Teradyne, Inc. (TER)

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Teradyne, Inc. (TER)

Q4 2009 Earnings Call Transcript

January 28, 2010 10:00 am ET


Andrew Blanchard – VP, IR

Mike Bradley – President and CEO

Greg Beecher – CFO


C.J. Muse – Barclays Capital

Jim Covello – Goldman Sachs

Mehdi Hosseini – FBR

Gary Hsueh – Oppenheimer & Company

Krish Sankar – Bank of America–Merrill Lynch

Satya Kumar – Credit Suisse

Peter Karazeris – Citigroup

David Duley – Steelhead Securities

Atif Malik – Morgan Stanley

Patrick Ho – Stifel Nicolaus

Gus Richard – Piper Jaffray

Raj Seth – Cowen and Company



Good morning, my name is Carrie and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2009 earnings conference call with Teradyne. All lines placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Mr. Andrew Blanchard, Vice President of Investor Relations. Mr. Blanchard, you may begin.

Andrew Blanchard

Thank you, Carrie. 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 and our Chief Financial Officer, Greg Beecher.

Following our opening remarks, we will provide details of our performance for the fourth quarter and year-end 2009, as well as our outlook for the first quarter of 2010. First, I'd like to address several administrative issues. The press release containing our most recent financial results was sent out via the business wire last evening. Copies are available on our website or by calling Teradyne's corporate relations office at 978-370-2221.

This call is being simultaneously webcast at teradyne.com. Note that during this call, we are providing slides on the website that may be helpful to you in following the discussion. To view them simply access the investor page of the site and click on live webcast. In addition, replays of this call will be available via the investor's page of teradyne.com 24 hours after the call ends. The replays will be available along with the slides through February the 12th.

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 will make reference to non-GAAP financial measures. We have 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 GAAP to non-GAAP reconciliation link. Also, you may want to note that between now and our next conference call, Teradyne will be participating in the Oppenheimer Semiconductor Summit on February 18 in New York, the Goldman Sachs Technology and Internet Conference in San Francisco on February 24th and 25th and Morgan Stanley's Media Technology and Telecom Conference in San Francisco on March 3rd and 4th.

Now let's get on with the rest of the agenda.

First, our CEO, Mike Bradley, will review the state of the company and industry in the fourth quarter ended year-end 2009 and will review our outlook for the first quarter of 2010. Then our CFO, Greg Beecher, will provide more details on our year-end and quarterly financial performance along with our guidance for the first quarter. We will then answer your questions. For scheduling purposes you should note that we intend to end this call after one hour. Mike?

Mike Bradley

Good morning, everyone. Thanks for joining us today. I'm pleased to report that we continue to see a strengthening across many of our product lines and with the business rebounding, we are getting very good earnings leverage as we keep our fixed cost structure in check. The lead story in the fourth quarter was a broadening of orders in our Semi Test business.

Bookings in that sector were up 13% to over 260 million, led by increases in wireless and microcontroller segments. This is on top of a nearly 70% uptick in the third quarter. Predictions of an industry pause in bookings as we entered the fourth quarter did not materialize. On the contrary, we have seen continued strong buying from both our IDM and OSAT customers.

So as we exit 2009, we have had a solid recovery in Semi Test from the $65 million trough order rate in the first quarter to nearly $265 million in the fourth quarter. Our System Test bookings were down 28% sequentially totaling $40 million in the quarter. This kind of swing was not surprising nor will it be going forward as the lumpy buying patterns within that group are expected to continue.

I will say that our Automotive Diagnostics and Commercial Board Test units have not seen the rebound during the year that has occurred in other lines, so when they do start clicking, they will give you a small boost to our overall results. I should also mention that the System Test group remained profitable throughout 2009, anchored by steady performance in our defense business which held up the best through this downturn.

So the overall picture for the quarter completed is the total company bookings increased 5% to just over $300 million and that's the basis for our increased revenue guidance of 290 million to $310 million for this first quarter. I'd like to spend several minutes on a few other topics which I think will be of interest to you and then I'll turn it over to Greg for a recap on the numbers, especially focusing on how the business model is performing now and should perform going forward.

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