Item 1. Financial Statements

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Item 1. Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 29, 2024			December 31, 2023
	(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents	$	510,036		$	757,571
Marketable securities		41,631			62,154
Accounts receivable, less allowance for credit losses of $1,972 and $1,988 at September 29, 2024 and December 31, 2023, respectively		484,376			422,124
Inventories, net		297,340			309,974
Prepayments		489,548			548,970
Other current assets		15,935			37,992
Current assets held for sale		—			23,250
Total current assets		1,838,866			2,162,035
Property, plant and equipment, net		491,704			445,492
Operating lease right-of-use assets, net		70,784			73,417
Marketable securities		125,944			117,434
Deferred tax assets		201,881			175,775
Retirement plans assets		13,114			11,504
Equity method investment		538,351			—
Other assets		48,384			38,580
Acquired intangible assets, net		21,288			35,404
Goodwill		419,412			415,652
Long-term assets held for sale		—			11,531
Total assets	$	3,769,728		$	3,486,824
LIABILITIES
Current liabilities:
Accounts payable	$	158,459		$	180,131
Accrued employees’ compensation and withholdings		159,794			191,750
Deferred revenue and customer advances		99,776			99,804
Other accrued liabilities		105,150			114,712
Operating lease liabilities		19,175			17,522
Income taxes payable		52,542			48,653
Current liabilities held for sale		—			7,379
Total current liabilities		594,896			659,951
Retirement plans liabilities		137,735			132,090
Long-term deferred revenue and customer advances		41,135			37,282
Long-term other accrued liabilities		8,373			19,998
Deferred tax liabilities		164			183
Long-term operating lease liabilities		60,287			65,092
Long-term incomes taxes payable		24,596			44,331
Long-term liabilities held for sale		—			2,000
Total liabilities		867,186			960,927
Commitments and contingencies (Note R)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 162,959 and 152,698 shares issued and outstanding at September 29, 2024, and December 31, 2023, respectively		20,370			19,087
Additional paid-in capital		1,896,161			1,827,274
Accumulated other comprehensive loss		(4,028	)		(26,978	)
Retained earnings		990,039			706,514
Total shareholders’ equity		2,902,542			2,525,897
Total liabilities and shareholders’ equity	$	3,769,728		$	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 Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
	(in thousands, except per share amount)						(in thousands, except per share amount)
Revenues:
Products	$	612,871		$	551,982		$	1,668,181		$	1,565,776
Services		124,427			151,750			398,815			439,923
Total revenues		737,298			703,732			2,066,996			2,005,699
Cost of revenues:
Cost of products		253,129			239,827			704,129			655,502
Cost of services		47,655			65,614			161,228			192,993
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		300,784			305,441			865,357			848,495
Gross profit		436,514			398,291			1,201,639			1,157,204
Operating expenses:
Selling and administrative		157,649			138,330			461,307			434,979
Engineering and development		117,474			104,413			332,489			315,881
Acquired intangible assets amortization		4,748			4,720			14,108			14,348
Restructuring and other		4,578			6,856			11,018			15,251
Gain on sale of business		—			—			(57,486	)		—
Total operating expenses		284,449			254,319			761,436			780,459
Income from operations		152,065			143,972			440,203			376,745
Non-operating (income) expense:
Interest income		(5,076	)		(6,873	)		(19,658	)		(18,486	)
Interest expense		808			963			2,998			2,994
Other (income) expense, net		(2,651	)		5,602			5,574			6,470
Income before income taxes and equity in net earnings of affiliate		158,984			144,280			451,289			385,767
Income tax provision		12,260			16,164			54,095			54,069
Income before equity in net earnings of affiliate		146,724			128,116			397,194			331,698
Equity in net earnings of affiliate		(1,075	)		—			(1,075	)		—
Net income	$	145,649		$	128,116		$	396,119		$	331,698
Net income per common share:
Basic	$	0.89		$	0.83		$	2.51		$	2.14
Diluted	$	0.89		$	0.78		$	2.42		$	2.01
Weighted average common shares—basic		163,002			153,762			157,951			154,809
Weighted average common shares—diluted		164,253			164,050			163,357			165,037

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
	(in thousands)						(in thousands)
Net income	$	145,649		$	128,116		$	396,119		$	331,698
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, and $0, respectively		37,838			(14,325	)		22,751			(2,073	)
Available-for-sale marketable securities:
Unrealized (losses) gains on marketable securities arising during period, net of tax of $609, $(731), $205, and $(408), respectively		2,507			(2,628	)		885			(903	)
Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $(2), $0, $24, and $9, respectively		(7	)		—			86			33
		2,500			(2,628	)		971			(870	)
Cash flow hedges:
Unrealized (losses) gains arising during period, net of tax of $(73), $728, $285, and $1,816, respectively		(260	)		2,590			1,014			6,456
Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $0, $(869), $(500) and $(441) respectively		—			(3,091	)		(1,780	)		(1,567	)
		(260	)		(501	)		(766	)		4,889
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(1), and $(1), respectively		(2	)		(2	)		(6	)		(6	)
Other comprehensive income (loss)		40,076			(17,456	)		22,950			1,940
Comprehensive income	$	185,725		$	110,660		$	419,069		$	333,638

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 September 29, 2024
Balance, June 30, 2024		161,802		$	20,225		$	1,865,351		$	(44,104	)	$	889,340		$	2,730,812
Net issuance of common stock under stock-based plans		130			17			14,966									14,983
Stock-based compensation expense								15,999									15,999
Warrant exercises		1,223			153			(155	)								(2	)
Repurchase of common stock		(196	)		(25	)								(25,376	)		(25,401	)
Cash dividends ($0.12 per share)														(19,574	)		(19,574	)
Net income														145,649			145,649
Other comprehensive income (loss)											40,076						40,076
Balance, September 29, 2024		162,959		$	20,370		$	1,896,161		$	(4,028	)	$	990,039		$	2,902,542
For the Three Months Ended October 1, 2023
Balance, July 2, 2023		154,148		$	19,269		$	1,784,590		$	(30,472	)	$	661,496		$	2,434,883
Net issuance of common stock under stock-based plans		207			26			17,180									17,206
Stock-based compensation expense								14,367									14,367
Repurchase of common stock		(1,120	)		(141	)								(118,766	)		(118,907	)
Cash dividends ($0.11 per share)														(16,909	)		(16,909	)
Settlements of convertible notes		210			25			(25	)								—
Exercise of convertible notes hedge call options		(210	)		(25	)		25									—
Net income														128,116			128,116
Other comprehensive income (loss)											(17,456	)					(17,456	)
Balance, October 1, 2023		153,235		$	19,154		$	1,816,137		$	(47,928	)	$	653,937		$	2,441,300


	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 Nine Months Ended September 29, 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		720			91			23,340									23,431
Stock-based compensation expense								46,817									46,817
Warrant exercises		10,036			1,254			(1,270	)								(16	)
Repurchase of common stock		(495	)		(62	)								(55,630	)		(55,692	)
Cash dividends ($0.36 per share)														(56,964	)		(56,964	)
Net income														396,119			396,119
Other comprehensive income (loss)											22,950						22,950
Balance, September 29, 2024		162,959		$	20,370		$	1,896,161		$	(4,028	)	$	990,039		$	2,902,542
For the Nine Months Ended October 1, 2023
Balance, December 31, 2022		155,759		$	19,470		$	1,755,963		$	(49,868	)	$	725,729		$	2,451,294
Net issuance of common stock under stock-based plans		838			104			13,399									13,503
Stock-based compensation expense								46,775									46,775
Repurchase of common stock		(3,362	)		(420	)								(352,371	)		(352,791	)
Cash dividends ($0.33 per share)														(51,119	)		(51,119	)
Settlements of convertible notes		585			72			(72	)								—
Exercise of convertible notes hedge call options		(585	)		(72	)		72									—
Net income														331,698			331,698
Other comprehensive income (loss)											1,940						1,940
Balance, October 1, 2023		153,235		$	19,154		$	1,816,137		$	(47,928	)	$	653,937		$	2,441,300

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended
	September 29, 2024			October 1, 2023
	(in thousands)
Cash flows from operating activities:
Net income	$	396,119		$	331,698
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation		74,480			68,858
Stock-based compensation		45,267			45,236
Provision for excess and obsolete inventory		15,516			23,069
Amortization		14,133			14,083
Losses (gains) on investments		10,139			(3,159	)
Equity in net earnings of affiliate		1,075			—
Gain on sale of business		(57,486	)		—
Deferred taxes		(26,261	)		(24,026	)
Retirement plan actuarial losses (gains)		(2,512	)		—
Other		(5,041	)		(13	)
Changes in operating assets and liabilities
Accounts receivable		(65,266	)		30,191
Inventories		11,127			6,395
Prepayments and other assets		61,438			(63,982	)
Accounts payable and other liabilities		(63,666	)		3,999
Deferred revenue and customer advances		3,624			(49,517	)
Retirement plans contributions		(4,169	)		(3,698	)
Income taxes		(18,898	)		(42,683	)
Net cash provided by operating activities		389,619			336,451
Cash flows from investing activities:
Purchases of property, plant and equipment		(140,710	)		(115,306	)
Purchase of investment in a business		(527,060	)		—
Purchases of marketable securities		(35,097	)		(137,786	)
Issuance of convertible loan		—			(5,000	)
Proceeds from the sale of a business, net of cash and cash equivalents sold		90,348			—
Proceeds from maturities of marketable securities		33,163			71,447
Proceeds from sales of marketable securities		23,600			36,963
Proceeds from insurance		873			460
Net cash used for investing activities		(554,883	)		(149,222	)
Cash flows from financing activities:
Repayments of borrowings on revolving credit facility		(185,000	)		—
Dividend payments		(56,936	)		(51,081	)
Repurchase of common stock		(55,053	)		(346,492	)
Payments related to net settlement of employee stock compensation awards		(13,833	)		(20,586	)
Payments of convertible debt principal		—			(26,735	)
Proceeds from borrowings on revolving credit facility		185,000			—
Issuance of common stock under stock purchase and stock option plans		37,265			34,084
Net cash used for financing activities		(88,557	)		(410,810	)
Effects of exchange rate changes on cash and cash equivalents		6,286			5,769
Decrease in cash and cash equivalents		(247,535	)		(217,812	)
Cash and cash equivalents at beginning of period		757,571			854,773
Cash and cash equivalents at end of period	$	510,036		$	636,961
Non-cash investing activities:
Capital expenditures incurred but not yet paid:	$	3,679		$	2,392

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 (“Integrated System Test” formerly "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

Teradyne accounts for investments using the equity method of accounting when it 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 records its share of investee's net income or loss and other comprehensive income, and the amortization of equity method basis difference, calculated as the difference between the investment and the amount of underlying equity in net assets acquired, on a 3-month lag, which is applied consistently from period to period. Teradyne's share of investee's net income and the amortization of equity method basis difference are reported in ‘Equity in net earnings of affiliate’ in the consolidated statement of operations. Teradyne includes its share of investee's other comprehensive income

and a cumulative translation adjustment in the consolidated statements of comprehensive income. Teradyne 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 September 29, 2024 (1)
Timing of Revenue Recognition
Point in Time		$	323,507	$	143,581	$	55,611	$	71,607	$	15,065	$	29,465	$	638,836
Over Time			68,848		6,798		17,701		1,811		168		3,136		98,462
Total		$	392,355	$	150,379	$	73,312	$	73,418	$	15,233	$	32,601	$	737,298
Geographical Market
Asia Pacific		$	364,476	$	137,890	$	29,277	$	10,873	$	2,960	$	24,342	$	569,818
Americas			17,150		1,325		39,919		32,315		8,460		5,515		104,684
Europe, Middle East and Africa			10,729		11,164		4,116		30,230		3,813		2,744		62,796
Total		$	392,355	$	150,379	$	73,312	$	73,418	$	15,233	$	32,601	$	737,298

For the Three Months Ended October 1, 2023 (1)
Timing of Revenue Recognition
Point in Time		$	330,846	$	86,247	$	66,418	$	68,938	$	14,012	$	32,638	$	599,099
Over Time			73,264		7,506		16,785		1,607		1,135		4,336		104,633
Total		$	404,110	$	93,753	$	83,203	$	70,545	$	15,147	$	36,974	$	703,732
Geographical Market
Asia Pacific		$	360,375	$	91,352	$	40,464	$	15,430	$	3,180	$	24,727	$	535,528
Americas			24,752		1,356		35,888		26,073		7,154		10,139		105,362
Europe, Middle East and Africa			18,983		1,045		6,851		29,042		4,813		2,108		62,842
Total		$	404,110	$	93,753	$	83,203	$	70,545	$	15,147	$	36,974	$	703,732

For the Nine Months Ended September 29, 2024 (2)
Timing of Revenue Recognition
Point in Time		$	896,635	$	367,679	$	157,203	$	210,222	$	49,850	$	82,652	$	1,764,241
Over Time			211,612		21,626		52,232		5,542		938		10,805		302,755
Total		$	1,108,247	$	389,305	$	209,435	$	215,764	$	50,788	$	93,457	$	2,066,996
Geographical Market
Asia Pacific		$	1,016,674	$	357,993	$	76,317	$	37,254	$	11,361	$	70,776	$	1,570,375
Americas			59,912		13,631		105,197		82,220		28,195		16,240		305,395
Europe, Middle East and Africa			31,661		17,681		27,921		96,290		11,232		6,441		191,226
Total		$	1,108,247	$	389,305	$	209,435	$	215,764	$	50,788	$	93,457	$	2,066,996

For the Nine Months Ended October 1, 2023 (2)
Timing of Revenue Recognition
Point in Time		$	886,201	$	260,052	$	200,076	$	194,698	$	42,748	$	108,262	$	1,692,038
Over Time			219,436		21,890		52,030		5,731		3,364		11,210		313,661
Total		$	1,105,638	$	281,942	$	252,106	$	200,429	$	46,112	$	119,472	$	2,005,699
Geographical Market
Asia Pacific		$	946,696	$	270,297	$	121,698	$	43,530	$	6,973	$	70,320	$	1,459,514
Americas			98,511		8,586		105,031		69,346		25,051		42,476		349,001
Europe, Middle East and Africa			60,431		3,059		25,377		87,553		14,088		6,676		197,184
Total		$	1,105,638	$	281,942	$	252,106	$	200,429	$	46,112	$	119,472	$	2,005,699

(1)

Includes $0.8 million and $1.4 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 $2.5 million and $3.9 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 nine months ended September 29, 2024, Teradyne recognized $13.4 million and $60.2 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. During the three and nine months ended October 1, 2023, Teradyne recognized $21.9 million and $91.3 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. 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 September 29, 2024, Teradyne had $1,045.4 million of unsatisfied performance obligations. Teradyne expects to recognize approximately 93% 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:


	September 29, 2024		December 31, 2023
	(in thousands)
Maintenance, service and training	$	57,866	$	66,458
Customer advances, undelivered elements and other		44,116		35,731
Extended warranty		38,929		34,897
Total deferred revenue and customer advances	$	140,911	$	137,086

Accounts Receivable

During the three and nine months ended September 29, 2024, and October 1, 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 September 29, 2024, and October 1, 2023, total trade accounts receivable sold under the factoring agreements were $36.1 million and $94.1 million, respectively. During the nine months ended September 29, 2024, and October 1, 2023, total trade accounts receivable sold under the factoring agreements were $116.8 million and $191.2 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 also received 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 September 29, 2024, $538.4 million was recorded as 'Equity method investment' in the consolidated balance sheets.


	(in thousands)
Balance at June 30, 2024	$	524,060
Other comprehensive income related to investment		15,366
Equity in net earnings of affiliate		(1,075	)
Balance at September 29, 2024	$	538,351

Based on the quoted closing price of Technoprobe stock as of September 29, 2024, the fair value of the publicly traded investment was $471.8 million, and there was no other-than-temporary impairment identified.

Teradyne's equity method basis difference was calculated as the difference between the investment and the amount of underlying equity in net assets acquired. The equity method basis difference calculated at acquisition attributable to developed technology, customer relationships, trade name, property, plant and equipment, inventory, and deferred tax liability was $204.7 million. The basis differences, net of tax, will be amortized over their estimated useful lives.

Teradyne made an accounting policy election to report its share of Technoprobe's results on a 3-month lag, which is applied consistently from period to period. Teradyne records its share of Technoprobe's net income or loss and the amortization of equity method basis difference, as 'Equity in net earnings of affiliate' in the consolidated statements of operations. Teradyne includes its share of Technoprobe's other comprehensive income and a cumulative translation adjustment in the consolidated statements of comprehensive income.

G. INVENTORIES

Inventories, net consisted of the following at September 29, 2024, and December 31, 2023:


	September 29, 2024		December 31, 2023
	(in thousands)
Raw material	$	216,019	$	258,422
Work-in-process		48,249		26,851
Finished goods		33,072		24,701
Total inventories, net (1)	$	297,340	$	309,974

(1)

Inventories, net at December 31, 2023, exclude $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 September 29, 2024, and December 31, 2023, were $140.5 million and $136.0 million, respectively.

H. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with original 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 nine months ended September 29, 2024, and October 1, 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 nine months ended September 29, 2024, were $0.8 million and $2.1 million, respectively. Realized gains recorded in the three and nine months ended October 1, 2023, were $0.1 million and $0.6 million,

respectively. Realized losses recorded in the three and nine months ended September 29, 2024, were $0.0 million and $0.3 million, respectively. Realized losses recorded in the three and nine months ended October 1, 2023, were $0.0 million and $0.3 million, respectively. 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 nine months ended September 29, 2024, were $2.2 million and $5.4 million, respectively. Unrealized gains on equity securities recorded in the three and nine months ended October 1, 2023, were $0.0 million and $4.6 million, respectively. There were no unrealized losses on equity securities recorded in the three and nine months ended September 29, 2024. Unrealized losses on equity securities recorded in the three and nine months ended October 1, 2023, were $1.7 million. 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 September 29, 2024, and December 31, 2023.


	September 29, 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	$	198,946	$	—	$	—	$	198,946
Cash equivalents		308,000		3,090		—		311,090
Available-for-sale securities:
U.S. Treasury securities		—		41,833		—		41,833
Corporate debt securities		—		37,149		—		37,149
Certificates of deposit and time deposits		—		21,741		—		21,741
Debt mutual funds		8,640		—		—		8,640
U.S. government agency securities		—		3,931		—		3,931
Non-U.S. government securities		—		801		—		801
Equity securities:
Mutual funds		53,480		—		—		53,480
	$	569,066	$	108,545	$	—	$	677,611
Derivative assets		—		332		—		332
Total	$	569,066	$	108,877	$	—	$	677,943
Liabilities
Derivative liabilities		—		1,435		—	$	1,435
Total	$	—	$	1,435	$	—	$	1,435

Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	506,946	$	3,090	$	—	$	510,036
Marketable securities		—		41,631		—		41,631
Long-term marketable securities		62,120		63,824		—		125,944
Other current assets		—		332		—		332
Total	$	569,066	$	108,877	$	—	$	677,943
Liabilities
Other current liabilities		—		1,435		—		1,435
Total	$	—	$	1,435	$	—	$	1,435


	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 September 29, 2024, and December 31, 2023, were as follows:


	September 29, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	510,036	$	510,036	$	757,571	$	757,571
Marketable securities		167,575		167,575		179,588		179,588
Derivative assets		332		332		18,746		18,746
Liabilities
Derivative liabilities		1,435		1,435		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 September 29, 2024:


	September 29, 2024
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	45,522	$	106	$	(3,795	)	$	41,833	$	22,985
Corporate debt securities	$	39,986	$	323	$	(3,160	)	$	37,149	$	25,248
Certificates of deposit and time deposits		21,741		—		—			21,741		—
Debt mutual funds		8,846		—		(206	)		8,640		3,319
U.S. government agency securities		3,921		11		(1	)		3,931		876
Non-U.S. government securities		801		—		—			801		—
	$	120,817	$	440	$	(7,162	)	$	114,095	$	52,428

Reported as follows:


	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	41,673		20	$	(62	)	$	41,631	$	9,973
Long-term marketable securities		79,144		420		(7,100	)		72,464		42,455
	$	120,817	$	440	$	(7,162	)	$	114,095	$	52,428

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 September 29, 2024, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $8.3 million and $44.1 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 September 29, 2024, and December 31, 2023, were not other than temporary.

The contractual maturities of investments in available-for-sale securities held at September 29, 2024, were as follows:


	September 29, 2024
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	41,673	$	41,631
Due after 1 year through 5 years		25,690		25,729
Due after 5 years through 10 years		7,950		7,908
Due after 10 years		36,658		30,187
Total	$	111,971	$	105,455

Contractual maturities of investments in available-for-sale securities held at September 29, 2024, exclude debt mutual funds with a fair market value of $8.6 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 September 29, 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
	September 29, 2024		December 31, 2023
	(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Taiwan dollar		29.6		42.7
U.S. dollar/Japanese yen		21.7		11.0
U.S. dollar/Korean won		8.9		7.2
U.S. dollar/British pound sterling		1.0		1.5
U.S. dollar/Danish krone		—		36.0
Danish krone/U.S. dollar		25.7		0.7
Euro/U.S. dollar		24.8		25.3
Singapore dollar/U.S. dollar		23.0		16.6
Philippine peso/U.S. dollar		9.7		10.1
Chinese yuan/U.S. dollar		1.7		1.0
Total	$	146.1	$	152.1

The fair value of the outstanding contracts was a net loss of $0.8 million and a net loss of $1.8 million at September 29, 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 September 29, 2024, and 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
	September 29, 2024		December 31, 2023
	(in millions)
Currency Hedged (Buy/Sell)
U.S. dollar/Japanese yen	$	12.1	$	35.5
Total	$	12.1	$	35.5

The fair value of the outstanding cash flow hedge contracts was a loss of $0.3 million and a gain of $0.6 million at September 29, 2024, and December 31, 2023, respectively.

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

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 nine months ended September 29, 2024, a realized loss of $9.8 million was recorded in 'Other (income) expense, net' in the consolidated statement of operations.

The following table summarizes the fair value of derivative instruments as of September 29, 2024, and December 31, 2023:


	Balance Sheet Location	September 29, 2024			December 31, 2023
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		332			733
Foreign exchange forward contracts	Other current liabilities		(1,102	)		(2,545	)
Foreign exchange option contracts	Other current assets		—			17,364
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		—			648
Foreign exchange forward contracts	Other current liabilities		(333	)		—
Total derivatives		$	(1,103	)	$	16,200

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and nine months ended September 29, 2024, and October 1, 2023:


		For the Three Months Ended					For the Nine Months Ended
	Location of (Gains) Losses Recognized in Statement of Operations	September 29, 2024		October 1, 2023			September 29, 2024			October 1, 2023
		(in thousands)					(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts (1)	Other (income) expense, net	$	4,829	$	(1,886	)	$	686		$	(4,667	)
Foreign exchange option contracts	Other (income) expense, net		—		—			9,764			—
Derivatives designated as hedging instruments:
Foreign exchange forward and option contracts	Revenue		—		(3,960	)		(2,280	)		(2,008	)
Total Derivatives		$	4,829	$	(5,846	)	$	8,170		$	(6,675	)

(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 nine months ended September 29, 2024, net losses (gains) from remeasurement of monetary assets and liabilities denominated in foreign currencies were $(2.9) million and $3.1 million, respectively. For the three and nine months ended October 1, 2023, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $5.3 million and $12.3 million, respectively.

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, covered, subject to customary anti-dilution adjustments, approximately 1.3 million shares of common stock. During the three and nine months ended September 29, 2024, 1.3 million and 14.7 million warrants expired, resulting in the issuance of 1.2 million and 10.0 million shares of Teradyne common stock, respectively. As of the final date of expiration, July 10, 2024, the strike price of the warrants was approximately $39.35 per shares.

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 nine months ended October 1, 2023, was as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(in thousands)				(in thousands)
Contractual interest expense on the coupon	$	—	$	74	$	—	$	312
Amortization of debt issuance fees recognized as interest expense		—		—		—		113
Total interest expense on the convertible debt	$	—	$	74	$	—	$	425

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 fully repaid its borrowings on the revolving credit facility prior to September 29, 2024. There was no outstanding revolver balance as of September 29, 2024.

As of November 1, 2024, the Credit Facility was undrawn, and Teradyne was in compliance with all covenants under the Credit Agreement.

J. PREPAYMENTS

Prepayments consist of the following:


	September 29, 2024		December 31, 2023
	(in thousands)
Contract manufacturer and supplier prepayments	$	439,647	$	502,257
Prepaid taxes		20,734		16,083
Prepaid maintenance and other services		19,040		17,592
Other prepayments		10,127		13,038
Total prepayments (1)	$	489,548	$	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 Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
	(in thousands)						(in thousands)
Balance at beginning of period	$	15,244		$	12,543		$	15,698		$	14,181
Accruals for warranties issued during the period		2,149			8,859			8,331			16,237
Accruals related to pre-existing warranties		(545	)		(795	)		(1,513	)		(1,552	)
Settlements made during the period		(2,990	)		(5,892	)		(8,658	)		(14,151	)
Balance at end of period	$	13,858		$	14,715		$	13,858		$	14,715

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


	For the Three Months Ended						For the Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
	(in thousands)						(in thousands)
Balance at beginning of period	$	33,512		$	44,422		$	34,897		$	56,180
Deferral of new extended warranty revenue		9,714			2,734			22,316			11,615
Recognition of extended warranty deferred revenue		(4,297	)		(8,313	)		(18,284	)		(28,952	)
Balance at end of period	$	38,929		$	38,843		$	38,929		$	38,843

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 nine months ended October 1, 2023, Teradyne recorded a stock-based compensation expense of $5.9 million related to the Retirement Agreement.

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

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

Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.

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

If a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) death or (2) after attaining both at least age sixty and at least ten years of service, 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 nine months ended September 29, 2024, and October 1, 2023, Teradyne granted 0.6 million and 0.5 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $95.98 and $102.66, 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 nine months ended September 29, 2024, and October 1, 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 $102.91, respectively.

During the nine months ended September 29, 2024, and October 1, 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 $139.04, respectively. The grant date fair value was estimated using the Monte Carlo simulation model with the following assumptions:


	For the Nine Months Ended
	September 29, 2024			October 1, 2023
Risk-free interest rate		3.9	%		4.0	%
Teradyne volatility-historical		42.4	%		49.7	%
NYSE Composite Index volatility-historical		15.6	%		24.1	%
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 the applicable 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 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 $104.12 for the 2023 grant.

During the nine months ended September 29, 2024, and October 1, 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 $41.23, respectively.

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


	For the Nine Months Ended
	September 29, 2024			October 1, 2023
Expected life (years)		4.0			4.0
Risk-free interest rate		4.0	%		3.8	%
Volatility-historical		46.3	%		46.6	%
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 $104.15 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)
Nine Months Ended September 29, 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, $205, $285, $0, respectively		22,751			885			1,014			—			24,650
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $0, $24, $(500), $(1), respectively		—			86			(1,780	)		(6	)		(1,700	)
Net current period other comprehensive (loss) gain, net of tax of $0, $229, $(215), $(1), respectively		22,751			971			(766	)		(6	)		22,950
Balance at September 29, 2024, net of tax of $0, $(1,499), $(73), $(1,133), respectively	$	309		$	(5,223	)	$	(260	)	$	1,146		$	(4,028	)

Nine Months Ended October 1, 2023
Balance at December 31, 2022, net of tax of $0, $(2,308), $(708), $(1,130), respectively	$	(39,849	)	$	(8,661	)	$	(2,517	)	$	1,159		$	(49,868	)
Other comprehensive (loss) gain before reclassifications, net of tax of $0, $(408), $1,816, $0, respectively		(2,073	)		(903	)		6,456			—			3,480
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $0, $9, $(441), $(1), respectively		—			33			(1,567	)		(6	)		(1,540	)
Net current period other comprehensive (loss) gain, net of tax of $0, $(399), $1,375, $(1), respectively		(2,073	)		(870	)		4,889			(6	)		1,940
Balance at October 1, 2023, net of tax of $0, $(2,707), $667, $(1,131), respectively	$	(41,922	)	$	(9,531	)	$	2,372		$	1,153		$	(47,928	)

Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and nine months ended September 29, 2024, and October 1, 2023, were as follows:


Details about Accumulated Other Comprehensive Income (Loss) Components	For the Three Months Ended				For the Nine Months Ended						Affected Line Item in the Statements of Operations
	September 29, 2024		October 1, 2023		September 29, 2024			October 1, 2023
	(in thousands)				(in thousands)
Available-for-sale marketable securities:
Unrealized (losses) gains, net of tax of $2, $0, $(24), $(9), respectively	$	7	$	—	$	(86	)	$	(33	)	Other (income) expense, net
Cash flow hedges:
Unrealized (losses) gains, net of tax of $0, $869, $500, $441, respectively		—		3,091		1,780			1,567		Revenue
Defined benefit pension and postretirement plans:
Amortization of prior service credit, net of tax of $0, $0, $1, $1, respectively		2		2		6			6		(a)
Total reclassifications, net of tax of $2, $869, $477, $433 respectively	$	9	$	3,093	$	1,700		$	1,540		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 nine months ended September 29, 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 nine months ended September 29, 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		3,765		—			(5	)		—			3,760
Balance at September 29, 2024
Goodwill	$	399,229	$	361,819		$	262,232		$	158,699			1,181,978
Accumulated impairment losses		—		(353,843	)		(260,540	)		(148,183	)		(762,566	)
Total Goodwill	$	399,229	$	7,976		$	1,692		$	10,516		$	419,412

Intangible Assets

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 September 29, 2024
Developed technology	$	267,706	$	(252,406	)	$	(5,337	)	$	9,963
Customer relationships		52,109		(49,134	)		210			3,185
Tradenames and trademarks		59,007		(49,618	)		(1,249	)		8,140
Total intangible assets	$	378,822	$	(351,158	)	$	(6,376	)	$	21,288
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 $14.1 million, respectively, for the three and nine months ended September 29, 2024, and $4.7 million and $14.3 million, respectively, for the three and nine months ended October 1, 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	$	4,775
2025		11,454
2026		2,402
2027		1,185
2028		1,104
Thereafter		368

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 Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(in thousands, except per share amounts)				(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	145,649	$	128,116	$	396,119	$	331,698
Weighted average common shares-basic		163,002		153,762		157,951		154,809
Effect of dilutive potential common shares:
Restricted stock units		768		455		637		410
Convertible note hedge warrant shares (1)		460		9,168		4,751		9,009
Stock options		13		26		13		39
Employee stock purchase plan		10		10		5		8
Incremental shares from assumed conversion of convertible notes (2)		—		629		—		762
Dilutive potential common shares		1,251		10,288		5,406		10,228
Weighted average common shares-diluted		164,253		164,050		163,357		165,037
Net income per common share-basic	$	0.89	$	0.83	$	2.51	$	2.14
Net income per common share-diluted	$	0.89	$	0.78	$	2.42	$	2.01

(1)

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

(2)

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

The computation of diluted net income per common share for the three and nine months ended September 29, 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 nine months ended October 1, 2023, excludes the effect of the potential vesting of 0.1 million and 0.4 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

P. RESTRUCTURING AND OTHER

During the three months ended September 29, 2024, Teradyne recorded restructuring and other charges primarily related to $1.3 million of severance charges related to headcount reductions principally in Robotics.

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

During the nine months ended September 29, 2024, Teradyne recorded restructuring and other charges primarily related to $5.3 million of severance and other charges, related to headcount reductions of 87 people primarily in Robotics and Semiconductor Test, which included charges related to a voluntary early retirement program for employees meeting certain conditions, and $2.2 million of acquisition and divestiture expenses related to the Technoprobe transactions.

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

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.

During the three months ended September 29, 2024, Teradyne purchased a group annuity contract for its retiree participants in the U.S. qualified pension plan. Under the group annuity, the accrued pension obligation for 132 retiree participants were transferred to an insurance company. The reduction in the pension benefit obligation and pension assets was $23.4 million. During the three and nine months ended September 29, 2024, Teradyne recorded settlement expense of $0.4 million related to the retiree group annuity transaction.

In the nine months ended September 29, 2024, and October 1, 2023, Teradyne contributed $2.3 million and $2.3 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.8 million and $0.8 million, respectively, to certain qualified pension plans for non-U.S. subsidiaries.

For the three and nine months ended September 29, 2024, and October 1, 2023, Teradyne’s net periodic pension cost was comprised of the following:


	For the Three Months Ended
	September 29, 2024						October 1, 2023
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	216		$	119		$	272		$	107
Interest cost		1,590			256			1,713			253
Expected return on plan assets		(1,204	)		(23	)		(1,286	)		(11	)
Net actuarial loss (gain)		(2,262	)		—			—			66
Settlement expense		394			—			—			5
Total net periodic pension cost	$	(1,266	)	$	352		$	699		$	420


	For the Nine Months Ended
	September 29, 2024						October 1, 2023
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	665		$	360		$	815		$	320
Interest cost		4,883			766			5,138			762
Expected return on plan assets		(3,737	)		(58	)		(3,856	)		(28	)
Net actuarial loss (gain)		(2,151	)		(242	)		24			66
Settlement expense		394			(24	)		—			5
Total net periodic pension cost	$	54		$	802		$	2,121		$	1,125

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 nine months ended September 29, 2024, Teradyne recorded special termination benefit charges associated with a voluntary early retirement program.

For the three and nine months ended September 29, 2024, and October 1, 2023, Teradyne’s net periodic postretirement benefit cost was comprised of the following:


	For the Three Months Ended						For the Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
	(in thousands)						(in thousands)
Service cost	$	9		$	9		$	28		$	26
Interest cost		72			60			217			181
Amortization of prior service credit		(2	)		(2	)		(7	)		(7	)
Special termination benefits		—			1,423			462			1,792
Net actuarial loss (gain)		—			—			(94	)		30
Total net periodic postretirement benefit cost	$	79		$	1,490		$	606		$	2,022

R. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of September 29, 2024, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $458.1 million, of which $445.9 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 September 29, 2024, and December 31, 2023, Teradyne had a product warranty accrual of $13.9 million and $15.7 million, respectively, included in other

accrued liabilities and revenue deferrals related to extended warranties of $38.9 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 September 29, 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 Nine Months Ended
	September 29, 2024			October 1, 2023			September 29, 2024			October 1, 2023
U.S. statutory federal tax rate		21.0	%		21.0	%		21.0	%		21.0	%
Non-deductible officers' compensation		0.5			1.3			0.4			1.1
Tax credits		(5.0	)		(9.3	)		(3.6	)		(5.0	)
Discrete expense (benefit) related to reserves for uncertain tax positions		(4.9	)		0.3			(2.2	)		0.1
Foreign taxes		(4.9	)		(1.5	)		(3.3	)		(1.1	)
International provisions of the U.S. Tax Cuts and Jobs Act of 2017		(0.8	)		(3.1	)		(1.1	)		(2.9	)
Other, net		1.9			2.5			0.8			0.8
Effective tax rate		7.8	%		11.2	%		12.0	%		14.0	%

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 September 29, 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 September 29, 2024, and December 31, 2023, Teradyne had $7.6 million and $18.6 million, respectively, of reserves for uncertain tax positions. The $11.0 million net decrease in reserves for uncertain tax positions is related to the audit settlements.

As of September 29, 2024, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $0.7 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 September 29, 2024, and December 31, 2023, $0.2 million and $1.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the nine months ended September 29, 2024, and October 1, 2023, a benefit of $1.0 million and expense of $0.2 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 nine months ended September 29, 2024, were $10.2 million, or $0.06 per diluted share. The tax savings due to the tax holiday for the nine months ended October 1, 2023, were $1.7 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 nine months ended September 29, 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 during the period in which the gain occurred.

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 September 29, 2024, the effective tax rate was impacted by legislative changes that went into effect for Pillar Two in some of Teradyne's foreign jurisdictions, but it did not have a material impact on its 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 nine months ended September 29, 2024, and October 1, 2023, is as follows:


	Semiconductor Test		System Test		Robotics			Wireless Test		Segment Total		Corporate and Eliminations			Consolidated
	(in thousands)
Three Months Ended September 29, 2024
Revenues	$	542,734	$	73,312	$	88,651		$	32,601	$	737,298	$	—		$	737,298
Income (loss) before income taxes (1)(2)		163,778		12,522		(24,206	)		4,279	$	156,373		2,611		$	158,984
Total assets (3)		1,308,031		178,291		794,277			76,882	$	2,357,481		1,412,247		$	3,769,728
Three Months Ended October 1, 2023
Revenues	$	497,863	$	83,203	$	85,692		$	36,974	$	703,732	$	—		$	703,732
Income (loss) before income taxes (1)(2)		136,451		23,754		(21,812	)		9,469	$	147,862		(3,582	)	$	144,280
Total assets (3)		1,382,444		178,904		684,207			92,514	$	2,338,069		1,032,586		$	3,370,655
Nine Months Ended September 29, 2024
Revenues	$	1,497,552	$	209,435	$	266,552		$	93,457	$	2,066,996	$	—		$	2,066,996
Income (loss) before income taxes (1)(2)		401,475		36,138		(56,099	)		13,355	$	394,869		56,420		$	451,289
Total assets (3)		1,308,031		178,291		794,277			76,882	$	2,357,481		1,412,247		$	3,769,728
Nine Months Ended October 1, 2023
Revenues	$	1,387,580	$	252,106	$	246,541		$	119,472	$	2,005,699	$	—		$	2,005,699
Income (loss) before income taxes (1)(2)		361,676		67,629		(66,704	)		30,841	$	393,442		(7,675	)	$	385,767
Total assets (3)		1,382,444		178,904		684,207			92,514	$	2,338,069		1,032,586		$	3,370,655

(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, legal settlement, pension mark-to-market, and inventory charges.

(3)

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

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


	For the Three Months Ended				For the Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(in thousands)				(in thousands)
Semiconductor Test:
Cost of revenues—inventory charge	$	4,041	$	10,422	$	11,405	$	18,374
Restructuring and other—employee severance		—		1,776		1,277		5,055
System Test:
Cost of revenues—inventory charge	$	—	$	—	$	1,016	$	1,412
Restructuring and other—employee severance		—		—		—		1,124
Robotics:
Cost of revenues—legal settlement	$	3,600	$	—	$	3,600	$	—
Restructuring and other—employee severance		1,110		636		2,647		2,707
Cost of revenues—inventory charge		537		652		1,071		2,203
Wireless:
Cost of revenues—inventory charge	$	1,204	$	—	$	2,024	$	1,080
Corporate and Eliminations:
Restructuring and other—acquisition & divestiture related expenses	$	—	$	—	$	2,214	$	—
Selling and administrative —equity modification		—		—		1,469		5,889
Restructuring and other—employee severance		—		1,753		—		2,877
Restructuring and other—contract termination		—		1,511		—		1,511
Restructuring and other—other		2,437		—		2,437		1,100

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. In 2024, Teradyne intends, based on market conditions, to

repurchase its common stock in an amount necessary to offset dilution from equity compensation and our employee share purchase program.

During the nine months ended September 29, 2024, Teradyne repurchased 0.5 million shares of common stock for a total cost of $55.1 million at an average price of $111.32 per share. The cumulative repurchases under the January 2023 repurchase program as of September 29, 2024, were 4.4 million shares of common stock for $455.6 million at an average price per share of $103.46.

During the nine months ended October 1, 2023, Teradyne repurchased 3.4 million shares of common stock for a total cost of $349.3 million at an average price of $103.89 per share.

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, May 2024, and August 2024, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.12 per share. Dividend payments for the three and nine months ended September 29, 2024, were $19.6 million and $57.0 million, respectively.

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

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