Greetings and welcome to the InTest Corporation second quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Sanjay Hari, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us. With me on the call are Rich Rogoff, President and Chief Executive Officer, and Duncan Gilmour, Chief Financial Officer and Treasurer. The earnings press release was issued this morning, as well as the slides that management will use during today's call. Both can be found in the investor relations section of the intest.com website. Please turn to slide two for a review of the Safe Harbor Statement. During this call, management may make some forward-looking statements about their current plans, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is stated here today. These risks, uncertainties, and other factors are provided in the earnings release as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on the InTest website or at sec.gov. Also, as covered in slide three, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating the company's performance. However, you should not consider the presentation of this additional information in isolation. or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. Before management begins today's discussion on slide four of the presentation, please note that certain first quarter 2026 comparisons in their prepared remarks reflect InTest's revised Q1 results. As the company announced on July 31, management revised Q1 cost of revenues, gross profit, gross margin, income tax expense, net earnings, and earnings per share together with their related non-GAAP measures. Q1 revenue and operating expenses were not affected by the revision. Q1 2026 financials provided as part of this presentation have been revised accordingly. With that, I would now like to turn the call over to our first speaker, Rich Rogoff, President and CEO. Please go ahead, Rich.

Thank you, Sanjay. Good morning, everyone, and thank you for joining us. On today's call, I will start with an overview of our second quarter performance, and Duncan will walk you through the Q2 financial results, after which I will discuss end market dynamics that support our raised revenue guidance for the year. and then open the call to Q&A. We are reporting Q2 results that are in line with our pre-announcement, with revenue of $35 million, gross margin of approximately 41% and operating expenses of $13.9 million. Demand across in-test divisions remained healthy in Q2, with revenue up approximately 26% year over year, Q2 also marks our third consecutive quarter of sequential revenue growth and our second consecutive quarter of year-over-year growth above 25%. The strength we saw was broad, led by strong project delivery in auto EV and a semiconductor funnel that continued to build towards the second half. The diversity we have built continues to broaden our revenue base, which gives us confidence and our raised full year top line guidance. As disclosed in our pre-announcement on July 31st, our second quarter margin reflected an unfavorable mix of high revenue, low margin projects at AlphaMation alongside a shortfall of higher contribution revenue that shifted to the third quarter. Turning to orders and backlog on slide five, Q2 orders were $28.9 million, down 9% sequentially, following three consecutive quarters above $30 million, and up 4% year-over-year. Semi was a standout. Orders here increased 56% sequentially, our strongest semi-order intake in six quarters, and grew 64% year-over-year. The semi-wave that we referenced in our Q1 call is now converting into orders. In auto EV, orders declined 67% sequentially after four quarters of strong order flow. Funnel activity in this end market remains healthy. In defense aerospace, orders declined 28% sequentially, reflecting non-reoccurring orders that drove strong Q1 orders and increased 70% year-over-year on higher DoD procurement. Turning to backlog at quarter end, backlog was $45.4 million, a sequential decrease of 12%, reflecting normalization off an elevated peak in auto EV projects. This also represents a year-over-year increase of 20%. Approximately 45% of the backlog is expected to ship beyond the third quarter. With that, I will turn it over to Duncan to take you through the financial detail beginning on slide six. Duncan?

Thank you, Rich. Starting on slide six, on a sequential basis, revenue in Q2 increased $1.4 million or 4%, from 33.9 million in Q1 to 35.3 million. The net increase was driven almost entirely by auto EV, which increased by 6 million on the shipment of high revenue, lower margin, alpha nation automotive projects from backlog. Industrial contributed 1.1 million. Partially offsetting these gains was a 2.1 million decline in defense aerospace, following a particularly strong first quarter, as well as decreases of 1.6 million in life sciences and 1.4 million in semi. Compared to Q2 2025, revenues increased 7.2 million, or 26%, from 28.1 million. The increase over the prior year period reflects the continued gradual recovery in the capital spending environment and continued penetration of non-semi-correlated end markets. Non-semi-markets accounted for approximately 74% of Q2 revenue. Sales in auto EV increased 7.6 million, followed by life sciences and industrial approximately 0.6 million each. Partially offsetting these gains was a $1.1 million decline in Semi. Turning to slide seven, second quarter gross profit was $14.3 million and gross margin was 40.5%. Compared to revised Q1 results, gross margin declined 280 basis points sequentially, reflecting a shift in revenue mix towards high revenue, lower margin auto EV shipments. For the same reason, gross margin declined 210 basis points from 42.6% in the prior year period. Moving on to slide eight, operating expenses for the second quarter were 13.9 million, a decrease of 0.5 million sequentially. The sequential decrease was due primarily to approximately 0.7 million in non-recurring restructuring costs associated with the CEO transition that we recorded in Q1 and did not recur in the second quarter. On a year-over-year basis, we generated 7.2 million of incremental revenue while absorbing only 1 million of incremental operating expenses which resulted in a reduction in operating expenses as a percentage of revenue to 39.5%. Turning to slides nine and 10 that collectively measure our profitability, on slide nine for Q2, net income was 0.5 million, representing a net margin of 1.3%. Adjusted EBITDA was 2.2 million, representing an adjusted EBITDA margin of 6.2% and up approximately 73% from 1.3 million in Q2 of 2025. On slide 10, net income was 4 cents per diluted share. Adjusted EPS, which adds back tax-affected acquired intangible amortization and restructuring charges, was 9 cents per diluted share. Our Q2 results include a discrete income tax benefit of approximately two cents per diluted share that is driven by stock option exercises during the quarter. This benefit is specific to the second quarter, but we continue to expect a full year effective tax rate of approximately 18%. Slide 11 shows our capital structure and cash flow. We ended the second quarter with cash and cash equivalents of $22.1 million, an increase of $6.4 million from the end of Q1. During the second quarter, we generated $6.3 million of cash from operating activities and received $2.9 million in proceeds from stock option exercises. These inflows were partially offset by $2.3 million of net debt repayments, including a $1 million reduction in term debt. and buy 0.4 million of capital expenditures. At June 30th, 2026, we had approximately 62 million in total liquidity. In addition to 22.1 million of cash and equivalents, we have 40 million of available borrowing capacity under our delayed draw term loan and revolving credit facilities, which we have extended through August 28th, 2026. Total debt was 6.2 million and our leverage ratio was 0.8 times trailing 12-month adjusted EBITDA. Turning to slide 12 and our financial guidance for the year, we are introducing guidance for Q3 and are reiterating the outlook we provided on July 31st. For Q3, we project revenue of 33 to 35 million. gross margin of approximately 44%, operating expenses of 13.8 to 14.2 million, and amortization of 0.5 million. For the full year, we now expect revenue of 135 to 140 million. At the midpoint, this represents growth of approximately 21% over 2025's 113.8 million. This increased revenue guidance reflects continued diversified demand supported by our backlog and improving order flow and outlook into the second half, particularly in semi-sales. Gross margin, approximately 43%, operating expenses of 55 to 57 million, amortization of 2.6 million, and interest expense of approximately 0.3 million with an effective tax rate estimated to be 18%. and finally, we expect capital expenditures of 1 to 2% of revenue consistent with our historical investment levels. This guidance excludes any potential acquisitions and restructuring costs and assumes our view of macroeconomic conditions remain unchanged through the end of the year. Finally, a brief word on internal controls. In connection with the Q1 revision on July 31st, management and our Audit Committee concluded that the control deficiencies underlying the revision at Alpha Nation constituted a material weakness in our internal control over financial reporting. We have implemented remediation plans and fully expect to demonstrate that these controls are operating effectively by fiscal year end. This is described more fully in our Form 10Q that will be filed later today. With that, if you turn to slide 13, I will now turn the call back over to Rich.

Thanks, Duncan. On our Q1 call, I noted that funnel activity and order flow were pointing to a strong second half of the year. Since then, we have seen demand strengthen, leading us to raise our full-year revenue outlook. To date in the third quarter, we have recognized the roughly $2 million of delayed shipments that moved out of Q2, and order activity across all our divisions is demonstrating momentum. Opportunities in the higher margin end markets we serve are expanding. In SEMI, the pace of activity in the back end markets is picking up, reflecting growing demand to test high power devices in the new electrified economy. In defense and aerospace, significantly higher DOD spending and capacity expansion are building an expanding funnel of testing opportunities. And in our auto EV market, demand remains healthy, supported by rising electronic content of today's vehicles. Order activity follows the cadence of our customers' multi-year automotive programs. Much of our growth in Q2 came from deepening and expanding our position with existing strategic accounts, where customers are standardizing on in-test solutions and returning to us as they move to new test platforms and programs. We are also realizing the benefit of our broader portfolio as we cross-sell our businesses and bring combined capabilities to shared customers. At the same time, we are steadily building our channel and partner coverage to extend our reach into customers and new geographies. Turning to technology and innovation, which is the foundation of InTest's long-term value creation, we are seeing good traction from recently introduced products. In our induction heating business, Our next generation EcoHeat is progressing through applications lab and distributor testing, with first customer shipments targeted for later this year. Across electronic testing, our robotic docking and intelligent interface solutions are increasingly being qualified as tools of record as customers transition to new tester and handler platforms, which positions us to win follow-on hardware as those programs ramp. Our advanced high power chillers is another place where customers are pulling us forward. Our current portfolio delivers between one and a half and seven kilowatts of cooling capacity, and customers need more as they embrace the demand for much higher power conversion. We are also directing new product development toward the highest value, fastest growing pockets of demand in each of our divisions. For example, our test solutions for high power High voltage devices including silicon carbide, gallium nitride, power modules, rising electronic content, batteries, and battery management systems are all involved in today's evolving power conversion architectures. In conclusion, we have ample opportunities for growth in our end markets, and profitability has further to go. My aim is to build consistency into how this business performs, converting our commercial momentum into steadier adjusted EBITDA as we gain operating leverage across our cost structure. Near term, that means taking a close look at our manufacturing footprint and business unit cost structure with a view towards improving cost efficiencies and productivity. This continues the operational review I described on our Q1 call. and remain central as we move through the second half. There is a great deal of work ahead and we are on it. With that, operator, please open the call to questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question today will come from Max Michaelis with Lake Street Capital Markets.

Hey, guys. A few from me. Nice job on the quarter as well. just going to the order numbers semi-obviously up nicely this quarter. I mean, can you give us a sense, was that in line with internal expectations and maybe not, you can't give exact detail, but maybe help us out how you expect orders to trend throughout Q3 and Q4?

Sure, Mike. Max, morning. Thanks for joining us. Yeah, so I think the order intake is as expected. As we mentioned in our Q1 call, we're pretty optimistic about the second half, and we're actually seeing that come to fruition. As we see it now, the order intake through the next quarter, quarter, maybe two, will be as expected, unless something changes in the market spaces as we see it. You know, things are looking strong. So, Duncan, if you have anything to add to that.

Yeah, no, agreed. I think, as we said earlier in the year, we see semi starting to come back. We start to see that here in the Q2 order numbers. I mean, the other side of that, as you can see, are mixed shifts as we look towards the second half of the year with some of those strong auto EV revenues dropping a little bit and semi starting to come through.

Yeah, totally understood. And then can you help me out, AutoEV, was that just one large customer, one large program that kind of drove the massive outperformance in Q2?

Well, it was a combination, actually. So, as we mentioned, and I think you saw, it was Q3, Q4 of last year, even into Q1, we had a strong order intake in AutoEV. So, There was planned deliveries, of course, of that backlog, so it would make a good Q2. And then there were some pull-ins from one or two customers that increased the revenues as well.

All right, again, thanks for taking my questions. Thanks, guys.

Next, we'll move to Ted Jackson with Northland Securities.

Thanks. Good morning. Congrats on the quarter.

I'm going to start out on AutoEV. You know, it's an awesome business that you bought, and it's really contributed to the company tremendously. It goes through its own kind of cycles, and I was kind of curious when you, you know, since you're tied to the development cycles of your auto customers, can you give us a sense with regards to, you know, kind of the cadence of projects in front of you? I mean, do you have like a... a pipeline of opportunity that's going to keep the business growing or have you kind of run through some of that pipeline and it's in the backlog you're going to work through it just maybe that'd be my first question is just kind of trying to think about that business you know over the next six to 18 uh yeah six to 18 months yeah great question thanks john um the the

Cycles are a little bit longer, as we've discussed in the past in the auto EV. They will develop a new product and will develop solutions for that product. There's some commonality, of course, but there's also some customization that occurs. Our funnel is pretty strong with those projects, so we don't see a major shift in things going forward. Of course, the cycles of new product introductions from the automotive industry companies themselves will dictate a little bit of that. But we have quite a few projects that we're working on, which we believe will continue the momentum there, as well as we're looking to expand beyond automotive, of course, as we did last year a little bit with life sciences.

Okay. And then shifting over, it's kind of a similar question on the semi side of the house. You know, the company has a An extensive history with regards to, you know, the semi-test market, you know, particularly in the back end. And you're kind of going through a new cycle now. You're seeing a pickup and order activity that you expect to continue through the second half. How long is a typical cycle for something like that? I know that typically with regards to it, you sort of the back end of the cycles as they go through. But, I mean, is it the kind of thing where you see, you know, continue typically, typically, I'm trying to say this is what this personal, this particular situations. But typically, you see a pickup and order an activity that lasts for, you know, six months, 12 months, 18 months, kind of what's a, what's a, what's kind of a standard way to think about that in terms of, you know, like a cycle for you?

Yeah, it's a, it's a great question. I guess if I had the exact answer, we have a different conversation, right? But, you know, I've been in the semi-business myself for more than 30 years. And, and, you know, typical cycles, it kind of goes ebbs and flows with the node transitions, which have typically been on the 18-month kind of timeframe, of course, barring any macroeconomic changes to the situation, right? So, for example, today, memory shortages, right, that maybe drive increased capacity needs. So, you know, I would say typically you see something on the order of nine to 12 months of higher order capacity increases, technology changes, and then you'd get into a somewhat of a slowdown period. You know, so something along those lines would make sense. But then you throw in the macro part of it, which is today's memory. Shortage is the AI aspect, and it kind of makes it a difficult answer to really predict.

But if you just were to say, like, this is the average, you know, in an average scenario, a typical thing when a cycle turns, you're at the beginning of it. And generally speaking, you would see continued strength as you finish off 26 and go into 27.

Yeah, that would be the expectation. Certainly, we're watching that guardedly, right? But typical would be, like I said, we would plan something in the order of six to nine months, maybe a maximum of 12 or so, and then really start to consider what would happen next. Of course, we then plan for projects for next round of technology growth, which would refuel the cycle again, right?

and then I know the semi-business is one of the better margin businesses for InTest. Could you give us some kind of color with regards to the margin profile for your backend semi-business relative to corporate averages?

Yeah, I can touch on that. I think we've talked about this before. I mean, our backend semi-business, as you mentioned, Ted, one of the legacy pieces of the business, certainly the margins there, Higher towards the mid-50s range, certainly one of the higher margin profiles across our product portfolio. And that shift between those higher margins versus some of the great auto projects, but tend to be higher volume, lower margin, that change of mix as we go into the second half, a real driver of the margin shift that we see in the second half versus the first half. Okay.

And then my last question, which you alluded to, you know, a renewed focus, if you would, on efficiency within InTest. Is this, you know, as you kind of dug in for the last hundred days and you're looking at it and saying, hey, we can do even better than this, is this something that's been, you know, just sort of part and parcel of things in the past? Are you Is it something where you might be coming back to us in a quarter or so and say, hey, we're taking these different programs and we're going to take this kind of cost out of the business? I guess, Duncan, you guys did that a year or two ago. How much of it is kind of just a continual improvement and how much of it is kind of like, well, we're going to put pencil to paper and this is actually something that's going to be a defined project?

Yeah, I mean, I think we're always in a continuous mode of looking at things. As you mentioned, we did some things last year. We're taking a harder look at things for sure now than we have in the past per se. Whether there's going to be a project or two, I think it's still a bit early to answer that question. We're still going through some of our analysis and things. One thing we are doing that we're implementing now, which will hopefully yield some some good efficiency gains going forward is working on more cross-collaboration between the businesses, utilizing our resources a little better. It's hard to put a number on that and the timing, but those are activities that are ongoing. But we're taking a hard look at everything in the business with regards to footprint, consolidation of efforts around purchasing and things like this that We hope we'll yield some things. And as mentioned in Q1, we hope by the Q3, Q4 timeframe, we'll be able to come back with some more concrete things.

Okay.

All right. Thank you very much for taking my questions. You're welcome.

And as a reminder, it's Star 1 if you would like to ask a question. Next, we'll move to Dick Ryan with Oak Ridge Financial.

Thank you. Rich, just a couple more questions on the SEMI side. Are you seeing anything show up yet on the front end? Was the front end any part of the increasing funnel that you're talking about in the second half? Or is that still something we should be anticipating in 2027?

Morning, Dick. Yeah, it's still more 2027 related. in our estimation, although I will say activities are picking up in that space as well.

No, I think you mentioned new product development, introducing something for the silicon carbide testing. Do you need to get that product line out or is your product portfolio, you know, sufficient at this point versus what you're seeing coming at you in the funnel?

The product line is somewhat unrelated. I think the front end semi-business that we've had in the past is there's still evolutions to the product that we're working with customers on. It's more of a demand issue on that side than it is a product development issue. More of the developments that we're seeing today in that space are more around the testing, which is more towards the back end of that space.

Okay. A question on the back end. I mean, with the introduction of robotics and automation, how has that increased your available market that you can go after versus the non-robotic automated side of things?

I think it's an evolution of the product and the market. So traditionally the back end of the market has been very manual. and as labor is tight and people are moving to get more efficient, things are becoming more and more automated. So I wouldn't say it's necessarily growing the market significantly, although our solutions are enabling us to take more of that market share.

Okay. One last one on the expanding opportunities across the end markets and deepening customer penetration. How do you see your customer concentration, whether top five, top ten, how do you see that shaping over the next year or so?

Yeah, I would guess that the goal would be to have a few, you know, to get our top 10 customers or top five customers even in a way even bigger. So we penetrate with more of our product solutions than maybe we do today. We're seeing, you know, joint activities between the businesses that are driving some of that activity, which would increase our wallet share at those at those customers. but I also see it as we've been growing, we've been changing the landscape of those top five customers over the quarter. So we'd like to get more customers up into those levels, but it'll probably change from quarter to quarter based upon their demands, right?

Sure, sure.

Okay, thank you, Richard. You're welcome.

And as a reminder, it's Star 1 if you would like to ask a question and we'll pause for just a moment. And this will conclude the question and answer session. I would now like to turn the floor back to Rich Rogoff for closing remarks.

Thank you, operator. We appreciate everyone joining us today. Thank you for your time and we welcome the opportunity to answer any questions. Please reach out to our investor relations team to coordinate our continued dialogue. On slide 14, please note the details regarding the replay of this call as well as our up-and-coming investor event schedule. We will publicize additional conference attendances via release, advisories, or on our IR website. Thanks again for participating in today and having a great day.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.