Teradyne, Inc. (TER)
Q2 2010 Earnings Call Transcript
July 29, 2010 10:00 am ET
Andrew Blanchard – VP, Corporate Relations
Mike Bradley – President and CEO
Greg Beecher – CFO
Jim Covello – Goldman Sachs
CJ Muse – Barclays Capital
Gary Hsueh – Oppenheimer
David Dooley [ph]
Krish Sankar – Bank of America
Satya Kumar – Credit Suisse
Patrick Ho – Stifel Nicolaus
Tom DeFillo [ph]
Gus Richard – Piper Jaffray
Atif Malik – Morgan Stanley
Good morning. My name is Jasmine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2010 earnings release conference call. (Operator instructions) I would now like to turn the call over to Mr. Andrew Blanchard, sir you may begin.
Thank you, Jasmine. Good morning, everyone and welcome to our discussion of Teradyne’s most recent financial results. I am 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 second quarter of 2010 as well as our outlook for the third 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 www.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 icon. In addition, replays of this call will be available via the investor’s page of teradyne.com about 24 hours after the call ends. The replays will be available along with the slides through August the 14th.
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 Annual Technology, Media & Telecommunications Conference on August 11 in Boston; and, Morgan Stanley Semiconductors and Semi-Cap Equipment Conference on August 25th in Chicago.
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 second quarter and will review our outlook for the third quarter. Then our CFO, Greg Beecher, will provide more details on our quarterly financial performance along with our guidance for the third quarter. We will then answer your questions. For scheduling purposes, you should note that we intend to end this call after one hour. Mike?
Good morning, everyone. Thank you for joining us today. We've continued to deliver some very good numbers this past quarter and have registered a solid first half of 2010. We’re obviously operating at a very strong SOC test up turn. We feel that our results this past quarter and the guidance for the third quarter reflect three important things. Number one significant share gains in our core business; number two, positive momentum in new markets; and, number three, a steady hand on costs. Together these three elements are delivering record profitability, very strong cash flow and a solid base for future growth.
I’ll have Greg go through the numbers in detail including some discussion on our model, our cash strategy, and how our supply line is performing. But let me expand for a few minutes on those items that I think are especially important.
First of all, our SOC test business is very strong, continuing to grow faster than the market, as evidenced by the fact that we're likely to account for about 50% of the total SOC market's revenues in the first half of this year. On a longer time frame, we’ve also shown steady gains. Since the 2005, 2006 period, we’ve grown our SOC share from about 34% up to about 41% last year. 60% of that growth came from our own Flex and J750 products and 40% from Eagle and Nextest growth. And we're on course to add three or four more share point this year, a very significant one-year move.
Our first half numbers would suggest an even larger share gain. But we believe some of these is due to the timing of segment buying patterns, which tend to be choppy, but which even out to their normalized levels over time. Our SOC test bookings in Q2 were up 1% topping the$430 million level for the second straight quarter. So for the first half, we’ve taken in over $870 million in total SOC orders and shipped about $670 million for our customers.
In addition, memory tests, both flash memory and DRAM, delivered another $27 million in orders this past quarter, putting us over $50 million for the year. So we're obviously operating in a strong SOC test market and are seeing signs of a strengthening memory test environment. But three things stand out in our numbers outside of this overall market growth.