Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Teradyne Inc (TER, Financial) delivered third-quarter financial results at the high end of their revenue guidance range, exceeding expectations in gross margin and earnings.
- The Semiconductor business, particularly the memory segment, performed above expectations with record high revenue driven by strong HPM demand.
- The company is seeing stabilization and modest improvement in other SemiTest segments, with utilization rates increasing.
- Teradyne Inc (TER) expects total company revenue growth of approximately 5% for 2024, up from prior expectations of low single-digit growth.
- The robotics business has delivered 8% year-to-date growth despite a challenging industrial macro environment, outperforming its peer group.
Negative Points
- The wireless business has been impacted by a slower-than-expected ramp of WiFi 7, affecting revenue.
- The production board test business continues to be weak due to low demand from Tier 1 automotive OEMs.
- The robotics market is inherently cyclical, and customers have significantly cut back on capital investment plans.
- Visibility into customer forecasts remains limited, with customers not generally providing forecasts beyond a quarter or two.
- The memory revenue is expected to moderate in the fourth quarter following a surge in shipments during the third quarter.
Q & A Highlights
Q: Can you discuss the opportunities in the system-level test (SLT) market and how Teradyne is positioned?
A: Gregory Smith, CEO, explained that SLT has become important for processors in smartphones and is now expanding to compute customers. While 2024 will see some contribution, 2025 is expected to be more significant. Teradyne is adding customers in the mobile space, anticipating growth as the market recovers.
Q: How does the increasing test time for AI chips impact Teradyne's opportunities?
A: Gregory Smith noted that higher test times are tied to device complexity. SLT helps limit test time growth, and Teradyne sees opportunities in AI accelerators. The focus is on vertically integrated producers (VIPs) and networking, which are driving demand.
Q: With the TAM increasing, why are Q4 and Q1 sales expected to be lower than Q3?
A: Sanjay Mehta, CFO, explained that the TAM expansion is due to stronger AI compute and better visibility into the Chinese market. While Teradyne has low exposure in China, the TAM is accelerating. The company will provide a detailed 2025 outlook in January, but the ingredients for growth are present.
Q: What explains the slower growth in the robotics business, and what needs to happen for Teradyne to achieve 20-30% growth?
A: Gregory Smith highlighted that industrial automation has faced a challenging environment, with low PMI and high interest rates. Teradyne has been expanding its offerings and distribution channels, including high payload robots and OEM solutions. Better market conditions are needed for sustained growth.
Q: How is Teradyne planning to manage OpEx while aiming for revenue growth in 2025?
A: Sanjay Mehta stated that while OpEx is expected to grow in the low teens, the company aims for operating leverage. The focus is on strategic investments in Semi Test, particularly in engineering and go-to-market efforts, to capitalize on the shift towards compute and VIP strategies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
