Teradyne Reports Second Quarter 2020 Results


GAAP to Non-GAAP Earnings Reconciliation 
                           
(In millions, except per share amounts)                       
             Quarter Ended            
     June 28, 2020  % of Net Revenues      March 29, 2020  % of Net Revenues      June 30, 2019  % of Net Revenues    
                                     
Net revenues   $ 838.7                 $ 704.4                 $ 564.2              
                                                     
Gross profit GAAP $ 471.5       56.2 %           $ 405.6     57.6 %           $ 323.9     57.4 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             0.4     0.1 %        
Gross profit non-GAAP $ 471.6       56.2 %           $ 405.7     57.6 %           $ 324.3     57.5 %        
                                                     
Income from operations - GAAP $ 217.9       26.0 %           $ 206.7     29.3 %           $ 134.0     23.8 %        
  Restructuring and other (1)   37.2       4.4 %             (7.6 )   -1.1 %             (10.4 )   -1.8 %        
  Acquired intangible assets amortization   8.9       1.1 %             9.9     1.4 %             10.1     1.8 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             0.4     0.1 %        
Income from operations - non-GAAP $ 264.1       31.5 %           $ 209.1     29.7 %           $ 134.1     23.8 %        
                                                     
                Net Income per
Common Share
          Net Income per Common Share           Net Income per Common Share
        June 28, 2020   % of Net Revenues   Basic   Diluted   March 29, 2020   % of Net Revenues   Basic   Diluted   June 30, 2019   % of Net Revenues   Basic   Diluted
Net income - GAAP $ 188.9       22.5 %   $ 1.14     $ 1.05     $ 176.2     25.0 %   $ 1.06     $ 0.97     $ 97.4     17.3 %   $ 0.57     $ 0.55  
  Restructuring and other (1)   37.2       4.4 %     0.22       0.21       (7.6 )   -1.1 %     (0.05 )     (0.04 )     (10.4 )   -1.8 %     (0.06 )     (0.06 )
  Acquired intangible assets amortization   8.9       1.1 %     0.05       0.05       9.9     1.4 %     0.06       0.05       10.1     1.8 %     0.06       0.06  
  Interest and other (2)   3.6       0.4 %     0.02       0.02       3.5     0.5 %     0.02       0.02       3.4     0.6 %     0.02       0.02  
  Inventory step-up   0.1       0.0 %     0.00       0.00       0.1     0.0 %     0.00       0.00       0.4     0.1 %     0.00       0.00  
  Pension mark-to-market adjustment (2)   (0.1 )     -0.0 %     (0.00 )     (0.00 )     -     -       -       -       0.4     0.1 %     0.00       0.00  
  Exclude discrete tax adjustments (3)   (1.1 )     -0.1 %     (0.01 )     (0.01 )     (7.7 )   -1.1 %     (0.05 )     (0.04 )     13.9     2.5 %     0.08       0.08  
  Non-GAAP tax adjustments   (8.3 )     -1.0 %     (0.05 )     (0.05 )     (1.9 )   -0.3 %     (0.01 )     (0.01 )     (2.0 )   -0.4 %     (0.01 )     (0.01 )
  Convertible share adjustment (4)   -       -       -       0.06       -     -       -       0.04       -     -       -       0.02  
Net income - non-GAAP $ 229.2       27.3 %   $ 1.38     $ 1.33     $ 172.5     24.5 %   $ 1.04     $ 1.00     $ 113.2     20.1 %   $ 0.66     $ 0.66  
                                                     
GAAP and non-GAAP weighted average common shares - basic   165.8                   166.6                   171.2              
GAAP weighted average common shares - diluted   180.3                   180.7                   178.6              
  Exclude dilutive shares related to convertible note transaction      (7.6 )                 (7.3 )                 (6.2 )            
Non-GAAP weighted average common shares - diluted   172.7                   173.4                   172.4              
                                                     
                                                     
(1 ) Restructuring and other consists of: 
        Quarter Ended            
        June 28, 2020               March 29, 2020               June 30, 2019            
    Contingent consideration fair value adjustment $ 29.3                 $ (10.0 )               $ (11.7 )            
    Contract termination settlement fee   4.0                   -                   -              
    Acquisition related expenses and compensation   3.1                   1.4                   0.5              
    Employee severance   -                   0.7                   0.8              
    Other     0.8                   0.3                   -              
        $ 37.2                 $ (7.6 )               $ (10.4 )            
                                                     
(2 ) For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 28, 2020 and June 30, 2019, adjustment to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting. 
                                                     
(3 ) For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, income tax (benefit) provision includes a $15 million tax provision related to the finalization of our toll tax charge. 
(4 ) For the quarters ended June 28, 2020 and March 29, 2020, the non-GAAP diluted EPS calculation adds back $1.3 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.8 million and 5.5 million shares, respectively, related to the convertible debt hedge transaction. 
        Six Months Ended                
        June 28, 2020   % of Net Revenues           June 30, 2019   % of Net Revenues                        
                                                     
Net Revenues   $ 1,543.0                 $ 1,058.3                              
                                                     
Gross profit GAAP $ 877.0       56.8 %           $ 611.6     57.8 %                        
  Inventory step-up   0.2       0.0 %             0.4     0.0 %                        
Gross profit non-GAAP $ 877.2       56.9 %           $ 612.0     57.8 %                        
                                                     
Income from operations - GAAP $ 424.7       27.5 %           $ 227.1     21.5 %                        
  Restructuring and other (1)   29.6       1.9 %             (5.3 )   -0.5 %                        
  Acquired intangible assets amortization   18.8       1.2 %             20.7     2.0 %                        
  Inventory step-up   0.2       0.0 %             0.4     0.0 %                        
Income from operations - non-GAAP $ 473.3       30.7 %           $ 242.9     23.0 %                        
                                                     
                Net Income per Common Share           Net Income per Common Share                
        June 28, 2020   % of Net Revenues   Basic   Diluted   June 30, 2019   % of Net Revenues   Basic   Diluted                
Net income - GAAP $ 365.1       23.7 %   $ 2.20     $ 2.02     $ 206.5     19.5 %   $ 1.20     $ 1.16                  
  Restructuring and other (1)   29.6       1.9 %     0.18       0.16       (5.3 )   -0.5 %     (0.03 )     (0.03 )                
  Acquired intangible assets amortization   18.8       1.2 %     0.11       0.10       20.7     2.0 %     0.12       0.12                  
  Interest and other (2)   7.1       0.5 %     0.04       0.04       6.8     0.6 %     0.04       0.04                  
  Inventory step-up   0.2       0.0 %     0.00       0.00       0.4     0.0 %     0.00       0.00                  
  Pension mark-to-market adjustment (2)   (0.1 )     -0.0 %     (0.00 )     (0.00 )     0.4     0.0 %     0.00       0.00                  
  Exclude discrete tax adjustments (3)   (8.7 )     -0.6 %     (0.05 )     (0.05 )     (16.2 )   -1.5 %     (0.09 )     (0.09 )                
  Non-GAAP tax adjustments   (10.1 )     -0.7 %     (0.06 )     (0.06 )     (5.5 )   -0.5 %     (0.03 )     (0.03 )                
  Convertible share adjustment (4)   -       -       -       0.10       -     -       -       0.03                  
Net income - non-GAAP $ 401.9       26.0 %   $ 2.42     $ 2.34     $ 207.8     19.6 %   $ 1.21     $ 1.20                  
                                                     
GAAP and non-GAAP weighted average common shares - basic   166.2                   172.4                              
GAAP weighted average common shares - diluted   180.5                   177.8                              
  Exclude dilutive shares from convertible note   (7.5 )                 (4.2 )                            
Non-GAAP weighted average common shares - diluted   173.0                   173.6                              
                                                     
(1 ) Restructuring and other consists of: 
        Six Months Ended                            
        June 28, 2020               June 30, 2019                            
    Contingent consideration fair value adjustment $ 19.2                 $ (8.7 )                            
    Acquisition related expenses and compensation   4.5                   1.8                              
    Contract termination settlement fee   4.0                   -                              
    Employee severance   0.8                   1.6                              
    Other     1.1                   -                   -              
        $ 29.6                 $ (5.3 )                            
                                                     
(2 ) For the six months ended June 28, 2020 and June 30, 2019, interest and other included non-cash convertible debt interest expense. For the six months ended June 28, 2020 and June 30, 2019, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting. 
                                                     
(3 ) For the six months ended June 28, 2020 and June 30, 2019, adjustment to exclude discrete income tax items. For the six months ended June 30, 2019, income tax (benefit) provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and includes a $15 million tax provision related to the finalization of our toll tax charge. 
                                                     
(4 ) For the six months ended June 28, 2020, the non-GAAP diluted EPS calculation adds back $2.6 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.7 million shares related to the convertible debt hedge transaction. 
                                                     
GAAP to Non-GAAP Reconciliation of Third Quarter 2020 guidance:                                            
                                                     
GAAP and non-GAAP third quarter revenue guidance:       $745 million   to   $805 million                                      
GAAP net income per diluted share     $ 0.91     $ 1.06                                      
  Exclude acquired intangible assets amortization       0.03       0.03                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Tax effect of non-GAAP adjustments       0.01       0.01                                      
  Convertible share adjustment       0.04       0.04                                      
Non-GAAP net income per diluted share     $ 1.01     $ 1.17                                      
                                                     

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