Item 1. Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		June 30, 2024				December 31, 2023
		(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents		$	421,904			$	757,571
Marketable securities			38,654				62,154
Accounts receivable, less allowance for credit losses of $1,944 and $1,988 at June 30, 2024 and December 31, 2023, respectively			470,297				422,124
Inventories, net			288,748				309,974
Prepayments			515,906				548,970
Other current assets			20,884				37,992
Current assets held for sale			—				23,250
Total current assets			1,756,393				2,162,035
Property, plant and equipment, net			472,457				445,492
Operating lease right-of-use assets, net			72,381				73,417
Marketable securities			123,723				117,434
Deferred tax assets			192,901				175,775
Retirement plans assets			11,293				11,504
Equity method investment			524,060				—
Other assets			47,923				38,580
Acquired intangible assets, net			25,465				35,404
Goodwill			405,110				415,652
Long-term assets held for sale			—				11,531
Total assets		$	3,631,706			$	3,486,824
LIABILITIES
Current liabilities:
Accounts payable		$	160,808			$	180,131
Accrued employees’ compensation and withholdings			161,187				191,750
Deferred revenue and customer advances			102,988				99,804
Other accrued liabilities			108,746				114,712
Operating lease liabilities			18,280				17,522
Income taxes payable			74,365				48,653
Current liabilities held for sale			—				7,379
Total current liabilities			626,374				659,951
Retirement plans liabilities			135,167				132,090
Long-term deferred revenue and customer advances			36,146				37,282
Long-term other accrued liabilities			16,632				19,998
Deferred tax liabilities			96				183
Long-term operating lease liabilities			61,883				65,092
Long-term incomes taxes payable			24,596				44,331
Long-term liabilities held for sale			—				2,000
Total liabilities			900,894				960,927
Commitments and contingencies (Note R)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 161,802 and 152,698 shares issued and outstanding at June 30, 2024, and December 31, 2023, respectively			20,225				19,087
Additional paid-in capital			1,865,351				1,827,274
Accumulated other comprehensive loss			(44,104	)			(26,978	)
Retained earnings			889,340				706,514
Total shareholders’ equity			2,730,812				2,525,897
Total liabilities and shareholders’ equity		$	3,631,706			$	3,486,824

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, 2023, 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands, except per share amount)								(in thousands, except per share amount)
Revenues:
Products		$	596,877			$	540,375			$	1,055,310			$	1,013,793
Services			133,002				144,062				274,388				288,173
Total revenues			729,879				684,437				1,329,698				1,301,966
Cost of revenues:
Cost of products			250,236				217,011				450,999				415,675
Cost of services			53,799				64,934				113,573				127,379
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)			304,035				281,945				564,572				543,054
Gross profit			425,844				402,492				765,126				758,912
Operating expenses:
Selling and administrative			154,470				145,695				303,658				296,650
Engineering and development			111,816				105,706				215,015				211,468
Acquired intangible assets amortization			4,664				4,825				9,361				9,627
Restructuring and other			2,012				6,358				6,440				8,395
Gain on sale of business			(57,486	)			—				(57,486	)			—
Total operating expenses			215,476				262,584				476,988				526,140
Income from operations			210,368				139,908				288,138				232,772
Non-operating (income) expense:
Interest income			(6,715	)			(6,354	)			(14,582	)			(11,613	)
Interest expense			1,530				1,045				2,190				2,031
Other (income) expense, net			(3,850	)			815				8,225				868
Income before income taxes			219,403				144,402				292,305				241,486
Income tax provision			33,130				24,352				41,835				37,905
Net income		$	186,273			$	120,050			$	250,470			$	203,581
Net income per common share:
Basic		$	1.18			$	0.78			$	1.61			$	1.31
Diluted		$	1.14			$	0.73			$	1.54			$	1.23
Weighted average common shares—basic			157,804				154,760				155,426				155,332
Weighted average common shares—diluted			163,470				164,751				162,909				165,530

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, 2023, 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Net income		$	186,273			$	120,050			$	250,470			$	203,581
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, and $0, respectively			(3,629	)			2,943				(15,087	)			12,250
Available-for-sale marketable securities:
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(183), $(180), $(404) and $323, respectively			(721	)			(568	)			(1,622	)			1,726
Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $(4), $8, $26, and $10, respectively			(13	)			28				92				33
			(734	)			(540	)			(1,530	)			1,759
Cash flow hedges:
Unrealized gains arising during period, net of tax of $0, $920, $358, and $1,088, respectively		—					3,270				1,274				3,866
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $0, $91, $(500) and $428, respectively		—					323				(1,780	)			1,524
			—				3,593				(506	)			5,390
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(1), and $(1), respectively			(2	)			(2	)			(3	)			(3	)
Other comprehensive income (loss)			(4,365	)			5,994				(17,126	)			19,396
Comprehensive income		$	181,908			$	126,044			$	233,344			$	222,977

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, 2023, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

		Shareholders' Equity
		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 Three Months Ended June 30, 2024
Balance, March 31, 2024			153,757			$	19,220			$	1,848,088			$	(39,739	)		$	730,260			$	2,557,829
Net issuance of common stock under stock-based plans			125				15				4,615												4,630
Stock-based compensation expense											13,660												13,660
Warrant exercises			7,998				1,000				(1,012	)											(12	)
Repurchase of common stock			(78	)			(10	)											(8,185	)			(8,195	)
Cash dividends ($0.12 per share)																			(19,008	)			(19,008	)
Net income																			186,273				186,273
Other comprehensive income (loss)															(4,365	)							(4,365	)
Balance, June 30, 2024			161,802			$	20,225			$	1,865,351			$	(44,104	)		$	889,340			$	2,730,812
For the Three Months Ended July 2, 2023
Balance, April 2, 2023			155,445			$	19,431			$	1,772,352			$	(36,466	)		$	694,145			$	2,449,462
Net issuance of common stock under stock-based plans			52				7				161												168
Stock-based compensation expense											12,077												12,077
Repurchase of common stock			(1,349	)			(169	)											(135,668	)			(135,837	)
Cash dividends ($0.11 per share)																			(17,031	)			(17,031	)
Settlements of convertible notes			50				6				(6	)											—
Exercise of convertible notes hedge call options			(50	)			(6	)			6												—
Net income																			120,050				120,050
Other comprehensive income (loss)															5,994								5,994
Balance, July 2, 2023			154,148			$	19,269			$	1,784,590			$	(30,472	)		$	661,496			$	2,434,883

		Shareholders' Equity
		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 Six Months Ended June 30, 2024
Balance, December 31, 2023			152,698			$	19,087			$	1,827,274			$	(26,978	)		$	706,514			$	2,525,897
Net issuance of common stock under stock-based plans			591				73				8,373												8,446
Stock-based compensation expense											30,818												30,818
Warrant exercises			8,812				1,102				(1,114	)											(12	)
Repurchase of common stock			(299	)			(37	)											(30,253	)			(30,290	)
Cash dividends ($0.12 per share)																			(37,391	)			(37,391	)
Net income																			250,470				250,470
Other comprehensive income (loss)															(17,126	)							(17,126	)
Balance, June 30, 2024			161,802			$	20,225			$	1,865,351			$	(44,104	)		$	889,340			$	2,730,812
For the Six Months Ended July 2, 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			631				79				(3,782	)											(3,703	)
Stock-based compensation expense											32,409												32,409
Repurchase of common stock			(2,242	)			(280	)											(233,604	)			(233,884	)
Cash dividends ($0.11 per share)																			(34,210	)			(34,210	)
Settlements of convertible notes			375				47				(47	)											—
Exercise of convertible notes hedge call options			(375	)			(47	)			47												—
Net income																			203,581				203,581
Other comprehensive income (loss)															19,396								19,396
Balance, July 2, 2023			154,148			$	19,269			$	1,784,590			$	(30,472	)		$	661,496			$	2,434,883

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, 2023, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Six Months Ended
		June 30, 2024				July 2, 2023
		(in thousands)
Cash flows from operating activities:
Net income		$	250,470			$	203,581
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation			48,927				45,231
Stock-based compensation			30,693				32,449
Losses (gains) on investments			13,090				(4,745	)
Provision for excess and obsolete inventory			9,438				11,341
Amortization			9,397				9,580
Gain on sale of business			(57,486	)			—
Deferred taxes			(16,830	)			(13,571	)
Retirement plan actuarial losses (gains)			(250	)			—
Other			1,240				(92	)
Changes in operating assets and liabilities
Accounts receivable			(54,211	)			(2,693	)
Inventories			17,102				(13,845	)
Prepayments and other assets			22,190				(29,584	)
Accounts payable and other liabilities			(53,009	)			(24,514	)
Deferred revenue and customer advances			2,739				(34,938	)
Retirement plans contributions			(2,774	)			(2,482	)
Income taxes			2,622				(13,614	)
Net cash provided by operating activities			223,348				162,104
Cash flows from investing activities:
Purchases of property, plant and equipment			(88,869	)			(80,702	)
Purchase of investment in a business			(524,653	)			—
Purchases of marketable securities			(27,757	)			(99,018	)
Proceeds from the sale of a business, net of cash and cash equivalents sold			87,172				—
Proceeds from maturities of marketable securities			26,858				21,997
Proceeds from sales of marketable securities			21,289				35,577
Proceeds from insurance			873				460
Net cash used for investing activities			(505,087	)			(121,686	)
Cash flows from financing activities:
Repayments of borrowings on revolving credit facility			(185,000	)			—
Dividend payments			(37,370	)			(34,184	)
Repurchase of common stock			(30,306	)			(227,845	)
Payments related to net settlement of employee stock compensation awards			(13,434	)			(20,308	)
Payments of convertible debt principal			—				(17,458	)
Proceeds from borrowings on revolving credit facility			185,000				—
Issuance of common stock under stock purchase and stock option plans			21,836				16,599
Net cash used for financing activities			(59,274	)			(283,196	)
Effects of exchange rate changes on cash and cash equivalents			5,346				1,213
Decrease in cash and cash equivalents			(335,667	)			(241,565	)
Cash and cash equivalents at beginning of period			757,571				854,773
Cash and cash equivalents at end of period		$	421,904			$	613,208
Non-cash investing activities:
Capital expenditures incurred but not yet paid:		$	3,124			$	1,741

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, 2023, 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 automated test systems and robotics products. Teradyne’s automated 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, autonomous mobile robots, and advanced robotic control software 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 automated 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. The December 31, 2023, 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, 2024, for the year ended December 31, 2023.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure 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 judgments 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.

Equity Method Investments

The Company accounts for investments using the equity method of accounting when the Company has significant influence over the financial and operating policies, but not control, of the investee. The equity method investments are initially recorded at cost and included in ‘Equity method investment’ in the consolidated balance sheet. Teradyne will record its share of investee's net income or loss and other comprehensive income, and the amortization of equity method basis difference on a 3-month lag, which is applied consistently from period to period. These results will be reported in ‘Equity in net earnings of affiliate’ in the consolidated statement of operations. The Company monitors on an ongoing basis its equity method investments for indicators of other-than-temporary declines in fair value below carrying value.

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which will require Teradyne to disclose significant segment expenses and other segment items used by the Chief Operating Decision Maker ("CODM") on an annual and interim basis as well as provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, Teradyne will be required to disclose the title and position of the CODM. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU will have no impact on results of operations, cash flows or financial condition. Upon adoption, Teradyne will apply the amendments in this ASU retrospectively to all prior period disclosures presented in the financial statements.

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires expanded disclosures relating to the tax rate reconciliation, income taxes paid, income (loss) before income tax expense (benefit) and income tax expense (benefit), requiring a greater disaggregation of information for each. The provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. The amendments in this update should be applied on a prospective basis, but retrospective application is permitted. This ASU will have no impact on results of operations, cash flows or financial condition.

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								System Test				Robotics								Wireless Test
		System on-a-Chip				Memory								Universal Robots				Mobile Industrial Robots								Total
	(in thousands)
For the Three Months Ended June 30, 2024 (1)
Timing of Revenue Recognition
Point in Time		$	343,536			$	121,662			$	43,519			$	72,722			$	15,495			$	32,273			$	629,207
Over Time			70,048				7,318				17,282				1,863				167				3,994				100,672
Total		$	413,584			$	128,980			$	60,801			$	74,585			$	15,662			$	36,267			$	729,879
Geographical Market
Asia Pacific		$	381,631			$	124,497			$	21,259			$	14,756			$	5,447			$	29,293			$	576,883
Americas			20,211				3,254				28,684				29,900				5,110				4,901				92,060
Europe, Middle East and Africa			11,742				1,229				10,858				29,929				5,105				2,073				60,936
Total		$	413,584			$	128,980			$	60,801			$	74,585			$	15,662			$	36,267			$	729,879
For the Three Months Ended July 2, 2023 (1)
Timing of Revenue Recognition
Point in Time		$	282,080			$	112,547			$	76,801			$	55,737			$	12,770			$	40,261			$	580,196
Over Time			72,614				7,467				17,471				2,116				1,011				3,562				104,241
Total		$	354,694			$	120,014			$	94,272			$	57,853			$	13,781			$	43,823			$	684,437
Geographical Market
Asia Pacific		$	303,062			$	115,250			$	41,644			$	14,883			$	2,291			$	22,362			$	499,492
Americas			32,191				4,286				40,163				22,832				6,086				19,491				125,049
Europe, Middle East and Africa			19,441				478				12,465				20,138				5,404				1,970				59,896
Total		$	354,694			$	120,014			$	94,272			$	57,853			$	13,781			$	43,823			$	684,437
For the Six Months Ended June 30, 2024 (2)
Timing of Revenue Recognition
Point in Time		$	573,127			$	224,098			$	101,592			$	138,615			$	34,785			$	53,187			$	1,125,405
Over Time			142,764				14,828				34,531				3,731				770				7,669				204,293
Total		$	715,891			$	238,926			$	136,123			$	142,346			$	35,555			$	60,856			$	1,329,698
Geographical Market
Asia Pacific		$	652,197			$	220,103			$	47,040			$	26,381			$	8,401			$	46,434			$	1,000,557
Americas			42,762				12,306				65,278				49,905				19,735				10,725				200,711
Europe, Middle East and Africa			20,932				6,517				23,805				66,060				7,419				3,697				128,430
Total		$	715,891			$	238,926			$	136,123			$	142,346			$	35,555			$	60,856			$	1,329,698
For the Six Months Ended July 2, 2023 (2)
Timing of Revenue Recognition
Point in Time		$	555,354			$	173,805			$	133,658			$	125,760			$	28,735			$	75,624			$	1,092,937
Over Time			146,173				14,384				35,245				4,124				2,229				6,874				209,029
Total		$	701,528			$	188,189			$	168,903			$	129,884			$	30,964			$	82,498			$	1,301,966
Geographical Market
Asia Pacific		$	586,321			$	178,945			$	81,234			$	28,100			$	3,793			$	45,593			$	923,986
Americas			73,759				7,230				69,143				43,273				17,898				32,337				243,640
Europe, Middle East and Africa			41,448				2,014				18,526				58,511				9,273				4,568				134,340
Total		$	701,528			$	188,189			$	168,903			$	129,884			$	30,964			$	82,498			$	1,301,966

(1)

Includes $0.8 million and $1.3 million in 2024 and 2023, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”

(2)

Includes $1.7 million and $2.5 million in 2024 and 2023, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”

Contract Balances

During the three and six months ended June 30, 2024, Teradyne recognized $18.7 million and $46.9 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. During the three and six months ended July 2, 2023, Teradyne recognized $27.3 million and $68.4 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 June 30, 2024, Teradyne had $1,049.9 million of unsatisfied performance obligations. Teradyne expects to recognize approximately 95% 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:

		June 30, 2024				December 31, 2023
		(in thousands)
Maintenance, service and training		$	62,001			$	66,458
Customer advances, undelivered elements and other			43,621				35,731
Extended warranty			33,512				34,897
Total deferred revenue and customer advances		$	139,134			$	137,086

Accounts Receivable

During the three and six months ended June 30, 2024, and July 2, 2023, 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 June 30, 2024, and July 2, 2023, total trade accounts receivable sold under the factoring agreements were $57.3 million and $59.3 million, respectively. During the six months ended June 30, 2024, and July 2, 2023, total trade accounts receivable sold under the factoring agreements were $80.7 million and $93.5 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. DISPOSITIONS

On May 27, 2024, Teradyne completed the sale of the Device Interface Solutions ("DIS") business, a component of the Semiconductor Test segment, to Technoprobe S.p.A. ("Technoprobe") for $85.0 million in cash, net of cash and cash equivalents sold, and a customary working capital adjustment. The sale resulted in a pre-tax gain of $57.5 million recorded as 'Gain on sale of business' in the consolidated statement of operations. The transaction did not meet the criteria to be classified as a discontinued operation, as it did not represent a strategic shift that will have a major effect on operations and financial results.

Assets and liabilities related to the DIS sale agreement met the criteria and were classified as held for sale in Teradyne’s consolidated balance sheet as of December 31, 2023, as follows:

		December 31, 2023
Current assets:
Inventories, net		$	17,952
Prepayments			5,298
Total current assets held for sale			23,250
Property, plant and equipment, net			8,986
Operating lease right-of-use assets, net			2,545
Total assets held for sale		$	34,781
Current liabilities:
Accounts payable		$	6,356
Other accrued liabilities			552
Operating lease liabilities			471
Total current liabilities held for sale			7,379
Long-term operating lease liabilities			2,000
Total liabilities held for sale		$	9,379
Net assets held for sale		$	25,402

F. EQUITY METHOD INVESTMENT

On May 27, 2024, Teradyne paid $524.1 million to purchase a combination of previously issued and outstanding shares and shares newly issued by Technoprobe, S.p.A. ("Technoprobe"). The shares purchased represent 10% of the issued and outstanding shares of Technoprobe. Teradyne was also granted a board seat as part of the purchase. Teradyne accounts for this investment using the equity method as a result of being able to exercise significant influence over the operating and financial decisions of Technoprobe. As of June 30, 2024, $524.1 million was recorded as 'Equity method investment', in the consolidated balance sheets.

Based on the quoted closing price as of June 30, 2024, the fair value of the publicly traded investment in Technoprobe was $643.3 million, and there was no other-than-temporary impairment identified.

Teradyne made an accounting policy election to report its share of Technoprobe's results on a 3-month lag, which will be applied consistently from period to period. Teradyne will record its share of Technoprobe's net income or loss and other comprehensive income, and the amortization of equity method basis difference, beginning in the third quarter of 2024.

G. INVENTORIES

Inventories, net consisted of the following at June 30, 2024, and December 31, 2023:

		June 30, 2024				December 31, 2023
		(in thousands)
Raw material		$	223,525			$	258,422
Work-in-process			43,493				26,851
Finished goods			21,730				24,701
Total inventories, net (1)		$	288,748			$	309,974

(1)

Inventories, net at December 31, 2023, excludes $18.0 million of primarily work-in-process inventories, net classified as assets held for sale. See Note E: "Dispositions" for additional information.

Inventory reserves at June 30, 2024, and December 31, 2023, were $134.0 million and $136.0 million, respectively.

H. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of 90 days 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. 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 six months ended June 30, 2024, and July 2, 2023, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Realized gains recorded in the three and six months ended June 30, 2024, were $0.3 million and $1.3 million, respectively. Realized gains recorded in the three and six months ended July 2, 2023, were $0.1 million and $0.4 million, respectively. Realized losses recorded in the three and six months ended June 30, 2024, were $0.1 million and $0.3 million, respectively. Realized losses recorded in the three and six months ended July 2, 2023, were $0.2 million. Realized gains and losses are included in 'Other (income) expense, net' in the consolidated statement of operations.

Unrealized gains on equity securities recorded in the three and six months ended June 30, 2024, were $0.6 million and $3.2 million, respectively. Unrealized gains on equity securities recorded in the three and six months ended July 2, 2023, were $2.6 million and $4.6 million, respectively. Unrealized gains and losses on equity securities are included in 'Other (income) expense, net' in the consolidated statement of operations.

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

The cost of securities sold is based on average cost.

The following tables set forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024, and December 31, 2023.

		June 30, 2024
		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		$	199,227			$	—			$	—			$	199,227
Cash equivalents			219,666				3,011				—				222,677
Available-for-sale securities:
U.S. Treasury securities			—				40,563				—				40,563
Corporate debt securities			—				35,041				—				35,041
Certificates of deposit and time deposits			—				21,688				—				21,688
Debt mutual funds			8,704				—				—				8,704
U.S. government agency securities			—				3,905				—				3,905
Commercial paper			—				—				—				—
Non-U.S. government securities			—				767				—				767
Equity securities:
Mutual funds			51,709				—				—				51,709
		$	479,306			$	104,975			$	—			$	584,281
Derivative assets			—				2,067				—				2,067
Total		$	479,306			$	107,042			$	—			$	586,348
Liabilities
Derivative liabilities			—				1,352				—			$	1,352
Total		$	—			$	1,352			$	—			$	1,352
Reported as follows:
		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	418,893			$	3,011			$	—			$	421,904
Marketable securities			—				38,654				—				38,654
Long-term marketable securities			60,413				63,310				—				123,723
Prepayments			—				2,067				—				2,067
Total		$	479,306			$	107,042			$	—			$	586,348
Liabilities
Other current liabilities		$	—			$	1,352			$	—			$	1,352
Total		$	—			$	1,352			$	—			$	1,352

		December 31, 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		$	298,156			$	—			$	—			$	298,156
Cash equivalents			453,298				6,117				—				459,415
Available-for-sale securities:
Corporate debt securities			—				52,734				—				52,734
U.S. Treasury securities			—				41,808				—				41,808
Certificates of deposit and time deposits			—				21,772				—				21,772
Debt mutual funds			8,773				—				—				8,773
U.S. government agency securities			—				4,892				—				4,892
Commercial paper			—				1,667				—				1,667
Non-U.S. government securities			—				810				—				810
Equity securities:
Mutual Funds			47,132				—				—				47,132
		$	807,359			$	129,800			$	—			$	937,159
Derivative assets			—				18,746				—				18,746
Total		$	807,359			$	148,546			$	—			$	955,905
Liabilities
Derivative liabilities			—				2,545				—				2,545
Total		$	—			$	2,545			$	—			$	2,545
Reported as follows:
		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	751,454			$	6,117			$	—			$	757,571
Marketable securities			—				62,154				—				62,154
Long-term marketable securities			55,905				61,529				—				117,434
Other current assets			—				18,746				—				18,746
Total		$	807,359			$	148,546			$	—			$	955,905
Liabilities
Other current liabilities		$	—			$	2,545			$	—			$	2,545
Total		$	—			$	2,545			$	—			$	2,545

The carrying amounts and fair values of Teradyne’s financial instruments at June 30, 2024, and December 31, 2023, were as follows:

		June 30, 2024								December 31, 2023
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Assets
Cash and cash equivalents		$	421,904			$	421,904			$	757,571			$	757,571
Marketable securities			162,377				162,377				179,588				179,588
Derivative assets			2,067				2,067				18,746				18,746
Liabilities
Derivative liabilities			1,352				1,352				2,545				2,545

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 June 30, 2024:

		June 30, 2024
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Corporate debt securities		$	39,750			$	58			$	(4,767	)		$	35,041			$	30,671
U.S. Treasury securities			45,305				—				(4,742	)			40,563				40,563
Certificates of deposit and time deposits			21,688				—				—				21,688				—
Debt mutual funds			9,060				—				(356	)			8,704				3,181
U.S. government agency securities			3,928				—				(23	)			3,905				3,905
Commercial paper			—				—				—				—				—
Non-U.S. government securities			767				—				—				767				—
		$	120,498			$	58			$	(9,888	)		$	110,668			$	78,320

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	38,718				—			$	(64	)		$	38,654			$	16,966
Long-term marketable securities			81,780				58				(9,824	)			72,014				61,354
		$	120,498			$	58			$	(9,888	)		$	110,668			$	78,320

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2023:

		December 31, 2023
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Corporate debt securities		$	56,458			$	201			$	(3,925	)		$	52,734			$	44,263
U.S. Treasury securities			45,725				14				(3,931	)			41,808				35,080
Certificates of deposit and time deposits			21,772				—				—				21,772				—
Debt mutual funds			9,081				—				(308	)			8,773				3,303
U.S. government agency securities			4,898				—				(6	)			4,892				4,892
Commercial paper			1,633				34				—				1,667				—
Non-U.S. government securities			810				—				—				810				—
		$	140,377			$	249			$	(8,170	)		$	132,456			$	87,538

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	62,385			$	36			$	(267	)			62,154			$	34,844
Long-term marketable securities			77,992				213				(7,903	)			70,302				52,694
		$	140,377			$	249			$	(8,170	)		$	132,456			$	87,538

As of June 30, 2024, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $34.5 million and $43.8 million, respectively. As of December 31, 2023, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $22.3 million and $65.2 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 June 30, 2024, and December 31, 2023, were not other than temporary.

The contractual maturities of investments in available-for-sale securities held at June 30, 2024, were as follows:

		June 30, 2024
		Cost				Fair Market Value
		(in thousands)
Due within one year		$	38,718			$	38,654
Due after 1 year through 5 years			27,821				27,285
Due after 5 years through 10 years			8,189				7,782
Due after 10 years			36,710				28,243
Total		$	111,438			$	101,964

Contractual maturities of investments in available-for-sale securities held at June 30, 2024, exclude debt mutual funds with a fair market value of $8.7 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 June 30, 2024, and December 31, 2023, 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
		June 30, 2024				December 31, 2023
		(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen			42.8				11.0
U.S. dollar/Taiwan dollar			33.6				42.7
U.S. dollar/Danish krone			32.1				36.0
U.S. dollar/Korean won			8.9				7.2
U.S. dollar/British pound sterling			0.3				1.5
Euro/U.S. dollar			24.1				25.3
Singapore dollar/U.S. dollar			18.8				16.6
Philippine peso/U.S. dollar			9.5				10.1
Chinese yuan/U.S. dollar			1.3				1.0
Danish krone/U.S. dollar			0.6				0.7
Total		$	172.0			$	152.1

The fair value of the outstanding contracts was a net gain of $0.7 million and a net loss of $1.8 million at June 30, 2024, and December 31, 2023, respectively.

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' in the consolidated statement of operations.

At December 31, 2023, 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
		June 30, 2024				December 31, 2023
		(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen		$	—			$	35.5
Total		$	—			$	35.5

There were no outstanding cash flow hedge contracts at June 30, 2024. The fair value of the outstanding cash flow hedge contracts was a gain of $0.6 million at December 31, 2023.

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.

On November 7, 2023, in connection with Teradyne's agreement to acquire 10% investment in Technoprobe S.p.A, Teradyne purchased a call option to buy 481.0 million Euros. The expiration date of the option was April 26, 2024. On April 12, 2024, Teradyne entered into a forward to buy 481.0 million Euros which expired on May 23, 2024. At December 31, 2023, the fair value of the outstanding contract was $17.4 million. For the three and six months ended June 30, 2024, a realized gain of $4.2 million and a realized loss of $9.8 million was recorded in 'Other (income) expense, net' in the consolidated statement of operations, respectively.

The following table summarizes the fair value of derivative instruments as of June 30, 2024, and December 31, 2023:

		Balance Sheet Location		June 30, 2024				December 31, 2023
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts		Other current assets			2,067				733
Foreign exchange forward contracts		Other current liabilities			(1,352	)			(2,545	)
Foreign exchange option contracts		Other current assets			—				17,364
Derivatives designated as hedging instruments:
Foreign exchange forward contracts		Other current assets			—				648
Total derivatives				$	715			$	16,200

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and six months ended June 30, 2024, and July 2, 2023:

				For the Three Months Ended								For the Six Months Ended
		Location of (Gains) Losses Recognized in Statement of Operations		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
				(in thousands)								(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts (1)		Other (income) expense, net		$	(2,444	)		$	(4,040	)		$	(4,144	)		$	(2,781	)
Foreign exchange option contracts		Other (income) expense, net			(4,154	)			—				9,764				—
Derivatives designated as hedging instruments:
Foreign exchange forward and option contracts		Revenue			—				414				(2,280	)			1,952
Total Derivatives				$	(6,598	)		$	(3,626	)		$	3,340			$	(829	)

(1)

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 six months ended June 30, 2024, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.3 million and $6.0 million, respectively. For the three and six months ended July 2, 2023, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $6.7 million and $7.0 million, respectively.

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

I. 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”) 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 bore interest at a rate of 1.25% per year payable semiannually in arrears on June 15 and December 15 of each year. The Notes matured on December 15, 2023.

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. 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 Teradyne's shareholders’ equity. The Warrant Transactions, which began expiring March 18, 2024, and continued to expire through July 10, 2024, currently cover, subject to customary anti-dilution adjustments, approximately 1.3 million shares of common stock. During the three and six months ended June 30, 2024, 11.7 million and 13.4 million warrants expired, resulting in the issuance of 8.0 million and 8.8 million shares of Teradyne common stock,

respectively. As of June 30, 2024, the strike price of the warrants was approximately $39.35 per share. The strike price is subject to adjustment under certain circumstances. The Warrant Transactions resulted in additional shares of Teradyne’s common stock being issued 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 interest expense on Teradyne's senior notes for three and six months ended July 2, 2023, was as follows:

		For the Three Months Ended								For the Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Contractual interest expense on the coupon		$	—			$	100			$	—			$	238
Amortization of debt issuance fees recognized as interest expense			—				—				—				113
Total interest expense on the convertible debt		$	—			$	100			$	—			$	351

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. On November 7, 2023, the Credit Agreement was amended to allow for the purchase of the shares of Technoprobe.

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 at 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.

On May 16, 2024, Teradyne borrowed $185.0 million under the Credit Agreement to support the acquisition of 10% of the issued and outstanding shares of Technoprobe. Teradyne has fully repaid its borrowings on the revolving credit facility prior to June 30, 2024. There was no outstanding revolver balance as of June 30, 2024.

As of August 2, 2024, the Credit Agreement was undrawn, and Teradyne was in compliance with all covenants under the Credit Agreement.

J. PREPAYMENTS

Prepayments consist of the following:

		June 30, 2024				December 31, 2023
		(in thousands)
Contract manufacturer and supplier prepayments		$	473,446			$	502,257
Prepaid maintenance and other services			20,443				17,592
Prepaid taxes			14,122				16,083
Other prepayments			7,895				13,038
Total prepayments (1)		$	515,906			$	548,970

(1)

Excludes $5.3 million at December 31, 2023 of contract manufacturer and supplier prepayments, classified as assets held for sale. See Note E: “Dispositions” for additional information.

K. 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Balance at beginning of period		$	15,324			$	12,901			$	15,698			$	14,181
Accruals for warranties issued during the period			2,922				3,261				6,181				7,378
Accruals related to pre-existing warranties			(284	)			(352	)			(967	)			(757	)
Settlements made during the period			(2,718	)			(3,267	)			(5,668	)			(8,259	)
Balance at end of period		$	15,244			$	12,543			$	15,244			$	12,543

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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Balance at beginning of period		$	34,509			$	49,343			$	34,897			$	56,180
Deferral of new extended warranty revenue			5,688				4,467				12,602				8,881
Recognition of extended warranty deferred revenue			(6,685	)			(9,388	)			(13,987	)			(20,639	)
Balance at end of period		$	33,512			$	44,422			$	33,512			$	44,422

L. 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 six months ended July 2, 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, after attaining both at least age sixty and at least ten years of service, 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, 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.

On January 22, 2024, the Board enacted the Executive Retirement Policy for Restricted Stock Unit and Option Vesting (the "Retirement Policy"). Under the Retirement Policy, an executive officer that is over the age of 65 and has 10 or more years of service as of the effective date of his or her retirement will be eligible for continued vesting of his or her unvested time-based restricted stock units and stock options granted prior to his or her retirement date.

During the six months ended June 30, 2024, and July 2, 2023, Teradyne granted 0.5 million and 0.5 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $95.06 and $102.30, respectively, and less than 0.1 million and 0.1 million of service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $120.38 and $90.50, respectively.

During the six months ended June 30, 2024, and July 2, 2023, Teradyne granted 0.1 million and 0.1 million of PBIT PRSUs with a weighted average grant date fair value of $94.51 and $102.23, respectively.

During the six months ended June 30, 2024, and July 2, 2023, Teradyne granted 0.1 million and 0.1 million of TSR PRSUs, with a weighted average grant date fair value of $102.51 and $137.64, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

		For the Six Months Ended
		June 30, 2024				July 2, 2023
Risk-free interest rate			3.9	%			3.9	%
Teradyne volatility-historical			42.4	%			50.2	%
NYSE Composite Index volatility-historical			15.6	%			24.8	%
Dividend yield			0.5	%			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 grants. Dividend yield was based upon an estimated annual dividend amount of $0.48 per share divided by Teradyne’s stock price on the grant dates, which have a weighted average grant date stock price of $95.83 for the 2024 grants, and an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $103.44 for the 2023 grant.

During the six months ended June 30, 2024, and July 2, 2023, Teradyne granted 0.1 million and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $37.50 and $40.90, respectively.

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

		For the Six Months Ended
		June 30, 2024				July 2, 2023
Expected life (years)			4.0				4.0
Risk-free interest rate			4.0	%			3.7	%
Volatility-historical			46.3	%			46.7	%
Dividend yield			0.5	%			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 $0.48 per share divided by Teradyne’s stock price on the grant date of $95.14 for the 2024 grant and an estimated annual dividend amount of $0.44 per share divided by Teradyne’s stock price on the grant date of $103.44 for the 2023 grant.

M. 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)
Six Months Ended June 30, 2024
Balance at December 31, 2023, net of tax of $0, $(1,728), $142, $(1,132), respectively		$	(22,442	)		$	(6,194	)		$	506			$	1,152			$	(26,978	)
Other comprehensive (loss) gain before reclassifications, net of tax of $0, $(404), $358, $0, respectively			(15,087	)			(1,622	)			1,274				—				(15,435	)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $0, $26, $(500), $(1), respectively			—				92				(1,780	)			(3	)			(1,691	)
Net current period other comprehensive loss, net of tax of $0, $(378), $(142), $(1), respectively			(15,087	)			(1,530	)			(506	)			(3	)			(17,126	)
Balance at June 30, 2024, net of tax of $0, $(2,106), $0, $(1,133), respectively		$	(37,529	)		$	(7,724	)		$	—			$	1,149			$	(44,104	)
Six Months Ended July 2, 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, $323, $1,088, $0, respectively			12,250				1,726				3,866				—				17,842
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $0, $10, $428, $(1), respectively			—				33				1,524				(3	)			1,554
Net current period other comprehensive gain (loss), net of tax of $0, $333, $1,516, $(1), respectively			12,250				1,759				5,390				(3	)			19,396
Balance at July 2, 2023, net of tax of $0, $(1,975), $808, $(1,131), respectively		$	(27,599	)		$	(6,902	)		$	2,873			$	1,156			$	(30,472	)

Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and six months ended June 30, 2024, and July 2, 2023, were as follows:

Details about Accumulated Other Comprehensive Income (Loss) Components		For the Three Months Ended								For the Six Months Ended								Affected Line Item in the Statements of Operations
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Available-for-sale marketable securities:
Unrealized (losses) gains, net of tax of $4, $(8), $(26), $(10), respectively		$	13			$	(28	)		$	(92	)		$	(33	)		Other (income) expense, net
Cash flow hedges:
Unrealized (losses) gains, net of tax of $0, $(91), $500, $(428), respectively			—				(323	)			1,780				(1,524	)		Revenue
Defined benefit pension and postretirement plans:
Amortization of prior service credit, net of tax of $0, $0, $1, $1, respectively			2				2				3				3			(a)
Total reclassifications, net of tax of $4, $(99), $475, $(437), respectively		$	15			$	(349	)		$	1,691			$	(1,554	)		Net income

(a)

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

N. 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 six months ended June 30, 2024, 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 six months ended June 30, 2024, were as follows:

		Robotics				Wireless Test				Semiconductor Test				System Test				Total
		(in thousands)
Balance at December 31, 2023
Goodwill		$	395,463			$	361,819			$	262,237			$	158,699			$	1,178,218
Accumulated impairment losses			—				(353,843	)			(260,540	)			(148,183	)			(762,566	)
Total Goodwill			395,463				7,976				1,697				10,516				415,652
Foreign currency translation adjustment			(10,433	)			—				(109	)			—				(10,542	)
Balance at June 30, 2024
Goodwill		$	385,031			$	361,819			$	262,128			$	158,699				1,167,676
Accumulated impairment losses			—				(353,843	)			(260,540	)			(148,183	)			(762,566	)
Total Goodwill		$	385,031			$	7,976			$	1,588			$	10,516			$	405,110

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				Accumulated Amortization				Foreign Currency Translation Adjustment				Net Carrying Amount
		(in thousands)
Balance at June 30, 2024
Developed technology		$	267,706			$	(249,298	)		$	(5,728	)		$	12,680
Customer relationships			52,109				(48,706	)			197				3,600
Tradenames and trademarks			59,007				(48,407	)			(1,415	)			9,185
Total intangible assets		$	378,822			$	(346,411	)		$	(6,946	)		$	25,465
Balance at December 31, 2023
Developed technology		$	267,706			$	(243,191	)		$	(5,343	)		$	19,172
Customer relationships			52,109				(47,850	)			232				4,491
Tradenames and trademarks			59,007				(46,021	)			(1,245	)			11,741
Total intangible assets		$	378,822			$	(337,062	)		$	(6,356	)		$	35,404

Aggregate intangible asset amortization expense was $4.7 million and $9.4 million, respectively, for the three and six months ended June 30, 2024, and $4.8 million and $9.6 million, respectively, for the three and six months ended July 2, 2023.

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

Year		Amortization Expense
		(in thousands)
2024		$	9,303
2025			11,254
2026			2,356
2027			1,140
2028			1,059
Thereafter			353

O. 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands, except per share amounts)								(in thousands, except per share amounts)
Net income for basic and diluted net income per share		$	186,273			$	120,050			$	250,470			$	203,581
Weighted average common shares-basic			157,804				154,760				155,426				155,332
Effect of dilutive potential common shares:
Convertible note hedge warrant shares (1)			4,930				8,876				6,896				8,929
Restricted stock units			726				323				573				389
Stock options			9				43				12				45
Employee stock purchase plan			1				7				2				7
Incremental shares from assumed conversion of convertible notes (2)			—				742				—				828
Dilutive potential common shares			5,666				9,991				7,483				10,198
Weighted average common shares-diluted			163,470				164,751				162,909				165,530
Net income per common share-basic		$	1.18			$	0.78			$	1.61			$	1.31
Net income per common share-diluted		$	1.14			$	0.73			$	1.54			$	1.23

(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 six months ended June 30, 2024, excludes the effect of the potential vesting of 0.1 million and 0.5 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 six months ended July 2, 2023, excludes the effect of the potential vesting of 0.4 million and 0.5 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

P. RESTRUCTURING AND OTHER

During the three months ended June 30, 2024, Teradyne recorded $2.0 million of severance charges related to headcount reductions of 35 people, primarily in Robotics.

During the three months ended July 2, 2023, Teradyne recorded $5.1 million of severance charges related to headcount reductions of 112 people, principally in Semiconductor Test and Robotics, which included charges related to a voluntary early retirement program for employees meeting certain conditions and a charge of $1.1 million for an increase in environmental liability.

During the six months ended June 30, 2024, Teradyne recorded $2.2 million of acquisition and divestiture expenses related to the Technoprobe transactions, and $4.2 million of severance and other charges, primarily related to headcount reductions of 66 people, primarily in Robotics and Semiconductor Test, which included charges related to a voluntary early retirement program for employees meeting certain conditions.

During the six months ended July 2, 2023, Teradyne recorded $7.2 million of severance charges related to headcount reductions of 179 people, primarily in Semiconductor Test and Robotics, which included charges related to a voluntary early retirement program for employees meeting certain conditions and a charge of $1.1 million for an increase in environmental liability.

Q. 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 six months ended June 30, 2024, and July 2, 2023, Teradyne contributed $1.6 million and $1.5 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.5 million and $0.6 million, respectively, to certain qualified pension plans for non-U.S. subsidiaries.

For the three and six months ended June 30, 2024, and July 2, 2023, Teradyne’s net periodic pension cost was comprised of the following:

		For the Three Months Ended
		June 30, 2024								July 2, 2023
		United States				Foreign				United States				Foreign
		(in thousands)
Service cost		$	217			$	114			$	272			$	110
Interest cost			1,646				243				1,714				263
Expected return on plan assets			(1,265	)			(18	)			(1,286	)			**(**9	)
Net actuarial loss (gain)			111				(242	)			24				—
Settlement loss (gain)			—				(24	)			—				—
Total net periodic pension cost		$	709			$	73			$	724			$	364

		For the Six Months Ended
		June 30, 2024								July 2, 2023
		United States				Foreign				United States				Foreign
		(in thousands)
Service cost		$	448			$	231			$	543			$	220
Interest cost			3,293				489				3,425				526
Expected return on plan assets			(2,533	)			(34	)			(2,571	)			**(**18	)
Net actuarial loss (gain)			111				(242	)			24				—
Settlement loss (gain)			—				(24	)			—				—
Total net periodic pension cost		$	1,319			$	420			$	1,421			$	728

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 predominantly to those employees. During the three and six months ended June 30, 2024, Teradyne recorded special termination benefit charges associated with a voluntary early retirement program.

For the three and six months ended June 30, 2024, and July 2, 2023, Teradyne’s net periodic postretirement benefit cost was comprised of the following:

		For the Three Months Ended								For the Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Service cost		$	9			$	8			$	18			$	17
Interest cost			72				60				145				121
Amortization of prior service credit			(2	)			(2	)			(4	)			(4	)
Special termination benefits			170				369				462				369
Net actuarial loss (gain)			(94	)			30				(94	)			30
Total net periodic postretirement benefit cost		$	155			$	465			$	527			$	533

R. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of June 30, 2024, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $402.2 million, of which $386.5 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.

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 June 30, 2024, and December 31, 2023, Teradyne had a product warranty accrual of $15.2 million and $15.7 million, respectively, included in other accrued liabilities and revenue deferrals related to extended warranties of $33.5 million and $34.9 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 June 30, 2024, and December 31, 2023, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.

S. 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
U.S. statutory federal tax rate			21.0	%			21.0	%			21.0	%			21.0	%
Tax credits			(2.7	)			(2.4	)			(2.8	)			(2.4	)
Foreign taxes			(2.5	)			(1.0	)			(2.4	)			(0.8	)
International provisions of the U.S. Tax Cuts and Jobs Act of 2017			(1.0	)			(2.5	)			(1.3	)			(2.8	)
Discrete benefit related to equity compensation			(0.6	)			(0.1	)			(0.7	)			(1.4	)
Other, net			0.9				1.9				0.5				2.1
Effective tax rate			15.1	%			16.9	%			14.3	%			15.7	%

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 June 30, 2024, 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 June 30, 2024, and December 31, 2023, Teradyne had $15.9 million and $18.6 million, respectively, of reserves for uncertain tax positions. The $2.7 million net decrease in reserves for uncertain tax positions is related to the settlement of an audit.

As of June 30, 2024, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $8.1 million in the next twelve months because of a lapse of statutes of limitation. The estimated decrease relates to transfer pricing and U.S. federal and state research and development credits.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of June 30, 2024, and December 31, 2023, $0.8 million and $1.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the six months ended June 30, 2024, and July 2, 2023, a benefit of $0.5 million and expense of $0.1 million, respectively, were 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 six months ended June 30, 2024, was $4.9 million, or $0.03 per diluted share. The tax savings due to the tax holiday for the six months ended July 2, 2023, was $1.0 million, or $0.01 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended Teradyne's 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.

In the quarter ended June 30, 2024, Teradyne recognized a $57.5 million gain on the sale of the Device Interface Solutions business which resulted in $10.7 million of income tax expense that was recognized as a discrete expense in the quarter.

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.

On December 15, 2022, the European Union ("EU") Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development ("OECD") Pillar Two Framework. The EU’s Pillar Two Directive effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbor rules that effectively extend certain effective dates to January 1, 2027. Certain EU Member States where Teradyne has a legal presence have recently enacted the directive and administrative guidance into their local tax legislation. Additionally, countries outside the EU where Teradyne has a legal presence have enacted similar language as the EU Members States in their local tax legislation. Teradyne is closely monitoring these developments and evaluating the potential financial impact on income tax expense. As of June 30, 2024, the effective tax rate was impacted by legislative changes that went into effect for Pillar Two in some of the Company's foreign jurisdictions, but it did not have a material impact on our financial statements.

T. 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 storage and system level test, defense/aerospace instrumentation 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 contract 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, 2023.

Segment information for the three and six months ended June 30, 2024, and July 2, 2023, is as follows:

		Semiconductor Test				System Test				Robotics				Wireless Test				Segment Total				Corporate and Eliminations				Consolidated
		(in thousands)
Three Months Ended June 30, 2024
Revenues		$	542,564			$	60,801			$	90,247			$	36,267			$	729,879			$	—			$	729,879
Income (loss) before income taxes (1)(2)			158,284				5,224				(17,916	)			9,970			$	155,562				63,841			$	219,403
Total assets (3)			1,306,390				175,567				731,264				83,262			$	2,296,483				1,335,223			$	3,631,706
Three Months Ended July 2, 2023
Revenues		$	474,708			$	94,272			$	71,634			$	43,823			$	684,437			$	—			$	684,437
Income (loss) before income taxes (1)(2)			129,040				28,599				(26,401	)			12,020			$	143,258				1,144			$	144,402
Total assets (3)			1,416,109				191,002				685,132				88,869			$	2,381,112				1,013,784			$	3,394,896
Six Months Ended June 30, 2024
Revenues		$	954,817			$	136,123			$	177,901			$	60,856			$	1,329,698			$	—			$	1,329,698
Income (loss) before income taxes (1)(2)			237,698				23,615				(31,892	)			9,076			$	238,497				53,808			$	292,305
Total assets (3)			1,306,390				175,567				731,264				83,262			$	2,296,483				1,335,223			$	3,631,706
Six Months Ended July 2, 2023
Revenues		$	889,717			$	168,903			$	160,848			$	82,498			$	1,301,966			$	—			$	1,301,966
Income (loss) before income taxes (1)(2)			225,225				43,874				(44,891	)			21,372			$	245,580				(4,094	)		$	241,486
Total assets (3)			1,416,109				191,002				685,132				88,869			$	2,381,112				1,013,784			$	3,394,896

(1)

Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, severance charges, pension, acquisition and divestiture related fees, and an expense for the modification of outstanding equity awards.

(2)

Included in income (loss) before taxes are charges related to restructuring and other, expense for the modification of outstanding equity awards, 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 Six Months Ended
		June 30, 2024				July 2, 2023				June 30, 2024				July 2, 2023
		(in thousands)								(in thousands)
Semiconductor Test:
Cost of revenues—inventory charge		$	2,408			$	4,184			$	7,364			$	7,952
Restructuring and other—employee severance			—				2,485				1,130				3,279
System Test:
Cost of revenues—inventory charge		$	—			$	—			$	720			$	1,113
Restructuring and other—employee severance			—				—				—				642
Robotics:
Restructuring and other—employee severance		$	1,308			$	1,638			$	1,537			$	2,071
Cost of revenues—inventory charge			—				769				534				1,551
Wireless Test:
Cost of revenues—inventory charge		$	—			$	—			$	820			$	725
Corporate and Eliminations:
Restructuring and other—acquisition & divestiture related expenses		$	—			$	—			$	2,214			$	—
Selling and administrative —equity modification			—				—				1,469				5,889
Restructuring and other—other			—				1,100				—				1,100
Restructuring and other—employee severance			—				—				—				1,124

U. 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. 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. Teradyne intends to repurchase up to $90.0 million of its common stock in 2024 based on market conditions.

During the six months ended June 30, 2024, Teradyne repurchased 0.3 million shares of common stock for a total cost of $30.3 million at an average price of $101.40 per share. The cumulative repurchases under the January 2023 repurchase program as of June 30, 2024, were 4.2 million shares of common stock for $430.8 million at an average price per share of $102.39.

During the six months ended July 2, 2023, Teradyne repurchased 2.2 million shares of common stock for a total cost of $229.5 million at an average price of $102.35 per share.

The total cost of shares acquired includes commissions and 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 2024 and May 2024, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.12 per share. Dividend payments for the three and six months ended June 30, 2024, were $19.0 million and $37.4 million, respectively.

In January 2023 and May 2023, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three and six months ended July 2, 2023, were $17.0 million and $34.2 million, respectively.