Hội nghị công bố kết quả kinh doanh quý 3 năm 2026 của inTEST (INTT): Đơn đặt hàng kỷ lục và lượng đơn hàng tồn đọng năm 2027

Điểm nhấn chính

• Doanh thu quý 3/2026 tăng 34% so với cùng kỳ năm trước lên 35,1 triệu USD, chạm cận trên trong phạm vi dự báo của ban lãnh đạo.
• Lượng đơn đặt hàng đạt mức kỷ lục 49,4 triệu USD, tăng 31% so với cùng kỳ năm trước và cao hơn 41% so với doanh thu quý. Giá trị đơn hàng tồn đọng tăng 32% từ tháng 6 lên mức kỷ lục 59,7 triệu USD, với khoảng 60% dự kiến sẽ được giao trong năm 2027.
• Đơn đặt hàng thiết bị bán dẫn phân đoạn sau đạt mức kỷ lục 23,9 triệu USD, gấp gần 4 lần cùng kỳ năm trước. Tổng đơn đặt hàng bán dẫn tăng hơn gấp đôi so với quý trước lên 25,1 triệu USD.
• Biên lợi nhuận gộp mở rộng lên 47,7%, tăng 720 điểm cơ bản so với quý trước và 580 điểm cơ bản so với cùng kỳ năm trước, chủ yếu nhờ cơ cấu sản phẩm thuận lợi.
• Lợi nhuận ròng cải thiện lên 1,9 triệu USD, tương đương 0,15 USD trên mỗi cổ phiếu pha loãng, trong khi EBITDA điều chỉnh tăng lên 4,4 triệu USD với biên lợi nhuận đạt 12,6%.
• Ban lãnh đạo dự báo doanh thu quý 4 đạt từ 34 triệu đến 36 triệu USD và biên lợi nhuận gộp khoảng 45%. Công ty cho biết lượng đơn hàng tồn đọng kỷ lục sẽ tạo đà khởi đầu vững chắc cho năm 2027.

Dữ liệu tài chính cốt lõi

Hiệu quả kinh doanh và vận hành

Nhu cầu bán dẫn là động lực chính thúc đẩy đơn đặt hàng. Tổng đơn đặt hàng mảng bán dẫn đạt 25,1 triệu USD, trong đó khâu kiểm thử phân đoạn sau chiếm gần như toàn bộ giá trị. Ban lãnh đạo cho biết các khách hàng sản xuất thiết bị tín hiệu hỗn hợp, analog và công suất cao đã mở rộng công suất, một phần nhờ nhu cầu đối với các thiết bị chuyển đổi năng lượng và truyền thông.

Công ty cho biết khâu đóng gói và kiểm thử thiết bị hoàn thiện đã trở thành điểm nghẽn đối với một số khách hàng ngành bán dẫn. Thời gian giao máy kiểm thử kéo dài hơn, đôi khi lên tới 18 tháng, cũng khiến khách hàng phải đặt mua trước các bộ điều khiển vị trí (manipulator), phần cứng ghép nối (docking hardware) và giao diện kết nối của inTEST từ sớm hơn.

Đơn đặt hàng xe điện (EV) tăng hơn gấp đôi so với quý trước lên 9,4 triệu USD khi tiến độ ra mắt các mẫu xe mới quay trở lại quỹ đạo bình thường sau giai đoạn tăng trưởng EV chững lại trong năm 2024 và 2025. Một hãng sản xuất ô tô lớn đã đặt đơn hàng đầu tiên cho hệ thống kiểm thử chức năng của inTEST, trong khi công ty cũng đã bàn giao thêm hai hệ thống kiểm thử pin cho một khách hàng xe điện.

Đơn đặt hàng từ lĩnh vực quốc phòng và hàng không vũ trụ tăng 43% so với quý 2, nhờ có thêm khách hàng mới và quý thứ hai liên tiếp ghi nhận tăng trưởng đơn hàng hệ thống gia nhiệt cảm ứng. Đơn đặt hàng mảng công nghiệp tăng 9% so với quý trước, bao gồm đơn hàng công nghiệp lớn nhất đối với hệ thống kiểm thử mạch (in-circuit test) kể từ khi công ty bổ sung dòng sản phẩm này.

Ban lãnh đạo cũng đang nỗ lực vận hành các mảng kinh doanh được inTEST mua lại như một nền tảng thống nhất, hướng tới các cơ hội thương mại, hiệp đồng chi phí, nâng cao hiệu quả sản xuất và tăng cường chia sẻ hoạt động R&D giữa các bộ phận.

Dự báo của ban lãnh đạo

Đối với quý 4/2026, ban lãnh đạo dự kiến:

• Doanh thu đạt từ 34 triệu đến 36 triệu USD.
• Biên lợi nhuận gộp đạt khoảng 45%.
• Chi phí hoạt động từ 14,2 triệu đến 14,7 triệu USD.
• Chi phí khấu hao tài sản vô hình đạt 0,5 triệu USD trong chi phí hoạt động.

Triển vọng này không bao gồm các thương vụ mua lại tiềm năng, chi phí tái cấu trúc và các chi phí liên quan đến tái cấu trúc. Dự báo này cũng giả định rằng đánh giá của ban lãnh đạo về điều kiện kinh tế vĩ mô sẽ không thay đổi từ nay đến cuối năm.

Ban lãnh đạo dự kiến biên lợi nhuận gộp quý 4 sẽ hạ nhiệt so với quý 3 do quý 3 có cơ cấu sản phẩm đặc biệt thuận lợi. Chi phí dự kiến sẽ tăng nhẹ khi inTEST tuyển dụng cho các vị trí lãnh đạo còn trống và bắt đầu lập kế hoạch cho năm 2027.

Công ty cho biết khoảng 60% lượng đơn hàng tồn đọng kỷ lục dự kiến sẽ được giao trong năm 2027, trong khi các đơn hàng bán dẫn trong quý 3 dự kiến phần lớn sẽ chuyển thành doanh thu trong nửa đầu năm. Dự báo cho cả năm 2027 dự kiến sẽ được công bố cùng với kết quả kinh doanh quý 4.

Rủi ro và các yếu tố cần theo dõi

• Thời gian giao hàng trong chuỗi cung ứng đang kéo dài. Ban lãnh đạo cho biết công ty có thể sẽ đầu tư nhiều hơn vào hàng tồn kho và vốn lưu động cho một số linh kiện nhất định, dù hiện tại chưa ghi nhận tình trạng gián đoạn nguồn cung nghiêm trọng bất thường.
• Cơ cấu sản phẩm vẫn là yếu tố biến động quan trọng ảnh hưởng đến biên lợi nhuận. Các sản phẩm bán dẫn phân đoạn đầu (front-end) thường có biên lợi nhuận thấp hơn so với các dòng sản phẩm bán dẫn phân đoạn sau (back-end).
• Ban lãnh đạo đánh giá sự phục hồi của mảng bán dẫn phân đoạn đầu mới ở giai đoạn đầu và cảnh báo rằng mảng này có thể sẽ không quay trở lại các mức từng ghi nhận cách đây 3 hoặc 4 năm.
• Thuế suất dự kiến cho cả năm tăng lên khoảng 20%, bao gồm cả khoản lợi ích phát sinh riêng lẻ được ghi nhận trong quý 2, do tỷ trọng lợi nhuận lớn hơn được tạo ra tại các khu vực có mức thuế suất cao hơn.
• Dù đà tăng trưởng của ngành bán dẫn có vẻ mạnh mẽ cho tới đầu năm 2027, ban lãnh đạo cho biết vẫn rất khó xác định thị trường sẽ diễn biến ra sao sau giai đoạn đó.

Điểm nhấn phiên hỏi đáp với chuyên gia phân tích

Ban lãnh đạo cho biết cơ cấu đơn hàng quý 4 dự kiến sẽ tương đối tương đồng với quý 3, với sự vững chắc tiếp tục duy trì ở mảng bán dẫn cùng hoạt động tích cực tại các thị trường xe điện và quân sự. Phễu bán hàng bước vào quý 4 xấp xỉ mức ở đầu quý 3 bất chấp lượng đơn đặt hàng kỷ lục trong quý 3.

Về mảng kiểm thử chức năng, ban lãnh đạo cho biết xe điện vẫn chiếm phần lớn hoạt động kinh doanh. Việc mở rộng sang các thị trường công nghiệp và các thị trường ngách cuối khác vẫn đang ở giai đoạn đầu, dù công ty đã giành được những thắng lợi bước đầu ngoài lĩnh vực xe điện.

Hoạt động trong mảng bán dẫn phân đoạn đầu đã được cải thiện, nhưng ban lãnh đạo nhận định đà phục hồi này mới chỉ ở giai đoạn sơ khởi. Tỷ lệ sử dụng công suất đang tăng lên, trong khi biên lợi nhuận của các sản phẩm phân đoạn đầu thường thấp hơn so với thiết bị bán dẫn phân đoạn sau do sản phẩm thường được bán cho các nhà sản xuất thiết bị khác.

Nhu cầu từ lĩnh vực quốc phòng và hàng không vũ trụ trải rộng trên một số mảng kinh doanh của inTEST, bao gồm hệ thống đầu dò di động (flying-probe) để kiểm thử PCB, thiết bị gia nhiệt cảm ứng, máy làm lạnh công nghiệp (process chiller) và một số sản phẩm camera nhất định. Doanh thu dịch vụ chiếm hơn 14% doanh thu hàng quý, nhìn chung phù hợp với mức thông thường của công ty.

Toàn văn biên bản cuộc gọi báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Greetings. Welcome to inTEST Corporation's third quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Sanjay Hurry, Investor Relations. Thank you, and you may begin.

Unknown Speaker

Good morning, everyone, and thank you for joining us. With me on the call are Rich Rogoff, President and Chief Executive Officer, and Duncan Gilmour, Chief Financial Officer and Treasurer.

Our earnings press release was issued this morning, as well as the slides that management will reference during today's call. Both can be found in the Investor Relations section of the intest.com website. Please refer to Slide 2 for a review of the Safe Harbor statement.

During this call, management may make some forward-looking statements about their current plans, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is stated here today. These risks, uncertainties, and other factors are detailed in the earnings press release, as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on the inTEST website or on SEC.gov.

Also, as covered on Slide 3, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating the company's performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides.

With that said, I will now turn the call over to our first speaker, Rich Rogoff, President and CEO. Please go ahead, Rich.

Unknown Speaker

Thank you, Sanjay. Good morning, everyone. On today's call, I will review our third quarter performance, including the record orders we pre-announced on October 5. Duncan will then take you through the financial results and our outlook for the fourth quarter. I will come back to discuss how we are positioning inTEST for 2027 before we open the call to questions.

To begin with, the semiconductor demand we told you to expect arrived in the third quarter. Let me frame our performance around 2 points.

First, demand is here and it extends into 2027. Orders were a record at $49.4 million, exceeding our revenue by 41%, and up 31% from a year ago. The driver was a record $23.9 million in back-end semiconductor orders, nearly 4x the level of a year ago. Non-semi orders of $24.3 million rose 44% from the second quarter. Year over year, they were lower than a strong prior year quarter that was driven by auto EV. Backlog at quarter end was also a record at $59.7 million, up 32% since June, and approximately 60% of it is expected to ship in 2027.

Second, we continue to grow. Revenue of $35.1 million came in at the high end of our guidance range, up 34% from $26.2 million a year ago. This was our third consecutive quarter of year-over-year growth above 25%. Gross margin of 47.7% was above our guidance and driven by favorable mix.

Turning to Slide 5, total semi orders were $25.1 million, representing about half of the quarter's total orders and more than double the Q2 level. Back-end tests accounted for almost all the semi orders. Customers in the mixed signal, analog, and high-power device markets are adding back-end test capacity, fueled in part by the demand for power conversion and communications devices. Our newer products played a meaningful role in capturing those orders.

What semi customers tell us is that the constraint has moved from building wafers to packaging and testing finished devices fast enough. Every tester they add needs a manipulator, docking hardware, and interface. Beyond total orders, the quarter showed the breadth of our semi momentum. We grew with existing customers and added new ones. We were selected for new test sites at existing customers, received the first order from a customer that had not purchased from us in a decade, added a data storage customer serving the data center market, and received an order for our high-voltage interface hardware, ordered for a customer's evaluation of a new silicon carbide wafer test platform.

Customers are also ordering further ahead of need than they used to. Testers often carry lead times of 18 months, so customers are placing orders for our accompanying equipment well ahead of the delivery. This gives us better visibility than we typically have.

Outside of semi, auto EV orders of $9.4 million more than doubled Q2's level as new model releases get back to a normal schedule after a slowdown in the EV momentum from 2024 through 2025. Year-over-year auto EV orders were lower against an exceptionally strong third quarter of 2025. However, we view this sequential improvement as encouraging.

In Q3, a major automaker placed its first order for our functional test systems, which will be used to test power management systems. We also received repeat orders from existing functional test customers and shipped 2 more battery test systems to an EV customer.

In defense aerospace, orders grew 43% compared to Q2. We added new aerospace and defense customers, and orders for induction heating systems from this market rose for a second consecutive quarter.

In industrials, orders were up 9% sequentially. A customer placed the largest industrial order we have received for our in-circuit test systems since adding this product line to our portfolio.

Here's what this means for the next several quarters. First, stronger orders give us an improved visibility over the next 2 to 3 quarters. Second, the sales funnels refilled. Even after capturing record orders in Q3, our funnel as we entered Q4 was roughly comparable to the start of Q3. Our opportunity set is intact, giving us confidence and continued order momentum in Q4.

Third, technology wins are opening new doors. As customers and new end markets wrestle with how to design, test, and deliver high-power and energy conversion products, it increasingly means we get the call for our solutions to their toughest challenges. We are excited to see our technologies and expertise in handling heat become more critically valued in so many new applications. Today's engagement on customers' toughest challenges becomes tomorrow's funnel opportunity and, in time, tomorrow's orders.

Together, these factors position us to close 2026 at the high end of our revenue guidance and gives us a solid start to 2027.

One note on our supply chain. As we noted on our release, lead times are expanding. Our supply chain and engineering teams are adapting accordingly and are managing the situation.

With that, I will turn it over to Duncan. Duncan?

Duncan Gilmour

Thank you, Rich. Starting on Slide 6, on a sequential basis, revenue in Q3 was essentially flat, down $0.2 million from $35.3 million in Q2 to $35.1 million. Higher defense aerospace, semi, industrial, and other revenue largely offset a $6.8 million decline in auto EV following Q2's shipment of high-revenue, lower-margin auto EV projects from backlog. Defense aerospace increased $3.6 million, semi increased $2.5 million, industrial contributed $0.8 million, and other contributed $0.7 million. Partially offsetting these gains, in addition to the auto EV decline, was a $0.8 million decrease in life sciences.

Compared to Q3 2025, revenue increased $8.8 million or 34% from $26.2 million. The net increase was driven by defense aerospace, which more than tripled on higher program activity, together with growth in auto EV, semi, and industrial. Together, these 4 markets contributed $9.9 million of growth, which more than absorbed declines in life sciences and safety security.

Turning to Slide 7, Q3 gross profit was $16.7 million, up 52% year over year, and gross margin was 47.7%. Sequentially, gross margin expanded by 720 basis points from 40.5%, reflecting a large positive shift in product mix. Compared with the prior year period, gross margin increased 580 basis points from 41.9%, reflecting the same positive shift in mix.

Moving on to Slide 8, operating expenses for the third quarter were $14 million, up $0.1 million sequentially, as higher general administrative expenses were largely offset by lower amortization of intangibles. On a year-over-year basis, we generated $8.8 million of incremental revenue while absorbing only $1.8 million of incremental operating expenses. This reduced operating expenses as a percentage of revenue to 39.9% from 46.4% in the prior year period.

The $1.8 million or 14.8% increase reflects higher selling, general administrative, and engineering expenses, primarily higher payroll and payroll-related costs and higher commissions associated with higher volume, partially offset by lower amortization and restructuring costs.

Slides 9 and 10 collectively measure our profitability. On Slide 9, net margin expanded by 400 basis points sequentially and 890 basis points year over year to 5.3%. And adjusted EBITDA margin expanded by 640 basis points sequentially and over 1,000 basis points year over year to 12.6%.

For Q3, net earnings were $1.9 million compared with $0.5 million in the second quarter and a net loss of $0.9 million in Q3 2025. Adjusted EBITDA was $4.4 million, up from $2.2 million in the second quarter and $0.4 million in Q3 2025.

On Slide 10, net earnings were $0.15 per diluted share compared with a net loss of $0.08 per diluted share in the prior year period. Adjusted EPS, which adds back tax-affected acquired intangible amortization and restructuring charges, was $0.18 per diluted share, compared with an adjusted net loss of $0.02 per diluted share in Q3 2025.

One item to note, since it affected per share results this quarter, is on the tax line. Our effective tax rate in Q3 was approximately 30%. This brings our year-to-date tax rate up to an increased expected full-year rate of approximately 20%, including the discrete benefit recorded in Q2. The higher expected rate is driven by a higher proportion of profitability being generated in our higher-tax jurisdictions.

Slide 11 shows our capital structure and cash flow. We ended Q3 with cash and cash equivalents of $20.9 million, a decline of $1.2 million from the end of Q2. Operating activities used $0.3 million of cash in the quarter. Net earnings and non-cash charges contributed approximately $4.4 million, which was more than offset by a $3.6 million increase in accounts receivable and a $1 million reduction in customer deposits and deferred revenue.

After $0.4 million of capital expenditures, free cash flow was negative $0.6 million. We also reduced the term debt by $1 million during the quarter.

At September 30, 2026, we had approximately $61 million in total liquidity, including $20.9 million of cash and equivalents and $40 million of available borrowing capacity, consisting of $30 million under our delayed draw term loan facility and the full $10 million under our undrawn revolving credit facility.

On August 14, we amended the facility to extend our ability to draw on the term note through August 28, 2028. Total debt was $5.5 million and our leverage ratio was 0.5x trailing 12-month adjusted EBITDA. We were in compliance with all covenants at quarter end.

Turning to Slide 12 and our financial guidance. Q3 came in at or better than our August guidance on revenue, gross margin, and operating expenses. Our Q4 guidance maintains that steady incremental progression with 2 factors to keep in mind. First, Q3's product mix was particularly favorable. Second, we expect some modest expense increases in Q4 as well as we fill open leadership positions and start planning for 2027.

Looking beyond Q4, we are positioned for a solid start to 2027. Our record backlog, roughly 60% of which ships in 2027, together with Q3 semiconductor orders converting largely in the first half, supports that outlook. We will provide full-year 2027 guidance with our fourth quarter results, as is our practice.

For Q4, we project revenue of $34 million to $36 million, gross margin of approximately 45%, operating expenses of $14.2 million to $14.7 million, and within operating expenses, amortization of $0.5 million.

This guidance excludes any potential acquisitions and restructuring and restructuring-related costs and assumes our view of macroeconomic conditions remains unchanged through the end of the year.

One housekeeping note, after the market closes today, we intend to file our Form 10-Q. We will also file a Form S-3 to refresh our existing shelf registration before it expires.

Now, if you turn to Slide 13, I will turn the call back over to Rich. Rich?

Unknown Speaker

Yes. Thanks, Duncan. Before we open the call to questions, I want to walk you through how electronification connects our end markets, how it is shaping our R&D and our new product priorities, and how it is creating new opportunities for inTEST.

Electronification is making customer testing more complex and essential, which is increasing demand for our solutions. Our portfolio is positioned well to meet these changing needs.

In semi, our advanced manipulators and high-power chillers address customers' growing power and thermal and testing requirements. The same trend is reshaping our flying probe business. These systems were originally built to check circuit board continuity and perform basic probing, but now they must meet more demanding test requirements as customers add electronics to their products. Battery testing is a clear example as it requires longer, more complex routines than flying probe systems have traditionally run.

We are expanding these systems from single-purpose testers into broader test platforms. Each new application adds test content per system, increasing the value for both the customers and to inTEST.

Our functional test systems are following a similar path. First developed for auto EV, they now also serve other end markets. Our teams are also working more closely to win customers. As an example, in Q3, an industrial customer for an in-circuit test system placed a separate order for one of our functional test systems.

In European markets where new regulations are restricting the usage of certain refrigerants, we will launch a first-of-a-kind new product next week that conforms to the new legislation that we believe equals or exceeds the performance of its predecessor.

Collaboration like this helps us grow revenue, but that's only half the job. The other half is making sure more of that growth reaches the bottom line consistently and through the cycle.

On my first call as CEO, I stated I would develop an operational plan for inTEST and share it with you. In our Q2 call, I outlined where I was focused and that work is well underway.

Over the past 2 quarters, I have examined the business through 5 lenses: our product levers that drive profitability, including product cost, mix, and supply chain; how efficiently we deploy our operating expenses; how we optimize our manufacturing footprint; how we can share R&D more effectively across our divisions.

Over that time, I have visited our facilities, met with our teams, and worked with my direct reports to develop detailed actions.

inTEST has grown through acquisitions, and our businesses have largely been run and managed separately. inTEST's next phase is to operate our business as a coordinated platform, capturing commercial opportunities, cost synergies, and a sharing of ideas.

To help execute this plan, Scott Taylor joined inTEST on October 1 as Vice President and General Manager of ITS, reporting to me. Scott brings more than 20 years of multi-site P&L responsibility, including leading North American operations of a thermal management manufacturer and a deep background in lean manufacturing and operational excellence. He will help ensure we deliver on the plan.

The plan is as much about where we direct our dollars as it is about where we take them out. As we plan for 2027, we will put our spending where it earns the best return. In our operations, that means continued efficiency gains. In our product, it means a disciplined engineering spend because the demands our customers are bringing us, such as the test applications I described a moment ago, make that the best investment inTEST can make.

To summarize, as we see it today, we are entering 2027 with a promising momentum and with our operational plan aimed squarely at profitability, efficiency, and inTEST's long-term success.

With that, operator, please open the call to questions.

Operator

[Operator Instructions] Our first question is from Max Michaelis with Lake Street Capital Markets. Please proceed.

Phần hỏi đáp

Maxwell Michaelis

Hey guys, congrats on the quarter. First one for me, if we look at the Q3 order book, obviously really solid. Sounds like that funnel's filled back up for Q4. I assume semi's a big part of that, but I'll let you answer it for me. Is the mix going to be relatively similar in terms of order or the order book for Q4 as we saw in Q3?

Unknown Speaker

Yes, thanks Max. Good to speak with you. Certainly semi is maintaining strength, but as noted, we're pretty positive about the activities in the other markets like auto EV and military as well.

Duncan Gilmour

Right. So I would just add Max, in terms of the mix, similar mix. Our guide does take margin down a little bit, as you probably saw. So we do see some small shifts to drive that, but certainly relatively positive mix there.

Maxwell Michaelis

Versus the way we were, for example, in Q2? Yes, and the Q4 gross margin guide makes sense. I mean, just given your commentary around Q3 orders from semi largely converting in Q3, first half of '27, but I'm curious to know, a lot of these guys are ordering ahead of time. I mean, conversations you're having with your customers going into 2027 is, what we saw in Q3 and Q4, was that largely pull-forwards from these customers, or do you expect to see that order book continue to see solid strength heading into the first few quarters of 2027?

Unknown Speaker

Certainly, we'll guide to 2027 later, but the momentum seems pretty strong right now. I think it's hard to tell what the market's going to do, but we do see strength in semi for sure, seemingly to go into the early part of 2027 at least.

Maxwell Michaelis

All right, guys. Thanks for taking my questions.

Operator

Our next question is from Ted Jackson with Northland Securities. Please proceed.

Edward Jackson

Again, congrats on the quarter. It's nice to see everything turning and business humming. So I want to touch base on supply chain. You know you've made a comment with regards to increased lead times. It's not the first company I've listened to this cycle make those types of observations. And so I guess what I wanted to dig into on this was, where are those pinch points? What kind of materials? How should we think about that? As we think about your working capital, really kind of, let's call it the coming 6, 12 months or whatever you want to put to it. I mean, I'd assume a lot of companies are actually taking inventory up relative to kind of historic norms because of these kind of issues and just kind of building more of a buffer. Is any of that kind of effort being driven by your customer base? That's kind of my first topic.

Duncan Gilmour

Yes, let me take that, Ted. So I don't think we're seeing any unusual supply chain challenges with large bumps in demand that we're obviously seeing. There's going to be some, and there certainly are bits and pieces, as we would typically expect. But that's part and parcel of managing the ups and downs of the business.

So nothing that we can't... We do manage it in some cases a little bit more investment in working capital and inventory, depending on the pieces and parts, but there's nothing out of the ordinary today. There's always battles, but nothing particularly unusual that we're highlighting.

Edward Jackson

And then, I almost said it was in my head, now I just went back out. Let's talk about Alfamation. You commented on this a little bit in the past that you had an air pocket with sort of the restructuring, if you would, of vehicle manufacturing and the shift off of EVs and reposition themselves and you're now starting to see some strength in there and you also have talked about your efforts to and success in extending the markets that some of those solutions go beyond auto and EV.

When you look into the opportunity funnel in front of you and maybe even the orders that you booked in the third quarter, can you provide some color with regards to the mix between auto EV and other markets and kind of how that's changed in the last 12 months?

Unknown Speaker

Yes, sure, Ted. So I would say generally, the majority is still in the auto EV space. That's certainly their strength. And as that market seems to be settling back into its normal cycles, we're seeing our continued strength in there, but as we mentioned, we had industrial customers and some other customers outside of the space looking at our functional test systems.

We've had some continued wins. I would say it's early phase of growing that market. It's building our name in that market and growing for the products and getting some of those wins that will drive the future of the growth in those spaces.

Edward Jackson

Okay, and then my last question, I just wanted to touch over on semi, on the front end. You know, the back end turn, you're feeling really good about where you stand. You had good order momentum in this quarter. You think it's going to continue at least into the first half of 2027. You know, those cycles can be 12, 18 months long. So you've got a good runway there.

What's going on on the front-end side? What are you seeing in terms of activity, pipeline opportunity, sort of the next leg, if you would, that might lift that segment higher as much?

Unknown Speaker

Yes, I think, as we've mentioned before, there's some signs of life activity growing in that space. I would say it's maybe a bit more active than it was a month ago when we pre-announced our orders. But it's still early stages in my opinion.

I think as we go forward, we're certainly hoping that that market comes back again. I'll caution, I don't think it's going to come back to what it did 3 or 4 years ago. But the capacity seems to be being utilized, and that's a good sign. The activity level is certainly picking up, and we're going to stay on top of that.

Edward Jackson

And then is that a margin structure similar to the back end or how would you compare it?

Duncan Gilmour

Yes, margin-wise, it's typically not quite as good. Those product lines, quite often we're selling to other manufacturers of equipment. So generally, the margins aren't quite as high as the back-end semi space that we've touted as being generally our highest margin product lines.

Edward Jackson

Okay. All right. Hey, thanks for taking the questions. Congrats. Thanks, Duncan.

Operator

[Operator Instructions] Our next question is from Dick Ryan with Oak Ridge Financial. Please proceed.

Richard Ryan

Thank you. Say, Rich, question on the defense side. In the slide deck, you said the induction heating had 2 quarters now of business there. How are your divisions hitting the defense cycle, or the defense industry? I mean, it's good to see that Embraer is participating in that, but how else are you hitting the defense side?

Unknown Speaker

It's a good question, Dick, thanks. Many of our businesses, I would say almost all of them, with the exception of maybe our EMS business, which is, you know, almost exclusively semi, all participate in the defense cycle to some degree with varying, you know, mostly with the prime contractors. We don't directly go to the government very often, but usually through the big prime contractors.

Duncan Gilmour

Yes, I mean, I can add a little bit as well. We do sell across our business units there, Dick. The in-circuit flying probe testers are used for PCB type testing across a number of primes and so forth. The induction heating equipment we reference in manufacturing processes. The environmental business with process chillers, for example, does some significant business with, again, a number of the larger primes. And Videology as well. Some of the cameras, we have some small lines there that are also going into that space. So it really cuts across the business.

Richard Ryan

That's good to see. One of the goals, obviously, say, Duncan, on the service side, I don't know if I caught what service represented in the quarter. What's your thoughts on that?

Duncan Gilmour

Yes, service is running just over 14%, which is a fairly typical number for us. You know, that percentage drops sometimes as revenues increase. The dollar is fairly stable, but we've been running reasonably stable numbers there in our service business.

Richard Ryan

Okay, thank you and congratulations on the quarter.

Duncan Gilmour

Thanks.

Operator

There are no further questions at this time. I would like to turn the conference back over to Rich for closing remarks.

Unknown Speaker

Thank you, operator, and thank you all for joining us. Demand has arrived. It is in our expanding backlog, and we are executing on our operational plan to convert it consistently.

Please reach out to our Investor Relations team to coordinate our continued dialogue. On Slide 14, please note the details regarding the replay of this call, as well as our upcoming investor event schedule. We hope to see you at one of the conferences we will be attending.

Thank you again for participating today, and have a great day.

Operator

Thank you. This concludes today's conference. Thank you for participating. You may disconnect at this time.

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