Teradyne Reports Third Quarter 2018 Results

GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)
																Quarter Ended
			September 30, 2018			% of Net Revenues										July 1, 2018			% of Net Revenues								October 1, 2017 (1)			% of Net Revenues

Net revenues			$	566.8												$	526.9										$	503.4

Gross profit GAAP			$	333.7			58.9	%								$	307.3		58.3	%							$	294.8		58.6	%
	Inventory step-up			-			-										0.4		0.1	%								-		-
Gross profit non-GAAP			$	333.7			58.9	%								$	307.7		58.4	%							$	294.8		58.6	%

Income from operations - GAAP			$	143.6			25.3	%								$	120.4		22.9	%							$	129.1		25.6	%
	Acquired intangible assets amortization			11.1			2.0	%									9.8		1.9	%								7.0		1.4	%
	Restructuring and other (2)			1.7			0.3	%									2.4		0.5	%								(4.4	)	-0.9	%
	Inventory step-up			-			-										0.4		0.1	%								-		-
Income from operations - non-GAAP			$	156.4			27.6	%								$	133.0		25.2	%							$	131.7		26.2	%

										Net Income per Common Share											Net Income per Common Share											Net Income per Common Share
			September 30, 2018			% of Net Revenues				Basic			Diluted			July 1, 2018			% of Net Revenues		Basic			Diluted			October 1, 2017			% of Net Revenues		Basic			Diluted
Net income - GAAP			$	120.0			21.2	%		$	0.65		$	0.63		$	101.0		19.2	%	$	0.53		$	0.52		$	103.4		20.5	%	$	0.52		$	0.51
	Acquired intangible assets amortization			11.1			2.0	%			0.06			0.06			9.8		1.9	%		0.05			0.05			7.0		1.4	%		0.04			0.03
	Interest and other (3)			3.3			0.6	%			0.02			0.02			3.2		0.6	%		0.02			0.02			3.1		0.6	%		0.02			0.02
	Restructuring and other (2)			1.7			0.3	%			0.01			0.01			2.4		0.5	%		0.01			0.01			(4.4	)	-0.9	%		(0.02	)		(0.02	)
	Pension mark-to-market adjustment (3)			0.3			0.1	%			0.00			0.00			(0.1	)	0.0	%		(0.00	)		(0.00	)		-		-			-			-
	Inventory step-up			-			-				-			-			0.4		0.1	%		0.00			0.00			-		-			-			-
	Exclude discrete tax adjustments (4)			0.3			0.1	%			0.00			0.00			(0.5	)	-0.1	%		(0.00	)		(0.00	)		0.3		0.1	%		0.00			0.00
	Non-GAAP tax adjustments			(3.4	)		-0.6	%			(0.02	)		(0.02	)		(3.4	)	-0.6	%		(0.02	)		(0.02	)		(1.7	)	-0.3	%		(0.01	)		(0.01	)
	Convertible share adjustment			-			-				-			0.01			-		-			-			0.01			-		-			-			-
Net income - non-GAAP			$	133.3			23.5	%		$	0.72		$	0.71		$	112.8		21.4	%	$	0.59		$	0.59		$	107.7		21.4	%	$	0.55		$	0.54

GAAP and non-GAAP weighted average common shares - basic				185.7													190.7											197.5
GAAP weighted average common shares - diluted				190.5													194.9											200.8
	Exclude dilutive shares related to convertible note transaction			(3.1	)												(2.6	)										(1.1	)
Non-GAAP weighted average common shares - diluted				187.4													192.3											199.7


(1)	Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.

(2)	Restructuring and other consists of:
			Quarter Ended
			September 30, 2018													July 1, 2018											October 1, 2017
		Employee severance	$	1.7												$	2.4										$	0.6
		Acquisition related expenses and compensation		0.8													2.5											-
		Contingent consideration fair value adjustment		(0.8	)												(3.5	)										(0.3	)
		Other		-													0.9											0.4
		Property insurance recovery		-													-											(5.1	)
			$	1.7												$	2.4										$	(4.4	)

(3)	For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended September 30, 2018 and July 1, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting policy.

(4)	For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude discrete income tax items.

			Nine Months Ended
			September 30, 2018			% of Net Revenues										October 1, 2017 (1)			% of Net Revenues

Net Revenues			$	1,581.2												$	1,657.2

Gross profit GAAP			$	910.9			57.6	%								$	950.5		57.4	%
	Inventory step-up			0.4			0.0	%									-		-
Gross profit non-GAAP			$	911.3			57.6	%								$	950.5		57.4	%

Income from operations - GAAP			$	361.5			22.9	%								$	430.7		26.0	%
	Acquired intangible assets amortization			28.6			1.8	%									23.1		1.4	%
	Restructuring and other (2)			3.8			0.2	%									0.4		0.0	%
	Inventory step-up			0.4			0.0	%									-		-
Income from operations - non-GAAP			$	394.3			24.9	%								$	454.2		27.4	%

										Net Income per Common Share											Net Income per Common Share
			September 30, 2018			% of Net Revenues				Basic			Diluted			October 1, 2017			% of Net Revenues		Basic			Diluted
Net income - GAAP			$	308.0			19.5	%		$	1.62		$	1.57		$	363.6		21.9	%	$	1.83		$	1.81
	Acquired intangible assets amortization			28.6			1.8	%			0.15			0.15			23.1		1.4	%		0.12			0.11
	Interest and other (3)			9.7			0.6	%			0.05			0.05			9.3		0.6	%		0.05			0.05
	Restructuring and other (2)			3.8			0.2	%			0.02			0.02			0.4		0.0	%		0.00			0.00
	Inventory step-up			0.4			0.0	%			0.00			0.00			-		-			-			-
	Pension mark-to-market adjustment (3)			0.2			0.0	%			0.00			0.00			(2.5	)	-0.2	%		(0.01	)		(0.01	)
	Exclude discrete tax adjustments (4)			(6.5	)		-0.4	%			(0.03	)		(0.03	)		(6.1	)	-0.4	%		(0.03	)		(0.03	)
	Non-GAAP tax adjustments			(8.7	)		-0.6	%			(0.05	)		(0.04	)		(9.9	)	-0.6	%		(0.05	)		(0.05	)
	Convertible share adjustment			-			-				-			0.03			-		-			-			-
Net income - non-GAAP			$	335.5			21.2	%		$	1.76		$	1.74		$	377.9		22.8	%	$	1.90		$	1.88

GAAP and non-GAAP weighted average common shares - basic				190.6													198.8
GAAP weighted average common shares - diluted				196.3													201.4
	Exclude dilutive shares from convertible note			(4.0	)												(0.6	)
Non-GAAP weighted average common shares - diluted				192.3													200.8

(1)	Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.

(2)	Restructuring and other consists of:
			Nine Months Ended
			September 30, 2018													October 1, 2017
		Employee severance	$	7.9												$	2.0
		Acquisition related expenses and compensation		4.1													-
		Other		0.9													1.7
		Contingent consideration fair value adjustment		(9.2	)												1.8
		Property insurance recovery		-													(5.1	)
			$	3.8												$	0.4

(3)	For the nine months ended September 30, 2018 and October 1, 2017, Interest and other included non-cash convertible debt interest expense. For the nine months ended September 30, 2018 and October 1, 2017, adjustments to exclude actuarial gains recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting policy.

(4)	For the nine months ended September 30, 2018 and October 1, 2017, adjustment to exclude discrete income tax items.

GAAP to Non-GAAP Reconciliation of Fourth Quarter 2018 guidance:

GAAP and non-GAAP fourth quarter revenue guidance:						$480 million			to	$510 million
GAAP net income per diluted share						$	0.39			$	0.46
	Exclude acquired intangible assets amortization						0.06				0.06
	Exclude non-cash convertible debt interest						0.02				0.02
	Exclude restructuring and other						0.01				0.01
	Tax effect of non-GAAP adjustments						(0.02	)			(0.02	)
	Convertible share adjustment						0.01				0.01
Non-GAAP net income per diluted share						$	0.46			$	0.54

For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com .
	Contact: Teradyne, Inc.
		Andy Blanchard 978-370-2425
		Vice President of Corporate Relations

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