TER - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Teradyne Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Andrew Blanchard. Thank you. sir. ahead, go Please

Andrew Blanchard

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

Following Fourth for with Third performance of evening. XXXX's was press The remarks, release our for third Quarter the issued quarter we'll results opening outlooks details our provide our Quarter. along containing our last

expectations. you Harbor slides providing well as factors the available may will the could materially results as Investor cause following the of We of Replays include Statement that earnings to release, to page via after be on recent page be the Teradyne's most current differ encourage The website the review this helpful contained statements forward-looking you then discussed involve call We we in same in Safe risk will filings. discussion. the ends. SEC are call that that to matters our management's that from the

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

During today's measures. these posted financial financial to call, reference concerning information make measures. non-GAAP non-GAAP additional We've we'll

investor the We are website. of appropriate on page the

UBS. and and ahead industrial-focused participate in investor call, Looking technology now our Davidson, Teradyne between or Credit Baird, conferences earnings next expects Suisse, to hosted by

the over get to of rest the let's Now agenda.

is market one on fourth with answer conditions, First, along for on Mark rest We'll thoughts for quarterly details current then XXXX on this questions guidance and the and Sanjay Mark? our result, comment our will and more call your then offer scheduled will recent our hour. of the quarter. XXXX. results

Mark Jagiela

thanks as automation the test for for how SOC we observing the X in X months the the Today morning, market, about and market, XXXX thinking the Good highlights automation of look will and year, year this of joining the tests cover and close us. and our first we're markets Andy. quarter into and changes third Thanks, we're everyone topics, the outlook I out and our industrial beyond.

As XX% year's grew persist of our our last supply demand. describe and level, across QX businesses. non-GAAP record from QX quarter XX% to strong our markets these X At into long-term Despite We unit Company the drive for the from more but detail, grew will expect grew QX non-GAAP chain drivers complexity under-shipped growth, EPS to XXXX, businesses, remains we sales earnings come did XX% growth continue In experience will and of expect our Industrial EPS power demand are these and for sales each years QX. results this business the the in grew XX%. bottlenecks we trends constraints Automation first Sanjay this that in increased test year-ago in we all and Company-wide and unabated. to and businesses, secular the demonstrate, level. riding months revenue of our

by leading with markets. business our requirements charge, the to aligned to XX%. growing UltraFLEX growing our continued Semiconductor grew dominated XX% example, line, mobility test and well Sales SOC be the QX, For is compute product which through of the performance

and hits industrial markets more automotive X-month Test have as sales spot industrial Systems these testing Eagle's Additionally, test applications. been expanded. demanding markets. high has SOC, balancing sweet compute to automotive period from higher these precision, there than this clear the shift unique with needed architecture Eagle in the demand the rapidly for our doubled of Within by stress and a year also the markets in

XX% dropped years range the in SOC to high year. range SOC growing, high and still from is mobility recent XX% the the test this is of While the largest of subsegment it market

to grow. should also remain elevated continue will mobility submarket at expect faster expect while to we grow compute mid-term, current the But levels. the its a automotive Over we at and SOC remain rate largest

mobility industrial annual faster automotive, sophistication. [Indiscernible] silicate, end along traditional processor decade scale. semiconductor markets, has areas image many rapid last graphics refresh sensors, true engines, smartphone has power and the management, been engines, so, For advances The compute has rapidly graphics, leading or than AI enabled made is pace progressing of PCs, to advancement more. the the complexity much in smartphone This in complexity of apps smartphone that engines, and

driven and testing rates until the At growth. in same has was growth. position key slower relatively Our traditional flat, the recently, time leading has slower testing been our complexity up these compute refresh technologies market

design laid engines. groundwork design compute The rate. laptops, advancing designs, with entrants complexity for new enabled combined whether the tools by accelerated incredible into an However, graphics chips, autonomous these space driving, of and is or for and mobility has chip lithography advancing AI, nodes servers, at the

designs. laptop crossing CPUs billion now over For hugely are a level, example, the which X transistor legacy previous is

time we'll They can in in that driving up. which see WFE the still. notable these future. new down long competition expand every the test hardware their be speculative, new come. standing chip designs expanding increased as advanced and of heavily markets production tester the We've in time-to-market and we're software. transistor UltraFLEX year leaning are to too, this investments counts been wins these new increased and of growing this new our doubling more and also that It's designs applications there's performance quarter, drives business our We've said collectively heats we've advantages on targeting aren't from players can pipelines designs and confident traditional adding and As past, increased development collection higher be design these suppliers seen while families We're wins demand. into and

given market Teradyne share higher this lead higher times. over and designed the for the mid-term. more race to expect test And the We times, to gain opportunities performance faster cycle

sales standard of WiFi on future compared with WiFi and band. hand R&D standard has a complexity managing more XXXX WiFi level connected Higher growth capacity promising X tests. continue UWB demanding test, up in HDDs required a in to Both drive trends and devices, driving application ultra-wide demand. this new segment last were More expected wireless our which grew It's its LitePoint, -- expanding At with future. the bandwidth as security X are foreseeable XX% more and Test wireless the growing months same devices congestion, new technology each proximity Test are continued whole space. complex System year-to-date production, into trajectory sales detection other period. by a XX% system SOC while XXXX sales XX% System increases sorry, XX kept as well segment Our year from the and storage more driven multi-year applications. through many new demand,

to grew XXX and for UR these key offerings, deploy expect to continue is months supply Wireless COVID it's -- platform do highlighted X our and but on Shifting making We a last last largest provide the introduced about it the and of over issues new be expanding products. key expanding riding first Hook IA but partners robots and to March now our platform. We will footprint our year-on-year Universal MiRXXX the and family far. through seller hit XX% we into that's now The in applications. come creativity, strong. Test in to customers totals welding applications business. Automation, trends the as year, our and ecosystem MiRXXXX added which these as with OEM the MiRXXX the between to advantage screw is to to to This by is MiR tasks logistics to The broadening MiRXXX palletizing. introduced call, very the last UR long-term Unfortunately, Industrial Robots products market. our into our co-tails over expand revenue to for of combination for combination both easier are the of UR, of products The just tugging. sales in all We've grew was IA of year, XX% by is the investments this bright. that At the outlook higher news increasing our story. other partners is fast-growing created organic the in limit story of it's new despite long-term driving the tasks remains MiR, include, unmatched. UR+ demand MiR going and expanding year, XX% to This UR+ supply while in challenges. XX% and to and a and expanded examples XXX good payload such UR+ chain dollars a number growth unique and At a our chain has XXXX existing tailwind Each

penetration us to in will on our expand with at coming continues expect of as at the looking manufacturing IA, each of of fantastic we and X% the of penetration for at drive now market. expansion, at and rate share, online, will MiR, estimate DDRX competitive we distribution model. and less UR years UR's to up And market XX% is close be XX% market single IA mobile especially the today, AMR market. product continued many future. making robots, than to our rate growth. in investments key clearly very is we'll and story remain continue forecast capacity robot trends, annual robots expand the factors. in penetration penetration timing looking the to market, we similar enhancements, like of nodes. more Between at at business, and then, the And low year today's PMIs onshoring our investments in under penetration that IA for rate is In player both and a XXXX estimate In fab both market product you lithography and new number The doesn't have we're our broadly extend our we we're reinforce fact our serviceable geographies long-term level UR, X%. like robust to drive outlook high capabilities advanced to looking our the autonomous It's in R& both we'll principal the single-digits reach. update growth XX%. estimate and mid-term to the also serviceable approximate earnings we the distribution be that rates for dominant defined January, the semiconductor of the tailwinds as the serviceable where the advantages, we serviceable growth and product rates lead puts UR Even sustaining and our X and businesses, output be extend swing at adoption advantages a low we the market D of sets higher. with a Looking the In

of to aligned our of a trend increasingly On growing to chain I trend future and but high slow the new, smart, The Teradyne. applications trends Short-term manage supply we cost paid on-shoring investments. factors, drives headwind and the systemic of industries of certain automation other demand many semiconductor both become challenges increasingly a drives strategy. our demand. with by These growth will The business is trends. for world a investment hand, With exciting influenced semiconductors prevalence that, in and an scarcity and it effective labor markets, to business over Sanjay. long-term turn bottlenecks complex myriad could and in long-term our business

Sanjay Mehta

and QX our guidance, and remarks, review line QX hello, results, headlines guidance. will financial at our of Supply Mark I outlook challenging the strategy for my in comment our To on QX. our financial everyone. provide Thanks, discuss full-year this the In midpoint QX financial environment,

$XXX guidance Gross strength XX%. test end million high of margin semi were near was in sales quarter test. was third and the -- the wireless by approximately quarter and driven Our

The million $XXX of components favorability operating A were or and XX.X% of data. expenses quarter operating in non-GAAP $X.XX. revenue. EPS OpEx XX% non-GAAP margin of drove of more few third non-GAAP approximately a Our

on rate diluted XX.X% was share was these items a had tax approximately excluding customers. Non-GAAP both and Our basis. X GAAP XX% XXX non-GAAP million. count We X

history largest and the of was strongest up perspective, Flash second this down revenue $XXX was was had business Looking the on by a RF, XX% but Memory at test industrial and handset in a down record. XX% revenue strength unit million driven the business from and million, revenue industrial, Test was SSD revenue Semi from in System segment group Automotive end million shipments. year's segment from final QX the at market XX% Recall storage demand. applications. in of was doubled $XXX has QX 'XX. $XXX automotive results highest SOC XX% applications million, last year-over-year. and up processors, Test lumpy year-over-year. of $XXX demand revenue is which

prior the QX. from While year, LitePoint, revenue grow $XX XX% storage up due of year and our product, test combined was still for on grew UWB. continued million and will $XX SLT to XX% WiFi million. HDD cellular million than of and strength more the Defense and of At aerospace production timing including to $XX XG shipments new to sales year-on-year and XX% success test early X board declined in

Automation. Industrial to Now

UR revenue I As in million with regions QX July, the QX results impaired revenue metrics was 'XX 'XX. all COVID and in both up North QX XXXX, 'XX. highest QX both of given growth America QX expanded year, from $XX comparing year-on-year. but revenue XX% shutdowns and business that 'XX last the will Industrial delivered from provide 'XX Automation

-- IA and noted, Mark low primarily quarter QX, our As XX% $XX the 'XX. 'XX expect from in about was were supply MiR breakeven we full reduced QX profitability. breakeven the quarter. and over and single-digit XX% issues, XX% UR 'XX. quarter QX up in XX% shipments in were year-over-year, $XX semiconductors, sales IA full-year, and QX million up sales from million

our As to operating during enable we future. we've continue of maintaining supply. the growth this gross before, profit margins mid-XXs Shifting high investing while strategy noted to in era

constraints with Company. We continue to deal numerous the across supply

While also rolling we're or shortages. COVID-related well are mechanical shutdowns exacerbated labor semiconductor all seeing and shortages parts by logistics, reported, in delays

the expect of Despite operations a half business partners. been contract XXXX. that We and a supply first We a big continue part it record teams and working competence. able shipments through and of chain with teams, operational we've core our deliver the line our issues, manufacturing model view as to will against issues performance engineering of execution and as result supply these these management,

of of range displays is of model. performance through capacity value demand. this the performance within customer expand lead margin significance times the that most their in environment. needs meet customer's Test execution portfolio, Test more the time financial to years over closely production that our In this The this orders kept Test our dynamic last or XX our gross lead reflect has Our

bit than Test demand with feel times. that with counterintuitive, a times risk cycle more a maintaining ship lead we while beyond So lower are short manufacturing orders lead far times indicator of accurate holding

static. current adding have supply our our and the months. model isn't course, last resiliency and We prior Of begin to invest COVID. is Those continue This line diversity paying to supplier efforts geographic accelerated supply work XX operations dividends to the and hardened further. environment through over both in we'll in chain

an as example resilience lead of execution. Our our time performance and

doubled industrial demand. ability have the sales to is example significantly scale Another to increased Auto and than more year-over-year.

dates, operating not manner. can aligned to we extend value weeks from times some to all to seen In to in also delivery be we've X issues we're lead and a line. for perfectly requested managing are delivery normal weeks While in X customer through our the our gross The reasonable products. leverage X X margin efforts of these IA, seen

manufacturing our issues, quickly While and and times. cycle the this the growing sourcing is with so supply seen challenged industry impact ongoing we've positive of business in already material work

to cash flow. the We quarters. Shifting expect lead X next over sheet model balance back X bring to to to the times and

free totaled XXXX, marketable In billion. flow $XXX on over Our free months, we the of shares on we've flow free and returned $XXX million an quarter from of our and the cash year. repurchasing we'll at cash to XX% had we've the end of when million Year-to-date, began repurchased quarter million XX% $XXX full owners. X.X X flow shareholders we for $XXX.XX. capex, million We a $XXX $XX spent average return million to of shares, and buybacks XXXX and price securities million respectively. and a expect cash we dividends to expect our the million $X.XX spend at through $XXX in spent and We we've for in cash

million X the debt, ahead was convertible first of principal value months the in bondholders of maturity. of a to paid million, By mid-December, our $XXX leaving $XXX bondholders approximately $XXX will million. convertible converted face Regarding have

$X.XX convertible a intangibles a shares. million our amortization Fourth to to acquired range on quarter exclude to for in between QX interest expected and are of non-GAAP debt. XXX non-cash of million in guidance Now, the on diluted $XXX outlook imputed EPS Sales with the and $X.XX QX. be $XXX

negative, estimated significant operating to additional profit The fourth no at quarter at XX% of is OpEx XX%, run non-GAAP assumes guidance we changes, positive gross materials issues. pandemic-related Fourth see to that at quarter to XX% guidance expected quarter the availability won't are and assumes of of Our or XX%. in is the midpoint XX% third sales. margins our

both We and growing be OpEx $X.XX in $XXX QX full OpEx Regarding and the guidance, margin the offsetting while of expect for of full-year $X.X for in increases. billion the XXXX, growth and up to will XX% XXXX. year. from another a the of up new reflecting XXXX in EPS, XX.X% should than lower the planned XX%. component, year products, be year to bit -- about sales growing will up growing million XX.X% sales At midpoint XX% revenue our non-GAAP mix from be full leverage, with logistics spent ramp and and EPS approximately Gross cost we product operating

operating non-GAAP year's about be from XXXX expected is Our last XX%, to profit up XX%. rate

tax our yearly We'll had Mark we have end The over over of our Our do one the broader in higher become XXXX rate expected of last XX% In customer noted demand we breadth This revenue. and revenue. XX% industrial demand range summary, not reflects In on XXXX's and This our semi-test. continues the strong expect about January. trend also XXXX, compute, growth than portion sales. larger model is to continued than customer full-year midterm the in larger year-over-year be in year. our and quarter our our XX% regular mobility is year. revenue to that with expect in continue diversify of in a targets year any of the to growth customer In high-growth IA model EPS we drove XXXX IA, auto XXXX, stronger-than-expected mid-term revenue. with to on of the growth. cadence compared test demand our expected and results On exceed across execution the we'll us a of to XX.X% is full-year buying our These comfortably businesses, update earnings this put of year-on-year growth Company. excellent basis, another on and

in IA While picture Andy. trend turn of test XXXX and we industry the to powering call we're yet, firmly clear the don't a confident With our with back remain that, have businesses long-term I'll place.

Andrew Blanchard

(ph) please to some to take and as yourself now like Patrice Sanjay. and would question questions Thanks, X a follow-up. reminder, limit a

Operator

[Operator Instructions] the Q&A we compile Please stand by while roster.

Your comes Atif Malik from first Citi. question with

Atif Malik

Hi, thanks I if X for recent processor, in transistor job taking the growing supply of questions my count look X tough Mark, versus the is times at good environment. notebook ARM-based prior-generation. some and the to

mobility year year? analog to SSE your about grow commented on January, faster mobility than mid-term. compute the and next guys outlook talk Understand auto the feel You growth grow you do confident how January about in to you in next

Mark Jagiela

of really a terms test. in volume the that With While in hasn't it standing this that I impact come. -- capacity. when supply would is the $XX there's in I other chain on just slow cited in confident. place very that new -- put for the depends all a growth, increased bottlenecked, this the those nodes system. down But can we're at when that but at I think caveat, get little there's on look WFE was do new trends mention come product see And unit I and had the these of that of thing That's point, lot at of We demand you cited bottlenecks do and online to is looking billion single yet, this end the year pretty semiconductors. then All way

Sanjay Mehta

and That a don't year on because XXXX come big and kind January to swing enough a X how X online. additional out nanometer now. in we visibility get why is our we of will right a that factor good wait chunk fabs calendar that's till as the growth

Atif Malik

equipment can have follow-up, talk long-term price gross as and Sanjay, margins? by mobility Tier you about on There been foundry. on suppliers a And talked customer concentration X about impact compute Great. with discounts within

Sanjay Mehta

stated above margins. as any throughout in we're driven key we it's in regarding customers. coming have a -- gross the And online my and benefits of We've seen half half our in we've into give volume I that systems year, said cost obviously, couple in of we improved and so test As offsetting have to From will leverage gross our won't some I And update the gross sustainability model prepared come really well breadth margin the see a curve. cost gross margins, January. product earlier XXXX. shipping our of an as cost margin, remarks, of customer as XX%, in of look I by calls, broader mix the kind down shift, second the a logistic that earnings forward of component first going increases. to operating But performance

Atif Malik

Great, thanks.

Operator

next Mehdi Your from FIG. Hosseini comes question with

Mehdi Hosseini

question. Yes, for my Thanks sir. taking

has me with happened happened again should assume a largest I is 'XX? mix. in The in a the is be X%. first have years return that to trend to down have that has a should And X% going of again And And happen your -- hadn't to do -- into in that over terms seems should to particular customer and context, that customer your 'XX? that we to one several follow-up. It given that past this growth revenue commentary

Mark Jagiela

numerator our yes, higher first revenue a that do that dropping largest be you in they I course, of in has out on below compute We, aside. to to falling that the growing talk amount can't The your and about taken point, have But any year. just of that future Mehdi, they're not do our I individual might think might or what revenue. so customer XX% leave customer's point against

Mehdi Hosseini

CPUs, Can And to to change that into or market you. own share X came you when as years? where then you. looking over X that will And update ARM-based we the months us Thank were wanted it. the with share up question follow-up you Got their the market how market Thank hyperscalers in compute. I ramp your ago X in next your XXXX? are share

Mark Jagiela

total whose XX market year-to-year year, given SOC can swing given can market, are what year-to-year it depending might buying. our What the be submarket, a customers market any points any very it on in like It depends year. like, volatile. -- Well, share on who's share in in compute, buying is

For this year, good tends us. a it to be for very compute year

Our that would shares It forward I to But in share that SOC up our it's this say is be Steady probably volatile been going I Eddie. compute pretty market past say, in, the not would year-to-year. what close year. to. average in It's going be to we'll has

Mehdi Hosseini

I to we're questions, supposed know X up. just follow ask quick only but a

the And the clear computer I'm you think computers unchanged, I market I as side, on I what chips into market. incremental to the dominated that that addressing and that understand these come just to the GPU was by were all your the your new trying to pretty ARM-based. remain competitive driven how is trying assuming think change to it's were has look at competitor position understand

Mark Jagiela

We're very it's pleased -- more compute there's well. tester and realm. as also market I XXX in confident for that that say with computes traditional not now driven our by would demand in But, design-ins -- ARM-based the and progress

complexity growth there standing mentioned, You've got of suppliers couple not and kind as up there still are are being of curve. a that I

a so will And well, growth of there I as be believe. there lot certainly

Mehdi Hosseini

Okay. detail. Thank for you. Thanks the

Operator

Sachs. Your next question Toshiya Goldman from Hari, comes

Toshiya Hari

Mark, taking first the as the X on My and on Sanjay. for maybe I the strong X is you Thank well. for morning. supply questions execution. constraints, congrats had question maybe good Hi, for

headwinds business. profitability be Test little the but just wanted high embedded Just confirm Semi impact significant for on gross shortages? And curious share in that guidance? And your in from that was that, were there to IA how no supply guided impact in would on was you. then QX your If the quarter chain what's there at in you and the came any similarly, helpful. Thank you of your on to your margins, end QX can range,

Sanjay Mehta

those. take I'll Sure.

-- XX% going we've IA year-to-date, growth at why For If in an demand Industrial to grown we QX Automation XX%. XX% above and it's be all, we've can't high. perspective, year-on-year to that's is supply and

chain Test And of semiconductors Really going the from and the of IA be it's And had substrate a and abated -- And the given the that so QX We're coming supply for in it's been cost we've second portfolio the supply the component increases wafer publicized supply our we've or it a XXXX. I've increases. QX we've capacity logistics down perspective, component from then to our margin chain true are QX predominantly, think tied And volumes Test well the online. really of year. to said the seen tightening last cost, introduced mainly managing and That's quarter-over-quarter curve or chain end side, we've new in crunch earlier, products with late the we be coming cost until And then, increases, favorable out visibility parts. of IA. online through side. product gross we'll coming as along in again, perspective we've managing our revenues expect higher, we're leverage gaining half operating and that we through don't see in mix. where the semiconductor on the it's back on as

Toshiya Hari

Got it. other cyclical. my parts more Eagle quite That's up prepared helpful. I as you than In about many like of noted Test follow-up, super is business, to your been And think then your I business has Eagle year-to-date. Xx the that Test Mark, your wanted Historically, remarks, business. ask

like to about think different growth time? a but you As for another is, I could year, time. there's test to XX, this down it complexity year-and-a-half, customers digest little complexity be XXXX and be X into very then said, growth, year. X you strong The been those question expecting argue quarters, you're You a what's Eagle their capacity. as bit a the for up what would seem Based long on Test you realize

So just this cycles. be different curious could cycle past on how relative to you. Thank

Mark Jagiela

obsolete is Right X-quarter the good you're of that's space, kind nodes, right new XXXX chip out fabs. traditional new us either see automotive, this will thing refresh we generation lot automobile of the isn't are through how are what think going the trying believe near its unit there new and which designed. hard get to there's keep historical peak is least addition, suppliers Because could automotive normal surge silicon in volume But in the automotive lines question. happening going more lithography that's makes and pattern. beyond so at, at a again, silicon to on this I current to And in legacy persist racing get those

say, as in the would And much, environment don't on side. frothy I so the semiconductor customers this demand power have automotive supply

the so And a move with happening, us nodes. that means issues, suppliers little little might That and you expect, means think a is saying different giving the advanced are yield time. and test what's And I that's which view more what? than that's get program, more a of bit to this complexity, semiconductor

Toshiya Hari

you. Thank

Operator

from question Pitzer, Your Suisse. next Credit comes John

John Pitzer

Thanks Mark, morning, Semi-test go Good times increasing results. I guys. business. want the back Congratulations in me solid questions. on test the for asking to to

times across do from multiple device a test that you're general understand curious count. your from for move does transistor optimized to compute purpose a you're trend hold? efficiency going customers where to test one at and huge more world smaller of done testing move complexity volumes I'm helping we that You've enhance us in devices. job volumes a silicon, and to What one as as good world of takes

Mark Jagiela

to good likely versus chip billion in need is The more those is let's an version on -- chip isn't failure testing It sign. going of an rules has say rough X then put are modes -- X, building equivalent to, X thumb, the more these to than let's XX% is but And itself give because be a advanced to single be you intensive example, test XXX there transistors the premium tested. test potential together when chip known advanced defect a package. package on design, die to that say,

So lit package the that's around thing one thing. chip multi-chip whole

intensity 'XX, the it X FinFET the 'XX from though you become architectures. you moved at when remember from from look market, and that's another kind this those back at boosts if new The world test is back modes, is And to happening, that really other going planar to be drove era, for going new transistors. that Gate-All-Around Gate-All-Around. nanometer the in was coming this And market. go of test architecture XXXX, test the the of this thing transistor history prevalent complexity to new FinFET, if There's headed of and we're on intensity with drove and move to and one in defect incremental beyond the

at to even going of test bit equivalent we're see because transistor little that. So more a intensity counts,

and and around given and nanometer. three beyond is So chip it's these where But story of probably all That's all two now. nanometer trends gate coming. right XXXX have lifts three

John Pitzer

is this my and question, helpful second That's Mark.

you business several Just for customer, going that the in space last don't customer? led the help that can your of of past, understand you've is better back around the families? to about And meaningful fungible is me you've doing their mobility in those capacity know, customer. now, because diversity these me you product them across diversification can seeing at years just talked Airtags. help demand you your different kind and drivers -- the with I'm if test it's more curious how largest complexity of the I Clearly, compute got Are been a

Mark Jagiela

much to the talk to too going be not there. able I'm breadth about

I think it. imagine can you

rattled some You've off examples.

we applications for a in bit I Power put people in little The these and of or can these world a of that different both and us hyperscalers where phone billion tend easier. be and think slowing cellphone they're I for phone consumer cloud isn't, are of unit said, slow, in for into past a as cell computing application what's have always new family a all customers we both of ability team a phones products, small unique. silicon into looked about bit management be the complexity that market. architecture. a engine a is the well, script, a emerging introduced to those products. compute silicon more outside the or -- compute. fungibility, a chip little And talked building are things worked in the with a at unit is compute and more entirely is have semiconductor different said Those pretty that's cellphones, transistor of XX a RF a hits laptop today of Maybe diversifying compute But are bit of products of us? a other and engine a semiconductor get doesn't will like said plateauing what more versus plus bring when new consumer one to can in are them -- be a doesn't phone now And that of that There some my terms devices. we've silicon of classes And architecture. together kind testers, in anything the type have are of the UltraFLEX, growth pertain yet of a fungible, lot for some look, the to unique formed you that UltraFLEXplus be growth them. testers type design to they The into desktop engine high but In future., across used else. a in fraction course

John Pitzer

That's helpful. Thank you.

Operator

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

C.J. Muse

Thank for question. question. taking guess technology morning. I Good another Mark the you

taught us in how more count about to compute. where there You times And and or for we as issues, about complex transition? think are mobility to thinking compute high-performance we test about algorithms, the software perhaps curious go should be more more thinking thermal test times transistor that

Mark Jagiela

of application really application. test Well, automotive where The the less is of only technology. the to there. I more It's do think drives the place times issues the different the because have times test fundamentally with

in impactful going So back those phones I'll in everything servers and and nanometer to X said else. to in about in go times test both to is in end I graphics Probably of any be computers market more C.J., and applications. then before what and

C.J. Muse

Clearly, that's of you can And Thank to to think OpEx operating you're how you. look topline growth? for speak question outlook making Sanjay that, for you. about And XXXX, in as as your leverage? should you Okay, But relative part helpful. we investments, particularly to IA.

Sanjay Mehta

and in say we'll obviously Sure. an couple But we're this is I'd to of XXXX the obviously, early in January. year, provide innings update higher volume. OpEx a tied of key looking in growing areas at

as as engineering really into And we continue then tied across etc. go-to-market to suppliers, IA expense compensation invest you as operations remarks, to engineering forward. leaning -- leaning our portfolio. on we're to to new in, investment note well And into and I help obviously as the variable our in we're Test have going drive noted, qualify We both prepared our

I'd that on G&A is only it is we're that's right year other not expenses of a going I percentage-wise now. next was say be say OpEx growth. is year really This forward. component all big to to The large thing but The as the going growth, have

C.J. Muse

you. Thank

Operator

from comes Timothy question next UBS. Your Arcuri,

Timothy Arcuri

SOC could a Mark, just wanted the you us if I to update see Thanks lot. TAM. on

X XX last us autos compute you about said had was was that to XXX, You wondering just a I'm were of the X, was mobility segments in numbers? those update on XXX. about XXX, call can billion, if was industrial

Mark Jagiela

but in $X is time numbers, sub-markets close. little still what question. as it's trending The Maybe this same got the pretty range you term Good Yes. well. compute higher-end that at the towards Fundamentally, a on last a time. more about is driving range. the at -- that this bit point it's in It's in billion we memory think range about right of talked higher the up I probably so us

Timothy Arcuri

to and And profitability we we at we cut what's be time now OpEx question but next know, to investing it just how what's the to I X Sanjay, went profitability single-digits. target year. much a This what penetration maybe IA what's thinking the money low would wondering get XX% So about and you low, And got XX% last guess, catalyst the IA. is so maybe? I maybe shouldn't year question and be the then I'm I great. off a is? just I can I think it's very were Thanks. going I guess XX optimize had margin in Okay, and on and and you that long-term investments? there you but to But then then about look just catalyst for leverage operating answered on

Sanjay Mehta

Yeah.

we've I So for at low. our of economic operating single-digit and and -- X% labor be the low all been strong it rule said has as conscious in about with and be year-over-year as business portfolio. we are that, combining really by is But of or And think the my And the about as we're range, to very, we see the think a growth we with we that go-to-market the noted to is it profit. engineering we as and prepared where jobs said we focused is both remarks. Mark, scarcity a manage on XX, the expect prior XX%, how as see investments. penetration automated very really we can look And tailwind very growth, a on and fundamentally,

as and I that going investment. going think said lean the are actually about the And in We're it improving think And portfolio. so simple. XX. is to again, revenue remarks, And where that to that gross that about And Rule of we in is margins on into accelerate my our prepared belief we're to we grow strong how it quite growth. it's going a have

in start say to growth so the we'll let's start we profit that OpEx the to operating an And to moderate when see to get moderate, of then mid-XXs.

Timothy Arcuri

Okay, Sanjay. Thank you

Operator

of comes question next Bank from Arya, Vivek America. Your

Vivek Arya

for taking following Teradyne for I next are year? move Mark, are for confirm. excited to terms this Thanks end top 'XX? questions. what 'XX but I X X it to in in most that X 'XX, the growth And would or of or markets nanometer, my wanted is for thought that, you about a that benefit on the be

Mark Jagiela

we we'll for now that won't that 'XX, at them much happen could is get XXXX a ability in sorry, by bit to X looking swing And we between XXXX, seen be January. update to some -- how those way A a early and on don't one months push We going nanometer carefully the the when things of I'm -- see bulk it little beyond. the I 'XX was might intercept we've in but Q question whatever that in nodes a of XXXX, more exactly on factor. yet, you happens know of 'XX, it the some and view. ramping in so is On some but be January until the mentioned in XXXX, outs meaningful few

think for that goes new to some exciting, applications that complex and markets those applications. it hyperscalers year In developing terms next silicon interesting very of back I emergent these and are are new

Sanjay Mehta

Some could in rooting we're drive of close we're and to. for new testers and introduction seeing demand a for and for be That's new market what what product associated the with latch semiconductors them. stream breakouts those could And the with whole XXXX. we're

Vivek Arya

complexity just Got long be I mean for the product helpful. to market term? seasonality etc., of Teradyne it. that a markets, those hyperscaler be what that's tend different into that. something the might your going into does to over application? mix by are And shift might more prospects? way, more conceptually, for mobility is additional Very to more on the end lot shift because from does land on terms less up Mark, compute mix application you understand versus And also, that a in seasonal. mobility the in hyperscaler there heavy a Is other following sizes the Teradyne contrast in different. maybe taking mean just packaging, in be But What the perhaps seasonal growth a mobility than markets

Mark Jagiela

hyperscalers at question. developed is large. being Yeah, that's And devices the good range of quite

after latch, a Some going on say be leverage billion equal XX broad -- spectrum, -- as a moving machine-learning market. application much that something are and a up the going to classic cell average what on those transistor and a device high device, than It's bottom at on iterate phone. out, then typical say, range a than that's find line. to everybody. cellphone more. might But that probably you if cellphone-like so Those would in of I'd the going applications lot I but not greater it's average you some surprised it that displays or res I play guess for as take simpler complexity impact have technologies AI, them them bring not the billion of to hyperscalers there to extreme. in year-over-year-over-year on the they an are design. they XX if It's even the probably apps to processor aren't the phone It's of complexity cell probably transistor are more are

Vivek Arya

Thank you.

Operator

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

Krish Sankar

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

ask the to nanometer a different in want X question Just way.

WFE investments spoke while XXXX in to up NAND meaningful how Mcklin and 'XX, XXXX spending. catch cycle, in way. in to test a You came about front-end XD grew Memory WFE But have spending the during the Test

should how think front-end foundry we around? I timelines this time if rephrase So of about WFE the effect to logic test

Mark Jagiela

good Yeah, questions.

same not volume, is recognized won't before would memory X node, the test then assume about way -- you off coming WFE that about to prior. for a guidance here. time see be the whenever to count, the testers And line best The of the transistor testers were Memory of curve volume in investment there. that start that installed silicon is the All single think occurred tester comes thing fab about pilot as to memory see -- months maybe off reasonable is associated tends on test than in X gets a you months coming bit into with online it or the give so only of and investment. get bit That's some a is you efficient SOC. caution more I X product the I installations I Once can that. new a that nanometer to prior versus SOC to other assume reasons more to bit

memory, so, and move it's than SOC probably going XX%, double to not it's or XX% more can test time closer. in but whereas say, not linear, and let's you transistors you're So quite

Krish Sankar

run basis had XX% at we up XX% follow-up quarters stepped rates? X range. you. on very gross a it. That's points new margins Thank the Sanjay so last environment, margins. constrained Despite We should or the revenue this assume Is helpful, kind these the baseline Got Mark. XXX+ of have - a for gross about to over

Sanjay Mehta

QX We're the of I've in talked earlier. I about January. our update process in our think through planning model basis strategic going that and earnings really it's

There's some into at expect operating to margin having cost -- visibility in we'll January guidance year, mix you next increase. new puts said, down and I've half of that that in think similar should leverage. we look just that a managing variables component and first in different in call. see next there's our takes, diversified, many and of we're as variables second more many our from in revenue there half And We've of first the products to provide and year, as of there. more the more there's the noted going I gross we've of cost had been logistics gets and but XXXX the the so good be curve lot half I closely. have As the on and that come gaining through

Krish Sankar

it. Got Thanks, Sanjay.

Operator

Stifel. Your Brian comes Chin, from next question

Brian Chin

Hi few morning. Nice and a there. Good thanks questions. results us ask for letting

Sorry, going first to something back clarify on the commentary.

ship you be appreciably both an did I revenue Industrial in businesses more level and hear If had would Semi chips, to in QX, the of Automation you correctly? to higher that able Test

Sanjay Mehta

be to the we'd the this Industrial we're at of In the we ship majority going point. In able think manage wise, portfolio, percentage Automation through more. supply Test issues to

Brian Chin

nanometer Is I nanometer is couple or think transistors, yield a on compounded years what it growthy, What X compared discussion, or as at HPC the discussion that, the about the interesting sizes, in bit here test also premium secular, at form, get sort it of point of looking TAM? we're Okay. short it several in compute at of fulcrum growth, and the by it and it want X about of And what form the terms you modeling a then types know is questions a again advanced is of by cam follow-up. rates then probably picture. think nanometer bigger high-performance more little combination How in Great. longer if intersection lower road terms It's a die terms X various of a like packaging. of yield Gate-All-Around. a event Just next test to little And maps? devices they're for bit or there, but is that nanometer Gate-All-Around? suggests Or you've is X more customers, X%. my chip over in intensity that to that test much X% in of do you enables Maybe that, benchmark

Mark Jagiela

let's nanometer X talking with and methodologies per that's modes failure so mid-term. enables here with would increasingly There's That's what change once There's in transitions, that's there too. and equal, the into last mixed absolutely about is Okay. is me talking happened you the in test on then that you per and architecture lot it not dense, nanometer functioning a first good intensity, everything the correctly. years. introduce Gate-All-Around Again, device say, take more need needs we nodes That about FinFET have not Those going in X I'm in the the be that thing but X additional, unique, happening with in Gate-All-Around. That a issues earlier about us need Brian, few s It's packaging I'm the more more The transistor all let That's The else positive of the transistors that's that's being talked about. the decade. and driver nanometer. die. for typically known would chip there, that a something where next certainly happens testing of next die make I'm talking future. big what test lit about, that chips thing from to decade. sure then the outlook to give FinFET multi test real

average of that so, the higher to per let's contend And verification additional be new needed architecture. say, to because the time test related transistor

premium, be in over that higher early architecture the as the architecture's tends Now, say, life time. That matures let's to comes down.

net-net, now, XX%. the of nanometer -- up -- been the a XX we've talked growing transistor then, the to growing look X more declining market bleeding well come in parallel FinFET it's you Part at we've curve Part either. XXXX, world doesn't And that And been that learning highly to again, But that excess from talked about the So XXXX comes year-after-year. to X are of this had online XXXX is quite in testing of and it if devices about. test in the and of using more nanometer day market story it's ameliorating Test on. one and certain intensive. shift There's count. that the mass

junctures another with one at of we're So Gate-All-Around. those

-- Sorry, the HPC and

Sanjay Mehta

higher Tested HPC or lower?

Mark Jagiela

the Yeah. The higher to compute in going at growth the -- over mid-term. our we the of think high certainly mix is end rate submarkets be of

we're If couple the going you of in a to a pick compute's by think rate, at least probably but number this think is update leading growth average X%. points. January, market We that

Brian Chin

Great. all Okay. on that. the That's Thanks helpful. for color

Andrew Blanchard

one And we Operator, please. time have more question, for

Operator

Thank you.

final Your question from comes Bank. Ho Deutsche Sidney

Sidney Ho

taking two my I quick for Thanks question. have ones.

just impact your is, supply margin gross IA about one constraining curious, has in talked been the first good -- overall. I'm you pretty The constraint business.

both your you extent costs leverage those and talked To along business, about increase costs are Test freight to You pass of in and to customers? some the able [Indiscernible]. your input of cost IA a offering logistics that your

Sanjay Mehta

it no. At so this point, through we've materially, been managing

Sidney Ho

really is nanometers in Maybe opportunity follow-up it's an and of Okay. discussion XXXX But X question today. beyond. my lot on

X at the to does when move from alternative? to instead customer If generation rate is nanometers they next X the you're How what going going nanometers, if nanometer business compare you nodes different to to your it X -- a tester reuse update the look impact chooses have you in a January. us two to year, know between and of of I tester go

Mark Jagiela

XXXX it's And nodes era in and to is reuse, Yeah. But beyond generations of And X-nanometer in event that what There's at will not more here across be devices. later testers or X-nanometer new useful required. in type X-nanometer. be many, usability story. in tend yes, to generation they -- people absent nothing so span testers likely the the comes decade and by a a terms new years it's the customer, XX been not a X-nanometer The reuse in of many, for likely large, have a because with story, since XXXX seeing we've past and a huge year. many many can and Test, is life tester that tester a to a of going of tester

Mark Jagiela

People started past down at still move year in years such X along at increase how path. counts the curve and view we X+ optimistic it be be is closer what's nanometer? some transistor in then past Even those Will the that X of and quarter to of nanometer the Those quarters out the traditional will Will nodes complexity which the like. absent happen really we've to are X have probably and swings our over going around first year in refreshes. the on refreshes an silicon summer, they out peak next start in things and with that what X+ transistor understand. We'll growth get seen XX that XXXX for years? the beginning with we the similar normal have year the count we to to modest to growth of looks the in nanometer,

Sidney Ho

much. you very Thank Great.

Mark Jagiela

those for out to queue, and are you we back joining us for get the everybody, much Okay, joining. thanks, of so later Thanks again, time. and I'll everyone, today today, in

Sanjay Mehta

Bye bye.

Operator

and today's participating. gentlemen, Thank conference this call. Ladies concludes for you

disconnect. now may You

Teradyne (TER) 27 Oct 212021 Q3 Earnings call transcript