TER - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Thea, and I will be the conference operator today. At this time, I would like to welcome everyone to the Teradyne Quarter Two 2018 Earnings Conference Call. Thank you. At this time, I would like to turn the conference over to Andrew Blanchard. sir. ahead, go Please

Andrew Blanchard

Greg earnings Good most will call and the this joined risk recent Jagiela, of available differ matters Financial CEO, review Thea. as our via release discussion cause was by to to press and materially we last after Replays Teradyne's the you to the of page to Mark Officer, Chief management's discussion. most could will in our involve recent we Teradyne's page same be statements financial quarter encourage and The morning that you, the SEC call welcome that website on evening, current with slides the everyone, results following our statement issued our factors Beecher. expectations. filings. Thank that results. Harbor that the release you the The providing ends. include may as second We containing Investor Safe our results discuss well are from in be today helpful forward-looking I'm contained

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

make will we non-GAAP call, to today's During measures. financial reference

between hosted Davidson, Manufacturing by earnings International in call, the information and non-GAAP concerning Also, have GAAP We additional our posted the and KeyBanc, IMTS. at September conferences with Bank. be Show, Needham, be financial Chicago investor will technology meeting We'll in investors Teradyne in participating reconciliation measures, Deutsche next most measures, Citi available now these also of the on website. page our including where to financial comparable directly the Investor

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

year. outlook then Mark? guidance your of for results, on this and conditions questions answer Greg on hour. financial is more and the results, Mark recent details our our for comment current quarter. one third then by quarterly our First, We'll call will followed market offer will scheduled the

Mark E. Jagiela

I'll year, of us products expect cover the results joining conditions, of today's we're rest new this some current will our highlight business how for morning. call, describe our the financial and and In we power future. the thanks growth in and everyone, that Hello, the recent at looking

the First, isolated in outlined updated expected second significant $XX test EPS parts even up test period. Xx $XXX in of quarter. SoC strengthening April million our year-over-year last In Elsewhere through a demand product. guidance of test call. quarter, by market nearly overall been Magnum driven ago to recently for we wafer mobility is segment exceeded million revenue on our due $X.XX our that we mix revenue six the test you primarily for of when the mobility us quarter with drop test Test, our businesses was of to strong. in stand-out year the memory from Semiconductor the an memory non-GAAP bringing of demand our sales package than than results; year-over-year stronger, SoC our the for in a demand setting test business traditional first significant Semi nice Memory months growth. demand remains million, $XXX being the customers introduced flash looks This both quarter we our and in the Other third Test, has and stronger other new in up quarter,

months year bright demand a continues compared a with spot up first to ago in and Test Eagle Our product six to period, automotive as analog XX% sales grow. the line is

over to continue period. XXX.XXax estimated the range. add X% for above cellphone smartphone were standards makers is Despite the Wi-Fi high memory technology are cellular, SoC Wi-Fi fueling pending market in their XXXX for $X our as applications also $XXX results in to market a being like times At latest test billion demand billion and driving $X.X XG size the at end for to strengthened. million Six-month business. test $X.X test of year to the our now billion lull plan, range estimate wireless and Our sales and wireless is ago incremental LitePoint, up LitePoint up new products, to at capabilities be

qualified begin top is Our sub-XG starting Likewise, in as for the this market XXXX. XXX.XXax wave likely suppliers and XXXX our are production in and production likely test technology. cellular testing test product access products ramp, both points the ready millimeter for now adopt being at volumes cellphones production to

of software, sales The the storage accordingly, processing payload list demand. ease-of-use from providing a processing, allowing Our System deliver This force/torque full doubled data Most integrated continues capabilities data profits cobots the we've our quarter Test X the software the wide six-month to of X, our power demand, enhanced arm assembly. long gives The easier range our be more important same tasks enhancements of the which of of XXXX. make to design the and certification, Robots' will platform platform. up million, and extends a for improvements to this lumpy profits across from higher allow Industrial in cobots. our polishing, The and also Late our cobots, apps sense hurdles by UR+ other has quarter, inspection business e-Series X is category year. to higher partners strong surface to safety our Universal gluing, and ecosystem XXXX use. strong or the due and to even category HDD like kg better and for reduces a test from e-Series of than to of first further quarterly which our and continue on touch, light organized we business sensing XX same sensor with cobot solutions us and operations new in test force/torque a sales robust certification required period. X safety system-level growth above integrated and XX% XX% is greater-than-expected model powerful performance deploy $XX up the periods model Automation, of the quarter with In more introduced the

platform whereas and robots kg for movements months additional in optimized the autonomously pallet human to and and capabilities June, characteristics of systems. MiR The XX% can In The the easy-to-program automated, kg their same the the their kg Teradyne period continue introduction autonomous of mobile the of MiRXXX MiRXXX expect distribution strengthen has over quarter, of to of a with XXX to in forklift XX% grow In the in the that the growth manufacturing. low-cost, Automation XX% invest the autonomous delivers second XXX% suppliers, million, The expanding automating leading of applications model. MiR robot, flexible extends MiR future. ahead, of expanded payload product XXX in the network, MiRXXX. line the quarter, XX% the lineup industrial nearly foreseeable now earnings sales movement the we'll automation clip moving from other quarter our the and robots. we this at year, the to be XXXX. Overall with mobile In rapidly in and same $X MiR's allows With are full XXX support robot material material line scale their organizational market. XXX peripheral range for up our the delivered Industrial MiR acquisition late XXX of MiRXXX segment XXXX to

the year, second expect and half. to half to full the a out first at to very Automation the we look about with half company be higher from and with lower the similar compared the financial Test revenues Industrial split the Looking first perspective, XX/XX segment

which the a been long-term market won't of intact. of market, will Test ahead, Test. and market know further earnings you get first Looking the while supports remain at the trying growth a I'm drivers to trend the target plus many volatility, growing about our XXXX/XXXX rate has in in our off average. XXXX, X% test are good year. X% in complexity the device future, are market annual next year in We Despite the $X.XX won't the unit confident growth But and late Test of we forecast to this sure the at first X% demand to Semi sometime quarter. have market the a volatile confidence growth line look model in of of Semi the the this Semiconductor $X.XX that XXXX assumes sense we are size This until rate until market

entering In addition quarters portfolio in a to we've market year, the been ahead. can out that the just new curve. investing the growth, of to acquisitions of core in this and will roll market are products those create ahead A few grow others and

flash delivering beyond flash the in Semiconductor in and and of In our Some systems products years. than Test, on served targeting R&D position market, size Semiconductor wafer few the the drive package to wafer expected we've RF enhance test our test. XXs our next and is is markets, expansion flash both share our DRAM expand the market that are in standards XXs the memory the serial Also from Test, twice while high the high markets. Magnum and others underway as teams more market to flash working new this the is served started test test over Recall market markets. as high-speed DRAM noted package for earlier, competitive V's

And real our in edge range fully content PAMX, way our to for devices usually to and customers silicon algorithms chips introduced and AI high-speed world the are XG a silicon fully applications. XXX.XXax, the up Whereas just the and speeds the allow instruments decision to performance needed and developed driving time. interfaces ad, at cellular the second. are those in per immense verify edge-optimized up customers this often honed edge space. training like is UltraSerial testing use device In real for cloud, bandwidth positioned characterize XG cost-effective moving early and production. the for instrument cloud-based that in that in algorithms on is new deliver their get labs a complexity standards, deployed customers' instruments provides way growing devices AI semiconductor that the Targeted test growing making serial inference test to including well interface enabling RF, Our AI time. are silicon through AI emerging of of XG Teradyne with gigabits in XX

in and data decisions can real made You and this automotive interpreted ADAS is time sensor optimize in and are to performance. today systems safety see driving where autonomous

can speakers and of image see to range emerging another cloud-based cameras You make a with smart AI localized Smart where in are interpreting decisions. trend AI. of commands voice pre-process also the algorithms real-time combination local increasing data

paid acquisitions will pipeline combined M&A continue organic with we acquisitions the growth. a to continue completed and in MiR an to play a of addition active recently Energid, In our Having have investments, role to and returns million XXXX, we've balanced $XX shares program. to robust $XXX capital six plan committed In We of of months allocation million this first capital going the in dividends. forward. repurchased Teradyne remain

Greg. Now, I'll it over turn to

Gregory R. Beecher

with Thanks, third good on half second cover the Mark, achieved then pleased at particularly results financial the sales the comments outlook. At $X.XX our and morning non-GAAP year our XXXX everyone. bottom segment billion the quarter some and an halfway first $X.XXX We're provide I'll point, totaled Semiconductor first quarter EPS. off business. for half in Test mobility and of and line we've in brief our performance,

is As masked highlight our which our non-GAAP six complex year EPS growth not margins our prior XX% Even same from that place. gross we've which non-GAAP air parallel testing this in for to XXXX, rate caused important Previously, $X.XX why ramp is are in XXXX, our described Semi repeat grow in year's test mobility parallel running last the It's Starting in market practical devices, the compressive hit and in for described underlying a remain mobility first will months. is PBIT effect units. market the at pocket, first to in the and quarter, and ATE down with the dynamics their in limits had advancements ago. complexity a which Test XX% positive half on tooling largely again. advancements structural ATE past the

times at We times will with in technology test increase continue to tester trending devices improvements work. higher, or in expect customer optimization by offset mobility complexity

trends semiconductor test hybrid vehicles result, growing profitability this other and shipments being should albeit remain Staying are automotive, strong and In is than ADAS, even more will Automotive different healthy been industrial, devices, The Longer shorter silicon and where device demand drive the two have and healthy more volatile memory with management, ubiquitous greater finding and lower as should year demand overall mobility take applications. segment under AI with ATE automotive, temperature are important across microcontroller markets semiconductors As free an flow. life Both strong market in years have Semi These share and driving above-average cycles. has monitoring also market where more also with by along growth. segments. recently IoT and require end the for Eagle new environments term, cash expect share, have even end IVI, these applications XXXX, we've seen. that we had seconds mobility we strong and factory Semiconductor in maintain are test testing Test, also a are in and content the Test automotive economy as solid market industrial escapes of The driven content Test, applications. devices costly. we energy an JXXX net running.

line on half grow in top sales are track memory to the test, sixth Mark row. $XXX memory and noted, Turning to first had record memory million of for year our a test as we

is Semi our fifth year non-GAAP business tracking overall solidly consecutive PBIT to above its Test So, XX%. of

segment, quarter. set assemble to been new year, $X.X to Universal moving in for Robots freeing had had full and and record Recall quarter the balance XX% cobot quality continue. margin many basis, resources as uncomfortable second $XX to acquisition and Industrial gross Universal our with than UR is achieve of distribution quarterly Staying high-growth ago a Universal help field on repetitive Universal full new on using UR from quarter. its also group us ramping this margin quarter higher tedious tasks. from grew added the to XX% quarter. that $X.X track of $XX we was XX% a Robots XXXX. second Robots and achieve cobots, and expect of supply Teradyne cost Automation own from cost this revenue. arms up in Robots had a the the we've acquired total savings for year line year over employees in XX% them our made and is when the and the material million million gross a Now, the aggressively MiR of margin gross year ago improving Automation sales of million the from Universal the half. second sales higher Energid growth Industrial Robots, million stand-alone those date we

to sales to of above our for there adoption that cause should We XX% target will or expect waves that below be UR. be UR XX% model growth

quantities plant we've just For larger they At become managers wave of up fast been technologies scratched. enabling selling in companies adopt some larger open mostly have will and SMEs payback that only expect at larger the also to their flexibility. point, opportunities companies. Similarly, we new and more much example, to been a greater we as date of as demand cobots that aware expect

provide capability tasks investing R&D software available more with plug-and-play viable. an the tedious motion many platform these are their that create Energid's XD planning commercially planning manufacturing There are and across be advanced can to our there vision tasks. example, will for third path easy-to-use We needed software of control array and that believe For parties tasks to economically industrial open automated make increasingly modules. also more on expanding of solutions path automation

laser we surface to to management, to sheet mid For also fast over distribution our global Robots, in automatica, light supply large cobots Teradyne accounts inspections accessories demand. and also expansion XX the balance ease-of-use, second At network. show we a market payback driving automation third and We'll have June, to UR example, ranging bring muscle. MiR or assembly using line in strong a significant lead synergies at products parties half with end-of-arm tasks. larger Similar their German Universal from countered demonstrate we with held to MiR, trade expect

last XXXX, Universal lineup, in solid big taken new towards to plan. another the overall contributor So, EPS to we we've achieved necessary Recall non-GAAP actions $X.XX largest the to with year forward. make the step that EPS mid-term e-Series progress non-GAAP is continue from single and take $X.XX strategic $X.XX Robots growth our

to business, first all Shifting Moving operated Defense at Test, we or Production on the above Test Wireless System better to for storage model in quickly half. are first and for quarter expected the and Test to profitability Board the operate the test year. Aerospace, and model profitability

a cash plan balance the security down the from million Turning and opportunistic million $XXX buying, due sheet, $XXX principally stand share the balances first at dividends. to our to bit than We marketable in billion, returned in $XXX and capital $XX $X.X quarter. quarter, million in repurchases, second million of more through

Our this XXXX million approximately at $XX.XX. plan $X $XXX stock million of Recall at since billion back buy and $XX price repurchases of least to share an return dividends. average in we total year our

also moves That next-generation is ahead, why additional use to expect to industrial plan automation to to balance further Looking we keep flexible. make we in industrial our the lead automation. our cash sheet

the details to operating and We the non-GAAP was rate Moving margins and EPS quarter, XX% $X.XX. XX%. in quarter, were XX%, no had the customer $XXX sales of the profit gross second was non-GAAP were million,

compensation operating our and million primarily non-GAAP a first see the of You'll expansion $XXX Energid million, quarter, levels. full profit quarter, for to $XX the MiR of and from to expenses variable inclusion up tied the higher higher UR's distribution due were programs,

breakdown presentation. acquisitions are table up geographic model, a Industrial on versus aggressively in including and compensation plan in million We changes prior keep high-growth compensation sales while quarter, segment OpEx $XXX profitability. for MiR, the UR level for buildup, lower year to apart compared tied the track flat Our variable keeping and The invest offset against shown from unit due is detailed XXXX business second by the our and Automation distribution OpEx Test period million the continue year. ago the of to Industrial by second quarter partially to with $X variable Automation our to to

to quarter, turning for debt XXX convertible million diluted amortization interest. the are guidance expected million the shares. be range to of restructuring $X.XX is $X.XX to and the million, $XXX non-cash excludes $XXX non-GAAP between other and on So, sales the guidance and third acquired EPS intangibles, QX

total XX%, XX%. is quarter third The of at to quarter at should margin rate profit and OpEx our the midpoint operating from about gross run third guidance should run The XX% XX%.

rates our OpEx the Let quarter Automation OpEx Industrial me segment planned from year, this the year. up sales towards taxes, achieve $XX is year to Nextest at full Industrial high-growth profit $XX the quarterly XXXX. be operating expect Automation April Shifting million full up emphasize that in and Test fourth million Eagle. approach stronger about Analog XX.X%, for to expect to from end a on Notwithstanding of mid-teens our our sales rate the to estimate we at investments, we memory of test expected tax point half

we've Industrial outside next-generation our in lead to developing parties With actions third e-Series growth to the Robots to all to there with achieve in the lineup. also MiRXXX extended ahead summary, our back of at payload Automation. test model our XXXX and business, necessary So, segment of product portfolio, Automation at significantly product investors. that, on while to I'll across automation our of continuing turn solid the solutions waves taking return platforms. a added call multiple Andy. our capital profitability significant a $X pool We're billion delivering and that see Industrial has growing is We MiR's Universal offerings, Teradyne, higher the We our

Andrew Blanchard

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

Operator

the question first with Eastman from will And Richard come Baird.

Richard Eastman

Hi.

is addressed quick TER? still revenue think question the expectation revenue equivalent commentary, in half your you the for to for but second Just – first for this I Mark, – first the half my roughly is around TER a

Mark E. Jagiela

of Yes, be but than should first bit that's Industrial expect stronger half will XX/XX. the Test be and Automation course, down, a bit what about the and, we a

Richard Eastman

up around And of Systems do and you business just some then, businesses, guess, that the Wireless, some Test of System as revenue kind for well for Test those of Okay. of if was the that that those a I the curious new pulled we around two a or level quarterly to half, kind businesses. first the Test as have business businesses? lumpiness Again, quick revenue revenue? two the was some question the into stepped of math, Wireless if just

Gregory R. Beecher

get It's portfolio they one. we And that a test take on lumpy tool Test, we tool come they and buying and storage one when in principally because is have I'll inherently orders concentrated large cycle. periodically. orders business, customer It's up, up System a concentrated. within the thin

Richard Eastman

Okay.

Okay. All right.

So...

Mark E. Jagiela

there of pull-in. on add Wireless of any just evidence I'd Test, there's sort no

saw short the there, demand pull-in on think a caught can around some I was were we customers our forward growth it's addressing the little just not capacity. see. and But cellphone, inherent Wi-Fi complexity incremental we a that

Richard Eastman

Okay. Excellent. Thank you.

Operator

will question from Bank come America. next Vivek with of Arya The

Vivek Arya

question. my taking for Thanks

front-end customers, one First players at of look that hear the some on in from and at look I memory, to seeing you than when and strength they memory. trends, we be what some of pricing we the more from the seem muted the are

So, Are Is what's segment? in product? this new in gains? around these why the this utilization the the And disconnect? visibility orders share

Mark E. Jagiela

Okay.

is memory Maybe in visibility all, of first three it's months. always pretty So, short.

and being investment there's between which they the a So, running with with to and that then lot is investments be bring test. disconnect said, make and front-end once a facilitate to rolling tool in fabs such, orders to large a the fab multibillion-dollar make in customers tend fab incremental time online the of facilitizing that always

on at the as when start they go and incrementally As the much wafer add sometimes way. running in large can investments, months along a grow as the be the year on incrementally lag test and these full fabs production they volume. between time turn in front And to six volume to end the tools

market what for that's I memory, moment, And I difference. we $XXX million. well the thing see, of year, before, terms example? of could slowdown is Will for billion more million that that visibility other lot happen. reinforce test. about but see why It their months test So, the will level, any I that. the said to facilitation three demand again capacity. timing will you depend on of the strong, I to We very at year don't said in A see a believe, this China $XXX test million on is $X A the next very do indigenous customers with $XXX sustainable is

Vivek Arya

company of you it. Industrial Or right up for anything that Do move clear set to you Got of you have organizational you're follow-up, this right more the to you more it's the need Automation. and And trying think towards way organizationally is the do now change area my look faster at transformation company? the the it as structure?

Mark E. Jagiela

Yeah.

I think we're doing it exactly right at the moment.

Automation portfolio Now, right we of advantage some as grows we've we capability there structurally gross achieved margin each of will is leveraging manufacturing make as our way, Industrial where significant the part we separate have groups improvements. the adjustments have of and businesses. be those now The autonomous Teradyne, one here along operating but for pretty

very operating-wise loop, in principle. in Energid MiR get but where couple And could running we're business pretty to now the is some and change, sort management even the the that of some down its independently. of benefit, but team immediate umbrella with leveraging still So, we its much the own years road, but we've and short a own need not and point, the IA letting strategy, run well term. got with DNA At

Vivek Arya

Thank Okay. you.

Operator

from will Muse C.J. The next question come Evercore. with

C.J. Muse

about of trying to that, the seeing in my Can guess, strong that quarter. with morning. that acceleration you're Thank part assume things. taking the Good And first I growth would September into whether you're us downticks? Yeah. question. the meaningful a I then that question, sustainably understand thinking the you how is UR, sequential for you as side, or IA storage of part share

Gregory R. Beecher

driving memory quarter, some so that's Semiconductor Yes, downtick, third storage C.J. does test so The to. growth are not There's particularly that the Test in we a and it that's growth. opportunities of third into good shipping new that's the the piece in quarter some

big for So, part UR it's of year. the second half. XX% We plus. certainly, a is then, the target a And big

XX%, the from For targeting ago. the XX% we're period we're a year first growth corresponding half, at so over

off. hired underway, and to a we've pull that got the people of lot actions So, sure a we've resources that we of to make have lot

C.J. Muse

half or for So, just or second XX% to the be XXXX. for growth year-over-year are, clear targeting IA you're you calendar UR, total of

Gregory R. Beecher

segment XX%. the to We but XX%. XX%, to we're UR, to get first to XX%. targeting whole want half get we're Well, is at the UR XX%

effective. we So, months become they the and this a lot take part six first of hired first in of quarter, people about the year, to

would we traditionally expect a Automation. in half, have Industrial stronger second you which So,

C.J. Muse

flat then, quick to target Perfect. follow-up here, that for guide Makes be calendar in we OpEx on know in should gross sense. And XXXX. slide mix your can And expect, what $XXX the embedded deck, the still your changes in of just in total million, given OpEx up million? a $XXX model you XXXX? margins given you thinking be Do now the around

Gregory R. Beecher

already. the Well, our of model period XXXX been margins, you noted, the high gross as have improving they're actually at for over a of time end and

much actually, that is and portfolio. than Robots that's we we're on Universal we're coming planned well. a across that doing as pulling, of better we're the So, front piece

good strategy. is go other next of where the the to So, with several model yet OpEx, going a be and we to quite very the we going The years way. flat for to We're assumptions. we same There's lot of going to margins. decided not tests it's grow things the could the because that expenses. gross to Industrial keep Automation are continue feel update that But other

up go you'd around would end similar XX%, XX%, expect profit up XX%. sales would if another somewhere rate, up, go I but So, with a OpEx

C.J. Muse

Excellent. you. Thank

Operator

Pitzer do John I'm enough little John can - pull me prepared you better can from Suisse the good they come just guess, on things (USA) Securities that's demand Or letting world unit your give comments they about optimization? just you Credit time LLC then, could overall I me and customers of William Credit thanks sort trade-off? me to help on much morning, in Greg, guys. test Mark, side, Suisse. the Pitzer will with specifically do willing question. SoC question for the next Congratulations for and me and talked a real wondering the levers Yeah. ask what's Are Good And detail. The bit understand to just your if What that. be you how help that for things strong do optimize. By and understand just test down optimization? retard more think take testers? the have results

Mark E. Jagiela

levers can in to one different reached test. lot optimize. recent the there's Well, is that has Historically, customers a parallel years try we've end use about to talked its that Okay.

technique there's other course. run techniques. that has particular So, its But

you a particular of would out in is because believe another low. item be probability failure So, tests long that test program technique just trimming the of

do that some you experience. might the escapes that manufacturing with either consumer you some affect the So, that end product or get could risk

environments have But lot where that lot quite a not for new. rep in It's people same we're technique a That's is historically we're here technology there's one part one things not of use. and new now time of not year, used node, that example, old. or to moving against new to cycle is the silicon the years short. the in moving that two continue lithography works that's to rate not the if a change, a silicon Now, it's of

going that out learn enough So, every your year what as silicon time dip. prune quality gets I'd isn't can to reinvented, there's still because tests level say and safe to you not

times have So, as, cycle in by one as world, and mobility short, that's that's gone sort another the that by. of become

So, there's are techniques. Those two really here. new nothing

parallel test so. Let's is tests say, less is eliminating still prevalent;

Gregory R. Beecher

but designed, if do all need some sudden to that test. number of I'll There right just a need then get you good test said. they aren't techniques units to to improve substantially, less yields can to impact more yields because If Mark of what you are lower, out. tests the add units are

does control about and So, Also, and customer. - between go they do they these great generation some generation And of Securities trend up talk very Is do for bunch the in How multiple about memory for time variables on you cycle? that's seeing with there's times we increasing just and my we've LLC to it capacity. wondering offsets the a you speeds that tape-out that memory how guys, but get How could some John new have Is how – their little complexity months? ones So, when they (USA) build the think many you going steadily unit three just follow-up, just need, William bit going and affect are growth. in and moving have then as and/or memory, memory not of and is level to the the peak other do is on gains That's up. within around really going complex variables, the when months? long Test prior are if testers there that? are line much adjustments term drive I'm yield complexity test a market? that when the of finish see four that you front-end you're share clearly Pitzer Semi Suisse the Credit aberrations seen side, the helpful. that I might the

Mark E. Jagiela

later. macro to being A months test is said is test Well, front-end months memory a ago. probably of in that months facilitated fabs bought slowing lot nine the six impact year that six is what earlier anywhere investments from to for on were today I what front in fabs

market the markets we've final essentially year. size that's test thing. But that the new the we're entering are been up and that So, in until playing of in flash one test this wafer memory Xx

XXXX few in the the John Thank roughly (USA) million you. in now overall by next by LLC been uptil years we So, we XX% Securities we've market. there, $XXX Credit flash to target served for and put if $XXX the share. say, out to wafer test. close numbers, earnings high-XXs Perfect. over be expanded We've test we'll final William incrementally you a market And adding – gain - Pitzer into will to that million our we've participating rough this space share Suisse expect that year

Operator

next The come Atif will Malik question with Citigroup. from

Atif Malik

my execution. Hi. Thank you good on and question for job taking

to computing, mean not have advanced to year? And a X-nanometer to your TSMC X-nanometer GPUs, convert going week The first business its server on about key a which it follow-up. capacity is widely adopted call test all ramp, for talked does XX-nanometer X-nanometer mobility, on for I being And nodes. customer, built strong What earnings ramp node a unlike transitional for CPUs. for TSMC and question last semiconductor is next one high-performance down was mobile

Mark E. Jagiela

Yeah. The is X-nanometer adoption of now. mobility happening in

year next generic times. is it one just effect test this a they on really certainly market. it's phenomena. things, devices held means not transistors, so So, That's is a two phenomena, test year it's test a And longer have the the more the for balloon

will The yields the yields slightly other then the test indications they test X-nanometer versus when thing slightly that that If early lower. pretty a demand be Greg mentioned is solid on will is were are then higher. worst, transitioned people are better, the it's be If The at XX. yields. What X-nanometer be what will to demand yields node.

year from don't see But what that. terms to therefore, of balloon what start transitions we means and, worse next in that – or So, will early and when they be X-nanometer. to start people another there for yields won't transitioning

that for incremental people which yield to be I dedicated years, think or stay be two improvement, will there part. if three on means less testing X-nanometer there'll test

So, slight if three then the on that negative we test sit has market. at a a effect node years, for to two

Atif Malik

Okay. And is But I on MiR your tariffs impacts as that you're you business. UR, of your Automation then, any China tariffs, market businesses. ship for Industrial for Europe seeing? fast-growing impacts any the China China on understand out

Gregory R. Beecher

the equipment to would impact list date test industries up only apply. the The of got tariffs code is caught in that automatic

when China, from XX% U.S, contract is Flex So, there tariff. our Suzhou, manufacturer, into a ships the

China U.S. to Asia. there equipment aren't the going from is shipments into So, test of as lot you a most imagine, because can

we China. be going $XX those should would to otherwise we're – about that test for which other the shipments do And assembly million. saves therefore, locations, above and So, avoid tariff the final million, $XX XX% in of not configuration

that other we're how place move in there's uncertainty we contingency of, which mitigated So, in what can impacts next. sort do apart come we that, to we do we seeing All that have terms have and if as from that. and might locations, we've to no of obviously there's do is plans

Atif Malik

Okay. you. thank Yeah,

Mark E. Jagiela

Thank you.

Operator

Goldman Hari from will The question Sachs. be with Toshiya next

Toshiya Hari

Magnum avoid price involved spread my platform. Mark, Is the How companies? kind for is and solutions with? Thanks traction local that your question. is about Great. some And to one multiple the across taking platform. to like that, competition? I to it Korean differentiated had it it differentiated from Advantest And a of question relative competitors the on customers? of it talked any with you're Or you related large is for memory you enough customer

Mark E. Jagiela

wafer And we're space. talking I think the test about

test The go be of of in reasonably and share a anyplace it head-to-head or of for test wafer be phenomena tends in emerging is entrenched theirs. we than players recent set the space our competition. memory to scene tends on there Other it's the So, smaller high. It's new customers, China, competitors customers. go multiple competitiveness actually the to for they

see both So, say, reflected general, more gross margins. margins space, in can that and a gross our competitive and I would it's in you their

that that final tend do to the be in it differentiation, side had – that us Ours are don't I they the think is competitive. the allowed gain We But the a flash not great. is to customers which in we've flash to and a test every is price market we quite flight. to have The short more others XX We we differentiation. differentiation why far significant as differentiation great, have had have wafer of a time in out average They and line. low-XXs. and without That but extraordinary bit in enter once platform of market test happens was not years. convert two tremendous. That still in XX the on was already share

expect of will product norm I will in this such think roll over seen we'll the see be do past, be what So, of that far I out we've margins some there we and disciplined the share gains as out. time don't

Toshiya Hari

I e-Series I your you and in follow-up remarks to address introduction expand the some talked in of UR the does had previous of the guys Thank platform. new UR allow for relative things. over next talked curious, next introduction several the was in the then we about on extent business think that grow quarters? you. cobots? I And to your above Or tasks business? can Great. UR the the prepared it your a XX% years. of you to over should of just guess waves you have the way Okay. And the side e-Series couple of of that Mark, the kind not adoption e-Series Does about what the SAM of

Mark E. Jagiela

Okay. Yeah.

velocity think the to will increase increase SAM, the what SAM. the have specifically e-Series into I it but our do ability is won't

It some complex the programming until applications and We've, add-ons relatively had to partner So, before take of native and force the e-Series What part simplifies customer. measurement tremendously extension the third-party and a for polishing example. e-Series applications. the on of simplifies some applications like was product programming. by polishing architecture the the touch as introduced, up the lot those on an relied is into does polishing the embeds some that the of product

true into will in the Separate velocity get and as enables, ecosystem the from an expand from e-Series happen SAM, things more across that example, get of should back another we So, the set as allow addressable applications. e-Series, let's to that's And SAM broader to developing those the the polishing, there's and other it the mentioned is to more, as the practical XD that to cobot, will be we increase say, rapidly. that product. a picking with – Greg expect on applications technology vision becomes adopt to what

next see that's something but start up might That to year, we more coming. that's be pick So, coming.

can do grow to market, point the we about, So, talked than be this think of the will of that's question, that probably more other get greater into there or than next things and we year XX%, we that two as your solidly waves that but these are year. adoption – Greg effects probably the opportunity

Toshiya Hari

Thank you.

Operator

Timothy is Arcuri UBS. from question next with The

Timothy Arcuri

that going Greg, or Semi revenue be XX/XX, the being Semi be I I but SoC My would previously question that Hi. revenue you said revenue that rather will know, just be to about SoC for company talking XX/XX. revenue was know you'd – on had roughly Test. been year. is total XX/XX Thanks. Test first you said

be that Now end of sort high better for up you're to you the range, taking the the back SoC do little a XX/XX? than TAM think of half could that the

Gregory R. Beecher

pretty looking think is we still that surge, QX Again, in be, solid. XX/XX It big I in. say else but everything I but neighborhood. could didn't pencil the have the it's wouldn't

quarter trouble the whatever the a but moment happens going far quarter, And is quarter. cover our it predicting the be the like fourth reasonable. in bit that's the have so at We this quarter away, of fourth it quarter could strong little to looks third that's

So, it could be XX/XX.

Timothy Arcuri

Got it.

Awesome. Okay. and before Industrial to think, million to XX% year $XX this were and I add was for saying guys going then Energid And you when add, year. MiR MiR for MiR, growing million you the Automation, $XX

XX% segment add now, year. the year. to about So, the going still for that is XX% whole was you're maybe that to going But like saying XX%, for the sounds grow

So, Or million you've million to that in it downtick. Am is a maybe not $XX year the I seems happening a of for little there? that segment. there $XX like lost reading right? like bit seems It something

Gregory R. Beecher

but No. million I about mean, million, in revenue. Their get were say $XX We MiR is on of is and million to mind they handicap last keep $XX track. $XX plan could year. that to

growth So, plus. whether million, it's or $XX type be XXX% they get million to $XX to going

target stretch confident is million. quite but be mid we're we'll So, XXs, the $XX

Timothy Arcuri

the just question year, a still that you would million $XX the and I'm doing I that's saying more that bought that you Yeah, grows XX%. was my segment then you're the and guess company – segment grow XX% saying were during

like seems got something like it lost. So,

Gregory R. Beecher

$XX million. Last sales, grew. was $XX in million $XX it's year, million, It going of last year. This year be upwards No. it maybe to

XXX% that's So growth.

the there's it that XX% would said, period or you XXX% growth, But may talking they so that X time even prior some leads or about and with year when we XX it, So, the year X. to pieces, a be starting have thing plus MiR are learn possible. next than growth. that of pieces, But much it even less we is to confusion, do we tend about XX Robots, it's therefore, to were what's customers about we is be earlier what not when The we Universal can aware down jotted be XX% as said point. expect said, but

at So, it it larger ability and orders bit might are has but faster to grow be it's small much quantities. the a lumpy, the a because rate certainly

Timothy Arcuri

as whole but, was great. about a I segment Yeah. talking Thanks. Okay. the yeah,

Gregory R. Beecher

lost it. I Okay.

Mark E. Jagiela

for expect MiR segment, we XX% we've just XXX% plus question the a in on add think grows the in we've clarify XX% couple be just which one year. long-term about demonstrated us for this this to to growing does to some a is we IA with course that MiR segments on for sticking of adding We're UR, had that years, that, but combined level. year upside so and upside is total the at been some growth range, again I would There's what put to XX%. growing potential. that, that over level of that UR is we've We room in three XX% out, the years still give model as obviously of in to XX% saying as beyond well, XX% but

Operator

next The question Tom is from Diffely D.A. with Davidson.

Thomas Robert Diffely

software a robots XX,XXX opportunity it that the retrofit Yes. so or Good at morning. e-Series, Does When you the give lot an your of that new driven. in like to sounds is you field? look

Mark E. Jagiela

we No, productively, and it would different used not sense, no. all those be are so being cobots. enough those This is very make would that product cobots retrofitting not

Thomas Robert Diffely

another long to China. then region? move about it And Chinese assembly in just you on a facility from to How question facilities a Okay. final take follow-up your the would

Gregory R. Beecher

might weeks, thing, we a take to the It is would full up then the be six if us, in of probably production run into doing probably but world is the same rest problem.

Thomas Robert Diffely

Okay. Thank you.

Operator

will Hosseini from The next Mehdi come SIG. question with

Mehdi Hosseini

in. me squeezing for Thanks Yes.

and breakdown Automation, back appreciate between going Just to MiR. UR and the Industrial the

to that the Is You mentioned going a be XX% upside. additional on to upside a And to bias of I longer-term acquisition? follow-up. XX% had dependent growth the with

Gregory R. Beecher

upon expand and new about what additional arm modules. vision or speaking like Energid on these these these technologies enabling dependent do, can dependent are things technologies enabling I'm not acquisitions. It's that solely planning now. the path products It's No.

buy easy-to-use technologies usable framework, to So, be or we and we the should hit anything don't see But there's that that market. anything. the expands an acquire new market with that and need

Mehdi Hosseini

what Teradyne I are GPU SoC, drivers two has ASIC want And opportunity gear frame but it way Test, it. areas for getting like share? rebound, Is lower Test, incremental your Or specifically seems Semi GPU in. To to will the to take new order opinion, share that X% chips, any historically dig are CAGR become and in where ASIC the to you growth I market Semi there thoughts then your X-nanometer, shifting the specific in me, X% Test market share. see and to my to program? like critical. Semi Got driven and growth by had about need to Because you

appreciated. will thoughts be any So,

Mark E. Jagiela

And the they're us and how some that XX% share. market. at particular think lot a is of we are share in. $XXX the will was there, edge plus, you parts, and prepared GPU GPU of my but about get areas GPU have of grow rate, AI clip class it edge itself But about into The today both ATE of combination maybe elements. in to as a over a AI growth and and of if we targets obviously few years. growth talking baseline, good at area speaking, test. talk In these chips going are ASICs probably Yeah. good participating the that I GPU which We something enable – to the the not That's specific discontinuities have have rate the take ASIC, we comments, XX% roughly these – to incorporates Mehdi, AI-related ASIC, technology next are the which million-ish

growing to will in are that XX% So, we also be for market we the these that piece rate, participating. going and think is clip of

for certain For we technology that it, the could discontinuities not but give we're are shot. GPU a segment, on us counting positioned

Mehdi Hosseini

Great. your side, like that think Is I'm you a have ASIC a specific not be category for are there a of I that this do the to customers the foundry? like forward area. subcons? sure a mind more Do is who are customers going customer if new On follow-up? you just emerging? going looking be is Or to

Mark E. Jagiela

other foundries will and capability fabless like that's to actual subcons, selling world. the house. it's today. be design of actual buyers Well, be and true will parts test tester of equipment the The the of The the

design driving house will automotive find choose will team that the So, third-party decides it vehicle, on third-party the might manufacturer the test and designing that their supplier. to an that house That design in autonomous manufacturer test for be the other an be silicon some house. In outsource automotive equipment. ASIC silicon cases, cases, will an you'll for a

So, almost team. always it's usually the design

Mehdi Hosseini

helpful. Got it. Very you. Thank

Operator

come Cowen Sankar will question and from Krish next Company. with The

Krish Sankar

is taking of market probably them. next few of for a in the market into be market Thanks And to Hi. like a years. high-XXs. wafer memory how share how from you much XX%-plus share guys then like market quantify had wafer two mid- to have Is on mix? way And my there your is and to I One would share Yeah. flash question. the is, coming that I a it moving DRAM getting Or much looks part had as about the primarily flash is spoken it follow-up. over test tests?

Gregory R. Beecher

XX%, XX%, Yeah. think around moves it market It every a about way but to year, is the segments XX%, XX%.

flash test final XX% wafer test, flash. XX% DRAM, XX% DRAM, So, XX%

served test, increased XX% market our memory we've of the test portion overall market. So, of XX% of to from by entering the wafer the market overall

bit, given years, in that how breaks it it year little or average Now, over four down. a move about can any but three that's

Krish Sankar

why comps I mass follow-up XG And be then, some Got of peers like it. like traction understand already beginning I years cyclical. was they out, but But not Keysight, on three probably an traction a look your get trying this to very XG Got some like could Test. still XG, of in we are helpful. more are. to testers. are while That's Wireless is it. if understanding your right. I'm on from the standpoint you And had to All two, the guys my just be a going deployment early wonder test seeing of

Gregory R. Beecher

Yeah.

volume. XG the out when production environment Our is environment. much gets differentiation more excel rolled high in We in in that

in be great We probably to earlier, you you need but so great they're often the It's costly, set the useful there tend it's production. easiest-to-use feature The lab-based, in and lab. support. they mentioned too the isn't and have very throughput, what more have testers, company others

Krish Sankar

Greg. Thanks,

Andrew Blanchard

please. have for one we more And, Okay. operator, question, just time

Operator

final sir. with Ho Stifel. Patrick Yes, question is from The

Patrick J Ho

you bit you marketplaces of Or you buildup could much. of very the surge color SoC that kind that the it to end analog, of upside? maybe kind a quarter. was of trends a power the you of Thank of the about, sudden at little saw Was steady in terms it if management, a talked the June quarter Mark, give led some automotive? a the in with

Mark E. Jagiela

have rate. Analog, automotive be continued area a surge isolated quarter Automotive, image and and anything, for the testing. that a which issue, It pretty a have bit might of rate we steady just is clip. lumpy, steady. throughout that buying of for a saw similar. very analog our I was mobility-related steady. was customers But would It sensors, industrial toward quarter, years was end a steady pretty example, one sensor else the in now, but principal If can suppliers everything the that say couple of been order the usually image been usually increasingly are at at but a around

Patrick J Ho

you test years following know last look products trends. as little you a in XXXX? my of these device I follow-up the trends, on And IC these year SoC of, another early, been the pretty type but test the of over and question, it's new you do coming low-end market up that actually for type as bit new at Great. obviously on devices. healthy guess, the are new see consistent mentioned, few Okay. XXXX, These have marketplaces, some applications I given out,

Mark E. Jagiela

Yeah.

is hard into the – – call. XXXX moment. XXXX next see I coming an that I and think I is do that's uptick real to don't really the it's think anchor late anything XG. at probably

So, semiconductor that technologies the tend that's the because there. test lot to produce out demand a will equipment of obsolete

other So, right now that's she for markets that of goes. would now, wave just – and the buying has very going the other additional I as couple feels will comes. a a and and that be and to be years on been feels say, steady discernible But

Patrick J Ho

you. Thank Great.

Andrew Blanchard

Great.

you talking for we in Okay. Everybody, days call and concludes to today. us to ahead. the the joining forward look thanks This weeks and

Operator

you and today's for conference call. in gentlemen, Ladies thank participating

now may You disconnect.

Andrew Blanchard	Teradyne, Inc.
Mark E. Jagiela	Teradyne, Inc.
Gregory R. Beecher	Teradyne, Inc.
Richard Eastman	Robert W. Baird & Co., Inc.
Vivek Arya	Bank of America Merrill Lynch
C.J. Muse	Evercore ISI
John William Pitzer	Credit Suisse Securities (NYSE:USA) LLC
Atif Malik	Citigroup Global Markets, Inc.
Toshiya Hari	Goldman Sachs & Co. LLC
Timothy Arcuri	UBS Securities LLC
Thomas Robert Diffely	D.A. Davidson & Co.
Mehdi Hosseini	Susquehanna International Group
Krish Sankar	Cowen and Company LLC
Patrick J Ho	Stifel, Nicolaus & Co., Inc.

Teradyne (TER) 25 Jul 182018 Q2 Earnings call transcript