inTest Corporation

Greetings and welcome to the Intest Corporation third quarter 2021 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deb Palowski, Investor Relations for Intest Corporation. Thank you. You may begin.

Thanks, Melissa, and good morning, everyone. We certainly appreciate your time today and your interest in Intest Corporation. Here with me are Nick Grant, our President and CEO, and Duncan Gilmore, our Chief Financial Officer and Treasurer. You should have a copy of the third quarter 2021 financial results, which we released this morning before markets opened. If not, you can access the release as well as the slides that will accompany our conversation today at our website, www.intest.com. After our formal presentation, we will be opening the line for Q&A. If you'll turn to slide two in the deck, I will first review the Safe Harbor Statement. You should be aware that we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and in the slides. So with that, if you would please turn to slide three, I will turn it over to Nick to begin. Nick?

Thank you, Deb, and good morning, everyone. We delivered solid third quarter results that we believe demonstrate the successful execution on our five-point strategy, which is focused on driving growth, diversifying our markets and customer base, while ensuring we have the right talent to execute. In the quarter, we achieved year-over-year net revenue growth of 46% to 21.1 million. As global demand for our semiconductors continued to show relative strength, and industrial sectors benefited from ongoing broad-based recovery. Of note, our multi-market revenue grew 22% sequentially. Like many others, we continue to face supply chain constraints and inflationary pressures. We had an estimated 500,000 of finished goods that were unable to ship in the quarter due to logistic challenges. Our teams have done an excellent job managing supplier and logistic challenges to fulfill orders. We continue to implement enhanced pricing to help overcome inflationary and expediting costs. The results of these efforts was reflected in our margins and profitability in the quarter, which were in our expected range. During the quarter, we generated $4.3 million of cash from operations, increasing our year-to-date total cash generated to $8.1 million. Cash on hand at the end of the quarter was nearly $19 million. And in support of our organic and inorganic growth initiatives, we announced a couple weeks ago that we executed a new extended and expanded credit agreement. Overall, this added liquidity allows us to capitalize on the attractive debt markets and provides additional financial flexibility to continue to pursue a robust pipeline of acquisition opportunities. Following that announcement, we successfully executed two acquisitions post third quarter close in October, Sea Sciences and Videology Imaging Solutions. Both acquisitions arose out of our M&A funnel generation program, that has been developed and refined over the last year. Slides four and five provide a brief overview of each. These Sciences was a small tuck-in asset acquisition which closed on October 6th and was funded with cash on hand. The acquisition is an ideal demonstration of our strategy to grow through innovative technologies with an eye towards fast-growing adjacent markets as it provided both a low-cost method for adding ultra-cold storage to our ultra-cold test solutions, and it allows us to gain a presence in a fragmented but fast-growing estimated $200 million addressable market. Their portfolio of high performance biomedical refrigerators and freezers are used to meet versatile applications, including ultra-cold storage solutions for biological sample banks, blood safety, vaccine safety, medical supplies, and reagent safety. Currently, there is little to no overlap in customer base as their products are largely sold to research institutions, university, pharmaceutical biotechnology manufacturers, and hospitals. While the current business has de minimis revenue, we believe we can build a scalable operation to accelerate growth and medical cold chain applications by leveraging our engineering expertise, manufacturing capabilities, and financial strength with targeted investments in sales and marketing as well as product innovation. Turning to slide five and our most recent acquisition, Videology, which we acquired last week on October 28th. The Videology acquisition is consistent with a number of our strategic initiatives. as it will help us expand our process technology solutions and diversify our reach into targeted life sciences and industrial markets, while also broadening our international footprint and customer base. Additionally, this aligns with enhancing automation capabilities, as we will look to add future product solutions with imaging data and analytical tools and valuable functionality and expertise as Intest strives to embrace opportunities created by the Internet of Things and making the most of artificial intelligent based tools. Their product set includes industrial grade circuit board mounted video digital cameras and related devices, systems, and software, which are used in a broad spectrum of applications. About 72% of their revenue is in the life sciences and security markets, but they also serve aerospace, machine vision, biometrics, and diagnostic imaging industries. Customers include Fortune 500 companies and government prime contractors, as well as midsize security, biotech, and machine vision OEMs and integrators. The company has a design and sales facility in the Netherlands and generates about 40% of the revenue from European customers. Similar to ZSciences space, this too is a highly fragmented market that is large and growing. It is important to note that this is not a camera acquisition. It is about image capture and data analysis that Videology brings. The company is similar to our other businesses in the sense that they develop highly valued engineered solutions. I want to briefly talk to a few application specific examples to give you a sense of the technology we are adding. Videology supplies cameras in the ophthalmology markets to capture images of the inner eye to examine patients for refractive correction, glaucoma, and other degenerative eye diseases. Another example is spectroscopy applications, which are commonly used in chemical analysis to provide a structural fingerprint by which molecules can be identified. Videology cameras are used by a leading Fortune 500 company in their handheld and tabletop devices providing this type of analysis. Finally, their small cameras are commonly used to inspect pipes of all diameters from large oil and gas pipes to small fiber optic applications. The medical applications for pipe inspections include medical intraoral endoscopes. What sets Videology apart from their competition is their design expertise and flexibility to work with customers on unique solutions. From a financial perspective, Videology's trailing 12-month revenue as of the end of September 21 was approximately $10 million and provided comparable gross margins with Intest. We expect the acquisition to be approximately $0.05 accretive to diluted earnings per share in the first year with Intest. This is net of one-time acquisition-related expenses of approximately $0.03 per diluted share, which will be recognized in the fourth quarter of 2021. While we financed the Videology transaction with a portion of our new credit facility, we still have the financial flexibility and resources to continue to pursue a robust pipeline of acquisition opportunities. Lastly, life sciences is a key target market for Intest. And both of these acquisitions bring technology and engineering know-how that enhances our medical offerings in that space. Importantly, with some incremental investments and operational support, we believe we can scale these businesses and benefit from secular tailwinds in the life sciences markets. These are exciting times for Intest as we drive change throughout the organization and build momentum by augmenting our deep industry knowledge, reputation, and expertise to develop and deliver more high-quality, innovative solutions to address our customers' complex requirements. With that, let me now turn it over to Duncan to review our third quarter financials in more detail. Duncan, over to you.