Welcome to inTEST Corporation’s 2015 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. [Operator Instructions] As a reminder, this conference is being recorded today. A replay will be accessible at www.inTEST.com. I would now like to turn the call over to Laura Guerrant, inTEST’s Investor Relations Consultant.

Thank you, Jackie. And thank you for joining us for inTEST’s 2015 third quarter financial results conference call. With us today are Robert Matthiessen, President and CEO; Hugh Regan, Treasurer and Chief Financial Officer; Jim Pelrin, Executive Vice President and General Manager of inTEST’s Thermal Products Segment; and Dan Graham, Senior Vice President and General Manager of inTEST’s Electrical and Mechanical Products Segments. Mr. Matthiessen will briefly review highlights from the third quarter as well as current business trends. Mr. Regan will then review inTEST’s detailed financial results and discuss guidance for the fourth quarter of 2015. We will then have time for any questions. If you have not yet received a copy of today’s release, a copy may 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 our ability to implement and execute the 2015 repurchase plan, changes in business conditions in the economy, changes in the demand for semiconductors, changes in the rates of and timing of capital expenditures by semiconductor manufacturers, 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 10-K and Form 10-Q. 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 unanticipated events. And with that, let me now turn the call over to Bob Matthiessen. Please go ahead, Bob.

Thanks Laura. I’d like to welcome everyone to our 2015 third quarter conference call. While you review the financial results in detail, I’ll review some of the highlights and will then discuss our markets and what we’re seeing in our customer base. Before we review our results for the third quarter, I’d like to take a moment to discuss two very important announcements made today. First, we announced a couple of changes to our executive staff. Dan Graham, Senior Vice President and General Manager of our Mechanical and Electrical Products Segment, has informed the board of his decision to retire at the end of 2015. I want to personally thank Dan for his many years of distinguished service. As one of the co-founders of inTEST, he has played an instrumental role in developing our technologies and I wish him all the best as he embarks for the next chapter of his life. Secondly, James Pelrin has been promoted to the position of Executive Vice President. Many of you know Jim and know the outstanding work he has done as Vice President and GM of our Thermal Product Segment, our largest most profitable and diversified division, which is providing inTEST with the growth opportunities in the future. Through the strategic diversification of this segment, we are creating new opportunities in industrial testing and broadening our end-market penetration to electronics test applications in various growth markets including automotive, consumer electronics, defense, aerospace, energy, industrial and telecommunications. Jim has overseen all aspects of that business including sales, product management, engineering and operations. And in his expanded role will have responsibility for all of our business segments. I look forward to working with Jim on implementing our long term objective to grow and evolve into as corporation into a broad based industrial test company…

Thanks Bob. Third quarter 2015 end user net revenues were 8.6 million or 93% of net revenues compared with 10.8 million or 93% of net revenues in the second quarter. OEM net revenues were $637,000 or 7% of net revenues, down from $839,000 or 7% for the second quarter of 2015. Net revenues from markets outside of semiconductor test were $3.1 million or 34% of net revenues compared with $3 million or 26% of net revenues in the second quarter. The company’s gross margin for the third quarter was $4.3 million or 47% as compared with $5.8 million or 51% in the second quarter. The reduction in the gross margin was the result of less favorable absorption of our fixed manufacturing costs, which were relatively unchanged at $1.4 million, but as a percentage of revenue increased from 13% in Q2 to 16% in Q3. Partially offsetting this increase was the slight reduction in our consolidated component material costs which declined from 33.6% in the second quarter to 33.2% in the third quarter. While our consolidated component material costs remained stable sequentially, we saw both increases and decreases within our product segments. Our Thermal Products segment saw a sequential increase in its component material costs, increasing from 29.2% in Q2 to 31.1% in Q3, while our Mechanical and Electrical Products segments both saw productions with our Mechanical Product segment decreasing from 42.0% to 40.3% sequentially and our Electrical Product segment decreasing from 36.6% in Q2 to 35.6% in Q3. The changes in component material costs were driven by changes in both product and customer mix. Selling expense was $1.4 million for the third quarter compared to $1.5 million for the second quarter, a decrease of $222,000 or 14% sequentially. The decrease was primarily due to reduced levels of commission expense due…

[Operator Instructions] Our first question comes from the line of Srini Sundararajan from Summit Research.

Hi guys.

Hi Srini.

I just wanted to ask - Hi Hugh and Matthiessen. I just wanted to ask you guys, when did you see some softening of Q4 meaning like I think earlier in the year, you had said that it could be a seasonally good quarter but when did you see the softening and is that mainly related to China?

The softness really, Srini was more attributable to the results of our Mechanical Product segment in the third quarter. You know that segment as Bob talked about the pause that we are seeing. We saw several of the largest customers of that segment though have basically stopped buying this year. They are satiated for one reason or another. And as a result that particular operation experienced a more significant operating loss in the quarter than originally projected which is one of the reasons we missed our earnings number for the quarter. You know I think clearly this segment has not performed as we had hoped it for this year and it’s primarily due to customers such as well, not sure I want to name them but some of our largest customers being on what one is on capital freeze and two other significant ones are just not adding capacity at this current time. And that’s really what the products from our Mechanical Product segment are, manipulators are sold for every tester sold and docking hardware is typically sold at the same time the testers are sold. So that’s what’s really driven that. And that occurred I would say ratably throughout the quarter, although the deterioration was more of say maybe possibly from the middle to the end. You know the quarter started off a little stronger and we were a little bit more optimistic, but it did not play out as originally projected.

And looking at Q4, I was expecting a slightly higher revenue level, what is the softness in Q4 related to?

It again continues to be driven to some degree by our Mechanical Product segment and concerns about you know where revenues will go in the fourth quarter. I mean seasonally as you know Srini, I think we’ve discussed this in prior calls, our first and fourth quarter are seasonal trough, clearly the third quarter was not as strong as we would typically see at this time of the year, we softer than anticipated and that really was driven by the bookings trend from Q1 to Q2 where you saw bookings decline instead of increase as they traditionally would have. You know we’ve been softer this year than anticipated. And again we attribute that primarily to our Mechanical Product segment and the fact that these customers have been frozen. We are talking to them fairly regularly and you know their indications that as Bob mentioned earlier we’re seeing an increase in code activity although some of that to be honest with you is really attributable to preparation of budgets as we go into year-end more so than what I would call from order. This is a phenomenon we see regularly at the end of the years people put their budgets together. I think you know as Bob has said before, we don’t see revenue growing again until we probably get into the second quarter of next year when we’d see the seasonal uptrend that we traditionally do at that time of the year.

Okay, but you think that this is a temporary phenomenon for this year and next year?

Yes, we do. We - you know one of the benefits of broad customer diversification is typically that all your customers don’t tend to cycle to the low end simultaneously. But unfortunately, this particular year, we’re seeing most of the customers of our Mechanical Segment at least the major customers of Mechanical segment are not buying significantly and all in units which is really impacted that particular segment.

Okay. Okay. And then if you hazard a guess on the end markets, is this related to the automotive end market or is it related to smartphone end market or just on a broad - just on a broader –?

From a semi perspective, that’s a great question Srini and I hadn’t asked my colleagues yet if they have any view into that. You know Dan or Bob I don’t know whether you’d have any comment on that for Srini as to what end market we thing were impacting the weakening in demand that we -

Well the number two tester company in the world attributed downturn they had in the last six months to decrease in computer sales and general, but that I mean the larger workstation computers and China not meeting its mobile phone demand, everyone expected. And of course going forward, we have the net of things doesn’t affect there but that’s not really up to speed yet. So this tends to be the nature of our business, one thing goes away and something else comes along to replace it. But this one particular customer of the Mechanical segment Srini that’s on capital freezes typically represents anywhere from 25% to 35% of that segment’s business in a given period. It - on a consolidated basis will be usually greater than 10% customer for us. So the fact that it’s on capital freeze has had a significant impact on this particular operations results this quarter.

Okay. And in terms of the all the mergers that have happened in the semiconductor sector, do you see any impact on inTEST?

Well the one thing we clearly are seeing is that you know the number of ATE companies generally is shrinking. You know I think on the tester side, their consolidation had occurred actually several years ago. So I don’t know that that impact has been as material for us. On the - as semiconductor manufacturers have merged for incidence, TI National that actually created an opportunity for us. When that merger occurred - Dan or Bob, I don’t know whether you’d -

One was a little bit further, that was about four years ago. But the more recent ones are NXP and Freescale which is not yet had done deal but they are both customers of our, so if the same they have excess equipment for example, it could possibly have affect us, but so far we’re not seeing any of that. There are some other big ones too like Avago and Broadcom, I think it was. But they are not really; they don’t have their own fab, so that’s a different story.

So I guess the takeaway from what my colleagues are saying to me is that they don’t see the currency consolidation at least in the - at the space time having material impact on our results as we see it today.

Okay and that’s all I have. Thank you very much.

Thank you, Srini.

Thanks for taking the question. Thank you.

Our next question comes from the line of [indiscernible].

Thanks. Do you have numbers for revenue segments for Thermal, Mechanical and Electrical?

Yes I do. Revenues for the quarter for Thermal were 6.2 million, Mechanical and that’s down from 6.7 million in Q2, Mechanical Products was 1.3 million down from 2.5 million in Q1 and Elector Products is 1.7 million down from 2.4 million in Q2.

Okay. And are you - you mentioned in your remarks about why the tax rate was lower, is it - what’s the outlook for tax rate for Q4?

That’s a good question. You know I think the tax rate for the third quarter will be back in the 35% range again. You know the fourth quarter is that a final period where we true things up, so it could drip a little lower but I don’t anticipate anything like we did. What really drove that this quarter was taking that valuation allowance into income for our German operation as well as the troop of dividend that we brought back during the year from our German operation as well. And those are - that we don’t have that happen again in the fourth quarter, so.

Okay. And you also mentioned in your prepared remarks that the - talking about the acquisition candidates that you are looking at, can you give us an idea of how far away from the EBIT multiple you are looking for, these companies are - these acquisition targets are trying to achieve?

Well, it’s you know, the multiples that we are seeing I can tell you have been moving. I mean we were focused initially looking at multiples between you know if something had moderate to low growth in the 5% to 6% or five to six times range where if something had stronger growth opportunities that was leading towards the seven, eight range. That said, I can tell you as we talked about previously on calls, we’ve been under letter of intent now several times in the last 12 months. And we are finding at least on the most recent opportunity that we were outbid on for a company that had moderate growth, the deal was done at over nine times. Yeah, that’s what we said. So we’re finding and that’s one of the reasons we’ve not been successful in getting a deal done. It’s not that we haven’t had opportunities that made strategic sense for us, we just now were willing to overpay for those opportunities. You know that said, we continue to search for things. As Bob mentioned earlier, we’re widening our view a little bit. And you know we do best when we’re not in a bidding situation against others. The problem happens even when you approach a company that’s not in play and you get them thing about telling themselves what typically happens is they decide to put themselves in play and to see what the market will bear in and that’s when you know because of basically cheap captain, you get people paying the multiples that they have been paying. You know I mean we sort of make a commitment to our investors that we’re not going to let Zuberance get into way and make us overpay. So we continue to look for opportunities that make sense for us. And quite frankly that’s one of the reasons we’ve initiated to buyback is because our own stock if you look at this is a multiple of our ETIBDA is well below those levels and we thing the buyback will begin the address that particular issue as we continue to search for inorganic growth opportunities.

Hugh, I am looking through my numbers that go back to I think ‘04, the Mechanical Product segments never had a - hasn’t had a revenue number like that for decade?

Yeah, it really was a bit -

No, actually no way we got down there but generally no.

I was going to say await of nine everything went to that level but you know but I agree with you that this segment has not seen this type of falloff. And we’re very concerned I can say that there was a lot of discussion of this at a board level and clearly we’re focused on managing our customer relationships and we do not believe difference since there’s been any loss of market share. We believe that it’s in an example of our customers simply not buying at this time. We continue to work with them and - but unfortunately at the time of year that we are right now as I said to Srini earlier, we don’t anticipate revenues going back to what we call normal level, you we’re at a seasonal trough now, so the fourth quarter is not going to be anything, even if you see improvement, it’s not going to get you to where we need this operation to be. So it’s been this pear pointing here for Mechanical but it’s driven by a capital freezes that as far as largest customers as well as what appears to be satiated demand at two very other significant customers.

Okay, thanks very much.

You’re welcome.

That was our final question. I now like to turn the floor back over to Bob Matthiessen for any additional or closing remarks.

Well, thank you for joining us tonight. We’ll come back to you next quarter and hopefully give you some good news. Good night.