Q4 2024 inTEST Corp Earnings Call
Operator: Greetings and welcome to the inTest Corporation 4th Quarter 2024 Financial Results. At this time, all participants are in the tsunami mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Greetings and welcome to the Intest Corporation fourth quarter 2024 financial results.
At this time all participants are in a listen only mode.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Operator: Our question and answer session will follow the following. Please type your questions into the Q&A box at any time by pressing Star 1 on your telephone.
A question and answer session will follow the formal presentation.
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Operator: As a reminder, this conference is being recorded.
As a reminder, this conference is being recorded.
Shawn Southard: It's now my pleasure to introduce your host, Shawn Southard. Please go ahead.
Speaker Change: It's now my pleasure to introduce your host Sean Southern Please go ahead Sean.
Shawn Southard: Good morning everyone. We certainly appreciate your interest in inTest Corporation and thank you for sharing your time with us today.
Sean Southern: Good morning, everyone. We certainly appreciate your interest in Intest Corporation and thank you for sharing your time with us today joining.
Shawn Southard: Joining me on our call are Nick Grant, our President and Chief Executive Officer, and Duncan Gilmour, our Chief Financial Officer and Treasurer. You should have received the earnings release that went out this morning, as well as the slides that will accompany our conversation today. If not, you can find these documents on the investor relations section of our website, inTest.com.
Sean Southern: Joining me on our call are Nick Grant, our President and Chief Executive Officer, and Duncan Gilmore, Our Chief Financial Officer and Treasurer.
Sean Southern: You should have received the earnings release that went out this morning as well as the slides that will accompany our conversation today.
Sean Southern: If not you can find these documents on the Investor Relations section of our website Intest Dot com.
Shawn Southard: Please turn to slide two as I review the Safe Harbor Statement. During this call, management may make some forward-looking statements about our current plans, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and other factors that could cause actual events to differ materially from what is stated here today. These risks, uncertainties, and other factors are provided in the earnings release, as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov.
Sean Southern: Please turn to slide two as I review, the Safe Harbor statement.
Sean Southern: During this call management may make some forward looking statements about our current plans beliefs and expectations. These statements apply to future events that are subject to risks uncertainties and other factors that could cause actual events to differ materially from what is stated here today. These risks uncertainties and other factors are provided in the earnings release as well as other documents filed by the company with the Securities and Exchange Commission.
Sean Southern: These documents can be found on our website or at SEC Gov.
Shawn Southard: Also, as covered on slide three, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating our 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.
Also as covered on slide three management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating our 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.
Sean Southern: In the tables that accompany today's reserve release and slides.
Shawn Southard: Now, please turn to slide four.
Now please turn to slide four net.
Nick Grant: Nick, I'll turn the call over to you. Thank you, Shawn, and good morning, everyone. Thanks for joining us for our fourth quarter 2024 earnings call. I'm pleased to report record fourth quarter revenue of $36.6 million, and notably for 2024, we delivered our third consecutive year of record revenue at $130.7 million. So I'd like to start by acknowledging the entire inTest team and expressing my sincere appreciation for their commitment to our strategy and their ongoing efforts across the globe. These efforts enabled the record revenue and strong operational results, further validating the effectiveness of our market and customer diversification strategy.
Speaker Change: I'll turn the call over to you.
Speaker Change: Thank you Sean and good morning, everyone. Thanks for joining us for our fourth quarter 2024 earnings call.
Speaker Change: I'm pleased to report record fourth quarter revenue was $36 6 million and notably for 'twenty 'twenty four we delivered our third consecutive year of record revenue at $130 7 million.
Speaker Change: So I'd like to start by acknowledging the entire Intest team.
Speaker Change: Pressing my sincere appreciation for their commitment to our strategy and our ongoing efforts across the globe.
These efforts enabled our record revenue and strong operational results further validating the effectiveness of our marketing customer diversification strategy as well as our focus on innovation.
Nick Grant: as well as our focus on innovation. Full year sales growth of 6% was driven by the $25 million contribution from the affirmation acquisition, as well as strong demand from our auto EV, defense aero, and life sciences market. The combination of the acquisition and higher demand in these targeted markets more than offset the measurable 26% decline we experienced in SEMI. We believe that delivering growth against such a severe headwind in SEMI is proof of the success of our strategy to evolve inTest into a more diversified test and process technology solutions business. In fact, it was our innovative test solutions that delivered growth in both auto EV and defense aerospace for the year.
Speaker Change: Full year sales growth of 6% was driven by the $25 million contribution from the affirmation acquisition as well as strong demand from our auto EV defense Aero and life Sciences markets.
Speaker Change: Combination of the acquisition and higher demand in these targeted markets more than offset the measurable 26% decline we experienced in semi.
Speaker Change: We believe that delivering growth against such a severe headwind in semi is proof of the success of our strategy to evolve intest into a more diversified test and process technology solutions business.
Speaker Change: In fact, it was our innovative test solutions that deliver growth in both auto EV and defense aerospace for the year.
Nick Grant: Specifically, revenue growth in auto EV was driven by the advanced testing technologies we acquired with Alfamation that are used to qualify infotainment systems for vehicles. We also saw increased demand for the technology we offer for testing battery packs that are used in various end products, not just EV. Our flying probe automated test systems are used in battery-packed testing to support the megatrend of electrification of a broad variety of equipment such as electric boats and drones. Our systems are frequently preferred by customers because they provide tremendous flexibility and market-leading test coverage, which increases quality assurance and throughput.
Speaker Change: Specifically revenue growth in auto EV was driven by the advanced testing technologies, we acquired with Al formation that are used to qualify infotainment systems for vehicles.
Speaker Change: We also saw increased demand for the technology, we offer for testing battery packs that are used in various end products not just E vs.
Speaker Change: Our flying probe automated test systems are used in battery pack testing to support the mega trend of electrification of a broad variety of equipment, such as electric boats and drones.
Speaker Change: Our systems are frequently preferred by customers because they provide tremendous of flexibility and market, leading test coverage, which increases quality assurance and throughput.
Nick Grant: In the fourth quarter, we received several repeat orders for these systems, and we won back a customer who had returned after trying a competitive solution. While the pipeline of opportunities for this technology entering 2025 is healthy, we are carefully monitoring customer spending given the ever-changing tariff environment. For the quarter, our year over year core business sales growth in defense aero semi back end and life sciences more than offset the decline in industry. We also benefited from approximately 2 million in previously delayed shipments to life sciences, defense, aero, and auto markets.
Speaker Change: In the fourth quarter, we received several repeat orders for these systems and we won back a customer who had returned after trying a competitive solution.
While the pipeline of opportunities for this technology entering 2025 is healthy we are carefully monitoring customer spending given the ever changing tariffs environment.
Speaker Change: For the quarter, our year over year core business sales growth in defense Aero semi backend and life sciences more than offset the decline in industrials.
Speaker Change: We also benefited from approximately $2 million in previously delayed shipments to life Sciences defense Aero and auto markets due.
Nick Grant: due to the logistic issues in the third quarter. Record sales to the defense aero market was driven by our innovative environmental and test technologies, which address the demanding requirements for these customers.
Speaker Change: Due to the logistic issues in the third quarter.
Speaker Change: Record sales to the defense Aero market was driven by our innovative environmental and test technologies, which address the demanding requirements for these customers.
Nick Grant: Gross profit in the fourth quarter decreased sequentially, reflecting a $1.6 million charge to cost of goods sold related to purchase price accounting for the Alfamation acquisition, as well as mix.
Duncan Gilmore: Gross profit in the fourth quarter decreased sequentially, reflecting a $1 6 million dollar charge to cost of goods sold related to purchase price accounting for the affirmation acquisition as well as mix Duncan will provide more details on the inventory step up charge shortly.
Nick Grant: Duncan will provide more details on the inventory step-up charge shortly.
Nick Grant: Let me now review orders and backlog on slides. Fourth quarter orders increased 11% year over year. Back-end SEMI continued to show signs of improvement, offsetting persistent weakness related to our silicon carbide gallium nitride applications in the front end to drive a $2.4 million increase in overall SEMI order. The $1.7 million increase in orders for AutoEV included $1.1 million from Alfamation. Demand in life sciences more than doubled to a record 2.3 million and reflected sizable orders for our induction heating solutions in multiple medical applications. Sequentially, orders were up 9%, marking our third consecutive quarter of improvement with strength in SEMI and Life Science.
Duncan Gilmore: Let me now review orders and backlog on slide five.
Duncan Gilmore: Fourth quarter orders increased 11% year over year.
Duncan Gilmore: Backend semi continued to show signs of improvement offsetting persistent weakness related to our silicon carbide gallium nitride applications in the front end to drive a 2.4 million dollar increase in overall semi orders.
Duncan Gilmore: The 1.7 million dollar increase in orders for auto E. V included $1 1 million from Alpha nation.
Duncan Gilmore: Demand in life sciences more than doubled to a record $2 3 million and reflected sizable orders for our induction heating solutions in multiple medical applications.
Duncan Gilmore: Sequentially orders were up 9%, marking our third consecutive quarter of improvement and with strength in semi and life Sciences.
Nick Grant: Auto EV demand slowed, reflecting continued softness in that end market. While orders for Defense Arrow were down in the quarter, we continue to see strong interest for our solutions in this. In the quarter, we received orders from multiple customers, including several prime defense contractors, commercial space companies, and NASA. Backlog at the end of 2024 was $39.5 million and included $7.4 million from AlphaMation.
Duncan Gilmore: Although E V demand slowed reflecting continued softness in that end market.
Duncan Gilmore: While orders for defense Aero were down in the quarter, we continued to see strong interest for our solutions in this market.
Duncan Gilmore: In the quarter, we received orders from multiple customers, including several prime defense contractors commercial space companies and NASA.
Duncan Gilmore: Okay.
Duncan Gilmore: Backlog at the end of 2024 was $39 5 million and included $7 4 million from Alpha nation.
Nick Grant: Backlog was $600,000 lower from the prior year period and down $6 million sequentially, reflecting the timing of affirmation shifts.
Duncan Gilmore: Backlog was 600000 lower from the prior year period, and down 6 million sequentially, reflecting the timing of affirmation shipments.
Duncan Gilmour: With that, let me now turn it over to Duncan to review the financials and outlook in more detail. Duncan, over to you. Thank you, Nick. Starting on slide six, as Nick noted, revenue for the fourth quarter was 36.6 million, including 8.5 million from Alfamation. The $8.7 million increase compared with Q4 2023 was driven by $7.9 million of growth in auto EV, all for malformation, $2.7 million of growth in defense aerospace, and $1.5 million of improved sales in SEMI as back-end improvement more than offset front-end weakness. Industrial sales were down 3.7 million due to general market softness and project timing.
Duncan Gilmore: With that let me now turn it over to Duncan to review the financials and outlook in more detail.
Duncan Gilmore: Duncan over to you.
Duncan Gilmore: Thank you Nick.
Speaker Change: Starting on slide six as Nick noted revenue for the fourth quarter was $36 6 million, including $8 5 million from Al formation.
Speaker Change: The $8 7 million increase compared with Q4, 2023 was driven by $7 $9 million of growth in auto EV, all from Alpha nation $2.7 million of growth in defense Aerospace and $1.5 million of improved sales in semi is backend improvement more than off.
Speaker Change: Front end weakness.
Speaker Change: Industrial sales were down 3.7 million due to general market softness in project timing.
Duncan Gilmour: Sequentially, fourth quarter revenue increased $6.3 million, as auto EV increased $5.7 million, defence aerospace was up $1.9 million, and security improved $0.3 million. It should also be noted that, as referenced on our third quarter conference call, the fourth quarter benefited from approximately two million of shipments that were delayed out of the third quarter.
Speaker Change: Sequentially fourth quarter revenue increased $6 3 million is also easy increased 5.7 million defense Aerospace was up $1 9 million and security improved zero point $3 million.
It should also be noted that as referenced on our third quarter conference call. The fourth quarter benefited from approximately 2 million of shipments that were.
Speaker Change: Were delayed out of the third quarter.
Duncan Gilmour: Moving to slide seven. In the fourth quarter, we refined and finalized the purchase price allocation for the AlphaMation acquisition. Adjustments recorded included a 1.6 million inventory step up, which increases the cost of inventory acquired. This adjustment was made to reflect the fair value of working process and finished goods as of the acquisition date. As the related inventory was sold in 2024, this increase was charged to cost of goods sold in the fourth quarter, which negatively impacted gross margin for the period. This is the 1.6 million charge impacting gross profit and 430 basis point impact to gross margin that Nick noted earlier.
Speaker Change: Moving to slide seven.
Speaker Change: In the fourth quarter, we refined and finalized the purchase price allocation for the Alpha nation acquisition.
Speaker Change: Adjustments recorded included a 1.6 million inventory step up which increases the cost of inventory acquired.
Speaker Change: This adjustment was made to reflect the fair value of work in process and finished goods as all of the acquisition date.
As the related inventory was sold in 2024. This increase was charged to cost of goods sold in the fourth quarter, which negatively impacted gross margin for the period.
Speaker Change: This is the 1.6 million charge impacting gross profit and 430 basis point impact to gross margin that Nick noted earlier.
Duncan Gilmour: Fourth quarter gross profit of $14.5 million increased $0.5 million sequentially on higher revenue and improved operating efficiencies that more than offset the $1.6 million charge. Compared with the prior year period, gross profit increased $2.1 million. Including the 430 basis point impact, gross margin of 39.7% for the quarter, contracted 660 basis points sequentially and 490 basis points year over year.
Speaker Change: Fourth quarter gross profit of $14 5 million increased 0.5 million sequentially on higher revenue and improved operating efficiencies that more than offset the 1.6 million charge.
Speaker Change: Paired with the prior year period gross profit increased $2 1 million.
Speaker Change: Including the 430 basis point impact gross margin of 39, 7% for the quarter, our contracted 660 basis points sequentially and 490 basis points year over year.
Duncan Gilmour: As you can see on slide 8, our operating expenses were $12.5 million. Compared with the prior year, operating expenses were up $1.1 million, reflecting the addition of Alpha Nation, which added $1.5 million. Alfamation operating expenses benefited from an $800,000 amortization credit in the current quarter. Overall, the increase in operating expenses were partially offset by cost reduction efforts and operational improvements in our core business. Compared with the trailing third quarter, operating expenses declined $1.1 million as a result of the sequential reduction in amortization expense of $800,000, as well as the impact of ongoing cost-cutting actions and operational improvements.
Speaker Change: As you can see on slide eight.
Speaker Change: Our operating expenses were $12 5 million compared.
Speaker Change: Compared with the prior year operating expenses were up 1.1 million, reflecting the addition of Alpha nation, which added $1.5 million.
Speaker Change: Alpha nation operating expenses benefited from an 800000 amortization credit in the current quarter.
Speaker Change: Overall, the increase in operating expenses were partially offset by cost reduction efforts and operational improvements in our core business.
Speaker Change: Compared with the trailing third quarter operating expenses declined $1 1 million as a result of the sequential reduction in amortization expense of 800000 as well as the impact of ongoing cost cutting actions and operational improvements.
Duncan Gilmour: Turning to slide nine, you can see our bottom line and adjusted EBITDA results. For the quarter, net earnings were $1.5 million, or $0.12 per diluted share. adjusted net earnings were $2.8 million or $0.23 per diluted share. Adjusted EPS reflects adding back the tax-affected impact of the inventory step-up and acquired intangible amortization charges. On an after-tax basis, these totals approximately 1.3 million or about 11 cents per diluted share in the fourth quarter. Adjusted EBITDA for Q4 was $4.4 million, representing a 12.1% adjusted EBITDA margin. For clarity, this is inclusive of adding back the $1.6 million inventory step-up impact.
Speaker Change: Turning to slide nine you can see our bottom line and adjusted EBITDA results.
Speaker Change: For the quarter net earnings were $1 5 million or 12 cents per diluted share.
Speaker Change: Adjusted net earnings were $2 8 million or <unk> 23 cents per diluted share.
Speaker Change: Adjusted EPS reflects adding back the tax affected impact of the inventory step up and acquired intangible amortization charges on an after tax basis. These totaled approximately $1 3 million or about 11 cents per diluted share in the fourth quarter.
Speaker Change: Adjusted EBITDA for Q4 was $4 4 million, representing a 12, 1% adjusted EBITDA margin.
Speaker Change: Clarity this is inclusive of adding back the 1.6 million inventory step up impact.
Duncan Gilmour: Slide 10 shows our capital structure and cash flow. During the quarter, we generated 2.6 million of operating cash. Capital expenditures in the fourth quarter were approximately $200,000 and the resultant pre-cash flow was $2.4 million. We ended the quarter with total debt of $15 million. This reflects a total debt leverage ratio of 1.4x. During the quarter, we repaid approximately $1.1 million of debt. Cash and equivalents at the end of the fourth quarter were $19.8 million, up $1.8 million from the trailing quarter. We continue to have $30 million available with our delayed draw term loan and an incremental $10 million available under our revolver.
Speaker Change: Slide 10 shows our capital structure and cash flow drew.
Speaker Change: During the quarter, we generated $2 6 million of operating cash capital expenditures in the fourth quarter were approximately 200000 and the resultant free cash flow was $2 4 million.
Speaker Change: We ended the quarter with total debt of 15 million. This reflects a total debt leverage ratio of 1.4 X.
Speaker Change: During the quarter, we repaid approximately $1 1 million of debt.
Speaker Change: Cash and equivalents at the end of the fourth quarter were $19 8 million up 1.8 million from the trailing quarter.
Speaker Change: We continue to have 30 million available with our delayed draw term loan and an incremental 10 million 10 million available under our revolver.
Duncan Gilmour: Turning to slide 11, we provide our outlook for 2025. Our outlook for 2025 is cautious, and we expect full-year revenue to be approximately $125 million to $135 million, with profitability gradually improving throughout the year. amortization expense for 2025 is expected to be 3.4 million. Our effective tax rate for the year is expected to be approximately 18%. Capital expenditures for 2025 are planned to be approximately 1 to 2% of revenue. For the first quarter, revenue is forecasted to be $27 to $29 million with gross margin of approximately 41% and operating expenses of $13.6 to $14 million, reflecting the typically higher levels in the first quarter.
Speaker Change: Turning to slide 11, we provide our outlook for 2025.
Speaker Change: Our outlook for 'twenty to 'twenty, five as cautious and we expect full year revenue to be approximately $125 million to $135 million with profitability gradually improving throughout the year.
Speaker Change: Amortization expense for 2025 is expected to be $3 4 million, our effective tax rate for the year is expected to be approximately 18% cap.
Speaker Change: Capital expenditures for 2025 are planned to be approximately 1% to 2% of revenue.
Speaker Change: For the first quarter, our revenue is forecasted to be 27 to 29 million with gross margin of approximately 41% and operating expenses of $13.6 million to $14 million, reflecting the typically higher levels in the first quarter.
Duncan Gilmour: This estimate excludes approximately $200,000 of restructuring expenses related to videology. Our expectations for the quarter reflect recent customer push-outs of approximately 3 million of orders in backlog to the latter half of the year. We have also taken into account the slowing receipt of orders we are seeing due to the uncertainty in end markets as a result of recent and impending tariffs. As usual, our guidance does not include the potential impact from any non-operating expenses such as corporate development and restructuring that may occur from time to time, nor does it include the potential impact from any additional acquisitions we may make.
Speaker Change: This estimate excludes approximately 200000 of restructuring expenses related to video allergy.
Our expectations for the quarter reflect recent customer push outs of approximately 3 million of orders and backlog to the left to the latter half of the year.
Speaker Change: We have also taken into account the slowing receipts of orders we are seeing due to the uncertainty in end markets as a result of recent and pending tariffs.
Speaker Change: As usual our guidance does not include the potential impact from any non operating expenses, such as corporate development and restructuring that may occur from time to time, nor does it include the potential impact from any additional acquisitions, we may make.
Nick Grant: With that, if you will turn to slide 12, I will now turn the call back over to Nick.
Speaker Change: With that if you'll turn to slide 12, I will now turn the call back over to Nick.
Nick Grant: Thanks, Duncan. As we closed 2024, we had solid momentum coming off a strong Q4 performance, and our opportunity funnels were expanded. However, as Duncan just mentioned, the uncertainty related to the change in administration is now delaying customer investment. As to tariffs, we continue to assess the potential impact from both a supply chain as well as market competitive position. even as the situation is rapidly changing. We do have suppliers in Canada and China that support our U.S. operations, but for the most part, our supply chain is relatively localized around our manufacturing. Because of the work we did during the supply chain disruption in 2022, we are in a better position and have alternate supply options.
Nick Grant: Thanks Duncan.
Nick Grant: We closed 2024, we had solid momentum coming off a strong Q4 performance and our opportunity funnels, we're expanding.
Speaker Change: However, as Duncan just mentioned the uncertainty related to the change in administration is now the lane customer investments.
Speaker Change: As to tariffs, we continue to assess the potential impact from both the supply chain as well as market competitive position.
Speaker Change: Even as the situation is rapidly changing.
Speaker Change: We do have suppliers in Canada, and China that support our U S operations, but for the most part our supply chain is relatively localized around our manufacturing facilities.
Speaker Change: Because of the work we did during the supply chain disruption in 2022, we are in a better position and had alternate supply options.
Nick Grant: If we are not able to mitigate costs, we do expect to pass increases on to our customers. We also think our competition is on the same playing field from a supply side perspective. Our greater focus currently is the impact tariffs may have on market competitiveness for our business. Aculogic, which is based in Canada, has a large portion of their sales into the U.S. Our semi-test equipment also is sold into China, and we are working with those customers to understand their mitigation strategies, given they are global manufacturers. As more clarity is provided regarding the tariffs, including the length of time they may be in effect, and the other countries that may be impacted, we can better evaluate our market position.
Speaker Change: If we are not able to mitigate costs, we do expect to pass increases onto our customers. We also thank our competition is on the same playing field from a supply side perspective.
Speaker Change: Our greater focus currently is the impact tariffs may have on our market competitiveness for our businesses Akea logic, which is based in Canada is a large portion of their sales into the U S.
Speaker Change: Our semi test equipment also is sold into China, and we are working with those customers to understand their minarik mitigation strategies given they are global manufacturers.
Speaker Change: There's more clarity is provided regarding the tariffs, including the length of time they'd be in effect in the other countries that may be impacted we can better evaluate our market position.
Nick Grant: In the meantime, we are in close conversation with our customers.
Speaker Change: In the meantime, we are in close conversation with our customers.
Nick Grant: The manufacturing build-out at our Malaysia facility is underway, and we plan to be producing products there by the end of the year. The in-the-region, for-the-region approach will save costs for both supply chain and logistics, and should improve market competitiveness.
Speaker Change: The manufacturing build out at AMRI leased facility is underway and we plan to be producing products there, but at the end of the year, but in the region for the region approach will save costs for both supply chain and logistics and should improve market competitiveness.
Nick Grant: In addition, we recently announced our intention to consolidate our Videology Netherlands facility into our Mansfield, Massachusetts location, which houses our U.S. Videology operations. This consolidation is intended to streamline operations to enable us to better serve customers while reducing costs. We are expecting approximately 600,000 of restructuring charges to be recognized through 2025 associated with this consolidation. We also expect these actions will result in annualized savings of approximately $500,000 beginning in 2026. While our outlook is cautious for 2025, our sales teams are focused on the right markets and applications. We expect to continue to see gradual improvements in some of our backend SEMI applications, along with increasing activity with Defense Aerospace Customs. Currently, the front-end semi-market remains paused, and we expect it to remain so throughout the year.
Speaker Change: In addition, we recently announced our intention to consolidate our video G Netherlands facility into our Mansfield, Massachusetts location, which houses our U S video EEG operation.
Speaker Change: Consolidation is intended to streamline operations to enable us to better serve customers, while reducing cost.
Speaker Change: We are expecting approximately 600000 of restructuring charges to be recognized through 2025 associated with this consolidation.
Speaker Change: We also expect these actions will result in annualized savings of approximately 500000, beginning in 2026.
Speaker Change: While our outlook is cautious for 2025, our sales teams are focused on the right markets and applications.
Speaker Change: We expect to continue to see gradual improvements in some of our backend semi applications, along with increasing activity with defense aerospace customers.
Speaker Change: Currently the front end semi market remains paused and we expect it to remain so throughout the year.
Nick Grant: We are confident that silicon carbide, gallium nitride, and epitaxy applications, where our solutions are used, will provide longer-term growth opportunities. We continually work to optimize our go-to-market channels to improve sales and expand geographic In addition to expanding our Malaysia facility, we have added sales resources and channel partners in Malaysia, Singapore, and Vietnam. We also recently announced a new agreement with a channel partner in Japan.
Speaker Change: We are confident that silicon carbide gallium nitride in epitaxy applications, where our solutions are used will provide longer term growth opportunities.
Speaker Change: We continually work to optimize our go to market channels to improve sales and expand geographic reach in addition to expanding our Malaysian facility. We have added sales resources and channel partners emulation, Singapore and Vietnam.
Speaker Change: We also recently announced a new agreement with a channel partner in Japan.
Nick Grant: Today, we announced our Board of Directors has renewed our stock repurchase This is a confirmation of our belief in the long-term value we are creating through innovation with solutions that solve our customers' most challenging problems. It is also a statement of our confidence and our expectations to continue to grow inTest over time, as we deepen our reach into targeted markets, broaden our customer base, and expand our geographic presence.
Speaker Change: Today, we announced our board of directors has renewed our stock repurchase plan.
Speaker Change: This is a confirmation of our belief in the long term value, we are creating through innovation with solutions that solve our customers' most challenging problems.
Speaker Change: It is also a statement of our confidence in our expectations to continue to grow in tests over time, as we deepen our reach into targeted markets broaden our customer base and expand our geographic presence.
Nick Grant: On March 26, we will host a strategy briefing at the New York Stock Exchange where we will present Vision 2030 and our strategy to achieve those long-term goals.
Speaker Change: On March 26, we will host a strategy briefing at the New York Stock Exchange, where we will present vision 2030, and our strategy to achieve those long term goals.
Operator: With that, operator, let's open the line for questions. Thank you. We will now be conducting a question and answer session.
Speaker Change: With that operator, let's open the line for questioning.
Speaker Change: Thank you, we'll now be conducting a question and answer session.
Operator: If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove a question. One moment, please, while we poll for questions. And once again, that's star one to be placed in the question.
Speaker Change: So that can be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
Speaker Change: You May press star two if he'd like to remove your question from a Q.
One moment, please while we poll for questions and once again Thats star one to be placed in the question queue.
Jaeson Schmidt: Our first question is coming from... for a while, is that why? Yes, thanks for taking my questions and congrats on a strong finish to the year.
Speaker Change: Our first question is coming from Jason Schmidt from Lake Street Capital markets. Your line is now live.
Speaker Change: Yeah.
Jason Schmidt: Yes, thanks for taking my questions and congrats on a strong finish to the year just wanted to start Nick with some of your commentary regarding push outs into the second half are you seeing any cancellations in your pipeline.
Jaeson Schmidt: Just want to start, Nick, with some of your commentary regarding pushouts into the second half. Are you seeing any cancellations in your pipeline?
Nick Grant: Hey, good morning, Jaeson. And thanks for the question. At this time, we aren't seeing cancellations, we have seen some customers kind of change one product over to a different product to different, say, powered solution, if you will, but no cancellations, really just more of a timing issue.
Jason Schmidt: Hey, good morning, Jason and thanks for the question I at this time, we arent seeing cancellations, we have seen some customers kind of change one product over to a different product a different.
Jason Schmidt: Let's say powered solution, if you will but no cancellations are really just more of a timing issue.
Nick Grant: Okay, gotcha. And then looking at the life sciences business, some early strong orders in Q4, was that driven by a couple of customers or was it really just broad It was pretty broad based across the our induction heating solutions was a big driver of that. And, you know, and as the team really focuses on opportunities and markets there, given the fall off, they've seen in that front end semi, you know, it's good to see the momentum we're gaining.
Jason Schmidt: Okay Gotcha, and then looking at the life Sciences business. Some really strong orders in Q4 or was that driven by a couple of customers or was it really just broad based.
Jason Schmidt: It was pretty broad based across the Oh, yeah. Our induction heating solutions was a big driver of that and you know and as the team really focuses on opportunities in markets there.
Jason Schmidt: Given the the falloff they've seen in that front end semi you know it's good to see the momentum we're gaining.
Jaeson Schmidt: Okay, and then just the last one from me, and I'll jump back into Q, looking at your annual guidance, when we think about potentially reaching the higher end of that Would that really just be driven by a couple customers or one particular end market or to get to that range as a more just kind of broad based improvement in the demand environment across the board? I mean, on the high end, as we mentioned, we we have seen some large push outs from Q1 that get delivered in the back half. So, you know, there's an element of backlog that we know will be delivered in that back half.
Jason Schmidt: Okay, and then just the last one for me and I'll jump back into queue looking at your annual guidance. When we think about potentially reaching the higher end of that range would that really just be driven by a couple of customers or one particular end market or to get to that range.
Jason Schmidt: Is it more just kind of broad based improvement in the demand environment across the board.
Jason Schmidt: I mean at the high end as we mentioned we have seen some large push aged from Q1 that get delivered in the back half. So there's an element of backlog that we know will be delivered in the back half.
Nick Grant: Other than that, your back end has been showing pockets of improvement. So there's an element of of continuing to see that at this stage. Front end, as we've talked about before, the assumption is that doesn't really pick back up until really twenty twenty six at this point. Broader industrial markets, we do feel challenged right now as people are. trying to understand a little bit more from a tariff perspective, as we talked about, and just general market uncertainty. But we do anticipate as things stabilize a little bit, those markets will improve. as well as the year progresses.
Jason Schmidt: Other than that no backend has been showing pockets of improvement. So there's an element of of continuing to see that at this stage front and as we've talked about before the assumption is that doesn't really pick back up until really 2026 at this point brought.
Jason Schmidt: Our industrial markets, we do feel challenged right now as people are.
Jason Schmidt: Trying to understand a little bit more from a tariff perspective, as we talked about it and just general market uncertainty but.
Jason Schmidt: But we do anticipate as things stabilize a little bit those markets will improve.
Jason Schmidt: As well as the year progresses.
Jaeson Schmidt: Okay, that's helpful. Thanks a lot, guys. Thanks, Jaeson.
Jason Schmidt: Okay. That's helpful. Thanks, a lot guys.
Jason Schmidt: Thanks, Jason.
Jason Schmidt: Thank you. Your next question is coming from Ted Jackson from Northland Securities. Your line is now live.
Edward Jackson: Next question is coming from Ted Jackson from Security's Alive is now Well, Duncan, you just answered my main question, which was on revenue, but I'll ask it a different way.
Ted Jackson: Well Duncan you just answered my main question, which was on revenue, but I'll ask it a different way and.
Edward Jackson: When you go into the 25 Outlook, can you just provide a little color with regards to cadence and by cadence? how you see the Corps progressing by you know, you've kind of talked with regards to, you know, back and and Nick Grant on Thank you. sign in. We will bring you back in in just a few a few You're obviously with our Q1 guide in the two-year numbers.
Ted Jackson: When you go into the 25 outlook can you just provide a little color with regards to cadence and by cadence I mean, you know like how you see the quarter progressing by kind of end market. You know what I mean like you know you've kind of talked with regards to you know back in being semi being stronger in front of it being weaker but you know maybe it's still a little more color and then maybe away.
Ted Jackson: Adding either kind of first half second half that would be my first question.
Ted Jackson: Sure obviously with our Q1 guide in the full year numbers.
Edward Jackson: There's a perspective that quarterly revenues increase during the course of 2025. As a reference with respect to back end in particular, we do see that you what's happening from a general economic kind of perspective. I mean, the other big market that is a little softer that we've talked about and as important as the auto sector, but that is a little bit slower for us.
Ted Jackson: There's a perspective that quarterly revenues increased during the course of 'twenty 'twenty five as I referenced with respect to backend in particular.
Ted Jackson: We do see that.
Ted Jackson: Stronger in the second half given some of the delays we've seen.
Ted Jackson: Shipments being pushed to that that back half.
Ted Jackson: I would say other markets, a little tougher to discern pick.
Ted Jackson: Pick up in Q2 versus back half of the of the year you know as I said I think Q1 was certainly seeing a little bit of uncertainty there across across many of our markets as people just try to get their arms around.
Ted Jackson: Yeah, what's happening from a general economic perspective, I mean, the other big market that.
Ted Jackson: It's a little softer that we've talked about it and as important as the auto the auto sector.
Ted Jackson: That is a little bit slower for us again, a lot of uncertainty across that marketplace, which we do see as resolving and picking up towards the backend of the year.
Edward Jackson: Again, a lot of uncertainty across that marketplace, which we do see as resolving and picking up towards the back end of the year.
Ted Jackson: Okay.
Edward Jackson: And then, with all the uncertainty and, you know, and you know you guys have a strategy of you know looking for acquisitions and stuff so what you know kind of an update on What's going on with regards to the M&A pipeline? How active are you? Make more opportunity for you and also see it give you more caution with regards to pulling the trigger on anything. So that'd be my second Yeah, that's a good question, Ted. And as you know, M&A is an important part of our strategy. And we are constantly working on, you know, building relationships with customers, identifying targets.
Ted Jackson: And then with all the uncertainty and you know.
Ted Jackson: There's things going around you know I mean does this have any impact I know you guys had a strategy of looking for acquisitions and stuff. So, but you know kind of an update on.
Speaker Change: What's going on with regards to the M&A pipeline. How active are you in it, particularly given kind of the current environment I could see part of it being something that might make more opportunity for you and also give you more caution with regards to pulling the trigger on anything so that'd be my second question.
Speaker Change: Yeah, no. It's a good question Ted.
Speaker Change: And as you know M&A is an important part of our strategy and we are constantly.
Speaker Change: Working on a you know building relationships with customers identifying targets and you know the teams are actively doing that out there as noted you know.
Nick Grant: And the teams are actively doing that out there. As noted, you know, certain times of the year, or certain times. Companies are more attractive from a valuation perspective. Other times they're a little too rich for our blood. So I think these kind of times makes it more favorable for us, and we just want to be ready to be able to act if the right strategic opportunity presents itself. So I think we're in a good position. And it's not like we're, you know, pausing M&A. So you're active in the market. It's just, you know, you just.
Speaker Change: Certain times of the year a certain times.
Speaker Change: Companies are more more attractive from a valuation perspective other times there, they're a little too rich for our blood. So I think these kind of times makes it more favorable for us and we just want to be ready to be able to act if the right strategic opportunity.
Speaker Change: Opportunity presents itself. So I think we're in a good position.
Speaker Change: And it's not like we're pausing M&A.
Speaker Change: Mhm.
Speaker Change: We're active in the market. It's just you know you.
Speaker Change: Just plain and simple.
Edward Jackson: And my last thing is, it's really just for Duncan. And so, you know, you you put out some more color and breakdown with regards to your financials, you know, where, at least in the press release, you know, you took your In the presentation, you provided some of that color historically, but you did not provide kind of a gross margin view like you did in the press release. Is there any chance that we could get some historics that are in the structure of what's in the press release, because I'd like to restructure my model around that?
Speaker Change: And then my last thing is.
Speaker Change: It was really just for Dunkin' until you know you you put out some more color and breakdown with regards to your financials, you know where at least in the press release you took your let's call. It you were kind of three segments you know electric.
Speaker Change: Electronic test environment process, and not just gave out the revenue, but gave some cost structures.
Speaker Change: Then in the.
Speaker Change: <unk> presentation, you provided some of that color historically, but did not provide you a kind of a gross margin view like you did in the press release is there any chance that we could get the some historic that are in the.
Structure of what's in the press release, because I'd like to restructure my model around that that's not really a question, but it is a question.
Duncan Gilmour: Not really a question, but it Yeah, I mean, I think we do provide the numbers to do that. We don't really manage our segments at the gross margin level. We're really looking at that divisional operating income profitability, which is why, quite honestly, we're intentionally not. You know, the information is provided. There is a new reporting requirement, actually, in our 10K that requires us to break down those expenses in a little bit more detail. But as I said, we're not really managing our segments to gross margin. We're managing our segments to divisional operating income. So, you know, the elements, the elements, I believe the elements are there.
Speaker Change: Yeah, I mean, I think we do provide the numbers to do that we don't really manage our segments at the gross margin level, but really looking at that divisional operating income profitability, which is why quite honestly, we're intentionally not.
Speaker Change: The information is provided there is a new reporting requirement actually you in our 10-K that requires us to breakdown those expand season, a little bit more detail.
Speaker Change: But as I said, we're not really managing our segments. The gross margin, we're managing our segments to divisional operating income. So you know the elements. The elements I believes the elements are there and we certainly can provide you the elements.
Edward Jackson: And we certainly can provide you the elements. But yeah, I mean, we're not going to publish. I would I understand what you would do. But if I want to flow my model down at those segment levels to get to that operating unit, I just kind of want to kind of I'd need the line items to do it. I think we're going to provide the numbers we're required to present for the segment reporting. Yeah, it is where we is where we are on that. Okay. All right. Well, that was it. That's it for me. Thanks very much for taking the time.
Speaker Change: Yeah.
Speaker Change: I would I understand what you would do but if I wanted to follow my model down at those segment levels to get to that operating unit.
Speaker Change: One you have to kind of meet I'd need to line items to do what I really wouldn't be able to that's all yeah. Yeah. You know I think we're going to provide the numbers were required to we are required to present for the segment reporting them.
Speaker Change: Yes, It is where we is where we are on that.
Speaker Change: Okay, all right well that was it that's it for me thanks very much for taking the questions from me.
Edward Jackson: Yeah, thanks, Ted.
Ted Jackson: Thanks Ted.
Dick Ryan: Next question is coming from Dick Ryan from Oak Ridge Financial. Your line is now open. Thank you.
Speaker Change: Thank you next question is coming from <expletive> Ryan from Oak Ridge Financial Your line is now what.
Ted Jackson: Okay.
Dick Ryan: Most of my questions have been answered, Nick and Duncan, but I have a question on the not a question, just an observation. You've got the investor day coming up where you're going to give a view into 2030. But previously, you had kind of a 27 target out there of whatever was 200 to 250 million. You know, when you look at the flattish Guidance for 25. And you consider, you know, the end markets, whether you've got the right products for the end markets and your competitive position. Is there any reason to back away from that aspirational 27 goal?
Speaker Change: Most of my questions have been answered, Nick and Duncan, but I have a question on the not a question just an observation you've got the investor day, coming up where you're going to give a.
Speaker Change: View into 'twenty 30, but previously you had kind of a 27 target out there of whatever it was $200 million to $250 million.
Speaker Change: You know when you look at the flattish.
Speaker Change: Guidance for 25.
Speaker Change: And you can theater.
Speaker Change: The end markets, whether you've got the right products for the end markets and your competitive position is there any reason to back away from that aspirational twenty-seven goal or is that something that'll be discussed on the investor day.
Nick Grant: Or is that something that will be discussed in the investor Hey, good morning, Dick. And thanks for the question. And absolutely, we'll be discussing that at investor day here in March, later in March, March 26. But in general, yeah, the we are not giving up on our targets that we laid out from our prior strategic plan, we did to try to get this business to, you know, north of 200 million, we absolutely believe there's room in our served markets to do that. We have the ability to, you know, drive the right initiatives and generate the right level of cash from our businesses, which we've seen in certain quarters.
Speaker Change: Hey, good morning, <expletive> and thanks for the question and absolutely we'll be discussing that at an investor day here in March.
Speaker Change: In March March 'twenty, six, but yeah in general yes, the we are not giving up on our targets that we laid out from our prior strategic plan. We did to try to get this business to you know north of 200 million. We absolutely believe there is room in our served market.
Speaker Change: To do that we have the ability to drive.
Speaker Change: Drive the right initiatives and generate the right level of cash from our businesses, which we've seen in certain quarters. So it's a matter of getting some of these markets to cooperate with us and that's really kind of kick the can down the road a little bit here, but yeah, we will get a lot more into it than on the 26 coming up.
Nick Grant: So it's a matter of getting some of these markets to cooperate with us. And that's really kind of kick the can down the road a little bit here.
Nick Grant: But yeah, we'll get a lot more into it and on the 26 coming up.
Nick Grant: Great view. When you look at I mean, other than the tariff uncertainty, but do you think you still have the product and competitive position? You know that you're satisfied with obviously, you're going to be introducing new solutions and systems as we go forward, but anything changing on your competitive landscape? No, nothing at all. We are generating tremendous value add for our customers with our expertise, know-how, solving their challenges out there. So our competitive position remains extremely strong. And as you noted, our innovation to stay a step ahead or two steps ahead of the competition is a key part of our strategy as well.
Speaker Change: Great do you when you look at I mean other than the tariff uncertainty, but do you think you still have the product and competitive position.
Speaker Change: You know that you are.
Speaker Change: Satisfied with obviously, you're going to be introducing new solutions and in systems as we go forward, but anything changing on your competitive landscape at this point.
Speaker Change: No nothing at all we are generating tremendous value add for our customers with our expertise knowhow solving their challenges out there. So our competitive position remains extremely strong and as you noted or innovation.
Speaker Change: Stay as a step ahead or two steps ahead of the competition is a key part of our strategy as well. So yeah no. We we like where we are.
Nick Grant: So yeah, no, we like where we are.
Dick Ryan: Great, thank you. Thanks, Dick. Thank you.
Speaker Change: Great. Thank you.
Speaker Change: Thanks <expletive>.
Shawn Southard: We reached the end of our question and answer session. I'd like to turn the floor back over for any further or closer Thank you, Kevin. We appreciate you joining us today. Thank you for your time, and we welcome the opportunity to answer any further questions you may have.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Thank you Kevin.
Speaker Change: We appreciate you joining us today. Thank you for your time and we welcome the opportunity to answer any further questions. You may have on slide 13. Please note that in addition to the details regarding the replay of this slide we have our investor and analyst strategy briefing listed along with the link to register I hope to see some of you.
Shawn Southard: On slide 13, please note that in addition to the details regarding the replay of this slide, we have our Investor and Analyst Strategy Briefing listed along with the link to register. I hope to see some of you all there. Thanks again for participating and have a great day. Thank you.
Speaker Change: All there thanks again for participating and have a great day.
Operator: That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day.
Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.