Greetings and welcome to the inTEST Corporation acquisition of Alfamation. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deb Pawlowski, Investor Relations for inTEST Corporation. Thank you. You may begin.
Thanks, Melissa. Good morning, everyone. We certainly appreciate your interest in inTEST Corporation, and thank you for sharing your time with us today on such short notice. As you know, we published the release announcing the acquisition of Alfamation after market yesterday. Also crossing the wires was the release regarding our plans to restate previously issued consolidated financial statements for the 2023 third quarter and nine-month results. That release provides the details of what the restatement is expected to entail, as well as the 8-K that was filed last night, too. As noted, we intend to file an amended third quarter 10-Q as well as the 2023 10-K as soon as practical. We plan to host a conference call following the filing and release of our fourth quarter 2023 financial results, and we'll provide notice once we can determine a date.
You should no longer rely upon a company's previously released financial statements nor any other related material for the third quarter and nine months ended September 30, 2023. Similarly, preliminary results reported for the fourth quarter ended December 31, 2023, should no longer be relied upon. Let's turn to the discussion of Alfamation. There are slides that you should have on the acquisition that we will use to accompany our conversation this morning. If you do not have the slides, they can be found at the Investor Relations section of our website, intest.com. Here with me today are Nick Grant, our President and Chief Executive Officer, and Duncan Gilmour, our Chief Financial Officer and Treasurer. Nick will briefly review the acquisition, and then we will open the call for Q&A regarding the acquisition. If you would please turn to slide two, I will review the safe harbor statements.
During this call, management may make some forward-looking statements about our current plans, beliefs, and expectations. These statements apply to future events and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in yesterday's releases, as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. In addition, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. So now, if you will turn to slide three, I will turn the call over to Nick to begin. Nick?
Thank you, Deb, and good morning, everyone. We are thrilled to have you with us this morning as we share the news of our most recent acquisition, Alfamation S.p.A. I would like to start by welcoming all of the new colleagues at Alfamation into the inTEST family. Alfamation is a leading global provider of state-of-the-art test and measurement solutions for the automotive market, consumer electronics applications, and the life sciences industries. As many of you are aware, an integral part of our five-point strategy for growth is our very disciplined approach to acquisitions, which led us to identify Alfamation. This acquisition advances all dimensions of our five-point strategy and is the latest milestone demonstrating our progress since we launched the strategy in 2021. This furthers our efforts to transform inTEST into the supplier of choice globally for innovative test and process technology solutions.
We expect the addition of Alfamation will deepen our presence in key target markets such as automotive EV and life sciences, expand our markets into consumer electronics, extend our geographic reach with a sizable footprint in Europe, broaden our portfolio of differentiated automated test solutions for our electronic test division, and finally, Alfamation brings a highly qualified team of employees, and we are excited to have them join us. Their technical talent, commitment, and customer focus align perfectly with inTEST's mission and culture to provide innovative, engineered solutions that address customers' high-value challenges. Turn to slide four, and I'll highlight further why we see this as an outstanding addition to our electronic test division. Alfamation advances our corporate vision as it brings broader and complementary technologies and applications to enhance our high-quality, innovative customer solutions.
We intend to leverage both companies' existing channels to market to gain synergies and accelerate growth across the broader portfolio. Alfamation enhances our product portfolio with a wide range of test and measurement solutions, from individual functional test modules to fully automated systems. Their test systems are used for both production processes as well as product development. Notably, this transaction further diversifies our market beyond semiconductor test equipment. It adds consumer electronics, extends our position in life sciences, and sizably advances our position in automotive EV. What's exciting is this opens up the infotainment system segment, where Alfamation's Flexmedia XM modular test solutions provide a platform for customers to build flexible and scalable functional testers.
We see the potential for sales synergies as well as leverage our presence in the U.S. to expand Alfamation's business, and are also planning to capitalize on the channels that Alfamation has established in Europe and Asia to accelerate the expansion of our current solutions. Let's move to slide five, and I'll touch on some of Alfamation's highlights. Alfamation was established in 1991 and is headquartered in Milan, Italy. Alfamation has grown through the years, driven by their success in the automotive, life sciences, and consumer electronics test markets. The business also has a small sales and service subsidiary based in Suzhou City, China. They have demonstrated double-digit revenue growth over recent years and had approximately EUR 25 million in total revenue last year. Shown here is a breakdown of that revenue by market and by customer.
Alfamation comes with approximately $15 million in backlog, comprised of several automotive OEMs and well-known tier-one electronic suppliers. In addition, they have several new customers in backlog that we believe have the potential to join our list of top customers globally. The test and measurement industry is a large market with a wide variety of participants. Alfamation has been able to differentiate itself because of its engineering focus on creating innovative solutions for customers, very similar to the culture and mission here at inTEST. On slide six, you'll see a snapshot of some of the test and measurement solutions offered by Alfamation. They have established their niche in creating solutions that address the continued advancement in electronics and electrification in a variety of industries.
Slide seven shows various applications that use Alfamation's test equipment, such as vehicles, infotainment and computing systems, wafer-level optics, and testing popular consumer devices. Let me sum up the business and the transaction on slide eight. As noted earlier, Alfamation delivered revenue of approximately EUR 25 million in their last fiscal year, extending the recent trend of double-digit year-over-year growth, and has a backlog of approximately EUR 15 million. From a margin perspective, the business has a margin profile similar to inTEST. We purchased all of the outstanding stock of the company for EUR 20 million. The purchase was paid 90% in cash and 10% in inTEST stock. This translates into EUR 18 million in cash and 187,432 shares of common stock, plus working capital adjustments. The transaction also included the assumption of approximately EUR 7 million of net debt.
As such, we're paying approximately 1.1x 2023 revenue and about 8x EBITDA. We plan to further invest in the acquired operations to drive continued growth. The acquisition is expected to be dilutive to GAAP earnings per diluted share in 2024, but accretive on a non-GAAP adjusted earnings basis due to the anticipated impacts associated with the amortization of intangible assets. With the close of the acquisition, we are updating our full-year 2024 revenue guidance to be in the range of $145 million-$155 million. Given how late in the quarter we closed, we expect the impact to be to the first quarter to be nominal, first quarter of 2024 to be nominal. Turning to slide nine, you'll see a summary that reiterates the benefits and the value of this transaction to inTEST and our investors.
We are excited about the addition of Alfamation to our portfolio as we create greater scale within our electronic test division. Operator, we can open the line now for questions.
Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Jaeson Schmidt with Lake Street Capital Markets. Please proceed with your question.
Hey, guys. Thanks for taking my questions. Just want to focus first on the geography. Obviously, you noted this expands your presence in Europe, but just curious if there's any overlap from a distribution channel perspective and how you're thinking about potentially kind of cross-selling these products into areas beyond Europe?
Yeah. From a geographic perspective, obviously, their footprint in Europe certainly gives us a much stronger presence there. From a sales perspective, about 35% of their sales are into Europe, about 45% into the Americas, and 20% into Asia. So we believe our position in the Americas will help strengthen them there. Their position in Europe will give us a stronger opportunity to sell more of our broader portfolio throughout the region there. Likewise, our Asia presence is something that we can leverage for them as well. So we think it's a really good fit geographically to provide additional sales synergies.
Okay. That's really helpful. And then you mentioned they have a small portion of services for revenue. Just curious what percentage that is?
Hi, Jaeson. Yeah. I mean, it's actually very similar, not only a similar margin profile as we talked about to the inTEST business, but their service component in the high single digits, close to 10%. So very similar from that perspective to the existing core inTEST business as well.
Gotcha. And then just the last one for me, and I'll jump back into queue. When you look at Alfamation, is there any sort of seasonality to their revenue?
So from a revenue perspective, they're pretty stable. They are a much more project-oriented business. These larger automotive orders and contracts that they have are pretty level, more level from a revenue perspective throughout quarters. However, we do see Q3 in the calendar year as a bit slower due to the vacation holiday seasons, if you will, in Europe and their factories. So that's really the most notable revenue, I would say, seasonality, if you will. Duncan, anything on that?
Yeah. No, I think that's exactly right.
Yeah.
You may want to just throw in there too about orders, though, being lumpy.
Yeah, yeah. Exactly. They're very similar to inTEST and our businesses today, although they have the potential for larger, I'd say, longer orders that carry out over 18 months-24 months or so on these test system deliveries out there. So orders can be a bit more lumpy across any given month or quarter. Thanks, Deb.
Got it. Thanks, guys.
No, thanks, Jaeson.
Thank you. As a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Peter Wright with Intro-act. Please proceed with your question.
Great. Good morning, guys. Thank you for taking my question, and congratulations on the acquisition.
Hey. Good morning, Peter. Thanks.
I have two questions. Nick, the first question is on the product synergy side. Is this going to sit more alongside your existing product suite? And I'm thinking specifically on the EV side, or is there any ambition for product innovation or integration of the product that they offer with yours? And the second part of that question is if you could help us understand kind of the ASP. What does this product look like from a numbers and average price sale that goes in? And then, Duncan, when looking at also a similar profile to inTEST, or can you give some type of guidance on how many months that represents?
You broke up a little bit just in your final question there, Peter.
The months of backlog that $15 million represents?
Oh, okay. Sure. Yeah, yeah.
Okay. So, Peter, let's first talk about product synergies here. So last year or not last year, in 2021, with the acquisition of Acculogic, we added functional test systems as well as flying probe test systems serving automotive, defense, and any other markets out there. So Alfamation, really, with their functional test systems, helps to expand our solutions, our portfolio across those two businesses nicely there. So we see some really good synergies from a product, from a customer, broader capabilities, common, potentially, we could leverage some softwares, etc. So we're really excited about the opportunities that exist there. Just from a market perspective, it gives us more solutions for customers out there across the entire portfolio since automotive EV is being served by all three divisions. So, yeah, excited about the synergies that exist.
It gives us a stronger presence in functional test and broader customer base to leverage there. So from an ASP perspective, these systems can range anywhere from, say, EUR 300,000-EUR 500,000 on the larger systems. Some of their smaller functional testers and the modular Flexmedia, lower than that and sub-EUR 100,000, if you will. So it all depends on how they construct and build up the solutions with this modular platform that they have. But similar, I'd say, ASPs as our Acculogic business out there as well.
And then on the backlog question, I mean, a lot of their business is these larger systems, which can be two to six months in terms of production time, lead time, etc. For the most part, the backlog they have just now will bleed in over the course of the next 12 months.
Some of that maybe drifts a little bit beyond that, but certainly slightly longer cycle than the bulk of our existing core inTEST business.
Fantastic. So one follow-up to that. So is it safe to assume when looking at kind of your full-year guidance, and I know you don't guide by product, but the growth that they've experienced over the last couple of years, is that expected to continue embedded in your guidance, or has something changed there?
Oh, no. Absolutely. This business, as mentioned multiple times, has a track record of driving growth recently at double digits, and we expect to continue to capture that and invest into the business, capture synergies to accelerate growth. So no, we're excited about the opportunities that exist there.
That's wonderful. Thank you, guys, and congratulations.
Thanks, Peter.
Thank you. Our next question comes from the line of Greg Weaver with Invicta Capital. Please proceed with your question.
Hi. Good morning. Just to follow up quickly on the backlog question Peter had. What was it a year ago, roughly?
The backlog is certainly a little bit higher just now. I don't have the precise number from a year ago, but it's certainly at a relative high point right now.
Okay. Yeah. Just trying to understand that. So the modules are more of a turn business than I got them on the shelf in your order room type of thing?
Well, they have that with their Flexmedia-type, quicker-turn-type solutions around these test modules. But the larger systems, which can be very heavily automated, robotic, pick and place, conveyors, testing, etc., these things go right in production. And those systems, as Duncan mentioned, can be two months to six months in production times out there. So that's why you get a little bit longer backlog there, longer duration.
Right. Gotcha. Thanks, Nick. And so I see up the guidance $20 million-$25 million, right, from what you had out before. So how much of that is due to the Alfamation, given you only get nine months there? I mean, that looks pretty good, or some of this is the rev rec shuffling?
Yeah. I mean, we're not going to necessarily break that out. We'll talk in more detail when we kind of get to announcing earnings. I mean, based on the numbers that are out there, $25 million ballpark annual revenue business, as you point out, kind of nine months and change. Obviously, there's contribution there from Alfamation tacked onto what we expect our core business to do.
Okay. Pretty linear then, I'll assume. Just how about some background on the transaction, I guess, kind of why was it for sale? Was it shop, private equity? Have you been pursuing it for a while? Anything like that?
Yeah. No, really followed our same recipes we've done on the others, really identifying targeted companies that are strategically attractive to us. We reached out to the owners there and worked. He was in his mid-60s looking for a potential home for the business long term. We were able to convince him that inTEST is the right home. And we see a lot of synergies between the two businesses and excited that the owner is going to stay on with us for the next three years to help in the integration of the two businesses and driving synergies between us. And yeah, we were able to preempt any potential sale process, which was what the owner was considering down the road.
So very, very pleased with the approach we've taken and the success we've had here with Alfamation to identify companies that strategically fit within inTEST and allow us to capture them without having to aggressively go after higher multiples in sale processes.
Great. That's excellent to hear. So nice work there. And just last question for me. So looking at the pie chart you offered in the presentation, I guess roughly half their business is one customer. Is that correct? And I guess is it a European automotive OEM?
Yes. Last in 2023, one of their third largest customers represented about half of their business. It is a global automotive electronics supplier. Their solutions are used throughout multiple plants for that supplier out there. It's an automotive tier-one electronics company there.
Okay. Perfect. Thank you very much, and good luck.
Thanks, Greg.
Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Grant for final comments.
Thank you, Melissa. Thanks, everyone, for participating on our call today. This will end our session. Have a great day.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.