No bad stock

Teradyne, Inc.
CEO : Mr. Gregory S. Smith

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q2	-18.6% YoY	-43.6%	-37.1%	2023-07-27

Greg Smith says,

Q2 Sales and Earnings

• Second quarter sales were at the top of the guidance range as supply constraints eased.
• Earnings were above guidance due to higher gross margins.

Semiconductor Tester Segment

• Semiconductor tester segment has been in a correction cycle driven by excess inventory, particularly in the mobility part of the market.
• Automotive demand remains strong in semiconductor test.
• Growth in DDR5 and HBM devices for data center applications are driving retooling in memory test.

Wireless and System Test Businesses

• Demand remains muted and unchanged in wireless and system test businesses.
• New standards like Wi-Fi 6 and 7 require new or upgraded test equipment in wireless test.
• Increased device complexity is leading to broader adoption of system-level test (SLT).
• Defense and aerospace sectors have a solid pipeline, providing a foundation for growth in system test.

Robotics Segment

• Robotics demand has softened due to challenging economic conditions, particularly low PMIs in Europe and the US.
• Transformation of the UR distribution channel has had a short-term impact on pipeline conversion.
• Shift to complementing existing distribution channel with direct touch coverage and adding OEM partners is slowing sales from distributors, but expected to yield long-term benefits.
• New product shipments include UR20 for welding and metal fabrication, and MiR insights for fleet monitoring and optimization.

Outlook for 2023

• Estimate of the 2023 SOC test market to be $3.7 billion to $4.1 billion, down 13% to 21% from 2022, but up from previous outlook in April.
• Expect HBM DRAM segment to drive incrementally stronger test demand for Magnum products in the second half of 2023.
• Overall memory test market expected to be at the low end of $900 million to $1 billion range described in April.
• Confident about the future of the semiconductor test market due to increasing device complexity and growth in automotive market.
• Expect VIP portion of the compute segment to grow faster than the overall compute segment, with Teradyne’s share higher than in traditional compute customers.
• Full year revenue for robotics group projected to be flat to down 10% from last year.

Greg Smith says,

Underperformance and projected loss

• The group has consistently underperformed profit targets.
• This is the first year where a loss is projected for the group.

Misunderstanding of market size and early adopters

• There was a misunderstanding of how large the potential end market is.
• Early years of the business were driven by sophisticated early adopters.
• As the company moved into a larger market, customers were more focused on buying solutions instead of being robot enthusiasts.

Skills gap and solution providers

• Customers in the larger market lacked the skills needed to put the robots into operation.
• The company is shifting emphasis towards solution providers like OEMs.
• This shift will allow the company to provide solutions that cater to the capabilities of its customers.
• Directly connecting with larger customers who can maintain and implement the robots is a part of the transformation strategy.

Go-to-market and product market fit challenge

• The main challenge in robotics is not technology but go-to-market and product market fit.
• Evidence shows that the company’s products do deliver value.
• The focus is on finding the best way to get the products into the hands of customers for easy adoption.

Q & A sessions,

Competitive Environment

• The UR is a clear leader in its space with more than 3x the market share of the nearest competitor.
• Shares in the mid-30s worldwide, but over 50% worldwide if you exclude China.
• Lost a few points of share to Chinese pure play cobot companies, mostly in China.
• Struggling to gain share in China due to serving the market at unprofitable prices.

AMR Market

• Total AMR market is about $2 billion per year.
• UR’s share is around 3%, with many other companies in the 1% to 6% range.
• Working on establishing strategic relationships with global customers to adopt large fleets.
• Believes competition is fragmented and can outperform.

Improvement and Profitability

• Expects significant improvement in Q4 2023 results due to the release of UR20 and 12 months of direct account coverage in large accounts.
• Target for the group is 5% to 15% profit, aiming to return to that range in 2023.
• Expect profitability to increase a couple of points by the end of the midterm (2022-2026).
• If business is growing 20% to 30% per year, aiming for 10% to 20% profit range.
• Planning for the group to operate at a rule of 40.

Sustainability and Automotive Demand

• Increasing attach rate of semiconductors in cars, driven by the growth of electric vehicles (EVs).
• Dollar value of semiconductors in each car shift is increasing at about a 12% rate.
• Automotive demand may cycle, but the strong underlying driver of increasing attach rate sustains.
• Industrial sector shows strength in clean energy and manufacturing infrastructure for EVs and batteries.

Macroeconomic Headwinds and Growth

• UR’s order rates are down roughly 10% year-on-year, compared to industrial robotics peers down 20% or greater.
• Facing broad economic headwinds, but as a disruptor, expect significantly higher growth than main players.
• Current distribution is vulnerable to macroeconomic cycles, but moving towards a distribution setup for consistent results.
• Build out of OEM and large account coverage will provide better immunity in future headwinds.