inTest Corporation

Greetings and welcome to the Intest Corporation first quarter 2025 financial results. 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Southard, Investor Relations with Intest. Thank you. You may begin.

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 the 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 plans, 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 the days released 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 first quarter 2025 earnings call. Q1 will be remembered by most as a quarter of shifting tariff policies, macroeconomic turmoil, and market uncertainty. It has certainly created challenging times for global companies. In the quarter, Intest delivered $26.6 million in revenue with gross margins of 41.5%, while generating over $5 million in cash and reducing debt by more than $3 million to further strengthen our balance sheet. I would like to thank the entire Intest team for making that happen in a relatively difficult environment. For the quarter, our sales were impacted by delays in customer spending driven by the uncertainty, as well as engineering challenges our team at our Environmental Technologies Division experienced on some complex temperature chambers and chillers that we had expected would be resolved by quarter end. These engineering delays pushed approximately 1.5 million of shipments out of the quarter. On a year-over-year comparison, Sales were primarily impacted by the headwinds in semi and continued weakness in industrial that we have been communicating for a few quarters now. Once again, we are benefiting from our efforts to diversify the company to help mitigate the cyclicality in semi. Sales to auto EV increased 2 million, life sciences increased 1 million, and other markets grew 1.3 million, which partially offset the year-over-year declines, and semi and industrial. Midway through the quarter, we took further steps to improve profitability. Given current market conditions, we have implemented tight cost controls, eliminated discretionary spending where appropriate, have restricted hiring, and are also leveraging government programs across our various sites that supplement employee wages during reduced work periods. Our goal was to remain flexible to respond quickly when market conditions improve. Encouragingly, we continued to gain traction with new products, added new customers, and further enhanced our channels to market. As I mentioned, revenue was negatively impacted when approximately 1.5 million of shipments at the end of the quarter were not fulfilled. Our team needed additional time due to the complexity of some products in order to ensure we met our high-quality standards that our customers have come to expect. These products are expected to ship in the coming weeks. Clearly, market conditions remain tenuous and the full ramifications of global trade situation and resulting impact to demand are not yet fully understood. During these times, we will lean into our strengths. We have leading market positions with customers, strong presence in our target markets, industry-leading applications, and innovative new products. Therefore, we believe we are well positioned for when markets do recover. Please turn to slide five. Regarding tariffs, while not immune to whatever the outcome may be, we believe we are fairly well insulated from direct impacts on our supply chain and sales. Our supply chain is mostly localized around our production sites, and our efforts to overcome the supply chain challenges post-COVID has allowed us to develop alternate suppliers when needed. In addition, our efforts to expand our presence globally positions us well in the long term for a in-the-region, for-the-region manufacturing strategy, which should provide a cushion for tariff shocks. We are assessing tariffs from two perspectives, from supply chain impact, as well as from a market competitiveness impact on sales. From the supply side, as shown on the chart, nearly three-fourths of our material spend is not directly impacted by additional tariffs currently. Our U.S. businesses only purchased approximately 1.5 million of products directly from China last year, which was less than 3% of our total spend. Our teams have been working diligently to mitigate tariff impacts with these products through alternate supply sources. We do source approximately 20% of our spend with suppliers outside of the U.S., excluding China, which today is subject to the 10% tariff baseline increase. Some suppliers have passed these costs on to us while others have not. Our businesses have already implemented tariff surcharges on quotes or have raised prices as a result. Ultimately, we expect that any incremental costs we are unable to mitigate will be passed along to customers given the high value nature of our products. On the revenue front, we have looked at where we may be impacted from our products being shipped into the U.S. as well as as where we may be affected with the reciprocal tariffs shipping products out of the U.S. As shown on the chart, over half of our sales are either associated with products made in the U.S. and sold to U.S. customers, or our products sold to global customers from our international sites, which are not currently impacted by tariffs. With U.S. MCA exemptions currently effective under the tariffs, our shipments from Canada into the U.S. for the most part will not be impacted either. Where we do have known exposure is on our shipments from Italy into the U.S., which last year amounted to approximately 6 million in sales and are currently subject to the increased 10% baseline tariff in place. Our biggest exposure is on what we ship directly to China from the U.S., which amounted to approximately 14 million in sales last year. The vast majority of these sales are to large U.S. or European multinational companies who have global manufacturing strategies. We are working closely with these customers to support them on any changes they implement to their manufacturing strategies. We also expect to be more flexible on that front as we begin production in our facility in Malaysia later this year. The balance of our sales, approximately 40 million, are to customers around the world from our U.S. factories that could be subject to reciprocal tariffs at some point should they materialize. We are optimistic that trade deals will be worked out to prevent this from happening, and depending on the deals could even result in us being more competitive in certain parts of the world. Thinking longer term, we believe we are well positioned to support our customers globally with a sizable manufacturing footprint in Europe and the addition of manufacturing in Malaysia. Let me now review orders and backlog on slide six. While sluggish, first quarter orders increased 11% year-over-year. Demand in industrial grew 47% to $4.6 million, driven by a $1.5 million order from a returning customer. Auto EV demand increased 25% to $5.1 million, primarily from alpha-mation. Safety and security and life sciences also reported year-over-year increases in orders. Sequentially, orders were down 17 percent from a solid fourth quarter. Semi-orders declined 6 million as demand was tempered in our electronic test division. Defense Aero and Life Sciences also reported lower demand of 1.8 million and 1.1 million, respectively. Although Defense Aero demand is down, our pipeline is robust, while this market tends to be lumpy from quarter to quarter. Currently, our next-generation solutions are performing well in test with our defense customers. To help partially offset those declines, industrial orders increased 2.1 million, auto EV grew 1.6 million, and safety and security also reported a sequential increase. Importantly, our funnel of opportunities is at an all-time high, as customers have CapEx spending plans which call for our solutions. When the global trade environment settles down, allowing economic progress to continue, we believe we are in a good spot to benefit. Backlog at March 31st was $38.2 million, which includes $5.8 million from alphamation. Excluding alphamation, backlog over the last five quarters has remained relatively stable between $30 and $33 million. Backlog was $17.2 million lower from the prior year period and down $1.3 million sequentially as we bled down the sizable backlog we acquired with alpha-mation. With that, let me turn it over to Duncan to review the financials and outlook in more detail. Duncan, over to you.