By Ken Nagy, CFA
On July 31, 2013, 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 2013 second quarter and six months, ended June 30, 2013.
Revenues during the second quarter 2013 were $11.218 million, above management’s guidance range of $9.5 million to $10.5 million for the quarter. This compares to revenues of $8.973 million for the three months ended March 31, 2013 and revenues of $13.576 million during the second quarter ended June 30, 2012.
The increase in revenues was fueled by strong demand by a wide verity of customers in the semiconductor industry. While net revenues exceeded guidance and increased sequentially by 25 percent, non-semiconductor test revenue increased both in terms of absolute dollars and as a percent of revenue.
Over the last few years inTest has been transforming itself through the strategic diversification of its Thermal products segment.
The diversification strategy outside of inTest’s traditional semiconductor markets helps to mitigate the cyclicality that's so closely tied to that industry and affords the company several exciting new opportunities with multiple new customers.
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.
22 percent of second quarter 2013 net revenues were derived from non-semiconductor test compared to 19 percent of first quarter 2013 net revenues being derived from non-semiconductor test. Sequentially, second quarter non-semiconductor test net revenues increased 30 percent.
inTest reported second quarter bookings were $11.0 million, compared to first quarter 2013 bookings of $7.7 million and from second quarter 2012 bookings of $11.8 million.
Similarly, 20 percent of the company’s second quarter 2013 bookings were derived from non-semiconductor test compared to 16 percent from the first quarter.
Backlog at the end of the second quarter was $2.7 million, down slightly from $2.9 million at the end of the first quarter.
Gross margin during the second quarter jumped to 48.7 percent compared to 45.8 percent from the first quarter fiscal 2013 and 45.6 percent for the three months ended June 30, 2012.
Gross margin was fueled by an increase in net revenues which caused a more favorable absorption of fixed manufacturing costs in the second quarter of 2013, which decreased from 16 percent of revenues in the first quarter to 13 percent of revenues in the second quarter.
inTest reported second quarter 2013 net income of $1.003 million compared to first quarter 2013 net income of $292,000 and net income of $1.334 million for the three months ended June 30, 2012.
Based on a weighted average number of diluted shares outstanding of 10.394 million, diluted net income per share resulted in net income of $0.10 per share for the quarter. This compared to diluted net income per share of $0.03 on a weighted average number of diluted shares of 10.366 million during the three months, ended March 31, 2013 and diluted net income per share of $0.13 on a weighted average number of diluted shares of 10.360 million during the second quarter ended June 30, 2012.
inTest’s balance sheet remained solid during the second quarter with cash and equivalents of $16.032 million, working capital of $22.789 million and no debt. This compares to $15.384 million in cash and equivalents and working capital of $21.572 million for the period ended March 31, 2013.
Furthermore, management currently expects cash generation to continue with cash and cash equivalents increasing sequentially throughout 2013.
inTest has added 5 companies to its operations in the last 15 years which have bolstered its growth opportunities. Last year, inTest acquired Thermonics, which further enhanced its presence in the ATE industry, while at the same time, providing additional leverage into growth industries outside of the semi industry.
Management intends to continue to leverage the Thermal division and Sigma Systems acquisition and expects that on an overall basis, non-semiconductor related products will play an even greater role in the company’s success as it diversifies its end market penetration.
As a result, management is confident in its long-term growth prospects and believes inTEST is well positioned to capture new opportunities as industry conditions improve.
Correspondingly, management reported that it anticipates that net revenues for the third quarter ending September 30, 2013 will be in the range of $10 million to $11 million and that net earnings will range from $0.06 to $0.10 per diluted share.
Management expects orders and net revenues in the second half of 2013 will be stronger than those of the first half, with a sequential increase in revenues in the fourth quarter.
Likewise, inTest has been profitable for the past 15 quarters, including a breakeven quarter in Q1 of 2012, and continues to generate cash and management expects to continue both trends through 2013.
A copy of the full research report can be downloaded here >> inTest Report
By Ken Nagy, CFA