INTT - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the inTEST Corporation 2018 Third Quarter Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded and a replay will be made accessible at www.intest.com. I will now turn the call over to inTEST Investor Relations Consultant, Laura Guerrant. Please go ahead.

Laura Guerrant

Cody. you, Thank for Financial you for XXXX inTEST And Conference joining Call. Quarter Results Third thank us With are Officer. Hugh Regan, us CEO; Treasurer and today and James Pelrin, Chief Financial President inTEST's and third Jim review business will well highlights the trends. briefly as quarter from current as then financial results review the guidance and detailed quarter. fourth inTEST's will discuss for Hugh XXXX then for questions. your We'll have time

website, If can be copy you release, today's a not have on yet www.intest.com. inTEST's of received a copy obtained

products, to to today's the or to customer, risks the The Company call cause raw occurrence after may on changes Before material the Litigation Such statements. diversify unanticipated date advise that and events limited timing but are conference changes of capital update to outside in events. subject other development anticipated obligation in that we increases from to, to uncertainties the events or in the of XX-Q. the These are business ATE future factors begin product materially XX-K to, that meaning Form and convey programs, circumstances the differ rates relate time hereof changes the SEC and of formal Reform not are but or not information, inTEST's our actual expenditures limited historical no on reflect Form risk or from and expectations. XXXX. by demand time of business Securities conference forward-looking attorneys information markets, the company's to contain our fabrication and strategy expressed or statements and based or associated of reports the economy, reflect by could including to filing call company's remarks, by undertakes those semiconductor in of statements Private not in upon semiconductors, uncertainties within periodic success do the include, potential These our set our to current the predicted markets for implied results risks such but entering progress statements this the and forth conditions with Act of management's costs

call, today's will non-GAAP financial measures. we make to During reference

additional many directly Annual a GAAP these measures measure following let including have be in comparable Event over the website, non-GAAP provided forward lastly, Main turn investor release, in York Please our Xth Jim. XXth look the we'll on posted in the Xth which Pelrin. Annual attending XXth. City We on Micro to and of to LD seeing our Los reconciliation December concerning December: the information And press www.intest.com. We page James New the you. go of with ahead, investor on conferences December to And Angeles the call is that, now Summit me

James Pelrin

Thank you, our to Laura. conference third quarter I'd call. XXXX to welcome everyone like

While detail, remarks focus my on Hugh highlights. will over the go I'll financial results in

solid markets. while users QX We solutions continue industrial, provider in telecom drive sequentially to diversify sensors, million, test. of segments manufacturing automotive, driven things We diversified into for defense $XX the OEMs. our QX and by is operating to in we increased automotive the end in bookings continues non-semi The presence demand Internet base of mobile for industry X% consolidated by as world-class of results markets industrial revenue year-over-year. and and and serve delivered we of driven XX% our global technologies a and within progress semiconductor company of aerospace the make business customer the electronic thermal both a broadening

been Ambrell, million better came the XX% increase our and in Again, have sequential Excluding revenues year-over-year. an guidance X%. XX%. Ambrell, of the net been a above representing X% would decrease year-over-year increase Consolidated would expected excluding $XX.X than have of year-over-year just increase of

Our particularly strong. thermal was segment

fact, Ambrell XX% inTEST from for highest more for the XX% record with quarter of QX revenue QX and ago. Solutions $X.X and net than was million compared in XX% $X.X derived revenues was while in year In the for quarter of were non-semi with gross Thermal achieved XX% at the XX XX% a million revenues compared QX margin years. QX

highly through resulting for which new as of both to user into complements process wide and opportunities and or of test as our Turning the industrial Thermal market, which this our the thermal the a inTEST's business, OEM inTEST electronic thermal market footprint markets. thermal and strategically a manufacturing applications. test penetration products both segment This diversified broadening end Solutions, Ambrell in is the reminder, applications. combined engineered serves industrial business provider in diversification test the segment ITS, industrial We've serves

bookings million XX% up thermal and were of segment XX% Solid $XX.X year-over-year. sequentially

Excluding excluding year-over-year Again, year-over-year. the revenues increase XX%. Net Ambrell, X% been sequentially Ambrell, $XX.X million increase the increased would've and XX% would have XX%. of been year-over-year

treating the in integrator was an automotive X a driven application, at valued who Asia greater accounted user OEM one and over companies with at grew end America systems, by user from end over major orders an North ago. frontend at and quarter sequentially semiconductor orders North thermal $X.X our Ambrell and who opportunities for America in Two an for with QX customers XX% of soldering bookings of application in Overall, bookings and Europe, sequentially aerospace users Ambrell's revenue up placed to compared a leadership million. year valued delivered projects. Ambrell company Our X% with for in Ambrell's was million, driving semi OEMs companies third Ambrell end partners to purchased Orders $X.X for X% and from automotive ECO and year-over-year. was record second semi, automotive increase $XXX,XXX. QX XX% order continues heat and the

equipment In the industry competitor. addition, Ambrell acquired induction a new customer aerospace displacing an in

quarter markets, year defense by over The orders XX% at and Solutions, delivered fueled remain of OEMs order by of industrial net a million year-over-year. as last return and and of $X.X defense from of inTEST market. the and was a to increase for heating from X% as as new semi, the first optical of driven a ITS, QX ITS' applications. and segment valued an significant well transceiver known XX% Thermal forging steady revenue $XXX,XXX strong bookings aero Chiller compared increased bookings $X.X customer. the million, telecom X% aero ago, sequentially orders

Let's talk about ITS orders were driven some by large manufactures products from transceiver $X.X highlights. million. at Bookings optical for over two valued

at over valued and companies supplier $XXX,XXX One Purchases major at communication orders military Elsewhere communication to for energy a temperature purchased $XXX,XXX. equipment. company XX chambers placed testing over In other major the thermal defense military several defense valued companies addition, testing several systems. ordered large for industrial purchased at valued equipment is sector $XXX,XXX.

EMS test the Turning which Products semiconductor business, automated the market for to industry. serves equipment

very a second see demand and continue driven On strong first product the quarter, IoT, industrial by to heels we electronics. and of consumer

bookings both prober million sequentially the a from quarter. compared The at lead and in bookings The the resulted decline of manufacturers factors. QX year two extended declined of As expected, XX% experienced a IDM for from however, revenue $X.X and combination X% from valued times in over $X.X orders bookings EMS third benefited of million while decline large previous to a ago. quarter resulted sequentially orders driven of manipulator by call bookings for applications. equipment for revenues to million for million, discussed quarter year of we X% commercial hardware. multiple major conference XX% EMS and ago. at compared upgrade that three IDMs $X.X and our were test and delays EMS a orders. in declined second in $X.X One of docking to EMS Overall cells valued automotive

also and customer for locations Asia, expand valued at America in North multiple production The capacity will $X.X million. second

The an third test $XXX,XXX. automotive for at IDM purchased application valued interfaces RF

outlook the comments. over close QX go a with for will I'll detail, Hugh While in few

and expect heels expectation be in of in performance of part to with quarters. it's the softer strong the notably third high revenue our that received various flows full million QX year in orders including and on quarter be will due second We then non-repeating the ebbs in fourth of year-to-date large to the the most we our QX. $XX range. normal And third and will comes a very consistent somewhat markets the mid

our of extended prober a and timing. I lead discussed, offered just to order as times in has EMS In others carryover chain customers addition, manufacturers the supply the by affected

will two this or expect We quarter through. a itself to work take

expand customer growing in process our base and markets industrial the serve test our while additional we We in footprint continue markets. to

Looking take advantage we forward, opportunities our robust IOT, long-term of automotive drivers industrial remain solid squarely in have where as place we strong including vehicle, and and we example, markets see semiconductors, defense aero. electric for focus,

Hugh? Hugh. share key And to condition like markets our We market In grow broaden base. with long-term the to further over well call are strong to creating positioned I'd will closing, for in turn our are we and a success for customer and continue to our resources XXXX. that, these direct

Hugh Regan

Thanks, Jim.

to Third revenues from markets XX% $X.X the or revenues $XX.X in of XX% revenues of $X.X revenues, million XX% of XX% quarter net second net up $XX.X $X.X semiconductor quarter. of million Net XX% were compared XXXX or for net of million revenues net million outside second revenues the or end-user or for or market were the or revenues OEM second the of revenues net with in quarter. net net million million $X quarter. were XX% QX compared

net $X.X As were call, the noted earlier revenues in record for Ambrell's the quarter million. third

revenues Ambrell, of were of $X quarter. million revenues semiconductor for or outside market our net net from markets XX% Excluding third

diversify our served Ambrell clearly So further to markets. continues

net increase costs, XX% material as in terms was $XX.X gross an increase second a compared in percentage quarter of in of third Our to margin to quarter. and our our extent was or primarily million fixed XX% with in the million dollar reduction lesser and in a gross absolute result the the component $XX.X an both costs. margin or manufacturing as The revenues

they or due absorbed Our net to favorably $XX,XXX lower third by quarter cost were fixed grew sequentially X% revenues. and [ph] less in the manufacturing

costs the of manufacturing quarter. these to the customers. our on third of in compared represented third fixed XX% related as quarter revenues their was to service the primarily support increased in result increase result, spending the to a materials The quarter costs As in net Ambrell XX% providing by second

as reflecting in less XX.X% EMS segment. material XX.X% and saw costs the was the the but increase consolidated to third material higher increase second compared decline quarter in second quarter mix. a quarter, in from in The QX material in in thermal costs a costs our its for mix offset component to quarter product from favorable third customer to second component in more QX, XX.X% quarter, cost component in partially reduction material was in the QX the This product the our material quarter. by customer from in third the slightly Our in to thermal the a costs segment, which XX.X% and our component to favorable reflecting due component grew increased XX.X% segment, XX.X%

were million have administrative million quarter, would a also extent, there $X.X and of $XXX,XXX and was $XX,XXX and in decrease in an our or XX% expenses expense of margin of and impact expenses the new was XX%. development by legal reduction for or The The $X.X and decreased decrease both third reduced commission benefit moving product quarter for and $X.X a third and XXXX reduced been of the Engineering for for Excluding increases related offset a To the move sequentially. gross these XX%. net lesser gross materials. expense General Ambrell, thermal $X.X acquisition million driven second or decreased was levels partially and million expense, $X.X X% quarter development benefit the by quarters, fees intangible expenses cost X% Rochester to included by was third revenues. amortization. was to by expense expense driven profit-related increase quarter the second lower compared into sequentially. margin There third quarter the sequentially. million expense offset Ambrell's our second in expense, and both partially IP their in professional was for primarily million third decrease XX% in or salary or which was second quarter salary segment. the the Ambrell's and were facility, reductions these Selling bonuses $X.X

the third the in quarter a earnout performance, At to $X.X $XXX,XXX second consideration million contingent our XXth, a reduction XXXX quarter. of have earnout compared liability this Ambrell's result we in related payable. a September As increase the to during $X.X million XXXX accrued accrued strong recorded for we liability

both XXXX During the the earnout $X.X Xx paid XXXX, Ambrell earnout capped we upon second for for for based EBITDA The payable. quarter, $XX million. is million and out adjusted XXXX at

the third second item was quarter expect to to in fourth compared of to The variability reduction income for the have financial in in $XXX,XXX results $XXX,XXX quarter. We to further our quarter. related expense accrued of a sequentially. XXXX. during compared this foreign the in the third the $XX,XXX in other second Other quarter losses exchange expense tax was $XX,XXX reduction quarter $XXX,XXX in due We expense primarily transaction

in result deductible. of the Our increase contingent to effective in quarter. tax not in $X.X quarter rate adjustment tax effective grew the our the is from the third X% The XXX% the tax liability second consideration rate being of of impact significant million

the that quarter in transition $XXX,XXX legislation the federal tax accrual tax in new during quarter rates purposes. September our reversed to XX.X% result needed. range tax deductible tax had as liability, for are the of reversal $X.X and the contingent the net been currently of remove the expect XXXX, of million for to of a the impact our not we XXXX was consideration tax federal addition, third second would've XX% quarter tax to contingent for value not the and adjusted In of which effective accrued XXXX compared determined quarter. of fourth the had excluding fair consideration When that of we the tax effective to our the second XX.X% of in liability the fourth adjustment XX%, of the the a transition payable, we quarter XXXX of changes the when we At XXth, for be deferred we impact rate

a $XXX,XXX earnings earnings million accruing of we X% share incurred third diluted As million net adjustment a quarter net loss result for net the compared of per XXXX. or Adjusted $X.X to million or per contingent or million of share for the $X $X.XX a net of consideration the Ambrell, $X.X of were share or diluted $X.X diluted per per for quarter compared with third earnings second quarter share. quarter $X.XX $X.XX second diluted adjusted

impact the of earnings of derived is to measure, shares to change weighted have the share. $X.XX our adjusted expense item, Adjusted earnings net the $XXX,XXX from consideration net adjusted adjusted per the any per the per the this eliminate XXXX adjusted reversal liability diluted net transition $X.XX would non-GAAP outstanding. a diluted which an earnings share quarter of share second of tax per diluted payable, diluted aforementioned federal included The net $X.XX share. effect was related which fair quarter and second amortization, When net income earnings earnings value adding Adjusted intangible per by by for contingent in dividing is is earnings of tax average share derived acquired diluted removing net earnings. adjusted been by

weighted XX,XXX,XXX competition per for For outstanding diluted shares XXth of outstanding weighted September loss of competition the diluted net earnings were average at were share, adjusted shares diluted while XX,XXX,XXX. average the

XXX, million June shares up the quarter amortization up liability second the person which did consideration purchase adjusted balance Cash level third XX. X,XXX end third million, contingent third quarter. third we staff a to Cash million from restricted cash was million any shares $X.X equivalents was the I'll were at during third the for to adjustments per the QX at issued Depreciation Consolidated for quarter $XXX,XXX was have XXth. $XX.X September, quarter third not repurchase $XXX,XXX XX,XXX from today in $XXX,XXX compared of and at quarter, and been Acquired in million. sheet. one for the second was EBITDA reported includes quarter shares $X.X During periods, to $XXX,XXX end at we options the share. When We stock of during the up from had $XX.X now June recorded EBITDA $XXX,XXX $X.XX and stands intangible the the quarter. from of second $X.X the of would adjusted quarter. amortization at the quarter. for in $X.X the compared both of headcount to temporary million staff for the QX. for reduction turn expense

decreased million million XXXX of tenant to September the quarter million $X.X of equivalents this receive $X.X consolidated and revenue $XX.X million and backlog impacts the to call. and to increased XXth we June. currently in activities. of the $X.X the were the quarter. at end end increase the cash offset in prior was $XX.X earlier for The from expenditures costs Ambrell. cash from $X.X was receivables booking backlog at Accounts in in at Inventory $XXX,XXX portion was provided end third of million the the to Ambrell's million Included Capital to any fourth expect million, acquisition related Ambrell. receivable grant quarter quarter for $X.X Jim to in was in the slightly the During second September expect data amount new Included of fourth quarter. in for the facility. of $XX.X down end the Included million sequentially $XXX,XXX for $XXX,XXX, down quarter XXth. at segment September during the of $XXX,XXX funding improvements Ambrell. We a

outlook, noted will December release, for the million of terms that $XX.X earnings In from quarter earnings And $XX.X will to in per financial in the range we net diluted million. XXXX share. expect revenue be net our XXst, $X.XX ended that to range of our $X.XX as

now We fourth XX% our to formal We our that range net mix XXXX $X.XX will expect third with will $X.XX quarter quarter per the XX%. earnings diluted We less from compared questions. favorable QX gross take be concludes share. XXXX remarks. and will that as expect that currently can margin Operator, that product the range to of adjusted from

Operator

question from Hills Theodore [Operator the with O'Neill Litchfield Instructions]. And our we'll take first Research.

Theodore O'Neill

Hi. Great quarter.

James Pelrin

Thank you, Theo.

Theodore O'Neill

Great. you. Thank

on portion orders vehicle was that in of any companies are related to sector? automotive, in question the first thermal or that So all electric is,

James Pelrin

with orders into go can't but automotive to identify. industry, go sensors, thermal for and the of do the do sensor electric also They -- which portion electrical A the we vehicles. very into vehicles, small were portion. infotainment of Most had

Theodore O'Neill

Okay.

next the hate So and the of sort to is wet is, on fourth this, quarter. a question be I rag

Hugh Regan

Right.

Theodore O'Neill

is your there being who a out There U and of going a is -- U a business that number there more being V big not be. are peers the lot how recovery semiconductor talking but of shaped, of knows a recovery in it's to about shaped

we've given guidance? you sort there, how And confident on fourth hearing of quarter what the revenue out been are

Hugh Regan

but semi revenue QX I in in up picking don’t much I think our we the of had according in quarter forecast our do to past. year. see expect and Theo. see and fourth we’re reasonably QX do softness We to least upside guidance QX, as we've internal confident, demand next at QX

Theodore O'Neill

Okay.

And more this so to a like is orders do see issue you that..? -- is more of seasonal of you the in push usually this is more or this or out related

James Pelrin

I of associated world. there are a over and that commissioning think, a both. busy customers are orders Theo, the been Certainly for all such it's combination has demand they

that delay do something extended So has the to I they lead in with we meet. it. nothing the think normally would have are and see has times for certainly being is to there prober because caused by held booked orders that that But EMS, now

Theodore O'Neill

very much. Thanks Okay.

Hugh Regan

And months for six lasting see we we the approximately, the that issues. next -- see supply condition, condition yes, Theodore will that will prober chain related

Theodore O'Neill

Thank right. you. All Helpful.

Operator

Thank you. now Dick from question next our And take we with Dougherty. will Ryan

Dick Ryan

see look And about that how thermal do the you. prober at does Jim, What maybe when just How pipeline in XXXX? thermal the outlook industrial the about Say, side? business, you’ve the look? going part you for side, side the thermal semi Thank kind EMS. of on into the softness talked for of you the

James Pelrin

and from and some the really have pipeline their on looks semi product front-end converted benefiting a there. industrial side. are -- major Ambrell Well, to speaking market. for gangbusters we're They those They that's going and strong customers customers the driver are of the

for from But that terms quarters downturn of hand, four much much seen on of impact of in when haven’t the business. booming see really ago. semi thermal, an the we didn't impact side a the an was three, other we semi that the In semi

steadier to So be it tends a business.

Dick Ryan

I now customer and sticky looks like it the to business the just there? at transceivers What's the just be diversification coming it outlook been seem mean And has the Ambrell, back. Okay. pretty

James Pelrin

business you quarter because was as was Thermal It's business that quarter very again. that and is, difficult at businesses our to is know, QX, strong transceiver inTEST is was strong, customers before industry it very Last the it ITS, just healthy. quarter, And the past choppy. that overall predict us the is very it this strong, not Well, that Solutions. for very orders difficult they very for it growing depends to know the is it, win. upon predict We very

to have make our going -- of sure So we we we share that orders. get just forward

Dick Ryan

expand And Ambrell's are all? seeing base customers customer you at --

James Pelrin

Yes, accounts some Ambrell's tend think of have be matter sticky. note fact, away pretty of to do wrestled very a competitors. that customers But they significant from I as successfully is

market they’re share. growing their So

Dick Ryan

Hugh, ahead. what was the -- sorry, go

James Pelrin

industries Just of across I’m happening. saying a number is this

Dick Ryan

in customer quarter? concentration, Hugh, Okay. What was the the

Hugh Regan

the XX.X% For had we TI at top business quarter, represented one XX%. of customer and XX customers

Dick Ryan

the what housekeeping. just stock was and the And you cash year-to-date have of quarter? a for couple Do flow comp in based

Hugh Regan

Yes, million cash final was and what year-to-date I is flow apologize? $X.X question, the ops Dick, from

Dick Ryan

Stock comp. based

Hugh Regan

was based XXX,XXX restricted stock comp one comp moment, quarter. Stock the yes, for was,

Dick Ryan

Okay, Thank guys. you, great.

Hugh Regan

You’re welcome.

James Pelrin

you. Thank

Operator

with [Operator And to I in questions you. Mr. to conference any Instructions]. queue, remarks. would additional the additional like for back or over Pelrin Jim turn Thank closing now the no

James Pelrin

you progress now noted the and fourth forward concluded. the you on inTEST. our Laura look results. thank you conference is at quarter in for as when your updating interest call report to our Well, We seeing Operator, we

Operator

you. that Thank you conference. all for your Thank does And today's participation. conclude

disconnect. may You now

inTEST (INTT) 4 Nov 182018 Q3 Earnings call transcript