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Eagle Test Systems Reports First Quarter Fiscal 2007 Results

Eagle Test Systems, Inc. (Nasdaq: EGLT), a provider of automated test equipment solutions for high-performance analog, mixed-signal and radio frequency (RF) semiconductors, announced financial results for its first quarter of fiscal 2007 ended December 31, 2006.

Quarter Highlights

-- Net revenue for the first fiscal quarter ended December 31, 2006 was

$24.0 million, up 7.1% from the same quarter in our prior fiscal year.

-- Net income for the current quarter was $3.9 million, or $0.17 per fully

diluted common share.

Operating Results

Net revenue was $24.0 million for the first fiscal quarter ended December 31, 2006, an increase of $1.6 million or 7.1%, over net revenue of $22.4 million for the same period in the prior fiscal year. Gross margin for the first fiscal quarter was 58.9% of net revenue; compared to gross margin of 68.7% reported in the same period in the prior fiscal year. The change in gross margin percentage was principally due to higher operating fixed costs related to infrastructure and capacity improvements. In addition, the prior year gross margin benefited from better product shipment mix and a sale of $500,000 of inventory that was previously reserved. Operating income for the first fiscal quarter was $4.6 million, compared to operating income of $7.1 million for the same period in the prior fiscal year; a decrease of $2.5 million or 34.9%, principally related to lower gross margin and higher SG&A expense as a result of foreign office expansion and public company costs not incurred in the same period of the prior fiscal year. Net income for the first fiscal quarter was $3.9 million, compared to net income of $1.9 million for the same period in the prior fiscal year in which we recorded a warrant valuation charge of $2.2 million. The Company reported income per fully diluted common share of $0.17 for the three months ended December 31, 2006, reflecting additional common shares issued in fiscal 2006, compared to a net income per fully diluted common share of $0.10 for the same period in the prior fiscal year.

"We are pleased with our results in light of current market conditions," stated Len Foxman -- Eagle CEO. "In the past twelve months we have expanded our foreign sales and service infrastructure to position us to address key strategic accounts that will allow us to take advantage of opportunities with products that enable these customers to lower their overall cost-of-test using our differentiated parallel test solution. We remain focused on continuing to deliver technically superior products in the markets we pursue, expanding our customer base and further penetrating existing customers with our parallel test solutions."

Outlook

The Company estimates net revenue will be between $18.0 and $22.0 million in our second quarter of fiscal 2007. The Company estimates GAAP earnings per share will be between $0.02 and $0.09 based on an estimated 23,200,000 fully diluted common shares.

Earnings Conference Call

Eagle Test Systems will host its earnings call today at 6:00 p.m. Eastern Time/ 5:00 p.m. Central Time for analysts, stockholders, investors and the public.

Participants can join for the voice portion of the call by dialing 1-800-901-5213 (domestic calls) or 1-617-786-2962 (international calls) starting at 5:45 p.m. Eastern time/ 4:45 p.m. Central time and enter the passcode 88618449; you will be asked for your name and firm's name. The live conference call will also be available via web cast and accessible along with our earnings release the day of the call through the Investor Relations section of our website at http://www.eagletest.com .

The conference call will be available for replay from approximately one hour after completion of the conference call until February 7, 2007. To hear a replay of the call, please dial 1-888-286-8010 (domestic calls) or 1-617-801-6888 (international calls) and enter the passcode, 76192541.

About Eagle Test Systems, Inc.

Eagle Test designs, manufactures, sells and services high performance automated test equipment for the semiconductor industry. The company's products are used to test analog, mixed-signal and radio frequency (RF) semiconductors that are used in products such as digital cameras, MP3 players, automotive electronics, cellular telephones, computers and peripherals. The Company was founded in 1976 and has offices located throughout the world in Asia, North America and Europe, with corporate headquarters in Buffalo Grove, Illinois. For more information, please visit http://www.eagletest.com .

Safe Harbor

Certain statements contained in the press release regarding matters that are not historical facts, including statements regarding our projections for revenue, earnings per share and weighted average diluted common shares for the second fiscal quarter ending March 31, 2007 and statements regarding winning new customers, penetrating existing customers with new products with parallel test capabilities, and our business focus in the future are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements involve important factors that could cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Such important factors involve risks and uncertainties, including, but not limited to, the risk associated with the highly cyclical nature of the semiconductor market; unanticipated challenges in assessing business conditions and the overall market; the lack of visibility with regard to future business conditions for our Company and the rapid nature of changes in industry business conditions; the risk of a loss or reduction of orders from one or more customers among which our business is concentrated; the difficulty in obtaining new customers because of the high switching cost; competition and pricing pressures; the decision by customers to cancel or defer orders that previously had been accepted; delays or shortages in an adequate supply of raw materials; insufficient or excess inventory; our ability to develop new and enhanced products; the ability to manage our growth; the ability to attract and retain key employees; prolonged disruption in the operations of our single manufacturing facility; economic, political and other risks associated with international sales and operations; risks related to our intellectual property; risks related to our need to achieve and maintain effective internal controls over financial reporting; risk related to unanticipated impact of stock based compensation and the tax effects thereunder on our expenses in any period pursuant to FASB Statement 123(R) and other factors that are detailed from time to time in reports filed by Eagle Test Systems, Inc. with the Securities and Exchange Commission, including risks and uncertainties discussed under "Risk Factors" in our Form 10-K, filed with the Securities and Exchange Commission on December 8, 2006. We undertake no obligation to publicly update or revise any forward-looking statements, whether changes occur as a result of new information or future events, after the date they were made.

Financial Tables to Follow

Eagle Test Systems, Inc

Financial Results

(UNAUDITED)

(all dollars in 000's except share and per share data)

Three Months ended

December 31,

2006 2005

Net Revenue $24,036 $22,447

COGS 9,877 7,029

Gross margin 14,159 15,418

Margin % 58.9% 68.7%

SG&A 7,414 6,288

R&D 2,154 2,076

Total operating expense 9,568 8,364

Operating income 4,591 7,054

% of Revenue 19.1% 31.4%

Interest expense (1) 16 980

Other (income) expense (2) (1,263) (157)

Warrant valuation charge (3) - 2,191

Income before taxes 5,838 4,040

Tax (benefit) expense 1,972 2,165

Net income $3,866 $1,875

16.1% 8.4%

Net income allocated to preferred

stockholders (4) - (1,152)

Income available for common stockholders $3,866 $723

Earnings per common share

Basic $0.17 $0.13

Fully diluted (5) $0.17 $0.10

Shares

Basic 22,834,508 5,396,248

Fully diluted 23,096,885 14,024,119

Notes to financial tables are presented below

FOOTNOTES:

(1) Interest expense for the three months ended December 31, 2005 includes

interest expense on subordinated notes which were repaid with a

portion of the proceeds of the Company's initial public offering (IPO)

on March 14, 2006.

(2) Other (income) expense primarily consists of interest income earned on

cash and marketable securities.

(3) Warrant valuation charge results from variable accounting on these

instruments. The warrants were exercised by the holder in connection

with the Company's IPO completed March 14, 2006, and are no longer

outstanding, accordingly, this non-cash item impacts the three months

ended December 31, 2005, and will not impact the results of operations

going forward.

(4) Basic share computation for the three months ended December 31, 2005

was performed using the two-class method described under EITF 03-06 -

"Participating Securities and the Two-Class Method under FASB

Statement No. 128" when there are participating securities such as the

Company's convertible preferred stock outstanding. The Company's

convertible preferred stock was converted and its redeemable preferred

stock was redeemed in connection with the Company's IPO and therefore,

for periods ended after March 14, 2006, the two-class computation

method is no longer required.

(5) The earnings used in the diluted share computation reflect adjustments

totaling $406 or ($0.03) per diluted share for the three months ended

December 31, 2005; related to the as converted impacts for the

warrants and convertible securities that were outstanding during this

period. The warrants and convertible securities were exercised or

redeemed in connection with the IPO and do not affect the three month

period ended December 31, 2006.

December 31, September 30,

Balance sheet Data (Unaudited) 2006 2006

Cash & investments $111,034 $75,946

Accounts receivables 11,133 17,338

Receivable from sale of common stock - 31,185

Inventory 22,121 22,378

Current assets 150,336 153,502

Total assets $161,777 $165,886

Accounts payable $4,367 $5,941

Deferred revenue 3,488 9,409

Current liabilities 16,862 27,764

Long-term liabilities 1,562 1,708

Total liabilities & stockholders equity $161,777 $165,886

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