Teradyne Reports Fourth Quarter and Fiscal Year 2019 Results


GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)
																	Quarter Ended
				December 31, 2019			% of Net Revenues										September 29, 2019			% of Net Revenues								December 31, 2018			% of Net Revenues

Net revenues				$	654.7												$	582.0										$	519.6

Gross profit GAAP				$	383.2			58.5	%								$	345.0		59.3	%							$	309.5		59.6	%
		Inventory step-up			0.1			0.0	%									-		-									-		-
Gross profit non-GAAP				$	383.3			58.5	%								$	345.0		59.3	%							$	309.5		59.6	%

Income from operations - GAAP				$	171.7			26.2	%								$	154.9		26.6	%							$	112.3		21.6	%
		Acquired intangible assets amortization			9.8			1.5	%									9.6		1.6	%								10.6		2.0	%
		Restructuring and other (2)			(2.1	)		-0.3	%									(6.5	)	-1.1	%								11.4		2.2	%
		Inventory step-up			0.1			0.0	%									-		-									-		-
		Equity modification charge (1)			-			-										2.1		0.4	%								-		-
Income from operations - non-GAAP				$	179.5			27.4	%								$	160.1		27.5	%							$	134.3		25.8	%

											Net Income per common share											Net Income per common share											Net Income per common share
				December 31, 2019			% of Net Revenues				Basic			Diluted			September 29, 2019			% of Net Revenues		Basic			Diluted			December 31, 2018			% of Net Revenues		Basic			Diluted
Net income - GAAP				$	136.8			20.9	%		$	0.82		$	0.75		$	135.9		23.4	%	$	0.80		$	0.75		$	143.8		27.7	%	$	0.80		$	0.79
		Acquired intangible assets amortization			9.8			1.5	%			0.06			0.05			9.6		1.6	%		0.06			0.05			10.6		2.0	%		0.06			0.06
		Interest and other (3)			3.5			0.5	%			0.02			0.02			3.5		0.6	%		0.02			0.02			3.3		0.6	%		0.02			0.02
		Equity modification charge (1)			-			-				-			-			2.1		0.4	%		0.01			0.01			-		-			-			-
		Restructuring and other (2)			(2.1	)		-0.3	%			(0.01	)		(0.01	)		(6.5	)	-1.1	%		(0.04	)		(0.04	)		11.4		2.2	%		0.06			0.06
		Pension mark-to-market adjustment (3)			7.7			1.2	%			0.05			0.04			-		-			-			-			(3.5	)	-0.7	%		(0.02	)		(0.02	)
		Inventory step-up			0.1			0.0	%			0.00			0.00			-		-			-			-			-		-			-			-
		Exclude discrete tax adjustments (4)			1.4			0.2	%			0.01			0.01			(7.7	)	-1.3	%		(0.05	)		(0.04	)		(52.9	)	-10.2	%		(0.30	)		(0.29	)
		Non-GAAP tax adjustments			(4.5	)		-0.7	%			(0.03	)		(0.02	)		(3.5	)	-0.6	%		(0.02	)		(0.02	)		0.3		0.1	%		0.00			0.00
		Convertible share adjustment (5)			-			-				-			0.03			-		-			-			0.02			-		-			-			-
Net income - non-GAAP (5)				$	152.7			23.3	%		$	0.91		$	0.88		$	133.4		22.9	%	$	0.79		$	0.77		$	113.0		21.7	%	$	0.63		$	0.63

GAAP and non-GAAP weighted average common shares - basic					167.3													169.6											179.0
GAAP weighted average common shares - diluted					181.8													180.5											181.5
		Exclude dilutive shares related to convertible note transaction			(7.3	)												(5.8	)										(0.9	)
Non-GAAP weighted average common shares - diluted (5)					174.5													174.7											180.6


(1	)	For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.

(2	)	Restructuring and other consists of:
				Quarter Ended
				December 31, 2019													September 29, 2019											December 31, 2018
			Contingent consideration fair value adjustment	$	(2.8	)											$	(7.8	)									$	10.2
			Acquisition related expenses and compensation		0.2													0.5											0.5
			Employee severance		0.5													0.8											0.8
				$	(2.1	)											$	(6.5	)									$	11.4

(3	)	For the quarters ended December 31, 2019, September 29, 2019, and December 31, 2018, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended December 31, 2019 and 2018, adjustment to exclude actuarial losses (gains) recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(4	)	For the quarters ended December 31, 2019, September 29, 2019, and December 31, 2018, adjustment to exclude discrete income tax items. For the quarter ended December 31, 2018, adjustment to treat the $52 million tax benefit related to the finalization of our toll tax charge as a discrete item.

(5	)	For the quarters ended December 31, 2019 and September 29, 2019, 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 5.4 million and 3.6 million shares, respectively, related to the convertible debt hedge transaction.

				Twelve Months Ended
				December 31, 2019			% of Net Revenues										December 31, 2018			% of Net Revenues

Net Revenues				$	2,295.0												$	2,100.8

Gross profit GAAP				$	1,339.8			58.4	%								$	1,220.4		58.1	%
		Inventory step-up			0.4			0.0	%									0.4		0.0	%
Gross profit non-GAAP				$	1,340.2			58.4	%								$	1,220.8		58.1	%

Income from operations - GAAP				$	553.7			24.1	%								$	473.8		22.6	%
		Acquired intangible assets amortization			40.1			1.7	%									39.2		1.9	%
		Equity modification charge (1)			2.1			0.1	%									-		-
		Restructuring and other (2)			(13.9	)		-0.6	%									15.2		0.7	%
		Inventory step-up			0.4			0.0	%									0.4		0.0	%
Income from operations - non-GAAP				$	582.4			25.4	%								$	528.6		25.2	%

											Net Income per common share											Net Income per common share
				December 31, 2019			% of Net Revenues				Basic			Diluted			December 31, 2018			% of Net Revenues		Basic			Diluted
Net income - GAAP				$	479.2			20.9	%		$	2.81		$	2.67		$	451.8		21.5	%	$	2.41		$	2.35
		Acquired intangible assets amortization			40.1			1.7	%			0.24			0.22			39.2		1.9	%		0.21			0.20
		Interest and other (3)			13.7			0.6	%			0.08			0.08			13.1		0.6	%		0.07			0.07
		Equity modification charge (1)			2.1			0.1	%			0.01			0.01			-		-			-			-
		Restructuring and other (2)			(13.9	)		-0.6	%			(0.08	)		(0.08	)		15.2		0.7	%		0.08			0.08
		Inventory step-up			0.4			0.0	%			0.00			0.00			0.4		0.0	%		0.00			0.00
		Pension mark-to-market adjustment (3)			8.2			0.4	%			0.05			0.05			(3.3	)	-0.2	%		(0.02	)		(0.02	)
		Exclude discrete tax adjustments (4)			(22.6	)		-1.0	%			(0.13	)		(0.13	)		(59.4	)	-2.8	%		(0.32	)		(0.31	)
		Non-GAAP tax adjustments			(13.4	)		-0.6	%			(0.08	)		(0.07	)		(8.4	)	-0.4	%		(0.04	)		(0.04	)
		Convertible share adjustment (5)			-			-				-			0.11			-		-			-			0.04
Net income - non-GAAP (5)				$	493.8			21.5	%		$	2.90		$	2.86		$	448.6		21.4	%	$	2.39		$	2.37

GAAP and non-GAAP weighted average common shares - basic					170.4													187.7
GAAP weighted average common shares - diluted					179.5													192.6
		Exclude dilutive shares from convertible note			(4.9	)												(3.2	)
Non-GAAP weighted average common shares - diluted (5)					174.6													189.4

(1	)	For the twelve months ended December 31, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.

(2	)	Restructuring and other consists of:
				Twelve Months Ended
				December 31, 2019													December 31, 2018
			Contingent consideration fair value adjustment	$	(19.3	)											$	1.0
			Employee severance		2.9													8.7
			Acquisition related expenses and compensation		2.5													4.6
			Other		-													0.9
				$	(13.9	)											$	15.2

(3	)	For the twelve months ended December 31, 2019 and December 31, 2018, Interest and other included non-cash convertible debt interest expense. For the twelve months ended December 31, 2019 and December 31, 2018, adjustments to exclude actuarial losses (gains) recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(4	)	For the twelve months ended December 31, 2019 and December 31, 2018, adjustment to exclude discrete income tax items. For the twelve months ended December 31, 2019, GAAP income tax provision (benefit) 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. For the twelve months ended December 31, 2018, adjustment to treat the $52 million tax benefit related to the finalization of our toll tax charge as a discrete item.

(5	)	For the twelve months ended December 31, 2019, the non-GAAP diluted EPS calculation adds back $5.2 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 2.7 million shares related to the convertible debt hedge transaction.

		MiR's revenue increase for the period January 1, 2019 to December 31, 2019 compared to the period April 23, 2018 to December 31, 2018 is 84%. MiR's pro-forma revenue increase for the period January 1, 2019 to December 31, 2019 compared to the period January 1, 2018 to December 31, 2018 is 43%.


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

GAAP and non-GAAP first quarter revenue guidance:							$670 million			to	$710 million
GAAP net income per diluted share							$	0.75			$	0.85
		Exclude acquired intangible assets amortization						0.05				0.05
		Exclude non-cash convertible debt interest						0.02				0.02
		Tax effect of non-GAAP adjustments						(0.01	)			(0.01	)
		Convertible share adjustment						0.05				0.05
Non-GAAP net income per diluted share							$	0.86			$	0.96

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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