Teradyne Inc. (NYSE:TER) Q1 2018 Earnings Conference Call - Final Transcript

Apr 25, 2018 • 08:00 am ET

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Teradyne Inc. (NYSE:TER) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Vivek Arya with Bank of America Merrill Lynch.

Analyst
Vivek Arya

If I heard you correctly, I think for 2018, you're suggesting roughly $2 billion plus/minus in terms of the top line outlook. Is it fair to say a lot of the delta versus consensus expectations has been captured in Q2, or should we anticipate any other trends in your mobility business in the second half?

Executive
Mark Jagiela

I think that if you look at what we said, meaning that the first half of this year and the second half of this year are roughly going to be 50-50 in our annual revenue, that you can do the math there and get close to what you just cited. We don't expect any further weakness in mobility. I think this is a pretty isolated case, and the rest of the year and most all other segments should be strong.

Analyst
Vivek Arya

And as a follow-up, as your business mix continues to shift more towards robotics, how should we think about just the overall growth contribution from robotics right with these new acquisitions that you have made? They seem to be obviously of a smaller base, but growing faster than the UR business, so growth outlook there as well as what it means in terms of operating profitability level?

Executive
Greg Beecher

In terms of the Industrial Automation segment, we've actually updated our model slide that's in the deck. Previously, we just had Universal Robots and we had 45% to 50% growth through 2021. Now we've upped that to 50% to 55% growth with these other new additions. MiR is certainly growing at a higher rate, as it's early in its life cycle. So we see the Industrial Automation business in 2021 getting to $900 million to $1 billion, so it should be a significant part of Teradyne's business. The profitability rate last year was 19%. This year, we're making aggressive investments, so the profit rate could be a little bit less. It may still end up close to 19%. But over time, we would expect the profit rate to move up into the low to mid 20's.

Operator
Operator

Your next question comes from Atif Malik with Citigroup.

Analyst
Atif Malik

In your prepared remarks, you commented mobile is lower complexity growth this year. Application processor opportunity is a complex function of optimization of die size through shrink and increasing transistor count. As you look at the ramp down of 10-nanometer this year and ramp up of 7-nanometer and then 7-nanometer plus 5-nanometer the next couple of years, do you expect complexity for your test business to return for mobility testing? And then I have a follow-up.

Executive
Mark Jagiela

Yes, I do think that what we see in the aggressive move to finer geometries and the transistor counts will keep propelling complexity in mobility and test time. So everything we see from today would say that that general trend is intact. And as we said in our prepared remarks, for most of this decade, what we had seen customers