Teradyne, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the provided text does not present standalone fourth-quarter results.
Business context and results
Teradyne designs and sells automated test equipment for semiconductors, wireless products and electronic systems, as well as collaborative robots and autonomous mobile robots. Its four reportable segments are Semiconductor Test, System Test, Wireless Test and Robotics.
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $3.155 billion | $3.703 billion |
| Gross profit / margin | $1.867 billion / 59.2% | $2.207 billion / 59.6% |
| Operating income / margin | $831.9 million / 26.4% | $1.201 billion / 32.4% |
| Net income / diluted EPS | $715.5 million / $4.22 | $1.015 billion / $5.53 |
| Operating cash flow | $577.9 million | $1.098 billion |
| Cash, cash equivalents and marketable securities | $1.005 billion | $1.500 billion |
Capital expenditures were $163.2 million, implying approximate operating cash flow less capital expenditures of $414.7 million. Year-end debt carrying value was $50.1 million, consisting of convertible notes; the $750 million revolving facility was undrawn as of February 22, 2023. Current assets were $2.258 billion and current liabilities $746.3 million.
Material changes versus FY 2021
- Revenue fell 14.8%, primarily because Semiconductor Test sales declined $561.7 million (21.3%) amid lower mobility and high-performance-computing tester demand. Segment revenue was $2.081 billion.
- System Test revenue increased 0.3% to $469.3 million; Robotics grew 7.2% to $403.1 million; Wireless Test declined 7.0% to $201.7 million.
- Gross margin decreased 0.4 percentage points. Higher service costs were partly offset by favorable product mix and lower variable compensation; service gross margin fell 4.8 points.
- Operating expenses rose to $1.035 billion from $1.006 billion, while operating margin contracted six percentage points. Net income declined 29.5% and diluted EPS 23.7%.
- Operating cash flow decreased by $520.4 million, with cash use from operating assets and liabilities increasing to $272.6 million, including higher supplier prepayments and inventory.
Outlook, commentary and risks
- Management expects 3-nanometer process adoption beginning in 2023, followed by gate-all-around processes, advanced packaging, device complexity and unit growth to support test demand over its four-year forecast period. Recovery timing and depth remain uncertain.
- Management expects Robotics channel expansion and new products to support 2023 growth. The UR20 collaborative robot was introduced in 2022 and is expected to begin shipping in the first half of 2023.
- Supply constraints may continue to affect revenue and costs. Teradyne said it could not fulfill approximately $20 million of test-business demand in 2022 and had $654.8 million of non-cancelable purchase commitments at year-end, $570.3 million due within 12 months.
- U.S. export restrictions announced in October 2022 may limit sales of semiconductor testers in China and affect China-based manufacturing and development. The impact on future revenue and operations was not yet clear; a temporary authorization supported certain China operations pending a license.
- Approximately 70% of Robotics revenue is denominated in foreign currencies; dollar strength reduced 2022 Robotics revenue versus forecast and could weigh on 2023 growth. Inflation had minimal effect on 2022 results, according to management.
- Customer and geographic concentration remain important: the five largest direct customers represented 26% of 2022 revenue; Qualcomm-driven sales, including indirect sales, were estimated at approximately 11%. Sales outside the U.S. were 85% of revenue.
- Teradyne reported $752.1 million of 2022 share repurchases and $69.7 million of dividends. In January 2023 it authorized a new $2 billion repurchase program and said it intended to repurchase up to $500 million in 2023, subject to market conditions. The quarterly dividend was $0.11 per share.
- The AutoGuide earn-out arbitration was settled for $26.7 million on March 25, 2022; Teradyne recorded a related $14.7 million charge during 2022. Management said pending ordinary-course legal matters were not expected to materially affect results or financial condition.
- Teradyne adopted ASU 2020-06 for convertible debt in 2022, changing its accounting presentation and reducing reported interest expense. The Singapore tax holiday, scheduled to expire December 31, 2025, generated $16.0 million of tax savings in 2022, down from $33.3 million in 2021.
Investor items to verify
- Whether semiconductor tester demand stabilizes and whether the expected advanced-node and packaging ramps translate into orders and revenue.
- Progress on China export licenses and the resulting effect on sales, customers and China-based operations.
- Whether supply availability improves, including fulfillment of customer demand and management of elevated inventory, supplier prepayments and purchase commitments.
- Robotics growth and margins after the MiR–AutoGuide combination, including foreign-exchange effects and UR20 shipments.
- Cash generation and capital allocation against the repurchase plan, dividend, capital spending and convertible-note maturity; confirm the remaining note principal and subsequent conversions.
- Customer concentration, the $31.5 million 2022 inventory provision, and the continuing benefit and qualification requirements of the Singapore tax holiday.
PricewaterhouseCoopers issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting as of December 31, 2022.