inTEST Corporation (NYSE American: INTT), a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets which include automotive/EV, defense/aerospace, industrial, life sciences, security, and semiconductor (“semi”), today announced financial results for the quarter ended September 30, 2024. Results include Alfamation S.p.A. (“acquisition” or “Alfamation”) from the date of the acquisition, which was March 12, 2024. Alfamation is included in the Electronic Test division.
Nick Grant, President and CEO, commented, “We delivered a solid quarter with revenue somewhat below our expectations although we delivered better than forecasted margins. While we had approximately $2 million in shipments that were delayed into the fourth quarter, we had better mix compared with the trailing second quarter primarily due to semi shipments being more heavily weighted toward backend test. In addition, we have taken out costs to better align with current market conditions. Importantly, we generated cash from operations and, given our financial flexibility, we both paid down debt and repurchased shares. We believe that investing in our business is a great use of capital.”
He added, “The team continues to execute on our strategy. We are adding new customers, continue to optimize our channels to market and are driving innovation. While our visibility is limited given market conditions, we are encouraged with what appears to be some stabilization in our targeted industries as orders gradually improved through the quarter. We expect demand for our induction heating technology for front-end semi will lag recovery in our other markets but remain excited about the underlying fundamentals that will drive long term growth for these solutions. We believe the appeal of our engineered solutions, the diversification in our target markets and our success with scaling the business through acquisitions has provided relative stability in revenue and the ability to generate profits through industry cycles.”
| 1 Orders and backlog are key performance metrics. See “Key Performance Indicators” below for important disclosures regarding inTEST’s use of these metrics. |
| 2 Adjusted earnings per diluted share is a non-GAAP financial measure. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release. |
Third Quarter 2024 Review (see revenue by market and by segments in accompanying tables)
| Three Months Ended | |||||||
| ($ in 000s) | As Restated | Change | Change | ||||
| 9/30/2024 | 9/30/2023 | $ | % | 6/30/2024 | $ | % | |
| Revenue | $30,272 | $30,941 | $(669) | -2.2% | $33,991 | $(3,719) | -10.9% |
| Gross profit | $14,012 | $14,447 | $(435) | -3.0% | $13,797 | $215 | 1.6% |
| Gross margin | 46.3% | 46.7% | 40.6% | ||||
| Operating expenses (incl. intangible amort.) | $13,525 | $11,979 | $1,546 | 12.9% | $13,461 | $64 | 0.5% |
| Operating income | $487 | $2,468 | $(1,981) | -80.3% | $336 | $151 | 44.9% |
| Operating margin | 1.6% | 8.0% | 1.0% | ||||
| Net earnings | $495 | $2,277 | $(1,782) | -78.3% | $230 | $265 | 115.2% |
| Net margin | 1.6% | 7.4% | 0.7% | ||||
| Earnings per diluted share (“EPS”) | $0.04 | $0.19 | $(0.15) | -78.9% | $0.02 | $0.02 | 100.0% |
| Adjusted net earnings (Non-GAAP)3 | $1,216 | $2,707 | $(1,491) | -55.1% | $959 | $257 | 26.8% |
| Adjusted EPS (Non-GAAP)3 | $0.10 | $0.22 | $(0.12) | -54.5% | $0.08 | $0.02 | 25.0% |
| Adjusted EBITDA (Non-GAAP)3 | $2,441 | $3,768 | $(1,327) | -35.2% | $2,154 | $287 | 13.3% |
| Adjusted EBITDA margin (Non-GAAP)2 | 8.1% | 12.2% | 6.3% | ||||
Sequentially, revenue was $3.7 million lower primarily due to shipments that were delayed into the fourth quarter for automated test systems and induction heating technologies. Revenue from semi, industrial and other markets demonstrated improving trends. Particularly in semi, revenue growth in back-end outpaced the decline in front-end.
Sequentially, gross profit of $14.0 million and gross margin of 46.3% improved despite lower revenue on better mix and cost actions. Higher sales of back-end semi test equipment, battery and flying probe automated test systems as well as improved operating efficiencies across most businesses contributed to the margin expansion. Operating income and margin improved reflecting mix and cost containment measures.
Year-over-year, third quarter revenue decreased $0.7 million. Alfamation contributed $5.4 million in revenue. Helping to offset the $7.1 million decline in semi revenue was $4.5 million growth in auto/EV, $1.1 million increase in industrial revenue and $1.3 million increase in revenue for other markets.
Year-over-year, gross margin contracted 40-basis points primarily due to lower volume of the organic business and the impact of Alfamation. Operating expenses increased $1.5 million over the prior-year period. The $1.9 million incremental operating expenses related to Alfamation and the additional $0.5 million in amortization were partially offset by cost reduction efforts and reduced corporate development costs.
Net earnings for the quarter of $0.5 million, or $0.04 per diluted share, improved from $0.2 million, or $0.02 per diluted share in the trailing quarter. Adjusted net earnings (Non-GAAP)3 were $1.2 million, or $0.10 adjusted EPS (Non-GAAP) 3 compared with $1.0 million, or $0.08 adjusted EPS (Non-GAAP) 3 in the second quarter of 2024.
| 3 Adjusted net earnings, adjusted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release. |
Balance Sheet and Cash Flow Review
During the quarter, the Company generated $4.2 million in cash from operations. Cash and cash equivalents at the end of the third quarter of 2024 were $18.0 million, down $2.4 million from the end of the second quarter of 2024 reflecting cash used for debt reduction and share repurchases. During the quarter, the Company repaid approximately $5.3 million in debt and invested $1.0 million to acquire 141,117 shares at an average price of $7.38 per share. Capital expenditures were $0.5 million in the third quarter of 2024, similar to the prior-year period.
At quarter end, total debt was $16.1 million, down $5.0 million from June 30, 2024, which included the impact of the change in foreign exchange rates. At September 30, 2024, the Company had $30 million available under its delayed draw term loan facility and no borrowings under the $10 million revolving credit facility.
Third Quarter 2024 Orders and Backlog1 (see orders by market in accompanying tables)
| Three Months Ended | |||||||
| ($ in 000s) | Change | Change | |||||
| 9/30/2024 | 9/30/2023 | $ | % | 6/30/2024 | $ | % | |
| Orders | $28,054 | $26,854 | $1,200 | 4.5% | $26,182 | $1,872 | 7.1% |
| Backlog (at quarter end)* | $45,454 | $40,491 | $4,963 | 12.3% | $47,672 | $(2,218) | -4.7% |
| *Backlog as of 9/30/23 as restated |
Third quarter orders of $28.1 million, including $3.9 million in orders attributable to Alfamation, grew 5% versus the prior-year period, and improved 7%, or $1.9 million, compared with the second quarter of 2024. The year-over-year increase reflects general strength across most markets although the semi market remains soft with $5.3 million, or 41%, lower orders. Orders from auto/EV, including Alfamation, increased $4.1 million, defense/aerospace increased $1.4 million, industrial grew $0.6 million, and other markets grew $1.9 million.
Sequentially, the 7% increase in orders reflects increases in auto/EV, defense/aerospace, security and other markets more than offsetting weakness in semi, industrial and life sciences.
Backlog at September 30, 2024, was $45.5 million and included $14.7 million of backlog associated with Alfamation. Approximately 42% of the backlog is expected to ship beyond the fourth quarter of 2024.
Fourth Quarter and Full Year 2024 Outlook
The Company has tightened the overall range of its expectations for the full year and is providing its fourth quarter financial guidance as shown in the table below. The Company continues to expect the effective tax rate for the year to be approximately 17% to 19%.
Fourth quarter 2024 interest expense is expected to be approximately $210,000. EPS and adjusted EPS (Non-GAAP)3 at the mid-point of the estimates for the quarter are approximately $0.08 and $0.14, respectively and is based on approximately 12,150,000 weighted average shares. Capital expenditures are expected to continue to be approximately 1% to 2% of revenue.
| (As of November 1, 2024) | Fourth Quarter Guidance | Full Year Guidance |
| Revenue | $34 million to $37 million | $128 million to $131 million |
| Gross margin | Approximately 42% | 42% to 43% |
| Operating expenses | Approximately $13.5 million | Approximately $53 million |
| Intangible asset amort expense | Approximately $0.9 million | Approximately $3.3 million |
| Intangible asset amort exp. After tax | Approximately $0.7 million | Approximately $2.7 million |
The foregoing guidance is based on management’s current views with respect to operating and market conditions and customers’ forecasts. It also assumes macroeconomic conditions remain unchanged through the end of the year. Actual results may differ materially from what is provided here today as a result of, among other things, the factors described under “Forward-Looking Statements” below. Further information about non-GAAP measures can be found under “Non-GAAP Financial Measures” and the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release.
