Q1 2021 inTest Corp Earnings Call

May 7, 2021

Welcome to Intest Corporation's 2021 first quarter financial results Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session at that time. If you have a question you will need to press star one on your telephone keypad.

As a reminder, this conference is being recorded today, a replay will be accessible at www Intest Dot com I would now.

Turn the call over to Intest Investor Relations consultant PARAGARD. Please go ahead ma'am.

Thank you operator, and thank you for joining us for income too.

Two powerful in 'twenty, one first quarter financial results conference call with US today are Nick Brad.

President and CEO, and Hugh Regan, Treasurer, and Chief Financial Officer.

Mark will briefly review the quarter's highlights as well as current business trends. He will then review intest.

Detailed financial results for the quarter and discuss guidance for the 2021 second quarter. We'll then have time for any questions.

A copy of today's press release can be obtained on <unk> website, Www Dot Intest Dot Com. In addition to our press release, we have issued supplemental information, which can be downloaded from our website on the investors page just mentioned the supplemental information is offered to provide shareholders and analysts.

With additional information and detail for analyzing our results in advance of the quarterly results conference call.

Before we begin the formal remarks. Please note that this conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 day.

Statements do not convey historical information, but relate to predicted or potential future of them.

Based upon management's current expectation.

The statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

In addition to the factors mentioned in our press release such risks.

And uncertainties include but are not limited to the risk factors set forth for time to time in our Securities Exchange Commission filing, including but not limited to our annual report on form 10-K for the year ended December 31 2020.

Any forward looking statements made by US in this conference call is based only on information currently available to US I think the circumstances only as of the date on which it was made we undertake no obligation to update the information on this call to reflect events or circumstances. After the date hereof or to reflect the occurrence.

I've anticipated or unanticipated events.

During today's call, we will make reference to non-GAAP financial measures.

We have provided additional information concerning these non-GAAP financial measures, including a reconciliation to the directly comparable GAAP financial measure in our press release as well as the supplemental information on the slide presentation for this call.

The release.

Financial information and the slide presentation are posted on the Investor page of our website www Dot dot com.

And lastly, we will be participating in the CEO summit virtual Investor Conference on June 15, and will be joining call. Your security for a virtual SCR may 14th.

With that let me now turn the call over to Nick <unk>. Please go ahead Nick.

Thanks, Laura and welcome everyone.

Thank you for joining us for the first quarter 'twenty, one financial results conference call.

Thanks, Craig has delivered truly solid financial results in the first quarter momentum we cited on our Q4 and full year 2020 call back in March.

Unabated.

Strong demand for our innovative testing process technology solutions across a diverse set.

Applications.

We continue to make progress developing vertical growth market segments outside of the semiconductor market, which will serve to lessen our dependency on the cyclical industry.

However, at the present time semi gets a considerable driver of our growth.

Given the strong industry tailwind and broad end market demand for semiconductors.

This by chip shortages.

Let's look first at bookings and backlog.

Bookings have been steadily increasing over the past year and order flow during the quarter was exceptionally strong.

Q1, consolidated bookings of $25 2 million approach the record levels, we saw back in 2000.

43% sequentially.

83% year over year.

This level resulted in a book to bill ratio of one point.

While this is clearly an elevated level from our target.

Just over one the team has worked diligently to ramp up revenue in the quarter and we expect to bring this back in line in Q2.

As noted first quarter bookings were fueled by the semi market.

Counted for 68% of our consolidated bookings.

Multi market made up 32% of the overall bookings driven by a solid rebound in demand from our customers in the industrial markets.

This is similar to the 63%, 37% split first stemming multi markets last quarter.

<unk> grew nicely sequentially multimarket bookings increased 24% to $8 1 million.

Bookings increased 54% to seven.

$17 2 million.

Our backlog continues to be healthy standing at $17 1 million at the end of March.

49% increase over the prior quarter.

Some products being requested immediately and others with delivery nicely spaced throughout the year.

Looking at revenue.

Q1, consolidated revenues of $19 6 million exceeded our guidance range and increased 31% sequentially and 74% year over year.

And as with bookings were driven by the semi market.

As a percentage of overall revenue semi comprised 68% and multi markets made up 32%.

This compares with a 51% 49% semi multi markets last quarter at the company captured growth driven by strong demand from our semi customers.

<unk> revenue for the first quarter and increased 75% sequentially to $13 3 million.

Multimarket revenues declined 14% to $6 two zone.

This decline reflects the slowdown we saw in multi market bookings in the December quarter. However.

However, with the order strength, we saw in Q1, we expect multimarket shipments in the June quarter to regain growth sequentially.

I wanted to remind everyone I joined Intest, roughly three quarters ago with a clear board mandate and a personal vision positioning the business for long term growth, which requires a cultural shift in investments.

And as we discussed on our last call when we laid out our strategic plan that will take time to achieve this however, I am pleased with the progress we have been able to thus far.

My concern that the strength in semi market distracts us from the larger mission of diversification.

Absolutely. So this is something that I pay attention to every day and I remind everyone that keep your focus on the end goal.

That doesn't mean, we aren't going after every bit of growth the semi market is currently providing.

I assure you we are and I believe our bookings reflect that.

However, with the balance of capturing growth and ensuring we're making the right long term investments.

More to come on that shortly.

Turning to net income.

I am pleased to report that we came in at the high end of our guidance range.

We reported GAAP net earnings $2 2 million or <unk> 21 per diluted share and non-GAAP adjusted net earnings of $2 5 million or.

<unk> 24 cents per diluted share.

And our EBITDA for the quarter was $3 million.

You will fill you in on the details around these figures in a few minutes.

Let's turn to our quarterly performance of our two operating segments, along with some customer highlights starting with MFS, which entered 2021 with an expanded backlog and good momentum.

<unk> is currently firing on all cylinders as the business continues to benefit from the broad based recovery and demand resurgence that began in Q4.

But frankly, it's semiconductor shortages, especially in the automotive and mobile markets, helping to drive orders as our customers rates to add capacity.

We continue to drive installed base diversification by securing new customers and broadening our geographic reach.

In Q1.

Bookings up $10 5 million.

Leased.

Essentially at 220% year over year well.

EMS revenues of.

$8 5 million increased 102% sequentially and 348% year over year.

I would like to remind everyone that in Q4, we completed the manufacturing consolidation of our California operations into New Jersey.

So this ramp up was quite notable in the quarter.

Why do I say that well.

Well, we currently expect that we will have shipped more interface products by the end of May and was shipped in 2020 entirely.

And we expect to have shipped more manipulators and the first half of 2021 and more shift in all of 2019 and 2020 combined.

I do believe that constitutes notable.

We expect to see sequential revenue growth again in the current June quarter as the team is working diligently to convert the backlog while orders continue to come in at a healthy pace.

Now, let me share with you some specific highlights in the quarter.

We continue to gain traction with our automated manipulator solutions and received orders for the first Lf theory units outside the U S.

<unk> was also selected by an international.

M over net income as they are.

Supplier of interface solutions.

Burn in testing at the wafer level.

Historically burn in testing has been done only post assembly and packaging.

Net sooner allows for earlier detection of failures.

This development has significant potential with this customer and we believe that we will for others as well.

Finally on the new customer front.

I just had a major win in China, selling its first intelligent test cell at a targeted accounts.

I am pleased with the progress of the <unk>.

<unk> is making on diversifying its customer base, particularly in light of the semi demand surge we're experiencing.

He's done an outstanding job capturing growth and working across the supply chain, while watching the utilization rates closely to ensure that they are able to deliver on our commitments to customers.

Shifting now to the thermal segment, where we continue to make inroads.

Cross multiple industries and verticals.

Thermal bookings for the first quarter of $14 7 million were up 33% sequentially and 40% year over year.

This was fueled by improving industrial markets and associated with new budgets at the beginning of the year.

Revenues for the segment.

$11 1 million increased 4% sequentially and 18% year over year.

We entered the June quarter with a larger backlog than previously and are optimistic market conditions will continue to improve throughout the year global economies strengthen.

Let me share with you some of the thermal March quarter highlights.

<unk> achieved its highest bookings quarter in the 30 year history of the company and it did so by beating the prior record by 34%.

And as with BMS the demand for our thermal related semi solutions, which are brought in applications.

Was a very strong driver of Q1 thermal growth.

<unk> three of the top four customers were semi related and the other was a medical customer what the crystal growing application.

For Ikea.

Any lab market continues to be strong with thermo string bookings, averaging over $1 million per month for nine consecutive months now.

What's happened since 2018.

On the automotive EV Fracs are ambarella business received a major order during Q1 for a new EV manufacturing facility in North America and continues to be robust orders from other Oems and integrators.

<unk> also delivered in the quarter, a number of our monarch chillers.

OEM manufacturer of materials used in the automotive supply chain.

On our new product right.

<unk> compact theory, which had a limited release in Q3 of 2020.

As the first two units up and running with very positive feedback.

As a result, we received an order for three additional units in the quarter from a new OEM in Europe and expect to fully released this product this quarter.

Despite the strength, we're seeing in much of the business there are areas.

Were less robust in the quarter and we are watching these closely.

King's at our defense Aero thermal business were somewhat sluggish as we saw the time to close orders slowed by a variety of approval whoops, resulting from the new administration.

And cannabis extraction orders were down for the quarter.

This seems to be a yearly trends driven by the seasonality surrounding the harvest.

And in light of that we would expect this business to pick up later this year.

In addition, a couple of major customer shipment delays negatively impacted the quarter are timing related basis.

All in all I believe we're making good strides in the thermal segment to capture growth opportunities in 2021.

That's the targeted growth investments, we're making will pay off for us in the future.

So let's discuss the investments we are making.

On our last call I shared with you our vision and strategic plan along with the strategies, we're driving to transform the business.

I plan to spend a portion of each conference call going forward addressing a particular aspect of these core strategies to share with you our progress.

And today I want to focus on investments, we are making in the geographic and market expansion.

Right.

Yeah.

Starting first with geographic expansion we.

We see geographic expansion is improving presence in our served markets globally.

In the first quarter, we laid the groundwork to drive future growth in Latin America, a region in which <unk> has historically not had a presence.

We believe Mexico provides a significant expansion opportunity for our thermal business with solid growth potential from a number of U S manufacturers leveraging will regions low cost position.

Well, Mexico is not a hotbed of semiconductor development the region has a large industrial base.

In fact, a large percentage of electric motors used in a variety of applications are manufactured in Mexico, which plays well for our anvil business.

You also may have heard but just a few days ago GM announced its plans to invest $1 billion.

In Mexico for EV production, which also plays well for us.

It's better position up there we added a full time sales professional in the region for our ambarella business.

Also as one of our growth programs Ambarella initiated plans to set up an application lab and Mexico and add an application engineer to support opportunity development within the region.

Through the first quarter they are already seeing traction from this investment.

We are also making investments in Asia, another region, where we have plenty of room to grow.

We are adding a net sales manager in the region to develop an Ics harmonics Chiller network.

And on the semi side EMS is focusing on expanding in southeast Asia to better serve customers and engineering resources added to further our expansion in this important region.

Shifting now to the other side of this strategy, which is market expansion activities for us. This means going after new and adjacent markets organically through targeted marketing and product development programs.

I have been discussing two of these markets now in the last couple of earnings calls electric vehicles in Canada, and while these emerging markets are not significant areas of our business today, we see them as high potential growth opportunities for our thermal solutions.

In the quarter, we have increased our organic activities with new EV integrators on multiple applications.

<unk> expanded our solution to now include coils with the industry leader in the electric vehicle space.

What's great about this is that these coils are aware items.

Which lead to recurring revenue streams.

The strategic accounts.

The team is also preparing to launch a targeted three day marketing campaign at 300 identified contacts in this space to continue driving awareness of our solutions.

And to drive lead generation.

Regarding Canada market penetration.

As I mentioned earlier, while Q1 was a slower order period due to the seasonality in the industry. We are certainly not easing our efforts.

The team continued to make progress with an OEM initiative, we launched earlier.

Receiving their first chiller order from a new OEM, which was just over $300000.

It also received a follow on order from another OEM, which started doing work with us last year.

And finally <unk>.

Started working with two new Oems in this quarter.

We fully expect the work we're doing with these Oems to generate returns for years to come.

And the strength continues to expand.

In addition, we launched a targeted marketing campaign at over 800 potential customers.

Awareness of our solutions and drive lead generation.

Finally, as it relates to EMS business.

Mentioned in the past our efforts around penetrating the memory space through targeted R&D development programs and while this continues we believe a bigger opportunity for them has arisen in the power device market. Thanks to E. M assets second generation high voltage test cell solution, which was introduced in Q1.

In the quarter, our teams worked with a major <unk> to successfully integrate this new solution that the global year for analog power devices.

As a result, they have since received follow on orders and believe this solution is applicable to many others in this space.

So overall I'm pleased with the progress around the strategic investments, we are making in the company and while we're just getting started we are setting the stage for long term growth and diversification, which is in line with our strategic plan.

Before I turn it over to you to walk you through the financials.

I want to once again, thank the entire intest team for delivering a truly solid quarter.

The teams are laser focused on capturing growth and driving investment which.

Will position us well long term.

We see Q2 was another strong quarter and anticipate continuing improvement in the industrial markets throughout the year as economies continued to strengthen.

I will now turn it over to you to walk you through the details of our most recent quarter's performance and discuss our guidance for Q2.

Q over to you.

Thanks, Nick.

Our first quarter gross margin of 49% came in at the bottom of our guidance range and was improved from the gross margin we reported for the fourth quarter.

While our fixed manufacturing costs of $2 $5 million for better absorbed at a higher net revenue levels in the first quarter, representing 13% of net revenues in Q1 compared to 17% in Q4 or Q1 2021 component material costs were 36, 2% up 110 basis points.

Compared to 35, 1% in the fourth quarter.

The increased component material costs were experienced across all business units and were driven by changes in customer and product mix, along with increased supply chain costs.

Selling expense grew 22% sequentially to $2 4 million in the first quarter driven primarily by increased commission expense on higher net revenue levels and to a lesser extent to increased salary and benefit costs and accruals for product warranty.

Engineering and product development expense increased 6% sequentially to $1 3 million.

Primarily as a result of higher levels of employee benefit costs as well as increased spending on product development supplies and consultants, partially offset by reduced spending on patent legal.

General and administrative expense increased 8% sequentially to $3 $2 million driven primarily by increases in profit related bonuses and higher levels of stock based compensation cost.

The increase stock based compensation expense is being driven by several factors, including a broader distribution of stock based awards in line with our recently adopted strategic plan attending of which is the motivation and retention of key employees vital to our future growth and success.

And larger award amounts, but the most significant factor behind the increase stock based compensation expense has been the recent improvement in our stock price, which has tripled over the last six months.

We currently expect our 2021 stock based compensation expense will be just below $1 5 million.

Compared to $671000 incurred in 2020 and $884000 in 2019.

The reduction in the expense in 2020 was driven by the forfeiture of stock awards made to our former CEO.

During the first quarter, we incurred restructuring and other charges of $55000 compared to $1 $1 million in the fourth quarter.

The first quarter restructuring charges were related to the recently completed manufacturing consolidation of our EMS product segment, while the majority of the fourth quarter restructuring charges were also driven by costs associated with this action, which totaled $889000 for the fourth quarter.

We expect the E&S restructuring and consolidation action will generate approximately $600000 in annual savings.

Also included in fourth quarter restructuring charges were $189000 accrued for costs associated with exiting the additional lease space in our Mansfield, Massachusetts offices.

We expect some additional costs related to the EMS manufacturing consolidation to occur in the second quarter consistent with the level. We saw in Q1 as we did complete this process and do not anticipate any further significant restructuring and other charges beyond fees in connection with the EMS segment restructuring and manufacturing.

Sure.

We accrued income tax expense of $366000 in the first quarter, reflecting a 14% effective tax rate.

This compares to a $74000 income tax benefit accrued in the fourth quarter, which reflected an effective tax rate of 16%.

The reduction in our effective tax rate in the quarter was the result of higher levels of overseas shipments during the quarter, which increased our city deduction as well as expected increased R&D tax deductions.

We expect that our effective tax rate in 2021 will now range from 14% to 16%.

We had net earnings of $2 2 million or 21 per diluted share for the first quarter compared to a net loss of $380000 or <unk> <unk> per diluted share for the fourth quarter.

As previously noted our first quarter results included $55000 in restructuring and other charges and when tax affected these costs amounted to $47000 were less than a penny per share.

Our fourth quarter results included $1 $3 million in restructuring and other nonrecurring costs and when tax affected these costs amounted to $1 $1 million were <unk> 11 per diluted share.

Excluding these restructuring and other nonrecurring costs, our fourth quarter net earnings would have been <unk> <unk> per diluted share non-GAAP.

We have provided a summary of our non recurring costs by quarter in the supplemental information posted to our website in connection with this call.

Diluted average shares outstanding were $10 $5 million for the first quarter of 2021 and during the quarter, we issued 81468 shares of restricted stock.

But did not have any forfeitures of restricted stock nor did we repurchase any shares.

During the first quarter, we saw 99740 option shares exercised which raised $717000 in cash proceeds.

EBITDA increased to $3 million for the first quarter up from $12000 reported for the fourth quarter.

Consolidated head count at March 31 was 208, an increase of four staff from the level. We had at December 31, and primarily represented new staff in our thermal segment.

This AD is net of heads that were terminated in the quarter from our California operation as a result of the manufacturing consolidation, which included one month overlap of interface manufacturing resources.

I'll now turn to our balance sheet.

As expected cash and cash equivalents declined by $82000 sequentially to $10 $2 million and we used $337000 of cash in operations during the first quarter.

Cash today stands at approximately $12 million.

We currently expect cash and cash equivalents to increase throughout the balance of 2021 subject to any strategic investments we may choose to make.

In early April we increased our line of credit with <unk> Bank from $7 5 million to $10 million and changed the facility from 364 day facility to a committed three year facility that will mature on April nine 2024.

In connection with this change the bank can post a 15 basis point non usage fee.

Accounts receivable grew $5 1 million or 60% sequentially to $13 5 million at March 31, with 62 DSO up from 52 DSO at December 31.

Inventories also grew $736000 or 10% sequentially to $8 2 million.

Really driven by raw material influx to support the increased semi demand we are seeing.

Capital expenditures during the first quarter were $388000 up from $138000 in the fourth quarter.

Included in the first quarter capital expenditures was $236000 to complete the tenant improvements to our Mount Laurel, New Jersey facility related to the EMS consolidation.

Our backlog at March 31 was $17 1 million.

Up $5 7 million or 49% sequentially.

As to guidance as noted in our earnings release, we expect that net revenues for the quarter ended June 32021 will be in the range of 20 million to $21 million and then our GAAP financial results will range from net earnings of 20.

To <unk> 24 per diluted share.

On a non-GAAP basis, we expect our adjusted net earnings per diluted share will range from 23 to 2007.

We currently expect that our second quarter gross margin will range from 49% to 51%.

Our guidance is based on the Companys current views with respect to operating and market conditions and customer forecasts, which are subject to change as well as our expectations for the balance of the quarter and are subject to any strategic investments we choose to make actually.

Actual results may differ materially as a result of among other things. The factors described under forward looking statements found in the materials that accompany this conference call, including the press release supplemental information and good day.

Operator that concludes our formal remarks, we can now take questions.

Thank you if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment.

Please press star one to ask a question.

And we can now take our first question from Jason Smith of Lake Street. Please go ahead.

Hey, guys. Thanks for taking my questions just wanted to start on the supply chain, obviously, it's been well discuss some of the component and supply chain constraints out there just curious.

If you are seeing an impact from that and how you're positioning yourselves going forward to deal with those challenges.

Hi, Jason This is Nick and thanks for the question.

Great one supply chain is something we're managing very carefully here.

And I'm quite pleased with the.

The ability our team's been able to.

The ramp these guys up and be able to meet customer deliveries that we've committed to and that so at this point I'd say, they're working really well with the supply chain and.

Yeah.

I think theres opportunities for us over time too.

Strength in our supply chain, but right now.

Everything is working well.

Okay. That's helpful and I guess Relatedly are you seeing any sort of gross margin impact due to expedited freight costs increased costs along those lines.

Yeah, absolutely I would say with the surge we saw in our EMS business.

There was quite a bit of expediting going on in Q1.

And expediting happens regularly.

As part of any business so to speak so it was elevated for sure in Q1 as we work to bring in <unk>.

<unk> to support the volume that would be requested so it was quite heavy in Q1.

Now we've increased our inventories we've got the material.

Flow coming through there. So we would expect that to be back at normal levels in Q2.

Okay, and then just the last one from me and I'll jump back into queue seeing some really nice traction with your handler products can you just talk about what sort of is driving that uptick.

Yeah well.

A combination of.

<unk> been working with customers on the technology to better support.

You know there are applications out there.

So this this.

High voltage high current.

Application that we penetrated on the power side is one that started.

Working with an ETE and the end user.

Permitted quite successfully but you know one of the key drivers behind that.

When I came onboard I'm challenging the teams to look at.

Our market space is that how we can further.

Sure.

New customers new segments like power and.

The teams are doing a great job and it takes time to penetrate accounts as we all know, but I'd say, they're actively working it and we're really pleased with the progress.

Okay sounds good thanks, a lot guys.

Thanks, David.

And we can now take our next question from <expletive> Ryan of Colliers. Please go ahead.

Thank you so net what sort of visibility do you have into the second half of the year I know the general some semi cap commentary has improved with that what's your sense not asking you for specific guidance, but how do you handicap.

Second half versus first half.

Yeah, Great question, and it's something that.

Joe Mcmanus and I as the new leader of the E&S business, there, we discussed that and try to.

Looking at the funnel health and everything and really they only have about a 90 day.

Visibility.

Alright lets say meaningful clarity.

And what what's in the pipeline.

With that said the orders have been strong and we've been back filling the <unk>.

<unk> as we book them with other projects.

We are seeing right now any kind of slowdown.

We really only have that 90 day visibility beyond beyond that but I do like what you know.

The industries.

A lot of fun.

Folks are saying out there around this having more legs and everything else and we're positioned to capture it as long as we can.

Okay.

One of your.

Initiatives is to increase your service revenue.

What level of percentage of revenue is service now and where can that drive eventually.

Yeah, Great question I'll, let you give you the specifics on service level, there, but I can tell you we haven't quite got R. R.

Initiatives underway, yet on that particular aspect there so.

More of the traditional service.

That's still resulting in the numbers here. So you have the Q1 service bigger, yes, I do Nick Q1 service.

Actual service component was just over $1 million that was down from about $1 $2 million that we saw in Q1 and $1 $2 million, we saw about a year ago the same quarter.

And that was due to a number of factors.

And that seasonality, but just inability to get into some of our clients in order to perform service during the first quarter.

But we expect that level to return to a more seasonally normal level in Q2.

Okay.

Heard your stock based comp commentary for the year, but I may have missed what it was in Q1.

Oh in Q1 stock based comp was $269000.

Okay. One last one for me net you talked about expanding into these other markets and you mentioned Ian cannabis.

But you said kind of organically, what's your view of you know.

What's your view of M&A at this point and where would you be looking at <unk>.

Any M&A efforts out there.

Yeah, Great question as you know one of our five core strategy is strategic acquisitions and partnerships and that's it.

Area that we are spending a fair amount of time on.

Absolutely looking at technologies that would complement our current portfolio as well as.

Companies that would position us in targeted markets.

That we see as a long term strategic.

Strategic fit for us so it's a space we're active in and as.

Intest has always been we really can't go into details too much on that but.

Certainly being one of our core strategies, we're focused on it.

Okay, great. Thank you and congratulations on the strong execution.

Hey, Thanks <expletive>.

Okay.

And we can now take our next question from Robert <unk> of <unk> capital. Please go ahead.

Thanks for taking and taking my question guys and congratulations on an excellent quarter also.

Sure.

Regarding the EMS business, Nick you mentioned that when you came aboard there was a material amount of low hanging fruit in <unk> and.

Pursuing geographical diversification as well as increased penetration in other applications for the products.

Have you been able to size the increase in the time since you've made the adjustments and have invested money in going after these markets.

Just another way of asking peak to peak in the semi cap equipment cycle, what kind of improvement in your addressable market do you think you've achieved.

Yeah, Hey, Robert.

The comments about the quarter certainly yes.

Of course, there relative to your question on <unk>.

<unk>.

Pam.

Yes, absolutely.

Targeted on expanding our Tam today.

And with Joe.

We believe.

The total Sam their served available market is roughly $135 million.

And they are actively.

With their new.

Product expansions like the intelligent test cell.

Pushing net higher as well as this new high power high current.

The test solution that they've been working with the <unk>. They see that has also opened up.

A nice attractive space, so, we're inching that up higher and higher over time, and when we say how much of what you're expanding in or.

<unk>.

And are these basis, it's coming in at chunks of five to 10 million of.

Additional Tam but.

As we.

Succeed with additional <unk> and opening up other geographic regions with our solutions that will only increase.

Is there upside to two ex the number you cited over a two or three year period or is that being too optimistic.

Well, that's a huge space as you know.

MFS test market that we're playing in in that.

But we do have some.

Limitations due to the fact that these eight.

<unk> had certain capabilities internally in that so we're working around that working with them and trying to.

To penetrate.

And expand our space as much as possible there, but could it get to ask you know I don't know if I have enough visibility yet to be able to say that.

Alright.

Regarding acquisitions, which you've already addressed.

Question I'm going to come from it from a different from a different perspective.

The <unk>.

Obviously, you want to keep diversification, but.

That means.

Adding non semi business.

The non semi business.

In the marketplace today for industrial I guess thermal products.

Is probably priced for small businesses around one times revenues, maybe wanted to have two something like that that's where we're priced.

The semiconductor equipment business, the big guys or your customers or price to 456 times sales. So you do face an issue in the semi business tends to be more highly value for both acquiring and valuing your own stock, but at the same time, you obviously want.

Some more diversification away from the deeper cyclicality of that business as you've been there now three quarters have you have you had a chance to look at the valuations and the benefits and the trade offs of acquiring more semi cap equipped niche businesses versus the <unk>.

Industrial businesses and have you come to any conclusions on whether you'd prefer to go with your first acquisition.

Yeah, Great Great question, there and youre spot on semi market being as hard as it is.

Valuations are elevated in there, but as I've alluded to in the past it is a space that we will be.

Looking to <unk> to add inorganically to our portfolio.

So we've got to make sure we do the acquisitions when the time's appropriate and at the right values.

Valuations for the business and our shareholders. There. So it is challenging in that space now so I would say our activity our focus is.

More weighted in the non semi just because valuations are.

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