inTEST Corporation (INTT) — Q2 2023 Form 10-Q
Unaudited results for the quarter and six months ended June 30, 2023. Amounts are in millions of dollars unless stated otherwise. inTEST supplies test and process technology across semiconductor, automotive, defense/aerospace, industrial, life sciences, security, and other markets through Electronic Test, Environmental Technologies, and Process Technologies.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $32.6 | $29.6 | $64.5 | $53.7 |
| Gross profit / margin | $15.0 / 46% | $13.5 / 46% | $30.1 / 47% | $24.6 / 46% |
| Operating income | $3.3 | $2.7 | $6.9 | $3.5 |
| Net earnings | $2.8 | $2.1 | $5.6 | $2.7 |
| Diluted EPS | $0.24 | $0.20 | $0.49 | $0.25 |
| Operating cash flow | Not separately reported | Not separately reported | $5.3 | $(5.1) |
- Q2 revenue increased 10% year over year; first-half revenue rose 20%. Q2 gross margin was unchanged year over year, while first-half margin improved one percentage point.
- For the first half, semiconductor-market revenue increased 22.5% to $36.5 million; defense/aerospace revenue rose 130.8% to $6.7 million. Auto/EV revenue declined 34.8% to $4.1 million. Foreign revenue was $43.5 million, versus $30.4 million a year earlier.
- Cash and cash equivalents were $37.4 million at June 30, up from $13.4 million at year-end; working capital was $58.2 million, up from $33.2 million. The cash increase principally reflects $19.2 million of net proceeds from a May stock offering.
- Term Note debt totaled $14.1 million, including $4.1 million current; no revolving-facility borrowings were outstanding. The company reported $30 million of available Term Note borrowing capacity and $10 million under the revolver. It was in compliance with loan covenants.
Material changes and operating indicators
- Q2 revenue growth reflected stronger semiconductor demand and defense/aerospace thermal-test demand, partly offset by lower auto/EV revenue attributed to order and delivery timing.
- Q2 orders were $31.4 million, down 22.4% year over year but up 2.0% sequentially. First-half orders were $62.3 million, down 5.1%. Management cited timing variability and unusually early customer orders during 2022.
- Backlog was approximately $44.6 million at June 30, compared with $46.0 million a year earlier and $45.7 million at March 31. Most backlog was expected to ship in 2023, but orders may be canceled or rescheduled.
- One customer represented 14% of first-half revenue; no other customer reached 10%. Semiconductor markets provided 56.6% of first-half revenue.
- The company sold 921,797 shares through an at-the-market offering for $19.2 million net, increasing shares outstanding. Equity compensation and employee option exercises also contributed to share-count growth.
Outlook, risks, and unusual items
- The filing provides no specific quantitative revenue or earnings guidance. Management expects cash, available credit, and operating cash flows to fund near-term working capital and planned investments; estimated minimum short-term working-capital needs are $8–$10 million.
- Management intends to diversify beyond semiconductors, but results remain exposed to semiconductor cyclicality, customer-specific demand shifts, product mix, pricing pressure, and order/backlog variability.
- Acculogic relies on a sole-source supplier in Belarus for certain material. The company estimated six to nine months of supply and was qualifying an alternate supplier, targeting qualification by year-end 2023. Supply-chain, logistics, inflation, and foreign-exchange risks remain.
- Debt includes a variable-rate draw carrying an approximately 7.2% rate at June 30; another draw was effectively fixed at approximately 3.2% through an interest-rate swap. First-half interest expense was $0.4 million.
- A contingent liability of $0.2 million relates to potential repayment of New York employment grants; the company reported it was meeting the employment targets. The Acculogic contingent-consideration liability was $1.4 million at June 30.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. Management stated disclosure controls were effective.
Investor verification priorities
- Track semiconductor orders and backlog conversion, particularly given the year-over-year order decline and the cyclicality of the market.
- Monitor customer concentration, the 14% customer exposure, and the timing and durability of defense/aerospace growth versus auto/EV weakness.
- Verify qualification of the alternate Belarus-related supplier and assess whether inventory and delivery plans mitigate disruption risk.
- Assess the effects of the May equity issuance and additional share-based compensation on dilution and per-share earnings.
- Review cash generation, debt repayments, variable-rate borrowing costs, covenant compliance, and actual use of available borrowing capacity.