Teradyne, Inc. (TER)

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Teradyne, Inc. (TER)

Q4 2010 Earnings Conference Call

January 27, 2011 10:00 AM ET

Executives

Andrew Blanchard – VP, IR

Michael Bradley – CEO

Gregory Beecher – CFO

Analysts

Krish Sankar – Bank of America Merrill Lynch

Jim Covello – Goldman Sachs

Atif Malik – Morgan Stanley

Mehdi Hosseini – Susquehanna Financial Group

Satya Kumar – Credit Suisse

David Duley Steelhead Securities

Mahavir Sanghavi – UBS Investment Bank

Timothy Arcuri – Citigroup

C.J. Muse – Barclays Capital

Patrick Ho – Stifel Nicolaus

Tom Diffely – D.A. Davidson

Presentation

Operator

Good morning. My name is Jaimie, and I will be your conference operator today. At this time, I would like to welcome everyone to Teradyne’s Q4 2010 earnings conference call. [Operator Instructions] I would now like to turn the conference call over to the Vice President of Investor Relations, Mr. Andrew Blanchard. Sir, you may begin your conference.

Andrew Blanchard

Thank you, Jaimie. 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’ll provide details of our performance for the fourth quarter and full year of 2010, as well as our outlook for the first quarter.

First, I’d like to address several administrative issues. The press release containing our most recent financial results was sent out via 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’re 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 icon. In addition, replays of this call will be available via the Investors page of teradyne.com about 24 hours after the call ends. The replays will be available along with slides through February the 13th.

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 the 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 Stifel Nicolaus Technology Conference on February 9 and Goldman Sachs Technology conference on February 15, both in San Francisco, Oppenheimer’s Semiconductor Summit in New York on February 17, and Morgan Stanley’s Technology, Media and Telecom Conference on March 1 in San Francisco.

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 in the fourth quarter, and we’ll review our outlook for the first quarter. Then our CFO, Greg Beecher, will provide more details on our quarterly and full year financials 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?

Michael Bradley

Good morning, everyone. Thanks for being with us again today. You can see that we’re guiding revenues up in the first quarter so I want to describe what’s driving that as well as the general tone of business as we enter 2011. But I’d like to spend some time first recapping 2010 as it reflects very solid progress on a long-term strategy. As you know, we closed out the year with annual revenues of $1.6 billion and non-GAAP earnings of $2.20 per share. That was the fourth highest revenue level in our history and the number one year in terms of profit rate and cash generation.

Obviously, these results were due in part to a strong recovery in the Semiconductor Test market, particularly in SOC Test. The worldwide SOC Test portion doubled from $1.3 billion in 2009 to $2.6 billion in 2010. And we captured nearly 60% of that growth as our SOC shipments grew from $500 million to just over $1.3 billion. Our customers ordered over 1,700 systems in a year, propelling our SOC market share to about 50%, up from 41% last year.

Now, we’ve benefited from some strong segment buying which can ebb and flow each year. So we believe a conservative base line market share would be somewhat lower, but still significantly up from 2009, with half of our share gain coming from new design wins and half from the steady mix shift in the market to mobile, consumer and smart power devices.

We’re very pleased that our customers voted so strongly in favor of the FLEX, the 750, Eagle and Nextest SOC products for their new silicon releases and for their aggressive product ramps this past year. Our FLEX and J750 installed base now sits at well over 6,000 systems, and record years for Eagle and Nextest had broadened our total installed base to the point where we’ll cross the 10,000-system mark sometime this year.

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