TER - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you standing by, and welcome to the Q4 2020 Teradyne, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. of President Vice Blanchard, Investor Relations. Andy ahead, go sir. Please

Andy Blanchard

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

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

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

measure, comparable financial these information today's measures, During GAAP measures. of financial available including most call, our we'll Investor make non-GAAP page financial concerning directly to non-GAAP posted additional on reference We’ve website. to reconciliation the the where

Sachs, Investor and technology participating Conferences now by earnings be Goldman in and Susquehanna. Looking Teradyne industrial our call, next Citi, ahead focused would hosted or between

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

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

Mark Jagiela

our the our up In XXXX. over our That then strength our the soft COVID. year model non-GAAP Teradyne joining from X.X XXXX, our full-year and fourth of and Sanjay in $X.XX, earnings quarter for allocation was Fourth provide and for per and with industrial thanks a XXXX and earnings and more XX% an to call for review us. highlights These our market up financial quarter businesses, driven XX% outlook, results, QX non-GAAP on amazing up summarize off will today, to morning capped for annual sales plans. made and updated Good by outlook test XX% comments automation XXXX. I’ll share sales QX all than EPS initial up versus details, just impacted billion, up capital provide XX%. full-year by brought of some that

for smartphone demand and in tester proxy the and especially a the shipments was the product power test areas these with in new expansion display, phone, tester has the about million we generation. test transistor This low conductivity, business management, SemiTest for subsystem big application the phone portion In the cellular relatively higher. share. growth In driving been transistors, growing complexity and we've in leading of Recall, business contracted should our took silicon both has processor capacity, cameras, investments the EPIC $XXX as billion. We cycle. to complexity by be Each our XXXX, own build-out continued product chipset smartphone $XXX DRAM XXXX, double-digits lifted steps full-year, Magnum the UltraFLEXplus the but also a XXXX ramped in its of smartphones, we refresh meaningful market. of foreseeable XXXX, up count use in SOC to now content, tailwind silicon on And processing XX mobility cellular where the In necessitated into each capacity. this our SOC complexity. XXXX, For UltraFLEXplus million processors compute applications exceed had and continuous the a related market, semiconductor our XG market future. driven beginning test of test. new saw X.X the also strong our ramp compute of million a billion which global historically the in for Together unit in product, sector the for roughly of $XXX

The of powerful unique to complexity, this of market. time to and emergence applications hyper in requirements in segment. yield power the scalars the market brings this processor more and including outgrow proposition players a dynamics, learning, value market, expect the sector With plus, general we the AI, managing and

was share For $X.X of the XXXX, our to about to estimate range SOC XXXX. the $X.X XX%. market up points test market moved billion we from about up We billion, $X.X in SOC billion XX in estimate

year-on-year of at XX%. timing due cycles the swings investment share estimate However, By unique our about of customers. out competitors’ measure, view and both smooths normalized that to of our SOC XXXX internal our we share our

SemiTest the new memory XX%. through Another XXXX, XXXX, a our noted design market in win the in significant we memory. band product combined test in share notable of LPDDRX estimate a portion increase Magnum XX% and memory business], for our was DRAM market. year entry million ago, $XXX about of business XXXX year at XXXX. from about a and up ramped growth segment into in the was our normalized and We from $XXX EPIC This XXXX call, In million DRAM healthy sales [traditional with drove this growth in

both Group Test than performance at contributed. complex from System and more automation our auto decline of Universal On growth for autonomous Robots and led the our results forma of the global demand growth year. which robot. related more to a sales grew deploy The the grew disinfecting cellular XXXX. the at offset in The the activity conductivity increased XX% tests wireless growth by from X% slowdown our In fully business, second XXXX consecutive as year our industrial similar investments and with growth, driven point markets. devices. business businesses for weaker unit. ultra-wideband and of easier test light of MiR in level X, recognize intensity year. XG also system business of steady SemiTest, ultraviolet hyper drives manufacturing our doubling on value test of from XX% in by test, to storage test This end pro grew mobile other contracted a our in HDD terabyte test also basis, in with X% the delivering semiconductor guide the is year all storage test solid makers the test hand great had products handset sales a Beyond than an XX% WiFi

half, year-over-year XXXX. for to X% year in sequential strength While returned dramatically environment was and second in weaker the XX% another quarter showing at XXXX UR the with in and growth. set continued record than we of returning the tests UR the growth second has the expected, Collectively, in in year-over-year exciting fourth growing and improved are IAA up With QX sales to business the troughed including in automation quarter. businesses growth industrial

of showing our Specifically, businesses QX we all XXXX. to strong at are growth year expecting a the than across X% greater to with start midpoint, the QX compared

semiconductor our and full-year As is the as evidenced always said, our market of decline and strength my updated preface test missing market one-year future with remarks sign. of by a challenge the see things that me describe keep calls. in the CapEx note a I forecast ago. we'll the visibility will how you publicized the just That know, you is we forecasted today. IAA very in let course the XXXX well And in of a bullish surge

ramping test to in beyond XXXX is built continue capacity year such XXXX. future felt the be likely years on in dynamics SOC made to commissioning and drive test, as a fab will volumes strong and aligned impact In the that fab yields. year into XXXX additional testers this and However,

test the contracting grow strengthening are we product after content for in demand XX% with lines in our should surging. Eagle to orders long expected and have about XG XXXX dormant shipments XXXX automotive increase. market addition, in Smartphone In test

down SOC expanded in in the sometime likely widened that tester Also, of in On from until our restrictions QX. trade always, test remain the were to be XXXX. due XXXX as effects hand, the full-year demand other market opaque largest will in and will China customer

should After view LPDDR-X $X Taking the Additionally, to XXXX, impact in of about at in in a we to tests, XXXX memory billion the XXXX to X.X growing at transition that XX% billion and in to and COVID momentum impact all bit and hard from in be it's the about the estimate DDRX size X.X beyond. up effects. range market slightly XXXX, on In arguments we its global our XXXX XXXX, midpoint. with for remain a after the tests the have into $XXX In HDD, positive at place. economic wider of underlying negative market storage midpoint. and demand complexity of density even and SOC system drivers increased level in billion, account, billion increased the memory XXXX devices range electronics and with in and tests, driving semi surge forecast the for both gain to demand

level. or be However, the of sales than very in After minus expect last and to over can be more limited years, visibility from band we the is tripling XX% three annual plus XXXX shipments lumpy. XXXX a

each we of to grow test year. we businesses, a to well-positioned deliver the on in COVID-related of starting XX% businesses XXXX. of XXXX execution, and on growth in any Barring off efficiency. rest strategy, our excess additional sector first X% shutdowns, quarter results automation is the are for XX% In expect the reflect Teradyne’s range footing. well and the sales our XXXXs highest Automation, Industrial For in in manufacturing expect ever we to strong

past show R&D the results for those to Our us and the bets test bets in future. enable years businesses successful made increase of

automation to short-term continue Our worldwide, on invest Teradyne operating challenges capitalize the model. we our even showed COVID, productivity. communities We resilience of and products team well-positioned R&D world undeterred Equally and to Industrial improve I'm the significant, milestones, get In and while This powerful and needs. investments executed suppliers, ramps, XXXX health, daily, to grateful new in delivered with memory, impacts and emerging the is our a global are cost meet of across Teradyne. and of more our face of all unimaginable SOC, exercising by employees, team. obstacles operation of to discipline to dealt resilience Automation shipments part met and text this very a truly product expected be steep record such customer’s and storage to extraordinary, schedule safety, the

bright XXXX, move the we our across into outlook appears all As markets.

repurchase we share have As returning our active program an are to Sanjay will pipeline. and M&A detail,

our confident strategy am and matter As XXXX no take employees. details. way long-term our exciting investors, for you in what through deliver the I team returns us, the and customers, now our global market taught Sanjay? financial will comes short-term, and modeling Sanjay will

Sanjay Mehta

cover Thank Good QX the of Mark. financial financial morning, everyone. Today I'll the and XXXX. highlights review you, details of

An capital allocation our Looking forward, I'll mid-term earnings plans. our provide our and outlook. update QX model to

million offset QX, $X.XX. driven SemiTest technology million due revenue lower seasonal devices. Industrial LitePoint emerging conductivity revenues demand a handsets million driven System of Now and enabling or revenue non-GAAP X with Automation range. mix. IA, profit trailing by speed $XXX had in $XX down to shipments. DRAM of million, million delivered the over product test had revenue which with and like high-end by gross storage were products, partially edge approximately of was growth operating $XX year-over-year above on of flat Non-GAAP the Test delivered memory down $XX WiFi in margins and $XXX SOC year-over-year a Group UWB flash conductivity first higher test and and QX XG by quarter-over-quarter and revenue million of of XX% a XXXX. and time were of the quarter-over-quarter new new decline of guidance plan increase for XX% technology. was $XXX QX, We to were sales EPS and

on third test the operating extra due The IA non-GAAP spending up quarter, quarter due tax ongoing quarter. see XX We non-GAAP basis and to discrete fourth million XX.X% $XXX million higher excluding the million to support the quarter, wins, investments. You'll generated in a payroll, items for GAAP our to $XXX in expenses cash design to from and increased days free were XX% rate, four on was a basis. in the

a of on ended XX.XX% XX.XX% For the and the We it a full-year with on is basis. GAAP year $X.XX and cash marketable basis, billion. non-GAAP securities

from and year-over-year. an billion Turning XXXX is to million, of SOC up the $XXX Mark, free generated growth revenues, the EPS revenues $XXX or as the was test from revenues our XXXX. contracted than increase $XXX XXXX. in Breaking of $XX XX-K Non-GAAP We due or on XX% Teradyne filing. was XX% XX% the driven XXXX, that and device of cash in new We revenues XX% XX%. accounted we'll customer million XX% million, strength $X.XX, million, for profit components $XXX of results market pandemic disclose increase of portfolio, standards to XX%, with were in XXXX. Gross in down million up computing. mobility, over more by test full-year outlined like the and by along $XXX IA had grew XXXX, was complexity $X.XX for In memory, XG which our by in million grew while of margins related in which year operating one revenue slowdown. our were XX%, growth

grew DRAM to system fourth strong year-over-year, NAND through million million $XXX the sales significant results, million, $XXX $XXX and related were from storage XXXX. and Revenue year demand LPDDR were running. Storage in contributor also growth both million hard test the sales drive test. revenues grew $XXX disk see or level year. test In primarily a system to on our for of While test up continue for we test, XX%

saw from or sales consecutive and of $XXX At reported a grew XXXX. STG. basis, an defense XX% was X% in as basis. aerospace $XXX on a of our on We also components for LitePoint IA pro fourth XXXX, million, revenue million, In year the X% forma annual decline XXXX above to growth

of year. As half the Universal half first pro XX% COVID year-over-year, second to heading related million, impacted reducing manufacturing the in full-year in Mark XXXX a grew X% the sales Robots, grew and AutoGuide troughing MiR sales down $XX on slowdown with $XXX QX, into UR noted, In forma annual XXXX. million of After driven in revenue year-over-year. versus the QX, slightly year-over-year, revenue grew giving basis. confidence grew

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

The first non-cash convertible amortization of guidance and interest intangibles, excludes imputed on debt. acquired the quarter

gross XX% to quarter estimated at are XX%. margins First

our flat XX% XX% XX%. with the quarter first running OpEx profit at quarter guidance sales The of at to of First quarter QX at midpoint midpoint first is non-GAAP guidance. operating about of rate is the

invest our In reinforce and expected product IA, SemiTests. the investments growth. sales test and XXXX’s to grow plans Regarding year spend our the continue our the XXXX, in to be two $XXX points expect plan the to X% sector. in spending travel, levels shows. Approximately will for million. Also increase we portfolio, OpEx in be will engineering, to primarily to go-to-market of position In marketing, we back in to to competitive we’ll ecosystem support OpEx our to IA, of along with resume which XX% trade across pre-COVID our from half related made to we expect revenue

was new over expenditures. several Turning operations, we for spending primarily This customer locations replace to We'll in in in facilities used invest demonstration ones engineering, leased In $XXX on the initial and where capital new to XXXX, years. was equipment, continue these XXXX. our facilities to plan million. grow to next CapEx

the So, at mid-to-long it tax we're a over more eliminate current XX.X%, profile buying CapEx GAAP our on tax XXXX. developing is rate at costs term. is to lease based Recall, non-GAAP XX% efficient tax is be spend to land laws. similar expected and XXXX estimated enable estimated rate to and and

mid-term earnings model. our to Moving

our exceeded strength years our two XXXX, earnings we've of of XXXX As you've test businesses. seen on early our with non-GAAP the $X.XX, model

X% IA model, When we of by the economy growth we've to and our autonomous X% to and with projections. seen XXXX to be and have IA confidence outlook increase unit as to growth complexity that revenues In demand to XX% we businesses, semiconductor grow compounded growth across our that [test industrial we midterm XXXX in for the will driven both to attractive revenues forklifts We IA, test continues applications expect in as and XX% high-single-digit resulting test, In steady global grow long-term growth our economically penetration our growth market we IA], opportunity average expect the for robots growth revenue in expand, improves. the high swings, they the baseline the building return to and for and along baseline, XXXX. From remains through use continue expect device test line, year-on-year in mobile long-term range low, trend of serve of to while cobots an given Teradyne.

$X.X modeled drive the XX%, XX%, to to to will estimates. improve assumes are XX% balance revenue XX% model position at as is sales Gross investments this of and mid-point EPS company The our a tax XX% direct current OpEx $X will expect of We potential to support will Shifting shareholder operating share allocation. billion XX%. place. to to percentage margin non-GAAP in a M&A operating returns and We’ll XXXX dividends and repurchases. at non-GAAP laws the decline to to to capital with to and our through strong cash margin continue

are levels increased acquisitions. tied We Recall, our to raising severe $XXX million M&A we of and for X X.XX million the minimum increase with held the cash $XXX potential for to economic million $XXX downturn. billion, valuations from billion

XXXX redeemed We of in million. million early, with date, been due will be planned QX, through our December convertible XXXX payment $XXX remaining in which also increasing with to bond of the $XX To face in cash XXXX. our that balance bond, comes service value has

in program April million XXXX, for back million price share suspended an Recall, uncertainty. $XX.XX. average bought X.X COVID-related due we in of repurchases, $XX repurchase share at Regarding our shares we to

$X $XXX plan program minimum million end no XXXX. in share repurchase our of a new date. of fixed a replacing billion are with prior repurchases of approved with authorization We We

in the past, strong summary, and spirit, of economic widespread In team. XXXX As inflicted three the in for the in be ingenuity, When and programmatic across incredible globe] incredibly [the we’re and hardship XXXX position components. both market and currently we plan the work test respectful of human I'm on opportunistic has society and Teradyne on were prepared and enter community and responded pain our employees, loss. achieving priorities. the customers, The supporting that with the I The objectives. our execution, and our both collaborative continued and our pandemic the priorities purpose, noted a more safety all of hit, our and which history. to IA. these proud part has us in this delivered the demand We incredible of strongest made supportive resilient energy, thankful XXXX see in us financial

that, is will While We're full-year growth diversified model excited enable we're which for market and our we limited. I'll turn prospects serve. markets in our Collectively, the underlying our things reality. for the the our With team Andy. to confident competitive new to visibility fundamentals, back portfolio, into financial turn long-term

Andy Blanchard

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

Operator

Krish First question Cowen. from with Sankar comes Instructions] [Operator

Krish Sankar

Mark, have Hi, thanks two question. for taking them. of my I

kind on be much just more auto be say, you and then would for do year color market how I think this curious to XXXX. how do if [peel] a you up. mobility test follow SOC? And thanks think one, calendar on of the test the have will little First I'm SOC a could you much

Mark Jagiela

Yeah.

more going million market We've range, peak million at that XXX auto talked in in run sort million say let's be been XXXX. $XXX up of of Certainly $XXX is year. normalized, about sequentially it's being to a last maybe rate question. the good So, to a

know rush up orders taper right demand of a a be we least this maybe that So, profile really XXX It's should off are million. capacity. XXX at exactly when to here. now for And going the don't million, of bit year

persists. higher So, if could go it this

which So solidified April-ish that in see color customer mobility, auto. us our think until moment really of for at of it's both that's of I the harder on doesn't because significant become the the on impact In year. us to market, the the largest

flat of, or So, mobility. it, in sort plus we're $XXX looking minus at million

Krish Sankar

XX% up do growth, big Got to driver other very And higher to is is the should just be IA we as side, Industrial on a going in-line mentioned a with it. you think follow That’s [XX% should assume of it, you be be than going plus] got Automation In Mark. growth? or then UR? helpful words, that UR UR

Mark Jagiela

– question. a Yeah, I that's think good

be I than better think are XX. all other groups going to

And some same small, AutoGuide up of them UR should average, they'll year. be I the think like and so be pull about the ahead MiR of are UR for the

Krish Sankar

much, very you Mark. Thank it. Got

Mark Jagiela

Okay.

Operator

Next question from Hosseini with Mehdi comes SIG.

Mehdi Hosseini

my for question. Yes. Thanks taking

Just year phones, And I'm is for SOC want to your, mix flattish investment. that of bit last larger with and expected millimeter account because I just wave commentary. surprised say of the believe kind back to a go I outlook. your little XG to a early was

wave So, follow And why phone penetration giving that isn't not you the I a incremental increased millimeter confidence? up. have of

Mark Jagiela

I think for that's the balloon Mehdi. certainly a year Yeah,

of of significant enabled You to in phones last millions the enabled know, a there brought last hundreds units going phones number wave maybe recall, to year, we're of was double year. also market millimeter were the wave but you step if up yes, XXXX, millimeter of in

you X.X if little much XXX out another million capacity that XXX, the million let's year, additional as global add a this about than millimeter units. last to brings might XXX year say bit you're XXX added say to enabled let's more billion, there'll be adding year, more, total units wave XXX essentially and of this maybe million million So, add units because

test of capacity. yes, wave last But big So there year year in was additional millimeter little will pretty bit too. a a growth be

Mehdi Hosseini

context, capitalize what the key looking market? XXXX, you to And it. especially any And try the for between you are the a synergies the market Got shift in incremental share end semi as GPU in underlying at share, for system that accounting and assumption are on then test? mid-term model

Sanjay Mehta

model, see so Yeah, the we the market. obviously in in Yeah, hi, growth Mehdi, it's earnings Sanjay.

you we from solution think the that, we've with continued where perspective, to, you memory years, we we're share you As into we growth. are projecting and let's as execute, share if we alluded know, players we memory more as perspective And coming with steady this well-positioned, feel Mark XX space can about increase that are on know go say UltraFLEXplus well. see address. growth When the growth, share on know, very you been of back, to compute that that a we continue

really our So, share are drivers. growth continued as size, growth well as in market

Mehdi Hosseini

or synergy the different between includes sectors segments? That

Sanjay Mehta

You want expand to on question? that

Mehdi Hosseini

Yes.

going into Just diversifies. model? see test, question, semi back wondering the I'm to your I your baked system as especially system the test and XXXX if opportunities the level that's And between just

Sanjay Mehta

Yeah.

for the Thanks Okay. clarification. Yes, it is.

You know, with and to device nanometer. complexity nanometer we're going X X then

I think both ATE that system account. as well take test level test, as into

Mehdi Hosseini

detail. Got it. Thank for you so much

Operator

Toshiya question Goldman Sachs. Next comes from Hari with

Toshiya Hari

remain of there so us new timeframe, quick as morning. fuzzy internally? April-ish I've much appreciate, to of largest got in-sourcing curious through business, on range efforts then question. relates CPUs, Good you. but can sort Thanks got, your the have a opaque, And impact And the chip. notebooks sort units, about the walk density I if your an out customer, know, obviously you will ask the for business on as until as well? Also up. know said, you've transistor to you've you or I of you follow it are taking their you things Mark, thinking Thank you're the potential got wanted of pretty outcomes could

Mark Jagiela

be a too reluctant I know, any customer. on bit to always am one you specific Okay,

here. more I'm a segment, to So, to together the I'll bit, mobility and going bundle speak which compute

as in to, that which because of fact alluded traditional market segment. strong a complexity both of and the incredibly was we new year we phones, the did mobility growth our enter last So, compute

additional know, So, up in we year million north that in revenues compute ended last market. year of for you that, with the $XX first

the unit of and reasonably about growth good systems the the issue part on in read is we a that. think and processor, such year, the growth of and we of as phones So, camera this smartphone complexity have the equation, apps

of it's side, bigger and year. a compute the outcomes lot market since a new of has for customers that for us for the And some new there's potential of there. moving a market parts lot a the range On our – there's

year. can't be You at know, could really but up over specific. over too on. so be up year, point, one we're the last we could this last that's triangulating significantly modestly That It be

Toshiya Hari

job the past the margin you of Thank color. a you know, and as quick for same acquired today, at XXXX? then you've Got the of does you aggressively profit years, businesses profile And that OpEx about, other automation, know, UR to time, it follow improving gross ask couple where margin You great from wanted been in guys I perspective. up, on it. I guess the over and of have you've industrial as the a spending done the at stand an business,

So, in your numbers? XXXX sort model, profile you. your what is embedded Thank of in margin for IA

Sanjay Mehta

it’s hi Sanjay. Yeah,

just we the So, to but of the to in just IA invest impact product portfolio, as than a with you the Obviously, continue know, ecosystem, COVID know, whole bit businesses, differentiation, for the contraction this breakeven, on year ease better we're roughly was above market fundamentally, a breakeven. multiple and the go and implementation. in you UR,

focused over And on to the and, growth that we're the so investments. revenue and the mid-term expect continue should you you know driving

be a over consistent we expect year. – as organization, just with as roughly relatively And margin to is profile AutoGuide so, profile, current new the the with the that we to

you We expect that in. with our you we as quality well to, know improve step know Teradyne as other our, chain, processes supply

Toshiya Hari

Thank you.

Mark Jagiela

us. automation And growth on I’m right industrial as if sales is commentary the kind of on to down we're top the to and we growing we're of down of at we'll we down we to can as Just breakeven, And mid-term, if to dropping depend And think what business of and we Sanjay Rule growth line, the the and kind breakeven, line mentioned, of at through people bottom rates. XX%, around now we the on that expect if growth, bottom the as below what to close be that start bring and rates to what XX% phase gross sort adhere [indiscernible] as line. long the of we're add to of ahead more happy growth we're come focus the the remind bottom one will, the size growth high exceed business we line during margin. And see going that up XX. to more or thing, that happy

Toshiya Hari

Thank you.

Operator

Next comes Morgan Joe Stanley. question from with Moore

Joe Moore

thank Great, you.

think that's last I chain the can you business? business lot is for continuity like you new XX opportunity I this just, technologies last guess of about may social the Universal negative characterize of on disruption. intakes what the to activity that trends the the those tells Robotics in just that what supply like just a stuff months of, manufacturing. question, year? know And and it feels distancing of Following At look Maybe business is business over in kind know, and for you of the the puts context the course and you tone would same for you in an like characterize the time,

Sanjay Mehta

Yeah, sure. It's Sanjay here.

run in revenues actually evidenced short a contraction how as know, know, were. you the by, saw our you we So,

that I with mid-term chains. into as and regards view And build your seeking think the supply resilience However, comments we decision hit a over to home to tailwind. makers warehouse their plant

also automotive Robots. seeing are couple in other our the We've a obviously about talked we remarks verticals. seeing the back and in seeing, come market electronics industry, are then and we're We of with prepared strength Universal

Joe Moore

thank you. Okay,

Operator

from question Evercore. Muse Next comes with C.J.

C.J. Muse

taking question for Mehdi’s thanks model. wanted hi, your on follow Yeah, I to the question. XXXX up regarding

up particularly when know, XXXX system look with actual, seems So, to doing million implied about which XXX conservative, test, million, UltraFLEXplus. you're what reflect your you I you you're level on, new SemiTest revenues if XXX at versus

point as know, memory you number? can areas in you might, I where you, And, that share terms know, conservative? So, walk implied you know, SOC market assumptions for and guess be both of that you're might to in you what through, making

Sanjay Mehta

our perspective, I'll that, know, you could first, in XX%. think mid-term. mid-XXs know, from articulated – talked that on the see in share I I see now, the the] memory an see that of about and Yeah, over we And the that you [is from share then to XXs, growing normalized touch as low our plan, about know, we right Mark level increasing you – SOC we

C.J. Muse

about back in XX%, the to, like? what the But July could XX% implied that within you spoke look as model, know, assuming are the a or goal Mark you

Sanjay Mehta

I a a a that think growth a a get been and point year. C.J. we've is share what we can So, to about point yeah, saying half

I around in XX mentioned, up And only should because normalized think a share a little chunkier, by in around we by is our as memory, then XXXX, share So, be moves I XX, XX, SOC. somewhere players there. few there's

it's I'd could is about So, add the color in the think versus But terms investment the we memory here mid-to-upper be the haven't in that to rate would $XX with is front-end of of across it. up four the with range you into is, know would conservative We've by billion be CapEx the the moving one other capacity mid-term fab on then, the I plan. say, into way mid-term of of profile recent that that the modeled years. for been incremental aggressive our added consistent something assumed piece mid-XXs side, we sort prior

the going for normal is to in more investment [WFE] So, new drive tests billion plus model. if the certainly years, we next that's four than $XX of

C.J. Muse

Very helpful.

for test Eagle As particularly in versus to a of test? XXXX up, gross my might look can margins get we about follow uplift sense be here XXXX? Trying SOC what like, should from thinking what speak to you

Sanjay Mehta

mean, I long-term how guided should we relatively you QX margins, in are consistent gross with expect we've model. our –

C.J. Muse

you. thank Okay,

Operator

Next Stifel. with question comes Chin from Brian

Brian Chin

been us morning. the sales here even automation. of that a breadth increasing questions. seeing? Maybe few might expect the up comes portion Good you of given you first of to for or that year-over-year, curious, letting do be grow adoption Thanks I key XX% there. your was the ask question of market a auto need industrial sort sales Automotive has our is portion and Hi historically

Sanjay Mehta

that, there's of think cover. lot a an still I to know with you emerging market, footprint Yeah,

So, that other verticals. we expect vertical, the as to electronics continue well automotive in well as industrials, as and as

Brian Chin

kind the bigger similar you're the a the from a later point, the good start starting Yeah, visibility. Auto kind just to the of year? than Is is [whole whether Okay. terms of adoption it outside starting seeing trying auto, to little pretty of visibility, know, of year, going you're lot or year expect sort and you're of you gauge bit in snapback more I with of] of was a in and of a

Sanjay Mehta

strong have auto that as we're the a well seeing base drivers from installed the market in incumbent also education, Life R&D, Sciences, we seeing we're as pharma, very Yeah, and a verticals, adoption, but we've – over years obviously, point, and built starting vertical.

Mark Jagiela

add automotive that was I’d of And one that, certainly to aspects of just URs the hit hard most business.

that You this certainly COVID, it the say of into it in XX% know, would business automotive coming although yet was growing has it where low-XXs. in And XXXX been should hasn't down, back that the know, back I to it's contracted portfolio. you point, to high our of and point running because come XXs, the in at dramatically the be

other that but issues chain semiconductor volumes of Sanjay segment, as crimped in not we will since As ambitions of companies there's expansion is some have automotive that our our it's ramp time sales. car the not here, to because so and expect UR has time, other our to bit over we automotive been still. areas of sort growing, go But and reducing around much little component automotive of decline the percentage has a a to been course, acquired just the supply that things mentioned continue over of the footprint into

Brian Chin

of split, the a of think vehicle one-third at might AMR] sort the that could I roughly XX% was or can yeah, [indiscernible] sort that mobile that then of kind driven? years much the I XX% give and like you of model, [IA of Great, four UR, moment, sense at be sales but in how timeframe? maybe sort us XXXX rough mobile out, is of be getting the two-thirds a in

Sanjay Mehta

percentage, MiR you're UR larger longer. but and as I portion we've will that that AutoGuide think with is think for little it I had bit percentage Yeah, on the grow spot revenue. And a a AMR of obviously, a

Brian Chin

so Okay, Thanks great. much.

Operator

with Next question Atif Citi. comes from Malik

Atif Malik

taking up And at Thanks the job last results enterprises up. and warehouse the follow good how a AutoGuide, first on is question on customers? larger the going Mark, questions in and following one, guide. for adoption my Hi. then I have

Mark Jagiela

Good Yes. question.

this customers year. know, you're the difficult COVID percent that a non-COVID case that it's be work done the target. in with had production and is very that we year, extended in a to we good timeframe you to hit in a of in same evaluations world. referencing, been didn't done business We So, and we a get accounts larger part AutoGuide’s the in it small XX-ish new validation acquire could frank but the And like our you, pilot area have gotten grew,

some life. those some and name for of boutique in as logistics both of we're side, well extension e-commerce of side but [evals] in that you the the [eval], manufacturing So, seen as we brands the hope we've would are industrial side the

at any we're whole sort business So, you It's from going last at should of did we had year year. this hoping to but know, is big acquisition the accounts point. if be place a is whole, the – impact these more, game of COVID because customer it once of doubling, was year, AutoGuide new big not this if breakout latch, there be that the kind that least big the

Atif Malik

peers just the and you which are China but test a given you of on nodes? on technologies benefiting where follow Can up, back-end through the this year, as and about then talked China on some down components and be And flattish Great. the investments China maybe last aren't sense mature walk to is down different. us investments makes some why the restriction year, front-end the of from front-end have the SOC mentioned you

Mark Jagiela

Yeah.

separate So, to think because different. if and you SOC, need you it's China, I quite look memory at

On growth expect as the we at will And China be there this test in least. well. side, year we – that or memory in

more occurring buying healthy And silicon restrictions power Because factors, profile, on both against What SMIC their the that year. of little I'd such trade much companies but then for HiSilicon in are Huawei on growth. impact hampered. so of in other China. growing in they a and tremendous it's SOC, growth headwinds silicon historically. bit buy difficult a And and severely test this that's further the are for been are really capacity say and terms like then mid-term the On market to see smaller has restrictions

but grow, memory it's So, bit down, contract, probably know, done going I to think but of it'll is going SOC little you likely side be life. be is net-net, the test to to not on a hugely

Atif Malik

Thanks.

Operator

Next question Bank from America. Arya Vivek comes of with

Vivek Arya

you margins you my leverage and on I Thanks mentioned with believe on that to OpEx I M&A. drive growth of to this question. the for kind is and XX%, at, where I of second a when your expected have X% XXXX On about there are keeping operating leverage, you're XX% of think a at drivers. Mark operating do one operating still two, taking know kind even grow year, Sanjay, outlined potential had are growth? leverage, then already, model, look you XX%, And number of to growth you sales interesting though

model? and what as talk would could operating you your drivers hoping you was I look So, leverage XXXX then this to the at year, be

Sanjay Mehta

and it's year to think, obviously, noted investment a prepared trade we're my point. another Okay, in sure. so getting back I Yeah, and remarks, key travel an – that it's shows, I which is

going space [with growth at the test business but year, percentage you have the the the in growth portfolios, the we've we're where in as IA higher. if is two look really, you for it in – be a to know, lower, growth will You OpEx OpEx leverage the] in

starts let's investment, we'll well, to That's how Rule grow, as the go And leverage, business. but we're you the thinking to in XX – but start the out growing bottom drive space, the know, line. know, growing we're revenues down, XXXX, XX%, we so, at that will in the should drop the a we'll to a forecast in continue we it of growth say described have below think and you from it. obviously if a the leverage Mark IA, test degree more with see, to that continue the you then in short-term like see cascade to predicting I the we're IA When to to about of we're

Vivek Arya

to going grow as margins overall But the you're and are here, to XXXX versus, the when you margins grow in sales at, to, or know, saying so to that pretty three, done level, operating X% flattish you really you're saying have model grown right that leverage? last XXXX CAGR I just or stay model, sales operating you are there, I'm much from CAGR, conservative more not expand faster either you're as operating that be not forecasting as to to look the to years, is know, XX% needs much from they you and been below at puzzled know, have are is grow drive four going what if going very at

Sanjay Mehta

at in then overall investments average then just believe going the remarks growth, And in that of X% comment], the contraction that to portfolio. X%, to prepared from during and IA. out but an the and when a Yeah, model, we’ll, you it XXXX, XXXX tied mobility balloon XXXX and of space, in that think of growth look we of and looked not my why we given of point off in IA average we XXXX, and period to the an are in XXXX XXXX, the be [I that's the significant the growing of just I at off

Mark Jagiela

the would when our just to get at we I look be and a pie revenues of we up said, should IA if chart to back you bigger tests. mix XXXX, mix, that say, And of go you what if

on we'll we're be want investing through pulling enterprise up bottom for gross a how rapidly, but that's all to continue conservative it'll to if line, with more business. drop margins on that likely know, keep side plan you're and So, grow be bottom because test we'll the the more be you will will much it's growth. have and high yes, But on and we looking profitability growing IA a should to we there, for efficient very increase, the more line, bit drop IA and at, through, very the more being

optimize of just optimizing profit mid-term and in for there, the kind we're in it IA the depends we're profile to what's investment for on you in, know not modeled going So, growth. we've

Vivek Arya

what of was the business, just but that, side to Mark, tuck-in, some of stock? we know, this to it Just model And baseline contemplating think kind about something bigger for that be technology talk the you. you the M&A, could that, have us? – impact and hoping Understand. you is you use mentioned Thank require it's for could that how thinking follow the you a the how I IA could M&A should type I set would transactions? and do smaller are presume Are up you about prospects in pipeline of additional you you

Mark Jagiela

Yeah.

in with modestly So, most to sized investing of our past what six we've been kind the of let's pipeline automation, consistent years five have to cap. is and things our the Industrial we years. market say in in acquiring relative investments,

in bit these use we it aperture the correlated have we on bring a our with M&A the some metrics that potentially test same return expanded things. by It's to always to areas test, which space, look However, and that things. are rich rate always governed larger, internal of

or, that's to stock investors cost that you our do we than be those of something our is kind internal capital. know, back – buying our whatever weighted attractive going of to So, more

about that's about can that. say I think all I So,

Vivek Arya

Alright. Thank you.

Operator

question comes from with UBS. Timothy Arcuri Next

Timothy Arcuri

Thanks. I had couple. a

OpEx So saying to year, going it's to this for grow you're X% about XX%.

IA? last in target that's OpEx of can you're to sort I And still back you And long-term mid-point, then going know, that you do I the you wondering this you're but going high sort how at you to that do this I breakeven margin have XX a the IA? of $XX is, way us op of Mark’s just that can more, get for slows, that business? if OpEx is on can if crank year? year, drop commenting can and you XX growth know follow single comment there? digits you up. to much you can come in tell wondering, if can So to guess, another sort I'm mean, basically asking grow what of year you Sanjay, million, about of And think I

Sanjay Mehta

Sure, yeah, it I think spot on. you hit

you majority take from know, to we you improve, we're when growth, OpEx come know as off you point shows, expect think in know, the I XX%, from you level forward of know, a you anomaly a to level We And our original were perspective, a spend basis. at will XXXX, growth the a growth. – on in about look profit you should profit jump our and travel plans, and and out that about the assuming year-over-year XXXX. going trade similar the be XXXX like we think you if the with of in back

Timothy Arcuri

Okay, got it.

can you year? So, you think margin XX% to op get this

Sanjay Mehta

minus, plus yeah. Yeah, or but

Timothy Arcuri

Okay.

Mark. question great. Okay, And a then for I guess, you,

a the customers predict, from So presented know, very a but tough when you that include to it's I is scenarios And testers were potential sort past, going the may may be they're also up, buy, number that know, you that's piece they which in they're to get in a didn't you scenarios. you but die the going to harbinger been revenue willing larger size, shrink year. the not your much of of not presented with this decline couple a that the I to customer, going be or case. down, live compute to of top unless

wondering, not of I'm asking experience So, the year. of that present past you you outcome past that I'm in as back you that be look didn't you that if yeah, when that your know, and this a or as because just sort just I'm harbinger kind customer, is the know, in specifics potential for down down it a happens, can possible, of, past, sort Thanks. could a the of on know, on well, draw say, and any wondering you

Mark Jagiela

and at go cadences. cameras, processor the it's the those complexity phone, there's I had different and remarks. a elements back in I phone – proliferated possible the all Yeah, apps the XG in of basically app memory, areas of various a the the in think what of throughout of XXXX, processor outlining processors, the let me apps leaps to technology, and When in take modem, phones. my you the But refresh the terms outcome. in phone complexity, jump look XG, big was And

capacity, several, there growth look million the XG XG the it'll units factor capacity. of the in year, XXXX, capacity, let's incremental needed incremental XXX whereas less say modem plus phones XG one XG for need growth So, because itself. unit worth at complexity as incremental is you in XXXX, This of be

do happening you could other That of XXXX, our is balloons big things what's in So, what's base. in power that pull customer think for happening with up, not area one happened has that. as XG management, leaves that cameras, resolution, XG I but back screen have do XXXX. with happening be the big it the what's with mobility

Timothy Arcuri

agreed. Yeah,

Okay. Thank you.

Andy Blanchard

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

Operator

question comes Pitzer Credit from with Okay. The John last Suisse.

John Pitzer

your date first this just we you as thanks or now or kind guess if Mark, for between market Andy, tax incentivize more that curious my in long rate? curious accretive? some think zero about be got benefit U.S. And the on on Hey, as and an them China guys. a to of customers shift Semi’s. U.S. exercise indirectly, think relations your kind would from directly is I'm there dynamic, kind of government I seeing year. production either domestic a we're sneaking term congratulations, in do or clearly question game, just capacity me for that you importantly, domestically if a be And I'm the of of as whether to sum not it I've is whole you're quick guiding up. that down of is build follow China then could

Mark Jagiela

Okay.

know, grow some indigenous China you restrictions ease and makers the reason, for again. So, on start Chinese to more China, if

neutral. it's think I

out China. let's customers was or indigenous say, would that of, that manufacturing was – it modems shifted the Teradyne much neutral to proportion was than a of picked in been processors, isn't business pretty as XXXX, that applications, test advanced the by China it that different us. done know, in There and up or You in have customers customers Chinese suppliers,

So there's a ramification. I it flows forth. ebbs wouldn't and big say and back

long the know, supply mature to that to think steadfast from something for significant business. to you set our and of question, of it's many, a time, to the I going On years U.S. take a domestic many incentives government

could I and You impact. have a build years, a positive might that manufactured U.S. we up it think of semiconductors semiconductors, the know, it infrastructure in think the I in bit small, for to don't an it's be think U.S. eight because if domestically, manufacture I really But stick seven,

as that but going buy count equipment. margin, there's I It's All of nothing trend Teradyne line sudden, on. would propensity they're in a a to a bake at more the to

John Pitzer

profit to, is another of curious, how sense. your should of to That's up model, maybe ton extent as conservative, above, how that think to top do gets getting you're just we I'm it to kind follow high-end to you're helpful. incremental going Then my to getting the proves the of explanation way as op back thinking of line makes business be just IA the of the the targets margin sort a model about kind scale, where the longer-term you XXXX can we go? it operating the op about of the know, target think margins or of

Sanjay Mehta

and dropped significantly say drop to myself, continued of we couple years, think to if if to the if see know, continue and starts the maybe I it that growth, and the to the going growth repeat higher I revenues lower, fruition, you'll start down. end, think what of let's let's business, growing we're through, Yeah, IA the businesses the they then come the say again, see, grow – just drives over revenue to first test at if to tail in you through that test we're incremental invest comes, but – and

you you the leverage, more it's short-term, see to little a investment. we but You but really, planning a we have the unfolds market how see significant may over are IA, know, bit know, in

John Pitzer

Helpful guys. Thank you.

Andy Blanchard

get to that much. forward you folks, talking straight I'll wraps days are that those in away. and today. you up us back Thanks ahead in to still queue, to the Alright for Look so the

Operator

today's concludes conference call. This

now disconnect. may You

Teradyne (TER) 28 Jan 212020 Q4 Earnings call transcript