Teradyne (TER) 26 Jan 232022 Q4 Earnings call transcript

Greetings, and welcome to the Teradyne Fourth Quarter and Full Year 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Andy Blanchard, Vice President of Corporate Communications. Thank you.

You may begin.

Daryl. you, Thank and recent everyone, our of discussion Good results. welcome most financial Teradyne's morning, to I'm by this and joined morning our Greg Jagiela; CFO, Smith; President, Sanjay Mehta. our CEO, Mark

our remarks, in be fourth following was provide and opening Investor quarter year, our the of results discussion. first with last issued evening. for call helpful of along website call XXXX's release XXXX. to our Following that The full details slides of press ends. fourth you via page performance we'll this We're of quarter page the may available the quarter outlook the the for containing Replays on be after providing will same our the

involve materially that to review as The in Teradyne's recent earnings results management's risk from the cause contained the matters encourage as we statements release factors safe today that could you differ discuss expectations. will current SEC well We include language filings. to most harbor that our forward-looking

Additionally, are made a today, to occurring no of those forward-looking take after update as events of result statements call. and obligation them we this as

comparable were During reconciliation concerning page additional the financial measures, these financial non-GAAP we'll including reference of available it GAAP on directly website. measures. the information We've our non-GAAP most as make today's financial call, posted to to Investor

or Stanley. between ahead Morgan conferences investor industrial-focused hosted technology expects now Capital by in and Looking and Susquehanna, participate our Teradyne next call, to Citi, Luke earnings

the with on get the let's of Now agenda. rest

with hour. the We'll on your our and we is Mark offer details will the results, this Sanjay recent X answer and along new then for First, results the market comment will enter then our conditions first as and scheduled Greg questions, our for on more call quarter. guidance quarterly year.

Mark?

from provide financial my everyone, today company our Greg thanks details, Sanjay leadership will updated the midterm Greg, as be remarks limit I'm us to the earnings of joining taking the week. outlook morning. to next I'll and model. full Hello, will this going leave and for including

sales X in in with and years was for XXXX after good we turn year the slowing. another Midyear, markets market history. our second growth SOC softening test of growth saw highest Automation Industrial a Teradyne with our

under financial company We well according to roll continue. this in line the business to oscillation level, Sanjay around or were our these chase up familiar and model. line earnings we trend slightly a our note lines midterm these operating expect results XXXX. long-term XXXX above after trend the will our investments not the pattern trend tend line is that At updated and excursions trend trend how manage to down. into This

Looking core our perspective, and combined the Automation revenue as like last at a longer-term test has about the doubled flow EPS and into shareholder Industrial Teradyne's rich about grown X new part is Xx. a Level recipe has story, markets Test. allocation has years, markets plan, Growth a is the and cash expansion returns. with over of been This, System balanced for of capital

As these all years place come. in the of will remaining you for see to we drivers hear,

our like and Teradyne. would of thank I call, invest to you earnings last my is who journey this follow, influence Since all at

for As key Greg a and part been of confident role, and beat, we our he's implementing takes won't miss on a the strategy developing years. I'm many

With results our Greg that, outlook. perspective to and I'll turn on things deeper his for over Greg?

everyone. XXXX XXXX. and morning, year of full comment Today, will I our on of Thanks, Mark, early summarize then and the view good

share. earnings full year, $X.XXX For $X.XX and billion per of of the sales delivered we non-GAAP

for This in this the in from demand including mobility revenue substantial end the down was automotive in history level record was but ADAS and -- by offset demand market, test, XXXX strength XXXX's second-highest offset processor compute. somewhat SOC in test. due reduced mainly was company specifically XX% to

SOC the the a about market estimate 'XX, similar Industrial in test year. billion, amount for X% and was Automation Overall market about terms. for down X% dollar $X.X was the we from grew memory down XXXX,

Foreign exchange was a major headwind business. in that

Our growth constant was currency. in XX%

divide our July early of of an as equipment outlook demand conditions XXXX, view and midterm. I'll markets we imbalances. Semi followed end In market began to by entering the comments a into for last the This in supply/demand market noted chip was declining smartphones. downturn, my inventory with on Test year, such create

types We a X- duration. to typically corrections have noted of these X-quarter

size in X-nanometer later in to limited and XXXX, market time, markets in, with customers a transition and billion XX% end below utilization. to level. second inventory Now we're SOC expected tests where the producers for estimate and half, be the a to to a this is are to point continue this compute headwinds our bit. we their in networking, XX% the Major mitigate XXXX's end SOC X more we start imbalance the continues, with visibility than market production could $X.X like into bit rebalance as and Much smartphones, lower downturn At of test-intensive quarters the demand. see

second be this less year. driven end revenue of be to Our weighted customer the this and in XXXX revenue percents our customer than until this to will low lead of XX% historically and largest for grow XXXX, double-digit half is towards in to expected by is Demand transition, finalized of expected the year. revenue moving QX won't from

increase models press that effect X-nanometer key to test XXXX. in are transition in is volumes decrease, the down impact unit described. complexity. The factor demand the device unit growth associated to offset likely the drivers, of the I've complexity is you with revenue the likely in and that demand net that and our reports In smartphone volume the be general, read have, We've X same

be troughs but portfolio that the likely it going to assumption will the fill full transition X-nanometer. gradual this Our also to in migrates mute the peaks, is to is as

node. unit types the to than we of portfolio top test across averaging each that and in entire prior On new new X-nanometer, further the that, of will higher or will part the in like node, increased the process continued drive X-nanometer investment life addition increases drive Overall, investment. test node of a expect total growth

interface to and test end In demand in memory ATE. of on technology a buying is testers purchases with next-generation replacement for in tested likely for difficult is our customers, Offsetting this the cannot speeds DRAM reduce Faster driving X.X flash market, transitions technology-driven DDRX this UFS demand. to are market be which existing and with drive memory continue year. capacity

quarter. We the of are in seeing some that impact first

to expect the slightly to market balance, be from On we down flat test XXXX. memory size

Test We lull the in be transition lower Industrial to on Automation. of will due a weak to XXXX the And be Test shipments Shifting and X capacity advance WiFi in demand XXXX. Wireless soft in in demand expect excess market. HDD end beginning Storage will to smartphone

expected, in we the with macro-outlook As markets weak industrial is cautious, industrial PMIs.

in first half headwind year. growth a be will this of expect the the We

with Rolling second company over factors flat up quarter and about half has headwinds judgment the of first the total these our our the offsetting year, for QX. current

in we the However, full the Industrial offset for have Automation headwinds factors later notable X in year, help that year. these should

the do impacts we currency we not exchange First, XXXX. in experienced expect

with that growth supplementing channel in at Second, transformation including One focused UR, OEM of distributor began traditional traction. initiatives XXXX, is will channel a component a our transformation gain the channel to in growth in XXXX, additional this and add verticals. XXXX XX% grow continue targeted OEMs delivered and OEM and continue effort partners That as to we expect our existing channel. we

XXXX, half Universal greater significant heavy-payload expanding drive Most second combined notably, the a is driving served factor reasonably XX% than ramp Barring the with will of growth in to IA new XXXX, of the the URXX, at market cobot shipments stable of economy products. the for macro half year. channel through expect deterioration in new third The new the long-reach, which the weighted Robots, in products, the expansion, in year. second and currencies, to we growth IA

patterns semi We the cap built model in equipment customer short-term cycles. flexible buying to midterm accommodate Now in our abrupt. can shifting The to those operating changes outlook. be

drivers long-term midterm that the trends than line each our baseline short-term track Our we but provided above given rather trend, land any for businesses demand or In has year, a the below the plans trend cycles. reliable of in and planning. historical will future

To up a our discussion, Sanjay to qualitative going like context. view earnings few make of that I'd to model. comments provide some set will through a be XXXX quantitative

shows midterm driving cloud and computing, are why factors environment Our including confidence ask There significant several in revenue EPS and AI and to and assume weak. reasonable XXXX our when mobile increasing so us is give complexity. short-term it's automotive, like model that content the and we are growth markets, chip earnings EV, midterm processing growth, and increased End outlook. semiconductor ADAS

pervasive ever and data the higher deployment wireless the end and This gate of new volumes will and standards X-nanometer, packaging around. drive market The technologies, edge nodes deployment semi like fab demand timeline AI. will for advanced chiplets all support of

complex These more is drive increasingly higher and test times level multichip of VIPs, chips these longer nodes drive changing. for these integrated seen test technologies demand hyperscalers have new Both technology new like automakers. We a higher the complex enable as landscape ATE chips drive packaging transitions But and are quality or developed of requirements. factors TAMs. chiplets producers, vertically class and including by the

system-level xXX date good long in increasingly by large, These customer test require To and SLT. opportunity adopt quality provide level, are a architectures, share levels. to applications emerging these low uptime-critical has used this devices achieve this or complex had tests space additional grow lower. We've legacy will to been design-in historically customers exceptionally our with and VIPs dominated Teradyne success an type, where step, defect share in with will our an

new this growth the a design-in midterm. and our growing with be footprint expected customers have We success strong driver market, a over to in is

of engine for this standards midterm both test and see to Test. instrumentation, growth expansion Wireless tracking expect existing we cycle over be will replacement X These the midterm, the security. devices ramp and precision UWB-enabled the obsolete both a for test rapid and Over location WiFi SOC new and

opportunities penetration robots, AMRs, IA. long-term will converging to shortages regional providing collaborative Global be and wages drivers. under X%, Market continue growth. for is Turning unrelenting labor for enormous demand to including

will a in the billion application revenue enable Summing it new broader range our of level to in products steady will us drive expand serve of channel to and our our the customers XXXX. up. The market, continue of served transformation technologies to $X and

Over midterm, become growth, and about strong company a test gain of businesses our and sales core meaningful trend will to line share support the XX% earnings. IA contributor to grow will be while

the Universal conditions substantial We vertically design-in in and our the customer at producer challenging growth. In business grew Robots XXXX, long-term for base sales from integrated our space [Newark]. SLT. expanded foundation have We and market. higher both in recognized expanded we the revenues growth set this in our IA planted and emerging future seeds footprint We for

downturn is and challenge. in We're capital industry, semiconductor visibility a in a always in downturns cyclical the

in sales line midterm expect earnings trend XXXX. and We below to our be

we and expect don't in have return earnings growth these an we strong of The to describe. midterm to will as line historical While to typical driving our sight will that's over demand, planning cycles. recover, rates horizon, in Sanjay market inflection

Before Teradyne to over Mark growth steered years industry our than XX turning more an and service the in thank his through X He to helped for Sanjay, period years our semiconductor and investments like it as has extraordinary through would I CEO. in company of his the to future to assure robotics.

personally, it's me an made has of for honor that Teradyne His Mark at work More period. to during us insight and been all better. and candor

clear Although downturn, tremendous Mark. as and facing a with to a financial vision, a a we're thanks strategic great facing it cyclical company we're team strength,

Sanjay? Now

updated morning, Good allocation our year earnings XXXX, summary capital and the of Thank cover our QX outlook I'll the QX full plans. you, and model Greg. provide and review financial everyone. Today,

to quarter million non-GAAP and Semi Automotive approximately were EPS and Now mid above Industrial of SOC. million, revenue $XXX with our strong Test QX. guide million $XXX $X.XX. was was in $XX of which Fourth sales

ago down in cellular was year but lower by million, HDD by System demand. Board to constant of lower Tests. million Storage X% driven $XX quarter Test down slightly up group of XX% from higher of and fourth WiFi revenue revenue $XXX defense a aerospace Industrial due Tests currency. market, X% and of XX% a had was Automation down LitePoint sales $XXX offset serving and revenue year-over-year, weaker million in Production end from year, last

mix. OpEx. to XX.X%, first of the profit were deferred and Non-GAAP were favorable costs was million, operating guidance, had margins above tax customer discrete flat with gross until because was quarter. on resiliency rate, XX.X% one some about $XXX had $X the The rate our million geographic lower the Non-GAAP XX% operating Non-GAAP We one excluding in shares product basis customer quarter due mix XX%. and than non-GAAP the third expenses quarter. a for -- 'XX. We we half quarter, repurchased items of planned in of

cash XX% one profit revenue of results. to was for XXXX. repurchases Gross and customer margin was $XXX QUALCOMM Turning operating of XX.X%, We We to in billion. Non-GAAP and million year returned was flow free the EPS We billion, approximately was OpEx and had was $XXX XX.X%. and full-year $X $X.X $X share for shareholders billion the million generated marketable the dividends securities. the $X.XX. with through our cash year. full our in year ended

Our a excluding basis. tax full was year, rate the items, on discrete for non-GAAP and GAAP XX.X%

revenue the with SOC memory revenue for $X.X contributing billion $X.X million. Semi Test billion, year $XXX was and

sales System million SOC our was Test million, In which $XXX and in cellular year-on-year, I'll Our bright increased $XXX flat offset us group a sales XXXX. roughly aerospace XXXX X% in and offset in in was Wireless memory, revenue DRAM. declines in for by and contracted where by year-on-year about between flash over note business. Test, spot declined evenly and XXXX. of partially storage Automotive, But decline were a in had split XX%. Board shipments Production Test strength Strength UWB. of was to in connectivity lower revenue with our defense and In

Now constant IA currency, in revenue U.S. which million, $XX includes. $XXX million, sold Notably, in the outside dollars. of IA and in contributing $XXX to XX% currencies. million the grew XX% Automation. with for Large MiR year and was local UR MiR portion sales are Industrial

profitability XX% on in the the sales China above year. operating From IA, breakeven U.S., was Europe, basis the a the of slightly the of XX% in rest non-GAAP in the XX% the full remainder full in world. year, were and group For for in IA the perspective a

then, we Now to QX. October, was In declines have occurred: which revenue was Since our for from X down $XXX million to be approximately outlook QX of from XX% expected QX. QX pulled million in approximately First, of projected our $XX revenue midpoint.

supply guidance has constraints Second, of our been QX, included range. which not $XX million we expect approximately in in

the Third, to of additions including year, million offsetting approximately related in $XX other memory has factors. shifted capacity to later

expected $XXX million and XXX diluted $X.XX in are million with million, sales non-GAAP EPS to QX to $XXX on of be a range shares. between $X.XX

quarter guidance acquired First excludes intangibles. amortization the of

quarter XX%. First our to at down our profit on the higher lower and expected service sales. quarter margins XX%, midpoint to XX% from OpEx due to and estimated guidance are at at spending run of to manufacturing volume gross accelerating of rate first QX The resiliency. first XX% quarter XX% operating is non-GAAP is

in assist to points few A modeling you in the XXXX.

margins service First, driven spending profile. will lower XXXX, In manufacturing on model accelerating in gross first margin expect below be gross the the we our and by half, resiliency. additional volume and our

margins expect We half to return XX% second our XX% to gross range. to model

Regarding OpEx full year. the for

We profitability XXXX. be in roughly the higher to XX% be planned to expect volume. compared OpEx flat, XXXX X% IA level to profit of year is with full on range

be non-GAAP and tax is XX.XX% forecasted Our in to GAAP rate XXXX.

allocation. Turning capital to

in reserves buybacks be authorization Our a billion a will M&A, approach to to $X significant cash prioritized strategy business Prior set downturn. share Excess free remains take the consistent level to aside authorization. run balanced replaced free and for maintain as have flow cash event share a and the flow dividends. new a was buyback minimum with we and prioritize of cash

expect to million of XXXX. in We up repurchases $XXX

earnings our to model. Moving

to OpEx model. estimated We will to as XX% XX%. of drive company updated of and yielding at is XX%. of to at non-GAAP to non-GAAP expect decline the margin percent the billion test XX% $X.XX growth will XX%, operating and midpoint revenue approximately to XX% a IA sales Gross XXXX EPS $X margin a to

on context the model. Some

compounded grown Over XX% at rate. revenue XX% rate EPS non-GAAP Teradyne at our has the last years, and a a X

EPS and XX% we be from our trend line reflecting to and contribution we expect model model midpoint, increasing in XX%, roughly Our extended non-GAAP be will at the historical to revenue XXXX an revenue respectively, with -- midpoint, CAGRs line Automation. Industrial for and XXXX -- the of rate

We these included in a have deck backup the illustrates that slide trends.

including the and growth device calls drivers drive horizon. prior we the test In will for ATE complexity X-year unit comments portfolio, anticipate growth, over key outlined the today, we and Greg's which technology trends, have

XXXX expected to XX% of are to a to X% XXXX. CAGR revenues test from Our at grow

penetrated. and market products this channel this believe we over still including the is for has shortages, IA, transformation. labor the outlined For market, new midterm sub-X% applications Greg drivers and

are XX% XXXX. revenues to XX% IA expected Our to XXXX to from grow

of $XXX by our After SOC in XX.X% of model and financial million million to share and in flow, non-GAAP $XXX the XXXX, free test market, cash our down up. $X operating reduced years smaller market returned the profit, X over count generated X% designed. the ended billion cash. year Summing with as slowed over half shareholders, growth, in test delivered we second flexed Despite the

updated historical test and our includes model of future foundation in on IA growth. Going new builds forward, and drivers proven of growth

run, there our team of executing uncertainty is growth. While capture we the serve the are in our we growth the strategy opportunities to confident markets and short that in

With that, Andy. I'll turn Andy? the to call back over

Thanks, questions. Sanjay. some to take Daryl, we would now [Operator like Instructions].

come the Hosseini Our Instructions] from Mehdi [Operator line with SIG. first of questions

first Semi to do Test cycle. one with the The has

for I peak Teradyne than more in already have XX% down then the Test that mention QX, by reconcile, perhaps last Test different? Semi would quarters. suggest quarter typical perhaps the I appreciate we X some that fair prepared look me follow-up. in your situation of Semi if correction. did You a at a remarks well are help I since early would the is say that wouldn't in If be guide is into to could Teradyne time 'XX, your semi But that would you is it to that X with the just and cycle downturn second and

Thanks for question, Mehdi. the

quarters we -- that believe the to you're terms well have thought And our is we visibility. we line. trend that cycle are that Semi was about the peak of Test above thing is Our X talking about one Where great in. in remember don't really

amount a we region, where to a contraction was of it would true have be downturn. we happen to there fair So got before sort considered of into a

sort 'XX from we time of frame. And X just July we're about of So are we really measuring quarters into that think it.

visibility. But factors will really of good second of see about than indicators the returning. a the don't half terms first. year a of that up, the better bit we leading demand the are number is don't of kinds back us when have In it inflect the There feel that make we little

So I you more color don't think that. we give lot can a than

it. Got

follow-up before and a model the downturn the have your in that don't say As don't want and calls the by to and fair my -- targeted out yet 'XX, we thank also the And 'XX, your into main pushed that XXXX. all of may a he we We have follow-up wish be we to know hosted years know. another But get target best as has a Mark for would recovery to of you endeavor. as through go target. X him I into second it here recovery is and you comment, rate to valuable because rate that his of new just next just the luck you

Sanjay. markets to channel it's Really, Greg comment it's to say shifted mentioned, has in supply as in that the the inventory to tied really reasonable model and the the a down market. the Yes, to tied think in demand the downturn. Mehdi, Yes. end I coming the right, economic the the

if every that we we as when Mehdi, the as of imbalance on it's to semiconductor around view, demand your I'll maybe, start different. and something point just thank you is and kind one cause you industry-wide classify inflect which summer. an does that supply comment downturn started to for make from point, it last try And between see first downturn, it cycle, quick But those comments. measure,

mark So it that's how we -- to date. that back why

Timothy from of Arcuri come questions with next the line Our UBS.

XXXX, SOC high of in the it came what end your TAM at So in range was. the

if the I what just segment sort us each be, some drove for -- this different you also So of think of you XX%, And of the down that what in us the will that then, mix? segment been sort in year, numbers of for the us change? how tell markets. you XXXX? gave us, XXXX, mix can you'd see I you the midpoint markets you sort of Can -- you take will how and can tell mean,

billion 'XX referenced with strength bit estimate continued Yes, prior Yes. in the that strength And and market, imbalance, the It's in from then in service 'XX along and demand compute we course, as SOC, most XXXX, across continued mobility, really in $X.X calls, board SOC as with well a exception And Industrial. compute, industrial we down about service. across and of and the and those in 'XX, a Automotive we little we in of board. supply in Sanjay. decline see as markets a about, see talked and we've mobility, notably, the auto in

So our from is really, it's decline across a the board perspective, view.

Okay.

really since guess, taking I like XXXX. well, I Okay. since past over growth the get -- the headwinds. I it. been I macro X downticking more or Got would guess of company, been consistently Greg, X for IA, you've been XXXX IA. know have years have And a of then you're expectations ton the indictment there's And And in sort I running the over

can like Do you know M&A, of of maybe IA. sort you'd like step the element it maybe back sounds you of competition? some some in to do take I a sort is market? assess think competitive in it and the just But

keep that question pushing because from IA So you whether out. there growth mean on I a as really lot much get think in some the of just folks model as -- I there does I questions is is just think

Yes.

other a So robotics, thing collaborative we or of in that has including market note or have predicted. it's is the the The AMRs, slower good players growth been really question. would I analysts the than

envisioning. a has TAM we rate the than originally at essentially, So grown slower were

in what helping seeing competitive increase is fast market general, profile of raising but sort other overall. we in accelerate market that to penetration and the how are we're entries the potentially the they're there field, So of

market we certainly compare. entrants to a they think where in are giving cobots, strong a customers curse, blessing especially are options and we both of So a that that have really position, sort share

hold quite in a increase growth that share we believe And We whole sort forming is that we're awareness leaders able to market We people of going spread -- the out product, market have it's much we winning our the but a accelerate to the And we is entrants. think think AMRs. have the that's and to one market, still and that be of to still those for really help wide. that got of certainty midterm their market. to AMRs, are going despite over In growth of we toss-up, more we've good that, in are the less in space. money share figuring a but how strategy the make of the market and

to plan our into growth account. the things in don't TAM. of of up, take sum share So to both of sign of due competition. is has loss that We sort think a to those slower it's been But

has question Evercore. from Muse line next of come the Our with C.J.

Industrial? was your off the guess, kind you very offset Would Auto, in assuming negative there. be for love account. question, from share First love to test off, year for would thoughts in Valentine's But find kind you'll of 'XX, thinking Mark, hear moving SOC first congrats. better in I thoughts looks And share we'll I from miss Day, seeing XX% your dates roughly It Eagle recovery parts. your like the on to around market I side what 'XX, you I'm there? of slowdown on here. should we which What are hear And a guess on the sure but Cupertino

making Sure. cautious No, about question. We're very about XXXX. it's predictions good a

also break first but are of reasonable has tended a both half, a with uncertainty share strong lot has have that sight, in second could push down. could just there compute to of quite In the around there's XXXX, -- there the our been half. customers that market line way And higher. our larger in and share some things We been and the traditional our drive even buying

that of really share number but to believe XXXX, target going give some see for in share So we're recovery. you can't I sort we a

X to And test, you trends then we in whether speak walk to had maybe of could for it's XXXX? SOC think helpful. that thinking should the drivers to about you growth rank-order be recovery the starting through into you drivers as more really expand, if underlying XXXX? you for And positive your auto, the business, X-nanometer, a can Very kind kind important of hyperscalers importantly, most about

Yes.

I think many So you hit them. of

cloudy a out industry, think significant But to we That's driver good TAM. of as automakers, more than drivers, are I about increase really device been figure it be a certainly. a hyperscalers about going always important complexity. positive to a X-nanometer hit is think -- the ATE is The and enables to ball that that in what's X-nanometer and tend real going more to gain for you we a share that, -- think opportunity we a adoption TAM XXXX are try one, crystal going think much bullish and on. I the XXXX, that There's broader across it's we So than an have driver.

think these of customers So certain a with shift class do for integrated a to to think that potentially has if share. an are going come or from number some end -- suppliers have vertically opportunity semiconductors traditional We well market we that the of you demand those and about semiconductors, producers.

take their to phones, tends a bit declines refresh have kind task content positive off, XXXX. the Overall, typically, they in seeing computing, to recovery little in cycle cloud following year And mobile I points of slow time a more XXXX high people down in I especially it. AI, in is hit for the if one think increasing unit and could if around smartphones thing automotive. happen that semiconductor in we're their The

may So help that also with the rebound.

JP Samik Morgan. Our next questions of come Chatterjee the from with line

of know in when the rely well. side, But on cycles, first -- of I of Or on rebound test the particularly of I the one, that this path? for prior to seeing SOC SOC as should test mean, than the certain experience guess memory you about sort market, the I the faster sort we Like a part your sort bit early path going you through think a we expect cycle But expect down, first about of down then different you're follow-up. others? of I pieces sort pieces half. between here? And sort would sooner? are have a called to the of you the the would How sort of recovery of you particularly think being down how recovery rebound should there sort

That's interesting subtlety.

XXXX Do now, think how thing we should memory mainly question that the SOC of SOC, more purchases, say the recovery? because it in I driving is shape these that, expect really, than that of it come first technology in first The though terms in of expect TAM. market transitions right the for So appears memory? more a your there isn't market are tester I'll capacity. is in And first is that need even to the impacted memory we that's

says that to a overage is recovery, that, capacity memory-led end more in when absorbed a there likely SOC-led is for it's to of be probably memory be me to need that than going the recovers. memory is because sort to What there's market as

opinion. that's my So just

murky. I think it's pretty

it and different is snap back think memory a than harder I would. faster But way. SOC out So to a could likely turn little

second for provide customers terms half you're mean, of of I you X-nanometer? But discussed I -- you Okay. better sort second versus a jumped driven if the a versus moving sounds bit this of -- half first bit how of late. is of apologize expectations to And of have what in like for of I by sort able in that much first split a you've your a already to sort the call, sort thinking And one of of terms follow-up, about and are revenue? on half, is primary how half

in the Yes, expect our right. 'XX. half, provided, half And lower, a as are revenue from the expect we Sanjay increase obviously, All And in first we than that including to really now, the through to SOC right market second the as of plans we do in year occur here. and well. Test. perspective, IA Semi It's think I an do tied

that be full, will half, sort first able so But it Yes. you to this exact an cautiously percentage, in optimistic can't percent percent we predict of not this half. second give really we're a bigger. We're XXXX

the of from with Brian line come questions Our Chin next Stifel.

luck, you. to complexity. more Greg, forward just on of first Maybe best to and Mark. working with clarify Again, And question, the look congratulations

You revenue year. expect expect -- mostly occur of I second in largest outlined that to customer again and that complexity-driven half believe your year-over-year will you the grow the

later fairly the anticipated X maybe might later occur would but versus in while half where ago you a XQ, this maybe the could sounds is that concentrated? why And be so towards from timing than normally similar, to sort those shipments And months I perspective? of you expect it second sizing just how describe

Brian. Thanks, Yes. Yes.

in a some is it think later years. seen than other we've I bit

have always firm Our demand second quarter. during of a their what to idea But customer oftentimes, sort need. the they tends they'll of up directional

this transition the the market and that's sort in pushing is think bit those of of our end But year. the in later outside I combination technology a smartphone softness decisions little observation.

could cell utilization or could by is where sort And a of do it it. us plan which subject probably mean year, just a test change end revision. give is midyear up But where your have is the think moment, based Maybe the where Got I device -- you markets? gets end you our broadly to on sense at a this you obviously geared current across and to to or planning? it of

Yes.

deltas. So trustworthy. it's of look so to thing so do absolute use that's to challenging try is we method sort is it each numbers something aren't the we -- try we to do, consistent at quarter, and that can measuring the to The the utilization a perfectly trust that

are then great. things is If indicator. if up, that's leading not then good that down, moving are So a moving things

it we've is utilization a of little bit that we IDMs. better expect definitely out sort to And what 'XX. seen second the is, of up helped XXXX softened potentially, increase It's through around of it and declining, especially across -- half where back are we in bottom of fourth But -- it's And to half inside is OSATs. holding quarter of year. this the utilization the in

Automation. similar And you profile on Got sense relative of channels? large OEM the comment. I one or margin thing year. UR growth a give if Maybe you just rate business Greg, it. provide a I relative also, UR, to sales? that different the could significance to XX% is us last through sneak Can traditional for that the how is, appreciate

take me in Let backwards order. that

same is traditional So our right the the margin the now OEM or channel in than better channels.

So for that business. potential that margin improvement is operating a

was should XXXX, if portion probably I'm the In check in of I of that terms recalling correctly, it double sales sales, we UR of XX% think but number.

Our next questions Hari Goldman come Toshiya from the with line of Sachs.

conservatism well, The pretty be you how Auto could weak was I'm surprised as Or little Test, second weakness the seeing just as of some Are your I today. near in in, guess the weakness given Eagle and term? into you in mentioned embedding it Industrial of are sort as you a SOC test this year, half? progress Greg, that kick sound you customers broad-based.

into year baking safe very modeled we've for -- in and very, declines through first a think the whole and it's that it say Industrial. been strong the well. and plan We're for to XXXX conservatism the well into Yes. quarter. we're XXXX, sustained But definitely Automotive as market year that in It's very I that in

What question then as the for kind with for a of long might Buybacks high-level you partnered think the top-down my a with follow-up, company versus Greg. introduce you do How And know a standpoint, it. portfolio? a you've going From how allocation? changes for of Got you, been long capital some about time. you've you strategy you time, what And to the forward? M&A? Mark I inherit? intend are manage

Yes.

I The strategy. share terms prioritizes of bake dividends, of have because terms that helped capital that we interesting allocation cake. question to an it's is change in M&A, a strategy strategy So that to in going this buybacks, nothing

to capital on didn't assume the to that's we XXXX valuations terms in that able going now. is shareholders of analysis because our was we more reasonable. our something of since we the it our using would when that become by mainly market valuations, thing It's to are do in beneficial different been a we've like seem way. And be that happened sidelines did M&A, The

of next in may you change years. change the more a outcomes the so That's business you've years than strategy, across few different see a And it's seen in few conditions. reflection in a of not past the

Bank from of Our with America. next Vivek of questions the come Arya line

and both wishes Congratulations best and Greg. to Mark

the wanted XX% last my it to check the For just to from to seems described XX% what in versus I'm ballpark how year-on-year. And different have I this segments, are ballpark. like do year. sure year full-year the I make in of sales you to your down you mobility about first sales being one, wanted expect yes, if

down. is we half. to full-year And And our visibility that's with as first and of expect you Vivek. throughout unclear downturns, Yes, see Thanks depth this and second we've It's for really, can is do downturn sales really prior the from something the the learned the guide Sanjay, comments call, be question. our quarter the duration questionable. in

really challenging -- full-year But view. to yes, we give the a agree. I it's would provide So directional you

to it be expect We down.

inventory a do view mobility given questions, is softer, demand that From coming again, perspective, view believe, And in just channel well, down the mobility again, the revenues volume. come earlier to TAM? how to as as down. down market we in and the We are TAM come in we significantly, and our the expected

absolutely existing do my Got it. possible Or I testers? need to tester follow-up, reuse the just it transition, for capacity? new I'm And curious, is X-nanometer for

excellent an that's Vivek, Yes. question.

Wireless testing or that part, for new the is for like new the and node the Test standards, unlike memory perfectly installed where capacity replacements, capable market X-nanometer, market, transitions So equipment in the of drives you part. most new need the

the driven increased is by so tester complexity. demand really And

you're that So test, the capacity, part on your that you to to test takes need part are if already you stuff add testers buy. new a longer you both to to then the test the going and own testing

basically of tested. the on to transistors have of that node we because so particular get a at carefully look is And number really how industry much the that drives

definitely reuse -- as a in of transition. So SOC market high nodes the there's degree it's

Got it.

a volumes testers So they that are low enough, half, new buy need there don't right? scenario back to really is the X-nanometer where, if in

That's could way this Yes. our play one certainly out current certainly scenario. balance view, but of of units things versus that best complexity. It's not because

questions of from Sankar line Our next Krish the with come Cowen.

Greg. for thanks quick questions. help, and welcome, Mark, your Two all

fact Kind margins back of going First what up. you gives gross half comfort, if Sanjay, that the the that in one, given kind back mentioned curious, year about of the you I of roll profitability the high-margin does kind auto Eagle And gross So of just second get those out have curious margin. testers over, equation? then I'm of a are follow-up. half your on that especially

question. the for Thanks Sure.

couple a are plan. of So I things in included think our

half, to some in also are the are our price volume mainly portfolio. efficiencies, that in expect that second There I through IA programs, our -- half. first into The thing second would and tied we is specific to some gain operational rolling say, some anticipated baked increases the in some is

weakness. China XXXX of equipment. have that especially also -- of have as the of ordered component I'm OSATs Got your a the are to it's counterparts on a might half it. through basis, front-end of then China maybe for Chinese XXXX, not in Greg. go-forward your seemed a export the I kind impacted of given sales, see OSATs these slowdown fact first they the past, and about a if Very understand helpful. you're of of mentioned seeing been a Chinese end. and China big you because But some by controls lot front follow-up, And folks to of Kind curious, have some how think a curious how more

Yes.

the facilities of other in there to still are non-Chinese a chips. question There parts their that is from to sort most through if issues of are business Chinese supply value places. are that of those They from Chinese world, chain. it's of terms volume They utilizing fabless other chains. that the that's to other any China their move need expect specifiers there's restrictions, are the of So that. will producing it because because facilities. then we going are that, that will in comes chips companies places specifiers driving also do that's -- local through good OSATs, And move build X What

TAM in in not the business sales, place. regulations that like Chinese and affected of the I'd our not China. of that But trade revenue majority indigenous by the of that, that majority The could in that's China, be the -- it's to new the point out are

our than our probably total exposure is of there to X% So less limited revenues.

Our next the Jefferies. come Shrotre of questions with Vedvati from line

a So of things. side little compute I SOC just bit wanted in on to dig the

xXX that have where going markets, that's digestion So lower you you in traditional mentioned the a lot you're seeing of share. on

that, a in versus things you on things xXX -- seeing the a does So you way, in position? architectures? different traditional are put Are better the hyperscalers

really purchases. a question that's drove they good So and of suppliers, was because for compute year lot a tester terrific a traditional XXXX

into soft, soften back and going in that seeing to remain that the are we of We expect XXXX. half the year,

that different a to new are The designing, vertically hyperscalers, that production. parts places have those new are They And track. integrated need different traditional running different on parts compute configurations typically capacity releasing than they're producers, tester driving in it they're including that to the specifiers.

of we compute think traditional softness So be be do market. the -- traditional market than part that, in going stronger that's in XXXX there'll the the a to

That's my for great. And then follow-up.

help of or would the and you ADAS are understand like XX-XX be on things. it Or levered other ADAS your split revenues tied more is more way On to traditional parts less I automotive side, there's, split? portion towards essentially? think, of side a Is around? some what legacy and to is, me Could it the that

Yes.

So a in transition. market definitely it's

that you back there last are be are market million $XXX and going automotive vehicles. into of year, legacy types the devices in for in management hybrid $XXX One EVs types. time, the are power X the which part ADAS, for was that new airbag electric have and controllers look types, engine would million complex battery been of and controllers, range. new are MCUs, parts, And And management high-power part devices. in and motors, digital sort other If to of majority would There market.

market classes, new in was legacy. it size XXXX, XXXX, size half so of bit ADAS, in less that's gave that I the is, X/X -- you EV slightly have would new in automotive. say I includes these number automotive than the been and that in of actually a half probably little part would these Well, the more and stuff the the than of maybe That of probably in the terms traditional and growing,

track legacy stuff the Moving expect to forward, vehicle we sales.

is from combustion So and rates a power. electric relatively the as But and in vehicle ADAS much of adoption rate. slow sales increase, the that transition going growth at to to internal increase higher would vehicles drive ADAS

come Our questions Sidney from Ho can we with question, in just Operator last sneak of line the operator, final And Bank. Deutsche please? one

I just have one question.

largest you than less about sales from going your So talked XX% ['XX]. of to, customer think, I

low double it call digits in 'XX. going to $XXX million, So

So bit maybe million still increase. that's But $XXX XXXX. quite a in than lower

$XXX it, And First, the less numbers than volatility call with maybe you think range but right? million do second, that rate, are those is in past? correct going this, the run forward,

Yes.

you're that's So our think I think well. specific I smoothing don't directionally, But numbers. belief out not want I about And the the comment to wrong. troughs, comment your on as

going As to to wait and what is, the see. average we're sort of have think I to steady state

into is be to coming new to continuing of and the and parts we that -- in processors both the X-nanometer because the portfolio all some average strong portfolio transition that march way. have pretty to of that, going of optimism We're going

kind be are -- that's view, the that's of be that to some overall stronger. the to going have going is that think peaks So I we our lower, optimism

welcome. our right, overstayed All And we've folks.

much for later back talking you remaining look Thanks and you so with today, in this ahead. much. morning. joining us weeks queue, forward we you those thank to So to the get I'll the in And so

participation. does teleconference. This your conclude today's you. appreciate Thank We