Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Teradyne Inc (TER, Financial) delivered Q2 financial results above revenue, gross margin, and earnings guidance ranges.
- Strong performance in Memory and SOC driven by AI applications, with compute revenue in the first half of 2024 exceeding all of 2023.
- Robotics business grew 11% in the first half of 2024 compared to the first half of 2023, despite a weak macro environment.
- Free cash flow was $171 million in Q2, driven by earnings and net working capital improvements.
- Teradyne Inc (TER) expects AI to be a long-term growth driver across both test and robotics businesses.
Negative Points
- Mobile and other major test markets continue to be soft, impacting overall growth.
- The broader auto industry remains sluggish, affecting related revenue streams.
- System Test group revenue was low due to weak demand in storage tests and SLT.
- Robotics revenue growth is expected towards the low end of the 10% to 20% range for 2024.
- Potential regulatory changes involving China could impact revenue, with 10% of total company sales shipped to China.
Q & A Highlights
Q: Could you speak to visibility and outlook into 2025, particularly around Semi Test and recovery in mobility and memory?
A: We are bullish on 2025 for the semi test market. Strength in computing and conversion of underutilized testers for compute and VIP applications are key drivers. We expect mobile to return in 2025, accelerating business. For HBM, we anticipate gaining share in performance test post-stacking and breaking into additional accounts, likely more in 2025. (Greg Smith, CEO)
Q: Can you update us on where you are with VIP, and how do you see that growing next year?
A: Currently, hundreds of testers are being used for VIP customers. We expect to exit this year with twice as many testers being used for VIPs. Multiple VIP customers have made plan-of-record decisions to use our testers, with parts to be released later this year and into 2025. (Greg Smith, CEO)
Q: Can you help us handicap the guidance for the DIS sale?
A: DIS contributed $16 million in Q2. For the full year, we expect low single-digit revenue growth, but excluding DIS, growth would be nearly three points higher. (Sanjay Mehta, CFO)
Q: How do you see N2 impacting the SOC TAM next year?
A: N2 and gate-all-around are enablers for higher device complexity, driven by cloud AI and Edge AI. We expect faster adoption of N2 compared to N3, driving demand through 2025-2027. (Greg Smith, CEO)
Q: Will the equilibrium between mobile SOC and compute revenue sustain into next year?
A: Compute revenue has been strong and will remain robust. Mobile market recovery in 2025 will likely result in mobile revenue outweighing compute. (Greg Smith, CEO)
Q: How does the breakeven in robotics for 2024 fit into your 2026 target?
A: We expect robotics to be roughly breakeven in 2024. With incremental scale, we anticipate profitability in the outer years, aligning with our 2026 targets. (Sanjay Mehta, CFO)
Q: Can you provide a range for mobile TAM recovery in 2025?
A: Mobile TAMs are unlikely to reach COVID peak levels but will be significantly stronger than in 2023 and 2024. A midpoint between the extremes might be a reasonable estimate. (Greg Smith, CEO)
Q: What will it take for the robotics business to achieve anticipated growth rates?
A: Scale, channel expansion, and new product introductions are key. We are optimistic due to specific strategy execution, including SAM expansion, OEM channel growth, and service and software opportunities. (Greg Smith, CEO)
Q: Was there any shipment pull-in from Q3 to Q2 in compute and memory?
A: Yes, we saw some acceleration from Q3 to Q2 due to strong demand in compute and memory. (Sanjay Mehta, CFO)
Q: How big could service and software be as a percent of revenue by 2026 in robotics?
A: We have around 80,000 UR cobots and 10,000 AMRs in the field. We see significant revenue opportunities in service and recurring software, especially with large accounts. (Greg Smith, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
