Good day, and welcome to the inTEST Corporation third quarter 2022 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Shawn Southard, Investor Relations. Please go ahead. Thank you. Good morning, everyone. We appreciate your time today and your interest in inTEST Corporation. Here with me are Nick Grant, our President and CEO, and Duncan Gilmour, our Chief Financial Officer and Treasurer. You should have a copy of the third quarter 2022 financial results, which we released earlier this morning. If not, you can access the release as well as the slides that will accompany our conversation on our website at ir.intest.com. After our formal presentation, we will be opening the line for Q&A. If you'll turn to slide two in the deck, I'll review the safe harbor statement. You should be aware that we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release, as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and in the slides. With that, please turn to slide three, and I will turn it over to Nick to begin. Nick. Thank you, Sean, and good morning, everyone. Thanks for joining us for our third quarter 2022 earnings call. We delivered another solid quarter that we believe demonstrates strong execution of our 5-Point Strategy as we focus on growing in our target markets, delivering quality engineered solutions, and leveraging our expanding sales force. The entire inTEST team has been working hard and staying focused, and I wanna thank everyone for their perseverance. In our third quarter, revenue grew 46% year-over-year to another record level of $30.8 million. Organically, revenue grew at an impressive 23% year-over-year. We believe our strong results are indicative of the success of our 5-Point Strategy that directs our efforts in our markets as well as keeps us on track and well-focused. In fact, our focus is enabling us to make some excellent inroads as we increase our customer base, drive innovation, deepen relationships with existing customers, and expand our geographic reach. Demand remains strong for our innovative solutions in the front end of the semi market, specifically in silicon carbide crystal growth applications. Sales to this market more than doubled over the prior year. The significant growth and demand for our induction heating solutions used in silicon carbide crystal growth reflects the advantages of our technology in this application, combined with the rapid expansion of silicon carbide as a more efficient and powerful semiconductor material. We continue to make positive inroads in back-end semi as well with our test and thermal solutions. Back-end semi sales were up 17% versus a year ago and up 23% sequentially. As a reminder, our test solutions in this space primarily serve analog and mixed signal semiconductor production, where demand has remained elevated. Our exposure is minimal in the memory and microprocessor space, which some companies are reporting is currently at overcapacity. We continue to make excellent inroads in the EV market, both with our organic and acquired businesses. Likewise, we have expanded our presence in defense and life sciences with our acquisitions, and as a whole, are benefiting from the strength in these markets. Of note, we surpassed our previous backlog record with $47.9 million in backlog at the end of the quarter. With that, let me turn it over to Duncan to review the financials in more detail. Duncan, over to you. Thank you, Nick. Starting on slide four, revenue for the third quarter 2022 was $30.8 million, up 46% on $9.6 million versus the same period last year, and at the top end of our guidance range of $29 million-$31 million. This revenue growth of $9.6 million comprised $4.8 million from the acquisitions made in the fourth quarter last year, and $4.8 million from legacy inTEST operations, representing 23% organic revenue growth. Both legacy operations and acquisitions contributed to growth in nearly all our target markets. Our acquisitions were the main contributor to growth in the security, auto EV, life sciences, and defense markets, and this broadening contribution is indicative of the company's strategy to diversify and expand revenue with new customers and from new markets. As Nick mentioned, we are also benefiting from secular trends in the segments of the semiconductor industry that we serve. Supply chain and logistics challenges were similar to recent quarters, and we estimate this impacted Q3 2022 revenue negatively by approximately $1 million. Our teams continue to address these challenges admirably and have demonstrated great tenacity and ingenuity in order to continue to meet customer expectations. Moving to slide five. Gross margins of 45.2% in the quarter tightened from the prior year and trailing periods, reflecting changes in product and channel mix. We also continue to manage through operational inefficiencies and material cost headwinds created by the ongoing supply chain challenges. The strengthening U.S. dollar has also had an impact on margin. We believe our current business mix will continue to deliver gross margins in the mid-40% range, which is consistent with our long-term plan to deliver 20% segment operating margins. As you can see on slide six, our operating expenses were relatively consistent with our trailing second quarter. The $2.9 million increase over the prior year period primarily reflects incorporating the acquisitions, which added approximately $2.4 million in incremental expenses. We have also made investments this year in sales, marketing, and engineering as we execute on our strategy to drive growth. Pre-tax intangible asset amortization was down $170,000 from the second quarter. As a percent of revenue, operating expenses declined 200 basis points from the prior year period, demonstrating the operating leverage gained with higher sales volume. Turning to slide seven, you can see our bottom line and Adjusted EBITDA results. We had GAAP net earnings $2.5 million or $0.23 per diluted share for the third quarter. On an adjusted basis, non-GAAP EPS was $0.28 per share, compared with $0.25 per share in the second quarter. Adjusted EPS reflects adding back tax-affected acquired intangible amortization. On an after-tax basis, acquired intangible amortization amounted to $492,000 in the third quarter. We expect after-tax intangible amortization for the fourth quarter to decline to $465,000. The reported effective tax rate for the quarter was 16.9%. Our effective tax rate for the balance of the year is expected to be in the 16%-17% range. Adjusted EBITDA, which excludes stock-based compensation, was $4.5 million, a nice improvement over both the prior year and trailing quarters. Slide eight shows our capital structure and cash flow. As we recently announced, during the quarter, we expanded our term loan facility by $25.5 million and ended the quarter with $30 million available under this facility. We also have $10 million available under our working capital revolver. We believe we are effectively leveraging the balance sheet to achieve our goals and have the financial flexibility to continue executing on our 5-Point Strategy for growth. Our current liquidity stands at approximately $52 million. Our cash equivalents and short-term investments at the end of the third quarter were $12.4 million. Currency impacted our cash balances, with foreign currency exchange rates reducing cash by about $0.5 million. We have $1.1 million in restricted cash related to a prepayment on a customer order. As we did in the prior two quarters, we repaid $1 million of debt, bringing it down to $17.2 million. Even with our augmented line of credit, our objective is to maintain a total debt to Adjusted EBITDA ratio under 2.5x. We generated $1.4 million in cash from operations in the quarter, although for the nine-month period, we have used $3.7 million to support our growth, primarily in working capital requirements with inventory build and the timing of receipts. Capital expenditures during the nine months were $1 million, up from about $600,000 in the first nine months of 2021. Given the timing of projects and purchases, we expect CapEx to be about $1.5 million for the year. With that, if you'll turn to slide nine, I will now turn the call back over to Nick. Thanks, Duncan. Orders for the quarter were up 55% to $32.7 million over last year's third quarter, as overall demand for our products and solutions remained strong. In fact, this is the fourth quarter in a row that we've had a book-to-bill ratio over one. Year-over-year, demand was strong across nearly all of our end markets, especially in semi, defense, security and life sciences. Orders for the semi market were up 44% year-over-year to $19.2 million. Nearly half of the increase over last year was related to silicon carbide and other front-end applications. Back-end orders remained strong, achieving 27% year-over-year growth. As I mentioned earlier, we are especially encouraged with the benefit of the secular trends in the particular segments of the semiconductor industry in which our technologies are applied. Demand for our products from the defense and space industries has been strengthening, where we have broadened our exposure to both of these industries with our acquisitions. Defense aerospace orders were up 66% sequentially. Security also had strength in the quarter and is a relatively new market that we gained through the acquisition of image and data capture technologies. As to our record backlog, we expect to convert approximately 55% to sales in the fourth quarter, which represents about 80% of our expectations for the quarter. That leaves over $20 million of backlog that we expect to convert in 2023. Historically, only about 20% of our backlog extended beyond the current quarter. The longer-term backlog represents customers securing our production capacity in rapidly growing markets such as silicon carbide crystal production. Let's look at the fourth quarter expectations on slide 10. We've been executing the plan, and we have a fairly solid line of sight to the year-end at this point. For the fourth quarter of 2022, we expect revenue to be in the range of $30 million-$32 million. We expect gross margins for the quarter to be approximately 45%, which is representative of our business mix as well as our expanding channels to market. Quarterly operating expenses are expected to run between $10.7 million-$10.9 million. These estimated expenses include intangible asset amortization, which is expected to be approximately $560,000 pre-tax. We also expect interest expense to run approximately $190,000 for the quarter and our effective tax rate to be between 16%-17% for the year. Q4 GAAP EPS should be in the range of $0.20-$0.25 per diluted share. Adjusted non-GAAP EPS is anticipated to be approximately $0.25-$0.30 per diluted share. The difference between GAAP and non-GAAP is tax-affected intangible asset amortization expense of approximately $465,000 in the quarter. Our fourth quarter guidance implies that our full-year revenue will land near the high end of our original guidance for the year of $110 million-$115 million. Our team's strong execution of our strategy has positioned us to deliver these results despite challenging supply chain headwinds and changing macroeconomic conditions. Our guidance is based on our current views and assume supply chain challenges remain unchanged from what we have been seeing and are subject to any strategic investments we may choose to make. Slide 11 highlights our strategic goals for 2025 that we delineated at our investor day in late March. Based on our 2022 revenue expectations, we will have doubled the size of the company in the last two years. By executing on our 5-Point Strategy, we believe we can achieve this again by 2025. I should note that acquisitions are a part of our long-term strategy, and we have an active pipeline of opportunities. Importantly, we have a strong balance sheet and expanded borrowing capacity that we believe will enable us to execute on our plan. If you'll turn to slide 12, given our expectations for top-line growth, we believe we can drive earnings and cash generation. We believe our plan positions us to deliver Adjusted EBITDA of approximately $30+ million by 2025 and improve earnings power to approximately $20+ million by 2025. Let me sum up on slide 13. As I have noted, our 5-Point Strategy is delivering results. We have highly engineered solutions that enable our customers to improve productivity or create more effective solutions themselves. Our growing sales force is reaching more prospects, and our new organization with the three business segments has driven greater collaboration across our company. This, in turn, creates even more sales opportunities. We believe that we are unlocking the potential of inTEST through our 5-Point Strategy by driving discipline, accountability, and process improvements throughout the company. These are certainly exciting times for us. With that, operator, let's open the lines for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Jaeson Schmidt at Lake Street. Please go ahead. Hey, guys. Thanks for taking my questions. Just wanna start with that backlog number because really impressive how that continues to grow. Is the end market mix within that backlog fairly similar to your current revenue composition? Hey, good morning, Jaeson, and thanks. So yeah, the backlog mix is very similar to what we delivered in Q3, and that's why you kinda look at the Q4 forecast and it's in line, you know, to the what we were able to deliver in Q3. Duncan, any comments? Yeah, I would agree. It's generally representative of what you're seeing. If anything, there might be some slightly longer term components, you know, in the front-end semi space, which has been, you know, exceptionally strong, but for the most part, representative of our actual results. Yeah, again, the record levels we're at now, you know, quite a change from when I joined the company and, you know, the reliance we were on book-to-bill in a quarter. It's great to have this backlog level and visibility looking out a couple quarters. Okay, got it. In your prepared remarks, Nick, you mentioned gaining new customers due to your 5-Point Strategy. Just wanna be clear, are these customers that you now are simply more engaged with, like sort of legacy inTEST customers that you're now prioritizing or just sort of new customers you've been able to gain given the broader product portfolio from the acquisitions? No, that's a great question, and you're exactly right. Expanding our customer base is one of our key strategies, and then we're making a number of efforts across all businesses. It's really a mix there, Jaeson, that we are penetrating some accounts that were legacy inTEST accounts that may have shifted away and then are coming back to us. We see that across some of the businesses there. We're also going aggressively after you know new customers, new markets, and new applications with technology. That's helping to drive expansion there. Duncan, anything you wanna- I would also say the nice thing that we're seeing is we're seeing new customers across all of our businesses. I mean, directionally, looking at maybe 25, 30 new customers in the quarter, but that's split, nicely split, you know, across our three operating segments. Okay. Got it. Then just the last one from me, and I'll jump back into queue. Just looking at gross margin, it seems to be a slight downshift from kinda your expectations in Q2, and fully recognize there's a ton of dynamics going on. Can you just help us understand sorta what is the most impactful? Obviously, the supply chain. Duncan, I think you mentioned some FX headwinds. Earlier this year, there seemed to be some slight headwinds from sort of the acquisition integration. I just wanna make sure I'm clear that it's less the acquisition and more just sort of the macro dynamics out there. Yeah. I mean, I think there's four main elements, Jaeson, and I'd rank them in order as product mix is still, you know, a big driver, just depending where, you know, where that kind of falls out. You know, secondly, you know, we talked a little bit about customer mix, and what we mean there is just how much we sell, selling maybe through distribution versus kinda direct. You might have noticed our operating expenses were actually a little bit lower than we anticipated. What you're seeing there is some of that channel mix. We sold a bit more through distribution than expected. You know, the flip side of that is the operating expenses were a little bit lower. From a bottom line perspective, you know, that item is neutral. Supply chain, talked about, you know, continuing. You know, although the global macro supply chain seems to be moderating, we're a bit more localized, and the impacts we're seeing really much the same as in prior quarters, so still kinda working through those inefficiencies. FX is probably the least impactful of those, but a real item. I mean, most of our revenues are actually, you know, USD, but we have enough where we had a small, you know, maybe 30 basis point impact on margin just from the strong U.S. dollar. Okay. That makes a lot of sense. Appreciate that color. Thanks, guys. Thanks, Jaeson. Thank you. Our next question today comes from Peter Wright at Intro-act. Please go ahead. Great. Congratulations on another record quarter, guys. Thank you for taking my questions. Yeah, no. Thanks, Peter. A couple questions. First question is, you know, kind of, tagging on the back of Jaeson's question. The backlog does continue to provide you guys with more visibility. Nick, I'm hoping you could help us understand if you're tracking ahead of kind of your plan if you look at, if I was just to linearize kind of the growth expectations of what you've guided to, on a target model in 2025. You know, how do you think we get there? If you can reflect on kinda cyclicality versus, you know, kinda secular growth. Do you think your business now is diversified as such that you can continue to kinda grow this business, you know, year on year to hit that target? If so, helping us understand kind of what that mix is. Looking within the customer mix, is it new geographies? Is it new product mix? Is it, you know, new markets? What continues to drive this continual record quarter after quarter, you know, numbers out of you guys? Yeah, no. Great question there. As you know, we are a very different company than we were in the past. The backlog is really comprised of our efforts and focus on our targeted key markets that we believe, you know, have these strong secular tailwinds as well as the markets that we have the right technology and can bring innovation to create further demand of our products. Markets like the automotive EV, like the silicon carbide, like medical cold chain that we acquired and brought into our business. You know, and security is another area with the acquisition. These are markets that we believe positions us well to drive growth, and we're demonstrating that across our businesses quarter after quarter here. You know, I really do believe it's the strategy paying off that's driving this, because we, you know, this is where we wanted to go, and this is where the business is heading. It does seem, when I look at kind of the makeup of the segments that you have, it's not that this record quarter is driven by everything running red hot. You've got some businesses that are still ebbing and flowing, and just the diversity of your business is driving more stable growth, more secular growth as opposed to cyclical growth going forward. Is that a fair takeaway? Yeah, no, absolutely. That was one of our strategies to drive diversification. We're having really solid success in that area, and that helps to the ebb and flow, if you will, by being in the right industries and the right segments of those industries that, you know, can drive growth for us on that. The diversification is absolutely part of it. Great. My other question is on gross margins, if you can help us understand the impact. You know, four of the 5-Point Strategies I get very clearly. The one that I've got a question on is kind of service and support and kind of your efforts there on monetizing service. Any update there? Then kind of a second part to that gross margin question, given inflation is, you know, high single digits, can you help us understand kind of how much your prices have moved this year and kind of any color on expectations going forward there? Let me touch on service, and then I'll let Duncan address some of the pricing questions there. Service, we are making some good inroads here. You know, one of the focus areas we initiated this year was really to drive master service agreements across some key accounts, and really pleased with the results to date. Within the quarter, we had one of the businesses capture over $1 million of service revenue from master service agreements. You know, these are multi-year agreements out there. Obviously, those revenues will be recognized over time on that, but really making some progress on that front, and also challenging the teams to you know position us better from you know driving that customer satisfaction, having inventory closer to customers, et cetera. Seeing the needle move there, which is great. Duncan, you wanna touch on? Sure. Pricing, I mean, as you may have heard, inflation is still out there. The battle kind of continues in terms of, you know, keeping up from a pricing standpoint. You know, we do look at this pretty closely in terms of understanding our margins and making sure we're not leaking, and assessing, you know, product mix versus, you know, are we pricing aggressively and so on. I'd say, you know, the teams certainly are, you know, driving hard to keep up with that. Another thing I'd highlight is that, as I mentioned actually earlier, we do invoice primarily in USD, even to our overseas customers. That actually gives us a bit of a competitive, from a competitiveness standpoint, and that's kind of challenging from a pricing standpoint, given the strength of the U.S. dollar. You know, that's something we certainly also have to take into account in some of the, you know, the foreign markets. It's still a very dynamic environment out there, Peter, from a pricing standpoint, and, you know, we continue to chase that as hard as we can, and that will continue. That's fantastic color. Thank you, Duncan. One last follow-up, Duncan, for you. Cash generation, very strong across the stack. You know, two places where that cash is residing right now through the year, maybe a little more. Any color on kind of inventory, working capital inventory and accounts receivable? Are you comfortable where those are? You know, how should I think of free cash flow generation in the next immediate period ahead of us? Yeah, no, absolutely. It was nice to see we did generate $1.4 million cash from operations in the quarter. You know, the investment in working capital moderated in Q3. You know, we still did drive dollars into working capital. You know, inventory is where we've disproportionately invested. As I said, we've continued to have to kind of manage through supply chain challenges. You know, I would expect our investment in working capital to continue to moderate, you know, going forward, even though we continue to grow. What we saw in Q3, which was positive cash from operations, you know, I'd expect to see that kind of dynamic continue as we're able to, as I said, reduce our investment in working capital, which really, you know, as you mentioned, has been the main kind of drain on cash dollars, you know, during the first three quarters of the year here. Yeah, I would just add, Peter, that you know, inventory is in one area that, as Duncan highlighted, we've been investing. We are comfortable that you know, we don't see any kind of obsolescence issues or anything like that with the products that we're bringing in-house given. You know, it really is to support our backlog and our commitment on lead times to customers. Yeah, I mean, I should also mention on the receivables side, which you also touched on. I mean, we're not seeing any challenges around collections, any concerns there either. Yes, the money's going into working capital, but we feel okay about that. That's fantastic. Good growth business, guys. Congratulations. Thanks, Peter. Thank you. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star then one. Our next question today comes from Robert Marson with Marson Asset Management. Please go ahead. Hey, gentlemen. Congratulations on another excellent quarter. Hey, thanks, Robert. As you guys have started planning for next year, is there any particular businesses or new products or geographies, the things that Peter was talking about in more detail, that set us up for our organic revenue growth for 2023? Great question there. You know, we've talked about this in the past as kind of a three-horse race between our segments there. You know, all three in attractive growth areas, growth markets out there. You know, some seeing some really strong success with the front-end silicon carbide. I would say our process technologies is positioned extremely well there. The environmental technologies making some nice inroads in our life sciences efforts there. You know, when I look into our electronic test. You know, with our electric vehicle exposure and battery testing areas, they're really positioning us well. I do expect all three to continue to drive growth for us here going forward. you know, is one gonna exceed the others substantially? I would. I don't see that right now. Okay, thank you. What inning would you say this silicon carbide capacity build-out is in? I know people are really pushing hard to grow capacity. The major semiconductor, you know, IDMs are really pushing hard, and even Wolfspeed's having some problems. So, there's. It's not simple nor easy. Do you think this is in the first or second inning or in the fourth inning? Yeah, great. Another great question. You're right, it's not easy. It's a very controlled environment required to grow these silicon carbide crystals out there, which is why our technology is, you know, being preferred out there. From what we're hearing from our customers is this is very early innings here. You know, some of them are talking about demand, you know, continuing to drive capacity expansions through the end of the decade. Yeah, it feels like we're in the early innings for sure. All right, thank you. Absolutely. Ladies and gentlemen, our next question comes from Gregory Weaver at Invicta Capital. Please go ahead. Hey. Good morning, gentlemen. Just Duncan, on the channel mix you referenced, what products typically are heavier in the distribution channel? Yeah. You know, in particular, some of our ThermoStream products, which are back-end semi coming out of our environmental test segment, you know, those are heavily skewed towards distribution. Also, some of the North Sciences products, you know, one of the new acquisitions, the new product lines there. Again, that's a very heavy kind of distribution kind of business, which we expect to kinda grow, you know, over the course of the next few quarters. I mean, I think those are the primary- Yeah. I would add our image capture is also an area that we've been developing that go to market and adding more distribution through for those cameras and video solutions out there as well. Yeah, those three are the primary product families, if you will, that are going through the distribution. Got you. Okay, thanks. On the auto EV segment, you had a prior couple of quarters, some pretty strong growth, and it's backed off some here. Any color on the volatility there, or is it just kinda inventory, you know, at your end customers or? Yeah, no, it's more of. Yeah, exactly that. They've gotta get their lines up and running the expansion, you know, which relies on a lot of external pieces of equipment, on that side of it. So your comment is spot on. It is a lumpy, kind of a lumpy business, but our activity there, you know, remains strong. You know, it's just more of a timing. Gotcha. Last one here is, again, good to see more of the silicon carbide talk here. You inferred that you're booking out into 2023 at this point for, especially the, silicon carbide. Could you maybe give us a little color? I mean, are the customers concerned about capacity or supply on your end? You know, is there any limitation on growth that they're concerned about? More so what we're seeing is they wanna secure the long lead time items. Some of these things have slipped out, you know, six months for electronic components and other products that are going into our solutions and that. We're seeing them placing orders to ensure that we get those things in the pipeline and commit to that inventory. Okay. Is that solicited? Is that them inbound to you or are you telling them, "Hey, you better give me more visibility if you want me to buy this stuff"? I'd say it's a combination. They're talking to us about what their plans are, and we're telling them that, you know, to support them on that we need to make sure we've got this pipeline material flowing. It's a joint discussion and you know, decisions being made. Any kinda generic color on, in terms of the diversity of the business there, in terms of the number of end customers that are pulling now and kinda maybe, you know, reorder activity, and such? Yeah, that continues to expand. What I believe we added three more new customers in the last quarter or at least the last two quarters in that space. Yeah, so it this the investment in this part of the market is in its early stages, and we'll continue to benefit from that. Great. Thanks. Good quarter. Thanks a lot, Greg. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Nick Grant for closing remarks. Thank you, Rocco. In summary, we're making excellent progress with the execution of our 5-Point Strategy, and I'm grateful to the entire inTEST team for their resiliency and persistence to exceed customer expectations. It is this dedication that enabled us to deliver our strong first half results. First, I should say, nine months results. You can note on slide 14 that we'll be presenting at the Southwest IDEAS Conference on November 16th and at the CEO Summit in New York on December 13th. Perhaps we'll see some of you all there. We really appreciate you taking the time to join us on our call today and your interest in inTEST. Thank you all and stay safe. Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.