TER - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen thank you for standing by. And welcome to the Teradyne First Quarter 2020 Earnings Conference Call. At this time, all participant lines have been placed in a listen-only mode and later we will open the floor for your questions. [Operator Instructions]. Thank you. pleasure begin. the my Andrew over now to Blanchard is to call turn to It ahead go Please sir.

Andrew Blanchard

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

quarter details containing remarks, of was outlook for for results second our quarter XXXX's our along first Following our of year our opening quarter The with release press XXXX. first we’ll provide evening. last performance and full issued the

providing on that the after of via you the We’re slides of available the the page Replays may in call Investor website ends. discussion. this page be same to call will be helpful the following

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

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

During non-GAAP we’ll reference measures. make today’s financial call, to

the release were page slide most take concerning have reconciliation export regulations. on the We financial pandemic and risks financial of the potential directly COVID-XX note to available special and in of Investor measure press measures deck comparable Statement information non-GAAP the our the to website. GAAP changes please including to posted these additional Also, related Harbor U.S. Safe for

hosted Cowen, Stifel. Research, Baird, next Teradyne investor technology earnings industrial expects Wolfe call, to ahead R.W. conferences in Looking or America, now UBS, and participate focused Bank of and our between by

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

is then questions. comment guidance and We’ll are along some then your conditions our our And results, with answer Mark? call offer on how will more for for COVID-XX the the one will quarter. scheduled the hour. we market pandemic. on details quarterly this results Sanjay Mark our First, responding to including recent second

Mark E. Jagiela

to will longer-term and context pandemic first specifics observing. how how I unclear our the current Hello second are we're then level the joining global on conditions responding and looking continue high for the COVID-XX us. it's market financial some details and how we're economic Sanjay then the the restrictions provide we're and how everyone Today the be. including might environment. at in provide on the shaken for will implications has what daily more for quarter thanks the managing COVID-XX we quarter. or I'll life economy, will describe results the long

as near earnings products release, However, strong you very for test and top to demand respectively. deliver the above revenue quarter read throughout we end guidance in of press the and our our first our able were remains and

numerous the expect, not production, more obstacles Teradyne might their and partners our you proud As I logistics could the during overcame supply, work. be and team quarter of and

challenge. must Globally Employee from health are be has our supply teams onsite employees customer and at top of our the line, priority some our are and with operations, of the Teradyne. working and resources home been supply majority them we providing support while well-being in necessary our line continue exposure on and more large revenue unusually way details risk. procedures protective to reflects come guidance to line Supply our their QX challenges the this response. you will minimize range give Sanjay

shift despite are enhanced but number and and working projects on minor both onsite to to projects and success long-term rapid customers. the support assisting with track, significant Teradyne R&D full our remotely. necessary largely are protocols. of using of are projects are with where ahead employees the short-term Application safety moving vital customers engineers These on exceptions schedule speed

arrangements, work potential any to are on this this watching seem so be far to ensure productivity things we get of we ahead loss closely plan. remote While proceeding from

So in stand part one these ramps is delivering feels great the pandemic, COVID-XX of to executing summary, careers our of Teradyne this largest be team the out despite in it challenges and like by history. of really Moments the and presented tester numerous the shipments in team.

as demand impacted remains business, the for to of Turning equipment pandemic. COVID-XX yet the test by little

and in While mobility, for demand. sector there strengthening the than is by incremental that's softening been of more automotive made up test XG, memory

and which other our impacted shutdowns. manufacturing remains in decline expect business QX QX, On as automation hand, deepen we saw by a Europe the North in will industrial American

Now how at we're looking let's review and unfolded QX how QX.

XX%. year in quarter the level be sales making uncertainty At up projections and today. the comments not Given in total both demand, were we our any Teradyne first will supply full XX% XX% our first up quarter earnings per that were QX up SoC sales was test In up share non-GAAP were of XX%. from XXXX from test XXXX, semi our of and

quarter infrastructure buying XG XQ expected buying trend As strengthened. into related handset and test as well. in slowed the continues This

face cameras demand to design technologies is counts, more up and time, but mobility driver comes Wi-Fi last we XG, biggest and processors, volume. drives of and complexity higher complexity apps for XG sophisticated more growth from for year, same testers handset test with wins describing like our unit Increased been displays. new The of increasingly more thing sensors even flat down powerful the in in the Part pixel turn silicon drives years. highlighted the from handsets in the we've which increasing comes of

shipments Tester remains components XG band XG technology, deployment low demand a year. XG the for the XG use millimeter growing of in modem while early handsets percentage modest. in be wave Much sub of will but specific handset XXXX, this RF will is small and

point. there capacity much is put both this near from test semi wave growing technology light in capabilities The of for zero early building at production. and industry However, is demand for so for in testing to capacity place is this millimeter demand initial

on XX% was system for epic various test LPDDRX of up out and the On XXXX. us. Memory were the is Magnum innings test the new our Revenues Test network is the geographies. through and highlight the Final infrastructure is as the out we story. DRAM bright build promising from moves quarter, expect another ramp ebb side demand The in QX as segment early and a still global test to flow build

that in flash perspective higher, We the quarter. to expect latest interface though, a refresh continue in in flash packaged driving a From systems. shipments revenue The controller standards test pushing the speeds protocol second ramp test dominant were interface are of quarter.

We expect the this in quarter. trend to second also continue

the indigenous XXXX, group with memory healthy saw quarter in test with the quarter. standing system we doubled for first from out sales In the Additionally, of first Chinese tests shipments storage level year ago in both was a and quarter This $XX strong. million quarter. times demand system for more as of over sales the the test HDD remains than level three of production

are softened aerospace on related handset on point automotive defense benefiting in test systems. cellular XX% transition. and test grew electronics shipments Wi-Fi board for increased point demand production XG Our business and light semi while connectivity In sales year-on-year, wireless Like foundational up tests and quarter slower test over both light building were XX% the capacity for demand. from the year-on-year tests fixed

America faced QX, as industrial in also to its universal COVID-XX Shifting quarter Asia, by in in automation, down headwinds improving saw year-on-year was as progressed. pandemic we QX which robots about increasing tracks the Europe the North stopped UR in dead was the revenue QX. In and for outlook in XX%

on a automation the robots quarter compared heavy resilience accelerate workflow. critical roughly reliance more On likely will flat sales supplies businesses as a be ago delivered logistics automated the a see of in post for also the MiR's opportunities year the mobile the with We opportunity other manufacturing benefit hand, period. believe and realignment and pandemic automation. of warehouse localized There in will the autonomous of automation

bin our in Robot flow. we application the Stacking ActiNav the and XD To that full autonomous the manufacturing precisely investment plug Autonomous Mobile vision In a uses Universal product picking hand-eye market's parts capable place It products, most formally a in capability distribution, UR at and to introduced in AutoGuide coordination end, MaxNXX bins continues necessary and from provides software In Plus speed. forklift. MiRXXX and a ActiNav. April, new the March, Robots introduced planning play path organizational to Pallet precisely deploy pick an proprietary solution. is easy both and parts that industrial

at jump up the look picture. Finally, big and let's

demand enough to challenges. were fulfill was nimble strong that the despite COVID-XX we Our demand XQ and very

demand QX knocking is the on stronger and quarter. team focused even supply great Our looks down realize another to bottlenecks

not in vacuum. industries, including not to we're operating is impact economic The shutdowns in a new that volatility recognize rolling in us. we uncertain midterm mind Bear that of our However, many remains own.

demand up and flex can with extreme and profitable. that down model still operating remain swings an have We

have in economic employees severe case and better positioned the past weathered have emerged We in company the across each competitively. that we've storms

At of solid a sheet be the time, prudent later year. come. in You global quarters know relentlessly remain serving suspended term, confident take likelihood financial opportunities in our and the an in will impact future lives. stock markets our note our all onward Sanjay. way, the clear. balance Sanjay automation have and we becomes marches them. test also asset details. until increased now we strategy a and you through providing rock outlook the Longer will an our to We hedge at long-term Either buyback solutions bit the challenges to as that same the will M&A technology we of in our to enriching for excel anticipate

Sanjay Mehta

this managing want families our morning This and I environment. first their and the operations, Good our will uncertain cover QX how environment customers, our through. Mark. allocation I'll everyone. acknowledge employees, spending our on morning results to capital going I you, outlook. in QX Thank and are tough details suppliers we're then provide

COVID-XX, soon. family for efforts thank and will your and with employees have patience that would I hope our our in to like be those Teradyne. speedy or For this us behind confidence wish a extraordinary and your friends and pandemic suppliers you for I customers recovery

customers, Mark of our the continued supporting objectives. priorities As execution earlier, achieving our financial our and our noted are employees, safety in

in this can't predict the consequences, we a this and enter of duration pandemic we economic a model. flexible its pandemic financial strong business position with While

marketable of QX million no short-term securities with XXX debt. end and have we Specifically, the of at cash

in $XXX a bond have that's value convertible We million due XXXX. face December

businesses diverse a industrial their businesses of in test set a of service These leading and with have products. portfolio continue to markets automation. We

businesses the like tailwinds to COVID-XX. technology in new automation and like introductions, Our various standards weaknesses test due the of by both flavors memory balanced our is businesses them of XG, auto continue with This LPDDRX. to industrial and industry have behind introductions contraction new

is to maximum we points structured scale our of able Total be low up. expenses the test cash we've generate during a our to couple large level swings. demand on handle hence ensure retaining while to to at expenses model, flexibility equipment of demand expense market A periods market set company's cyclical, are

the extensive manufacturers. For contract are of portfolios not mainly flexible to example, costs. cost our are with Therefore, fixed manufacturing outsourced test sold we for goods much of burdened as our

expense G&A We have operations, functions operating in our low are cost and engineering, portions an efficient of model where regions.

revenue Lastly, our with levels. profit our varies compensation and structure

across in industrial As Mark noted, to UR roadmaps includes continuing and AI, we investments by Plus come. product product in picking of AutoGuide invest XG, application our as are just investing as to MiR test. This kits, benefit at pullout ActiNav significant in also the bin our IP company. memory introduced and We're will a roadmaps the that Robots, to years our related support new engineering key including Universal us the well

focus investment year supply our line. key this will Another be

in of supply the is supporting While global. truly close Asia customers, line is production our production the bulk that our to

improve. has customer job of delivery demonstrated, our areas we QX to operations an days chain these We're supply taking identified but only did requirements. partners on reinforced learned not further manufacturing critical outstanding circumstances areas have the and and to our our value lessons team, the our team has the in costs. an that in ahead, could of components As meet experience for redundancy internal This primarily These difficult and will these are capacity. in adding strengthen impact

with revenues $XXX were of test to solutions tied System terabyte win. XX% strengthened XXXX driven test by memory, also line revenue of of an storage $XX as Wi-Fi XX% XXX [ph] Light indicator new cellular encouraging million hopefully sign group In XX% revenues driven primarily XG some solutions. SoC -- Industrial Semi and IA final get tests revenue or connectivity QX year-over-year manufacturing ramped was down leading In for year-over-year. company LPDDRX which up flash system drives QX XXX QX, driven revenue the China, pre-COVID-XX by to $XX our from over test pandemic. by by was million doubled up driving million and in million, for strong class -- back to grew we related a which and countries we improvement near year-over-year standard year-over-year test. as design on our had market growing of well as demand had and March, amplified Now tests work revenue handset XXXX, Point COVID-XX towards see weakness X did in million revenue. environments. of is system automation the fastest

margins were mix. down product due to gross quarter-over-quarter Non-GAAP XX.X%, a point

operating a from expenses profit. dollar. million by tax test was to timing profit a non-GAAP $XXX a the were The rate rate and is driven than was year basis higher non-GAAP XX% The quarter revenue for Non-GAAP Our million GAAP on items fourth portfolio operating slightly tax lower discretionary by and offset non-GAAP excluding mix on compensation planned. the discrete our a from improvement on and rate due higher basis. expenditures, XX.X% variable of down quarter EPS was $X to XX% and spending higher in

million share the Effective program. to first average have to of $XX.XX at we this million share for we an why we shares X.X April Turning reasons two quarter. suspended repurchase made time. cash at $XX There back in are bought decision preserve price the our Xst, buybacks,

we of duration COVID-XX. economic the the is of look the forward as uncertainty Firstly, depth and of there impact

retain to sheet on we the M&A opportunities enable balance Secondly, in the to themselves which may more wanted cash near-term. present

As QX. QX $X of QX. of we in as free annual we million compensation flow paid lowest drivers dividends in cash Share were $XXX generation decline is typically and quarter primary in our buybacks cash our million cash variable generated

volatile volatile range, environment given we're we're range environment scenarios QX to reflect widened revenue Turning sorry, Turning to we've facing the considering. to guidance QX, that the various our the given --

The first shut third waves to that the of assumption or is do businesses. force essential not second countries virus semiconductor down

retain semiconductors governments status considered that is work imposing stay at essential the by being assumption second orders. of The home when

team issues mitigate be is production able globally. chain third and our operations to that continues The assumption to supply

like From to of a you also of couple remind important demand perspective I points. would a

associated First, to launches. handsets Smartphone related we their and have in QX a concentrated demand

As you could outlook demand in QX. change changes immune latest while know, and quickly Smartphone our to reflects guidance demand short-term for our not our estimates, we're can change the that materially

play conditions, Second, normal we're normal not may in come not the quarters. seasonality in future so operating into

million. are to be $X.XX QX $XXX of of $XXX Now outlook, to expected shares. to our XXX sales between on a million EPS million Non-GAAP $X.XX diluted and

the and convertible Second the non-cash quarter interest guidance acquired excludes of computed the intangibles amortization debt. on

the midpoint approximately at gross from down are are two XX% decline. margins XX% quarter Second margin estimated to QX. There X% at causing factors the

incremental line COVID-XX our First, associated incurred costs in impact being This margin the are of with results under ensure to supply as noted decline. half prior. just

business of of just mix increased Second, the quarter mobility drives in margin the decline. over half

in mix historical similar towards is follows a sales pattern QX when mobility. expected Margins bias there

solutions. the come ramps are XXXX cost QX not of from continued decline due Wave to such which have gross half in margins Second to Millimeter expected new product growth Plus down and further the as curve UltraFLEX

due investments and in to midpoint both to R&D at first increase We expect OPEX SG&A. XX% operating to XX%. IA of OPEX to in sales. gross investments. were to test expected return incremental Incremental focused run our will quarter and development historical the spending XXXX. is our second product from profit margins non-GAAP distribution of quarter at The is quarter XX% second the guidance on investments

to X% Regarding grow XXXX changes our our year, guide. from earlier, projects the down million in OPEX to light we is $XXX January estimate X% about in for discussed This full latest XXXX. the OPEX of our plans from

we these volatility. well-positioned to we times are period execute and closing, the of over In challenging believe are demand

and customers, roadmaps to future an in our diversified reinforce portfolio continuing future while taking of to will cash strategically uncertain sheet, balance success. invest strong product a and customer that power business our and have position We support against actions businesses

foundational if I'll industries pandemic to that markets. attractive economic we we'll electronics this As Andy. make back confident continue needed societal changes and in will noted. line things impacts growth resulting with ahead proceed make that, the automation industrial Difficulty] the and we're demographic forces the and With [Technical When to test turn global recede

Andrew Blanchard

a a Thanks, now some follow-up. take limit to to questions Maria we would question and one reminder, and Sanjay. yourself like please as

Operator

you. Thank

from Chin Stifel. of line comes question first Our Brian the of

Brian Chin

and you're clearly semi business, what and strength for are a expectations seeing Hi question of there, call. sort skewing growth automotive range there results what's how of My strength in I further beyond complexity morning. into certainly are reconcile plan Congratulations have do be lowered, markets you good of conference your you the is declining factor, making not is would customers first reconcile in platforms be been expanding maybe the test would growth lower the in guess expectations of Smartphones XXXX sort in why test the of of cut and a sort as one the appreciate terms to and quarter? of to just success second the this capacity your some you also more wide on new for could like Zoom for form And and you understand the your with downstream? rationalization business expectations strength further of bluntly, of

Mark E. Jagiela

it's a lot incoherent at declining time. unit or and is it the little particularly the there's such tester strong of This handsets. I I about the the occurring not is people But, of But not Okay, issue much absolutely silicon so to complexity see and bit perhaps volumes, think think are phones in back uncertainty moment. it's a obviously unprecedented. are in that's demand the this talking to the in when that number there. associated in the being And the is of test produced, phones what's

believe know don't growth, and impact doesn't which sort provided many complexity possibility. happen, the or business down there's just like the it's overbuying new persist is of a would in driving new next necessarily into a right increase. it's rationalization We that but year slow complexity it's the of Wi-Fi this now of rate COVID so But I the a sensor of And not, equally around year a were in features pandemic course we whether of think things robust. with that of coming don't if economic a lot So XG, phones possibility. will be the midst some this together technologies, I and or standard,

don't with business, that necessarily And because semiconductors the correlate of test I well think for you that. the markets end can so

see is industrial business in You automotive we for And see test. strong. quite down, certainly mobility business we see But down. way in our and down our that that

Brian Chin

of it Maybe also appreciate XXXX, that business know, sort of early in additions you use XXXX. maybe maybe quite well? against those even exceptionally terms strong, not relative in of or now that that environment terms what I strength occurred complexity that. comments, there processor from deal I in capacity you was in phone unit mobile your you're test you saw the Would also seeing think a an was great analog early as to of as

Mark E. Jagiela

for there's mobility. where revenue. or lot terms quarter in Yeah, year-to-year, and incrementally In analogous. of technological year-to-year of growth more years the a that I third the seen our in to there's consistent second therefore, is related years some what down. the it's where in change, it'll is change be reasonably in more And not we think it's then modest business and you've And get test monotonic our business

see. So eye to as that's of future, the as can be part far our going

particularly look a yes, line this as and, a really at year. is trend we strong So it

Brian Chin

I Alright. you. appreciate Thank that.

Operator

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

Mehdi Hosseini

In given actually versus And you of I as would taking conference first of visibility. could words, first other -- revenue your first would January first want just half comment to Thanks earnings back strong question. Mark, go you answer captured back characterized the do that half. lack of the to XX% XX-XX. for I how your call, more XX% half XXXX it's in understand be XXXX second be is, agree I your than your the But step revenues? in

Mark E. Jagiela

be. It certainly could

described January equal is being sort of the roughly think right. that call as what is we seen the second close first I we've and what since to quarters

projected to higher seen our at then. in think end then. be second And a quarter we've back bit QX than I seen we little turn little the a guide of out we've back more the than strengthening high

no the So to that out not rely it's come it therefore, -- to a in skew could be thing second first higher. percentage on the and the a model little toward there about what's The happen. can be half predict hotter there could we it's half certainly going though bit is

quarter So, know we're but at the the moment quoting strong, the a moment's even that backlog and the demand, are change third deliveries in pretty the through can notice. we

Mehdi Hosseini

of would is second And in for I a M&A happen thank become terms focus adjusting additional of if now automation you, industrial to the and half, would want making you go semi Sure, tests the tests your back to were or for investment cash there? the to use priority what priorities priority you. or in they on areas to semi

Sanjay Mehta

here. Yeah, hey buddy, Sanjay it's

have the that I last the So, been key financially. Obviously, come down as -- M&A and an think that years. we potentially active at have many we've we more and future, but are of industrial that several strategy look products the companies the a in automation, opportunities on or in focus become attractive fit good different group actively valuations that looking is has part

a But wouldn't say, I historically even there'll automation. forward looking focus be count And and industrial so on I'd now. anything

Mehdi Hosseini

you. Thank

Operator

Bank of Our Securities. line the next question America Arya Vivek of from comes of

Vivek Arya

but my Mark, volume Thanks then, in year question. about the I that come start imagine for Smartphone at but mobile, since understand complexity expectations of growing the the have I taking down. known argument was

so. high that or I assumption think the down is single digit

you if customers So that a China the that and are as much from give customers? could curious is downwards? seeing color how that better. I'm some improve mix cost U.S. to have that, demand tester about strength when have Korean incremental part volumes is versus And is could of us been domestic just of XG revised it you what

Mark E. Jagiela

and test of of in fourth the occur this I for installed third year. so Most quarter handsets Yeah, good first that quarter is production will think all, capacity of third, being of second is that in it's question. a

and phones, So that seen demand. QX for think, QX, do people no we've but what will in the business there apparently not to pretty strength in be the year. robust. the just falloff It's of the still in view relationship for new second going is volume aggregate, unit in related on in handsets new half the that is phones And by that the

other that go changes sense The to till is thing test as impact time. now you January better the of a get from on complexity start people

So preliminary to January views but demand. as there's some in the back you sets production, is closer of reality down get mass and in up what that or time test drive can

situation several moving than saw ago it's January test time reduction We a a bit the April to if capacity that's particular thought. turned years from better remember case, because the in to direction. this not situation out you where resulted in test In progression people other the of be a

half volumes are think the on a handsets those strong the seeing around things two across that geography, old first we're down. that on the board. the it's it's So it's competitive demand it's China, unit for in despite are the China else, robust then just going anyplace phones. versus incrementally U.S., one stronger very fact that are technology I not to plan new are causing Korea, generally be demand It's And

Vivek Arya

these for so I lower course half sales is growth is specifically down having what your -- Got new gross mentioned about product having automation XX%. the gross But maybe second that gross to follow-up my mix the on I that so QX in I And some take said year-on-year? margin Sanjay in and margin understand don't QX industrial second ramps margin XX% would and so it, is for very a impact on impact. gross can be is you an sense then half helpful. where can when what understand strong margins of Could and beyond pressure give what much you think quarters us you be,

Sanjay Mehta

to at concentration is QX about midpoint past. decline going not That's is so the about half the -- of half we've really in down and of unlike Sure, X% it, the mobility. sales the is mix seen said what I patterns the tied over from and think

The associated supply second to part with impact. the under costs half prepared the mentioned remarks our impact in and my strengthen just COVID-XX and we've be had is would of which many I chain

half And that second second you let uncertainty. me to half, there's tremendous really question and about the from second of say on bridges So then QX. comment QX to getting demand kind your first the

businesses with we we As you'd impact. new solutions could would said But expect come really or product of products could have not the have in the and so that in specifically -- come being that have several seeing adoption different an mix we're and over years Wave Millimeter and platforms we platform Plus curve. if a recall faster ramping really are they stage UltraFLEX infancy you bit hold their and And take last come these down volumes predicted. little than had in that XX cost a

margins expect so in XXXX. to and do back we -- And come

Vivek Arya

Thank you.

Operator

Atif Citi. of question comes the of next line Malik from Our

Atif Malik

or chip and for and license great execution. talked looking strength thanks on government perhaps makers we hear about about Mark into of you China indigenous expected in you any back questions taking the quarter my kind of concerns? job in they to U.S. the there were for exposed U.S. suppliers about for China the demand indigenous discussions Hi, and first pulling what your fees was or January worried any that customers this [indiscernible] the in license equipment was with

Mark E. Jagiela

a little that say talk SoC is the but in since don't for nothing out seen the are on test much situation. playing but really bit material. I maybe memory have on also up side bit call. about We've test no want demand from had for region would little equipment China. planned as the been pretty things All specific incremental demand China I January may any there's of customer a Light Point change to

Atif Malik

then are one going into automation business Sanjay you the and this maybe differently and positioning recession. Great industrial for how

and You the Are auto end from talked logistics looking market? about you more. away moving maybe markets warehouses end -- into

Sanjay Mehta

shutdowns some impact so of the the to industry manufacturing weeks March demand April that seeing see and large well COVID-XX think of with automation We as We're in last a had rolling the date. part China auto business. the is And year-on-year. industrial for weakness regions Yes, Europe obviously U.S. in business. big the in encouraging which as couple I building predominantly did of and up in the are in some contract to

are of pick an back normal. innings early But an levels the We as on back to that. might encouraging things seeing we're still demand return in it's how pre-COVID and sign indicator to up

the a with and and back, run out we've actually in we down. was ever of the moderated remains, lot we market and automation in on to But kept about supply down business, that to to decline the fundamentals benefit COVID-XX manufacturing think A a come ecosystem, we XX% one, etc. I that of had But comes and really strategy spend the to for product, XXXX there's there's contraction we've in to hope When comes if think guided your back brought to for OPEX tied go an really investment strengthening automation. to the believe X% the the the growth XX% the plans will growth. advantages we as that in And chain the and long to focus tied is that industrial market investing X%. that uncertainty industrial our the we it as investment highlight we

just work. Now, as the less given by it'll in a seeing. to be back distribution. will anticipated, just moderated we continue invest as in XXXX, be bit balanced to this the getting we're well It's than people would little need revenue we But to ecosystem

Operator

the question of Hari comes next Goldman of line Toshiya Sachs. from Our

Toshiya Hari

little and remarks. the about guys question. for talked morning, a Millimeter taking Mark, your thanks Wave Good in bit prepared you

big you beyond. do be and contribute growth quantify noted think how help the contribution are for small or and you relatively Then us to Wave should what year could I your next Millimeter you in Thanks. in expectations but a XXXX technology of that expect I've this be years? Can your business got XXXX follow how to for the couple up. small, quick

Mark E. Jagiela

Yeah.

dollars of the be production tens impact of beginning the year this of Wave, year, a people the certainly think end. of in now I produced of high fraction small across bound somewhere range. the but I company, And, So, in the that'll it's Millimeter this sort to it's somewhere related millions to in are that ramp in handsets

longer-term million the the And towards said everything XG million It's going with Millimeter this right for are of XG to into intensive. added that sub side because with we on now such, should we've we sub build two with the sort and strong of total XG thirds $XXX are $XXX of test this. to demand Now, and maybe wave Wave the seeing TAM. less way just

those as I grow. of go that the So, would are And bookends. I XXXX into to we think sort expect

Toshiya Hari

IA it. follow quick Then on business. your a of Got up the side

talked you've think to I customers of direct years, of to and going more couple in or past large just I about sort your insignificant the how direct wanted but check Over business sales. And significant how side, have curious distributors your much the Thank as just percentage current distribution is inventory on much into of today hold today, I'm IA a the environment? you visibility how you. given confirm

Mark E. Jagiela

Yeah.

started part, automation out our in program year the launched something companies doing distribution that's heavily both that and of we sales all direct three last On a oriented. it's we're

UR MiR of those and customers a quarters. sales, For towards that's couple effect We're been automotive into downturn a a have but now related. lot were in really of for large direct accounts moved

be that turns have a So that revenue percentage I the so of I quick think overhang any It's front me, think don't numbers look buildup business. I carefully very every all the there. no very in automation. around in point. this On channel We quarter pretty but don't there's at inventory inventory don't significant would much at the of

Toshiya Hari

Thank you.

Operator

of Evercore. Muse line from CJ Our the next question of comes

CJ Muse

Thank redundancy you Southeast in hear in short-term for chain, first the during here. your kind of speed customers, to had plans hopefully into locations? for future? coming planning you particularly in in difficult guess I How particular the are plans the love elsewhere for are around whether ramp Malaysia, uncertainty the this it seeing And any or to taking seeing paradigm bump just own supply what the about recall you're at curious those guess for I customers a given if is question. you hopefully COVID so would Thank back kind from so sort perhaps is financial you speak out of issues you you're a inventory, which to of not FPGA desire manage you. etc., assemble shortages test recovery Yeah, as correction, made think downstream morning. I can your question and multiple good and the a then Asia today regarding and what crisis, of your to to testers

Sanjay Mehta

hi, Sanjay here. it's Yeah

a -- we manufacturer large from pandemic supply supply redundancy we have So, geographic it to drove kind done our And other we thing world. first did kicked path task into operations team then a chain well yeoman's first chain in specifically, broke off get supply first back, China, break and of effort. locations. it the different ensuring parts lines think And we our we out where from as partners ensuring this labor a is in supply the in chain on as And supply force have of a to perspective when or down, feeding -- I if contract get we invested different our we've materials.

redundancy key we equipment the different in the the manufacturers capacity for -- pandemic and grew are so to contract products countries, to get to mentioned, Malaysia, secondly, the actually you as the industrial both then for and test qualification in is deployed. and South Asian that get build to in lines the that redundancy the to as you in our components products both to world automation And throughout flight had then And also component building our different feeds our territories. but and and building Philippines get logistics customers, takeaway to

knows chain who go, supply going event have how So strengthen been diversification to a long of going have to clear we investment the make that supply if strength. and our significant sure it's we're pandemic, in there's will the which that

delivering, I And where do believe currently kind to where inventory is meet really we as thing is down building one. tied you to And of of And, of demand. the as high think the assurance obviously second growing, really so range. of range part inventories we saw, the our significant anticipation delivery in we're we went And our are can that. that's we building a just have are

think unfolds. are normalize as it'll building I shake market time. inventory out starts the this demand So and we to as But at

CJ Muse

follow-up, kind guess of a I my two question. as Hopeful, part

around mobility for about and back UltraFLEX into driver the Millimeter but, the the could really Plus into commentary gross margins half the introduction talked half. You Wave impacted would QX continue by second given that suggest perhaps

So same understanding the think software, the I hardware from very plus do my is about we that, non-plus. guess then mobility of and seasonality? how that different with as part And

curious on new the into types the obsolescence and get demand see what kind for and of XXXX UltraFLEX might And XXXX? that of there are what that you so as here product introductions using you that tool in Plus, only impact might have

Sanjay Mehta

at of out strong is we anticipated we've the QX kind It half. the Yeah, playing little our bit a way year think in stronger so it. It's of as a first I beginning range. in we anticipated guided the

has gross adoption half there The has of earlier, given the January, tail. I our of pandemic We volatility impact the UltraFLEX and up around could UltraFLEX puts this half, bunch in opaque. really the takes point. of really been, been a margin. second regards at acceleration said that a UltraFLEX, long of unclear the relative decades and an of construction Millimeter With ramp more of the in the there has to the economic second The a for bit be and do the as in Wave year to is of and little Plus of the expectations the is know

a necessarily transition obsolescence So as with it occurs. we see risk the don't huge

Andrew Blanchard

Could we question please. next the have

Operator

question next UBS. of comes from Timothy line Our the of Arcuri

Timothy Arcuri

had thanks. I guess I Hi, questions. two

First, is on [indiscernible].

indirect revenue year. you the direct so offsets disclosed case I through So was the XX% that know and in of last

they sounds March. be It that and Harbor is that XX% I that greater ask question risk part two than quite change expected like year? for then than it revenue I the likely thanks. the something XX% half greater Safe had clearly back a of the there, XX% say did case were happen You greater because that is follow-up, the disclosures in the guess number, they than seems they to the were did And I in a still customer in are to like be and June to seems at and so bit December.

Sanjay Mehta

Yeah, so Sanjay here.

all, don't that did on customer won't did we of specific one obviously procure last this our year, affiliates [ph] comment business So, the we XX% customers. in comment. We quarter. ValveA and specifically XX% of but annual We report have first disclose did

Timothy Arcuri

you seems past Okay, that that like okay. said you yeah. I in so because it have ask say did last quarter the but

semi assume question could up. for my would can down I then I like is test the you second sounds systems to the is, us guess give comes test be memories it of a what and sense on mix a little June, side Okay, bit. flat

going remain You said IA pretty is to weak.

give I if in on us any comment seems particularly the to just you Thanks. So [ph] if which any wonder I the to can guess I'm wondering you million give can mix range. million be XXX there? has like color it fee, SS XXX

Sanjay Mehta

testers semi tad expect decline we as I of numbers, very to from will the perspective do comment messaged as will but part And as a mobility, strong. system on I decline. specific test or think we've will be to mix a -- said you

Timothy Arcuri

Okay, alright.

Okay, thank you.

Operator

Krish, your mute. and the sure of Sankar Krish Our not line next line from is of question make comes Company. Cowen

Andrew Blanchard

Krish. to back come let's Well,

Operator

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

Weston Twigg

for taking automation had thanks industrial question. ones, quick Hi, I business. Actually, my one two on the

they conversations of recover? that there on having the today the operations other with total having that But that need some of is pandemic be that demand been I'm may is in have words, invest expectation. You on based other comment makes automation, In nice which should smaller acceleration you you're just these realize to would wondering expectation an or side of mentioned manufacturing sense. this a or conversations they just

Mark E. Jagiela

applications robustly of quarter-over-quarter, part that an the for I it's platform in been that headlights, the think are platform as for that of that by commented saw terms space a And say I that we've their impacted expectation. conversations this the there's but pandemic. near, Yeah, not today far that hasn't reason is that would flat are healthcare already in really growing. out mobile the But hit sales

been that's industrial increasing. been while moving has down, So

of enterprises how on sized another look an likely automation coming other these disproportionately out part medium to industrial small growth will this But of in partly there's -- is think moving at are toward as coming this. of strategic to this I accelerates the asset. grow a that so verticals calculus out as of some And automation

Weston Twigg

you customers And helpful. are that follow-up if a Okay, as I to that had seeing manufacturing about is redundancy from your redundancy. wondering part I'm function? other semi talked words, is chain out then and my in strength of well for near-term related and other temporary good testing, test building demand the building supply is test that you're companies heard And out capacity redundancy, that's have some

Mark E. Jagiela

You we've see we're concerned about extent that the We know, something checked and think looked. really. I don't to and that's

You we've be been utilized at to the utilization invest to it utilized of really to be the capacity customers we and know, the looked it an third would be shift by and pulled as we've in capital move quickly they're pretty going testers unless typically saw seems away. purchased are are not to equipment trying party OSAT or turned it's very And test obvious if that OSATs right but speaking, silicon quickly. and willing on that to installing,

into being So test, we're the capacity channel semi that aware of. idle there's not put test

Weston Twigg

Okay, very Thank you. helpful.

Operator

Our Suisse. line John from of Credit Pitzer of next comes question

John Pitzer

on the Yeah. really had there's Good I'll SoC seeing quarter for memory back Maybe you growth memory one March at environment were was pick versus guys. on been give the morning, letting the of test, questions me test kind spending levels a Thanks ask the question. decelerating. just XXXX lot Mark, you business. of which in accelerating sort fact, we better both of in strong significantly when and was and a

there, you back half curious and that the share how the think complexity drivers do am is and some year? of bit you if of little drivers there in about of market a I kind the sustainable talk So can the

Mark E. Jagiela

there. are opened going are that there on of of existing for tests there's couple world DRAM occurring the final That Yeah, of God But, a a obsoletes there haven't things LPDDRX. in is memory a One we half it piece DRAM back in we the to up before, equipment And out the that test. of is knows. fleet transition interesting. segment that year of new which participated the

shift that QX. they point So through a we view, not incremental for likely from but will to that's has it continue in the and year, And but to have of no manufacturers And beyond. that's us go. in the that just something technological memory are extent buy years QX capacity choice benefiting just beginning to

a that's sure. tailwind for So

memory wouldn't unlike the of of shift in ubiquitous. around not I And protocols of going say and test buying lot for application towards speeds flash case similar kind to controlled are drives of undergoing incremental the they're DRAM is diversity -- going In flashes test now or the a flash, a commodity, there instrument all but more terms design And revenue bigger kind generational bespoke standards The the of in. and on years much high say piece of handset for speed. a on have in been variety. is they're I that going DRAM, many very that would around that's interface depending the the

in true are And been the putting tailwind. manufacturers that's They that's in that slowing online now. historically. It comment other are then China I'll capacity new that strong is coming we see is down. as So not a make just right and also

John Pitzer

can having of rely and was again, sustainability think just some and us comments share a this upon as I'm system line and help curious about quarter segment And had That's to of helpful component drives how Mark. hard year-over-year. near just other the and follow standout then versus the the volumes? And maybe you was up strength around my big both drives. sequentially growth you test kind about complexity

Mark E. Jagiela

Yeah.

years reasonably two can has manufacturers pretty see much and do several sustainable that this only test So, standout year. as drives storage aspects is I what a are really far been with out as have the it's And, And there's next drive both sustainable think the interesting. hard on hard there. product we been of and eye going and piece And predominant now. for through

the of volume. little definitely these seems as issue to underlying And so an as much systemic And there density be not just and with share is as a increasing the bit it drives growth there.

a become test adoption. or that's market more yet. system semiconductor a manufacturers It's final unclear to additional more our edge methodology very in the were the methodology it exceeded test is ship It's of side, insertion product decide before our fortunately that expectations leading an and that's for what there test compared a industry not market. expectations. level volume early additional adopted still pervasive few their manufacturers year test an that an on the semiconductor where to certainly have add of or Will We're step insertion On they ago is And nascent development. but tests.

sign. it's So a good secular

John Pitzer

and Thanks congratulations again.

Operator

from comes of next Our Richard question of Baird. line Eastman the

Richard Eastman

of industrial and for model a at business cost sneaking quarter, profitable IA and automation here. question contributor but the don't $XX variable But fixed I -- a that know business just little entire there kind revenue with first the me and second in the million Yes, mix that perhaps in you first bit in know business thanks run business the how is for just the around the a rate here is the first quarter ticks was in quarter?

Sanjay Mehta

is it Sanjay hi, here. Yeah

auto on of pandemic thing enter of rapid because in we as as mid-term. higher fixed much in first a but it's is over we the weakness internal the manufacturing. a percentage trajectory the the growth inherently that our IA, obviously the cost with believe seeing this So, We're into that do market we impact businesses

fundamentally do have believe a leadership because higher leadership of one position fixed our attributes position. to we that's inherently hold so have outsource that and some And we on we a but structure we just cost subcomponents to

So there is a higher fixed cost component.

we XXXX is year. investment heavy that revenue. weren’t first profitable were though We believe was have to the second we it even a a with would In contraction The year we comment tied profitable, of quarter profitable. in kind we redacted down we've plans had the

Richard Eastman

making awaited quarter maybe development may they but are still again out that the new around a look products assumption by products do IA product the sales that -- of this does products to kind with sort businesses potentially table MiR Okay on year-over-year? in seeing the we do new new it the is of economy improving some the be at assumption ActiNav fourth fourth Is push the global the introduced. the plus growth that now quarter, on fourth and the the obviously reasonable we being the quarter as

Mark E. Jagiela

year-over-year whether the It's IA you anchor records is QX It in come on well happen sales but question. our as IA or signs in strong. an IA table into our early a QX always March the I was on quarter sure we've business. in could certainly gone pretty is it'll and fourth mean into back strong China, very for they've China And buying. in know, not set

sequentially is QX IA So can the see certainly world if was up. we a the of which of we don't image rest mirror a that in know that

Richard Eastman

good are size still previous the this the test side seems you takes on notice as memory or just and at this you the And But and there well as test you Mark even here SoC and test the it time for I strength Okay the market. was commentary industrial mobility market softer. and around in thoughts the the slides of updates lot puts test I And market, just reasonably semi from is time? piece strength still any comfortable guys assumptions around at and like the here. comments with SoC market the and memory in market maybe the the of gather a they are your memory didn't obviously IA SoC

Mark E. Jagiela

the and if led the toss market high in end year kind we in we at that unfortunately if compared half But the that of both projected know we're half. size about prior and would first first is running second half year the the about towards know because Yeah, to say the what can overboard memory I the of of is look all do what what SoC you don't we estimates. just to I

estimates some without been So, if of light each size for our segment. of now market right revising had anything can't really year sort comment. in happening this -- COVID normal be probably what's we year the for But up we of a if

Richard Eastman

your Understood, really thank you quarter fantastic great, team. to okay, and

Andrew Blanchard

could are we And try one little bit squeeze and so started more just I give to more we know to you going late just question one a operator please. please us

Operator

Bank. Ho last the Sidney question of come Deutsche our will Certainly, from line of

Sidney Ho

SoC the question Virus lose you give get can that thanks situation control you Great, is the a forecasts previous SoC squeezing market in. for Is by your TAM of is understand is be this to up assuming just to for will that most the permanently, year The end the question. me -- that that Corona want of Well don't year say I maybe market? view by Thanks. to under guess I year recovered follow TAM. some about this going be next lost that calendar the talk year. end full of

Mark E. Jagiela

maybe it's just color speculative Yeah, but just it. probably very I bit little and think I'll regret give of a you I'll

in XXXX in sort XXXX the to still could a created If trend that happened you with it you in hole what a as XXXX came on that XXXX. line vengeance of a in reference, basis go argue back back and it and was

squashed volume growth drives terms like which cumulative. So is a the complexity that drop occurred there. can unit sharp demand underlying a test came with it back It this in a what in is progress temporarily of be technological vengeance. just But demand through things

unit question everybody's the think when the And guess. the then real recover will because underlying that's situation demand will is in I continue growth volume So technological likely this unabated.

say year declining I through We have a Testament handset the It's slightly demand. oscillate little impact some year-to-year. year next of must test in would the double-digit growth on complexity and expect complexity the that because is persist have been that really If mobility it'll had underlying declines and quite likely starts high. years this now on things, it for market impact couple handsets it's into

but just no prediction. are of those sort So touchstones

Sidney Ho

QX, industrial guessing will how continue Okay, business you or level should QX to see automation today follow pretty in for quarters in just and to my we think set, segment last that some up end to namely about automotive is I'm areas that's deceleration the the weakness the to question QX to the that maybe over geography. whatever or want Maybe by continue exposure I sharp few revenue market fair. expected use given the

to at the trying if to continue things how risk? of understand wrong much is that go Just way

Sanjay Mehta

Sanjay Yeah, so here. is it

predicting a place, really locations manufacturing just downward a still bias QX we're So, in that the filter given are down. fact of lot in there's

further a we so do see contraction. And

I did enter the And pre-COVID an signs of the in did levels would weakness a getting tell call we fast I as see how really automotive. bit we with in would earlier said of forward initial back improvement but it recovery we early to be. Looking innings did to enter little what last it's -- China too quarter

Sidney Ho

great, Okay, thanks.

Andrew Blanchard

ahead Thanks and this interest look to Teradyne. straight those still in back to forward in the We for much. away. your talking queue to call. folks, I'll the Okay you our concludes get you in weeks Thanks so

Operator

does XXXX Teradyne's first This Thank call. conclude you conference gentlemen. and earnings ladies quarter

disconnect. may You now

Teradyne (TER) 22 Apr 202020 Q1 Earnings call transcript