Teradyne Reports Second Quarter 2020 Results

GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)
																	Quarter Ended
				June 28, 2020			% of Net Revenues										March 29, 2020			% of Net Revenues								June 30, 2019			% of Net Revenues

Net revenues				$	838.7												$	704.4										$	564.2

Gross profit GAAP				$	471.5			56.2	%								$	405.6		57.6	%							$	323.9		57.4	%
		Inventory step-up			0.1			0.0	%									0.1		0.0	%								0.4		0.1	%
Gross profit non-GAAP				$	471.6			56.2	%								$	405.7		57.6	%							$	324.3		57.5	%

Income from operations - GAAP				$	217.9			26.0	%								$	206.7		29.3	%							$	134.0		23.8	%
		Restructuring and other (1)			37.2			4.4	%									(7.6	)	-1.1	%								(10.4	)	-1.8	%
		Acquired intangible assets amortization			8.9			1.1	%									9.9		1.4	%								10.1		1.8	%
		Inventory step-up			0.1			0.0	%									0.1		0.0	%								0.4		0.1	%
Income from operations - non-GAAP				$	264.1			31.5	%								$	209.1		29.7	%							$	134.1		23.8	%

											Net Income per Common Share											Net Income per Common Share											Net Income per Common Share
				June 28, 2020			% of Net Revenues				Basic			Diluted			March 29, 2020			% of Net Revenues		Basic			Diluted			June 30, 2019			% of Net Revenues		Basic			Diluted
Net income - GAAP				$	188.9			22.5	%		$	1.14		$	1.05		$	176.2		25.0	%	$	1.06		$	0.97		$	97.4		17.3	%	$	0.57		$	0.55
		Restructuring and other (1)			37.2			4.4	%			0.22			0.21			(7.6	)	-1.1	%		(0.05	)		(0.04	)		(10.4	)	-1.8	%		(0.06	)		(0.06	)
		Acquired intangible assets amortization			8.9			1.1	%			0.05			0.05			9.9		1.4	%		0.06			0.05			10.1		1.8	%		0.06			0.06
		Interest and other (2)			3.6			0.4	%			0.02			0.02			3.5		0.5	%		0.02			0.02			3.4		0.6	%		0.02			0.02
		Inventory step-up			0.1			0.0	%			0.00			0.00			0.1		0.0	%		0.00			0.00			0.4		0.1	%		0.00			0.00
		Pension mark-to-market adjustment (2)			(0.1	)		-0.0	%			(0.00	)		(0.00	)		-		-			-			-			0.4		0.1	%		0.00			0.00
		Exclude discrete tax adjustments (3)			(1.1	)		-0.1	%			(0.01	)		(0.01	)		(7.7	)	-1.1	%		(0.05	)		(0.04	)		13.9		2.5	%		0.08			0.08
		Non-GAAP tax adjustments			(8.3	)		-1.0	%			(0.05	)		(0.05	)		(1.9	)	-0.3	%		(0.01	)		(0.01	)		(2.0	)	-0.4	%		(0.01	)		(0.01	)
		Convertible share adjustment (4)			-			-				-			0.06			-		-			-			0.04			-		-			-			0.02
Net income - non-GAAP				$	229.2			27.3	%		$	1.38		$	1.33		$	172.5		24.5	%	$	1.04		$	1.00		$	113.2		20.1	%	$	0.66		$	0.66

GAAP and non-GAAP weighted average common shares - basic					165.8													166.6											171.2
GAAP weighted average common shares - diluted					180.3													180.7											178.6
		Exclude dilutive shares related to convertible note transaction			(7.6	)												(7.3	)										(6.2	)
Non-GAAP weighted average common shares - diluted					172.7													173.4											172.4


(1	)	Restructuring and other consists of:
				Quarter Ended
				June 28, 2020													March 29, 2020											June 30, 2019
			Contingent consideration fair value adjustment	$	29.3												$	(10.0	)									$	(11.7	)
			Contract termination settlement fee		4.0													-											-
			Acquisition related expenses and compensation		3.1													1.4											0.5
			Employee severance		-													0.7											0.8
			Other		0.8													0.3											-
				$	37.2												$	(7.6	)									$	(10.4	)

(2	)	For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 28, 2020 and June 30, 2019, adjustment to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(3	)	For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, income tax (benefit) provision includes a $15 million tax provision related to the finalization of our toll tax charge.
(4	)	For the quarters ended June 28, 2020 and March 29, 2020, the non-GAAP diluted EPS calculation adds back $1.3 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.8 million and 5.5 million shares, respectively, related to the convertible debt hedge transaction.
				Six Months Ended
				June 28, 2020			% of Net Revenues										June 30, 2019			% of Net Revenues

Net Revenues				$	1,543.0												$	1,058.3

Gross profit GAAP				$	877.0			56.8	%								$	611.6		57.8	%
		Inventory step-up			0.2			0.0	%									0.4		0.0	%
Gross profit non-GAAP				$	877.2			56.9	%								$	612.0		57.8	%

Income from operations - GAAP				$	424.7			27.5	%								$	227.1		21.5	%
		Restructuring and other (1)			29.6			1.9	%									(5.3	)	-0.5	%
		Acquired intangible assets amortization			18.8			1.2	%									20.7		2.0	%
		Inventory step-up			0.2			0.0	%									0.4		0.0	%
Income from operations - non-GAAP				$	473.3			30.7	%								$	242.9		23.0	%

											Net Income per Common Share											Net Income per Common Share
				June 28, 2020			% of Net Revenues				Basic			Diluted			June 30, 2019			% of Net Revenues		Basic			Diluted
Net income - GAAP				$	365.1			23.7	%		$	2.20		$	2.02		$	206.5		19.5	%	$	1.20		$	1.16
		Restructuring and other (1)			29.6			1.9	%			0.18			0.16			(5.3	)	-0.5	%		(0.03	)		(0.03	)
		Acquired intangible assets amortization			18.8			1.2	%			0.11			0.10			20.7		2.0	%		0.12			0.12
		Interest and other (2)			7.1			0.5	%			0.04			0.04			6.8		0.6	%		0.04			0.04
		Inventory step-up			0.2			0.0	%			0.00			0.00			0.4		0.0	%		0.00			0.00
		Pension mark-to-market adjustment (2)			(0.1	)		-0.0	%			(0.00	)		(0.00	)		0.4		0.0	%		0.00			0.00
		Exclude discrete tax adjustments (3)			(8.7	)		-0.6	%			(0.05	)		(0.05	)		(16.2	)	-1.5	%		(0.09	)		(0.09	)
		Non-GAAP tax adjustments			(10.1	)		-0.7	%			(0.06	)		(0.06	)		(5.5	)	-0.5	%		(0.03	)		(0.03	)
		Convertible share adjustment (4)			-			-				-			0.10			-		-			-			0.03
Net income - non-GAAP				$	401.9			26.0	%		$	2.42		$	2.34		$	207.8		19.6	%	$	1.21		$	1.20

GAAP and non-GAAP weighted average common shares - basic					166.2													172.4
GAAP weighted average common shares - diluted					180.5													177.8
		Exclude dilutive shares from convertible note			(7.5	)												(4.2	)
Non-GAAP weighted average common shares - diluted					173.0													173.6

(1	)	Restructuring and other consists of:
				Six Months Ended
				June 28, 2020													June 30, 2019
			Contingent consideration fair value adjustment	$	19.2												$	(8.7	)
			Acquisition related expenses and compensation		4.5													1.8
			Contract termination settlement fee		4.0													-
			Employee severance		0.8													1.6
			Other		1.1													-											-
				$	29.6												$	(5.3	)

(2	)	For the six months ended June 28, 2020 and June 30, 2019, interest and other included non-cash convertible debt interest expense. For the six months ended June 28, 2020 and June 30, 2019, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(3	)	For the six months ended June 28, 2020 and June 30, 2019, adjustment to exclude discrete income tax items. For the six months ended June 30, 2019, income tax (benefit) provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and includes a $15 million tax provision related to the finalization of our toll tax charge.

(4	)	For the six months ended June 28, 2020, the non-GAAP diluted EPS calculation adds back $2.6 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.7 million shares related to the convertible debt hedge transaction.

GAAP to Non-GAAP Reconciliation of Third Quarter 2020 guidance:

GAAP and non-GAAP third quarter revenue guidance:								$745 million		to		$805 million
GAAP net income per diluted share							$	0.91			$	1.06
		Exclude acquired intangible assets amortization						0.03				0.03
		Exclude non-cash convertible debt interest						0.02				0.02
		Tax effect of non-GAAP adjustments						0.01				0.01
		Convertible share adjustment						0.04				0.04
Non-GAAP net income per diluted share							$	1.01			$	1.17

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