TER - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Zetania and I will be your conference operator today. At this time I would like to welcome everyone to the Teradyne Q3 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. may conference. you begin Blanchard, your Andy

Andrew Blanchard

and Thank our financial discussion Good morning, Mark results. welcome to everyone and Jagiela CEO, of our joined morning you, Greg this Beecher. Zetania. I'm by CFO, Teradyne's most recent

provide be today opening release of the and SEC performance for could for results of our the website results to evening available in of ends. page discuss will The quarter. call include current the the differ providing materially press forward-looking quarter Following the slides following contained cause in earnings Teradyne's this from A involve our as details filings. same our was most We third review last via well that call to page management's encourage third quarter and statements our maybe you that helpful we're on after factors we'll Safe will we remarks you the The recent outlook fourth matters XXXX's expectations. release discussion. statement containing Investor issued to our today's that that as Harbor the risk replay

statements forward-looking take obligation result as update of are today no a after and of them we as this occurring made to developments call. those Additionally,

W. our most we'll UBS, between Also conferences and website. next call, Bank comparable today's During the R. measures, the available now in of and call, GAAP of Goldman be Baird, page investor Teradyne posted earnings concerning measures. Investor reconciliation measure, We've hosted including additional the by directly Sachs America. will participating non-GAAP information on to financial make reference to financial those where non-GAAP

of the get let's the on Now agenda. with rest

enter along your call conditions quarter. recent the our hour. market answer Mark? the for will results, guidance is offer financial the on our questions, on results comment then We'll with and our quarter. then scheduled as will details one Mark more fourth for fourth First, quarterly Greg and we this

Mark Jagiela

to today. us strategy, test I'll an provide early color, for our view in an about thanks how thinking key four along and topics: highlights, everyone, financial will In long-term details. and joining XXXX update Robots cover expect then remarks, Greg our my morning, XXXX. additional we're expansion and Good drive we growth prepared with Universal which the on on businesses, trends

As quarter a saw our Semiconductor for XXXX. and fourth sales release, in third Test were Semiconductor view. since the substantially earlier were Seasonally, result you in above is highest Test. very a orders above our outlook the of third Test healthy Memory guidance, the performance market, and our is our QX quarter This quarter our of earnings especially level

in up earnings Additionally, billion show strong from and continue $X.XX sales with months, year, quarter to our we've share. above nine of generated Universal of XX% over XX% $X.XX per baseline same growth, last Through rate. Robots the non-GAAP well sales

year consecutive targeted share XXXX $X.X Test with estimated will the ahead For per the and expect market, EPS last up guidance, us we for from per puts size, an sales we fourth well of second market the growth This $X.XX of full goal XXXX. around share. originally $X billion at year, X% the $X earnings quarter that of midpoint in year. be non-GAAP of our SOC above our of billion

Test, record $XX year Test XX% up QX our points million, $XXX $XXX XXXX market be sales expect were will orders Test Memory full to In at our and roughly levels, market about grow We Teradyne about million about Memory last year. from XX% sales will Memory XX%, at share SOC of XX%. million. that we and from test XXXX's the about expect grow several above to rate increase to

an rate growth XXXX. were $X.X strong about Combining even faster year from were above while all Through fall will back year growing strong first we've to third than not of SOC up our grown in a of Robots, QX. XX%, market yet bit XX% sales for and the likely quarter some and the with sales as nine segments At will share period moderate we for last Clearly, memory Universal XX%. serve growth. do about XX% in Test about billion first are regions a growth our growing XX% Teradyne a same year, memory year combined market above months, Our nine the is the points last the the few months, overall baseline. a that market

For about XX%. the expect year, to grow full UR we

showing increases for are year-to-date a Test top-line benefit In the and in addition the System period, impact. revenues from an follow-up of In also XXXX to million we revenues are cost same to $XXX down mainly down up Storage making improved as demand. margin gross XX% price due growth, selective in test,

At about the has detect revenue The a for of quarter XX% environment. modestly a new up the Test the However, the to months test QX nine our we up expect a product system-level to product is from This were to failures result XXXX connectivity on sales flat This new complex, with initial in performance are first chips growth capture traditional in in bring been ETE. XX% application demand QX weak top-line that for space. last recognize to the XXXX. and off group nearly application high-volume, LitePoint, environment that will mobility-focused semiconductors. expanding year in in market hard simulated of Storage allusive

driving and to standards XXXX. New are not the expected cellular, meaningful in volume. connectivity In new XXX.XXax like preproduction not is XG until demand yet Wi-Fi drive early stage

growth seeing space. However, LTE we narrowband IoT are in

XX% we from full XX% rate grow year. at to to about LitePoint For last year, expect the

trends, equipment XXXX, after level. our years model Test growth SOC Semiconductor X% inflected trend down, since been line on at we market many actual that of trending X% the billion. the CAGR to XXXX. we from in the basis As market about in these a has average market update targets XXXX/'XX has of market from January $X.X of call. will of light noted growing and approximately Test XXXX, we and sizes SOC been the Through In the first XXXX, model about grow in

volume signs are recent been markets drivers is the have be a the These in volatility, Memory of device is market Test identified of smartphones place. of the volatility has applications a commonplace the they increasing and parallel the bit key growth we diminishing expect semiconductor high-speed to even for increasing demand the part are with quality test on past. density and year. impact test, memory, XD higher While now and point In earlier NAND customers. SSD demand market this proliferation we in of and that of future The in interfaces include of remain increases, as the the driven growth trajectory, encouraging, complexity

program. UR along the XXXX, XXXX, And of way, successfully the Flash unchanged. our Universal Building that provide in remains enabled specific XX% The family specifics like accelerate partners aggressively add-on with with one demand been simpler to will continues highlight we've those customers Those followed strategy applications. get operate paradigm. full increased to UR of by interface. a of For have Robots, universal expanding enable same investment, our the discontinuity enables provides through our applications. basis similar that UR, year. to our to and emergence a improved to our seamless products prior adapt architecture million of by share package segment end in out further market XXXX universal a cobot a mid-XXs ecosystem the margins gross we the Teradyne, year our stand-alone At the to ease-of-use for outline this links both Beginning of Greg test in software Plus referrals continue plug-and-play testers into the quarter UR is UR UR's for ability breadth that XXXX. deliver also we'll and but hardware ecosystem investments provides for our that software high-speed breadth provide amount. allowing faster, to on customize to to end ease-of-use our XX% platform created a on investment application rate growing up products an growth. pattern that way. platform. is the Magnum the application's open to I'd UR partner and that we specific to nearly increasing Plus OpEx deployments. an quarterly drive At natively We've essential growth. Through spending for their Plus API from experience, $X We partners cobot by software growth in from innovators growth, XXXX per at of about of increase by an investments for

package. fast partner welder, the manufacture is this welding a well-being using applications be glassmaker to integration, give UR and frames. The improves manual floorplan rest. be next no month, ability operator The the cobot programming cost players. boost facility changes repeatability Chicago, flexibility a high-mix, larger fabrication applications a common at customer UR that to a thread small our for gripper these eye The identify metal Plus Fab changes in for points is will short much example, special metal and Show software very change implementation that with and Tech shops. gas quickly From art is the the U.S. allowing For the Trade cycles. Plus to demonstration of the A compete and task stop the has for between product can deployed are cobot tight start the in different to low-volume the programming This is the does there perspective, only application with or URX reduces existing needed.

for future. As UR to we plus foreseeable growth look XX% at clip ahead, a we remain expect the

continue accelerate M&A to explore organic UR's growth. additional through both opportunities, We further and to

quality to UR's human product and will cost automation scale demand continue availability, for collaborative unique solutions. labor expect We requirements drive

time said, billion. of preliminary this limited. SOC $XXX visibility forecast for year, an is of million. test market That market year equipment our and $X.X to between demand billion million In being $X.X for typical Memory to $XXX is the estimate next about As customers' into we the be Test, our

industrial market, demand the key expect the automotive be memory, markets. We end drivers to mobile and

up that year Test business. of This, forecast, expect continued increasing long-term we is across will we are semiconductors of next confident next economy year positive Test similar market the drive conditions lifecycles market Systems Teradyne the with gains, complexity, growth. At expanding short for combined the as more LitePoint, all XXXX, of our and XG $X provide our use to for well picks and share revenue momentum difficult While and semiconductor Semiconductor to buy-in to billion segments early significant a up. XXXX, full $X in growth target, exceed followed Test cellular ahead XXX.XXax and as XXXX year likely summary, over we XXXX. in of will the in saw XXXX begin In by plan. Wireless turn we expect buying EPS

of size road in the positions XXXX, powering continued us long-term the Semiconductor that forecast While for well Robots with drivers the it's over growth business Universal strong to ahead. at actively difficult Combining the the of Test XX% the to that, market. details. turn plus I'll it With financial for we're the confident market Greg test

Gregory Beecher

XXXX EPS a growth, last along quarter our quite with our in up Thanks, with line are the year start last be good of nicely some tracking finish morning, with XXXX Factoring are We'll expected to quick the non-GAAP the quarter up add up and sight. EPS guidance on top Both I'll the sales actions to summary that is the guidance. and Mark, are in third Starting quarter year. XX%. also while and results financial summary. trends in non-GAAP to be fourth everyone. of midpoint, the be XX% projected our fourth is over line over commentary as driving

Robots lift complete average earnings and managing January We'll Universal our in years a year, SemiTest along ahead full outlined target three our $X on getting from after with planning. midterm Conference share Investor our This the We're next gains. count. EPS model is of share solid update while stronger of non-GAAP midterm projected we return market, high favorable our the due plans $X.XX to XXXX capital in polling last growth also For year. ongoing principally our Call is

platform As large fine-tune being debugging in of come new to growth in changes We'll ubiquitous one performance. and which to you're bring right the complexity, of incumbent. to drives with to of often from as pronounced your customers complexity, longer to also as at complexity designs move leads a lives. we market and so largely faults degradation, nodes. well environment. use test derivative the segments which remain the The volatile the and develop growth nodes. market, programming significant Consequently, new we central flow added in impact every initial and having state as driven tools driven electrical We're winning costs harder-to-detect by big for us. from by directly capacity. Business often that level, around earlier get times rise Semiconductors to added optimal strengths rather Nonetheless, test advancements these both they and to waters very unit high trying than switchover In also front-end share. from yield role critical granular hit strengths remain get and also tide and battle trigger another Mark a noted, to due find simply robust in more nature connected These This the world constant cases, ATE many share on in the inflection unit gains today's characteristics a eventually customers services proficiency remains need new performance of the daily share. packaging our have advancements. rising a targeting our share add or products to fuels and test of and complexity a advantages heart wherein certain a part point have versus a and so and that added small is coverage growth we gain more

to cycles, mobility electronics along quarterly Our a volatility the back-to-school launches is with to on principally basis in predictable tied consumer and buying. fall, holiday tied new

that in and broader disciplined the approach key memory term, basis selective Robots. the low-cost since jump We're to that on Universal of more In are human the to billion favorable. is of performance. two lean tasks in automation the Shifting this year near pleased targeting thousands has and this we points from business, XX%, while XX supply which allowed a gave device China, By and to of trends now to action X to and tens less above This are makes also it's reports which tied this prior chain, a us in clearly very tedious annual to remain when XX% straight high-growth demand In an past, there Compared profits fits SemiTest or our comparison, more market SemiTest the repetitive easy-to-program to gross and short, due rate XXXX, cobot share than cobots. are focus of UR an on segment scale of our third-party There assessment. with growth ATE in but the points the would we're highly sharp several on the benefit and largely strong track prior past we level at a far PBIT margins start sixth decade The somewhat decade. safe, volatility to of portfolio. continuation have customer about device average PBIT opaque, that more and Our non-GAAP and shorter to non-GAAP keeping volatile maintaining decades the back The report maintain about year is OpEx. downturns. more expect trends. we're of of a our company gain efficient lifecycles gains. this of share

We competitiveness. tedious high expect critical maintain cost become automate tasks and to will to increasingly quality repetitive, that these it

Shifting China in to ensure ahead subsidies actions local see grow of or offered addition, to companies to stay being key cobot and In to XX% more. now we continue at their take advantage some cobots. the that

as how buying of repetitive sensing to redesigning potential possible today without tasks the of client from awareness do a workshop. involvement it is small large from is without automate cobots. at First an or moves that not about cobots and sales Many shows, corporate buyers a medium-sized possible do cobots. cautiously and companies the educational with average to power many of buy what larger with trade cobot new to To inflection, cobot the Much an web embrace about continue task We business future campaign understand locally greater two on. who larger and our advertising is so inflection cobot enterprises of technology, or easy expect building very This resources small sponsoring awareness is managers at more versus quickly awareness sale. in with today big content, which tend this accelerate distributor, companies, ordering will programs, to end-users. we're the many UR move

or though would platform. We expect how UR ahead expect as field. these Critical over we develop will easier expand on end-users competitors addresses more we use task important join the on plan accessories as is do the the time cobot to staying

and year our integrators channel and getting sales strengthening their this of aligned throwing Through by growing the in map up along that will adequate about who platform. support, velocity with First strategic we're sales sales covering. partners year. sales partners velocity onboard the We're are best distributors for to XX% product more for with and in training last both our with programs, the not is us sponsoring tech channel partners a global advanced increasing U.S. also

Next, third-party our anyone that many not can to us aware be portal. of the develops turnkey from ecosystem platform ecosystem allows and this plug-and-play so cost solutions plus We're if risk. else backing third-party UR solutions of ask, our to with accessed on that you're we'd them. have This going implementation of type lower

program, programming make add is, even in example, course, Third a shortcut even usage for further. easier our of new to investment cobots R&D which, that to

to to we'll Teradyne's improve Systems Lastly, UR's Shifting leverage strength performance. overall continue Group. to Test

mono and about server to X% growing group interfaces production by driven we're faster sales test, production test PCB and as year profitability. radar board at tracking bus board mil/aero while this sensors, demand. advanced by And industrial such upgrades mil/aero new avionic driven for and advanced Our is automotive, is

Test Group, in to now. SSD application, outlined, sporadic tied leg Mark Systems market Storage is is demand Test new third the system-level test in and the launching HDD the and which Our

profitable start. fourth production in XG time test before sizeable tune quarter. In the wireless be for We starting for cycle out expect to remain in low solidly XXX.XXax and LitePoint further

last stay Our actions focus and year new have business growth. been the resized a on

far, synergies So on model longer-term running for opportunities. traction this a the good year, and getting profit we're

plans. of reminder about on $XXX in this a shares capital year returning while our our $XX million of allocation minimum shareholders. a million to dividend Now buying We're

million price at to average aggregate in average So spent for of $XXX an bought $XX.XX. shares $XX.XX, year, million an X.X back we Since million. we XX.X shares totaling at this acquire million price XXXX, $XXX of

billion Our $X.XXX cash end receivable securities quarter quarter. due million to the collections in strong and and totaled the marketable up the of $XXX accounts from strong second profits

$XXX and is of offshore. annual million the generation balance We be in have offshore year. the about U.S., cash will XX% And our this

to the details quarter. the of Moving third

higher on at $XXX were is in Universal spot the due XX% million non-GAAP third non-GAAP variable Robots. XX% quarter accruals quarter. was operating in company million. and sales product margin $X.XX. EPS from higher was year due highest margin non-GAAP last third the levels. see rate XX% third OpEx quarter quarterly We years, from margins the to XX% four operating Gross bright favorable $XX in compensation A lower driven variable of this million Our our We Universal of decreased to on improvement to the is compensation mix. down Robots year clear quarter gross our million accruals $XX $XXX spending had by and profit XX%, higher the ago profit in million, up customer at $XXX Company profits rate from the worth one was expenses second year. Total in quarter

OpEx, variable XXXX. Robots full $XX UR's year in $XX in about OpEx essentially changes to be will from million excluding normal year-on-year for compensation, We to grow full million Europe expect Universal our XXXX flat and

or in plan Looking quarter variable our well. of step-up where compensation. as swings changes ahead, UR all first in except, profitability are will slide half spending in compensation, Universal our the OpEx to keep Robots at Included which test flat due the in growth variable move second growth. we and businesses shows OpEx aggregate in this course, of grow to and will

Semi SOC were Flash million, detail. orders sensor Test were and mobility. the strength balance. quarterly broad-based totaled applications. Semi Now were bookings the million memory, $XX Test, million Test moving orders record Semi revenues were to segment were the Semi Test image driven quarter. Memory $XXX in in Memory $XX service a $XXX the quarter, service by of microcontrollers, with analog, SOC Test $XXX million, up making and Test in million Test $X $XXX total. million level orders million, third in with sales

expected in QX for Asia, in million XXXX. intangibles. and quarter On in third XXX, carries Please rate run under takes fourth at third Universal from to midpoint should million, the revenue that be your $XX required Systems due Wireless which We XX.XX%, Moving to Orders XXXX. shares. And a product Shifting amortization our of XX% million. is sales no to to gross of million. and mix. strength OpEx the million fourth and were business, expect $XXX tax quarter, $XX XX% to acquired The recognition the to sales operating material Robots, quarter. changes to third very America Europe, margin profit from at about July be a basis sales million XX% is fourth note, quarter XX%. to were due also expected Test. quick effect were XX%. business to the down guidance range tax quarter the that and points U.S. memory million XX% Test. a housekeeping total Shifting XXX XX from note and rate January X% strong we in up rate about $XXX $XX a run estimate quarter rest $XX the down the non-GAAP third $X.XX were is higher quarter our from were step The our of At guidance should from XX%, which XX% rate. orders full and expect We $XX the changes joined $XX a North UR's in EPS Sales that growth advised diluted AIC taxes, between booked million, of we up about to excludes for sales be quarter tax pending world. million to $X.XX is

flow million, years planned our $X driven We're EPS hit profits. share three totaled on ATE cash year. free strong year-to-date for $XXX non-GAAP the straight Our early. summary, to In gaining by we're in track sixth

about have grown Robots We again Universal discipline year. we're steady to and call With this returning And that, back turn Andy. financial XX% I'll capital. maintaining

Andrew Blanchard

Thanks, limit we'd now as Greg. a Zetania, follow-up. question a please like to take some and questions. remainder one to And yourself

Operator

of Your Instructions] question Redstone. [Operator line Iyer comes first Summit the from Jagdish from

Jagadish Iyer

taking Yeah. questions. Thanks for my question. Two

can First, into And I an NAND here? Test? a and why resurgence was how wondering split just think should Is Memory interesting you I there have a we And there inflection follow-up. that about light? is in bring DRAM

Mark Jagiela

Yeah.

volume be going change really a device off roughly se. we one million. took by market time million. The bit that Test the us. drives then $XXX thing Memory will obsoletes, be Memory year. the It's not changes $XXX-ish unit So driven older really Test demand, is It's technology we last It speeds, Memory grow this in interface estimating were that and Test If to surprised equipment. per density go this year back perhaps

also And lot Those have a the because speed be just cycle. construction see still is higher Flash going of demand. So of and interfaces. 'XX on yet of or not obsolescence it Test to for we test are Memory outside heavy or of 'XX in China. actually growth. of that, affected There's the memory most do on equipment fabs bit probably going come late DRAM growth and expansion a tooling test Those then unit in online

looks the look robust, for which Memory bit years horizon, good as will, have memory So like remains it we Test out we provided over the several demand should demand, demand.

Jagadish Iyer

margin can as you the at inflection about think in And say but continue in XX we a look uptick some over margins to operating realistically, should in we the UR, an operating Seen gross will forward? when follow-up, months? to the we see invest margins the how correct. as That's XX next going

Gregory Beecher

XX%. The happening we'll sales years we - be to improved it And the Jagadish, long-term it away meet long-term very XX% gross it's we be and this so than be get think year, expect example margins isn't is This will at high have could a Greg. target for were modeling. earlier operating nicely our we're so year. sooner X We rate. slightly above to this going

expect get more as further the the margin next we operating I'd XX% years will So become insight to too.

Andrew Blanchard

Next question please.

Operator

comes the Chris Your Bank with next question of America. Shankar of from line

Chris Shankar

X hi. Yeah, my Thanks them. question. for I taking have of

one, out looks SOC, $X.X billion, $XXX in $XXX of $X billion market XXXX? for year what and similar Test of was Greg, Can you First gpu us million Michael, this compositions give $X.X automotive SOC billion million. you like think

Mark Jagiela

Yeah.

came in on much. continue this of bit tea of and spaces For change The the again not mobility strong a so little XXXX, change to point again a strong year be should year, not should year strong at that it's leaf green mix. this next but to do memory I mix be automotive lot expect next that

Chris Shankar

follow-up a Got on it, got it and business. then cobots

cobot Do X still a of plan Some payloads URs. have higher guys just you while payload for the on developing of higher business? your you competitors SKUs have

Mark Jagiela

have No, higher-payload cobots. we no plans for

very human flexible are redesigning has scale cobots itself. Our exactly

market we fits So the we're that don't see to highest payload what trying do.

Operator

next Your of the of Atif question Citigroup. Malik line from comes

Atif Malik

if look comment the for your billion I results market taking congratulations and next year. $X Thanks out Mark, talking about in Japan, in question at peer Hi. they're the for guide. on my of strong

bit little billion. are billion, $X.X below $X.X that, a You guys

of us conservative. market next the to What SOC end more follow-up. And high year? then test generally You're takes the a I have

Gregory Beecher

market service. forecast test all, our sizes peer the And include exclude for first Yeah, of the service. sizes advance

and service $X $XXX In million believe number. I for SOC. to excluding you to $XXX their have to billion to that add $X.X are and there for service billion actually, another $XXX So million business, the million memory

the through other. next to So year, of least were end early in of for close north We $X.X But year. of complete time slightly up easily could continued at to SOC a truth, is than And coming year next strong a of billion, we visibility part billion with demand. for to we're end as by could higher last us, this billion shows the talking $X.X have about $X.X each market we $X.X the the this market of range. outside into billion. last year. we tale we We're run year, the now, $X.X in pretty end tape as year market, a billion We into the said be year, a

very the at really point they're precise forecast give in difficult us Very message a forecast. to unable year. want it's factors. for this top-down to a give is customers to few of because We forecast lot I So the took us create

So we're and around we the next design coming complexity year's try to looking the trends see for production demand. to devices what estimate of are into at that out pipeline

Atif Malik

you, broadly should made this it. year. talk looking have then next a mix And mix. Got more very next You for this gross about Thank we at gross as you're similar Greg, margins, what year? the How think improvements on drove higher little year? year. you the product about commented, Mark bit helpful. you margins margin Can And mentioned

Gregory Beecher

was margins. year Yes. than stronger us strong. SOC we expected. for This was a gross was LitePoint very strong very

memory a down. Test business, which you business one have would on Storage we thing flipside, that less turn the the that our expect next itself margins year the And probably when down. Test more there's coming so bit too. And move be around, pulls that On Storage by way, helping we margins business, would

some margins well. as And have might lower that of

for to to get are down forecast. margins news make improvements example. is a Universal cost able difficult year-after-year at good material and significant The bit always So Robots, we're

for spot, a can quantifiable So But we we things, thought of with do have two Test but that could I memory of business. have couple from and starting apart Storage a think see that, headwinds stronger a impact. I

Operator

comes Baird. line of W. question next Your Richard of from the Eastman Robert

Richard Eastman

Yes. Good morning.

Just two and quarter the quick this had in customer's plans one queue we've Mark, here, given you questions orders mobility when business. big into into new products. years pull-forward of on look for the XXXX the SemiTest we've had where two of XXXX fourth

we orders where XXXX more they kind quarter, like and sure side that trend on vendors, still we expectation normalized fourth test pull queue order XXXX SemiTest, chip the there As here see have does pattern? into vendors this move big that the does their it order is for the we'll earlier? in get this Or mobility of look mobility and make

Mark Jagiela

I'll XXXX, hard Yes, been depending their questioned. order the call really window on is that's move planning And to internal it's for the order about between several release it's these years timing. and their that window can last cycles the because eight-week always XXXX, be XXXX,XXXX,XXXX,

late clear. timing the QX. could early It QX. So be It be isn't could

meaning I orders kind of will QX, concentration independent the in when QX years. schedule ship think similar, it's off prior the the of as be been book

Richard Eastman

side a impact just of M memory. Magnum here Okay. And ultra-flex the referenced quarter, Does that the question on that's in test side? then margin presume on the backlog the I SemiTest. or gross kind were given orders the you in The third that in side SemiTest

Mark Jagiela

A little bit.

of But that say, memory a given not Test SemiTest. it's Memory of bit relative in $XX total, impactful. to X at swing gross size there. X let's below margins the average are overly Our the points million, to maybe It's

Gregory Beecher

the both they we've and I lower quarter down margins, of margins, OpEx PBIT. have so good And gross those memory. comes should lower that of But Storage with it lower add got fourth all businesses Test have because OpEx. gross generally the

Richard Eastman

maybe And get need understand year-over-year? gross year-over-year, can margin margin maybe XXX question just how trying on is gross of the a of down, you coming points price, improvement is basis UR, you supply to bit I to that components speak that cost - could from stuff, it to kind do chain just improvement Okay. just little

Mark Jagiela

from is the increase That's We've done now. good a material year part material smaller improvement. cost news a We Most next shipping early through. pulled which it is next is The Orders in of now price the of cost. year, we were price. year. and announced continues

So strategic commercial and we do should Teradyne to be help line the our and in best from group able lower material get robots to continue sourcing place. expect cost supply terms

continue. So that will

In margin. pleased software overall very the gross largely what Universal we're It's the So it's Robots components. chemical reliable, truth, here. is delivering we're with very performance with

that time the keep do So opportunities margins healthy. we the over quite to see

Richard Eastman

Understand. Great, thank you.

Operator

question Your Ho from comes Stifel. of line next the Patrick of

Unidentified Analyst

letting Brian Patrick. is questions. for few This in a calling Thanks me for Cheng ask

customers again particular. into how your typically you the that SemiTest and just year? and back early business the next typical from business characterize and in First SOC question, now maybe strategic just seasonality right business the at perspective set going utilization Could you what for environment expect versus you to up the a your now

Mark Jagiela

Yes. This new now, is always in a are installed lot Right having a strong products electronic keeping utilization period period. after in production. of equipment product, summer

roughly It stronger, been where close of period, to is, to compared period. it prior is running So utilization a prior QX QX in it's to little bit is periods; prior high. very

be found doesn't but that coming we've that prognosticator of where are not is right what's to next now. year, Now that we - necessarily a

Unidentified Analyst

Okay, UR that's to helpful. business. over the Switching

to possible Is in business the targets in of yourself your UR be side next of could is of in just you're install margin on even Test we push in continue that cobots? is metrics, just the in what up Curious relative that growth basis? much different up install now that still what percent margin curious, some moving your Semi for here strong of, base if Europe you Just of And to the it up an base year? given second and sort from business think more even the And and part that tact on the forward? business. that those strength investments for could set that you under-investing even trajectory a are exiting perspective really maybe pump how the the

Mark Jagiela

is the in growth higher we and Right. next year. in by as number. point, grow That's invest sales OpEx a growth do continue to on a bigger expect good Obviously, XX%, more to we

two pencil probably last million, quarters. But the is end than we year. going the increase we'll OpEx to could the up grow So as go of that it of XX towards more

opportunities fan opportunities. to partners, see many we regions, short-term So distributors, ecosystem out in Robots Universal no different

where is and remarks, a are, that described cobots losing mix consistent. we the that little in fairly the it's bit. of the XX%, about I'm terms Europe prepared been In

these quarter, as bringing rate. higher-cost there's all in we accelerate of is high policymakers the significant. very past North XX%. This be But are china many America today, Long expect regions is to XX%. at very growing Asia term, in X% applications And rest of in subsidies a government the some And cobots from China, have you are my workforce. china deployed. cobots that mentioned entities, which I their the that to being see advantage countries the could faster remarks in world.

Unidentified Analyst

Great. Thank you.

Operator

Toshiya Sachs. Next, Hari of Goldman we have

Toshiya Hari

Hey and in My think industrial for good for I thanks end my Test. strength now. morning first one is quarters talked several on have and the guys Semi you automotive markets questions. Mark; about taking

I historically, would end it'd first think be analog, on But and several quarters markets, this like I markets, offer these seems the whether on see kind guess, in several you it or positive extended time, again. digital be is at think back What and quarters way. end forward? expectations And going in your are what a this I of did these cycle QX?

Mark Jagiela

has You're this correct. extended you been Typically, pattern longer. the one true, mentioned and has

happened Third quarter pretty again. fourth be was in strong to quarter looks What good.

that's than or in it's avalanche of has away mean, complexity. the three something from are a I prior higher electronics been moving say, with several although in are lot in of semiconductors one vehicles, that, is the things the One toward talking of all the we're new bleed, traditional of vehicles much years, let's fueling new here. of think generations. it EV new starting hybrid electrification is ADAS, slow is there years past, automotive Whether dynamic that become that are of complexity I that an designs now. and to automobile model next-generation the about to the

really for sort So intensity a that effect bits and this you step-up in to high-test of changed has ubiquity starts complexity where of dynamics start double environment the with, test, have plus and things.

few on for electronics. automotive positive pretty we're So the years next

Toshiya Hari

remind Memory could Test. actively you. TAM Can of know XX potentially percentage I XX in number place I what to Test? being your Thank you expand months And have then And percentage Great. new months? the where today but within have TAM, addressed a guys us to you you follow-up Memory on initiatives a

Mark Jagiela

Yeah.

is So million that that And share of TAM high Test. that, a test. say, of It's the pretty Memory segment portion we this serve we segment. primary let's year for Flash million roughly think we $XXX $XXX have final

there. is have concentration So we now the

now moving new million are into product applications, next the adder. market as We line an we to opportunity which that start seeing is a wafer should $XXX us Magnum year more for closer

Operator

Your comes Mehdi the Hosseini of next of SIG. from question line

Mehdi Hosseini

no you strengthen go in fair the return of you. strategy? prospect is wanted Thank which that M&A, mentioned pretty Yeah. changes capital in has taxation to back briefly change taxation, and would to it impact using program? to, I the M&A accelerate given any Or

Mark Jagiela

our us doing tax Mehdi, different approach. cause I see don't any changes in possible would any M&A

that M&A the And the can sort as about, don't like with or there's fit if us. drive think the It's differentiation, Universal put that the advantage that's our into direction. approach any that financial of it that Trexler on thing that of at something bonus obviously, give with much we is planning, but we So is more put of return. as growth should tax a Robots in more the much

Mehdi Hosseini

wafer any application you that understand? then new other that wafer can mentioned there us of test, help you packaging? Or level wafer And Okay. is is driver increased driven by adoption

Mark Jagiela

Are test? you referring wafer to memory

Mehdi Hosseini

that what driver just you to I'm additional you're figure wafer mentioned that. for Yes, trying the the looking at Yes. test yeah, out

Mark Jagiela

for is because the in memory that segment to itself We, gave is years a segment. chose where the interface Well, relatively take Magnum, introducing market many that we us test to first on wafer of focus discontinuity Flash and test large for been share. final opportunity presented

there, Now wafer technology. we places that some exploit can where that benefit test to the market been established we're and pre-existing take wafer able of see of the in we've architectural Magnum test,

to is pre-existing in platform say that So position take something a market. I but changing, now into large wouldn't wafer we're a

Mehdi Hosseini

of And backlog This had your about it. your demand almost trend. million. to clarification $XXX you high strong a backlog. if just I ask year, In comment is Got historical one QX may the have a typically when

by trend demand should unit, the highlighted, the similar you each next minimum for underlying can year? that that the Given business trend backlog you early we the assume hit strength level add in

Mark Jagiela

the one QX factor timing earlier is I even versus No, early assume the orders late this gets shift QX is let's peak for, true order incremental that discussion the order to that. had It been summer in But orders you we year. don't order a the think that sometimes, because should one in a the say, the takes QX. back of place, bit then There's from follow-on starts demand. an baseline QX as summer initial demand It's to and not lump unfold. drives to typically

orders QX those through, the from they're So way periods. anywhere all spread their late and May, run across let's say,

the from to that it's of QX at hard So meaningful of and snap that. judgments or end making at align it the backlog say QX end you

Operator

comes next Your from question C. Evercore. of J. Muse

C. J. Muse

the Good share talk looks for morning. 'XX, revenue question, expected at your guess in XX%. you I it around I of about sizing your bps, taking first Thank look like Test is about Semi when of and when market question. my memory, your SOC you for market up XXX

is, that that right SOC the question kind of retain you the would So math? is the expect to in share first market And is into that XXXX?

Mark Jagiela

could We let's shipments the X It points, Well, It X.XX. QX gains said market up likely share say, yes, X.X is of be in in in and anywhere done. from I to market actual think, our we X XXXX share everything first size. all, SOC. could depend will will But for when be X.X. the be

Next probably we'll think consolidating up we'll be is end what year. doing I next year,

done much is year We've better pace. typically two plan and pick off to to one this Our try that to points year. a beyond

now, and think And allow side with case share and as we're year gain for market going I in the expected there hit to for we're the going the next and position. we're to going it to momentum to memory, for We're growth. momentum. looking more maintain SOC both try share this at see market year, In an of so look

C. J. Muse

as year-on-year. will X% gross very midpoint, think size business, about it's if margin for specifically the next year. early SOC predicting helpful. follow-up And of I your question, be take But what you it's Very still kind obviously, roughly margin as the a

mix again year-over-year? business for this the of how think into should about know the going As but think about shift kind about gross we it, next margins SOC think year, early, should how we I year you it's

Mark Jagiela

that a a inventory few the think profit. that comes possible out down It's was We that had point will digitally I so half will generally credits sold, so. some that margins they're similar. be reserve meaning SOC in or we reverse,

just some the So similar so would in have what Storage is improved you a get year, erosion retrofit the year. or bunch as charges, certainly the for charges bit better obsolete of thing really Test we're guide analytical so their to And which think the itself, Robots, the Storage be little credit margin stay downward a But have type throughout don't year. largely in time. this tend that year, equilibrium cost, ignoring can material that but impact. think and of a I there's the forecast is we will have point to one but product that to sense there may will anticipating, said, those, we be Memory, - there. Test as the or can't moving Universal could out we'll get next things They SOC be and to we much think little price the mix Obviously, we I a some bit bigger over

C. J. Muse

as auto, I lower digital. opposed industrial margin guess, on margin, you're read trying how Do on all things have I year-over-year? read equal, get thinking to was about higher being to a early that you an

Mark Jagiela

think isn't of Not the really. different I this too next those year terms Like mix in from I said, year segments.

C. J. Muse

you. Okay. Thank Very helpful.

Operator

Mok Edwin of line the from comes question next Your of Needham.

Edwin Mok

question. my taking for Thanks Great.

is just I question First on SemiTest. guess

could term? I driver market? that become test incremental longer high-performance driving think become big talked customer think Do see contributing you that market? for one big about an your a do driver you How potential the foundries with of test

Mark Jagiela

digital complexity high device driver. Any a is

more, the will a applications to require deep AI, specialized, learning say, so be balloon, And digital, absolutely. complex, let's that extent processing-type

Edwin Mok

Or long-term? that you right Are callable seeing something in that now? is the

Mark Jagiela

which type test and think, those to discussion GPUs, no, now. at it of a kinds even somewhere lot per places million are There's year. look that $XXX in right processors, million of if you I $XXX the Well, not of market buzz But around application. like

small, from relatively it's to market. the of X% anywhere So XX%

Edwin Mok

will increase expect robot? as just in you kind think you think OpEx as your distribution, a Is SG&A? you Is to grown to your guys see step increase look spend on helpful. going you bigger guys about comp OpEx a further over and or right? That's there should we XXXX? most XXXX two R&D invest especially needs next UR, then into way jumping on how last you XXXX, that there how for in things you OpEx great. the spending has years OpEx be Okay, likely the increased to I UR investing capability curious I'm OpEx the to your of between way could you And like R&D, do software, talked into about

Gregory Beecher

our what plan marketing. more I OpEx grow we're both or going dollars to increase would more considerably in so to is expect to higher XXXX, we're to the distribution higher prior programs. to XXXX last greater field years done in dollars, year from need XXXX, have initiatives distribution again, sales and all we've XX% going growth because, those Similar to of and

R&D, in cobots. That's a we onboard challenge challenge we question size. to attractive as to other opportunities And In shortage continue right the into cobot R&D. The the three is opportunities working cobot terms We the getting to opportunities. us we direction. for a bigger make a of today. the the any up to extend when little not earlier talented that of go going with spaces it's people so different see bit many see of specifically, to are versus many Frankly, are back in goes this number that

Operator

the Weston of of comes question from next Twigg Capital Your KeyBanc Markets. line

Weston Twigg

for taking my question. Thanks Hi.

on a addressing which segment just the on market market if about outlook being down to year? First, what midpoint. maybe a you SOC bit bit next concerned you bit next you have wondering I'm specific had little bit, for concerned, a little bit could year, a universal the little a lower more be you had

Mark Jagiela

it's maybe be low, at is that would over the of visibility don't many particular reticent in I just It's any segment. aggressive. this experience too the years I be think a industry being lot point to

it at view stage come able up point. think have be I that. But January, to this conservatism some to maybe we'll of we'll stock a better

Weston Twigg

sense. makes That Okay.

had he side. or sequentially. share Robots sequential us quarterly growth? also, a on much there I'm anything market you current bit prevented that think quarterly growth Was could grow revenue I Universal your the question what other to is? on is wondering The just was update the And why faster if QX related

Mark Jagiela

the second meet in tough because trying Europe. in point, So UR's a of compares people be on big to year-end quarter tends sequential tends to in case. be the slow were to really QX vacations QX quarter because quarterly of past the a goals.

us I we'll probably think finish rush year compare we've that try that closer I because out years. programs this end-of-year growth seen buy our to changed at smooth mentioned number, prior year's incentive year-over-year we the the to mid-XXs. about QX will meaning XX, That's XX% the be to to for in

not Year-over-year ordering in are something is would very comparisons say. sequential So meaningful, better. that's UR I

Weston Twigg

Okay. And market share?

Mark Jagiela

So there's growing market reliable there's tough cobots. on share is and no one of because a a third-party reports population this,

out and a situations few more more a them into. out of few us None settling we're Google there. and go you'll you every quarter, If see in are with terms the that cobots, the of competitive

it's on I for too reliable share. don't in precise over on on meaningful some pretty reports a point a until to that get share-based market us So still we said are reporting. hard size roughly but XX% it's we this environment, going be past lost year that old estimates. we any believe third-party I at be But think to the

Weston Twigg

Thank you. right. All

Andrew Blanchard

please. we have just Zetania, more time one for question

Operator

Suisse. of the Ahmad comes Farhan line Your Credit from final of question

Farhan Ahmad

you forecasting been the I year? you about Hi. talk If Thanks question. are SME for SOC my test this next the taking just it's Can since growth, how XX%, SemiTest think for about stronger year us excluding revenue market sense kind going about you're are you Test give you and how growth XXXX tracking of market? SOC almost And memory. year? what assuming next Can of just about a for

Mark Jagiela

for that growth that growth, things Complexity is important. us, our always, unit revenue important. to but the generally unit So is SemiTest drive not certainly market, growth important correlates is growth

looking sense at now what major that to same at we and the test see do customers complexity, hard unit test? are year's so through of at we're that year sets kind of programs a that grow, that at to stage, looking because of means clearly in in next complexity with QX ramp trying development. happening year's of the get We're preproduction in our see growth. So forecast time. What terms will we parallel test next growth, is, will we're devices amount looking intensity trends Next do parallel test get are this which

that right of look we now time a read So test, and what complexity, look unit good kind don't think around parallel is we on tend like. test trends have growth is at

Gregory Beecher

market. our maybe it's something so speak we time talk it's that to just every we the add, the it's gross company, forth. that and isn't that I'll are answer focused trying to because amount there more literally goals And many so answerable. goals, margin of There's put because enormous really inside enormous not share and energy you something not on we're those guys, time we not much executing very they're market And to notable. our questions about uncertainties. But

Farhan Ahmad

end what this the the at high just you of you a maybe can the of at the the in growth kind But sense end? forecast, deceleration maybe or are acceleration year similar, and it. us Got give assuming unit low

Gregory Beecher

growth of giving ranges analytics the go year. think But it there's lot be the be a again, to said, high obviously end, that similar fall that significant back. a unit as you. into Greg end I will I'm The will low not this

Farhan Ahmad

margins, here? can these pretty it. The grow should And do somewhat from expect revenue Got we moderation next we margins at of just this about year year? think has margin high you sustainable grows, maybe XX%. level, a have terms operating your been you above Can been talk phenomenal. and As then your a are of in

Gregory Beecher

don't where is window is people. Test. with the really so need point and next We profitability need But this but are we higher what precision. exactly think add in I engineers if more drop-through sales good is the conversation, us don't the We for trends. it because size for drives long-term in tied add feel to there to time, any good difficult calling prior market XX-month to about was much our that year Semi such people. sales But manufacturing or

control, our biggest we've and biggest obviously The swing getting as system is thing things all the single Semi that's we doing to LitePoint the So can in businesses market, doing size. are improving the the other factor been that's share, we've market P&L our our like doing that that, the we market more improving that is wildcard been profitability. well. that is robots Test But this of what in then

Farhan Ahmad

That's Thank you. I had. all

Andrew Blanchard

Okay, immediately operator, ends. we're going us get everybody, closing queue, close and call to up. back joining after for you I'll Thanks, the this this to

Operator

call. today's concludes This conference

now disconnect. may You

Teradyne (TER) 26 Oct 172017 Q3 Earnings call transcript