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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