inTEST Corporation (INTT) Q1 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the inTEST Corporation First Quarter 2012 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Laura Guerrant, inTEST's Investor Relations Consultant. Please go ahead.

Thank you, operator. Joining us today from the company are Robert Matthiessen, President and Chief Executive Officer; Hugh Regan, Treasurer and Chief Financial Officer; and joining us for the first time is Jim Pelrin, Vice President and General Manager of inTEST Thermal Products segment. Mr. Matthiessen will briefly review highlights from the first quarter, as well as current business trends. Mr. Regan will then review inTEST's detailed financial results and discuss guidance for the second quarter of 2012. We'll then have time for any questions. If you have not yet received a copy of today's release, please e-mail me at laura@guerrantir.com or you can get a copy of the release on inTEST's website, www.intest.com. Before we begin the formal remarks, the company's attorneys advised 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 in the economy, changes in the demand for semiconductors, changes in the rates of and timing of capital expenditures by semiconductor manufacturers, progress of product development programs, increases in raw material and fabrication costs associated with our products, implementation of restructuring initiatives and other risk factors set forth from time to time in the company's SEC filings, included, 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 Robert Matthiessen. Please go ahead, Bob.

Thanks, Laura. Welcome, everyone, to our 2012 quarter -- first quarter conference call. While Hugh will review the financial results in detail, I'd like to highlight some of our achievements. Let me start with financial results for the quarter, which were better than we had expected. What a difference a few months make. Recall that our Q1 guidance provided on March 7 reflected the turbulent macroeconomic environment and resulting softness in semiconductor-related bookings that the industry experienced in the second half of 2011, as well as costs related with the closing of the Thermonics acquisition. At the same time, though, we also noted that we were fairly certain that as we approached the end of the first quarter, we were through the trough in the semiconductor business, and we expected a continuation of the trend, which we have decidedly seen. To date, our order flow has returned to more robust levels, and Q1 bookings increased 60% quarter-over-quarter, a clear reflection of our customers' commitments to increase their overall test capacity. And I think it bears noting that although the softness in the semiconductor-related business of last year, of course, mainly impacted our Mechanical and Electrical Products segment, I am proud to note that a few weeks ago, that very same Mechanical and Electrical Products groups were recognized for excellence and awarded the Texas Instruments 2011 Supplier Excellence Award. Our results for the quarter were fueled by a continued recovery of our semiconductor business, driven by the increasing demand for mobility products, and demonstrate our focus and commitment to a differentiated product strategy. Over the last few years, we have been transforming inTEST through the strategic diversification of our Thermal Products segment, and we now address growth markets in both the semiconductor and non-semiconductor areas, including automotive, consumer electronics, defense/aerospace, telecommunications and most recently, the nuclear market. Q1 revenue of $10.7 million increased 6% sequentially and exceeded guidance by 2%. In addition, our essentially breakeven net income also exceeded our expectations. And although we broke our 9-quarter trend of profitability, we do expect to be profitable again in Q2. So we see Q1's results as only a dip. Total bookings for the first quarter were $12.9 million, a 60% increase as compared with Q4 2011's bookings of $8.1 million. 13% of first quarter 2012 bookings were derived from markets outside of semiconductor tests as compared with 38% in fourth quarter of 2011 and 17% in the comparable prior quarter. It's not unexpected that our non-semi business, as a percentage of total bookings and revenues, would decline in Q1, largely due to the impact of the acquisition of Thermonics, whose revenues were 100% in the semi space. The 2011 year-end statistics for the non-semi business were heavily impacted by 2 things which inflated the percentage of non-semi business. One was the second half weakness in the semi business and our Mechanical and Electrical Products segments, which made the non-semis business we had appear as a larger percentage of our overall business; and secondly, the significant order we received in the second half of the year from Emerson Rosemount, which was approximately $1 million. This order related to equipment needed to replace damaged or destroyed equipment in the Thai floods, and that business was 100% non-semi. We continue to leverage our Thermal division and the Sigma Systems acquisition and expect that, on an overall basis, non semiconductor-related products will continue to play an even greater role on the company's success as we further diversify our end market penetration. Now let me turn to each of the segments in which we operate. The Mechanical Products, which make the test head manipulators and docking hardware; Electrical Products, who make the tester interfaces, and of course, our thermal products. Within Mechanical Products, we saw a very strong resurgence in bookings in the last few months of the quarter, with increased first quarter bookings of $3.8 million compared with fourth quarter bookings of $1.1 million. In this segment, we continue to develop and refine our manipulator and docking hardware products, which positions us with a well-targeted product mix to develop customer-specific docking solutions. We have had a number of successes in this quarter. We received an order for $2.2 million from a major domestic semiconductor manufacturer. Some of the order, which includes manipulator, docking hardware and tester interface products manufactured by both our Mechanical and Electrical Products segments, were shipped during the first quarter, and the remainder is shipping in the second quarter. We secured a multipiece docking order in Shanghai against heavy competition. We understand the business is mobile communications-related and based on new devices for next-generation smartphone. Additionally, we introduced new docking and interface products to support the Advantest T2000 tester and have begun shipping these with no issues. This is a tester family that we have had little previous activity on. Our understanding is that this domestic IC manufacturer had a 5-year exclusive deal with Advantest on that tester that has just -- sorry, that's just become available to other customers in the past few years. And lastly, as I mentioned earlier, we are awarded the Supplier Excellence Award by Texas Instruments, and there will be a delegation from TI visiting us in mid-May to make the formal presentation. Our partnership with TI has spanned nearly 30 years. Long-standing industry relationships with our suppliers and customers are a hallmark of our success, leading to smooth, new product introductions and helping to ensure that all the elements of our customers' test sets will work together efficiently as a system and be delivered on time. The TI Supplier Excellence Award is public recognition of the ongoing efforts that we have made to provide the highest level of manufacturing expertise to support the industry's highly demanding technology. Going forward, we will continue to refine and develop new docking solutions, as these are semi-custom products. Our Cobal 500 manipulator is completing its TUV certification, and 2 units are being prepared for customer evaluation, 1 domestically and the other in Southeast Asia. This manipulator is suitable for test heads weighing up to 500 kilograms or 1,100 pounds. A range of popular testers are in this class, including those from Teradyne, Verigy and Nextest. Turning to the Electrical Products segment. We continue to make substantial inroads. And as we experienced with the Mechanical segment, we also saw a very strong resurgence in bookings in the last few months of the quarter. First quarter Electrical bookings of $3.8 million exceeded our expectations, substantially improving over fourth quarter 2011 bookings of $864,000. Our Electrical segment was extremely busy this quarter. Not only did they record their highest bookings since 2009, they also relocated to a new facility in Fremont, California over a long weekend at the end of March and were back in production on Monday, April 2. This facility is much better suited to our needs and size and cost, and our lease runs for 5 years, with an additional 6 months of free rent. Electrical segment highlights for the first quarter included: one, a record volume of orders in Q1 for probe towers for Teradyne's FLEX testers. We understand that much of this business is mobile communications-related; secondly, the Electrical segment shared with the Mechanical segment design wins on the Advantest T2000; and thirdly, we successfully installed new interfaces for the Eagle test ETS-200FT system for use in testing high-voltage, high current semiconductors, such as those used in electrically-powered automobiles; and last, but surely not least, let me turn it to our Thermal segment, which remains our strongest segment. First quarter Thermal bookings were $5.3 million as compared with fourth quarter bookings of $6.1 million. As we had discussed on our last quarterly call, the quarter-over-quarter decline in bookings is attributed to the slowdown in business that began in October and November of 2011, although these months did benefit from the $1.4 million in the Thai flood-related bookings. The slowdown bottomed in January and then a recovery began. Bookings in February were up 38% over January, with March up another 37% over February. And bookings for April continue to be strong. 33% of first quarter bookings for the Thermal Products segment came from non-semi customers. Sigma Systems accounted for 14% of Q1 bookings for the Thermal Products segment. The industry is definitely heating up, no pun intended, with mobility driving the semi test recovery. Worldwide, there is continued expansion in all forms of technology, and opportunities in the telecom market continue to offer good business potential for us. As the boundaries of telecom and media entertainment continue to merge, an increased demand for bandwidth will drive expansion. The Semiconductor market improved, and we had increasingly strong bookings from those companies serving the telecom market, including fiber optics, RF and microwave companies. For example, although the fiber optic industry went somewhat quiet in Q4 of 2011, a major Singaporean supplier of optical interface components has increased its fiber optic device testing, buying month-after-month over the last 4 months. Also, a large Chinese manufacturer of mobile computing devices, including broadband modems, wireless gateways and routers and M2M cloud platforms, shows our mobile attempt [ph] solution, which is basically a ThermoStream combined with thermal chambers for production testing of fiber optic components for their latest 3G and 4G technologies, which resulted in almost $500,000 in orders during the quarter. Truck sales and service bookings were up 21% over Q4 2011 and 7% compared with Q1 2011. On January 16, we closed the acquisition of Thermonics and have fully integrated it into our operations. The addition of Thermonics further enhances our presence in the ATE industry, while at the same time, provides additional leverage in the growth industries outside of the semiconductor industry. The California operations were shut down on February 17, 2012, and the business was relocated to our Mannsfield, Massachusetts facility, with manufacturing commencing on March 5. And while we did experience an initial lull in the sales cycle due to some preliminary uncertainty by both the end user and distribution networks surrounding the acquisition, leads and quotation activity have been up sequentially each month since the first quarter. And Q2 was presently forecast back to 2011 business levels. We shipped over 200,000 in Thermonics products in March, including multiple units built from scratch in Mannsfield, and we expect $500,000 in shipments for April. Thermonics is expected to be creative to our operations beginning in the second quarter of 2012. Clearly, the expansion of our Thermal group presents inTEST with increased opportunities arising from new capabilities and products from the Thermonics brand. We are forging a new path and tapping new markets. In fact, we are identifying markets and creating customers with new products they've never had before. In summary, we continue to advance our growth initiatives and delivered another strong quarter. We exceeded our guidance and are guiding for a higher Q2. The diversification of our served markets via our Thermal group is a strength we will leverage going forward. The recovery of our semiconductor customers, along with the new non-semi businesses in which we are engaging, give us confidence in the long-term growth prospects for inTEST Corporation. It's a very exciting time for our industry, with ever-changing developments in technology, market conditions and end user requirements driving innovation. In the test equipment world, change is good as increased ship content translates into more testing, which, in turn, is good for inTEST. In fact, we benefit from both capacity increases and technology advances, as geometry nodes become ever finer. For example, capacity will typically drive or manipulate our business because capacity demand normally means new testers, which, in turn, means new manipulators. However, in addition to that, any changes in devices that require different methods of probing them or different handling systems to move them around require a new docking hardware and new electrical interfaces from us. Additionally, we benefit from ever-increasing need to test products not only in the factory environment but also in thermally-challenging conditions that would apply to handheld electronics and automotive electronics and telecommunications equipment, as well as any component or system that will or could be subjected to a hostile environment. InTEST is thriving on these changes and the increased need to test that follows. As we look ahead to 2012, we expect these elements to persist, and we are positioned to meet the demands of these changes. Our operations are strong, and we are well-positioned to define the next steps in our expansion to businesses outside of the semiconductor industry. I'd like to now turn the call over to our CFO for the financial review. Hugh?

Thanks, Bob. Net revenues for the quarter ended March 31, 2012 were $10.7 million, increased 6% over the fourth quarter net revenues of $10.1 million and decreased when compared with the first quarter 2011 net revenues of $11.7 million. First quarter end user net revenues were $9.1 million or 85% of net revenues compared with fourth quarter end user net revenues of $9.2 million or 91% of net revenue. OEM net revenues were $1.6 million or 15% of net revenues compared with fourth quarter OEM net revenues of $894,000 or 9% of net revenues. Net revenues from markets outside of semiconductor tests were $2.4 million or 22% of net revenues compared with $4 million or 40% of net revenues in the fourth quarter. On a products segment basis, first quarter net revenues for the Mechanical Products segment were $2.5 million or 23% of net revenues as compared with fourth quarter Mechanical Products net revenues of $1.9 million or 19% of net revenue. Our Thermal Products segment had net revenues of $6.1 million or 57% of net revenues as compared with fourth quarter Thermal Products net revenue of $7.4 million or 73% of net revenues. Included in the first quarter, Thermal Products net revenues were $669,000 of revenues for Thermonics. Finally, our Electrical Products segment reported net revenues of $2.1 million or 20% of net revenues as compared with fourth quarter net revenues of $823,000 or 8% of net revenues. The company's overall gross margin for the first quarter was $4.6 million or 43% as compared with $4.9 million or 48% in the fourth quarter of 2011 and $5.1 million or 44% in the first quarter of 2011. The decline in gross margin is driven by a less favorable product mix in our Mechanical Products segment. Our consolidated material cost in the first quarter of 2012 was 36.3% compared to 31.4% in the fourth quarter. The material cost in our Mechanical Products segment increased from 35.4% in the fourth quarter to 44.2% in the first quarter, due to an increase in the percentage of manipulators shipped in the first quarter, which increased from 20% of this segment's revenues in the fourth quarter to 32% of this segment's revenues in the first quarter, as well as a reduction in the net margin for docking hardware product, which declined from 71% in the fourth quarter to 70% in the first quarter. The material cost in our Thermal Products segment increased to 30.1% in the first quarter from 28.7% in the fourth quarter due to the impact of the Thermonics acquisition. Offsetting these increases was a reduction in the material cost of our Electrical Products segment, which declined from 46.4% in the fourth quarter to 44.5% in the first quarter. The decline in consolidated gross margin was also impacted by an increase in our fixed manufacturing costs in both absolute dollar terms and as a percentage of net revenues. These fixed manufacturing costs, which increased from $1.6 million in the fourth quarter of 2011 to $1.8 million in the first quarter of 2012, increased from 16.1% of net revenues in the fourth quarter to 16.9% in the first quarter. The increase in fixed manufacturing costs was due to the acquisition of Thermonics and costs associated with operating their California facility from the closing date in January through the facility closure date in February. I'll now discuss the breakdown of operating expenses for the quarter. Selling expense for the first quarter was $1.4 million or 13% of net revenues compared with $1.3 million or 13% of net revenues for the fourth quarter, an increase of $131,000 or 10%. The increase was primarily due to increased sales commission expense on higher levels of revenues and increased third-party installation costs, as well as higher travel expenses. First quarter engineering and product development expense was $924,000 or 9% of net revenues compared with $796,000 or 8% of net revenues, an increase of $128,000 or 16%. This increase was primarily caused by increased salary and benefit costs, as well as higher levels of spending on third-party consulting services. General and administrative expense for the first quarter was $2 million or 19% of net revenues compared with $1.6 million or 16% of net revenues in the fourth quarter, an increase of $372,000 or 23%. First quarter G&A expenses included nonrecurring Thermonics acquisition-related expenses of $337,000 compared to $148,000 incurred during the fourth quarter of 2011, bringing total acquisition-related expenses on the Thermonics transaction to $485,000. These costs included a success fee to the broker on the transaction, legal costs and fees for valuation purposes. First quarter G&A expenses were also impacted by increases in amortization expense, which was up $114,000 quarter-over-quarter due to the Thermonics acquisition, as well as $96,000 in costs associated with operating the Thermonics California facility during the transition period to closure. In addition to Thermonics-related expenses, there were also increases in salary and benefit expenses and $39,000 of expenses associated with the relocation of our Electrical Products segment operations during the first quarter. We expect to incur some additional move-related expenses for this relocation in the second quarter of 2012, and these increased G&A expenses were offset by reductions and accruals for profit-related bonuses. Restructuring and other charges were $359,000 for the first quarter, and there were no restructuring charges in the fourth quarter of 2011. The restructuring charges were related to the relocation of Thermonics operation from California to Massachusetts, and the primary components of these charges were a $220,000 accrual related to the terminated 1-year facility lease and move-related expenses of $116,000. We do not currently anticipate to incur any further nonrecurring costs associated with the acquisition or relocation of Thermonics in future periods. Other income for the first quarter was $13,000 compared to $10,000 in the fourth quarter. For the first quarter, we recorded an income tax benefit of $28,000 compared with the income tax expense of $420,000 booked in the fourth quarter. Our effective tax rate in the first quarter was 39%, which was higher than the 25% effective tax rate guidance that had been provided. The higher-than-expected effective tax rate was driven by the proration of our domestic operating loss to our foreign earnings during the period. We currently expect that our effective tax rate will be 25% for the balance of 2012 based upon our current estimates for the year, which is consistent with the guidance we had provided in March. At March 31, 2012, we had total deferred tax assets of $2.5 million, unchanged from the amount at December 31, 2011. The first quarter net loss was $43,000 or $0.00 per diluted share as compared with fourth quarter net earnings of $769,000 or $0.08 per diluted share. Included in fourth quarter results were approximately $914,000 in nonrecurring expenses, which included $337,000 of Thermonics acquisition-related expenses, $359,000 of restructuring and other charges, $179,000 in costs associated with the operations of Thermonics' California facility prior to its closure and $39,000 worth of move-related expenses for Electrical Products segment. On a per share basis, these items represented $0.07 per diluted share when tax effected using a 17% effective tax rate for our domestic operations in the first quarter of 2012. Consolidated headcount at the end of the fourth -- first quarter, which includes temporary staff, was 140, no change from year-end. And as we have noted before, we closely monitor our resource levels and will adjust as needed when we see any prolonged softness in demand levels. I'll now turn to our balance sheet. Cash and cash equivalents at the end of the first quarter were $10.1 million, down $3.9 million from the $14 million reported at December 31, 2011. The decrease in cash was due to the Thermonics acquisition and the payment of profit-related bonuses. We currently expect cash and cash equivalents to begin increasing sequentially again starting in the second quarter of 2012. Accounts receivable at the end of the first quarter was $7.9 million, an increase of $1.8 million from the $6.2 million at 12/31. The increase was driven by higher levels of net revenues in the first quarter compared to the fourth quarter. Inventory at the end of the first quarter was $4.7 million compared with $3.9 million reported at the end of the fourth quarter. The inventory level increased due to the acquisition of Thermonics, as well as purchases made in response to the increased bookings experienced during the first quarter. During the first quarter, we completed the preliminary purchase price allocation for our Thermonics acquisition and expect to complete this process by June 30, 2002 -- 2012. We paid $3.8 million in cash to acquire essentially all the assets and assumed certain liabilities of Thermonics. In connection with our purchase price allocation, we established tangible assets of $2.2 million, which included accounts receivable of $1.2 million and inventories of $804,000, and assumed liabilities of approximately $226,000, which included accounts payable and accruals for sales commissions on accounts receivable acquired, as well as accruals for product warranty. We engaged a third-party valuation firm, who assisted us in determining identifiable intangible assets of $1.7 million, and the most significant of which were customer relationships of $1.1 million and patented technology of $360,000. Amortization expense on these intangible assets recorded during the first quarter was $114,000, which will declined to approximately $82,000 in the second quarter and then to $73,000 in the third and fourth quarters. There were no capital expenditures during the first quarter compared to $95,000 in the fourth quarter. As Bob noted earlier, total bookings for the first quarter were $12.9 million compared with $8.1 million for the fourth quarter, and bookings from markets outside of semiconductor tests were $1.7 million or 13% of first quarter booking. Thermonics bookings during the first quarter were $553,000. The backlog at the end of the first quarter was $7 million compared with $4 million at the end of the fourth quarter of 2011. Thermonics backlog was $674,000 at March 31. In terms of our financial outlook, as noted in our earnings release, we expect that the net revenue for the quarter ended June 30, 2012 will be in the range of $13.5 million to $14.5 million, with net earnings ranging from $0.12 to $0.15 per diluted share. We currently expect that our Q2 2012 material cost, as a percentage of revenue, will range from 37% to 39% due to an unfavorable product mix. We expect the Thermonics acquisition to be accretive beginning in the second quarter of 2012 and currently expect a 30% net contribution margin on the incremental revenues, which we expect to improve sequentially during 2012. Please note that our outlook is based on the company's current views, with respect to operating and market conditions and customer forecasts, which are subject to change. Operator, that concludes our formal remarks. We can now take questions.

[Operator Instructions] And our first question is from the line of Ken Nagy with Zacks Investment Research.

Just curious, if we can go back to the liquid-processed chiller contract for the nuclear power industry, is there an update on that? What would that look like in terms of is it scalable for other plants and industries? And when could we start to see revenues on it?

Jim, you want to handle it?

Certainly. The liquid-processed chiller is now in Phase 2 of a 4-phase development program. The development program is expected to take 23 months. The last 6 months of that is a pure run-time to prove the robustness of the chiller itself. It is scalable, the technology is scalable. It can be made smaller, it can be made larger. In that industry, the most important attributes are product reliability. It simply has to perform, and it has to continue to perform over long periods of time. Revenue expected from that is, in the first 3 years, probably around $3 million.

Okay. And that's probably not -- is that a 2014...

Yes. We would begin late 2013. We think we would begin seeing revenue.

Okay. And what do the margins look like on that? Are they higher than average?

The margins are -- if everything holds true, the margins are quite healthy.

[Operator Instructions] The next question is from the line of Benjamin Sexton with First Wilshire Securities Management.

I had 2 questions. The first kind of ties into margins for next quarter. You said material costs of about 38%?

Yes.

Okay. And then layering on the fixed costs, are those going to be around the $1.8 million that we saw this quarter? Or...

I would expect them to return to more historically normal levels of about $1.5 million to $1.6 million.

Okay. So is it fair to say that Q2 could see margins above what we've seen historically?

It's possible that you could see that, although with the trend up in material costs, I don't know that for sure. I mean, don't forget last year, we had a 53% margin in the third quarter, when you had sort of a perfect storm of very low material costs and fixed costs that were trending down at the time.

Okay. Do you have sort of a long-term mix that you'd like to have for Thermal versus Mechanical and Electrical?

We -- this is Bob Matthiessen. We originally said, "Why don't we try to make it a 50-50 mix?" And I don't see any reason to change that goal immediately. But if we see continued success in our attempts to create business outside of semi, why stop at 50-50 if that looks good? So the initial target is 50-50, but I wouldn't be surprised, if we get there in a reasonable time, that we'll continue to try to build on that outside semi space.

Our next question comes from the line of Bob DeLean with Red Rock Partners.

Hugh, I have a couple of housekeeping questions. What was on your receivables? You mentioned because the revenue rates were up. Your DSOs came in at 68 days. I would assume you had a lot of shipments late in the quarter?

Yes, we did. It was a rather back-end loaded quarter from a revenue perspective.

Okay. And those probably returned to the historic 55, 60 days, you think, on order [ph]?

As a matter of fact, at the very end of the quarter, our DSOs were just below 60.

Okay. With respect to CapEx, you say it was 0 for the Q1?

Yes, it was. We – what's rather unusual there is, we have an operation in Germany that acquires a system that it uses to lease, and those are netted against capital expenditures. So there were actually capital expenditures during the quarter. But you have the German acquisition of those assets offsetting it, or dispositions, I should say, of those assets offsetting it. And that's why it netted to a 0.

Okay. Fair enough. And what do you think CapEx will be for the year?

As we said previously, we're not a significant CapEx company. I would expect no more than $200,000 to $300,000 for the balance of the year.

Okay. And I think you said your D&A was up about $100,000 over last quarter. What was the D&A number for the quarter?

The G&A number for the quarter...

No, no, D&A, depreciation and amortization.

I'm sorry. Depreciation and amortization for the quarter came in -- depreciation expense was about $70,000, and amortization expense was about $150,000.

And so would that be a continuing number or, with California now closed, does that go back down?

It's going to go down. As I have mentioned before, the amortization related to the Thermonics intangibles on 2 of the major intangibles, we're using an accelerated depreciation method. In addition, there was one of the intangibles was a backlog, which was fully shipped during the first quarter. So we expect that number, as I have said before, I'm just looking for my prepared remarks, it's basically almost half by the time we get to the end of the year from the current level.

Okay. And I apologize for making you repeat that. It's hard on this end to write down all those numbers as you're rattling them off so fast.

No problem. I'll work to slow down a little bit on future calls.

And then I just have 1 other thing. With respect to employees, you said you finished at 140, same as at year-end. Would that imply you didn't keep anybody from the Thermonics acquisition?

In the Thermonics acquisition, we did keep 1 person out of the 26 employees that were there, but we had some reductions in our Mechanical segment. So the net was still at 140.

[Operator Instructions] And at this time, there are no further questions in queue. I'd like to turn the call back over to Mr. Matthiessen for closing remarks.

Okay. Thanks for your interest in inTEST. In closing, we remain confident in our business prospects. InTEST occupies a profitable lease [ph] space. We have a proven long-term history with customers across the globe and provide high-quality mission-critical products that perform in high stress environments. We will continue to work with our customers and drive innovations that allow us to continue being a leader in our target markets. So we thank you again, and we look forward to updating you on our progress when we report our second quarter results. Good evening.

Thank you, and good night.

And ladies and gentlemen, that does conclude our conference for today. We like to thank you for your participation, and you may now disconnect.