Welcome to the inTEST Corporation 2018 Third Quarter Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded and a replay will be made accessible at www.intest.com. I will now turn the call over to inTEST Investor Relations Consultant, Laura Guerrant. Please go ahead.

Thank you, Cody. And thank you for joining us for inTEST 2018 Third Quarter Financial Results Conference Call. With us today are James Pelrin, inTEST's President and CEO; and Hugh Regan, Treasurer and Chief Financial Officer. Jim will briefly review highlights from the third quarter as well as current business trends. Hugh will then review inTEST's detailed financial results and discuss guidance for the 2018 fourth quarter. We'll then have time for your 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. 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, changes in business conditions and the economy, changes in the demand for semiconductors, changes in the rates of and timing of capital expenditures by our customer, 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 filing 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. 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, www.intest.com. And lastly, we'll be attending the following investor conferences in December: the 11th Annual LD Micro Main Event in Los Angeles on December 4th and the 7th Annual New York City Summit on December 11th. We look forward to seeing many of you. And with that, let me now turn the call over to James Pelrin. Please go ahead, Jim.

Thank you, Laura. I'd like to welcome everyone to our 2018 third quarter conference call. While Hugh will go over the financial results in detail, I'll focus my remarks on highlights. We continue to make progress in broadening our presence within the markets we serve as we diversify the company into a global world-class provider of thermal solutions for industrial manufacturing and electronic test. We delivered solid Q3 operating results in both of our segments driven by a diversified customer base of end users and OEMs. The semiconductor industry continues to drive revenue for automotive sensors, the Internet of things and mobile technologies while non-semi business is driven by demand in the automotive, industrial, telecom and defense aerospace markets. Q3 consolidated bookings of $20 million, increased 4% sequentially and 13% year-over-year. Excluding Ambrell, the year-over-year increase would have been 18%. Consolidated net revenues of $20.2 million came in just above our guidance representing a better than expected sequential decrease of 4% and an increase of 16% year-over-year. Again, excluding Ambrell, the year-over-year increase would have been 7%. Our thermal segment was particularly strong. In fact, Ambrell achieved record net revenues for the quarter of $6.8 million while inTEST Thermal Solutions revenue at $7.8 million for the quarter was the highest in more than 15 years. Q3 gross margin was 50% compared with 52% for Q2 and 43% of Q3 revenues were derived from non-semi compared with 38% in Q2 and 47% a year ago. Turning to the thermal business, as a reminder, our thermal segment is the combined business of inTEST Thermal Solutions, or ITS, which serves the test market and Ambrell which serves the industrial process markets. We've strategically diversified this segment resulting in new opportunities in industrial manufacturing through both OEM and end user applications. This diversification complements…

Thanks, Jim. Third quarter 2018 end-user net revenues were $17.2 million or 85% of net revenues compared to $18.2 million or 86% of net revenues in the second quarter. Q3 OEM net revenues were $3 million or 15% of net revenues, up from $2.9 million or 14% for the second quarter. Net revenues for markets outside of the semiconductor market were $8.7 million or 43% of net revenues compared with $8.1 million or 38% of net revenues in the second quarter. As noted earlier in the call, Ambrell's record net revenues for the third quarter were $6.8 million. Excluding Ambrell, our net revenues from markets outside of semiconductor market were $4 million or 30% of net revenues for third quarter. So clearly Ambrell continues to further diversify our served markets. Our third quarter gross margin was $10.1 million or 50% as compared with $10.9 million or 52% in the second quarter. The reduction in the gross margin was primarily the result of an increase in our fixed manufacturing costs, both in absolute dollar terms and as a percentage of net revenues and to a lesser extent to an increase in our component material costs. Our fixed manufacturing cost grew by $89,000 [ph] or 4% sequentially and they were less favorably absorbed in the third quarter due to lower net revenues. As a result, these costs represented 14% of our net revenues in the third quarter as compared to 13% in the second quarter. The increase in the third quarter fixed manufacturing costs was primarily the result of increased spending by Ambrell on materials related to providing service to support their customers. Our Q3 consolidated component material costs increased slightly from 33.7% in Q2 to 34.0% in Q3, reflecting higher component material costs in our thermal segment. The increase in the…

[Operator Instructions]. And we'll take our first question from the Theodore O'Neill with Litchfield Hills Research.

Hi. Great quarter.

Thank you, Theo.

Thank you. Great. So first question is, on the thermal orders in automotive, was any portion or all of that related to companies that are in electric vehicle sector?

A very small portion. Most of the thermal orders were for -- had to do with infotainment and the sensors, sensor portion of the automotive industry, which do go into electric vehicles, but we can't identify. They also go into electrical vehicles.

Okay. So the next question is, and I hate to be sort of a wet rag on this, is the fourth quarter.

Right.

There is a lot of -- there is a number of your peers out there that are talking about recovery in the semiconductor business not being V shaped, but being more of a U and who knows how big a U shaped recovery it's going to be. And sort of given what we've been hearing out there, how confident are you on the fourth quarter revenue guidance?

I think we’re reasonably confident, Theo. I don’t expect much upside to our fourth quarter revenue guidance as we've had in the past. We do see softness in Q4 and Q1, but we do see semi demand at least according to our internal forecast picking up in Q2 and Q3 of next year.

Okay. And so is this more of a seasonal issue like you usually see or do you -- is this more of or is this more related to the push out in orders that..?

I think, Theo, it's a combination of both. Certainly there has been such a demand for orders that are customers associated and they are busy commissioning all over the world. So I think that has something to do with it. But certainly for EMS, the prober extended lead times has caused the delay and we see that in orders that they normally would have booked by now are being held because there is nothing to meet.

Okay. Thanks very much.

And we will see that condition, Theodore -- yes, we will see that condition lasting for the next six months approximately, the prober related supply chain issues.

All right. Helpful. Thank you.

Thank you. And we will now take our next question from Dick Ryan with Dougherty.

Thank you. Say, Jim, when you look at the thermal side, you’ve talked about the softness in the prober side for EMS. How about the semi outlook for the thermal side? What do you kind of see going into 2019? And maybe just on the industrial part of the thermal business, how does that pipeline look?

Well, the pipeline looks strong on the industrial side. They are really benefiting from the semi front-end market. They have converted some customers to their product and those customers are going gangbusters and that's a major driver for -- and we're speaking of Ambrell there. In terms of the semi side for thermal, we haven’t seen that much of an impact from a downturn in the semi business. But on the other hand, we didn't see that much of an impact when the semi was really booming three, four quarters ago. So it tends to be a steadier business.

Okay. And just the just the customer diversification at Ambrell, I mean it looks like it has been pretty sticky business and now the transceivers seem to be coming back. What's the outlook there?

Well, the transceiver businesses is, as you know, is at ITS, inTEST Thermal Solutions. And that business is just very choppy. Last quarter business was not strong, the quarter before that it was very strong, this past quarter, Q3, it was very strong again. It's very difficult for us to predict it, very difficult for our customers to predict it because it depends upon the orders that they win. We know that overall the industry is growing and is very healthy. So we just have to make sure that we -- going forward we get our share of orders.

And are you seeing Ambrell's customers -- customer base expand at all?

Yes, as a matter of fact, Ambrell's customers do tend to be very sticky. But I think of note is that they have successfully wrestled some pretty significant accounts away from competitors. So they’re growing their market share.

Hugh, what was the -- sorry, go ahead.

Just I’m saying across a number of industries this is happening.

Okay. What was the customer concentration, Hugh, in the quarter?

For the quarter, top 10 customers represented 41.2% of business and we had one customer TI at 11%.

And just a couple of housekeeping. Do you have cash flow for the year-to-date and what was stock based comp in the quarter?

Yes, cash flow from ops year-to-date is $7.2 million and what was the final question, Dick, I apologize?

Stock based comp.

Stock based comp was, yes, one moment, restricted stock comp was 180,000 for the quarter.

Okay, great. Thank you, guys.

You’re welcome.

Thank you.

[Operator Instructions]. Thank you. And with no additional questions in the queue, I would now like to turn the conference back over to Mr. Jim Pelrin for any additional or closing remarks.

Well, thank you for your interest in inTEST. We look forward to seeing you at the conference as Laura noted and updating you on our progress when we report our fourth quarter results. Operator, the call is now concluded.

Thank you. And that does conclude today's conference. Thank you all for your participation. You may now disconnect.