inTEST (INTT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents InTest Corporation's unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows, along with detailed notes on accounting policies and disclosures Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $19,248 | $19,830 | | Trade accounts receivable, net | $23,349 | $29,495 | | Inventories | $27,610 | $26,837 | | Total current assets | $74,847 | $78,812 | | Total assets | $149,653 | $152,288 | | Total current liabilities | $30,958 | $31,948 | | Total liabilities | $47,061 | $52,498 | | Total stockholders' equity | $102,592 | $99,790 | Unaudited Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $28,130 | $33,991 | $54,767 | $63,815 | | Gross profit | $11,973 | $13,797 | $23,029 | $26,873 | | Operating (loss) income | $(927) | $336 | $(3,808) | $828 | | Net (loss) earnings | $(503) | $230 | $(2,832) | $892 | | Basic (loss) earnings per share | $(0.04) | $0.02 | $(0.23) | $0.07 | | Diluted (loss) earnings per share | $(0.04) | $0.02 | $(0.23) | $0.07 | - Revenue for the three months ended June 30, 2025, decreased by 17.2% year-over-year, and for the six months ended June 30, 2025, decreased by 14.2% year-over-year[12] - The company reported a net loss of $(503) thousand for the three months and $(2,832) thousand for the six months ended June 30, 2025, compared to net earnings in the prior year periods[12] Unaudited Consolidated Statements of Comprehensive Earnings (Loss) Consolidated Statements of Comprehensive Earnings (Loss) Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) earnings | $(503) | $230 | $(2,832) | $892 | | Foreign currency translation adjustments | $3,266 | $(697) | $4,763 | $(786) | | Total other comprehensive earnings (loss) | $3,242 | $(741) | $4,704 | $(844) | | Comprehensive earnings (loss) | $2,739 | $(511) | $1,872 | $48 | Unaudited Consolidated Statements of Stockholders' Equity Stockholders' Equity Changes (in thousands, except share data) | Metric | Balance, January 1, 2025 | Net Loss | Other Comprehensive Earnings | Amortization of Deferred Compensation | Issuance of Unvested Shares | Forfeiture of Unvested Shares | Stock Options Exercised | ESPP Shares Issued | Shares Surrendered for Tax | Balance, June 30, 2025 | | :--------------------------------- | :----------------------- | :------- | :--------------------------- | :------------------------------------ | :-------------------------- | :---------------------------- | :---------------------- | :----------------- | :------------------------- | :--------------------- | | Common Stock (Shares) | 12,457,658 | — | — | — | 134,196 | (27,365) | 4,925 | 5,374 | — | 12,559,753 | | Common Stock (Amount) | $124 | — | — | — | $1 | — | — | — | — | $125 | | Additional Paid-in Capital | $57,658 | — | — | $858 | $(1) | — | $18 | $71 | — | $58,604 | | Retained Earnings | $45,087 | $(2,832) | — | — | — | — | — | — | — | $42,255 | | Accumulated Other Comprehensive Earnings (Loss) | $(2,137) | — | $4,704 | — | — | — | — | — | — | $2,567 | | Treasury Stock (Shares) | 79,382 | — | — | — | — | — | — | — | 2,695 | 82,077 | | Treasury Stock (Amount) | $(942) | — | — | — | — | — | — | — | $(17) | $(959) | | Total Stockholders' Equity | $99,790 | $(2,832) | $4,704 | $858 | — | — | $18 | $71 | $(17) | $102,592 | Unaudited Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $4,847 | $(3,015) | | Net cash used in investing activities | $(691) | $(19,383) | | Net cash used in financing activities | $(5,602) | $(1,850) | | Effects of exchange rates on cash | $864 | $(642) | | Net cash used in all activities | $(582) | $(24,890) | | Cash and cash equivalents at end of period | $19,248 | $20,370 | - Net cash provided by operating activities significantly improved to $4.8 million in 2025 from a usage of $(3.0) million in 2024[21] - Net cash used in investing activities decreased substantially due to the absence of a major acquisition in 2025, compared to the Alfamation™ acquisition in 2024[21] Notes to Consolidated Financial Statements (1) NATURE OF OPERATIONS InTest Corporation is a global supplier of innovative test and process technology solutions across diverse markets, operating through three segments with a strategy to diversify and reduce dependence on the cyclical semiconductor market - InTest Corporation is a global supplier of innovative test and process technology solutions for manufacturing and testing across diverse markets[23] - The company operates through three reportable segments: Electronic Test, Environmental Technologies, and Process Technologies[23] - A key strategy is to diversify markets, product offerings, and customer base to reduce dependence on the volatile semiconductor market[26] (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section details the company's significant accounting policies, including business combinations, asset valuation, revenue recognition, and stock-based compensation, noting no material impact from ASU 2023-07 and ongoing evaluation for other ASUs - Financial statements are prepared in conformity with U.S. GAAP, requiring management estimates and assumptions for various accounts[30] - Goodwill and intangible assets are accounted for under ASC Topic 350, with goodwill assessed for impairment annually and finite-lived intangibles amortized over their estimated useful lives[44][45] - Revenue is recognized when performance obligations are satisfied and control of products or services is transferred to the customer[64] - The adoption of ASU 2023-07 (Segment Reporting) had no impact on consolidated financial statements, while ASU 2024-03 (Expense Disaggregation) and ASU 2023-09 (Income Tax Disclosures) are being evaluated for footnote disclosure impacts[90][91][93] (3) ACQUISITION On March 12, 2024, InTest acquired Alfamation S.p.A. for approximately $21.9 million, aiming to expand its presence in auto/EV, life sciences, and consumer electronics, resulting in $9.883 million in goodwill and $13.332 million in identifiable intangible assets - Acquired Alfamation S.p.A. on March 12, 2024, a global provider of test and measurement solutions for auto/EV, life sciences, and specialty consumer electronics markets[96] - The aggregate purchase price was approximately €20.0 million ($21.9 million), consisting of $19.7 million in cash and 187,432 shares of common stock valued at $2.1 million[98] Alfamation™ Purchase Price Allocation (in thousands) | Asset/Liability | Amount | | :--------------------------------- | :----- | | Goodwill | $9,883 | | Identifiable intangible assets | $13,332 | | Tangible assets acquired and liabilities assumed | $(1,314) | | Total purchase price | $21,901 | - The acquisition is expected to deepen InTest's presence in auto/EV and life sciences, expand exposure in consumer electronics, and extend geographic reach in Europe[96] (4) INVENTORIES Total inventories increased slightly to $27.6 million at June 30, 2025, from $26.8 million at December 31, 2024, primarily due to raw materials, with consistent excess and obsolete inventory charges year-over-year Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Raw materials | $16,932 | $16,109 | | Work in process | $5,108 | $5,940 | | Finished goods | $5,314 | $4,500 | | Total inventories | $27,610 | $26,837 | Excess and Obsolete Inventory Charges (in thousands) | Period | 2025 | 2024 | | :--------------------------------- | :--- | :--- | | Three Months Ended June 30 | $97 | $130 | | Six Months Ended June 30 | $304 | $306 | (5) PROPERTY AND EQUIPMENT Net property and equipment increased to $4.7 million at June 30, 2025, from $4.5 million at December 31, 2024, with depreciation expense consistent at $0.6 million for the six months ended June 30, 2025 Property and Equipment (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Machinery and equipment | $9,688 | $9,162 | | Leasehold improvements | $4,502 | $4,125 | | Gross property and equipment | $14,190 | $13,287 | | Less: accumulated depreciation | $(9,513) | $(8,830) | | Net property and equipment | $4,677 | $4,457 | Depreciation Expense (in thousands) | Period | 2025 | 2024 | | :--------------------------------- | :--- | :--- | | Three Months Ended June 30 | $314 | $356 | | Six Months Ended June 30 | $630 | $629 | (6) GOODWILL AND INTANGIBLE ASSETS Goodwill increased to $32.4 million at June 30, 2025, primarily due to foreign currency translation, with total intangible assets, net, rising to $26.6 million, and expected amortization expense of $1.7 million for the remainder of 2025 and $2.6 million in 2026 Goodwill Carrying Value (in thousands) | Metric | Amount | | :--------------------------------- | :----- | | Balance - January 1, 2025 | $30,744 | | Impact of foreign currency translation adjustments | $1,693 | | Balance – June 30, 2025 | $32,437 | Intangible Assets, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Finite-lived intangible assets | $16,128 | $16,201 | | Indefinite-lived intangible assets | $10,519 | $10,175 | | Total intangible assets | $26,647 | $26,376 | Estimated Annual Amortization Expense for Finite-Lived Intangible Assets (in thousands) | Year | Amount | | :--------------------------------- | :----- | | Remaining 2025 | $1,699 | | 2026 | $2,608 | | 2027 | $2,057 | (7) FAIR VALUE MEASUREMENTS The company measures its interest rate swap using Level 2 inputs and contingent consideration liability using Level 3 inputs, with the Acculogic acquisition-related contingent consideration at $872 thousand at June 30, 2025, contingent on EV/battery sales - Interest rate swap agreement is measured at fair value using Level 2 inputs, while contingent consideration liability uses Level 3 inputs[115] - The contingent consideration liability, stemming from the Acculogic acquisition, is tied to EV or battery customer sales and has a maximum payout of CAD $5.0 million (approx. $3.7 million) through 2026[116] Fair Value Measurements (in thousands) | Item | June 30, 2025 (Total) | December 31, 2024 (Total) | | :--------------------------------- | :-------------------- | :------------------------ | | Interest rate swap | $58 | $117 | | Contingent consideration - current | $(431) | $(62) | | Contingent consideration - long term | $(441) | $(825) | (8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Total accrued expenses and other current liabilities increased to $9.9 million at June 30, 2025, from $9.5 million at December 31, 2024, driven by other current liabilities, partially offset by decreased accrued wages and benefits Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Accrued wages and benefits | $4,609 | $5,420 | | Accrued professional fees | $1,360 | $1,294 | | Accrued sales commissions | $837 | $1,039 | | Accrued warranty | $978 | $802 | | Other current liabilities | $2,069 | $930 | | Total accrued expenses and other current liabilities | $9,853 | $9,485 | (9) LEASES Operating lease costs for the six months ended June 30, 2025, were $1.3 million, with a weighted average remaining lease term of 5.4 years and total lease payments of $12.2 million, while the Alfamation™ acquisition increased ROU assets and operating lease liabilities by $1.7 million Operating and Short-Term Lease Costs (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $641 | $509 | $1,294 | $960 | | Short-term lease cost | $2 | $4 | $6 | $7 | - The weighted average remaining lease term is 5.4 years, with a weighted average discount rate of 6.7% as of June 30, 2025[121] Maturities of Lease Liabilities (in thousands) | Year | Amount | | :--------------------------------- | :----- | | 2025 (remainder) | $1,410 | | 2026 | $2,529 | | 2027 | $2,334 | | 2028 | $1,696 | | 2029 | $1,583 | | Thereafter | $2,624 | | Total lease payments | $12,176 | - The Alfamation™ acquisition in March 2024 led to a non-cash increase of approximately $1.7 million in ROU assets and operating lease liabilities[122] (10) DEBT InTest has a Credit Facility with M&T Bank, including a $50.5 million Term Note and $10.0 million Revolving Facility, with $30 million available under the Term Note at June 30, 2025, and obtained a waiver for non-compliance with the fixed charge coverage ratio covenant until March 31, 2026, while assuming $4.2 million of debt from the Alfamation™ acquisition - The Credit Facility with M&T Bank includes a $50.5 million Term Note and a $10.0 million Revolving Facility, expiring May 2, 2031[125] - At June 30, 2025, $30 million was available under the Term Note, and no amounts were borrowed under the Revolving Facility[125] - The company was not in compliance with the fixed charge coverage ratio covenant (0.80 to 1.0 vs. 1.25 to 1.0) at June 30, 2025, but secured a waiver from M&T Bank until March 31, 2026[127][128] Term Note Maturities (in thousands) | Year | Amount | | :--------------------------------- | :----- | | 2025 (remainder) | $2,050 | | 2026 | $3,842 | | Total remaining maturities of our Term Note | $5,892 | - Alfamation™ debt totaled $4.2 million at June 30, 2025, comprising fixed and variable rate term loans and short-term financing[132] (11) REVENUE FROM CONTRACTS WITH CUSTOMERS Consolidated revenue decreased by 14.2% for the six months ended June 30, 2025, driven by declines in semi and auto/EV markets, with end user revenue decreasing and OEM/Integrator revenue seeing a larger decline, while contract liabilities increased to $7.0 million Revenue by Customer Type (in thousands) | Customer Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | End user | $45,628 | $48,926 | | OEM/Integrator | $9,139 | $14,889 | | Total | $54,767 | $63,815 | Revenue by Product Type (in thousands) | Product Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Thermal test | $9,232 | $7,927 | | Thermal process | $10,828 | $20,798 | | Semiconductor test | $10,660 | $10,296 | | Video imaging | $4,346 | $3,804 | | Flying probe and in-circuit testers | $3,060 | $3,775 | | Alfamation™ products | $8,778 | $11,098 | | Service/other | $7,863 | $6,117 | | Total | $54,767 | $63,815 | Revenue by Market (in thousands) | Market | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Semi | $19,187 | $25,091 | | Auto/EV | $11,821 | $14,693 | | Defense/Aerospace | $6,406 | $6,921 | | Industrial | $6,807 | $7,602 | | Life Sciences | $3,074 | $2,847 | | Safety/Security | $1,462 | $1,333 | | Other | $6,010 | $5,328 | | Total | $54,767 | $63,815 | - Customer 'A' accounted for 11% and 12% of consolidated revenue for the three and six months ended June 30, 2025, respectively[137] Contract Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Total contract liabilities | $7,000 | $6,400 | (12) EARNINGS (LOSS) PER SHARE Weighted average common shares outstanding for basic and diluted EPS remained stable, with a significant number of potentially dilutive securities excluded from diluted EPS due to their anti-dilutive effect, reflecting the net loss reported Weighted Average Common Shares Outstanding | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 12,215,258 | 12,234,599 | 12,197,338 | 12,130,480 | | Diluted | 12,215,258 | 12,330,280 | 12,197,338 | 12,244,289 | - Average number of potentially dilutive securities excluded from diluted EPS calculation due to anti-dilutive effect: 662,167 for Q2 2025 and 769,896 for H1 2025[141] (13) EQUITY The Board renewed the share repurchase plan on March 5, 2025, authorizing up to $10.0 million in common stock repurchases, with approximately $9.0 million available, and no repurchases made during the six months ended June 30, 2025 - Share repurchase plan renewed on March 5, 2025, authorizing up to $10.0 million in common stock repurchases[142] - Approximately $9.0 million was available for repurchases as of the renewal date[142] - No shares were repurchased under the plan during the six months ended June 30, 2025[261] (14) STOCK-BASED COMPENSATION PLAN Total stock-based compensation expense for the six months ended June 30, 2025, was $0.9 million, with new stock options, restricted stock awards, and units granted, and several performance-based restricted stock awards forfeited due to non-achievement of criteria or employee termination Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $45 | $37 | $83 | $68 | | Selling expense | $19 | $14 | $32 | $25 | | Engineering and product development expense | $10 | $8 | $(1) | $12 | | General and administrative expense | $361 | $505 | $744 | $808 | | Total | $435 | $564 | $858 | $913 | - Total compensation expense to be recognized in future periods is $4.6 million, with a weighted average period of 2.8 years[146] Stock Option Activity (Six Months Ended June 30, 2025) | Metric | Number of Shares | Weighted Average Exercise Price | | :--------------------------------- | :--------------- | :------------------------------ | | Options outstanding, January 1, 2025 | 602,593 | $10.92 | | Granted | 310,086 | $7.74 | | Exercised | (4,925) | $3.69 | | Forfeited | (23,188) | $10.78 | | Options outstanding, June 30, 2025 | 884,566 | $9.85 | - Several performance-based restricted stock awards were forfeited in 2025 due to non-achievement of performance criteria or employee termination, totaling 37,823 shares for the six months ended June 30, 2025[158][159][161][162] (15) EMPLOYEE STOCK PURCHASE PLAN The ESPP allows eligible employees to purchase common stock at a 15% discount, with 9,966 shares purchased for the six months ended June 30, 2025, resulting in $11 thousand in compensation expense - The ESPP allows eligible employees to purchase common stock at a 15% discount from the closing market price on the purchase date[166] ESPP Activity (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--------------------------------- | :--- | :--- | | Shares purchased | 9,966 | 8,587 | | Total cost of shares | $60 | $84 | | Total discount (compensation expense) | $11 | $15 | (16) RESTRUCTURING InTest initiated restructuring, including Videology Consolidation and Environmental Technologies leadership transition, expecting cash charges of $425 thousand for severance and $200-$300 thousand for facility consolidation, with total consolidated restructuring charges of $529 thousand for the six months ended June 30, 2025 - Restructuring includes the Videology Consolidation (Netherlands operations into US) and an Environmental Technologies leadership transition[168][170] - Expected cash charges: $425 thousand for severance and termination benefits, and $200-$300 thousand for facility consolidation costs[171] Consolidated Restructuring Charges (in thousands) | Period | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :----------------------------- | | Total consolidated restructuring charges | $216 | $529 | - The restructuring accrual was $523 thousand at June 30, 2025[173] (17) EMPLOYEE BENEFIT PLANS The company offers a 401(k) plan with discretionary employer matching contributions totaling $0.6 million for the six months ended June 30, 2025, and Alfamation™ employees are entitled to Trattamento di Fine Rapporto (TFR), a deferred compensation liability of $1.6 million at June 30, 2025 - The InTest Savings Plan is a defined contribution 401(k) plan with discretionary employer matching contributions[174] Discretionary Employer Matching Contributions (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Matching contributions | $205 | $219 | $564 | $608 | - Alfamation™ employees in Italy are entitled to Trattamento di Fine Rapporto (TFR), a deferred compensation, with an accrual of $1.6 million at June 30, 2025[174] (18) SEGMENT INFORMATION InTest operates through three segments: Electronic Test, Environmental Technologies, and Process Technologies, selling products globally, with Electronic Test generating the highest revenue and operating income for the six months ended June 30, 2025, and foreign revenue accounting for 54% of total revenue - The company's three operating segments are Electronic Test, Environmental Technologies, and Process Technologies[175] Revenue by Segment (Six Months Ended June 30, 2025, in thousands) | Segment | Revenue | | :--------------------------------- | :------ | | Electronic Test | $26,992 | | Environmental Technologies | $13,483 | | Process Technologies | $14,292 | | Consolidated | $54,767 | Division Operating Income (Loss) by Segment (Six Months Ended June 30, 2025, in thousands) | Segment | Operating Income (Loss) | | :--------------------------------- | :---------------------- | | Electronic Test | $2,241 | | Environmental Technologies | $356 | | Process Technologies | $606 | Revenue by Geographic Region (in thousands) | Region | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | U.S. | $25,038 | $24,900 | | Foreign | $29,729 | $38,915 | | Total | $54,767 | $63,815 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key trends, critical accounting estimates, and a detailed comparison of financial performance, liquidity, capital resources, and the impact of recent accounting standards Risk Factors and Forward-Looking Statements - The report contains forward-looking statements based on management's current expectations and estimates, which involve risks and uncertainties[183] - Key risks include the ability to execute the VISION 2030 Strategy, grow in target markets, integrate acquisitions, manage semiconductor market cycles, ensure supply chain stability, and retain key personnel[186] Overview - InTest is a global supplier of innovative test and process technology solutions across various markets, including semi, auto/EV, defense/aerospace, industrial, life sciences, and safety/security[186] - The company's three reportable segments are Electronic Test, Environmental Technologies, and Process Technologies[187] - Consolidated gross margin can vary significantly due to changes in the mix of products sold, influenced by customer needs and varying gross margin levels across products[188] Markets - The semiconductor (semi) market has historically been the largest but is characterized by rapid technological change, competitive pricing, and cyclical patterns[189] - InTest aims to diversify its markets, product offerings, and customer base to reduce dependence on the volatile semi market, focusing on auto/EV, defense/aerospace, industrial, life sciences, and safety/security[189][194] - Demand in the semi market is primarily driven by semiconductor manufacturers expanding or upgrading facilities, which depends on market demand for integrated circuits (ICs)[190] Known Trends - The company was not in compliance with the fixed charge coverage ratio covenant (0.80 to 1.0) at June 30, 2025, but secured a waiver from M&T Bank until March 31, 2026[196][197] - Changes in global trade policy and tariffs could negatively impact demand, pricing, and costs, with approximately half of sales shipped to customers outside the U.S.[198][258] - Supply chain risks include a sole-source capacitor supplier in Israel for Ambrell's induction heating products and a sole-source supplier in Belarus for Acculogic parts, now under sanctions, for which a new supplier has been qualified and OFAC/Global Affairs Canada licenses are pending for legacy parts[199][200][201][202] Critical Accounting Estimates - No significant changes to critical accounting estimates as of June 30, 2025[205] - Critical estimates include inventories, long-lived assets, goodwill, identifiable intangibles, contingent consideration liabilities, and deferred income tax valuation allowances[205] Results of Operations Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Electronic Test | $13,733 | $16,159 | $26,992 | $27,275 | | Environmental Technologies | $7,215 | $8,273 | $13,483 | $15,101 | | Process Technologies | $7,182 | $9,559 | $14,292 | $21,439 | | Total revenue | $28,130 | $33,991 | $54,767 | $63,815 | Revenue by Market (in thousands) | Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Semi | $10,192 | $10,124 | $19,187 | $25,091 | | Auto/EV | $5,862 | $10,735 | $11,821 | $14,693 | | Life Sciences | $1,386 | $2,194 | $3,074 | $2,847 | | Safety/Security | $898 | $792 | $1,462 | $1,333 | Orders by Market (in thousands) | Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Semi | $7,292 | $11,026 | $16,932 | $21,279 | | Auto/EV | $7,066 | $4,721 | $12,127 | $8,762 | | Life Sciences | $2,863 | $1,025 | $4,095 | $1,723 | | Safety/Security | $1,173 | $81 | $1,848 | $121 | - Gross margin improved by 200 basis points to 42.6% for the three months ended June 30, 2025, due to favorable product sales mix and cost reduction initiatives, but declined 10 basis points to 42.0% for the six months due to fixed cost absorption on lower volumes[212][225] - Restructuring costs of $216 thousand and $529 thousand were recognized for the three and six months ended June 30, 2025, respectively, related to the Videology Consolidation and Environmental Transition[218][230] Liquidity and Capital Resources - Primary liquidity source is cash flow generated by operations, supplemented by the Credit Facility and potential equity issuance for long-term needs[233][243] Cash and Working Capital (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $19,248 | $19,830 | | Working capital | $43,889 | $46,864 | - Net cash provided by operating activities for the six months ended June 30, 2025, was $4.8 million, a significant increase from $(3.0) million used in the prior year[244] - Net cash used in investing activities decreased by $18.7 million to $(0.7) million for the six months ended June 30, 2025, due to no acquisitions in the current period[245] - Net cash used in financing activities increased to $(5.6) million for the six months ended June 30, 2025, primarily due to repayments of short-term borrowings and long-term debt[246] New or Recently Adopted Accounting Standards - Refer to Note (2) for information concerning the implementation and impact of new or recently adopted accounting standards[247] Off-Balance Sheet Arrangements - There were no material off-balance sheet arrangements during the three months ended June 30, 2025[248] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required for a smaller reporting company - This disclosure is not required for a smaller reporting company[249] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the period - CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[251] - No material changes in internal control over financial reporting occurred during the period covered by this report[252] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings occurring in the ordinary course of business - The company is not currently involved in any material legal proceedings[254] Item 1A. Risk Factors This section highlights adverse impacts of credit facility covenants on strategy, financial performance, and liquidity, especially given recent non-compliance, and addresses potential negative impacts from U.S. tariff policies and global retaliatory countermeasures on costs, supply chain, and customer purchasing - The company's credit facility covenants could adversely impact its ability to pursue strategy and affect financial performance and liquidity[256] - Non-compliance with the fixed charge coverage ratio covenant at June 30, 2025, was waived by M&T Bank until March 31, 2026, but requires consent for Revolving Facility use and a pledge of cash holdings[257] - U.S. tariff policies and potential global retaliatory countermeasures could increase costs, disrupt the supply chain, or affect customer purchasing activities, negatively impacting results of operations[258] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, 2,049 shares were surrendered by employees for tax withholdings, and while the share repurchase plan was renewed with $9.0 million available, no repurchases were made during the six months ended June 30, 2025 Shares Purchased (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--------------------------------- | :----------------------------- | :--------------------------- | | April 1-30 | 1,951 | $6.31 | | May 1-31 | 98 | $6.41 | | June 1-30 | — | $ - | | Total | 2,049 | | - The share repurchase plan was renewed on March 5, 2025, authorizing up to $10.0 million in repurchases, with approximately $9.0 million available[260] - No repurchases were made under the Repurchase Plan during the six months ended June 30, 2025[261] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[262] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[263] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the second quarter, and the company entered into the Sixth Amendment to its Loan Agreement on August 5, 2025, waiving the Fixed Charge Coverage Ratio covenant until March 31, 2026, and pledging cash collateral - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter ended June 30, 2025[264] - The Sixth Amendment to the Loan Agreement, dated August 5, 2025, suspends compliance with the Fixed Charge Coverage Ratio covenant for periods ending June 30, 2025, through March 31, 2026[265] - In connection with the Sixth Amendment, the company pledged and granted M&T Bank a lien on certain cash collateral[265] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Sixth Amendment to the Loan Agreement, the Pledge and Assignment of Cash Collateral Account Agreement, and various certifications - Exhibits include the Sixth Amendment to the Amended and Restated Loan and Security Agreement and the Pledge and Assignment of Cash Collateral Account Agreement, both dated August 5, 2025[267] - Certifications from the Chief Executive Officer and Chief Financial Officer are also filed[267] SIGNATURES - The report is signed by Richard N. Grant, Jr., President and Chief Executive Officer, and Duncan Gilmour, Chief Financial Officer, Treasurer and Secretary, on August 7, 2025[271]