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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Teradyne Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	313,918)	659,470)	1,034,943)	850,330)	499,351)
Cost of capital²	18.94%	18.81%	18.47%	17.88%	17.57%
Invested capital³	2,415,179)	2,587,403)	2,564,053)	2,183,213)	1,845,838)

Economic profit⁴	(143,525)	172,841)	561,371)	459,963)	175,098)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 313,918 – 18.94% × 2,415,179 = -143,525

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Teradyne Inc. economic profit decreased from 2021 to 2022 and from 2022 to 2023.

Teradyne Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income	448,752)	715,501)	1,014,589)	784,147)	467,468)
Deferred income tax expense (benefit)¹	(37,642)	(38,693)	(17,305)	(15,688)	(9,456)
Increase (decrease) in allowance for credit losses²	33)	(57)	(22)	298)	63)
Increase (decrease) in deferred revenue and customer advances³	(56,330)	(7,690)	8,085)	42,171)	40,389)
Increase (decrease) in product warranty liability⁴	(19,766)	(18,384)	20,183)	28,889)	4,342)
Increase (decrease) in equity equivalents⁵	(113,705)	(64,824)	10,941)	55,670)	35,338)
Interest expense	3,806)	3,719)	17,820)	24,182)	23,145)
Interest expense, operating lease liability⁶	4,296)	3,890)	3,122)	3,007)	3,266)
Adjusted interest expense	8,102)	7,609)	20,942)	27,189)	26,411)
Tax benefit of interest expense⁷	(1,701)	(1,598)	(4,398)	(5,710)	(5,546)
Adjusted interest expense, after taxes⁸	6,401)	6,011)	16,544)	21,479)	20,865)
(Gain) loss on marketable securities	(7,500)	9,900)	(6,400)	(7,900)	(6,000)
Interest income	(27,348)	(6,379)	(2,627)	(5,982)	(24,785)
Investment income, before taxes	(34,848)	3,521)	(9,027)	(13,882)	(30,785)
Tax expense (benefit) of investment income⁹	7,318)	(739)	1,896)	2,915)	6,465)
Investment income, after taxes¹⁰	(27,530)	2,782)	(7,131)	(10,967)	(24,320)
Net operating profit after taxes (NOPAT)	313,918)	659,470)	1,034,943)	850,330)	499,351)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue and customer advances.

⁴ Addition of increase (decrease) in product warranty liability.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 82,614 × 5.20% = 4,296

⁷ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 8,102 × 21.00% = 1,701

⁸ Addition of after taxes interest expense to net income.

⁹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 34,848 × 21.00% = 7,318

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Teradyne Inc. NOPAT decreased from 2021 to 2022 and from 2022 to 2023.

Teradyne Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Provision for income taxes	76,820)	124,884)	146,366)	116,868)	58,304)
Less: Deferred income tax expense (benefit)	(37,642)	(38,693)	(17,305)	(15,688)	(9,456)
Add: Tax savings from interest expense	1,701)	1,598)	4,398)	5,710)	5,546)
Less: Tax imposed on investment income	7,318)	(739)	1,896)	2,915)	6,465)
Cash operating taxes	108,845)	165,914)	166,173)	135,350)	66,842)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Teradyne Inc. cash operating taxes decreased from 2021 to 2022 and from 2022 to 2023.

Teradyne Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Current debt	—)	50,115)	19,182)	33,343)	—)
Long-term debt	—)	—)	89,244)	376,768)	394,687)
Operating lease liability¹	82,614)	82,770)	76,155)	62,646)	65,325)
Total reported debt & leases	82,614)	132,885)	184,581)	472,757)	460,012)
Shareholders’ equity	2,525,897)	2,451,294)	2,562,444)	2,207,018)	1,480,158)
Net deferred tax (assets) liabilities²	(175,592)	(139,517)	(96,101)	(77,092)	(61,115)
Allowance for credit losses³	1,988)	1,955)	2,012)	2,034)	1,736)
Deferred revenue and customer advances⁴	137,086)	193,416)	201,106)	193,021)	150,850)
Product warranty liability⁵	50,595)	70,361)	88,745)	68,562)	39,673)
Equity equivalents⁶	14,077)	126,215)	195,762)	186,525)	131,144)
Accumulated other comprehensive (income) loss, net of tax⁷	26,978)	49,868)	5,948)	(33,516)	18,854)
Mezzanine equity	—)	—)	1,512)	3,787)	—)
Adjusted shareholders’ equity	2,566,952)	2,627,377)	2,765,666)	2,363,814)	1,630,156)
Construction in progress⁸	(54,799)	(22,470)	(8,105)	(13,098)	(2,537)
Marketable securities⁹	(179,588)	(150,389)	(378,089)	(640,260)	(241,793)
Invested capital	2,415,179)	2,587,403)	2,564,053)	2,183,213)	1,845,838)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue and customer advances.

⁵ Addition of product warranty liability.

⁶ Addition of equity equivalents to shareholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Teradyne Inc. invested capital increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Teradyne Inc., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,687,701)	15,687,701)	÷	15,770,315)	=	0.99	0.99	×	19.02%	=	18.92%
Convertible debt³	—)	—)	÷	15,770,315)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	82,614)	82,614)	÷	15,770,315)	=	0.01	0.01	×	5.20% × (1 – 21.00%)	=	0.02%
Total:	15,770,315)					1.00					18.94%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,724,944)	15,724,944)	÷	15,946,721)	=	0.99	0.99	×	19.02%	=	18.75%
Convertible debt³	139,007)	139,007)	÷	15,946,721)	=	0.01	0.01	×	5.00% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	82,770)	82,770)	÷	15,946,721)	=	0.01	0.01	×	4.70% × (1 – 21.00%)	=	0.02%
Total:	15,946,721)					1.00					18.81%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,112,749)	18,112,749)	÷	18,793,552)	=	0.96	0.96	×	19.02%	=	18.33%
Convertible debt³	604,648)	604,648)	÷	18,793,552)	=	0.03	0.03	×	5.00% × (1 – 21.00%)	=	0.13%
Operating lease liability⁴	76,155)	76,155)	÷	18,793,552)	=	0.00	0.00	×	4.10% × (1 – 21.00%)	=	0.01%
Total:	18,793,552)					1.00					18.47%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,068,721)	22,068,721)	÷	23,870,920)	=	0.92	0.92	×	19.02%	=	17.58%
Convertible debt³	1,739,553)	1,739,553)	÷	23,870,920)	=	0.07	0.07	×	5.00% × (1 – 21.00%)	=	0.29%
Operating lease liability⁴	62,646)	62,646)	÷	23,870,920)	=	0.00	0.00	×	4.80% × (1 – 21.00%)	=	0.01%
Total:	23,870,920)					1.00					17.88%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	10,088,794)	10,088,794)	÷	11,164,394)	=	0.90	0.90	×	19.02%	=	17.19%
Convertible debt³	1,010,275)	1,010,275)	÷	11,164,394)	=	0.09	0.09	×	5.00% × (1 – 21.00%)	=	0.36%
Operating lease liability⁴	65,325)	65,325)	÷	11,164,394)	=	0.01	0.01	×	5.00% × (1 – 21.00%)	=	0.02%
Total:	11,164,394)					1.00					17.57%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible debt. See details »

⁴ Operating lease liability. See details »

Teradyne Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	(143,525)	172,841)	561,371)	459,963)	175,098)
Invested capital²	2,415,179)	2,587,403)	2,564,053)	2,183,213)	1,845,838)
Performance Ratio
Economic spread ratio³	-5.94%	6.68%	21.89%	21.07%	9.49%
Benchmarks
Economic Spread Ratio, Competitors⁴
Advanced Micro Devices Inc.	-19.87%	-19.58%	37.14%	10.89%	-7.23%
Analog Devices Inc.	-7.34%	-8.70%	-11.97%	-7.01%	-5.46%
Applied Materials Inc.	18.48%	28.35%	23.87%	12.06%	11.70%
Broadcom Inc.	9.35%	7.79%	-1.58%	-7.12%	-6.81%
First Solar Inc.	2.28%	-1.34%	-7.14%	-12.82%	-18.27%
Intel Corp.	-13.47%	-7.04%	10.14%	15.80%	13.88%
KLA Corp.	24.51%	26.78%	15.41%	4.29%	5.81%
Lam Research Corp.	9.03%	23.92%	19.28%	3.35%	0.00%
Micron Technology Inc.	-26.49%	1.31%	-3.24%	-8.81%	1.37%
NVIDIA Corp.	-9.62%	32.58%	13.01%	-0.99%	59.61%
Qualcomm Inc.	3.71%	30.15%	27.56%	12.60%	13.99%
Texas Instruments Inc.	15.48%	36.14%	34.76%	29.91%	29.59%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -143,525 ÷ 2,415,179 = -5.94%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Teradyne Inc. economic spread ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

Teradyne Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	(143,525)	172,841)	561,371)	459,963)	175,098)

Revenues	2,676,298)	3,155,045)	3,702,881)	3,121,469)	2,294,965)
Add: Increase (decrease) in deferred revenue and customer advances	(56,330)	(7,690)	8,085)	42,171)	40,389)
Adjusted revenues	2,619,968)	3,147,355)	3,710,966)	3,163,640)	2,335,354)
Performance Ratio
Economic profit margin²	-5.48%	5.49%	15.13%	14.54%	7.50%
Benchmarks
Economic Profit Margin, Competitors³
Advanced Micro Devices Inc.	-50.71%	-48.56%	14.00%	4.87%	-3.66%
Analog Devices Inc.	-26.36%	-32.61%	-76.90%	-22.78%	-16.73%
Applied Materials Inc.	12.39%	16.37%	15.23%	9.18%	8.11%
Broadcom Inc.	16.36%	14.57%	-3.72%	-19.64%	-18.10%
First Solar Inc.	4.34%	-1.93%	-13.61%	-25.68%	-27.27%
Intel Corp.	-22.88%	-9.90%	11.36%	16.64%	15.55%
KLA Corp.	19.47%	22.64%	15.19%	4.81%	8.11%
Lam Research Corp.	7.93%	17.65%	15.55%	3.89%	0.00%
Micron Technology Inc.	-91.13%	2.24%	-5.42%	-17.37%	2.28%
NVIDIA Corp.	-7.61%	21.84%	10.17%	-1.28%	24.34%
Qualcomm Inc.	3.26%	20.08%	16.60%	9.51%	12.35%
Texas Instruments Inc.	19.96%	31.69%	31.09%	26.81%	24.80%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -143,525 ÷ 2,619,968 = -5.48%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Teradyne Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

Teradyne Inc. (NASDAQ:TER)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin