Teradyne, Inc. (TER)

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Teradyne (TER)

Q1 2013 Earnings Call

April 25, 2013 10:00 am ET


Andrew J. Blanchard - Vice President of Corporate Relations

Michael A. Bradley - Chief Executive Officer and Executive Director

Gregory R. Beecher - Chief Financial Officer, Principal Accounting Officer, Vice President and Treasurer

Mark E. Jagiela - President


Vernon P. Essi - Needham & Company, LLC, Research Division

Satya Kumar - Crédit Suisse AG, Research Division

Mahavir Sanghavi - UBS Investment Bank, Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Timothy M. Arcuri - Cowen and Company, LLC, Research Division

Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division

Krish Sankar - BofA Merrill Lynch, Research Division

Thomas Diffely - D.A. Davidson & Co., Research Division

Vishal Shah - Deutsche Bank AG, Research Division

David Duley

Terence R. Whalen - Citigroup Inc, Research Division

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division

Jagadish K. Iyer - Piper Jaffray Companies, Research Division



Good morning. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradyne First Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn today's conference over to Mr. Andrew Blanchard, the Vice President of Investor Relations.

Andrew J. Blanchard

Thank you, Christie. Good morning, everyone, and welcome to our discussion of Teradyne's most recent financial results. I'm joined this morning by our Chief Executive Officer, Mike Bradley; President, Mark Jagiela; and our Chief Financial Officer, Greg Beecher. Following our opening remarks, we'll provide details of our performance for the first quarter as well as our outlook for the second quarter of this year.

First, I'd like to address several administrative issues. The press release containing our first quarter results was issued last evening. Copies are available at teradyne.com, where this call is also being simulcast. We're providing slides on the Investor page of the website that may be helpful to you on following the discussion. In addition, replays of this call will be available via the same page about 24 hours after the call ends. The replays will be a available, along with the slides, through May 11.

The matters that we discuss today will include forward-looking statements that involve risk factors that could cause Teradyne's results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release, as well as our most recent SEC filings, for a complete description. Additionally, those forward-looking statements are made as of today, and we take no obligation to update them as a result of developments occurring after this call.

During today's call, we'll make reference to non-GAAP financial measures. We posted additional information concerning these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP financial measure where available on our website. To view them, go to the Investor page and click on the GAAP to non-GAAP Reconciliation link.

Also, between now and our next conference call, Teradyne will be participating in investor conferences hosted by Bank of America, Cowen & Company and Crédit Suisse.

Now let's get on with the rest of the agenda. First, our CEO, Mike Bradley, will review the state of the company and the industry for the first quarter and provide our outlook for the second quarter of 2013. Then our CFO, Greg Beecher, will provide more details on our quarterly performance, along with our guidance for the second quarter. We'll then answer your questions. You should note that we intend to end this call after 1 hour. Mike?

Michael A. Bradley

Good morning, everyone. Thanks for being with us again today.

The overall message today has 2 parts. First, we're moving upward in the semiconductor test cycle, in line with what we expected coming into the year. And second, we're very much on track with the new market and new product initiatives that we outlined to you at this time, last quarter.

You can see that our total bookings have taken a sharp step up, increasing nearly 50% over the prior quarter. This is the net change of very strong Wireless Test demand, solid improvement in SemiTest order rate and the usual lumpiness in our Systems Test bookings.

Most notable is that we've had a better start to the year at LitePoint than we did last year at this time, with orders about 2.5x the level of Q1 last year and over 4x what we saw just 1 quarter ago. SemiTest is rebounding nicely, with over 40% sequential growth in orders as improved mobility demand has been coupled with strengthening patterns in microcontroller and automotive applications.

SOC test is up 35%, while Memory Test saw a 130%-plus increase over the relatively low order rate we had in Q4.

I'd also add that in SemiTest, our OSAT demand doubled in Q1, while IDMs and fabless moved up only 10% sequentially. Systems Test is on a normal, albeit, choppy pattern with much lower defense spending in the quarter compared to the very high bookings picture we reported 3 months ago.

So while the trend is positive on many fronts, it doesn't have the record trajectory that we saw a year ago, where SOC test bookings were so front-end-loaded in the year. All of which led to a full year that had 2/3 of its demands in the first half and where customer new product cycles drove our shipment peaks in the Q2, Q3 period.

What is noteworthy about our start to this year is a very good hit rate on the strategic new markets we're entering and new products that we're bringing forth this year. On that front, we've made very good headway at the quarter poll. First of all, as I mentioned on our last call, we set a course for 2 new market offensive this year; one in Cellular Test at LitePoint, and one in the 3.5-inch hard disk drive space in our Storage Test unit. I'm pleased to report that we've received production orders in both new markets as of the end of March and are targeting volume ramps for each during the next 2 quarters.

Read the rest of this transcript for free on seekingalpha.com