Compared with the first quarter of 2022, sales to the semi industry grew 23% driven exclusively by demand for front-end applications. Sales increased 30% to automotive/EV and 67% to the life sciences market. Sales to industrial, security and other markets all improved sequentially as well, while the defense/aerospace market had a modest decline due to the timing of projects.
Gross margin was comparable on a sequential basis although contracted compared with the prior-year period as that period had benefitted from an exceptionally favorable product mix from back-end semi demand. While the supply chain and inflation continue to present challenges, improving operating efficiencies and price increases are expected to help offset these headwinds.
Operating expenses were up $2.9 million compared with the second quarter of 2021 reflecting the additional expenses related to the acquisitions and investments in engineering, sales and marketing. Sequentially, operating expenses were 36.6% of revenue compared with 42.5%, demonstrating operating leverage as the organization scales.
Balance Sheet and Cash Flow Review
Cash, cash equivalents and short term investments at the end of the second quarter of 2022 were $14.0 million, down $3.2 million from the first quarter of 2022, reflecting working capital investments to support growth and a $1.0 million repayment of debt in the quarter. At quarter end, debt was $18.2 million, compared with $19.2 million at the end of the first quarter of 2022. For the first six months of 2022, the Company used $5.1 million of cash in operations.
Capital expenditures were $373,000 in the second quarter of 2022 compared with $75,000 in the prior-year period. For the first six months, capital expenditures were $708,000 compared with $463,000 in the prior-year period.
Second Quarter 2022 Orders and Backlog (see orders by market in accompanying tables)
($ in 000s) |
Three Months Ended |
||||||
Change |
Change |
||||||
6/30/2022 |
3/31/2022 |
$ |
% |
6/30/2021 |
$ |
% |
|
Orders |
40,518 |
25,063 |
15,455 |
61.7% |
25,105 |
15,413 |
61.4% |
Backlog (at quarter end) |
45,981 |
35,034 |
10,947 |
31.2% |
20,426 |
25,555 |
125.1% |
Order growth of 61.4% over the prior-year period reflected increases across all end markets especially in semi, industrial and life sciences. Orders for the semi market were up 62% to $26.7 million of which one third was related to front-end applications. Sequentially, orders grew across most markets with noticeable strength in semi, life sciences and security.
Backlog reached a record $46.0 million versus its previous record of $35.0 million at March 31, 2022 of which approximately 45% is expected to ship beyond the third quarter. Historically, only 20% to 25% of backlog would be available beyond the current quarter.
Mr. Grant commented, “We believe we are driving growth by executing on our 5-Point Strategy to expand our geographic presence, enlarge our customer base, deepen customer relationships, extend our channels to market and develop innovative solutions that address our customers’ most pressing needs. In fact, we believe the extended nature of our backlog reflects our customers’ confidence in our technologies and we are more frequently receiving longer term commitments to secure production capacity.”
Reconfirms 2022 Revenue Outlook Despite Macroeconomic Environment and Supply Chain Challenges
inTEST continues to expect 2022 revenue to grow to approximately $110 million to $115 million, or 32% at the mid-point of the range over 2021.
The Company is expecting gross margin in the second half of 2022 to range between 46% to 48%. Quarterly operating expenses are now expected to run at approximately $10.8 million to $11.0 million. These estimated expenses include intangible asset amortization, which is expected to be approximately $600,000 per quarter.
Interest expense is expected to be approximately $150,000 per quarter and the effective tax rate is expected to be approximately 16% to 17% for the year. Capital expenditures for the year are expected to remain approximately 1% to 2% of revenue.
Third quarter 2022 revenue is expected to be in the range of $29 million to $31 million. Third quarter 2022 EPS (GAAP) is expected to be in the range of $0.20 to $0.25 while adjusted EPS (Non-GAAP) is expected to be in the range of $0.25 to $0.30. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release.
The foregoing guidance is based on management’s current views with respect to operating and market conditions and customers’ forecasts. It also assumes supply chain challenges remain unchanged and begin to improve modestly in the second half of the year. Actual results may differ materially from what is provided here today as a result of, among other things, the factors described under “Forward-Looking Statements” below.
Conference Call and Webcast
The Company will host a conference call and webcast today at 4:45 p.m. ET. During the conference call, management will review the financial and operating results and discuss inTEST’s corporate strategy and outlook. A question and answer session will follow. To listen to the live call, dial (212) 231-2933. In addition, the webcast and slide presentation may be found at:
https://ir.intest.com/ .
