Q3 2025 inTest Corp Earnings Call
Good morning ladies and gentlemen. Thank you for standing by. Welcome to the incast corporation. Third quarter 2025 Financial results conference call.
At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
I will now turn the conference over to your host, Alex Fee Alta. Thank you. You may begin.
Good morning everyone. And thank you for joining us with me on the call, our Nick, Grant our president, and chief executive officer, and Duncan Gilmore our Chief Financial Officer and Treasurer the earnings release was issued this morning, as well as the slides that management will use during the call. Both of these can be found in the investor relations section of the intest calm website.
Please turn to slide 2 for a review of 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. And 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 with that. I'll turn the call over to Nick.
Thank you, Alex and good morning everyone. Thanks for joining us for our third quarter, 2025 earnings call.
We will begin today's discussion on slide 4, the presentation.
After several months of order, sluggishness as tariff and economic concerns complicated, customers capital investment plans. It's refreshing to see some pockets of customers break, free and move forward with capital projects.
We have always contended that a market recovery is a matter of when not if
Our final of opportunities has been at high levels since q1 and this quarter, the conversion rate picked up resulting in orders of 37.6 million. Our strongest level since Q2 of 2022.
Leading to a sequential 11.4 million increase in our backlog.
Most of this improving demand is coming from customers in the automotive and defense Aerospace end markets.
A clear Testament to the success of our Market diversification strategy.
These customers are relying on our Innovative and differentiated test equipment that enable better quality control and increasingly complex, manufacturing processes.
While this increase in orders is encouraging, conversion rates do vary by End Market and many customers still remained hesitant to commit to new capital projects.
This is especially true in semi
However, based on what we are seeing and hearing, it feels like we may be moving into a period of gradual recovery.
Revenue for Q3 was 26.2 million.
Lower than Q2 and below the guidance range we provided on last quarter's call.
During the quarter, our Engineers encountered technical challenges and finalizing a few systems which delayed approximately 2 million in shipments.
Appreciated with new capabilities.
And the other case, the systems were for a new customer and a new target market.
These challenges have since been resolved and the systems have been shipped.
We are excited about the positive impact. Our steadfast resolve to drive Innovations and add new customers will have on our future as we execute on our vision 2030 strategy.
During the quarter, we continue to strengthen our competitive position and preparation for a broader Market recovery by making more progress, and penetrating Target accounts and driving adoption of new products.
We believe we have the balance sheet, the financial flexibility, and capacity to support our customers as demand, and proofs.
Living. Now, review, orders and backlog on slide 5.
Auto EV led the climb in orders this quarter accounting for around 3/4 of the sequential growth and doubling to 14.6 million.
Al for bookings, were at an all-time record level for the business representing. Strong demand for test equipment, from Tier 1, Electronic suppliers as they expand capacity to support 2027 model year, programs and start new projects.
Defense, Aerospace orders more than doubled, sequentially to 6.4 million. Primarily due to the increased test demand for Next Generation Weapons Systems.
We continue to see success with our new products.
This is especially true at archaeological where they have expanded their flying probe capabilities to include radio frequency and oscilloscope measurement test Solutions.
Thereby enhancing our customers manufacturing efficiencies.
These expanded capabilities, drove, multiple system orders in the quarter from new customers.
In addition.
Several defense contractors are continuing to qualify our new products.
Year-over-year orders were up, 34.2% the increase, reflects, the strength, and auto EV, which grew 7.4 million industrial, which increased 2.4 million.
Defense Aerospace which increased 1.9 million Life Sciences, increased 0.9 million and semi which was up 0.4 million.
These increases outpaced the declines and safety security, and other markets.
although we saw some pickup in semi orders overall, the semi Market remains sluggish
especially in our analog mix signal business.
Clogged at September 30th, was 49.3 Million substantially above where it was at the end of the second quarter and positioning, as well, for the upcoming quarters.
Before turning the call over to Duncan to review the financials and Outlook and more detail. I want to thank the entire intest team for their continued dedication and commitment to our shared Vision 2030 goals.
Duncan over to you.
Thank you, Nick.
Starting on, slide 6 revenue for the third quarter was 26.2 million compared to 2 8. 1 2.
A decrease of 1.9 million.
Sales and defense Aerospace accounted for 1.3 million of the decline, followed by Otto EV which declined 0.9 million and semi, which decreased 0.4 million.
This decline was partially offset by an increase of 7 million across Life Sciences, safety security, and other markets.
Compared with Q3 2024 Revenue declined, 4 million, reflecting lower semi auto EV defense Aerospace, and other sales, totaling 5 million, partially offset by increases in life, sciences and safety security, totaling 1 million.
Moving to slide 7.
Starting with the sequential comparison, gross profit decreased by $1 million to $11 million, and gross margin declined by 70 basis points to 41.9%, primarily due to lower volume.
Compared to the prior year, period gross profit, declined, 3 million, and gross margin declined, 440 basis points due to reduced volume and unfavorable product mix.
Launching impacts.
As you can see on slide 8, our operating expenses are $12.2 million, decreased $7 million sequentially and $1.3 million compared to the third quarter last year. As our cost reduction actions flow through, we aim to improve our long-term profitability.
The consolidation of our videography Netherlands facility, which we estimate will translate into annualized savings of approximately, 500,000, beginning in 2026, remains on track.
Turning to slide 9, you can see our bottom line and adjusted Evita results.
For the quarter, net loss was $0.9 million, or a loss of $0.08 per share.
Adjusted net loss, which adds back tax affected, acquired, intangible amortization charges and restructuring charges. Was a loss of 2 cents per share.
Adjusted ebita for Q3 was 0.4 million.
Slide 10.
Shows our capital structure and cash flow.
In the first 9 months of 2025, we reduced debt by $6.2 million, including the $1.2 million we paid down in the third quarter.
Total debt outstanding was 8.9, million a quarter end for a total debt. Leverage ratio of 1.7 x.
Cash Cash equivalents and restricted cash. At the end of the third quarter. Were 21.1 million up 1.8 million for the end of the second quarter.
We ended the quarter with approximately 61 million in liquidity.
In tests remains a cash generating company that we believe has the financial resources to scale the business and Achieve our vision 2030 goals.
Turning to slide 11 and our guidance.
Our long-term fundamentals are solid within test, maintaining its strong leadership position, and specialized, high-value applications, and our Readiness for a market recovery.
As Nick said we are seeing some pockets of renewed Capital spending but many customers still remain hesitant to commit to capital projects and we do not have visibility into the timing of an overall Market recovery. Therefore we are continuing to offer guidance on a forward quarter basis, only
Including the shipments, which slip from the third to the fourth quarter and the orders in backlog, that we anticipate to fulfill and ship during the fourth quarter, we expect Revenue in the fourth quarter, to rebound to a range of 30 to 32 million.
We are forecasting gross margin of approximately 43% and operating expenses of 12.3 to 12.7 million. Excluding approximately 200,000 of restructuring expenses.
Amortization and interest expense are projected to be consistent with Q3.
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. Not. Does it include the potential impact from any additional Acquisitions? We may make
With that if you will turn to slide 12, I will now turn the call back over to Nick.
Thanks Dalton.
Although the third quarter had its challenges, we are pleased with our performance. Overall, our order book expanded our Market diversification strategy continues to take hold and our Innovative new products are gaining traction. As we continue to execute our vision 2030 gross strategy.
The adoption of these new products position us, well to capture New Opportunities and expand our service mobile market.
This quarter's increase in backlog, a little more than half of which is scheduled to ship in 2026 and our strong funnel of opportunities, suggest that demand. And some of our end markets is beginning to recover.
Although, as Duncan noted visibility for a full Market, recovery remains Limited,
while our market conditions have been weak this year. We have not been idle
We have been strengthening our Market recovery Readiness. Penetrating new targeting accounts, broadening our Channel networks, expanding our manufacturing footprint to support, Global customer needs, while introducing new products that deliver more value to our customers.
We believe we have the right Technologies and that we are focused on the right markets and the right customers to scale the business as we advance towards our vision 2030 goals.
With that operator. Let's open the lines for questions.
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. If any time you wish to remove your question from the queue, please press star 2 for participants. Using speakers equipment. May be necessary to pick up your handset. Can we pick up the star key?
Our first question is from Max, Mike Harris with Lake Street Capital markets.
Hey guys, thanks for taking my question and thanks for quantifying, quantifying sort of the push-ups that happened in the quarter of 2 million. I was wondering if you could kind of break out into what verticals that 2 million dollars falls into
Yeah, morning Max. So, uh, about million and a half of it was, um, tied to the life science. Um, uh, markets, it, it was the, um, tried to do a couple units couple systems at our operation business, uh, which is really for the medical technology. Um,
Kind of diversification. Uh, efforts, we've been driving there and they had a little bit of a delay in getting the, um, the systems, you know, ready to go by the end of the quarter. But so, but the the challenges they faced have been resolved in the C customers that fat is completed and the tools have been shipped so uh customers very happy um, on the on that side in fact because I'm giving us a Loi for additional
System. So very um while it was disappointing we didn't get those out at the end of the system or end of the quarter. You know? It's it's a we're pleased that uh the the outcome there. The other was for um our uh semi industry.
Uh, at archeologically, uh, was, uh, missed the shipment at the end of the quarter, just by ship the following week. So, um, but into the semi Market,
Uh, no, thank you for that. And then the next question. So if we look at your order growth, really solid in the quarter, especially with the AMD and then Automotive, if you highlighted, uh, 2027 Automotive programs kind of driving the demand, and that's in that vertical, I mean how what's the
I mean, how long does that last like does is that a few more quarters of strong momentum or kind of give us like an idea on how long we can expect this strong, uh, Automotive orders to continue.
Yeah. Now as you uh as you noted there um that you know the front end or the uh
The automotive, uh, programs tied to these new.
Pro uh 2027 model years. Uh, really started last quarter. We saw almir have a nice strong quarter in Q2 and then really picked up here in Q3. What's encouraging is their funnel, even though they've booked quite a bit of this. Uh, activity Still Remains healthy, they're filling in new opportunities. And, um, so we do see that the, this, um,
Test investment for the new technologies around, infotainment ccu's, displays lighting Etc in these vehicles, you know should should uh continue for a foreseeable future here.
Awesome. Great guys. Thanks
As a reminder, can I ask a question please press star 1? Our next question is from dick. Ryan with Oakridge.
Uh thanks so Nick just to uh discuss the challenges again in the quarter. Were they a continuation of the ones that you saw on the first quarter or are they kind of more 1 off and and uh
Those issues are behind.
Yeah, very different than the ones we saw in the first quarter. Those were uh challenges that our its thermal solution. Um and uh where we were seeing more? Uh I'd say uh repetitive challenges there for that business and we needed to make a change uh which we did. Um, these were really 2, uh shipments that were tied to new technologies at Alpha and AA logic. And as, you know, dick, we're we're um,
We're we're always, uh, you know, pushing the envelope working with customers to solve some of their toughest challenges. And it doesn't always, um, lead to us being able to hit our our
Certainly, uh, you know, something you we see from time to time just because of the the work we do.
Sure, sure. Okay, thanks for that clarification. Say on the semi side, you talked. Uh sluggish, can you can you
Talk a little bit about front end, back end. I mean, I think some of the commentary for the analog side says, you know, at least that market is stable, you know, there may not be much growth over the next couple of quarters, but then it seems on the silicon carbide side, commentary for 26.
uh, seems to be more growth oriented coming off of a transformational 2025, what are you seeing in those 2, uh, markets from your customer conversations,
Yeah, I mean let me just touch on that dick. I mean I think on the front end side.
activity, pretty anemic still, uh, as I think,
We see across the marketplace, although there are signs of life. I think we're starting to see a little bit more activity. As we've talked about before. Customers are still interested, we still have good dialogue in terms of projects that they're still working on. But as you indicate looking further out into later, 26 since the 27th, things like that. So
We're still very optimistic about the future, you know, in that, in that space.
But not a great deal happening right now. In terms of order placement Revenue generation on the back end, things have been a little bit softer as we indicated and I would characterize that as some of our larger customers. For example are still struggling a little bit. With the Tariff situation, still struggling a little bit with where to place their chips investment wise. So
You know things like investment into say China is perhaps a little bit slowed. So we're certainly seeing a little bit of that. And again I think the rhetoric around analog mixed signal with a number of the the larger players are very similar, similar story.
Great. Okay, thanks guys. And, uh, congratulations on the order that, uh, order level, that's pretty impressive.
Great. Thanks dick.
Our next question comes from, Ted Jackson with Northland securities.
Thanks. Good morning guys. Um I want to ask a bit about yeah how are you?
Good.
So um I wanted to talk a bit about just sort of uh what happened during the quarter and kind of you know the what might maybe has changed in the near term Visa B. You know when you when you entered the quarter let's say I mean I I you know the timing stuff I mean stuff like that happens but I was I'm a little surprised that
We didn't see with regards to the guys in the fourth quarter, you know, maybe a little bit more because, you know, you're basically bringing 2 million dollars already from the third quarter and into the fourth. So, you know, the high end of your range at 32 is, you know, pretty much where the, you know, the consensus and everyone was looking for anyway. And so and, you know, when I, when I think about that does that this was their
A downtick in terms of kind of, you know, the, the economic environment for you. And, you know, there was there a shift in something or some part of the business, you know. And as we you know, kind of went through this quarter this last quarter and got into this quarter relative to what you, you know, where things were, you know, call 3 months ago, that's kind of my first question.
Yeah, so, uh, the first part of that, um, you know, the, the issues really is around these new technologies as we highlighted, um, and you know, once our teams get these, uh, things implemented, you know, for the applications. Um, the building the next follow on tools is, is, you know, very less less risky. Uh, and of
A new system. So that technology really resonating with the market out there. Um, so we're excited about that.
You know, as for Q4, kind of the range we put out there.
I would say our our teams are, you know,
very uh,
confident given providing numbers on what they're going to hit this quarter. I we made it very clear slippage, uh, you know, things that are at risk, but I don't want them in the, in the 4 CS. So that's what we're kind of seeing things that we're we were able to deliver on, um, with minimal risk. Now, if we get some other stuff out, then that's all upside. But these guys, um, you know, they've got the message loud and clear. Uh, yeah, I would also add a lot of the, the strong order activity and and Q3, which was, you know, great to see Testament to the work that the teams have all been doing a lot of that is for delivery in.
Q1 and Beyond the 2026. So a lot of that is slightly longer lead, time stuff that isn't necessarily turning in, you know, Q4 here. So I think that's another piece of the puzzle in terms of putting together those
those components.
You see what I'm getting at is like. So if you had 2 million that that slipped out that you were expected to come in the third quarter, so your third quarter, instead of being, you know, 262 what it should have been 282. And then if you take that out, that would mean that your, you know, your third, your fourth quarter guidance, you know, is, you know, at best flat
You see I'm going with this and and yeah I see we are going. So so but so my question is is like has you know does that is? Does my sense is that?
That's you know kind of a I think you can get guidance. It's not like a guy down but you know that you know, the that that's a bit disappointing vcd, perhaps what you would have thought.
Last time we had a call and maybe I'm wrong with that, but that's just true to my sense. And so, I've just kind of curious, you know, is that because there's been some kind of change within the Dynamics or that you're just kind of tightening up the things that you're putting in, you know, and counting on.
These things and for for your budget and and why I bring all this up because, you know, to be honest, like the tone of this call, it's the best tone that you've had all year. I mean clearly you know you're feeling better about your business today than you were 3 months ago or 6 months ago you see I'm going and so you know there's just a disconnect for me with that. So I'm just trying to understand understand
Yeah, I mean I think I think Chad obviously the tone is positive, the orders were extremely encouraging, quite honestly, they were literally 2 or 3 systems that make up the 2 million dollars. A very small number of of tools which and quite quite frankly, the story behind those, misses is a very positive 1 in. In terms of the the new technologies, the new capabilities logistic a little bit longer to turn around as well as uh, in the affirmation side, into the life sciences, penetrating new markets. So, although disappointing that it was a revenue miss the fact that it was literally slippage of a, a few days. A few weeks, very positive aspects in terms of this sequential Revenue. I think we were looking at Revenue growing Q2 versus Q3 versus Q4. The 2 million slips. We would have been in the low 28.
Flat-ish with Q3 had all of those systems gone out the door. Then we'd have been looking at, say, around a 30 instead of a 30 to 32. So, not a spectacular ramp. I think we have indicated the recovery is going to be gradual here.
We do feel most of our markets are at relatively low points. We don't see a spectacular ramp back up. So,
I think we feel
somewhat in line with with, with what we had, what we had painted, we're always disappointed when the numbers, uh,
we'd always like the number to be higher. I suppose is 1 way to look at it.
Don't we all? Um, okay. Then my next thing, let's go on to something a little different. So when you look at, you know, kind of the book to Bill and you look at your different segments, like, I'd like to talk a little bit maybe just about industrial, No 1 brings it up anymore. But you've actually put up a book to build number better than 1 for the 4 in a row and actually 5 at the last 6. So, you know, with regards to Industrial, I know it's not, you know, it's it's been let's just say, it hasn't been a problem, trying,
You know, like kind of like, you know, what's happening with the next segment of Your World.
Things there that are still kind of delayed as customers. Hold back on capex. So it could be better. Um, but the teams are are, um, you know,
Capturing what they can capture out there. So we we still believe Industrials throttled back a little bit. Um, as we've had commented, semi is still, uh, slow for us on that. But on the positive defense arrow, uh, you know, really, uh, robust for us the activities, we're seeing there the orders, we're getting the, um,
The automotive, these these programs um and the uh you know the life science activities we're driving. So the diversification we drove really is paying off as semi will come back and our industrial base will get pick up stronger here as uh as economy improves. And so we're in a in a good position. Um, as we go forward here, and it's great to see a few of our Target markets, you know, coming in nicely.
All right. That's it for me. Thanks. Thanks for the time.
No, thanks. Ted.
Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back to Nick Grant for closing remarks.
Thank you David. We appreciate you joining us today and thank you for your time and we welcome the opportunity to answer any further questions. You may have
On slide 13, please note that in addition to the details regarding the replay of this call, we will be participating in two conferences before the end of the year. We hope to see some of you there.
Coming into this call. I understand there was uh some web website technical challenges uh for a few folks. Um there are teams been working to get that resolved and we'll continue to do so as quickly as possible, if it's not already completed, so
Thank you again for taking the time and, um, you all have a great day.
Mr. Good News today's conference and test. Thank you for your participation. You may disconnect your lines at this time.