Item 1. Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		October 1, 2023				December 31, 2022
		(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents		$	636,961			$	854,773
Marketable securities			79,570				39,612
Accounts receivable, less allowance for credit losses of $2,191 and $1,955 at October 1, 2023 and December 31, 2022, respectively			455,878				491,145
Inventories, net			322,632				325,019
Prepayments			593,366				532,962
Other current assets			10,952				14,404
Total current assets			2,099,359				2,257,915
Property, plant and equipment, net			436,449				418,683
Operating lease right-of-use assets, net			78,978				73,734
Marketable securities			103,911				110,777
Deferred tax assets			162,669				142,784
Retirement plans assets			11,403				11,761
Other assets			37,581				28,925
Acquired intangible assets, net			39,165				53,478
Goodwill			401,140				403,195
Total assets		$	3,370,655			$	3,501,252
LIABILITIES
Current liabilities:
Accounts payable		$	176,117			$	139,722
Accrued employees’ compensation and withholdings			155,246				212,266
Deferred revenue and customer advances			109,445				148,285
Other accrued liabilities			122,609				112,271
Operating lease liabilities			18,026				18,594
Income taxes payable			35,687				65,010
Current debt			23,529				50,115
Total current liabilities			640,659				746,263
Retirement plans liabilities			123,244				116,005
Long-term deferred revenue and customer advances			34,405				45,131
Long-term other accrued liabilities			17,114				15,981
Deferred tax liabilities			238				3,267
Long-term operating lease liabilities			69,364				64,176
Long-term incomes taxes payable			44,331				59,135
Total liabilities			929,355				1,049,958
Commitments and contingencies (Note P)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 153,235 and 155,759 shares issued and outstanding at October 1, 2023 and December 31, 2022, respectively			19,154				19,470
Additional paid-in capital			1,816,137				1,755,963
Accumulated other comprehensive loss			(47,928	)			(49,868	)
Retained earnings			653,937				725,729
Total shareholders’ equity			2,441,300				2,451,294
Total liabilities and shareholders’ equity		$	3,370,655			$	3,501,252

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands, except per share amount)
Revenues:
Products		$	551,982			$	676,252			$	1,565,776			$	2,000,081
Services			151,750				150,821				439,923				423,128
Total revenues			703,732				827,073				2,005,699				2,423,209
Cost of revenues:
Cost of products			239,827				277,539				655,502				795,229
Cost of services			65,614				64,155				192,993				181,279
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)			305,441				341,694				848,495				976,508
Gross profit			398,291				485,379				1,157,204				1,446,701
Operating expenses:
Selling and administrative			138,330				135,632				434,979				415,351
Engineering and development			104,413				111,715				315,881				331,781
Acquired intangible assets amortization			4,720				4,729				14,348				14,663
Restructuring and other			6,856				1,796				15,251				19,554
Total operating expenses			254,319				253,872				780,459				781,349
Income from operations			143,972				231,507				376,745				665,352
Non-operating (income) expense:
Interest income			(6,873	)			(1,318	)			(18,486	)			(2,972	)
Interest expense			963				779				2,994				2,704
Other (income) expense, net			5,602				5,849				6,470				20,472
Income before income taxes			144,280				226,197				385,767				645,148
Income tax provision			16,164				42,712				54,069				101,948
Net income		$	128,116			$	183,485			$	331,698			$	543,200
Net income per common share:
Basic		$	0.83			$	1.17			$	2.14			$	3.41
Diluted		$	0.78			$	1.10			$	2.01			$	3.17
Weighted average common shares—basic			153,762				156,364				154,809				159,325
Weighted average common shares—diluted			164,050				166,733				165,037				171,156

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Net income		$	128,116			$	183,485			$	331,698			$	543,200
Other comprehensive income, net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively			(14,325	)			(28,951	)			(2,073	)			(66,258	)
Available-for-sale marketable securities:
Unrealized losses on marketable securities arising during period, net of tax of $(731), $(997), $(408), and $(3,570), respectively			(2,628	)			(3,581	)			(903	)			(13,491	)
Less: Reclassification adjustment for losses included in net income, net of tax of $0, $(11), $9, $48, respectively			—				177				33				386
			(2,628	)			(3,404	)			(870	)			(13,105	)
Cash flow hedges:
Unrealized gains arising during period, net of tax of $728, $0, $1,816, $0 respectively			2,590				537				6,456				537
Less: Reclassification adjustment for losses included in net income, net of tax of $(869), $0, $(441), $0 respectively			(3,091	)			—				(1,567	)			—
			(501	)			537				4,889				537
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(1), $(2), respectively			(2	)			(2	)			(6	)			(5	)
Other comprehensive (loss) income			(17,456	)			(31,820	)			1,940				(78,831	)
Comprehensive income		$	110,660			$	151,665			$	333,638			$	464,369

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE COMMON SHARES

AND SHAREHOLDERS’ EQUITY

(Unaudited)

						Shareholders' Equity
		Convertible Common Shares Value				Common Stock Shares				Common Stock Par Value				Additional Paid-in Capital				Accumulated Other Comprehensive (Loss) Income				Retained Earnings				Total Shareholders’ Equity
						(in thousands)
For the Three Months Ended October 1, 2023
Balance, July 2, 2023		$	—				154,148			$	19,269			$	1,784,590			$	(30,472	)		$	661,496			$	2,434,883
Net issuance of common stock under stock-based plans							207				26				17,180												17,206
Stock-based compensation expense															14,367												14,367
Repurchase of common stock							(1,120	)			(141	)											(118,766	)			(118,907	)
Cash dividends ($0.11 per share)																							(16,909	)			(16,909	)
Settlements of convertible notes							210				25				(25	)											—
Exercise of convertible notes hedge call options							(210	)			(25	)			25												—
Net income																							128,116				128,116
Other comprehensive loss																			(17,456	)							(17,456	)
Balance, October 1, 2023		$	—				153,235			$	19,154			$	1,816,137			$	(47,928	)		$	653,937			$	2,441,300
For the Three Months Ended October 2, 2022
Balance, July 3, 2022		$	—				157,880			$	19,735			$	1,721,586			$	(52,959	)		$	610,234			$	2,298,596
Net issuance of common stock under stock-based plans							169				21				12,031												12,052
Stock-based compensation expense															13,194												13,194
Repurchase of common stock							(2,267	)			(283	)											(203,918	)			(204,201	)
Cash dividends ($0.11 per share)																							(17,149	)			(17,149	)
Settlements of convertible notes							207				26				(58	)											(32	)
Exercise of convertible notes hedge call options							(207	)			(26	)			26												—
Net income																							183,485				183,485
Other comprehensive loss																			(31,820	)							(31,820	)
Balance, October 2, 2022		$	—				155,782			$	19,473			$	1,746,779			$	(84,779	)		$	572,652			$	2,254,125

						Shareholders' Equity
		Convertible Common Shares Value				Common Stock Shares				Common Stock Par Value				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total Shareholders’ Equity
						(in thousands)
For the Nine Months Ended October 1, 2023
Balance, December 31, 2022		$	—				155,759			$	19,470			$	1,755,963			$	(49,868	)		$	725,729			$	2,451,294
Net issuance of common stock under stock-based plans							838				104				13,399												13,503
Stock-based compensation expense															46,775												46,775
Repurchase of common stock							(3,362	)			(420	)											(352,371	)			(352,791	)
Cash dividends ($0.33 per share)																							(51,119	)			(51,119	)
Settlements of convertible notes							585				72				(72	)											—
Exercise of convertible notes hedge call options							(585	)			(72	)			72												—
Net income																							331,698				331,698
Other comprehensive income																			1,940								1,940
Balance, October 1, 2023		$	—				153,235			$	19,154			$	1,816,137			$	(47,928	)		$	653,937			$	2,441,300
For the Nine Months Ended October 2, 2022
Balance, December 31, 2021		$	1,512				162,251			$	20,281			$	1,811,545			$	(5,948	)		$	736,566			$	2,562,444
Net issuance of common stock under stock-based plans							754				95				(4,287	)											(4,192	)
Stock-based compensation expense															39,056												39,056
Repurchase of common stock							(7,223	)			(903	)											(749,097	)			(750,000	)
Cash dividends ($0.33 per share)																							(52,617	)			(52,617	)
Settlements of convertible notes							1,211				151				(364	)											(213	)
Exercise of convertible notes hedge call options							(1,211	)			(151	)			151												—
Convertible common shares			(1,512	)											1,512												1,512
Cumulative-effect of change in accounting principle related to convertible debt															(100,834	)							94,600				(6,234	)
Net income																							543,200				543,200
Other comprehensive loss																			(78,831	)							(78,831	)
Balance, October 2, 2022		$	—				155,782			$	19,473			$	1,746,779			$	(84,779	)		$	572,652			$	2,254,125

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Nine Months Ended
		October 1, 2023				October 2, 2022
		(in thousands)
Cash flows from operating activities:
Net income		$	331,698			$	543,200
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation			68,858				67,902
Stock-based compensation			45,236				37,420
Provision for excess and obsolete inventory			23,069				18,929
Amortization			14,083				15,012
Deferred taxes			(24,026	)			(28,373	)
(Gains) losses on investments			(3,159	)			11,436
Other			(13	)			740
Changes in operating assets and liabilities
Accounts receivable			30,191				4,248
Inventories			6,395				(68,817	)
Prepayments and other assets			(63,982	)			(94,331	)
Accounts payable and other liabilities			3,999				(71,682	)
Deferred revenue and customer advances			(49,517	)			(5,896	)
Retirement plans contributions			(3,698	)			(3,897	)
Income taxes			(42,683	)			(31,370	)
Net cash provided by operating activities			336,451				394,521
Cash flows from investing activities:
Purchases of property, plant and equipment			(115,306	)			(128,672	)
Purchases of marketable securities			(137,786	)			(267,175	)
Issuance of convertible loan			(5,000	)			—
Proceeds from maturities of marketable securities			71,447				182,092
Proceeds from sales of marketable securities			36,963				259,200
Proceeds from life insurance			460				—
Net cash (used for) provided by investing activities			(149,222	)			45,445
Cash flows from financing activities:
Repurchase of common stock			(346,492	)			(750,000	)
Dividend payments			(51,081	)			(52,578	)
Payments of convertible debt principal			(26,735	)			(52,005	)
Payments related to net settlement of employee stock compensation awards			(20,586	)			(32,987	)
Issuance of common stock under stock purchase and stock option plans			34,084				28,733
Net cash used for financing activities			(410,810	)			(858,837	)
Effects of exchange rate changes on cash and cash equivalents			5,769				7,418
Decrease in cash and cash equivalents			(217,812	)			(411,453	)
Cash and cash equivalents at beginning of period			854,773				1,122,199
Cash and cash equivalents at end of period		$	636,961			$	710,746
Non-cash investing activities:
Capital expenditures incurred but not yet paid:		$	2,392			$	2,349

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. THE COMPANY

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automated test equipment and robotics solutions. Teradyne designs, develops, manufactures and sells automatic test systems and robotics products. Teradyne’s automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s robotics products include collaborative robotic arms and autonomous mobile robots (“AMRs”) used by global manufacturing, logistics and industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Teradyne’s automatic test equipment and robotics products and services include:

semiconductor test (“Semiconductor Test”) systems;

storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

wireless test (“Wireless Test”) systems; and

robotics (“Robotics”) products.

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts may have been reclassified to conform to the current year presentation. The December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2023, for the year ended December 31, 2022.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived assets, accounts receivable, income taxes, deferred tax assets and liabilities, pensions, warranties, contingent consideration liabilities, and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Management is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For the nine months ended October 1, 2023, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne’s consolidated financial statements.

D. REVENUE

Disaggregation of Revenue

The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.

		Semiconductor Test												Robotics
		System on-a-Chip				Memory				System Test				Universal Robots				Mobile Industrial Robots				Wireless Test				Total
	(in thousands)
For the Three Months Ended October 1, 2023 (1)
Timing of Revenue Recognition
Point in Time		$	330,846			$	86,247			$	66,418			$	68,938			$	14,012			$	32,638			$	599,099
Over Time			73,264				7,506				16,785				1,607				1,135				4,336				104,633
Total		$	404,110			$	93,753			$	83,203			$	70,545			$	15,147			$	36,974			$	703,732
Geographical Market
Asia Pacific		$	360,375			$	91,352			$	40,464			$	15,430			$	3,180			$	24,727			$	535,528
Americas			24,752				1,356				35,888				26,073				7,154				10,139				105,362
Europe, Middle East and Africa			18,983				1,045				6,851				29,042				4,813				2,108				62,842
Total		$	404,110			$	93,753			$	83,203			$	70,545			$	15,147			$	36,974			$	703,732
For the Three Months Ended October 2, 2022 (1)
Timing of Revenue Recognition
Point in Time		$	383,801			$	117,943			$	93,248			$	71,300			$	15,025			$	42,885			$	724,202
Over Time			66,614				7,346				22,906				2,062				680				3,263				102,871
Total		$	450,415			$	125,289			$	116,154			$	73,362			$	15,705			$	46,148			$	827,073
Geographical Market
Asia Pacific		$	399,323			$	122,839			$	73,768			$	18,850			$	2,917			$	34,420			$	652,117
Americas			31,719				2,129				35,865				26,515				8,877				9,481				114,586
Europe, Middle East and Africa			19,373				321				6,521				27,997				3,911				2,247				60,370
Total		$	450,415			$	125,289			$	116,154			$	73,362			$	15,705			$	46,148			$	827,073
For the Nine Months Ended October 1, 2023 (2)
Timing of Revenue Recognition
Point in Time		$	886,201			$	260,052			$	200,076			$	194,698			$	42,748			$	108,262			$	1,692,038
Over Time			219,436				21,890				52,030				5,731				3,364				11,210				313,661
Total		$	1,105,638			$	281,942			$	252,106			$	200,429			$	46,112			$	119,472			$	2,005,699
Geographical Market
Asia Pacific		$	946,696			$	270,297			$	121,698			$	43,530			$	6,973			$	70,320			$	1,459,514
Americas			98,511				8,586				105,031				69,346				25,051				42,476				349,001
Europe, Middle East and Africa			60,431				3,059				25,377				87,553				14,088				6,676				197,184
Total		$	1,105,638			$	281,942			$	252,106			$	200,429			$	46,112			$	119,472			$	2,005,699
For the Nine Months Ended October 2, 2022 (2)
Timing of Revenue Recognition
Point in Time		$	1,102,467			$	281,456			$	317,230			$	234,352			$	49,570			$	152,079			$	2,137,154
Over Time			193,996				21,473				52,295				6,268				2,582				9,441				286,055
Total		$	1,296,463			$	302,929			$	369,525			$	240,620			$	52,152			$	161,520			$	2,423,209
Geographical Market
Asia Pacific		$	1,153,599			$	294,986			$	243,135			$	54,828			$	10,826			$	113,472			$	1,870,846
Americas			90,148				6,727				105,884				81,857				24,670				36,628				345,914
Europe, Middle East and Africa			52,716				1,216				20,506				103,935				16,656				11,420				206,449
Total		$	1,296,463			$	302,929			$	369,525			$	240,620			$	52,152			$	161,520			$	2,423,209

(1)

Includes $1.4 million and $1.8 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”

(2)

Includes $3.9 million and $5.9 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “Revenue from Contracts with Customers.”

Contract Balances

During the three and nine months ended October 1, 2023, Teradyne recognized $21.9 million and $91.3 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. During the three and nine months ended October 2, 2022, Teradyne recognized $27.1 million and $87.3 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct

performance obligation. As of October 1, 2023, Teradyne had $1,133 million of unsatisfied performance obligations. Teradyne expects to recognize approximately 89% of the remaining performance obligations in the next 12 months and the remainder in 1-3 years.

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:

		October 1, 2023				December 31, 2022
		(in thousands)
Maintenance, service and training		$	65,720			$	78,089
Extended warranty			38,843				56,180
Customer advances, undelivered elements and other			39,287				59,147
Total deferred revenue and customer advances		$	143,850			$	193,416

Accounts Receivable

During the three and nine months ended October 1, 2023 and October 2, 2022, Teradyne sold certain trade accounts receivables on a non-recourse basis to third-party financial institutions pursuant to factoring agreements. During the three months ended October 1, 2023 and October 2, 2022, total trade accounts receivable sold under the factoring agreements were $94.1 million and $15.9 million, respectively. During the nine months ended October 1, 2023 and October 2, 2022, total trade accounts receivable sold under the factoring agreements were $191.2 million and $73.0 million, respectively. Factoring fees for the sales of receivables were recorded in interest expense and were not material. Teradyne accounted for these transactions as sales of receivables and presented cash proceeds as cash provided by operating activities in the consolidated statements of cash flows.

E. INVENTORIES

Inventories, net consisted of the following at October 1, 2023 and December 31, 2022:

		October 1, 2023				December 31, 2022
		(in thousands)
Raw material		$	243,402			$	256,065
Work-in-process			40,128				37,982
Finished goods			39,102				30,972
		$	322,632			$	325,019

Inventory reserves at October 1, 2023 and December 31, 2022 were $145.4 million and $136.8 million, respectively.

F. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne’s equity and debt mutual funds are classified as Level 1 and available-for-sale debt securities are classified as Level 2. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

During the three and nine months ended October 1, 2023 and October 2, 2022, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Realized gains recorded in the three and nine months ended October 1, 2023, were $0.1 million and $0.6 million, respectively. Realized gains recorded in the three and nine months ended October 2, 2022, were $0.1 million and $0.6 million, respectively. No realized losses were recorded in the three months ended October 1, 2023. Realized losses recorded in the nine months ended October

1, 2023, were $0.3 million. Realized losses recorded in the three and nine months ended October 2, 2022, were $0.3 million and $0.9 million, respectively. Realized gains and losses are included in other (income) expense, net.

No unrealized gains on equity securities were recorded in the three months ended October 1, 2023. Unrealized gains on equity securities recorded in the nine months ended October 1, 2023 were $4.6 million. No unrealized gains on equity securities were recorded in the three and nine months ended October 2, 2022. Unrealized losses on equity securities were recorded in the three and nine months ended October 1, 2023 were $1.7 million. Unrealized losses on equity securities recorded in the three and nine months ended October 2, 2022, were $2.3 million and $11.1 million, respectively. Unrealized gains and losses on equity securities are included in other (income) expense, net.

Unrealized gains and losses on available-for-sale debt securities are included in accumulated other comprehensive income (loss) on the balance sheet.

The cost of securities sold is based on average cost.

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of October 1, 2023 and December 31, 2022.

		October 1, 2023
		Quoted Prices in Active Markets for Identical Instruments (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
		(in thousands)
Assets
Cash		$	309,348			$	—			$	—			$	309,348
Cash equivalents			307,160				20,453				—				327,613
Available-for-sale securities:
U.S. Treasury securities			—				58,499				—				58,499
Corporate debt securities			—				50,830				—				50,830
Commercial paper			—				12,454				—				12,454
Debt mutual funds			8,236				—				—				8,236
Certificates of deposit and time deposits			—				6,688				—				6,688
U.S. government agency securities			—				4,774				—				4,774
Equity securities:
Mutual funds			42,000				—				—				42,000
		$	666,744			$	153,698			$	—			$	820,442
Derivative assets			—				5,198				—				5,198
Total		$	666,744			$	158,896			$	—			$	825,640
Liabilities
Derivative liabilities		$	—			$	1,128			$	—			$	1,128
Total		$	—			$	1,128			$	—			$	1,128
Reported as follows:
		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	616,508			$	20,453			$	—			$	636,961
Marketable securities			—				79,570				—				79,570
Long-term marketable securities			50,236				53,675				—				103,911
Prepayments			—				5,198				—				5,198
Total		$	666,744			$	158,896			$	—			$	825,640
Liabilities
Other current liabilities		$	—			$	1,128			$	—			$	1,128
Total		$	—			$	1,128			$	—			$	1,128

		December 31, 2022
		Quoted Prices in Active Markets for Identical Instruments (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
		(in thousands)
Assets
Cash		$	632,417			$	—			$	—			$	632,417
Cash equivalents			161,767				60,589				—				222,356
Available-for-sale securities:
Corporate debt securities			—				50,856				—				50,856
U.S. Treasury securities			—				39,649				—				39,649
Commercial paper			—				7,159				—				7,159
Debt mutual funds			6,580				—				—				6,580
U.S. government agency securities			—				6,352				—				6,352
Certificates of deposit and time deposits			—				1,740				—				1,740
Non-U.S. government securities			—				535				—				535
Equity securities:
Mutual Funds			37,518				—				—				37,518
		$	838,282			$	166,880			$	—			$	1,005,162
Derivative assets			—				86				—				86
Total		$	838,282			$	166,966			$	—			$	1,005,248
Liabilities
Derivative liabilities			—				4,215				—				4,215
Total		$	—			$	4,215			$	—			$	4,215
Reported as follows:
		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	794,184			$	60,589			$	—			$	854,773
Marketable securities			—				39,612				—				39,612
Long-term marketable securities			44,098				66,679				—				110,777
Prepayments			—				86				—				86
Total		$	838,282			$	166,966			$	—			$	1,005,248
Liabilities
Other current liabilities		$	—			$	4,215			$	—			$	4,215
Total		$	—			$	4,215			$	—			$	4,215

The carrying amounts and fair values of Teradyne’s financial instruments at October 1, 2023 and December 31, 2022, were as follows:

		October 1, 2023								December 31, 2022
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Assets
Cash and cash equivalents		$	636,961			$	636,961			$	854,773			$	854,773
Marketable securities			183,481				183,481				150,389				150,389
Derivative assets			5,198				5,198				86				86
Liabilities
Derivative liabilities			1,128				1,128				4,215				4,215
Convertible debt			23,529				74,919				50,115				139,007

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

The following table summarizes the composition of available-for-sale marketable securities at October 1, 2023:

		October 1, 2023
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
U.S. Treasury securities		$	63,773			$	—			$	(5,274	)		$	58,499			$	57,794
Corporate debt securities			57,710				—				(6,880	)			50,830				50,830
Commercial paper			12,411				44				(1	)			12,454				2,988
Debt mutual funds			8,724				—				(488	)			8,236				3,082
Certificates of deposit and time deposits			6,688				—				—				6,688				—
U.S. government agency securities			4,823				—				(49	)			4,774				4,774
		$	154,129			$	44			$	(12,692	)		$	141,481			$	119,468

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	80,145			$	44			$	(619	)		$	79,570			$	62,711
Long-term marketable securities			73,984				—				(12,073	)			61,911				56,757
		$	154,129			$	44			$	(12,692	)		$	141,481			$	119,468

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2022:

		December 31, 2022
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Corporate debt securities		$	57,006			$	3			$	(6,153	)		$	50,856			$	50,667
U.S. Treasury securities			44,030				—				(4,381	)			39,649				39,649
Commercial paper			7,089				70				—				7,159				—
Debt mutual funds			6,997				—				(417	)			6,580				3,095
U.S. government agency securities			6,442				—				(90	)			6,352				6,352
Certificates of deposit and time deposits			1,740				—				—				1,740				—
Non-U.S. government securities			535				—				—				535				—
		$	123,839			$	73			$	(11,041	)		$	112,871			$	99,763

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	39,950			$	70			$	(408	)		$	39,612			$	30,713
Long-term marketable securities			83,889				3				(10,633	)			73,259				69,050
		$	123,839			$	73			$	(11,041	)		$	112,871			$	99,763

As of October 1, 2023, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $54.3 million and $65.1 million, respectively. As of December 31, 2022, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $66.3 million and $33.4 million, respectively.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at October 1, 2023 and December 31, 2022 were not other than temporary.

The contractual maturities of investments in available-for-sale securities held at October 1, 2023, were as follows:

		October 1, 2023
		Cost				Fair Market Value
		(in thousands)
Due within one year		$	80,145			$	79,570
Due after 1 year through 5 years			20,012				19,257
Due after 5 years through 10 years			6,858				6,128
Due after 10 years			38,390				28,290
Total		$	145,405			$	133,245

Contractual maturities of investments in available-for-sale securities held at October 1, 2023, exclude debt mutual funds with a fair market value of $8.2 million, as they do not have a contractual maturity date.

Derivatives

Teradyne conducts business in various foreign countries, with certain transactions denominated in local currencies. As a result, Teradyne is exposed to risks relating to changes in foreign currency exchange rates. Teradyne’s foreign currency risk management objective is to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, and changes in its cash inflows attributable to the forecasted cash flows from certain foreign currency denominated revenues.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.

Teradyne also enters into foreign currency forward and option contracts designated as cash flow hedges to hedge the risk of changes in its cash inflows attributable to changes in foreign currency exchange rates. The cash flow hedges have maturities of less than six months and mature in the period of revenue recognition for certain products and services in backlog and forecasted to be recognized in a future period. Teradyne evaluates cash flow hedges for effectiveness at inception based on the critical terms match method. The hedges are not expected to incur any ineffectiveness however a quarterly qualitative assessment of effectiveness is done to determine if the critical terms match method remains appropriate to use. The change in fair value of the contracts is recorded in accumulated other comprehensive income (loss) and reclassified to earnings at maturity date.

Teradyne does not use derivative financial instruments for speculative purposes.

At October 1, 2023 and December 31, 2022, Teradyne had the following contracts to buy and sell non-U.S. currencies for U.S. dollars and other non-U.S. currencies with the following notional amounts:

		Net Notional Value
		October 1, 2023				December 31, 2022
		(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen		$	49.6			$	37.1
U.S. dollar/Taiwan dollar			29.5				29.2
U.S. dollar/Korean won			9.3				6.4
U.S. dollar/British pound sterling			1.2				1.2
Euro/U.S. dollar			22.7				38.4
Singapore dollar/U.S. dollar			13.3				33.5
Philippine peso/U.S. dollar			10.0				2.7
Chinese yuan/U.S. dollar			1.3				2.2
Danish krone/U.S. dollar			0.6				—
Total		$	137.5			$	150.7

The fair value of the outstanding contracts was a net gain of $1.0 million and a net loss of $0.9 million, respectively, at October 1, 2023 and December 31, 2022.

Unrealized gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

At October 1, 2023 and December 31, 2022, Teradyne had the following cash flow hedge contracts to buy and sell non-U.S. currencies for U.S. dollars with the following notional amounts:

		Net Notional Value
		October 1, 2023				December 31, 2022
		(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen		$	38.6			$	61.2
U.S. dollar/Taiwan dollar			—				10.9
Japanese yen/U.S. dollar			—				23.4
Taiwan dollar/U.S. dollar			—				5.5
Total		$	38.6			$	101.0

The fair value of the outstanding cash flow hedge contracts was a gain of $3.0 million and a loss of $3.2 million at October 1, 2023 and December 31, 2022, respectively.

Unrealized gains and losses on foreign currency cash flow hedge contracts are included in accumulated other comprehensive income (loss). At maturity, the gains or losses associated with cash flow hedge contracts are recorded to revenue.

The following table summarizes the fair value of derivative instruments as of October 1, 2023 and December 31, 2022:

		Balance Sheet Location		October 1, 2023				December 31, 2022
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts		Prepayments		$	2,159			$	86
Foreign exchange forward contracts		Other current liabilities			(1,128	)			(990	)
Derivatives designated as hedging instruments:
Foreign exchange option contracts		Prepayments			3,039				—
Foreign exchange option contracts		Other current liabilities			—				(3,225	)
Total derivatives				$	4,070			$	(4,129	)

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and nine months ended October 1, 2023 and October 2, 2022:

				For the Three Months Ended								For the Nine Months Ended
		Location of (Gains) Losses Recognized in Statement of Operations		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts		Other (income) expense, net		$	(1,886	)		$	1,246			$	(4,667	)		$	(2,209	)
Derivatives designated as hedging instruments:
Foreign exchange option contracts		Revenue			(3,960	)			—				(2,008	)			—
Total Derivatives				$	(5,846	)		$	1,246			$	(6,675	)		$	(2,209	)

The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three and nine months ended October 1, 2023, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $5.3 million and $12.3 million, respectively. For the three and nine months ended October 2, 2022, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.6 million and $9.5 million, respectively.

See Note G: “Debt” regarding derivatives related to the convertible senior notes.

G. DEBT

Convertible Senior Notes

On December 12, 2016, Teradyne completed a private offering of $460.0 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023 and received net proceeds, after issuance costs, of approximately $450.8 million, $33.0 million of which was used to pay the net cost of the convertible note hedge transactions and $50.1 million of which was used to repurchase 2.0 million shares of Teradyne’s common stock under its existing stock repurchase program from purchasers of the Notes in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the pricing of the Note offering. The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest at a rate of 1.25% per year payable semiannually in arrears on June 15 and December 15 of each year. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, only under the following circumstances: (1) during any calendar quarter beginning after March 31, 2017 (and only during such calendar quarter), if the closing sale price of Teradyne’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after September 15, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its future conversion obligation by paying cash for the principal amount of the Notes and paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election for the amount in excess of principal. On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash. As of October 1, 2023, the conversion price was approximately $31.41 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances. As of November 3, 2023, one hundred and thirty-five debt holders had exercised the option to convert $436.5 million worth of notes.

Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of $31.41.

Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold net-share-settled (or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. These transactions have been accounted for as an adjustment to our shareholders’

equity. The Warrant Transactions currently cover, subject to customary anti-dilution adjustments, approximately 14.6 million shares of common stock. As of October 1, 2023, the strike price of the warrants was approximately $39.42 per share. The strike price is subject to adjustment under certain circumstances. The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.

The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant. The net cost of the Note Hedge Transactions, after being partially offset by the proceeds from the sale of the warrants, was approximately $33.0 million.

In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.

Originally, Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component, which represented a discount to the debt and was amortized to interest expense using the effective interest method through December 2023. Effective January 1, 2022, Teradyne adopted ASC 2020-06 using the modified retrospective method of transition and accounts for the debt as a single liability measured at its amortized cost. As a result of the adoption, Teradyne recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to retained earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was reduced to zero and additional paid-in capital was reduced by $100.8 million.

Debt issuance fees at October 1, 2023, have been fully amortized to interest expense using the effective interest method over the seven-year term of the Notes.

The tables below represent the key components of Teradyne’s convertible senior notes:

		October 1, 2023				December 31, 2022
		(in thousands)
Debt principal		$	23,529			$	50,228
Unamortized debt issuance fees			—				113
Net Carrying amount of convertible debt		$	23,529			$	50,115

Teradyne’s convertible senior notes were reported as current debt at October 1, 2023 and December 31, 2022.

The interest expense on Teradyne’s convertible senior notes for the three and nine months ended October 1, 2023 and October 2, 2022 was as follows:

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)								(in thousands)
Contractual interest expense on the coupon		$	74			$	159			$	312			$	592
Amortization of debt issuance fees recognized as interest expense			—				43				113				173
Total interest expense on the convertible debt		$	74			$	202			$	425			$	765

As of October 1, 2023, the conversion price was approximately $31.41 per share and the if converted value of the notes was $75.3 million. There were no unsettled conversions as of October 1, 2023. Teradyne expects to make principal interest payments of $0.1 million in the next 3 months.

Revolving Credit Facility

On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provided for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”).

On December 10, 2021, the Credit Agreement was amended to extend the maturity date of the Credit Facility to December 10, 2026. On October 5, 2022, the Credit Agreement was amended to increase the amount of the Credit Facility to $750.0 million from $400.0 million.

The Credit Agreement provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders the available incremental amount under the Credit Facility, not to exceed the greater of $200.0 million or 15% of consolidated EBIDTA. The interest rate applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.00% to 0.75% per annum or SOFR plus a margin ranging from 1.10% to 1.85% per annum, based on the consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.15% to 0.25% per annum, based on the then applicable consolidated leverage ratio.

Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary SOFR breakage costs.

The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter: a consolidated leverage ratio and an interest coverage ratio.

The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.

As of November 3, 2023, the Credit Agreement was undrawn and Teradyne was in compliance with all covenants under the Credit Agreement.

H. PREPAYMENTS

Prepayments consist of the following:

		October 1, 2023				December 31, 2022
		(in thousands)
Contract manufacturer and supplier prepayments		$	556,369			$	491,105
Prepaid taxes			18,633				18,625
Prepaid maintenance and other services			8,655				14,545
Other prepayments			9,709				8,687
Total prepayments		$	593,366			$	532,962

I. PRODUCT WARRANTY

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Balance at beginning of period		$	12,543			$	16,036			$	14,181			$	24,577
Accruals for warranties issued during the period			8,859				4,930				16,237				15,460
Accruals related to pre-existing warranties			(795	)			(654	)			(1,552	)			(5,024	)
Settlements made during the period			(5,892	)			(6,181	)			(14,151	)			(20,882	)
Balance at end of period		$	14,715			$	14,131			$	14,715			$	14,131

When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in short and long-term deferred revenue and customer advances.

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Balance at beginning of period		$	44,422			$	65,791			$	56,180			$	64,168
Deferral of new extended warranty revenue			2,734				6,987				11,615				28,550
Recognition of extended warranty deferred revenue			(8,313	)			(10,858	)			(28,952	)			(30,798	)
Balance at end of period		$	38,843			$	61,920			$	38,843			$	61,920

J. STOCK-BASED COMPENSATION

On February 1, 2023 (the “Retirement Date”), Mark E. Jagiela retired as Chief Executive Officer of Teradyne and a member of Teradyne’s Board of Directors, and Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Jagiela. Under the Retirement Agreement, Mr. Jagiela’s unvested time-based restricted stock units and stock options granted prior to his Retirement Date were modified to allow continued vesting; and any vested options or options that vest during that period may be exercised for the remainder of the applicable option term. During the nine months ended October 1, 2023, Teradyne recorded a stock-based compensation expense of $5.9 million related to the Retirement Agreement.

Under Teradyne’s stock compensation plans, Teradyne grants time-based restricted stock units, performance-based restricted stock units and stock options, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).

Service-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted stock unit awards granted to non-employee directors vest after a one-year period, with 100% of the award vesting on the earlier of (a) the first anniversary of the grant date or (b) the date of the following year’s Annual Meeting of Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to time-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.

Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period.

Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.

PRSUs granted to Teradyne’s executive officers may also have a performance metric based on three-year cumulative non-GAAP profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue. Non-GAAP PBIT is a financial measure equal to GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses; non-cash convertible debt interest expense; and other non-recurring gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant date to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the retirement and termination eligibility provisions noted below.

If a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period. Stock options to purchase Teradyne’s common stock at 100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a maximum term of seven years.

During the nine months ended October 1, 2023 and October 2, 2022, Teradyne granted 0.5 million and 0.4 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $102.66 and $110.34, respectively, and 0.1 million of service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $90.50 and $106.91, respectively.

During the nine months ended October 1, 2023 and October 2, 2022, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $102.91 and $110.84, respectively.

During the nine months ended October 1, 2023 and October 2, 2022, Teradyne granted 0.1 million of TSR PRSUs, with a grant date fair value of $139.04 and $101.06, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

		For the Nine Months Ended
		October 1, 2023				October 2, 2022
Risk-free interest rate			4.0	%			1.4	%
Teradyne volatility-historical			49.7	%			47.1	%
NYSE Composite Index volatility-historical			24.1	%			22.7	%
Dividend yield			0.4	%			0.4	%

Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index over the most recent three-year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $104.12, and an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $112.12 for the 2022 grant.

During the nine months ended October 1, 2023 and October 2, 2022, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $41.23 and $39.01, respectively.

The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:

		For the Nine Months Ended
		October 1, 2023				October 2, 2022
Expected life (years)			4.0				4.0
Risk-free interest rate			3.8	%			1.6	%
Volatility-historical			46.6	%			43.7	%
Dividend yield			0.4	%			0.4	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $104.15 for the 2023 grant and an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $112.12 for the 2022 grant.

K. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss), which are presented net of tax, consist of the following:

		Foreign Currency Translation Adjustment				Unrealized (Losses) Gains on Marketable Securities				Unrealized (Losses) Gains on Cash Flow Hedges				Retirement Plans Prior Service Credit				Total
		(in thousands)
Nine Months Ended October 1, 2023
Balance at December 31, 2022, net of tax of $0, $(2,308), $(708), $(1,130), respectively		$	(39,849	)		$	(8,661	)		$	(2,517	)		$	1,159			$	(49,868	)
Other comprehensive (loss) gain before reclassifications, net of tax of $0, $(408), $1,816, $0, respectively			(2,073	)			(903	)			6,456				—			$	3,480
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $9, $(441), $(1), respectively			—				33				(1,567	)			(6	)			(1,540	)
Net current period other comprehensive (loss) gain, net of tax of $0, $(399), $1,375, $(1), respectively			(2,073	)			(870	)			4,889				(6	)			1,940
Balance at October 1, 2023, net of tax of $0, $(2,707), $667, $(1,131), respectively		$	(41,922	)		$	(9,531	)		$	2,372			$	1,153			$	(47,928	)
Nine Months Ended October 2, 2022
Balance at December 31, 2021, net of tax of $0, $1,055, $0, $(1,128), respectively		$	(10,818	)		$	3,704			$	—			$	1,166			$	(5,948	)
Other comprehensive (loss) gain before reclassifications, net of tax of $0, $(3,570), $0, $0, respectively			(66,258	)			(13,491	)			537				—			$	(79,212	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $48, $0, $(2), respectively			—				386				—				(5	)			381
Net current period other comprehensive (loss) gain, net of tax of $0, $(3,522), $0, $(2), respectively			(66,258	)			(13,105	)			537				(5	)			(78,831	)
Balance at October 2, 2022, net of tax of $0, $(2,467), $0, $(1,130), respectively		$	(77,076	)		$	(9,401	)		$	537			$	1,161			$	(84,779	)

Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and nine months ended October 1, 2023 and October 2, 2022, were as follows:

Details about Accumulated Other Comprehensive Income (Loss) Components		For the Three Months Ended								For the Nine Months Ended								Affected Line Item in the Statements of Operations
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Available-for-sale marketable securities:
Unrealized losses, net of tax of $0, $11, $(9), $(48), respectively		$	—			$	(177	)		$	(33	)		$	(386	)		Other (income) expense, net
Cash flow hedges:
Unrealized gains, net of tax of $869, $0, $441, $0, respectively			3,091				—				1,567				—			Revenue
Defined benefit pension and postretirement plans:
Amortization of prior service credit, net of tax of $0, $0, $1, $2, respectively			2				2				6				5			(a)
Total reclassifications, net of tax of $869, $11, $433, $(46), respectively		$	3,093			$	(175	)		$	1,540			$	(381	)		Net income

(a)

The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note O: “Retirement Plans.”

L. GOODWILL AND ACQUIRED INTANGIBLE ASSETS

Goodwill

Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “Intangibles—Goodwill and Other” on December 31 of each fiscal year unless interim indicators of impairment exist. In the nine months ended October 1, 2023, there were no interim indicators of impairment. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.

The changes in the carrying amount of goodwill by reportable segments for the nine months ended October 1, 2023, were as follows:

		Robotics				Wireless Test				Semiconductor Test				System Test				Total
		(in thousands)
Balance at December 31, 2022
Goodwill		$	383,166			$	361,819			$	262,077			$	158,699			$	1,165,761
Accumulated impairment losses			—				(353,843	)			(260,540	)			(148,183	)			(762,566	)
Total Goodwill			383,166				7,976				1,537				10,516				403,195
Foreign currency translation adjustment			(2,079	)			—				24				—				(2,055	)
Balance at October 1, 2023
Goodwill			381,087				361,819				262,101				158,699				1,163,706
Accumulated impairment losses			—				(353,843	)			(260,540	)			(148,183	)			(762,566	)
Total Goodwill		$	381,087			$	7,976			$	1,561			$	10,516			$	401,140

Intangible Assets

Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.

Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:

		Gross Carrying Amount (1)				Accumulated Amortization (1)				Foreign Currency Translation Adjustment				Net Carrying Amount
		(in thousands)
Balance at October 1, 2023
Developed technology		$	267,708			$	(240,155	)		$	(5,927	)		$	21,626
Customer relationships			52,109				(47,276	)			190				5,023
Tradenames and trademarks			59,007				(44,966	)			(1,525	)			12,516
Total intangible assets		$	378,824			$	(332,397	)		$	(7,262	)		$	39,165
Balance at December 31, 2022
Developed technology		$	270,967			$	(234,208	)		$	(5,935	)		$	30,824
Customer relationships			57,739				(51,186	)			172				6,725
Tradenames and trademarks			59,387				(41,930	)			(1,528	)			15,929
Total intangible assets		$	388,093			$	(327,324	)		$	(7,291	)		$	53,478

(1)

In 2023, $9.3 million of amortizable intangible assets became fully amortized and have been eliminated from the gross carrying amount and accumulated amortization.

Aggregate intangible asset amortization expense was $4.7 million and $14.3 million, respectively, for the three and nine months ended October 1, 2023, and $4.7 million and $14.7 million, respectively, for the three and nine months ended October 2, 2022.

Estimated intangible asset amortization expense for each of the five succeeding fiscal years and thereafter is as follows:

Year		Amortization Expense
		(in thousands)
2023		$	4,630
2024			18,469
2025			11,202
2026			2,343
2027			1,127
Thereafter			1,394

M. NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share:

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands, except per share amounts)
Net income for basic and diluted net income per share		$	128,116			$	183,485			$	331,698			$	543,200
Weighted average common shares-basic			153,762				156,364				154,809				159,325
Effect of dilutive potential common shares:
Convertible note hedge warrant shares (1)			9,168				8,284				9,009				9,114
Incremental shares from assumed conversion of convertible notes (2)			629				1,453				762				1,965
Restricted stock units			455				564				410				673
Stock options			26				45				39				56
Employee stock purchase plan			10				23				8				23
Dilutive potential common shares			10,288				10,369				10,228				11,831
Weighted average common shares-diluted			164,050				166,733				165,037				171,156
Net income per common share-basic		$	0.83			$	1.17			$	2.14			$	3.41
Net income per common share-diluted		$	0.78			$	1.10			$	2.01			$	3.17

(1)

Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price, multiplied by the number of warrant shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period.

(2)

Incremental shares from assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price, multiplied by the number of convertible notes shares. The result of this calculation, representing the total intrinsic value of the convertible notes, was divided by the average Teradyne stock price for the period.

The computation of diluted net income per common share for the three and nine months ended October 1, 2023, excludes the effect of the potential vesting of 0.1 million and 0.4 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three and nine months ended October 2, 2022, excludes the effect of the potential vesting of 0.7 million and 0.9 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

N. RESTRUCTURING AND OTHER

During the three months ended October 1, 2023, Teradyne recorded $4.7 million of severance charges related to headcount reductions of 94 people primarily in Semiconductor Test and Robotics, which included charges related to a voluntary early retirement program for employees meeting certain conditions, and a $1.5 million contract termination charge.

During the three months ended October 2, 2022, Teradyne recorded $1.2 million of severance charges primarily in Robotics and $0.7 million for an increase in legal liabilities.

During the nine months ended October 1, 2023, Teradyne recorded $11.8 million of severance charges related to headcount reductions of 197 people primarily in Semiconductor Test and Robotics, which included charges related to a voluntary early retirement program for employees meeting certain conditions, a $1.5 million contract termination charge, and a charge of $1.1 million for an increase in environmental liability.

During the nine months ended October 2, 2022, Teradyne recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an earn-out dispute, which was settled on March 25, 2022 for $26.7 million, a charge of $2.7 million for an increase in environmental and legal liabilities, and $2.1 million of severance charges primarily in Robotics.

O. RETIREMENT PLANS

ASC 715, “Compensation—Retirement Benefits,” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all its plans.

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (the “IRC”), as well as unfunded qualified foreign plans.

In the nine months ended October 1, 2023 and October 2, 2022, Teradyne contributed $2.3 million and $2.5 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.8 million and $0.7 million, respectively, to certain qualified pension plans for non-U.S. subsidiaries.

For the three and nine months ended October 1, 2023 and October 2, 2022, Teradyne’s net periodic pension cost was comprised of the following:

		For the Three Months Ended
		October 1, 2023								October 2, 2022
		United States				Foreign				United States				Foreign
		(in thousands)
Service cost		$	272			$	107			$	397			$	153
Interest cost			1,713				253				1,222				96
Expected return on plan assets			(1,286	)			(11	)			(732	)			(16	)
Net actuarial loss			—				66				—				—
Settlement loss			—				5				—				—
Total net periodic pension cost		$	699			$	420			$	887			$	233

		For the Nine Months Ended
		October 1, 2023								October 2, 2022
		United States				Foreign				United States				Foreign
		(in thousands)
Service cost		$	815			$	320			$	1,191			$	539
Interest cost			5,138				762				3,665				333
Expected return on plan assets			(3,856	)			(28	)			(2,195	)			(54	)
Net actuarial loss (gain)			24				66				(45	)			—
Settlement loss			—				5				—				—
Total net periodic pension cost		$	2,121			$	1,125			$	2,616			$	818

Postretirement Benefit Plan

In addition to receiving pension benefits, Teradyne employees in the United States who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits and the existing benefit obligation relates primarily to those employees. During the three and nine months ended October 1, 2023, Teradyne recorded special termination benefit charges associated with a voluntary early retirement program.

For the three and nine months ended October 1, 2023 and October 2, 2022, Teradyne’s net periodic postretirement benefit cost was comprised of the following:

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Service cost		$	9			$	16			$	26			$	48
Interest cost			60				44				181				132
Amortization of prior service credit			(2	)			(2	)			(7	)			(7	)
Special termination benefits			1,423				—				1,792				—
Net actuarial loss			—				—				30				54
Total net periodic postretirement benefit cost		$	1,490			$	58			$	2,022			$	227

P. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of October 1, 2023, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $465.8 million, of which $400.2 million is for less than one year.

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on its business, financial position or results of operations.

On March 8, 2021, Industrial Automation LLC, sellers of AutoGuide, submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand sought full acceleration of the maximum earn-out amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the earn-out provisions of the Purchase Agreement. On March 25, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne has no remaining earn-out obligations.

Guarantees and Indemnification Obligations

Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and agents for liabilities arising from certain events or occurrences, while the officer, director, employee, or agent, is or was serving, at Teradyne’s request in such capacity. Teradyne may enter into indemnification agreements with certain of its officers and directors. With respect to acquisitions, Teradyne provides indemnifications to or assumes indemnification obligations for the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ by-laws and charter. As a matter of practice, Teradyne has maintained directors’ and officers’ liability insurance coverage including coverage for directors and officers of acquired companies.

Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to Teradyne’s products. From time to time, Teradyne also indemnifies customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, breach of confidentiality obligations and environmental claims relating to the use of Teradyne’s products and services or resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its products in addition to the warranty described below.

As a matter of ordinary course of business, Teradyne warrants that its products will substantially perform in accordance with its standard published specifications in effect at the time of delivery. Most warranties have a one-year duration commencing from installation. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. As of October 1, 2023 and

December 31, 2022, Teradyne had a product warranty accrual of $14.7 million and $14.2 million, respectively, included in other accrued liabilities and revenue deferrals related to extended warranties of $38.8 million and $56.2 million, respectively, included in short and long-term deferred revenue and customer advances.

In addition, in the ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the guarantees do not. Therefore, as the market demand decreases, Teradyne re-evaluates these guarantees and determines what charges, if any, should be recorded.

With respect to its agreements covering product, business or entity divestitures and acquisitions, Teradyne provides certain representations, warranties and covenants to purchasers and agrees to indemnify and hold such purchasers harmless against breaches of such representations, warranties and covenants. Many of the indemnification claims have a definite expiration date while some remain in force indefinitely. With respect to its acquisitions, Teradyne may, from time to time, assume the liability for certain events or occurrences that took place prior to the date of acquisition.

As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness obligations of its subsidiary companies, limited to the borrowings from financial institutions, purchase commitments to certain vendors and lease commitments to landlords.

Based on historical experience and information known as of October 1, 2023 and December 31, 2022, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.

Q. INCOME TAXES

A reconciliation of the United States federal statutory corporate tax rate to Teradyne’s effective tax rate was as follows:

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
U.S. statutory federal tax rate			21.0	%			21.0	%			21.0	%			21.0	%
Non-deductible officers' compensation			1.3				1.8				1.1				1.4
Tax credits			(4.9	)			(2.1	)			(3.4	)			(1.9	)
International provisions of the U.S. Tax Cuts and Jobs Act of 2017			(3.4	)			(1.4	)			(3.0	)			(1.2	)
Foreign taxes			(0.6	)			(0.6	)			(0.8	)			(2.4	)
Discrete expense related to foreign currency gain or loss			0.9				0.1				0.8				0.4
Discrete benefit related to tax credits			(4.4	)			—				(1.6	)			—
Discrete benefit related to equity compensation			(0.3	)			(0.1	)			(1.0	)			(1.9	)
Other, net			1.6				0.2				0.9				0.4
Effective tax rate			11.2	%			18.9	%			14.0	%			15.8	%

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of October 1, 2023, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of October 1, 2023 and December 31, 2022, Teradyne had $16.5 million and $15.6 million, respectively, of reserves for uncertain tax positions. The $0.9 million net increase in reserves for uncertain tax positions is related to U.S. federal research and development credits generated in the current year.

As of October 1, 2023, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $0.1 million in the next twelve months because of a lapse of statutes of limitation. The estimated decrease relates to U.S. state research and development credits.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of October 1, 2023 and December 31, 2022, $0.6 million and $0.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the nine months ended October 1, 2023 and October 2, 2022, an expense of $0.2 million and $0.1 million, respectively, was recorded for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the nine months ended October 1, 2023, was $1.7 million, or $0.01 per diluted share. The tax savings due to the tax holiday for the

nine months ended October 2, 2022, was $9.7 million, or $0.05 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA introduced a 15% alternative minimum tax based on the financial statement income of certain large corporations (“CAMT”), effective January 1, 2023. Teradyne currently does not expect the CAMT to have a material impact on its financial results.

R. SEGMENT INFORMATION

Teradyne has four reportable segments (Semiconductor Test, System Test, Wireless Test and Robotics). Each of the reportable segments represents an individual operating segment.

The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage and system level test, and circuit-board test. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. The Robotics segment includes operations related to the design, manufacturing and marketing of collaborative robotic arms, autonomous mobile robots and advanced robotic control software. Each operating segment has a segment manager who is accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2022.

Segment information for the three and nine months ended October 1, 2023 and October 2, 2022 is as follows:

		Semiconductor Test				System Test				Robotics				Wireless Test				Corporate and Eliminations				Consolidated
		(in thousands)
Three Months Ended October 1, 2023
Revenues		$	497,863			$	83,203			$	85,692			$	36,974			$	—			$	703,732
Income (loss) before income taxes (1)(2)			136,451				23,754				(21,812	)			9,469				(3,582	)			144,280
Total assets (3)			1,382,444				178,904				684,207				92,514				1,032,586				3,370,655
Three Months Ended October 2, 2022
Revenues		$	575,704			$	116,154			$	89,067			$	46,148			$	—			$	827,073
Income (loss) before income taxes (1)(2)			182,625				40,201				(3,992	)			12,647				(5,284	)			226,197
Total assets (3)			1,366,478				192,684				614,558				110,484				1,035,702				3,319,906
Nine Months Ended October 1, 2023
Revenues		$	1,387,580			$	252,106			$	246,541			$	119,472			$	—			$	2,005,699
Income (loss) before income taxes (1)(2)			361,676				67,629				(66,704	)			30,841				(7,675	)			385,767
Total assets (3)			1,382,444				178,904				684,207				92,514				1,032,586				3,370,655
Nine Months Ended October 2, 2022
Revenues		$	1,599,392			$	369,525			$	292,772			$	161,520			$	—			$	2,423,209
Income (loss) before income taxes (1)(2)			510,112				135,566				(15,496	)			56,659				(41,693	)			645,148
Total assets (3)			1,366,478				192,684				614,558				110,484				1,035,702				3,319,906

(1)

Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, legal and environmental fees, severance charges, pension, contract termination settlement charge and an expense for the modification of Teradyne’s former chief executive officer’s outstanding equity awards.

(2)

Included in income (loss) before taxes are charges related to restructuring and other, and inventory charges.

(3)

Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets.

Included in each segment are charges and credits in the following line items in the statements of operations:

		For the Three Months Ended								For the Nine Months Ended
		October 1, 2023				October 2, 2022				October 1, 2023				October 2, 2022
		(in thousands)
Semiconductor Test:
Cost of revenues—inventory charge		$	10,422			$	10,829			$	18,374			$	13,144
Restructuring and other—employee severance			1,776				—				5,055				—
System Test:
Restructuring and other—employee severance		$	—			$	—			$	1,124			$	—
Cost of revenues—inventory charge			—				—				1,412				—
Robotics:
Cost of revenues—inventory charge		$	652			$	—			$	2,203			$	1,411
Restructuring and other—employee severance			636				1,074				2,707				1,616
Wireless:
Cost of revenues—inventory charge		$	—			$	966			$	1,080			$	3,942
Corporate and Eliminations:
Restructuring and other—employee severance		$	1,753			$	—			$	2,877			$	—
Restructuring and other—contract termination			1,511				—				1,511				—
Selling and administrative —equity modification			—				—				5,889				—
Restructuring and other—other			—				700				1,100				2,700
Restructuring and other—legal settlement			—				—				—				14,700

S. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

In January 2023, Teradyne’s Board of Directors cancelled its January 2021 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Teradyne intends to repurchase up to $500.0 million of its common stock in 2023 based on market conditions.

During the nine months ended October 1, 2023, Teradyne repurchased 3.4 million shares of common stock for a total cost of $349.3 million at an average price of $103.89 per share. As of January 1, 2023, share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired.

During the nine months ended October 2, 2022, Teradyne repurchased 7.2 million shares of common stock for $750.0 million at an average price of $103.83 per share.

The total cost of shares acquired includes commissions and, starting in 2023, related excise tax, and is recorded as a reduction to retained earnings.

Dividend

Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.

In January 2023, May 2023, and August 2023, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three and nine months ended October 1, 2023, were $16.9 million and $51.1 million, respectively.

In January 2022, May 2022, and August 2022, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three and nine months ended October 2, 2022, were $17.1 million and $52.6 million, respectively.