inTEST to Restate Third Quarter and First Nine Months 2023 Financial Statements

Rhea-AI Summary

inTEST Corporation (INTT) plans to restate its financial statements for Q3 and nine months ended September 30, 2023, due to revenue deferral related to discontinued material purchases. The restatement is expected to decrease revenue by $1.7 million, increase deferred revenue by the same amount, and lower net income by approximately $700,000 for Q3 2023. Earnings per diluted share for Q3 2023 are expected to decrease from $0.24 to $0.19. Fourth quarter 2023 revenue is expected to be $27.9 million with net earnings of $1.5 million. The Company will amend and file its 10-Q/A for Q3 2023 and expects to report a material weakness in internal control over financial reporting.

Positive

• None.

Negative

• Restating financial statements can erode investor confidence and lead to increased scrutiny from regulatory bodies.
• Material weaknesses in internal controls can indicate potential risks in financial reporting and governance.
• Lowered earnings per share may impact investor sentiment and stock performance negatively.

Insights

Financial Analyst

The announcement by inTEST Corporation to restate its Q3 2023 financial statements is a significant event for investors and analysts. The restatement, which involves a $1.7 million decrease in revenue and a corresponding increase in deferred revenue, signals potential issues with revenue recognition practices. The restatement's impact on net income, reducing it by approximately $700,000 and its effect on earnings per share, decreasing from $0.24 to $0.19, will likely lead to a reevaluation of the company's financial health and performance.

Deferred revenue, while a liability on the balance sheet, represents future revenue that the company expects to recognize. However, the adjustment suggests that the company may have prematurely recognized revenue, which could raise concerns about the accuracy and timing of revenue reporting. The restatement's effect on the fourth quarter's preliminary results, although described as small, further emphasizes the need for investors to reassess the company's future earnings potential and financial stability.

Furthermore, the expected report of a material weakness in internal control over financial reporting is a red flag that may undermine investor confidence. Material weaknesses can increase the risk of financial misstatements and often require significant resources to address. Investors will closely monitor the company's efforts to remediate this weakness and the effectiveness of its internal controls going forward.

Legal Expert

The disclosure of a material weakness in internal control over financial reporting carries legal implications for inTEST Corporation. It indicates that there is a reasonable possibility that a material misstatement of the company's financial statements will not be prevented or detected on a timely basis. This admission could lead to increased scrutiny from regulatory bodies such as the Securities and Exchange Commission (SEC) and potentially result in legal challenges or penalties if the weakness led to violations of financial reporting requirements.

It is also important for the company to ensure that all communications, including press releases and earnings calls, are accurate and not misleading. The need to amend and refile financial statements suggests that prior communications may have been based on inaccurate financial information, which could have legal ramifications if it is found that investors were misled.

The company's proactive approach to addressing the restatement and the material weakness by planning to file amended reports and host a conference call is a step towards transparency and compliance. However, this situation underscores the importance of robust internal controls and accurate financial reporting to maintain corporate governance standards and investor trust.

Market Research Analyst

The restatement of financial results by inTEST Corporation could have broader implications for market perception and the company's competitive position within the sectors it serves, such as automotive/EV, defense/aerospace and semiconductor. Investors and competitors alike may scrutinize the company's operational efficiency and ability to manage complex transactions, such as 'last time buys' for discontinued components, which were at the heart of the revenue deferral issue.

From a market perspective, the restatement may influence investor sentiment towards not only inTEST Corporation but also other companies within the industry. If the revenue deferral is indicative of broader industry practices, it could lead to increased caution among investors when evaluating the financial statements of similar companies. Conversely, if this is viewed as an isolated incident, the impact may be limited to inTEST Corporation's stock.

Moreover, the company's stock price may experience volatility in the short term as investors digest the news and adjust their expectations. In the long term, the company's ability to effectively address the material weakness and restore confidence will be crucial for its market reputation and investor relations.

MT. LAUREL, N.J.--(BUSINESS WIRE)-- inTEST Corporation (NYSE American: INTT), a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets which include automotive/EV, defense/aerospace, industrial, life sciences, security, and semiconductor (“semi”), announced today that it plans to restate its previously issued consolidated financial statements for the third quarter and nine months ended September 30, 2023. The restatement pertains to deferral of revenue related to purchases on behalf of certain customers associated with “last time buys” of discontinued material/components for potential future orders.

Preliminary indications are that the third quarter 2023 restatement is expected to result in a decrease in revenue of approximately $1.7 million and an increase in deferred revenue on the balance sheet by the same amount. After also deferring associated costs and the tax effect, net income is expected to be approximately $700,000 lower for the third quarter 2023. After giving effect to this change, earnings per diluted share for the third quarter 2023 as previously reported is expected to be reduced from $0.24 to $0.19.

The deferral of revenue is also expected to have a small impact on previously announced preliminary fourth quarter results. Fourth quarter 2023 revenue is now expected to be approximately $27.9 million with net earnings of $1.5 million, or $0.12 per diluted share.

The Company intends to amend and file its third quarter 2023 10-Q/A as soon as practical. Investors should no longer rely upon the Company’s previously released financial statements for the third quarter and nine months ended September 30, 2023. Similarly, prior related press releases, earnings releases, and investor communications describing the Company’s financial statements for those periods and preliminary results reported for the fourth quarter ended December 31, 2023, should no longer be relied upon. The Company also intends to file its 2023 10-K as soon as practical and expects to host a conference call following the filing and release of fourth quarter 2023 financial results. Based on the matters underlying the restatement, the Company expects to report a material weakness in its internal control over financial reporting.

About inTEST Corporation
inTEST Corporation is a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets including automotive/EV, defense/aerospace, industrial, life sciences, and security, as well as both the front-end and back-end of the semiconductor manufacturing industry. Backed by decades of engineering expertise and a culture of operational excellence, inTEST solves difficult thermal, mechanical, and electronic challenges for customers worldwide while generating strong cash flow and profits. inTEST’s strategy leverages these strengths to grow organically and with acquisitions through the addition of innovative technologies, deeper and broader geographic reach, and market expansion. For more information, visit intest.com.

Preliminary, Unaudited Financial Disclosures
The data presented above is preliminary and unaudited, based upon our estimates, and subject to further internal review by management and compilation of actual results. Our closing procedures for the year and quarter ended December 31, 2023, are not yet complete. Our management's estimates are based upon preliminary information currently available from our business segments and extrapolation from that information. While we expect that our results will be consistent with these preliminary and unaudited estimates, our actual results may differ materially from these preliminary estimates.

This preliminary financial information is not a comprehensive statement of our financial results for this period, and our actual results may differ materially from these estimates due to the completion of our financial closing procedures, final adjustments, and other developments that may arise between now and the time the closing procedures for the fiscal year and quarter are completed.

All the data presented above has been prepared by and is the responsibility of our management. Our independent registered public accounting firm has not completed its audit procedures with respect to our accompanying preliminary financial data. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect to this data.

Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements do not convey historical information but relate to predicted or potential future events and financial results, such as statements of the Company’s plans, strategies and intentions, or our future performance or goals, that are based upon management's current expectations. These forward-looking statements can often be identified by the use of forward-looking terminology such as “expects,” “intends,” “may,” “plan,” “potential,” “preliminary,” “estimate,” “extrapolate,” or similar terminology. 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, any mentioned in this press release as well as the Company’s ability to execute on its 5-Point Strategy, achieve high single-digit growth in 2023, realize the potential benefits of acquisitions and successfully integrate any acquired operations, grow the Company’s presence in its key target and international markets, manage supply chain challenges, convert backlog to sales and to ship product in a timely manner; the success of the Company’s strategy to diversify its markets; the impact of inflation on the Company’s business and financial condition; indications of a change in the market cycles in the semi market or other markets served; changes in business conditions and general economic conditions both domestically and globally including rising interest rates and fluctuation in foreign currency exchange rates; changes in the demand for semiconductors; access to capital and the ability to borrow funds or raise capital to finance potential acquisitions or for working capital; changes in the rates and timing of capital expenditures by the Company’s customers; and other risk factors set forth from time to time in the Company’s Securities and Exchange Commission filings, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2022. Any forward-looking statement made by the Company in this press release is based only on information currently available to management and speaks to circumstances only as of the date on which it is made. The Company undertakes no obligation to update the information in this press release to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated events, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240312996953/en/

inTEST Corporation

Duncan Gilmour

Chief Financial Officer and Treasurer

Tel: (856) 505-8999

Investors:

Deborah K. Pawlowski

Kei Advisors LLC

dpawlowski@keiadvisors.com

Tel: (716) 843-3908

Source: inTEST Corporation

FAQ

Why is inTEST Corporation (INTT) restating its financial statements for Q3 and nine months ended September 30, 2023?

inTEST Corporation is restating its financial statements due to revenue deferral related to purchases on behalf of certain customers associated with 'last time buys' of discontinued material/components for potential future orders.

What is the expected impact of the restatement on revenue for Q3 2023?

The restatement is expected to result in a decrease in revenue of approximately $1.7 million for Q3 2023.

How will net income be affected by the restatement for Q3 2023?

Net income is expected to be approximately $700,000 lower for Q3 2023 due to the restatement.

What is the expected change in earnings per diluted share for Q3 2023?

Earnings per diluted share for Q3 2023 are expected to be reduced from $0.24 to $0.19 as a result of the restatement.

What are the projected revenue and net earnings for fourth quarter 2023?

Fourth quarter 2023 revenue is expected to be approximately $27.9 million with net earnings of $1.5 million.

What action does the Company plan to take following the restatement?

The Company intends to amend and file its 10-Q/A for Q3 2023 and expects to report a material weakness in its internal control over financial reporting.