Strong Results and Strong Guidance at inTEST
Ken Nagy, CFA
On May 2, 2012, inTest Corporation (INTT), an independent designer, manufacturer and marketer of semiconductor automatic test equipment interface solutions and temperature management products, reported financial results for its fiscal 2012 first quarter, ended March 31, 2012.
inTest’s financial results came in stronger than expected from the previous guidance that the Company provided on March 7, 2012, which reflected a turbulent macroeconomic environment as well as costs related with the closing of the Thermonics acquisition.
Revenues during the first quarter of 2012 exceeded the Company’s guidance by 2 percent at $10.731 million compared to revenues of $11.704 million for the three months ended March 31, 2011 and revenues of $10.081 million during the fourth quarter ended December 31, 2011.
Still, the improved sequential numbers were driven by the increasing demand for mobility products, demonstrating the Company’s focus and commitment to a differentiated product strategy.
It should be noted that over the last few years inTest has been transforming itself through the strategic diversification of its Thermal products segment.
As a result the Company now addresses growth markets in both the semiconductor and non-semiconductor areas, which include automotive, consumer electronics, defense aerospace, telecommunications and most recently the nuclear market.
Nonetheless, inTest reported that first quarter bookings were $12.9 million, solidly up sequentially from its fourth quarter 2011 bookings of $8.1 million but down year over year from first quarter 2011 bookings of $13.1 million.
While bookings during the quarter were down year over year, the 60 percent quarter over quarter increase reflects the commitment on the part of inTest’s customers to increase their overall test capacity.
What’s more, the Company’s Mechanical products saw a very strong resurgence in bookings in the last few months of the quarter and the Electrical products segment had its highest bookings since 2009.
Similarly, inTest’s strongest segment, its Thermal segment, had bookings in February that were up 38% over January. Furthermore, the segment’s March bookings were up another 37% over February, and booking for April continued to be strong.
Although non-semi related bookings fell from 38 percent in the fourth quarter, ended December 31, 2011 to 13% of first quarter 2012 bookings, this was primarily a result of the impact from the acquisition of Thermonics, whose revenues were 100% in the semi space.
Still, inTest expects to continue to leverage its Thermal division and the Sigma Systems acquisition and expects that non-semiconductor related products will continue to play an even greater role its future success as it further diversifies end market penetration.
The Company reported a net loss for the quarter, breaking its previous streak of nine consecutive quarters of profitability.
inTest reported a net loss during the first quarter 2012 of $43,000 compared to net income of $1.257 million for the three months ended March 31, 2011 and net income of $769,000 for the quarter ended December 31, 2011.
The year over year and sequential drop to a net loss was primarily due to a drop in gross margin as well as increase in total operating expenses.
Still, inTest anticipates profitability again in the second quarter fiscal 2012.
Total operating expenses during the first quarter increased to $4.680 compared to $3.832 million during the first quarter fiscal 2011 and $3.690 for the fourth quarter ended December 31, 2011.
Gross margin during the first quarter fell to 42.8 percent compared to 43.5 percent from the first quarter fiscal 2011 and from 48.3 percent for the three months ended December 31, 2011.
Based on a weighted average number of diluted shares outstanding of 10.205 million, diluted net loss per share resulted in a $0.00 per share net loss for the quarter. This compared to diluted net income per share of $0.12 on a weighted average number of diluted shares of 10.267 million during the three months, ended March 31, 2011 and diluted net income per share of $0.08 on a weighted average number of diluted shares of 10.281 million during the fourth quarter ended December 31, 2011.
inTest’s balance sheet remained strong during the first quarter with cash and equivalents of $10.101 million and working capital of $19.919 million. This compares to $13.957 million in cash and equivalents and working capital of $20.837 million for the period ended December 31, 2011.
Still, total stockholder’s equity improved sequentially by roughly $31,000 to $26.230 million.
It should be noted that during the quarter the Company received an order for $2.2 million from a major domestic semiconductor manufacturer, secured a multi-piece docking order in Shanghai as well as introduced and began shipping new docking and interface products to support the Advantest T2000 tester.
Furthermore, over the past few years inTest has been attempting to transform itself through the strategic diversification of its Thermal Products segment, which remains the Company’s strongest segment, driven by mobility and opportunities in the telecom market.
In January 2012, Temptronic Corporation, a member of inTEST Corporation's Thermal Solutions Group, closed on the acquisition of Thermonics, Inc.
With a purchase price for the assets of approximately $3.8 million in cash (which included net working capital of approximately $1.1 million) , Thermonics is expected to further enhance inTEST's presence in the ATE industry as well as provide additional leverage into growth industries outside of the semiconductor industry.
The integration of the acquisition has been completed and management continues to expect it to be accretive to operations beginning in the second quarter of 2012.
Along the same lines, it should be noted that moving forward; the Company expects non-semiconductor related products to play an even greater role in the Company's growth strategy and success.
Additionally, management reported that it anticipates net revenue for its second quarter ended June 30, 2012 will be in the range of $13.5 million to $14.5 million and that net earnings will be in the range of $0.12 to $0.15 per diluted share.
Similarly, inTest anticipates cash to resume increasing sequentially in the second quarter of 2012.
Guidance for the second quarter reflects the continued improvement the Company has experienced in its traditional semiconductor market as well as the new markets addressed by inTEST Thermal Solutions.
Furthermore, inTest’s management is confident in its long term growth prospects as a result of the improving semiconductor dealings due to the effect of demand for mobility products as well as its continued expansion of its non-semiconductor businesses.
Likewise, the Company further believes that with the diversification of its served markets it is well positioned to meet the needs of its customers who continue to strategically increase their overall test capacity as they seek to meet end market demand for a broad range of products.
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