Delaware

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1-36117

(Commission File Number)

22-2370659

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804 East Gate Drive, Suite 200, Mt. Laurel, New Jersey 08054
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       N/A       
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Exhibit

Number

Description

99.1

Press Release dated November 2, 2017.

99.2

Textual representation of conference call of November 2, 2017.

●      Company Reports 32nd Consecutive Quarter of Profitability

(1)

Consolidated results include expenses related to the acquisition of Ambrell Corporation (Ambrell) of $849,000 and $31,000 for the second and third quarters of 2017, respectively.

inTEST Reports 2017 Third Quarter Financial Results

inTEST Reports 2017 Third Quarter Financial Results

inTEST Reports 2017 Third Quarter Financial Results

inTEST Reports 2017 Third Quarter Financial Results

Operator:

Welcome to the inTEST Corporation’s 2017 third quarter financial results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session. At that time if you have a question please press star one on your touch tone phone.

As a reminder this conference is being recorded today. A replay will be accessible at www.intest.com. I will now turn the call over to inTEST Investor Relations Consultant Laura Guerrant. Please go ahead.

Laura Guerrant:

Thank you Amy, and thank you for joining us for inTEST 2017 third quarter financial results conference call. With us today are Robert Mattheissen, inTEST Executive Chairman, President and CEO, Hugh Regan, Treasurer and Chief Financial Officer, and Jim Pelrin, Executive Vice President and Chief Operating Officer.

Bob will briefly review highlights from the third quarter as well as the current business trends. Hugh will then review inTEST detailed financial results and discuss guidance for the 2017 fourth quarter. We’ll then have time for any questions. If you’ve not yet received a copy of today’s release a copy can be obtained on inTEST’s website www.intest.com.

Before we begin the formal remarks the Company’s attorneys advise that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements do not convey historical information, but relate to predicted or potential future events that are based upon management’s current expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include, but are not limited to, changes in business conditions and the economy; changes in the demand for semiconductors; changes in the rates of, and timing of, capital expenditures by our customers; our ability to integrate Ambrell Corporation into our business successfully or operate Ambrell profitably; the success of our strategy to diversify our business by entering markets outside the semiconductor or ATE markets; progress of product development programs; increases in raw material and fabrication costs associated with our products, and other risk factors set forth from time to time in the Company’s SEC filings -- including, but not limited to, inTEST’s periodic reports on Form 10K and Form 10Q.

The Company undertakes no obligation to update the information on today’s conference call to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or un-anticipated events.

During today’s call we will make reference to non-GAAP financial measures. We have provided additional information concerning these non-GAAP measures, including a reconciliation to the directly comparable GAAP measure in our press release, which is posted on the investor page of our website www.intest.com. And with that let me now turn the call over to Bob Mattheissen. Please go ahead, Bob.

Bob Mattheissen:

Thanks Laura, I’d like to welcome everyone to our 2017 third quarter conference call. We continue to see strong demand for our solutions, which are increasingly broad based.

Our strategy of growth primarily through acquisition, capped off by our most recent acquisition of Ambrell Corporation that we acquired on May 24^th, broadens our customer diversification, and increases our footprint in several growth markets.

Q3 marks our 32nd consecutive quarter of profitability, with non-GAAP adjusted net earnings per diluted share of $0.20. Net revenue grew 9% sequentially and 60% year-over-year, with 47% derived from non-ATE, compared with 26% a year ago, due in large part to the Ambrell acquisition.

As most of you know, there is a natural ebb and flow to the test industry, with strength in the first the half of the year typically balanced by seasonal declines in the second half.

And while the semiconductor market continues to be very healthy with fab spending for 2017 and 2018 expected to be at historic levels, it remains a cyclical industry and is a market which we have strategically lessened our historic dependence on.

Q3 bookings increased 21% sequentially and 56% year-over-year. Excluding the impact of the Ambrell acquisition, third quarter revenue declined 11% sequentially, but increased 15% year-over-year, while booking declined 9% sequentially and 1% year-over-year, reflecting the usual seasonal softening. And lastly, we ended the quarter with a backlog of $11.3 million.

Our thermal test segment is now composed of the combined businesses of inTEST Thermal Solutions (or iTS) and Ambrell. iTS provides thermal products for test and development applications while Ambrell provides thermal induction heating products for industrial manufacturing application.

Ambrell’s induction heating technology complements our thermal technologies and firmly establishes our position in industrial markets with a diverse customer base in a broader manufacturing space -- including in many emerging markets, consumer product packaging, fiber-optic, automotive and other markets.

We have strategically diversified this segment, resulting in new opportunities in industrial manufacturing through both OEM and end user applications.

This diversification complements our broad penetration into electronic test markets, broadening inTEST’s footprint as a provider of highly engineered thermal products, now for both test and industrial applications.

Thermal segment bookings for the third quarter were better than expected at $12.1 million, compared with $8.8 million in the second quarter. And, Q3 revenues for the Thermal segment were $11.5 million, compared with $9.2 million for the second quarter.

As this is the first quarter we have had the full impact of Ambrell, we will be bifurcating the Thermal segment results and talking to both of the operations - iTS and Ambrell - separately.

We’ll be doing this for this quarter only, in order to help you better understand the Ambrell contribution. iTS experienced the normal seasonal softness typical of the third and fourth quarters, with Q3 iTS bookings down 11% and revenues down 9% sequentially.

So, looking forward we continue to see significant opportunities. Key drivers for inTEST include the surging use of sophisticated electronics in automobiles, continued growth of telecommunications and internet backbone, the drive for improved semi device packaging, and the growth of applications for the Internet of Things.

As we continue to execute our differentiated product strategy, we believe the conditions for our long-term success remain firmly in place, and were solidly on track for a strong 2017 and an even stronger 2018.

Before I turn the call over to Hugh, I’m sure you saw our release last week announcing my retirement and the promotion of Jim Pelrin. I’ll be retiring from my positions as President and CEO at the end of the year.

It has been my distinct honor to lead inTEST alongside our family of dedicated employees around the world, and I am proud to continue serving the company and its stakeholders as Chairman of the Board.

Jim will be assuming the office of President and CEO. Many of you have met Jim at investor conferences over the last several years. Jim is currently our Chief Operating Officer and he brings considerable success to the leadership of this Company, having served inTEST in various executive roles for the past 16 years.

Jim’s excellent performance, along with his successful experience in running our thermal product segment, positions inTEST to continue to deliver outstanding results to our shareholders.

As Jim takes the helm, I am confident that inTEST will continue its growth trajectory and he and the team will build on our strong foundation of success. The Company is in very good hands in my opinion, and with that, I’d like to turn the call over to Hugh.

Hugh Regan:

Thanks, Bob. Third quarter 2017 end user net revenues were $17 million, or 98% of net revenues, compared to $15.1 million or 95% of net revenues in the second quarter. OEM net revenues were $305,000 or 2% of net revenues, down from $762,000 or 5% for the second quarter.

Net revenues from markets outside of the ATE market were $8.2 million or 47% of net revenues, compared with $5.7 million or 36% of net revenues in the second quarter.

As noted earlier in the call, Ambrell net revenues for the third quarter were $4.9 million, and our net revenues from markets outside of the ATE market, excluding Ambrell, were $3.3 million or 19% of net revenues.

So clearly, Ambrell has further diversified our served markets. We expect revenues from markets outside of the ATE market will equal or exceed our ATE market revenues going forward.

Our third quarter gross margin was $8.8 million or 51%, as compared with $8.4 million or 53% in the second quarter. The reduction in the gross margin was primarily the result of an increase in our fixed manufacturing costs and a less favorable absorption of these costs, coupled with the slight increase in our component material costs from 32.8% in Q2 to 32.9% in Q3.

Our fixed manufacturing costs increased by $537,000 or 28% sequentially and represented 14% of our net revenues in the third quarter, compared to 12% in the second quarter.

Ambrell’s third quarter fixed manufacturing costs were $913,000, up from $404,000 for the second quarter which only represented six weeks, versus a full quarter in Q3. And excluded the impact of Ambrell -- and excluding, excuse me -- the impact of Ambrell, our fixed manufacturing costs would have only increased $19,000 or 1% sequentially and would represent 12% of our net revenues for the third quarter.

Third quarter G&A expense included $560,000 for acquired intangible ammonization compared to $197,000 accrued in the second quarter.

Diluted average shares outstanding were 10,351,009 at September 30th.  During the third quarter, we issued 9,000 shares of restricted stock and did not repurchase any shares.  As of September 30, 2017, we had repurchased a cumulative total of 297,020 shares or approximately 2.8% of our outstanding common stock at a net cost of $1.2 million or $4 per share.

Operator:

Thank you, at this time if you would like to ask a question please press star one. You have a question from Joan Tong with Sidoti and Company.

Joan Tong:

Good afternoon guys, very good quarter. Just a couple of questions, here. For the fourth quarter guidance, that $17.5 million to $18.5 million revenue, you said that the mix would be a little bit different compared to this quarter. Can you give us a little bit more color? And when you say “mix,” are you talking about mix of Ambrell versus legacy business? Or within the legacy business there’s a mix shift in the fourth quarter?

Thank you.

Hugh Regan:

Hi, Joan, it’s Hugh. The mix shift was in our legacy business. It was a less favorable margin profile in both our EMS product segment as well as our Thermal product segment. Specifically our iTS operation. And with Ambrell, Jim correct me if I’m wrong, we expect the margin profile to be consistent for Ambrell in Q4 with Q3?

Jim Pelrin:

We don’t expect any major changes.

Hugh Regan:

Correct. Thank you.

Joan Tong:

All right. Thank you. Questions regarding Ambrell, you mentioned at the end of the quarter there was some operating issue, limited things, the shipment but I assume that that hiccup is being corrected. Am I correct?

Hugh Regan:

Yes, you are. These are the kind of things you run into with acquisitions. You finally get in there and see what’s happening and they’ve had a few problems and we have the horsepower to straighten that out and that’s exactly what we’re doing. Jim, do you want to expand on that?

Jim Pelrin:

I think that’s exactly right. Some of them were some material issues, sourcing materials, which we’re able to help them out. We brought some additional resources to bear and that’s why we can say that we expect record or near record shipments in Q4.

Joan Tong:

Great, great, great. So, obviously the booking for Ambrell is very solid and it’s $6.4 million. And, can you talk about the pipeline as well? Just want to get a sense of how the pipeline is and what are some of those opportunities going forward, in terms of growth market that you mentioned in the past.

Hugh Regan:

Jim, you want to take that?

Jim Pelrin:

Sure. I can say that Ambrell’s total business outlook in terms of backlog, pipeline, expected revenue isn’t really -- you could say is at an all time high. And it’s never been quite as robust as it is now, and that’s expected to continue.

They have some very, very strong relationships with large OEM firms, customers, and those relationships are really beginning to blossom now.

Joan Tong:

OK, got it. And then any longer term strategy -- how to think about Ambrell perhaps? Since you guys have a pretty solid international platform and most of Ambrell business is more domestic --so, any strategy going forward to maybe expand, like leveraging your international platform on the Ambrell piece? Thank you.

Jim Pelrin:

Well Ambrell, I’ll answer this; Ambrell actually is quite strong in both domestically and in Europe. Where they have not had much activity historically is Asia and we’re taking steps to begin a program to grow that business and we expect that Asia would be a major component of 2018 and going forward.

Joan Tong:

OK, so the timing actually can be as soon as 2018, right?

Jim Pelrin:

Well compared to, you have to remember they’re coming from very, very little revenue in Asia…

Joan Tong:

Sure.

Jim Pelrin:

…right now. We expect important revenue next year and setting the stage for it to continue to grow.

Joan Tong:

Right, right. And then finally, for profitability for Ambrell do you guys talk about what is the operating income contributed by Ambrell for the quarter?

Hugh Regan:

Ambrell actually had a loss for this quarter, Joan, of $48,000. So as opposed to last quarter where we had a contribution it essentially broke even this quarter, had a slight loss and that was really due to the inability to get the shipments out the door, we expect that to turn around during the fourth quarter and to have it being accretive and contributing to both revenue and earnings and cash flow.

Joan Tong:

That’s good. All right great, thank you guys.

Hugh Regan:

Thank you.

Operator:

Your next question comes from Dick Ryan with Dougherty & Company.

Dick Ryan:

Great thank you. So just a couple of housekeeping numbers -- stock based comp, what was that in the quarter?

Hugh Regan:

Stock based comp for the quarter, bear with me one second, was $88,000.

Dick Ryan:

OK. And I may have missed -- did you give any guidance for Opex in Q4?

Hugh Regan:

No guidance for Opex. The only guidance we gave was top line EPS and the margin.

Dick Ryan:

OK. And Jim, on Ambrell, I think the view has been that the existing business has been pretty sticky, the strategy would be to go out and really not open some of these growth markets.

Can you talk about the pipeline? Are there any certification programs underway if that’s increasing? And maybe just what’s the general response with one quarter under your belt from the customers of Ambrell?

Jim Pelrin:

Well as you just said, it’s only one quarter, but I can tell you that for an example; one of the largest, first year suppliers to the automotive industry, Ambrell has now entered into discussions to possibly become the preferred supplier worldwide for this contractor.

And that’s a strategic account that they had been working towards for some time and they’ve now had very high level meetings with them and the outlook is very positive. It’s too early to make a prediction, but the outlook is very positive.

So, there’s several things of that nature going on, there’s a major OEM that has been, they’ve been now to the factory twice for their quality and business audits, and we expect to hear favorable news from them shortly as well.

Dick Ryan:

OK, great, thank you.

Operator:

Again, if you would like to ask a question, please press star one. There are no further questions at this time. I would like to turn the call to over to Mr. Matthiessen.

Bob Mattheissen:

OK, thank you for your interest in inTEST. We look forward to seeing many of you in the investor’s conferences we’ll be attending in December -- we’ll be at the LD Micro Conference in Los Angeles, December 5th and the New York City CAP Summit, December 6th and the Benchmark Conference in Chicago on December 14th -- and to updating you on our progress when we report our fourth quarter results. Operator, this call is concluded.

Operator:

Thank you, this concludes today’s conference, you may now disconnect.