We manage our business investments according to this trend line and tend not to chase these excursions up or down. Sanjay will note how these trend lines roll into our updated midterm earnings model. Looking at a longer-term perspective, over the last 8 years, Teradyne's revenue has about doubled and EPS has grown about 4x. Growth of our core test markets is part of the story, as is expansion into new markets like Industrial Automation and System Level Test. This, combined with a rich cash flow and a balanced capital allocation plan, has been the recipe for shareholder returns. As you will hear, we see all of these drivers remaining in place for the years to come. Since this is my last earnings call, I would like to thank all of you who follow, invest and influence our journey at Teradyne.

As Greg takes on the role, I'm confident we won't miss a beat, and he's been a key part of developing and implementing our strategy for many years. With that, I'll turn things over to Greg for his deeper perspective on our results and outlook. Greg?

Greg Smith: Thanks, Mark, and good morning, everyone. Today, I will summarize the full year of 2022 and then comment on our early view of 2023. For the full year, we delivered sales of $3.155 billion and non-GAAP earnings of $4.25 per share. 2022 was the second-highest revenue in company history but down 15% from 2021's record level due mainly to reduced demand in SOC test, specifically in mobility and compute. This offset was -- this was offset somewhat by strength in the automotive end market, including substantial demand for ADAS processor test. Overall for 2022, we estimate the SOC test market was about $4.6 billion, down 6% from '21, and the memory market was down a similar amount for the year. Industrial Automation grew about 7% in dollar terms.

Foreign exchange was a major headwind in that business. Our growth was 15% in constant currency. I'll divide my comments on market conditions into an early view of 2023, followed by our outlook for the midterm. In July of last year, we noted the Semi Test equipment market was entering a downturn, with demand declining in end markets such as smartphones. This began to create chip supply/demand and inventory imbalances. We noted these types of corrections typically have a 4- to 6-quarter duration. Now we're a bit more than 2 quarters in, and as the downturn continues, our customers continue to rebalance their production and inventory with end market demand. Much of the imbalance is in test-intensive end markets like smartphones, compute and networking, where we see lower utilization.

At this point in time, with limited visibility into the second half, we estimate a market size for SOC tests to be 10% to 30% below 2022's $4.6 billion level. Major SOC producers are expected to start the transition to 3-nanometer later in 2023, and this could mitigate the headwinds a bit. Our historically largest end customer is expected to lead this transition, and revenue driven by this customer is expected to grow in 2023, moving from less than 10% of our revenue in 2022 to low double-digit percents of revenue for this year. Demand won't be finalized until Q2 and will be weighted towards the second half of the year. In general, our models factor in 2 key demand drivers, unit volume and device complexity. We've read the same press reports that you have, that smartphone volumes are likely to be down in 2023.

The complexity growth associated with the 3-nanometer transition is likely to offset the test demand impact of the unit decrease, and the net effect is the increase in revenue that I've described. Our assumption that this transition is going to be gradual is likely to mute the peaks, but it will also fill in the troughs as the full portfolio migrates to 3-nanometer. Overall, averaging across the entire life of a process node, like 5-nanometer or 3-nanometer, we expect that each new node will drive continued higher test investment in total than the prior node. On top of that, increased unit growth and the addition of new part types to the portfolio will drive further increases in test investment. In the memory test market, technology transitions continue to drive demand.

Faster interface speeds in DRAM with DDR5 and in flash with UFS 4.0 cannot be tested on existing testers and are driving purchases of next-generation ATE. Offsetting this technology-driven replacement demand is a difficult end market for our memory customers, which is likely to reduce capacity buying for this year. We are seeing some impact of that in the first quarter. On balance, we expect the memory test market size to be flat to slightly down from 2022. We expect Storage Test will be weak in 2023 due to excess capacity in the HDD end market. And Wireless Test demand will be soft on lower smartphone shipments and a demand lull in advance of the transition to WiFi 7 beginning in 2024. Shifting to Industrial Automation. As we expected, the macro-outlook in industrial markets is cautious, with weak industrial PMIs. We expect this will be a growth headwind in the first half of the year.

Rolling up these headwinds and offsetting factors over the first half of the year, our current judgment for the total company has our second quarter about flat with Q1. However, in Industrial Automation for the full year, we have 3 notable factors that should help offset these headwinds later in the year. First, we do not expect the currency exchange impacts we experienced in 2022. Second, growth initiatives that began in 2022, including a channel transformation at UR, will gain traction. One component of the channel transformation is supplementing our traditional distributor channel with a focused OEM channel. That effort delivered 26% growth in 2022, and we expect this to continue in 2023 as our existing OEM partners continue to grow and we add additional OEMs and targeted verticals.

The third factor driving IA growth is expanding the served market through new products. Most notably, in 2023, shipments of the new long-reach, heavy-payload cobot at Universal Robots, the UR20, which will ramp in the second half of the year. Barring a significant deterioration in the macro economy and reasonably stable currencies, we expect channel expansion, combined with new products, to drive greater than 20% growth for IA in 2023, weighted to the second half of the year. Now shifting to the midterm outlook. The short-term changes in customer buying patterns in semi cap equipment can be abrupt. We built our flexible operating model to accommodate those cycles. Our midterm plans track the long-term historical trends and the future demand drivers in each of our businesses rather than the short-term cycles.

In any given year, we will land above or below trend, but that trend line has provided a reliable baseline for planning. Sanjay will be going through a quantitative view of our 2026 earnings model. To set up that discussion, I'd like to make a few qualitative comments to provide some context. Our 2026 earnings model shows significant revenue and EPS growth, and it's reasonable to ask why we assume midterm growth when the short-term environment is so weak. There are several factors that give us confidence in our midterm outlook. End markets, like AI and cloud computing, mobile processing and automotive, including ADAS and EV, are driving increased semiconductor content and increasing chip complexity. The deployment of advanced wireless standards will support ever higher data volumes and the pervasive deployment of edge AI.

This end market demand will drive the timeline for new semi fab nodes and packaging technologies, like 3-nanometer, chiplets and gate all around. We have seen these technology transitions drive demand for test as the new nodes enable more complex chips and multichip packaging technologies like chiplets drive higher quality level requirements. Both of these factors drive longer test times and higher ATE TAMs. But the landscape is changing. These complex chips are increasingly developed by a new class of vertically integrated producers, or VIPs, including hyperscalers and automakers. We've had good design-in success to date with this emerging customer type, and these VIPs provide Teradyne with an opportunity to grow share in a space long dominated by legacy x86 architectures, where our share has historically been lower.

These large, complex devices are used in uptime-critical applications and will require exceptionally low defect levels. To achieve this quality level, our customers will increasingly adopt an additional test step, system-level tests or SLT. We have a strong footprint in this growing market, and our design-in success with new customers is expected to be a growth driver over the midterm. Over the midterm, we expect to see WiFi 7 ramp and the rapid expansion of UWB-enabled devices for both precision location tracking and security. These new standards obsolete existing test instrumentation, and this replacement cycle will be a growth engine over the midterm for both SOC test and Wireless Test. Turning to IA. Global labor shortages and converging regional wages will continue to be unrelenting demand drivers.

Market penetration for collaborative robots, including AMRs, is under 5%, providing enormous opportunities for long-term growth. The steady application of new technologies in our products will continue to expand our served market, and the transformation of our channel will enable us to serve a broader range of customers and drive revenue to the $1 billion level in 2026. Summing it up. Over the midterm, our strong core test businesses will support share gain and trend line growth, while IA will grow to be about 20% of company sales and become a meaningful contributor to earnings. In 2022, we have planted the seeds for future growth. We expanded our design-in footprint in the vertically integrated producer space and recognized substantial revenues from this emerging market.

We expanded our customer base in SLT. We grew our IA sales in challenging business conditions and set the foundation for higher long-term growth at both Universal Robots and . We're in a cyclical downturn in the semiconductor capital industry, and visibility in downturns is always a challenge. We expect sales and earnings to be below our midterm trend line in 2023. While we don't have line of sight to an inflection in demand, that's typical in these cycles. The market will recover, and we expect to return to historical growth rates driving strong earnings over our midterm planning horizon, as Sanjay will describe. Before turning it over to Sanjay, I would like to thank Mark for his more than 40 years of service to Teradyne and his 9 years as CEO.

He has steered the company through an extraordinary period in the semiconductor industry and helped to assure our future growth through our investments in robotics. More personally, it's been an honor to work for Mark during that period. His candor and insight has made me and all of us at Teradyne better. Although we're facing a cyclical downturn, we're facing it as a company with tremendous financial strength, a great team and a clear strategic vision, thanks to Mark. Now Sanjay?

Sanjay Mehta: Thank you, Greg. Good morning, everyone. Today, I'll cover the financial summary of Q4 and the full year 2022, provide our Q1 outlook and review our updated earnings model and capital allocation plans. Now to Q4. Fourth quarter sales were $732 million, which was approximately $20 million above our mid guide with non-GAAP EPS of $0.92. Semi Test revenue of $481 million was strong in Automotive and Industrial and SOC. System Test group had revenue of $100 million, down 22% year-over-year, driven by lower sales in Storage Tests serving a weaker HDD end market, slightly offset by higher defense and aerospace and Production Board Tests. LitePoint revenue of $40 million was down 23% from a year ago due to lower cellular and WiFi demand.

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Industrial Automation revenue of $110 million was down 2% from fourth quarter of last year, but up 7% in constant currency. Non-GAAP gross margins were 57.4%, above our guidance, due to favorable product mix and some resiliency costs deferred until the first half of '23. Non-GAAP operating expenses were $252 million, about flat with third quarter OpEx. Non-GAAP operating profit rate was 23%. We had one customer -- we had one 10% customer in the quarter. The tax rate, excluding discrete items for the quarter, was 12.3% on a non-GAAP basis and lower than planned because of geographic mix. We repurchased $2 million of shares in the quarter. Turning to the full-year results. We had revenue of approximately $3.2 billion. QUALCOMM was our one 10% customer for the full year.

Gross margin for the year was 59.2%, OpEx was $1 billion, and operating profit was 27.5%. Non-GAAP EPS was $4.25. We generated $415 million in free cash flow in 2022. We returned $822 million to our shareholders through share repurchases and dividends and ended the year with $1 billion of cash and marketable securities. Our tax rate for the full year, excluding discrete items, was 16.3% on a GAAP and non-GAAP basis. Semi Test revenue for the year was $2.1 billion, with SOC revenue contributing $1.7 billion and memory $373 million. Our SOC sales contracted in 2022. But I'll note a bright spot for us in Automotive, where year-on-year shipments increased over 60%. In memory, our sales declined about 6% and were roughly evenly split between flash and DRAM.

System Test group had revenue of $469 million, which was flat to 2021. Strength in defense and aerospace and Production Board Test was offset by a decline in our storage business. In Wireless Test, revenue of $202 million in 2022 was lower year-on-year, with declines in cellular and connectivity partially offset by strength in UWB. Now to Industrial Automation. IA revenue was $404 million, with UR contributing $326 million and MiR $77 million, which includes. Notably, MiR grew 26% for the year in constant currency, 19% in dollars. Large portion of IA sales are outside the U.S. and sold in local currencies. For the full year, 40% of the IA sales were in Europe, 35% in the U.S., 11% in China and the remainder in the rest of the world. From a profitability perspective in IA, the group was slightly above breakeven on a non-GAAP operating basis for the full year.

Now to our outlook for Q1. In October, we expected Q1 revenue of approximately $640 million which was projected to be down 10% from our Q4 midpoint. Since then, 3 declines have occurred: First, approximately $20 million of revenue was pulled in from Q1. Second, we expect approximately $20 million of supply constraints in Q1, which has not been included in our guidance range. Third, approximately $20 million of memory related to capacity additions has shifted to later in the year, including other offsetting factors. Q1 sales are expected to be between $550 million and $630 million, with non-GAAP EPS in a range of $0.28 to $0.52 on 165 million diluted shares. First quarter guidance excludes the amortization of acquired intangibles. First quarter gross margins are estimated at 55% to 56%, down from Q4 due to lower volume and higher spending on accelerating our manufacturing and service resiliency.

OpEx is expected to run at 39% to 44% of first quarter sales. The non-GAAP operating profit rate at the midpoint of our first quarter guidance is 14%. A few points to assist you in the modeling in 2023. First, the gross margin profile. In 2023, we expect gross margins will be below our model in the first half, driven by lower volume and additional spending on accelerating our manufacturing and service resiliency. We expect second half gross margins to return to our 59% to 60% model range. Regarding OpEx for the full year. We expect full year 2023 OpEx to be roughly flat, compared with 2022. IA profitability is planned to be in the range of 5% to 15% profit level on higher volume. Our GAAP and non-GAAP tax rate is forecasted to be 16.75% in 2023.

Turning to capital allocation. Our strategy remains consistent as we take a balanced approach and prioritize free cash flow to maintain a minimum cash level to run the business and to have reserves set aside in the event of a significant downturn. Excess free cash flow will be prioritized for M&A, share buybacks and dividends. Prior share buyback authorization was replaced with a new $2 billion authorization. We expect up to $500 million of repurchases in 2023. Moving to our earnings model. We expect test and IA growth will drive 2026 company revenue to approximately $5 billion and non-GAAP EPS to $8.75 at the midpoint of the updated model. Gross margin is estimated at 59% to 60%. OpEx as a percent of sales will decline to 26% to 28%, yielding a non-GAAP operating margin of 31% to 34%.

Some context on the model. Over the last 6 years, Teradyne has grown revenue at a compounded 10% rate and our non-GAAP EPS at a 19% rate. Our model midpoint, we -- at our model midpoint, we expect the 2016 to 2026 extended trend line for revenue and non-GAAP EPS CAGRs will be -- to be 11% and 19%, respectively, roughly in line with the historical rate and reflecting an increasing contribution of revenue from Industrial Automation. We have included a backup slide in the deck that illustrates these trends. In prior calls and Greg's comments today, we have outlined the key drivers for the test portfolio, including device technology trends, complexity and unit growth, which we anticipate will drive ATE growth over the 4-year horizon. Our test revenues are expected to grow at a CAGR of 8% to 13% from 2022 to 2026.

For IA, we believe this market is still sub-5% penetrated. Greg has outlined the drivers over the midterm for this market, including labor shortages, new products and applications and channel transformation. Our IA revenues are expected to grow 20% to 30% from 2022 to 2026. Summing up. After 6 years of growth, the SOC test market slowed in the second half of 2022, and our financial model flexed down as designed. Despite the smaller test market, we delivered 27.5% non-GAAP operating profit, generated over $400 million in free cash flow, returned over $800 million to shareholders, reduced our share count by 4% and ended the year with $1 billion in cash. Going forward, our updated model builds on proven foundation of historical growth in test and IA and includes new drivers of future growth.

While there is uncertainty in the short run, we are confident of the growth opportunities in the markets we serve and our team executing our strategy to capture that growth. With that, I'll turn the call back over to Andy. Andy?

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