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

Apr 25, 2018 • 08:00 am ET


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


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Mark Jagiela

into the DRAM wafer segment. In analog test, our Eagle product line shipment soared in the quarter on demand from industrial and automotive end markets.

The one soft spot in Semi Test, and it was especially soft, was mobility test, where the expected demand did not materialize and the full year outlook declined. More on that in a few moments. Universal Robots growth in the quarter was on target, with sales up 34% from last year's atypically high first quarter. UR remains on track to increase sales at 50% or more for the full year. Sales growth at UR comes from both increasing our penetration of existing markets and establishing beachheads in new markets.

For example, in automotive assembly, which we've served for many years, our new application uses UR cobots to vacuum the inside of cars on the production line before their interiors are installed. A new example is in the entirely new market of banking. UR cobots are now operating banknote sorting and counting machines, eliminating adult task for human operators while improving accuracy and security.

In line with our strategy to reinforce our competitive moats and to be the industry standard for collaborative robots, we continue to build out UR's global infrastructure in the quarter. We opened a new repair center in Shanghai and our third China sales office in Beijing. We opened our fifth office in the U.S. and Boston and added new offices in Italy and Turkey. We've also expanded our online training facility, UR Academy, to include Korean and Japanese language offerings, so we are now offering efficient online UR training courses in seven languages.

Turning to the full year outlook in Semi Test. The biggest component of that market is mobility test. In that segment, with the data we have today, we now expect substantially lower demand for new test capacity this year than we anticipated in our January call. This leads us to lower our 2018 estimate for the SOC market to the $2.2 billion to $2.4 billion range, at the midpoint, down $300 million from the midpoint of our January outlook. Due to our high share in this segment, much of this reduction in the market will hit Teradyne this year.

I should point out that this is not a result of any loss of business to competitors, and we do not believe it's a long-term, broad-based change in the mobility market. Rather, it is an isolated reset of specific 2018 customer plans. Our Q2 guidance reflects this revised outlook, and we now expect first half sales to be about even with second half sales. Year-to-year volatility in the Semi Test market is nothing new, and we expect this to continue both up and down in the coming years. In fact, two sequential up years in 2016 and 2017 is more the exception than the rule this decade. Because these market terms are hard to predict, we tuned our business model to deliver strong results independent of these annual swings. And