INTT - Earnings call 3 2023 | inTEST Corporation

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Operator

Welcome to the inTEST Corporation Third Quarter 2023 Financial Results. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Shawn Southard, with Investor Relations.

You may begin.

Shawn Southard

Thank you. everyone. morning, Good interest, with your you sharing for We Corporation. and time inTEST your appreciate thank

Here Nick and me Gilmore, with are our and and Chief Duncan CEO; Financial Officer Treasurer. Grant, our President

open at of presentation, will You should which lines released on accompany the well access our this earlier as third we can website XXXX If you release financial conversation we not, the intest.com, morning. the Q&A. have our results, quarter the will investor-Relations. copy After a as for slides our that

Now to harbor turn Slide please review X, the statement. and safe I'll

You as forward-looking from that These events should and uncertainties well be as and could that well release documents statements formal our results differ be as or aware during as and the future company These stated to the are that other website found other well with we factors subject factors is may filed as make discussions materially sec.gov. actual today. earnings session. apply documents provided at can in cause statements to some Commission. other These during in risks to the Q&A as the here uncertainties the risks, on what by Exchange are and Securities

measures. we discuss call, will in During today's evaluating performance. these some We non-GAAP also will financial believe our useful be

for not the substitute accordance isolation prepared results presentation a consider should as in You GAAP. of in this information or additional with

Nick. measures comparable turn slides. We I'll to the have over X, And turn provided please GAAP that call in that, Slide accompany the reconciliations with measures release to with non-GAAP tables today's and of and

Nick Grant

thank The strength of record the team delivering performance for quarter recognize for by these our members X-point us joining well strong to executing their XXXX on results. for want strategy, another has everyone. delivered to our plan to team third reach Thank allowed you, earnings for of $XX.X us Thanks to markets. in quarter quarter. a I achieving to Shawn, our commitment growth. and results strategy million our their and exceptional growth executing for number another morning, Their third our inTEST the and call. in reflects quarterly dedication revenue, hard work This good

division in versus the year. our shipments epitaxi to induction crystal Technologies the remained Environmental solutions semi silicon saw quarter robust market Sales growth the mainly wafer aerospace carbide defense Our heating and prior for front-end applications. supporting strong development results. Likewise, share we our believe auto to shipments saw solid is grow deeper in and this reflected quarter's I product expansion, reach across the focus through all market divisions. to EV customer geographic diversification, X market for our

efforts in these X-point elements Our strategy. they our as areas ongoing of key are are

growth of XXXX. in we strategy the made acquired example let improved in the productivity to have me and an our investments businesses point As progress, within for we

and of Our will us recently forward. announced position this and efficiencies. service design, AciLogic's operational X new development customer better We to circuit electronic facility going well and test improve manufacturing consolidation EV battery supporting X buildings enhance will from collaboration, drive believe systems

this very us owning is camera beginning the we're Zoom few to kind they we note of is prior new new half dozen any edge this year. the It's first given embedded of to products have change have is Salix which within block a capabilities. launches with new their Since example its important for including at the as product progress over regarding AI that step business them, Videology. a launched platform Another the would making year, cameras,

our to we delivered profitability also delivering operations. leverage we capturing the remain focused and according growth, sales plan. and financial Beyond of operational on as efficiencies potential

the scale leverage added the earnings. quarter operating I'm growth continue potential gross to We you generated believe Cash validates extremely will align we shortly. year in inventory a from we've was operations the on Our with with XX% working to capital to strong more versus in ago this continued made details sheet as Duncan X% quarter. chain progress net reduce XX% our give pleased organization. increase improvements. growth profit the balance the in demand as efficiency in in improving we sales and supply and

near-term But to experienced turn In heard for from demand, what bookings, a causing the others dissimilar you over customer impacted in remainder it have shift headwinds, our of which the quarter, our what comment believe me to be him, we before we has I will let year. on outlook probably space. in some not the

in frequent have orders shift the our Over were the customers' chains just-in-time in of quarters, supply when patterns provided towards we constrained. of that regarding were larger behavior severely normalized orders fashion more a blanket color buying the more common last couple more smaller, versus

customers We talked projects. amplified, customer released. number addition, we've the macroeconomic sustained in rates. was projects driven were QX On higher requiring with was already markets. encouraging about being some note, QX, projects more an behavior worsening was XX% resulting by the quarter. in quarter, the second before as approvals down and slowed trailing In and decisions shift have especially this purchase orders believe delayed Compared industrial our of conditions are slowdown booked and apparent fourth from interest CapEx been internal delayed In the the in in demand a semi POs of this as a

With of our over we me turn to spending some But over in to next and Duncan the quarters. markets review of it the general, will in outlook over you. see Duncan, continue that, to cautious more detail. let financials couple expect this to

Duncan Gilmour

Slide on Thank you, Nick. Starting X.

strong by and silicon was applications. $XX.X This induction a growth revenue the and to technology for crystal line the with Semi heating XX% As period solutions million in $X.X million. versus up . Fed's driven aerospace epitaxy reflected and was most year our revenue offerings. across $X.X quarter for front-end up to million, The revenue million. increase carbide wafer was The X% sales year-over-year increased guidance. growth Nick revenue last same noted, record X% markets third $XX.X

XX.X% mix, continued the and points X. XXX driven basis to focus the volume, XX due in trailing period on increased quarter, quarter productivity margin, with pricing Moving primarily to Gross margin Compared gross prior favorable a improved with improvements. the compared points, favorable product increased basis year by mix. higher Slide product

percent see by The expense. up operating to million -- was $X full Our of gross X, of gross on and an million margin with million with for of corporate $X.X XX.X%. were XX-month our a Slide majority development sales XX.X% profit gross of as grew $XX.X The increased year outlook margin driven this trailing year-over-year in in can approximately of line XX%. as you increase our expenses

X. to Slide Turning

Adjusted and diluted net had $X diluted million similar XXXX expenditures share back of second of bottom shows in EPS demonstrated as in to -- or prior see line after-tax adjusted in up reflects related capital strong $X.XX EBITDA on quarter. per adding can which the was million amortization $XXX,XXX intangible acquisitions. You We structure X approximately or the the share to $X.X an quarter. results. our our from earnings which XXXX. asset generation million Capital non-GAAP per cash Xrd period. On were points we quarter approximately mentioned, which million, basis, Adjusted $X.X third basis an was adjusted per from and -- to similar EBITDA was margin the tax-effected operations improved diluted last from $XXX,XXX X% flow third quarter XX to quarter. Slide basis of year adjusted to in share, XX%. year, $X.XX $X.X while contracted the Nick EPS amounted EBITDA $X.XX cash

million earnings. about modest was flow double our capital expenditure net $X.X our Given or requirements, free cash

from of includes June facility end our the an at equivalents of borrowing credit. of were from million we the term cash million have $XX XXXX. and which XX, over $XX availability XXXX million With our million $XX.X Cash $X.X third and $XX of line of our $XX liquidity million revolving million remaining on loan and quarter in capacity, increase

repaid we done to debt we ratio in bringing our down million respectable of $X.XX. a debt total As level $XX.X down have of leverage $X million prior current and to quarters,

X. to Slide Turning

quarter XX% industrial, demand and million in semi to from offset $XX.X aerospace down were EV security the partially lower last XX% year-over-year orders markets sequentially. defense, compared and quarter other year. Strength the automotive same orders third and from of Our

behavior a capital. evaluate future their customer and with during It given slowing on projects appears impacted commented, as of towards were Nick timing decision-making in a customers that As internal delays. trend orders order by return, somewhat the notably resultant quarter, of project regarding slowed cost capital change rate higher has spending the

XX, Compared ship with especially Backlog quarter XX% the and the million, of the XXXX. compared backlog beyond slowdown XX% $XX.X is XX% Approximately quarter. apparent of to prior fourth the was was semi trailing XXXX, industrial year second in lower expected trailing the and September than at down with the quarter, markets. the

XXXX. updated Turning XX. We'll our to review outlook for Slide

million Revenue be timing, XXXX our project with margin $XX.X regarding be approximately $XX The for to behavior quarter expected including the for quarter expectations is of Fourth million. approximately asset operating to fourth million gross approximately fourth amortization, $XX customer the expected amortization believe changing the to expected XX%. to Intangible approximately tax prudent Given be quarter. are we XXX,XXX. to expenses, is after moderate it is of

quarter, is We expect effective fourth tax to expected and be interest to our the similar be income rate third quarter to net XX%.

$X.XX be should per the $X.XX the per share. the range range be share EPS in for should while in of fourth to to adjusted $X.XX EPS quarter diluted $X.XX of diluted

the X approximately for tax-effected on revenue year months Based the for to XXXX outlook and amortization full reminder, the for a for As outlook adjust of are million. $XXX simply million quarter, $XXX results expense. fourth our we refining our we our to

expected adjusted operating $X.X intangible expenses expense for our of determining with $XX We amortization the for earnings. purposes the million gross includes approximately are outlook This year margin approximately of full asset of XX%, at maintaining roughly XXXX tax-adjusted million.

rate tax to remains Our XX%. expected XX% effective approximately

Finally, our of run to X% capital X% sales. continue expenditures expected are between to to for XXXX

nonoperating our not impact time. time occur guidance may expenses usual, to potential the any that unusual As does from from include

we and position technology ahead, further markets target remain success. us our continued confident offerings for that Looking

we currently our trajectory we and as start next clarity have borrowing growth gradually we'll the gain expect However, more then on improve a and costs. projected plans on year execute of slower

strategic our to continue portfolio. and and partnerships expand acquisitions we Additionally, extend reach our to pursue

if call that, you will will the back to Nick. now [ With I turn XX, to turn over Slide

Nick Grant

QX Duncan. taken making this over guidance, Thanks, our with in to of our stated towards solid are million less like revenue to than Even progress XX, million. from tempered Slide $XXX to revenue XXXX the $XXX in to million we $XXX in million we year. $XX have would test expect On highlight XXXX goal we

doubled driving growth. more while We revenue will in also than X have years strong earnings

In of XX% be compound during annual this over fact, our will time sales frame. growth the rate

years, allowing growth, . us in that will to to organic our and continue augment our we to anticipate revenue the coming business with growth reach We goals. drive base future acquisitions XXXX expect

million $XX available, over pipeline cash and believe Our with term sufficient of partnership execute and active, of we loan opportunities remains our million structure facility plan. to our $XX on flexibility acquisition with we on the hand and a capital have

growth shows how earnings XX translate we expect our revenue will growth. into Slide strong

Our the profile. plan maintaining is same, strategy primarily the reiterating that our company our focused and on margin scaling top-tier remains

Slide on up sum me XX. Let

throughout Point for delivering As we our have noted our comments, strategy shareholders. is -- results prepared X

engineered of challenging production for Our portfolio or test productivity solutions solutions products. requirements solve improve create our customers of enable their to own more effective

organizational technology Our driving focus company. are collaboration has the and segmented across greater generated structure we

It's for As call was type both our to a who from test divisions challenges a Environmental to action. weeks customer. in sales teams and of thermal test electronic a couple collaboration together with good and of new solve example, see working joint this Technologies were a great ago, conducted

to our quarter outstanding an a leverage to more broader The solutions test in position team as inTEST able portfolio be operationally. provider. to delivered And value-added

our in technology to the We aspirations. long-term target continue create markets confident our the journey of on and that the growth and test process demand is choice last a supplier applications Despite we on for to to focus unleash shift a of path quarter, becoming innovative our inTEST potential achieve are right solutions.

in addressable efforts and in We our targeted opportunities acquisition our deepen our expand offerings, presence continue markets pursuing industries. product our to enhance

let's operator, a questions. balance sheet support is lines the open efforts. With our our position in for to And that, solid

Operator

[Operator Instructions]

with Street. Our of first the question Jaeson from Lake Schmidt comes line

Jaeson Schmidt

being on were at start to But want of regarding few is customers if market. sort customer slowing end culprits. broad-based sort within and curious know the markets you highlighted this Just or the just each demand. a your comments of concentrated industrial I semi as

Nick Grant

just kind projects macroeconomic conditions couple, say we that customer of of number of I'd I why a all -- a being they're blamed it would more is more industrial something I and kind that's of of there. cautious. a It's general, said, noticeably a are But Yes. not out across mean, kind and say, that in and that kind semi Jaeson, we we've like industries there. on number getting this, you of it just in of seen that customers not highlighted delaying

Jaeson Schmidt

on And fair. some but obviously, then mean, at all? you That's are Okay. delays just in are there purchasing that. cancellations following seeing up decisions, I order

Nick Grant

No.

order and any was these had healthy. taking being higher our just longer haven't extremely cancellations funnels at And QX. in We we QX all. than can tell through. to it's our I at are it look you, funnels get

just is will. it's really cautiousness, you So that the dictating timing-wise if

Jaeson Schmidt

and just makes queue. That I'll then the me, Okay. jump back the sense. one in And last for

Following up on on M&A. comments your

valuations funnel. if if you're bit just You active curious starting are number out come opportunities there? guys or always the have of seeing to a a in But pretty increasing

Nick Grant

becoming attractive. now, seen of acquisitions positions, But here. if pretty number a opportunities aligning We're that are better on valuations more you and approach active our both for pretty out say with there. would quarters will, our I in disciplined we've

we So our here. with pleased we're where M&A with are

Operator

Our of Peter the next from question Wright comes line [indiscernible]

Peter Wright

Good good leverage job environment. in maintaining an increasingly operating difficult

Nick, X for you -- question for my Duncan. question and questions a first

rebooking the -- you departments from softness ball your already fourth risk is you in XQ already into in crystal proactively light guys, sales do in question there's they've having procurement off? you kind demand and and with been first that kind you think more your is to look you're they're if is the the Or experienced that reacting think -- being some conversations question do The of that experienced softening for you quarter. of the of that that in a comment the that

So if you I'm that kind force of that looking they any risk color last. the how could at sales duration from on see long have for your this

of about any you how for how inTEST true anything story whether the look creating on value there's cameras, question how the the is are you're you or new ASP looking it for your be should value or products new share we there? second kind The mix incremental proposition, can at at if margin

quarter. us then And expect the side, not the still operating see expenses to breakeven million-ish holding Duncan in and what softness take is I you fourth for do free the for on Can be you would them side? where reacting $XX all. you're yet that to you you operating remind And And to the if leverage little you'd it can to for be for you free flow flow quarter? give then maybe target X react on in follow-up fourth us expect is, cash That's cash a positive -- just the year?

Nick Grant

lot There's a there. All right.

So with are activities is mentioned believe approvals increase getting nice it truly the CapEx strong, I quarter-over-quarter. demand start projects. slowing seen these on just the a we and and funnel let's our we've more

right getting the that just signatures the returns are the rate projects are of opportunities So there. a And got going identified things the there. of meet that and budgets internal CapEx slowing the projects they've it's are to matter are

anything demand haven't decreasing that. our funnels indicating in slowdown seen like or broader a We

new Relative other have cameras very many or the type different more there. things our are cases. These cameras that the to ASPs and less these $X,XXX projects out are cameras, we CapEx in solutions from

manufacturing these So on change these of with our some these in abilities it. it in getting with components of going things. some ASP. thing our cameras improved cost does with we're we've And designs, this margins overall margins into decent rig general, redesigned But and

cetera, So is industry, components updated, note evolving video sensors, et constantly cetera. is being the Important to this this new -- new et space

we'll the in up-to-date in cameras it launches be forward. had the done versus demand and Duncan, the you order quite do going business to the of for us keep product seeing past a want think we to generating out So what frequent more this other? tackle

Duncan Gilmour

Yes.

that you're ballpark, million I Peter, breakeven million, line. at the terms in So right in think your $XX of $XX top

would the softer thjs not driving. working benefits sense we're really We're capital expect QX. So be that a number. flow we're work with and has for although on improvements on QX, cash still been Obviously, perspective, I seeing the in positive guiding flow number the capital slightly cash projecting that makes to the continuing on quarterly P&L efficiency, happy specifically a that picture but we're business working in our of from cash that

Peter Wright

If have follow-up. guys. I could Wonderful, last X

is generations Videology you new new new it cameras On margin the that driving improved that is have, producing? the it? driving What Is manufacturing it what Or and is you're markets? profile?

Nick Grant

first out Scale The computing is of lot of the with its mentioned, I all edge of really product kind across X applicable the capabilities. markets It's AI a all or above. there markets that a

particular not application. targeted and just at unique really X it's So

Some our those their these identify help embedding improve customers cameras to are others performance like specific in issues to upgraded to -- really cameras technologies inspection improve of some those the are their ability that. more pipe of particular

it's also to we're combination. as improve that is well. driving cost a So -- an area the team

yes, above. So the all of

Operator

from line with Our next Jackson question of Northland Securities. comes Ted the

Unknown Analyst

I got had my everything And you checked fourth a on off. got list again, But we've X weaker correct. I just have question, quarter. are

the still your providing fourth mean, quarter. see the quarter. that's in a fourth expect, my down fourth That's business? to from it I mean, guidance quarter we first I are regards that I that the slowdown this actions sequentially very -- know of change 'XX. But disruption within guidance we're business, made my impact taken Does now regards their based upon to business kind only and seasonality is for does You question to for of it would if -- plenty having company quarter you're your question. not the typical the really companies you in with similar and guidance. very is But only this you similar comments seeing would, not with cautiousness have

Duncan Gilmour

don't would before, seasonality our with isn't, overly as dramatic other unfavorable see is as we're per But I business. I many companies say, I seasonality something are talked se. we've conditions some we say, think Obviously, into running I about really here. market mean, that would .

Unknown Analyst

it, the It Well, not look absent acquisitions, quarters. I like mean, has I that been mean I of the at the of seems years. generally, last quarter if first your couple stronger

you're So me answer that you're it's you on an all that. saying don't so for -- -- no, not have but

Duncan Gilmour

impacted I'm isn't dynamic seasonality No, player as every are Obviously, in is a see we saying don't marketplace . the see. we by market conditions we

Operator

turn Nick question-and-answer now session. end and we like the remarks. the for closing Grant, the have CEO, of looks It President I'll to over reached call And back the

Nick Grant

Shamali. you, Thank

I and again Before express global and continue close, And my in participating we'll Dallas we XX. some to on York to connect these call and on Southwest Conference as want finally, in they our Summit sincere appreciate you the interest with today December at results. have a IDEAS our gratitude at you for to on the join We New CEO deliver inTEST. great XX team be you in outstanding November taking the of all, hope . time to Thank us to day. We events. and your

Operator

may This lines this time. your you disconnect participation. Thank at concludes you conference, your today's for and

inTEST (INTT) 3 Nov 232023 Q3 Earnings call transcript