TERADYNE INC. 
Statements in this Quarterly Report on Form 10-Q which are not historical facts,
so called "forward-looking statements," are made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, including those detailed in our filings with the
Overview
We are a leading global supplier of automation equipment for test and industrial applications. We design, develop, manufacture and sell automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our industrial automation products include collaborative robotic arms, autonomous mobile robots ("AMRs") and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Our automatic test equipment and industrial automation products and services include:
• semiconductor test ("Semiconductor Test") systems;
• storage and system level test ("Storage Test") systems, defense/aerospace
("Defense/Aerospace") test instrumentation and systems and circuit-board
test and inspection ("Production Board Test") systems (collectively these
products represent "System Test");
• wireless test ("Wireless Test") systems; and
• industrial automation ("Industrial Automation") products.
The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. A few customers drive significant demand for our test products both through direct sales and sales to the customers' supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future. In 2022, we expect lower demand in the mobility and compute segments of our Semiconductor Test business due to end market slowdown in these segments as well as slower technology transition in one of our largest end-markets. While there is uncertainty if end markets will recover in 2023, the ramp of 3 nanometer starting in 2023 followed by gate-all-around and increasing multichip packaging remain drivers of growth. We expect Semiconductor Test demand in the automotive and industrial segments to remain strong in 2022.
Our Industrial Automation segment consists of
Both our test and industrial automation businesses may continue to be impacted
by supply constraints, which will in turn impact our revenue and is expected to
increase costs in 2022. Through the third quarter of 2022, inflation has not had
a material impact on our results. In the third quarter 2022, we were unable to
supply approximately
Our financial statements are denominated in
Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Industrial Automation businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for opportunistic acquisitions.
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Impact of the COVID-19 Pandemic on our Business
The novel coronavirus (COVID-19) pandemic resulted in government authorities
implementing numerous measures in an effort to contain the spread of the virus,
such as travel bans and restrictions, limitations on gatherings or social
distancing requirements, quarantines, shelter-in-place orders, vaccination and
testing mandates, and business limitations and shutdowns. These measures have
impacted our day-to-day operations and disrupted our business, workforce and
operations, as well as the operations of our customers, contract manufacturers
and suppliers. We are continuing to monitor the rapidly evolving situation
regarding the COVID-19 pandemic, particularly in
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the
global economy and our markets. We are not aware of any specific event or
circumstance that would require an update to our estimates or judgments or a
revision of the carrying value of our assets or liabilities as of
Health and Safety
In response to the COVID-19 pandemic, we have taken proactive, aggressive action to protect the health and safety of our employees, customers, contract manufacturers and suppliers, and we have complied with all government orders around the globe. The spread of COVID-19 has caused us to modify our business practices, which includes implementing social distancing protocols, limiting employee travel and requiring employees to work remotely. We may take further actions as may be required or recommended by government authorities or that we determine are in the best interests of our employees, customers, contract manufacturers and suppliers.
Operations
We believe the COVID-19 pandemic, and the numerous measures implemented by authorities in response, has adversely impacted our results of operations, including by increasing costs, but we cannot accurately estimate the amount of the impact to our third quarter of 2022 financial results or to our future financial results. In addition, the pandemic has disrupted our contract manufacturers and suppliers, and has resulted in supply constraints and short-term cost increases to meet customer demand. While the duration and severity of the pandemic may further impact our workforce and operations, as well as those of our customers, contract manufacturers and suppliers, we expect that our manufacturing facilities will remain operational, at sufficient capacity to support production based on demand and the availability of supply. We are monitoring our operations closely in an effort to avoid any potential productivity losses caused by responses to the COVID-19 pandemic.
Demand
The COVID-19 pandemic significantly increased economic uncertainty in our
markets. Demand for our Test products in
Liquidity
Although there is continued uncertainty related to the impact of the COVID-19
pandemic on our future results, we believe our business model and our current
cash reserves leave us well-positioned to manage our business through this
crisis. We have a strong balance sheet, as well as an operating model that we
believe is capable of flexing up and down with extreme demand swings while still
remaining profitable. Based on our analysis, we believe our existing balances of
cash and cash equivalents and our currently anticipated operating cash flows
will be sufficient to meet our working capital needs and other capital and
liquidity requirements for the next twelve months. However, due to the
uncertainty related to the future impact of the COVID-19 pandemic, in order to
bolster our liquidity position, on
We are continuing to monitor the evolving situation regarding the COVID-19 pandemic, the availability of vaccinations where we do business and guidance from government authorities around the world. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As a result, given the uncertain nature of this situation, we are not able to accurately predict the full extent of the impact of COVID-19 on our business, financial condition, results of operations, liquidity, or cash flows in the future.
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Supply Chain Constraints and Inflationary Pressures
The global supply shortage of electrical components, including semiconductor
chips, continued to impact our supply chain in the third quarter of 2022. As a
result, we experienced, and expect to continue to experience, increases in our
lead times and costs for certain components for certain of our products. In
addition, while not material, inflationary pressures contributed to increased
costs for product components and wage inflation, impacting our cost of products,
gross margin and profit for the quarter. Our supply chain team, and our
suppliers, continue to manage numerous supply, production, and logistics
obstacles. While not material through the third quarter of 2022, in an effort to
mitigate these risks, in some cases, we have incurred higher costs due to
investment in supply chain resiliency and to secure available inventory or have
extended or placed non-cancellable purchase commitments with semiconductor
suppliers, which introduces inventory risk if our forecasts and assumptions
prove inaccurate. We have also sourced components from additional suppliers and
multi-sourced and pre-ordered components and finished goods inventory in some
cases in an effort to reduce the impact of the adverse supply chain conditions
we have experienced. There is no assurance that these efforts will be
successful. In the third quarter 2022, we were unable to supply approximately
Impact of
Impact of
On
See Part II-Item 1A, "Risk Factors," included in our Annual Report on Form 10-K
for the fiscal year ended
Critical Accounting Policies and Estimates
We have identified the policies which are critical to understanding our business
and our results of operations. There have been no significant changes during the
nine months ended
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Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying assumptions may have a material impact on our financial condition and results of operations. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions.
Convertible Debt
We adopted Accounting Standards Update ("ASU")
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions.
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