Welcome to inTEST Corporation's 2020 First Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded today. A replay will be at www.intest.com. I will now turn the call over to inTEST Investor Relations Consultant, Laura Guerrant. Please go ahead.

Thank you, Matt, and thank you for joining us for inTEST's 2020 first quarter financial results conference call. With us today are Jim Pelrin, inTEST's President and CEO; and Hugh Regan, Treasurer and Chief Financial Officer. Jim will briefly review the quarter's highlights as well as current business trends. Hugh will then review inTEST's detailed financial results for the quarter and discuss guidance for the 2020 second quarter. We'll then have time for any questions. If you have not yet received a copy of today's release, a copy can be obtained on inTEST's website, www.intest.com. In addition to our press release, we have issued supplemental information in advance of this call, which can be downloaded from our website on the Investor Relations page. The supplemental information is offered to provide shareholders and analysts with additional time and detail for analyzing our results in advance of the company's quarterly results conference call. 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. In addition to the factors mentioned in our press release, such risks and uncertainties include, but are not limited to, the impact of the COVID-19 pandemic on our business, liquidity, financial condition and results of operations, including as a result of evolving public health requirements in response to the pandemic, such as government-mandated facility closures, availability of employees, supply chain and distribution constraints, customers' inability or refusal to accept product deliveries and the sufficiency of our current level of working capital to address the impact of the pandemic. Indications of a change in the market cycles in the semi-market or other markets we serve, including as a result of the COVID-19 pandemic; changes in business conditions and general economic conditions, both domestically and globally, as a result of the COVID-19 pandemic; changes in the demand for semiconductors, generally and as a result of the COVID-19 pandemic; the success of our strategy to diversify our business by entering markets outside the semi-market; the possibility of future acquisitions or dispositions and the successful integration of any acquired operations; the ability to borrow funds or raise capital to finance major potential acquisitions; changes in the rates of, and timing of capital expenditures by our customers, including as a result of the COVID-19 pandemic; progress of product development programs; increases in raw material and fabrication costs associated with our products, including as a result of the COVID-19 pandemic; and other risk factors set forth from time to time in our SEC filings, including, but not limited to, our periodic reports on Form 10-K and Form 10-Q. Any forward-looking statements made by inTEST during this conference call is based only on information currently available to inTEST and speaks to circumstances only as of the date, on which it is made. inTEST undertakes no obligation to update the information in this conference call to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated 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. And with that, let me now turn the call over to Jim Pelrin. Please go ahead, Jim.

Thank you, Laura. Good morning to those joining us on today's conference call and also those listening online. We appreciate your interest in inTEST, and I hope all of you and your families are safe and healthy. Before I discuss our financial results, I'd like to say a few words about the coronavirus and our response to this global pandemic. The impact of COVID-19 on our country, industries and, most importantly, people has been dramatic. I want to thank and commend all inTEST employees, customers, and supply chain partners who have helped keep our business operating during these challenging times and to express our heartfelt concern to all those who have been affected. As we navigate the COVID-19 pandemic and recovery, inTEST is focused and aligned on three top priorities: safety, business continuity, and liquidity. I want to touch on each of these three, beginning first and foremost with safety. While we act on our responsibility to maintain our operations and continue to deliver important products, I see an even greater responsibility to protect the health and safety of every inTEST employee. We have been highly proactive in implementing workplace safeguards to protect our employees and ensure their health and well-being, and are taking all precautions in adjusting operational norms to ensure the continued safety of our employees, customers, and business partners while continuing to provide worldwide sales and service support. Over half of our employees are working from home and have been provided the tools and technology necessary to serve our customers and investors on a secure basis. Our manufacturing teams and the people who support them continue to work in our factories, following World Health Organization and CDC-recommended practices as well as state and local directives. These safety precautions implemented in each of our facilities, though vital, make it more difficult for our manufacturing folks to do their jobs. Yet they do every day, and they do them well. Second, I want to speak to how we are focused on business continuity. inTEST corporate offices and all business units are open and operating and have been deemed critical and essential business operations under the various government COVID-19 mandates. We are using all applicable safety practices to protect our employees while supporting the critical needs of our customers. Across the board, the products we manufacture play a critical role in helping the nation withstand the virus as well as rebuilding our economy in the coming months. Ambrell induction heating tools are used for the manufacture of critical N95 face masks. EMS Products are being used to test semiconductor devices that will ultimately be used in such things as ventilators and other health-related tools. iTS is supporting a variety of critical applications in essential industries, such as the satellite industry, keeping communications open; and defense where iTS is a sole source provider of specialized products for several important military programs and, of course, semiconductor tests. Each one of our businesses has a vital job to do, and they continue to design, manufacture, and deliver their products during this crisis. Our supply chain is holding up well. While we have had to make some shifts on sourcing certain items, we've fortunately been able to continue operations without any major disruptions. And lastly, as to assuring liquidity, we took some essential steps during the quarter, each of which have helped us to be more certain of our future and add to our confidence that we can meet our financial obligations as we operate each business and serve our customers during the nation's recovery. In addition to securing a new working line of credit, we continue to stress disciplined cost management. On another note, as you will see in today's press release, we've returned the $2.8 million PPP loan, which we had qualified for. When we first considered the loans, we carefully reviewed our financial condition and the economic impact and uncertainty caused by the coronavirus pandemic. At that time, we determined the funds were necessary to maintain our ongoing operations in accordance with the terms and conditions of the CARES Act. We applied for the loans in good faith. After we entered into the loans, the FDA and the U.S. Department of Treasury announced changes in guidance and statements. In light of the new guidance, we repaid the loans in full. As we go forward, we are evaluating all new information daily to ensure we are positioned to make the best decisions for our employees and our businesses. I know that's a lot to digest and that it's been a stressful time amidst a rapidly changing environment, but it's critical for our investors to understand. So, now let me turn to our business review for the first quarter of 2020. Despite uncertain business conditions stemming from COVID-19, Q1 has shown an uptick in demand with Q1 consolidated bookings of $13.8 million, a 24% increase over Q4. We had a positive book to bill and are getting a good mix of orders across all divisions. In our Thermal division, the pickup was led by semiconductor front-end products; EMS orders increased quarter-over-quarter at an even higher rate, somewhat reflecting the Q4 softness. Turning to shipments, Q1 consolidated revenues of $11.2 million decreased 18% sequentially, as we had expected due to the soft Q4 bookings, reflecting continued headwinds in the analog and mixed-signal production test sector. Breaking down overall revenues: Semi revenues for the quarter were $5 million, representing 45% of overall revenues. The sequential decline in semi revenues was also largely attributable to the weak semi bookings reported in Q4. In Q1, Multi Market revenues were $6.2 million, or 55% of revenue. Multi Market revenues were predominantly driven by industrial and mil/aero markets. As we have noted in the past, our ultimate goal is to grow Multi Market business to reduce the impact of the volatility that is inherent in the semi market. Let's now turn to our two operating segments, beginning with Thermal, which consists of two businesses, Ambrell and iTS. You will recall that Thermal is responsible for all Multi Market revenue as well as important revenue from semiconductor front-end manufacturing and back-end testing. Q1 Thermal bookings increased 21% sequentially to $10.5 million and included a number of large orders in the quarter. Thermal Q1 net revenues decreased 7% to $9.3 million, due in part to delays in planned shipments to areas that have been affected by the coronavirus. A major driver in our Thermal business is the semiconductor arena, where we continue to see important orders in wafer deposition and silicon carbide crystal growth. Rounding out key thermal market applications are mil/aero, and industrial, which includes packaging, automotive, and medical. These applications as well as semi accounted for nearly 80% of thermal bookings and over 70% of Thermal revenues. I want to highlight a few interesting developments during the quarter that demonstrate our expanding ability to quickly respond with innovative products. In an application for our Thermonics cryogenic process chiller product, we provided a custom chiller to an OEM for use in the industry's first turnkey, closed-loop, ethanol extraction system optimized for CBD extraction. Ambrell solutions labs' resources were expanded in scope and precision and now offer a broader geographical reach with state-of-the-art laboratory equipment to deliver innovative and effective heating solutions for the most challenging applications. Our applications laboratory facilities are located in Rochester, New York, Hengelo in the Netherlands, and now a third location in Fremont, California. We stepped up our application support of a key medical customer who is aggressively ramping their capacity to produce N95 COVID-19 masks. So, we continue to focus on applications within our Thermal segment that advance our technical capabilities and diversification. Now, let's turn to the EMS Products segment, which predominantly serves production tests for analog and mixed-signal semiconductor applications. Q1 EMS bookings increased 33% sequentially to $3.3 million, and EMS revenue of $1.9 million was down 47% sequentially. As expected, EMS bookings were slow at the start of the quarter but picked up considerably beginning mid-quarter, even in the face of the continued macroeconomic pressures, which were compounded by the COVID-19-related slowdown. Further, a major supplier to consumer electronics placed a docking and interface order for a continued ramp in their power management products. Now, let me close here with a couple of comments and then hand off to Hugh for detailed operating numbers. Overall, despite the challenges of the last months, we are still seeing a diverse set of end applications driving our business growth, confirming our multi-market strategy. On a macro basis, the uncertainty sown by COVID-19 has led to industry forecasts and signals that are mixed at best. In this new and ever-changing landscape, it's hard to know what the future holds. The reality is no one knows exactly what will happen next, and that can make developing scenarios for guidance more challenging. For inTEST, we remain engaged with our entire customer base, most of whom continue to place orders, and as usual, we are designing, manufacturing, and shipping products to meet their needs. Our standard lead times are intact, and our team is prepared to provide the responsive assistance our customers require, including an ample supply of spare parts, ready for immediate shipment. We are prepared to help develop any new applications our customers require. Now, I'd like to address M&A. We have featured M&A as an integral part of our long-term growth strategy, but economic conditions due to COVID-19 have, by necessity, taken precedence. In this time of uncertainty and scarce resources, we have paused our M&A activity until such time as economic headwinds subside. It, of course, remains an important component of our growth strategy, but as we laid out in the beginning of this call, our primary focus is on safety, continuing to meet our customer requirements, and assuring continuity and liquidity in all of our businesses. While there is still considerable end market uncertainty, now compounded by the COVID-19 situation, the diversification of our customer base remains the anchor of our business, and we believe our long-term fundamentals remain intact. I'm extremely proud of each and every inTEST employee. Individually and as an organization, we have risen to the shared challenges this pandemic has unleashed. We continue to drive forward, as we always do, partnering with our customers to advance their technology road maps and with resilience and efficiency, we are positioning the company for success as this crisis abates. Lastly, I'd like to express our profound thanks to the numerous people on the front lines who are caring for those who have been affected and who are working to keep our economy running, as well as to those working countless hours to provide much-needed equipment to support them; heroes all. And with that, I'd like to turn the call over to Hugh.

Thanks, Jim. As we noted earlier, our first quarter net revenue was at the lower end of our guidance range and came in at $11.2 million, down 18% sequentially. First quarter gross margin of 43% was also at the lower end of our guidance range and was down from the 48% gross margin we reported for the fourth quarter, reflecting a less favorable absorption of fixed production costs and reduced revenue levels, which was partially offset by improved component material costs, which declined from 31.5% in Q4 to 30.3% in Q1. Selling expenses grew by 5% sequentially to $2.1 million for the first quarter, driven by increased compensation expenses and commission, partially offset by reduced advertising and warranty costs. The higher sales commission expense was primarily driven by seasonal-related increases as well as new sales staff added in the first quarter, and the increased commission expense was the result of an expansion of Ambrell's sales representative network. Engineering and product development expenses increased 7% sequentially to $1.3 million, primarily as a result of seasonal-related increased compensation expenses, partially offset by decreased patent legal costs. General and administrative expenses grew 7% sequentially to $2.9 million, driven by increased professional fees and seasonal-related compensation expenses, partially offset by reductions in stock-based compensation expenses and travel. Our loss for the first quarter drove our accrual of a $250,000 income tax benefit, which reflected an effective tax rate of 18%. This compares to a $76,000 income tax benefit booked in the fourth quarter, which reflected an effective tax rate of minus 12%. The income tax benefit booked in the fourth quarter was the result of reconciling the impact of the foreign-derived income– intangible income deduction allowed under the new income tax law, which benefits companies that manufacture in the U.S. and have significant overseas sales, as well as a book to tax return adjustment. We now expect that our effective tax rate will range from 16% to 17% throughout the balance of 2020, and that the higher effective tax rate in the first quarter was driven by an additional book to tax return adjustment. For the quarter, we reported a net loss of $1.1 million or $0.11 per diluted share, compared to net earnings of $724,000 or $0.07 per diluted share for the fourth quarter. Diluted average shares outstanding were 10.2 million for the first quarter of 2020. During the first quarter, we issued 58,160 shares of restricted stock and repurchased 13,767 shares under our stock repurchase plan, which commenced on September 18th, 2019. In response to concerns over COVID-19, we suspended our stock repurchase plan on March 3rd, 2020, and to date, we had repurchased 243,075 shares at a total cost of $1.2 million. EBITDA was a negative $927,000 for the first quarter compared to $1.1 million for the fourth quarter. Consolidated headcount at March 31st was 205, a reduction of one from the level we had at December 31st. I'll now turn to our balance sheet. Cash and cash equivalents declined by $294,000 sequentially to $7.3 million, and cash flow used in operations was $119,000 for the first quarter. The decrease in cash was primarily driven by our operating loss in the first quarter. We currently expect cash and cash equivalents to increase throughout 2020, and as of today, cash stands at $6.9 million. Accounts receivable decreased $1.2 million during the first quarter and was at $8.1 million at March 31st with 65 DSO, up from 63 at December 31st. Inventories increased $538,000 or 8% sequentially and was primarily driven – the increase was primarily driven by the aforementioned customer shipment delays caused by COVID-19. Our backlog at the end of March was $8.1 million, up from $5.5 million at December 31st, reflecting the growth in orders in the first quarter. As to guidance, as noted in our earnings release, we continue to see uncertainty with regard to our customers' ordering patterns stemming from responses to the coronavirus pandemic, which we are closely monitoring. Accordingly, we are providing a wider than usual guidance range and expect that net revenues for the second quarter ending June 30th, 2020, will be in the range of $11.5 million to $13 million and that our financial results will range from a net loss per diluted share of $0.09 to breakeven. On a GAAP basis, our financial results will range from an adjusted net loss per share of $0.06 to net earnings of $0.03, and we currently expect our gross margin for the second quarter to be in the range from 44% to 46%. Operator, that concludes our formal remarks. We can now take questions.

Thank you. Our first question will come from Jaeson Schmidt with Lake Street.

Hey guys. Thanks for taking my questions. I just want to start with, saying, if you could provide some color on what you saw from an order momentum standpoint and linearity of orders in April and now sort of in the first part of May?

Yes, Jaeson. Orders were, for the quarter, I wouldn't call it linear; we actually saw a bit of a peak in the middle of the quarter, this particular quarter, on a consolidated basis. Within the business units, though, we did see some different activity. For instance, EMS had a more back-end loaded quarter, while iTS and Ambrell had a quarter that was more evenly spaced. But on a consolidated basis, if you've looked at the bookings pattern, it was $4.2 million, $5.2 million, and then $4.4 million on a monthly basis.

Okay, that's helpful. And then I apologize if I missed it, but are you guys seeing any component shortages or supply constraints anywhere?

Yes, Jaeson, I'll be happy to answer that. We have had some components that we were sourcing from China, in particular, and back when in the January, February timeframe when COVID-19 erupted in China, we quickly changed to non-Chinese sources for those components. So, there was a slight delay for a short period of time, but everything is pretty much normal now.

Okay. And then the final one for me, and I'll jump back into queue. Are you seeing any significant pushback from customers from a pricing standpoint, just given the current macro backdrop?

No, we're not, actually. That has not been an issue. We've had some customers we haven't been able to ship to at the end of the quarter, as we noted, because their facilities were closed due to the corona issue. But no, we haven't seen any pushback on pricing. We haven't seen anyone asking for a special pricing or anywhere in any of our businesses that I'm aware of.

Okay, that's helpful. Thanks a lot, guys.

Thank you.

Thank you, Jaeson.

And our next question will come from Theodore O'Neill with Litchfield Hills Research.

Thanks. Good morning. Follow-up to Jason's question here. When you switched to a supplier that was not Chinese, did the costs go up somewhat? And second question is, Hugh, you mentioned that you had lower advertising costs in the quarter. Is that a change in strategy or a reduction related to COVID in things like conferences?

Well, I'll answer the first part. As far as increased costs, yes, there was a small incremental increase in costs, but these components are a very small percentage of the cost of the product. So, it's really insignificant even on a gross margin basis.

And Peter, the second part of your question was related to G&A. I apologize it cut off, and I didn't hear it exactly.

Sorry. You mentioned that you had lower advertising costs in the quarter. And I was wondering if that a change in the strategy or COVID-related reduction in things like conferences.

It's really a COVID-related strategy and reduction to conferences. We continue to move forward with our traditional marketing methods, but things such as conferences and another area, quite frankly, that's off materially is travel simply at this point because we can't jump on planes. There wasn't as much of that scheduled in the first quarter, but a very significant of that is scheduled obviously in Q2, and at what point we'll be able to get back to that is unclear.

Thanks very much.

You're welcome.

And our next question will come from Dick Ryan with Dougherty & Company.

Thank you. Jim, on the wider guidance for Q2, how are you handicapping your two divisions, Multi Market and semi? What are your kind of puts and takes on guidance for those segments for Q2?

Well, Dick, let me answer that more generally and say that we've gone into Q2 with a much stronger backlog, and that has given us confidence in our guidance. And the backlog is across the board in both semi and Multi Market.

I understand there were some delays in EMS shipments. How will that backlog impact Q2? What volume do you anticipate shipping in Q2?

Just about everything that was delayed because of coronavirus has already shipped, in fact. I think there's one or two orders that are still pending. So, I would expect that all of the delayed orders will ship in Q2.

Okay. The new Fremont facility, what markets are you kind of keying off of that new opening?

Well, there's a tremendous amount of industry, as you know, on the West Coast, in general, but we also happen to be right down the street from one of the major EV manufacturers, and that doesn't hurt, which has been quite active building two new factories.

And how are you staffing? What's your headcount going to be over there?

Well, right now, it's staffed with a single person, which is more than sufficient because it's also supported by our facility in Rochester, New York. Particularly during this time, when travel is limited to places you can drive to, this is an important tool for us.

Okay. So, Hugh, did you say you amended the credit facility or can you refresh me on what availability you have?

We have $7.5 million available under the credit facility. As Jim mentioned, we did repay the $2.8 million in PPP loans that we had borrowed as a result of changes in the treasury department's guidance on those loans.

Okay. Thank you.

You're welcome.

And with no further questions, I'd like to turn the call back over to Mr. Pelrin for any closing remarks.

Well, thank you for your interest in inTEST, everyone. We appreciate your listening in. If you have further questions, don't hesitate to call me, Hugh, or Laura. We look forward to updating you on our progress when we will report our results for the second quarter. Everyone, please stay safe and healthy. Thank you.

Once again, that does conclude our call for today. Thank you for your participation. You may now disconnect.