TER - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Shelby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Teradyne Q2 2019 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. Instructions] [Operator

Andy begin Mr. conference. you Blanchard, you. your may Thank

Andy Blanchard

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

page opening of provide details remarks, quarter of release our discussion. XXXX. XXXX The performance of for outlook evening, website results slides will call we're ends. the investor you same the with last providing be may second following along will the to call press quarter Replays the our we'll was helpful the after our our for via on Following second third that issued this the quarter page be containing when available of

today review forward-looking risk include statement that Safe The SEC from statements Teradyne's to filings. discuss to matters that contained factors the as current release differ we you the recent involve management's encourage results as most materially cause well could earnings our Harbor in We that expectations. will

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

website. be we'll Teradyne, City these between the GAAP call, by Key We financial to investor reference additional information Also, Davidson, now were available reconciliation earnings posted measure financial Bank, and in and next Deutsche will page concerning call, non-GAAP our most Investor conferences today's non-GAAP During of including Bank. make measures comparable our financial measures. to participating directly hosted the on

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

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

Mark?

Mark Jagiela

second point us where first and we businesses. of the In remarks, stand this and Hello, and for my and year half Test on Industrial business our in you everyone, morning. current prepared the for our at and Automation conditions joining half the then thanks update I'll highlight outlook

But with moving first, the CFO, along in the to then I'd a call. the direct ramping industry like financial to our our Mehta businesses. the deep Sanjay have expertise of to background I semiconductor and details am team. fast Sanjay will new on take we'll global in him Sanjay quarter, your delighted review brings questions. welcome

exceeded our We delivered X% profit guidance financial respectively. QX and X% of sales that the results non-GAAP end in by high and

months while same six sales compared gross period grew and grew the higher lower XX% share year, of year, For the with count the margins. last X% first non-GAAP EPS on

build strong case infrastructure QX, multi-year in build of out silicon the road. the was the several that our for will XG down in XG Semiconductor early QX of infrastructure investment for in The demand work As represents the into handsets principal mainstream performance years used its the way driver the emerging was innings Testers up. eventually a

any meaningful sanctions to volatile forecast on had that see sales. also for its affiliates, material I Huawei will in Administration's We've it slowdown Entity have and While put to have the List and created trade May yet in Testers. our a and impact tensions has U.S. domain environment. Semiconductor actions made our to the difficult note no

are or products not we to have subject imposed announced, List sold the determine Huawei our companies subject Many products the restrictions. they're Regulations and other to the extensive our performed not an Entity restrictions. Export of whether As to review Administration to of

As we a supply affiliates. to its have and these result, continued Huawei to products

U.S. seeking the under Export to subject the the restrictions, For are imposed licenses Regulations. products that we are

billion market size to picture earlier and $X.X Entering estimated on the mobile $X.X expect view. our Test the market weakness million year's down end the be device an in market year, and based in The we automotive range, in from downtick forecasted improved industrial demand. test from billion markets about SOC $XXX overall in Semi last has would to

and in in slowed and estimates. test growth tester in an as industrial XG exceeded for the range strong our related smartphone handsets complemented quarter semiconductors infrastructure QX have for related chip markets auto unexpectedly second and results drove strong demand wide by of demand infrastructure smartphone has expected, demand While XG The was used earlier for accelerated that demand the capacity.

All demand view expecting test the is test this quarter, in this is complexity driving that $X market apparent equipment billion result to increase new third meaningful of becoming increasing demand billion $X.X in and XXXX. indications generation. a held long to to will an in that continue Our are are each device SOC more with we

the are phases me of out. we where rolled On we're provide a four XG of we how From on overall the let bit in market XG, insight topic the perspective, at a high looking volume see opportunity and of progression.

build-up below wave of One for millimeter a higher frequencies. those support a infrastructure a that operating First, for with frequencies. frequencies two handsets handsets same similar ramp Gigahertz, build-up frequencies later, those years infrastructure for X in by an ramp followed or subsequent

infrastructure, In the X-G playing out to two momentum terms building in over of volume, sub the by next we primarily infrastructure remaining phase driven are China and now with years. mostly five first the phases

very tester and Semi capable are ramps a the that millimeter development Recall, to millimeter with lead was the we big MX-XX. been LitePoint last development across just production middle of was the week, announced a We've the the and still at both wave there in in wave and millimeter wave active underway LitePoint. in first industry. Test future, customers While market work

early software which for product, worthiness early several instrument in the to customers for devices MX-XX the has The development economics wave RF and millimeter an millimeter Test wave production quarters. the UltraFLEX and Semi modules. delivers ease hands been production platform use, Our our of of support of necessary and performance,

our million at of low be up shipments over QX $XXX were the market soft expect flash XX% from see the DRAM in the testing strength flash interface NAND million speed to for market, of of Despite end XX range, continue to and strong Test, push we the our higher Memory as QX growth. on In overall million our $XXX continue to we the be demand test tester flash continues for strong. test to final and wafer to

In XXXX, Industrial Automation, QX first sales XX% grew with and sales the XX%. QX for compared grew of half

more related global malaise remains robot difficult supply moment. were However, The those sales market, a a automobile in to in malaise in and chain sector provide production on been this sector Sanjay overcome. large headwind. industrial component especially the this automotive weakness in the global has industrial markets, stiff to details of will

XX to be Given XX%. expect year under growth, now low our term sales date end year's the we full range lower of growth long the %to to of

While we confident a flow natural our and sales which ebb market below Automation last not the most market, broader companies reporting as QX. results are remain and growth year's our this year, term We targets. competitive of growth the our slower in Industrial issue, to long with of see favorably as a declines, year's goal this compare compared

continue of delivering picking vertical generation later new year. bin market to Tam availability our activities, ramping work We solution our expanding initial diversification this and lead on

Those in account moderated know. growth base our include the were to UR's X,XXX significant While crossing quarter, install the threshold. several largest milestones IA robot there

automation. OEM Sapro, Continued program, progress a on manufacturing our in partnership plastics an with large leader and account

fleets excess install we XX hospitals and robots, operating now base have at sites MiR, over several Chinese has of At in of to mobile reached MiR and units customer continues robots our XX grow.

gain a private strategy automation of an bringing the Teradyne to their entire company and innovative mounted the potential all This of improve on applications device head and I'd investment, companies Through and to a to technologies range in of Before employees recent that technology, quality makes of productivity advanced comment leaving power our of insights into sizes the safer RealWear, investment services. wide like wearable their this enabling workplace IA, use power a across reality case, with of of business. with productive. our the the aligns and that will products more augmented advanced the investment in uses

above level, you than we at when three a ago. expected company full bit and second year, total weaker Test stronger slightly look the we IA first with half the to be the months the and back revenue EPS bit to So expect half,

turn Sanjay. to I'll over that, things With

Sanjay Mehta

some Thank to quarter first This on offer make business the Teradyne to observations half related morning, quarter outlook. highlights the and several you, move after third on I'll results the units, three about comments and through months of Mark. our second then first XXXX, some go my job,

half pleased performance. our first with We're

Test half As Mark non-GAAP $X.XX XXXX, from totaled billion, the first of EPS year, of X% first midpoint our noted, at the and XX% half first our half driven up sales from up fiscal primarily to $X.XX, the XXXX. margin in fundamentals point X business of as The mix half our XXXX, of favorable noted. Test. in remained XX% first Gross the Semi strong of product improved Semi by

and infrastructure test several Industrial complexity, With acceleration market XG demand, expectations, the marketplace facing facing Automation to headwinds. but than albeit grow, increasing still slower continue driving investments of the in

two, test million. and infrastructure units. growth growth our key by test had of second strong business, flash quarter-on-quarter sales drivers one, quarter and memory to The testers a Semi XG business of XX% continued in supporting the were shipments. DRAM Turning $XXX of with polling driven

XG and We demand QX. in continue to expect drivers memory

of accelerated XXXX. second spending see infrastructure half for test continuing we XG, equipment Regarding in the

XXXX. we a While larger spending we are ramp year, expect growing test XG spending handset in related next forecasting

business to System $XX standards XX% buying. quarter-over-quarter the XG Test grew million, LitePoint handset and for by Our early requirements wireless new driven

expect continue to level of business We this QX. into

drives defense revenues and for by Test System grew million, disk driven to aerospace hard testers storage increase $XX XX% quarter-over-quarter and shipments. primarily multi-terabyte and capacity In

Industrial to turning Now Automation business.

were year-over-year. approximately XX% revenues XX% $XX million, QX and grew Our quarter-over-quarter which

year-over-year Europe relatively drivers China in and As our we North single the less growth Nonetheless, largest slowdown, which Geographically, robot Mark remains automotive growth growth but believe forecast. demand by glowing in America. was fundamental market. universal noted, been to despite the cobots than is in Asia recent market. Pacific XX UR's is and investments, XX% the slower of strong, offset this has million Even

long the benefits enhance to and unique returns of manufacturing quality, growth. financial Specifically, labor, and continue will ergonomic scarcity drive term

will believe base headwinds We growth. of several of mid-term. are from to the cobots short an term, we situation. points hundreds seeing against calibrate Several our tens market in industry we of help working of In reference installed quick thousands will to thousands continue the go the

an in on robot American trend association RIA, the a Association extended March Industry Reported all of principally focused in automobile Robotics through due units is This sold the this the the quarter. decline All market. robot North entire a we slowdown are robots. conditions sector, to industrial measures PMI June believe indicating around or manufacturing a year-over-year regional quarter, is the First, rather – over the growing. North market. not growth managers from has XX now view industry that have purchasing the moderated marketing XX. immune wide proxy for PMIs the robotics American world XX% conditions. contracting Thus, which Global with XX below than we're Obviously, of XX%

invest market competitive and believe term to regardless short product For will extend UR, to ecosystem portfolio. we in invested our and the portfolio, headwinds continue channel leverage our the to product strengths the Ecosystem in in the and of channel differentiation.

parties. time in bring channel channel continue develop partners, but relationships lead continue to enable with we and strategy Lastly, fulfilled key the accelerate be Recall, our to partners. requirements to third solutions deployment segments. will in go-to-market large the vertical our enable and to market understand on for new and These direct verticals. customers also support end with us new through our is key relationships products, market to leaders partners Demand train with

use, the that of investments expect competitive product industrial continued market lead, bin In to picking an with enhance recovery Later our to out yield economics investments. opportunity our come flexibility extend our Universal year, Robots. our provide will of customers and have this through and ease from view, coming

approximately new investment UR This functionality market investments above accelerate. robots market the us growth others and expect cobots for sorry, XX% UR will picking will position we industrial bin We addressable increase when – like plus. for

which MiR, obviously life. earlier much Shifting to is in its

part in with of up robots. sales last a We pro pallet XX%. the QX basis, the approximately $XX second quarter are million autonomous from see year's moving continue growth healthy to forma to MiRXXXX introduction MiRXXX and sales due on

Core While flexible model job which I've well-positioned just digits. a a The the market portfolio I'd is general secular aligned with the Test are to ensures been in Teradyne with company's Manufacturing and all to Test brings profitability, like offer growth mostly sometimes the market. few on with business, variable are low and for some outsourced objectives. tied is volatile single objectives compensation months, the business observations. which for employees’ has CapEx that Core reduces flexibility

hinder could without mapping the product assets, roadmap up optimal significant term factory road strategic managing lowering on burden flexibility. focus can of capital, planning We which tie and long

levels. in of joint short I China processes impressed modulating our operation and spending contract the of flexible to the operate customer quality while production lead and partners ensure relative visited in manufacturing with Malaysia. and mechanisms In volatile was are that manufacturing flexibility We several I to May, our of demand. markets delivers times

in The manufacturing trade it the other relevant that China about enables the us minimize current is of impact and point Malaysia to environment.

I've observed automation. in industrial

different defining developing a that very markets. we're have and situation We and new

has synergies are operation, in being and so ecosystem a markets are stay and delivered acquisition. these distribution, able to opportunities these are support recent fortify ahead our on an thing, global As infancy, competitive opportunities Scaling scale manufacturing position. focusing to areas Teradyne well as their with application our these we to and another. is Capturing global where one

are to into opportunities, clear IA effective. industry and accelerate design scale we the to allows companies, companies hindered expertise scale decentralized efficient drive and realize bureaucracy. supply To operations, smaller support, me entrepreneurial approach quality pace have that capture is to Synergies at support This company's HR, that and our functions like our enabled new businesses to to sometimes capture management, with to enable acquired for through and legal operating drive all the an decision integrating market. global some experts their truly making. businesses minimal to key line the also combined growth, which market which It's Teradyne's continue

supporting on of Industrial is Semi needs core fast difference these leaders Test Automation collaborative management true businesses. the and growing that focused A a between key and is the business corporate There's between business approach manufacturing.

our stated, diversity for has businesses scale, Test many cost, of location, and something times. Core very these As manufacturing outsource reasons, that including important geographic proven flexibility, in

trying key is new portfolio grow a fast integrated and in-house. Automation differentiator to vertically markets in-house quality manufacturing in solutions. that time with to these is Industrial are Our and enable Manufacturing we market

disciplined and financial allocation strength return it capital sense. to acquisitions to stay making capital now. where along Turning to shareholders, We'll maintain financial the with makes

we've and paramount billion million earmarking $X because a to share target return on years, approximately a calendar flow, capital three buybacks, supports of which approach acquisitions. past averaged sheet, we the million the $XXX free We can with Over $XXX maintaining cash annual to balanced ensure dividends balance we continue from competitive the capture market such This an our well out invest and downturn turns ride economic be long to term success roadmap in growth downturn, will roadmap. our with the to when is to positioned a opportunity.

million $XXX pipeline. potential our acquisitions earmark we addition, for In to support M&A

million form the any $XXX our have term January long in in review in also convertible our approach debt We to board capital will allocation We changes with XXXX. you annually a in communicate and of the call. due bond

to Turning sheet. the balance

$XXX million dividends. second principally end million and first million to repurchases XX million, the cash the quarter. returned of at of quarter, securities Our through marketable in $XXX about share We stand capital of in XX flat and the of

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

Non-GAAP was high XX%. in quarter. above than Turning of the Company to our of of driven the two quarter. infrastructure. for margin Non-GAAP was had sales Non-GAAP and of acceleration the $XXX second came end revenue EPS gross tester QX, profit $X.XX. greater slightly customers in shipments million We XG XX% mainly operating for XX% guidance, by the was

and tied distribution along million quarter expenses and to our higher the variable increased see profits. the higher planned, investments, You’ll due Semi as R&D were Test $XXX first expenses with compensation up million, operating non-GAAP primarily $XX some UR to from

the level in in the for geographic for MiR shown and table UR presentation. second the are quarter breakdown including detailed the The sales segment

We Industrial and continue up expenditures excuse Test our to scale schedule for a businesses. me showing operating this Automation We’ve between included IA. breakdown

tax of me tool with Let our the discrete item one tax finalization of to repatriation million note. we expense $XX the gap related had approximately liability. mention quarter, In

to for interest. Turning EPS our million be XXX $XXX restructuring is on million to to expected $X.XX shares. intangibles, required – and be million convertible guidance $XXX non-cash is Revenue Non-GAAP quarter. and QX $X.XX excludes of the expected the to amortization guidance debt range between the third diluted and

run XX% run XX% to XX%. quarter from quarter guidance XX%. gross XX% OpEx our is profit approximately operating should should and margin forecasted XX% taxes. to to to Third total third to of The be Shifting

full is year non-GAAP to Our with rate expected tax which is our prior be guidance. XX%, consistent

XG Test driven forecast seen Semi we’ve our by above shipments. In business closing, performance infrastructure in

growth QX XG and Test by continuation Our infrastructure mainly Semi is driven spending. of

economic to but the product objectives. is our growth will midterm headwinds, outpacing and invest portfolio continue Automation IA market growth Industrial we leadership ecosystem keep due and expect to to we and for the channel to slowing drive achieve to

turn I’ll the that, back With Andy. call to

Andy Blanchard

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

Operator

[Operator of Instructions] Pitzer John from Our first question Credit comes Suisse.

John Pitzer

– guys. the just growth prepared we of and say sort to below be end full the me thanks the business, growth term that half? How Yeah. let all the about the low in is half comments. Automation target context the in for for of of And flattish Good going Industrial detail about kind morning, the curious, end in going Industrial Automation rate half much on how ask to on just year. I’m talking be business overall your kind below Thanks of it’s should Mark, half business you question. think the low long for

Mark Jagiela

Yeah.

the in in half. what past kind short to in similar an to second you’ve are little obviously expect see it’s second second half seen But think project pretty IA. years, precision a I half you us first, should think half of first IA times for difficult to I uptick to and with the in any

in wide year, that, range over somewhere see I think in that think half I terms half we’ve I set, up that a we far and to in first XX% going so it we’re in probably we’ll growth be somewhere, XXs number. mentioned, the in and to proportional XX% to I below end as do to what that the years. up that it’ll of where we’re be XX past the going target to And second seen low-mid to So, give

John Pitzer

I’m XG majority you’re Then the are as there. kind follow-up, Test of million. phases think on That’s you four about XG what’s the we does that just handset SOC curious, the of TAM, SOC your talked is the you kind what by helpful. view the about vast given I’m cycle just it my But where it over XXX of to time? Test on TAM just about, that assuming on raising of infrastructure

Mark Jagiela

see said in of Yeah, we talked the to running a We that millimeter that billion about through up the speed handsets X.X capability wave to Semi the We the past. TAM. should a increase we’re and mean, $XXX embedded. full majority Test bit when world $XXX million million have

of So, sort that and in plus my thing that always said remarks, phase this last I about we’ve that’s said the of happens. when XXXX sort

infrastructure in So, on U.S., China nothing of primarily major sub sort for early infrastructure here compared the but rollout XX. there’s and more XG wave much deployments deployments. Yes, for of we’re sub the that still in millimeter going scattered there to in

John Pitzer

Appreciate Thanks. it.

Operator

question at Chin comes from Brian Stifel. Your next

Brian Chin

got and Hi, Sanjay, of the water. you letting the hope there, welcome I Thanks us few morning. a good glass company a to questions. ask for call. And

Sanjay Mehta

Thank you.

Brian Chin

revenue First, quarter breakdown guide. about to curious the just relative the third

expect do business speaking, segments to in trend to you XQ? relative key roughly your XQ how Just

Sanjay Mehta

think here. – so Sanjay I Yeah, it’s

continue in similar Mark the you Semi continued infrastructure. business see And the So, think increase the see what seen to – as an XG with drivers Industrial you’ve increases you’ll the specifically, will of past. the in Automation, mentioned, should I along Test

our X like XXax, continued growth really standards, I think of front. that Wi-Fi driven gigahertz examples and X the was are businesses by LitePoint, the wireless some see other the new should the you on or

the kind million. group, to did of in quarter-over-quarter And QX then $XX Test XX% on which grow System

business, are as deployment continued there datacenters, going the see aerospace typically disk into there. drive by disk should driven and our government really well and the You phase. large the agencies, enterprise really ones large defense datacenter, large deployment as from growth programs into hard the some programs, which business are And with drives moving

Brian Chin

helpful. then two got for And It’s question, I that. second Appreciate very part. kind my Okay, a maybe it. of guess

geography First, growth. quarter. or of in the bit I in decelerate late any monthly but guess little of adoption, what see of business, of in kind sort And that in some you XX% the still and maybe quarter towards in MiR, progression UR terms curious could off of and seeing year-over-year contingent those more tail I commentary, little to pronounced payouts versus was the revise maybe sort then, did by at down i.e. surprising, that business UR MiR, guess of headwinds, looking QX? plus of a the also Kind business sort for also earlier was of a that just you’re phases in having some to wait of of – or terms

Sanjay Mehta

Yeah.

I I XX%. prepared really I think are – to of markets my in America, So, results. perspective, robotics really when seeing negative actually slowdown seeing the the companies think and you’re other tied on year-on-year And commented Europe the impact automotive. think showing remarks, UR of North from the Many about you’re we’re I right

see month we to looking we on did so I we think expect Pacific, be hand. Korea in forward, to China, Asia of on I – strong. that – have the and you was, We’ll However, in have actually profile. relatively there continue that to get strength the Japan, we’re monthly back don’t and to

Brian Chin

Okay, thank you.

Mark Jagiela

comment And bit. on then a a MiR, little just maybe

potential think of the is So headwinds greater probably they day in roughly the sales. that would sit Sanjay first sort doubled mentioned a the we its we’re than now, tied at out going the in out, this where to out max given MiR turn And less. in have year earn result had certainly ambitious to but given is, full much one. be will the originally to has and some XX% sit plan had we from of – And half QX where look doubling to as we here very have range, year, in

Brian Chin

you. Okay, thank

Operator

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

C.J. Muse

you thank the I Yeah, question first on for question. taking side. SOC guess the

spite You talked last half, the elevated think in seen the here? as maybe obviously over we’ve And half of SOC very can about lower from this ago, the XXXX? in spending quantify into year, headwinds than two cards we that industrial? those auto some how translating the about year, are years had moving kind and is how into saw rising of into previously and second versus headwinds and How million XX tracking, about you, complexity you first you now of size think still market that that’s we a should XXXX,

Mark Jagiela

so you points a few that. on give guide Yeah, let me

strengthening do I because of the So, think

Semi that up. flat. about Test mentioned second be Semi I are versus environment And we’re probably IA earlier, as going Test revenues half be seeing should first to

that that to the So second made first. gets the be the I stronger that than comments a half should bit

you when still drive So, at years the now, fact are think, year, several I robust Testers. Semiconductor the that been declining, for we have very things volumes that the two and happening business, the flat essentially to declining for unit of complexity and uptake of look demand despite handset a then, see this are

the cameras that that complexity a into been And some to the this in So year are around, complexity density going of the the number driven. and the others of lot obviously the in recent not phones. drivers related have increase the years, unit driven, more is of and

in coming And year the of thing speed that cameras NAND propagates of throughout six the in up, up terms this with NAND which them. the higher the DRAM. will goes have phones with Flash complexity, Some the same out amount goes of phone Flash end

that the And complexity related to coming. drives XG is this bandwidth, part for of silicon high into we’re yet story business. get the all cell So, our phones of that’s

we’ve So of that’s sort had. the thesis

the so as well. far I playing think, out it’s pretty evidence

C.J. Muse

And helpful. guess follow-up on the a IA side. I That’s

As hear deciding today, of before least can auto, buy put in relative U.S. to terrorist exposure, you that’s weakness companies other kind you thoughts that at place, perhaps, exposure, there? China love European where the would coming weakness, from, contemplate components to pinpoint between potential you’re your seeing

Mark Jagiela

to Yeah, that, so market the think America just once in we’re we believe still slowdown a XX% in to again, the we in I a tied for again, to And new a things different we’re investing there’s large these like that in of adoption, XX wave drive picking And are bin we’re market in we nascent will and like mobile the robots example, hospitals, applications roughly like talk industry. the nascent markets, investing accounts. hospitals. Europe did in North bit with verticals in also continue invest once then believe grow, little or overall, I really quarter. MiR, and in auto deployed for

market And accounts competitors. pull little you. to – and forward. drive typically and what we’re the different as a then to bit process, the reaccelerated so, and really cycle have evaluating Thank a these looking big market the to qualification spending see, this But large going forward, we really we helping they’re design longer for again, we create and believe we’re products see

C.J. Muse

Thank you.

Operator

UBS. comes Arcuri Your Timothy next of from question

Timothy Arcuri

– million that’s think to I it’s ultimately, guess the think million I to infrastructure, $XXX had XG two, consistent you be to incremental TAM. $XXX around is I the Mark first the pretty that one going the comments

Andy Blanchard

you we there, lost Could repeat Tim. lost we you Tim, the – question?

Timothy Arcuri

you hear now? Sure. me Can

Mark Jagiela

Yes.

Timothy Arcuri

So yeah, my question is, [Technical Difficulty]

Mark Jagiela

we paraphrase are to question. Tim, the going try to

that are this early of You raising XG? Is up of attributing term indicative the and market longer it TAM a size? in the this to about step wondering much

Sanjay Mehta

Yeah, I asking, think was Tim that’s hopefully. what

Okay.

it to lot the QX, very a still looking infrastructure. demand, of strong We’re we see into related

good this the is raising point a basis. TAM I really think So, at solid

it’s China. be of in to a on fact, going years, the There And out next that several large year. think early the I your continue to tell. next in it’s part for at plans over not going was it’s over like And how there’s for think build the this I question end year. too other So, that of much us into license have does to

On the kinds and economic all that. temper other other of tariffs hand, there’s conditions and that could things

comments are Test So, in the about actually than next confidence innings that allow specifically mid-terms uptick generating I year, Semi of my a growth. as in our Olympiad modest early suggest to should to in relatively said, of market other And that the significant call us build this, market. model lot wouldn’t is that talking I earnings

we pretty feel against still good that happening – as And so, positive a we proof this about what’s model. year

Timothy Arcuri

my Yeah, there’s Thank Thank another question. you. you. question. guys. And then Awesome, was that

your you little about better Thank bit talked comments us give that Mark, I’m that can more surprised there? also think, customer, as you. little a you I a smartphone. about well, biggest

Mark Jagiela

smartphones, the on of any I’m time. more just pixels before, and denser I I’ll the specific Yeah, said cameras, key not more to comment going customer. more things cameras, of test has thing one proliferation say the in been what But

without unit into is growth, this of we growth that year. and one see semiconductor why element see we strong strong, market a smartphone why memory, a So, that key complexity test extends

Timothy Arcuri

Okay guys, much. so thanks

Mark Jagiela

you. Thank

Operator

Your next Sachs. Toshiya from Goldman comes of Hari question

Toshiya Hari

taking Hey, good the I’ve two. for question. morning, Thanks guys. got

First the on was your competitor. this exceeded quarter, market in long Memory time. And ever the a the making a nearest think quarter quarter, first progress maybe you’re of only clearly In it’s on Memory Test. but your front. Mark, realized quarter revenue first the I I good Test that share

follow-up. well? or test driven if And your increasingly NAND the curious I’ve final DRAM a your business was business more got strength traditional as by So

Mark Jagiela

that flash. case the to Yeah, test memory to DRAM variants of think about expect what will in segment be my that is gathering talking high see don’t And tends I and I didn’t look consistently, But sub I speed the growing still yeah, been expect lifetime. persist. that around of we’ve the at

the QX, to continuation in test of deep test So, second wafer we both test. It’s test. of a the DRAM and saw we of is business the sort final with this flash flash of what NAND a saw adder due final wafer in quarter lot

component wafer test what’s the you if said So, that, main it’s the important quarter-on-quarter of growth, piece.

Toshiya Hari

And years follow-up. think couple then losing Got slow, it. were business LitePoint, On as was my guys the I in a money when really one point, you business. at ago

some and revenue you think cutting initiatives since I then has had improved. cost

for set importantly, do So when margin – curious, business become XG meaningful forward does more driver today? to LitePoint expect where going where a you that specifically? guess I

Sanjay Mehta

Yeah. I'll that Hi, it's Sanjay, one. take

running currently a to should you a to above support little XG it includes bit So little think continue above, average LitePoint about and our is and company will grow. shipments bit indeed, and profitable

Toshiya Hari

you. Thank

Mark Jagiela

Okay, next question, please.

Operator

comes question Your next of Mehdi Hosseini SIG. from

Mehdi Hosseini

the same that question. Mark, by is SOC phone and another of Should about assume million XXX up to you has station, to sub-X are XXX year, for Yes, XXX? XXX bass amount phones million. the TAM increase TAM of follow-up. XXX a my taking went out about that this thanks XG I the million talked and for the I your networking when increment XXX TAM have gigahertz incremental million

Mark Jagiela

to that and we XXX that I infrastructure of the incorporates business for way. base about No, with wouldn't the think stations phones, talked And million million XG. the XG XXX it associated

So, it's all one thing.

Mehdi Hosseini

by Okay, million. about you but TAM year is base increased the all XXX station, and this

drivers when station mean the does the So, that demand are to or content that it will, the changes as from phones base out, smartphone?

Mark Jagiela

related expectation of think than sensor higher year Yeah, of image it XXX million this station. base lot that our increase about There's talked smartphone, that's $XXX trends. the look I TAM to first exclusively isn't I all back silicon also to these a million

So, there else combination project should around being drive. that as and what legs out, taper know, of equal, you of base several piece several should and the then main take over come. for off, seeing it's years be year. stations, this handset we're time, for And this will maybe everything piece years. good to base you phones your continued have then a over as But will XXXX-XXXX growth it's And a station

Mehdi Hosseini

question. time phone? try characterize the mix station smart you it gigahertz the to sub-X Of the how does XXX the So, would How million million first more are compare and base to XXX let associated my me opportunities as to with TAM one follow-up XG.

Mark Jagiela

what about. want on you year to talk depends it So,

will next way talk the be will stations. to to going to not about want it'll to it's three four, that point, that years, XXX years below be million the two two sort driven all to out, five XXX XXX mostly it to get And base by up up be base pattern. station. million primarily you After rate, XXX million of it'll at it the get If that that to to

XXX say infrastructure. let's years, say there's it's XXX a So, of to from after XXX next couple this, two the XXX million, to shift million let's that and it's million

Mehdi Hosseini

any phone. And you help LitePoint? has do, like you. question Test XG then Sure. board my give opportunity second impacting Thank you also assume figure associated level LitePoint? there quantify with Is that all as to could us can And I impacts that's me on your more

Mark Jagiela

too, that coming grow. you access that also a Wi of, a gigahertz band will with that about there's said lot X the market. talked And there's Wi-Fi points million X we've know, we and Fi, business Yeah, to adds about there infrastructure and $XXX of mostly lot but its also phones,

meaningful. that's So you but know of business, XX% probably it's LitePoint's

Mehdi Hosseini

Okay. Thank you.

Operator

comes from question and Cowen Sankar of Company. next Your Krish

Krish Sankar

of coming a thanks first told question. today? Hi, revenues? Test plus I any is from much LitePoint can them Mark, quantify What And then is being follow-up? how and/or XG of had you for percentage your Semi there my Semi I one

Mark Jagiela

do Yeah, forward. see to consolidated we moment, haven't we the that we'll But look at that really Maybe, don't out. break if going we've that. at that can really

Krish Sankar

too, And two real as worries. the in opportunity LitePoint asked it last path And but wave better along I you you LitePoint, side four for in like, LitePoint opportunity are seems know, involved? industry you players like, there's do players everyone question Wireless millimeter there same to then this FRX, there's or key think Test. the the guess, FR No is think know, frequency opportunity Gotcha. and you. the Wireless consolidated the Test LitePoint. time for I that know, if in for Gotcha. you I also a Semi range on Thank Do think in like follow-up, to you

Mark Jagiela

test FRX, that opportunity or five. talked The out. production fewer is there therefore, in is it's may all for LitePoint I we are in products specializes production test dynamics a there really thing you the for FRX growth of we've for although be market. on before, development are still purposes. test, test, for competitive R&D it than of about truly know, business, so as Their an production but And competitors that five And optimization. FRX crowded four think us rolls there's less of market, the designed not three, is Yeah, instead in

production a less expect. tests, bit So for than a bit I crowded but little little yeah, it's might think you crowded,

Krish Sankar

Thanks, Mark. Gotcha.

Operator

comes of Citigroup. Malik Atif question next from Your

Atif Malik

strength. thank beaten for how another Can you've entered my Taiwan job rationale Hi, quarter market. you probe closer big I good strategic taking is? Mark, a you and that Then we and into the on follow-up. have XG that on opportunity just here questions in raised talk about

Mark Jagiela

exactly wafer, you're to makes to, enter tester any we're we I'm haven't sandwich part Yeah, are the that posers not doctor made around the referring sure but announcements products what of any talk specific certainly about not that. and ready there these of

Atif Malik

different side, by seeing then action And preferring makes China business Sure. retaliatory look you local are you at cobots that any IA in strategically? on this

Sanjay Mehta

Yeah, it's Sanjay. hi,

a perspective, other a seeing software, differentiation, a to where the think we're is we even at shifts, hardware not actually finding what I perspective, growth. is is what are cobot to kind call, and we actually, from the three And So the taking to outperform look of the a from because a benefits. return the on mentioned hardware competition. run competition. XX/X in finding was the mention customers the the it performance But we're is they're China last And basically hardware still continue can as what that ecosystem that sustain

the that's that coming. Now, competition to not isn't say

specifically a year of more view seeing an the enhanced bit competitors we anything, but and are be is We in China, come little around if unfolded. have actually as

Mark Jagiela

next question, Okay, we'll please. take

Operator

of comes question next Richard from Eastman Baird. Your

Richard Eastman

Good Yes. morning.

A you the as But the We business. the any the the if seeing expected there. on the also slow for are a IA spoke lighting couple agreement do that have there? we then half those; target booked first and back think And of any incremental we I traction be still direct Just or things Automation these better? full the of you Industrial industry. IA, through we the One just EBITDA or the kind is XX% enterprise within around year, is, target, in in quarter had examples is curious we as close sales. first to maybe of couple in investments of question EBITDA I'm to is more year know,

Sanjay Mehta

going what's kind Yeah, and it's targets Sanjay. speak EBITDA of the I'll on. to

I'll perspective term, So, we and we're investments. and first believe is, long believe think from long trade those reap going invest the it going again, as going And to to if of in to reiterate, invest. you where to should in we're continue off the thing revenue this really we're market, we to about in continue benefits term a mid

those what do the in roughly XX%. is plus our towards operating that a to operating channel differentiator product And investment I XXXX, is that, was profit obtain be really priority little expect in through – the first either that should developing of short competitive that revenue, average. the be sure In our in And will company expect and ecosystem grow going investments forego we or make will will drive or term you the bit leveraged to an and to So, investments long to is term, standpoint. profit from minus. think we're our

Mark Jagiela

And couple this path. we sort accounts was a to just rolling XX-ish to that out we’re continue added quarter, that in cobots of of and on month mentioned other units per describing the had over first larger in this I that count continue XX-ish large account discussion, so rate, and robots. down those I we yes, remarks, perform XXXX now up And it’s my customers large that the

– they’re occurred by So, way a obviously period. year that’s over about the three

much much So, coming terms talk have obviously at they’re month those that talk We get there pipeline. Hopefully, in XX out to that magnitude if to of but that. are at QX we in in else those about XX permission about in rate anything than in to a the somebody rolling would a additionally, quarters. higher didn’t of our plan in rate, who’s be

Richard Eastman

Okay. as a And question. then follow-up just Mark,

and Could maybe a and targeted the industrial. of couple – that what to and kind product look were side you to those what speak percentage those we can there is spots at what exposure? are Test just of business, Tests there test line, your industries Semi auto Semi – maybe perhaps that the On see and flag percentage

Mark Jagiela

actuators. us, for test automotive market has analog, and been the Traditionally breaks mainly, this engine systems, million of control say XXX control, then into it talk let’s and power so sort control actual Yeah, about microcontrollers automotive first.

between increasing, is to line and our and So, platforms. Tester. Eagle those has Overtime finding our SOC more as on are it’s UltraFLEX our of been split and of electrification more vehicles complexity JXXX Tester way moving their forward, the devices

So, there’s a migration occurring.

strong for talked is demand I’ve saw what running hasn’t unprecedented sort as XXXX very But out that demand down maybe year those year, automotive the XX%, years through from we three of This was three before, about been of XXXX. automotive average. from

typically So, much a it’s year, more a would than that most. pretty earlier it been And I normal than and a it at half year expected last have That’s occurred. doesn’t significant pause.

– that’s JXXX or hard products, to And expect In think that’s there’s I that it’s down maybe last similar product of not down trends then are platform. But the so the years. where industrial to lines, moving or similar compared there the as couple that. so space, for So, Eagle in a XX% perhaps fine. it’s we way, after a the very year recovery as only UltraFLEX and been Test running the it’s auto, and past a about similar,

Richard Eastman

of percentage a Semi Test? And as

Mark Jagiela

of million again, do SOC, normally an math, XXX you industrial. then the one can the market, let’s that’s XX or automotive and linear XXX, the if nominally probably So is XX, out say more XXX

Richard Eastman

Yeah.

you. Thank Great. Okay.

Operator

Ho of Sidney from comes question next Bank. Deutsche Our

Sidney Ho

question. Great. I want back question. Thanks my for XG to the go to taking

their buying about from if you the you for been you seeing the them line not you significant XG are plans ban, in can don’t expect specifically purchases is the for built it’s quarters? tell of impact how you talked the look customer or You Huawei future. them, impact in with for if that buying future infrastructure, the not and But at

Mark Jagiela

whether supplying any you disconnect. was I’m and that on. see all that out said, head if always And through so of terms we’re no trying don’t the not buying, we kind in got that to there’s triangulate not, know the say quarter, one try or quarter. say look will is I about I We’ve to shipment of But look in can of something demand like saw customer. any what of and in at evidence specifically going a buying we quarter, comment is head not what second Yeah, got customer we that it there a products if buying in we the of at with we any all constantly. is But see or that in a demand adds we We second up. we’re second get

Sidney Ho

your another thing, about give than networking? Okay, XG growth, than can or market infrastructure that’s other helpful. you Are If expected we strengthen better it’s a different in also you press the of great? question Maybe end auto in same color industrial, in your be mentioned, talking but would referred to release, some Thanks. you networking. type

Mark Jagiela

subtle Yeah, it’s it’s But driven distinction. a probably being essentially the by same thing.

network modules, sort access XG And connection backhaul has to backhaul have networking you have of the in you processing XG of then the radio converters, the you a a you And network, related which through to network we talked then is So, down rollout, the have modems. processing. about infrastructure. antenna the have,

Sidney Ho

Thanks very great. much. Okay,

Andy Blanchard

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

Operator

question is Your David final of Security. Steelhead from Duley

David Duley

Thanks question. my for taking

what increase guess billion, I just you in X.X the this expect a market. in you the size Could the size year, of you on this you TAM guess Just the how that it and the SOC XXXX to clarification reference, was market I year? of SOC big is be said?

Mark Jagiela

billion was market SOC the – had year, $X last a peak about size. so in year phenomenal of Yeah,

X.X, something the at like X.X, talking X.X current we’re midpoint, that. about So,

So, down down, maybe it’s range. that still it’s XX%

David Duley

expect And if this do will XX%, to market’s the we year? test business SOC what – for down

Mark Jagiela

business go I think, I back this what test to said. year, SOC

not be expect to roughly guiding specifically but equivalent full year our first we a the half there, half. We’re our to second

So, that. you can define it from

David Duley

Final Okay. question.

us customer, seeing? You to or intensity give about over referring that, idea you’re times I intensity. test what an could in And like mentioned generation, you sort a time are complex chip generation different increase of of APU of couple imagine your sort any you

Mark Jagiela

generation, hard to complex get of it’s obviously of get a Yeah, thumb because generation so to there, have and more really, all more have it’s first it rule transistors. depends – themselves the devices

time test count, go would between there’s So, being everything generation, time. correlation transistor test to equal generation and good a else up

optimize However, architectural in to things test could that thing now certain the some then be testing. methodology and efficient that happen tester more allows the

where could improved time the go test or might find you device customer quality didn’t it or technique, the a up side. a test more complex, a generation but be that got So, on issue

time events. in XX% So, in kind general, test we offset see with XX% some digital natural highly to these by other of that of onetime silicon, complex migration

David Duley

was your obviously who you the was? mention I curious XX% did one can guess with who customers but I other one is, about where Finally,

Mark Jagiela

didn’t, in specifically won’t call we quarter. out we that the No,

lumpy. year customer However, patterns end And would the the will remind buying at disclosure. we little I you just that, I call what of the in a provide XX-K, are

So, entire but the should the XX% in having that at they we doesn’t be greater customer provide disclosure quarter year. the of than me, for year, will surprise the a end XX%

David Duley

Can out you sort us as help far color? market goes as any end or of

Mark Jagiela

don’t this about next we’re think if into going we I But we’ll No, it into as talking get obviously year. that. persists, get be situation to

David Duley

Thank you.

Mark Jagiela

reach joining me questions, Okay, Thank us. please if that's for have follow-up you as about wraps it folks. you out to a directly. reminder, up And

Operator

today's concludes call. conference This

now may You disconnect.

Teradyne (TER) 24 Jul 192019 Q2 Earnings call transcript