INTT - Earnings call transcript Q3 2024

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Operator

Ladies and gentlemen, greetings, and welcome to the inTEST Corporation Third Quarter 2024 Financial Results 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 morning, 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

X that find earnings well that the I of Relations these as our documents You accompany this If today. our slides out turn section release on have safe morning went website, to the should not, harbor will conversation the as as you Slide intest.com. Please review can Investor statement.

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

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

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

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

Nick Grant

earnings for everyone. call. joining XXXX our quarter and Shawn, Thank good us morning, for you, third Thanks

executing continued our entire inTEST First, I would strategy. to like team on for their the efforts thank

new customers. adding are We

of our and our end softness driving channels key markets. the optimize to some in are efforts we to differentiate are helping few a our market, offset continue of We solutions. These innovation to

improve electronics, quarter progress as where through synergies, as acquisition driving The including gross base. A managing the by strengthened life the our achieving cycle are consumer the million, the continues teams exploiting and focused markets, positions diversified cost XX.X% of margin and leveraging $XX being current customer automotive, well more to sciences opportunities the chain on are by revenue shipments on our highlight of supply into technology and the were semiconductor was across as quarter. well Alfamation. was We delayed in and benefiting product broader which million $X of our well to fourth impacted in performance on integration

and trends quarter, showed sales third revenue strength, back markets demonstrated the end. semi During Alfamation to $X.X in revenue our million while diversified improving contributed in the

and XXX to semi semi gross In was driven actions fact, back-end decline points improved front margin sequential volume by growth conditions. mix, adjust in from in end. in higher-margin compared The market to with basis the product back-end QX outpaced favorable taken expansion cost

has Our XXXX, businesses in-sourcing basis expanding headcount conditions base margin through our in reductions, current businesses our less been reduced in of have EBITDA sequential beginning headcount basis margin and aligning been cost XX Product their efforts and improving spending management are and Since market the operating by cost improvement points. reflected XX%. activities. and points mix our with XXX adjusted discretionary structure

back-end an improved Alfamation. other the semi the period and $XX Backlog million, through million, Turning acquisition Stronger were were $X.X in have improved QX defense up million to further consecutive quarter. contribution the had industrial up pause has and recognizing at quarter, aerospace, sequentially, I'll of markets elevated Orders out and weakness signs closing. and outlaid over current semi. Encouragingly, year prior the $XX.X from coming $X which for showing offset experiencing backlog EV, X. orders front-end the trough. This improvement the auto from Slide demand backlog. of the orders to helped semi. the in of in review modestly year we're Alfamation, third Orders including in the was million

large As with mentioned be quarter, multisystem declined can detail. the in projects to the over timing turn and their lumpy it the down Duncan as to trailing backlog. With in Duncan, of to Compared vary let Alfamation's orders quarter-to-quarter. past, backlog Alfamation's can we financials as worked over me more review you. that, outlook

Duncan Gilmour

X. Nick. Slide Starting you, on Thank

and compared including with As million Nick third the $X.X million sales quarter. in million, EV, noted, decline as markets. Sequentially, in The from other was auto million offset $X was into was third and industrial approximately $XX decreased by by semi primarily quarter in delayed Alfamation. a fourth revenue million sales driven $X.X million $X.X improved QX revenue shipments quarter $X.X for growth in XXXX the of were that Alfamation, partially million $X.X from decrease

improving down trends. communicated As quarter was the be case, was with compared quarter. we demonstrated unusually markets Meanwhile, from other last going an to semi, revenue industrial and second Alfamation strong

higher-margin revenue. comparison, basis, sales. expanded The Slide gross XX-month of high-margin reflects year-over-year of was and was actions, basis our points a driven quarter for mix Nick and semi margin solutions nominally a profit XX.X% gross product decline volume as $XX.X XX.X% to On XXX noted. favorable million improved margin X. semi sales. On unchanged with on Gross the Moving by lower cost back-end the weakness or trailing in sequentially,

expenses and operating X, Slide operating of cost see reductions corporate our the can expenses million, inclusion offset by you operating partially were compared essentially Sequentially, year, as costs. on up $X.X were the flat. with Alfamation's expenses prior development As reflecting

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

was to intangible approximately our X.X% quarter. adjusted structure million, acquired net in capital $X.XX margin. Slide flow. per diluted adding and share amortization back representing or EPS Adjusted per On diluted reflects diluted $XXX,XXX million our share. were per amortization. tax-effected XX For acquired intangible an after-tax Adjusted earnings basis, the quarter, net amounted about $X.X or EBITDA share. $XXX,XXX Adjusted $X.XX QX earnings third $X.X $X.XX EBITDA were for cash the an shows or

expenditures were a total approximately quarter $XX.X ratio the this third in cash. the we million, $XXX,XXX debt generated During of resultant leverage the total ended of of and million. $X.X was cash quarter, reflects debt flow $X.X the million X.Xx. free quarter operating Capital We with

repaid the $X repurchased average and million million, $XX shares repayments $X and from we of a of of $X.X for quarter, approximately million shares. During trailing total XXX,XXX debt net investment quarter of an at reflecting repurchase the price at were quarter, equivalents approximately million. Cash third and debt $X.XX the end down the

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

to amortization million Gross to expect we outlook to margin Turning we $XXX from XXXX, for have outlook XXXX full our range for XX, $XXX million. revenue Slide our year review tightened and as expected now of with million approximately This approximately $X.X expenses of a million or expected is basis. approximately $X.X XX% be XXXX to million. intangible tax-adjusted to asset $XX includes on XX% expense operating

expected for is are $X.XX Based per approximately approximately be the XX% $XX are remains results $XX be share. $XX.X amortization XX%. about $X.XX expenses, of fourth expecting including approximately revenue midpoint after to the approximately range, from gross be or revenue our Our expected of $X.XX, rate implied effective The guidance million the expected and to amortization, XX%. Operating to tax adjusted EPS about we $XXX,XXX asset tax and EPS on quarter intangible and tightened respectively. implies $XXX,XXX quarter at guidance of fourth million. million with margins to to Total approximately

still our between reminder, expenditures to XXXX amortization As X% adjust of tax-effected we a sales. to simply expect capital in expense. We for X% run

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

Nick Grant

Duncan. Thanks,

believe carbide are for we CapEx fourth past semi limited which paused. currently semi We elections of new industries. The year, of our stability and applications, once increased silicon gradual projects with The front-end increase are a visibility the beyond demand and serves market, some moving in order us automotive is into we pipeline quarter, likely believe nitride we the gallium larger seeing improvement number have back-end reflecting and we targeted across has will industries. the projects. While signs

for to inventory for adapt existing While in need existing these and EV power materials semiconductor a encouraging, market consume is the demand. efficiencies lines, changes production the the there picture to with the improve longer-term is

efficiency We higher high-power are technology especially excited about that and the evolving delivers many nitride opportunity gallium as applications.

Asia, continue adding the optimize the have go-to-market to or and sales can coverage Malaysia around We along world. In nicely, we're is new geographic higher drive seeing facility our the the by our hired. engineers we upgrading our from partners already benefits while Southeast U.S. and that channel coming throughout expanding

did thermal modified product on product Environmental Penang. until it. It's team. now, an impact by from of to more test our fact, that successes look for for see recently something order the being But few in to their team on was that future map Technologies division not months new first our received some first we team great complete designed This the in I In to board. have the forward their a time. members solution new bandwidth road many their was was making has

to IntelliDOCK solution test opportunities. we could customer our In of integrated with future to expect Europe the our division, strategy, key our in our many As noted at solution one success. was as installed X-point automated innovation electronic keys an is our in manipulator a recently that lead

test latest a and In know-how feedback has in very manipulator us at technology our phase positive. It's intelligent the coupled of expertise type these opportunities. the is is company opens that with differentiates large and addition, our up computing displacement competitive test and initial automated been and

X induction silicon EKOHEAT the some for in which, and system With in uptime health of our experiencing built-in our technology, sitting diagnostics its asset key the internal a increased headwinds Our control customers. way, heating X lower by are process not we solutions costs, operating has power is performance leveraged markets, system, number provide delivery of and we still. technologies are key for EKOHEAT can leverages monitoring. Despite system industry-leading carbide being next-gen

are We innovation. driving

optimize price we existing operator, We enhance value-added open are working complement our In and let's for that, line capturing executing strategy. With short, on our our technologies. we we acquisitions are solutions, our are continue that evaluate can questions. approach, go-to-market to or constantly for to the

Operator

line Lake Street. [Operator is Schmidt the question with Jaeson from Instructions] of The first

Jaeson Schmidt

if And to? concentrated to of it or end what want couple the start relatedly, order market you are just related guess is I more Curious is highlighted. that customers then just on broad-based? a if I those at pushouts

Nick Grant

million really didn't QX roughly of and arrived QX, Yes. Jaeson, basically that so by customer out pushouts in early we QX in in that there. end $X referenced were the QX delays a shipment to the reach

that semi. front-end roughly that push referenced that $X So out we've said, that's there. the we With million seen customers have

while a on work orders to we've space continue customers in that backlog with We that. placed in they that had for shipments our on

on accommodating so just them So there, more front-end the side.

Jaeson Schmidt

you. expect are how level, of about semi just then market, related just point? front-end to And clouded a you I Got longer-term thinking a some too when tailwinds, guys to know kind the this are curious high there? visibility at hiccup Or is there but

Nick Grant

number that our we're a at solutions this additional multiple anticipating space. -- Yes. deliveries of their is with would the and What stage. Obviously, when hearing kind half of is working we're from that's that But them second time on can needed deliveries customers they're hearing actually line that in next-gen customers XXXX of from change. there be

Jaeson Schmidt

headcount highlighted one I'll the I you some in gross margin Okay. mean, sort and improved just back of nice the helpful. for efficiencies. then seeing really I And last performance. jump just the and sort know or and That's me, reductions queue. really

for much this how is -- demand potentially curious I Have sort of the margin? permanent? be you up, level of gross when could the picks profile Just new this back mean

Duncan Gilmour

tough mean, to it's elements, break all Jaeson. I Yes. down the

like certainly very you factor mean, uptick gross highlighted. hard of probably of the the see and that roughly, it mix from with Nick that we a about that cost with the the the being know, also As initiatives but benefit semi the mix, through is actions but of biggest strong There's back-end very to driver discern. that we benefit margin, I highlighted. higher point flowing number, cost percentage of the majority things that

Operator

from is Securities. Northland question Jackson Ted next The with

Edward Jackson

I've a couple only couple questions. were got hit of mine just a now. of Actually,

the are? base what about base First down of XX% in comment businesses just can you your reduction all, a define being just when you the made businesses, headcount

Nick Grant

part Yes. all companies Alfamation base this outside our of It's businesses. collective They're our of stage. at

others. of not some X Now impacted the companies are being those as severely

the are collectively, that say, it's more more would seeing that actions. but weighted semi space I seen downturn So XX% businesses the the in we've and some there, front-end industrial towards taken the slowdowns

Edward Jackson

the into to how together that, like reduction again. quarter playing I getting financials? -- haven't that the try gone see and mean, with dug do through and then put my And we really I mean, Okay. through fourth we are I

I that quarter. like impact mean, some Color an So we there, Is out this of immediately? we'll it 'XX? I see fourth please. almost first assume additional see the get play into in the Does we'll as quarter it something of

Duncan Gilmour

a And [ back, to place quarter a quarter, I seen Yes. we really number X severance, really we've referenced lot numbers, minor action action. have been XX% Last We've QX we slowly end labor, per of what by strong, going seeing associated to bit And months just that we around driven se. been base with demand favorable clarity. towards been example, the for reduced talked of has provide think to We're comparison. million so the that by benefits the activity It headcount a so But though, that in businesses. very the that's we a action which expenses months. And mix QX speak. demand referring process, more gradual direct businesses, about little the The look the of through more one operational relatively mix soften. headcount seeing we certainly through continue was starting versus that is last quarter, a or a to benefit as specific unfavorable the Nick's in obviously and of the here we've it's is flow adjusted of last headcount. mentioned, took that, uptick annualized I the $X.X bit course XX%. occurring margin as as ] this in that margin of we'll total and ongoing over softened QX last to course and about as would been hasn't of with reemphasize, being a impact forward. see a creep over been in X that, those when of in It's

Edward Jackson

more end My next just maybe the maybe but at hit stabilize mean commented just color front around back that for question, seen on, months, I the back color have this of And little and several some you guess, when a terms see there that geography, Okay. point has strengthening? end been just end. in I kind terms you've within and calling maybe Or of you out? anything like in incremental that it, end is the look drivers in to note strength in anything that's it at underlying business you're you what's thematic of seeing that market worth reshoring, is happening improve. business that's

Nick Grant

seeing I Nothing a It's not an and improvement. for quotes. out. we in particular, you are off, gradual will. say, taken request if L-shape like worth calling more But more would It is

Our pipelines are growing.

off projects, I CapEx Some signal are off, be projects kicked soon. cut they mean, here to very

we side, showing now. the yes, anemic improvement So about very pretty is, for us, back-end right flip feel now on that front good that gradual end

Edward Jackson

near of the question thing. just for kind just color and of kind turn of more a will in you, No. that around thematic Well, future Last hopefully, too.

Alfamation Just better. and including talk a myself, It's it everyone, of your about a help chunk kind good bit backlog. still of understand

out could it. all kind of or it's kind are through stuff. I the that maybe kind cycles impact a of of business in wondering refreshes it is within models, -- there releases terms color And revenue where has growth? Like world some of model about? terms was little terms -- going that working a the I electronics new Alfamation's like -- But could what of that within of automating getting it, design it. should to of anything is new know wrong this? drive like if that's particular heavy commercial you or in of thinking a anything that as there me. that terms on equipment for Just going and more we you like are be get themes in maybe to hat win of that's mean, of in a they happens auto even is excited mean, is with hang a you You're lot or cars vertical? some a to sketch a model exposure within and that it business, refresh I some the tied like be that that and new I provide it we should into just a of start growth hook start into hang there's Or about model we the

Nick Grant

sure. Yes,

the reshuffling being a as part Majority slowed of heavy for into of type EV The towards Alfamation, Alfamation it's It's just go little very still programs of here. automotive. them. So of last of moving ICE the matter bit here family models go inTEST automotive But couple hybrid doing agnostic that. and in kind the excited the industry of for the forward vehicles. kind quarters testers which a on more a of

So this pickup encouraging you, which systems numerous also around that these of onboard nice the the what these new infrastructure one a to -- different there. quality. is to out some seeing , are require good will is systems, the the monitor electronics there, having that system centralized changes the in and systems and shift kind as managed have us vehicles, the more a pipeline whole computing design onboard computing is for as testers underway around moving the well them testers shift at within across evaluate being and Alfamation require is computing OEMs will shift the computing on managing car really projects entire computers infotainment versus And the

there's going a in So, cars. mean I on yes, lot

is everyone new of aware tech, that and well new think I features.

testing a And opportunities lot us. so for there's of

Alfamation. for future the about positive very feel we so And

we Just timing-wise, be pointed can as on, lumpy. orders

Operator

are conference over Nick to questions, there like for the would further hand As now I closing Grant comments. Instructions] no [Operator to

Nick Grant

call and XX, you time, appreciate welcome of your may some participating, a details I today, and hope upcoming everyone On to and upcoming the us opportunity you have Slide can list have thank chance a We again the further we'll conference. at regarding any you, an replay you this Thank and nice for find questions events of you see of to the participating for in. to answer be day. Thanks a we joining have. Zico.

Operator

you. Thank teleconference. This today's concludes

your this your you disconnect participation. may for lines You time. Thank at

inTEST (INTT) 1 Nov 242024 Q3 Earnings call transcript