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 automated test equipment and robotics solutions. We design, develop, manufacture and sell automatic test systems and robotics products. Our automatic test systems are 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 robotics products include collaborative robotic arms and autonomous mobile robots ("AMRs") used by global manufacturing, logistics and industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Our automatic test equipment and robotics 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
• robotics ("Robotics") 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 the first quarter of 2023, the demand in the mobility and compute segments of our Semiconductor Test business was lower due to end market slowdown in these segments as well as a slower technology transition in one of our largest end-markets. While the depth of the slowdown and the timing of the recovery are uncertain, we expect the ramp of 3 nanometer process technology followed by gate-all-around process technology, increasing multichip packaging, additional device complexity and unit growth will drive additional demand for test over our four year forecast period.
Our Robotics segment consists of
In the first quarter of 2023 we met customer demand, in part, through faster
than expected recoveries from supply chain constraints. Both our test and
robotics businesses may still be influenced by supply constraints during the
remainder of 2023, which could impact our revenue and costs. Our second quarter
2023 forecast excludes 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 Robotics 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 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. In the first quarter of 2023 the COVID-19 pandemic had significantly less impact on our business than in prior quarters since the start of the pandemic in 2020. However, we are unable to accurately predict the future impact of COVID-19, which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges or new strains or variants of the virus in areas where we do business.
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
We believe the COVID-19 pandemic and the numerous measures implemented by authorities in response, adversely impacted our results of operations, including by increasing costs, but we cannot accurately estimate the amount of the impact to our financial results. In addition, the pandemic disrupted our contract manufacturers and suppliers, and resulted in supply constraints and in short-term cost increases to meet customer demand.
Supply Chain Constraints and Inflationary Pressures
The global supply shortage of electrical components, including semiconductor
chips, continued to impact our supply chain in the first quarter of 2023. 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 first quarter of 2023, 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. Our second quarter 2023 forecast excludes approximately
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
three months ended
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.
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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