Q2 2025 inTest Corp Earnings Call

Shawn Southard: Greetings and welcome to the InTest Corporation Second Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone 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, Shawn Southard, Investor Relations for InTest. Thank you. You may begin.

Greetings and welcome to the intest corporation, second quarter 2025 Financial results call at this time. All participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance? During the conference? Please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Shawn Southard: 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 Gilmour, 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.

It is now my pleasure to introduce your host, Sean Southern investor relations for 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 inest.com.

Please turn the slide to as I review The Safe Harbor statements.

During this call management, may make some forward-looking statements about our current plans, beliefs, and expectations.

Shawn Southard: 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 today's release and slides. Now, please turn to slide four. I will turn it over to Nick. Nick, over to you.

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, 3 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 today's release and slides.

Now, please turn the slide forward.

I'll turn it over to Nick Nick over to you.

Nick Grant: Thank you, Shawn, and good morning, everyone. Thanks for joining us for our second quarter 2025 earnings call. The second quarter played out pretty much as we expected. While the ongoing global economic and tariff uncertainties continued to drive customer hesitancy as it relates to moving forward with larger capital projects, we were able to deliver incremental improvement in the quarter. I want to take a moment and thank the entire INTEST team for staying focused and delivering results through these continuing challenges. We remain focused on driving innovation, market diversification, and geographic expansion to strengthen our position and preparation for market improvements. In the quarter, INTEST delivered just over $28 million in revenue, with growth margins of about 42% and received orders of nearly $28 million as our recently introduced products continued to gain traction, while our sales teams added new customers and optimized our channel network.

Thank you, Sean and good morning everyone. Thanks for joining us for our second quarter 2025 earnings call.

The second quarter played out pretty much as we expected.

While the ongoing global economic and tariff uncertainties, continued to drive customer hesitancy, as it relates to moving forward with larger capital projects, we were able to deliver incremental Improvement in the quarter.

I want to take a moment and thank the entire end test team for staying focused and delivering results through these continuing challenges.

We remain focused on driving Innovation, Market diversification and Geographic expansion to strengthen our position in preparation for Market improvements.

Nick Grant: Once again, our funnel of opportunities has increased to a new all-time high as customers recognize our innovative solutions are integral to their long-term capital plans. While overall semi and industrial markets remain sluggish, our teams are focused on capturing opportunities in other markets that are more active, like Defense Aero. In the quarter, our process technologies division benefited from a meaningful commercial space order. As you probably noted, we just announced a large defense order at our environmental technologies division, which was a long time coming, for missile test systems to a prime defense contractor. Also, in the quarter, we saw order activity gaining traction in auto EV, which I'll touch on shortly. During these times of uncertainty, we continue to take actions to improve profitability, and we further reduced debt by $1.7 million.

In the quarter and tests, delivered, just over 28 million in Revenue with growth margins above 42% and received orders of nearly 28 million as our recently introduced products continued to gain traction, while our sales teams added new customers and optimized our Channel network.

Once again, our funnel of opportunities has increased to a new all-time high, as customers recognize our innovative solutions are integral to their long-term capital plans.

While overall sending industrial markets remain sluggish, our teams are focused on capturing opportunities in other markets that are more active like defense arrow.

In the quarter our process Technologies division benefited from a meaningful commercial space order and as you probably noted we just announced a large defense order at our environmental Technologies division which was a long time coming for missile test systems to a prime defense contractor.

Also, in the quarter.

We saw order activity gaining Traction in Auto EV, which I'll touch on shortly.

Nick Grant: Year to date, we've reduced debt by nearly $5 million, bringing our total debt down to approximately $10 million. Please turn to slide five. We remain committed to our Vision 2030 strategic goal of driving innovation and geographic expansion to create greater scale. That can be seen in the progress we're making building out our Malaysia facility. We announced this expansion at the end of 2023, and when the building was completed, we focused on adding engineering and supply chain talent to address our immediate bottlenecks. The build-out of the manufacturing space was recently completed, and we remain on schedule to begin manufacturing first article products in this new facility during the second half of this year, with production slated to ramp up in 2026.

During these times of uncertainty, we continue to take actions to improve profitability, and we further reduce debt by 1.7 million.

Year to date, we've reduced debt by nearly 5 million dollars, bringing our total debt down to approximately 10 million.

Please turn to slide 5.

We remain committed to our vision 2030 strategic goal of driving Innovation and Geographic expansion to create greater scale.

That can be seen in the progress, we're making building out our Malaysia facility.

We announced this expansion at the end of 2023. And when the building was completed, we focused on adding engineering and supply chain talent to address our immediate bottlenecks

Nick Grant: Our in-the-region, for-the-region approach will enable us to better serve customers in the area, capitalize on a lower-cost supply chain, and capture logistics improvements that we expect will enhance our market competitiveness and drive growth. In addition, it will provide a lever we can use to better insulate us from potential tariff impacts. We believe the addition of manufacturing in Malaysia, along with our expanded manufacturing footprint in Europe with Alfamation, positions us well to support the global needs of our customers. Let me now review orders and backlog on slide six. Orders for the quarter of nearly $28 million grew 10% sequentially, reflecting strength in several markets. Demand in auto EV increased 40% to $7.1 million. Life sciences more than doubled to $2.9 million. Safety security grew 74% to $1.2 million, while Defense Aero industrial and other markets also improved.

Answering space was recently completed and we remain on schedule to begin manufacturing. First article products in this new facility, during the second half of this year with production slated to ramp up in 2026.

Our in the region for the region approach will enable us to better serve customers in the area. Capitalize on a lower cost supply chain. And capture the logistics improvements that we expect will enhance our Market competitiveness and drive growth.

In addition, it will provide a lever. We can use to better insulate us from potential tariff impacts.

We believe the addition of manufacturing in Malaysia along with our expanded manufacturing footprint in Europe with alpha position, positions us, well to support the global needs of our customers.

Living now, review orders and backlog on slide 6.

Orders for the quarter of nearly 28 million, grew 10%, sequentially reflecting, strengthened several markets.

Nick Grant: Semi continued to remain weak, with a decrease in orders of 24% sequentially. The $2 million increase in auto EV demand was driven by wins with key Tier 1 suppliers at our Alfamation business for OEM 2027 model year program starts. In addition, Alfamation made good progress diversifying their auto exposure with a key win in the life sciences space, resulting in that business achieving its highest level of orders since joining InTest Corporation. The improved demand over the trailing quarter across all markets except semi reinforces that our ongoing diversification efforts are effective while the semi market remains sluggish. Year-over-year orders were up 6%. Auto EV demand grew $2.3 million, life sciences grew $1.8 million, industrial rose $1.2 million, and safety security increased $1 million. These increases were partially offset as semi orders declined $3.7 million and other markets declined $1 million.

Demand and auto EV increased 40% to 7.1 million Life Sciences, more than doubled, the 2.9 Million, safety security, grew 74% to 1.2 million while defense, arrow industrial and other markets also approved.

Semi continued to remain weak with a decrease in orders of 24%, sequentially?

The $2 million increase in auto EV demand was driven by winds with key Tier 1 suppliers that are alphanumeric businesses for OEM 2027 model year program starts.

In addition, Alpha mation made good progress diversifying their Auto exposure with a key win in the Life Sciences space, resulting in that business achieving its highest level of orders since joining in test.

The improved demand over the trailing quarter across all markets, except semi reinforces that our ongoing diversification efforts are effective, while the semi Market remains sluggish.

Year-over-year. Orders were up 6% Auto EV demand group, 2.3 million, Life Sciences, grew 1.8, million, industrial rows, 1.2 million, and safety security, increased 1 million.

Nick Grant: Defense Aero was essentially unchanged at $2.5 million. Backlog at June 30th was $37.9 million, essentially flat over the last two quarters. Backlog was $9.8 million lower from the prior year period, which at the time reflected the large backlog we acquired with Alfamation. With that, let me turn it over to Duncan Gilmour to review the financials and outlook with you in more detail. Duncan, over to you.

These increases were partially offset at semi orders declined 3.7 million and other markets declined, 1 million.

Defense arrow was essentially unchanged at 2.5 million.

Backlog at June 30th was 37.9 million essentially flat over the last 2 quarters.

Backlog was 9.8 million lower from the prior year period, which at the time, reflected the large backlog. We acquired with alfam.

With that. Let me turn it over to Duncan to review the financials and Outlook with you in more detail.

Duncan over to you.

Duncan Gilmour: Thank you, Nick. Starting on slide seven, as Nick noted, revenue for the second quarter was $28.1 million. Sequentially, sales to semi increased 13% to $10.2 million. Industrial improved 25% to $3.8 million. Defense Aero increased 27% to $3.6 million, and safety security grew 59% to $0.9 million. This growth more than outpaced the combined decline of $1.6 million across life sciences, auto EV, and other markets. Compared with Q2 2024, revenue was down $5.9 million, driven by a $4.9 million decline in auto EV sales and slight declines in life sciences, defense aerospace, and other markets. This was partially offset by increases in industrial, safety security, and semi, where the increase in backend sales outpaced the decline in frontend. Moving to slide eight, second quarter gross profit of $12 million increased $0.9 million sequentially on higher sales volume, ongoing cost actions, and the execution of tariff mitigation tactics.

Thank you, Nick.

Starting on slide 7 as Nick, noted revenue for the second quarter was 28.1 Million.

Sequentially sales to semi increased 13% to 10.2 million industrial improved 25% to 3.8 million. Defense aerial increased 27% to 3.6 million and safety security. Grew 59% to 0.9 million this growth more than outpaced. The combined decline of 1.6 million across Life Sciences, Auto EV and other markets

Compared with Q2 2024, revenue was down $5.9 million, driven by a $4.9 million decline in Auto EV sales and slight declines in life, sciences, defense, aerospace, and other markets.

This was partially offset by increases in industrial.

Safety security and semi where the increase in back-end sales outpaced to the decline in front end.

Moving to slide 8.

Duncan Gilmour: Compared to the prior year period, it decreased $1.8 million due to reduced volume. Q2 2025 gross margin of 42.6% improved 110 basis points sequentially, driven by improved volume and ongoing cost reductions. Compared with the prior year period, the 200 basis point improvement reflects a more favorable product mix combined with the impact of cost reduction efforts. As you can see on slide nine, our operating expenses of $12.9 million also reflect recent cost reduction efforts with a sequential decrease of $1 million, including the recently announced leadership transition. Year-over-year operating expenses decreased $0.6 million. We continue to implement a series of cost-saving actions to improve our long-term profitability. The previously announced consolidation of our videology Netherlands facility, which we estimate will translate into annualized savings of approximately $500,000 beginning in 2026, remains on track.

Second quarter, gross, profit of 12 million increased. 0.9 sequentially on higher sales, volume ongoing cost actions and the execution of tariff mitigation tactics.

Compared to the prior year period, it decreased 1.8 million due to reduced volume.

In cost, reductions.

Compared with the prior year period, the 200 basis, point Improvement, reflects, a more favorable product, mix combined with the impact of cost reduction efforts.

As you can see on slide 9, our operating expenses of 12.9 million also reflect recent cost, reduction efforts, with a sequential decrease of 1 million, including the recently announced leadership transition.

Year-over-year operating expenses decreased 0.6 million.

Duncan Gilmour: In addition, we further reduced headcount during Q2 and employed austerity measures versus our budgeted 2025 spend. Turning to slide 10, you can see our bottom line and adjusted EBITDA results. For the quarter, net loss was $0.5 million, or a loss of $0.04 per diluted share. Adjusted net earnings was $0.4 million, or a gain of $0.03 per diluted share. Adjusted EPS reflects adding back acquired intangible amortization charges and restructuring costs. Adjusted EBITDA for Q2 was $1.3 million. Slide 11 shows our capital structure and cash flow. In the first half of 2025, we reduced debt by $4.9 million, including the $1.7 million we paid down in the second quarter. Total debt was $10.1 million at quarter end. We have a total debt leverage ratio of 1.4x.

We continue to implement a series of cost-saving actions to improve our long-term profitability. The previously announced consolidation of our video video Netherlands facility, which we estimate will translate into annualized savings of approximately 500,000, beginning in 2026 remains on track. In addition, we further reduced headcount during Q2 and employed austerity measures versus our budgeted 2025 spend.

Turning to slide 10, you can see our bottom line and adjusted ebita results.

For the quarter, net loss was $0.5 million, or a loss of 4 cents per diluted share. Adjusted net earnings...

Was 4 million or a gain of 3 cents per diluted share.

Adjusted EPS reflects adding back acquired intangible amortization charges and restructuring costs.

Adjusted ebita for Q2 was 1.3 million.

Slide 11 shows our capital structure and cash flow in the first half of 2025, we reduced debt by 4.9 million, including the 1.7 million. We paid down in the second quarter.

Total debt was $10.1 million at quarter end.

Duncan Gilmour: Cash and equivalents at the end of the second quarter were $19.2 million, down $2.8 million from the end of the first quarter. On August 5th, 2025, we entered into a covenant waiver agreement with our U.S.-based lender through the first quarter of 2026 in exchange for pledging cash equal to U.S. debt outstanding. At June 30th, 2025, we held $5.9 million of U.S.-based debt. Regardless, we have more than sufficient liquidity given our net cash position. Turning to slide 12, as Nick Grant mentioned, given the continued uncertainty resulting from the global trade environment, we are focusing our guidance on the forward quarter only where we have better visibility. For the third quarter, revenue is forecasted to be $28 million to $30 million, with gross margins similar to Q2 2025 and operating expenses of $12.6 million to $13.1 million, excluding approximately $100,000 of restructuring expenses.

We have a total debt, leverage ratio of 1.4 X.

Cash and equivalents at the end of the second quarter or 19.2 million down 2.88 million for the end of the first quarter.

On August 5th, 2025 we entered into a covenant waiver agreement with our us-based lender, through the first quarter of 2026 in exchange for pledging cash equal to US debt outstanding.

At June 30th 2025, we held 5.9 million of us-based debt.

Regardless, we have more than sufficient liquidity, given our net cash position.

Turning to slide 12 as Nick mentioned, given the continued uncertainty resulting from the global trade environment.

we are focusing our guidance on the forward, quarter only where we have better visibility,

Duncan Gilmour: Amortization and interest expense are projected to be consistent with Q2. As usual, our guidance does not include the potential impact from any non-operating expenses, such as corporate development and incremental restructuring that may occur, nor does it include the potential impact from any additional acquisitions we may make. To reiterate, we continue to be confident in the long-term fundamentals of our business and in our market position. Our customer pipeline is at the highest level in the history of our company. While we continue to expect sequential improvement in top line and profitability through the year, our visibility into the timing of orders and shipments remains limited at this point. With that, if you will turn to slide 13, I will now turn the call back over to Nick Grant.

For the third quarter revenue is forecasted to be 28 to 30 million with gross margins, similar to Q2 2025 and operating expenses of 12.6 to 13.1 million, excluding approximately 100,000 of restructuring expenses, amortization, and interest expect expense are projected to be consistent with Q2.

As usual our guidance does not include the potential impact from any non-operating expenses, such as corporate development and incremental restructuring that may occur nor does it include the potential impact from any additional Acquisitions? We may make

To reiterate. We continue to be confident in the long-term fundamentals of our business and in our Market position, our customer pipeline is at the highest level in the history of our company. While we continue to expect sequential Improvement in Topline and profitability through the year, our visibility into the timing of orders and shipments remains Limited at this point.

Nick Grant: Thanks, Duncan. With the continually changing trade conditions, companies around the world are adjusting to new market dynamics impacting pricing, supply chains, manufacturing decisions, and more, which is driving many customers to remain hesitant to invest in capital projects. As they remain cautious, we continue to make progress on our Vision 2030 growth strategy and are encouraged by wins across several markets where our diversification has proven effective, our innovative new products are gaining traction, and our geographic reach extends continuously further. During the second quarter, new products represented sales of $6 million, which was just over 20% of our total sales. One of our Vision 2030 goals is to get this vitality metric to 25% in the coming years, and we are pleased with the solid progress we are making.

With that, if you will turn to slide 13, I will now turn the call back over to Nick.

Thanks Duncan.

With a continually changing trade conditions companies around the world are adjusting to new market dynamics and packing pricing Supply chains, manufacturing decisions and more which is driving. Many customers to remain hesitant to invest in capital projects.

As they remain cautious, we continue to make progress on our vision 2030 growth strategy. And our, by winds across several markets, where our diversification has proven effective. Our Innovative new products, are gaining traction, and our Geographic reach extends continuously further

during the second quarter, new products represent sales of 6 million which was just over 20% of our total sales.

Nick Grant: As we have stated, the opportunity funnel across the organization has reached a new all-time high, maintaining optimism about a pending increase in capital spending. In the meantime, we are managing costs while positioning us to be ready to capture the growth when it comes. We have a healthy balance sheet and, as Duncan noted, believe we have sufficient liquidity to manage whatever challenges the future may hold. While visibility remains limited amid the persistently weak market conditions for capital investment, most notably in the digital analog semi industry, we expect to deliver modest quarter-over-quarter improvement throughout 2025. With that, operator, let's open the lines for questions.

1 of our vision 2030 goals is to get this Vitality metric to 25% in the coming years and we're pleased with the solid progress. We are making

Funnel across the organization. Has reached a new all-time high maintaining optimism about a pending increase in capital spending.

In the meantime, we are managing cost while positioning us to be ready to capture the growth when it comes.

We have a healthy balance sheet and as Duncan noted believe, we have sufficient liquidity to manage whatever challenges the future may hold.

While visibility remains limited amid, the persistently weak market conditions for Capital Investments, most notably in the digital analog semi industry. We expect to deliver modest quarter over quarter Improvement throughout 2025,

Shawn Southard: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Jaeson Schmidt from Lake Street Capital Markets. Please go ahead.

With that operator. Let's open the lines for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. If you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset, before pressing the star Keys 1 moment, please while we pull for questions.

Jaeson Schmidt: Yes, thanks for taking my questions. I just want to start with today's announcement on that defense order. Is this a brand new customer for you guys? I guess relatedly, why did you win?

The first question is from Jason Schmidt from Lake Street Capital markets, please go ahead.

Yes, thanks for taking my questions. I just want to start with today's announcement on that defense order. Is this a brand new customer for you guys and I guess relatedly. Why did you win?

Nick Grant: Hey, good morning, Jaeson. This customer is an existing customer of ours. We actually delivered three systems back at the end of Q4 of 2024. This is a follow-on from the prototype units that were delivered. We have a longstanding relationship with this customer, did a number of the first-generation test systems, and now they're ramping up next-gen systems as well as volumes.

Hey, good morning Jason. And, uh, Yep, this customer is an existing customer of ours. Uh, we actually delivered, um, 3 systems, uh, back at the end of Q, uh, in Q4 of 2024 and, um, this is a follow on, uh, those from the Prototype units that were delivered. So, uh, we, we, we have a long-standing relationship with this customer, uh, did a number of the first generation test systems and now with their, their ramping up NextGen systems as well as volumes.

Jaeson Schmidt: Gotcha. Understanding the dynamics you laid out for the outlook, I am just curious if you could comment on how customer order patterns have been so far for the first six weeks of this quarter.

Gotcha. And then understanding sorry the Dynamics you laid out for the Outlook but just curious if you could comment on how customer order patterns have been so far for the first 6 weeks of this quarter,

Nick Grant: Yeah, we're really pleased with the order pattern we're seeing. Typically, as we've talked about in the past, the first month is softer and it continues to improve throughout the quarter. We've had a really solid start over the first few weeks here of the quarter. So, encouraged we continue to see the automotive industry investing for their 2027 model year programs. The defense space remains very active, and of course, this order helps in that. But yeah, very encouraged by the start here in Q3.

Yeah, we're really pleased with the uh, the order pattern we're seeing typically as we've talked about in the past, the first month is, uh, softer and it continues to improve throughout the quarter. We've had a uh, a really solid start over the first uh, few weeks here of the quarter. So uh encouraged, um we continue to see the automotive um,

Industry investing um, for the 2027 model year programs. We're uh, the the fence space stays remains very active and of course this order helps and that but yeah, very encouraged by the start here in Q3.

Jaeson Schmidt: Okay, that is good to hear. Just the last one from me, I will jump back into Q. Can you remind us what the capacity will be in the Malaysian facility? I know it will vary by given sort of product mix, but at a high level, how should we think about capacity?

Okay, that's good to hear and then just the last 1 from me and I'll jump back into queue. Can you remind us what the capacity will be in the Malaysian facility? Know it will vary by um given sort of product mix? But at a high level how should we think about capacity?

Nick Grant: Good question there. The guys have all kind of identified some products that they will start making out of there, and of course, we will ramp up more over time to better support that region. But we anticipate that facility to be able to do $10 million, $15 million for us over time here out of the support of the Asian market.

Good question there. Uh, the guys have all kind of identified some products that, uh, they will start making out of there. And, of course, we'll ramp up more over time to better support that region. But, you know, we anticipate that facility to be able to, you know, to do, you know, 1015 million for us over time here out of out of um the support the Asian market.

Jaeson Schmidt: Okay, really helpful. Thanks a lot, guys.

Okay, really helpful. Thanks a lot guys.

Shawn Southard: The next question is from Richard Ryan from Oak Ridge Financial. Please go ahead.

Richard Ryan: Thank you. Nick, coming out of Q1, you had those environmental challenges that kind of pushed some business. Then you had these strong defense orders coming in for the division. Were those engineering challenges related to the defense side, or were they something else? Where do you stand with those issues?

The next question is from dick. Ryan from Oakridge Financial, please go ahead.

Thank you. Same Nick on the, you know, coming out of q1. You had those environmental challenges that kind of pushed them business.

But then you had these strong Defence orders.

Uh coming in for the division were those engineering challenges related to the defense side or were they something else and where do you stand with those uh those issues?

Nick Grant: Yeah, no, the engineering challenges from Q1 were predominantly more industrial applications. I think a little bit on the defense, but the majority of those all shift shortly after the end of the quarter and by mid-quarter and that. Engineering challenges are not, you know, an issue this quarter here. We do have a new leader at that location, and he is working to improve the coordination of the engineering efforts there.

Yeah. No. The engineering challenges from q1 were um predominantly, more industrial, uh, applications. I think a little bit on the defense but the majority of those all shipped shortly after the end of the quarter by mid quarter um and that. So uh yeah, engineering challenges, uh not uh, you know, an issue this quarter here as uh, we do have a new leader at that location and he's working to, uh, improve the uh,

Richard Ryan: Okay, that is good to hear. On the semi side, you had a couple of comments towards the end on the backend business. Any glimpse into 2026? What could happen on the frontend side of the business, or is that still, you know, maybe a mid-year sort of thing?

Efforts there.

Okay, that's good to hear on. On the semi side, you had a couple comments towards the end on the back end uh business. Any

Any Glimpse in the 2026, what could uh happen on the front end side of the business? Or is that still, you know, maybe a mid-year sort of thing.

Nick Grant: Our team stays very active with the players in that space on next-generation products and their kind of locations, new locations, and where things they are working on, looking at costing, potentially improvements, et cetera, on the design side of things. We are working closely with all of them. As for timing, it clearly looks like it is a 2026 kind of a rebound. Whether it is first half, second half, it has to be determined. I think it will slowly come back, but with ramping throughout 2026, and especially if we continue to see the automotive industry improving.

Yeah, our teams stay very active with the, uh, the players in that space, on Next Generation products. And um,

they're kind of locations, new locations and and where things are working on looking at, uh,

You know, costing potentially, uh, improvements Etc and the design side of things. So we're working closely with all them as for timing, you know, it clearly looks like it's a 2026, um, you know, uh, kind of a rebound and whether its first half. Second half, uh, yet to be determined, I think it'll slowly come back. Um, but I with ramping throughout 26,

Richard Ryan: Okay. Now, one last one. Alfamation, obviously, it is good to see the auto business and wins there, but on life sciences, can you provide some color what they are providing to the life sciences and kind of the outlook you might have there? Is that kind of a one-off sort of win, or is there some continuation there that you might be expecting?

And especially if we continue to see the automotive industry. Improving

Nick Grant: Yeah, the team is absolutely looking to drive further diversification. The wins that they saw here were kind of a follow-on on some medical device electronics in the medical space there. There is a strong pipeline of continued follow-on orders with this particular customer, but they are focused on other applications. Their technology really lends itself nicely for this space as well from an electronic test perspective. We are focused on capturing the automotive as it comes back here, but also driving diversification.

Okay yeah 1 last 1, I mean affirmation obviously, it's good to see the auto business and wins there but unlike Sciences. Can you provide some color? What they're providing to the life sciences and and kind of the Outlook you might have there is that kind of a 1-off sort of win or is there some continuation there that you might be expecting?

Yeah, though, the team is uh, absolutely looking to drive further diversification. Um, the, the winds that they saw here were kind of uh, follow on on some medical device Electronics. Um, um, and the the medical space there and um,

Richard Ryan: Great. I appreciate that, and good job on a solid quarter here on outlook. Appreciate it, Nick. Thanks.

There's a a strong pipeline of continued follow-on orders with with this particular customer but they are focused on other applications and um you know their technology really lends itself nicely for this space as well from an electronic test perspective. So um yeah we're we're we're focused on you know capturing the automotive as it comes back here but also driving diversification.

Okay.

Nick Grant: Thanks. Yeah, thanks, Dick.

Great. Well, I appreciate that. And, uh, good job on, uh, a solid quarter here in Q2 2025 for InTest Corp. Appreciate it. Next, thanks.

Thank ya. Thanks dick.

Shawn Southard: As a reminder, to ask a question, please press star one. The next question is from Ted Jackson from Northland Securities. Please go ahead.

As a reminder to ask a question. Please press star 1

Ted Jackson: Thanks. Good morning.

The next question is from Ted Jackson from Northland Securities, please. Go ahead.

Thanks, good morning.

Nick Grant: Hey, Ted. How are you doing?

Ted Jackson: am pretty good for a busy day. You know, it is peak reporting season, but you know what? I am up to the challenge. I wanted to start out. Book to bill was about one, and you have been, you know, basically knocking around one the last two quarters. To me, that tells me that, you know, you have got, let us say, you have kind of come back where you have got a pretty decent handle around your business in terms of, you know, kind of the near term. When you think about, you know, getting growth back in the business, you know, we would expect to see that book to bill start trending up above that one.

How you doing?

I'm pretty good for a busy day, you know?

Peak reporting season. But you know what? I up to the challenge.

Um so I want to start out um book. The bill was about 1 and you've been you know, basically knocking around 1, the last 2 quarters and you know to me that tells me that you know you've got um let's say you know you you've kind of come back where you've got a 3 piece in handle around your business in terms of, you know, kind of the near-term. When you um,

You think about, you know, getting growth back in the business, you know, we would expect to see them spoke to Bill start.

Ted Jackson: For those of us that sit on the outside, are there things that, you know, we should be looking for that would be kind of leading indicators to say, "Hey, you know, the order activity is really picking up." Could you kind of describe that a bit? Just give us some guideposts, maybe. That would be my first question.

Trending up above that 1. And so you know for those of us that sit on the outside, are there things that you know, we should be looking for? That would be kind of leading indicators to say, hey, you know, the order activity is really going to just picking up and you know, could you kind of describe that a bit, you just give us both some guide posts? Maybe that would be my first place.

Nick Grant: We tried to provide a little bit, you know, kind of baseline for you here with, you know, kind of the new products. These are certainly positioning us well to create demand out there, win some new accounts. We had a really strong quarter there from Q2, $2 million or a little less than $2 million of improvement over Q1 with new products. The more traction we gain will help drive the orders, push that orders above one on a book-to-bill basis there. With the pipeline being at an all-time high and continuing to grow each quarter, it gives us extreme confidence that, as soon as these customers get comfortable with the market dynamics and ready to kick off these CapEx projects, it is going to generate good order demands for quarters to come here. Duncan Gilmour, any thoughts from your side?

Yeah, we tried to provide a little bit, uh, you know, uh,

kind of Baseline for you here with, you know, kind of the new products. You know, these are certainly positioning us well to create demand um out there, win some new accounts. Uh and you know we had really strong quarter there from um in Q2 about 2 million or a little less than 2 million improvement over q1 with new products. And the more traction we gain will will help Drive uh, the orders push that order as above, uh, 1 on a book, to Bill basis there. Um, but the pipeline being as uh, in an all-time high and continuing to grow each quarter. It gives us extreme uh, confidence that you know, as soon as these customers get.

Duncan Gilmour: I think we have seen some of it. The announcement on the defense aero order as an example. Also seeing the Alfamation activity, both auto and life sciences, picking up. Those are all positive signs. The frontend world is not moving really right now in terms of customers actually placing orders. Although, as Nick Grant indicated, there is plenty of discussion, plenty of ongoing dialogue. Just a case of capital investment kicking off again for another cycle down the road, but likely out into 2026. That would be another space to keep an eye on. Backend, the backend semi was a little softer as we indicated this quarter. Again, I think seeing that out in the marketplace across other analog mixed signal test type players.

Uh comfortable with the market dynamics and ready to kick off these capex projects. You know it's going to generate you know good order demands for quarters to come here uh dunking. Any thoughts from your side? I think we've seen some of it the announcement on the defense.

Picking up, those are all positive signs.

The front end world is not moving really right now, in terms of customers, actually placing orders although as Nick indicated.

There's plenty of discussion, plenty of ongoing dialogue. Just a case of capital investment kicking off again, for for another cycle down the road, but, but likely out into 2026, but that'll be another space.

To keep an eye on.

Back in the back end. Semi was a little softer as we indicated this, this quarter

Duncan Gilmour: We expect to see that continue to pick back up as hopefully the global economy stabilizes, a little bit more certainty, and people start to know where to place their bets from a capital investment perspective.

Again, I think seeing that out in the marketplace across other analog mixed signal test type players. Um

But again, you know, we expect to see that, you know, continue to, you know, pick back up as hopefully, the global economy stabilizes a little bit more certainty. And and and people start to to know where to place their their bets from a capital investment perspective.

Ted Jackson: On the defense order, I probably already know the answer, just given kind of what your orders were for the quarter, but did that order happen in the third quarter? Hence, we would see a pickup in terms of all else being equal. The defense aerospace orders line when you report your third quarter?

Nick Grant: Yes, it was a Q3 order that came in.

On the, um, the defense order. And I I probably already know the answer, it was just given kind of what your orders were for the quarter but did that order, um, happen in the third quarter and hence we would see a pick up in terms of all else, being equal, uh, the defense Aerospace orders line when you report your third quarter,

Ted Jackson: Okay. Then a question for both of you on OpEx. Honestly, I mean, great expense control over the VPN was lower than I expected it to be. Duncan Gilmour, you talked about some headcount and reduction in austerity measures. Can you kind of walk through what you are doing in terms of bringing those costs down? And how much of that savings is permanent in nature, and how much of it will turn around once we kind of get to a more normalized market where it goes? I have one more after this.

Yes, it was a Q3 order. Uh that that came in.

Okay. Um then um uh a question for both of you on Opex, you know, I mean honestly you have to be a great expense for a controller. Looking at it was

Duncan Gilmour: Yeah, a lot of it is, so I mentioned headcounts. We have been reducing headcount steadily over really the last number of quarters as volumes have dropped. Direct labor, some of the operational overheads, headcount has dropped. Year over year, we are probably down around 50 heads across the global organization. Q2 versus Q1, probably around 15 heads, with a lot of those in direct labor overhead type positions. We have been adding slowly where we have seen attrition. We obviously will continue to replace positions that are needed. Then discretionary spending areas like travel, marketing spend, trade shows, things like that, we have been tampering down, holding back on. We would expect to continue to invest in those spaces and increase that as activity levels dictate. So to answer the second part of your question, some of that will come back as we see volumes pick back up.

Lower than I expected it to be. Duncan you talked about, you know, some headcount and um reduction and austerity measures, um can you kind of walk through what you're doing in terms of bringing those costs down? And you know how much of that savings is permanent in nature and how much of it will, you know, turn around once we kind of get to a more normalized Market where growth returns and then I have 1 more after this.

yeah, I mean a lot of it is so I mentioned headcounts, we have

Been reducing headcount steadily over really the last number of quarters as volumes have dropped direct labor. Some of the operational. Overheads headcount is dropped. You over a year, we're probably down around 50 heads across. The the global organization due to versus q1 probably around 15 heads with a lot of those in direct Labor, uh,

Over overhead type type positions.

We've been adding slowly where we've seen attrition, um, we obviously will continue to to, to replace a positions that are needed. And then discretionary spending areas, like travel marketing, spend trade shows, things like that, we have been

Tampering down holding back on, we would expect to continue to invest in those spaces and increase that as activity levels.

Duncan Gilmour: A couple of the other things we referenced, the videology operational restructuring, those savings kick in in 2026. That is a longer-term initiative that we are driving. We also did have in Q2, we did announce a small executive restructuring. We reduced our executive headcount by one with Rich Rogoff, who was in a dedicated M&A role, moving into the environmental technologies leadership role, which led to a net headcount reduction across the executive team of one. These are all examples of things that we have been doing. I would say more skewed towards the temporary than the permanent, but we are very focused, as you can see, on spend control as we see the top lines a little softer.

Dictate. Um, so to answer the second part of your, your question, some of that will will come back as we see volumes pick back up.

A couple of the other things. We referenced the video, operational restructuring those Savings kick in in 2026. That's a longer term initiative that we're driving. And we also did have in, in Q2 we did announce a small executive, restructuring red. We reduced our executive headcount by 1 with with Rich rogoff, who was it was in the dedicated m&a, role moving into the environmental Technologies leadership role, which led to a net headcount reduction across the executive team of, of, of 1. So, these are all examples of things that we've been been doing, um, I'd say more skewed towards the temporary than the permanent but we're very focused as you can see on, on spend control as we see

The is the top lines, a little softer.

Ted Jackson: Okay. My last question, just touching back over to the Malaysian operations as you ramp that up. How much of the, as you ramp up manufacturing of product in there, how much of your, I do not know, you call it revenue or however you want to think of it, volume is going to be transferred from existing facilities in there? What will the net of that be with regards to margin as you kind of, basically take absorption down, if you would, in some areas, and then improve it, obviously, in Malaysia? When you talk about getting that to $10 or $15 million in revenue, when do you see that happening?

Okay. And then my last question, just touching back over to the Malaysian operations as you ramp that up. You know, kind of a give and take.

How much of, you know, the if you ramp up manufacturing, the product in there? How much of your

I don't know, you call it revenue or however you want to think of the volume is going to be transferred from existing facilities in there. And um and then, what will the net of that be with regards to

Revenue, Wendy.

You see that happening?

Nick Grant: Yeah. So yeah, we are focused on really driving growth out of that facility by better serving customers in the region, allowing us to be more competitive from a price position with a better supply chain cost base and lower labor cost on that. So it is not like we are going to be shifting a whole bunch of operations out of the U.S. over there. We will support some customers that are, you know, have facilities in those regions, you know, out of that site. But we also anticipate this regionalization effort for, you know, bringing more activity back to the U.S. You know, it will give us the capacity to keep our existing facilities, you know, leveraged out there. So yeah, it is about a growth story, better competitiveness in the region, and getting aggressive after the competition to drive the top line.

Nick Grant: As for timing, it will be a ramp-up. You know, the group has laid out kind of a five-year plan here that we will move to those kind of numbers over during that timeframe. But obviously, things can change in two, three years down the road. And as I mentioned in the opening statement, if we need to do something from a tariff, you know, kind of lever that we could pull to better serve customers and minimize our costs going up as a result of tariffs, we have that lever to pull as well down the road.

Yeah, so um yeah, we're focused on really driving growth out of that Facility by better serving customers in the region, allowing us to be more competitive from a price. Uh, position. Um, with a better supply chain, cost base, and lower Labor, uh, labor cost on that. So the it's not like we're going to be shifting a whole bunch of operations out of the us over there. We will support some customers that that are, um, you know, have facilities in those regions, um, you know, out of that site. But we also anticipate this regionalization effort, uh, for, you know, bringing more activity back to the US, um, you know, or give us the capacity to keep our our existing facilities, you know, leveraged out there. So, uh, yeah, it's a, it's about a growth story, better competitiveness in the region and uh, getting uh, aggressive after the competition to uh, Drive the top line as for timing. It'll

Be a ramp up, you know, the groups. Um,

laid out, kind of a a 5 year plan here, uh, that you will uh,

Move to those kind of numbers over during that time frame. But uh, obviously things can change in 2, 3 years down the road. And as I mentioned in the opening statements, if we need to do something from a tariff, uh, um, you know,

Kind of, uh, lever that we could pull to better serve customers and minimize our, uh, cost going up. As a result of tariffs. We, we have that lever to pull as well down the road.

Ted Jackson: Well, you know, it was a nice solid quarter, and I appreciate the good guidance. I know things will turn around, and you guys are pulling all the levers you can, it sounds like. So thanks for the time.

Nick Grant: Thanks, Ted.

Okay, well, um, you know, it was a nice solid quarter and uh, appreciate the good guidance and I know things will turn around and you guys are doing all the levers you can. It sounds like so thanks for the time.

Thanks, Ted.

Shawn Southard: There are no further questions at this time. I would like to turn the floor back over to Nick Grant for closing comments.

There are no further questions at this time. I would like to turn the floor back over to Nick Grant for closing comments.

Nick Grant: Thank you, Sati. We appreciate you joining us today. Thank you for your time, and we welcome the opportunity to answer any further questions you may have. On slide 14, please note that in addition to the details regarding the replay of this call, we will be participating in several upcoming conferences later this month and next. Thanks again for participating today, and have a great day.

Thank you, Santee.

We appreciate you joining us today. Thank you for your time and welcome. We welcome the opportunity to answer any further questions, you may have on slide 14, please note that. In addition to the details regarding the replay of this call, we will be participating in several upcoming conferences, later this month. And next,

Thanks again for participating today and have a great day.

Shawn Southard: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.