INTT - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, Greetings, and welcome to the inTEST Corporation First Quarter 2024 Financial Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shawn Southard, Investor Relations. Please go ahead.

Shawn Southard

Good afternoon, everyone. interest time Corporation with your for thank appreciate your sharing us certainly in and inTEST you We today.

Chief and Joining Nick me Gilmour, Officer; Grant, are and our Duncan our President on and Chief our Financial Officer call Treasurer. Executive

to which you earnings as the documents X, Relations harbor the can Slide will find You that wires conversation our section as the website, Investor release, these have review today crossed of intest.com. Please I'll should today. the slides accompany statement. the aftermarket well If turn our and not, on safe

forward-looking Exchange During by financial and expectations. be in documents are with this from what call, performance. sec.gov. Also, believe results the other statements provided future our to in management uncertainties about or non-GAAP website refer as in here apply factors management and stated statements is be and current will may events and these other We These actual evaluating These make that beliefs uncertainties well at the differ are will release risks cause and subject some factors risks, to company to the on as plans, materially our to today. Commission. that some our These documents measures. filed other earnings Securities useful found can could

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

in comparable slides. measures with You measures the that can accompany find of reconciliations release GAAP tables today's and non-GAAP

the Nick. turn to call I'll Slide over please X, to turn Now and Nick?

Nick Grant

lower nearly in than by about about for happen call. owned last the contributed and while for million $X.XX like our was of higher of for quarter good The gross expected, expected, over operating Thanks entire adjusted expected, Alfamation. million and thank of margin First was fourth earnings I'd timing $XX X.X expenses somewhat was XXXX the tough an in us where inTEST and joining EPS revenue had everyone. XX.X% $X.XX we slightly for Shawn, you, team quarter environment. Revenue of relatively it afternoon, we of Thank in quarter than a With making lower came in which primarily to the the -- acquisition Quarter on the was of year. weeks the driven coming Alfamation $X.X increase basis. million $X.X the for

the and having quarter, given revenue costs the However, on a period, stub were margins typical would gross normalized be their In our ours. of acquisition a similar to in expect misaligned they and a to margin. timing short drag we

strategy, are and We execute growth as continue cycle. X-point thinking. to our efforts in helping which These strategic our through the efforts tough markets semiconductor manage focuses we our drives diversified

fact, Industrial further us solid in and the they the automotive Alfamation, the addition while for space provide in provides of which diversification. for can their quarter. The and markets Aero electronics In infotainment remained industry Defense, own be a rights, lumpy will us in meaningful position test

with $XX even to where quarter operations. about $XX strategy. is transformation million we ended we in adequate We acquisition, financial Importantly, million, cash. after keep used this we flexibility advancing And the cash believe continue generate to from our the Alfamation

will to I backlog. the Turning and orders review X, Slide

expected year. been the the half of last the have first of weaker was since we As communicating than half November, XXXX be second to

the for quarter, outlook very has and a end now had our the of in that impacted the order measurable year. we However, change at trends

to boost call. size delayed on back-end our was record $XX million about is in spot directly partially note is had backlog. levels. end. The to bright in is of million $XX.X Specifically, we with at quarter. One at in a in up reduced sequentially, our were that front-end backlog result semi orders Alfamation Encouragingly, noted stabilization, in expected offset the first we helped This from the which showing signs a or acquisition had anticipated decline orders year-end quarter we $X of notable contributing either the had million

at their that about XX EUR recall had backlog acquired million may them. You we when we reported

for percentage of have acquisition, under recognition their a completion revenue was GAAP, is appropriate. we based However, methodology. revenue on the more accounting point-in-time U.S. that After concluded

As to revenue. of timing a our impact in statements increased that regarding this recognition result the revenue of the is does treatment backlog not and million. Keep Alfamation's annual mind acquired change, to $XX.X previous accounting related

the While progressing integration days, is planned. as it's of Alfamation in its early

In trade already fact, and interactions. jointly participated in have we shows numerous customer

we turn joining it that the could the and do you. Duncan over inTEST We to over With team further Alfamation that, in are more financials to strategy. outlook to detail. to and excited together all our Duncan, really about me let review

Duncan Gilmour

by Industrial XX%. Nick. the $X.X days a XX% first the Defense/Aerospace with of revenue exceptionally within organic Starting QX was from driven Alfamation which auto/EV, Slide for was Revenue in you, in was markets. Sequentially, which and decline semi, in quarter that offset including market $XX.X compared XXXX first Defense/Aerospace off million remaining revenue Alfamation, with fourth $X.X partially a low acquired increased growth semi up helped businesses. up on offset X.X only by million, primarily XX the or was while the in quarter million quarter, X. $X.X with from $X.X in the million, Thank quarter. The decline Revenue decline was million weeks

point as margin margin sequentially, XX.X% from the X. year-over-year from the frame in volume on the recognition for a points revenue and comparison, to period by a product This for expenses result Alfamation. just basis aforementioned is XXX impact of stub and driven of well acquisition. of Moving the of contracted quarter Gross negative ownership given a short as basis mix lower the timing impact mismatch gross a a Slide result contraction was time QX. On XX

sales gross $XX margin for and of our line of in gross trailing profit XX outlook or million months with XX% year updated Our XX.X% of this between is XX%.

development expenses operating year, X, expenses, acquisition and were operating our the Slide versus professional higher incremental up with on expenses inherited corporate see $X.X by can the fees. prior higher million you As driven

As OpEx to points of increased sales, a XXX XX.X%. percent basis

and see Turning to EBITDA Slide X, adjusted results. line you bottom our can

were the cash the expenditures the $XXX,XXX our EBITDA Adjusted first solid net had X X.X% EPS quarter. million, per adding first were per margin. Slide $X.XX quarter On We quarter structure $X.XX the Capital from share diluted after-tax Adjusted a from $X.X amortization year of intangible adding intangible were share. period. $XXX,XXX, in flow. $XXX,XXX basis, net earnings million share. an For a $X.X $X.X cash Adjusted back EBITDA in or to amortization. QX our earnings $X.XX representing about for was shows reflects or tax-effected per quarter, and diluted acquired operations. or acquired capital generation, amounted adjusted approximately prior million unchanged diluted

the $XX free acquisition the the acquisition. cash quarter, is grow a of Alfamation. Borrowings ended increased at X.Xx. reflects Cash debt $X.X in million, the with million approximately organic the We the the Given in very trailing of our capital million we the total leverage which total from modest to $XX.X equivalents quarter flow end reflecting of the use the from $X million. manageable for were requirements down of quarter debt business, assumed was believe we million ratio and debt million, due $XX.X $XX first to of quarter

$X million repaid During the of we debt. quarter, approximately

incremental have revolver. available $XX with continue $XX under million available draw and our We to an million our loan delayed term

the to by extended XXXX on drawdown date to Friday, facilities X-years and May maturity extended period announced we on X-years May As these XXXX. the was

Turning for XX we outlook Slide as our to review XXXX.

approximately to For million, and million the XX% with gross margin are expecting $XX XX%. be revenue of quarter, to second we between $XX

Second million. After to quarter operating expenses, incremental to about including expected to or higher million per be expected operating range $XX This reflects the amortization. share. Alfamation amortization, and range this from costs is acquisition approximately the gained in $X.XX tax, asset million be intangible are the $XX.X total of $X.X of

be between share, $X.XX EPS second expecting quarter to while EPS $X.XX be share. diluted to diluted $X.XX to the are should adjusted We per breakeven for approximately per

As adjust tax-effected reminder, expense. we a simply for amortization

approximately expense to approximately million. operating XX%, Nick Gross million revenue year of margin recent $XX order and million. $XXX expect full tax expected we of This with includes for expenses to from million is range Alfamation of to XXXX now the to our For the with adjusted discussed, $X.X million. $XXX outlook, $XX amortization trends asset addition XX% be to expected roughly intangible XXXX

Our expected XX% to now about to tax projected be rate effective XX%. is

For sales. capital X% expenditures in XXXX, to we expect of to between run X%

additional not does Slide over guidance occur acquisitions from will potential from our from XX, the call any may if With such we now turn the as nor to the that, impact usual, potential include expenses turn non-operating make. to any that development Nick. include time, does it As back you will I impact time may corporate to

Nick Grant

their keeping executing macro our and Duncan. Thanks, is a tough our environment, In heads plan. down team

had less in the headwinds total up have is historically. been against half but market, We heavy it of sales, about some been semi which than

in latest which Our to position drive market further advance long will the leverage our to help solutions. acquisition we our semi exciting growth like Nonetheless, know-how megatrends has market, over run, innovative and as diversification. the we

within We also automated responsive solutions-oriented new customers service, more through capturing technologies we by and additional existing gaining continue to our innovate providing ones. are traction while

our to Our diversified leverage across markets channel strategy is are with customers the enabling required are unique reach the more and and it's solutions partners. Underpinning discipline effort but accountability well. and X-point channels our inroads to that team's markets new well, expand serving us and execute

well as position, pricing, the across and channel drive partners competition are as teams growth. Our market our evaluating within opportunities talent consistently to

encouraged open with for operator, are our can and future. questions. about With our the We that, lines we progress excited

Operator

Street Our Thank line question Schmidt the Lake with you. [Operator Instructions] of is from first Jaeson Capital.

Jaeson Schmidt

reduction? towards want delayed regarding recognize Just reduced potential shifted recoup this permanent if that to quarter do is you orders full a size, later? later Or order the orders you orders curious then to And year. that in were this start there's that end, the to with think expect those

Nick Grant

more of year QX, orders were kind just them do right. the the shift are so us. see did really later -- part of based the customers to on of telling moving kind Jaeson, that QX, into that our We what delayed

that balance the is fact, in year. the reduced the of quarter is we customers driven, orders get and for in here in the in demand that of booked year. through the the the balance primarily that to size, -- particular is size really And end -- second user As reduction for

reflected to not be but in in was going here QX, just QX and did expected materialize. that's So

Jaeson Schmidt

integration time bad the plan. then the a helpful. acquisition? had with like now just anything that sounds Alfamation it. whether good Got And that little progress there's more surprised you, But the That's to curious has with continues if you've it or

Nick Grant

gives up trade all they our mentioned positive Acculogic jointly there with a company the the in X their show show, interactions them, really showed Canada U.S. with No, And that and pre-remarks good some group the some calls being pursuits to customer Yes. APEX had teams businesses credibility a we so between projects. and part of activity, the of far. fantastic in gone and I -- there. very have good larger

you from So all positive that sense. from anything your that come across... Duncan, side

Duncan Gilmour

No. more mean, visibility final I we recognition, wasn't surprise, all far. a alluded I gave get Nick hood, under us to good but just the mean, that so something as that complete into determination. revenue

nothing surprising So far. so

Jaeson Schmidt

that's last for Okay. to the No, back hop And then in just and one hear. queue. great me, I'll

You noted headwinds some from Alfamation gross margins. regarding

could the you QX. if here quantify curious in impact Just

Duncan Gilmour

I mean of impact. it Yes. basis XXX was points

of the margin of So points -- to and of number that, a relatively thin versus things stub number like case about upon versus be just period costs the days the based days brought impact and into of that literally, actual there. had XXX a basis on business revenue

Operator

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

Edward Jackson

I semi when almost carbide? what market, the mentioned silicon to does as it capacity ended bit a What's or front-end that press a about and start with about up little really when customers? just the reading discussion simply follow you at regards with of macro hear mean it of kind I open you another... in around color it's put, with to from Is the release I of some semis, that normalizes I'd your just of color talk your to real -- driving where to wanted level, overbuild. it get -- as you kind customers what I'll that the more am market correctly? And like sounded of front-end then love the and sort to out, kind view kind mean

Nick Grant

well crystal or are Yes. the well And our a would for we been now it's in had really where shipments semi, the that QX, crystal the in as driven we seen epitaxy applications. really silicon as solutions more holding happened the project I was there know, think things. But epitaxy as they of strength digest growth, in kind you say, then of up as end had and heating front-end we gallium that Ted, the slow users our number epitaxy carbide, quarters that the and and for seeing of saw -- where business we the there. growing have that's out capacity nitride -- induction relative and as used on soft orders, side

were the on larger at, expecting either need delayed, going were that of they number or Some units of projects they the rescoped that. canceled on to

in placing our to and there, was the to the really and with more telling XXXX. as They're customers up size we orders. they're well So really start that think late that us year the saw. our reduction picking the the Talking so integrators -- that what in end really as need in both users, really starts second half into for we going

Edward Jackson

doing positive of been well I if little for wondered color a outlook on then what was you discussion, could are has And the time. within market, quite driving applications color. That the defense that business provide it are period it? a that your for and And a great more

Nick Grant

We all testers, No. serve well. missiles, systems, Yes. probe circuit you missile flying used will, testing robust as defense used our if of that boards the and being electronics in various defense applications space of in X testing divisions, some our systems across

And wide there. so variety it of really is applications a

in more components on We planes cameras aircraft, also the side used used as say, on of I'd do some, defense/aero well. some

or -- variety we've But pretty components see the in that in and it our going on of higher testing do applications, we missiles, I'd a staying to more for products missiles into driving say, themselves So touches the the the us nothing past. here driving needs, upgrades designs wide new robust those particular. served

time. quite it's So yes, for some continue that -- we see will

Edward Jackson

that that. Good. backlog I semi then your want question is was my purely backlog driven? last drop substantially. backlog. And down And in Alfamation hear on take out, If to we

Duncan Gilmour

that portion driven. huge is Yes. a I semi mean of

still from a or up. low As of quarter you can somewhat see the order activity relatively revenue kind low in semi, holding

do of there. can and kind dropping that backlog the you math kind on You of see

component, So of kind Nick front-end with kind really as as respect commentary Q&A, highlighted, semi, in certainly backlog of of the the reduction. bigger in driver The that that to as well driver. sector being there

relatively I -- think we kind rest the of you're where change. relatively the the holding see up that's but markets, biggest well, of

Operator

of [Operator Peter Wright Instructions] Intro-act. Our the next from with question line comes

Peter Wright

your capacity of to question note they're seeing more point separate from first customers' on pushouts of you the could purchases the Thank some think more conversations look is share have of there some or cost made there. and acquisitions decelerating? And at question to as guys the we more cycle, perspective then have -- -- cut or your cuts maybe the hurdles kind have in second or development innovation your your investment or color expansion. to some some tell what kind or kind accelerating kind kind But has you are I can Do innovation you. where reactive? what full Nick, highlight harder you new from proactive there, are anything any customers, capacity we're been in in steam of of there of own cycle. my if the is on you you are activity around guys' Is maybe of ahead? or Or or cost type own this philosophy changing you get there? to is And tech by either at guys in

Nick Grant

Sure. Peter, the questions for and there. thanks

road before to and just those we're on say in our for they those maps. matter things. need of most and expansions what funnels. projects Customers our they're delayed have been And capacity have kind trigger it's equipment to these really a relative timing the of going pull still They're there. So out I would of seeing, their

is So canceled. on CapEx purely being say, just just I'd or there. approvals mothballed nothing delay It's -- getting spending

driving in to And throughout. continues in that. in going we activities and slower that more aggressive we've customers is And these an after across since share the areas, times obviously, new customers, got been going in those businesses this existing I getting competitive to after going wallets. their As new customers joined, relate something aggressively accounts of the elevate fact, markets, in we've push after and

larger them every add So the new customers and of to teams in we laser-focused trying we in will last R&D. well. And opportunities getting doing the our the there. the on customer had, the out to as quarter. are comment then our new explore we portfolio customers and base across solutions closed relative that to on -- And Alfamation with investments question and you excited brought finding But and are about was what continue their

in core area. of innovation strategies, we down and that aren't our one So remains slowing

up do number the to the release new Kind time In qualifying fact, the of year. and linked customers new we in more that camera the design vision customers new about to speed SCAiLX teams cameras. excited products. pushing are the with It around pretty new that did to that try development of in is last takes

new so And was fruit over leads dozens in good start a launched our came that that opportunities the bearing specifically had later that year. there at out California, around pipeline in excitement launched bench-top got that business Massachusetts, -- product. ThermoStream Likewise, in we've the of of Mansfield, should we there trade at back up show ITS

those So we're chasing down.

demand won't for it's yes, believe going create us. throttle back. innovation something is to going So We we forward

Peter Wright

at notably question, inflation of you pricing look maybe If flows or I Duncan, more the managing where there easier there at notably are and we ebbs kind could ask is question. one anything cost out getting trends, kind looking the difficult survey-ish of of margin? cycle, is kind more type and in of detailed a if -- of in

Duncan Gilmour

certainly, the to a certainly that supply ago less. at are chain, mean supply versus costs, then lot compare X.X I We're were you -- if teams perspective, a when constantly chain more amplitude it's looking et But years, pricing inflationary the and volatile at costs, I a is appropriately managing mean, constantly our the of and cetera. equation price teams it's ensuring managing constant what, it. et cost all looking things are from relative, X-years cetera,

manageable, So an ongoing be. is it the it's but more amplitude battle, and should

Operator

As there I comments. I'm Peter Nick the to Grant have now closing are Question a hand for conference sorry, no Wright. further questions, from would I his over

Peter Wright

Malaysia re-pulled. there? just Any on last that one. I noteworthy the is update One facility

Nick Grant

but full working permits site, Yes. steam moving little everything some delayed we're ordered. getting the of been build-out final with getting there. the No, have and that have with the architects I a into proceeded ahead with we

So expect we'll pull and we here final trigger that any to then there. have permit out day, the

hiring. next have We of We talented got will on in hired handful really the here. couple or that a be that started here of weeks a weeks individuals few we've starting

So excited in our embrace Southeast and further then team's and really progress help site Asia. the that on the it about position commitment to

Operator

Thank questions you. there in Nick, are no queue. the further

Nick Grant

that the All questions to a appreciate right. you regarding call Thank the you We today will opportunity chance at you I in. joining to some be find participating, conferences. welcome any Ryan. Thanks, On meet hope may and to of for Slide the XX, list you great this answer us day. upcoming events participating have. we you can details of have have further and a and the

Operator

for Corporation Thank your has The you. now of conference you participation. Thank InTEST concluded.

your You lines. now may disconnect

inTEST (INTT) 6 May 242024 Q1 Earnings call transcript