (211,466) 
Cash dividends ($0.11 per share)       (17,561)   (17,561)     (17,908)   (17,908) 
Settlements of convertible notes      495   62   (149)   (87)     509   64   (157)   (93) 
Exercise of convertible notes hedge call options      (495)   (62)   62   —       (509)   (64)   64   —   
Cumulative-effect of change in accounting principle related to convertible debt       1,752   1,752    (1,512)   (99,322)   92,850   (6,472) 
Net income       197,787   197,787     161,928   161,928 
Other comprehensive loss       (33,480)   (33,480)     (13,531)   (13,531) 
                                             
Balance, July 3, 2022  $—      157,880  $19,735  $1,721,586  $(52,959)  $610,234  $2,298,596 
Balance, April 3, 2022  $—     161,053  $20,132  $1,711,690  $(19,479)  $762,189  $2,474,532 
                                             
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, 2021,2022, are an integral part of the condensed
consolidated financial statements.
 
4
Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  
For the Six Months Ended
   
For the Three Months Ended
 
  
July 3,
 
July 4,
   
April 2,
 
April 3,
 
  
2022
 
2021
   
2023
 
2022
 
            
  
(in thousands)
   
(in thousands)
 
Cash flows from operating activities:      
Net income  $359,715  $533,831   $83,531  $161,928 
Adjustments to reconcile net income from operations to net cash provided by operating activities:      
Depreciation   44,460   45,848    22,680   22,503 
Stock-based compensation   25,122   23,231    18,885   12,894 
Provision for excess and obsolete inventory   5,610   1,590 
Amortization   10,095   19,343    4,926   5,233 
Losses (gains) on investments   8,973   (4,650) 
Provision for excess and obsolete inventory   6,695   3,625 
Deferred taxes   (23,597)   (800)    (7,634)   11,288 
Contingent consideration fair value adjustments   —     (7,227) 
Loss on convertible debt conversions   —     5,244 
Retirement plans actuarial gains   —     (627) 
(Gains) losses on investments   (2,238)   2,001 
Other   522   199    108   177 
Changes in operating assets and liabilities      
Accounts receivable   (146,384)   (372,698)    37,204   208 
Inventories   (46,682)   19,908    (23,697)   (9,480) 
Prepayments and other assets   (94,751)   (117,416)    (15,380)   (74,305) 
Accounts payable and other liabilities   (43,611)   86,790 
Accounts payable and other accrued expenses   (83,208)   (124,382) 
Deferred revenue and customer advances   14,163   15,189    (32,705)   6,747 
Retirement plans contributions   (2,618)   (2,739) 
Retirement plan contributions   (1,234)   (1,329) 
Income taxes   10,815   (2,628)    12,488   (7,611) 
              
Net cash provided by operating activities   122,917   244,423    19,336   7,462 
              
Cash flows from investing activities:      
Purchases of property, plant and equipment   (89,743)   (73,957)    (41,444)   (43,999) 
Purchases of marketable securities   (247,881)   (398,086)    (69,276)   (165,977) 
Proceeds from sales of marketable securities   7,929   30,581 
Proceeds from maturities of marketable securities   139,652   460,213    7,468   96,682 
Proceeds from sales of marketable securities   143,642   116,112 
Purchase of investment   —     (12,000) 
Proceeds from life insurance   460   —   
              
Net cash (used for) provided by investing activities   (54,330)   92,282 
Net cash used for investing activities   (94,863)   (82,713) 
              
Cash flows from financing activities:      
Issuance of common stock under stock purchase and stock option plans   16,536   32,581    15,997   16,475 
Repurchase of common stock   (532,799)   (196,584)    (93,308)   (201,465) 
Payments related to net settlement of employee stock compensation awards   (19,870)   (31,048) 
Dividend payments   (17,165)   (17,895) 
Payments of convertible debt principal   (42,292)   (66,828)    (15,155)   (20,694) 
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)    (129,501)   (254,627) 
              
Effects of exchange rate changes on cash and cash equivalents   8,014   (489)    (537)   2,282 
(Decrease) increase in cash and cash equivalents   (550,176)   40,320 
       
Decrease in cash and cash equivalents   (205,565)   (327,596) 
Cash and cash equivalents at beginning of period   1,122,199   914,121    854,773   1,122,199 
              
Cash and cash equivalents at end of period  $572,023  $954,441   $649,208  $794,603 
              
Non-cash
investing activities:
      
Capital expenditures incurred but not yet paid:  $1,855  $4,503   $3,823  $2,500 
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, 2021,2022, are an integral part of the condensed
consolidated financial statements.
 
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Table of Contents
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. THE COMPANY
Teradyne, Inc. (“Teradyne”) is a leading global supplier of automationautomated test equipment for test and industrial applications.robotics solutions. Teradyne designs, develops, manufactures and sells automatic test systems and robotics products. Teradyne’s automatic test systems are 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 automationrobotics products include collaborative robotic arms and autonomous mobile robots and advanced robotic control software(“AMRs”) 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 automationrobotics 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 automationrobotics (“Industrial Automation”Robotics”) 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, 20212022 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, 2022,22, 2023, for the year ended December 31, 2021.2022.
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, contingent consideration liabilities, 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 0 and additional
paid-in
capital was reduced by $99.3 million.
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C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For the sixthree months ended July 3, 2022,April 2, 2023, 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 0 changes during the three and six months ended July 3, 2022.
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E.
D. 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  $(146)  $1,085,728 
                                     
Geographical Market
                                    
Asia Pacific $710,995  $87,151  $61,230  $18,044  $2,439  $—    $45,802  $—    $925,661 
Americas  21,664   3,672   36,256   24,808   6,897   209   7,107   (146)   100,467 
Europe, Middle East and Africa  9,011   1,483   7,333   33,225   6,564   —     1,984   —     59,600 
                                     
Total
 $741,670  $92,306  $104,819  $76,077  $15,900  $209  $54,893  $(146)  $1,085,728 
                                     
For the Six Months Ended July 3, 2022 (2)
 
                            
Timing of Revenue Recognition
                                    
Point in Time $718,666  $163,513  $223,981  $163,591  $33,264  $1,281  $109,194  $(539)  $1,412,951 
Over Time  127,382   14,127   29,390   4,206   1,342   560   6,178   —     183,185 
                                     
Total
 $846,048  $177,640  $253,371  $167,797  $34,606  $1,841  $115,372  $(539)  $1,596,136 
                                     
Geographical Market
                                    
Asia Pacific $754,277  $172,147  $169,369  $35,978  $7,909  $—    $79,052  $—    $1,218,732 
Americas  58,428   4,598   70,017   55,880   13,952   1,841   27,147   (539)   231,324 
Europe, Middle East and Africa  33,343   895   13,985   75,939   12,745   —     9,173   —     146,080 
                                     
Total
 $846,048  $177,640  $253,371  $167,797  $34,606  $1,841  $115,372  $(539)  $1,596,136 
                                     
For the Six Months Ended July 4, 2021 (2)
 
                            
Timing of Revenue Recognition
                                    
Point in Time $1,040,148  $186,124  $207,511  $138,419  $29,155  $(120)  $89,499  $(289)  $1,690,447 
Over Time  121,752   14,015   30,145   3,259   876   548   6,292   —     176,887 
                                     
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289)  $1,867,334 
                                     
Geographical Market
                                    
Asia Pacific $1,098,231  $191,200  $160,750  $35,877  $5,886  $—    $79,334  $—    $1,571,278 
Americas  42,443   7,092   63,915   42,961   12,050   428   12,876   (289)   181,476 
Europe, Middle East and Africa  21,226   1,847   12,991   62,840   12,095   —     3,581   —     114,580 
                                     
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289)  $1,867,334 
                                     
   
Semiconductor Test
       
Robotics
            
   
System on-
a-Chip
   
Memory
   
System
Test
   
Universal
Robots
   
Mobile
Industrial
Robots
   
Wireless
Test
   
Corporate
and
Eliminations
  
Total
 
                                
   
(in thousands)
 
For the Three Months Ended April 2, 2023 (1)
                                       
Timing of Revenue Recognition
                                       
Point in Time  $273,275   $61,258   $56,857   $70,029   $15,959   $35,363   $—    $512,741 
Over Time   73,559    6,917    17,774    2,008    1,218    3,312    —     104,788 
                                        
Total
  $346,834   $68,175   $74,631   $72,037   $17,177   $38,675   $—    $617,529 
                                        
Geographical Market
                                       
Asia Pacific  $283,259   $63,695   $39,590   $13,217   $1,502   $23,231   $—    $424,494 
Americas   41,568    2,944    28,980    20,447    11,806    12,846    —     118,591 
Europe, Middle East and Africa   22,007    1,536    6,061    38,373    3,869    2,598    —     74,444 
                                        
Total
  $346,834   $68,175   $74,631   $72,037   $17,177   $38,675   $—    $617,529 
                                        
For the Three Months Ended April 3, 2022 (1)
                                       
Timing of Revenue Recognition
                                       
Point in Time  $323,456   $88,723   $105,288   $83,182   $16,744   $48,429   $(346)  $665,476 
Over Time   63,129    7,033    13,380    2,102    1,161    3,089    —     89,894 
                                        
Total
  $386,585   $95,756   $118,668   $85,284   $17,905   $51,518   $(346)  $755,370 
                                        
Geographical Market
                                       
Asia Pacific  $340,741   $93,151   $73,784   $18,621   $2,592   $34,946   $—    $563,835 
Americas   29,714    2,046    36,608    28,148    8,564    9,687    (346)   114,421 
Europe, Middle East and Africa   16,130    559    8,276    38,515    6,749    6,885    —     77,114 
                                        
Total
  $386,585   $95,756   $118,668   $85,284   $17,905   $51,518   $(346)  $755,370 
                                        
 
(1)
Includes $1.9$1.3 million and $4.2$2.3 million in 20222023 and 2021,2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606
“Revenue from Contracts with Customers.”
(2)
Includes $4.2 million and $7.3 million in 2022 and 2021, respectively, for leases of Teradyne’s systems recognized outside ASC 606
“Revenue from Contracts with Customers.”
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Contract Balances
During the three and six months ended JulyApril 2, 2023 and April 3, 2022, Teradyne recognized $25.1$50.7 million and $60.2$35.0 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. During the three and six months ended July 4, 2021, Teradyne recognized $22.0 million and $49.6 million, respectively, that was previously included within the deferred revenue and customer advances balances. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. As of July 3, 2022,April 2, 2023, Teradyne has $1,574had $1,240.7 million of unsatisfied performance obligations. Teradyne expects to recognize 90%88% of the remaining performance obligations in the next 12 months and 10%12% in
1-3
years.
Deferred revenue and customer advances consist of the following at July 3, 2022 and December 31, 2021, and are included in short and long-term deferred revenue and customer advances on the balance sheet:
   
April 2, 2023
   
December 31, 2022
 
         
   
(in thousands)
 
Maintenance, service and training  $70,609   $78,089 
Extended warranty   49,343    56,180 
Customer advances, undelivered elements and other   41,200    59,147 
           
Total deferred revenue and customer advances  $161,152   $193,416 
           
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Table of Contents
   
July 3,
   
December 31,
 
   
2022
   
2021
 
         
   
(in thousands)
 
Maintenance, service and training  $83,464   $81,826 
Extended warranty   65,791    64,168 
Customer advances, undelivered elements and other   64,229    55,112 
           
Total deferred revenue and customer advances  $213,484   $201,106 
           
Accounts Receivable
During the three and six months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne sold certain trade accounts receivables on a
non-recourse
basis to third-party financial institutions pursuant to factoring agreements. During the three months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, total trade accounts receivable sold under the factoring agreements were $37.6$34.2 million and $7.6 million, respectively. During the six months ended July 3, 2022 and July 4, 2021, total trade accounts receivable sold under the factoring agreements were $57.1 million and $14.9$19.4 million, respectively. Factoring fees for the sales of receivables were recorded in interest expense and were not material. Teradyne accounted for these transactions as sales of receivables and presented cash proceeds as cash provided by operating activities in the consolidated statements of cash flows.
F.
E. INVENTORIES

Inventories, net consisted of the following at July 3, 2022April 2, 2023 and December 31, 2021:2022:
 
  
July 3,
   
December 31,
 
  
2022
   
2021
   
April 2, 2023
   
December 31, 2022
 
                
  
(in thousands)
   
(in thousands)
 
Raw material  $193,907   $155,641   $264,035   $256,065 
Work-in-process
   36,184    37,740    43,987    37,982 
Finished goods   65,534    49,949    44,036    30,972 
                
  $295,625   $243,330   $352,058   $325,019 
                
Inventory reserves at July 3, 2022April 2, 2023 and December 31, 20212022 were $115.5$138.6 million and $114.1$136.8 million, respectively.
G.
F
. FINANCIAL INSTRUMENTS
Cash Equivalents
Teradyne considers all highly liquid investments with maturities of three months 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. Contingent consideration is classified as Level 3. 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 six months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
9
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R
ealized gains recorded in the three and six months ended July 3, 2022 were $0.1 million and $0.5 million, respectively. Realized gains recorded in the three and six months ended July 4, 2021April 2, 2023 and April 3, 2022 were $0.9$0.3 million and $2.0$0.4 million, respectively. Realized losses recorded in the three and six months ended JulyApril 2, 2023 and April 3, 2022 were $0.4$0.1 million and $0.6$0.2 million, respectively. NaN realized losses were recorded in the three and six months ended July 4, 2021. Realized gains and losses are included in other (income) expense, net.
Unrealized losses on equity securities recorded in the three and six months ended July 3, 2022 were $6.6 million and $8.8 million, respectively. NaN
unrealized gains on equity securities were recorded in the three and six months ended July 3, 2022. Unrealized gains on equity securities recorded in the three and six months ended July 4, 2021 wer
eApril 2, 2023 were $2.0 million and $3.3 million, respectively.million. Unrealized losses on equity securities recorded in the three and six months ended July 4, 2021April 3, 2022 were $0.7$2.2 million. Unrealized gains and losses on equity securities are included in other (income) expense, net.
Unrealized gains and losses on
available-for-sale
debt securities are included in accumulated other comprehensive income (loss). on the balance sheet.
The cost of securities sold is based on average cost.
The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of July 3, 2022April 2, 2023 and December 31, 2021.
   
July 3, 2022
 
   
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  $447,312   $—     $—     $447,312 
Cash equivalents   95,068    29,643    —      124,711 
Available-for-sale
securities:
                    
Commercial paper   —      150,443    —      150,443 
U.S. Treasury securities   —      73,100    —      73,100 
Corporate debt securities   —      49,344    —      49,344 
Debt mutual funds   6,514    —      —      6,514 
U.S. government agency securities   —      4,693    —      4,693 
Certificates of deposit and time deposits   —      1,261    —      1,261 
Non-U.S.
government securities
   —      546    —      546 
Equity securities:                    
Mutual funds   35,944    —      —      35,944 
                     
   $584,838   $309,030   $—     $893,868 
Derivative assets   —      103    —      103 
                     
Total  $584,838   $309,133   $—     $893,971 
                     
Liabilities                    
Derivative liabilities  $—     $233   $—     $233 
                     
Total  $—     $233   $—     $233 
                     
Reported as follows:
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                 
   
(in thousands)
 
Assets
        
Cash and cash equivalents  $542,380   $29,643   $—     $572,023 
Marketable securities   —      209,846    —      209,846 
Long-term marketable securities   42,458    69,541    —      111,999 
Prepayments and other current assets   —      103    —      103 
                     
Total  $584,838   $309,133   $—     $893,971 
                     
Liabilities   .                
Other current liabilities  $—     $233   $—     $233 
                     
Total  $—     $233   $—     $233 
                     
2022.
 
1
0
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December 31, 2021
 
   
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  $628,740   $—     $—     $628,740 
Cash equivalents   412,212    81,247    —      493,459 
Available-for-sale
securities:
                  —   
Commercial paper   —      189,620    —      189,620 
U.S. Treasury securities   —      77,789    —      77,789 
Corporate debt securities   —      56,901    —      56,901 
Debt mutual funds   7,971    —      —      7,971 
U.S. government agency securities   —      4,610    —      4,610 
Certificates of deposit and time deposits   —      1,356    —      1,356 
Non-U.S.
government securities
   —      589    —      589 
Equity securities:                    
Mutual Funds   39,253    —      —      39,253 
                     
   $1,088,176   $412,112   $—     $1,500,288 
Derivative assets   —      92    —      92 
                     
Total  $1,088,176   $412,204   $—     $1,500,380 
                     
Liabilities                    
Derivative liabilities   —      118    —      118 
                     
Total  $—     $118   $—     $118 
                     
   
April 2, 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  $244,542   $—     $—     $244,542 
Cash equivalents   252,374    152,292    —      404,666 
Available-for-sale
securities:
                    
U.S. Treasury securities   —      52,168    —      52,168 
Corporate debt securities   —      51,369    —      51,369 
Commercial paper   —      47,548    —      47,548 
U.S. government agency securities   —      7,394    —      7,394 
Debt mutual funds   6,800    —      —      6,800 
Certificates of deposit and time deposits   —      1,754    —      1,754 
Non-U.S.
government securities
   —      554    —      554 
Equity securities:                    
Mutual funds   42,246    —      —      42,246 
                     
Total  $545,962   $313,079   $—     $859,041 
                     
Liabilities                    
Derivative liabilities  $—     $1,980   $—     $1,980 
                     
Total  $—     $1,980   $—     $1,980 
                     
Reported as follows:
 
  
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                                
  
(in thousands)
   
(in thousands)
 
Assets
                    
Cash and cash equivalents  $1,040,952   $81,247   $—     $1,122,199   $496,916   $152,292   $—     $649,208 
Marketable securities   —      244,231    —      244,231    —      92,895    —      92,895 
Long-term marketable securities   47,224    86,634    —      133,858    49,046    67,892    —      116,938 
Prepayments and other current assets   —      92    —      92 
                                
Total  $1,088,176   $412,204   $—     $1,500,380   $545,962   $313,079   $—     $859,041 
                                
Liabilities                        
Other current liabilities  $—     $118   $—     $118   $—     $1,980   $—     $1,980 
                                
Total  $—     $118   $—     $118   $—     $1,980   $—     $1,980 
                                
Changes in the fair value of Level 3 contingent consideration for the six months ended July 3, 2022, and July 4, 2021 were as follows:9
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $—     $—     $—     $7,227 
Fair value adjustment (a)   —      —      —      (7,227) 
                     
Balance at end of period  $—     $—     $—     $—   
                     
(a)In the six months ended July 4, 2021, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide was reduced to zero, which resulted in a benefit of $7.2 million, primarily due to a decrease in forecasted revenues and earnings before interest and taxes.
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Table of Contents
On March 25, 2022, the arbitration claim filed by Industrial Automation LLC, sellers of AutoGuide, against Teradyne alleging
non-compliance
with the
   
December 31, 2022
 
   
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  $632,417   $—     $—     $632,417 
Cash equivalents   161,767    60,589    —      222,356 
Available for sale securities:                    
Corporate debt securities   —      50,856    —      50,856 
U.S. Treasury securities   —      39,649    —      39,649 
Commercial paper   —      7,159    —      7,159 
Debt mutual funds   6,580    —      —      6,580 
U.S. government agency securities   —      6,352    —      6,352 
Certificates of deposit and time deposits   —      1,740    —      1,740 
Non-U.S.
government securities
   —      535    —      535 
Equity securities:                    
Mutual funds   37,518    —      —      37,518 
                     
Total  $838,282   $166,880   $—     $1,005,162 
Derivative assets   —      86    —      86 
                     
Total  $838,282   $166,966   $—     $1,005,248 
                     
Liabilities                    
Derivative liabilities  $—     $4,215   $—     $4,215 
                     
Total  $—     $4,215   $—     $4,215 
                     
earn-out
provisions of the Membership Interests Purchase Agreement, datedReported as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide was settled f
or $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.follows:
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                 
   
(in thousands)
 
Assets                    
Cash and cash equivalents  $794,184   $60,589   $—     $854,773 
Marketable securities   —      39,612    —      39,612 
Long-term marketable securities   44,098    66,679    —      110,777 
Prepayments   —      86    —      86 
                     
Total  $838,282   $166,966   $—     $1,005,248 
                     
Liabilities                    
Other current liabilities  $—     $4,215   $—     $4,215 
                     
Total  $—     $4,215   $—     $4,215 
                     
The carrying amounts and fair values of Teradyne’s financial instruments at July 3, 2022April 2, 2023 and December 31, 20212022 were as follows:
   
April 2, 2023
   
December 31, 2022
 
   
Carrying Value
   
Fair Value
   
Carrying Value
   
Fair Value
 
                 
   
(in thousands)
 
Assets                    
Cash and cash equivalents  $649,208   $649,208   $854,773   $854,773 
Marketable securities   209,833    209,833    150,389    150,389 
Derivative assets
   —      —      86    86 
Liabilities                    
Derivative liabilities
   1,980    1,980    4,215    4,215 
Convertible debt   35,109    119,586    50,115    139,007 
10
   
July 3, 2022
   
December 31, 2021
 
   
Carrying Value
   
Fair Value
   
Carrying Value
   
Fair Value
 
                 
   
(in thousands)
 
Assets
        
Cash and cash equivalents  $572,023   $572,023   $1,122,199   $1,122,199 
Marketable securities   321,845    321,845    378,089    378,089 
Derivative assets   103    103    92    92 
Liabilities                    
Derivative liabilities   233    233    118    118 
Convertible debt   74,428    233,339    108,426    604,648 
Table of Contents
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 July 3, 2022:April 2, 2023:
 
   
July 3, 2022
 
   
Available-for-Sale
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Commercial paper  $150,695   $
8
   $(260)  $150,443   $137,162 
U.S. Treasury securities   75,962    42    (2,904)   73,100    71,861 
Corporate debt securities   53,274    147    (4,077)   49,344    46,289 
Debt mutual funds   6,783    —      (269)   6,514    3,245 
U.S. government agency securities   4,786    —      (93)   4,693    4,693 
Certificates of deposit and time deposits   1,261    —      —     1,261    —   
Non-U.S.
government securities
   546    —      —     546    —   
                         
   $293,307   $197   $(7,603)  $285,901   $263,250 
                         
   
April 2, 2023
 
   
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  $55,615   $38   $(3,485)  $52,168   $49,669 
Corporate debt securities   56,040    41    (4,712)   51,369    49,131 
Commercial paper   47,225    337    (14)   47,548    16,845 
U.S. government agency securities   7,427    9    (42)   7,394    4,419 
Debt mutual funds   7,130    —      (330)   6,800    3,312 
Certificates of deposit and time deposits   1,754    —      —     1,754    —   
Non-U.S.
government securities
   554    —      —     554    —   
                         
   $175,745   $425   $(8,583)  $167,587   $123,376 
                         
Reported as follows:
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $210,598   $8   $(760)  $209,846   $195,003 
Long-term marketable securities   82,709    189    (6,843)   76,055    68,247 
                         
   $293,307   $197   $(7,603)  $285,901   $263,250 
                         
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2
Table of Contents
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $92,915   $337   $(357)  $92,895   $60,438 
Long-term marketable securities   82,830    88    (8,226)   74,692    62,938 
                         
   $175,745   $425   $(8,583)  $167,587   $123,376 
                         
The following table summarizes the composition of
available-for-sale
marketable securities at December 31, 2021:2022:
   
December 31, 2022
 
   
Available-for-Sale
     
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Corporate debt securities  $57,006   $3   $(6,153)  $50,856   $50,667 
U.S. Treasury securities   44,030    —      (4,381)   39,649    39,649 
Commercial paper   7,089    70    —     7,159    —   
Debt mutual funds   6,997    —      (417)   6,580    3,095 
U.S. government agency securities   6,442    —      (90)   6,352    6,352 
Certificates of deposit and time deposits   1,740    —      —     1,740    —   
Non-U.S.
government securities
   535    —      —     535    —   
                         
   $123,839   $73   $(11,041)  $112,871   $99,763 
                         
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Table of Contents
   
December 31, 2021
 
   
Available-for-Sale
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Commercial paper  $189,614   $15   $(9)  $189,620   $22,784 
U.S. Treasury securities   77,707    551    (470)   77,789    46,435 
Corporate debt securities   52,266    4,863    (227)   56,901    19,422 
Debt mutual funds   7,928    43    —     7,971    —   
U.S. government agency securities   4,617    5    (12)   4,610    3,296 
Certificates of deposit and time deposits   1,356    —      —     1,356    —   
Non-U.S.
government securities
   589    —      —     589    —   
                         
   $334,077   $5,477   $(718)  $338,836   $91,937 
                         
Reported as follows:
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $244,213   $64   $(46)  $244,231   $54,798 
Long-term marketable securities   89,864    5,413    (672)   94,605    37,139 
                         
   $334,077   $5,477   $(718)  $338,836   $91,937 
                         
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $39,950   $70   $(408)  $39,612   $30,713 
Long-term marketable securities   83,889    3    (10,633)   73,259    69,050 
                         
   $123,839   $73   $(11,041)  $112,871   $99,763 
                         
As of July 3, 2022,April 2, 2023, the fair ma
rketmarket value of investments with unrealized losses less than one year and greater than one year totaled $252.4$68.4 million and $10.9$55.0 million, respectively. As of December 31, 2021,2022, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $85.4$66.3 million and $6.5$33.4 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 July 3, 2022April 2, 2023 and December 31, 20212022 were not other than temporary.
The contractual maturities of investments in
available-for-sale
securities held at July 3, 2022April 2, 2023 were as follows:
 
   
July 3, 2022
 
   
Cost
   
Fair Market

Value
 
         
   
(in thousands)
 
Due within one year  $210,598   $209,846 
Due after 1 year through 5 years   32,283    31,069 
Due after 5 years through 10 years   5,055    4,736 
Due after 10 years   38,588    33,736 
           
Total  $286,524   $279,387 
           
   
April 2, 2023
 
   
Cost
   
Fair Market

Value
 
         
   
(in thousands)
 
Due within one year  $92,915   $92,895 
Due after 1 year through 5 years   31,721    30,672 
Due after 5 years through 10 years   5,022    4,612 
Due after 10 years   38,957    32,608 
           
Total  $168,615   $160,787 
           
Contractual maturities of investments in
available-for-sale
securities held at July 3, 2022April 2, 2023 exclude debt mutual funds with a fair market value of $6.5$6.8 million, as they do not have a contractual maturity date.
Derivatives
Teradyne conducts business in a number ofvarious foreign countries, with certain transactions denominated in local currencies. The purpose ofAs 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 onassociated 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 monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.revenues.
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3
Table of Contents
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.
12
Table of Contents
At July 3, 2022April 2, 2023 and December 31, 2021,2022, 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:
 
   
July 3, 2022
  
December 31, 2021
 
   
Buy

Position
  
Sell

Position
   
Net

Total
  
Buy

Position
  
Sell

Position
   
Net

Total
 
                      
   
(in millions)
 
Japanese Yen  $(32.5)  $—     $(32.5)  $(31.4)  $—     $(31.4) 
Taiwan Dollar   (27.2)   —      (27.2)   (35.1)   —      (35.1) 
Korean Won   (3.1)   —      (3.1)   (4.2)   —      (4.2) 
British Pound Sterling   (1.0)   —      (1.0)   (1.8)   —      (1.8) 
Singapore Dollar   —     40.0    40.0   —     61.9    61.9 
Euro   —     39.8    39.8   —     44.9    44.9 
Philippine Peso   —     3.2    3.2   —     3.9    3.9 
Chinese Yuan   —     2.8    2.8   —     2.8    2.8 
                            
Total  $(63.8)  $85.8   $22.0  $(72.5)  $113.5   $41.0 
                            
   
April 2, 2023
  
December 31, 2022
 
   
Buy

Position
  
Sell

Position
   
Net

Total
  
Buy

Position
  
Sell

Position
   
Net

Total
 
                      
   
(in millions)
 
Japanese Yen  $(57.7)  $—     $(57.7)  $(37.1)  $—     $(37.1) 
Taiwan Dollar   (38.3)   —      (38.3)   (29.2)   —      (29.2) 
Korean Won   (3.1)   —      (3.1)   (6.4)   —      (6.4) 
British Pound Sterling   (1.2)   —      (1.2)   (1.2)   —      (1.2) 
Singapore Dollar   —     35.7    35.7   —     33.5    33.5 
Euro   —     24.3    24.3   —     38.4    38.4 
Philippine Peso   —     2.5    2.5   —     2.7    2.7 
Chinese Yuan   —     1.9    1.9   —     2.2    2.2 
                            
Total  $(100.3)  $64.4   $(35.9)  $(73.9)  $76.8   $2.9 
                            
The fair value of the outstanding contracts was a loss of $0.1$1.1 million and $0.1$0.9 million, respectively, at July 3, 2022April 2, 2023 and December 31, 2021.2022.
GainsUnrealized 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.
At April 2, 2023 and December 31, 2022, 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:
   
April 2, 2023
   
December 31, 2022
 
   
Buy

Position
  
Sell

Position
   
Net

Total
   
Buy

Position
  
Sell

Position
   
Net

Total
 
                       
   
(in millions)
 
Japanese Yen  $(13.6)  $30.2   $16.6   $(23.4)  $61.2   $37.8 
Taiwan Dollar   —     —      —      (5.5)   10.9    5.4 
                             
Total  $(13.6)  $30.2   $16.6   $(28.9)  $72.1   $43.2 
                             
The fair value of the outstanding cash flow hedge contracts was a loss of $0.9 
million and $3.2 million at April 2, 2023 and December 31, 2022, 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.
The following table summarizes the fair value of derivative instruments as of July 3, 2022April 2, 2023 and December 31, 2021:2022:
   
Balance Sheet Location
   
April 2,

2023
   
December 31,

2022
 
             
       
(in thousands)
 
Derivatives not designated as hedging instruments:               
Foreign exchange forward contracts   Prepayments   $—     $86 
Foreign exchange forward contracts   Other current liabilities    (1,057)    (990) 
Derivatives designated as hedging instruments:               
Foreign exchange option contracts   Other current liabilities    (923)    (3,225) 
                
Total derivatives       $(1,980)   $(4,129) 
                
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Table of Contents
   
Balance Sheet

Location
  
July 3,

2022
   
December 31,
2021
 
            
      
(in thousands)
 
Derivatives not designated as hedging instruments:
             
Foreign exchange contracts  Prepayments  $103   $92 
Foreign exchange contracts  Other current liabilities   (233)    (118) 
              
Total derivatives     $(130)   $(26) 
              
The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and six months ended JulyApril 2, 2023 and April 3, 2022 and July 4, 2021:
   
Location of (Gains) Losses
  
For the Three Months

Ended
   
For the Six Months

Ended
 
   
Recognized in
  
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
Statement of Operations
  
2022
   
2021
   
2022
   
2021
 
                    
      
(in thousands)
 
Derivatives not designated as hedging instruments:
                    
Foreign exchange contracts  Other (income) expense, net $(1,703)   $1,531   $(3,455)   $3,650 
2022:
 
       
For the Three Months

Ended
 
   
Location of Losses (Gains)

Recognized in Statement

of Operations
   
April 2, 2023
   
April 3, 2022
 
             
       
(in thousands)
 
Derivatives not designated as hedging instruments:               
Foreign exchange forward contracts   Other (income) expense, net   $1,259   $(1,752) 
Derivatives designated as hedging instruments:               
Foreign exchange option contracts   Revenue    1,538    —   
                
Total Derivatives       $2,797   $(1,752) 
                
The above 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 six months ended JulyApril 2, 2023 and April 3, 2022 net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.7$0.4 million, and $8.0$4.3 million, respectively. For the three and six months ended July 4, 2021, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.1 million and $0.3 million, respectively.
See Note H:G: “Debt” regarding derivatives related to the convertible senior notes.

H.G
. DEBT
Convertible Senior Notes
On December 12, 2016, Teradyne completed a private offering of $
460.0
$460.0 million aggregate principal amount of
1.25
% 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023 and received net proceeds, after issuance costs, of approximately $
450.8
$450.8 million, $
33.0
$33.0 million of which was used to pay the net cost of the convertible note hedge transactions an
d
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$
50.1
and $50.1 million of which was used to repurchase
2.0
 million shares of Teradyne’s common stock under its existing stock repurchase program from purchasers of the Notes in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the pricing of the Note offering. The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest at a rate of
1.25
% 1.25% per year
payable semiannually in arrears on June 15 and December 15 of each year
.year. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, only under the following circumstances: (1) during any calendar quarter beginning after
March 31, 2017
(and (and only during such calendar quarter), if the closing sale price of Teradyne’s common stock, for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than
130
% 130% of the conversion price on each applicable trading day; (2) during the
5
five business day period after any
5
five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $
1,000
$1,000 principal amount of Notes for each trading day of the measurement period was less than
98
% 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after
September 15, 2023,
until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its future conversion obligation by paying cash for the principal amount of the Notes and paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election for the amount in excess of principal. On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash. As of July 3, 2022,April 2, 2023, the conversion price was approximately $
31.49
$31.44 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances. As of AugustMay 5, 2022,2023, one hundred and sixthirty debt holders had exercised the option to convert $
386.4
$427.2 million worth of notes.
Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of $31.49.$31.44.
Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold
net-share-settled
(or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions currently cover, subject to customary anti-dilution adjustments, approximately 14.6 million shares of common stock. As of July 3, 2022,April 2, 2023, the strike price of the warrants was approximately $39.52$39.46 per share. The strike price is subject to adjustment under certain circumstances. The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.
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The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant. The net cost of the Note Hedge Transactions, after being partially offset by the proceeds from the sale of the warrants, was approximately $33.0 million.
In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.
Originally, Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component, which represented a discount to the debt and was amortized to interest expense using the effective interest method through December 2023. Effective January 1, 2022, Teradyne adopted ASC
2020-06
using the modified retrospective method of transition and accounts for the debt as a single liability measured at its amortized cost. As a result of the adoption, Teradyne recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $
1.8
$1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, 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 0zero and additional
paid-in
capital was reduced by $99.3$100.8 million.
On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash.
Debt issuance fees of approximately $0.3 million, at July 3, 2022, are beingApril 2, 2023, have been fully amortized to interest expense using the effective interest method over the seven-year term of the
Notes.
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The tables below tables represent the key components of Teradyne’s convertible senior notes:
 
  
July 3,

2022
   
December 31,
2021
   
April 2,

2023
   
December 31,

2022
 
                
  
(in thousands)
   
(in thousands)
 
Debt principal  $74,688   $116,980   $35,109   $50,228 
Unamortized debt issuance fees (1)   260    8,554    —      113 
                
Net Carrying amount of convertible debt  $74,428   $108,426 
Net carrying amount of convertible debt  $35,109   $50,115 
                
Teradyne’s convertible senior notes were reported as current debt at April 2, 2023 and December 31, 2022.
ReportedThe interest expense on Teradyne’s convertible senior notes for the three months ended April 2, 2023 and April 3, 2022 was as follows:
 
   
July 3,

2022
   
December 31,
2021
 
         
   
(in thousands)
 
Current debt  $9,632   $19,182 
Long-term debt   64,796    89,244 
           
Net carrying amount of convertible debt  $74,428   $108,426 
           
   
For the Three Months

Ended
   
For the Six Months
Ended
 
   
July 3,

2022
   
July 4,

2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Contractual interest expense on the coupon  $121   $1,072   $432   $2,311 
Amortization of debt issuance fees recognized as interest expense (2)   64    3,511    130    7,347 
                     
Total interest expense on the convertible debt  $185   $4,583   $562   $9,658 
                     
(1)
Unamortized debt issuance fees as of December 31, 2021 include unamortized debt discount of $
8.1
 million, which was eliminated with the adoption of ASU
2020-6
on January 1, 2022.
(2)
Three and six months ended July 4, 2021 includes the amortization of debt discount component, which was eliminated with the adoption of ASU
2020-06
on January 1, 2022.
   
For the Three Months

Ended
 
   
April 2,

2023
   
April 3,

2022
 
         
   
(in thousands)
 
Contractual interest expense on the coupon  $138   $311 
Amortization of the issue fees recognized as interest expense   113    66 
           
Total interest expense on the convertible debt  $251   $377 
           
As of July 3, 2022,April 2, 2023, the conversion price was approximately $31.49$31.44 per share and the
if-converted
if converted value of the notes was $203.5$120.0 million.
During the six months ended July 3, 2022, twenty-five debt holders elected to convert $42.3 million of debt principal. The conversion of the debt was settled in cash for principal amount and in shares for the excess of conversion value over principal amount. The 1.0 million shares issued to the debt holders were received from exercising the convertible notes hedge call options.
Additional conversions of approximately $9.6$2.3 million of debt principal will occur in the thirdsecond quarter of 2022 and the liability is included in current debt.2023.
Teradyne expects to make principal interest payments of $0.9$0.4 million in the next 12 months and $0.5 million thereafter.months.
Revolving Credit Facility
On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provided for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”).
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On December 10, 2021, the Credit Agreement was amended to extend the maturity date of the Credit Facility to December 10, 2026. On October 5, 2022, the Credit Agreement was amended to increase the amount of the Credit Facility to $750.0 million from $400.0 million.
The amended Credit Agreement provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders the available incremental amount under the Credit Facility, not to exceed the greater of $200.0 million or 15% of consolidated EBIDTA. The interest rate applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.00% to 0.75% per annum or LIBORSOFR plus a margin ranging from 1.00%1.10% to 1.75%1.85% per annum, based on the consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.15% to 0.25% per annum, based on the then applicable consolidated leverage ratio.
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Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBORSOFR breakage costs.
The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarterquarter: a consolidated leverage ratio and an interest coverage ratio.
The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.
As of AugustMay 5, 2022,2023, the Credit Agreement was undrawn and Teradyne has 0t borrowed any funds under the credit facility and was in compliance with all covenants.covenants under the Credit Agreement.
I.
H
. PREPAYMENTS
Prepayments consist of the following:
   
April 2,

2023
   
December 31,

2022
 
         
   
(in thousands)
 
Contract manufacturer and supplier prepayments  $494,849   $491,105 
Prepaid taxes   22,677    18,625 
Prepaid maintenance and other services   16,591    14,545 
Other prepayments   14,997    8,687 
           
Total prepayments  $549,114   $532,962 
           
I
   
July 3,
   
December 31,
 
   
2022
   
2021
 
         
   
(in thousands)
 
Contract manufacturer and supplier prepayments  $460,727   $364,478 
Prepaid maintenance and other services   17,421    13,660 
Prepaid taxes   8,675    15,090 
Other prepayments   11,270    13,038 
           
Total prepayments  $498,093   $406,266 
           
J.. PRODUCT WARRANTY
Teradyne generally provides a
one-year
warranty on its products, commencing upon installation, acceptance or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.​​​​​​​​​​​​​​
   
For the Three Months

Ended
 
   
April 2,

2023
   
April 3,

2022
 
         
   
(in thousands)
 
Balance at beginning of period  $14,181   $24,577 
Accruals for warranties issued during the period   4,117    4,100 
Accruals related to
pre-existing
warranties
   (405)    (2,758) 
Settlements made during the period   (4,992)    (5,814) 
           
Balance at end of period  $12,901   $20,105 
           
16
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $20,105   $23,893   $24,577   $16,633 
Accruals for warranties issued during the period   6,429    10,197    10,530    22,078 
Accruals related to
pre-existing
warranties
   (1,611)    (3,450)    (4,370)    (3,003) 
Settlements made during the period   (8,887)    (4,964)    (14,701)    (10,032) 
                     
Balance at end of period  $16,036   $25,676   $16,036   $25,676 
                     
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When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in short and long-term deferred revenue and customer advances.​​​​​​​​​​​​​​
   
For the Three Months

Ended
 
   
April 2,

2023
   
April 3,

2022
 
         
   
(in thousands)
 
Balance at beginning of period  $56,180   $64,168 
Deferral of new extended warranty revenue   4,413    11,774 
Recognition of extended warranty deferred revenue   (11,250)    (10,216) 
           
Balance at end of period  $49,343   $65,726 
           
J
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $65,726   $53,908   $64,168   $51,929 
Deferral of new extended warranty revenue   9,788    16,290    21,563    23,805 
Recognition of extended warranty deferred revenue   (9,723)    (6,673)    (19,940)    (12,209) 
                     
Balance at end of period  $65,791   $63,525   $65,791   $63,525 
                     

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K.. STOCK-BASED COMPENSATION
On February 1, 2023 (the” Retirement Date”), Mark E. Jagiela retired as Chief Executive Officer of Teradyne and a member of Teradyne’s Board of Directors, and Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Jagiela. Under the Retirement Agreement, Mr. Jagiela’s unvested time-based restricted stock units and stock options granted prior to his Retirement Date were modified to allow continued vesting; and any vested options or options that vest during that period may be exercised for the remainder of the applicable option term. During the three months ended April 2, 2023, Teradyne recorded a stock based compensation expense of $5.9 million related to the Retirement Agreement.
Under Teradyne’s stock compensation plans, Teradyne grants service-basedtime-based restricted stock units, performance-based restricted stock units and stock options, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).
Service-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted stock unit awards granted to
non-employee
directors vest after a
one-year
period, with 100% of the award vesting on the earlier of (a) the first anniversary of the grant date or (b) the date of the following year’s Annual Meeting of Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to service-basedtime-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.
Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.
PRSUs granted to Teradyne’s executive officers may also have a performance metric based on three-year cumulative
non-GAAP
profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue.
Non-GAAP
PBIT is a financial measure equal to GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses;
non-cash
convertible debt interest expense; and other
non-recurring
gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant date to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the retirement and termination eligibility provisions noted below.
If a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will
17
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vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.
Stock
options to purchase Teradyne’s common stock at
100
% 100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a maximum term of seven years.
years
During the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne granted 0.40.5 million and 0.30.4 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $111.21$102.36 and $113.23, respectively, and $0.1 million of service-based restricted stock unit awards to
non-employee
directors at a weighted average grant date fair value of $106.91 and $127.77,$111.31, respectively.
During the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $102.23 and $110.84, and $113.65, respectively.
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During the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne granted 0.1 million of TSR PRSUs, with a grant date fair value of $101.06$137.64 and $125.02,$101.06, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:​​​​​​​
 
   
For the Six Months

Ended
 
   
July 3,
2022
  
July 4,
2021
 
Risk-free interest rate   1.4%   0.2% 
Teradyne volatility-historical   47.1%   43.9% 
NYSE Composite Index volatility-historical   22.7%   22.9% 
Dividend yield   0.4%   0.4% 
   
For the Three Months

Ended
 
   
April 2,

2023
  
April 3,

2022
 
Risk-free interest rate   3.9%   1.4% 
Teradyne volatility-historical   50.2%   47.1% 
NYSE Composite Index volatility-historical   24.8%   22.7% 
Dividend yield   0.4%   0.4% 
Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index over the most recent three-year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $112.12$103.44 for the 20222023 grant and an estimated annual dividend amount of $0.40$0.44 per share divided by Teradyne’s stock price on the grant date of $113.48$112.12 for the 20212022 grant.
During the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $40.90 and $39.01, and $36.60, respectively.
The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
 
   
For the Six Months

Ended
 
        
   
July 3,
2022
  
July 4,
2021
 
Expected life (years)   4.0   5.0 
Risk-free interest rate   1.6%   0.4% 
Volatility-historical   43.7%   37.8% 
Dividend yield   0.4%   0.4% 
   
For the Three Months

Ended
 
   
April 2,

2023
  
April 3,

2022
 
Expected life (years)   4.0   4.0 
Risk-free interest rate   3.7%   1.6% 
Volatility-historical   46.7%   43.7% 
Dividend yield   0.4%   0.4% 
Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $112.12$103.44 for the 20222023 grant and an estimated annual dividend amount of $0.40$0.44 per share divided by Teradyne’s stock price on the grant date of $113.48$112.12 for the 20212022 grant.
 
19

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L.
K
. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss), which are presented net of tax, consist of the following:
 
   
Foreign

Currency

Translation

Adjustment
   
Unrealized

Gains

(Losses) on

Marketable

Securities
   
Retirement

Plans Prior

Service

Credit
   
Total
 
                 
   
(in thousands)
 
Six Months Ended July 3, 2022
        
Balance at December 31, 2021, net of tax of $0, $1,055, $(1,128), $0, respectively  $(10,818)   $3,704   $1,166   $(5,948) 
Other comprehensive loss before reclassifications, net of tax of $0, $(2,573), $0, respectively   (37,307)    (9,910)    —     $(47,217) 
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $59, $(1), respectively   —      209    (3)    206 
                     
Net current period other comprehensive loss, net of tax of $0, $(2,514), $(1), respectively   (37,307)    (9,701)    (3)    (47,011) 
                     
Balance at July 3, 2022, net of tax of $0, $(1,459), $(1,129), respectively  $(48,125)   $(5,997)   $1,163   $(52,959) 
                     
Six Months Ended July 4, 2021
                    
Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126), respectively  $25,389   $6,954   $1,173   $33,516 
Other comprehensive loss before reclassifications, net of tax of $0, $(472), $0, respectively   (15,974)    (1,776)    —      (17,750) 
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(121), $(1), respectively   —      (441)    (3)    (444) 
                     
Net current period other comprehensive loss, net of tax of $0, $(593), $(1), respectively   (15,974)    (2,217)    (3)    (18,194) 
                     
Balance at July 4, 2021, net of tax of $0, $1,317, $(1,127), respectively  $9,415   $4,737   $1,170   $15,322 
                     
   
Foreign

Currency

Translation

Adjustment
  
Unrealized
(Losses)
Gains on

Marketable

Securities
  
Unrealized
(Losses)
Gains on
Cash Flow
Hedges
  
Retirement

Plans
Prior

Service

Credit
  
Total
 
                 
   
(in thousands)
 
Three Months Ended April 2, 2023
                     
Balance at December 31, 2022, net of tax of $0, $(2,308), $(708), $(1,130), respectively  $(39,849)  $(8,661)  $(2,517)  $1,159  $(49,868) 
Other comprehensive gain before reclassifications, net of tax of $0, $503, $167, $0, respectively   9,309   2,294   596   —     12,199 
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $2, $338, $0, respectively   —     5   1,200   (2)   1,203 
                      
Net current period other comprehensive gain (loss), net of tax of $0, $505, $505 $0, respectively   9,309   2,299   1,796   (2)   13,402 
                      
Balance at April 2, 2023, net of tax of $0, $(1,803), $(203), $(1,130) respectively  $(30,540)  $(6,362)  $(721)  $1,157  $(36,466) 
                      
Three Months Ended April 3, 2022
                     
Balance at December 31, 2021, net of tax of $0, $1,055, $0, $(1,128), respectively  $(10,818)  $3,704  $—    $1,166  $(5,948) 
Other comprehensive loss before reclassifications, net of tax of $0, $(1,333), $0, $0, respectively   (8,076)   (5,388)   —     —     (13,464) 
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(18), $0, $0, respectively   —     (65)   —     (2)   (67) 
                      
Net current period other comprehensive loss, net of tax of $0, $(1,351), $0, $0, respectively   (8,076)   (5,453)   —     (2)   (13,531) 
                      
Balance at April 3, 2022, net of tax of $0, $(296), $0, $(1,128), respectively  $(18,894)  $(1,749)  $—    $1,164  $(19,479) 
                      
Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and six months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021 were as follows:
 
Details about Accumulated Other Comprehensive Income (Loss) Components
  
For the Three Months

Ended
  
For the Six Months

Ended
   
Affected Line Item
in the Statements
of Operations
   
July 3,
2022
  
July 4,
2021
  
July 3,
2022
  
July 4,
2021
    
                 
   
(in thousands)
    
Available-for-sale
marketable securities:
       
Unrealized (losses) gains, net of tax of $(77), $(2), $(59), $121, respectively  $(274)  $(3)  $(209)  $441   Other (income)
 
expense, net
Defined benefit postretirement plan:                    
Amortization of prior service credit, net of tax of $0, $0, $1, $1, respectively   2   2   3   3   (a)
                     
Total reclassifications, net of tax of $(77), $(2), $(58), $122, respectively  $(272)  $(1)  $(206)  $444   Net income
                     
Details about Accumulated Other Comprehensive Income (Loss) Components
  
For the Three Months

Ended
   
Affected Line Item

in the Statements

of Operations
 
   
April 2,
   
April 3,
     
   
2023
   
2022
     
             
   
(in thousands)
     
Available-for-sale
marketable securities:
               
Unrealized (losses) gains, net of tax of $(2) and $18, respectively  $(5)   $65    Other (income)
expense, net		 
 
Cash flow hedges:               
Unrealized losses, net of tax of $(338) and $0, respectively   (1,200)    —      Revenue 
Defined benefit pension and postretirement plans:               
Amortization of prior service benefit, net of tax of $0 and $0, respectively   2    2    (a) 
                
Total reclassifications, net of tax of $(340) and $18, respectively  $(1,203)   $67    Net income 
                
 
(a)
The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note P:
O
: “Retirement Plans.”
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L
. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC
350-10,
“Intangibles—Goodwill and Other”
on December 31 of each fiscal year unless interim indicators of impairment exist. In the sixthree months ended July 3, 2022,April 2, 2023, there were no interim indicators of impairment. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.
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The changes in the carrying amount of goodwill by reportable segments for the sixthree months ended July 3, 2022,April 2, 2023, were as follows:
 
   
Industrial

Automation
  
Wireless
Test
  
Semiconductor
Test
  
System
Test
  
Total
 
                 
   
(in thousands)
 
Balance at December 31, 2021
                     
Goodwill  $405,971  $361,819  $262,101  $158,699  $1,188,590 
Accumulated impairment losses   —     (353,843)   (260,540)   (148,183)   (762,566) 
                      
Total Goodwill   405,971   7,976   1,561   10,516   426,024 
                      
Foreign currency translation adjustment   (28,225)   —     (66)   —     (28,291) 
                      
Balance at July 3, 2022                     
Goodwill   377,746   361,819   262,035   158,699   1,160,299 
Accumulated impairment losses   —     (353,843)   (260,540)   (148,183)   (762,566) 
                      
Total Goodwill  $377,746  $7,976  $1,495  $10,516  $397,733 
                      
   
Robotics
   
Wireless

Test
  
Semiconductor

Test
  
System

Test
  
Total
 
                  
   
(in thousands)
 
Balance at December 31, 2022                      
Goodwill  $383,166   $361,819  $262,077  $158,699  $1,165,761 
Accumulated impairment losses   —      (353,843)   (260,540)   (148,183)   (762,566) 
                       
    383,166    7,976   1,537   10,516   403,195 
Foreign currency translation adjustment   6,609    —     24   —     6,633 
                       
Balance at April 2, 2023                      
Goodwill   389,775    361,819   262,101   158,699   1,172,394 
Accumulated impairment losses   —      (353,843)   (260,540)   (148,183)   (762,566) 
                       
   $389,775   $7,976  $1,561  $10,516  $409,828 
                       
Intangible Assets
Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:
 
   
Gross

Carrying

Amount
   
Accumulated

Amortization
   
Foreign Currency
Translation
Adjustment
   
Net

Carrying

Amount
 
                 
Balance at July 3, 2022
  
(in thousands)
 
Developed technology  $272,547   $(229,766)   $(6,182)   $36,599 
Customer relationships   57,739    (50,058)    149    7,830 
Tradenames and trademarks   59,387    (39,706)    (1,601)    18,080 
                     
Total intangible assets  $389,673   $(319,530)   $(7,634)   $62,509 
                     
Balance, December 31, 2021                    
Developed technology  $272,547   $(223,413)   $(4,093)   $45,041 
Customer relationships   57,739    (48,921)    209    9,027 
Tradenames and trademarks   59,387    (37,237)    (583)    21,567 
                     
Total intangible assets  $389,673   $(309,571)   $(4,467)   $75,635 
                     
   
Gross

Carrying

Amount
   
Accumulated

Amortization
   
Foreign

Currency

Translation

Adjustment
   
Net

Carrying

Amount
 
                 
   
(in thousands)
 
Balance at April 2, 2023     
Developed technology  $270,967   $(237,269)   $(5,560)   $28,138 
Customer relationships   57,739    (51,756)    184    6,167 
Tradenames and trademarks   59,387    (43,101)    (1,345)    14,941 
                     
Total intangible assets  $388,093   $(332,126)   $(6,721)   $49,246 
                     
Balance, December 31, 2022                    
Developed technology  $270,967   $(234,208)   $(5,935)   $30,824 
Customer relationships   57,739    (51,186)    172    6,725 
Tradenames and trademarks   59,387    (41,930)    (1,528)    15,929 
                     
Total intangible assets  $388,093   $(327,324)   $(7,291)   $53,478 
                     
Aggregate intangible asset amortization expense was $4.9 million and $9.9 million, respectively, for the three and six months ended JulyApril 2, 2023 and April 3, 2022 and $5.4was $4.8 million and $10.9$5.1 million, respectively, for the three and six months ended July 4, 2021.respectively.
Estimated intangible asset amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
 
  
Year
  
Amortization Expense
   
Amortization Expense
 
  
(in thousands)
   
(in thousands)
 
2022  $9,547 
2023   18,642   $14,219 
2024   18,336    18,749 
2025   11,154    11,320 
2026   2,333    2,371 
2027   1,155 
Thereafter   2,497    1,432 
 
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N.
M
. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per common share:
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands, except per share amounts)
 
Net income for basic and diluted net income per share  $197,787   $328,319   $359,715   $533,831 
                     
Weighted average common shares-basic   159,563    165,995    160,805    166,243 
Effect of dilutive potential common shares:                    
Convertible note hedge warrant shares (1)   9,029    10,073    9,528    9,751 
Incremental shares from assumed conversion of convertible notes (2)   1,900    9,578    2,220    9,944 
Restricted stock units   581    1,015    730    1,205 
Stock options   54    78    61    93 
Employee stock purchase plan   32    11    23    9 
                     
Dilutive potential common shares   11,596    20,755    12,562    21,002 
                     
Weighted average common shares-diluted   171,159    186,750    173,367    187,245 
                     
Net income per common share-basic  $1.24   $1.98   $2.24   $3.21 
                     
Net income per common share-diluted  $1.16   $1.76   $2.07   $2.85 
                     
   
For the Three Months

Ended
 
   
April 2,
   
April 3,
 
   
2023
   
2022
 
         
   
(in thousands, except per share
amounts)
 
Net income for basic and diluted net income per share  $83,531   $161,928 
           
Weighted average common shares-basic   155,904    162,048 
Effect of dilutive potential common shares:          
Convertible note hedge warrant shares (1)   8,983    10,028 
Incremental shares from assumed conversion of convertible notes (2)   914    2,541 
Restricted stock units   453    875 
Stock options   48    69 
Employee stock purchase plan   6    14 
           
Dilutive potential common shares   10,404    13,527 
           
Weighted average common shares-diluted   166,308    175,575 
           
Net income per common share-basic  $0.54   $1.00 
           
Net income per common share-diluted  $0.50   $0.92 
           
 
(1)
Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price, multiplied by
the number of warrant
shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period.
(2)
Incremental shares from assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price, multiplied by
the number of convertible notes
shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.
The computation of diluted net income per common share for the three and six months ended JulyApril 2, 2023 and April 3, 2022 excludes the effect of the potential vesting of 0.1 million and 0.2 million, respectively, of restricted stock units because the effect would have been anti-dilutive.
The computation of diluted net income per common share for the three and six months ended July 4, 2021 excludes the effect of the potential vesting of 0.10.5 million and 0.1 million, respectively, of restricted stock units because the effect would have been anti-dilutive.
O.
N
. RESTRUCTURING AND OTHER
During the three months ended July 3, 2022 and July 4, 2021,April 2, 2023, Teradyne recorded a charge$2.0 million of $1.5 millionseverance charges related to headcount reductions of 67 people primarily in Semiconductor Test, Robotics and $1.7 million, respectively, for an increase in environmental and legal liabilities.Corporate.
During the sixthree months ended JulyApril 3, 2022, Teradyne recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an
earn-out
dispute, which was settled on March 25, 2022 for $26.7 million, and a charge of $2.0 million for an increase in environmental and legal liabilities. Previously, in the three months ended December 31, 2021, Teradyne recorded a charge of $12 million related to this
earn-out
dispute.
million.
During the six months ended July 4, 2021, Teradyne recorded a gain of $7.2 million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities.O
P.. RETIREMENT PLANS
ASC 715, “Compensation—Retirement Benefits,” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.
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Defined Benefit Pension Plans
Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain
non-U.S.
subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (the “IRC”), as well as unfunded qualified foreign plans.
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In the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne contributed $1.6$0.8 million and $1.7$0.8 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.5$0.2 million and $0.5$0.3 million, respectively, to certain qualified pension plans for
non-U.S.
subsidiaries.
For the three and six months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne’s net periodic pension cost was comprised of the following:
 
   
For the Three Months Ended
 
   
July 3, 2022
   
July 4, 2021
 
   
United

States
   
Foreign
   
United

States
   
Foreign
 
                 
   
(in thousands)
 
Service cost  $397   $180   $452   $245 
Interest cost   1,221    120    1,096    88 
Expected return on plan assets   (732)    (18)    (936)    (17) 
Net actuarial gain   (45)    —      (400)    —   
                     
Total net periodic pension cost  $841   $282   $212   $316 
                     
  
   
For the Six Months Ended
 
   
July 3, 2022
   
July 4, 2021
 
   
United

States
   
Foreign
   
United

States
   
Foreign
 
                 
   
(in thousands)
 
Service cost  $794   $386   $905   $491 
Interest cost   2,443    238    2,196    175 
Expected return on plan assets   (1,463)    (38)    (1,872)    (33) 
Net actuarial gain   (45)    —      (400)    —   
                     
Total net periodic pension cost  $1,729   $586   $829   $633 
                     
   
For the Three Months Ended
 
   
April 2,

2023
   
April 3,

2022
 
   
United States
   
Foreign
   
United States
   
Foreign
 
                 
   
(in thousands)
 
Service cost  $272   $109   $397   $206 
Interest cost   1,711    262    1,222    118 
Expected return on plan assets   (1,285)    (9)    (732)    (20) 
                     
Total net periodic pension cost  $698   $362   $887   $304 
                     
Postretirement Benefit Plan
In addition to receiving pension benefits, Teradyne employees in the United States who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits and the existing benefit obligation relates primarily to those employees.
For the three and six months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, Teradyne’s net periodic postretirement benefit cost (credit) was comprised of the following:
   
For the Three Months

Ended
 
   
April 2,
   
April 3,
 
   
2023
   
2022
 
         
   
(in thousands)
 
Service cost  $9   $17 
Interest cost   61    44 
Amortization of prior service credit   (2)    (2) 
           
Total net periodic postretirement benefit cost  $68   $59 
           
P
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Service cost  $15   $17   $32   $33 
Interest cost   45    41    88    85 
Amortization of prior service credit   (2)    (2)    (4)    (4) 
Net actuarial loss (gain)   54    (228)    54    (228) 
                     
Total net periodic postretirement benefit cost (credit)  $112   $(172)   $170   $(114) 
                     
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Q.. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of July 3, 2022,April 2, 2023, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $1,006.8$589.7 million, of which $870.5$530.7 million is for less than one year.
Legal Claims
Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on its business, financial position or results of operations.
On March 8, 2021, Industrial Automation LLC, sellers of AutoGuide, submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand sought full acceleration of the maximum
earn-out
amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the
earn-out
provisions of the Purchase Agreement. On March 
25,
, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.
Guarantees and Indemnification Obligations
Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and agents for liabilities arising from certain events or occurrences, while the officer, director, employee, or agent, is or was serving, at Teradyne’s request in
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such capacity. Teradyne may enter into indemnification agreements with certain of its officers and directors. With respect to acquisitions, Teradyne provides indemnifications to or assumes indemnification obligations for the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’
by-laws
and charters.charter. As a matter of practice, Teradyne has maintained directors’ and officers’ liability insurance coverage including coverage for directors and officers of acquired companies.
Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to Teradyne’s products. From time to time, Teradyne also indemnifies customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, breach of confidentiality obligations and environmental claims relating to the use of Teradyne’s products and services or resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its products in addition to the warranty described below.
As a matter of ordinary course of business, Teradyne warrants that its products will substantially perform in accordance with its standard published specifications in effect at the time of delivery. Most warranties have a
one-year
duration commencing from installation. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. As of July 3, 2022April 2, 2023 and December 31, 2021,
2022, Teradyne had a product warranty accrual of $16.0$12.9 million and $24.6$14.2 million, respectively, included in other accrued liabilities and revenue deferrals related to extended warranties of $65.8$49.3 million and $64.2$56.2 million, respectively, included in short and long-term deferred revenue and customer advances.
In addition, in the ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the guarantees do not. Therefore, as the market demand decreases, Teradyne
re-evaluates
these guarantees and determines what charges, if any, should be recorded.
With respect to its agreements covering product, business or entity divestitures and acquisitions, Teradyne provides certain representations, warranties and covenants to purchasers and agrees to indemnify and hold such purchasers harmless against breaches of such representations, warranties and covenants. Many of the indemnification claims have a definite expiration date while some remain in force indefinitely. With respect to its acquisitions, Teradyne may, from time to time, assume the liability for certain events or occurrences that took place prior to the date of acquisition.
As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness obligations of its subsidiary companies, limited to the borrowings from financial institutions, purchase commitments to certain vendors and lease commitments to landlords.
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Based on historical experience and information known as of July 3, 2022April 2, 2023 and December 31, 2021,2022, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.
R.
Q
. INCOME TAXES
A reconciliation of the United States federal statutory corporate tax rate to Teradyne’s effective tax rate was as follows:
 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 3,
2022
  
July 4,
2021
  
July 3,
2022
  
July 4,
2021
 
U.S. statutory federal tax rate   21.0%   21.0%   21.0%   21.0% 
Non-deductible
officers’ compensation
   1.4   0.8   1.3   0.8 
Foreign taxes   (3.2)   (4.3)   (3.3)   (4.5) 
Tax credits   (2.0)   (1.2)   (1.8)   (1.2) 
International provisions of the U.S. Tax Cuts and Jobs Act of 2017   (1.0)   (1.7)   (1.2)   (1.6) 
Discrete benefit related to equity compensation   (0.2)   (0.2)   (2.9)   (2.4) 
Other, net   1.1   0.1   1.0   0.1 
                  
Effective tax rate   17.1%   14.5%   14.1%   12.2% 
                  
   
For the Three Months

Ended
 
   
April 2,
  
April 3,
 
   
2023
  
2022
 
        
US statutory federal tax rate   21.0%   21.0% 
Non-deductible
officers’ compensation
   0.9   1.1 
Discrete benefit related to equity compensation   (3.3)   (6.6) 
International provisions of the U.S. Tax Cuts and Jobs Act of 2017   (3.2)   (1.3) 
Tax credits   (2.5)   (1.6) 
Foreign taxes   (0.6)   (3.4) 
Other, net   1.7   1.0 
          
Effective tax rate   14.0%   10.2% 
          
On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of July 3, 2022,April 2, 2023, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the
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condensed consolidated balance sheet. However, should Teradyne believe that it is
more-likely-than-not
that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.
As of July 3, 2022April 2, 2023 and December 31, 2021,2022, Teradyne had $14.6$15.7 million and $14.5$15.6 million, respectively, of reserves for uncertain tax positions. The $0.1 million net increase in reserves for uncertain tax positions consists of an increaseis related to U.S. federal research and development credits generated in the current year partially offset by the release of reserves related to prior year loss carryforwards.year.
As of July 3, 2022,April 2, 2023, Teradyne does not anticipate a material change inestimates that it is reasonably possible that the balance of unrecognized tax benefits duringmay decrease approximately $0.1 million in the next twelve months.
months because of a lapse of statutes of limitation. The estimated decrease relates to U.S. state research and development credits.
Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 3, 2022April 2, 2023 and December 31, 2021, $0.32022, $0.4 million and $0.3$0.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the sixthree months ended JulyApril 2, 2023 and April 3, 2022, and July 4, 2021, an expense of $0.1 million and $0.2$0.1 million, respectively, was recorded for interest and penalties related to income tax items.
Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the sixthree months ended July 3, 2022April 2, 2023 was $8.3$0.2 million, or $0.05$0.0 per diluted share. The tax savings due to the tax holiday for the sixthree months ended July 4, 2021April 3, 2022 was $15.9$3.5 million, or $0.08$0.02 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended
its
our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA introduced a 15% alternative minimum tax based on the financial statement income of certain large corporations (“CAMT”), effective January 1, 2023. Teradyne currently does not expect the CAMT to have a material impact on its financial results.
S.
R
. SEGMENT INFORMATION
Teradyne has 4four reportable segments (Semiconductor Test, System Test, Industrial AutomationWireless Test and Wireless Test)Robotics). Each of the reportable segments is alsorepresents an individual operating segment.
The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage and system level test, and circuit-board test. The Industrial AutomationWireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. The Robotics segment includes operations related to the design, manufacturing and marketing of collaborative robotic arms, autonomous mobile robots and advanced robotic control software. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts and plans for the segment.
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Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments in effect are the same as those described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form
10-K
for the year ended December 31, 2021.
2022.
Segment information for the three and six months ended JulyApril 2, 2023 and April 3, 2022 and July 4, 2021 is as follows:
 
            
  
Semiconductor

Test
   
System

Test
   
Industrial

Automation
 
Wireless

Test
   
Corporate

and

Eliminations
 
Consolidated
   
Semiconductor

Test
   
System

Test
   
Robotics
 
Wireless

Test
   
Corporate

and

Eliminations
 
Consolidated
 
                                        
  
(in thousands)
   
(in thousands)
 
Three Months Ended July 3, 2022
            
Three Months Ended April 2, 2023
            
Revenues  $541,348   $134,702   $101,055  $63,854   $(193)  $840,766   $415,009   $74,631   $89,214  $38,675   $—    $617,529 
Income (loss) before income taxes (1)(2)   177,782    54,042    (6,406)   25,393    (12,219)   238,592    96,185    15,275    (18,490)   9,352    (5,238)   97,084 
Total assets (3)   1,449,878    229,359    644,099   118,445    1,046,645   3,488,426    1,386,851    173,669    676,092   87,875    1,058,920   3,383,407 
Three Months Ended July 4, 2021
            
Three Months Ended April 3, 2022
            
Revenues  $833,976   $104,819   $92,186  $54,893   $(146)  $1,085,728   $482,341   $118,668   $103,189  $51,518   $(346)  $755,370 
Income (loss) before income taxes (1)(2)   337,302    33,954    (9,837)   21,472    1,135   384,026    149,705    41,322    (5,098)   18,619    (24,189)   180,359 
Total assets (3)   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922    1,296,070    187,283    675,560   113,821    1,336,420   3,609,154 
Six Months Ended July 3, 2022
            
Revenues  $1,023,688   $253,371   $204,244  $115,372   $(539)  $1,596,136 
Income (loss) before income taxes (1)(2)   327,487    95,365    (11,504)   44,012    (36,409)   418,951 
Total assets (3)   1,449,878    229,359    644,099   118,445    1,046,645   3,488,426 
Six Months Ended July 4, 2021
            
Revenues  $1,362,039   $237,656   $172,137  $95,791   $(289)  $1,867,334 
Income (loss) before income taxes (1)(2)   513,670    85,015    (22,804)   31,088    1,050   608,019 
Total assets (3)   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922 
 
(1)
Included in Corporate and Eliminations are: legal
 and environmental
fees, contingent consideration fair value adjustments, interest income, interest expense, severance charges, net foreign exchange gains (losses), intercompany eliminations, legal and environmental fees, severance charges, acquisition related charges and compensation pension, intercompany eliminations and an expense for the three and six months ended July 4, 2021, loss on convertible debt conversions.
modification of Teradyne’s former chief executive officer’s outstanding equity awards.
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(2)Included in income (loss) before taxes are charges and credits related to restructuring and other, and inventory charges and, for the three and six months ended July 4, 2021, loss on convertible debt conversions.charges.
(3)Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets.
Included in each segment are charges and credits in the following line items in the statements of operations:
   
For the Three Months

Ended
 
   
April 2,
   
April 3,
 
   
2023
   
2022
 
         
   
(in thousands)
 
Semiconductor Test:
          
Cost of revenues—inventory charge  $3,768   $—   
Restructuring and other—employee severance   794    —   
System Test:
          
Cost of revenues—inventory charge  $675    —   
Robotics:
          
Cost of revenues—inventory charge  $782   $—   
Wireless:
          
Cost of revenues—inventory charge  $—     $877 
Corporate and Other:
          
Selling and administrative - equity modification charge  $5,889   $—   
Restructuring and other—employee severance   659    —   
Restructuring and other—legal settlement charge   —      14,700 
S
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Semiconductor Test:
                    
Cost of revenues—inventory charge  $2,071   $—     $2,315   $1,234 
Industrial Automation:
                    
Cost of revenues—inventory charge  $831   $—     $1,197   $1,285 
Restructuring and other—acquisition related expenses and compensation   —      —      —      550 
Wireless:
                    
Cost of revenues—inventory charge  $2,099   $—     $2,976   $672 
Corporate and Eliminations:

                    
Restructuring and other—other  $1,500   $1,700   $2,000   $1,846 
Restructuring and other—legal settlement charge   —      —      14,700    —   
Other (income) expense, net—loss on convertible debt conversions   —      1,175    —      5,244 
Restructuring and other—AutoGuide contingent consideration adjustment   —      —      —      (7,227) 
Restructuring and other—acquisition related expenses and compensation   —      —      —      (513) 
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T.. SHAREHOLDERS’ EQUITY
Stock Repurchase Program
In January 2021,2023, Teradyne’s Board of Directors cancelled theits January 20202021 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Teradyne intends to repurchase a minimum of $750.0up to $500.0 million of its common stock in 2022.2023 based on market conditions.
During the sixthree months ended July 3, 2022,April 2, 2023, Teradyne repurchased 5.00.9 million shares of common stock for $532.8a total cost of $93.7 million at an average price of $107.50$104.88 per share. As of January 1, 2023, share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired.
During the sixthree months ended July 4, 2021,April 3, 2022, Teradyne repurchased 1.61.8 million shares of common stock for $196.6$201.5 million at an average price of $125.69$115.12 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $116.45.
The total pricecost of shares acquired includes commissions and, starting in 2023, related excise tax, and is recorded as a reduction to retained earnings.
Dividend
Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.
In January 20222023 and MayJanuary 2022, Teradyne’s Board of Directors declared a quarterly cash dividend
of
$0.11 $0.11 per share. Dividend payments for the three and six months ended JulyApril 2, 2023 and April 3, 2022 were $17.5$17.2 million and $35.4$17.9 million, respectively.
In January 2021 and May 2021, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three and six months ended July 4, 2021 were $16.6 million and $33.3 million, respectively.
While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.
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Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this Quarterly Report on Form

10-Q
which are not historical facts, so called “forward-looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form
10-Q
and Part I, Item 1A “Risk Factors” in our Annual Report on Form
10-K
for the year ended December 31, 2021.2022. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.

Overview

We are a leading global supplier of automationautomated test equipment for test and industrial applications.robotics solutions. We design, develop, manufacture and sell automatic test systems and robotics products. Our automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our industrial automationrobotics products include collaborative robotic arms and autonomous mobile robots (“AMRs”) 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. Our automatic test equipment and industrial automationrobotics 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

robotics (“Industrial Automation”Robotics”) products.

The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. A few customers drive significant demand for our test products both through direct sales and sales to the customers’ supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.

In 2022, we expect lowerthe first quarter of 2023, the demand in the mobility and compute segments of our Semiconductor Test business was lower due to end market slowdown in these segments as well as a slower technology transition in one of our largest

end-markets.
While there is uncertainty if end markets will recover in 2023,the depth of the slowdown and the timing of the recovery are uncertain, we expect the ramp of 3 nanometer starting in 2023process technology followed by gate-all-around and process technology, increasing multichip packaging, remain unaltered drivers of growth. We expect Semiconductor Testadditional device complexity and unit growth will drive additional demand in the automation and industrial segments to remain strong in 2022.
for test over our four year forecast period.

Our Industrial AutomationRobotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms and Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs.automation. The market for our Industrial AutomationRobotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (SMEs)(“SMEs”) throughout the world. We expect our UR and MiR businessesRobotics sales channel expansion combined with new products to continue to growdrive growth in 2022, while our AutoGuide business will focus on continuing to invest to scale and integrate high payload AMR solutions.

the second half of 2023.

In the first quarter of 2023 we met customer demand, in part, through faster than expected recoveries from supply chain constraints. Both our test and industrial automationrobotics businesses may continue tostill be impactedinfluenced by supply constraints during the remainder of 2023, which will in turncould impact our revenue and is expected to, along with inflation, increase costs in 2022. Through thecosts. Our second quarter of 2022, inflation has not had a material impact on our results. In the second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 20222023 forecast excludes approximately $50$25 million of revenue, primarily in our test businesses, due to these continued supply chain constraints.

In the first quarter of 2023, inflation had minimal effects on our results.

Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately 70 percent of our Robotics revenue is denominated in foreign currencies. In 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted revenues in our Robotics segment. Continued strengthening of the U.S. dollar would negatively affect Robotics revenue growth in 2023.

Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Industrial AutomationRobotics businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for opportunistic acquisitions.

26

Impact of the

COVID-19
Pandemic on our Business

The novel coronavirus

(COVID-19)
pandemic resulted in government authorities implementing numerous measures in an effort to contain the spread of the virus, such as travel bans and restrictions, limitations on gatherings or social distancing requirements, quarantines,
shelter-in-place
orders, vaccination and testing mandates, and business limitations and shutdowns. These measures have impacted our
day-to-day
operations and disrupted our business, workforce and operations, as well as the operations of our customers, contract manufacturers and suppliers. We are continuing to monitorIn the rapidly evolving situation regardingfirst quarter of 2023 the
COVID-19
pandemic particularlyhad significantly less impact on our business than in China, andprior quarters since the availability and impactstart of vaccinations globally.the pandemic in 2020. However, we are unable to accurately predict the full
28
Tablefuture impact of Contents
impact of
COVID-19,
which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges or new strains or variants of the virus in areas where we do business, the availability and use of vaccinations, any further government actions to contain the virus or treat its impact, continuing shutdowns in China, and how quickly and to what extent normal economic and operating conditions can resume.
business.

Due to the

COVID-19
pandemic, there has been uncertainty and disruption in the global economy and our markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of AugustMay 5, 2022,2023, the date of issuance of this Quarterly Report on Form
10-Q.
Health and Safety
In response to the
COVID-19
pandemic, we have taken proactive, aggressive action to protect the health and safety of our employees, customers, contract manufacturers and suppliers, and we have complied with all government orders around the globe. The spread of
COVID-19
has caused us to modify our business practices, which includes implementing social distancing protocols, limiting employee travel and requiring employees to work remotely. We may take further actions as may be required or recommended by government authorities or that we determine are in the best interests of our employees, customers, contract manufacturers and suppliers.
Operations

We believe the

COVID-19
pandemic and the numerous measures implemented by authorities in response, has adversely impacted our results of operations, including by increasing costs, but we cannot accurately estimate the amount of the impact to our second quarter of 2022 financial results or to our future financial results. In addition, the pandemic has disrupted our contract manufacturers and suppliers, and has resulted in supply constraints and in short-term cost increases to meet customer demand. While the duration and severity of the pandemic may further impact our workforce and operations, as well as those of our customers, contract manufacturers and suppliers, we expect that our manufacturing facilities will remain operational, at sufficient capacity to support production based on demand and the availability of supply. We are monitoring our operations closely in an effort to avoid any potential productivity losses caused by responses to the
COVID-19
pandemic.
Demand
The
COVID-19
pandemic has significantly increased economic uncertainty in our markets. Demand for our Test products in China and other countries was strong throughout 2021 and in the first half of 2022, but the
COVID-19
pandemic could cause further economic disruption that could cause demand for our products to decline, which would adversely affect our business.
Liquidity
Although there is continued uncertainty related to the impact of the
COVID-19
pandemic on our future results, we believe our business model and our current cash reserves leave us well-positioned to manage our business through this crisis. We have a strong balance sheet, as well as an operating model that we believe is capable of flexing up and down with extreme demand swings while still remaining profitable. Based on our analysis, we believe our existing balances of cash and cash equivalents and our currently anticipated operating cash flows will be sufficient to meet our working capital needs and other capital and liquidity requirements for the next twelve months. However, due to the uncertainty related to the future impact of the
COVID-19
pandemic, in order to bolster our liquidity position, on May 1, 2020 we entered into a credit agreement providing for a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, we amended the credit agreement to extend its maturity to December 10, 2026 as further described in Note H: “Debt.” As of August 5, 2022, we have not borrowed any funds under the credit facility.
We are continuing to monitor the evolving situation regarding the
COVID-19
pandemic, the availability of vaccinations where we do business and guidance from government authorities around the world. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As a result, given the uncertain nature of this situation, we are not able to accurately predict the full extent of the impact of
COVID-19
on our business, financial condition, results of operations, liquidity, or cash flows in the future.

Supply Chain Constraints and Inflationary Pressures

The global supply shortage of electrical components, including semiconductor chips, continued to impact our supply chain in the secondfirst quarter of 2022.2023. As a result, we experienced, and expect to continue to experience, increases in our lead times and costs for certain components for certain of our products. In addition, while not material, inflationary pressures contributed to increased costs for product components and wage inflation, impacting our cost of products, gross margin and profit for the quarter. Our supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles. While not material through the secondfirst quarter of 2022,2023, in an effort to mitigate these risks, in some cases, we have incurred higher costs due to investment in supply chain resiliency and to secure available inventory or have extended or placed

non-cancellable
purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. We have also sourced components from additional suppliers and multi-sourced and
pre-ordered
components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. There is no assurance that these efforts will be successful. In theOur second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 20222023 forecast excludes approximately $50$25 million of revenue, primarily in our test businesses, due to these continued supply chain constraints.
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Table of Contents
Impact of Russia’s invasion of Ukraine on our Business
Russia’s invasion of Ukraine, in February 2022, did not have a significant impact on our business as we have minimal business in Russia and Ukraine, both directly and indirectly. However, following the invasion, the U.S. and other countries imposed significant sanctions against the Russian government and many Russian companies and individuals. Although Teradyne does not have significant operations in Russia, the sanctions and Russia’s response to the sanctions, have impacted Teradyne’s business in other countries and could have a negative impact on the Company’s future revenue and supply chain, either of which could adversely affect Teradyne’s business and financial results. In addition, the global economic uncertainty following the invasion, sanctions and Russia’s response to the sanctions could impact demand for our products.

See Part II—Item 1A, “Risk Factors,” included in our Annual Report on Form

10-K
for the fiscal year ended December 31, 20212022 for our risk factors regarding risks associated with both the
COVID-19
pandemic and international conflicts.

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the sixthree months ended July 3, 2022April 2, 2023 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form

10-K
for the fiscal year ended December 31, 2021,2022, except as noted below.

Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying assumptions may have a material impact on our financial condition and results of operations. These estimates may change, as new events occur and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions.

Convertible Debt
We 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,
we account 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. We use the
if-converted
method in the diluted EPS calculation for convertible instruments. As a result of adoption, we recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, 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.

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 reported in the financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions.

27

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Table of Contents

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

   
For the Three Months

Ended
  
For the Six Months

Ended
 
              
   
July 3,
2022
  
July 4,
2021
  
July 3,
2022
  
July 4,
2021
 
Percentage of revenues:
     
Revenues:
     
Products
   83%   88%   83%   86% 
Services
   17   12   17   14 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   100   100   100   100 
Cost of revenues:
     
Cost of products
   33   36   32   35 
Cost of services
   7   5   7   5 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
   40   40   40   41 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
   60   60   60   59 
Operating expenses:
     
Selling and administrative
   17   13   18   14 
Engineering and development
   13   10   14   11 
Acquired intangible assets amortization
   —     —     1   1 
Restructuring and other
   —     —     1   —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Total operating expenses
   31   24   33   26 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income from operations
   29   36   27   33 
Non-operating
(income) expense:
     
Interest income
   —     —     —     —   
Interest expense
   —     1   —     1 
Other (income) expense, net
   1   —     1   —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Income before income taxes
   28   35   26   33 
Income tax provision
   5   5   4   4 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income
   24%   30%   23%   29% 
  
 
 
  
 
 
  
 
 
  
 
 
 

   For the Three Months
Ended		 
   April 2,  April 3, 
   2023  2022 
        

Percentage of revenues:

   

Revenues:

   

Products

   77%   83% 

Services

   23   17 
  

 

 

  

 

 

 

Total revenues

   100   100 

Cost of revenues:

   

Cost of products

   32   32 

Cost of services

   10   8 
  

 

 

  

 

 

 

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)

   42   40 
  

 

 

  

 

 

 

Gross profit

   58   60 

Operating expenses:

   

Selling and administrative

   24   19 

Engineering and development

   17   14 

Acquired intangible assets amortization

   1   1 

Restructuring and other

   —     2 
  

 

 

  

 

 

 

Total operating expenses

   43   36 
  

 

 

  

 

 

 

Income from operations

   15   25 

Non-operating (income) expense:

   

Interest income

   (1)   —   

Interest expense

   —     —   

Other (income) expense, net

   —     1 
  

 

 

  

 

 

 

Income before income taxes

   16   24 

Income tax provision

   2   2 
  

 

 

  

 

 

 

Net income

   14%   21% 
  

 

 

  

 

 

 

Results of Operations

Second

First Quarter 20222023 Compared to SecondFirst Quarter 2021

2022

Revenues

Revenues by our reportable segments were as follows:

   
For the Three Months

Ended
     
   
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
             
   
(in millions)
 
Semiconductor Test
  $541.3   $834.0   $(292.7) 
System Test
   134.7    104.8    29.9 
Industrial Automation
   101.1    92.2    8.9 
Wireless Test
   63.9    54.9    9.0 
Corporate and Eliminations
   (0.2)    (0.1)    (0.1) 
  
 
 
   
 
 
   
 
 
 
  $840.8   $1,085.7   $(244.9) 
  
 
 
   
 
 
   
 
 
 

   For the Three Months
Ended		     
   April 2,   April 3,   Dollar 
   2023   2022   Change 
             
   (in millions) 

Semiconductor Test

  $415.0   $482.3   $(67.3) 

System Test

   74.6    118.7    (44.1) 

Robotics

   89.2    103.2    (14.0) 

Wireless Test

   38.7    51.5    (12.8) 
  

 

 

   

 

 

   

 

 

 
  $617.5   $755.4   $(137.9) 
  

 

 

   

 

 

   

 

 

 

The decrease in Semiconductor Test revenues of $292.7$67.3 million, or 35.1%14.0%, was driven primarily by lower tester sales in high performance compute processor and mobile applications and lower memory test sales of flashDRAM memory testers. The increasedecrease in System Test revenues of $29.9$44.1 million, or 28.5%37.2%, was primarily due to higherlower sales in Storage Test of system level and hard disk drive testers.testers and lower sales in Defense/Aerospace. The increasedecrease in Industrial AutomationRobotics revenues of $8.9$14.0 million, or 9.7%13.6%, was driven primarily by higherlower demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The risedecrease in Wireless Test revenues of $9.0$12.8 million, or 16.4%24.9%, was primarily due to increasea decrease in connectivity test products.

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Revenues by country as a percentage of total revenues were as follows (1):

   
For the Three Months

Ended
 
   
July 3,
2022
  
July 4,
2021
 
        
Taiwan
   25%   44% 
Korea
   17   9 
United States
   14   9 
China
   13   15 
Europe
   8   5 
Thailand
   6   3 
Malaysia
   5   2 
Japan
   5   5 
Philippines
   3   6 
Singapore
   2   1 
Rest of World
   2   1 
  
 
 
  
 
 
 
   100%   100% 
  
 
 
  
 
 
 

   For the Three Months
Ended		 
   April 2,
2023		  April 3,
2022		 

Taiwan

   18%   18% 

United States

   18   15 

Korea

   12   13 

Europe

   12   10 

China

   10   19 

Japan

   9   6 

Singapore

   8   4 

Philippines

   5   2 

Malaysia

   3   5 

Thailand

   3   5 

Rest of World

   2   3 
  

 

 

  

 

 

 
   100%   100% 
  

 

 

  

 

 

 

(1)

Revenues attributable to a country are based on location of customer site.

Gross Profit

Our gross profit was as follows:

   
For the Three Months

Ended
    
   
July 3,
2022
  
July 4,
2021
  
Dollar/Point
Change
 
           
   
(in millions)
 
Gross profit
  $506.4  $647.0  $(140.6) 
Percent of total revenues
   60.2%   59.6%   0.6 

   For the Three Months
Ended		    
   April 2,
2023		  April 3,
2022		  Dollar/Point
Change		 
           
   (in millions) 

Gross profit

  $356.4  $454.9  $(98.5) 

Percent of total revenues

   57.7%   60.2%   (2.5) 

Gross profit as a percent of revenue increaseddecreased by 0.62.5 points, primarily due to favorablelower volume and product mix in Semiconductor Test partially offset byand higher material costs due to inflation.

inventory reserves.

Selling and Administrative

Selling and administrative expenses were as follows:

   
For the Three Months

Ended
    
   
July 3,
2022
  
July 4,
2021
  
Dollar
Change
 
           
   
(in millions)
 
Selling and administrative
  $139.5  $140.2  $(0.7) 
Percent of total revenues
   16.6%   12.9%  

   For the Three Months
Ended		    
   April 2,
2023		  April 3,
2022		  Dollar
Change		 
           
   (in millions) 

Selling and administrative

  $151.0  $140.2  $10.8 

Percent of total revenues

   24.4%   18.6%  

The decreaseincrease of $0.7$10.8 million in selling and administrative expenses was primarily due to the charge of $5.9 million recorded in the three months ended April 2, 2023, related to the modification of Teradyne’s chief executive officer’s outstanding equity awards in connection with his retirement and higher spending in Robotics, Semiconductor Test and System Test, partially offset by lower variable compensation.

29

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Engineering and Development

Engineering and development expenses were as follows:

   
For the Three Months

Ended
    
   
July 3,
2022
  
July 4,
2021
  
Dollar
Change
 
           
   
(in millions)
 
Engineering and development
  $112.0  $110.0  $2.0 
Percent of total revenues
   13.3%   10.1%  

   For the Three Months
Ended		    
   April 2,
2023		  April 3,
2022		  Dollar
Change		 
           
   (in millions) 

Engineering and development

  $105.8  $108.1  $(2.3) 

Percent of total revenues

   17.1%   14.3%  

The increasedecrease of $2.0$2.3 million in engineering and development expenses was primarily due to lower variable compensation, partially offset by higher spending in Semiconductor Test and Industrial Automation, partially offset by lower variable compensation.

Robotics.

Restructuring and Other

During the three months ended JulyApril 2, 2023, we recorded $2.0 million of severance charges related to headcount reduction of 67 people primarily in Semiconductor Test, Robotics and Corporate.

During the three months ended April 3, 2022, and July 4, 2021, we recorded a charge of $1.5$14.7 million related to the arbitration claim filed against Teradyne and $1.7 million, respectively,AutoGuide related to an earn-out dispute, which was settled on March 25, 2022 for an increase in environmental and legal liabilities.

$26.7 million.

Interest and Other

   
For the Three Months

Ended
     
   
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
             
   
(in millions)
 
Interest income
  $(1.0)   $(0.6)   $(0.4) 
Interest expense
   0.9    5.6   $(4.7) 
Other (income) expense, net
   9.4    (0.1)   $9.5 

   For the Three Months
Ended		     
   April 2,
2023		   April 3,
2022		   Dollar
Change		 
             
   (in millions) 

Interest income

  $(5.3)   $(0.7)   $(4.6) 

Interest expense

   1.0    1.0    —   

Other (income) expense, net

   0.1    5.2    (5.1) 

Interest expense decreasedincome increased by $4.7$4.6 million primarily due to the January 1, 2022 adoption of ASU

2020-06
which eliminated the amortization of the debt discount which was $3.3 millionhigher interest rates in the three months ended July 4, 2021.2023. Other (income) expense, net increaseddecreased by $9.5$5.1 million primarily due to changes in unrealized gains/losses on equity securities, from a $1.3$2.2 million loss in 2022 to a $2.0 million gain in 2021 to a $6.6 million loss in 2022.
2023.

Income (Loss) Before Income Taxes

   
For the Three Months

Ended
     
   
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
             
   
(in millions)
 
Semiconductor Test
  $177.8   $337.3   $(159.5) 
System Test
   54.0    34.0    20.0 
Wireless Test
   25.4    21.5    3.9 
Industrial Automation
   (6.4)    (9.8)    3.4 
Corporate and Eliminations (1)
   (12.2)    1.1    (13.3) 
  
 
 
   
 
 
   
 
 
 
  $238.6   $384.0   $(145.4) 
  
 
 
   
 
 
   
 
 
 

   For the Three Months
Ended		     
   April 2,
2023		   April 3,
2022		   Dollar
Change		 
             
   (in millions) 

Semiconductor Test

  $96.2   $149.7   $(53.5) 

System Test

   15.3    41.3    (26.0) 

Wireless Test

   9.4    18.6    (9.2) 

Robotics

   (18.5)    (5.1)    (13.4) 

Corporate and Other (1)

   (5.2)    (24.2)    19.0 
  

 

 

   

 

 

   

 

 

 
  $97.1   $180.4   $(83.3) 
  

 

 

   

 

 

   

 

 

 

(1)

Included in Corporate and Eliminations are legal and environmental fees, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, legal and environmental fees, severance charges, acquisition related charges and compensation, and an expense for the three months ended July 4, 2021, loss on convertible debt conversions.

modification of Teradyne’s former chief executive officer’s outstanding equity awards.

The decrease in income before income taxes in Semiconductor Test was driven primarily by lower revenues in compute processor and mobile applications and lower memory test sales of flashDRAM memory testers. The increasedecrease in income before income taxes

30

in System Test was primarily due to higherlower sales in Storage Test of system level and hard disk drive testers. The risedecrease in income before taxes in Wireless Test was driven primarily by an increasea decrease in sales of connectivity test products. The lower lossesdecrease in income before taxes in Industrial AutomationRobotics was driven primarily by higherlower demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots.

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Table of Contents
The decrease in loss before income taxes in Corporate and Eliminations was primarily due to legal settlement charges in 2022 related to litigation for the earn-out dispute in connection with the AutoGuide acquisition.

Income Taxes

The effective tax rate for the three months ended JulyApril 2, 2023 and April 3, 2022 was 14.0% and July 4, 2021 was 17.1% and 14.5%10.2%, respectively. The increase in the effective tax rate from the three months ended July 4, 2021April 3, 2022 to the three months ended July 3, 2022April 2, 2023 was primarily attributable to a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions and a reductiondecrease in the benefit related tofrom equity compensation. These increases in expense were partially offset by increases in benefit from the international provisions of the U.S. Tax Cuts and Jobs Act of 2017 and an increase in

non-deductible
officers’ compensation. These increases in expense were partially offset by an increase in benefit from tax credits.
Six Months 2022 Compared to Six Months 2021
Revenues
Revenues by our reportable segments were as follows:
   
For the Six Months

Ended
     
   
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
             
   
(in millions)
 
Semiconductor Test
  $1,023.7   $1,362.0   $(338.3) 
System Test
   253.4    237.7    15.7 
Industrial Automation
   204.2    172.1    32.1 
Wireless Test
   115.4    95.8    19.6 
Corporate and Eliminations
   (0.5)    (0.3)    (0.2) 
  
 
 
   
 
 
   
 
 
 
  $1,596.1   $1,867.3   $(271.1) 
  
 
 
   
 
 
   
 
 
 
The decrease in Semiconductor Test revenues of $338.3 million, or 24.8%, was driven primarily by lower tester sales in high performance compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in System Test revenues of $15.7 million, or 6.6%, was primarily due to higher sales in Defense/Aerospace and in Production Board Test. The increase in Industrial Automation revenues of $32.1 million, or 18.7%, was driven primarily by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The rise in Wireless Test revenues of $19.6 million, or 20.5%, was primarily due to increase in connectivity test.
Revenues by country as a percentage of total revenues were as follows (1):
   
For the Six Months

Ended
 
   
July 3,
2022
  
July 4,
2021
 
        
Taiwan
   22%   40% 
China
   16   17 
Korea
   15   9 
United States
   15   9 
Europe
   9   6 
Thailand
   5   5 
Japan
   5   4 
Malaysia
   5   3 
Philippines
   3   5 
Singapore
   3   2 
Rest of World
   2   —   
  
 
 
  
 
 
 
   100%   100% 
  
 
 
  
 
 
 
(1)
Revenues attributable to a country are based on location of customer site.
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Table of Contents
Gross Profit
Our gross profit was as follows:
   
For the Six Months

Ended
    
   
July 3,
  
July 4,
  
Dollar/Point
 
   
2022
  
2021
  
Change
 
           
   
(in millions)
 
Gross profit
  $961.3  $1,108.6  $(147.3) 
Percent of total revenues
   60.2%   59.4%   0.8 
Gross profit as a percent of revenue increased by 0.8 points, primarily due to favorable product mix in Semiconductor Test, partially offset by higher material costs due to inflation.
Selling and Administrative
Selling and administrative expenses were as follows:
   
For the Six Months

Ended
    
   
July 3,
  
July 4,
  
Dollar
 
   
2022
  
2021
  
Change
 
           
   
(in millions)
 
Selling and administrative
  $279.7  $270.0  $9.7 
Percent of total revenues
   17.5%   14.5%  
The increase of $9.7 million in selling and administrative expenses was primarily due to higher spending in Industrial Automation, and Semiconductor Test, partially offset by lower variable compensation.
Engineering and Development
Engineering and development expenses were as follows:
   
For the Six Months

Ended
    
   
July 3,
  
July 4,
  
Dollar
 
   
2022
  
2021
  
Change
 
           
   
(in millions)
 
Engineering and development
  $220.1  $210.4  $9.7 
Percent of total revenues
   13.8%   11.3%  
The increase of $9.7 million in engineering and development expenses was due to higher spending primarily in Semiconductor Test and Industrial Automation, partially offset by lower variable compensation.
Restructuring and Other
During the six months ended July 3, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an
earn-out
dispute, which was settled on March 25, 2022 for $26.7 million, and a charge of $2.0 million for an increase in environmental and legal liabilities. Previously, in the three months ended December 31, 2021, we recorded a charge of $12.0 million related to this
earn-out
dispute
During the six months ended July 4, 2021, we recorded a gain of $7.2 million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities.
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Interest and Other
   
For the Six Months

Ended
     
   
July 3,
   
July 4,
   
Dollar
 
   
2022
   
2021
   
Change
 
             
   
(in millions)
 
Interest income
  $(1.7)   $(1.4)   $(0.3) 
Interest expense
   1.9    11.6    (9.7) 
Other (income) expense, net
   14.6    3.7    10.9 
Interest expense decreased by $9.7 million primarily due to the January 1, 2022 adoption of ASU
2020-06
which eliminated the amortization of the debt discount which was $6.9 million in the six months ended July 4, 2021. Other (income) expense, net increased by $10.9 million primarily due to changes in unrealized gains/losses on equity securities, from a $2.6 million gain in 2021 to an $8.8 million loss in 2022, partially offset by lower losses on convertible debt early conversions.
Income (Loss) Before Income Taxes
   
For the Six Months

Ended
     
   
July 3,
   
July 4,
   
Dollar
 
   
2022
   
2021
   
Change
 
             
   
(in millions)
 
Semiconductor Test
  $327.5   $513.7   $(186.2) 
System Test
   95.4    85.0    10.4 
Wireless Test
   44.0    31.1    12.9 
Industrial Automation
   (11.5)    (22.8)    11.3 
Corporate and Eliminations (1)
   (36.4)    1.1    (37.5) 
  
 
 
   
 
 
   
 
 
 
  $419.0   $608.0   $(189.0) 
  
 
 
   
 
 
   
 
 
 
(1)
Included in Corporate and Eliminations are legal and environmental fees, contingent consideration adjustments, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, acquisition related charges and compensation and for the six months ended July 4, 2021, loss on convertible debt conversions.
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower revenues in compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in income before income taxes in System Test was primarily due to higher sales in Defense/Aerospace and in Production Board Test. The rise in income before taxes in Wireless Test was driven primarily by an increase in connectivity test products. The reduction in losses before taxes in Industrial Automation was driven primarily by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The loss before income taxes in Corporate and Eliminations was primarily due to legal settlement charges related to litigation for the
earn-out
dispute in connection with the AutoGuide acquisition.
Income Taxes
The effective tax rate for the six months ended July 3, 2022 and July 4, 2021 was 14.1% and 12.2%, respectively. The increase in the effective tax rate from the six months ended July 4, 2021 to the six months ended July 3, 2022 was primarily attributable to a shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, a reduction in the benefit related to the international provisions of the U.S. Tax Cuts and Jobs Act of 2017 and an increase in
non-deductible
officers’ compensation. These increases in expense were partially offset by increases in benefit from tax credits and discrete benefit related to equity compensation.

Contractual Obligations

There have been no changes outside of the ordinary course of business to our contractual obligations as disclosed in our Annual Report on Form

10-K
for the year ended December 31, 2021.
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2022.

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balances decreased by $606.4$146.1 million in the sixthree months ended July 3, 2022April 2, 2023 to $893.9$859.0 million.

Operating activities during the sixthree months ended July 3, 2022April 2, 2023 provided cash of $122.9$19.3 million. Changes in operating assets and liabilities used cash of $309.1 million. This was$106.5 million due to a $287.8$1.9 million increase in operating assets and a $21.3$104.7 million decrease in operating liabilities.

The increase in operating assets was primarily due to a $146.4$23.7 million increase in accounts receivable,inventories, a $94.8$15.4 million increase in prepayments and other assets due to prepayments to our contract manufacturers, andpartially offset by a $46.7$37.2 million increasedecrease in inventories.

accounts receivable.

The decrease in operating liabilities was due to a $61.7$93.1 million decrease in accrued employee compensation, a $6.9$32.7 million decrease in other accrued liabilities,deferred revenue and $2.6customer advance payments, and $1.2 million of retirement plan contributions, partially offset by a $25.0$12.5 million increase in income taxes, a $9.6 million increase in other accrued liabilities, and a $0.3 million increase in accounts payable, a $14.2 million increase in deferred revenue and customer advance payments, and a $10.8 million increase in income taxes.

payable.

Investing activities during the sixthree months ended July 3, 2022April 2, 2023 used cash of $54.3$94.9 million due to $247.9$69.3 million used for purchases of marketable securities, and $89.7$41.4 million used for purchases of property, plant and equipment, partially offset by $139.7$7.9 million and $143.6$7.4 million in proceeds from maturitiessales and salesmaturities of marketable securities, respectively.

respectively, and $0.5 million in proceeds from the cancellation of Teradyne owned life insurance policies related to the cash surrender value.

Financing activities during the sixthree months ended July 3, 2022April 2, 2023 used cash of $626.8$129.5 million due to $532.8$93.3 million used for the repurchase of 5.00.9 million shares of common stock at an average price of $107.5$104.88 per share, $42.3 million used for payments of convertible debt principal, $35.4 million used for dividend payments, and $32.8$19.9 million used for payment related to net settlements of employee stock compensation awards, $17.2 million used for dividend payments, and $15.2 million used for payments of convertible debt principal, partially offset by $16.0 million from the issuance of common stock under employee stock purchase and stock option plans.

Operating activities during the three months ended April 3, 2022 provided cash of $7.5 million. Changes in operating assets and liabilities used cash of $210.2 million. This was due to an $83.6 million increase in operating assets and a $126.6 million decrease in operating liabilities.

The increase in operating assets was due to a $74.3 million increase in prepayments and other assets due to prepayments to our contract manufacturers, a $9.5 million increase in inventories, partially offset by a $0.2 million decrease in accounts receivable.

The decrease in operating liabilities was due to a $114.0 million decrease in accrued employee compensation, a $13.8 million decrease in other accrued liabilities, a $7.6 million decrease in income taxes, and $1.3 million of retirement plan contributions, partially offset by a $6.7 million increase in deferred revenue and customer advance payments, and a $3.4 million increase in accounts payable.

Investing activities during the three months ended April 3, 2022 used cash of $82.7 million due to $166.0 million used for purchases of marketable securities and $44.0 million used for purchases of property, plant and equipment, partially offset by $96.7 million and $30.6 million in proceeds from maturities and sales of marketable securities, respectively.

31

Financing activities during the three months ended April 3, 2022 used cash of $254.6 million due to $201.5 million used for the repurchase of 1.8 million shares of common stock at an average price of $115.12 per share, $31.0 million used for payment related to net settlements of employee stock compensation awards, $20.7 million used for payments of convertible debt principal, $17.9 million used for dividend payments, partially offset by $16.5 million from the issuance of common stock under employee stock purchase and stock option plans.

Operating activities during the six months ended July 4, 2021 provided cash of $244.4 million. Changes in operating assets and liabilities used cash of $373.6 million. This was due to a $470.2 million increase in operating assets and a $96.6 million increase in operating liabilities.
The increase in operating assets was due to a $372.7 million increase in accounts receivable due to greater sales, a $117.4 million increase in prepayments and other assets due to prepayments to our contract manufacturers as a result of higher forecasted revenues, partially offset by a $19.9 million decrease in inventories.
The change in operating liabilities was due to increases of $78.5 million in other accrued liabilities, $22.3 million in accounts payable, and $15.2 million in deferred revenue and customer advance payments, partially offset by a $14.0 million decrease in accrued employee compensation, $2.7 million of retirement plan contributions, and a $2.6 million decrease in income taxes.
Investing activities during the six months ended July 4, 2021 provided cash of $92.3 million due to $460.2 million and $116.1 million in proceeds from maturities and sales of marketable securities, respectively, partially offset by $398.1 million used for purchases of marketable securities, $74.0 million used for purchases of property, plant and equipment and $12.0 million used for an investment in MachineMetrics, Inc.
Financing activities during the six months ended July 4, 2021 used cash of $295.9 million due to $66.8 million used for payments of convertible debt principal, $196.6 million used for the repurchase of 1.6 million shares of common stock at an average price of $125.69 per share, $31.8 million used for payments related to net settlements of employee stock compensation awards, and $33.3 million used for dividend payments, partially offset by $32.6 million from the issuance of common stock under employee stock purchase and stock option plans.

In January 2022 and May 2022, Teradyne’s Board of Directors declared a 10% increase in the quarterly cash dividend ofto $0.11 per share. Dividend payments for the three and six months ended JulyApril 3, 2022 were $17.5 million and $35.4 million, respectively.

$17.9 million. In January 2021 and May 2021, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three and six months ended JulyApril 4, 2021 were $16.6 million and $33.3 million, respectively.
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$16.7 million.

In January 2021,2023, our Board of Directors cancelled the 2021 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program. We intend to repurchase a minimumup to $500.0 million of $750.0 millioncommon stock in 2022.

2023 subject to market conditions.

During the sixthree months ended July 3, 2022, TeradyneApril 2, 2023, we repurchased 5.00.9 million shares of common stock for $532.8$93.3 million at an average price of $107.5$104.88 per share. During the sixthree months ended July 4, 2021, TeradyneApril 3, 2022, we repurchased 1.61.8 million shares of common stock for $196.6$201.5 million at an average price of $125.69$115.12 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $116.45.

While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition.

On May 1, 2020, we entered into a credit agreement providing a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. On October 5, 2022, the credit agreement was amended to increase the amount of the credit facility to $750.0 million from $400.0 million. As of AugustMay 5, 2022,2023, we have not borrowed any funds under the credit facility.

We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend and meet our working capital and expenditure needs for at least the next twelve months. Inflation has not had a significant long-term impact on earnings. At this time, the

COVID-19
pandemic has not had an impact on our liquidity, but there is no assurance that continued impacts resulting from the pandemic will not have an adverse effect in the future.

Equity Compensation Plans

As

In addition to our 1996 Employee Stock Purchase Program as discussed in Note Q: “Stock-Based Compensation” in our 20212022 Annual Report on Form

10-K,
we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”).

The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers directors, consultants and/or advisors.and directors. Both plans were approved by our shareholders.

Recently Issued Accounting Pronouncements

For the sixthree months ended July 3, 2022,April 2, 2023, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to our consolidated financial statements.

Item 3:

Quantitative and Qualitative Disclosures about Market Risks

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Part 2 Item 7A, “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form

10-K
filed with the SEC on February 23, 2022.22, 2023. There were no material changes in our exposure to market risk from those set forth in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2021.
2022.

In addition to market risks described in our Annual Report on Form

10-K,
we have an equity price risk related to the fair value of our convertible senior unsecured notes issued in December 2016. In December 2016, Teradyne issued $460 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023. As of July 3, 2022, $74.7millionApril 2, 2023, $35.1 million of principal remained outstanding and the Notes had a fair value of $233.3$119.6 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the secondfirst quarter of 2022 and the estimated impact on the fair value of the Notes. The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature. The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value. The change in stock price affects the fair value of the Notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally,

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we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively.

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Hypothetical Change in Teradyne Stock Price
  
Fair Value
   
Estimated change
in fair value
   
Hypothetical
percentage
increase (decrease)
in

fair value
 
             
10% Increase
  $253,683   $20,344    8.7% 
No Change
   233,339    —      —   
10% Decrease
   212,995    (20,344)    (8.7) 

Hypothetical Change in Teradyne Stock Price

  Fair Value   Estimated change
in fair value		   Hypothetical
percentage
increase
(decrease) in
fair value		 
             

10% Increase

  $131,584   $11,998    10.0% 

No Change

   119,586    —      —   

10% Decrease

   107,588    (11.998)    (10.0) 

Item 4:

Controls and Procedures

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule

13a-15(b)
or Rule
15d-15(f)
promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as defined in Rules

13a-15(f)
and
15d-15(f)
under the Exchange Act) during the three months ended July 3, 2022April 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1:

Legal Proceedings

We are subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on its business, financial position or results of operations.

On March 8, 2021, Industrial Automation LLC submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand sought full acceleration of the maximum

earn-out
amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the
earn-out
provisions of the Purchase Agreement. On March 25, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.

Item 1A:

Risk Factors

In addition to other information set forth in this Form

10-Q,
including the risk discussed below, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form
10-K
for the year ended December 31, 2021,2022, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form
10-K
remain applicable to our business and many of these risks could be further increased due to the
COVID-19
pandemic.

The risks described in our Annual Report on Form

10-K
are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
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The global supply shortage of electrical components and inflationary cost increases has impacted our ability to meet customer demand and could adversely affect our business and

Adverse developments affecting the financial results

There is currently a global supply shortage of electrical components,services industry, including semiconductor chips. As a result, we have experienced, and expect to continue to experience, increases in our lead times and costs for certain components for certain products and delays in the delivery of some orders placedevents or risks involving liquidity, defaults or non-performance by our customers. While not material, year to date 2022, in an effort to mitigate these risks, in some cases, we have incurred higher costs due to investment in supply chain resiliency and to secure available inventory or have extended or placed
non-cancellable
purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. We have also sourced components from additional suppliers and multi-sourced and
pre-ordered
components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. However, if we are unable to secure manufacturing capacities from our current or new suppliers and contract manufacturers, on acceptable terms or at all, or successfully manage our purchase commitments and inventory for components, our ability to deliver our products to our customers in the desired quantities, at competitive prices or in a timely manner may be negatively impacted for the remainder of 2022 and into 2023. In the second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 2022 forecast excludes approximately $50 million of revenue, primarily in our test businesses, due to these continued supply chain constraints. Also, our suppliers and contract manufacturers have increased their prices, which increased our cost of products. We have been and may continue to be, affected by wage inflation. We have, and may continue to attempt to, offset the effect of these inflationary pressures by increasing the prices of our products. However, we may not be fully able to pass additional costs on to our customers, whichfinancial institutions, could have a negativematerial adverse effect on our business, financial condition or results of operations.

On March 10, 2023, Silicon Valley Bank (SVB), who is a lender in our revolving credit facility and where we maintain certain accounts and cash deposits, was placed into receivership with the Federal Deposit Insurance Corporation (FDIC), which resulted in all funds held at SVB being temporarily inaccessible by SVB’s customers. As of March 13, 2023, access to our cash and cash equivalents at SVB was fully restored. Although our cash balances at SVB are insignificant and we do not expect further developments at SVB to have a material impact on our resultscash and cash equivalents, we do hold cash balances in several large financial institutions significantly in excess of operationsFDIC and global insurance limits. If other banks and financial condition.institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

33

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

In January 2021,2023, Teradyne’s Board of Directors cancelled our 2021 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. During the sixthree months ended July 3, 2022, TeradyneApril 2, 2023, we repurchased 5.00.9 million shares of common stock for $532.8a total cost of $93.7 million at an average price of $107.5$104.88 per share. We record share repurchases at cost, which includes broker commissions and related excise taxes. During the sixthree months ended July 4, 2021, TeradyneApril 3, 2022, we repurchased 1.61.8 million shares of common stock for $196.6$201.5 million at an average price of $125.69$115.12 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $116.45.

The following table includes information with respect to repurchases we made of our common stock during the three months ended July 3, 2022April 2, 2023 (in thousands except per share price):

Period
  
(a) Total

Number of

Shares

(or Units)

Purchased
  
(b) Average

Price Paid per

Share (or Unit)
  
(c) Total Number of

Shares (or Units)

Purchased as Part of

Publicly Announced

Plans or Programs
   
(d) Maximum Number

(or Approximate Dollar

Value) of Shares (or

Units) that may Yet Be

Purchased Under the

Plans or Programs
 
               
April 4, 2022 - May 1, 2022
   853  $111.53   852   $1,103,537 
May 2, 2022 - May 29, 2022
   989  $104.60   974   $1,001,700 
May 30, 2022 - July 3, 2022
   1,381  $97.45   1,380   $867,202 
  
 
 
  
 
 
  
 
 
   
   3,223 (1)  $103.37 (1)   3,206   
  
 
 
  
 
 
  
 
 
   

Period

  Total
Number of
Shares
(or Units)
Purchased		  Average
Price Paid per
Share (or Unit)		  Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs		   Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that may Yet Be
Purchased Under the
Plans or Programs (2)		 
               

January 1, 2023 - January 29, 2023

   147  $103.09   —     $2,000,000 

January 30, 2023 – February 26, 2023

   414  $105.18   369   $1,960,941 

February 27, 2023 – April 2, 2023

   526  $104.25   524   $1,906,292 
  

 

 

  

 

 

  

 

 

   
   1,087 (1)  $104.44 (1)   893   
  

 

 

  

 

 

  

 

 

   

(1)

Includes approximately seventeenone hundred ninety-four thousand shares at an average price of $109.12$102.42 withheld from employees for the payment of taxes.

(2)

As of January 1, 2023, share repurchases net of share issuances are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred is included as part of the cost basis of shares repurchased in the Condensed Consolidated Statements of Convertible Common Shares and Stockholders’ Equity.

We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.

Item 4:

Mine Safety Disclosures

Not Applicable

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Item 6:

Exhibits

Exhibit


Number

  

Description

    3.1Amended and Restated By-Laws of Teradyne, Inc. effective March 24, 2023 (filed as Exhibit 3.1 to Teradyne’s Current Report on Form 8-K filed on March 28, 2023)
31.1  Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2  Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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Exhibit

Number
Description
32.1  Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2  Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS  Inline XBRL Instance Document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document
104  Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TERADYNE, INC.
Registrant

/s/ S

ANJAY
M
EHTA

Sanjay Mehta

Vice President,

Chief Financial Officer and Treasurer

(Duly Authorized Officer

and Principal Financial Officer)

August

May 5, 2022

2023

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