The paragraph introduces Teradyne, Inc.'s first quarter 2025 earnings conference call. The operator explains that participants are currently in listen-only mode, with a Q&A session planned for later. Traci Tsuchiguchi, VP of Investor Relations, begins the conference by welcoming attendees and outlining the agenda, which includes a discussion of the company's first quarter 2025 financial performance and second-quarter outlook. The press release with the earnings details was released the previous night, and supplemental materials are available on Teradyne's website. The presentation will include forward-looking statements, with a caution against undue reliance as actual results may vary due to risks outlined in their SEC filings. These statements are only valid as of today and may not be updated except as legally required. Non-GAAP financial measures will also be used in the presentation.

The paragraph discusses Teradyne's financial reporting and future activities. It mentions additional information on non-GAAP financial measures being available on the company's website and plans to participate in upcoming investor conferences. The quiet period is set to begin on June 20th, 2025. Greg Smith outlines the first-quarter results and discusses industry trends such as AI, verticalization, and electrification, which are expected to drive future growth. However, near-term challenges include trade policies and uncertainty in end market demand affecting orders. While first-quarter revenue was high, visibility beyond the second quarter is limited, so no future guidance beyond that is provided.

The paragraph highlights year-over-year growth driven by demand for SoC in the mobile market and strong compute revenue, particularly for AI accelerators. Mobile demand is deemed temporary due to supply chain transitions. The Memory Business Unit won a significant HBM4 performance test with a major DRAM manufacturer, marking a milestone for the company's memory division. The Integrated Systems Test (IST) business met expectations and saw new opportunities, while the LitePoint wireless test sector secured all available Wi-Fi 7 opportunities despite a weak market. The company aims to lead in Silicon Photonics tests and plans to acquire Quantifi Photonics in the second quarter.

In the first quarter, Teradyne's Robotics division underwent a reorganization, merging sales, marketing, and service functions of UR and MiR. Despite challenging market conditions, the division secured a major order from a global automotive manufacturer and launched the new Pallet Jack MiR 1200. Moving into Q2, order deliveries have been delayed due to international trade uncertainties. Teradyne remains cautious with expenses while leveraging its flexible business model for operational efficiency. With strong financials and ongoing investments, the company is poised for growth as market conditions stabilize. Teradyne's business units, like TAS, are capitalizing on new opportunities, particularly in automating labor-intensive semiconductor processes.

In the first quarter, the company announced a partnership with ADI to deploy cobots and AMRs for collaborative automation in the semiconductor market, aiming for growth in AI computing and semiconductor testing. They reported initial revenue from a major customer. The production board test business is expanding into AI compute, leveraging technologies from Semi Test to assist hyperscalers in testing server-level products, creating new opportunities due to the increasing complexity and failure costs of end products. The mobile segment has seen improved utilization rates, leading to new system orders and upgrades, with advancements in LPDDR and next-generation image sensor testers. The company is optimistic about the future of its mobile business with upcoming technologies such as 2-nanometer and gate-all-around. Despite uncertainties in global demand due to trade policies, they expect a strong recovery in 2025, similar to past experiences. The call is then handed over to Sanjay Mehta to discuss the financial summary of Q1 and the Q2 outlook.

In the first quarter, sales reached $686 million, with non-GAAP EPS surpassing expectations at $0.75. Non-GAAP gross margins were higher than anticipated at 60.6%, owing to product mix, and operating expenses were up as investments were made for future growth. Semi Test revenue totaled $543 million, primarily driven by SoC revenue linked to mobile, while Memory revenue declined as customers adjusted to previously delivered HBM equipment. IST revenue increased, supported by new shipments and AI compute revenue. Product Test revenue dropped 4% year-over-year, with growth in wireless test counterbalanced by declines in automotive and defense sectors. Robotics revenue fell to $69 million, affected by macroeconomic factors, with an operating loss of $22 million aligning with forecasts.

In Q1, the company reported a GAAP loss of $37 million, with significant restructuring costs. The restructuring has lowered its operating breakeven revenue from $440 million to $365 million. In total, the company's life-to-date GAAP losses in its Robotics segment amount to $231 million, offset slightly by cumulative non-GAAP operating profit. One customer contributed over 10% of Q1 revenue, with 19% of revenue coming from China. The tax rate was 13.5%, and free cash flow was $98 million. The company repurchased $157 million in shares and paid $19 million in dividends, ending the quarter with $622 million in cash and securities. For Q2, sales are forecast between $610 million and $680 million with gross margins slightly decreasing due to product mix and volume. Operating expenses are projected at 40.5% to 44.5% of sales, with a non-GAAP operating profit rate of 14.5% and non-GAAP EPS between $0.41 to $0.64. GAAP EPS is estimated between $0.35 to $0.58.

The paragraph discusses the impact of tariffs on the company's business, noting that while the tariffs are expected to slightly increase costs in Q2, the company is primarily passing these costs to customers in affected regions. The company has limited ability to predict future changes in tariff or trade policies and advises not relying on financial guidance beyond Q2. In specific markets, Q2 revenue for Mobile is expected to decrease, and a notable decline in Memory revenue is anticipated. Tariffs are likely to impact mobile, automotive, and industrial markets, while changes in trade restrictions could affect the Compute market. Additionally, the company plans to increase its share buyback target to $1 billion by the end of 2026, signaling confidence in its long-term strategy and cash flow. Overall, the company's Q2 expectations align with previous guidance, including the anticipated tariff impact.

The paragraph discusses the current market dynamics related to tariff impacts and customer demand. The speaker, Greg Smith, notes that while earlier it seemed there were pushouts due to tariffs, some OSAT customers are now experiencing pull-ins for end orders. These pull-ins are primarily utilizing existing capacity rather than requiring additional capital equipment, and they haven't notably impacted the timelines for the first and second quarters. The pushouts mentioned at an earlier Analyst Day remain unchanged and mainly affect customers in the automotive and industrial sectors. Although there have been no significant pushouts in the mobile sector, there is concern about potential future market impacts that are still uncertain. Krish Sankar, the questioner, acknowledges this and seeks clarification on the verticals affected.

The paragraph discusses a conversation between Greg Smith, Krish Sankar, and C.J. Muse regarding recent business developments related to HBM (High Bandwidth Memory). Greg Smith explains that they secured a new HBM4 business win with a customer who didn't previously have HBM3 or 3E business with them. C.J. Muse then asks about financial guidance amid uncertainty, particularly concerning gross margins and operating expenses. Sanjay Mehta responds that due to variables like trade policies and revenue mix, they are not providing specific guidance for the full year. However, he mentions that the company's first half gross margin percentages align with expectations, although there's no guidance for the second half due to ongoing uncertainties.

In the paragraph, the discussion centers on operational expenses (OpEx) and variable compensation models, highlighting that revenue fluctuations will impact spending. The focus will be on prioritizing Semi Test, engineering, and go-to-market strategies, with expectations of decreased spending in robotics year-over-year and flat product test expenses. Greg Smith adds historical context by noting margin fluctuations during downturns, such as a decrease from 59% in 2022 to 57% in 2023, and emphasizes narrow-margin movements going forward. C.J. Muse inquires about recent SLT wins related to AI accelerators and mobility at 2-nanometer. Greg Smith clarifies that recent mobile socket wins will contribute to business in 2025-2026, while the 2-nanometer transition will drive demand in 2026, separate from SLT wins.

The paragraph discusses the challenges and solutions related to AI accelerators in server assemblies, noting that these devices often face high failure rates unless they undergo system-level tests (SLT) during actual training workloads. A new solution has been implemented for a leading AI accelerator, which has been accepted and is in production. It's anticipated that with next-generation, more complex accelerators, 100% SLT will become essential for achieving necessary quality levels. The solution is highlighted for its effective thermal control and power management, and it's expected to generate significant revenue by 2026. Following this, Timothy Arcuri from UBS asks about what Greg mentioned earlier regarding the largest robotics order ever, specifically for an automotive customer.

The paragraph discusses a significant order received by a company for its Autonomous Mobile Robots (AMRs) and collaborative robot arms (cobots) from a strategic customer. This order is the largest ever for their AMRs and the first time they've worked with this customer as a combined robotics unit rather than separate UR and MiR units. The AMRs are used for material handling in factories to move parts from storage to the assembly line, while cobots automate manual processes. The customer continues to invest in cobots for ongoing process improvements without needing to separate workers from automation. Timothy Arcuri asks when the order will benefit the business, and Greg Smith seeks clarification on this question.

In the article paragraph, Greg Smith and Sanjay Mehta address questions about shipment timelines and competitive impact due to tariffs. Greg Smith explains that shipments are spread across the first two quarters of the year and generally have short lead times; they do not extend into the second half of the year. He also notes that tariffs have not caused customers to shift to non-U.S. competitors in the testing market. Sanjay Mehta mentions that the strong gross margin this quarter is due to product mix, and the company is not providing an update on total addressable market (TAM) or full-year breakdown due to uncertainty.

The paragraph discusses the company's investment strategies and business model, emphasizing a target operating range of 59% to 60%. It notes that the product mix is dependent on customer needs, particularly from a tester perspective. In the first half of the year, the company is already at 59%. Additionally, Greg Smith explains that the VIP TAM numbers are focused on semiconductor ATE and do not include SLT revenue, which could contribute 10% to 30% of the total TAM. Future updates on these figures are expected in January. Brian Chin then inquires about the potential for onshoring advanced back-end test and packaging lines in the United States and the realistic timeline for such developments.

The paragraph discusses the impact of advanced logic wafer fab capacity expansion in the U.S. on the demand for testers. Greg Smith explains that while the location of manufacturing may shift from Taiwan or China to the U.S., the overall market demand for chips remains unchanged. Onshoring is more relevant to front-end equipment because it requires significant investment regardless of demand. Testers, however, are purchased based on specific wafer volume needs. Shane Brett asks about the factors influencing NAND demand in memory, to which Greg Smith responds that increased mobile phone volume or AI-enabled phones requiring more storage could drive NAND demand. Additionally, interface standards play a role in demand changes.

The paragraph discusses growth in the mobile and compute spaces, highlighting new protocols in iOS and Android ecosystems that require investment in testing capacities as new standards are adopted, driving Total Addressable Market (TAM) in mobile. It mentions the increasing demand for NAND capacity and nearline storage for AI, which could boost demand in cloud computing. Greg Smith responds to Shane Brett's question about testing equipment utilization, noting that while specific numbers aren't available, there is an upward trend and a shift from upgrade sales to significant system orders, especially with AI accelerators, indicating that fewer systems are upgradeable now compared to six months ago.

In the paragraph, David Duley asks for clarification about the HBM stack die test, and Greg Smith clarifies that Duley's assumption is not correct. Duley also inquires about a robot demonstrated at the Analyst Day which loads and unloads FOUPs, wanting to know about its revenue potential and market impact. Greg Smith explains that the company already generated revenue from their robotics business in the semiconductor vertical in Q1 and has similar workflows in production at multiple sites. The expected revenue impact in 2025 is single-digit millions of dollars, with growth anticipated over time. The robotics offering is part of a larger enterprise value proposition, allowing the company to be a trusted test and robotics partner for their customers. Following Duley’s questions, the operator introduces the next question from an unidentified analyst representing Vivek Arya from Bank of America.

In the article paragraph, Greg Smith mentions that there haven't been significant delays affecting their Q1 and Q2 results, but there's uncertainty regarding the second half of the year due to customer uncertainty about project timing and capacity needs. Despite this uncertainty, the company's outlook remains consistent with expectations from the Investor Day. Additionally, in the robotics sector, the company aims to significantly outgrow traditional industrial peers by focusing on an underpenetrated market that involves advanced robotics and human-interoperable automation, a market they believe will be accelerated by AI, though currently faced with sluggish end-market conditions.

The paragraph discusses the company's decision to restructure in order to reduce its breakeven point due to uncertain market conditions and limited project funding. Originally set at $440 million for 2024, the breakeven point has been reduced to $365 million for the current year. This restructuring allows the company to maintain critical investments while being more cautious with go-to-market spending and leveraging synergies between groups. The aim is to achieve growth despite having limited control over market conditions.

This summary was generated with AI and may contain some inaccuracies.