Name: Teradyne Inc. (NASDAQ:TER) | Common-Size Income Statement
Creator: Stock Analysis on Net

Common-Size Income Statement

Teradyne Inc., common-size consolidated income statement

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Products	78.33%	82.14%	86.33%	86.21%	82.25%
Services	21.67%	17.86%	13.67%	13.79%	17.75%
Revenues	100.00%	100.00%	100.00%	100.00%	100.00%
Cost of products	-32.99%	-33.04%	-35.11%	-37.08%	-34.08%
Cost of services	-9.59%	-7.78%	-5.30%	-5.71%	-7.54%
Cost of revenues, exclusive of acquired intangible assets amortization	-42.58%	-40.82%	-40.41%	-42.79%	-41.62%
Gross profit	57.42%	59.18%	59.59%	57.21%	58.38%
Selling and administrative	-21.57%	-17.69%	-14.79%	-14.89%	-19.05%
Engineering and development	-15.62%	-13.96%	-11.55%	-12.01%	-14.07%
Acquired intangible assets amortization	-0.71%	-0.61%	-0.58%	-0.99%	-1.75%
Restructuring and other	-0.80%	-0.54%	-0.25%	0.42%	0.60%
Operating expenses	-38.70%	-32.81%	-27.17%	-27.47%	-34.26%
Income from operations	18.72%	26.37%	32.43%	29.74%	24.12%
Interest income	1.02%	0.20%	0.07%	0.19%	1.08%
Interest expense	-0.14%	-0.12%	-0.48%	-0.77%	-1.01%
Other income (expense), net	0.04%	0.18%	-0.66%	-0.29%	-1.29%
Non-operating income (expenses)	0.92%	0.27%	-1.07%	-0.88%	-1.21%
Income before income taxes	19.64%	26.64%	31.35%	28.87%	22.91%
Income tax provision	-2.87%	-3.96%	-3.95%	-3.74%	-2.54%
Net income	16.77%	22.68%	27.40%	25.12%	20.37%

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).

An analysis of the five-year common-size income statement reveals a period of margin expansion peaking in 2021, followed by a contraction in profitability through 2023. While gross margins remained relatively stable, the net income margin experienced a notable decline from its high of 27.40% in 2021 to 16.77% by the end of 2023.

Revenue Mix and Composition: A shift in the revenue stream is evident, characterized by a transition toward a higher proportion of services. Product revenues peaked in 2021 at 86.33% of total revenues before declining to 78.33% in 2023. Conversely, services as a percentage of revenue grew from 13.67% in 2021 to 21.67% in 2023, indicating a strategic pivot or a change in market demand toward recurring service-based income.
Gross Profitability: Gross profit margins have demonstrated resilience, fluctuating within a narrow band between 57.21% and 59.59%. Although the cost of services as a percentage of revenue increased from 5.30% in 2021 to 9.59% in 2023, this was partially offset by a slight decrease in the cost of products relative to revenue, which moved from 35.11% in 2021 to 32.99% in 2023. The resulting gross profit margin in 2023 stood at 57.42%.
Operating Expense Trends: The most significant volatility is observed in operating expenses. Total operating expenses dropped to a low of 27.17% of revenue in 2021 but surged to 38.70% by 2023. This increase is primarily attributed to rising costs in selling and administrative expenses, which climbed from 14.79% in 2021 to 21.57% in 2023, and engineering and development expenses, which rose from 11.55% in 2021 to 15.62% in 2023.
Operating and Net Income Performance: Operating income margins followed a bell-shaped trajectory, rising from 24.12% in 2019 to a peak of 32.43% in 2021, before falling to 18.72% in 2023. This compression is directly linked to the expansion of operating expenses. Net income margins mirrored this trend, declining from 27.40% in 2021 to 16.77% in 2023, though this was slightly mitigated by a positive contribution from non-operating income, which reached 0.92% of revenue in 2023.

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