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    inTest Corp (INTT)

    Business Description

    inTEST Corporation (INTT) is a global supplier of innovative test and process technology solutions used in manufacturing and testing across various industries. The company designs, manufactures, and markets products that serve the semiconductor, automotive, defense/aerospace, industrial, life sciences, and security markets. INTT operates through three main segments, offering a diverse range of products including semiconductor test equipment, thermal test systems, and induction heating solutions.

    1. Electronic Test - Provides semiconductor test equipment, flying probe testers, and in-circuit testers. Also includes the operations of Alfamation S.p.A., which enhances capabilities in automated test equipment and serves industries such as automotive, defense/aerospace, industrial, and life sciences.

    2. Process Technologies - Offers induction heating and video imaging products for wafer production in the semiconductor market and other industries, including automotive, defense/aerospace, industrial, life sciences, and security.

    3. Environmental Technologies - Delivers thermal test, process, and storage products to end users and OEMs in the semiconductor market and other industries such as automotive, defense/aerospace, industrial, and life sciences.

    Q3 2024 Summary

    Initial Price$9.95July 1, 2024
    Final Price$7.09October 1, 2024
    Price Change$-2.86
    % Change-28.74%

    What went well

    • Back-end semiconductor orders are gradually improving, with increased requests for quotes and growing pipelines, indicating a recovery in this segment.
    • Effective cost management with a 10% headcount reduction over the past nine months is leading to improved margins and operational efficiency.
    • Alfamation presents strong growth prospects in the automotive sector, with a robust project pipeline driven by shifts towards centralized computing systems in vehicles, requiring new testing solutions.

    What went wrong

    • Front-end semiconductor market is very anemic, with customers pushing out orders, and deliveries not expected to pick up until the second half of 2025. ,
    • INTT has reduced headcount by 10% in its base businesses due to downturns in the front-end semiconductor space and industrial slowdowns.
    • The recent gross margin improvement may not be sustainable, as it is largely driven by favorable mix with higher back-end semiconductor sales, rather than permanent cost reductions.

    Q&A Summary

    1. Front-End Semiconductor Outlook
      Q: When is recovery expected in front-end semiconductors?
      A: Management anticipates that additional deliveries in the front-end semiconductor market will be needed in the second half of 2025, based on customer feedback. This timeline comes from multiple customers working on next-generation solutions, but visibility remains limited and could change.

    2. Gross Margin Sustainability
      Q: Are recent gross margin improvements permanent?
      A: The strong gross margin was primarily driven by favorable product mix, particularly higher back-end semiconductor sales, but also benefited from cost initiatives, contributing roughly 1 percentage point. While some cost savings are ongoing, the margin level may adjust with changes in demand and product mix.

    3. Headcount Reductions and Cost Savings
      Q: How will headcount reductions impact financials?
      A: Over the last nine months, the company has gradually reduced headcount in its base businesses by 10%, aligning with softened demand. These actions have been yielding cost benefits that are starting to reflect in the financials, contributing to improved margins in Q3, and will continue going forward.

    4. Order Pushouts Impact
      Q: Are order pushouts broad-based or concentrated?
      A: The company experienced approximately $2 million in shipment delays from Q3 to Q4 due to orders not reaching customers by quarter-end, arriving in early Q4 instead. While these are specific delays, there have also been broader pushouts in the front-end semiconductor space, with customers adjusting their shipment schedules.

    5. Back-End Semiconductor Improvements
      Q: Is the back-end semiconductor market strengthening?
      A: The back-end semiconductor business is showing gradual improvement, with increasing requests for quotes and a growing pipeline. While not a sharp upturn, there is a positive trend with upcoming capital expenditure projects expected to kick off soon, indicating better demand in this segment.

    6. Alfamation's Growth Drivers
      Q: What drives growth for Alfamation?
      A: Alfamation focuses on automotive testing solutions and is benefiting from shifts in the automotive industry, such as the move toward centralized computing systems in vehicles. This transition requires new testers and creates opportunities despite changes in vehicle models. The pipeline for Alfamation is strong, with significant testing opportunities arising from new technologies and features in cars.

    Key Metrics

    View all financials →
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States11.099.91210.6713.5545.2210.47714.42310.866
    Foreign20.8322.64621.99312.6178.0819.34719.56819.406
    Total Revenue31.9232.55832.66326.16123.3029.82433.99130.272

    Executive Team

    NamePositionStart DateShort Bio
    Richard N. Grant, Jr.President, Chief Executive Officer, and DirectorAugust 10, 2023Richard N. Grant, Jr. serves as the President, Chief Executive Officer, and Director of inTEST Corporation. He has been in this role since August 10, 2023.
    Duncan GilmourChief Financial Officer, Treasurer, and SecretaryJune 2021Duncan Gilmour has served as Chief Financial Officer, Treasurer, and Secretary of inTEST Corporation since June 2021. He previously worked at ABB, Inc., Tyco International, and Coopers & Lybrand.
    Joseph McManusDivision President, Electronic TestJanuary 2022Joseph McManus joined inTEST Corporation in February 2021 and was promoted to Division President, Electronic Test in January 2022. He previously worked at CECO Environmental and Akrion.
    Michael GoodrichDivision President, Process TechnologiesJanuary 15, 2024Michael Goodrich joined inTEST Corporation as Division President, Process Technologies on January 15, 2024. He previously worked at Vixar Inc. and Rudolph Technologies.
    Michael TanniruDivision President, Environmental TechnologiesMay 2023Michael Tanniru joined inTEST Corporation in May 2023 as Division President, Environmental Technologies. He previously worked at Cincinnati Test Systems, AMETEK, and Emerson Process Management.

    Questions to Ask Management

    1. With the front-end semiconductor market currently paused and customers pushing out shipments, how do you plan to mitigate the impact on your revenues until additional deliveries are expected in the second half of 2025?
    2. Given that headcount in your base businesses has been reduced by 10% since the beginning of 2024, can you elaborate on how these reductions will affect your operational capabilities and whether these cost savings are sustainable as demand picks up?
    3. Your gross margin improved to 46.3% in Q3, driven by favorable product mix and cost actions, but with operating expenses up due to the inclusion of Alfamation, how confident are you in maintaining these margins amid potential shifts in product mix and market demand?
    4. Alfamation's orders are described as "lumpy" due to the timing of large multisystem projects; how do you plan to manage this volatility, and what strategies are in place to smooth out revenue fluctuations from this segment?
    5. Considering the front-end semi market's need to improve efficiencies and adapt to changes in EV demand, what specific initiatives are you undertaking to capitalize on the evolving gallium nitride opportunity and position yourself competitively in this space?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateNovember 17, 2023
    End Date/DurationNovember 17, 2024
    Total additional amount$10.0 million
    Remaining authorization amount$8,961,150 as of September 30, 2024
    DetailsRepurchases through open market transactions, privately negotiated transactions, or otherwise, with a per-share price cap of $9.00. 141,117 shares repurchased at a total cost of $1,038,850; all repurchased shares were retired.

    Past Guidance

    Guidance Provided by inTEST (INTT) in the Last Four Earnings Calls

    1. Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Full-Year 2024 Revenue: Expected to range between $128 million to $131 million.
      • Full-Year 2024 Gross Margin: Expected to be approximately 42% to 43%.
      • Full-Year 2024 Operating Expenses: Approximately $53 million, including intangible asset amortization expense of $3.3 million (or $2.7 million on a tax-adjusted basis).
      • Full-Year 2024 Effective Tax Rate: Approximately 17% to 19%.
      • Q4 2024 Revenue: Implied to range between $34 million to $37 million.
      • Q4 2024 Gross Margin: Approximately 42%.
      • Q4 2024 Operating Expenses: Approximately $13.5 million, including total intangible asset amortization of $900,000 (or $700,000 after tax, equivalent to about $0.06 per share).
      • Q4 2024 EPS: Approximately $0.08.
      • Q4 2024 Adjusted EPS: Approximately $0.14.

    2. Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Full-Year 2024 Revenue: Expected to range between $128 million and $133 million.
      • Full-Year 2024 Gross Margin: Approximately 42% to 43%.
      • Full-Year 2024 Operating Expenses: Approximately $54 million, including intangible asset amortization expense.
      • Full-Year 2024 Intangible Asset Amortization Expense: Approximately $3.3 million or $2.7 million on a tax-adjusted basis.
      • Full-Year 2024 Effective Tax Rate: Approximately 17% to 19%.
      • Full-Year 2024 Capital Expenditures: Expected to run between 1% to 2% of sales.
      • Q3 2024 Revenue: Expected to be slightly lower than Q2 2024.
      • Q3 2024 Gross Margin: Expected to improve somewhat compared to Q2 2024.
      • Q3 2024 Operating Expenses: Expected to be similar to Q2 2024, including amortization.
      • Q3 2024 Intangible Asset Amortization: Approximately $900,000 or $700,000 after tax (about $0.06 per share).
      • Q3 2024 EPS and Adjusted EPS: Expected to be similar to Q2 2024.

    3. Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      • Q2 2024 Revenue: Expected to be between $34 million and $36 million.
      • Q2 2024 Gross Margin: Approximately 44% to 45%.
      • Q2 2024 Operating Expenses: Expected to be in the range of $14.5 million to $15 million.
      • Q2 2024 Tax-Adjusted Intangible Asset Amortization: Approximately $1.2 million, or about $0.10 per share.
      • Q2 2024 EPS: Expected to be between breakeven to $0.06 per diluted share.
      • Q2 2024 Adjusted EPS: Expected to be approximately $0.10 to $0.16 per diluted share.
      • Full-Year 2024 Revenue: Expected to range from $140 million to $150 million.
      • Full-Year 2024 Gross Margin: Approximately 44% to 46%.
      • Full-Year 2024 Operating Expenses: Expected to be roughly $56 million to $58 million, including tax-adjusted intangible asset amortization expense of approximately $4.1 million.
      • Full-Year 2024 Effective Tax Rate: Projected to be about 17% to 19%.
      • Full-Year 2024 Capital Expenditures: Expected to run between 1% to 2% of sales.

    4. Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Q1 2024 Revenue: Approximately $29 million.
      • Q1 2024 Gross Margin: Approximately 45% to 46%.
      • Q1 2024 Operating Expenses: Approximately $13 million, including amortization and elevated corporate development expenses.
      • Q1 2024 Intangible Asset Amortization (after tax): Approximately $0.5 million.
      • Q1 2024 Effective Tax Rate: Between 16% and 17%.
      • Q1 2024 EPS: Approximately $0.06 per diluted share.
      • Q1 2024 Adjusted EPS: Approximately $0.10 per diluted share (adjusted for tax-effected amortization expense).
      • Full-Year 2024 Revenue: Expected to range from $145 million to $155 million.
      • Full-Year 2024 Gross Margin: Approximately 45% to 46%.
      • Full-Year 2024 Operating Expenses: Expected to be roughly $57 million to $59 million, including tax-adjusted intangible asset amortization expense of approximately $3.5 million.
      • Full-Year 2024 Effective Tax Rate: Expected to be about 18% to 20%, reflecting the jurisdictional impact of the Alfamation acquisition.
      • Full-Year 2024 Capital Expenditures: Expected to run between 1% to 2% of sales.

    This is the exhaustive guidance provided by inTEST (INTT) in the last four earnings calls.