in TEST Corporation, a global provider of innovative testing and process technology solutions across key sectors including automotive/EV, defense/aerospace, industrial, life sciences, security, and semiconductor, announced its financial results for the quarter ending September 30, 2024. These results incorporate the financials of Alfamation S.p.A., acquired on March 12, 2024, and now part of the Electronic Test division.
Nick Grant, President and CEO, stated, “We experienced a solid quarter, with revenue slightly below our expectations but margins exceeding our forecasts. Approximately $2 million in shipments were delayed and will move into the fourth quarter. However, we benefited from a better product mix compared to the previous quarter, primarily due to a stronger performance in back-end semiconductor shipments. Additionally, we have implemented cost reductions to better align with current market conditions. Importantly, we generated cash from operations, allowing us to reduce debt and repurchase shares, reinforcing our belief that investing in our business is a wise use of capital.”
Grant added, “Our team is executing our strategy effectively. We are acquiring new customers, optimizing our sales channels, and driving innovation. While visibility remains limited due to market conditions, we see signs of stabilization in our targeted industries, with gradual improvements in orders throughout the quarter. We anticipate that demand for our induction heating technology for front-end semiconductor applications will lag behind recovery in other sectors, yet we remain optimistic about the strong fundamentals that will support long-term growth for these solutions. Our engineered solutions, diverse target markets, and successful scaling through acquisitions have provided relative stability in revenue and profit generation amid industry fluctuations.”
Third Quarter 2024 Financial Overview
Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) | Q2 2024 | Change ($) | Change (%) |
|---|---|---|---|---|---|---|---|
| Revenue | $30,272 | $30,941 | $(669) | -2.2% | $33,991 | $(3,719) | -10.9% |
| Gross Profit | $14,012 | $14,447 | $(435) | -3.0% | $13,797 | $215 | 1.6% |
| Gross Margin | 46.3% | 46.7% | – | – | 40.6% | – | – |
| Operating Expenses | $13,525 | $11,979 | $1,546 | 12.9% | $13,461 | $64 | 0.5% |
| Operating Income | $487 | $2,468 | $(1,981) | -80.3% | $336 | $151 | 44.9% |
| Net Earnings | $495 | $2,277 | $(1,782) | -78.3% | $230 | $265 | 115.2% |
| Earnings per Diluted Share | $0.04 | $0.19 | $(0.15) | -78.9% | $0.02 | $0.02 | 100.0% |
In Q3 2024, revenue decreased by $0.7 million year-over-year, despite a contribution of $5.4 million from Alfamation. This was offset by declines in semiconductor revenue of $7.1 million, although automotive/EV revenue grew by $4.5 million, industrial revenue by $1.1 million, and other markets by $1.3 million.
Gross margin contracted by 40 basis points year-over-year due to lower organic business volume and the impact of the Alfamation acquisition. Operating expenses rose by $1.5 million compared to the prior year, mainly due to increased costs from Alfamation, which were partially countered by cost reductions in other areas.
The company’s net earnings for the quarter were $0.5 million, or $0.04 per diluted share, an improvement from the previous quarter’s earnings of $0.2 million. Adjusted net earnings (non-GAAP) were $1.2 million, translating to an adjusted EPS of $0.10, compared to $1.0 million and $0.08 in the prior quarter.
Balance Sheet and Cash Flow Analysis
During the quarter, inTEST generated $4.2 million in cash from operations. Cash and cash equivalents at the end of Q3 totaled $18.0 million, reflecting a decrease of $2.4 million from the previous quarter due to debt repayments and share repurchases. The company repaid about $5.3 million in debt and acquired 141,117 shares at an average price of $7.38 each. Capital expenditures remained steady at $0.5 million.
At the end of the quarter, total debt was $16.1 million, down $5.0 million from June 30, 2024. The company also had $30 million available under its delayed draw term loan facility and no borrowings under its revolving credit facility.
Orders and Backlog Update
For Q3 2024, inTEST reported orders of $28.1 million, which includes $3.9 million from Alfamation, marking a 5% increase from the same period last year. This also represented a 7% improvement compared to the previous quarter. Although the semiconductor market remained weak with a decline of $5.3 million in orders, increases in the automotive/EV sector, defense/aerospace, industrial, and other markets offset this drop.
The backlog at the end of September 2024 stood at $45.5 million, including $14.7 million related to Alfamation, with approximately 42% of this backlog expected to ship beyond Q4 2024.
Outlook for Fourth Quarter and Full Year 2024
The company has refined its full-year expectations and provided guidance for Q4 2024, which anticipates revenue between $34 million and $37 million, with a gross margin of approximately 42%. Operating expenses are projected at around $13.5 million for the quarter.
Conference Call and Webcast
The company will host a conference call and webcast today at 8:30 a.m. ET to discuss the financial results and future outlook. The call can be accessed by dialing (201) 689-8263, and the webcast is available at intest.com/investor-relations. A replay of the call will be accessible until November 8, 2024, by calling (412) 317-6671 and entering the replay pin number 13749100. The webcast replay and transcript will also be posted on the investor relations section of the company’s website.
