inTest Corporation

Ladies and gentlemen, greetings and welcome to the Intesh Corporation 3rd Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Sauta. Investor Relations, please go ahead.

Good morning, everyone. We certainly appreciate your interest in Intest Corporation, and thank you for sharing your time with us today. Joining me on our call are Nick Grant, our President and Chief Executive Officer, and Duncan Gilmore, our Chief Financial Officer and Treasurer. You should have the earnings release that went out this morning, as well as slides that will accompany our conversation today. If not, you can find these documents on the investor relations section of our website, intest.com. Please turn to slide two as I review the safe harbor statement. During this call, management may make some forward-looking statements about our current plan, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and 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. Also, as covered on slide three, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating our performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. Now, please turn to slide four. Nick, I'll turn the call over to you.

Thank you, Sean, and good morning, everyone. Thanks for joining us for our third quarter 2024 earnings call. First, I would like to thank the entire in-test team for their continued efforts executing on our strategy. We are adding new customers, we continue to optimize our channels to market, and we are driving innovation to differentiate our solutions. These efforts are helping offset some of the softness in a few of our key end markets. We are managing well through the current semiconductor cycle and benefiting more on our diversified markets, including automotive, life sciences, and consumer electronics, where our positions were strengthened by the acquisition of Alpha Nation. The integration continues to progress well as the teams are focused on driving product and technology synergies, leveraging our supply chain to improve cost and performance, as well as exploiting opportunities across the broader customer base. A highlight in the quarter was achieving gross margin of 46.3% on revenue of $30 million. which was impacted by $2 million in shipments being delayed into the fourth quarter. During the third quarter, acclimation contributed $5.4 million in revenue, and sales to our diversified markets showed strength, while semi-revenue demonstrated improving trends in the back-end. In fact, sequential growth in back-end semi outpaced the decline in front-end. The 570 basis points expansion in gross margin compared with Q2, was driven by favorable product mix, improved volume from higher margin back-end semi, and cost actions taken to adjust to market conditions. Our businesses have been aligning their cost structure with current market conditions through headcount reductions, less discretionary spending, and insourcing activities. Since the beginning of 2024, headcount in our base businesses has been reduced by 10%. Product mix and our cost management efforts are reflected in our sequential improvement and operating margin expanding 60 basis points and adjusted EBITDA margin improving 180 basis points. Turning to slide five, I'll review orders and backlog. Orders have modestly improved through the year and the quarter. Orders in Q3 were $28 million, including $3.9 million from affirmations. Stronger demand in auto, EV, defense aerospace, industrial, and other markets outweighed the weakness in semi. Encouragingly, for the third consecutive quarter, back-end semi orders were up sequentially, showing further signs of coming out of the trough. This improvement helped to offset the current pause we're experiencing in front-end semi. Backlog has improved over the prior year period and was up $5 million, recognizing the $14.7 million contribution from the acquisition of Alphamation, which had an elevated backlog at closing. As mentioned in the past, Alphamation's orders can be lumpy as timing of their large multi-system projects can vary quarter to quarter. Compared with the trailing quarter, backlog declined as we worked down Alphamation's backlog. With that, Let me turn it over to Duncan to review the financials and outlook in more detail. Duncan, over to you.