inTEST (INTT) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached a record $34.0 million, up 4% year-over-year and 14% sequentially, driven by the Alfamation acquisition, which contributed $9.7 million.

• Gross margin declined to 40.6%, primarily due to lower volume, unfavorable product mix, and reduced high-margin semiconductor sales.

• Net earnings for Q2 2024 were $230,000 ($0.02 per diluted share), down sharply from the prior year, with adjusted net earnings of $1.0 million ($0.08 per diluted share) and adjusted EBITDA of $2.2 million (6.3% margin).

• The Alfamation acquisition expanded presence in auto/EV and life sciences, offsetting ongoing semiconductor market weakness and achieving a record quarter for that business.

• Orders improved 15% sequentially but declined year-over-year, with backlog at $47.7 million, about 50% expected to ship beyond Q3.

Financial highlights

• Q2 revenue increased $1.4 million year-over-year, with auto/EV and industrial markets growing, mainly from the Alfamation acquisition, offsetting an $8.7 million decline in semi.

• Gross margin contracted 325–560 basis points sequentially and year-over-year due to product mix and lower high-margin semi sales.

• Operating expenses increased $1.8 million year-over-year, mainly from the acquisition, but legacy business OPEX was reduced by nearly $1 million sequentially.

• Free cash outflow was $5.4 million; cash and equivalents ended at $20.4 million, down from $45.3 million at year-end 2023, mainly due to the acquisition.

• Total debt at quarter end was $21.1 million, up due to acquisition-related borrowings.

Outlook and guidance

• Q3 2024 revenue expected to be slightly lower than Q2, with some gross margin improvement; operating expenses and EPS expected to be similar to Q2.

• 2024 revenue guidance updated to $128–133 million (down from $140–150 million); gross margin expected at 42–43%; operating expenses around $53–54 million.

• Effective tax rate expected at 17–19%; capital expenditures to run 1–2% of sales.

• Demand for front-end semi solutions expected to remain subdued into 2025.

• Backlog supports revenue visibility for the next twelve months.