Sanjay Mehta
Chief Financial Officer, Vice President & Treasurer at Teradyne
Thank you, Mark. Good morning, everyone. Today, I'll provide details on our Q1 results, offer additional color on the operating environment, including the supply line update and describe our Q2 outlook.
Now to Q1. First quarter sales were $755 million, with non-GAAP EPS of $0.98. Non-GAAP gross margins were 60.2% and our non-GAAP operating expenses were $248 million, slightly below our guidance due to slower-than-planned hiring. Non-GAAP operating profit rate was 27.4%. We had no 10% customers in the quarter. The tax rate, excluding discrete items for the quarter was 16% on both a GAAP and non-GAAP basis. Please note, you should now use this for the full year tax rate as well.
Looking at the results from a business unit perspective. Semi Test revenue of $482 million was down 9% from Q1 '21 as expected. SOC revenue was $387 million driven by strength in mobility and compute end markets. Memory revenue was $96 million, driven by flash final test and DRAM wafer sort. System Test group had revenue of $119 million, which was down 11% year-over-year, again, as expected. Storage Test sales, including HDD and system-level test solutions were $68 million in the quarter, down from $95 million in Q1 '21. Defense and aerospace and production board test grew year-on-year. At LitePoint, revenue of $52 million was up 26% from prior year due primarily to strong shipments of WiFi and UWB test systems.
Looking at our test portfolio overall. The positive demand environment, Mark noted, reinforces the trend line growth built into our 2024 earnings model. In Semi Test, growing device complexity supported by no transitions and unit growth will provide a long-term tailwind to that business. At LifePoint and in System Test, similar increases in complexity continue to drive growth.
A couple of examples. One, LitePoint revenue in 2021 was approximately double the 2017 level. Two, our Storage Test business. Revenue in Storage Test has more than quadrupled from 2017 to 2021. At LitePoint, we expect growth to continue to be driven by more complex wireless standards for connectivity, sophisticated location tracking and security technologies and cellular applications. In Storage Test, growing chip complexity combined with higher density, hard disk drives are driving long-term growth.
Now to Industrial Automation. Industrial Automation revenue of $103 million was up 29% year-over-year. This was ahead of what we planned in our Q1 guidance as we were able to work through several supply line constraints in the quarter at UR. I'll also note that we expect IA revenue to follow the historical pattern and grow as we move through the year. UR sales were $85 million in Q1, up 30% and year-over-year with the highest growth in North America. MiR sales were $17 million, up 22% from Q1 '21. As Mark noted, higher payload products with higher ASPs contributed to that growth, and we expect this trend to continue. Overall demand at both UR and MiR remained strong as labor availability and rising costs make the financial case for our human scale automation compelling. But as noted, we are watching for the impacts of COVID events in China and the Russian-Ukraine war closely.
From a financial perspective in IA, the group was breakeven on a non-GAAP operating basis in the first quarter. And for the full year, we expect to operate in the 5% to 15% range we discussed in past calls, with 2022 trending towards the low end of the range. Recall in 2021, IA delivered a 4% non-GAAP operating profit for the full year.
As noted in the past, with market penetration for cobots and AMRs below 3% and high market growth, our strategy is to prioritize growth over obtaining model profits. Simply put, we are investing to capture these markets as we see significant growth beyond the midterm.
Shifting to supply. While the demand environment is strong, supply issues are getting progressively worse. We continue to manage through a very challenging supply environment as we have for the past 2 years. Our supply management operations teams and partners have done an incredible job, including navigating through a multi-week plant shutdown at one of our major contract manufacturers in Q1. Fortunately, it was mid-quarter, and we had time to recover. Had the shutdown happened later in the quarter, the recovery could have shifted into the following quarter. It highlights the risk which will persist during the global COVID pandemic.
In Q2, there is more demand to ship if we could align supply. Issues range from chip shortages to COVID-related delivery shutdowns. We're taking numerous actions to harden our supply chain, including expanding our production operations geographically, adding new geographically diverse suppliers, redesigning products to use available components and many other actions. However, even with these actions, we expect supply line constraints to remain an issue through at least the first half of 2023.
Shifting to the balance sheet and cash flow. Our cash and marketable securities at the end of the quarter totaled $1.2 billion. We had $37 million in negative free cash flow in the quarter. Cash burn in the first quarter is typical for us as we pay variable compensation and profit sharing in the quarter. We spent $201 million and $18 million on buybacks and dividends, respectively, in Q1. As noted in January, we expect to purchase a minimum of $750 million -- sorry, $750 million of shares in 2022.
Regarding debt. To date, $384 million of convertible bonds have early converted in Q1. We paid $21 million to bondholders in the quarter. Now to our outlook for Q2. As you've heard this morning, customer demand is strong in all parts of the business. Our guidance range is wider than normal as number of material shortages continues to expand. And while we've been successful to date in addressing these issues, the margin for error continues to narrow, and the guidance assumes we won't see extended shutdowns of our production facilities due to COVID.
With that said, sales in Q2 are expected to be between $780 million and $870 million, with non-GAAP EPS in a range of $1 to $1.29 on 170 million diluted shares. The second quarter guidance excludes the amortization of acquired intangibles. Second quarter gross margins are estimated at 60% to 61%. Opex is expected to run at 31% to 34% of second quarter sales. The non-GAAP operating profit rate at the midpoint of the second quarter guidance is 28%.
Turning to the impact of inflation on our P&L. First, gross margins. We are seeing increased costs primarily in components and labor, both internally and at our partners. We're mitigating those increases through a variety of measures, including product pricing, operational efficiencies, multi-sourcing and seeing the benefit of our prior investments to reduce our bill of materials.
Our gross margin performance in Q1 and outlook for Q2 reflects our success to date with these measures. But I remind you, this is a very dynamic environment. On the opex front, we have planned for increased costs tied to inflation and we still plan on growing opex 11% to 13% over 2021 as noted in January.
Looking at our revenue profile for the year. The first half is shaping up a little bit better than expected with very tight supply. The second half is looking to be slightly up versus last year's second half, reasonably consistent with our expectations at the beginning of the year, even though test demand is incrementally higher. Supply issues may push some of that incremental demand into 2023. We expect third quarter revenues will grow high single digits from the Q2 level and Q4 will grow sequentially as well. Our current view is that the first half revenues will be 46% to 47% and second half revenues will be 53% to 54%.
To sum up, demand across the company remains strong and growing supply constraints are moderating our shipments more than at any other time since the pandemic began. We're expanding our playbook to address these issues, but it's a very dynamic playing field and we're calling a lot of audibles along the way.
Our global teams in go-to-market operations, engineering and support functions continue to execute and collaborate in a challenging and dynamic environment to meet customer demand and deliver shareholder value. The passion is enjoyable to observe. Well done, team.
With that, I'll turn things back to Andy.