Good morning. My name is Tia, and I will be the conference operator today. At this time, I would like to welcome everyone to the Teradyne Q2 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. At this time, I would like to turn the conference over to Mr. Andrew Blanchard. Sir, please begin. Andrew Blanchard - Vice President-Corporate Relations & IR Contact: Thank you, Tia. Good morning, everyone, and welcome to our discussion of Teradyne's most recent financial results. I'm joined this morning by our CEO, Mark Jagiela; and our Chief Financial Officer, Greg Beecher. Following our opening remarks, we'll provide details of our performance for the second quarter of 2016 and our outlook for the third quarter of this year. The press release containing our second quarter results was issued last evening. We're providing slides on the Investor page of the website that may be helpful to you in following the discussions. Those slides can be downloaded now or you can follow along live. Replay to this call will be available via the same page after the call is over. The matters that we discuss today will include forward-looking statements that involve risk factors that could cause Teradyne's results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release as well as our most recent SEC filings. Additionally, those forward-looking statements are made as of today and we take no obligation to update them as a result of developments occurring after this call. During today's call, we'll make reference to non-GAAP financial measures. We've posted additional information concerning these non-GAAP financial measures, including reconciliation to the most directly…

The first question will come from Toshiya Hari with Goldman Sachs. Toshiya Hari - Goldman Sachs & Co.: Hi, good morning. My first question is on UR. You talked about operating margins potentially improving from 10% this year to I think you said 15% in 2017. Is that primarily a function of OpEx as a percentage of sales coming down from 2016 or is it more a function of potential gross margin expansion or both? Gregory R. Beecher - Chief Financial Officer & Treasurer: This is Greg. It's a function of OpEx growing slower next year than what it grew this year. We grew OpEx quite significantly this year purposely to get further ahead in distribution and at a stronger ecosystem. We don't need to continue with that same aggressive step-up next year. We would expect gross margins to be about the same next year. We've got some actions to lower material cost, but we're going to assume for now that that will offset any competition we see. And we see the sales growth very high, so the higher sales growth will – and modest OpEx increases next year will end us – should end us close to the 15% target. And you might recall when we bought Universal Robots, they were running at about 15%; but again this year, we want to get further ahead in distribution. Toshiya Hari - Goldman Sachs & Co.: Okay, great. And then, my follow up is on Semi Test. I realize predicting 2017 at this point is difficult, if not impossible, but what are your thoughts on the on/off or odd/even dynamic going into 2017? Are there any fundamental or structural changes that could potentially allow 2017 to be an on year? Mark E. Jagiela - President, Chief Executive Officer & Director: Yeah,…

The next question will come from Timothy Arcuri with Cowen & Co. Karl Ackerman - Cowen & Co. LLC: Hi. Good morning. This is Karl Ackerman on for Timothy. If I may, I'd like to address the Wireless Test business. When I think about the short term disruptions in the Wireless Test base versus the long-term opportunity, how do you guys frame that up in your mind? Obviously, you've talked about the issues that are driving the market this year, and even next year. But with that in mind, how do you think about the long-term reward to live with some of the short-term volatility in that market, particularly as it seems this business is now losing money and remains highly competitive? Mark E. Jagiela - President, Chief Executive Officer & Director: Yes, so, what we said earlier around the near-term outlook, which is the rest of this year even extending into next year, is that the rate of technology change in cellular and in connectivity looks to be quite low. However, millimeter-wave technology, 28-gigahertz up through 70-some odd gigahertz, opening up that band for both backhaul and mobile device applications is the next tooling wave. Now, it's a bit of a judgment as to when that will start. We're currently thinking that's 2018 for WiFi and more like 2020 for cellular, and that will result in another round of tooling surge in the market. So if you recall, I mentioned that back in 2012, the tooling surge peaked at a $1.2 billion market for cellular and WiFi combined, down to $200 million now; huge volatility, huge swing. The next phase of this, we don't believe, will get back to that $1.2 billion level. There's – because that $1.2 billion level was a combination of both technology and unit growth,…

The next question will come from C.J. Muse with Evercore.

Good morning. Thank you for taking my question. I guess, first question, I think, Greg, I'm not sure if I heard correctly, but did you say that you expected revenues to grow year-on-year here in calendar 2016? And I guess as part of that, how should we be thinking about the contribution from LitePoint? Gregory R. Beecher - Chief Financial Officer & Treasurer: Yes, we expect revenues to grow year-on-year, but LitePoint will be down anywhere $100 million neighborhood. So, it's down considerably; their market cut in half from $400 million to $200 million. So this is the opposite of what we saw a couple of years ago. And this can happen when you have a very large customer with 50%-plus concentration. You can get swung around quite severely. So, in the short term, we're going to remodel or renovate LitePoint and prioritize where we place our bets. But we have with other businesses; we'll get this one back on health and focus towards growth opportunities, and that's what we need to do as an operator of Wireless Test.

Great, and I guess the second question, in terms your gross margin guide roughly up 200 bits Q-on-Q. You alluded to mix shift there. Is there also savings from the write down of LitePoint or is this really more of moving away from mobility into microcontroller, core analog et cetera. Mark E. Jagiela - President, Chief Executive Officer & Director: It's simply mix in Semi Test, is the piece because of a large concentrated buyer is taking most of their testers earlier in the year, Q1, Q2, so now we're back to normal mix. If you guys looked at our mix sometimes in – back in time, we used to talk about 54%, 56%. We'd bounced back and forth, whether we had an even or an odd year, because even year, we had the large concentrated buying. That got thrown off last year with the leases. But generally speaking, we have a very large concentrated buyer that pulls the margins down. When they're not buying in a particular quarter, we get back to a more normalized margin.

Well, I guess, the question is, are there savings that can accrue to the gross margin line, gross profit line, as you are looking to, I guess, reduce the footprint of LitePoint? Gregory R. Beecher - Chief Financial Officer & Treasurer: They could, but I wouldn't expect those to be significant, C.J. I mean, LitePoint has very strong gross margins even with all these headwinds. They have excellent product differentiation but the market headwinds are so strong. So, it's a – I mean, there might be a little bit, but the margins are very healthy. So, I think the opportunities on LitePoint are more on OpEx.

Okay, make sense. Thank you.

The next question will come from Krish Sankar with BoAML.

Yeah. Hi, I have two quick questions. One is, can you characterize the NAND solid state drive test opportunity you see over the next couple of years? And would that flow through both your, I think, your storage test and your memory test business? And then I had a follow-up. Mark E. Jagiela - President, Chief Executive Officer & Director: Yes. So the extent that applications for NAND or non-volatile memories grow, it universally helps our memory test business, and that's an area of strength for us in flash, especially these new high-speed flash interfaces. As it relates to the SSD itself, the unit, that one's a nascent market still. It's been roughly 20%, 25% of our Storage Test business the past few years. And we are hopeful that that would, at some point here, start to move north. But at least for the most recent, let's say, two-year to three-year period, it's been steady at about that level. And so the real question will be, as more enterprise applications of SSDs grow, which tend to have higher capacities, higher test times – longer test times, will we see the market start to trend there. But right now, it's, I'd say, still a pretty small piece of a market and piece of our business.

Got it. Got it. And then I think I missed the earlier comment. Did you guys say, in calendar 2017, your SoC test revenues would grow or the SoC test market will grow? I forgot – I'm sorry, I didn't catch that comment. Mark E. Jagiela - President, Chief Executive Officer & Director: We didn't talk about 2017, we didn't give numbers. I think the question was – that was asked was, do we expect 2016 to be up from 2015. And we said, yes, 2016 should be up from 2015 even with the Wireless headwinds, Wireless being down $100 million.

So what about – do you have any view... Gregory R. Beecher - Chief Financial Officer & Treasurer: On 2017?

Yeah, on 2017, given that the usual odd year, but looks like there are some positive in terms of test time and like advanced packaging. Gregory R. Beecher - Chief Financial Officer & Treasurer: Right. I'll let Mark to take that – took a crack at that earlier one. Mark E. Jagiela - President, Chief Executive Officer & Director: Yeah. What I said earlier was in memory, there's definitely some upside next year. And I mentioned that going back to $500 million market is – looks pretty good, and we could be as high as $600 million depending on the rate of adoption and mobility of some of these new flash technologies. And in SoC, we certainly see moderation in the even-odd year cycle because of complexity growth giving us more test time plus parallelism, as well as this performance tuning aspect of the testers. So, I gave a range of the market, 2:1 to 2:5, (37:37) kind of, but beyond that it's just too early to narrow it.

Got it, very helpful. Thank you, guys.

The next question will come from Edwin Mok with Needham. Edwin Mok - Needham & Co. LLC: Hi, thanks for taking my questions. So, first question, on the prepared remarks, you mentioned something about the analog and microcontroller market is down this year. Can you give us some color on that and where you guys stand with (38:06) product? Mark E. Jagiela - President, Chief Executive Officer & Director: Yes. So, both of those markets are relatively weak compared to prior period like this, and our market share and our product position there is very strong. So it turns out we are disproportionally impacted if those are soft markets and we're disproportionally benefit when they strengthen. So, the issues – there was some significant tooling last year in power, linear. We had a very strong year there. So I think this year, in that aspect, there's been some digestion. In MCU, it's really just low growth. The end pull-through demand for MCUs seems to just be at the moment flat line. There is some expectation that applications in IOT would propel growth of MCUs and MCUs with embedded RF, and that's something we've bet on, it's something we've got a good product position for, but it's not a market that's truly taken off yet. So last year, big year in power, this year, down. MCU is kind of flat year-over-year but running below the trend line. Edwin Mok - Needham & Co. LLC: Okay. That's helpful. And then on UR, I think you guys said that you expect your revenue to be somewhere around $90 million to $100 million this year. If I do the math on the first half of the year, and I picked the midpoint of that, that's probably a 6% growth in the second half from…

The next question will come from Farhan Ahmad with Credit Suisse. Farhan Ahmad - Credit Suisse Securities (USA) LLC (Broker): Thanks for taking my question. My first question is just regarding your long-term model. Thanks for providing with details around on the $2 target. Now, if I look back at your revenue and EPS in 2010, you already have like $2 of EPS back in 2010, and since then, your revenue has grown basically low single digits from 2010, but the OpEx has gone up by like 40% to 50%. So as – and if I look at like every even year to even year, your operating margins are declining. So, if I think in that context, like, why is there not more focus on cutting your OpEx and using that to drive earnings growth, and it doesn't seem to me like the strategy that you have going forward is very dramatically different from what you had for the last five years, which was acquiring companies outside of Semi Test and driving growth through that. So, if you could just talk about, like, why is that operating model not expected to be like higher profitability just from, like, why is the OpEx so high related to your revenues right now and why shouldn't the operating margins be higher? Gregory R. Beecher - Chief Financial Officer & Treasurer: Okay, good question. Let me take that one. Our operating margins are non-GAAP operating profit. The last three to five years has averaged 19% to 21%. This year, we'll be close to that. Now, you mentioned 2010, 2010, our operating profit was 28%. Now, keep in mind, 2010 was the year after many companies had very severe cutting in 2009, and it was questionable what the world would look like down the road.…

The next question will come from Weston Twigg with Pacific Crest Securities

Hi, thanks for taking my question. I was wondering if you could just remind us what your memory exposure is between NAND and DRAM? And then, more specifically, just wondering with the big ramp in 3D NAND this year and next year and the potential for very high big growth next year, why maybe you're not a little bit more bullish on the memory test market? Mark E. Jagiela - President, Chief Executive Officer & Director: So, were heavily concentrated in flash versus DRAM. I think on a revenue breakdown, we're probably 80%/20% this year toward non-volatile. So, that's the first part. Second part is next year could be a big year. So, I mentioned it could go from $400 million this year to $600 million next year. That's, on a percentage basis, a pretty big jump over 2015 and, on a normalized $500 million basis, a 20% bump. That's a rough bogey, but what would drive that? It would be a majority of cellphones adopting these high-speed interfaces. The bit rate growth is certainly one thing, but we've been in a high bit rate growth environment in NAND for many, many years and that's yielded this stasis of about a $500 million Memory market. The interface change is the real interesting technology shift here and the adoption of that is the wild card for next year. If it doesn't happen next year, it will be the year after. So, it's coming. It's hard to call next year.

Okay, that's really helpful. And then, the other question I had was in Wireless Testing and I know you're talking about the market coming down quite a bit, but how can you be so confident that you haven't simply lost some market share? I think you've said that you're fairly confident that you've continued to gain market share in Wireless Test. Gregory R. Beecher - Chief Financial Officer & Treasurer: We have good relationships at the major buyers and we see who's getting what. And what really has happened this year – I mean, mathematically, this year we will lose market share because our large customer, where we have high market share, is buying a lot less. So, mathematically, this will probably be the only year we lose market share, but that's because we're in a – with one customer very tightly and all the factors that we've talked earlier, including operational efficiencies, are playing out in that account in this year.

Okay, got it. Thank you.

The next question will come from Patrick Ho with Stifel Nicolaus. Patrick Ho - Stifel, Nicolaus & Co., Inc.: Thank you very much. Mark, in terms of the increasing capital intensity trends that you're seeing on the mobility side of Semi Test, I kind of understand from the complexity of the devices and the higher test times, how do you see that, I guess, thesis or trend migrating to other devices, whether it's analog, microcontrollers? Is that still some time away when they reach that kind of inflection point when complexity for them requires increasing testers? Mark E. Jagiela - President, Chief Executive Officer & Director: Yes, it is, frankly. The things that drive – the complexity growth tends to be centered on large digital content devices and their peripheral devices. And lower lithography nodes enable that and also create this larger, let's say, process variance equation that have to be solved with this other trend I mentioned, which is more extensive trimming and optimizing the part it tests for performance. So all of that gets concentrated around some lithography node migration and growth of transistor count. In analog and in MCUs, really, there hasn't been as quick of a migration to lower lithography nodes and more transistor counts. So, it's a slower trend line there. Patrick Ho - Stifel, Nicolaus & Co., Inc.: And then, maybe as a follow up to that question, at some point you will reach that kind of balance, once again, on the mobility side where your enhanced tester performances will meet some of the complex tester capabilities. What kind of runway do you see right now in terms of this change that you're seeing where the tester buys may increase? Is this kind of a two-year to three-year phenomena, or is this something that can last a little bit longer? Mark E. Jagiela - President, Chief Executive Officer & Director: Yeah. I don't think this is an issue of the tester will catch up. It's really, will – the question is how long will the transistor growth continue in these devices, because the transistor growth and the lower lithography node migration are the two key factors. So, certainly, over the next – how far – we have visibility on that at best 18 months out. We have roadmap information to suggest it could go another three years to four years beyond that. But, frankly, after that, nobody – our customers don't have a lot of clarity there. So, I would say pretty good certainties over the next couple of years, reasonable, maybe three years to four years, and after that we're really speculating. Patrick Ho - Stifel, Nicolaus & Co., Inc.: Great, that's really helpful. Thank you.

The next question is from Stephen Chin with UBS.

Good morning. This is Neil (51:38) on for Stephen. My first question is about the $2.00 EPS target. You said about $0.35 of this will come from Semi Test. Can you give us an idea of how much of this will be SSD and how much will be upside from Memory? Mark E. Jagiela - President, Chief Executive Officer & Director: The majority is SoC test. The SoC test is a larger market. We have higher share there. So, that's where we see the significant majority of it coming from.

All right, thank you. If I could have a follow-up related to future M&A, after the goodwill write down in the Wireless segment, does this change your approach to future M&A at all? Gregory R. Beecher - Chief Financial Officer & Treasurer: As I mentioned in some of my comments, a couple of years ago we did shift our M&A focus to the A in automated test. We saw automation as a better place for us to get new growth because there are markets, such as collaborative robots, where there is very broad applications and there's many different industries. So, it's basically the opposite of Wireless Test where you had a 50% plus customer and we didn't see a competitive landscape at this point. It's sort of a new white space. So we are looking much more towards automation because we see automation can work next to our testers whether it's a Wireless Test, Storage Test, our Printed Circuit Board, but then automation next for the (53:15) tester is a small part of the automation market. So we like that factor, too.

All right, thank you.

The next question will come from Atif Malik with Citigroup.

Hi, thanks for taking my questions. The first question, understand the concentration with the customer on Wireless Test side. So even if the units are up year-over-year next year and the standards, I understand, are difficult to call, even if the units are up next year, you would expect the Wireless Test opportunity to be down next year? Mark E. Jagiela - President, Chief Executive Officer & Director: Look, it's hard to be precise, but if you – it depends – our units up, we'll get to those units, there's a lot of factors, what's going out with test time, what can be further down with operational efficiencies. So it's less clear. But we, at this point, just want to signal that we would expect probably a flat market with this year, next year. We may be surprised, there may be upside because units are up with a new product, and that would be wonderful. But at this moment, we'd just rather be cautious in terms of what is – what we have high confidence in in the next 24 months.

Okay. And then the follow-up, can you help us quantify the opportunities of advanced packaging side? And if you could just pan out (54:38) these new packages? If we just look at – if we can zoom in on that opportunity, what kind of growth are you expecting this year over last year? And then what should we be thinking about the adoption of these packages year-over-year for next year? Mark E. Jagiela - President, Chief Executive Officer & Director: Yes. So, there is a variety of advanced package types. But in general, that change or that shift is a relatively small component of what we see driving the business. It does inflate the tester demand for a small class of devices by maybe 10% because of complexity issues with that package as well as some efficiency of parallelism with that package. But it's still, we're talking about 10%-ish of the market. So, even as it proliferates into other types of devices and other manufacturers, I don't think that's going to be a key driver, whether it happens quickly or slowly to our business. The main key driver is this complexity, growth, the reduction of the impact of parallelism and this performance tuning aspect of the devices. Gregory R. Beecher - Chief Financial Officer & Treasurer: Okay. Operator, we'll take our next question, please.

Yes, sir, the next question will come from Sidney Ho with Deutsche Bank.

Thanks for taking my question. Related to the SoC test for – this is for next quarter. How much conservatism do you think you have built in to specific guidance? Because if I look at your past five years on average, your orders in the previous quarter in 2Q translates to about 100% of revenue the following quarter. Is there something unique this quarter that is different or is there a seasonality factor that we should consider? Mark E. Jagiela - President, Chief Executive Officer & Director: Well, yeah, the key seasonality or core issue this year is that everything has been shifted by about a month. And because our revenue swings can be 2x from the trough to the peak, it has a significant impact at the quarter boundaries. So, a little bit of what traditionally would have been third quarter orders and shipments moved into second quarter orders and shipments this year than in the past several years.

Okay, that's helpful. Going back to the LitePoint side of things, you talked about LitePoint had pro forma – In the past, you talked about LitePoint had pro forma operating margin similar to corporate average but obviously at a much lower revenue level. Today, margins have to be low and probably a loss. What can you do to get your margins back to your targets on a pro forma basis? Is it just growing your revenue into it or there is some OpEx reduction that's left to be done? Mark E. Jagiela - President, Chief Executive Officer & Director: Historically, LitePoint has had higher gross margins than the company's average. I think of LitePoint more as a software business with hardware but heavy software content. So, they've had very good gross margins, always have. Where gross margins have been under pressure a little bit is cellular, but when you put the whole thing back together, the gross margins are strong at LitePoint. Where we see the opportunity to get the operating margin back to health, and by the way, the operating margin, after the OpEx, has been above our 15% target ever since we bought LitePoint. So, historically, it's done well. So, what we now need to do is look at our OpEx and make some priority changes in terms of what programs, what technologies, what accounts, what are we going to pursue because it's strategically fits our strength in what do we not do. So, we've got an exercise underway to figure out how we reposition Wireless Test or LitePoint back to health and growth.

Okay. Maybe, just to clarify, so in your Q3 guidance which you implied now with roughly $5 million to $6 million, should we expect a more step down with OpEx from the LitePoint business going forward, or is that the right revenue of the OpEx spacing to drive growth from here? Mark E. Jagiela - President, Chief Executive Officer & Director: We will be trimming LitePoint expense going forward. When it hits numbers, probably hits the numbers in the fourth quarter, but we would look to trend those expenses so we could have a healthier business.

Okay, great. Thanks so much. Mark E. Jagiela - President, Chief Executive Officer & Director: And, operator, we have time to just sneak in one more quick one if you could, please.

Yes, sir. The final question is a follow-up from C.J. Muse with Evercore.

Thank you. Just a quick question, how should we be thinking about the tax rate going into calendar 2017 and 2018? Gregory R. Beecher - Chief Financial Officer & Treasurer: Yeah. That's a good question because it's getting pretty tricky, the tax rate. We have a mix of businesses that have very different tax rates. And you can see what can happen in a year like this year where LitePoint, our U.S. business, is down. Semi Test is doing quite well. Universal Robots is growing, that all pulls our rate down. So, one, it's sort of a good news-bad news. Our tax rate has gone down considerably to about 13% this year. We are doing work to kind of figure out what is it long-term when you normalize the businesses. But our rate probably will be closer to 19%, 20% on a long-term basis, perhaps less than what we thought earlier because we're finding more and more of our profits are offshore.

And in long term, you're referring to 2017, or that's further out? Gregory R. Beecher - Chief Financial Officer & Treasurer: I'm referring to 2017 to 2020, C.J. And 2017, I could be a little surprised, if it's possible looks like this, but I think LitePoint will healthier next year, and that's U.S. income.

Got you. Great. Thanks so much. Mark E. Jagiela - President, Chief Executive Officer & Director: Okay. Thank you, everyone. This concludes this call and we appreciate your interest to Teradyne and look forward to talk to you down the road. Andrew Blanchard - Vice President-Corporate Relations & IR Contact: Thank you.

Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect.