UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-06462
TERADYNE, INC.
(Exact Name of Registrant as Specified in Its Charter)
MASSACHUSETTS
(State or Other Jurisdiction of
Incorporation or Organization)
600 RIVERPARK DRIVE
NORTH READING, MASSACHUSETTS
(Address of Principal Executive Offices)
04-2272148
(I.R.S. Employer
Identification Number)
01864
(Zip Code)
Registrant’s telephone number, including area code: (978) 370-2700
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
TER
Name of each exchange on which registered
Nasdaq Stock Market LLC
Title of each class
Common Stock, par value
$0.125 per share
Indicate by check mark if the registrant is awell- known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File to be submitted pursuant to Rule 405 of
Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required areco very analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act (check one):
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
☐
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed are port on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant as of July 2, 2023, was approximately $11.0 billion based upon
the closing price of the registrant’s Common Stock on the Nasdaq Stock Market on that date.
The number of shares outstanding of the registrant’s only class of Common Stock as of February 16, 2024, was 153,080,607 shares.
Portions of the registrant’s proxy statement in connection with its 2024 annual meeting of shareholders are incorporated by reference into Part III of
DOCUMENTS INCORPORATED BY REFERENCE
this Form 10-K.
TERADYNE, INC.
INDEX
PART I.
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business..............................................................................................................................................................
Risk Factors........................................................................................................................................................
Unresolved Staff Comments ..............................................................................................................................
Cybersecurity .....................................................................................................................................................
Properties............................................................................................................................................................
Legal Proceedings ..............................................................................................................................................
Mine Safety Disclosure ......................................................................................................................................
PART II.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities ............................................................................................................................................................
(Reserved) ..........................................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operation..............................
Quantitative and Qualitative Disclosures about Market Risk ............................................................................
Financial Statements and Supplementary Data ..................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...........................
Controls and Procedures.....................................................................................................................................
Other Information...............................................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ...............................................................
PART III.
Directors, Executive Officers and Corporate Governance.................................................................................
Executive Compensation....................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters..........
Certain Relationships and Related Transactions, and Director Independence...................................................
Principal Accountant Fees and Services ............................................................................................................
Exhibits and Financial Statement Schedule .......................................................................................................
Form 10-K Summary .........................................................................................................................................
Signatures ...........................................................................................................................................................
PART IV.
Page No.
2
10
21
21
23
23
23
24
24
25
36
38
87
87
87
87
88
88
88
88
88
89
90
95
TERADYNE, INC.
FORM 10-K
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” regarding Teradyne's future business prospects,
financial performance or position and results of operations. When used herein, the words such as “anticipate,” “expect,” “plan,”
“could,” “may,” “will,” “believe,” “estimate,” “goal,” or other comparable terms are intended to identify forward-looking statements
although not all forward-looking statements contain these identifying words. Forward-looking statements involve risks and
uncertainties, including, but not limited to, those discussed in the section entitled “Risk Factors” of this Annual Report on Form 10-K
and elsewhere, and in our other filings with the Securities and Exchange Commission (“SEC”). Readers are cautioned not to place
undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof and are subject to
risks and uncertainties that could cause actual results to differ materially from those stated or implied. Teradyne assumes no obligation
to update these forward-looking statements for any reason, except as may be required by law.
1
Item 1: Business
PART I
Teradyne, Inc. (“Teradyne”) was founded in 1960 and is alead ing global supplier of automated test equipment and robotics
solutions.
We design, develop, manufacture and sell automated test systems and robotics products. Our automated test systems are used to
test semiconductors, wireless products, data storage and complex electronics systems in many industries including 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 automated 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 products both through direct sales and
sales to the customer’s 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 2023, the demand in our Semiconductor Test business continued to be impacted by acorrect ion cycle driven by excess
semiconductor inventory, primarily in the mobility segment of the market. The depth of this slowdown and the timing of the recovery
are uncertain, however, strong automotive and image sensor demand partially offset these declines. The growth of DDR5 and High
Bandwidth Memory ("HBM") devices for data center applications continued to drive demand for our products in the memory market
in 2023. Over the midterm, we expect the ramp of 3nanometer and g ate-all-around process technology, increasing multichip
packaging, additional device complexity and unit growth will drive additional demand for Semiconductor Test.
Our Robotics segment consists of Universal Robots A/S (“UR”), aleadin g supplier of collaborative robotic arms, and Mobile
Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation. The market for our Robotics segment products is
dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”)
throughout the world. Demand in the fourth quarter of 2023 increased, tied to introduction of new products and seasonally high
demand in Robotics after market softness and the impact of our channel transformation resulted in aweak er than forecasted first half
of 2023.
On November 7, 2023, Teradyne and Technoprobe S.p.A (“Technoprobe”), ale ader in the design and production of probe cards,
announced the establishment of astrategi c partnership that will seek to accelerate growth for both companies and enable higher
performance semiconductor test interfaces for customers worldwide. As part of the partnership, Teradyne will make an investment of
481.0 million Euros in exchange for a10% equity investment in Technoprobe and Technoprobe will acquire 100% of Teradyne’s
Device Interface Solutions ("DIS") business in exchange for $85.0 million. The transaction is expected to close during the first half of
2024.
In 2023, inflation had minimal effect on our results. While both our test and robotics businesses may continue to be influenced
by supply constraints, which could impact our revenue and costs, we do not anticipate that supply chain constraints will have a
material impact on our financial results in 2024.
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately
70 percent of our Robotics sales are denominated in foreign currencies. There was no material impact to our 2023 results due to
changes in foreign exchange rates, however, in 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted
revenues in our Robotics segment. Strengthening of the U.S. dollar would adversely affect Robotics revenue growth in 2024.
2
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 continue investing in our growth while balancing capital allocations between stock repurchases and dividends
and using capital for acquisitions.
Investor Information
We are a Massachusetts corporation incorporated on September 23, 1960. We are subject to the informational requirements of
the Securities Exchange Act of 1934 (“Exchange Act”). We file periodic reports, proxy statements and other information with the
SEC. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other
information regarding issuers that file documents electronically.
You can access financial and other information, including the charters of our Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee, our Corporate Governance Guidelines and Code of Conduct, by clicking the
Investors link on our web site at www.teradyne.com. We make available, free of charge, copies of our filings with the SEC, including
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act through our web site as soon as reasonably practicable after filing
such material electronically or otherwise furnishing it to the SEC.
Products
Semiconductor Test
We design, manufacture, sell and support Semiconductor Test products and services on a worldwide basis. The test systems we
provide are used both for wafer level and device package testing of semiconductor devices. These devices are used in automotive,
industrial, communications, consumer, smartphones, cloud, computer and electronic game applications, among others. Semiconductor
devices span a broad range of functionality, from very simple low-cost devices such as appliance microcontrollers, operational
amplifiers or voltage regulators to complex digital signal processors, Artificial Intelligence/Machine Learning (“AI/ML”) training,
high performance computing and microprocessors as well as memory devices. Semiconductor Test products and services are sold to
integrated device manufacturers (“IDMs”) that integrate the fabrication of silicon wafers into their business, “Fabless” companies that
outsource the manufacturing of silicon wafers, “Foundries” that cater to the processing and manufacturing of silicon wafers, and
semiconductor assembly and test providers (“OSATs”) that provide test and assembly services for the final packaged devices to both
Fabless companies and IDMs. Fabless companies perform the design of integrated circuits without manufacturing capabilities and use
Foundries for wafer manufacturing and OSATs for test and assembly. These customers obtain the overall benefit of comprehensively
testing devices and reducing the total costs associated with testing by using our Semiconductor Test systems to:
•
improve and control product quality;
• measure and improve product performance;
•
•
reduce time to market; and
increase production yields.
Our FLEX Test Platform architecture advances our core technologies to produce test equipment that is designed for high
efficiency multi-site testing. Multi-site testing involves the simultaneous testing of many devices in parallel. Leading semiconductor
manufacturers are using multi-site testing to significantly improve their “Cost of Test” economics. The FLEX Test Platform
architecture addresses customer requirements through the following key capabilities:
• A high efficiency multi-site architecture that reduces tester overhead such as instrument setup, synchronization and data
movement, and signal processing;
• The IG-XL™ software operating system which provides fast program development, including instant conversion from single
to multi-site test; and
• Broad technology coverage by instruments designed to cover the range of test parameters, coupled with a universal slot test
head design that allows easy test system reconfiguration to address changing test needs.
FLEX Test Platform purchases are made by IDMs, OSATs, Foundries and Fabless customers. The FLEX Test Platform has
become a widely used test solution at OSATs by providing versatile testers that can handle the widest range of devices, allowing
OSATs to leverage their capital investments. The broad consumer, automotive and broadband markets have historically driven most of
the device volume growth in the semiconductor industry. These markets include mobile phones and tablets, PCs, servers, networking
3
and automotive electronics. These end use markets continue to be drivers for the FLEX Test Platform family of products because they
require a wide range of technologies and instrument coverage. In 2019, we introduced our next generation UltraFLEXPlus tester, the
newest member of the UltraFLEX family, UltraFLEXPlus uses the new PACETM architecture to deliver superior economics and fast time
to market for complex digital devices.
Our J750™ test system shares the IG-XL software environment with the family of FLEX Test Platform systems. The J750 is
designed to handle high volume semiconductor devices, such as microcontrollers, that are central to the functionality of almost every
consumer electronics product, from small appliances to automobiles. J750 test systems combine compact packaging, high throughput
and ease of production test. We extended the J750 platform technology to create the IP750 Image Sensor™ test system. The IP750 is
focused on testing image sensor devices used in smartphones, automobiles and other imaging products. We have continued to invest in
the J750 platform with new instrument releases that bring new capabilities to existing market segments and expand the J750 platform
to new devices that include high end microcontrollers and the latest generation of image sensors.
Our Magnum platform addresses the requirements of mass production test of memory devices for flash and DRAM memory.
Flash and DRAM memory are widely used core building blocks in modern electronic products finding wide application in consumer,
industrial, and computing equipment. Magnum 7, the newest member of the family introduced at the end of 2021, is a next generation
memory test solution designed for parallel memory test in the flash, DRAM and multi-chip package markets. In 2019, we introduced a
high-speed DRAM test version of our Magnum platform called Magnum EPIC giving us full product coverage of the memory test
market.
Our ETS platform is used by semiconductor manufacturers and assembly and test subcontractors, primarily in the analog/mixed
signal markets that cover more cost sensitive applications. Our proprietary SmartPin™ technology enables high efficiency multi-site
testing, on an individual test system, permitting greater test throughput. Semiconductors tested by ETS platform systems are
incorporated into a wide range of products in historically high-growth markets, including mobile devices, automotive electronics,
computer peripherals, and notebook and desktop computers. The Eagle platform includes the ETS-88, a high performance multi-site
production test system designed to test awide vari ety of high volume power and precision devices, including Silicon Carbide (SiC)
and Gallium Nitride (GaN) power devices used in vehicle electrification, and the ETS-800, a high performance multi-site production
test system, is used to test high complexity power devices in automotive, industrial and consumer applications.
System Test
Our System Test segment is comprised of three business units: Storage Test, Defense/Aerospace, and Production Board Test.
Storage Test
The Storage Test business unit addresses the high throughput, automated manufacturing test requirements of hard disk drive
(“HDD”) and semiconductor manufacturers. Our HDD products address the client and enterprise storage markets. The client market is
driven by the needs of desktop, laptop, and external HDD storage products. The enterprise market is driven by the needs of data
centers and cloud storage. Our system level test product for the semiconductor production market is used to test devices following
wafer and package test. The business unit’s products lead in addressing customer requirements related to factory density, throughput
and thermal performance.
Defense/Aerospace
We are a leading provider of high performance test systems, subsystems, instruments and service for the defense and aerospace
markets. Our test products are used to ensure the readiness of military and commercial aerospace electronics systems. New programs,
such as tactical aircraft and missile systems, as well as upgrade programs, continue to fuel the demand for high performance test
systems in this market. Our test products are well-suited to the demands of defense/aerospace electronics manufacturers and repair
depots worldwide. Our leadership in this market is underscored by our success with major Department of Defense programs across all
U.S. military service branches and many allied defense services worldwide.
Production Board Test
Our test systems are used by electronics manufacturers and OEMs worldwide to perform In-Circuit-Test (“ICT”) and device
programming of printed circuit board assemblies. Fast, accurate and cost-effective test capabilities are hallmark features of our Test
Station product families. We offer the Test Station in off-line and automated in-line configurations. The automated in-line
configurations address the growing requirements for automating production lines for high volume applications, such as automotive
electronics, computing, and communications.
4
Wireless Test
Our Wireless Test segment is a business unit run under the LitePoint brand name providing wireless test solutions for silicon
validation, wireless module manufacturing, and wireless end device manufacturing. The world’s leading makers of smartphones,
laptops, access points, and Internet-of-Things (“IoT”) devices rely on LitePoint equipment to ensure their products get into
consumer’s hands with high quality and high efficiency.
LitePoint wireless test systems span design verification to high volume manufacturing and are deployed across the entire
production chain from wireless chipset suppliers to consumer brands. Design verification involves comprehensive automated testing
of small quantities of devices in an R&D lab to ensure the device meets its design targets over awide range of conditions and
scenarios. High Volume manufacturing involves the calibration and testing of each wireless device to ensure the product will deliver
the intended customer experience. This ensures all the products perform identically in terms of their wireless characteristics.
LitePoint equipment serves an ever-expanding number of wireless standards in three segments: connectivity, cellular, and
secure ranging. Connectivity encompasses numerous short range unlicensed communication standards. Cellular includes standards
operating in licensed spectrum from afew G Hz to 10s of GHz (mmWave). Finally, secure ranging uses Ultra Wideband (UWB)
technology to provide centimeter level positioning with secure data transactions for applications such as “digital keys” and item
location (tag type trackers).
LitePoint serves these wireless segments with multiple product families. The LitePoint IQxel-MX and IQxel-MW7G series
provide leading edge measurement performance for both design validation and high volume manufacturing of connectivity
products. The LitePoint IQxstream-5G and IQgig-5G families combine support for 4G and 5G technologies across a wide range of
frequencies to serve all the needs of both end user (smartphones) and network infrastructure (small cells and O-RAN)
equipment. Finally, the IQgig-UWB+ provides comprehensive certification and manufacturing test support for UWB (802.15.14)
products used for secure ranging.
Robotics
Our Robotics segment is comprised of two business units: Universal Robots and Mobile Industrial Robots.
Universal Robots
Universal Robots is ale ading provider of collaborative robots (cobots) used across various industries, including automotive,
food & beverage, metal & machining, electronics, pharmaceutical, and in education. Founded in 2005 and headquartered in Odense,
Denmark, Universal Robots aims to create a world where people work with robots, not like robots. Its mission is simple: “Automation
for anyone. Anywhere.”
Since introducing the world's first commercially viable cobot in 2008, Universal Robots has sold over 75,000 cobots worldwide
and has developed aproduct p ortfolio reflecting a range of reaches and payloads, including the UR3e, UR5e, UR10e, UR16e, UR20
and UR30 robots. All models are robust, built to withstand awide range of industrial environments, and can be easily integrated into
existing production setups, providing a number of game-changing benefits:
• Straightforward programming – UR's intuitive software, PolyScope, enables users to program a cobot easily and have an
application up and running within a few hours.
• High return on investment – cobots require a lower initial investment than traditional robotics and have an average
payback time of 12-18 months.
• Versatile deployment – cobots' high degree of flexibility allows customers to change the task and pace of the cobot
according to production demands.
• Collaborative-capable safety functions – following a risk assessment, most cobots can seamlessly operate alongside
employees, assisting with dull, dirty, and dangerous tasks.
• Cutting-edge precision engineering – UR's global team of talented engineers creatively tackles customer challenges,
ensuring our cobots are rigorously tested and built for demanding industrial tasks.
An extensive ecosystem has grown around the company's cobot technology creating innovation, choice for customers and a
wide range of components, kits and solutions to suit every application. UR also provides an all-encompassing customer experience
including UR Academy -an award-winning training program, available both online and in person in more than 120 training centers
worldwide, and three tiers of service offerings carefully designed to accelerate customer success.
5
Universal Robots has recently established global Centers of Excellence for Welding, Palletizing, and Machine Tending
applications. These centers, led by subject matter experts, serve as knowledge hubs, offering expert recommendations and guidance on
the latest trends in the field to UR partners and key customers worldwide.
Mobile Industrial Robots
MiR is ale ading provider of autonomous mobile robots (AMRs) for the manufacturing and logistics segments. The MiR AMRs
enhance productivity, offering a high return on investment by streamlining workforce efficiency, reducing lead times, and improving
workplace safety. These AMRs operate autonomously, eliminating the need for traditional guidance infrastructure. MiR currently
offers three models—MiR250, MiR600, and MiR1350—each with varying payload capacities, all managed by our unified fleet
management software, MiR Fleet. Launched in fall 2021, MiR600 and MiR1350 are industrial-grade robots with IP52 rating,
compliant with ISO 3691-4 safety standards, and TÜV certified.
All models can be easily integrated into existing production environments. MiR’s products are differentiated by their:
• Ease of Use and Speed of Deployment: Our robots are designed for quick deployment and flexibility, allowing customers
to adapt tasks based on changing demands.
• Safe Operations: Equipped with 360 safety coverage, our robots navigate around static and dynamic obstacles, ensuring
safety in busy environments.
• Reliable Autonomous Navigation: The MiR robots demonstrate consistent, reliable navigation across large manufacturing
and warehouse areas.
• Short Payback Period: With an average payback period of 12–24 months, MiR's products provide a swift return on
investment.
Sales and Distribution
In 2023, revenues from Texas Instruments Inc., a customer of our Semiconductor Test segment, accounted for 10% of our
consolidated revenues. In 2021, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of our
Semiconductor Test segment, accounted for 12% of our consolidated revenues. In each of the years, 2023, 2022 and 2021, our five
largest direct customers in aggregate accounted for 32%, 26% and 33% of our consolidated revenues, respectively.
OSAT customers, such as Taiwan Semiconductor Manufacturing Company Ltd., often purchase our test systems based upon
recommendations from OEMs, IDMs and Fabless companies. In all cases when an OSAT customer purchases a test system from us,
we consider the OSAT as the customer since credit risk, title and risk of loss, among other things, are between Teradyne and the
OSAT. We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test, and Wireless
Test segments, combining direct and indirect sales, accounted for approximately 11% of our consolidated revenues in 2022. We
estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments, combining
direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company
Ltd.), accounted for approximately 19% of our consolidated revenues in 2021. The loss of, or significant decrease in demand from this
OEM customer or any of our five largest direct customers, could have a material adverse effect on our business, results of operations
and financial condition.
We have sales and service offices located throughout North America, Central America, Asia and Europe. We sell in these areas
predominantly through a direct sales force, except for Robotics products, which are sold principally through distributors. Our
manufacturing activities for our test businesses are primarily conducted through subcontractors and outsourced contract manufacturers
with significant operations in China and Malaysia. The manufacturing activities for our Robotics businesses are done primarily in our
production facilities in Denmark and the U.S.
Sales to customers outside the United States were 84%, 85%, and 89%, respectively, of our consolidated revenues in 2023, 2022
and 2021. Sales are attributed to geographic areas based on the location of the customer site.
See also “Item 1A: Risk Factors” and Note T: “Operating Segment, Geographic and Significant Customer Information” in Notes
to Consolidated Financial Statements.
6
Competition
We face significant competition throughout the world in each of our reportable segments. Competitors in the Semiconductor
Test segment include, among others, Advantest Corporation and Cohu, Inc.
Competitors in the System Test segment include, among others, Keysight Technologies, Inc., Advantest Corporation, Test
Research, Inc. SPEA S.p.A. and Astronics Corporation.
Competitors in our Wireless Test segment include, among others, Rohde & Schwarz GmbH & Co. KG, Anritsu Company,
Keysight Technologies, Inc., National Instruments Corporation, Welzek and iTest.
Competitors in our Robotics segment include manufacturers of traditional industrial robots such as KUKA Robotics
Corporation, ABB, FANUC, Staubli and Yaskawa Electric Corporation, companies with emerging collaborative robot offerings such
as Techman, Doosan, Jaka, and AUBO Robotics, and manufacturers of autonomous mobile robots in the material handling space such
as Omron, Rockwell Automation, Junion, HikRobot, Agilox, and KION.
Some of our competitors may have greater financial and other resources to pursue engineering, manufacturing, marketing, and
distribution of their products. We also face competition from emerging Asian companies and from internal suppliers at several of our
customers. Some of our competitors have introduced or announced new products with certain performance characteristics which may
be considered equal or superior to those we currently offer. We expect our competitors to continue to improve the performance of their
current products and to introduce new products or new technologies that provide improved cost of ownership and performance
characteristics. See also “Item 1A: Risk Factors.”
Backlog
At December 31, 2023 and 2022, our backlog of unfilled orders in our four reportable segments was as follows:
Semiconductor Test
System Test
Robotics
Wireless Test
2023
2022
(in millions)
$
$
822.8
223.8
42.3
35.7
1,124.6
$
$
879.6
253.0
42.6
60.0
1,235.2
Customers may delay delivery of products or cancel orders suddenly and without advanced notice, subject to possible
cancellation penalties. Due to possible customer changes in delivery schedules and cancellation of orders, our backlog at any
particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules or cancellations
of backlog during any particular period could have a material adverse effect on our business, financial condition or results of
operations.
Raw Materials
Our products contain electronic and mechanical components that are provided by awide range of suppliers. Some of these
components are standard products, while others are manufactured to our specifications. We have experienced delays in obtaining
timely delivery of certain components. These delays have impacted and may continue to impact the manufacturing of certain products
and the timing of delivery of those products to our customers. While the majority of our components are available from multiple
suppliers, certain items are obtained from sole sources. We may experience a temporary adverse impact if any of our sole source
suppliers delay or cease to deliver products.
Intellectual Property and Licenses
The development of our products, both hardware and software, is based in significant part on proprietary information, our
brands and technology. We protect our rights in proprietary information, brands and technology through various methods, such as:
• patents;
•
•
copyrights;
trademarks;
7
•
•
•
trade secrets;
standards of business conduct and related business practices; and
technology license agreements, software license agreements, non-disclosure agreements, employment agreements, and other
agreements.
However, these protections might not be effective in all circumstances. Competitors might independently develop similar
technology or exploit our proprietary information and our brands in countries where we lack enforceable intellectual property rights or
where enforcement of such rights through the legal system provides an insufficient deterrent. Also, intellectual property protections
can lapse or be invalidated through appropriate legal processes. We do not believe that any single piece of intellectual property or
proprietary rights is essential to our business.
Human Capital
We believe that our future success depends upon our continued ability to attract, develop, and retain ahigh-perform ance
workforce, comprised of people with shared values. As of December 31, 2023, we employed approximately 6,500 employees, of
whom approximately 2,000 were employed in the United States and approximately 4,500 were employed outside of the United States.
Our largest non-US employee populations are in the Philippines (18%), Denmark (12%), China (10%), Taiwan (7%) and Costa Rica
(6%). We also leverage contractors to provide flexibility for our business and manufacturing needs. As of December 31, 2023, we
worked with approximately 300 contractors globally. Since the inception of our business, we have experienced no work stoppages or
other labor disturbances.
Corporate Culture
Our core values are conducting business with honesty and integrity, collaborating with our colleagues as acompany w ithout
doors, and partnering with our customers every step of the way, because customers count on us.
We strive to foster a positive work environment that helps employees thrive. It is aprio rity for us to ensure that our people feel
inspired, supported, safe and able to achieve their personal best. We are committed to equality through nondiscrimination, harassment
prevention and pay equity policies. We value a diverse, inclusive and respectful work environment where all employees enjoy
challenging assignments, development opportunities and a safe, positive culture.
We are committed to conducting business in a responsible manner, with strategic operational policies, procedures and values
that support transparency, sustainability and legal compliance. We ensure ethical operations and business commitments through robust
governance of the company’s code of conduct and global environmental, health and safety programs.
Competitive Pay and Benefits
The primary objective of our compensation program is to provide a compensation and benefits package that will continue to
attract, retain, motivate and reward high performing employees who operate in a highly competitive and technologically challenging
environment. We seek to achieve this objective by linking a meaningful portion of compensation to company and business unit
performance. We enable employees worldwide to share in the success of the company through various programs including a stock
purchase program, equity compensation, profit sharing and bonus plans. We seek competitiveness and fairness in total compensation
with reference to peer comparisons and internal equity.
In addition to providing our employees with competitive compensation packages, we offer benefits designed to meet the needs
of employees and their families worldwide, including paid time off, parental leave, bereavement leave, health insurance coverage,
flexible work arrangements, contributions to retirement savings, and access to employee assistance and work-life programs.
Employee Development and Training
We believe that employee development and training is a key factor in attracting, motivating, improving and retaining a strong,
competitive global workforce. We provide continual development to our employees focused on developing their job skills and
competencies. Examples include new manager competencies like giving feedback and coaching, and training in software development
tools and project management. Our employees worldwide also receive annual performance reviews and are involved in setting goals
for their own development and performance. Employees and managers look back on the previous year, review career development
plans and create goals for the next year. In 2022, we implemented anew l earning management system integrated with our human
resource system. This enabled our business to more easily create and offer business training courses.
8
We are committed to recruiting and developing talent at the collegiate level to help advance Science, Technology, Engineering
and Mathematics (“STEM”) education for the future generation. For example, our paid internships and entry-level positions offer real-
world experience, and our co-op program offers higher education students aunique learning opportunity as students alternate one
semester in a work assignment and one semester in the classroom. Additionally, we offer reimbursement for educational courses
related to an employee’s work or as part of adegree program, including tuition, lab fees and books. We also offer aschol arship
program for employees with college-age children, step-children and grandchildren. In 2023, approximately half of the scholarship
recipients were outside of the United States.
Employee Engagement
We conduct regular employee surveys to check in with our global workforce and obtain input on a number of topics. The
feedback we receive from these surveys helps us assess employee sentiment, identify areas of improvement and guides our decision-
making as it relates to people management. In addition, our CEO and other executives meet with employees worldwide on afrequent
basis through exchange meetings and quarterly webcasts. The exchange meetings allow the executives to directly interact with a small
group of employees, while the global webcasts enable all employees to engage with senior leaders and ask questions in an open Q&A
session.
We also offer employees worldwide an opportunity to network and connect with colleagues who share similar interests. This
includes global groups such as New Employees to Teradyne, Woman’s Affinity Group, Veterans, Blue and Green (for team members
that are committed to the environment), Runner’s affinity group and LGBTQ+ advocates.
Diversity and Inclusion
We believe in fostering a diverse workforce and equitable and inclusive culture in order to build a stronger and more resilient
company for our customers, our investors, our employees and our communities worldwide. To support this effort, we have a Diversity
and Inclusion Charter which was developed by our Diversity, Equity and Inclusion (“DEI”) executive sub-committee and designed to
ensure that we build diversity across our workforce. Since 2021, we have had aDEI p rogram manager to steer our DEI efforts and
maintain an internal DEI website for employees. We have established programs for recruiting and hiring candidates from various
backgrounds and experiences. We have policies regarding gender pay equity and regularly conduct audits of pay equity in the United
States. We conduct mandatory DEI-related training for our employees worldwide and offer awide variety of optional DEI-related
training courses as well. We are an equal opportunity and affirmative action employer committed to making employment decisions
without regard to race, religion, ethnicity or national origin, gender, sexual orientation, gender identity or expression, age, disability,
protected veteran status or any other characteristics protected by law.
We have a tradition of amplifying the charitable actions of our employees and responding to the needs of the communities
where we work. To make it easier for employees to support charitable activities and magnify the impact of support, we established a
formal matching gift program, “Teradyne Gives.” The program matches up to $1,000 per year of an employee’s donations to charities
of their choosing, selected from a wide range of qualified non-profit organizations.
Additionally, advancing education for future generations is a primary initiative at Teradyne. We seek to increase the diversity
of STEM graduates worldwide through our support of STEM programs at the middle, high school and collegiate level. We also donate
test equipment and robots to colleges, universities, and vocational programs.
Health and Safety
The health and safety of our employees worldwide is our highest priority. We are committed to complying with all applicable
regulatory health and safety requirements wherever we operate. We conduct internal audits, regular reviews and monitoring of
regulations to ensure compliance with laws and regulations at the local, state, province and country levels. We ensure workers are
provided with the knowledge to perform their jobs safely by deploying mandatory environmental, health and safety training. We also
require contractors to complete safety training prior to working at any Teradyne site. We monitor, track and report common safety
metrics such as accidents, near misses and illness. Our injury and illness rate is below the industry average. We also provide our
employees with a flexible and adjustable workspace, which includes reviewing ergonomics issues in the workplace, educating
employees to self-identify risks and ensuring they have the work environment they need to do their jobs safely and effectively.
Regulatory Environment
We are subject to various federal, state, and local government laws and regulations relating to international trade, business
conduct, the protection of employee health and safety and the environment.
9
We accrue for all known environmental liabilities when it becomes probable that we will incur cleanup costs and those costs can
reasonably be estimated. Estimated environmental costs are not expected to materially affect the financial position or results of our
operations in future periods. However, estimates of future costs are subject to change due to protracted cleanup periods and changing
environmental remediation laws and regulations.
We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services and may
restrict our transactions with certain customers, business partners and other persons. In certain circumstances, export control and
economic sanctions regulations prohibit the export of certain products, services, and technologies, and in other circumstances we are
required to obtain an export license before exporting the controlled item. For example, we must comply with current U.S. Department
of Commerce export control regulations restricting transactions with certain customers in China. We must also comply with export
restrictions and laws imposed by other countries affecting trade and investments. We maintain an export compliance program but
there are risks that the compliance controls could be circumvented, exposing us to legal liabilities. Compliance with these laws has
limited our sales and likely will continue to limit sales to certain customers in the future. Changes in, and responses to, U.S. trade
policy could reduce the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our
business, financial condition or results of operations.
Item 1A: Risk Factors
The risks described below are not the only risks that we face. Additional risks and uncertainties not currently known to us or that
we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Risks Associated with Teradyne’s Markets
Our business is impacted by global and industry-specific economic cycles, which are difficult to predict, and actions we have taken
or may take to offset these cycles may not be sufficient.
Capital equipment providers in the electronics, semiconductor industries and robotics, such as Teradyne, have, in the past, been
negatively impacted by both sudden slowdowns in the global economies and recurring cyclicality within those industries. These cycles
have resulted in periods of over-supply; a trend we believe will continue to occur. Our business and results of operations depend, in
significant part, upon capital expenditures of manufacturers of semiconductors electronics and other industrial products, which in turn
depend upon the current and anticipated market demand for those products. Disruption or deterioration in economic conditions may
reduce customer purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse changes in
economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price
competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts
receivable from our customers, potential reserves for credit losses and write-offs of accounts receivable, increased risk of restructuring
charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating
results. We are unable to predict the likely duration, frequency and severity of disruptions in financial markets, credit availability, and
adverse economic conditions throughout the world, and we cannot ensure that the level of revenues or new orders for afiscal quarter
will be sustained in subsequent quarters. We have taken actions to address the effects of general economic variability and recurring
industry cyclicality, including implementing cost control and reduction measures. We cannot predict whether these measures will be
sufficient to offset global or market-specific disruptions that might affect our businesses and we may need to take additional or
different measures in the future.
We are subject to intense competition.
We face significant competition throughout the world in each of our reportable segments. Some of our competitors have
substantial financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products. In
addition, we are subject to trade regulations imposed by the United States government, which may not impact some of our
competitors. We also face competition from emerging Asian companies and internal development at several of our customers. Some
of our competitors have introduced or announced new products with certain performance characteristics that may be considered equal
or superior to those we currently offer. We expect our competitors to continue to improve the performance of their current products
and to introduce new products or new technologies that provide improved cost of ownership and performance characteristics. New
product introductions by competitors could cause a decline in revenues or loss of market acceptance of our products.
The market for our products is concentrated, and our business depends, in part, on obtaining orders from a few significant
customers.
10
The market for our products is concentrated with a limited number of significant customers accounting for a substantial portion
of the purchases of test equipment. In each of the years, 2023, 2022 and 2021, our five largest direct customers in aggregate accounted
for 32%, 26% and 33% of consolidated revenues, respectively.
We estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments,
combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing
Company Ltd.), accounted for 19% of our consolidated revenues in 2021.
Customer consolidation could affect our operating results.
There has been a trend toward customer consolidation in the semiconductor industry through business combinations, including
mergers, asset acquisitions and strategic partnerships. If this trend continues, it could make us more dependent on fewer customers
who may be able to exert increased pressure on our prices and other contract terms and could increase the portion of our total sales
concentration for any single customer. Customer consolidation activity could also reduce the demand for our products and services if
such customers streamline research and development or operations, reduce purchases or delay purchasing decisions. These outcomes
could negatively impact our operating results and financial condition.
If we fail to develop new technologies to adapt to our customers’ needs or if our customers fail to accept our new products, our
revenues will be adversely affected.
We believe that our technological position depends primarily on the technical competence and creative ability of our engineers.
In a rapidly evolving market, such as ours, the development or acquisition of new technologies, commercialization of those
technologies into products and market acceptance and customer demand for those products are critical to our success. Successful
product development or acquisition, introduction and acceptance depend upon a number of factors, including:
• new product selection;
•
ability to meet customer requirements including with respect to safety and cyber security;
• development of competitive products by competitors;
•
•
•
•
timely and efficient completion of product design;
timely and efficient implementation of manufacturing and manufacturing processes;
timely remediation of product performance issues, if any, identified during testing;
assembly processes and product performance at customer locations;
• differentiation of our products from our competitors' products;
• management of customer expectations concerning product capabilities and product life cycles;
•
•
•
•
•
transition of customers to new product platforms;
compliance with product safety regulations;
ability to protect products from cyber attacks when used by our customers;
ability to attract and retain technical talent; and
innovation that does not infringe on the intellectual property rights of third parties.
Risks Associated with Operating a Global Business
We are subject to risks of operating internationally.
A significant portion of our consolidated revenues is derived from customers outside the United States. Our international sales
and operations are subject to significant risks and difficulties, including:
• unexpected changes in legal and regulatory requirements affecting international markets;
•
•
•
cost increases due to inflation;
changes in tariffs and exchange rates;
social, political and economic instability, acts of terrorism and international conflicts;
11
• disruption caused by health pandemics;
• difficulties in protecting intellectual property;
• difficulties in accounts receivable collection;
•
cultural differences in the conduct of business;
• difficulties in staffing and managing international operations;
•
•
•
•
compliance with anti-corruption laws;
compliance with data privacy regulations;
compliance with customs and trade regulations; and
compliance with international tax laws and regulations.
In addition, an increasing portion of our products and the products we purchase from our suppliers are sourced or manufactured
in foreign locations, including China, Malaysia and Denmark, and a large portion of the devices our products test are fabricated and
tested by foundries and subcontractors in Taiwan, China, Korea and other parts of Asia. As aresult, we are subject to a number of
economic and other risks, particularly during times of political, health or financial instability in these regions. Disruption of
manufacturing or supply sources in these international locations could materially adversely impact our ability to fill customer orders
and potentially result in lost business.
We are subject to risks associated with doing business in China.
In addition to the risks associated with the tariffs and trade regulations detailed below, we are subject to the following risks
associated with doing business in China:
•
adverse changes in Chinese political, economic or social conditions or Chinese laws, regulations or policies, including the
imposition of unexpected or confiscatory taxation, restrictions on currency conversion, imports and sources of supply,
devaluations of currency, the nationalization or other expropriation of private enterprises, or the reversal of economic reform
policies that encourage private economic activity, foreign investments and greater economic decentralization;
• differing economic practices compared to most developed countries, including with respect to the amount of government
involvement, control of foreign exchange and allocation of resources;
• uncertainties presented by the Chinese legal system, which is not fully integrated and continues to rapidly evolve, impeding
our ability to interpret certain Chinese laws and regulations, predict and evaluate the outcome of administrative and court
proceedings and the level of legal protection to enforce contracts we have entered into in China; and Chinese controls on the
convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China, restricting
our ability to remit sufficient foreign currency to pay dividends or make other payments to us, or otherwise satisfy foreign
currency-denominated obligations.
The foregoing risks and the ongoing geopolitical tensions and economic uncertainty between the United States and China and
the unknown impact of current and future Chinese rules and regulations, may cause increased costs, as well as restrictions on our
ability to sell, or a decreased demand from customers to purchase, our products, which could harm our business, financial condition
and operating results.
The Israel-Hamas conflict may have amate rial impact on our Business
The Israel-Hamas conflict could have anega tive impact on our future revenue and supply chain, either of which could adversely
affect our business and financial results. Our customers in Israel may experience delays in product releases due to impacts to their
labor force and impacts on their suppliers because of the conflict, which could materially impact demand for our products. Similarly,
our suppliers in Israel may experience delays in providing us with parts due to the conflict. In addition, the global economic
uncertainty following the start of the conflict could impact demand for our products.
Risks Related to Teradyne’s Finances
We may not fully realize the benefits of our acquisitions or strategic alliances.
In June 2015, we acquired Universal Robots, in 2018, we acquired Energid and MiR and, in 2019, we acquired Lemsys and
AutoGuide. In November 2023, we announced entering into strategic partnership agreement with Technoprobe which included
12
Teradyne acquiring 10% of the equity in Technoprobe. We may not be able to realize the benefits of acquiring or successfully growing
these businesses. We may continue to acquire additional businesses, form strategic alliances, or create joint ventures with third parties
that we believe will complement or augment our existing businesses. We may not be able to realize the expected synergies and cost
savings from the integration with our existing operations of other businesses or technologies that we may acquire. In addition, the
integration process for our acquisitions may be complex, costly and time consuming and include unanticipated issues, expenses, and
liabilities. We may have difficulty in developing, manufacturing, and marketing the products of a newly acquired company in a
manner that enhances the performance of our combined businesses or product lines and allows us to realize value from expected
synergies. Following an acquisition, we may not achieve the revenue or net income levels that justify the acquisition. Acquisitions
may also result in one-time charges (such as acquisition-related expenses, write-offs or restructuring charges) or in the future,
impairment of goodwill or acquired intangible assets, or adjustments to contingent consideration liabilities that adversely affect our
operating results. Additionally, we may fund acquisitions of new businesses, strategic alliances, or joint ventures by utilizing our cash,
incurring debt, issuing shares of our common stock, or by other means. Additionally, we may face restrictions pursuant to the terms of
an acquisition or strategic alliance agreement, such as the three year restriction on the transfer or disposition of the Technoprobe
shares upon closing of the agreement, subject to certain early termination events.
We may incur higher tax rates than we expect and may have exposure to additional international tax liabilities and costs.
We are subject to paying income taxes in the United States and other countries where we operate. Our effective tax rate is
dependent on where our earnings are generated and the tax regulations and the interpretation and judgment of administrative tax or
revenue authorities in the United States and other countries. We have pursued a global tax strategy that could be adversely affected by
the mix of earnings and tax rates in the countries where we operate, changes to tax laws, tax regulations or an adverse tax ruling by
administrative authorities. We are also subject to tax audits in the countries where we operate. Any material change in our tax liability
resulting from changes in tax laws, tax regulations, administrative rulings or audits from an administrative tax or revenue authority
could negatively affect our financial results.
As a multinational corporation, we are subject to income taxes as well as non-income-based taxes, in both the United States and
various foreign jurisdictions. In certain foreign jurisdictions, we qualify for tax incentives and tax holidays based on our ability to
meet, on acontinuing ba sis, various tests relating to our employment levels, research and development expenditures and other
qualification requirements in apa rticular foreign jurisdiction. While we intend to operate in such a manner to maintain and maximize
our tax incentives and tax holidays, no assurance can be given that we have so qualified or that we will so qualify for any particular
year or jurisdiction. If we fail to qualify or fail to remain qualified for certain foreign tax incentives and tax holidays, we may be
subject to further taxation or an increase in our effective tax rate which would adversely impact our financial results. In November
2020, we entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday
under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire
on December 31, 2025.
The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2023, 2022 and 2021 were $1.4
million or $0.01 per diluted share, $16.0 million or $0.09 per diluted share, and $33.3 million or $0.18 per diluted share, respectively.
These tax savings may not be achievable in subsequent years due to changes in Singapore’s tax laws, issuance of new global minimum
tax laws, or the expiration of the tax holiday.
In addition, we may incur additional costs, including headcount expenses, in order to maintain or obtain aforeign t ax incentive
or tax holiday in a particular foreign jurisdiction.
We have significant guarantees, indemnification, and customer confidentiality obligations.
From time to time, we make guarantees to customers regarding the delivery, price and performance of our products and
guarantee certain indebtedness, performance obligations or lease commitments of our subsidiary and affiliate companies. We also
have agreed to provide indemnification to our officers, directors, employees and agents, to the extent permitted by law, arising from
certain events or occurrences, while the officer, director, employee or agent, is or was serving at our request in such capacity.
Additionally, we have confidentiality obligations to certain customers and if breached would require the payment of significant
penalties. If we become liable under any of these obligations, it could materially and adversely affect our business, financial condition
or operating results. For additional information see Note M: “Commitments and Contingencies-Guarantees and Indemnification
Obligations” in Notes to Consolidated Financial Statements.
We may discontinue or reduce our quarterly cash dividend or share repurchase program.
13
In January 2014, our Board of Directors initiated aquarterly cash dividend. Since 2014, the Board of Directors has increased our
quarterly cash dividend from $0.06 per share to $0.12 per share. Holders of our common stock are only entitled to receive dividends
when and if they are declared by our Board of Directors.
In January 2021, our Board of Directors approved a$2.0 billion s hare repurchase program. In 2022 and 2021, we repurchased
$752.1 million, and $600.0 million, respectively of common stock. In January 2023, our Board of Directors cancelled the 2021
repurchase program and approved ane w $2.0 billion share repurchase program. In 2023, we repurchased $400.5 million of common
stock. We intend to repurchase up to $90.0 million in 2024. Under the share repurchase program, we may repurchase outstanding
shares of our common stock from time to time in the open market and through privately negotiated transactions. Unless terminated
earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for
repurchase under the share repurchase program.
Future cash dividends and share repurchases are subject to the discretion of our Board of Directors and will depend, among
other things, upon our earnings, capital requirements and financial condition. While we have declared a quarterly cash dividend on our
common stock and authorized ashare r epurchase program, we are not required to do either and may reduce or eliminate our cash
dividend or share repurchase program in the future. The reduction or elimination of our cash dividend or our share repurchase program
could adversely affect the market price of our common stock.
We have incurred indebtedness and may incur additional indebtedness.
On May 1, 2020, we entered into athree-ye ar, senior secured revolving credit facility of up to $400.0 million. On December 10,
2021, the credit agreement was amended to extend the maturity date of the credit facility to December 10, 2026. On October 5, 2022,
the credit agreement was amended to increase the amount of the credit facility to $750.0 million from $400.0 million. The amended
credit agreement provides that, subject to customary conditions, we may seek to obtain from existing or new lenders the available
incremental amount under the credit facility, not to exceed the greater of $200.0 million or 15% of consolidated EBIDTA. We could
borrow funds under this credit facility at any time for general corporate purposes and working capital. As of February 22, 2024, we
have not borrowed any funds under this credit facility.
Our outstanding and any additional indebtedness, among other things, could:
• make it difficult to make payments on this indebtedness and our other obligations;
• make it difficult to obtain any necessary future financing for working capital, capital expenditures, debt service requirements
or other purposes;
•
•
require the dedication of asubstantial p ortion of any cash flows from operations to service for indebtedness, thereby
reducing the amount of cash flows available for other purposes, including capital expenditures, and
limit our flexibility in planning for or reacting to changes in our business and the industries in which we complete.
Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue
business strategies.
The agreement governing our senior secured revolving credit facility limits our ability, among other things, to incur additional
secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and
incur liens. In addition, our senior secured revolving credit facility contains financial and other restrictive covenants that limit our
ability to engage in activities that may be in our long-term best interest, such as, subject to permitted exceptions, making capital
expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional
indebtedness while our indebtedness under our senior secured revolving credit facility is outstanding. Our failure to comply with
financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders
requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness.[3]
Our warrant transactions could impact the value of our stock.
On December 12, 2016, we completed a private offering of $460.0 million aggregate principal amount of 1.25% convertible
senior unsecured notes (the “Notes”) that matured on December 15, 2023. Concurrent with the offering of the Notes, we entered into
convertible note hedge transactions with the initial purchasers or their affiliates (the “Option Counterparties”). Separately and
concurrent with the pricing of the Notes, we entered into warrant transactions with the Option Counterparties (the “Warrant
Transactions”) in which we sold net-share-settled (or, at our election subject to certain conditions, cash-settled) warrants to the Option
Counterparties. The Warrant Transactions, which expire between March 18, 2024 and July 10, 2024, cover, subject to customary anti-
14
dilution adjustments, approximately 14.7 million shares of our common stock. The strike price of the warrants is $39.40 per share. The
Warrant Transactions could result in increased common stock outstanding to the extent that the market price per share of our common
stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.
We may not be able to pay our debt and other obligations.
If our cash flows are inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to
generate sufficient cash flows or otherwise obtain funds necessary to make required payments on our senior secured revolving credit
facility or certain of our other obligations, we would be in default under the terms thereof, which would permit the holders of those
obligations to accelerate their maturity and also could cause defaults under future indebtedness we may incur. Any such default could
have a material adverse effect on our business, prospects, financial position and operating results.
Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability to realize projected growth rates
in its sales and earnings.
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately
70% of our Robotics revenue in 2023 was denominated in foreign currencies. Correspondingly, our results of operations and our
ability to realize projected growth rates in sales and earnings in Robotics could be adversely affected if the U.S. dollar strengthens
significantly against foreign currencies.
Adverse developments affecting the financial services industry, including events or risks involving liquidity, defaults or non-
performance by financial institutions, could have a material adverse effect on our business, financial condition or results of
operations.
On March 10, 2023, Silicon Valley Bank (SVB), who is ale nder in our revolving credit facility and where we maintain certain
accounts and cash deposits, was placed into receivership with the Federal Deposit Insurance Corporation (FDIC), which resulted in all
funds held at SVB being temporarily inaccessible by SVB’s customers. As of March 13, 2023, access to our cash and cash equivalents
at SVB was fully restored. Although our cash balances at SVB are insignificant and we do not expect further developments at SVB to
have a material impact on our cash and cash equivalents, we do hold cash balances in several large financial institutions significantly
in excess of FDIC and global insurance limits. If other banks and financial institutions with whom we have banking relationships enter
receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash
equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.
Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and
due to factors beyond our control.
The market price of our common stock is subject to wide fluctuations in response to various factors, some of which are beyond
our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this report, factors that could cause
fluctuations in the market price of our common stock include the following:
•
•
•
•
•
ratings changes by any securities analysts who follow our company;
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint
ventures, or capital commitments;
changes in operating performance and stock market valuations of other technology companies generally, or those in our
industry in particular;
changes in accounting standards, policies, guidelines, interpretations, or principles;
actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
• developments or disputes concerning our intellectual property or our products and platform capabilities, or third-party
proprietary rights;
cybersecurity attacks or incidents;
announced or completed acquisitions of businesses or technologies by us or our competitors;
changes in our board of directors or management;
announced or completed equity or debt transactions involving our securities;
•
•
•
•
15
•
sales of shares of our common stock by us, our officers, directors, or other stockholders; and
• other events or factors, including those resulting from global and macroeconomic conditions, including heightened inflation,
rising interest rates, bank failures, and a potential recession, and speculation regarding the same, as well as public health
crises, geopolitical tension, incidents of terrorism, or responses to these events.
In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume
fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating
performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market
volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the
attention of management from our business, and adversely affect our business, results of operations, financial condition, and cash
flows. A decline in the value of our common stock, including as a result of one or more factors set forth above, may result in
substantial losses for our stockholders.
Risks Related to Operations
Our operating results are likely to fluctuate significantly.
Our operating results are affected by a wide variety of factors that could materially adversely affect revenues or profitability.
The following factors could impact future operations:
•
•
•
a worldwide economic slowdown or disruption in the global financial or industrial markets;
cost increases from inflation on materials, employee wages, third party labor, and contract manufacturing;
competitive pressures on selling prices;
• our ability to introduce, and the market acceptance of, new products;
•
•
•
changes in product revenues mix resulting from changes in customer demand;
the level of orders received which can be shipped in aquarter because of the tendency of customers to wait until late in a
quarter to commit to purchase due to capital expenditure approvals and constraints occurring at the end of aquarter, o r the
hope of obtaining more favorable pricing from a competitor seeking the business;
engineering and development investments relating to new product introductions, and the expansion of manufacturing,
outsourcing and engineering operations in Asia;
• provisions for excess and obsolete inventory relating to the lack of demand for and the discontinuance of products;
•
•
impairment charges for certain long-lived and intangible assets, and goodwill;
an increase in the leasing of our products to customers;
• disruption caused by health pandemics, such as the coronavirus;
•
the success of sales channel expansion in Robotics;
• our ability to expand our global distribution channel for our collaborative and mobile robots;
• parallel or multi-site testing which could lead to adecrea se in the ultimate size of the market for our semiconductor and
electronic test products; and
•
the ability of our suppliers and subcontractors to meet product quality or delivery requirements needed to satisfy customer
orders for our products, especially if consolidated revenues increase.
As a result of the foregoing and other factors, we have experienced and may continue to experience material fluctuations in
future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition,
operating results or stock price.
If our suppliers do not meet product or delivery requirements, we could have reduced revenues and earnings.
If any of our suppliers were to cancel contracts or commitments or fail to meet the quality or delivery requirements needed to
satisfy customer orders for our products, we could lose time-sensitive customer orders, have significantly decreased revenues and
earnings and be subject to contractual penalties, which would have a material adverse effect on our business, results of operations and
financial condition. In addition, we rely on contract manufacturers for certain of our products, and our ability to meet customer orders
16
for those products depends upon the timeliness and quality of the work performed by these subcontractors, over whom we do not
exercise any control.
To a certain extent, we are dependent upon the ability of our suppliers and contract manufacturers to help meet increased
product or delivery requirements. It may be difficult for certain suppliers to meet delivery requirements in aperiod of rapid growth,
therefore impacting our ability to meet our customers’ demands.
Our suppliers are subject to trade regulations, including tariffs and export restrictions imposed by the United States Government
and by the governments of other countries. These regulations could impact our suppliers’ ability to provide us with components for
our products or could increase the price of those components.
We rely on the financial strength of our suppliers. The loss of suppliers either as a result of financial viability, bankruptcy or
otherwise could have amate rial adverse effect on our business, results of operations or financial condition.
The global supply shortage of electrical components and inflationary cost increases has impacted our ability to meet customer
demand and could adversely affect our business and financial results.
The global supply shortage of electrical components, including semiconductor chips, continued to impact our supply chain in
2023. As a result, we have experienced, and may experience in the future, increases in our lead times and costs for certain components
for certain products and delays in the delivery of some orders placed by our customers. In addition, in 2023, inflationary pressures
contributed to increased costs for product components and wage inflation, which had minimal impact on our cost of products, gross
margin and profit for the year. Our supply chain team, and our suppliers, continue to manage numerous supply, production and
logistics obstacles. 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. However, if we are unable to secure manufacturing capacities
from our current or new suppliers and contract manufacturers, on acceptable terms or at all, or successfully manage our purchase
commitments and inventory for components, our ability to deliver our products to our customers in the desired quantities, at
competitive prices or in atim ely manner may be negatively impacted for 2024. Also, our suppliers and contract manufacturers have
increased their prices, which increased our cost of products. We also have been, and may continue to attempt to, offset the effect of
these inflationary pressures by increasing the prices of our products. However, we may not be fully able to pass additional costs on to
our customers, which could have a negative impact on our results of operations and financial condition.
Our operations may be adversely impacted if our outsourced contract manufacturers or service providers fail to perform.
We depend on Flex Ltd. (“Flex”) to manufacture and test our FLEX and J750 family of products from its facility in Malaysia;
Plexus Corp. (“Plexus”) to manufacture and test our Magnum products from its facilities in Malaysia and also Thailand and ETS
family of products from its facility in Malaysia; SAM Meerkat to manufacture and test our storage test family of products from its
facilities in Malaysia and Thailand and on other contract manufacturers to manufacture other products. If for any reason these contract
manufacturers cannot provide us with these products in a timely fashion, or at all, we may not be able to sell these products to our
customers until we enter a similar arrangement with an alternative contract manufacturer.
If we experience a problem with our supply of products from Flex, Plexus, SAM Meerkat, or our other contract manufacturers,
it may take us significant time to either manufacture the product or find an alternate contract manufacturer, which could result in
substantial expense and disruption to our business.
We have also outsourced certain general and administrative functions to reputable service providers, many of which are in
foreign countries, sometimes impacting communication with them because of language and time differences. Their presence in foreign
countries also increases the risk they could be exposed to political and cybersecurity risk. Additionally, there may be difficulties
encountered in coordinating the outsourced operations with existing functions and operations. If we fail in successfully coordinating
and managing the outsourced service providers, it may cause an adverse effect on our operations which could have a material adverse
effect on our business, results of operations or financial condition.
Our business may suffer if we are unable to attract and retain key employees.
Competition for employees with skills we require is intense in the high technology industry. We expect intense competition for
employees to continue in 2024. Our success will depend on our ability to attract and retain key technical employees. The loss of one or
17
more key or other employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel
could each have amaterial a dverse effect on our business, results of operations or financial condition.
Our operations, and the operations of our customers and suppliers, are subject to risks of natural catastrophic events, severe
weather, widespread health epidemics, acts of war, terrorist attacks and the threat of domestic and international terrorist attacks,
any one of which could result in cancellation of orders, delays in deliveries or other business activities, or loss of customers and
could negatively affect our business and results of operations.
Our business is international in nature, with our sales, service and administrative personnel and our customers and suppliers
located in numerous countries throughout the world. Our operations, and those of our customers and suppliers, are subject to
disruption for a variety of reasons, including work stoppages, acts of war, terrorism, health epidemics, fires, earthquakes, hurricanes,
typhoons, volcanic eruptions, energy shortages, telecommunication failures, tsunamis, flooding or other natural disasters. Such
disruption could materially increase our costs and expenses as well as cause delays in, among other things, shipments of products to
our customers, our ability to perform services requested by our customers, or the installation and acceptance of our products at
customer sites. Any of these conditions could have a material adverse effect on our business, financial condition or results of
operations.
Global climate change can result in natural disasters occurring more frequently, with greater intensity and with less
predictability. For example, in December 2021, our operations in Cebu, Philippines experienced a devastating typhoon. Our
employees in Cebu succeeded in restoring most of our operations within days despite the severity of the damage in the region. The
long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear but could be
severe.
Risks Related to Intellectual Property (“IP”) and Cybersecurity
Third parties may claim we are infringing their intellectual property and we could suffer significant litigation costs, licensing
expenses or be prevented from selling our products.
We have been sued for patent infringement and receive notifications from time to time that we may be in violation of patents
held by others. An assertion of patent infringement against us, if successful, could have a material adverse effect on our ability to sell
our products or it could force us to seek a license to the intellectual property rights of others or alter such products so that they no
longer infringe the intellectual property rights of others. A license could be very expensive to obtain or may not be available at all.
Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical. Additionally, patent
litigation could require a significant use of management resources and involve a lengthy and expensive defense, even if we eventually
prevail. If we do not prevail, we might be forced to pay significant damages, obtain licenses, modify our products, or stop making our
products; each of which could have a material adverse effect on our financial condition, operating results or cash flows.
If we are unable to protect our IP, we may lose avaluable a sset or may incur costly litigation to protect our rights.
We protect the technology that is incorporated in our products in several ways, including through patent, copyright, trademark
and trade secret protection and by contractual agreement. However, even with these protections, our IP may still be challenged,
invalidated or subject to other infringement actions. While we believe that our IP has value in the aggregate, we do not believe that
any single element of our IP is in itself essential. If a significant portion of our IP is invalidated or ineffective, our business could be
materially adversely affected.
A breach of our operational or security systems could negatively affect our business and results of operations.
We rely on various information technology networks and systems to process, transmit and store electronic information,
including proprietary and confidential data, and to carry out and support ava riety of business activities, including manufacturing,
research and development, supply chain management, sales and accounting. We have experienced several attempted cyber-attacks of
our network. None of the attempted attacks have caused adisruption to o ur operations or had amaterial adverse effect on our business
or financial results. As aresult of the attempts, we have taken further preventive security measures to protect our systems. Despite
these preventative security measures we have implemented, we may continue to be vulnerable to attempts by third parties to gain
unauthorized access to our networks or sabotage our systems. These attempts, which might be related to criminal hackers, industrial
espionage or state-sponsored intrusions, include trying to covertly introduce malware to our computers, networks and systems and
impersonating authorized users. In addition, third party suppliers and service providers that we rely on to manage our networks and
systems and process and store our proprietary and confidential data, including the data of our customers and suppliers, may also be
subject to similar attacks. Employees and contractors may also attempt to gain unauthorized access to our systems and steal
proprietary and confidential data. Such attempts could result in the misappropriation, theft, misuse, disclosure or loss or destruction of
18
the intellectual property, or the proprietary, confidential or personal information, of Teradyne or our employees, customers, suppliers
or other third parties, as well as damage to or disruptions in our information technology networks and systems. These threats are
constantly evolving and expanding, such as through the increased use of artificial intelligence in our products and expanding remote
work opportunities for our employees, thereby increasing the difficulty of defending against them or implementing adequate
preventative measures. While we seek to detect and investigate all security incidents and to prevent their recurrence, attempts to gain
unauthorized access to our information technology networks and systems may be successful, and in some cases, we might be unaware
of an incident or its magnitude and effects. A failure in or a breach of our operational or security systems or infrastructure, or those of
our suppliers and other service providers, including as a result of cyber-attacks, could have a material adverse effect on our business or
financial results, disrupt our business, result in the disclosure or misuse of proprietary or confidential information, damage our
reputation, cause losses and increase our costs. We expect to continue to devote significant resources to the security of our information
technology networks and systems.
A breach of the security of our products could negatively affect our business and results of operations.
We may be subject to security breaches of certain of our products caused by viruses, illegal break-ins or hacking, sabotage, or
acts of vandalism by third parties or our employees or contractors. A breach of our product security systems could have a material
adverse effect on our business or financial results, disrupt our business, result in the disclosure or misuse of proprietary or confidential
information, damage our reputation, cause losses, and increase our costs. We expect to continue to devote significant resources to the
security of our products.
Risks Related to Legal and Regulatory Compliance
The implementation of tariffs on our products may have a material impact on our business.
Our business operations and supply chain are global and may be disrupted by the implementation of tariffs.
In 2018, the United States Trade Representative imposed a 25% tariff on many lists of products, including certain Teradyne
products that are made in China and imported into the United States. We have implemented operational changes that mitigate the
impact of the 25% tariff on the import of our impacted products into the United States. As a result, the existing tariff has not had a
material adverse effect on our business, financial condition or results of operations. The implementation of additional tariffs by the
United States could have ama terial adverse effect on our business, financial condition or results of operations.
In addition to the actions taken by the United States, China has implemented retaliatory tariffs on products made in the United
States and imported into China, including certain Teradyne products. We have implemented, if appropriate, operational changes that
would mitigate the impact of the retaliatory tariffs. However, notwithstanding our efforts, the retaliatory tariffs or other trade
restrictions implemented by China could disrupt our business operations, sales and supply chain and, therefore, have a material
adverse effect on our business, financial condition or results of operations.
Trade regulations and restrictions impact our ability to manufacture certain products and to sell products to and support certain
customers, which may materially adversely affect our sales and results of operations.
We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services and may
restrict our transactions with certain customers, business partners and other persons. In certain circumstances, export control and
economic sanctions regulations prohibit the export of certain products, services and technologies, and in other circumstances are
required to obtain an export license before exporting the controlled item. We must also comply with export restrictions and laws
imposed by other countries affecting trade and investments. We maintain an export compliance program but there are risks that the
compliance controls could be circumvented, exposing us to legal liabilities. Compliance with these laws has not significantly limited
our sales but could significantly limit them in the future. Changes in, and responses to, U.S. trade policy could reduce
the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our business, financial
condition or results of operations.
The U.S. government from time to time has issued export restrictions that prohibit U.S. companies from exporting U.S.
manufactured products, foreign manufactured products with more than 25% controlled U.S. content, as well as U.S. origin technology.
For example, the U.S. Department of Commerce has restricted the access of U.S. origin technologies to certain Chinese semiconductor
companies by adding those companies to the Entity List under U.S. Export Administration Regulations (“EAR”). The addition of
certain of these companies to the entity list has had and will continue to have an adverse impact on our business with these customers.
We will take appropriate actions, including filing for licenses with the U.S. Department of Commerce to attempt to minimize the
impact of the restrictions on our business.
19
On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity
List under the EAR. This action by the U.S. Department of Commerce imposed new export licensing requirements on exports, re-
exports, and in-country transfers of all U.S. regulated products, software and technology to the designated Huawei entities. On August
17, 2020, the U.S. Department of Commerce published final regulations expanding the scope of the U.S. EAR to include additional
products that would become subject to export restrictions relating to Huawei entities including HiSilicon. These new regulations
restrict the sale to Huawei and the designated Huawei entities of certain non-U.S. made items, such as semiconductor devices,
manufactured for or sold to Huawei entities including HiSilicon under specific, detailed conditions set forth in the new regulations.
These new regulations have impacted our sales to Huawei, HiSilicon and their suppliers. We are taking appropriate actions, including
filing license applications and obtaining licenses from the U.S. Department of Commerce. However, we do not expect these actions
will mitigate the impact of the regulations on our sales to Huawei, HiSilicon and other suppliers. As aresult, the r egulations will
continue to have an adverse impact on our business and financial results. It is uncertain the extent these new regulations and any
additional regulations that may be implemented by the U.S. Department of Commerce or other government agency may have on our
business with other customers or potential customers. Also, our controls related to Entity List compliance could be circumvented,
exposing us to legal liabilities.
On April 28, 2020, the U.S. Department of Commerce published new export control regulations for certain U.S. products and
technology sold to military end users or for military end-use in China, Russia and Venezuela. The definition of military end user is
broad. The regulations went into effect on June 29, 2020. In December 2020, the U.S. Department of Commerce issued a list of
companies in China and other countries that it considered to be military end users. Compliance with the new export controls has
impacted our ability to sell products to certain customers in China. In addition, while we maintain an export compliance program, our
compliance controls could be circumvented, exposing us to legal liabilities. We will continue to assess the impact of these export
controls on our business and operations and take appropriate actions, including filing for licenses with the U.S. Department of
Commerce, to minimize any disruption. However, we cannot be certain that the actions we take will mitigate all the risks associated
with the export controls that may impact our business.
On October 7, 2022, the U.S. Department of Commerce published regulations restricting the export to China of advanced
semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and
technology for the manufacturing in China of certain semiconductor manufacturing equipment. The restrictions impacted our sales to
certain companies in China and our manufacturing and development operations in China. We mitigated the impact of these restrictions
on our business by obtaining licenses from the U.S. Department of Commerce. On October 17, 2023, the U.S. Department of
Commerce released new rules updating the export controls issued on October 7, 2022. The new rules, which took effect on November
17, 2023, significantly limit the impact of the October 7, 2022 restrictions on our business. However, the regulations may continue to
have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the
regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be
adversely impacted.
In response to the regulations issued by the U.S. Department of Commerce, the Chinese government has passed new laws,
including blocking legislation, which may impact our business activities in China. The Company is assessing the potential impact of
these new Chinese laws and monitoring relevant laws and regulations issued by the Chinese government. The impact of these new
Chinese laws on our business activities in China remains uncertain at this time.
We may be subject to product recalls and warranty and product liability claims.
We invest significant resources in the design, manufacturing and testing of our products. However, from time to time, we
discover design or manufacturing defects in our products after they have been shipped and, as a result, we have incurred development
and remediation costs and settled warranty and product liability claims. In addition, when our products contain defects or have
reliability, quality or safety issues, we have conducted aproduct r ecall which resulted in significant repair or replacement costs and
substantial delays in product shipments and may damage our reputation which could make it more difficult to sell our products. We
could continue to have warranty and product liability claims or product recalls in the future. Any of these results could have a material
adverse effect on our business, results of operations or financial condition.
We may incur significant costs of complying with present and future environmental regulations and may incur significant
liabilities if we fail to comply with such environmental regulations.
We are subject to both domestic and international environmental regulations and statutory strict liability relating to the use,
storage, discharge, site cleanup and disposal of hazardous chemicals used in our manufacturing processes. In addition, future
regulations in response to global climate change may affect us, our suppliers, and our customers. Such regulations could cause us to
incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers, or both
incurring additional compliance costs that are passed on to us. Future climate change regulations could result in decreased demand for
20
our products. If we fail to comply with present and future regulations, or are required to perform site remediation, we could be subject
to future liabilities or cost, including penalties or the suspension of production. Present and future regulations may also:
•
•
•
•
•
restrict our ability to expand facilities;
restrict our ability to ship certain products;
require us to modify our operations logistics;
require us to acquire costly equipment; or
require us to incur other significant costs and expenses.
Pursuant to present regulations and agreements, we are conducting groundwater and subsurface assessment and monitoring and
are implementing remediation and corrective action plans for facilities located in Massachusetts and New Hampshire which are no
longer conducting manufacturing operations. As of December 31, 2023, we have not incurred material costs as a result of the
monitoring and remediation steps taken at the Massachusetts and New Hampshire sites.
The directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the “RoHS
Directive”) and the directive on Waste Electrical and Electronic Equipment (the “WEEE Directive”) altered the form and manner in
which electronic equipment is imported, sold and handled in the European Union. Other jurisdictions, such as China, have followed
the European Union’s lead in enacting legislation with respect to hazardous substances and waste removal. Ensuring compliance with
the RoHS Directive, the WEEE Directive and similar legislation in other jurisdictions, and integrating compliance activities with our
suppliers and customers could result in additional costs and disruption to operations and logistics and thus, could have a negative
impact on our business, operations or financial condition.
We currently are, and in the future may be, subject to litigation or regulatory proceedings that could have an adverse effect on our
business.
From time to time, we may be subject to litigation or other administrative, regulatory or governmental proceedings, including
tax audits and resulting claims that could require significant management time and resources and cause us to incur expenses and, in the
event of an adverse decision, pay damages or incur costs in an amount that could have a material adverse effect on our financial
position or results of operations.
We may face risks associated with shareholder activism.
We may become subject to campaigns by shareholders advocating corporate actions such as financial restructuring, increased
borrowing, special dividends, stock repurchases or divestitures. Such activities could interfere with our ability to execute our business
plans, be costly and time-consuming, disrupt our operations, divert the attention of management, or result in our initiating borrowing
or increasing our share repurchase plan or dividend, any of which could have an adverse effect on our business or stock price.
Provisions of our charter and by-laws and Massachusetts law may make a takeover of Teradyne more difficult.
There are provisions in our basic corporate documents and under Massachusetts law that could discourage, delay or prevent a
change in control, even if a change in control may be regarded as beneficial to some or all of our stockholders.
Item 1B: Unresolved Staff Comments
None.
Item 1C: Cybersecurity
We believe cybersecurity is critical to supporting our vision and enabling our strategy. As a producer of leading-edge electronic
testing products and maker of advanced robotics, we face a multitude of cybersecurity threats that range from attacks common to most
industries, such as ransomware and denial-of-service, to attacks from more advanced, persistent, and highly organized adversaries,
including nation state actors, that may target us for our role in critical infrastructure sectors. Our customers, suppliers, and partners
face similar cybersecurity threats and, while we have not been materially affected to date, a cybersecurity incident impacting us or any
of these entities could materially adversely affect our operations, performance, and results of operations. These cybersecurity threats
and related risks make it imperative that we maintain astrong focus on cybersecurity.
21
Governance
The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to
help align our risk exposure with our strategic objectives. Senior leadership, including our Chief Information Security Officer
("CISO"), regularly brief the Audit Committee of the Board of Directors on our cybersecurity and information security posture.
The corporate information security organization, under the CISO, has implemented agovernance structure and processes to
assess, identify, manage, and report cybersecurity risks. The CISO chairs management’s Cybersecurity Steering Committee, in which
current cyber threats, program performance, and ongoing risk mitigations are regularly reviewed. Cybersecurity related risks are also
integrated into our overall enterprise risk management ("ERM") process. These risks are included in the risk universe that the ERM
function evaluates to assess top enterprise risks on an annual basis and is reviewed and evaluated by the Board of Directors. The
Board of Directors is also apprised of cybersecurity issues or incidents deemed to have a moderate or higher business impact as they
arise, even if considered immaterial.
In the event of a significant incident, we intend to follow our detailed incident response playbooks, which outline the steps to be
followed from incident detection through mitigation, recovery and notification, including escalation to functional areas (e.g., legal),
and escalation to senior leadership via the Cybersecurity Steering Committee. Upon escalation, the Cybersecurity Steering Committee
will review all inputs, assess the materiality of the incident, and then brief the Board of Directors on the determination and on how
management intends to respond.
Risk management and strategy
Our global information security organization, led by our CISO, is responsible for our overall information security strategy,
policy, security engineering, operations, and cyber threat detection and response. Our CISO is an experienced cybersecurity senior
executive with more than 25 years of experience building and leading cybersecurity, risk management and information technology
teams. The information security organization manages and continually enhances a robust enterprise security structure with the goal of
preventing cybersecurity incidents to the extent feasible, while simultaneously increasing system resilience and deploying highly
proficient detection and response capabilities in an effort to minimize the business impact should an incident occur.
Central to this organization is our global cyber operations team, which is responsible for the protection, detection, and response
capabilities used in the defense of critical data and enterprise computing services. We also have a corporate-wide insider threat
detection program to proactively identify external and internal threats and mitigate those threats in atimely manner. Our broader
Teradyne employee community also has a key role in our cybersecurity defenses and is immersed in a comprehensive training and
awareness curriculum to build and promote a corporate culture supportive of security.
Third parties also play a role in our cybersecurity. We engage third-party services to provide 24x7x365 monitoring, escalation,
and response to cyber events. In addition to consulting on best practices, we leverage third parties for independent evaluations of our
security controls through penetration testing and independent audits. These evaluations include testing both the design and operational
effectiveness of security controls. We also share and receive threat intelligence with our industry peers, cybersecurity associations, and
our cyber controls vendors.
We rely on contract manufacturing organizations and distributors to deliver our products to our customers, and a cybersecurity
incident at one of these organizations or a key supplier could materially adversely impact us. We assess third party and supply chain
cybersecurity controls through risk monitoring services tailored to align with our risk policy. Notwithstanding the extensive approach
we take to cybersecurity, we may not be successful in preventing or mitigating acy bersecurity incident that could have ama terial
adverse effect on us, either directly within our managed environment or indirectly via a third-party partner or supply chain vendor.
Periodically we have a recognized independent security expert firm to assess our cyber security maturity along with risks and provide
feedback on where we should continue to improve to mitigate exposures. We share this review with our Board and develop asecu rity
roadmap which incorporates this feedback.
Additionally, for our business that supports the defense and aerospace sector, we must comply with extensive regulations,
including requirements imposed by the Defense Federal Acquisition Regulation Supplement ("DFARS") related to adequately
safeguarding controlled unclassified information ("CUI") and reporting cybersecurity incidents to the DoD. We have implemented
cybersecurity policies and frameworks based on industry and governmental standards to align closely with DoD requirements,
instructions, and guidance. Moreover, we are pursuing the necessary controls to support the Cybersecurity Maturity Model
Certification ("CMMC") program, DoD’s program to ensure members of the defense industrial base meet cybersecurity requirements
for handling CUI and federal contract information. We believe we are well positioned to meet the requirements of the CMMC and are
preparing for certification once the requirements are effective.
22
Item 2: Properties
We conduct manufacturing, engineering, sales and marketing, service, corporate administration and other operations in various
leased and owned facilities throughout the world. We own approximately 720,000 square feet of office space and lease approximately
1,500,000 square feet of office space. Our corporate headquarters is in North Reading, Massachusetts, in buildings that we own
consisting of approximately 422,000 square feet. We believe our existing facilities and planned expansions noted below are adequate
to meet our current and reasonably foreseeable requirements. We regularly evaluate our expected facility needs and periodically make
adjustments based on these evaluations. In 2019, we purchased land in Denmark, approximately 200,000 square feet, to construct a
new building for our Robotics operations. The new building construction is expected to be completed by the first half of 2024.
Item 3: Legal Proceedings
We are subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not
limited to, patent, employment, commercial and environmental matters. We believe that we have meritorious defenses against all
pending claims and intend to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending
claims or to provide possible ranges of losses that may arise, we believe the potential losses associated with all these actions are
unlikely to have a material adverse effect on our results of operations, financial condition or cash flows.
Item 4: Mine Safety Disclosure
Not Applicable.
23
PART II
Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “TER.” As of February 22, 2024,
there were approximately 1,148 holders of record of shares of our common stock.
See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for information on the
frequency and amounts of our quarterly cash dividends, equity compensation plans and performance graph.
The following table includes information with respect to repurchases we made of our common stock during the three months
ended December 31, 2023 (in thousands except per share price):
Period
October 2, 2023 – October 29, 2023
October 30, 2023 – November 26, 2023
November 27, 2023 – December 31, 2023
(a) Total
Number of
Shares
(or Units)
Purchased
(b) Average
Price Paid per
Share (or Unit)
$
363
185
1
549 (1) $
97.65
85.97
93.70
93.70 (1)
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that may Yet Be
Purchased Under the
Plans or Programs
$
362
185
—
547
1,615,390
1,599,497
1,599,497
(1)
Includes approximately two thousand shares at an average price of $94.13 withheld from employees for the payment of taxes.
(2) As of January 1, 2023, share repurchases net of share issuances are subject to a 1% excise tax under the Inflation Reduction Act.
Excise tax incurred is included as part of the cost basis of shares repurchased in the Condensed Consolidated Statements of
Convertible Common Shares and Stockholders' Equity.
(3)
In January 2023, the Board of Directors cancelled the 2021 repurchase program and approved a new $2.0 billion of common
stock. Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased
all shares authorized for repurchase under the share repurchase program.
We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted
stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an
aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.
Item 6: (Reserved)
24
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a leading global supplier of automated test equipment and robotics products. We design, develop, manufacture and sell
automated test systems and robotics products. Our automated test systems are used to test semiconductors, wireless products, data
storage and complex electronics systems in many industries including 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 automated 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 products both through direct sales and
sales to the customer’s 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 2023, the demand in our Semiconductor Test business continued to be impacted by acorrect ion cycle driven by excess
semiconductor inventory, primarily in the mobility segment of the market. The depth of this slowdown and the timing of the recovery
are uncertain, however, strong automotive and image sensor demand partially offset these declines. The growth of DDR5 and High
Bandwidth Memory ("HBM") devices for data center applications continued to drive demand for our products in the memory market
in 2023. Over the midterm, we expect the ramp of 3nanometer and g ate-all-around process technology, increasing multichip
packaging, additional device complexity and unit growth will drive additional demand for Semiconductor Test.
Our Robotics segment consists of Universal Robots A/S (“UR”), aleadin g supplier of collaborative robotic arms, and Mobile
Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation. The market for our Robotics segment products is
dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”)
throughout the world. Demand in the fourth quarter of 2023 increased, tied to introduction of new products and seasonally high
demand in Robotics after market softness and the impact of our channel transformation resulted in aweak er than forecasted first half
of 2023.
On November 7, 2023, Teradyne and Technoprobe S.p.A, (“Technoprobe”), ale ader in the design and production of probe
cards, announced establishment of astrategic p artnership that will seek to accelerate growth for both companies and enable higher
performance semiconductor test interfaces for customers worldwide. As part of the partnership, Teradyne will make an investment of
481.0 million Euros in exchange for a10% equity investment in Technoprobe and Technoprobe will acquire 100% of Teradyne’s
Device Interface Solutions ("DIS") business in exchange for $85.0 million. The transaction is expected to close during the first half of
2024.
In 2023, inflation had minimal effect on our results. While both our test and robotics businesses may continue to be influenced
by supply constraints, which could impact our revenue and costs, We do not anticipate that supply chain constraints will have a
material impact on our financial results in 2024.
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately
70 percent of our Robotics revenue is denominated in foreign currencies. There was no material impact to our 2023 results due to
changes in foreign exchange rates, however, in 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted
revenues in our Robotics segment. Continued strengthening of the U.S. dollar would adversely affect Robotics revenue growth in
2024.
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 continue investing in our growth while balancing capital allocations between stock repurchases and dividends
and using capital for acquisitions.
25
Supply Chain Constraints and Inflationary Pressures
The global supply shortage of electrical components, including semiconductor chips, impacted our supply chain in the first half
of 2023. In the second half of 2023, we saw improvements related to supply constraints and, consequently, did not experience material
increases in our lead times and costs for components. In addition, in the 2023, inflationary pressures contributed to increased costs for
product components and wage inflation, which had a minimal impact on our cost of products, gross margin and profit for the year. Our
supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles. 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. Though these mitigation efforts have not had ama terial impact on our financial results, our
continuing efforts may not be successful. While our businesses could be impacted by supply constraints in the future, we do not
anticipate supply chain constraints will have a material impact on our financial results in 2024.
Impact of the Israel-Hamas conflict on our Business
The recent Israel-Hamas conflict could have anegati ve impact on our future revenue and supply chain, either of which could
adversely affect our business and financial results. Our customers in Israel may experience delays in product releases due to impacts
to their labor force and impacts on their suppliers because of the conflict, which could materially impact demand for our
products. Similarly, our suppliers in Israel may experience delays in providing us with parts due to the conflict. In addition, the global
economic uncertainty following the start of the conflict could impact demand for our products.
Impact of October 7, 2022 and October 17, 2023 U.S. Department of Commerce Regulations on our Business
On October 7, 2022, the U.S. Department of Commerce published new regulations restricting the export to China of advanced
semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and
technology for the manufacturing in China of certain semiconductor manufacturing equipment. As previously disclosed, the
restrictions impacted Teradyne’s sales to certain companies in China and Teradyne’s manufacturing and development operations in
China. Teradyne mitigated the impact of these restrictions on its business by obtaining licenses from the Department of Commerce.
On October 17, 2023, the Department of Commerce released new rules updating the exporting controls issued on October 7, 2022.
The new rules which took effect on November 17, 2023 significantly limit the impact of the October 7, 2022 restrictions on
Teradyne’s business. However, the regulations may continue to have an adverse impact on certain actual or potential customers of
Teradyne and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the
global semiconductor industry, Teradyne’s business and revenues will be adversely impacted.
See Part II—Item 1A, “Risk Factors,” included herein for updates to our risk factors regarding risks associated with supply
chain issues, international conflicts, and legal and regulatory compliance.
Critical Accounting Policies and Estimates
We have identified the policies and estimates discussed below as critical to understanding our business and our results of
operations and financial condition. The impact and any associated risks related to these estimates on our business operations is
discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies
affect our reported and expected financial results. For a full description of our accounting policies related to the below items refer to
Note B. Accounting Policies, included in the Notes to Consolidated Financial Statements in this Annual Report.
Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying
assumptions may have amate rial 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.
Revenue Recognition
In accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues, when or as
control is transferred to acustom er. Our determination of revenue requires judgment in the determination of performance obligations
and allocation of the transaction price to performance obligations. We often sell bundled orders that include both product and services
or multiple different products within the same order. We evaluate each of the deliverables to determine if it meets the definition of a
performance obligation, which requires that it is capable of being distinct and distinct within the context of the contract. This
26
determination is based on an assessment of contractual rights of the contract and the ability of the performance obligation to perform
on its own or with readily available resources. In bundled transactions we estimate the standalone selling price of each identified
performance obligation and use that estimate to allocate the transaction price among said performance obligations. The estimated
standalone selling price is determined using all information reasonably available to us, including standalone transactions, market
information and other observable inputs.
Inventories
Inventories are stated at the lower of cost using astan dard costing system which approximates cost based on a first-in, first-out
basis or net realizable value. On a quarterly basis, we evaluate all inventories for net realizable value. This quarterly process identifies
obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess
inventory, which represents inventory items that are not expected to be consumed within the forecasted demand window, is written
down to estimated net realizable value. Forecasted demand information is obtained from the sales and marketing groups and
incorporates factors such as backlog and future revenues. The demand forecast is based on assumptions around the product life and
customer and market expectations.
Retirement and Postretirement Plans
We recognize net actuarial gains and losses and the change in the fair value of the plan assets in our operating results in the year
in which they occur or upon any interim remeasurement of the plans. Discount rate and expected return on assets are two assumptions
which are important elements of pension plan expense and asset/liability measurement. We evaluate our discount rate and expected
rate of return on assets assumptions annually on aplan and c ountry specific basis. We evaluate other assumptions related to
demographic factors, such as retirement age, mortality and turnover periodically, and update them to reflect our experience and
expectations for the future.
In developing the expected return on U.S. Qualified Pension Plan (“U.S. Plan”) assets assumption, we evaluated input from our
investment manager and pension consultants, including their forecast of asset class return expectations. We believe that 4.75% was an
appropriate rate of return on assets to use for 2023. The December 31, 2023 asset allocation for our U.S. Plan was 94% invested in
fixed income securities, 5% invested in equity securities, and 1% invested in other securities. Our investment manager regularly
reviews the actual asset allocation and periodically rebalances the portfolio to ensure alignment with our target allocations.
The discount rate that we utilized for determining future pension obligations for the U.S. Plan is based on the FTSE Pension
Index adjusted for the U.S. Plan’s expected cash flows and was 4.75% at December 31, 2023, down from 4.95% at December 31,
2022. We estimate that in 2024 we will recognize approximately $0.2 million of pension expense for the U.S. Plan. The U.S. Plan
pension expense estimate for 2024 is based on a4.75% discount rate and a4.65% return on assets. Future pension expense or income
will depend on future investment performance, changes in future discount rates and various other factors related to the employee
population participating in our pension plans.
Goodwill, Intangible and Long-Lived Assets
We assess goodwill for impairment at least annually in the fourth quarter, as of December 31, on a reporting unit basis, or more
frequently, when events and circumstances occur indicating that the recorded goodwill may be impaired. We review intangible and
long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets
may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Goodwill impairment will be the amount
by which are porting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Impairment of
intangible and long-lived assets would result in the asset being written down to its estimated fair value. The calculated fair value of a
reporting unit or intangible or long-lived asset is dependent upon discounted cash flow (“DCF”) models, discount rates, and market
multiples. DCF models rely on our forecasted mid-term plans which are subjective based on customer or market conditions and can
change materially. We utilize third party specialists when determining discount rates and selected market multiples. A change in any
of these key assumptions could result in a reporting unit, intangible asset, or long-lived asset being impaired in afuture period.
Convertible Debt
We adopted Accounting Standards Update (“ASU”) ASU 2020-06 – “Debt—Debt with Conversion and Other Options and
Derivatives and Hedging—Contracts in Entity’s Own Equity,” on January 1, 2022 using the modified retrospective method of
adoption. As a result of adoption, we recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $1.8
million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to retained
earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was
reduced to zero and additional paid-in capital was reduced by $100.8 million. In accordance with ASU 2020-06, we account for a
27
convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and
recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of ade bt discount, which was
previously amortized to interest expense. Settled shares reduce the outstanding debt balance in an amount equal to the cash paid, but
do not result in any gain or loss on extinguishment. We use the if-converted method in the diluted EPS calculation for convertible
instruments.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The
measurement of deferred tax assets is reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax
assets will not be realized. Evaluating the positive and negative evidence regarding the realization of the net deferred tax assets in
accordance with ASC 740, “Accounting for Income Taxes” is akey j udgment in the valuation of income taxes. This assessment
included the evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax-planning
strategies. Although realization is not assured, based on our assessment, we concluded that it is more likely than not that such assets,
net of the existing valuation allowance, will be realized.
Results of Operations
Information pertaining to fiscal year 2021 results of operations, including a year-to-year comparison against fiscal year 2022,
was included in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part II, Item 7, “Management’s
Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on February 22, 2023. This
information is incorporated by reference herein.
The following table sets forth the percentage of total net revenues included in our consolidated statements of operations:
Years Ended December 31,
2022
2023
78.3%
21.7
100.0
82.1%
17.9
100.0
33.0
9.6
42.6
57.4
21.6
15.6
0.7
0.8
38.7
18.7
(1.0)
0.1
—
19.6
2.9
16.8%
33.0
7.8
40.8
59.2
17.7
14.0
0.6
0.5
32.8
26.4
(0.2)
0.1
(0.2)
26.6
4.0
22.7%
Percentage of revenues:
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Total cost of revenues (exclusive of acquired intangible
assets amortization shown separately below)
Gross profit
Operating expenses:
Selling and administrative
Engineering and development
Acquired intangible assets amortization
Restructuring and other
Total operating expenses
Income from operations
Non-operating (income) expenses:
Interest income
Interest expense
Other (income) expense, net
Income before income taxes
Income tax provision
Net income
28
Revenues
Revenues for our reportable segments were as follows:
Semiconductor Test
Robotics
System Test
Wireless Test
Corporate and Eliminations
2023
1,818.6
375.2
338.2
144.3
—
2,676.3
2022
(in millions)
2,080.6
403.1
469.3
201.7
0.3
3,155.0
$
$
$
$
$
$
2022-2023
Dollar
Change
(262.0)
(27.9)
(131.1)
(57.4)
(0.3)
(478.7)
The decrease in Semiconductor Test revenues of $262.0 million, or 12.6%, was driven primarily by lower tester sales for
compute and mobility applications. The decrease in Robotics revenues of $27.9 million, or 6.9%, was driven primarily by softening
demand due to slowing global industrial activity and macro-economic headwinds and the impact of the transformation of Universal
Robots' sales channel. The decrease in System Test revenues of $131.1 million, or 27.9%, was primarily due to lower sales in Storage
Test of system level and hard disk drive testers. The decrease in Wireless Test revenues of $57.4 million, or 28.5%, was primarily due
to a decrease in sales of connectivity test products.
Our reportable segments accounted for the following percentages of consolidated revenues:
Semiconductor Test
Robotics
System Test
Wireless Test
Revenues by country as a percentage of total revenues were as follows (1):
United States
Korea
Taiwan
China
Japan
Europe
Philippines
Singapore
Thailand
Malaysia
Rest of the World
2023
2022
68%
14
13
5
100%
2023
2022
16%
15
14
12
11
10
7
4
3
3
5
100%
66%
13
15
6
100%
15%
17
20
16
5
9
4
3
4
5
2
100%
(1) Revenues attributable to acountry are based on the location of the customer site.
The breakout of product and service revenues was as follows:
Product revenues
Service revenues
2023
$
$
2,096.3
580.0
2,676.3
2022
(in millions)
2,591.6
563.5
3,155.0
$
$
$
$
2022-2023
Dollar
Change
(495.3)
16.5
(478.8)
29
Our product revenues decreased $495.3 million, or 19.1%, primarily due to lower tester sales in Semiconductor Test for
compute and mobility applications, adecrease in sales in Storage Test of system level and hard disk drive testers, and a decrease in
Wireless Test sales of connectivity test products. Our service revenues increased $16.5 million, or 2.9%, primarily in Semiconductor
Test and Storage Test.
In 2023, revenues from Texas Instruments Inc., a customer of our Semiconductor Test segment, accounted for 10% of our
consolidated revenues. In 2021, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of our
Semiconductor Test segment, accounted for 12% of our consolidated revenues. In 2023 and 2022, our five largest direct customers in
aggregate accounted for 32% and 26% of our consolidated revenues, respectively. We estimate consolidated revenues driven by
Qualcomm, acustomer of our Semiconductor Test, System Test and Wireless Test segments, combining direct and indirect sales,
accounted for approximately 11% of our consolidated revenues in 2022.
Gross Profit
Gross profit
Percent of total revenues
2023
$
1,536.7
2022
(in millions)
1,867.2
$
57.4%
59.2%
2022-2023
Dollar /
Point
Change
$
(330.5)
(1.8)
Gross profit as apercent o f total revenues decreased by 1.8 points, primarily due to a lower volume, higher spending to
strengthen our supply chain, and product mix.
The breakout of product and service gross profit was as follows:
Product gross profit
Percent of product revenues
Service gross profit
Percent of service revenues
2023
1,213.4
2022
(in millions)
1,549.0
$
57.9%
323.4
55.7%
$
59.8%
318.1
56.5%
$
$
$
$
2022-2023
Dollar /
Point
Change
(335.6)
(1.9)
5.3
(0.8)
Product revenues gross profit percentage decreased by 1.9 points, primarily due to lower volume, higher spending to strengthen
our supply chain, and product mix.
We assess the carrying value of our inventory on aquarterly basis by estimating future demand and comparing that demand
against on-hand and on-order inventory positions. Forecasted revenues information is obtained from the sales and marketing groups
and incorporates factors such as backlog and future revenues. This quarterly process identifies obsolete and excess inventory. Obsolete
inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items
that are not expected to be consumed within the forecasted demand window, is written down to estimated net realizable value.
During the year ended December 31, 2023, we recorded an inventory provision of $28.4 million included in cost of revenues,
primarily due to downward revisions to previously forecasted demand levels for certain products. Of the $28.4 million of total excess
and obsolete provisions, $22.5 million was related to Semiconductor Test, $2.3 million was related to Robotics, $1.9 million was
related to System Test, and $1.7 million was related to Wireless Test.
During the year ended December 31, 2022, we recorded an inventory provision of $31.5 million included in cost of revenues,
primarily due to downward revisions to previously forecasted demand levels for certain products. Of the $31.5 million of total excess
and obsolete provisions, $21.5 million was related to Semiconductor Test, $4.6 million was related to Wireless Test, $3.7 million was
related to Robotics, and $1.7 million was related to System Test.
30
During the years ended December 31, 2023 and 2022, we scrapped $26.4 million and $8.8 million of inventory, respectively,
and sold $5.2 million and $1.8 million of previously written-down or written-off inventory, respectively. As of December 31, 2023,
we had inventory related reserves for amounts which had been written-down or written-off totaling $136.0 million. We have no pre-
determined timeline to scrap the remaining inventory.
Selling and Administrative
Selling and administrative expenses were as follows:
Selling and administrative
Percent of total revenues
2023
$
577.3
21.6%
2022
(in millions)
558.1
$
17.7%
2022-2023
Change
$
19.2
The increase of $19.2 million in selling and administrative expenses was primarily due to the charge of $5.9 million related to
the modification of Teradyne’s chief executive officer’s outstanding equity awards in connection with his retirement and higher sales
and marketing spending in Robotics and Semiconductor Test.
Engineering and Development
Engineering and development expenses were as follows:
Engineering and development
Percent of total revenues
2023
$
418.1
15.6%
2022
(in millions)
440.6
$
14.0%
2022-2023
Change
$
(22.5)
The decrease of $22.5 million in engineering and development expenses was due to lower variable compensation and lower
spending in Semiconductor Test, partially offset by higher spending in Robotics.
Restructuring and Other
During the year ended December 31, 2023, we recorded $14.7 million of severance charges related to headcount reductions of
215 people primarily in Semiconductor Test and Robotics, which included charges related to avoluntary e arly retirement program for
employees meeting certain conditions, $3.1 million of acquisition and divestiture expenses related to the Technoprobe transaction, a
$1.5 million contract termination charge, and a charge of $1.1 million for an increase in environmental liability.
During the year ended December 31, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against
Teradyne and AutoGuide related to an earn-out dispute which was settled on March 25, 2022 for $26.7 million, $2.9 million of
severance charges primarily in Robotics, and a charge of $2.7 million for an increase in environmental and legal liabilities, partially
offset by a $3.4 million gain on sale of an asset.
Interest and Other
Interest income
Interest expense
Other (income) expense, net
2023
2022
(in millions)
2022-2023
Change
$
(27.3) $
3.8
(1.0)
(6.4) $
3.7
(5.8)
(20.9)
0.1
4.8
Interest income increased by $20.9 million due to higher interest rates in 2023. Other (income) expense, net decreased by $4.8
million primarily due to the change in pension actuarial gains/losses, from a $25.6 million gain in 2022 to a $2.7 million loss in 2023,
partially offset by the change in unrealized gains/losses on equity securities, from a $9.7 million loss in 2022 to a $7.2 million gain in
2023, and a$7.5 million unrealized gain on our call option purchased in connection with our agreement to acquire a 10% investment
in Technoprobe S.p.A.
31
Income (Loss) Before Income Taxes
Semiconductor Test
System Test
Wireless Test
Robotics
Corporate and Eliminations (1)
2023
453.3
94.1
30.6
(54.3)
1.9
525.6
2022
(in millions)
634.5
166.9
66.8
(16.2)
(11.6)
840.4
$
$
$
$
$
$
2022-2023
Change
(181.2)
(72.8)
(36.2)
(38.1)
13.5
(314.8)
(1)
Included in Corporate and Eliminations are interest income, interest expense, net foreign exchange gains (losses), intercompany
eliminations, employee severance, pension and postretirement plan actuarial gains (losses), legal and environmental fees,
acquisition and divestiture related expenses, contract termination settlement charge, and an expense for the modification of
Teradyne's former chief executive officer's outstanding equity awards.
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower tester sales for compute and
mobility applications. The decrease in income before income taxes in System Test was primarily due to lower sales in Storage Test of
system level and hard disk drive testers. The decrease in income before income taxes in Wireless Test was driven primarily by a
decrease in sales of connectivity test products. The decrease in income before income taxes in Robotics was driven primarily by
softening demand due to slowing global industrial activity and macro-economic headwinds and the impact of the transformation of
Universal Robots sales channel. The increase in income before income taxes in Corporate and Eliminations was primarily due to legal
settlement charges in 2022 related to litigation for the earn-out dispute in connection with the AutoGuide acquisition, changes in
unrealized gains/losses on equity securities and higher interest income.
Income Taxes
Income tax expense for 2023 and 2022 totaled $76.8 million and $124.9 million, respectively. The effective tax rate for 2023
and 2022 was 14.6% and 14.9%, respectively.
The decrease in the effective tax rate from 2022 to 2023 is primarily attributable to increases in benefit from tax credits and the
U.S. foreign derived intangible income deduction. These decreases in expense were partially offset by a shift in the geographic
distribution of income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate
jurisdictions and areducti on in benefit from equity compensation.
We qualify for atax h oliday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic
Development Board under which certain headcount and spending requirements must be met. The tax savings attributable to the
Singapore tax holiday for the years ended December 31, 2023 and 2022 were $1.4 million or $0.01 per diluted share and $16.0 million
or $0.09 per diluted share, respectively. In November 2020, we entered into an agreement with the Singapore Economic Development
Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31,
2020. The new tax holiday is scheduled to expire on December 31, 2025.
Capital Resources and Material Cash Requirements
Our cash, cash equivalents and marketable securities balance decreased by $68.0 million in 2023 to $937.2 million. Cash
decreased due to stock repurchases in the amount of $397.2 million, quarterly cash dividend payments in the amount of $67.9 million,
and payments of convertible debt principal in the amount of $50.3 million, partially offset by cash generated by our global operations.
Operating activities during 2023 provided cash of $585.2 million. Changes in operating assets and liabilities used cash of $9.6
million. This was due to a $33.2 million decrease in operating assets and a$42.8 million decrease in operating liabilities.
The decrease in operating assets was due to a $71.0 million decrease in accounts receivable due to lower sales and a$5.3 million
decrease in inventories, partially offset by a $43.1 million increase in prepayments and other assets due to prepayments to our contract
manufacturers.
32
The decrease in operating liabilities was due to a $57.2 million decrease in deferred revenue and customer advance payments, a
$26.9 million decrease in income taxes, a $21.2 million decrease in accrued employee compensation, and $5.5 million of retirement
plan contributions, partially offset by a $45.0 million increase in accounts payable, and a $23.0 million increase in other accrued
liabilities.
Investing activities during 2023 used cash of $179.6 million, due to $161.9 million used for purchases of marketable securities,
$159.6 million used for purchases of property, plant and equipment, and $5.0 million used for issuance of convertible loan, partially
offset by $85.0 million and $61.4 million in proceeds from maturities and sales of marketable securities, respectively, and $0.5 million
in proceeds from the cancellation of Teradyne owned life insurance policies related to the cash surrender value.
Financing activities during 2023 used cash of $501.9 million, due to $397.2 million used for the repurchase of 3.9 million shares
of common stock at an average price of $102.47 per share, $67.9 million used for dividend payments, $50.3 million used for the
payments of convertible debt principal, and $20.8 million used for payments related to net settlement of employee stock compensation
awards, partially offset by $34.3 million from the issuance of common stock under employee stock purchase and stock option plans.
Operating activities during 2022 provided cash of $577.9 million. Changes in operating assets and liabilities used cash of $272.6
million. This was due to a $170.9 million increase in operating assets and a$101.7 million decrease in operating liabilities.
The increase in operating assets was due to a $140.7 million increase in prepayments and other assets due to prepayments to our
contract manufacturers, and an $80.8 million increase in inventories, partially offset by a $50.6 million decrease in accounts receivable
due to lower sales.
The decrease in operating liabilities was due to a $40.3 million decrease in accrued employee compensation, a $29.8 million
decrease in income taxes, a $10.8 million decrease in accounts payable, a$9.3 million decrease in other accrued liabilities, a$6.2
million decrease in deferred revenue and customer advance payments, and $5.1 million of retirement plan contributions.
Investing activities during 2022 provided cash of $43.8 million, due to $268.1 million and $222.9 million in proceeds from sales
and maturities of marketable securities, respectively, $3.4 million due to sale of an asset, partially offset by $287.4 million used for
purchases of marketable securities and $163.2 million used for purchases of property, plant and equipment.
Financing activities during 2022 used cash of $893.0 million, due to $752.1 million used for the repurchase of 7.3 million shares
of common stock at an average price of $103.69 per share, $69.7 million used for dividend payments, $66.8 million used for the
payments of convertible debt principal, and $33.2 million used for payments related to net settlement of employee stock compensation
awards, partially offset by $28.7 million from the issuance of common stock under employee stock purchase and stock option plans.
In January 2023, May 2023, August 2023 and November 2023, our Board of Directors declared a quarterly cash dividend of
$0.11 per share. Total dividend payments in 2023 were $67.9 million. In January 2022, May 2022, August 2022 and November 2022,
our Board of Directors declared a quarterly cash dividend of $0.11 per share. Total dividend payments in 2022 were $69.7 million.
In January 2023, our Board of Directors cancelled the 2021 repurchase program and approved ane w repurchase program for up
to $2.0 billion of common stock. In 2023, we repurchased 3.9 million shares of common stock for $397.2 million, which excludes
related excise tax, at an average price of $102.47 per share. In 2022, we repurchased 7.3 million shares of common stock for $752.1
million at an average price of $103.69 per share against the 2021 repurchase program. The cumulative repurchases as of December 31,
2022, under the 2021 repurchase program, were 12.0 million shares of common stock for $1,352.1 million at an average price per
share of $112.44. In 2024 we intend to repurchase up to $90.0 million.
While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash
dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our
Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition.
On November 7, 2023, Teradyne announced a strategic partnership with Technoprobe S.p.A including Teradyne's agreement to
acquire a 10% equity investment in Technoprobe for 481.0 million Euros. Teradyne will face a three year restriction on the transfer or
disposition of the Technoprobe shares upon closing of the agreement, subject to certain early termination events.
On May 1, 2020, we entered into acredit agreement providing a three-year, senior secured revolving credit facility of $400
million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December
10, 2026. On October 5, 2022, the credit agreement was amended to increase the amount of the credit facility to $750.0 million from
$400.0 million. As of February 22, 2023, we have not borrowed any funds under the credit facility.
33
We expect operations to continue to be the primary source of cash to operate the business and meet material cash commitments,
including any payments of convertible debt principal, our stock repurchase program, our quarterly dividends, our office lease
obligations, contractual obligations related to inventory purchases and the construction of new facilities. We believe our cash, cash
equivalents and marketable securities balance will be sufficient to pay our quarterly dividend and meet our working capital and
expenditure needs for at least the next twelve months. Inflation has not had asignifi cant long-term impact on earnings.
At December 31, 2023, our future contractual obligations were related to debt, leases, retirement plan liabilities, deferred tax
benefits, and purchase obligations. See Note J. “Debt”, Note I. “Leases”, Note P. “Retirement Plans”, and Note S. “Income Taxes” of
Notes to Consolidated Financial Statements in this Annual Report for information about those obligations, which Notes are
incorporated by reference into this section. Our purchase obligations were approximately $414.4 million, with $379.1 million expected
to be paid within twelve months.
Retirement Plans
ASC 715-20, “Compensation—Retirement Benefits—Defined Benefit Plans,” requires an employer with defined benefit plans or
other postretirement benefit plans to recognize an asset or alia bility on its balance sheet for the overfunded or underfunded status of
the plans as defined by ASC 715-20. The pension asset or liability represents the difference between the fair value of the pension
plans’ assets and the projected benefit obligation as of December 31. For other postretirement benefit plans, the liability is the
difference between the fair value of the plan’s assets and the accumulated postretirement benefit obligation as of December 31.
For the year ended December 31, 2023, our pension expense, which includes the U.S. Qualified Pension Plan (“U.S. Plan”),
certain qualified plans for non-U.S. subsidiaries, and a U.S. Supplemental Executive Defined Benefit Plan, was approximately $6.8
million. Pension expense is calculated based upon a number of actuarial assumptions. Discount rate and expected return on assets are
two assumptions which are important elements of pension plan expense and asset/liability measurement. We evaluate our discount rate
and expected rate of return on assets assumptions annually on aplan and c ountry specific basis. We evaluate other assumptions related
to demographic factors, such as retirement age, mortality and turnover periodically, and update them to reflect our experience and
expectations for the future.
In developing the expected return on U.S. Plan assets assumption, we evaluated input from our investment manager and pension
consultants, including their forecast of asset class return expectations. We believe that 4.75% was an appropriate rate of return on
assets to use for 2023. The December 31, 2023 asset allocation for our U.S. Plan was 94% invested in fixed income securities, 5%
invested in equity securities, and 1% invested in other securities. Our investment manager regularly reviews the actual asset allocation
and periodically rebalances the portfolio to ensure alignment with our target allocations.
We recognize net actuarial gains and losses and the change in the fair value of plan assets in our operating results in the year in
which they occur or upon any interim remeasurement of the plans. We calculate the expected return on plan assets using the fair value
of the plan assets. Actuarial gains and losses are generally measured annually as of December 31 and, accordingly, recorded during
the fourth quarter of each year or upon any interim remeasurement of the plans.
The discount rate that we utilized for determining future pension obligations for the U.S. Plan is based on the FTSE Pension
Index adjusted for the U.S. Plan’s expected cash flows and was 4.75% at December 31, 2023, down from 4.95% at December 31,
2022. We estimate that in 2024, we will recognize approximately $0.2 million of pension expense for the U.S. Plan. The U.S. Plan
pension expense estimate for 2024 is based on a4.75% discount rate and a4.65% return on assets. Future pension expense or income
will depend on future investment performance, changes in future discount rates and various other factors related to the employee
population participating in our pension plans.
As of December 31, 2023, our pension plans had no unrecognized pension prior service cost.
The assets of the U.S. Plan consist substantially of fixed income securities. U.S. Plan assets have increased from $111.8 million
at December 31, 2022 to $112.6 million at December 31, 2023, while the U.S. Plan’s liability increased from $100.0 million at
December 31, 2022 to $101.1 million at December 31, 2023.
Our funding policy is to make contributions to our pension plans in accordance with local laws and to the extent that such
contributions are tax deductible. During 2023, we made contributions of $3.1 million to the U.S. supplemental executive defined
benefit pension plan, and $1.0 million to certain qualified plans for non-U.S. subsidiaries. In 2024, we expect to contribute
approximately $3.1 million to the U.S. supplemental executive defined benefit pension plan. Contributions to be made in 2024 to
certain qualified plans for non-U.S. subsidiaries are based on local statutory requirements and are estimated at approximately $1.4
million.
34
Equity Compensation Plans
In addition to our 1996 Employee Stock Purchase Plan discussed in Note Q: “Stock-Based Compensation” in Notes to
Consolidated Financial Statements, we have a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”) under
which equity securities are authorized for issuance. The 2006 Equity Plan was initially approved by stockholders on May 25, 2006.
At our annual meeting of stockholders held May 21, 2013, our stockholders approved an amendment to the 2006 Equity Plan to
increase the number of shares issuable thereunder by 10.0 million, for an aggregate of 32.0 million shares issuable thereunder, and our
stockholders also approved an amendment to our 1996 Employee Stock Purchase Plan to increase the number of shares issuable
thereunder by 5.0 million, for an aggregate of 30.4 million shares issuable thereunder. At our annual meeting of stockholders held
May 12, 2015, our stockholders approved an amendment to the 2006 Equity Plan to extend its term until May 12, 2025. At our annual
meeting of stockholders held May 7, 2021, our stockholders approved an amendment to our 1996 Employee Stock Purchase Plan to
increase the number of shares issuable thereunder by 3.0 million, for an aggregate of 33.4 million shares issuable thereunder.
The following table presents information about these plans as of December 31, 2023 (share numbers in thousands):
Plan category
Equity plans approved by shareholders
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column one)
1,548 (1)
$
94.85
7,863 (2)
Includes 1,377,662 shares of restricted stock units that are not included in the calculation of the weighted average exercise price.
(1)
(2) Consists of 4,352,428 securities available for issuance under the 2006 Equity Plan and 3,510,784 of securities available for
issuance under the Employee Stock Purchase Plan.
The purpose of the 2006 Equity Plan is to motivate employees, officers and directors by providing equity ownership and
compensation opportunities in Teradyne. The aggregate number of shares available under the 2006 Equity Plan as of December 31,
2023 was 4,352,428 shares of our common stock. The 2006 Equity Plan authorizes the grant of stock-based awards in the form of (1)
non-qualified and incentive stock options, (2) stock appreciation rights, (3) restricted stock awards and restricted stock unit awards, (4)
phantom stock, and (5) other stock-based awards. Awards may be tied to time-based vesting schedules and/or performance-based
vesting measured by reference to performance criteria chosen by the Compensation Committee of the Board of Directors, which
administers the 2006 Equity Plan. Awards may be made to any employee, officer, consultant and advisor of Teradyne and our
subsidiaries, as well as to our directors. The maximum number of shares of stock-based awards that may be granted to one participant
during any one fiscal year is 2,000,000 shares of common stock.
As of December 31, 2023, total unrecognized compensation expense related to non-vested restricted stock units and options was
$73.7 million and is expected to be recognized over aweight ed average period of 2.5 years.
35
Performance Graph
The following graph compares the change in our cumulative total shareholder return in our common stock with (i) the Standard
& Poor’s 500 Index and (ii) the Morningstar Global Semiconductor Equipment & Materials GR USD Industry Group. The comparison
assumes $100.00 was invested on December 31, 2018 in our common stock and in each of the foregoing indices and assumes
reinvestment of dividends, if any. Historic stock price performance is not necessarily indicative of future price performance.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No.
2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which will require us to disclose
significant segment expenses and other segment items used by the Chief Operating Decision Maker ("CODM") on an annual and
interim basis as well as provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are
currently required annually. Additionally, we will be required to disclose the title and position of the CODM. The new standard is
effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,
2024, with early adoption permitted. This ASU will have no impact on our results of operations, cash flows or financial condition.
Upon adoption, we will apply the amendments in this ASU retrospectively to all prior period disclosures presented in the financial
statements.
In December 2023, FASB issued ASU 2023-09 –“Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which
requires expanded disclosures relating to the tax rate reconciliation, income taxes paid, income (loss) before income tax expense
(benefit) and income tax expense (benefit), requiring a greater disaggregation of information for each. The provisions of ASU 2023-09
are effective for fiscal years beginning after December 15, 2024. The amendments in this update should be applied on aprospect ive
basis, but retrospective application is permitted. We are currently evaluating the impact of this new standard.
Item 7A: Quantitative and Qualitative Disclosures about Market Risks
Concentration of Credit Risk
Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash equivalents,
marketable securities, forward currency contracts and accounts receivable. Our cash equivalents consist primarily of money market
funds invested in U.S. Treasuries and government agencies. Our fixed income available-for-sale marketable securities have a
minimum rating of AA by one or more of the major credit rating agencies. We place forward currency contracts with high credit-
quality financial institutions in order to minimize credit risk exposure. Concentrations of credit risk with respect to accounts receivable
36
are limited due to the large number of geographically dispersed customers. We perform ongoing credit evaluations of our customers’
financial condition and from time to time may require customers to provide a letter of credit from abank to secure accounts
receivable. As of December 31, 2023, a customer of our Semiconductor Test segment, Texas Instruments Inc., accounted for 18% of
our accounts receivable balance. There were no customers who accounted for more than 10% of our accounts receivable balance as of
December 31, 2022.
Exchange Rate Risk Management
We regularly enter into foreign currency forward contracts to hedge the value of our monetary assets and liabilities in Japanese
Yen, British Pound, Korean Won, Taiwan Dollar, Singapore Dollar, Euro, Philippine Peso, Chinese Yuan, and Danish Krone. These
foreign currency forward contracts have maturities of approximately one month. These contracts are used to minimize the effect of
exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities.
We also enter into foreign currency forward contracts to hedge the impact of exchange rates on our revenues in Japanese Yen
and Taiwan Dollar. These contracts have maturities of less than one year. We do not engage in currency speculation.
On November 7, 2023, in connection with our agreement to acquire 10% investment in Technoprobe S.p.A, we purchased a call
option to buy 481.0 million Euros. The expiration date of the option is April 26, 2024. Since the transaction price was agreed to in
Euros, this option contract reduces the impact to the purchase price of changes in the Euro to U.S. Dollar exchange rate.
We performed a sensitivity analysis assuming ahypothe tical 10% fluctuation in foreign exchange rates to the hedging contracts
and the underlying exposures described above. As of December 31, 2023 and 2022, the analysis indicated that these hypothetical
market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.
Interest Rate Risk Management
We are exposed to potential losses due to changes in interest rates. Our interest rate exposure is primarily related to short-term
and long-term marketable securities.
In order to estimate the potential loss due to interest rate risk, afluctu ation in interest rates of 25 basis points was assumed.
Market risk for the short and long-term marketable securities was estimated as the potential change in the fair value resulting from a
hypothetical change in interest rates for securities contained in the investment portfolio. The potential change in the fair value from
changes in interest rates is immaterial as of December 31, 2023 and 2022.
37
Item 8: Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Teradyne, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Teradyne, Inc. and its subsidiaries (the “Company”) as of
December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income, convertible common
shares and shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, including the
related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023
appearing under Item 15(c) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's
internal control over financial reporting as of December 31, 2023, based on criteria established inInte rnal Control -Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2023, based on criteria established in Internal Control -Inte grated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note Bto the c onsolidated financial statements, the Company changed the manner in which it accounts for convertible
debt in 2022.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is aproces s designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
38
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have ama terial effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Revenue Recognition - Certain Product Revenue
As described in Note B to the consolidated financial statements, the Company recognizes revenue for transactions that do not meet the
criteria for over time recognition at a point in time when shipped or delivered based on contractual terms. The transaction price is the
amount of consideration the Company expects to be entitled to in exchange for such products, which is generally at contractually
stated prices. The Company’s total product revenue was $2.1 billion for the year ended December 31, 2023, of which amajo rity
relates to certain product revenue.
The principal consideration for our determination that performing procedures relating to revenue recognition for certain product
revenue is a critical audit matter is ahigh degree of auditor effort in performing procedures related to revenue recognition for certain
of the Company’s product revenue.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the recognition
process for certain product revenue. These procedures also included, among others (i) testing the completeness, accuracy, and
occurrence of revenue recognized for a sample of certain product revenue transactions by obtaining and inspecting source documents,
such as purchase orders, invoices, and proof of shipment or delivery; (ii) testing the cut off of revenue recognized for asample of
certain product revenue transactions near period end by obtaining and inspecting source documents, such as purchase orders, invoices
and proof of shipment or delivery; and (iii) confirming asample of outstanding customer invoice balances as of December 31, 2023
and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment
or delivery, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 22, 2024
We have served as the Company’s auditor since 1968.
39
TERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
2023
2022
(in thousands, except per share amount)
Current assets:
ASSETS
Cash and cash equivalents
Marketable securities
Accounts receivable, less allowance for credit losses of $1,988 and $1,955 in 2023 and 2022,
$
757,571
62,154
$
respectively
Inventories, net
Prepayments
Other current assets
Current assets held for sale
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets, net
Marketable securities
Deferred tax assets
Retirement plans assets
Other assets
Acquired intangible assets, net
Goodwill
Long-term assets held for sale
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Accrued employees’ compensation and withholdings
Deferred revenue and customer advances
Other accrued liabilities
Operating lease liabilities
Income taxes payable
Current debt
Current liabilities held for sale
Total current liabilities
Retirement plans liabilities
Long-term deferred revenue and customer advances
Deferred tax liabilities
Long-term other accrued liabilities
Long-term operating lease liabilities
Long-term income taxes payable
Long-term liabilities held for sale
Total liabilities
Commitments and contingencies (Note M)
Common stock, $0.125 par value, 1,000,000 shares authorized, 152,698 and 155,759 shares issued
and outstanding at December 31, 2023 and 2022, respectively
SHAREHOLDERS’ EQUITY
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
Total liabilities, convertible common shares and shareholders’ equity
$
$
$
854,773
39,612
491,145
325,019
532,962
14,404
—
2,257,915
418,683
73,734
110,777
142,784
11,761
28,925
53,478
403,195
—
3,501,252
139,722
212,266
148,285
112,271
18,594
65,010
50,115
—
746,263
116,005
45,131
3,267
15,981
64,176
59,135
—
1,049,958
422,124
309,974
548,970
37,992
23,250
2,162,035
445,492
73,417
117,434
175,775
11,504
38,580
35,404
415,652
11,531
3,486,824
180,131
191,750
99,804
114,712
17,522
48,653
—
7,379
659,951
132,090
37,282
183
19,998
65,092
44,331
2,000
960,927
$
$
19,087
1,827,274
(26,978)
706,514
2,525,897
3,486,824
$
19,470
1,755,963
(49,868)
725,729
2,451,294
3,501,252
The accompanying notes are an integral part of the consolidated financial statements.
40
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Total cost of revenues (exclusive of acquired intangible assets
amortization shown separately below)
Gross profit
Operating expenses:
Selling and administrative
Engineering and development
Acquired intangible assets amortization
Restructuring and other
Total operating expenses
Income from operations
Non-operating (income) expenses:
Interest income
Interest expense
Other (income) expense, net
Income before income taxes
Income tax provision
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares—basic
Weighted average common shares—diluted
2023
Years Ended December 31,
2022
(in thousands, except per share amount)
2021
$
$
2,096,286
580,012
2,676,298
882,892
256,658
1,139,550
1,536,748
577,315
418,089
18,999
21,277
1,035,680
501,068
(27,348)
3,806
(962)
525,572
76,820
448,752
2.91
2.73
154,310
164,304
$
$
$
$
$
$
$
$
$
$
2,591,572
563,473
3,155,045
1,042,555
245,339
1,287,894
1,867,151
558,103
440,591
19,333
17,185
1,035,212
831,939
(6,379)
3,719
(5,786)
840,385
124,884
715,501
4.52
4.22
158,434
169,734
3,196,575
506,306
3,702,881
1,300,106
196,119
1,496,225
2,206,656
547,559
427,609
21,456
9,312
1,005,936
1,200,720
(2,627)
17,820
24,572
1,160,955
146,366
1,014,589
6.15
5.53
164,960
183,625
The accompanying notes are an integral part of the consolidated financial statements.
41
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
TERADYNE, INC.
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0,
respectively
Available-for-sale marketable securities:
Unrealized gains (losses) on marketable securities arising during
period, net of tax of $568, $(3,388), ($578), respectively
Less: Reclassification adjustment for losses (gains) included in net
income, net of tax of $12, $25, $(277), respectively
Cash flow hedges:
Unrealized gains (losses) arising during period, net of tax of $1,537,
$(708), $0, respectively
Less: Reclassification adjustment for losses included in net
income, net of tax of $(686), $0, $0, respectively
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax $(2), $(2), $(2),
respectively
Other comprehensive income (loss)
Comprehensive income
2023
Years Ended December 31,
2022
(in thousands)
2021
$
448,752
$
715,501
$
1,014,589
17,407
(29,031)
(36,207)
2,423
44
2,467
5,464
(2,441)
3,023
(12,666)
301
(12,365)
(2,517)
—
(2,517)
(2,255)
(995)
(3,250)
—
—
—
(7)
22,890
471,642
$
(7)
(43,920)
671,581
$
(7)
(39,464)
975,125
$
The accompanying notes are an integral part of the consolidated financial statements.
42
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE COMMON SHARES
AND SHAREHOLDERS’ EQUITY
Year Ended December 31, 2020
Net issuance of common stock under stock-based plans
Stock-based compensation expense
Repurchase of common stock
Cash dividends ($0.40 per share)
Settlements of convertible notes
Exercise of convertible notes hedge call options
Convertible common shares
Net income
Other comprehensive loss
Year Ended December 31, 2021
Net issuance of common stock under stock-based plans
Stock-based compensation expense
Repurchase of common stock
Cash dividends ($0.44 per share)
Settlements of convertible notes
Exercise of convertible notes hedge call options
Convertible common shares
Cumulative-effect of change in accounting principle
related to convertible debt
Net income
Other comprehensive loss
Year Ended December 31, 2022
Net issuance of common stock under stock-based plans
Stock-based compensation expense
Repurchase of common stock
Cash dividends ($0.44 per share)
Settlements of convertible notes
Exercise of convertible notes hedge call options
Net income
Other comprehensive income
Year Ended December 31, 2023
Convertible
Common
Shares Value
$
3,787
(2,275)
$
1,512
(1,512)
$
—
Common
Stock Shares
Common
Stock
Par Value
166,123
899
$
20,765
113
(4,771)
8,148
(8,148)
(597)
1,018
(1,018)
Shareholders’ Equity
Accumulated
Other
Comprehensive
Income (loss)
Additional
Paid-in
Capital
(in thousands)
$
$ 1,765,323
(225)
45,632
984,622
(986,082)
2,275
162,251
761
$
20,281
96
$
$ 1,811,545
(4,471)
48,466
(7,253)
1,495
(1,495)
(907)
187
(187)
(442)
187
1,512
(100,834)
155,759
848
$
19,470
106
$
$ 1,755,963
13,371
57,940
(3,909)
1,072
(1,072)
(489)
133
(133)
(133)
133
Retained
Earnings
Total
Shareholders’
Equity
33,516
$
387,414
(599,403)
(66,034)
1,014,589
(39,464)
(5,948)
$
736,566
$
(751,175)
(69,763)
94,600
715,501
(43,920)
(49,868)
$
725,729
$
(400,040)
(67,927)
448,752
2,207,018
(112)
45,632
(600,000)
(66,034)
985,640
(987,100)
2,275
1,014,589
(39,464)
2,562,444
(4,375)
48,466
(752,082)
(69,763)
(255)
—
1,512
(6,234)
715,501
(43,920)
2,451,294
13,477
57,940
(400,529)
(67,927)
—
—
448,752
22,890
2,525,897
$
—
152,698
$
19,087
$ 1,827,274
$
22,890
(26,978)
$
706,514
$
The accompanying notes are an integral part of the consolidated financial statements.
43
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
2023
Years Ended December 31,
2022
(in thousands)
2021
$
448,752
$
715,501
$
1,014,589
Cash flows from operating activities:
Net income
Adjustments to reconcile net income from operations to net cash provided by
operating activities:
Depreciation
Stock-based compensation
Provision for excess and obsolete inventory
Amortization
Retirement plans actuarial losses (gains)
Deferred taxes
(Gains) losses on investments
Gains on sale of asset
Loss on convertible debt conversion
Contingent consideration fair value adjustment
Other
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable
Inventories
Prepayments and other assets
Accounts payable and other accrued expenses
Deferred revenue and customer advances
Retirement plan contributions
Income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Purchases of marketable securities
Proceeds from maturities of marketable securities
Proceeds from sales of marketable securities
Proceeds from insurance
Issuance of convertible loan
Proceeds from sale of asset
Purchase of investment and acquisition of business
Net cash (used for) provided by investing activities
Cash flows from financing activities:
Repurchase of common stock
Dividend payments
Payments of convertible debt principal
Payments related to net settlement of employee stock compensation awards
Issuance of common stock under stock purchase and stock option plans
Net cash used for financing activities
Effects of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplementary disclosure of cash flow information:
Cash paid for:
Interest
Income taxes
Non-cash investing activities:
Capital expenditures incurred but not yet paid:
$
$
$
$
92,118
57,682
28,358
18,768
2,703
(37,642)
(14,915)
—
—
—
(955)
70,977
5,327
(43,101)
46,782
(57,210)
(5,492)
(26,921)
585,231
(159,642)
(161,906)
85,042
61,401
460
(5,000)
—
—
(179,645)
(397,241)
(67,878)
(50,264)
(20,788)
34,259
(501,912)
(876)
(97,202)
854,773
757,571
296
140,239
2,735
$
$
$
$
90,763
48,228
31,452
19,912
(25,584)
(38,693)
9,985
(3,410)
—
—
2,353
50,628
(80,809)
(140,713)
(60,507)
(6,233)
(5,116)
(29,834)
577,923
(163,249)
(287,409)
222,941
268,058
—
—
3,410
—
43,751
(752,082)
(69,711)
(66,759)
(33,170)
28,733
(892,989)
3,889
(267,426)
1,122,199
854,773
1,498
193,246
1,826
$
$
$
$
91,073
45,643
15,475
34,412
(2,217)
(17,305)
(6,410)
—
28,828
(7,227)
271
(57,778)
6,495
(175,846)
129,499
9,873
(5,405)
(5,604)
1,098,366
(132,472)
(661,781)
660,148
266,466
—
—
—
(12,000)
120,361
(600,000)
(65,977)
(342,990)
(32,303)
32,686
(1,008,584)
(2,065)
208,078
914,121
1,122,199
4,236
172,134
1,973
The accompanying notes are an integral part of the consolidated financial statements.
44
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.
THE COMPANY
Teradyne, Inc. (“Teradyne”) is a leading global supplier of automated test equipment and robotics solutions. Teradyne designs,
develops, manufactures and sells automated test systems and robotics products. Teradyne’s automated test systems are used to test
semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics,
wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s robotics products
include collaborative robotic arms, autonomous mobile robots, and advanced robotic control software used by global manufacturing,
logistics and industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease
manufacturing and logistics costs. Teradyne’s automated 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.
B.
ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant
intercompany balances and transactions are eliminated. Certain prior years’ amounts were reclassified to conform to the current year
presentation.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis,
management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived
assets, accounts receivable, income taxes, deferred tax assets and liabilities, pensions, warranties, contingent consideration liabilities,
and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that
are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Management is not aware of any specific event or
circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as
of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional
information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.
Revenue Recognition
Revenue from Contracts with Customers
In accordance with ASC 606, Teradyne recognizes revenues, when or as control is transferred to a customer. Teradyne’s
determination of revenue is dependent upon a five-step process outlined below.
• Teradyne accounts for a contract with a customer when there is written approval, the contract is committed, the rights of the
parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of
collection.
• Teradyne periodically enters into contracts with customers in which a customer may purchase a combination of goods and
services, such as products with extended warranty obligations. Teradyne determines performance obligations by assessing
whether the products or services are distinct from the other elements of the contract. In order to be distinct, the product or
service must perform either on its own or with readily available resources and must be separate within the context of the
contract.
45
• Teradyne determines the transaction price to be the amount of consideration to which Teradyne expects to be entitled to,
which is generally at contractually stated prices.
• Transaction price is allocated to each individual performance obligation based on the standalone selling price of that
performance obligation. Teradyne uses standalone transactions when available to value each performance obligation. If
standalone transactions are not available, Teradyne will estimate the standalone selling price through market assessments or
cost plus a reasonable margin analysis. Any discounts from standalone selling price are spread proportionally to each
performance obligation.
•
In order to determine the appropriate timing for revenue recognition, Teradyne first determines if the transaction meets any
of three criteria for over time recognition. If the transaction meets the criteria for over time recognition, Teradyne recognizes
revenue as the good or service is delivered. Teradyne uses input variables such as hours or months utilized or costs incurred
to determine the amount of revenue to recognize in a given period. Input variables are used as they best align consumption
with benefit to the customer. For transactions that do not meet the criteria for over time recognition, Teradyne will recognize
revenue at apoint i n time based on an assessment of the five criteria for transfer of control. Teradyne has concluded that
revenue should be recognized when shipped or delivered based on contractual terms. Typically, acceptance of Teradyne’s
products and services is aformalit y as Teradyne delivers similar systems, instruments and robots to standard specifications.
In cases where acceptance is not deemed a formality, Teradyne will defer revenue recognition until customer acceptance.
Performance Obligations
Products
Teradyne products consist primarily of semiconductor test systems and instruments, defense/aerospace test instrumentation and
systems, storage test systems and instruments, circuit-board test and inspection systems and instruments, wireless test systems and
robotics products. Teradyne’s hardware is typically recognized at a point in time upon transfer of control to the customer.
Services
Teradyne services consist of extended warranties, training and application support, service agreements, post contract customer
support (“PCS”) and replacement parts. Each service is recognized based on relative standalone selling price. Extended warranty,
training and support, service agreements and PCS are recognized over time based on the period of service. Replacement parts are
recognized at apoint in time upon transfer of control to the customer.
Teradyne does not allow customer returns or provide refunds to customers for any products or services. Teradyne products
include a standard 12-month warranty. This warranty is not considered a distinct performance obligation because it does not obligate
Teradyne to provide a separate service to the customer and it cannot be purchased separately. Cost related to warranties are included in
cost of revenues when product revenues are recognized.
As of December 31, 2023 and 2022, deferred revenue and customer advances consisted of the following and are included in the
short and long-term deferred revenue and customer advances:
Maintenance, service and training
Customer advances, undelivered elements and other
Extended warranty
Total deferred revenue and customer advances
2023
2022
(in thousands)
$
$
66,458
35,731
34,897
137,086
$
$
78,089
59,147
56,180
193,416
46
Product Warranty
Teradyne generally provides aone-year warranty on its products, commencing upon installation, acceptance or shipment. A
provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience.
Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities:
Balance at December 31, 2020
Accruals for warranties issued during the period
Accruals related to pre-existing warranties
Settlements made during the period
Balance at December 31, 2021
Accruals for warranties issued during the period
Accruals related to pre-existing warranties
Settlements made during the period
Balance at December 31, 2022
Accruals for warranties issued during the period
Accruals related to pre-existing warranties
Settlements made during the period
Balance at December 31, 2023
Amount
(in thousands)
16,633
35,727
(6,846)
(20,937)
24,577
21,851
(5,618)
(26,629)
14,181
21,644
(1,576)
(18,551)
15,698
$
$
When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on a straight-line basis
over the contract period. Related costs are expensed as incurred. The balance below is included in short and long-term deferred
revenue and customer advances:
Balance at December 31, 2020
Deferral of new extended warranty revenue
Recognition of extended warranty deferred revenue
Balance at December 31, 2021
Deferral of new extended warranty revenue
Recognition of extended warranty deferred revenue
Balance at December 31, 2022
Deferral of new extended warranty revenue
Recognition of extended warranty deferred revenue
Balance at December 31, 2023
Amount
(in thousands)
51,929
43,597
(31,358)
64,168
33,686
(41,674)
56,180
14,330
(35,613)
34,897
$
$
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Teradyne maintains allowances for
estimated losses resulting from the inability of its customers to make required payments. Estimated allowances for credit losses are
reviewed periodically taking into account the customer’s recent payment history, the customer’s current financial statements and other
information regarding the customer’s creditworthiness. Account balances are written off against the allowance when it is determined
the receivable will not be recovered.
Teradyne sells certain trade accounts receivables on a non-recourse basis to third-party financial institutions pursuant to
factoring agreements. Teradyne accounts for these transactions as sales of receivables and presents cash proceeds as aca sh provided
by operating activities in the consolidated statements of cash flows. Total trade accounts receivable sold under the factoring
agreements were $243.5 million and $93.9 million during 2023 and 2022, respectively. Factoring fees for the sales of receivables are
recorded in interest expense and are not material.
47
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. On a quarterly basis, Teradyne uses
consistent methodologies to evaluate all inventories for net realizable value. Teradyne records apr ovision for both excess and obsolete
inventory when such write-downs or write-offs are identified through the quarterly review process. The inventory valuation is based
upon assumptions about future demand, product mix and possible alternative uses.
Investments
Teradyne accounts for its investments in debt and equity securities in accordance with the provisions of ASC 320-10,
“Investments—Debt and Equity Securities.” ASC 320-10 requires that certain debt and equity securities be classified into one of three
categories; trading, available-for-sale or held-to-maturity securities. On aquarterly basis, Teradyne reviews its investments to identify
and evaluate those that have an indication of a potential other-than-temporary impairment. Factors considered in determining whether
a loss is other-than-temporary include:
• The length of time and the extent to which the market value has been less than cost;
• The financial condition and near-term prospects of the issuer; and
• The intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in market value.
Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in
valuation techniques during the twelve months ended December 31, 2023 and 2022.
Teradyne measures its debt and equity investments at fair value, in accordance with ASC 820-10, “Fair Value Measurements
and Disclosures.” ASC 820-10 defines fair value as the price that would be received from the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value be classified
and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets as of the reporting date;
Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a
common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique
used to value securities by relying on the securities’ relationship to other benchmark quoted prices, and is considered a Level 2
input; or
Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best
information available, which might include Teradyne’s own data.
Teradyne’s debt investments are classified as Level 2, and equity investments are classified as Level 1. Acquisition-related
contingent consideration is classified as Level 3. Teradyne determines the fair value of acquisition-related contingent consideration
using aMonte C arlo simulation model. Assumptions utilized in the model include forecasted revenues, revenue volatility, earnings
before interest and taxes, and discount rate.
Financial Assets and Financial Liabilities
Teradyne records changes in fair value of equity securities directly in earnings and unrealized gains and losses in other (income)
expense, net, in accordance with ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities.”
48
Prepayments
Prepayments consist of the following:
Contract manufacturer and supplier prepayments
Prepaid maintenance and other services
Prepaid taxes
Other prepayments
Total prepayments
2023 (1)
2022
(in thousands)
$
$
502,257
17,592
16,083
13,038
548,970
$
$
491,105
14,545
18,625
8,687
532,962
(1)
Excludes $5.3 million of contract manufacturer and supplier prepayments, classified as assets held for sale. See Note E: “Assets
held for sale” for additional information.
Retirement and Postretirement Plans
Teradyne recognizes net actuarial gains and losses and the change in the fair value of the plan assets in its operating results in
the year in which they occur or upon any interim remeasurement of the plans. Teradyne calculates the expected return on plan assets
using the fair value of the plan assets. Actuarial gains and losses are generally measured annually as of December 31 and, accordingly,
recorded during the fourth quarter of each year or upon any interim remeasurement of the plans.
Teradyne reports net periodic pension cost and net periodic postretirement benefit costs in accordance with ASU 2017-07,
“Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost.” The service cost component of net benefit costs is reported in the same line item in the consolidated
statement of operations as other employee compensation costs. The non-service components of net benefit costs such as interest cost,
expected return on assets, amortization of prior service cost, and actuarial gains or losses, are reported within other (income) expense,
net.
Goodwill, Intangible and Long-Lived Assets
Teradyne accounts for goodwill and intangible assets in accordance with ASC 350-10, “Intangibles-Goodwill and Other.”
Intangible assets are amortized over their estimated useful economic life and are carried at cost less accumulated amortization.
Goodwill is assessed for impairment at least annually in the fourth quarter, as of December 31, on a reporting unit basis, or more
frequently when events and circumstances occur indicating that the recorded goodwill may be impaired.
In accordance with ASC 350-10, Teradyne has the option to perform a qualitative assessment to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne
is required to perform aquant itative goodwill impairment test to identify potential goodwill impairment and measure the amount of
goodwill impairment loss to be recognized. If Teradyne determines that it is more likely than not that the fair value of the reporting
unit is greater than its carrying amounts, a quantitative goodwill impairment test is not required.
In accordance with ASC 360-10, “Impairment or Disposal of Long-Lived Assets,” Teradyne reviews long-lived assets for
impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on acompar ison of the
estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its
estimated fair value based on adiscounted cash flows analysis. The cash flows estimates used to determine the impairment, if any,
contain management’s best estimates using appropriate assumptions and projections at that time.
Business Combination
Teradyne recognizes the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at
the date of acquisition. The fair value of identifiable intangible assets is based on detailed cash flows valuations that use information
and assumptions provided by management. Teradyne estimates the fair value of contingent consideration at the time of the acquisition
using all pertinent information known to us at the time to assess the probability of payment of contingent amounts or through the use
of a Monte Carlo simulation model. Teradyne allocates any excess purchase price over the fair value of the net tangible and intangible
assets acquired and liabilities assumed to goodwill. The assumptions used in the valuations for our acquisitions may differ materially
from actual results depending on performance of the acquired businesses and other factors. While Teradyne believes the assumptions
used were appropriate, different assumptions in the valuation of assets acquired and liabilities assumed could have amate rial impact
on the timing and extent of impact on our statements of operations. Goodwill is assigned to reporting units as of the date of the related
acquisition.
49
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over the estimated useful lives of the assets. Leasehold
improvements and major renewals are capitalized and included in property, plant and equipment accounts, while expenditures for
maintenance and repairs and minor renewals are charged to expense. When assets are retired, the assets and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements of operations.
Teradyne provides for depreciation of its assets principally on the straight-line method with the cost of the assets being charged
to expense over their useful lives as follows:
Buildings
Building improvements
Leasehold improvements
Furniture and fixtures
Test systems manufactured internally
Machinery, equipment and software
40 years
5 to 10 years
Lesser of lease term or 10 years
10 years
6 years
3 to 5 years
Test systems manufactured internally are used by Teradyne for customer evaluations and manufacturing and support of its
customers. Teradyne depreciates the test systems manufactured internally over a six-year life to cost of revenues, engineering and
development, and selling and administrative expenses. Teradyne often sells internally manufactured test equipment to customers.
Upon the sale of an internally manufactured test system, the net book value of the system is transferred to inventory and expensed as
cost of revenues. The net book value of internally manufactured test systems sold in the years ended December 31, 2023, 2022, and
2021 was $2.8 million, $6.6 million, and $16.6 million, respectively.
Convertible Debt
Teradyne adopted Accounting Standards Update (“ASU”) ASU 2020-06 – “Debt—Debt with Conversion and Other Options
and Derivatives and Hedging—Contracts in Entity’s Own Equity,” on January 1, 2022 using the modified retrospective method of
adoption. As a result of adoption, Teradyne recorded an increase of $1.4 million to current debt for unsettled shares, an increase of
$1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to
retained earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares
value was reduced tozero a nd additional paid-in capital was reduced by $100.8 million. In accordance with ASU 2020-06, Teradyne
accounts for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require
bifurcation and recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of adebt discount,
which was previously amortized to interest expense. Settled shares reduce the outstanding debt balance in an amount equal to the cash
paid, but do not result in any gain or loss on extinguishment. We use the if-converted method in the diluted EPS calculation for
convertible instruments.
Leases
Under ASC 842, a contract is or contains a lease when Teradyne has the right to control the use of an identified asset. Teradyne
determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to
and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an
underlying asset available for use by Teradyne. As of December 31, 2023, Teradyne does not have material leases that have not yet
commenced.
Teradyne determines if the lease is an operating or finance lease at the lease commencement date based upon the terms of the
lease and the nature of the asset. The lease term used to calculate the lease liability includes options to extend or terminate the lease
when it is reasonably certain that the option will be exercised.
The lease liability is measured at the present value of future lease payments, discounted using the discount rate for the lease at
the commencement date. As Teradyne is typically unable to determine the implicit rate, Teradyne uses an incremental borrowing rate
based on the lease term and economic environment at commencement date. Teradyne initially measures payments based on an index
by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease
liability and are recognized as they are incurred. The right-of-use (“ROU”) asset is initially measured as the amount of lease liability,
adjusted for any initial lease costs, prepaid lease payments, and reduced by any lease incentives.
50
Teradyne’s contracts often include non-lease components such as common area maintenance. Teradyne elected the practical
expedient to account for the lease and non-lease components as asingle l ease component. For leases with a term of one year or less,
Teradyne has elected not to record the lease asset or liability. The lease payments are recognized in the consolidated statement of
earnings on a straight-line basis over the lease term. Teradyne includes lease costs within cost of revenues and operating expenses. See
Note I: “Leases.”
Engineering and Development Costs
Teradyne’s products are highly technical in nature and require a large and continuing engineering and development effort.
Software development costs incurred prior to the establishment of technological feasibility are charged to expense. Software
development costs incurred subsequent to the establishment of technological feasibility are capitalized until the product is available
for release to customers. To date, the period between achieving technological feasibility and general availability of the product has
been short and software development costs eligible for capitalization have not been material. Engineering and development costs are
expensed as incurred and consist primarily of salaries, contractor fees including non-recurring engineering charges related to product
design, allocated facility costs, depreciation, and tooling costs.
Stock Compensation Plans and Employee Stock Purchase Plan
Stock-based compensation expense is based on the grant-date fair value estimated in accordance with the provisions of ASC
718-10, “Compensation-Stock Compensation.” Teradyne elects to account for forfeitures by applying an estimated forfeiture rate and
recognizes compensation costs only for those stock-based compensation awards expected to vest. Under its stock compensation plans,
Teradyne has granted stock options, restricted stock units and performance-based restricted stock units, and employees are eligible to
purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).
Excess tax benefits or tax deficiencies are recognized as a discrete tax benefit or discrete tax expense to the current income tax
provision in Teradyne’s consolidated statements of operations, all excess tax benefits related to share-based payments are reported as
cash flows from operating activities, and all cash payments made to taxing authorities on the employees’ behalf for withheld shares
are presented as financing activities on the statement of cash flows.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The
measurement of deferred tax assets is reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax
assets will not be realized. Teradyne performed the required assessment of positive and negative evidence regarding the realization of
the net deferred tax assets in accordance with ASC 740, “Accounting for Income Taxes.” This assessment included the evaluation of
scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax-planning strategies. Although
realization is not assured, based on its assessment, Teradyne concluded that it is more likely than not that such assets, net of the
existing valuation allowance, will be realized.
Advertising Costs
Teradyne expenses all advertising costs as incurred. Advertising costs were $15.5 million, $17.3 million and $13.4 million in
2023, 2022 and 2021, respectively.
Translation of Non-U.S. Currencies
The functional currency for all non-U.S. subsidiaries is the U.S. dollar, except for Universal Robots, MiR and Lemsys for which
the local currency is its functional currency. All foreign currency denominated monetary assets and liabilities are remeasured on a
monthly basis into the functional currency using exchange rates in effect at the end of the period. All foreign currency denominated
non-monetary assets and liabilities are remeasured into the functional currency using historical exchange rates. Net foreign exchange
gains and losses resulting from remeasurement are included in other (income) expense, net. For Universal Robots, MiR and Lemsys,
assets and liabilities are translated into U.S. dollars using exchange rates in effect at the end of the period. Revenues and expense
amounts are translated using an average of exchange rates in effect during the period. Translation adjustments are recorded within
accumulated other comprehensive income (loss) on the balance sheet.
Net foreign exchange gains and losses resulting from remeasurement are included in other (income) expense, net. For the years
ended December 31, 2023, 2022 and 2021, losses (gains) from the remeasurement of the monetary assets and liabilities denominated
in foreign currencies were $10.9 million, $10.8 million, and $(2.1) million, respectively.
51
These amounts do not reflect the corresponding (gains) losses from foreign exchange contracts. See Note H: “Financial
Instruments” regarding foreign exchange contracts.
Net Income per Common Share
Basic net income per common share is calculated by dividing net income by the weighted average number of common shares
outstanding during the period. Except where the result would be anti-dilutive, diluted net income per common share is calculated by
dividing net income by the sum of the weighted average number of common shares plus common stock equivalents, if applicable.
With respect to its convertible debt issued in 2016, Teradyne is required to settle the principal of the convertible debt in cash;
accordingly, the principal amount is excluded from the determination of diluted earnings per share. As aresult, Teradyne is accounting
for the conversion spread using the treasury stock method.
Comprehensive Income
Comprehensive income includes net income, unrealized pension and postretirement prior service costs and benefits, unrealized
gains and losses on investments in debt marketable securities, unrealized gains and losses on cash flow hedge and foreign currency
translation adjustment.
C.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No.
2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which will require us to disclose
significant segment expenses and other segment items used by the Chief Operating Decision Maker ("CODM") on an annual and
interim basis as well as provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are
currently required annually. Additionally, we will be required to disclose the title and position of the CODM. The new standard is
effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,
2024, with early adoption permitted. This ASU will have no impact on Teradyne’s results of operations, cash flows or financial
condition. Upon adoption, Teradyne will apply the amendments in this ASU retrospectively to all prior period disclosures presented in
the financial statements.
In December 2023, FASB issued ASU 2023-09 –“Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which
requires expanded disclosures relating to the tax rate reconciliation, income taxes paid, income (loss) before income tax expense
(benefit) and income tax expense (benefit), requiring agrea ter disaggregation of information for each. The provisions of ASU 2023-09
are effective for fiscal years beginning after December 15, 2024. The amendments in this update should be applied on aprospect ive
basis, but retrospective application is permitted. Teradyne is currently evaluating the impact of this new standard.
52
D.
REVENUE
Disaggregation of Revenue
The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical
market, and major product lines.
Semiconductor
Test
Robotics
System-on-
a-chip
Memory
System
Test
Universal
Robots
Mobile
Industrial
Robots
Wireless
Test
Corporate
and
Eliminations
Total
(in thousands)
For the Year Ended December 31, 2023 (1)
Timing of Revenue Recognition
Point in Time
Over Time
Total
Geographical Market
$ 1,141,882
290,739
$ 1,432,621
$ 356,417
29,598
$ 386,015
$ 268,379
69,818
$ 338,197
$ 296,252
7,540
$ 303,792
Asia Pacific
Americas
Europe, Middle East and Africa
Total
$ 1,214,322
117,728
100,571
$ 1,432,621
$ 366,151
11,367
8,497
$ 386,015
$ 153,387
151,579
33,231
$ 338,197
$
63,312
111,761
128,719
$ 303,792
For the Year Ended December 31, 2022 (1)
Timing of Revenue Recognition
Point in Time
Over Time
Total
Geographical Market
$ 1,445,238
261,646
$ 1,706,884
$ 344,693
29,013
$ 373,706
$ 402,074
67,272
$ 469,346
$ 317,514
8,218
$ 325,732
Asia Pacific
Americas
Europe, Middle East and Africa
Total
$ 1,514,964
122,575
69,345
$ 1,706,884
$ 360,176
11,987
1,543
$ 373,706
$ 294,350
146,040
28,956
$ 469,346
$
73,930
112,203
139,599
$ 325,732
For the Year Ended December 31, 2021 (1)
Timing of Revenue Recognition
Point in Time
Over Time
Total
Geographical Market
$ 1,989,979
256,751
$ 2,246,730
$ 365,441
30,171
$ 395,612
$ 409,383
58,356
$ 467,739
$ 305,512
5,670
$ 311,182
Asia Pacific
Americas
Europe, Middle East and Africa
Total
$ 2,076,647
102,702
67,381
$ 2,246,730
$ 381,444
10,665
3,503
$ 395,612
$ 306,812
135,230
25,697
$ 467,739
$
81,456
94,897
134,829
$ 311,182
$
$
$
$
$
$
$
$
$
$
$
$
66,986
4,405
71,391
10,424
36,191
24,776
71,391
73,812
3,594
77,406
15,724
35,213
26,469
77,406
60,884
3,839
64,723
12,919
26,069
25,735
64,723
$ 129,399
14,883
$ 144,282
$
85,415
50,770
8,097
$ 144,282
$ 189,040
12,680
$ 201,720
$ 140,767
47,350
13,603
$ 201,720
$ 204,247
12,648
$ 216,895
$ 172,103
36,173
8,619
$ 216,895
$
$
$
$
$
$
$
$
$
$
$
$
— $ 2,259,315
—
416,983
— $ 2,676,298
— $ 1,893,011
479,396
—
—
303,891
— $ 2,676,298
251
—
251
$ 2,772,622
382,423
$ 3,155,045
— $ 2,399,911
475,619
251
279,515
—
$ 3,155,045
251
— $ 3,335,446
—
367,435
— $ 3,702,881
— $ 3,031,381
405,736
—
—
265,764
— $ 3,702,881
(1)
Includes $5.2 million, $8.2 million and $13.2 million in 2023, 2022 and 2021, respectively, for leases of Teradyne’s systems
recognized outside of ASC 606: “Revenue from Contracts with Customers.”
Contract Balances
For the years ended December 31, 2023, 2022 and 2021, Teradyne recognized $108.1 million, $112.4 million and $102.5
million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period.
This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support.
Each of these represents adistin ct performance obligation. As of December 31, 2023, Teradyne had $1,124.6 million of unsatisfied
performance obligations. Teradyne expects to recognize 90% of the remaining performance obligation in the next 12 months, 9% in 1-
3 years, and 1% thereafter.
E.
ASSETS HELD FOR SALE
On November 7, 2023, Teradyne entered into adefiniti ve agreement to sell Teradyne’s Device Interface Solutions ("DIS")
business, a component of the Semiconductor Test segment, to Technoprobe S.p.A. for $85.0 million in cash. As a result, the related
assets and liabilities met the criteria and were classified as held-for-sale in Teradyne’s consolidated balance sheet as of December 31,
2023. The transaction, which does not qualify as astrate gic shift required for discontinued operations treatment, is expected to close in
the first half of 2024.
53
Assets held-for-sale comprise of the following as of December 31, 2023:
Current assets:
Inventories, net
Prepayments
Total current assets held for sale
Property, plant and equipment, net
Operating lease right-of-use assets, net
Total assets held for sale
Current liabilities:
Accounts payable
Other accrued liabilities
Operating lease liabilities
Total current liabilities held for sale
Long-term operating lease liabilities
Total liabilities held for sale
Net assets held for sale
December 31,
2023
(in thousands)
$
$
$
$
$
17,952
5,298
23,250
8,986
2,545
34,781
6,356
552
471
7,379
2,000
9,379
25,402
F.
INVENTORIES
Inventories, net consisted of the following at December 31, 2023 and 2022:
Raw material
Work-in-process
Finished goods
2023 (1)
2022
(in thousands)
$
$
258,422
26,851
24,701
309,974
$
$
256,065
37,982
30,972
325,019
(1)
Excludes $18.0 million of primarily work-in-process inventories, net classified as assets held for sale. See Note E: “Assets held
for sale” for additional information.
G.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consisted of the following at December 31, 2023 and 2022:
Land
Buildings
Machinery, equipment and software
Furniture and fixtures
Leasehold improvements
Construction in progress
Less: accumulated depreciation
2023 (1)
2022
(in thousands)
$
$
19,487
127,705
1,047,235
28,093
66,777
54,799
1,344,096
898,604
445,492
$
$
18,481
128,991
1,059,880
29,929
64,631
22,470
1,324,382
905,699
418,683
(1)
Excludes $9.0 million of property, plant and equipment, net classified as assets held for sale. See Note E: “Assets held for sale”
for additional information.
Depreciation of property, plant and equipment for the years ended December 31, 2023, 2022, and 2021 was $92.1 million, $90.8
million, and $91.1 million, respectively. As of December 31, 2023 and 2022, the gross book value included in machinery and
equipment for internally manufactured test systems being leased by customers was $5.1 million and $5.8 million, respectively. As of
December 31, 2023 and 2022, the accumulated depreciation on these test systems was $4.9 million and $5.6 million, respectively.
54
H.
FINANCIAL INSTRUMENTS
Cash Equivalents
Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash
equivalents.
Marketable Securities
Teradyne’s equity and debt mutual funds are classified as Level 1 and available-for-sale debt securities are classified as Level 2.
Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are fixed income securities priced by third
party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if
specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.
During the years ended December 31, 2023 and 2022, there were no transfers in or out of Level 1, Level 2, or Level 3fi nancial
instruments.
Realized gains recorded in 2023, 2022, and 2021 were $0.6 million, $0.8 million, and $3.1 million, respectively. Realized losses
recorded in 2023 and 2022 were $0.3 million and $1.0 million, respectively. No realized losses were recorded in 2021. Realized gains
and losses are included in other (income) expense, net.
Unrealized gains on equity securities recorded during the years ended December 31, 2023, 2022 and 2021 were $8.9 million,
$1.9 million and $5.1 million, respectively. Unrealized losses on equity securities recorded during the years ended December 31,
2023, 2022, and 2021 were $1.7 million, $11.6 million and $1.8 million, respectively. Unrealized gains and losses on equity securities
are included in other (income) expense, net. Unrealized gains and losses on available-for-sale debt securities are included in
accumulated other comprehensive income (loss) on the balance sheet.
The cost of securities sold is based on average cost.
55
The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value
on a recurring basis as of December 31, 2023 and 2022:
Assets
Cash
Cash equivalents
Available for sale securities:
Corporate debt securities
U.S. Treasury securities
Commercial paper
Debt mutual funds
U.S. government agency securities
Certificates of deposit and time deposits
Non-U.S. government securities
Equity securities:
Mutual funds
Total
Derivative assets
Total
Liabilities
Derivative liabilities
Total
Reported as follows:
Assets
Cash and cash equivalents
Marketable securities
Long-term marketable securities
Other current assets
Total
Liabilities
Other current liabilities
Total
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
December 31, 2023
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in thousands)
Total
$
298,156
453,298
$
— $
6,117
— $
—
298,156
459,415
—
—
—
8,773
—
—
—
52,734
41,808
1,667
—
4,892
21,772
810
47,132
807,359
—
807,359
$
$
—
129,800
18,746
148,546
—
— $
2,545
2,545
$
$
$
—
—
—
—
—
—
—
—
— $
—
— $
—
— $
52,734
41,808
1,667
8,773
4,892
21,772
810
47,132
937,159
18,746
955,905
2,545
2,545
(Level 1)
(Level 2)
(Level 3)
Total
(in thousands)
751,454
—
55,905
—
807,359
$
$
6,117
62,154
61,529
18,746
148,546
— $
— $
2,545
2,545
$
$
$
$
— $
—
—
—
— $
— $
— $
757,571
62,154
117,434
18,746
955,905
2,545
2,545
$
$
$
$
$
$
$
56
Assets
Cash
Cash equivalents
Available for sale securities:
Corporate debt securities
U.S. Treasury securities
Commercial paper
Debt mutual funds
U.S. government agency securities
Certificates of deposit and time deposits
Non-U.S. government securities
Equity securities:
Mutual funds
Total
Derivative assets
Total
Liabilities
Derivative liabilities
Total
Reported as follows:
Assets
Cash and cash equivalents
Marketable securities
Long-term marketable securities
Other current assets
Total
Liabilities
Other current liabilities
Total
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
December 31, 2022
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
632,417
161,767
$
—
—
—
6,580
—
—
—
(in thousands)
— $
60,589
50,856
39,649
7,159
—
6,352
1,740
535
37,518
838,282
—
838,282
$
$
—
166,880
86
166,966
—
— $
4,215
4,215
$
$
$
— $
—
632,417
222,356
—
—
—
—
—
—
—
50,856
39,649
7,159
6,580
6,352
1,740
535
—
37,518
— $ 1,005,162
—
86
— $ 1,005,248
—
— $
4,215
4,215
(Level 1)
(Level 2)
(Level 3)
Total
(in thousands)
794,184
—
44,098
—
838,282
$
$
60,589
39,612
66,679
86
166,966
— $
— $
4,215
4,215
$
$
$
$
854,773
— $
39,612
—
110,777
—
—
86
— $ 1,005,248
— $
— $
4,215
4,215
$
$
$
$
$
$
$
The carrying amounts and fair values of Teradyne’s financial instruments at December 31, 2023 and 2022 were as follows:
Assets
Cash and cash equivalents
Marketable securities
Derivative assets
Liabilities
Derivative liabilities
Convertible debt (1)
December 31, 2023
December 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
(in thousands)
$
757,571 $
179,588
18,746
757,571 $
179,588
18,746
854,773 $
150,389
86
854,773
150,389
86
2,545
—
2,545
—
4,215
50,115
4,215
139,007
(1)
The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the
convertible note which includes the equity conversion features.
The fair values of accounts receivable, net and accounts payable approximate the carrying amount due to the short-term nature
of these instruments.
57
The following tables summarize the composition of available-for-sale marketable securities at December 31, 2023 and 2022:
Corporate debt securities
U.S. Treasury securities
Certificates of deposit and time deposits
Debt mutual funds
U.S. government agency securities
Commercial paper
Non-U.S. government securities
Reported as follows:
Marketable securities
Long-term marketable securities
Corporate debt securities
U.S. Treasury securities
Commercial paper
Debt mutual funds
U.S. government agency securities
Certificates of deposit and time deposits
Non-U.S. government securities
Reported as follows:
Marketable securities
Long-term marketable securities
December 31, 2023
Available-for-Sale
Unrealized
Gain
Unrealized
(Loss)
(in thousands)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
$
$
201
14
—
—
—
34
—
249
$
$
(3,925) $
(3,931)
—
(308)
(6)
—
—
(8,170) $
52,734
41,808
21,772
8,773
4,892
1,667
810
132,456
$
$
44,263
35,080
—
3,303
4,892
—
—
87,538
Cost
56,458
45,725
21,772
9,081
4,898
1,633
810
140,377
Cost
Unrealized
Gain
Unrealized
(Loss)
(in thousands)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
62,385
77,992
140,377
$
$
36
213
249
$
$
(267) $
(7,903) $
(8,170) $
62,154
70,302
132,456
$
$
34,844
52,694
87,538
December 31, 2022
Available-for-Sale
Unrealized
Gain
Unrealized
(Loss)
(in thousands)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
3
—
70
—
—
—
—
73
$
$
(6,153) $
(4,381)
—
(417)
(90)
—
—
(11,041) $
50,856
39,649
7,159
6,580
6,352
1,740
535
112,871
$
$
50,667
39,649
—
3,095
6,352
—
—
99,763
Cost
57,006
44,030
7,089
6,997
6,442
1,740
535
123,839
$
$
Cost
Unrealized
Gain
Unrealized
(Loss)
(in thousands)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
39,950
83,889
123,839
$
$
70
3
73
$
$
(408) $
(10,633) $
(11,041) $
39,612
73,259
112,871
$
$
30,713
69,050
99,763
$
$
$
$
$
$
$
$
As of December 31, 2023, the fair market value of investments with unrealized losses less than one year and greater than one
year totaled $22.3 million and $65.2 million, respectively.
As of December 31, 2022, the fair market value of investments with unrealized losses less than one year and greater than one
year totaled $66.3 million and $33.4 million, respectively.
58
Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on
this review, Teradyne determined that the unrealized losses related to these investments at December 31, 2023 and 2022 were not
other than temporary.
The contractual maturities of investments in available-for-sale marketable securities held at December 31, 2023 were as follows:
Due within one year
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Cost
Fair Value
(in thousands)
$
$
62,385 $
23,703
6,049
39,159
131,296 $
62,154
23,319
5,735
32,475
123,683
Contractual maturities of investments in available-for-sale marketable securities held at December 31, 2023 exclude debt mutual
funds with the fair market value of $8.8 million as they do not have a contractual maturity date.
Derivatives
Teradyne conducts business in various foreign countries, with certain transactions denominated in local currencies. As a result,
Teradyne is exposed to risks relating to changes in foreign currency exchange rates. Teradyne’s foreign currency risk management
objective is to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities
denominated in foreign currencies, and changes in its cash inflows attributable to the forecasted cash flows from certain foreign
currency denominated revenues.
To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities
denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these
derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in
foreign currencies.
Teradyne also enters into foreign currency forward and option contracts designated as cash flow hedges to hedge the risk of
changes in its cash inflows attributable to changes in foreign currency exchange rates. The cash flow hedges have maturities of less
than six months and mature in the period of revenue recognition for certain products and services in backlog and forecasted to be
recognized in afuture period. Teradyne evaluates cash flow hedges for effectiveness at inception based on the critical terms match
method. The hedges are not expected to incur any ineffectiveness however a quarterly qualitative assessment of effectiveness is done
to determine if the critical terms match method remains appropriate to use. The change in fair value of the contracts is recorded in
accumulated other comprehensive income (loss) and reclassified to earnings at maturity date.
Teradyne does not use derivative financial instruments for speculative purposes.
59
At December 31, 2023 and 2022, to hedge certain of its local currency balance sheet assets and liabilities, Teradyne had the
following contracts to buy and sell non-U.S. currencies for U.S. dollars and other non-U.S. currencies with the following notional
amounts:
Currency Hedged (Buy/Sell)
U.S. dollar/Taiwan dollar
U.S. dollar/Danish krone
U.S. dollar/Japanese yen
U.S. dollar/Korean won
U.S. dollar/British pound sterling
Euro/U.S. dollar
Singapore dollar/U.S. dollar
Philippine peso/U.S. dollar
Chinese yuan/U.S. dollar
Danish krone/U.S. dollar
Total
Net Notional Value
December 31,
2023
December 31,
2022
(in millions)
$
42.7 $
36.0
11.0
7.2
1.5
25.3
16.6
10.1
1.0
0.7
152.1
29.2
—
37.1
6.4
1.2
38.4
33.5
2.7
2.2
—
150.7
The change in the fair value of the outstanding contracts was a loss of $1.8 million and $0.9 million, respectively, at
December 31, 2023 and 2022.
Unrealized gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on
monetary assets and liabilities are included in other (income) expense, net.
At December 31, 2023 and 2022, Teradyne had the following cash flow hedge contracts to buy and sell non-U.S. currencies for
U.S. dollars with the following notional amounts:
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen
U.S. dollar/Taiwan dollar
Japanese yen/U.S. dollar
Taiwan dollar/U.S. dollar
Total
Net Notional Value
December 31,
2023
December 31,
2022
(in millions)
$
$
35.5 $
—
—
—
35.5 $
61.2
10.9
23.4
5.5
101.0
The change in the fair value of the outstanding cash flow hedge contracts was a gain of $0.6 million at December 31, 2023 and a
loss of $3.2 million at December 31, 2022.
Unrealized gains and losses on foreign currency cash flow hedge contracts are included in accumulated other comprehensive
income (loss). At maturity, the gains or losses associated with cash flow hedge contracts are recorded to revenue.
On November 7, 2023, in connection with our agreement to acquire 10% investment in Technoprobe S.p.A we purchased a call
option to buy 481.0 million Euros. The expiration date of the option is April 26, 2024. At December 31, 2023, the fair value of the
outstanding contract was $17.4 million and an unrealized gain of $7.5 million was recorded in other (income) expense, net.
60
The following table summarizes the fair value of derivative instruments as of December 31, 2023 and 2022:
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Foreign exchange option contracts
Foreign exchange forward contracts
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Foreign exchange option contracts
Total derivatives
Balance Sheet Location
Other current assets
Other current assets
Other current liabilities
Other current assets
Other current liabilities
December 31,
2023
December 31,
2022
(in thousands)
$
$
733
17,364
(2,545)
648
—
16,200
$
$
86
—
(990)
—
(3,225)
(4,129)
The following table summarizes the effect of derivative instruments in the statements of operations recognized for the years
ended December 31, 2023, 2022, and 2021:
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts (1)
Foreign exchange option contracts
Derivatives designated as hedging instruments:
Location of (Gains) Losses
Recognized in Statement
of Operations
Other (income) expense, net
Other (income) expense, net
Foreign exchange forward and option contracts
Revenue
Total derivatives
December 31,
2023
December 31,
2022
(in thousands)
December 31,
2021
$
$
(1,843) $
(7,464)
(2,482) $
—
(3,127)
(12,434) $
(251)
(2,733) $
6,488
—
—
6,488
(1)
The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities
denominated in foreign currencies. For the years ended December 31, 2023, 2022 and 2021, net losses (gains) from
remeasurement of monetary assets and liabilities denominated in foreign currencies were $10.9 million, $10.8 million, and
$(2.1) million, respectively.
See Note J: “Debt” regarding derivatives related to the convertible senior notes.
Concentration of Credit Risk
Financial instruments which potentially subject Teradyne to concentrations of credit risk consist principally of cash equivalents,
marketable securities, forward currency contracts and accounts receivable. Teradyne’s cash equivalents consist primarily of money
market funds invested in U.S. Treasuries and government agencies. Teradyne’s fixed income available-for-sale marketable securities
have a minimum rating of AA by one or more of the major credit rating agencies. Teradyne places foreign currency forward contracts
with high credit-quality financial institutions in order to minimize credit risk exposure. Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of geographically dispersed customers. Teradyne performs ongoing credit
evaluations of its customers’ financial condition and from time to time may require customers to provide a letter of credit from a bank
to secure accounts receivable. As of December 31, 2023, one customer of our Semiconductor Test segment, Texas Instruments Inc.,
accounted for 18% of our accounts receivable balance. There were no customers who accounted for more than 10% of our accounts
receivable balance as of December 31, 2022.
I.
LEASES
Teradyne has facility and auto leases, which are accounted for as operating leases. Teradyne’s facility leases are primarily used
for administrative functions, research and development, manufacturing, and storage and distribution. Remaining lease terms range
from less than one year to twelve years.
For the years ended December 31, 2023, 2022 and 2021, total lease expense was $42.7 million, $40.1 million, and $39.2 million
respectively, and included $15.5 million, $14.1 million, and $12.6 million, respectively, of variable lease costs and $1.3 million, $2.0
million, and $1.8 million, respectively, of costs related to short-term leases, which are not recorded on the consolidated balance sheets.
61
At December 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases was
6.3 years and 5.2%, respectively. At December 31, 2022, the weighted average remaining lease term and weighted average discount
rate for operating leases was 5.9 years and 4.7%, respectively.
Supplemental cash flows information related to leases was as follows:
Cash paid for amounts included in the measurement of lease
liabilities included in operating cash flows:
Right-of-use assets obtained in exchange for new lease obligations
Maturities of lease liabilities as of December 31, 2023 were as follows:
December 31,
2023
For the Years Ended
December 31,
2022
(in thousands)
December 31,
2021
$
26,059
17,987
$
20,775
26,149
$
24,593
34,246
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less imputed interest
Total lease liabilities
Operating Lease (1)
(in thousands)
$
$
21,045
18,755
15,074
11,733
7,622
23,906
98,135
(15,521)
82,614
(1)
Excludes $2.5 million of lease liabilities classified as liabilities held for sale. See Note E: “Assets held for sale” for additional
information.
J.
DEBT
Convertible Senior Notes
On December 12, 2016, Teradyne completed aprivat e offering of $460.0 million aggregate principal amount of 1.25%
convertible senior unsecured notes (the “Notes”) and received net proceeds, after issuance costs, of approximately $450.8 million,
$33.0 million of which was used to pay the net cost of the convertible note hedge transactions and $50.1 million of which was used to
repurchase 2.0 million shares of Teradyne’s common stock under its existing stock repurchase program from purchasers of the Notes
in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the
pricing of the Note offering. The Notes bore interest at a rate of 1.25% per year payable semiannually in arrears on June 15 and
December 15 of each year. The notes matured on December 15, 2023. Substantially all of the Notes were converted as of December
15, 2023.
During 2023, twenty three debt holders elected to convert $50.2 million of debt principal. The conversion of the debt was settled
in cash for principal amount and in shares for the excess of conversion value over principal amount. The 1.1 million shares issued to
the debt holders were received from exercising the convertible notes hedge call options.
Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge
Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject
to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes.
62
Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option
Counterparties (the “Warrant Transactions”) in which it sold net-share-settled (or, at its election subject to certain conditions, cash-
settled) warrants to the Option Counterparties. These transactions have been accounted for as an adjustment to our shareholders
equity. The Warrant Transactions, which expire between March 18, 2024 and July 10, 2024, currently cover, subject to customary
anti-dilution adjustments, approximately 14.7 million shares of common stock. As of December 31, 2023, the strike price of the
warrants was approximately $39.40 per share. The strike price is subject to adjustment under certain circumstances. The Warrant
Transactions could result in additional shares of Teradyne’s common stock being issued to the extent that the market price per share of
Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the
warrants.
The net cost of the Note Hedge Transactions, after being partially offset by the proceeds from the sale of the warrants, was
approximately $33.0 million.
In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option
Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of
Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In
addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions
with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in
secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities
could adversely affect the value of Teradyne’s common stock and the Notes.
Originally, Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component,
which represented a discount to the debt and was amortized to interest expense using the effective interest method through December
2023. Effective January 1, 2022, Teradyne adopted ASC 2020-06 using the modified retrospective method of transition and accounts
for the debt as a single liability measured at its amortized cost. As are sult of the adoption, Teradyne recorded an increase of $1.4
million to current debt for unsettled shares, an increase of $1.8 million to deferred tax assets, an increase of $6.6 million to long-term
debt for unamortized debt discount, and an increase to retained earnings of $94.6 million for the reclassification of the equity
component. Mezzanine equity representing unsettled shares value was reduced to zero and additional paid-in capital was reduced by
$100.8 million.
The below tables represent the key components of Teradyne’s convertible senior notes:
Debt principal
Unamortized debt issuance fees
Net carrying amount of convertible debt
For the Years Ended
December 31,
2023
December 31,
2022
$
$
(in thousands)
— $
—
— $
50,228
113
50,115
For the Years Ended
December 31,
2023
December 31,
2022
Contractual interest expense on the coupon
Amortization of the issuance fees recognized as interest expense
Total interest expense on the convertible debt
$
$
$
(in thousands)
312
113
425
$
732
209
941
Revolving Credit Facility
On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent
and collateral agent, and the lenders party thereto. The Credit Agreement provides for a three-year, senior secured revolving credit
facility of $400.0 million (the “Credit Facility”).
On December 10, 2021, the Credit Agreement was amended to extend maturity date of the Credit Facility to December 10,
2026. On October 5, 2022, the Credit Agreement was amended to increase the amount of the Credit Facility to $750.0 million from
$400.0 million.
63
The Credit Agreement provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders
the available incremental amount under the Credit Facility, not to exceed the greater of $200.0 million or 15% of consolidated
EBIDTA. The interest rate applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a
margin ranging from 0.00% to 0.75% per annum or SOFR plus a margin ranging from 1.10% to 1.85% per annum, based on the
consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments
under the Credit Facility ranging from 0.15% to 0.25% per annum, based on the then applicable consolidated leverage ratio.
Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions.
Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty,
other than customary SOFR breakage costs.
The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants
that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make
certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also
requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter; aco nsolidated leverage ratio and an
interest coverage ratio.
The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and
such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.
As of February 22, 2024, the Credit Agreement was undrawn and Teradyne was in compliance with all covenants under the
Credit Agreement.
K. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss), which is presented net of tax, consist of the following:
Balance at December 31, 2021, net of tax of $0, $1,055, $0,
$(1,128), respectively
Other comprehensive loss before reclassifications, net of tax of
Foreign
Currency
Translation
Adjustment
Unrealized
Gains
(Losses) on
Marketable
Securities
Unrealized
(Losses)
Gains on
Cash Flow
Hedges
(in thousands)
Retirement
Plans Prior
Service
Credit
Total
$
(10,818) $
3,704
$
— $
1,166
$
(5,948)
$0, $(3,388), $(708), $0, respectively
(29,031)
(12,666)
(2,517)
Amounts reclassified from accumulated other comprehensive
income (loss), net of tax of $0, $25, $0, $(2), respectively
Net current period other comprehensive loss, net of tax of $0,
—
301
—
$(3,363), $(708), $(2), respectively
(29,031)
(12,365)
(2,517)
—
(7)
(7)
(44,214)
294
(43,920)
Balance at December 31, 2022, net of tax of $0, $(2,308), $(708),
$(1,130), respectively
Other comprehensive gain before reclassifications, net of tax of
$
(39,849) $
(8,661) $
(2,517) $
1,159
$
(49,868)
$0, $568, $1,537, $0, respectively
17,407
2,423
5,464
—
25,294
Amounts reclassified from accumulated other comprehensive
income (loss), net of tax of $0, $12, $(686), $(2),
respectively
Net current period other comprehensive gain (loss), net of tax
—
44
(2,441)
of $0 $580, $851, $(2), respectively
17,407
2,467
3,023
Balance at December 31, 2023, net of tax of $0, $(1,728), $143,
(7)
(7)
(2,404)
22,890
$(1,132), respectively
$
(22,442) $
(6,194) $
506
$
1,152
$
(26,978)
64
Reclassifications out of accumulated other comprehensive income (loss) to the statements of operations for the years ended
December 31, 2023, 2022, and 2021, were as follows:
Details about Accumulate Other Comprehensive Income (Loss)
Components
Available-for-sale marketable securities
Unrealized (losses) gains, net of tax of $(12), $(25), $277,
respectively
Cash flow hedges:
Unrealized gains, net of tax of $686, $0, $0, respectively
Defined benefit pension and postretirement plans:
Amortization of prior service benefit, net of tax of $2, $2, $2,
respectively
Total reclassifications, net of tax of $676, $(23), $279,
respectively
December 31,
2023
For the years ended
December 31,
2022
(in thousands)
December 31,
2021
Affected Line Item
in the Statements
of Operations
$
(44)
$
(301) $
995 Other (income) expense, net
2,441
7
—
7
— Revenue
7
(a)
$
2,404
$
(294) $
1,002 Net income
(a)
The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit;
see Note P: “Retirement Plans.”
L. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “Intangibles—Goodwill
and Other,” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired
when the net book value of areporti ng unit exceeds its estimated fair value.
Teradyne has the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of
a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform a quantitative
goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be
recognized. If Teradyne determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying
amounts, the quantitative goodwill impairment test is not required. In performing the quantitative goodwill impairment test, Teradyne
determines the fair value of a reporting unit using the results derived from an income approach and a market approach, weighting the
fair value determined under each approach to determine an estimated fair value for areporti ng unit. The income approach is estimated
through the discounted cash flows (“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including
judgments about appropriate discount rates, perpetual growth rates, and the amount and timing of expected future cash flows.
Discount rates are based on aweighted average cost of capital (“WACC”), which represents the average rate a business must pay its
providers of debt and equity, plus arisk premium. The WACC used to test goodwill is derived from a group of comparable
companies. The cash flows employed in the DCF analysis are derived from internal forecasts and external market forecasts. The
market approach estimates the fair value of the reporting unit by utilizing the market comparable method which is based on revenue
and earnings multiples from comparable companies. If the estimated fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, then the
goodwill is written down by the amount that carrying value exceeds the fair value of the reporting unit, but not below zero.
In the fourth quarter of 2023, Teradyne performed the annual goodwill impairment test, completing a quantitative assessment
for the Robotics reporting unit and a qualitative assessment for the Wireless Test and System Test reporting units. There was no
impairment as aresult of the annual test performed in the fourth quarter of 2023. Key assumptions in the goodwill valuation model are
forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in
any of these key assumptions could result in the reporting unit being impaired in afuture period.
In the fourth quarter of 2022, Teradyne performed the annual goodwill impairment test, completing a quantitative assessment
for the Robotics reporting unit and a qualitative assessment for the Wireless Test and System Test reporting units. There was no
impairment as aresult of the annual test performed in the fourth quarter of 2022. Key assumptions in the goodwill valuation model are
forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies.
65
The changes in the carrying amount of goodwill by reportable segments for the years ended December 31, 2023 and 2022 are as
follows:
Robotics
Wireless
Test
Semiconductor
Test
(in thousands)
System
Test
Total
Balance at December 31, 2021:
Goodwill
Accumulated impairment losses
Foreign currency translation adjustment
Balance at December 31, 2022:
Goodwill
Accumulated impairment losses
Foreign currency translation adjustment
Balance at December 31, 2023:
Goodwill
Accumulated impairment losses
Intangible Assets
$
$
$
405,971
—
405,971
(22,805)
$
361,819
(353,843)
7,976
—
361,819
(353,843)
7,976
—
383,166
—
383,166
12,297
395,463
—
395,463
262,101
(260,540)
1,561
(24)
262,077
(260,540)
1,537
160
$
158,699
(148,183)
10,516
—
$ 1,188,590
(762,566)
426,024
(22,829)
158,699
(148,183)
10,516
—
1,165,761
(762,566)
403,195
12,457
361,819
(353,843)
7,976
$
$
262,237
(260,540)
1,697
$
158,699
(148,183)
10,516
1,178,218
(762,566)
415,652
$
Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the
carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
There were no events or circumstances indicating that the carrying value of intangible and long-lived assets may not be
recoverable in 2023, 2022 and 2021.
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheets:
Developed technology
Customer relationships
Tradenames and trademarks
Total intangible assets
Developed technology
Customer relationships
Tradenames and trademarks
Total intangible assets
December 31, 2023
Gross
Carrying
Amount (1)
Accumulated
Amortization
(1)
Foreign
Currency
Translation
Adjustment
Net
Carrying
Amount
(in thousands)
267,706
52,109
59,007
378,822
$ (243,191) $
(47,850)
(46,021)
$ (337,062) $
(5,343) $
232
(1,245)
(6,356) $
19,172
4,491
11,741
35,404
December 31, 2022
Gross
Carrying
Amount (1)
Accumulated
Amortization
(1)
Foreign
Currency
Translation
Adjustment
Net
Carrying
Amount
(in thousands)
270,967
57,739
59,387
388,093
$ (234,208) $
(51,186)
(41,930)
$ (327,324) $
(5,935) $
172
(1,528)
(7,291) $
30,824
6,725
15,929
53,478
$
$
$
$
(1)
In 2023 and 2022, $9.3 million and $1.6 million, respectively, of amortizable intangible assets became fully amortized and have
been eliminated from the gross carrying amount and accumulated amortization.
66
Aggregate intangible assets amortization expense for the years ended December 31, 2023, 2022, and 2021, was $19.0 million,
$19.3 million, and $21.5 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal
years is as follows:
Year
2024
2025
2026
2027
2028
Thereafter
Amortization Expense
(in thousands)
$
18,983
11,402
2,390
1,173
1,092
364
M. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of December 31, 2023, Teradyne had entered into non-cancelable purchase commitments for certain components and
materials. The purchase commitments covered by the agreements aggregate to approximately $414.4 million, of which $379.1 million
is for less than one year.
Legal Claims
Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not
limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all
pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending
claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions
are unlikely to have a material adverse effect on its business, financial position or results of operations.
On March 8, 2021, Industrial Automation LLC, sellers of AutoGuide, submitted ademand for arbitration against Teradyne and
AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests
Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and
AutoGuide. The arbitration demand sought full acceleration of the maximum earn-out amount payable under the Purchase Agreement,
or $106.9 million, for the alleged breach of the earn-out provisions of the Purchase Agreement. On March 25, 2022, the arbitration
claim was settled for $26.7 million. As a result, Teradyne has no remaining earn-out obligations.
Guarantees and Indemnification Obligations
Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and agents for liabilities
arising from certain events or occurrences, while the officer, director, employee, or agent, is or was serving, at Teradyne’s request in
such capacity. Teradyne may enter into indemnification agreements with certain of its officers and directors. With respect to
acquisitions, Teradyne provides indemnifications to or assumes indemnification obligations for the current and former directors,
officers and employees of the acquired companies in accordance with the acquired companies’ by-laws and charter. As amatt er of
practice, Teradyne has maintained directors’ and officers’ liability insurance coverage including coverage for directors and officers of
acquired companies.
Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors, integrators and
suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party against intellectual property
infringement claims brought by a third party with respect to Teradyne’s products. From time to time, Teradyne also indemnifies
customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal
property damage, product liability, breach of confidentiality obligations and environmental claims relating to the use of Teradyne’s
products and services or resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On
occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its products in addition to the
warranty described below.
As a matter ofordinary course of business, Teradyne warrants that its products will substantially perform in accordance with its
standard published specifications in effect at the time of delivery. Most warranties have aone-year duration commencing from
installation. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based upon
historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is deferred
67
and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. As of December 31, 2023 and
2022, Teradyne had aproduct w arranty accrual of $15.7 million and $14.2 million, respectively, included in other accrued liabilities,
and revenue deferrals related to extended warranties of $34.9 million and $56.2 million, respectively, included in short and long-term
deferred revenue and customer advances.
In addition, in the ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure
continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or
modifications to the purchase commitments as the market demand decreases, most of the guarantees do not. Therefore, as the market
demand decreases, Teradyne re-evaluates these guarantees and determines what charges, if any, should be recorded.
With respect to its agreements covering product, business or entity divestitures and acquisitions, Teradyne provides certain
representations, warranties and covenants to purchasers and agrees to indemnify and hold such purchasers harmless against breaches
of such representations, warranties and covenants. Many of the indemnification claims have a definite expiration date while some
remain in force indefinitely. With respect to its acquisitions, Teradyne may, from time to time, assume the liability for certain events
or occurrences that took place prior to the date of acquisition.
As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness obligations of its subsidiary
companies, limited to the borrowings from financial institutions, purchase commitments to certain vendors, and lease commitments to
landlords.
Based on historical experience and information known as of December 31, 2023, and 2022, except for product warranty,
Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.
N.
NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per common share:
2023
2022
(in thousands, except per share amounts)
2021
Net income for basic and diluted net income per share
Weighted average common shares-basic
Effect of dilutive potential common shares:
Convertible note hedge warrant shares (1)
Incremental shares from assumed conversion of convertible notes (2)
Restricted stock units
Stock options
Employee stock purchase rights
Dilutive potential common shares
Weighted average common shares-diluted
Net income per common share-basic
Net income per common share-diluted
$
$
$
448,752
154,310
$
715,501
158,434
$
1,014,589
164,960
8,897
633
423
34
7
9,994
164,304
2.91
2.73
$
$
8,806
1,763
657
52
22
11,300
169,734
4.52
4.22
$
$
9,956
7,435
1,180
86
8
18,665
183,625
6.15
5.53
(1) Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the
period and the warrant price, multiplied by the number of warrant shares. The result of this calculation, representing the total
intrinsic value of the warrant, was divided by the average Teradyne stock price for the period.
(2)
Incremental shares from the assumed conversion of the convertible notes was calculated using the difference between the
average Teradyne stock price for the period and the conversion price, multiplied by the number of convertible notes shares. The
result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne
stock price for the period.
The computation of diluted net income per common share for 2023 excludes the effect of the potential exercise of stock options
to purchase approximately 0.1 million shares and restricted stock units to purchase approximately 0.1 million shares because the effect
would have been anti-dilutive. The computation of diluted net income per common share for 2022 excludes the effect of the potential
exercise of stock options to purchase approximately 0.1 million shares and restricted stock units to purchase approximately 0.4 million
shares because the effect would have been anti-dilutive.
68
O. RESTRUCTURING AND OTHER
During the year ended December 31, 2023, Teradyne recorded $14.7 million of severance charges related to headcount
reductions of 215 people primarily in Semiconductor Test and Robotics, which included charges related to avoluntary e arly
retirement program for employees meeting certain conditions, a$3.1 million of acquisition and divestiture expenses related to
Technoprobe transaction, a $1.5 million contract termination charge, and acharge of $1.1 million for an increase in environmental
liability.
During the year ended December 31, 2022, Teradyne recorded a charge of $14.7 million related to the arbitration claim filed
against Teradyne and AutoGuide related to an earn-out dispute, which was settled on March 25, 2022 for $26.7 million, $2.9 million
of severance charges primarily in Robotics, and a charge of $2.7 million for an increase in environmental and legal liabilities, partially
offset by a $3.4 million gain on sale of asset.
During the year ended December 31, 2021, Teradyne recorded a charge of $12.0 million related to the arbitration claim filed
against Teradyne and AutoGuide related to an earn-out dispute, $1.5 million of severance charges primarily in Robotics, $0.5 million
of acquisition related compensation and expenses, and $2.5 million for other expenses, offset by a $7.2 million gain for the decrease in
the fair value of the AutoGuide contingent consideration liability.
P.
RETIREMENT PLANS
ASC 715, “Compensation—Retirement Benefits,” requires an employer with defined benefit plans or other postretirement
benefit plans to recognize an asset or ali ability on its balance sheet for the overfunded or underfunded status of the plans as defined by
ASC 715. The pension asset or liability represents adiffere nce between the fair value of the pension plan’s assets and the projected
benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.
Defined Benefit Pension Plans
Teradyne has defined benefit pension plans covering aportio n of domestic employees and employees of certain non-U.S.
subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to
make contributions to the plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of
these plans consist primarily of fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive
defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement
Income Security Act (“ERISA”) and the Internal Revenue Code (the “IRC”), as well as unfunded qualified foreign plans.
In 2023, Teradyne’s projected benefit obligations increased primarily due to actuarial losses of approximately $6.0 million
across all pension plans from increases in discount rates, and approximately $1.0 million of losses from foreign exchange effects for
foreign plans. In 2022, Teradyne’s projected benefit obligations decreased primarily due to actuarial gains of approximately $59.1
million across all pension plans from increases in discount rates, and approximately $3.1 million gain from foreign exchange effects
for foreign plans.
69
The December 31 balances of these defined benefit pension plans assets and obligations are shown below:
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
Beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Liability (gain) loss due to settlement
Non-U.S. currency movement
End of year
Change in plan assets:
Fair value of plan assets:
Beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Settlements gain
Non-U.S. currency movement
End of year
Funded status
2023
2022
United States
Foreign
United States
Foreign
(in thousands)
$
$
$
143,814
1,063
6,888
3,229
(10,807)
—
—
144,187
111,760
8,613
3,051
(10,807)
—
—
112,617
(31,570) $
$
29,935
446
1,057
2,738
(947)
(254)
1,009
33,984
$
192,472
1,588
4,886
(45,932)
(9,200)
—
—
143,814
2,087
43
1,028
(947)
(254)
(28)
1,929
(32,055) $
149,578
(31,835)
3,217
(9,200)
—
—
111,760
(32,054) $
45,774
784
482
(13,181)
(863)
—
(3,061)
29,935
2,017
153
949
(863)
—
(169)
2,087
(27,848)
The following table provides amounts recorded within the account line items of the statements of financial position as of
December 31:
2023
2022
United States
Foreign
United States
Foreign
Retirement plans assets
Accrued employees’ compensation and withholdings
Retirement plans liabilities
Funded status
$
$
$
11,504
(3,110)
(39,964)
(31,570) $
(in thousands)
— $
(1,255)
(30,800)
(32,055) $
$
11,761
(3,055)
(40,760)
(32,054) $
—
(1,191)
(26,657)
(27,848)
The accumulated benefit obligation for the United States defined benefit pension plans was $142.2 million and $140.6 million at
December 31, 2023 and 2022, respectively. The accumulated benefit obligation for foreign defined benefit pension plans was $32.6
million and $28.6 million at December 31, 2023 and 2022, respectively.
Information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2023
2022
United States
Foreign
United States
Foreign
$
$
43.1
42.6
—
$
(in millions)
34.0
32.5
1.9
$
43.8
42.3
—
29.9
28.6
2.1
70
Expense
For the years ended December 31, 2023, 2022, and 2021, Teradyne’s net periodic pension cost (income) was comprised of the
following:
2023
United
States
Foreign
2022
United
States
Foreign
(in thousands)
2021
United
States
Foreign
Components of Net Periodic Pension Cost (Income):
Service cost
Interest cost
Expected return on plan assets
Net actuarial loss (gain)
Settlement (gain) loss
Total net periodic pension cost (income)
$
$
1,063
6,888
(5,194)
18
(209)
2,566
$
$
446
1,057
(45)
2,735
5
4,198
$
$
1,588
4,886
(2,927)
(11,170)
—
$
784
482
(75)
(13,259)
—
$
(7,623) $ (12,068) $
1,784
4,427
(3,858)
643
(204)
2,792
$
$
941
337
(67)
(2,223)
—
(1,012)
Weighted Average Assumptions to Determine Net Periodic Pension Cost at January 1:
Discount rate
Expected return on plan assets
Salary progression rate
2023
United
States
Foreign
2022
United
States
Foreign
2021
United
States
Foreign
3.5%
4.8
2.4
3.5%
1.8
2.1
2.5%
2.0
2.4
1.1%
4.0
2.2
2.2%
2.4
2.4
0.7%
3.5
2.3
Weighted Average Assumptions to Determine Pension Obligations at December 31:
Discount rate
Salary progression rate
2023
2022
United States
Foreign
United States
Foreign
4.7%
2.5
3.0%
2.4
4.9%
2.5
3.5%
2.1
In developing the expected return on plan assets assumption, Teradyne evaluates input from its investment manager and pension
consultants, including their forecast of asset class return expectations. Teradyne believes that 4.75% was an appropriate rate to use for
fiscal year 2023 for the U.S. Qualified Pension Plan (“U.S. Plan”).
Teradyne recognizes net actuarial gains and losses and the change in the fair value of the plan assets in its operating results in
the year in which they occur or upon any interim remeasurement of the plans. Teradyne calculates the expected return on plan assets
using the fair value of the plan assets. Actuarial gains and losses are generally measured annually as of December 31 and, accordingly,
recorded during the fourth quarter of each year or upon any interim remeasurement of the plans.
The discount rate utilized to determine future pension obligations for the U.S. Plan is based on FTSE Pension Index adjusted for
the plan’s expected cash flows and was 4.7% at December 31, 2023, down from 4.9% at December 31, 2022.
Plan Assets
As of December 31, 2023, the fair value of Teradyne’s pension plans’ assets totaled $114.5 million, of which $112.6 million
was related to the U.S. Plan and $1.9 million was related to the Taiwan defined benefit pension plan. Substantially all of Teradyne’s
pension plans’ assets are held in individual trusts, which were established for the investment of assets of Teradyne’s sponsored
retirement plans.
71
The following table provides weighted average pension asset allocation by asset category at December 31, 2023 and 2022:
Fixed income securities
Equity securities
Other
2023
2022
United States
Foreign
United States
Foreign
94.0%
5.0
1.0
100.0%
—%
—
100.0
100.0%
94.0%
5.0
1.0
100.0%
—%
—
100.0
100.0%
The assets of the U.S. Plan are overseen by the Teradyne Fiduciary Committee which is comprised of members of senior
management drawn from appropriate diversified levels of the management team. The Fiduciary Committee is responsible for setting
the policy that provides the framework for management of the U.S. Plan assets. In accordance with its responsibilities, the Fiduciary
Committee meets on aregular b asis to review the performance of the U.S. Plan assets and compliance with the investment policy. The
policy sets forth an investment structure for managing U.S. Plan assets, including setting the asset allocation ranges, which are
expected to provide an appropriate level of overall diversification required to maximize the long-term return on plan assets for a
prudent and reasonable level of risk given prevailing market conditions, total investment return over the long term, and preservation of
capital, while maintaining sufficient liquidity to pay the benefits of the U.S. Plan. The investment portfolio will not, at any time, have
a direct investment in Teradyne stock. It may have indirect investment in Teradyne stock, if one of the funds selected by the
investment manager invests in Teradyne stock. In developing the asset allocation ranges, third party asset allocation studies are
periodically performed that consider the current and expected positions of the plan assets and funded status. Based on this study and
other appropriate information, the Fiduciary Committee establishes asset allocation ranges taking into account acceptable risk targets
and associated returns. The investment return objectives are to avoid excessive volatility and produce a rate of return that at least
matches the Policy Index identified below. The manager’s investment performance is reviewed at least annually. Results for the total
portfolio and for each major category of assets are evaluated in comparison with appropriate market indices and the Policy Index.
The target asset allocation and the index for each asset category for the U.S. Plan, per the investment policy, are as follows:
Asset Category:
U.S. corporate fixed income
U.S. corporate fixed income
U.S. government fixed income
Global equity
High yield fixed income
Cash
Policy Index:
Bloomberg U.S. Corporate Aor Better Index, 20+ Year
Index
Bloomberg U.S. Corporate Aor Better Index, 5- 20 Year
Index
Bloomberg U.S. 3 -10 year Treasury Bond Index
MSCI World Index
ICE BofA BB-B U.S. High Yield Constrained Index
ICE BofA 3-Month Treasury Bill Index
Target
Allocation
43%
32
14
5
5
1
Teradyne’s U.S. Plan invests primarily in common trust funds. Units held in the common trust funds are valued at the unit price
as reported by the investment manager based on the asset value of the underlying investments; underlying investments in equity
securities are valued at the last reported sales price, and underlying investments in fixed-income securities are generally valued using
methods based upon market transactions for comparable securities.
During the years ended December 31, 2023 and December 31, 2022, there were no transfers of pension assets in or out of Level
1, Level 2, and Level 3.
72
The fair value of pension plan assets by asset category and by level at December 31, 2023 and December 31, 2022 were as
follows:
Level 1
Level 2
Level 3
United States
December 31, 2023
Total
(in thousands)
Level 1
Foreign
Level 2
Level 3
Total
Fixed income securities:
Corporate debt securities
U.S. government securities
Global equity
Other
Cash and cash equivalents
Total
$ — $
—
—
—
1,138
$ 1,138
89,971
15,817
5,691
—
—
$ 111,479
$ — $ 89,971
15,817
5,691
—
1,138
$ — $ 112,617
—
—
—
—
$ — $ — $ — $ —
—
—
1,929
—
$ — $ 1,929
—
—
1,929
—
$ — $ 1,929
—
—
—
—
—
—
—
—
Level 1
Level 2
Level 3
United States
December 31, 2022
Total
(in thousands)
Level 1
Foreign
Level 2
Level 3
Total
Fixed income securities:
Corporate debt securities
U.S. government securities
Global equity
Other
Cash and cash equivalents
Total
Contributions
$ — $
—
—
—
1,147
$ 1,147
89,403
15,631
5,579
—
—
$ 110,613
$ — $ 89,403
15,631
5,579
—
1,147
$ — $ 111,760
—
—
—
—
$ — $ — $ — $ —
—
—
2,087
—
$ — $ 2,087
—
—
2,087
—
$ — $ 2,087
—
—
—
—
—
—
—
—
Teradyne’s funding policy is to make contributions to the plans in accordance with local laws and to the extent that such
contributions are tax deductible. During 2023, Teradyne contributed $3.1 million to the U.S. supplemental executive defined benefit
pension plan and $1.0 million to certain qualified plans for non-U.S. subsidiaries. During 2022, Teradyne contributed $3.2 million to
the U.S. supplemental executive defined benefit pension plan and $0.9 million to certain qualified plans for non-U.S. subsidiaries. In
2024, contributions to the U.S. supplemental executive defined benefit pension plan and certain qualified plans from non-U.S.
subsidiaries will be approximately $3.1 million and $1.4 million, respectively.
Contributions to the U.S. supplemental executive defined benefit pension plan and certain non-U.S. subsidiaries qualified plans
will be approximately $6.6 million and $2.3 million, respectively, in 1 to 3 years, $7.1 million and $2.5 million, respectively, in 3 to 5
years and $16.9 million and $7.9 million, respectively, thereafter.
Expected Future Pension Benefit Payments
Future benefit payments are expected to be paid as follows:
2024
2025
2026
2027
2028
2029-2032
United States
Foreign
(in thousands)
$
10,210 $
9,720
9,863
10,792
10,795
51,857
1,312
1,068
1,191
1,301
1,238
8,832
73
Postretirement Benefit Plans
In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility requirements as of
their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death
benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S.
employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees. During
the twelve months ended December 31, 2023, Teradyne recorded special termination benefit charges associated with a voluntary early
retirement program.
The December 31 balances of the postretirement assets and obligations are shown below:
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
Beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Special termination benefits
End of year
Change in plan assets:
Fair value of plan assets:
Beginning of year
Company contributions
Benefits paid
End of year
Funded status
2023
2022
(in thousands)
$
$
$
5,345
34
299
155
(1,413)
2,513
6,933
—
1,413
(1,413)
—
(6,933) $
7,210
64
177
(1,155)
(950)
—
5,345
—
950
(950)
—
(5,345)
The following table provides amounts recorded within the account line items of financial position as of December 31:
Accrued employees’ compensation and withholdings
Retirement plans liabilities
Funded status
2023
2022
(in thousands)
$
$
(1,508) $
(5,425)
(6,933) $
(853)
(4,492)
(5,345)
The following table provides amounts recognized in accumulated other comprehensive income (loss) as of December 31:
Prior service credit, before tax
Deferred taxes
Total recognized in other comprehensive income (loss), net of tax
2023
2022
(in thousands)
(23) $
(1,691)
(1,714) $
(31)
(1,689)
(1,720)
$
$
74
Expense
For the years ended December 31, 2023, 2022, and 2021, Teradyne’s net periodic postretirement benefit cost (income) was
comprised of the following:
Components of Net Periodic Postretirement Benefit Cost (income):
Service cost
Interest cost
Amortization of prior service credit
Net actuarial loss (gain)
Special termination benefits
Total net periodic postretirement benefit cost (income)
Changes in Plan Assets and Benefit Obligations Recognized in Other
$
Comprehensive Income:
Reversal of amortization items:
Prior service credit
Total recognized in other comprehensive income
Total recognized in net periodic postretirement cost (income) and other
2023
2022
(in thousands)
2021
$
34
299
(9)
155
2,513
2,992
$
64
177
(9)
(1,155)
—
(923)
9
9
9
9
64
170
(9)
(433)
—
(208)
9
9
comprehensive income
$
3,001
$
(914) $
(199)
Weighted Average Assumptions to Determine Net Periodic Postretirement Benefit Income as of January 1:
Discount rate
Initial health care cost trend rate
Ultimate health care cost trend rate
Year in which ultimate health care cost trend rate is reached
2023
2022
2021
5.0%
7.2
4.5
2032
2.6%
7.3
4.5
2029
2.2%
7.3
4.5
2029
Weighted Average Assumptions to Determine Postretirement Benefit Obligation as of December 31:
Discount rate
Initial health care trend
Ultimate health care trend
Medical cost trend rate decrease to ultimate rate in year
2023
2022
2021
4.7%
7.7
4.5
2033
5.0%
7.2
4.5
2032
2.6%
7.3
4.5
2029
Contributions
Contributions to the U.S. postretirement benefit plan will be approximately $1.5 million in 2024, $1.6 million in 1 to 3 years,
$1.2 million in 3 to 5 years and $2.0 million, thereafter.
Expected Future Benefit Payments
Future benefit payments are expected to be paid as follows:
2024
2025
2026
2027
2028
2029-2032
75
Benefit Payments
(in thousands)
$
1,508
924
701
637
568
2,004
Q.
STOCK-BASED COMPENSATION
Stock Compensation Plans
On February 1, 2023 (the “Retirement Date”), Mark E. Jagiela retired as Chief Executive Officer of Teradyne and amember of
Teradyne's Board of Directors, and Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Jagiela. Under the
Retirement Agreement, Mr. Jagiela's unvested time-based restricted stock units and stock options granted prior to his Retirement Date
were modified to allow continued vesting; and any vested options or options that vest during that period may be exercised for the
remainder of the applicable option term. During 2023, Teradyne recorded a stock-based compensation expense of $5.9 million related
to the Retirement Agreement.
Under Teradyne’s stock compensation plans, Teradyne grants time-based restricted stock units, performance-based restricted
stock units, and stock options, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase
Plan (“ESPP”).
Service-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted
stock unit awards granted to non-employee directors vest after aone -year period, with 100% of the award vesting on the earlier of (a)
the first anniversary of the grant date or (b) the date of the following year’s Annual Meeting of Shareholders. Teradyne expenses the
cost of the restricted stock unit awards subject to time-based vesting, which is determined to be the fair market value of the shares at
the date of grant, ratably over the period during which the restrictions lapse.
Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric
based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance is measured against the New York Stock
Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance
achieved from 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR
PRSUs are valued using aMonte C arlo simulation model. The number of units expected to be earned, based upon the achievement of
the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on astraight-
line basis over the shorter of the three-year service period or the period from the grant to the date described in the retirement
provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized
during the year following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned
based upon the market condition, provided the executive officer remains an employee at the end of the three-year period.
Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee,
subject to the retirement and termination eligibility provisions noted below.
PRSUs granted to Teradyne’s executive officers may also have a performance metric based on three-year cumulative non-
GAAP profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue. Non-GAAP PBIT is afinancial m easure equal to
GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture
related charges or credits; pension actuarial gains and losses; non-cash convertible debt interest expense; and other non-recurring gains
and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of
the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized
on a straight-line basis over the shorter of the three-year service period or the period from the grant date to the date described in the
retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is
recognized during the year following the grant. Compensation expense is recognized based on the number of units that are earned
based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at
the end of the three-year period subject to the retirement and termination eligibility provisions noted below.
If a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability
or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service,
then all or aportio n of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will
vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the
executive officer is no longer an employee at the end of the three-year period. Stock options to purchase Teradyne’s common stock at
100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a
maximum term of seven years.
During 2023, 2022 and 2021, Teradyne granted 0.5 million, 0.4 million and 0.3 million of service-based restricted stock unit
awards to employees at aweight ed average grant date fair value of $102.45, $109.42, and $114.16, respectively.
76
During 2023, 2022 and 2021, Teradyne granted 0.1 million of service-based restricted stock unit awards to non-employee
directors at aweighted average grant date fair value of $90.50, $105.93, and $128.70, respectively.
During 2023, 2022 and 2021, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $102.91, $110.84 and
$113.65, respectively.
During 2023, 2022 and 2021, Teradyne granted 0.1 million TSR PRSUs, with a grant date fair value of $139.04, $101.06, and
$125.02, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:
Risk-free interest rate
Teradyne volatility-historical
NYSE Composite Index volatility-historical
Dividend yield
2023
2022
2021
4.0%
49.7%
24.1%
0.4%
1.4%
47.1%
22.7%
0.4%
0.2%
43.9%
22.9%
0.4%
Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index for each of the
2023, 2022 and 2021 grants over the most recent three-year period. The risk-free interest rate was determined using the U.S. Treasury
yield curve in effect at the time of each of the grants. Dividend yield was based upon an estimated annual dividend amount of $0.44
per share for 2023, $0.44 per share for 2022, and $0.40 per share for 2021, divided by Teradyne’s stock price on the grant date of
$104.12 for the 2023 grants, $112.12 for the 2022 grants, and $113.48 for the 2021 grants.
During 2023, 2022 and 2021, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted
average grant date fair value of $41.23, $39.01, and $36.60, respectively.
The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
Expected life (years)
Risk-free interest rate
Volatility-historical
Dividend yield
2023
2022
2021
4.0
3.8%
46.6%
0.4%
4.0
1.6%
43.7%
0.4%
5.0
0.4%
37.8%
0.4%
Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the
executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for aperiod equal to the
expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend
yield was based upon an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock on the grant date of
$104.15 for the 2023 grant, and $112.12 for the 2022 grant, and $0.40 per share divided by Teradyne’s stock price on the grant date of
$113.48 for the 2021 grants.
Stock compensation plan activity for the years 2023, 2022 and 2021, is as follows:
Restricted Stock Units:
Non-vested at January 1
Awarded
Vested
Forfeited
Non-vested at December 31
Stock Options:
Outstanding at January 1
Granted
Exercised
Forfeited
Expired
Outstanding at December 31
Vested and expected to vest at December 31
Exercisable at December 31
77
2023
2022
(in thousands)
2021
1,317
728
(609)
(58)
1,378
188
41
(56)
(2)
—
171
171
68
1,417
660
(709)
(51)
1,317
171
42
(25)
——
—
188
188
69
1,789
447
(749)
(70)
1,417
216
34
(78)
(1)
—
171
171
30
Total shares available for the years 2023, 2022 and 2021:
Shares available:
Available for grant at January 1
Options granted
Options forfeited
Restricted stock units awarded
Restricted stock units forfeited
Available for grant at December 31
2023
2022
(in thousands)
2021
5,062
(41)
2
(728)
58
4,353
5,713
(42)
—
(660)
51
5,062
6,123
(34)
1
(447)
70
5,713
Weighted average restricted stock unit award date fair value information for the years 2023, 2022 and 2021, is as follows:
Non-vested at January 1
Awarded
Vested
Forfeited
Non-vested at December 31
2023
2022
2021
$
$
88.71
105.05
75.55
102.12
101.00
$
$
67.97
108.74
54.27
85.71
88.71
$
$
47.84
115.51
43.99
65.52
67.97
Restricted stock unit awards aggregate intrinsic value information at December 31 for the years 2023, 2022 and 2021 is as
follows:
Vested
Outstanding
Expected to vest
2023
2022
(in thousands)
2021
$
62,001 $
149,504
135,238
95,408 $
115,087
108,666
101,679
231,763
231,246
Restricted stock units weighted average remaining contractual terms (in years) information at December 31 for the years 2023,
2022 and 2021 is as follows:
Outstanding
Expected to vest
2023
2022
2021
1.13
1.13
0.99
0.99
0.89
0.89
Weighted average stock options exercise price information for the year ended December 31, 2023 is as follows:
Outstanding at January 1
Options granted
Options exercised
Options forfeited
Options cancelled
Outstanding at December 31
Exercisable at December 31
$
2023
76.52
104.15
39.71
112.57
113.03
94.85
81.53
The total cash received from employees as a result of employee stock options exercised during the years ended December 31,
2023, 2022 and 2021, was $2.2 million, $0.9 million, and $3.1 million, respectively. In connection with these exercises, the tax benefit
realized by Teradyne for the years ended December 31, 2023, 2022 and 2021, was $0.2 million, $0.1 million, and $0.4 million,
respectively.
78
Stock option aggregate intrinsic value information for the years ended December 31, 2023, 2022 and 2021 is as follows:
Exercised
Outstanding
Expected to vest
Vested and exercisable
$
2023
2022
(in thousands)
2021
3,901 $
2,647
696
1,950
2,030 $
3,963
1,583
2,380
6,345
17,356
13,500
3,856
Stock options weighted average remaining contractual terms (in years) information at December 31, for the years 2023, 2022
and 2021 is as follows:
Outstanding
Expected to vest
Vested and exercisable
2023
2022
2021
4.4
5.1
3.4
4.2
4.8
3.1
4.4
4.8
2.5
As of December 31, 2023, total unrecognized expense related to non-vested restricted stock unit awards and stock options was
$73.7 million and is expected to be recognized over aweight ed average period of 2.5 years.
Employee Stock Purchase Plan
Under the ESPP, eligible employees may purchase shares of common stock through regular payroll deductions of up to 10% of
their compensation, to a maximum of shares with afair market value of $25,000 per calendar year, not to exceed 6,000 shares. Under
the plan, the price paid for the common stock is equal to 85% of the stock price on the last business day of the six-month purchase
period.
In July 2023, 0.2 million shares of common stock were issued to employees who participated in the plan during the first half of
2023 at the price of $94.64 per share. In January 2024, Teradyne issued 0.2 million shares of common stock to employees who
participated in the plan during the second half of 2023 at the price of $92.25 per share.
In July 2022, 0.2 million shares of common stock were issued to employees who participated in the plan during the first half of
2022 at the price of $76.12 per share. In January 2023, Teradyne issued 0.2 million shares of common stock to employees who
participated in the plan during the second half of 2022 at the price of $74.25 per share.
In July 2021, 0.1 million shares of common stock were issued to employees who participated in the plan during the first half of
2021 at the price of $113.87 per share. In January 2022, Teradyne issued 0.1 million shares of common stock to employees who
participated in the plan during the second half of 2021 at the price of $139.00 per share.
As of December 31, 2023, there were 3.5 million shares available for grant under the ESPP.
The following table provides the effect to income from operations for recording stock-based compensation for the years ended
December 31, 2023, 2022, and 2021:
Cost of revenues
Engineering and development
Selling and administrative
Stock-based compensation
Income tax benefit
Total stock-based compensation expense after income taxes
$
$
2023
4,208
10,659
42,815
57,682
(10,397)
47,285
2022
(in thousands)
4,050
$
9,992
34,186
48,228
(11,493)
36,735
$
$
$
2021
4,196
9,783
31,664
45,643
(14,389)
31,254
R.
SAVINGS PLAN
Teradyne sponsors adefi ned contribution employee retirement savings plan (“Savings Plan”) covering substantially all U.S.
employees. Under the Savings Plan, employees may contribute up to 20% of their compensation (subject to Internal Revenue Service
limitations). The Savings Plan provides for a discretionary employer match that is determined each year. In 2023, 2022 and 2021,
79
Teradyne matched 100% of eligible employee contributions up to 4% of their compensation for employees not accruing benefits in the
U.S. Qualified Pension Plan. There was no match for employees still actively accruing benefits in the U.S. Qualified Pension Plan.
Teradyne’s contributions vest 25% per year for the first four years of employment, and contributions for those employees with four
years of service vest immediately.
In addition, Teradyne sponsors an unfunded U.S. Supplemental Savings Plan to provide savings benefits in excess of those
allowed by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The provisions of this plan are the
same as the Savings Plan. The liability for the U.S. Supplemental Savings Plan at December 31, 2023 and 2022, was $55.9 million and
$44.1 million, respectively, and is included in retirement plan liabilities. Teradyne contributes to defined contributions savings plans
for its foreign employees. Under Teradyne’s savings plans, amounts charged to the statements of operations for the years ended
December 31, 2023, 2022, and 2021 were $30.5 million, $30.1 million, and $26.9 million, respectively.
S.
INCOME TAXES
The components of income before income taxes and the provision (benefit) for income taxes as shown in the consolidated
statements of operations were as follows:
Income before income taxes:
U.S.
Non-U.S.
Provision (benefit) for income taxes:
Current:
U.S. Federal
Non-U.S.
State
Deferred:
U.S. Federal
Non-U.S.
State
Total provision for income taxes:
2023
2022
(in thousands)
2021
$
$
$
$
307,997
217,575
525,572
58,063
54,037
2,362
114,462
(27,459)
(8,584)
(1,599)
(37,642)
76,820
$
$
$
$
385,968
454,417
840,385
$
403,451
757,504
$ 1,160,955
86,692
74,204
2,681
163,577
(36,739)
1,232
(3,186)
(38,693)
124,884
$
$
58,218
105,153
300
163,671
(15,106)
(4,300)
2,101
(17,305)
146,366
Income tax expense for 2023, 2022 and 2021 totaled $76.8 million, $124.9 million, and $146.4 million, respectively. The
effective tax rate for 2023, 2022 and 2021 was 14.6%, 14.9% and 12.6%, respectively.
At December 31, 2023, Teradyne’s remaining tax liability resulting from the U.S. one-time transition tax on the mandatory
deemed repatriation of foreign earnings amounts to $59.1 million. Teradyne will pay approximately $14.8 million related to the
transition tax in 2024, and $44.3 million in 1 to 3 years.
Teradyne has made an accounting policy election to account for global intangible low-taxed income (“GILTI”) as a component
of tax expense in the period in which Teradyne is subject to the rules and therefore did not provide any deferred tax impacts of GILTI
in its consolidated financial statements.
On July 27, 2015, in Altera Corp. (“Altera”) v. Commissioner, the U.S. Tax Court issued an opinion invalidating the regulations
relating to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. Afina l decision was
issued by the Tax Court in December 2015. The IRS appealed the decision in June 2016. On July 24, 2018, the U.S. Court of Appeals
for the Ninth Circuit (“Ninth Circuit”) issued a decision that was subsequently withdrawn and a reconstituted panel conferred on the
appeal. On June 7, 2019, the Ninth Circuit upheld the cost-sharing regulations. On November 12, 2019, the Ninth Circuit denied
Altera’s petition for rehearing of its case. Altera’s application for certiorari to the Supreme Court was declined on June 22, 2020. In
the fourth quarter of 2021, Teradyne recognized approximately $2.5 million of tax benefit related to the inclusion of stock-based
compensation in its intercompany cost-sharing arrangement.
80
The decrease in the effective tax rate from 2022 to 2023 is primarily attributable to increases in benefit from tax credits and the
U.S. foreign derived intangible income deduction. These decreases in expense were partially offset by a shift in the geographic
distribution of income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate
jurisdictions and areduct ion in benefit from equity compensation.
The increase in the effective tax rate from 2021 to 2022 is primarily attributable to a shift in the geographic distribution of
income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, increases
in expense from U.S. global low-taxed income and increases in expense from non-deductible officer compensation. These increases in
expense were partially offset by increases in benefits from the U.S. foreign derived intangible income deduction and tax credits.
A reconciliation of the effective tax rate for the years 2023, 2022 and 2021 is as follows:
U.S. statutory federal tax rate
Foreign taxes
Non-deductible officers’ compensation
U.S. global intangible low-taxed income
State income taxes, net of federal tax benefit
U.S. research and development credit
U.S. foreign derived intangible income
Foreign tax credits
Equity compensation
Other, net
2023
2022
2021
21.0%
2.5
1.1
0.8
0.1
(4.2)
(3.9)
(3.3)
(0.4)
0.9
14.6%
21.0%
(1.9)
1.3
1.2
(0.1)
(1.8)
(3.1)
(1.0)
(1.1)
0.4
14.9%
21.0%
(4.5)
0.8
0.6
0.2
(1.4)
(2.3)
(0.5)
(1.0)
(0.3)
12.6%
Teradyne qualifies for ata x holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic
Development Board under which certain headcount and spending requirements must be met. The tax savings attributable to the
Singapore tax holiday for the years ended December 31, 2023, 2022 and 2021 were $1.4 million or $0.01 per diluted share, $16.0
million or $0.09 per diluted share, and $33.3 million or $0.18 per diluted share, respectively. In November 2020, Teradyne entered
into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially
similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31,
2025. Teradyne does not anticipate entering into asimi lar tax holiday agreement with the Singapore Economic Development Board
when the current agreement expires.
81
Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2023 and 2022 were as follows:
Deferred tax assets:
Tax credits
Research and development
Accruals
Pension liabilities
Lease liabilities
Inventory valuations
Deferred revenue
Equity compensation
Vacation accrual
Net operating loss carryforwards
Investment impairment
Intangible assets
Marketable securities
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Right of use assets
Depreciation
Contingent consideration
Total deferred tax liabilities
Net deferred assets
2023
2022
(in thousands)
$
$
$
$
$
112,571
82,571
25,644
24,997
21,167
19,289
13,807
7,179
6,096
5,737
3,292
2,323
128
953
325,754
(109,251)
216,503
$
$
(19,016) $
(16,681)
(5,214)
(40,911) $
$
175,592
105,503
47,760
30,747
21,335
18,679
22,554
14,909
6,578
5,856
1,857
3,292
350
2,283
2,520
284,223
(103,807)
180,416
(16,607)
(19,078)
(5,214)
(40,899)
139,517
As of December 31, 2023 and 2022, Teradyne evaluated the likelihood that it would realize deferred income taxes to offset
future taxable income and concluded that it is more likely than not that the majority of its deferred tax assets will be realized through
consideration of both the positive and negative evidence. At December 31, 2023 and 2022, Teradyne maintained a valuation
allowance for certain deferred tax assets of $109.3 million and $103.8 million, respectively, primarily related to state net operating
losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments could be required in the future
if Teradyne estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded.
At December 31, 2023, Teradyne had tax effected operating loss carryforwards that expire in the following years:
2024
2025
2026
2027
2028
2029-2033
2034-2038
Beyond 2038
Non-expiring
Total
State
Operating Loss
Carryforwards
Foreign
Operating Loss
Carryforwards
(in thousands)
$
$
6
4
—
—
23
121
31
—
30
215
$
$
—
—
—
—
83
500
—
—
4,939
5,522
Teradyne has approximately $147.1 million of tax credit carryforwards including federal business tax credits of approximately
$3.4 million which expire in 2028 through 2033, and state tax credits of $143.8 million, of which $76.5 million do not expire and the
remainder expires in the years 2023 through 2043.
82
Teradyne’s gross unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 were as follows:
Beginning balance as of January 1
Additions:
Tax positions for current year
Tax positions for prior years
Reductions:
Tax positions for prior years
Expiration of statutes
Ending balance as of December 31
2023
$
15,608
2022
(in thousands)
14,465
$
2021
$
17,903
—
3,024
1,398
13
(26)
—
18,606
$
(56)
(212)
15,608
$
$
1,417
30
(1,639)
(3,246)
14,465
Current year additions primarily relate to foreign transfer pricing and prior year reductions relate to state research credits.
Of the $18.6 million of unrecognized tax benefits as of December 31, 2023, $12.9 million would impact the consolidated
income tax rate if ultimately recognized. The remaining $5.7 million would impact deferred taxes if recognized.
As of December 31, 2023, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may
decrease approximately $2.8 million in the next twelve months as a result of the resolution of an audit and a lapse of statutes of
limitation. The estimated decrease relates to transfer pricing and state research credits.
Teradyne records all interest and penalties related to income taxes as a component of income tax expense. Accrued interest and
penalties related to income tax items at December 31, 2023 and 2022 amounted to $1.3 million and $0.4 million, respectively. For the
years ended December 31, 2023, 2022 and 2021, expense of $0.9 million, expense of $0.1 million, and benefit of $0.9 million,
respectively, was recorded for interest and penalties related to income tax items.
Teradyne is subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. As of
December 31, 2023, all material state and local income tax matters have been concluded through 2018, all material federal income tax
matters have been concluded through 2017 and all material foreign income tax matters have been concluded through 2015. However,
in some jurisdictions, including the United States, operating losses and tax credits may be subject to adjustment until such time as they
are utilized and the year of utilization is closed to adjustment.
As of December 31, 2023, Teradyne is not permanently reinvested with respect to the unremitted earnings of non-U.S.
subsidiaries to the extent that those earnings exceed local statutory and operational requirements. Remittance of those earnings is not
expected to result in material income tax.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA introduced a 15% alternative
minimum tax based on the financial statement income of certain large corporations (“CAMT”), effective January 1, 2023. Teradyne
currently does not expect the CAMT to have ama terial impact on its financial results.
On December 15, 2022, the European Union ("EU") Member States formally adopted the EU’s Pillar Two Directive, which
generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and
Development ("OECD") Pillar Two Framework. The EU’s Pillar Two Directive effective dates are January 1, 2024, and January 1,
2025, for different aspects of the directive. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe
harbor rules that effectively extend certain effective dates to January 1, 2027. Certain EU Member States where Teradyne has alegal
presence have recently enacted the directive and administrative guidance into their local tax legislation. Additionally, countries outside
the EU where Teradyne has a legal presence have enacted similar language as the EU Members States in their local tax legislation.
Teradyne is closely monitoring these developments and evaluating the potential financial impact on future periods. Based upon
preliminary calculations for calendar year 2024, Teradyne anticipates it will meet the safe harbors in most jurisdictions, and any
remaining tax under the rules should be immaterial.
83
T. OPERATING SEGMENT, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
Teradyne has four reportable segments (Semiconductor Test, System Test, Wireless Test and Robotics). Each of the reportable
segments represents an individual operating segment.
The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test
products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products
and services for storage and system level test, defense/aerospace instrumentation test, and circuit-board test. The Wireless Test
segment includes operations related to the design, manufacturing and marketing of wireless test products and services. The Robotics
segment includes operations related to the design, manufacturing and marketing of collaborative robotic arms, autonomous mobile
robots and advanced robotic control software. Each operating segment has asegment m anager who is accountable to and maintains
regular contract with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities,
financial results, forecasts, and plans for the segment.
Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income
(loss) before income taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting
Policies.”
Segment information for the years ended December 31, 2023, 2022 and 2021 is as follows:
2023
Revenues
Income (loss) before taxes (1)(2)
Total assets (3)
Property additions
Depreciation and amortization expense
2022
Revenues
Income (loss) before taxes (1)(2)
Total assets (3)
Property additions
Depreciation and amortization expense
2021
Revenues
Income (loss) before taxes (1)(2)
Total assets (3)
Property additions
Depreciation and amortization expense
Semiconductor
Test
System
Test
Robotics
Wireless
Test
Segment
Total
(in thousands)
Corporate
and
Eliminations
Consolidated
$
$
$
1,818,636
453,320
1,329,522
113,415
77,745
2,080,590
634,488
1,382,623
126,898
76,532
2,642,342
976,988
1,245,596
115,618
75,982
$
$
$
338,197
94,073
182,084
3,643
3,801
469,346
166,879
165,925
7,275
3,235
467,739
163,064
170,954
3,905
3,156
$
$
$
$ 375,183
(54,251)
737,323
40,739
25,527
$ 403,138
(16,244)
665,638
25,712
25,339
$ 375,905
(8,167)
701,196
9,821
27,336
144,282
30,568
68,291
1,845
4,043
201,720
66,820
94,298
3,364
4,991
216,895
83,543
107,513
3,128
6,055
$ 2,676,298
523,710
2,317,220
159,642
111,116
$ 3,154,794
851,943
2,308,484
163,249
110,097
$ 3,702,881
1,215,428
2,225,259
132,472
112,529
$
$
$
— $
1,862
1,169,604
—
(230)
251
(11,558)
1,192,768
—
578
$
— $
(54,473)
1,584,166
—
12,956
2,676,298
525,572
3,486,824
159,642
110,886
3,155,045
840,385
3,501,252
163,249
110,675
3,702,881
1,160,955
3,809,425
132,472
125,485
(1)
(2)
(3)
Included in Corporate and Eliminations are interest income, interest expense, net foreign exchange gains (losses), intercompany
eliminations, pension and postretirement plan actuarial gains (losses), legal and environmental fees, contingent consideration
adjustments, acquisition and divestiture related expenses, contract termination settlement charge, an expense for the
modification of Teradyne's former chief executive officer's outstanding equity awards, and loss on convertible debt conversions
in 2021.
Included in income (loss) before taxes are charges and credits related to restructuring and other, inventory charges and loss on
convertible debt conversions in 2021.
Total assets are attributable to each segment. Semiconductor Test includes $34.8 million of total assets classified as assets held
for sale. See Note E: “Assets held for sale” for additional information. Corporate assets consist of cash and cash equivalents,
marketable securities and certain other assets.
84
Included in each segment are charges and credits in the following line items in the statements of operations:
Semiconductor Test:
Cost of revenues—inventory charge
Restructuring and other—employee severance
System Test:
Cost of revenues—inventory charge
Restructuring and other—employee severance
Robotics:
Cost of revenues—inventory charge
Restructuring and other—employee severance
Restructuring and other—acquisition &divestit ure related expenses
Wireless:
Cost of revenues—inventory charge
Corporate and Eliminations:
Selling and administrative—equity modification charge
Restructuring and other—employee severance
Restructuring and other—acquisition &divestit ure related expenses
Restructuring and other—contract termination
Restructuring and other—environmental and legal liabilities
Other (income) expense, net—gain on foreign exchange option
Restructuring and other—legal settlement charge
Restructuring and other—gain on sale of asset
Other (income) expense, net—loss on convertible debt conversion
Restructuring and other—AutoGuide contingent consideration adjustment
Information as to Teradyne’s revenues by country is as follows:
Revenues from customers (1):
United States
Korea
Taiwan
China
Japan
Europe
Philippines
Singapore
Thailand
Malaysia
Rest of the World
2023
For the Years Ended December 31,
2022
(in thousands)
2021
$
$
$
$
$
$
$
22,482
5,666
1,855
1,541
2,275
3,707
—
1,746
5,889
3,599
3,562
1,511
1,100
(7,464)
—
—
—
—
2023
433,661
394,690
384,842
314,899
281,742
273,784
189,419
116,969
91,818
89,197
105,277
2,676,298
$
$
$
$
$
$
$
$
21,456
—
$
1,730
$
— $
$
3,668
2,115
—
4,598
$
— $
—
—
—
2,700
—
14,700
(3,410)
—
—
6,661
—
641
—
6,403
1,210
1,000
1,770
—
—
(513)
—
1,971
—
12,000
—
28,828
(7,227)
2022
(in thousands)
2021
469,948
544,816
626,424
491,798
162,920
268,384
124,107
99,503
137,356
142,203
87,586
3,155,045
$
$
392,626
502,167
1,117,874
631,963
166,231
259,954
166,838
121,582
138,812
136,774
68,060
3,702,881
(1) Revenues attributable to acountry are based on location of customer site.
In 2023, revenues from Texas Instruments Inc., a customer of our Semiconductor Test segment, accounted for 10% of our
consolidated revenues. In 2021, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of Teradyne’s
Semiconductor Test segment, accounted for 12%, of Teradyne’s consolidated revenues. Teradyne estimates consolidated revenues
driven by Qualcomm, acustomer of our Semiconductor Test, System Test, and Wireless Test segments, combining direct and indirect
sales, accounted for approximately 11% of its consolidated revenues in 2022. Teradyne estimates consolidated revenues driven by one
OEM customer, of our Semiconductor Test and Wireless Test segments, combining direct sales to that customer with sales to the
customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for 19% in 2021.
85
Long-lived assets by geographic area:
December 31, 2023 (2)
December 31, 2022
United
States
$
$
322,445
328,341
Foreign (1)
(in thousands)
207,995
$
164,076
$
Total
$
$
530,440
492,417
(1) As of December 31, 2023 and December 31, 2022, long-lived assets attributable to Denmark were $78.1 million and $42.5
(2)
million, respectively.
Includes $11.5 million of long-lived assets classified as assets held for sale. See Note E: “Assets held for sale” for additional
information.
U.
STOCK REPURCHASE PROGRAM
In January 2023, Teradyne’s Board of Directors cancelled the January 2021 repurchase program and approved anew r epurchase
program for up to $2.0 billion of common stock. In 2023, Teradyne repurchased 3.9 million shares of common stock for a total cost of
$400.5 million at an average price of $102.47 per share. In 2022, Teradyne repurchased 7.3 million shares of common stock for
$752.1 million at an average price of $103.69 per share. The cumulative repurchases under the January 2021 repurchase program as of
December 31, 2022 were 12.0 million shares of common stock for $1,352.1 million at an average price per share of $112.44.
The total cost of shares acquired includes commissions and, starting in 2023, related excise tax, and is recorded as a reduction to
retained earnings.
V.
SUBSEQUENT EVENTS
In January 2024, Teradyne’s Board of Directors declared a 9% increase in the quarterly cash dividend to $0.12 per share to be
paid on March 15, 2024 to shareholders of record as of February 16, 2024.
While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the
cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of
Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial
condition.
86
Item 9: Changes in and disagreements with accountants on accounting and financial disclosure
SUPPLEMENTARY INFORMATION
(Unaudited)
None.
Item 9A: Controls and procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management, with the participation of our CEO and CFO, evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon
that evaluation, our CEO and CFO concluded that, as of the end of the period covered by this report, our disclosure controls and
procedures were effective in ensuring that material information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, including ensuring that such material information is accumulated and communicated to our management, including our CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the fourth fiscal quarter ended December 31, 2023
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO
and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our
internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by
PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report which is included under
Item 8 of this Annual Report.
Inherent Limitations on Effectiveness of Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B: Other Information
Our officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
(“Section 16 Officers”) and directors from time to time enter into contracts, instructions or written plans for the purchase or sale of our
securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense
against liability for trading in securities on the basis of material nonpublic information. We refer to these contracts, instructions, and
written plans as “Rule 10b5-1 trading plans” and each one as a “Rule 10b5-1 trading plan.” During our fiscal quarter ended December
31, 2023, no Section 16 Officer or director adopted, modified or terminated a Rule 10b5-1 trading plan.
Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
87
Item 10: Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item 10 will be included in our definitive Proxy Statement in connection with our 2024 Annual
Meeting of Shareholders to be held on May 9, 2024. The Proxy Statement will be filed with the SEC not later than 120 days after the
close of the fiscal year covered by this Annual Report and is incorporated herein by reference.
We have adopted awritt en code of business conduct that applies to all of our employees, officers and directors, including our
principal executive officer, principal financial officer and principal accounting officer. Our Code of Conduct is available on our
investor relations website at investors.teradyne.com under the section entitled "Governance Policies" in the "Governance" menu. If we
make any substantive amendments to our Code of Conduct or grant any of our directors or executive officers any waiver, including
any implicit waiver, from aprovision of our Code of Conduct, we will disclose the nature of the amendment or waiver on our website
or in a Current Report on Form 8-K.
Item 11: Executive Compensation
The information required by this Item 11 will be included in our definitive Proxy Statement in connection with our 2024 Annual
Meeting of Shareholders to be held on May 9, 2024. The Proxy Statement will be filed with the SEC not later than 120 days after the
close of the fiscal year covered by this Annual Report and is incorporated herein by reference. For this purpose, the Compensation
Committee Report included in such proxy statement is specifically not incorporated herein.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be included in our definitive Proxy Statement in connection with our 2024 Annual
Meeting of Shareholders to be held on May 9, 2024. The Proxy Statement will be filed with the SEC not later than 120 days after the
close of the fiscal year covered by this Annual Report and is incorporated herein by reference. Also see “Item 7: Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Equity Compensation Plans.”
Item 13: Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be included in our definitive Proxy Statement in connection with our 2024 Annual
Meeting of Shareholders to be held on May 9, 2024. The Proxy Statement will be filed with the SEC not later than 120 days after the
close of the fiscal year covered by this Annual Report and is incorporated herein by reference.
Item 14: Principal Accountant Fees and Services
The information required by this Item 14 will be included in our definitive Proxy Statement in connection with our 2024 Annual
Meeting of Shareholders to be held on May 9, 2024. The Proxy Statement will be filed with the SEC not later than 120 days after the
close of the fiscal year covered by this Annual Report and is incorporated herein by reference.
88
Item 15: Exhibits and Financial Statement Schedule.
15(a)(1) Financial Statements
The following consolidated financial statements are included in Item 8:
PART IV
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP, PCAOB ID No 238) .................
Consolidated Balance Sheets as of December 31, 2023, and 2022............................................................................................
Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021............................................
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 .......................
Consolidated Statements of Convertible Common Shares and Shareholders’ Equity for the years ended December 31,
2023, 2022 and 2021 ..................................................................................................................................................................
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021...........................................
Page
38
40
41
42
43
44
15(a)(2) Financial Statement Schedule
The following consolidated financial statement schedule is included in Item 15(c):
Schedule II—Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since they are either not required or information is otherwise
included.
15(a)(3) Listing of Exhibits
The Exhibits which are filed with this report or which are incorporated by reference herein are set forth in the Exhibit Index.
89
15(c) Financial Statement Schedules
TERADYNE, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Column A
Description
Valuation reserve deducted in the balance sheet
from the asset to which it applies:
Accounts receivable:
2023 Allowance for credit losses
2022 Allowance for credit losses
2021 Allowance for credit losses
Column A
Description
Valuation reserve deducted in the balance sheet
from the asset to which it applies:
Deferred taxes:
2023 Valuation allowance
2022 Valuation allowance
2021 Valuation allowance
Item 16: Form 10-K Summary
Not applicable.
Column B
Balance at
Beginning
of Period
Column C
Additions
Charged to
Cost and
Expenses
Column D
Column E
Column F
Other
(in thousands)
Deductions
Balance at
End of Period
$
$
$
1,955
2,012
2,034
$
$
$
301
500
500
$
$
$
$
23
(6) $
(27) $
291
551
495
$
$
$
1,988
1,955
2,012
Column B
Balance at
Beginning
of Period
Column C
Additions
Charged to
Cost and
Expenses
Column D
Column E
Column F
Other
(in thousands)
Deductions
Balance at
End of Period
$
$
$
103,807
97,170
84,962
$
$
$
5,759
7,652
13,502
$
$
$
59
$
$
21
— $
374
1,036
1,294
$
$
$
109,251
103,807
97,170
90
The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed with the Securities
and Exchange Commission and are referred to and incorporated by reference to such filings.
EXHIBIT INDEX
Exhibit
No.
Description
Restated Articles of Organization.
Amended and Restated By-laws, as amended.
SEC Document Reference
Exhibit 3.1 to Teradyne’s Current Report on Form 8-K
filed on May 13, 2021.
Exhibit 3.1 to Teradyne’s Current Report on Form 8-K
filed on January 29, 2024.
Indenture dated as of December 12, 2016, between Teradyne,
Inc. and Wilmington Trust, National Association, as trustee.
Exhibit 4.1 to Teradyne’s Current Report on Form 8-K
filed on December 12, 2016.
First Supplemental Indenture dated as of November 4, 2021
between Teradyne, Inc. and Wilmington Trust, National
Association, as trustee.
Exhibit 4.1 to Teradyne’s Quarterly Report on Form 10-Q
for the quarter ended October 3, 2021.
Description of Teradyne, Inc. Securities Registered under
Section 12 of the Exchange Act.
Filed herewith.
Standard Manufacturing Agreement entered into as of
November 24, 2003 by and between Teradyne and Solectron.
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2007.
Second Amendment to Standard Manufacturing Agreement,
dated as of August 27, 2007, by and between Teradyne and
Solectron.
Sixth Amendment to Standard Manufacturing Agreement,
dated as of July 27, 2009, by and between Teradyne and
Flextronics Corporation.
Exhibit 10.3 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2007.
Exhibit 10.5 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2009.
Addendum to Standard Manufacturing Agreement (Authorized
Purchase Agreement)—Revised July 1, 2010.
Exhibit 10.6 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2010.
Eighth Amendment to Standard Manufacturing Agreement,
dated as of April 13, 2012, by and between Teradyne and
Flextronics Sales &Marketing N orth Asia (L) LTD.
Ninth Amendment to Standard Manufacturing Agreement,
dated as of September 17, 2012, by and between Teradyne and
Flextronics Sales &Marketing N orth Asia (L) LTD.
Exhibit 10.7 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
Exhibit 10.8 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
2006 Equity and Cash Compensation Incentive Plan, as
amended. *
Exhibit 10.2 to Teradyne’s Current Report on Form 8-K
filed on May 13, 2021.
Danish Sub-Plan to the 2006 Equity and Cash Compensation
Incentive Plan.
Exhibit 10.10 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2018.
Form of Performance-Based Restricted Stock Unit Agreement
for Executive Officers under 2006 Equity and Cash
Compensation Incentive Plan.*
Form of Time-Based Restricted Stock Unit Agreement for
Executive Officers under 2006 Equity and Cash Compensation
Incentive Plan.*
Form of Executive Officer Stock Option Agreement under
2006 Equity and Cash Compensation Incentive Plan, as
amended. *
Exhibit 10.9 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2020.
Exhibit 10.10 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2020.
Exhibit 10.11 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2020.
Form of Restricted Stock Unit Agreement for Directors under
2006 Equity and Cash Compensation Incentive Plan.*
Exhibit 10.12 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2016.
91
3.1
3.2
4.1
4.2
4.3
10.1†
10.2†
10.3†
10.4
10.5
10.6†
10.7
10.8
10.9
10.10
10.11
10.12
10.13
1996 Employee Stock Purchase Plan, as amended.*
10.14
Danish Sub-Plan to the 1996 Employee Stock Purchase Plan.
10.15
Deferral Plan for Non-Employee Directors, as amended.*
10.16
Supplemental Savings Plan, as amended and restated.*
10.17
Supplemental Executive Retirement Plan, as restated.*
Exhibit 10.13 to Teradyne's Annual Report on Form 10-K
for the fiscal year ended December 31, 2022.
Exhibit 10.15 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2019
Exhibit 10.1 to Teradyne’s Quarterly Report on form 10-Q
for the quarter ended October 3, 2021.
Exhibit 10.18 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008.
Exhibit 10.19 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008.
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Agreement Regarding Termination Benefits dated January 31,
2023 between Teradyne and Gregory S. Smith.*
Exhibit 10.18 to Teradyne's Annual Report on Form 10-K
for the fiscal year ended December 31, 2022.
Employment Agreement dated May 7, 2004 between Teradyne
and Mark Jagiela.*
Exhibit 10.37 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended July 4, 2004.
Executive Officer Retirement Agreement dated July 17, 2019
between Teradyne and Gregory R. Beecher.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2019.
Executive Officer Agreement dated January 31, 2023 between
Teradyne and Mark Jagiela.*
Exhibit 10.21 to Teradyne's Annual Report on Form 10-K
for the fiscal year ended December 31, 2022.
Amended and Restated Executive Officer Change in Control
Agreement dated May 26, 2009 between Teradyne and Charles
J. Gray, as amended.*
Exhibit 10.30 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
Employment Agreement dated July 24, 2009 between
Teradyne and Charles J. Gray.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended April 4, 2010.
Executive Officer Agreement dated January 25, 2024 between
Teradyne and Charles J. Gray.*
Exhibit 10.1 to Teradyne's Current Reprot on Form 8-K/A
filed January 29, 2024
Amended and Restated Executive Officer Change in Control
Agreement dated June 30, 2012 between Teradyne and Walter
G. Vahey, as amended.*
Exhibit 10.32 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
Employment Agreement dated February 6, 2013 between
Teradyne and Walter G. Vahey.*
Exhibit 10.33 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
Executive Officer Change in Control Agreement dated
September 1, 2014 between Teradyne, Inc. and Bradford
Robbins.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 28, 2014.
Employment Agreement dated September 1, 2014 between
Teradyne, Inc. and Bradford Robbins.*
Exhibit 10.2 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 28, 2014.
Executive Change in Control Agreement dated February 8,
2016 between Teradyne, Inc. and Gregory S. Smith.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended April 3, 2016.
Employment Agreement dated February 8, 2016 between
Teradyne, Inc. and Gregory S. Smith.*
Exhibit 10.2 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended April 3, 2016.
Teradyne Offer of Employment dated February 8, 2019 for
Sanjay Mehta.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2019.
Executive Officer Change in Control Agreement dated April
25, 2019 between Teradyne, Inc. and Sanjay Mehta.*
Exhibit 10.2 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2019.
Employment Agreement dated April 25, 2019 between
Teradyne, Inc. and Sanjay Mehta.*
Exhibit 10.3 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2019.
Agreement Regarding Termination Benefits dated April 25,
2019 between Teradyne, Inc. and Sanjay Mehta.*
Exhibit 10.4 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2019.
92
10.35
10.36
10.37
10.38
10.39
10.40
Executive Officer Change in Control Agreement dated October
1, 2020 between Teradyne, Inc. and Richard Burns.*
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 27, 2020.
Executive Officer Change in Control Agreement dated August
21, 2023 between Teradyne, Inc. and Ujjwal Kumar.*
Exhibit 10.1 to Teradyne's Quarterly Report on Form 10-
Q for the quarter ended October 1, 2023.
Employment Agreement dated June 27, 2023 between
Teradyne, Inc. and Ujjwal Kumar.*
Exhibit 10.2 to Teradyne's Quarterly Report on Form 10-
Q for the quarter ended October 1, 2023
Executive Officer Change in Control Agreement dated
February 2, 2024 between Teradyne, Inc. and Ryan Driscoll.*
Filed herewith.
Employment Agreement dated October 1, 2020 between
Teradyne, Inc. and Richard Burns.*
Exhibit 10.2 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended September 27, 2020.
Time-Based Restricted Stock Unit Agreement dated May 1,
2019 for Sanjay Mehta under 2006 Equity and Cash
Compensation Plan.*
Exhibit 10.5 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2019.
10.41
Form of Indemnification Agreement.*
10.42
LitePoint Corporation 2002 Stock Plan.
Exhibit 10.24 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006.
Exhibit 10.43 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2011.
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
Letter Agreement, dated December 6, 2016, between Barclays
Bank PLC and Teradyne, Inc., regarding the Base Warrants.
Exhibit 10.1 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Letter Agreement, dated December 6, 2016, between Bank of
America, N.A., and Teradyne, Inc. regarding the Base
Warrants.
Letter Agreement, dated December 6, 2016, between Wells
Fargo Bank, National Association and Teradyne, Inc.
regarding the Base Warrants.
Letter Agreement, dated December 6, 2016, between Barclays
Bank PLC and Teradyne, Inc. regarding the Base Call Option
Transaction.
Letter Agreement, dated December 6, 2016, between Bank of
America, N.A. and Teradyne, Inc. regarding the Base Call
Option Transaction.
Letter Agreement, dated December 6, 2016, between Wells
Fargo Bank, National Association and Teradyne, Inc.
regarding the Base Call Option Transaction.
Letter Agreement, dated December 9, 2016, between Barclays
Bank PLC and Teradyne, Inc., regarding the Additional
Warrants
Letter Agreement, dated December 9, 2016, between Bank of
America, N.A., and Teradyne, Inc. regarding the Additional
Warrants.
Letter Agreement, dated December 9, 2016, between Wells
Fargo Bank, National Association and Teradyne, Inc.
regarding the Additional Warrants.
Letter Agreement, dated December 9, 2016, between Barclays
Bank PLC and Teradyne, Inc. regarding the Additional Call
Option Transaction.
Letter Agreement, dated December 9, 2016, between Bank of
America, N.A. and Teradyne, Inc. regarding the Additional
Call Option Transaction
Exhibit 10.2 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.3 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.4 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.5 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.6 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.7 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.8 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.9 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.10 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.11 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
93
10.54
10.55
10.56
10.57
21.1
23.1
31.1
31.2
32.1
32.2
97.1
101
Letter Agreement, dated December 9, 2016, between Wells
Fargo Bank, National Association and Teradyne, Inc.
regarding the Additional Call Option Transaction.
Credit Agreement dated May 1, 2020 among Teradyne, Inc.,
Truist Bank, as the administrative agent, issuing bank and
swingline lender, and other lenders party thereto.
First Amendment to Credit Agreement dated December 10,
2021 among Teradyne, Inc., Truist Bank, as the administrative
agent, issuing bank and swingline lender, and other lenders
party thereto.
Second Amendment to Credit Agreement dated October 5,
2022 among Teradyne, Inc., Truist Bank, as the administrative
agent, issuing bank and swingline lender, and other lenders
party thereto.
Exhibit 10.12 to Teradyne’s Current Report on Form 8-K
filed December 12, 2016.
Exhibit 10.1 to Teradyne’s Current Report on Form 8-K
filed May 5, 2020.
Exhibit 10.52 to Teradyne’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2021.
Exhibit 10.1 to Teradyne’s Quarterly Report on Form 10-
Q for the quarter ended October 2, 2022.
Subsidiaries of Teradyne.
Consent of PricewaterhouseCoopers LLP.
Filed herewith.
Filed herewith.
Rule 13a-14(a) Certification of Principal Executive Officer.
Filed herewith.
Rule 13a-14(a) Certification of Principal Financial Officer.
Filed herewith.
Section 1350 Certification of Principal Executive Officer.
Furnished herewith.
Section 1350 Certification of Principal Financial Officer.
Furnished herewith.
Policy for Recoupment of Incentive Compensation.
Filed herewith.
The following financial information from Teradyne, Inc.’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2023, formatted in Inline XBRL (eXtensible
Business Reporting Language): (i) Consolidated Balance
Sheets as of December 31, 2023 and December 31, 2022, (ii)
Consolidated Statements of Operations for the years ended
December 31, 2023, 2022 and 2021, (iii) Consolidated
Statements of Comprehensive Income (Loss) for the years
ended December 31, 2023, 2022 and 2021 (iv) Consolidated
Statements of Shareholders’ Equity for the years ended
December 31, 2023, 2022 and 2021, (v) Consolidated
Statements of Cash Flows for the years ended December 31,
2023, 2022 and 2021, and (vi) the Notes to Consolidated
Financial Statements.
104
The cover page of the Annual Report on Form 10-K formatted
in Inline XBRL (included in Exhibit 101).
† -Confidential treatment granted.
* -Management contract or compensatory plan.
94
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 22nd day of February 2024.
SIGNATURES
TERADYNE, INC.
By:
/S/ SANJAY MEHTA
Sanjay Mehta,
Vice President, Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ PAUL J. TUFANO
Paul J. Tufano
/S/ GREGORY SMITH
Gregory Smith
/S/ SANJAY MEHTA
Sanjay Mehta
Chair of the Board
February 22, 2024
Chief Executive Officer (Principal Executive
Officer) and Director
February 22, 2024
Vice President, Chief Financial Officer and
Treasurer (Principal Financial and
Accounting Officer)
February 22, 2024
/S/ TIMOTHY E. GUERTIN
Director
February 22, 2024
Timothy E. Guertin
/S/ PETER HERWECK
Director
February 22, 2024
Peter Herweck
/S/ MERCEDES JOHNSON
Director
February 22, 2024
Mercedes Johnson
/S/ ERNEST E. MADDOCK
Director
February 22, 2024
Ernest E. Maddock
/S/ MARILYN MATZ
Marilyn Matz
/S/ FOUAD TAMER
Fouad Tamer
Director
Director
February 22, 2024
February 22, 2024
/S/ BRIDGET VAN KRALINGEN
Director
February 22, 2024
Bridget van Kralingen
95
Exhibit 4.3
DESCRIPTION OF COMMON STOCK
As of December 31, 2023, Teradyne, Inc. (“Teradyne” or the “Company”) has its common stock as the only class of
securities under Section 12 of the Securities Exchange Act of 1934, as amended.
The following is a description of the material terms and provisions of the Company’s common stock and may not
contain all the information that is important to you. Please refer to the Company’s Restated Articles of Organization
(the “Articles of Organization”) and Amended and Restated Bylaws (the “Bylaws”) for complete information.
Under the Company’s Articles of Organization, it has authority to issue 1,000,000,000 shares of common stock, par
value $0.125 per share. As of December 31, 2023, there were 152,889,750 shares of common stock outstanding.
Common Stock
Holders of Teradyne common stock are entitled to one vote for each share held on all matters submitted to avot e of
stockholders. Since holders of Teradyne common stock do not have cumulative voting rights, the holders of more
than 50% of Teradyne common stock can elect all the directors if they so choose. Holders of Teradyne common
stock are entitled to receive ratably dividends, if any, as may be declared by the Teradyne board of directors out of
funds legally available for payment of dividends. Upon the liquidation, dissolution or winding up of Teradyne,
holders of Teradyne common stock are entitled to receive ratably the net assets of Teradyne available after the
payment of all debts and other liabilities of Teradyne. Holders of Teradyne common stock have no preemptive,
subscription, redemption or conversion rights, nor are they entitled to the benefit of any sinking fund. The
outstanding shares of common stock are fully paid and non-assessable.
The transfer agent and registrar for the common stock is Broadridge Corporate Issuer Solutions, Inc., P.O. Box
1342, Brentwood, NY 11717. The common stock is listed on the Nasdaq Global Select Market under the trading
symbol “TER.”
Anti-Takeover Effects of Massachusetts Law and Provisions of our Charter Documents
Certain provisions in the Massachusetts General Laws, the Articles of Organization and the Bylaws may have the
effect of delaying, deferring or preventing ach ange in control of Teradyne, including:
Special Meetings of Stockholders. Special meetings of our stockholders may be called only by the Chief Executive
Officer, the President, by the directors or by the Secretary, or in case of the death, absence, incapacity or refusal of
the Secretary, by any other officer, upon written application of one or more stockholders who hold at least amajority
of the shares of our capital stock entitled to vote at such a meeting (or such lesser percentage in interest as shall be
the maximum percentage permitted under Massachusetts law).
Advance Notice Procedures. The Bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of the Company’s stockholders, including proposed nominations of persons for
election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations
specified in the written notice of meeting or brought before the meeting by or at the direction of the board of
directors, the Chief Executive Officer or the President or by a stockholder who was a stockholder of record on the
record date for the meeting, who is entitled to vote at the meeting and who has given our Secretary timely written
notice, in proper form, of the stockholder’s intention to bring that business before the meeting, or pursuant to the
proxy access nomination procedures in the Bylaws.
Proxy Access Nominations. Under the Bylaws, the Company will include in its proxy statement for an annual
meeting the name, together with certain other required information, of any person nominated for the election of to
the board of directors in compliance with specified provisions in the Bylaws by asingle s tockholder that satisfies (or
by a group of no more than 20 stockholders that satisfy) various notice and other requirements specified in the
Bylaws. Among other requirements in the Bylaws, such stockholder or group of stockholders would need to provide
evidence verifying that the stockholder or group owns, and has owned continuously for the preceding three years, at
least 3% of the issued and outstanding voting shares of the Company. The Bylaws contain limitations on the
maximum number of nominees submitted by stockholders that the Company would be required to include in its
proxy statement for an annual meeting.
Removal of Directors and Vacancies. The Bylaws provide that any director may be removed from office only (a) for
cause as defined in the Massachusetts General Laws and by the affirmative vote of amajori ty of our outstanding
shares and entitled to vote in the election of directors or (b) for cause by vote of a majority of the directors then in
office. Vacancies and newly created directorships, whether resulting from an increase in the size of the board of
directors, from the death, resignation, disqualification or removal of adire ctor or otherwise, shall be filled solely by
the affirmative vote of amajori ty of the remaining directors then in office, even though less than a quorum of the
board of directors.
Indemnification of Directors, Officers and Employees. Pursuant to the Articles of Organization and Bylaws,
Teradyne shall indemnify, to the full extent authorized by law, any person made or threatened to be made a party to
an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or
she is or was a director, officer, employee or agent of Teradyne or is or was serving, at the request of the Teradyne,
as a director, officer, employee or agent of another organization. The board of directors may, without stockholder
approval, authorize Teradyne to enter into agreements, including any amendments or modifications thereto, with any
of its directors, officers, employees or other agents providing for indemnification of such persons to the maximum
extent permitted under applicable law and Teradyne’s Articles of Organization and Bylaws.
Business Combinations with Interested Stockholders. The Massachusetts General Laws contain anti-takeover
provisions regarding, among other things, business combinations with an affiliated stockholder. In general, the
Massachusetts General Laws prevent a publicly held Massachusetts corporation from engaging in abusiness
combination, as defined in the Massachusetts General Laws, with an interested stockholder for a period of three
years after the date of the transaction in which the person became an interested stockholder, unless:
•
•
•
before the date on which the person became an interested stockholder, the board of directors of the
corporation approved either the business combination or the transaction in which the person became an
interested stockholder;
the interested stockholder acquires at least 90% of the outstanding voting stock of the corporation at the
time it becomes an interested stockholder; or
the business combination is approved by the board of directors and the holders of at least two-thirds of the
outstanding voting stock of the corporation voting at a meeting, excluding the voting stock owned by the
interested stockholder.
An interested stockholder is generally a person owning 5% or more of the outstanding voting stock of the
corporation. A business combination includes mergers, consolidations, stock and asset sales and other transactions
with the interested stockholder that result in afinancia l benefit to the interested stockholder.
Control Share Acquisitions. Teradyne has elected to opt out of the control share acquisitions provisions of the
Massachusetts General Laws. Teradyne could, however, opt into these control share acquisitions provisions at any
time by amending our Bylaws.
In general, the control share acquisitions provisions of the Massachusetts General Laws provide that any person,
including his, her or its affiliates, who acquires shares of a corporation that are subject to the control share
acquisitions statute and whose shares represent one-fifth or more, one-third or more, or ama jority or more of the
voting power of the corporation in the election of directors cannot exercise any voting power with respect to those
shares, or any shares acquired by the person within 90 days before or after an acquisition of this nature, unless these
voting rights are authorized by the stockholders of the corporation.
The authorization of voting rights requires the affirmative vote of the holders of a majority of the outstanding voting
shares, excluding shares owned by:
•
the person making an acquisition of this nature;
•
•
any officer of the corporate; and
any employee who is also a director of the corporation.
There are several other types of share acquisitions that are not subject to these provisions of the Massachusetts
General Laws, including acquisitions of shares under atende r offer, merger or consolidation which is made in
connection with an agreement to which the corporation is a party and acquisitions of shares directly from the
corporation or awholly owned subsidiary of the corporation.
Present Subsidiaries
Exhibit 21.1
Entity Name:
Teradyne (Asia) Pte., Ltd.
Teradyne Canada Limited
Teradyne de Costa Rica S.R.L.
Teradyne GmbH
Teradyne Holdings Denmark ApS
Teradyne International Holdings B.V.
Teradyne International UK Holdings Ltd.
Teradyne Israel Limited
Teradyne Italia SrL
Teradyne K.K.
Teradyne Korea Ltd.
Teradyne Limited
Teradyne Malaysia Sdn. Bhd.
Teradyne Philippines Limited
Teradyne Robotics Holdings Denmark ApS
Teradyne SAS
Teradyne (Shanghai) Co., Ltd
Teradyne Taiwan LLC
Teradyne Thailand Limited
Device Interface Solutions Technology (Shanghai) Co., Ltd
DIS Tech America, LLC
DIS Tech Italia S.r.l.
DIS Tech Japan, G.K.
DIS Tech Philippines, LLC
DIS Tech Singapore Pte. Ltd.
DIS Tech Taiwan LLC
GenRad, LLC
Herco Technology Corp.
P.L.S.T., Inc. (f/k/a Perception Laminates, Inc.)
Eagle Test Systems, Inc.
Nextest Systems Corporation
Lemsys SA
LitePoint Corporation
LitePoint Europe A/S
LitePoint Technology Limited
LitePoint Technology (Shanghai) Company Ltd.
LitePoint Vietnam Limited
Mobile Industrial Robots A/S
Mobile Industrial Robots, Inc.
MiR Global, Inc.
MiR Robots (Shanghai) Co. Ltd.
Universal Robots A/S
Universal Robots (India) Pte. Ltd.
Universal Robots (Shanghai) Co. Ltd.
Universal Robots (USA), Inc.
Teradyne Robots (Germany) GmbH
Teradyne Robots (Spain) S.L.
Universal Robots Mexico S.A. de C.V.
Universal Robots (UK) Ltd.
UR Technology (Shanghai) Co. Ltd.
State or Jurisdiction Of
Incorporation
Percentage of Voting
Securities Owned
Singapore
Canada
Costa Rica
Germany
Denmark
The Netherlands
United Kingdom
Israel
Italy
Japan
Korea
United Kingdom
Malaysia
Delaware
Denmark
France
Peoples Republic of China
Delaware
Delaware
Peoples Republic of China
Delaware
Italy
Japan
Delaware
Singapore
Delaware
Delaware
California
California
Delaware
Delaware
Switzerland
Delaware
Denmark
Hong Kong
Peoples Republic of China
Socialist Republic of Vietnam
Denmark
Delaware
Delaware
Peoples Republic of China
Denmark
India
Peoples Republic of China
Delaware
Germany
Spain
Mexico
United Kingdom
People Republic of China
100%*
100%
100%
100%*
100%*
100%
100%*
100%
100%*
100%
100%*
100%*
100%*
100%
100%*
100%
100%*
100%*
100%
100%*
100%
100%
100%*
100%
100%*
100%
100%
100%
100%
100%
100%
100%*
100%
100%*
100%*
100%*
100%*
100%*
100%*
100%
100%*
100%*
100%*
100%*
100%*
100%*
100%*
100%*
100%*
100%*
* Indirect subsidiaries whose voting securities are 100% controlled by Teradyne, Inc.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-256136;
333-188824; 333-159723; 333-143231; 333-134519; 333-116632; 333-101983; 333-68074; 333-56373; and 333-
07177) of Teradyne, Inc. of our report dated February 22, 2024 relating to the financial statements, financial
statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-
K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 22, 2024
CERTIFICATIONS
I, Gregory Smith, certify that:
1. I have reviewed this annual report on Form 10-K of Teradyne, Inc.;
EXHIBIT 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 22, 2024
By:
/s/ GREGORY SMITH
Gregory Smith
Chief Executive Officer
CERTIFICATIONS
I, Sanjay Mehta, certify that:
1. I have reviewed this annual report on Form 10-K of Teradyne, Inc.;
EXHIBIT 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 22, 2024
By:
/S/ SANJAY MEHTA
Sanjay Mehta
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Teradyne, Inc. (the “Company”) on Form 10-K for the period ending
December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
Gregory Smith, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/S/ GREGORY SMITH
Gregory Smith
Chief Executive Officer
February 22, 2024
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Teradyne, Inc. (the “Company”) on Form 10-K for the period ending
December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
Sanjay Mehta, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/S/ SANJAY MEHTA
Sanjay Mehta
Chief Financial Officer
February 22, 2024