Teradyne, Inc.

Good morning everyone and welcome to our discussion of Teradine's most recent financial results. I'm joined this morning by our CEO Greg Smith and our CFO Sanjay Mehta. Following our opening remarks we'll provide details of our performance for the first quarter of 2025 and our outlook for the second quarter of 2025. The press release containing our first quarter results was issued last evening. We are providing slides as well as a copy of this earnings script on the investor page of the Teradine website that may be helpful in following the discussion. Replays of this call will be available via the same page after the call ends. The matters that we discussed today will include forward-looking statements that involve risks that could cause Teradine's results to differ materially from management's current expectations. We caution listeners not to place undue reliance on any forward-looking statements including in this presentation. We encourage you to review the safe harbor statement contained in the slides accompanying this presentation as well as the risk factors described in our annual report on form 10k for the fiscal year ended December 31st 2024 on file with the SEC. Additionally these forward-looking statements are made only as of today and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances except to the extent required by law. During today's call we will refer to non-GAAP financial measures. We have posted additional information concerning these non-GAAP financial measures including reconciliation to the most directly comparable GAAP financial measures were available on the investor page of our website. Looking ahead between now and our next earnings call, Teradine expects to participate in a technology and industrial focused investor conferences hosted by J.B. Morgan, T.D. Cowan, and Stiefel. Our quiet period will begin at the close of business on June 20th 2025. Following Greg and Sanjay's comments this morning we'll open up the call for questions. This call is scheduled for one hour. Greg?

Thanks Tracy. Good morning everyone and thanks for joining us. Today I'll discuss our first quarter results and provide an update on the trends that we are seeing across our businesses. Sanjay will then provide more detail on our first quarter results and second quarter guidance. It's been seven weeks since our analyst day and the long-term themes that we discussed, AI, verticalization, and electrification remain the primary industry drivers that we expect will accelerate our growth trajectory in the years ahead. In the near term the combination of trade policy and our customers heightened uncertainty around end market demand has caused orders to push out as we discussed last month. Although the direct impact of current and anticipated 90-day tariffs on our model is minimal, we are more concerned about the impact of tariffs on the end market demand. Many of our segments are reviewing their capital acquisition plans and we do not have firm forecasts from them at this time. Beyond the second quarter our visibility is very limited. As such we are not commenting on or reaffirming our expectations beyond the second quarter. We delivered first quarter revenue towards the high end of our guidance range with gross margin and earnings per share above the high end of our expectations. Strength and semi-test, specifically SOC for the mobile end market, drove -over-year growth. This mobile demand is transitory and related to some supply chain transitions at our customers rather than a signal of end market recovery. Our compute revenue also grew -over-year in Q1 with record loading on our Ultraflex and testers for AI accelerators. Revenue in our product test and robotics test divisions were generally in line with our expectations in Q1. In semi-test, SOC delivered above our plan and memory was in line with our expectations as customers digest the HBM or high bandwidth memory capacity that was put in place last year. In the quarter our memory business unit secured a coveted HBM for performance test win with a major DRAM manufacturer which is beginning to expected to begin shipping in the second half of this year. This is our first DRAM way for sort win at this customer and a major milestone for our memory business. Our IST business or integrated system test delivered first quarter results in line with our expectations and achieved initial customer acceptance for the new Titan HP targeted at system level test of AI accelerators. We are seeing new opportunities emerging in the IST space with both new and existing customers. All of the businesses in our newly formed product test division delivered first quarter results in line with our expectations. While the wireless test end market for our Lightpoint business has been generally weak since 2023, the team has continued to secure the majority of opportunities in wireless networking sockets. In the first quarter, Lightpoint won 13 of 13 of the Wi-Fi 7 wireless test opportunities. A critical aspect of our strategy to gain share in high performance computing is to establish a leadership position in silicon photonics test. In support of that goal, we believe that we are on track to close the acquisition of quantified photonics in the second quarter. In the first quarter, our robotics division executed a structural reorganization consolidating the customer facing sales, marketing, and service organizations between UR and Mir. Our robotics team has responded with resilience in what continues to be a very challenging macro backdrop. In the quarter, Teradyne Robotics received the largest order in its history from a global automotive manufacturer for both Mir AMRs and UR Cobot arms. The new Palajack, Mir 1200, is now in the hands of distributors and select lead customers and pilot installations are running. Moving on to Q2. As we discussed at our analyst day, we have seen customers push order delivery out from the second quarter into future quarters due to the uncertainty international trade policy could have on end market demand. Despite this, our view of Q2 remains in line with the expectations that we set in March. Given the lack of visibility and the impact that trade policy may have on the industry and our business, we are prudently managing expenses. While there are systematic savings that are delivered by our flexible business model and variable compensation strategy, we are also actively managing expenses for the objective of generating operating leverage. With our strong balance sheet, consistent free cash flow generation, low capital intensity, and variable operating model, we are continuing critical investments and are positioning ourselves drive growth as customers figure out their strategy in the current macro environment. We see green shoots of evidence of this across Teradyne as our business units address emerging opportunities and increasingly work across divisions to better solve customer problems. TAS, or Teradyne Automated Solutions, is a great example. Semiconductor customers are interested in automating particularly their back end processes which are still quite labor intensive. In the first quarter, we announced the strategic partnership with ADI, which will deploy UR cobots and mere AMRs to support ADI's collaborative automation initiative. The semiconductor market is one of the segments our robotics business is targeting to drive diversified growth. Within SemiTest, IST is working hand in hand with our SOC team to help current and potential customers in the AI compute space cost effectively optimize test insertion points. We are seeing this with our first Titan HP customer acceptance and revenue in Q1 from a hyperscaler customer. And in Product Test, our PBT or Production Board test business, which has historically been strongest in the automotive industry, is making gains in AI compute where technologies pioneered by SemiTest are being leveraged to help hyperscalers test server level products. The increasing complexity and high cost of failure of these end products is creating sizable opportunities for us. In the mobile space, after years of over capacity, utilization rates have improved considerably. As evidenced by new system orders for AI compute, complementing upgrades of underutilized mobile testers. We have started to see improvement in LPDDR for mobile applications and we started shipping our next generation image sensor testers for the mobile market in Q1 of 2025. We are also winning new opportunities in SLT in the mobile market. With 2 nanometer and gate all on the horizon, we are optimistic that as demand recovers, the setup for our mobile business is good. We cannot predict the impact that dynamic trade policies will have on global end demand. But we know that Teradyne has historically emerged stronger coming out of challenging macroeconomic periods. We expect that to be the case in 2025 as well. With that, I'll turn the call over to Sanjay.

Thank you, Greg. Good morning, everyone. Today I'll cover the financial summary of Q1 and provide our Q2 outlook. Now to Q1. First quarter sales were $686 million, which was towards the high end of our guidance with non-GAAP EPS of $0.75 above our high end guide of $0.68. Non-GAAP gross margins were 60.6%. This was above our guidance due primarily to product mix. Non-GAAP operating expenses were $275 million up year over year as we have increased our investment and target opportunities to drive longer term growth. That said, it's down sequentially as part of our implemented spending controls. Non-GAAP operating profit was 20.5%. Turning to our revenue breakdown in Q1, semi-task revenue for the quarter was $543 million, with SOC revenue contributing $406 million, memory $109 million, and IST $27 million. Strength and SOC was driven primarily by mobile. As expected, memory revenue was lower as customers digest the HBM test equipment delivered in 2024. We expect DRAM to dominate the memory mix in 2025 just as it did in 2024. IST revenue was $27 million, was up both sequentially and year over year, driven by new SLT shipments for mobile and our first AI compute revenue. In product test, Q1 revenue was $74 million, down 4% year over year, with wireless test revenue of $29 million, up 20% year over year. This growth in wireless test was offset with weakness in production board tests tied to the automotive industry and timing of programs and defense in aerospace. Now to robotics. Revenue was $69 million, declining both sequentially and year over year. In the quarter, UR contributed $49 million and MIR contributed $20 million. While the long-term drivers of AI and on-shoring in advanced robotics remain intact, near-term macro factors continue to be a headwind. In robotics, the operating loss was $22 million, in line with our expectation. Given our restructuring, I'll share the gap to non-gap reconciliation of the loss. On a gap basis, our loss in Q1 was $37 million, including approximately $11 million in restructuring primarily associated with our -to-market consolidation and $4 million of amortization of intangible assets. This restructuring has reduced our operating breakeven revenue from $440 million to $365 million as described in January. I'd like to highlight our -to-date robotics gap results. -to-date, our gap losses are $231 million. Breaking that down, approximately $233 million of non-cash amortization of intangibles, $45 million of restructuring cost resulting, and $47 million of cumulative non-gap operating profit. Some other financial information in Q1. We had one customer that directly or indirectly drove more than 10% of our revenue in the first quarter. In Q1, 19% of our revenue was shipped to China, 12% in support of multinational customers, and 7% in support of Indigenous Chinese customers. For context, in the past two years, shipments to Chinese Indigenous customers has been 5% of TerraDyn's revenue. The tax rate, excluding the street items for the quarter, was .5% on a gap and non-gap basis. At a company level, our free cash flow was $98 million, primarily driven by earnings and networking capital improvements in the quarter. We repurchased $157 million of shares in the quarter and paid $19 million in dividends. We ended the quarter with $622 million in cash and marketable securities. Now turning to our outlook for Q2. Q2 sales are expected to be between $610 million and $680 million. Second quarter gross margins are estimated at .5% and 57.5%. A decrease quarter over quarter driven by product mix and lower volume. Q2 OPEX is expected to run at .5% to .5% of second quarter sales. The non-gap operating profit rate at the midpoint of our second quarter guidance is 14.5%, with non-gap EPS expected to be in the range of 41 to 64 cents on 161 million diluted shares. Gap EPS is expected to be in the range of 35 to 58 cents. Moving to the topic of tariffs. As Greg noted, the primary concern of the tariffs is the impact on the end market demand. As our manufacturing footprint and the location of our customers, we expect only a minimal impact on the efficiency of our business model. The impact of the tariff will generally be passed along to customers in affected regions. In Q2, we expect to have a small increase of cost of sales and operating expenses, which amounts to approximately two cents of earnings for Q2, which is included in our guide. While we have assessed the financial impact due to tariffs in Q2, there is little ability to predict either the changes in tariff or trade policy or the magnitude of impact of the trade policy on end market demand. As such, please do not rely on prior financial guidance that extend beyond the second quarter. That said, I'd like to provide additional color on the dynamics we're seeing in some of our markets. In mobile, after two consecutive quarters of strength driven by some supply chain shifts, we expect our Q2 revenue for mobile to be lower. In Q2, we also expect a significant sequential decline in memory revenue as the market continues to digest installed HBM test capacity. Looking out further, trade policy, including tariffs, are most likely to impact mobile, automotive, and industrial end markets. Significant changes to the AI diffusion rule or semiconductor trade restrictions may impact the compute market. Turning to share buybacks, as noted in our press release, we've increased our share buyback target from $400 million in 2025 to up to $1 billion through the end of 2026, reflecting our confidence in our long-term plans and free cash flow generation. Summing up, we delivered strong sales, earnings, and free cash flow in the first quarter. Our expectations for the second quarter are largely in line with our expectations provided at our analyst day, inclusive of the expected impact of tariffs. While visibility remains limited and there is a heightened uncertainty on the end market demand, we are confident in the long-term drivers of AI, electrification, and verticalization that will drive the industry and our businesses in the coming years. Our resilient variable business model and strong balance sheet enable us to continue to invest in areas of strategic importance as we await a broader end market recovery. With that, turn the call back to the operator to open the line up for questions. Operator?

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please ask one question and one follow-up question. One moment while we pull for questions. Our first question is from Krish Sankar with TD Cowan. Please proceed.

Thank you for putting my question. Greg, you kind of mentioned how seven weeks ago at your analyst day you saw tariffs-related pushouts, but now it seems like some of your OSAT customers are seeing tariffs-related pull-ins. I'm kind of curious what are the dynamics you're seeing. It seems like you're only seeing pushouts, no pull-ins. What end vertical is it coming from? Is it mostly auto analog industrial? Are you also seeing this trend in mobile and HPC? Then I had a quick follow-up.

Yeah, Krish. I think the effects of pull-ins for end orders, people hurrying to get chips, are mostly affecting capacity. It's using capacity that's already in it. We haven't seen significant pull-ins into Q1 or into Q2 to provide additional capital equipment to support that. That's not a factor. The pushouts that we were talking about at analyst day are, the situation is essentially the same as it was back then. The pushouts are coming from our customers that serve the auto and industrial space. We haven't seen significant pushouts associated with mobile, but we are concerned about the potential end market impact. That is an effect yet to be seen that we don't have information about.

Got it. Thanks, Greg. Then just to follow up on that HBM vapors.win, is this an existing HBM customer or is it a new one? Also, typically, Teradon has been better in final tests because speed is more important. I'm curious what got you the vapors.win. Thank you.

The important thing to remember is that with HBM memory, there is now a performance test that occurs at wafer level. This is a post-stack test. You do a core test of all of the DRAM wafers, then you dice those wafers, you stack them up onto a substrate wafer, and then you do another wafer level test of the entire stacked HBM memory. That's a performance test that happens at higher speed. That's the insertion that we won. That HBM.win is with a customer we didn't have existing HBM 3 or 3E business.

Thank you, Greg. Very helpful.

Our next question is from CJ Muse with Cantor Fitzgerald. Please proceed.

Yeah, good afternoon. Good morning. Sorry. Thank you for taking the question. I guess I understand not guiding to the second half given lack of visibility, but I'm hoping you could speak to what you can control. How are you thinking about what the new gross margin range would look like for the full calendar year, and do you have an updated view on how we should be thinking about OPEX?

Yeah. Hi, CJ. It's André. For the full calendar year, given the uncertainty on the top line and the impact of the tariffs or the trade policy, the revenue mix is really a large factor, so we're not providing any guide for the gross margin. I will share that our first half from a gross margin perspective is percentage-wise is roughly in line with where we expected. Q1, a little bit better, and as we're guiding Q2, a little bit worse, but overall in the first half, percentage-wise, we're aligned. Given the uncertainty of the top line, we're not providing any guide for the second half. From an OPEX perspective, the story may sound a little bit redundant, but from a variable compensation model perspective, what we'll see is depending on the revenue flux, if the revenue comes down, we'll have a favorable impact, lower spend. If it goes up, we'll have more spend, but the narrative is consistent where we're going to prioritize our semi-test, our engineering, and our -to-market. You saw the restructuring in robotics, in Q1. You should see that decline year over year, and from an OPEX perspective and product test, it should be roughly flattish to the prior year.

If you don't mind, Sanjay, I'd like to add one sort of historical perspective to that for CJ. If you look into sort of past situations where we have had a sharp downturn within a year, from 2022 to 2023, in the middle of 2023, we had a sharp slowdown in the mobile space that occurred mid-year, and our margins went from 59% in 2022 to 57% in 2023. We're not calling a gross margin for the full year because we don't have a good picture of the full year. The thing I want to emphasize is that it's probably going to move in a pretty narrow range.

Very helpful context. I guess as my follow-up, I was hoping you could speak to the SLT wins that you kind of highlighted in your prepared remarks. Can you kind of give us more color on what you're seeing with AI accelerators and then also on the mobility side of 2 nanometer? Is that just a win at your large existing customer or have you broadened your design wins in that arena? Thank you.

I'm glad you asked for clarification around the mobile SLT win. In my script, it was sort of two separate thoughts that we have one additional mobile sockets that are going to drive business in 2025 and into 2026. A separate thought is the transition to 2 nanometer is going to be a positive demand tailwind in 2026 as well. I didn't mean to imply we won an SLT 2 nanometer socket. I just want to make sure we're really clear about that. On AI accelerators, this is sort of a leading edge trend. What we're seeing is that AI accelerator devices when they're being incorporated into higher level assemblies, those assemblies have a acceptable failure rate as they're being built into servers. It takes a significant amount of time to get the test coverage that you need for these devices. Many of the failures can only be found when they are running actual training workloads. The most cost effective way to be able to run those training workloads is to do it in a system level test environment. We've implemented that for a leading edge AI accelerator. We've delivered that product. That product has been accepted and is being used in production right now. The trend that we believe is going to happen is that with next generation accelerators that are even more complex, that 100% SLT is going to be the most economic choice that these customers will make in order to achieve the quality levels that they need. This is sort of the tip of the spear when it comes to SLT of these devices. The key thing that we have is a great solution around the thermal control and power required to do this. It's an important strategic win that is going to deliver significant revenue in 2026.

Very helpful. Thank you.

Our next question is from Timothy Acary with UBS. Please proceed.

Thanks a lot. Greg, you talked about, I think you said the biggest robotic order ever. I think you all over the map. If you said it's normal seasonal, it's pretty flat in June. Can you talk about that order? What was it for? What does it tell you about the business? When is it going to hit?

Yeah, sure. As we said in the script, it's for an automotive customer. This has been a historically large strategic customer for us for both UR and MIR for a while. This is the first, it's the largest order for our AMRs that we've ever received. It's the first time that we've received an order where we dealt with this customer in a combined way as a robotics unit versus a UR and MIR unit. It demonstrated the ability to transition the sales force to selling all of our products to these strategic customers. The product is primarily used in, so for the AMRs, they're primarily used in the material handling part of the factory. Essentially, they bring parts from storage to line side. Then the other automation takes that and brings it into the product being assembled. The cobot arms are generally used to automate manual processes in existing factories. When they build the factory, they will design in the core automation for the assembly line. There is a significant amount of manual operations that occur, especially as the product gets further through the process. After the factory is commissioned, this customer will continually look for process improvements. Collaborative robotics is one of the key technologies that they use for those kinds of improvements because they don't have to make sure the product and automation and the workers are separated. It's an ongoing continuous improvement investment from this customer on the cobot side.

When does it help the business? Then, can you give us some TAM updates from what you provided during the analyst day? You had said 49 SSE, 14 memory, and then you had all the breakdown within SSE. Is there any change to that that you would want to highlight? Tim, I didn't quite

catch

the first part of your question around that. Yeah, Greg, I was just trying to understand if this is such a big order, when does it help the business? Does it ship in the back half of the year? Does it ship in June? What does it ship?

Oh, no. Its shipments are spread out from Q1 into Q2. It wouldn't extend into the second half of this year. The lead times on the robotics products are generally pretty short.

Then, maybe addressing your next request. As we said in the prepared remarks, given the uncertainty, we're not providing an update on the TAM and the breakdown for the full year.

Our next question is from Tamee Chatterjee with JP Morgan. Please proceed.

Hi, this is Priyanka Thapa on First Islamic Chatterjee. This, my question is on secondary impacts for tariffs. Have you observed a shift among international customers towards non-US competitors in the testing space, or have you noticed that your competitive positioning has remained stable?

Hi, Priyanka. In terms of competitive impact, so it especially, you know, the key thing in the market is we have two major international suppliers and then there are indigenous suppliers in China and Korea that also serve the market. We have not seen any competitive impact, customers that are deciding to buy from a different vendor because of the tariffs. And, you know, there are certainly, you know, it's a very competitive market, so we're in competing all the time. Tariffs has not been a deciding factor in any of those competitions.

All right. And one follow-up. Just to put on the gross margin impacts, it was noticeably strong on product mix this quarter. What measures are necessary in the long term to achieve this sort of 60% gross margin, or is the narrow range that you spoke of like somewhat below that?

Yeah, hi, it's Sandra. Thanks for the question. You know, the strength, as we know in the prepared remarks, is really tied to product mix. And, you know, we overall, when we make our investment decisions, we are looking to differentiate our solutions. And we have an overall business model of 59 to 60%. And that's how we design our products in the markets we enter. I would say in the short run, you know, when we talk about product mix, you know, from a tester perspective, depending on what the needs are for a particular customer, it's really configuration dependent on what goes in there. But overall, in the first half, you know, if you take a look at our guide, the first half were about 59%. We do believe over the mid and long term that we will continue to operate our business at 59 to 60%.

All right. Thank you so much.

Our next question is from Brian Chen with Steeful. Please proceed.

Good morning. Thanks for letting us ask a few questions. Maybe one for you, Greg. When you sized the VIP TAM at around $600 million in 2016 and potentially $800 million in 2028, were you including SLT? Can you give us a sense, even if you don't necessarily reaffirm those targets at the moment, like how material to those TAM figures could SLT be?

Yeah. So the numbers that we cited for the SLT, for the VIP TAM are around semiconductor ATE, and it doesn't include SLT revenue. If there is a, you know, if the trend that I'm talking about plays out, then I don't think we've provided a formal estimate of that TAM. It would not, it's not like going to be as big, but probably in the 10 to 30% of the total TAM would be the SLT TAM for that. We'll be updating that over time and we'll let you know probably in January of next year when we start talking about the long term. But you should look at it as impactful, but not huge, not like this.

Okay,

thanks. And then I guess kind of broadly, are you anticipating more meaningful advanced backend test and packaging lines to be onshore here in the States? And what timeframe seems realistic and should this coincide with the next expansion of advanced logic wafer fab capacity in the US?

Yeah. So the thing that we have usually said, and we still believe, is that customers buy testers that, for the parts that they need to test, and where those parts are produced, whether it's in Taiwan or in China or in the US, doesn't affect the end market demand for those chips. So our ship to locations may change in the future if there's more on-site manufacturing in the US, but the total demand is unlikely to change in any meaningful way. There may be some additional inefficiency if yields are lower at first or if utilization is lower, but I think the onshoreing of manufacturing is probably a bigger factor for front-end equipment where you need to make a large investment whether or not you have the demand for the product. For things like testers, you're only going to buy testers essentially at the point in time when you know that you have the wafer volume that's going to require the test capacity.

Okay, thank you.

Our next question is from Shane Brett with Morgan Stanley. Please proceed.

Thank you for taking my question. So firstly on memory, you spoke about DRAM dominating the memory mix in 2025, just as it did in 2024, which would imply NAND remains at very low levels. What do you think is needed from customer utilization or technology transitions to see test orders again? Thank you.

So there are two factors that will drive a larger NAND demand. The first is really mobile phone unit volume. So if mobile phone unit volume inflects significantly, then we would see an increase in the demand. Also if the rise of AI-enabled smartphones requires a lot more local storage for model parameters, that would increase the amount of NAND per phone. So those are sort of the volume drivers for the market. The other important driver is interface standards. And this is true both in the mobile space and also in the compute space. In the mobile space, there are new protocols in both the iOS ecosystem and the Android ecosystem that require investment in new tester capacity to be able to verify those devices. So as new phones adopt new standards, that does drive TAM in the mobile space. The last factor around the NAND market is as the NAND capacity continues to increase and the need for near-line storage for AI increases, there's a potential for very high demand in the cloud compute space for storage. And that's something that we think would be a positive factor for demand for ATE. And we also think that that's an interesting market for us, for our IST group.

Got it. Thank you. And as for my follow-up, you've previously mentioned that most of the VIP demand in 24 came from upgrades. And if they were system sales, revenue would have doubled. Do you have a gauge on what the utilization are for your testers? And at what point would customers have to purchase new testers rather than resorting to upgrades? Thank you.

So we don't have an accurate enough measure of utilization that we can share sort of specific numbers. The trend is definitely upward. And we have already seen an increase in system orders associated with AI accelerators. So in the early parts of 2024, it was really quite dominated by upgrade sales. As we got into the latter half of 2024, we began to see significant system orders in addition to those upgrade orders. And also the mobile business that we've transacted over Q4 and Q1 is consuming additional capacity. It's mobile of one type to mobile of another type, but it is definitely consuming idle testers. So the best I can do is give you a qualitative answer that we believe that the number of upgradeable systems is much, much lower now than it was, say, six months ago. Got it.

Thank you very much.

Our next question is from Dave Dooley with Gill Head Securities. Please proceed.

Yes, thank you for taking my question. I guess I had one clarification. As far as the HBM stack die test, just to clarify, I guess you now have all three of the HBM guys for stack die test. Is that how we interpret this, Lynn?

No. No, we have, um, that is not a correct assumption. Okay.

And then as far as the, at the analyst day, you demonstrated a robot that was loading and unloading foops. And I was kind of wondering, and I think you mentioned that that was in production or in demonstration of one customer. Just helps understand the timing of, you know, when you expect to start to see revenue from that product and how big a market do you think that can be?

So, um, we already have, we had revenue in Q1 in association with the semiconductor vertical for our robotics business. And so that, you know, those are, and we also have semiconductor workflows similar to what we demonstrated at our analyst day in production at multiple sites for a different semiconductor customer. In terms of the revenue impact in 2025, it's kind of single digit millions of dollars. And we expect it to grow over time. But, you know, it also is a key element of a, like an enterprise level value proposition to these customers that we are already in their production facilities to provide support for our test equipment. We understand their workflows quite well. And by being able to offer them the robotics that they need to automate some of these processes, we're able to do that quite efficiently. And we're also a trusted partner. So we think that this is an important way for us to demonstrate that we're the right test and robotics partner to these customers.

Thank you.

Our next question is from Suzanne Aria, Bank of America. Please proceed.

Hi, thank you for taking that question. This is Duxan Zheng on behalf of Favec. One on compute, I know you said you're not seeing a lot of pushouts with this end market. And I know you won't guide the second half, but should we then expect this business to generally remain on track with your expectations from the investor day? Just given you're not seeing any pushouts. Thank you.

Yeah, so we haven't seen significant pushouts in terms of affecting our Q1, Q2 results. There is uncertainty around the second half of the year. And I'd like to emphasize that it is uncertainty. There are potential upside factors and there are potential downside factors. And that's one of the reasons that we are not trying to guide the full year is that we, we're not trying to subtly communicate a downward message or anything. We're just hearing a lot of uncertainty from our customers about the timing of projects and the need for capacity. But yeah, the view from the analyst day to now is essentially the same.

Got it. And then one on robotics. Obviously, the sales side is a bit uncertain, but you've previously been assuming that this segment will outgrow your industrial peers by a significant margin. So is this still what you're expecting? That would be helpful. Thank you.

Yeah, so we are, you know, the way that we are typically thinking about our robotics business is that we would want to significantly outgrow traditional industrial automation peers in this space, mainly because we're addressing an under penetrated market, the advanced robotics segment, and especially the segment of robotics where people are trying to automate processes that need to be in the presence of people or interact interoperating with people. So that's a different market. And we believe a market that is going to be accelerated by AI. We have not seen anything that changes our opinion that that's possible. But we definitely are struggling with an end market that's quite sluggish. And if people don't have money for projects, then it's difficult for you to achieve sort of an absolute level of growth in the business. So that's the key reason that we undertook the restructuring that we did to try and bring down our break even. So our break even was at 440 million in 2024. Our break even for this year is down at 365 million. And that was really a reaction to understanding that we don't have control over those end market conditions. And we needed to set ourselves up so that we could maintain our critical investments and still be more careful in terms of the investments that we are making around the go to market and achieve the synergies that we could between these two groups. Understood. Thank you.