TER - Earnings call transcript Q2 2020

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Q2 2020 Teradyne Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Andy Blanchard, Vice President of Investor Relations. ahead. go Please

Andy Blanchard

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

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

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

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

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

hosted or investor next our to Teradyne expects ahead and participate conferences in Citibank now industrial technology Looking KeyBanc, Bank. Deutsche call, between earnings focused by and

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

with on call scheduled our expanded comment our and the will along results details quarterly hour. then regulations. our COVID-XX on and for Sanjay answer trade conditions the your We'll third pandemic including is offer this one quarter. on more And results, comments recent then the guidance Mark for will market First, questions. Mark?

Mark Jagiela

performing summarize trade Today first I'll on new of everyone. conditions, year. provide guidance our half half environmental and trade the on – view second for Sanjay and and issues our including Despite comment In the then details quarter the of the trend results headwinds our describe the test current then morning, the second second the second the related the Good pandemic our and regulations is intensity results quarter impact model. our of efficiency the and of and quarter affirmed exceptionally the QX. XXXX, financial of industrial growing will automation, of shutdown well. for Teradyne quarter business

from see demand our guidance, remains QX can you robust. the As market

in Industrial XQ saw global shutdowns and test. memory level continues growth driven record of second system as QX to SOC sequential by automation saw being While throughout growth effects quarter. in pull of industrial monthly sales we out is shipments, test the

and achievement. test this for of of thank employees to without to programs working Flipping for do takes the engineers the global launch I constraints line sales to collaboration Teradyne be by and team were on both largely in develop customers continues concert shipment new with It customers to takes levels. similar switch all numbers success. It accomplishment. hundreds We and for Teradyne to second second be records new quarter our products. a and a beat mitigated bottom And remote test. remotely expect to working Superb managed the this display a Teradyne back to new within as technical missing IA was in and Supply full show close XXXX we to XQ deliver is execution quarter test silicon. with fantastic dozens with to congratulate

new On second the Huawei quarter. related the both trade China regulations end were military front, in announced and to users

expect China In we to the currently Huawei, costs, while increase case restrictions of material do work China. but our do our not business our and any on impose compliance military impact end-user on who with will expect customers into the sales We expect new equipment. with test test devices our we the new business Huawei impact regulations our Huawei restrictions any using sub-com not it directly, likely

Shifting is regulations. future. the demand silicon any idled created alternative However, to demand supplies fill This highlights. as as supply the alternative drive should the whatever capacity of global by new macro as test test sources in we in grow impacted these be to to minimally absorb expect gap well

as is million. a reached our the years. playing significantly two estimate we market last billion the XQ million to to about up test stronger $XXX the to memory XXXX is about $X.X compared half out SOC, moved of test in planned to the our $XXX In has $X.X year, while As cycle for midpoint of January SOC tooling our grew billion market than XX% mobility our sales XX% in and participation in year's first this forecast as

weak the demand. infrastructure strong handset of as related XXXX, bulk while after XG silicon the remains expected capacity As related a is driving

intelligence, to of is forward. XG, expect related connectivity, to foreseeable to the related expect in handset demand add incremental reality, the continue there driver the location rollout early mobility addition related XG handset Weather be innings for complexity to we are growth still or will going is small mobility still to a is an a a Specific drive beginning rich advanced in that resolution of sensing, future. we silicon and piece market, demand to artificial features the photography, it set vast gaming, majority XG wireless the augmented test or silicon. in video of While to high demand non-XG multi-year

continue platform going UltraFLEXplus in will sources new new computing revenue and our in XQ Additionally, ramping forward. providing mobility

to QX, industrial tests not In combined with test and ramping but design is for weak results. drove sales LPDDRX flat from of test In this remain our faster recovery to do up sales demand. the were position XXs we DRAM segments LPDDRX XX% XQ And of year. group, first were win Beyond package hold to XX% shipments due wafer half up to the DRAM us testers mobility, memory, Flash the transition. automotive with see of test storage due low allow until SOC tests in growing the than package test our about QX system should QX XXXX strong the the and to XXXX share in DRAM and expect market XXXX. in our XXXX. compared flash test

great half X in frequency X require new called gigahertz XQ million sequentially has products semiconductor for being instruments test for of is the XXXX. year. and is level product, in at expanded test sales of X our grow We demand $XX expect additional and XX% and By both shipments. by force first the recently will beyond. storage standard we XG example HDD XX% combined and derivative Demand a substantially up this been QX system level shipments are range. test the test compared a silicon and WiFi by to driven Teradyne. in Wifi Wifi to markets HDD new driven positive combining testers, XXXX from opening test LitePoint, over shipments $XXX sales expect with be in At we've sets. Testing allocated XXXX this to million spectrum X which grown growing with were System test XE will

UR. environment biggest healthcare to UR, had business sales of contracted same for hand last the compared on the mixed, IA QX Moving first MiR to from sales IA grew and in AutoGuide, the XX% mobile At our saw year. sales on unit level newest XXXX. with period America is XX% markets. than were X% last from they shutdowns down significant in exposure segment, half impact Automation, our but a and the more Europe last double year’s from year. benefited other the Industrial from QX disinfectant sales XQ the period improving. Overall, as Manufacturing same IA North

have of positive improvement We as move second we through seen quarter. indications

example, sequential as had began reopen. QX, For growth three all across to monthly customers sales businesses

quarter, expect or QX. the return until demand will improve to we growth QX in don't expect IA While year-on-year to third we

outlook growth XX%. remains longer Our XX% IA at unchanged term for to

for Social distancing more need flow additional resilient the collaborative and drivers our add should products. for manufacturing automation

IA investments to widen the competitive R&D business slowdowns and lead. macro provide these our as opportunities distribution dividends continue Our in

to second of quarter, stable the plug plus our XXX in over distributors certified continue UR items. expanded to add and We play products

ability revenue applications to solutions to front to look our estimates plus our at execution. and moving familiar with level, customer grow Teradyne’s This industrial experienced capacity. In of for the saw differentiated bin-picking year complete what latest test test for strong similar when UR company introduced smartphone like Stepping have also showed and is welding. loaded about to especially we XX%. we exemplary half the half in new strengths in first specific and at full the products summary, markets requirements investments at We demonstrated back year in XXXX and ones XX% XXXX the to

Our is planned through driving sales. and business model drop efficient incremental on the

broaden Teradyne’s in markets. Our of financial industrial the our nascent strength amidst to a downturn competitive in showed value global moats industrial investments automation IA these

visibility employees, confident that limited, to remains long-term short-term and our deliver our While we investors. our strategy are for customers, results outstanding will continue

Sanjay to things details. turn additional the I’ll for Now, and color over financial

Sanjay Mehta

our outlook. This supply morning, from you, perspective. and QX results I the I’ll line review financial is everyone. pandemic management Good QX morning, us summarize a then Thank impacting Mark. how will financial

view, in a in marketable quarter generated employees, during supporting $X.X achieve remain debt. wanted ever. families QX approximately customers priorities call the challenges, financial Our pandemic, and of I our From remarks, with and point objectives. and the ended our their acknowledge $XXX going million Teradyne and suppliers, during than flow our earnings crisp cash line of free through employees, and the safety continued financial pandemic. cash our securities is to this of customers, billion In stronger consistent short-term QX with my no execution coronavirus to We

of the a revolver put of place security against and During us during opportunities. future our credit to execution revolving time. quarter, added established and uncertainty strength a line sheet, for business enabled $XXX model The the business very in million balance we uncertain

face December which have in evident. supply the matures From team line material is debt and issues a great our done long-term did operations global of XXXX. second so has perspective, revenues our this job a team line not to million years, Over have management none a built team a Our in on more of supply value $XXX has many and an never Teradyne QX. impact year. convert, been COVID-related that partners far value

UltraFLEX testers Our part teams of overcoming number all ever environment. challenging products across businesses of along in us IA XXX to included SOC, cargo load numerous very This air a while to and shortages the scheduled delivery. our logistical to shortage of quite ensure customer produce quarter, a led labor the one in combined a dedicated operating capacity case, timely the charter in with second literally, highest systems new and deliver, memory constraints. In ramped to plane

of While take operationally to a our we operations. executing well, chain view very strengthen supply how to critical continue

have identified along weaknesses impact small We actions are potential actions on long-term strengthen The our operations short-term a and further. with COVID-XX margins. these related have actions to taking

the safely our done. environmental collectively staffing. with teams, the at-home done. commitments health, delivery services, to products, also shined alone. on-site While in of Well organization combination revolver, maintain company run productively they not global meet the which to Very to to our thanks programs allowed entire were engineering, our operations and like R&D well introduce repair quarter, legal, at team and us applications from to and the HR new finance, extend a field I’d and clearly facilities and

ago, of on high was the was revenue test. a range first half from year from accelerated strength DRAM. X% and up one, in QX the to strength quarter. higher from contracted revenue year driven of down mobility. XXXX, have and of the was year. million, tends ago for of Revenue ramp which shipments. of Test the $XX our System storage XX% end up million, storage Epic XX% memory up million, to from up broad XX% $XXX In in the Also QX shipments to but up QX IA details test two, test up QX. of were were revenue driven a shipments XX% of the million, Recall Semi from on up included $XX for X% expected above in was our due than revenue by; And and Test, a million, XXXX. ago, Now which continued in solution IA year-over-year, test SOC flash million, by lumpy Magnum of sequentially, business revenues revenue $XXX SOC was while $XXX XX% QX $XX year

first from down Energid We to remainder. one IE a We primarily contributed $XX plan made XX% the HDD test QX, the level coronavirus and First while and from in test but up UR XXX% HDD QX. half bottomed had product driven over Growth system $XX near was SLT of is on shipments million. the lines. the million, quarter. was by processor in half revenue XX% in both up in XXXX storage demand hard on in above XXXX strengthen strong XE AG $XX exabyte the in WiFi out segment from customer were and XX% of QX QX QX industrial driven drives. by due was WiFi revenue quarter, growth of generation million was $XX up believe revenue, LitePoint our in the of XXXX sequential down for next XXXX, quarter. automation, entering road the demand. million XG revenue In growth our revenue X% to X and on and

reminder, operating Tax customers days in Non-GAAP XXX full compensation. and non-GAAP company model. a basis. performance down DSO support Non-GAAP to GAAP was our reflect were up XX% due XX.X% $XX and or annual was basis margin year quarter company to variable XX.X% logistics EPS operations against from and as forecasted. costs mobility of on XX% disruptions. on shipments increased QX higher due concentrated in supply $XXX are to ahead margins timing $XXX in causing we contribute gross operating QX the the COVID-related revenue QX who of million impact potential the disclosed quarter were Test was Semi of the XX.X%, in pandemic. the our million and shipments of rate tracking to increased QX buffer Both quarter. Non-GAAP XXXX XXXX million XX in more a basis the and As of $X.XX. shipments non-GAAP Inventory the to expenses XXXX points added XX-K. in to a due from to Margins

GAAP Our down XX%, XX.X%. expected tax be is full rate prior of our estimate to year from

expected be to rate in Our quarter. flow decrease million We few average the QX. to is of generated tax from bought at in paid $XX The We million of the XX.X%, XX%. is cash in full year non-GAAP down XXX,XXX first dividends days We million of an in due quarter. $X.X rate tax for price in free the product shares $XXX back estimate prior mix. our in $XX.XX

capital share As you noted update program repurchase look we’ll our program in April, share X. regularly repurchase of we We as next our April suspended at allocation and the quarter. and entire

at will Looking strong memory, UltraFLEXplus expect line recent momentum Magnum supporting and new SOC system a significant ramp flash our product wins. ahead revenues applications. continued test we our In of for QX. our QX, include disk expectations in driven and DRAM year. design are for the shipments market test significantly demand shipments hard in exceeding see end our tests group, test to test LPDDRX demand continue storage expected grow to system drive In level system markets for by

than and the to the also demand is QX of I’ll business expect significant this XXXX. from infrastructure shipments years expected are XG-related in experienced on QX fluctuates not waves we double we infrastructure like while test planning more note quarter-to-quarter, half, level. in that second ahead, the both for multiple in handsets we While

automation, we lower revert back are industrial SOC In improvements business. shipments. in a As to incremental expect to of pre-XXXX QX we UR’s pattern result, seeing

In in revenue. to of of are gross of QX, of April, interest million guiding expected ranges million $XXX seeing $X.XX convertible MiR Recall U.S. disinfectant a by the guidance $X.XX demand. new in In the ultraviolet XX% typically to risks million a end The demand. and reflect on Europe half Europe half by to we and amortization margin and As greater we non-GAAP of year-over-year range non-cash XXX the to grew first are than supply previewed and second start of impact product potential and execute the continued EPS revenue XXXX headwinds represent the continues excludes U.S. due on of $XXX imputed X% of intangibles momentum and debt. open quarter-over-quarter. on in diluted coronavirus to increased light signs shares. market acquired year, up, we UR’s the ramps. The driven

While will will the view than latest our the margins ramps less QX be is XX% earlier impact as severe XX%. continue planned, gross be expected. to

million. We our $XX and X% grow with at track full April expect XX%. are to XXXX. be with year-to-date of the XX% to million. we is levels approximately back X% sales CapEx to operating revised be our historical expenses quarter total expect of plan operating full-year guidance The In are to to are $XXX in to year And from gross XXXX. margin XX% QX, on investments profit midpoint investments third expected

more support investing chain financial rollouts, out a strength summarize, of strengthening performance We’re a new and new showing is difficult We with of bright supply industrial and operational our that product facility outstanding environment. outlook the new market and close To enter early to year improvement. CapEx in QX working projects. this automation in ramps on with signs product we QX an

While our processes the products, shocks. quarters and visibility immune to Andy. things ahead. thrive back macroeconomic is have that limited the confident With and to we in turn people I’ll that, I’m to not we’re

Andy Blanchard

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

Operator

comes from the Instructions] Hosseini line from [Operator Our first of SIG. question Mehdi

Please now Your question. line is your ask open.

Mehdi Hosseini

Two Thank my questions. Yes. you question. for taking

I the better earning think power. understand want about to to First, how

a you is your earnings quarters I there at XXXX. an sustainable China. be ago in you. $X.X is question other $X.XX given a And run out And gains ago to onetime earning already Thank the laid up that execution upside it to much you a share think And of was think has areas, to memory by suggests event. provide? is two do perhaps that you’re that scenario it and a and or did highlighted that to revenue follow that contribution earning recent my with $X question viewed as you months rate. six you How do shouldn’t my China

Sanjay Mehta

Hi, near it’s and out think the range bottom puts many the line line. this earnings in the of and And here. we’ll and the Sanjay model and in storage come strengthened XXXX, portfolio. be hitting the Yes, or in that the provide Test close is the on what doing plan term then. top earnings What January Semi published updating we’ll we to IA our offsetting there’s and on COVID model, impacts for relative business model of I obviously guidance and takes year; in specifically earnings future

Mark Jagiela

Mehdi And as add volatile in. we that that, know I very well, we just, I’ll a play you very think have market

model linear growth decade business trend kind is mid-term exceeding sustain and of be earning is to in in, do we’re reaching the a for peak lines no that so And we support, the that throughout not certainly Teradyne. to going way believe but a

Mehdi Hosseini

on Great. revenue And What’s China? China. Congrats. then contribution just quickly the of

Mark Jagiela

quarter, China XX.X% revenue. about was So of in the

Mehdi Hosseini

you. thank Okay,

Operator

comes Next line the from Vivek Bank Arya of question from America. of

ask now Your question. Please your line open. is

Vivek Arya

business, according mid the XG your to look down overall on question congratulations even a are test relatively our Thank do it’s part up, think on I bought taking volumes strong you teens, track for TSMC we over in have SOC has and phone few strong. the XX% for but test been to though Mark, growth, factor my how I intensity in the the put When but model. not results that at know times, you up honestly and execution.

And Will going as do that because how how XG XX% importantly, it’s go Is or factor be a your unit? knowing intensity test intensity that SOC evolve better difficult per do XXXX? quantify size X% without it it better? sales size XG How we what this do versus into this will comparison? you to very So factor you forward? test will

Mark Jagiela

to me, it. what Yes, the using the think we when test if in we trend I in line growth complexity. is the a big, gives range. drives believe advertising difficulty big said we growth over do us growth, it be average X% that see market appreciate because we’ve that is we But transistors and look at an formula, had I And picture, would X% that what

yields node many are come and from there’s It year. typically has on takes if Now, five that a seven a people puts transition making and that depends every with nanometer to a note like a enables it. transistors major to more go lower

and lumpy of at when sort model to effects it’s very the projections the to year-to-year. year-to-year So hard that and historically for X% are you test. for But to growth five line net look trend past years X% very back seven our

So that in it’s going to other going think be be changing affects anything not But is to don’t And that. smooth. the this. It’s I thing lumpy.

up – the we and test this what’s at year, market cell It’s and look a is declines and year. the being with obviously is SOC $X.X billion bad both of going news Teradyne $X.X to automotive billion phone unit you and for the a market out for world market and effects off such economic last all the netting flat off on example, to news. as picking If being underlying this said good year. That’s other really is lot hand of industrial in on share about flat three and a and market.

markets but despite like it’s I mentioned weaknesses see economy is continue in a as trend those this market holding pockets macro come the growing year out is grow the those every to very love encouraging. then own, grow I we think we’d this, news will year, its of start expect global again, the the and to we fact along difficult that the And just and bad lines. the pandemic

the had I don’t, formula, I the but of speaking wish think is evidence I itself. I sort for So

Vivek Arya

if business what correlate at your of do as or that versus business your for again you infrastructure of let’s handsets XG, try relates XG And tester to do the will sense a does us can sense better? give we look give how Got the is how test of it year say demand business for or us to when and infrastructure? we, part right, of intensity SOC as next Does it. triple kind follow-up, your for on And my Mark, for Thank it prospects you. I the how that, handsets? the business handsets XG being to much – growth some mean number same your and triple

Mark Jagiela

Okay.

– in phone So part silicon-related XG is a of XG to It’s a phone. one a is the piece of phone. a

market So but long, talked in tripling they and said to XG you and saw XG the all XG year business, you there’s that business. our aggregate $XXX business market. no and business last somewhere way very if the investments. it’s in about of would also tester not But we growth. give to add, the sense, talking some $XXX should level grew we’re infrastructure when Teradyne Teradyne’s infrastructure to of of peaking. But let’s million would it about toward year, peaking, handset XX% into investments $XXX-ish about, test And to triples taper the to the million should fact which piece and between was that and say back end XXXX, is market what our And those of the related be would year still have, due come talked of add we we’ve that off million then we’re at our robust the

We’re million hundred that – maybe into year, a million near envelope. not we’re This $XXX peaking. dollars couple

we’re five on level, plus When level. years you give get million that much annual mature of the basis. the could an four will So hopefully to that think over running XG at mean minus you calibration to to $XXX might revenue or additional on how next that million $XXX we us sort

Vivek Arya

Thank you.

Operator

Chin question Next line from comes of from Stifel. Brian the

Your is line open. Please ask question. now your

Brian Chin

thanks questions. results, ask few Hi, us letting Mark and great Sanjay, for a and

– last and the growth contributing Semi and year-to-date discussed there, year-over-year, just was as rate XX% your industry-specific factors the Tests. company to XX%, First, company question clearly in but in

would chip customers this the However, wafer, some layer could customers do against I inventory thoughts. place, your demand of put you customers’ any think or even or in chain safeguard attempt device, be supply uncertainties? to reflect future end and growth appreciate a it

Sanjay Mehta

Sanjay. it’s Hi, Yes.

testers So, a in a Mark you trying our what built shipments buildup of we XXXX And triangulate as trying and the and levels capacity. and think inventory infrastructure do out was which utilization kind work lot of earlier saw I to to and of of understand there. articulated test tooling then

could end have test a an market seeing inventory we’re From So and inventory or rate. not they run build. perspective,

it buildup. analysis done, we always inventory and for We’re on from we’ve the concerned see actually that it. But about don’t lookout the

Brian Chin

you’re in great. further terms equipment downstream Okay, talking more that about activity. the And versus of

Sanjay Mehta

Yes. Mainly hard end the be perspective, from or tester from to very smartphone equipment, inventories. it automotive it’s those or market about industrial think an

Brian Chin

Sure.

as would Yes. similar geared one, higher, does one XX% the appreciate would think based Semi sales revenue fourth but was you first comment, or quarter Test that XQ I of at And downstream, XX% roughly I weighted lower rate? more know, something the decline se further I suggest half Maybe here, sequential. sales Okay. kind last your commentary. but be are I down like expect per XX% you XX%, – not guiding on

Sanjay Mehta

Yes, down mid. we’re XX% guiding XX% QX effectively versus to

Mark Jagiela

exactly – that, think there’s did. businesses do when the flux. lot I you in is what various decomposition in still we’re now the And what Yes, the you it just of a math,

in quarter So that continue. expect be tends fourth will up IA the to we and

last think with with I So year strong atypical the semiconductors.

think if looked So you prior I at kind same get you essentially mix. of years, the

Brian Chin

Okay, it. Great. appreciate I great.

Operator

the question from Next line comes Credit John Suisse. of Pitzer from

ask your open. now Please line question. Your is

John Pitzer

at incremental guess I of test good bands the I guessing potential results. the some suppliers kind the Congratulations and as it’s capacity wave actually much on you those a think little to cause for void, Or there when just fill know suppliers that’s you And into me for said buying? the comments I’m but test suppliers do fill ask vis-à-vis Thanks importantly, your of look that as next it effect, suppliers? curious, letting you that Huawei? do void. Huawei in a just gets an how your of might morning the you capacity does come bit share out prepared with different of other game, guys. Yes, think you see impact look repurposed of these the question. kind don’t Mark, solid to global

Mark Jagiela

year. there long be be Well, there’s going repurposed I meaning and be a could think let’s the to haul, early there’ll over incremental in on. I think think – say I don’t buy

the being until We’re full XX right through we of period September and period in the testers still where grace very sort now date this get past a into the used up are embargo.

that supply their work completely buying fungible. could the they’ll because period way and post spot there they’re over be of into So time, But demand some not time, balance.

share it we in it’s consequence some I our So lower, of see. a supply, don’t detriment benefited because think, silicon better, make be neutral. for overly alternative when that going products. to there’s no some long-term going the we’ve overall, to see shift analyzed those that sources position who’s of but I little the a are in we’re And the think here are we’re We or

John Pitzer

to just of like sequential I implied XXXX, precedence fourth you back back for that out the split? do your the the but fall how given is of you calendar informs go in saw environment not that QX, if XXXX, kind And I’m of off that the that decline actually And curious, Mark, conservative visibility is to of to going uncertain XXXX kind just model. December quarter, at half-on-half XX%, guidance a is have implied that period, the quarter placeholder, kind attempt or then your kind today, without business in of XX% view

Mark Jagiela

is XXXX looked if say even that, at What I recently more XXXX. and would Yes. you

another those to for heavy we that seeing X% We to also order were right drops QX now is of the those tooling were XX% on saw by XX% followed years differences the significant smartphones years, from pretty in for X% QX. maybe in to QX us. of One

instead we’re our is of QX to XQ this it kind seeing the coming So all XQ year of drop, forecast.

is look variability out obviously, bit you actually a a Our in this the visibility us we’ve We of there. quite might of been limited followed in there’s – time, when long what quarter terms what doing out and materialize. if you quite year, at

customer the the of things. a lot having can we and quite There’s that a have we’re extends based it’s don’t kinds of we but that conversations will range far backlog happen. those wide on and what So around do, it, modeling actually out

John Pitzer

Helpful you. guys. Thank

Operator

from from Atif comes from question line Malik Citi. the Next

now your open. is line Please ask Your question.

Atif Malik

of my taking the Mark, about results you Wave part to Millimeter and on you evolve side? investments opportunity mobility can of job for infrastructure the the and good and you the also Thank expect timing in Yes. talk questions the the when guide.

Mark Jagiela

U.S. is when Wave, aggressively subsequently Wave. handset being then then big Millimeter likely, would areas none do flavor I off urban In frankly, but first from there’s high-density appears it and toward XG are intensive some moving quite I of in sub slowly some Millimeter the areas. deployments, event It’s most and Millimeter think geographies it’s big it of is story. occurs, test move carriers the the are boutique part a a say, and But of ways the infrastructure in some with U.S., going to rollout Wave. a

seen some premium it So that capability our view that is, the there’ll there handsets already certainly bump, we’ve networks at run those be and scarce will be year. have this and tier to on

shipments and test Wave of and Millimeter both millions equipment at Test Semi of tens dollars. of tens are LitePoint Our

probably the matter it’s my we’re even talking miniscule But XXXX, it XXXX be about. not starts it’s volumes until estimate. not So to before insignificant if would

Atif Malik

is UltraFLEXplus. computing, design you you about which a And with relatively Great. area wins in guys then for new talked

notebooks. also CPUs than to CPUs one die those have processor that We customers smartphone. customers’ the size larger much of And using heard apps moving ARM-based your for their

your how XX the to XX at you months? share So over do gain look computing opportunity months next

Sanjay Mehta

it’s Hi, Yes. Sanjay here.

And annually $XXX million roughly or $XXX market roughly is million. our the historically. give XX% been So to has take compute share

help product win this share. grow new us initial help design along Our that And will will journey. UltraFLEXplus that

we’re it term. near that’s So thinking how the in about

Atif Malik

you. Thank

Operator

the Sachs. from Goldman from of line Hari Toshiya comes question Next

your open. ask now Please is question. line Your

Toshiya Hari

results. taking side Good congrats about the as ask question as and System Mark, the morning. on I strong for the Thanks Test side. the HDD wanted SLT both on business to your well

Advantest, that speaking of competitor that a strength SLT you your your of since sustainability strength guiding of this think should competitive quarters. guess we I your business, also QX? And are you but HDD well have and SLT? And I the about past here? you. sizing a of business nearest guess now, some side, specific terms Thank In I how opportunity QX, then vocal the on thinking been the this application you’re And How the here, of just position follow-up. that how the into, to up not there couple about about for play they’ve as you’ve quarters in players to relative been over couple are pretty other

Mark Jagiela

robust. The the it story, of it’s is whole surprised SLT, sustainability though been year. It even pretty has storage us. doesn’t not this And a and as test mean business, it it’s whether volatile or it’s in tremendous seems HDD

can quarter. the see swing XX%, on can XX% You shipments, we quarter-to-quarter a

working underlying lower million. but are is nascent for somewhat further strong both something step of others a and attractive volume – overall volatile, suppliers additional using of SLT. RF and test demand and devices content high of some devices, high side with it, such. to HDD make of SLT the more as reduce insertion it’s The And that devices, manufacturers we’ve centric both classes it’s for This an equipment and described to are volume analog economics market. So signal that still volume defects is before, customers like of are per this quarter-to-quarter and some other more very the ourselves mixed try to digital

has outside doing even when SLT exists a which rate of like that it's the a year adoption just this something tests been the the for limited this this, the So significant. last quite so million roughly that to tester some of XX:XX splitting or big adoption test early unknown Advantest adoption can but be sort just time, you how of It that today, in of it year. $XXX we're compute, pretty see with occurred and with area. is And market, might be probably from grown

So issues, I we're think complex steps legs. very complexity the I it's do underlying think test end that compel devices. high do got additional these of in the about talking

to to likely And these we've growth adopting quarter-to-quarter see it's a be And get you're It's going customers this that a though. to till wildly, now. up dozen industry. going volatile we so, until be fluctuations seen and year-to-year

Toshiya Hari

profile ask as wanted that. you're And for there. I about and how then the my growth industrial business long-term Thanks thinking to about the automation follow-up,

this your customers your and your the think COVID-XX just little potential curious I call? it think drive on Thank guess. impact long-term remarks, reiterated that how I adoption you have things a UR given but about target, footprint, of prepared customer’s Could in like customers significant it growth in a and robots? to factory their Or could early rates increase cobots you. is and MiR make

Sanjay Mehta

here. Sanjay Hi, Yes.

XXXX, out potentially the MiR UR and think significant well growth continue that second we're experienced in since to year contraction in the COVID looking depending at I a in XXXX over in adding AutoGuide So how expected and then market XXXX. than as in growth half. And shakes on we've XXXX. as we hit, Obviously,

work However, industrial to continue XX% the going over remarks. getting as is to think the long balance our over a that we're versus to I you going automation. people belief at his that really think XX% to I of to be run to Mark stated And short-term, consider back prepared need grow the there's in

to plant we're production seeing development makers a However, in in and activities, the distance. their managers activity looking harden and decision lines social business this of lot

activity seeing in are the we short-term. So, even

provide will in the think long-term, I a tailwind. it

continue growth, in product in invest the However, to we're those still to we XX% and businesses. differentiation XX% the in around still mid-term application and differentiation

Toshiya Hari

you. Thank

Operator

C.J. question line Muse Next from comes the Evercore. from of

is open. line Please Your now ask your question.

C.J. Muse

remarks, question Thank I guess, double check in morning. question. for just Yes, the prepared I want first to taking here. good you your

QX from as about in test? you that I thinking balancing that QX. be correct? can heard test Is And the think part a of growth you an storage that, system of versus idea give double traditional $XX should million I into us would we where say system

Mark Jagiela

double we baseline was say it storage. in million I right. of did but in would QX, off $XX that than you're of Yes, double and more

Sanjay Mehta

storage. In

Mark Jagiela

storage. in Yes,

C.J. Muse

was just not overall system the that comment, test. storage So

Mark Jagiela

Correct.

C.J. Muse

Okay. as probably drivers the parse role. embedded that a They're believe, And hoping your also AI you guys. question customer bringing turning you low really I market, SOC thinking to Great. I through up helps plays the on. do to is was share like my it guess there. your processors, guess XX% then And on looks from through you And I follow XXs largest for going have arm-based year-on-year. mix that Obviously,

being You you driver. only a have new UltraFLEXplus. talked minimal And then, XG

So, what amidst are shift? about looking into share drivers more sustainability how we And share that of should think that XXXX? of importantly, the the backdrop, that key

Mark Jagiela

due who's this majority year shift We the of right. share XX% probably of around to our So think – and in much you're up SOC is it it buying. moves the of

And down. XX our kind buying will our came the this in the opposite share SOC So effect of or the of point customers couple biggest more. It be years, defecting. share was who wasn't so are It buying. customers year, was in of last of piece gain

in the had However, talked mobility there's wins also add about We've this streams year the the and of and Those compute. back component. revenue UltraFLEXplus half we've designs the for new us. to are in going additional

real And on so, are up to this. picking customers we

completely to insignificant more be won't XXXX. and that So It's that's mature beginning. the of in going not

And that and grow throughout XXXX will XXXX. so

to ones core headroom continue pipeline. the of lot in will move of based as a other know XX% have you sort But those design on do fluctuate we buying So wins to the north our share underlying of year-to-year.

years go of to back tooling So big bit smartphone up our to very down. and picked a offset was silicon. customers around of some XXXX sort that. part had new you and XXXX, We XXXX XXXX infrastructure if we business of for in

talked within on share north. XX%, of line getting we gives be is to SOC new come be revenue to a persist long-term design top based little Now, keep going could bit is real reasonable. that perhaps, wins. we've more about that XX% market past while, XX% wedge sure. a of us moving a new average streams that but our gangbusters. back, certainly it's Once you're And to is on on of in of That for it's I'm But this riding there'll ability volatile, but still this share little And difficult sight.

C.J. Muse

Great, thank you.

Operator

Timothy Next of comes from Arcuri from the question UBS. line

Your is question. your now open. line ask Please

Timothy Arcuri

thanks. Hi,

get to portion of First of all, this the what wanted XG the year. I SOC TAM of

Let's had XG much that's saying $X.X million, to then I another one. million Thanks. of say you're $X.X just and how I'm wondering

Mark Jagiela

I what the my but give and precisely, to just numbers. struggled guess one again, give you I'll that – of We context the estimate you Yes. best

represent So test. tests about and about to at SOC million to should that LitePoint $XXX said million we $XXX adder peak, XG adder

XG envelope, SOC that of in probably this somewhere range $XXX-ish is year million the So million $XXX for TAM. max

Timothy Arcuri

it. how much in piece mean, – the is current the Mark, And wireless of Got for I there's year? wireless, coming

Mark Jagiela

–this is test, year, wireless in $XX million R&D and wireless, a be we've million in – than probably million that $XXX the adder $XX production actually for grow the not bigger to It or range $XXX this market. bit is so. million that may it's But could the $XX XXX to a – Yes, probably adder. but that test, be million in seen wireless

Timothy Arcuri

Got it.

Okay, up And on then I just follow to wanted the awesome. last question.

an is of have there's So XX, a your because mean, UltraFLEXplus say I have XX year. lot And you gain share years. gain they will a big usually, big portion And mean, certainly, significant this the customers your of year, going on share stuff having beyond ramping. I points But a on don't usually, you're to X customer. going your straight on

at one So going year? low they've shares would time why versus how on I'm on had then away it had Thanks. all and year that would XX stuff X next year, history big the you off this if sustainable where on different into they've an other straight wondering you and be just have where they sort strip look years of

Mark Jagiela

interesting Well, I this. think history in is

look and in and actually XXXX, past, successive business related were was the If flat smartphone pretty and X XXXX years consistent it our at Those was year. you hot. and peak

but on/off, thoughts and valid XXXX part goes XXXX of equally decade, back think pattern the to think that. I So are the the models around and on/off earlier I

the I I'd go to necessarily at going some is and market. it's be baseline sort but a point that line mean think up back thought. what's that's judgment, doesn't not of of So one down, but in norm It trend to

X%. grow expect We X% to to

this that SOC again, is about being everything the next year. be market nominally, $X.X year billion, if a market let's equal say, billion, So talking else billion, should we're $X.X $X.X

we strong we have them haven't year talked sequential the these yet. out there past, online a do that's this that. is strong we've Plus And the coming new think nothing having to about this So equipment installed there's we if And that two era year, in shift very XXXX, of is matured mobile large going with year. we're pretty the coming. the shift DDRX you years that to I had of see thing memory. then DDRX test have and Memory haven't DDRX. can because wrong And design we base innings is the obsoletes devices, LPDDRX the is but for from look shift into early the XXXX This more DRAM at final for as test. wins said,

So there's there a well. as big retooling coming

Timothy Arcuri

thanks. Okay,

Operator

Sankar of Next from from Cowen Krish line and Company. the question comes

Your your line question. is now Please open. ask

Krish Sankar

Thanks of two for had Hi. my taking them. question. I

First one, Mark, on to just follow up comments question. previous your from the

you like growth. growth like SOC of like you a five standpoint, You test It looks said years continuous years. couple had of a market sequential from had

longer the cycle. understand is and intensity of kind I'm curious, going seems So stronger and test a be to a XG up

forward, So if for market billion a to plus use $X SOC And be follow size? I the have decent bogey should up. a a going

Mark Jagiela

me so is we about more think I bogey, – add comments a Go few let where a are. just

in midst This is pandemic. heavy in it's automotive of the and that's And around all as annual of absent growth And also interesting year also show the mobility. it's market heavy, maybe sequential for the over. to midst This So is some may quite participation show And but it X%, the of time any growth of year, real flat, the industrial a X% well in regulations you're by it's the right. length seen here. going We've China. coming about a be time buying.

say, back SOC years. the X% go to in should model to X% a be five would I'll is over mid-term, tracking So rate four TAM I That at. for and we what growth

Krish Sankar

months Clearly, million. is to LPDDRX? $XXX Mark, from follow-up, to helpful. when from $XXX you’re million coming six is then it, your much tell can million I DRAM. ago size, us your $XXX And more Got That's about And at how it. memory got like as a market you it $XXX look million, talking revenue of just was the upside

size just is LPDDRX? is the And from coming the coming LPDDRX? how trying the upside within much how figure revenue on your of market so, that, And out to from I'm of much

Mark Jagiela

It's out Yes, thirds both DRAM revenue, increase our and compared I'm but going the our the DRAM. two one not about market is say break size to flash LPDDRX will to and estimate I in third flash January. that in

flash are of So in And the too. LPDDRX. to is seeing we upside on DRAM related much upside

of is maybe capture we're QX ramping you the coming – And of to going that this is because can to and market. of for of wins flat, working would introduced we're close revenue expect design much estimate share out just that kind derive year DRAM in year. year. product it this us you on be of a So more We how hopefully last our and

what really upside next position think today have our into range year, that's low have have that sort to us So the if should we XX% about able – that and competitive next today, the here DDRX, we move execute share calls talked we into earlier be well. years, around and going of we market in couple we the the we in XX% of XX% should XX% gives to products with we –

So that's in planning. focused what we're on

Krish Sankar

helpful. Thanks Mark. that, Very for

Operator

Richard line the of Next Baird. Eastman from question comes from

Your ask now open. question. line is Please your

Richard Eastman

nice sure. yes. Very Oh, Good Sanjay. quarter morning. to very Good morning nice, and Mark be

here how IA a business. expectations, to questions. business a seeing the could you in of might just maybe just maybe universal quarter two on little bit around kind discuss about any the and about for or progressed? IA some talked I'm talk robots Could have. you're upside your geographically you but going to focus you what couple a relative in Just of talk the second You successes perhaps

initiatives distribution about and around applications around market. to some talked new self-help product You some coming

just it not little growth at maybe on provide stabilized, has towards least seems like maybe of business that bit if mode. there color back because a So getting

Sanjay Mehta

Sanjay Hi. It's here.

about kind a kind the of of monthly talk little and I'll So GO bit profile.

kind a a in then COVID March when we saw of really to look back first coming sequentially we China, take of throughout and kind when and opening we the based we historical XX% the that we recipe data look at which strong. very UR, of last QX forecast of out, improvement continuing. when improvement and So and improvement improving look business, is up but not And at take saw quarter over the over QX we back Europe, UR monthly we and to at and when profile, first I on for the levels, to of see the look a take that come year's take encouraged. at go into look and kind and we're at the But U.S.

we are activities. business And seeing so, development

really baseline the activities Europe. as bin ecosystem. we're from and our have product recently drive is but a from continuing And seeing to launched And of applications, the really well continue to in April ActiNav for U.S. the are business We perspective as implementation activity We've invest. picking. for growing we the and growth coming, China the in ease

Richard Eastman

profitability again, did you manage – quarter, – math XX%, the in out that million the were you follow-up, IA? from was in And a and IA And for that hanging did we to I how at far manage the maybe that high do OpEX $XX quarter… for XXs, still at just as your how in the gross if is revenue how the – margin in quickly the quarter

Sanjay Mehta

be was still the side think a Yes, our as with – we both hits to the in in on were not levels profitable growth. well plan year investment IA, at COVID heavy a IA and profitable engineering year earlier we’re go-to so And XXXX I in having XXXX, the plan you and in faced XXXX. similar in side. pre-COVID full as revenue I market we of then situation mentioned

lot significant and reduction. of go-to-market meet So a that we down or was the a spends

However, significantly. application spend we with forward and the continued engineering

in marketing the is cetera, spending seeing shows, market metering short-term of obviously. kind seeing more go-to and online and more and that et aside the kind you're of what you're restricted So, travel, more marketing, of and from immediate virtual re-vectoring kind in did trade more the down we selling or

and selling in short-term you're spend. a So, seeing marketing reduction

of bit ranks, but significantly within are you a engineering travel costs on invest and little we're continuing front. seeing that the those of types However, to

Richard Eastman

that’s far As close to as profitability…

Sanjay Mehta

XXXX, back – – it's the the of don't revenue in very half uncertain are the will I on we We believe year. levels depending in

Mark Jagiela

Okay.

Sanjay Mehta

by as UR are the the continue. It want we and just expect really But I – on. that in but we depends line, China for QX to to up of we're teetering and are encouraged the activity reiterate on QX we well as top – ramp that in

Richard Eastman

Thank you.

Mark Jagiela

Okay. And operator, out are time. we of

the for to the in joining the back thanks call will and to today. to I we talking and forward of at those days you get us weeks ahead. everyone conclusion you So in this Bye-bye. look And queue,

Operator

Ladies concludes and this wonderful gentlemen, day. conference. and today's a have for participation your you Thank

You may all disconnect.

Teradyne (TER) 22 Jul 202020 Q2 Earnings call transcript