Financial Instruments | I. 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. 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 years ended December 31, 2024 and 2023, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments. Realized gains recorded in 2024, 2023, and 2022 were $ 2.2 million, $ 0.6 million, and $ 0.8 million, respectively. Realized losses recorded in 2024, 2023, and 2022 were $ 0.3 million, $ 0.3 million, and $ 0.1 million, respectively. Realized gains and losses are included in other (income) expense, net. Unrealized gains on equity securities recorded during the years ended December 31, 2024, 2023 and 2022 were $ 6.7 million, $ 8.9 million and $ 1.9 million, respectively. Unrealized losses on equity securities recorded during the years ended December 31, 2024, 2023, and 2022 were $ 1.2 million, $ 1.7 million and $ 11.6 million, respectively. 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 December 31, 2024 and 2023 : December 31, 2024 Quoted Prices Significant Significant Total (in thousands) Assets Cash $ 261,176 $ — $ — $ 261,176 Cash equivalents 283,037 9,141 — 292,178 Available for sale securities: U.S. Treasury securities — 44,942 — 44,942 Corporate debt securities — 35,696 — 35,696 Certificates of deposit and time deposits — 21,689 — 21,689 Debt mutual funds 8,951 — — 8,951 U.S. government agency securities — 3,970 — 3,970 Non-U.S. government securities — 773 — 773 Equity securities: Mutual funds 54,412 — — 54,412 Total $ 607,576 $ 116,211 $ — $ 723,787 Derivative assets — 1,665 — 1,665 Total $ 607,576 $ 117,876 $ — $ 725,452 Liabilities Derivative liabilities — 1,324 — 1,324 Total $ — $ 1,324 $ — $ 1,324 Reported as follows: (Level 1) (Level 2) (Level 3) Total (in thousands) Assets Cash and cash equivalents $ 544,213 $ 9,141 $ — $ 553,354 Marketable securities — 46,312 — 46,312 Long-term marketable securities 63,363 60,758 — 124,121 Other current assets — 1,665 — 1,665 Total $ 607,576 $ 117,876 $ — $ 725,452 Liabilities Other current liabilities $ — $ 1,324 $ — $ 1,324 Total $ — $ 1,324 $ — $ 1,324 December 31, 2023 Quoted Prices Significant Significant Total (in thousands) Assets Cash $ 298,156 $ — $ — $ 298,156 Cash equivalents 453,298 6,117 — 459,415 Available for sale securities: Corporate debt securities — 52,734 — 52,734 U.S. Treasury securities — 41,808 — 41,808 Certificates of deposit and time deposits — 21,772 — 21,772 Debt mutual funds 8,773 — — 8,773 U.S. government agency securities — 4,892 — 4,892 Commercial paper — 1,667 — 1,667 Non-U.S. government securities — 810 — 810 Equity securities: Mutual funds 47,132 — — 47,132 Total $ 807,359 $ 129,800 $ — $ 937,159 Derivative assets — 18,746 — 18,746 Total $ 807,359 $ 148,546 $ — $ 955,905 Liabilities Derivative liabilities — 2,545 — 2,545 Total $ — $ 2,545 $ — $ 2,545 Reported as follows: (Level 1) (Level 2) (Level 3) Total (in thousands) Assets Cash and cash equivalents $ 751,454 $ 6,117 $ — $ 757,571 Marketable securities — 62,154 — 62,154 Long-term marketable securities 55,905 61,529 — 117,434 Other current assets — 18,746 — 18,746 Total $ 807,359 $ 148,546 $ — $ 955,905 Liabilities Other current liabilities $ — $ 2,545 $ — $ 2,545 Total $ — $ 2,545 $ — $ 2,545 The carrying amounts and fair values of Teradyne’s financial instruments at December 31, 2024 and 2023 were as follows: December 31, 2024 December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value (in thousands) Assets Cash and cash equivalents $ 553,354 $ 553,354 $ 757,571 $ 757,571 Marketable securities 170,433 170,433 179,588 179,588 Derivative assets 1,665 1,665 18,746 18,746 Liabilities Derivative liabilities 1,324 1,324 2,545 2,545 The fair values of accounts receivable, net and accounts payable approximate the carrying amount due to the short-term nature of these instruments. The following tables summarize the composition of available-for-sale marketable securities at December 31, 2024 and 2023: December 31, 2024 Available-for-Sale Cost Unrealized Unrealized Fair Market Fair Market (in thousands) U.S. Treasury securities $ 49,879 $ 14 $ ( 4,951 ) $ 44,942 $ 30,530 Corporate debt securities 40,395 79 ( 4,778 ) 35,696 27,824 Certificates of deposit and time deposits 21,689 — — 21,689 — Debt mutual funds 9,299 — ( 348 ) 8,951 3,238 U.S. government agency securities 3,966 5 ( 1 ) 3,970 1,946 Non-U.S. government securities 773 — — 773 — $ 126,001 $ 98 $ ( 10,078 ) $ 116,021 $ 63,538 Reported as follows: Cost Unrealized Unrealized Fair Market Fair Market (in thousands) Marketable securities $ 46,349 $ 16 $ ( 53 ) $ 46,312 $ 10,454 Long-term marketable securities 79,652 82 ( 10,025 ) $ 69,709 53,084 $ 126,001 $ 98 $ ( 10,078 ) $ 116,021 $ 63,538 December 31, 2023 Available-for-Sale Cost Unrealized Unrealized Fair Market Fair Market (in thousands) Corporate debt securities $ 56,458 $ 201 $ ( 3,925 ) $ 52,734 $ 44,263 U.S. Treasury securities 45,725 14 ( 3,931 ) 41,808 35,080 Certificates of deposit and time deposits 21,772 — — 21,772 — Debt mutual funds 9,081 — ( 308 ) 8,773 3,303 U.S. government agency securities 4,898 — ( 6 ) 4,892 4,892 Commercial paper 1,633 34 — 1,667 — Non-U.S. government securities 810 — — 810 — $ 140,377 $ 249 $ ( 8,170 ) $ 132,456 $ 87,538 Reported as follows: Cost Unrealized Unrealized Fair Market Fair Market (in thousands) Marketable securities $ 62,385 $ 36 $ ( 267 ) $ 62,154 $ 34,844 Long-term marketable securities 77,992 213 ( 7,903 ) $ 70,302 52,694 $ 140,377 $ 249 $ ( 8,170 ) $ 132,456 $ 87,538 As of December 31, 2024, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $ 22.6 million and $ 40.9 million, respectively. As of December 31, 2023, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $ 22.3 million and $ 65.2 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 December 31, 2024 and 2023 were not other than temporary. The contractual maturities of investments in available-for-sale marketable securities held at December 31, 2024 were as follows: Cost Fair Value (in thousands) Due within one year $ 46,349 $ 46,312 Due after 1 year through 5 years 25,554 25,316 Due after 5 years through 10 years 8,648 8,232 Due after 10 years 36,151 27,210 Total $ 116,702 $ 107,070 Contractual maturities of investments in available-for-sale marketable securities held at December 31, 2024 exclude debt mutual funds with the fair market value of $ 9.0 million as they do not have a contractual maturity date. Derivatives Teradyne conducts business in various foreign countries, with certain transactions denominated in local currencies. As 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 associated 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 revenues. 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. At December 31, 2024 and 2023, to hedge certain of its local currency balance sheet assets and liabilities, 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: Net Notional Value December 31, 2024 December 31, 2023 (in millions) Currency Hedged (Buy/Sell) U.S. dollar/Taiwan dollar $ 14.5 $ 42.7 U.S. dollar/Japanese yen 12.6 11.0 Danish krone/Chinese yuan 10.5 — U.S. dollar/Korean won 4.2 7.2 U.S. dollar/British pound sterling 1.2 1.5 U.S. dollar/Danish krone — 36.0 Singapore dollar/U.S. dollar 28.9 16.6 Euro/U.S. dollar 22.3 25.3 Danish krone/U.S. dollar 16.9 0.7 Philippine peso/U.S. dollar 9.4 10.1 Chinese yuan/U.S. dollar 1.6 1.0 $ 122.1 $ 152.1 The change in the fair value of the outstanding contracts was a loss of $ 0.6 million and a loss of $ 1.8 million, respectively, at December 31, 2024 and 2023. Unrealized 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 December 31, 2024 and 2023, 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: Net Notional Value December 31, 2024 December 31, 2023 (in millions) Currency Hedged (Buy/Sell) U.S. dollar/Japanese yen $ 15.6 $ 35.5 Total $ 15.6 $ 35.5 The change in the fair value of the outstanding cash flow hedge contracts was a gain of $ 0.9 million at December 31, 2024 and a gain of $ 0.6 million at December 31, 2023. 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. On November 7, 2023, in connection with the agreement to acquire 10 % investment in Technoprobe S.p.A, Teradyne purchased a call option to buy 481.0 million Euros. The expiration date of the option was April 26, 2024 . At December 31, 2023, the fair value of the outstanding contract was $ 17.4 million and an unrealized gain of $ 7.5 million was recorded in other (income) expense, net. On April 12, 2024, Teradyne entered into a forward to buy 481.0 million Euros which expired on May 23, 2024 . For the year ended December 31, 2024, a realized loss of $ 9.8 million was recorded in 'Other (income) expense, net' in the consolidated statement of operations. T he following table summarizes the fair value of derivative instruments as of December 31, 2024 and 2023: Balance Sheet Location December 31, December 31, (in thousands) Derivatives not designated as hedging instruments: Foreign exchange forward contracts Other current assets $ 725 $ 733 Foreign exchange option contracts Other current assets — 17,364 Foreign exchange forward contracts Other current liabilities ( 1,324 ) ( 2,545 ) Derivatives designated as hedging instruments: Foreign exchange forward contracts Other current assets 940 648 Total derivatives $ 341 $ 16,200 The following table summarizes the effect of derivative instruments in the statements of operations recognized for the years ended December 31, 2024, 2023, and 2022: Location of (Gains) Losses December 31, December 31, December 31, (in thousands) Derivatives not designated as hedging instruments: Foreign exchange forward contracts (1) Other (income) expense, net $ 3,226 $ ( 1,843 ) $ ( 2,482 ) Foreign exchange option contracts Other (income) expense, net 9,764 ( 7,464 ) — Derivatives designated as hedging instruments: Foreign exchange forward and option contracts Revenue ( 2,402 ) ( 3,127 ) ( 251 ) Total derivatives $ 10,588 $ ( 12,434 ) $ ( 2,733 ) (1) The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the years ended December 31, 2024, 2023 and 2022, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $ 2.8 million, $ 10.9 million, and $ 10.8 million, respectively. See Note K: “Debt” regarding derivatives related to the convertible senior notes. Concentration of Credit Risk Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, forward currency contracts and accounts receivable. Our cash equivalents consist primarily of money market funds invested in U.S. Treasuries and government agencies. Our fixed income available-for-sale marketable securities have a minimum rating of AA by one or more of the major credit rating agencies. We place forward currency contracts with high credit-quality financial institutions in order to minimize credit risk exposure. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of geographically dispersed customers. We perform ongoing credit evaluations of our customers’ financial condition and from time to time may require customers to provide a letter of credit from a bank to secure accounts receivable. As of December 31, 2024, two customers of our Semiconductor Test segment, Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc, each accounted for 10 % of our accounts receivable balance. As of December 31, 2023, a customer of our Semiconductor Test segment, Texas Instruments Inc., accounted for 18 % of our accounts receivable balance. |