Teradyne's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Teradyne (TER)

Q1 2012 Earnings Call

April 26, 2012 10:00 am ET


Andrew J. Blanchard - Vice President of Corporate Relations

Michael A. Bradley - Chief Executive Officer, President and Executive Director

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


James Covello - Goldman Sachs Group Inc., Research Division

Wenge Yang - Citigroup Inc, Research Division

Krish Sankar - BofA Merrill Lynch, Research Division

Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division

Christopher J. Muse - Barclays Capital, Research Division

Satya Kumar - Crédit Suisse AG, Research Division

Raj Seth - Cowen and Company, LLC, Research Division

David Duley

Vishal Shah - Deutsche Bank AG, Research Division



Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2012 earnings conference call. [Operator Instructions] Andrew Blanchard, you may begin your conference.

Andrew J. Blanchard

Thank you, Katie. 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 first quarter of 2012, as well as our outlook for the second 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 at teradyne.com, where this call is also being simulcast.

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 the Live Webcast icon.

In addition, replays of this call will be available via the same page about 24 hours after the call ends. The replays will be available along with the slides through May 12.

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 statements 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 were 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 Bank of America Merrill Lynch conference on May 9, in San Francisco, Craig-Hallum Investor conference on May 30 in Minneapolis, Cowen and Company's Annual TMT Conference on May 31 in New York, and SEMICON West in San Francisco in July.

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 first quarter and provide our outlook for the second quarter. 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. For scheduling purposes, you should note that we intend to end this call after one hour. Mike?

Michael A. Bradley

Good morning, everyone. Thanks for being with us again today. As you can see, we're off to a very strong start in 2012, with nearly $400 million in first quarter revenues and a projection for $100 million or more in revenue growth in Q2.

This will be the second quarter in a row of adding about $100 million to the top line, and represents just over 70% growth off the Q4 2011 trough. And with it, we'll post our best first half totals in nearly a decade.

Obviously, a piece of this momentum comes from the SOC sector, which is rebounding from last year's second half pullback. This market recovery will lift all boats to some degree. But I want to emphasize the 2 or 3 main stories behind these growth numbers that we are seeing, which are unique to us.

First, our focus on the complex SOC chips within the wave of new mobility products is producing unprecedented demand for our UltraFLEX system. The chip coverage we have in the latest smartphones and tablets have fueled a sharp increase in demand for testers that cover baseband processors, wireless connectivity chips and power management ICs.

Just about 90% of our SOC bookings increase in Q1 was accounted for by this upsurge in UltraFLEX demand.

Second, our storage test product line will post first half revenue numbers nearly equal to the second half of last year, which was itself a half-year record. So the market acceptance of our 2.5-inch drive test product remains broad and strong.

And third, we'll have very good growth from LitePoint as they outpace the market in end product wireless test.

In addition, we'll continue to get steady top and bottom line performance from our defense, our board test and our memory test units.

Obviously, back-to-back quarters like we're seeing will stir questions about both the near and long-term sustainability of what we're seeing.

For the near term, you can see that we're leaning into things, ramping of revenues a bit faster than our trailing bookings. We're doing this both because we see some short-term strength, but also because we're getting a more versus less tone from our customers as we plan nearing capacity.

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