inTest Corporation

Greetings. Welcome to the Intest Corporation third quarter 2023 financial results. At this time, all participants are in the 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. Please note this conference is being recorded. I'll now turn the conference over to your host, Sean Southard, with Investing Relations. You may begin.

Thank you. Good morning, everyone. We appreciate your interest and thank you for sharing your time with 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 2023 financial results, which we released earlier this morning. If not, you can access the release as well as the slides that will accompany our conversation on our website at intest.com slash investor hyphen relations. After our presentation, we will open the lines for Q&A. Now please turn to slide two, and I'll 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, uncertainties, and other factors are provided in the earnings release as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found 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 reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. And with that, please turn to slide three, and I'll turn the call over to Nick.

Thank you, Sean, and good morning, everyone. Thanks for joining us for our third quarter 2023 earnings call. The NCES team has delivered another quarter of strong results by executing well on our five-point strategy for growth. I want to thank and recognize our team members for their commitment to our strategy, dedication to executing the plan, and their hard work delivering these results. Their exceptional performance allowed us to reach another record for quarterly revenue, achieving $32.7 million in the third quarter. This growth reflects strength in a number of our markets. Our Environmental Technologies Division saw strong shipments to the defense aerospace market in the quarter versus the prior year. Sales remained robust for our induction heating solutions for front-end semi, mainly supporting silicon carbide crystal growth and wafer epitaxy applications. Likewise, we saw solid shipments to the auto EV across all three divisions. I believe our focus to grow our market share through geographic expansion, market diversification, product development, and deeper customer reach is reflected in this quarter's results. Our efforts in these areas are ongoing as they are key elements of our five-point strategy. As an example of our strategy in progress, let me point to the investments for growth and improved productivity we have made within the businesses we acquired in 2021. Our recently announced new facility supporting AccuLogic's design, development, and manufacturing of electronic circuit and EV battery test systems will position us well going forward. We believe this consolidation from three buildings to one will drive better collaboration, enhance customer service, and improve operational efficiencies. Another example is the progress we're making regarding new products at Videology. Since the beginning of the year, we have launched over half a dozen new cameras, including their Scalex platform, which is the first of its kind zoom block camera with embedded edge AI capabilities. It's important to note that this is a step change for this business, as prior to us owning them, they would have very few new product launches within any given year. Beyond sales growth, we also delivered profitability according to plan, as we remain focused on capturing operational and financial efficiencies and delivering the leverage potential of our operations. Our 6% increase in sales in the quarter versus a year ago added 10% growth in gross profit and 18% growth in net earnings. We believe this validates our operating leverage potential as we continue to scale the organization. I'm extremely pleased with the progress we've made improving working capital efficiency in the quarter. Cash generated from operations was strong as we continue to reduce inventory to align with demand and supply chain improvements. Duncan will give you more details on the balance sheet shortly. But before I turn it over to him, let me comment on bookings, which has impacted our outlook for the remainder of the year. In the quarter, we experienced a shift in customer demand, causing what we believe will be some near-term headwinds, not dissimilar to what you have probably heard from others in our space. Over the last couple of quarters, we have provided color regarding the shift in our customers' buying behavior towards bookings. more normalized patterns of smaller, more frequent orders in a just-in-time fashion versus the larger blanket orders that were more common when supply chains were severely constrained. In addition, we've talked about CapEx projects requiring more internal customer approvals before POs are being released. In Q3, this behavior was amplified, resulting in a shift in demand as a number of our customers slowed purchase decisions and delayed projects. We believe this was driven by worsening macroeconomic conditions and sustained higher interest rates. Compared with the trailing second quarter, orders were down 15% as the slowdown was especially apparent in the semi and industrial markets. On an encouraging note, some of the delayed projects from Q3 have already been booked in the fourth quarter. But in general, we expect some of our markets will continue to see this cautious spending over the next couple of quarters. With that, let me turn it over to Duncan to review the financials and outlook in more detail. Duncan, over to you. Thank you, Nick.