inTest Corp (INTT) 2025 Q4 法說會逐字稿

Greetings. Welcome to InTest Corporation's fourth quarter 2025 financial results conference call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that today's conference is being recorded.

At this time I will now turn the conference over to Sanjay Hari of Investor relations. Please go ahead, Sanjay.

Good morning, everyone, and thank you for joining us. With me on the call are Nick Grant, President and Chief Executive Officer, and Duncan Gilmour, Chief Financial Officer and treasurer. The earnings press release was issued this morning, as well as the slides that management will use during this call. Both can be found in the investor relations section of the intest.com website.

Please turn to slide two for a review of the safe harbor statement. During this call, management will 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 results to differ materially from what is stated here today. These risks, uncertainties, and other factors are provided in the earnings release as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at SEC.gov.

Also, as covered in slide three, 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, I will turn the call over to Nick. Good morning Nick.

Good morning, Sanjay, and thank you. Good morning, everyone. Thanks for joining us on our fourth quarter and year in 2025 earnings call. We will begin today's discussion on slide four of the presentation. Our fourth quarter results represent a strong finish to a challenging year. Much of this challenge stemmed from customer hesitation to spend on capital projects driven by tariff and macroeconomic uncertainties, as well as ongoing soft demand in our semi-business.

After seeing some pockets of customers move forward with capital projects in the third quarter, we continue to see strong demand in the fourth quarter as our orders once again exceeded $ 37 million. As a result, we delivered revenue of $ 32.8 million that was above our guidance range, and we ended the year with a healthy year-end backlog of $ 53.9 million, representing a 36% increase over year-end 2024.

I want to personally thank the entire InTest team for their hard work and steadfast dedication. Revenue for the fourth quarter was at the highest quarterly level for the year, which benefited from approximately $ 2 million related to orders that slipped out from the third quarter.

Demonstrating the effectiveness of our diversification strategy, fourth quarter revenue reflected strength in industrial, defense aerospace, and life sciences and markets. In addition, growing market acceptance of our new products introduced over the past several quarters, particularly from Alfamation and from Acculogic, contributed meaningfully to the top-line and progressed us towards our vision 2030 target of generating 25% of revenue from new products.

During the fourth quarter, we benefited from the cost actions taken across the businesses throughout the year. We continued to execute manufacturing efficiency initiatives and further scaled our Malaysia operation to support customers in the region. Our efforts were further complemented by growing customer acceptance of new products that drove incremental revenue and a margin lift. Through effective execution of our diversification strategy, we delivered gross margins of 45.4%. Notably, this was achieved without a significant contribution from our semi-business, historically one of our highest margin end markets.

Revenue diversification and new product innovation are two key pillars of our Vision 2030 growth strategy. With nearly 80% of fourth quarter revenue derived from non-semi end markets and momentum in new product sales contributing meaningfully to revenue and gross margin, we believe our strategy is working.

Market diversification is creating broader order opportunities for us and fertile ground for new product adoption, while our innovative new products are resonating with customers and earning their place in their purchasing decisions. With that context in place, let's go deeper on orders and backlogs for the fouth quarter on slide five.

After deferring spending plans due to tariffs and macroeconomic uncertainties in the first half of the year, we continued to see customers move away from a wait and see mode in the fourth quarter as they recognized that the cost of inaction increasingly outweighed perceived market risk. The momentum in our order book demonstrated demand durability engineered through deliberate and market focus. This strategy enables us to expand our addressable market and diversification into higher growth, less semi-correlated verticals. In fact, over the past five years, our non-semi revenues have grown at approximately a 20% quicker. Which is something we are quite proud of.

Equally important, the momentum in our order book also reflects customer adoption and end markets where we are still in the early stages of penetration. During the fourth quarter we saw continued strength in our life sciences orders as they tripled sequentially, reflecting strong bookings for new Alfamation products. Encouragingly, semi-orders were up about 18% sequentially as some customers began to move forward with plans to provision new test facilities, a trend that builds on the modest order growth recorded between the second and thirrd quarters.

Year over year, Q4 orders were up 22%, an increase of $ 6.8 million versus Q4 2024. This improvement was broad-based with strength in auto EV, life sciences, defense aerospace, and safety security, partially offset by continued softness and semi. On a full year basis, Life Sciences orders were up 137% year over year. Auto EV orders were up 89% and industrial was up 53%.

Touching on our semi-business, year over year orders were down from a year ago period and represented about 25% of total orders this past Q4 compared to 40% for the fourth quarter of 2024. This is a compelling testament to our deliberate market diversification strategy succeeding and lessening our exposure to the cyclicality of the semi-business.

We ended the year with a healthy backlog of $ 53.9 million, up 9% sequentially and 36% year over year. Backlog bottomed in the second quarter of 2025 and has steadily improved since. Approximately 60% of our backlog is expected to shift beyond the first quarter of 2026, providing forward visibility into the year. With a higher and more diversified backlog at the end of 2025, we are in a solid position for recovering growth in 2026. With that, I will turn it over to Duncan to walk through the financial results in detail, starting with revenue on slide six. Duncan, over to you.

Thank you, Nick. Starting on slide six, revenue in Q4 increased $ 6.6 million, or 25%, from $ 26.2 million in Q3 to $ 32.8 million, reflecting a gradual improvement in the capital spending environment and momentum in new product sales, as well as about $ 2 million of revenue that slipped out of Q3. Sales and industrial accounted for $ 3.3 million of the increase, followed by defense aerospace at $ 3.2 million, Life Sciences at $ 2.1 million, and AEV about $ 1 million. Partially offsetting these increases was a $ 2.9 million decline in Semi. Compared to Q4 2024, revenue declined by $ 3.8 million, reflecting lower auto EV, semi and safety security revenue totaling $ 11.7 million that was partially offset by increases in industrial, life sciences and defense aerospace totaling $ 7.9 million.

Although demand trends in 2025 dampened volume and revenue, roughly three quarters of the nearly $ 17 million decline between our 2024 revenue and our 2025 revenue was directly attributable to semiconductor market weakness. The remainder reflected a slower than anticipated capital spending recovery in our non-semiconductor end markets.

Moving to slide seven, gross margin expanded 350 basis points sequentially from 41.9% in Q3 2025 to 45.4% in Q4 2025. This improvement Was driven by volume gains and higher sales of new alformation products which provided a lift to consolidated gross margin as these differentiated innovative solutions carry higher margin profiles relative to our legacy product portfolio. Notably, as Nick previously mentioned, we achieved Q4's gross margin level without a significant contribution from Semi.

On a year over year basis, fourth quarter gross margin expanded by 570 basis points. The expansion was driven by the lapping of a $ 1.6 million one-time acquisition related inventory step up charge that pushed the Q4 2024 margin down 430 basis points, and the remaining 140 basis points. The basis point increase reflected improved operating leverage because of cost reduction and manufacturing efficiency initiatives implemented throughout 2025. It also reflected a favorable product mix shift towards higher marginalformation products.

On a full year basis, normalizing for the 120 basis points full year impact of the inventory step up, full year 2025 gross margin of 43% reflected a modest underlying decline versus the prior year driven primarily by lower revenue volume in our semi end market that reduced our ability to spread fixed manufacturing costs across a larger revenue base. Moving on to slide 8.

Operating expenses for the fourth quarter were $ 13.6 million, an increase of $1.4 million sequentially, driven primarily by higher sales commissions and marketing activity, commensurate with the higher levels of revenue in the quarter. We generated $ 6.6 million in incremental revenue while absorbing only $ 1.4 million in incremental operating expenses, which resulted in a reduction in operating expenses as a percentage of revenue to 41.5%. This reduction is the operating leverage profile we expect to see as revenue scales. And it reinforces our confidence that the cost discipline we have maintained throughout this cycle positions in test to expand margins as market conditions continue to improve.

Fourth quarter, 2025, operating expenses increased $ 1.2 million year over year, rising from $ 12.5 million in Q4 2024 to $ 13.6 million in Q4 2025. The comparison includes a non-recurring $ 800,000 million amortization credit recorded in Q4 2024, tied to the finalization Alfamation purchase accounting. While Q4 2025 absorbed $200,000 million of restructuring charges, stripping out these non-recurring and acquisition related items, underlying operating expenses remained effectively flat year over year.

Slides 9 and 10 collectively illustrate our Q4 profitability. Starting with slide nine, for the fourth quarter, net income was $ 1.2 million. Adjusted EBITA was $ 3.2 million, representing an adjusted EBITA margin of 9.7%. You can see here the improvements in adjusted EBITA for Q4 2025 from the Q3 2025 trough of $ 400,000 million at a 1.5% margin. This demonstrates our operational leverage as revenue recovers. For the full year 2025, net loss was $ 2.5 million. Adjusted EBITT was $ 4 million, representing an adjusted EBITTA margin of 3.5% compared to $ 10.8 million and an 8.3% margin in full year 2024.

On slide 10, on a per share basis, net income was $ 0.10 per diluted share. Adjusted EPS, which adds back tax affected, acquired intangible amortization charges and restructuring charges, was $ 0.16 per diluted share. For the full year of 2025, net loss was $ 0.21 per share. Adjusted net income, which adds back tax affected acquired and tangible amortization charges and restructuring charges, was $ 800,000 million or $0.06 adjusted EPS. This compares to an adjusted EPS of $0.51 in the prior year.

Slide 11 shows our capital structure and cash flow. We reduced debt by $ 1.4 million in Q4 and by $ 7.6 million in 2025. Total debt outstanding at the end of the year was $ 7.5 million. We ended the year with approximately $ 58 million in liquidity, including cash equivalents and restricted cash of $18.1 million. We also maintained full access to our $ 30 million delayed draw term loan facility and our $ 10 million revolver.

Our ability to generate cash and maintain substantial liquidity, even in a challenging macroeconomic environment, positions as well to scale the business and achieve our vision 2030 goals. With respect to the waiver on a term loan entered into last August, we expect to return to full compliance with our original covenant terms by mid year, with no anticipated impact on interest expense or reported profitability.

Turning to slide 12 and our 2026 guidance, we enter the year with a healthy backlog, of which 60% we expect to ship after the first quarter. Combined with positive indications of a gradual broadening recovery in capital spending that began to take shape in the third and fourth quarters of 2025, we expect 2026 will be a year of return and growth. As a result, we are comfortable resuming our practice of offering guidance for the full year 2026 as well as the first quarter of the year.

Against this backdrop, strong backlog, improving demand, a leaner cost structure, and growing new product contributions, we are well positioned for profitable growth throughout 2026. For the first quarter of 2026, we project revenue of $ 31 million to $ 33 million, gross margin of approximately 44%. This is a step down from the 45.4% we delivered in Q4, primarily reflecting expected Q1 product and customer mix versus Q4's particularly favorable, Alfamation contribution.

Operating expenses of 13.3 to 13.7, Q1 operating expenses reflect the typical first quarter annual compensation resets, and amortization of $ 800,000 million. Before walking through the specifics of our full year guidance, I note that our guidance does not contemplate any material impact, positive or negative, from changes in tariff policy or the broader geopolitical environment. For the full year 2026, we expect revenue of $ 125 million to $ 130 million.

At the midpoint, this represents growth of approximately 12% over 2025's $ 113.8 million. This guidance reflects the diversified demand, particularly in industrial, aerospace defense, auto EV, and life sciences, supported by our growing backlog, but does not contemplate a meaningful rebound in semi sales. Gross margin of approximately 45%. This reflects the combination of higher volume, the capture of continued manufacturing efficiency, and the expanding contribution of new higher margin products.

And operating expenses of $ 53 million to $ 55 million reflecting higher variable selling costs. Amortization of $2.6 million and interest expense of approximately $ 300,000 million with an effective tax rate of approximately 18%. We expect amortization expenses to be higher in the first half of the year than in the second half as certain intangible assets reach the end of their amortization lives. And finally, we expect capital expenditures of 1% to 2% of revenue consistent with our historical investment levels. With that, if you turn to slide 13, I will now turn the call back over to Nick.

Thanks, Duncan. In summary, the momentum we are seeing across new product adoption and market diversification and geographic reach is the direct result of a deliberate strategy and disciplined execution. Our non-semiconductor business has grown meaningfully, improving InTest long-term earnings profile with less dependency on semicyclicality.

The establishment of our Malaysia manufacturing hub in 2023 and expanded European footprint due to the acquisition of Alfamation in 2024 positions us to better serve customers. They also enable us to deepen relationships in these regions that represent significant long-term opportunities. In addition, our operational excellence initiatives, which are a contributor to our margin improvement story, give us confidence that as conditions improve and we scale the business, we will realize greater operating leverage inherent in our business model.

New product revenue contribution is trending in the right direction, reinforcing our confidence that we are on pace towards our vision 2030 goal of generating 25% of revenue from new product sales. In Southeast Asia, in Europe, and in the US, a local presence enables the engineering collaboration and customer intimacy that drives higher value long cycle relationships, and increasingly it is our new products themselves that are opening doors to customers who are discovering us for the first time and to others who are rediscovering and test.

We enter 2026 well positioned for diversified growth as capital spending strengthens with an expanding portfolio of highly valued engineered solutions, a growing in-region presence across key geographies, and a strong balance sheet. We are poised to translate the structural changes we have made to InTest over the past 2 years into sustainable, profitable growth for our shareholders. With that operator, please open the call for questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instruction).

Max Michaelis, Lake Street Capital Markets. Please receive your questions.

Hey guys, congratulations on the good quarter in the solid guide for 2026. first question is just around the semis space here. I was hoping you can elaborate a little bit. Talked about modest growth picking up in the back half of 2026. A lot of the companies, that following have been talking about sort of a strong. Order rebound in the back half of 2026 is your language in the press release sort of just a case of you guys being ultra conservative, or, I mean, get what else can you guys kind of provide us around the semi-space.

Yeah, hey, Max, and, great to hear from you here. Yeah, as we laid out, our guidance we provided there really is based on just modest recovery in semi, which, yeah, could be conservative. Semi, certainly has come back strong, historically and, if we look at trends and what have you, and I believe we're well positioned to capture that, when if it does happen again. But we just wanted to, make sure we're providing the guidance we are confident we're able to achieve.

Okay. And then maybe we go back to last quarter you talked about the 2027 automotive program. How is that progressing, as we enter 2026 here? And then can you kind of touch on how we should expect auto orders to trend throughout the year.

Yeah. So, order been a nice bright spot on our order pattern here the last, couple quarters, we really did see customers start moving forward with some 2027 model year programs, making the investments in Q3. They continued to kick off more, of those, capacity. Additions, in Q4 there, so we believe well positioned from an auto perspective, with Alfamation to support these new, model year programs and, across the board I would say auto demand has not taken off or what have you inventories have been worked down, but. I think we are well positioned now that as as that demand comes back, these new model programs come out and create greater demand around the new tech and the cars and everything else, that that is only going to complement this kind of wave of build out that we are seeing right now.

Great. Last one from me guys, life sciences has really taken off here. I mean, is there anything else you can share? I mean, pockets of strength that you're seeing in life sciences that is really driving the solid growth and orders and revenue?

Yeah, no, life science is a bright spot for sure, and this is really a concentrated effort we have made to go after MedTech, the med tech space, testing, various, technology in this area, and, it is really broader across all the businesses had really nice success with, alfamation, diversifying them in the med tech space with some glucometer, electronic testing. We did a press release on that, in the second half of last year and, continue to see good momentum there. We can winning applications at our archaeologic group around MedTech and, even in process technology we are Gaining applications there around, Induction heating and imaging in in the med tech area. So, really pleased with the progress. It is one of the areas that we highlighted is, still a low penetration area for us, so we think it'll be a good growth avenue for us.

Alrighty thanks Guys.

Thanks, Max.

Our next questions Dick Ryan, Oak Ridge. Please receive with your questions.

Thank you and also a good job and a strong finish, guys.

Thanks, Dick.

I have a, I want to go back to the semi side if we can talk a little bit about the back end and your front end and maybe it is focuses more on the positioning, up and down the line, semi cap is talking about a strong WFE for this year. Your back end, typically is kind of lag that to as back end test. Is a little bit out of sync with what happens on the front end, but nonetheless, you brought automation into the back end and how do you think you are positioned on your back end test, with customers or with some of the new products you have rolled out the automation.

Yeah. We are very well positioned in that back end test space not only from our traditional EMS business but also on our thermal, solutions supporting, testing of chips and, electronics back there. So yeah, you are right, a lot of companies are out there talking about it and we are well positioned to capture that growth as it materializes out there. And the new products we have been launching really has broadened our customer base, win back some competitive accounts, so I believe, when that comes back we are in a better position to, benefit from the growth, as the investments in these, testing spaces, take off.

Okay, and probably more importantly I am more interested maybe on the front end, the comments coming out of the silicon carbide, space is. Pretty encouraging, one of the players saying that after the downfall they are looking for a ramp in 2026 with getting back to the 2024 levels by 2027. I mean you guys generated, a lot of revenue in that silicon carbide space in the. Payday 2023, and 2024, what, how are you positioned there and would you also, kind of echo those comments that you are may be seeing some growth come back in, not necessarily 2026 but 2027 and beyond.

Yeah, we are very well positioned in that space, as we are really serving a number of players in the silicon carbide, gallium nitride. Space not only on the crystal growth but on the, epitaxi side of things as well and as those we have been talking about it as these technologies get adopted into new applications, and creates more demand as, auto comes back, demand for autos, it is only going to. Drive the need for additional capacity down the road and we are very staying very close to our customers and ready to support them as as they needed going forward here and you are exactly right it was a very meaningful part of revenue growth that we achieved there and we have the capacity to to scale right up to support them at those levels and beyond.

Mm, would you think any of that comes in this year or is that more of a 2027 story?

I think if we do see it, it will be more in the second half of this year starting to come back, and, but 2027 should be, a more meaningful impact on that. Duncan, your thoughts on that?

No, agreed, as we said, modest increases in semi, big 10, the front end side has been slow. We think the outlook looks great, but we are really not banking on a great deal in 2026.

Oh, that is encouraging. Good. All right, thanks guys.

Thanks, Dick.

The next question is in the line of Ted Jackson, Northland Securities. Please receive your questions.

Hey guys, congrats on the quarter.

Thanks, Ted. .

So, Nick Duncan, my first question, I want to, jump over on gross margins and guidance and kind of, just kind of thinking it through. So you put up some, you showed improving margin as you have been putting a lot of efficiencies in your business and you are clearly scaling and it is non-semi semi and Cy is your higher margin business and so, like you look at your revenue. In prior periods, in some historical periods, when you were hitting some of these revenue targets, your gross margin was actually, the, almost close to 50%. And so my first question is the lack of semi keeping you from getting to that, and then behind that is, given that the margin is probably, substantially better than it might have been, for the non-semi business, if Cindy does kick around and turn, could we be seeing your margins through that next cycle, not only, retrace back to those, kind of close to 50% margin levels but maybe even exceeded.

So I think a lot of your observations are correct. We had a nice strong Q4 from a margin perspective, some favorable product mix within some of our businesses, so certain product lines within alfamation in particular. The semi contribution was low, as we have indicated, yet we still had a nice gross margin quarter. We do not have, as we said, tremendous growth baked into semi. Our back end semi in particular is where we see higher margins, command higher margins. So it is correct to assert that if that comes back in a strong fashion at some point, then we would expect margin to tick up. Whether it would tick up to the 50s, I think some of those 50s were when the business was much less diversified and much more dependent upon that business and smaller, but we would certainly expect positive margin contribution as and when back in semi in particular bounces back up.

So, I mean, in summary, I would say almost yes, and yes to what you have said about to 50 would be probably spectacular. I am not going to say unachievable, but would require a high percentage of that back in semi contribution.

Okay, and then, going kind of into guides and I am going to keep with this theme is, the guides you provided shows some, nice solid year over year growth. Can you talk a bit about the cadence? Is it the kind of thing where we'll see, you have given first quarter guidance that we will see, continued.

Sequential improvement as we roll through the year, will there be any type of seasonality within it and then going back into the revenue guidance, if it is going to be building over the year and then the back half of the year, it's going to have more contribution from semi, should we be thinking of, a bit more of a step up in terms of marginal improvement in the second half of 2026 vis a vis the first half.

Yes. So, we are cautiously optimistic about 2026, as we have mentioned, have not built in a tremendous amount of semi upside, and I think that is reflected in In the guide vis a vis what we saw in Q4, what we are laying out for Q for Q1, Q4 was, if we back out the $ 2 million of delayed shipments, we did see growth in Q4 over Q3. We are projecting a similar quarter in Q1, a little bit of growth, and I would say we are expecting, We are expecting Cautious sequential growth throughout the year with respect to our cautiously optimistic guide, if that is the best way to put it. As we have mentioned a couple of times, if there was a really strong recovery in semi in particular, we would expect to see the benefits of that. Just a reminder, we are a back end semi business squarely in the analog mix signal space, which is an area that, I think a lot of people are cautiously optimistic about and seeing some green shoots of recovery, but we haven't seen the turn yet.

Okay, next question. Just, we are well into the first quarter. You have had two quarters in a row now, really nice bookings. Can you give us a little color in terms of what you are seeing with regards to bookings activity, quarter to date, and, so, both in terms of momentum and maybe in terms of sector.

Yeah, so, as noted, we have had really two strong, quarters of bookings, and. I would say really fueled by our automotive exposure at alfamation on these 2027 model year programs. Our funnel overall funnel is healthy, and. But I would expect, Alpha Nation's order rate to kind of moderate back a little bit. They have been running at, $ 1,213 million, the last two quarters. That business was, in the, $ 25 million when we bought it, we're kind of run right there. So really strong quarters, I think, they are going to continue to see. Nice booking levels but more traditional with for that kind of business. So we also in Q1 have a little bit of the Lunar New Year, kind of impact on some activities out of Asia there but slower. But, for the most part, the funnels are healthy and the opportunities are there. If customers move forward with spending as we believe that they will here, orders, we are well positioned to deliver on the, on the year we've laid out.

Okay, and then my last question is, you, you have come through a rough patch, and it is just more because I have seen it with, several companies I cover because it seems like everybody's been going through a rough patch. When you have laid out your guidance for OX, I mean, are you, I assume you guys have really dialed back on a lot of incentive comp over the last year. Are you, factoring in your guidance, you know. Kind of a reinstatement of, kind of, basically more variable comp and incentive, or is there, the chance that if you, kind of roll in and say you do better than this, op optimistic conservative guidance that we would see an expense, excuse me, expense structure adjustment as you have to layer in that kind of stuff. That's my last question.

Yes, we have, and obviously if we did a lot better than laid out, then there would be an operating expense impact from an incentive comp standpoint, reflective of the dynamic you are talking about. But yes, we have factored in the incentive comp side of the numbers that we have laid out with respect to the spending guidelines.

Okay. All right, great. Thanks for the time and, congrats on the quarter and looking forward to 2026.

Same here, Ted.

Thanks. At this time, if you would like to ask a question, you may press star one from your telephone keypad. Thank you. At this time I will turn the floor back to Nick for closing comments.

Thank you, Rob. We appreciate everyone joining us today. Thank you for your time and we welcome the opportunity to answer any additional questions you may have. Please reach out to our investor relations team to coordinate. On slide 14, please note the details regarding the replay of this call as well as our upcoming investor event schedule. We will publicize additional conference attendance as they arise via press release advisories and on our website. I want to thank everyone again for participating today and I wish you all a great day. Thanks everyone.

Thank you. This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation.