TERADYNE, INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Semiconductor Test: Cloud AI has been a dominant driver for Semiconductor Test, with SOC and memory test revenue growing 17% Y/Y in 2024 (excluding DIS). Achieved 50% market share in computing vertically-integrated producers (VIPs). SOC revenue in the Compute market grew over 3.5x in 2024. Memory business grew 30% Y/Y in 2024 due to AI Compute demand. Announced a strategic partnership with Infineon to acquire their internal tester development team for power semiconductors.
• Robotics: Industrial automation market was weak in Q4 2024. UR channel transformation progressed with OEM channel growth, and MiR large accounts saw 24% Y/Y growth in 2024. Restructuring robotics go-to-market functions to consolidate marketing, sales, and service for UR and MiR to improve efficiency and customer experience.

Segment Performance

• Semiconductor Test: Fourth quarter revenue was $561 million. Full-year 2024 semiconductor test revenue, including Integrated System Test (IST), was $2.124 billion. SOC revenue in Q4 was $429 million, with full-year SOC revenue at $1.537 billion. Memory revenue in Q4 was $112 million, and full-year memory revenue was $502 million. IST revenue in Q4 was $19 million, with full-year IST revenue at $85 million. Other product test businesses (System Test, Wireless Test) contributed $94 million in Q4 and $331 million in full-year 2024.
• Robotics: Q4 robotics revenue was $98 million. Full-year 2024 robotics revenue was $98 million, with UR contributing $293 million and MiR contributing $72 million.

Guidance

• Q1 2025: Sales expected to be between $660 million and $700 million, with non-GAAP EPS in the range of $0.58 to $0.68.
• Full Year 2025: Revenue projected at $2.82 billion, gross margin expected to be 59% to 60%, OpEx increase 8% to 10% year-over-year, GAAP tax rate forecasted at 15.25%, non-GAAP tax rate at 15%.
• Midterm Model: Projected revenue to grow from $2.8 billion in 2024 to $5 billion in 2028, with EPS expected to grow from $3.22 per share to $8.25 per share over the same period.

Risks

• Market Volatility: Fluctuations in end-market conditions can impact Semiconductor Test and Robotics segments.
• Discrete Semiconductor Market: Adverse times in power semiconductors, particularly silicon carbide and gallium nitride, affecting related test equipment business.
• Industrial Automation Slowdown: Prolonged weak investment cycle in industrial automation impacting Robotics business performance.

Question and Answer

• Q: Expansion on low single-digit share growth in Semi Test and recovery in non-compute businesses A: Greg Smith discussed that low single-digit share growth in Semi Test is driven by Compute VIPs maintaining 50% share, Mobile complexity driving TAM growth, and Auto/Industrial having short-term slowdown but long-term semiconductor content growth.
• Q: Infineon partnership details A: Greg Smith explained the partnership with Infineon helps Teradyne accelerate the road map in power semiconductors, benefiting Infineon by allowing them to focus on chip design.
• Q: Robotics restructuring and plan A: Greg Smith talked about combining go-to-market functions for UR and MiR to improve efficiency, customer experience, and service by having a unified organization for marketing, sales, and service.
• Q: VIP business growth and customer base A: Greg Smith mentioned the VIP business is concentrated, expecting robust ramp of existing customers with potential new logos in 2025-2026.
• Q: HBM test digestion and recovery A: Greg Smith stated HBM test market digestion in 2025 with recovery in 2026 based on customer conversations and capital planning regarding HBM device end-market and test equipment market dynamics