inTEST (INTT) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Performance Overview Q1 2024 saw tempered semiconductor market conditions impacting sales and margins, with revenue at $29.8 million and net earnings of $0.7 million, while backlog reached a record $55.5 million Management Commentary CEO Nick Grant noted Q1 results were impacted by a tempered semiconductor market, leading to sales decline and margin compression, despite a record backlog - First quarter results reflect tempered semiconductor market conditions from late 2023[3] - A sudden shift in order trends late in the quarter led to delayed or reduced opportunities, especially in front-end semiconductor projects[3] - The company holds a record backlog of $55.5 million, significantly boosted by $22.8 million from the Alfamation acquisition[3] - The full-year outlook is moderated due to an unexpected lower rate of orders in the quarter[3] First Quarter 2024 Financial Highlights inTEST reported Q1 2024 revenue of $29.8 million, a 6.6% decrease year-over-year but a 7.0% increase sequentially, with gross margin contracting to 43.8% and net earnings falling to $0.7 million Q1 2024 Financial Performance Summary | ($ in 000s, except per share data) | 3/31/2024 | 3/31/2023 | % Change (YoY) | 12/31/2023 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $29,824 | $31,919 | -6.6% | $27,884 | 7.0% | | Gross profit | $13,076 | $15,052 | -13.1% | $12,449 | 5.0% | | Gross margin | 43.8% | 47.2% | -340 bps | 44.6% | -80 bps | | Operating income | $492 | $3,518 | -86.0% | $1,109 | -55.6% | | Net earnings | $662 | $2,817 | -76.5% | $1,455 | -54.5% | | Earnings per diluted share ("EPS") | $0.05 | $0.25 | -80.0% | $0.12 | -58.3% | | Adjusted EPS (Non-GAAP) | $0.10 | $0.29 | -65.5% | $0.16 | -37.5% | | Adjusted EBITDA (Non-GAAP) | $1,811 | $4,826 | -62.5% | $2,418 | -25.1% | - The year-over-year revenue decline was driven by a $2.7 million decrease in semiconductor market sales, partially offset by a $1.4 million contribution from Alfamation acquisition and growth in industrial and defense/aerospace markets[5] - Gross margin contracted by 340 basis points YoY to 43.8%, with the Alfamation acquisition being dilutive by 100 basis points due to the stub period of ownership[6] Orders and Backlog First-quarter orders decreased 26% year-over-year to $22.8 million, primarily due to a 44% decline in semiconductor market orders, while backlog reached a record $55.5 million Q1 2024 Orders and Backlog Summary | ($ in 000s) | 3/31/2024 | 3/31/2023 | % Change (YoY) | 12/31/2023 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Orders | $22,799 | $30,824 | -26.0% | $27,523 | -17.2% | | Backlog (at quarter end) | $55,481 | $45,705 | 21.4% | $40,130 | 38.3% | - The decline in Q1 orders reflects an $8.1 million (44%) decrease in semiconductor market orders, with approximately $5 million in expected orders delayed or reduced by customers[12] - Backlog at March 31, 2024, was $55.5 million, including $22.8 million from the Alfamation acquisition, with approximately 45% expected to ship beyond Q2 2024[13] Balance Sheet and Cash Flow The company ended Q1 with $27.3 million in cash, down from $45.3 million due to the Alfamation acquisition, while generating $2.1 million in cash from operations and holding $20.4 million in total debt - Cash and cash equivalents were $27.3 million at the end of Q1 2024, down from $45.3 million at the end of 2023, primarily due to $19 million in cash used for the Alfamation acquisition[8] - The company generated $2.1 million in cash from operations during the first quarter[8] - Total debt was $20.4 million at quarter-end, including approximately $9.4 million assumed with the acquisition, with $30 million available under its delayed draw term loan facility[9] Business Outlook The company has moderated its full-year 2024 outlook, with Q2 revenue projected between $34 million and $36 million, and full-year revenue now expected to be $140 million to $150 million Second Quarter 2024 Guidance For Q2 2024, inTEST projects revenue between $34 million and $36 million, with gross margin of 44% to 45%, and GAAP EPS ranging from $0.00 to $0.06 Q2 2024 Guidance | Metric | Expected Range | | :--- | :--- | | Revenue | $34 million to $36 million | | Gross Margin | 44% to 45% | | Operating Expenses | $14.5 million to $15 million | | EPS (GAAP) | $0.00 to $0.06 | | Adjusted EPS (Non-GAAP) | $0.10 to $0.16 | Full Year 2024 Guidance The company has moderated its full-year 2024 revenue guidance to $140 million to $150 million, down from previous estimates, with a slightly lowered gross margin forecast of 44% to 46% Full Year 2024 Guidance Comparison | Metric | Current Guidance | Previous Guidance | | :--- | :--- | :--- | | Revenue | $140M to $150M | $145M to $155M | | Gross margin | 44% to 46% | 45% to 46% | | Operating expenses | $56M to $58M | $57M to $59M | | Effective tax rate | 17% to 19% | 18% to 20% | Detailed Financial Statements This section provides detailed financial statements, including the Consolidated Statements of Operations, Balance Sheets, and Cash Flows for Q1 2024 Consolidated Statements of Operations The Consolidated Statement of Operations for Q1 2024 shows revenue of $29.8 million and net earnings of $662,000, resulting in a diluted EPS of $0.05, a significant decrease from Q1 2023 Consolidated Statements of Operations (In thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2024 | 2023 | | Revenue | $29,824 | $31,919 | | Gross profit | 13,076 | 15,052 | | Operating income | 492 | 3,518 | | Net earnings | $662 | $2,817 | | Earnings per common share – diluted | $0.05 | $0.25 | Consolidated Balance Sheets As of March 31, 2024, total assets were $159.5 million and total liabilities were $60.2 million, reflecting significant increases in inventories, goodwill, and intangible assets due to the Alfamation acquisition Consolidated Balance Sheets Highlights (In thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current assets | | | | Cash and cash equivalents | $27,331 | $45,260 | | Inventories | 31,331 | 20,089 | | Total current assets | $85,389 | $85,778 | | Goodwill | 33,278 | 21,728 | | Intangible assets, net | 28,819 | 16,596 | | Total assets | $159,527 | $134,829 | | Total current liabilities | $39,653 | $24,299 | | Total liabilities | $60,210 | $38,548 | Consolidated Statements of Cash Flows For Q1 2024, net cash provided by operating activities was $2.1 million, while net cash used in investing activities was $19.2 million, primarily due to the Alfamation acquisition payment Consolidated Statements of Cash Flows (In thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2024 | 2023 | | Net cash provided by operating activities | $2,075 | $2,484 | | Net cash used in investing activities | (19,244) | (334) | | Net cash used in financing activities | (874) | (853) | | Net cash provided by (used in) all activities | (17,929) | 1,368 | | Cash at beginning of period | 45,260 | 14,576 | | Cash at end of period | $27,331 | $15,944 | Supplemental Data This section provides supplemental data, including revenue and orders by market, segment data, and reconciliations of non-GAAP financial measures Revenue and Orders by Market In Q1 2024, the Semiconductor market contributed 50.2% of revenue but saw a 15.4% YoY decline, while Auto/EV experienced significant growth in both revenue (52.4%) and orders (97.7%) Q1 2024 Revenue by Market (In thousands) | Market | Revenue | % of Total | YoY % Change | | :--- | :--- | :--- | :--- | | Semi | $14,967 | 50.2% | -15.4% | | Industrial | $4,187 | 14.0% | 33.5% | | Auto/EV | $3,958 | 13.3% | 52.4% | | Defense/Aerospace | $3,239 | 10.9% | 14.1% | | Life Sciences | $653 | 2.2% | -56.8% | | Security | $541 | 1.8% | -44.0% | | Other | $2,279 | 7.6% | -28.4% | Q1 2024 Orders by Market (In thousands) | Market | Orders | % of Total | YoY % Change | | :--- | :--- | :--- | :--- | | Semi | $10,253 | 45.0% | -44.1% | | Auto/EV | $4,041 | 17.7% | 97.7% | | Industrial | $3,093 | 13.5% | -25.3% | | Defense/Aerospace | $2,684 | 11.8% | 35.8% | | Life Sciences | $698 | 3.1% | -63.9% | | Security | $40 | 0.2% | -81.1% | | Other | $1,990 | 8.7% | -8.2% | Segment Data In Q1 2024, Process Technologies was the largest revenue contributor at $11.9 million, followed by Electronic Test at $11.1 million, with all three segments experiencing a decline in division operating income year-over-year Q1 2024 Segment Data (In thousands) | Segment | Revenue 2024 | Revenue 2023 | Division Operating Income 2024 | Division Operating Income 2023 | | :--- | :--- | :--- | :--- | :--- | | Electronic Test | $11,116 | $10,371 | $1,813 | $2,578 | | Environmental Technologies | $6,828 | $8,042 | $15 | $1,013 | | Process Technologies | $11,880 | $13,506 | $1,961 | $2,676 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, showing adjusted net earnings of $1.2 million and adjusted EBITDA of $1.8 million for Q1 2024 Reconciliation of Net Earnings to Adjusted Net Earnings (Non-GAAP) (In thousands) | | 3/31/2024 | 3/31/2023 | | :--- | :--- | :--- | | Net earnings | $662 | $2,817 | | Acquired intangible amortization | 595 | 544 | | Tax adjustments | (95) | (92) | | Adjusted net earnings (Non-GAAP) | $1,162 | $3,269 | Reconciliation of Net Earnings to Adjusted EBITDA (Non-GAAP) (In thousands) | | 3/31/2024 | 3/31/2023 | | :--- | :--- | :--- | | Net earnings | $662 | $2,817 | | Acquired intangible amortization | 595 | 544 | | Net interest expense (income) | (193) | 169 | | Income tax expense | 125 | 577 | | Depreciation | 273 | 245 | | Non-cash stock-based compensation | 349 | 474 | | Adjusted EBITDA (Non-GAAP) | $1,811 | $4,826 |