inTest Corporation

Greetings and welcome to the InTest Corporation first quarter 2022 financial results conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star one on your telephone keypad. 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. It is now my pleasure to introduce your host, This is Deborah Pulaski, Investor Relations for Intest. Thank you. Please go ahead.

Thanks, 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 first quarter 2022 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 Securities and Exchange Commission. These documents can be found on our website or at scc.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. With that, if you will turn to slide three, I will turn it over to Nick to begin.

Nick? Thank you, Deb, and good morning, everyone. Thanks for joining us this morning for our first quarter 2022 earnings report. I would like to start by thanking the entire Intest organization for the resiliency and never-ending desire to exceed customer expectations and deliver a solid start to the year. The first quarter played out as expected with both top and bottom line results in line with our guidance despite Omicron, supply chain constraints, transportation shortages, and continued inflationary pressures. We are advancing our five-point strategy and executing well. Revenue grew 23% year-over-year and 8% sequentially to $24.1 million and was the result of continued demand of our innovative and differentiated solutions. The quarter was not without its challenges. There was an estimated $1 million of product that was not able to ship due to supply chain constraints or logistic issues. As an example, we had a product on a ship that could not get into port in Baltimore in time. However, as we advanced through the quarter, we were able to improve our ability to deliver with bringing on more qualified suppliers, increasing inventory of raw materials, and driving greater efficiencies in our production processes. We are becoming experts at whack-a-mole to get product out the door to our customers. Acquisitions contributed $4 million in the quarter, primarily from demand in industrial, security, and other markets. Organic growth of 3% reflected our growing presence in automotive electric vehicles and select industrial segments. We believe that our diversification efforts around targeted growth markets are working well. This is demonstrated by the strong sales of our leading test and process solutions to the automotive industry, including electric vehicles. In fact, in Q1, we saw our bookings and sales for automotive EV applications more than double from the prior year period. As we have been communicating, our diversification within SEMI is also providing benefits. We had sales of our innovative solutions for the front-end space, specifically in silicon carbide crystal growth applications, as well as sales of our thermal back-end solutions, both increase sequentially in the quarter. more than offsetting lower volume in our backend electronic test solutions. For semi-sales to hold up that well is quite remarkable, given the atypical strength that we saw during the first half of 2021 for our backend electronic test solutions. There were a few factors that impacted margins, both sequentially and from a year ago period. When comparing the year over year, the change in product mix was the primary reason for margin contraction. This was mostly due to the significant volume from our backend semi-electronic test solutions during the first half of 2021. Our custom engineered solutions in this backend test space generally tend to command our highest margins. From a sequential comparison, the initial contributions from the acquisitions had a drag on margins as they were not where we expect they will be at the end of the year. Margins should improve as we drive productivity gains and as the investments we have made to grow revenue and realize operating leverage begin to pay off as we advance through the year. Integration of the three acquisitions that closed during the fourth quarter of 2021 is going as planned. We are improving their systems and processes with more discipline and sophistication to enable greater scalability while investing in the sales organization across our enterprise to support our growth plans. We are building out our sales teams both domestically and in Europe. And recently, we opened our newest induction heating demonstration lab in conjunction with our channel partner in Mexico. History has shown we have a high success rate of converting prospects to customers when we demonstrate our technology solving their production challenges in our labs. Our strategy is to invest in more labs around the world to drive greater market penetration through customer conversion. In parallel with these sales and marketing efforts, we continue to advance our new product innovation efforts that will further enhance our solutions offerings and help drive additional sales growth. As we tackle supply chain constraints, we are having to redirect our development engineers to qualify new suppliers and validate product specifications, which is somewhat slowing our new product development efforts. Last year, we defined our vision and mission and initiated our five-point strategy. As we announced at our recent investor day, we felt it was necessary to reorganize our structure after completing the three acquisitions we made at the end of last year to better execute our forward plans. We now have three reportable segments that align with our technology platforms of electronic test, environmental technologies, and process technologies. We believe this division structure enables us to increase efficiencies, broaden opportunities, better utilize our managers' talents, and leverage our strong customer relationships to accelerate growth and capture cost synergies. We also expect to be able to increase collaboration across the businesses, which will help to create broader customer solutions. Finally, with our new technology division structures, we believe we are well positioned to build our forward vision of innovative test and process technology solutions and the platform to support our growth ambitions. You can find the results by segment in our news release as well as in the supplemental tables of our slide deck. We had orders of $25 million in the first quarter of 2022, a record backlog at quarter end, and demand has elevated as we advanced into the second quarter. This provides us with the confidence to reaffirm our guidance for 2022 and establish second quarter revenue guidance of approximately $27 to $29 million. With that, let me now turn it over to Duncan to review the financials in more detail. Duncan, over to you.