InTest Corporation (INTT) Earnings Call Transcript & Summary

[Presentation] Good morning, and welcome to inTEST Corporation's First Investor and Analyst Day. We're happy to have both the folks in the room here with us as well as those of you that are listening via the webcast. I'm Deborah Pawlowski, Investor Relations for inTEST. Let me start by talking to you about the safe harbor statement. As you are aware, we may make some forward-looking statements during this presentation as well as during the Q&A. These statements are covered by the Private Securities Litigation Reform -- I'm not touching anything, the slides are flipping. Sorry about that. You should be aware that we may make some forward-looking statements during the presentation as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided here as well as with other documents filed with the Securities and Exchange Commission. This presentation can be found on our website or at sec.gov. We will also discuss some non-GAAP financial measures -- sorry about the technical difficulties. Again, I apologize for the technical difficulties. We will also discuss some non-GAAP financial measures during our presentation today, if we can get it going. We believe these will be useful in evaluating our performance. And you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of our non-GAAP measures with comparable GAAP measures in the slides that are posted here on our website. I'll pause for a moment, and you can read this now. We have a very full day here for us. We've got the executive management team, each presenting their results, successes for year 1 of our 5-point strategy, and we will hold our questions until the end of the presentation, but we've allowed ample time for lots of questions at the end. I should mention that if you're listening via the webcast, you can submit questions at any time during the presentation, and we'll get to those at the end as well. Here's the leadership team that are all here present in the room today. Most of you are familiar with Nick Grant, our President and CEO; and Duncan Gilmour, our Chief Financial Officer. Also joining us are Rich Rogoff who joined us just last year -- yes, it was just last year as our Vice President of Corporate Development; Meghan Blount, who is with us here today, has been with the company all of 5 weeks now. She's our Vice President of Human Resources. And then we have our 3 division heads. We did announce this morning via press release that learned more about that during the presentations. These are Scott Nolen, who is the President of Process Technologies, Joe McManus, who is the Division President of Electronic Test; and Gregory Martel, who is the Vice President, GM of Environmental Technologies. So we welcome you again here today. And now maybe we can get started without any problems. So let me turn it over to Nick.

All right. Good morning, everyone, and thanks, Deb. Really appreciate your participation today. We're excited to share with you the journey that we embarked on here at inTEST. A little bit about my background. I joined the company 18 months ago as the CEO and actually the first externally hired CEO into this business with the intention of coming in and driving change into this organization. And I've had a successful career, leading multiple businesses, divisions, world areas for a number of large industrial conglomerates, including ABB, AMETEK and Emerson throughout my career and really excited to take what I've learned over the past 20-some odd years in leadership roles there and apply it to inTEST. But I'm even more excited to share with you the journey we're on here, and we've really made some great progress in year 1, but we've got a long way to go. So one of the first things I did working with the management team here was we got together and we said we need to find a purpose for inTEST. What are we striving to become, and collectively and rather quickly. We settled in on the innovative test and process solutions technology company and striving to become the supplier of choice out there, meaning that you're one of the market leaders in there. They're the ones they think of when they need your products and solutions. And so that's our goal. That's our objective. And we said then, how are we going to get there? And it's really about leveraging our expertise, our know-how, our industry knowledge. And you're going to hear a lot about that across our businesses. We've got hundreds of years of engineering know-how across our businesses. And it's about applying that in a way that allows us to differentiate, to innovate and sell these solutions, but not only on a small scale, but across a wide variety of the market. So that's where we're going. And we -- over the past 18 months, we made some tremendous progress. If anyone's been following inTEST for quite some time, I really believe things are changed. It's not the company you've come to know. We have a robust 5-point strategy in place, which you're going to hear a whole lot about today, as well as the company is diversified, serving the globe as well as a number of industries -- targeted growth industries out there. We've got consistent communication, wide open communication up and down open-door policies now and really everyone is aligned on what we're trying to achieve. So we've got an energized workforce. And we're shifting from this more conservative sleepy risk-averse type company to one more results-driven aggressive entrepreneurial out there and really pleased with the progress we made this past year. And I was also coming into the company, very happy to know that we aren't starting from scratch. I looked at this and really assessed where was I going to be coming in and trying to drive this transformation from and really excited about the technologies we have. The -- all 3 businesses, their approach is really highly engineered, customer-driven solutions and which -- they've built decades long relationships with customers that -- blue chip customers that we can build off of. As I mentioned, we're diversified, the prior management team really has moved, I would say, over the past couple of decades to try to diversify this business outside of just semi. So we are serving a wide variety of industries today. And we are a global company. We had about half of our sales go into Asia last year, about 1/3 into the Americas and the balance into Europe, Middle East, Africa. So really a great foundation and platform to really build our forward vision -- and that's all about creating long-term value for our shareholders and our employees. So how do we do that? This is our recipe here. And it's -- again, it starts with that foundation I just described. We build off of that. We make sure we've got the right leadership in place. And I've made some really good progress this past year, upgrading talent, bringing in some individuals that can execute our strategies as well as getting the right individuals in the company in the right roles that they belong in that help us deliver where we want to go. We launched our 5-point strategy, which I've been talking about on the earnings call since the beginning of last year, these earnings calls and giving you a little more insight, but we're going to go to a lot deeper into it today. We've got a new focus on acquisitions, it was something the company used to do every 4, 5 years. We've taken a very aggressive approach to filling up our portfolio gaps adding new technologies and expanding into new markets. And we've got the strong balance sheet to do that. And excited to announce, as Deb alluded to, the -- we're reorganizing the company to really better position us for the growth ahead. And I'm going to talk more about that in just a minute. But as we all know, it always comes down to people. And if you don't have the right people, an energized team and aligned team that is committed to where you want to go, you won't get there. And I got to say, over this past 18 months really pleased with the organization, the cultural change I've seen and the support from the bottom to the top across the organization. And I think that really started to show in our results this past year. The commitments there. And if you look at nearly every measure or nearly all measures out there that 2021 indicates we're definitely moving in the right direction. We've got a long ways to go, but our recipe is working. We've made some good market share gains, some innovation, which you're going to hear quite a bit about from our division leaders today about their activities in their businesses. We're also diversifying and getting into new markets to expand our served markets out there. And we did have some overall tailwinds, which allowed us to accelerate some of our activities into the first year. So really, really happy. And at the end of the year, we added 3 companies into -- and in the fourth quarter there that now positions us well heading into 2022 and beyond. So this new organization structure, as you guys have known, inTEST has reported into 2 segments, Thermal and EMS for quite some time. With the acquisitions we completed last year with the direction we're going, the Thermal and EMS -- trying to manage the business in those 2 segments is not what we want to do, is not appropriate and it's not going to deliver the results. So we're moving to a new organization structure with around 3 technology divisions. First being the Electronic Test division, will be headed -- which is headed by Joe McManus, who's going to speak shortly. And this is where we'll house our semiconductor test equipment or EMS products as well as our new flying probe technology and in-circuit testers from Acculogic that we acquired. The second is the Environmental Test division, and this is headed by Greg Martel. And this is where our thermal test and storage solutions will reside today, which includes our -- the Z-Sciences acquisition that we folded into our ITS business last year. And last but not least, is our Process Technologies division, which will house our induction heating solutions as well as video imaging video capture solutions we picked up with our Videology. And heading that will be Scott Nolen. And you'll hear from all 3 of these guys today, but I really believe technology aligned divisions are where we want to go, and there's a lot of benefits for doing that. I'm a strong believer that having focus drives accountability and results. So we have leaders overseeing these businesses that can leverage their resources, can drive common practices, processes, leverage systems and really deliver the overall results we're trying to gain. More importantly, they can bundle solutions that will give us broader solutions for customers there. The bundle technologies like process, induction heating and imaging, flying probes and interface testing. So we've got that now sharing of technology promoting collaborations across these divisions and really believe this is the right platform for us to go forward. And if you look at it, we really do, based on the revenues this past year have about a 3-legged stool that we're building from here. It's almost 1/3, 1/3, 1/3 with these 3 divisions. And we'll look to scale them appropriately over time. One area that we made a lot of progress this past year was expanding our served markets. Not only going about it organically by innovating new products to penetrate adjacent spaces but also going after the new markets and getting a position in these markets with our acquisitions and new technologies. When I started with the company, our served market was roughly $600 million. And we -- over time, we have positioned ourselves as the market leaders in these segments. However, now with these acquisitions with our new technology expansions there, we're serving over $2 billion served market that we can grow in, which provides ample opportunity for each division to really accelerate growth out there. And so excited about our new playground. Not only the size of it is the makeup of it. We are serving diverse markets, some great industries and a lot of people have come to think of inTEST as a semiconductor company, and that's where the heritage was, that's where it started. But when I joined in 2020, it was about 50-50 semi non-semi markets. And going forward, because of our growth, our investments to diversify the company, semi will remain main focus area for us, and we'll continue to invest in semi. It's just that our other markets are anticipated to grow faster than semi, and we believe being in the right application segments like electric vehicles battery testing in cannabis, in medical -- medical cold chain technologies, all of that's going to drive faster growth in our non-semi segments. So, how do we get to where we want to go? And it's really about having that road map, the execution plan, and that's our 5-point strategy. And the strategy is all about the customer. It's about how do we better serve the customer? And that's by driving more innovative and differentiated solutions that solves their challenges. It's about expanding our global presence to be present with the customer, be able to be on site to help them along the way. It's about having the right service and support out there after market, which to make sure that we can drive repeat business with these customers and their complete customer satisfaction. And ultimately though, it comes down to the talent and the culture, do we have the right people in the right roles are we the organization's culture, one that the good people that come in, want to stay. So that's something that we'll dive into a little bit more. But it's an area that I've been focusing on. And then last but not least, is about strategic acquisitions and partnerships and not only driving the organic piece through these other activities, and that it's about building out our portfolios, about entering new markets. And partnering with companies that expand our solutions. So really pleased with the progress we made this past year on all of these strategies, and we're going to dive into each 1 a little bit deeper. Starting with global and market expansion. So this, as I indicated, is about serving the globe better. While we're a global company with half of our revenues in Asia, almost half in Asia and about a quarter in Europe, we could do it much better. We're -- we've got gaps. We've got logistic challenges in that. So we've got to look at how do we position ourselves in our end markets appropriately. How do we ensure we've got the right coverage from a sales front-end perspective in the markets to capture the growth we want to go. And so it's all about making these direct investments in the front end the sales resources, it's about developing channel partners. It's executing global supply agreements with our key accounts. It's about making inTEST more known, first-thought out there, so improving our branding in that. And we've made some really good progress this first year with on this particular part of our strategy. A number of key investments you'll hear from the division leaders relative to the some key investments they made on the front end. They've expanded their channel partners across the globe where they had gaps. We're entering new markets with technology, you'll hear some more about that. And all 3 have really driven OEM programs as an area that not only our direct sales guys will be out there driving in that. But once we get embedded with these OEMs and system integrators we're able to leverage their sales force to pull our solutions along in theirs. So really strong progress this past year that will pay off for the years to come. And as I mentioned, it's about improving our footprint out there. So we're closer to customers, which we did. And you'll hear more about from the division leaders. Next, innovation and differentiation. This one's near and dear to me being a physicist by undergraduate here and really, again, focusing on the customer. But it's about driving the -- that solution that others can't out there and leveraging our industry know-how. So really pleased with the progress we're making in this area, areas we've invested in more engineering resources across the organization. We've launched a number of new products that really do address market needs. And that's the opportunity here is these inTEST's approach in the past, highly valued customer solutions is again making it more applicable within the market. And this is an area that we're putting a lot of focus on developing road maps that are market driven and again, more to come on that. But again, great progress in year 1. Our EKOHEAT -- compact EKOHEAT and workhead solutions we launched last year, really did address one of the top pain points for customers out there. The team did a great job identifying what do customers really need and they wanted more floor space availability instead of having large equipment sitting out there, they needed the smaller footprints. And so these new workheads are half the size or less in some cases than in our prior products. So great job by the induction heating team there. Our environmental tech solutions around the cannabis chillers. We've now got a platform of 5 different offerings for this market. It really gives us a stronger position, allows us to drive more standardization and -- rather than just picking off one customer at a time there. Our next-gen ECO stream is really something you'll hear about that fills a gap in our portfolio, but also a market need out there. And then thinking about our electronic test, the work we're driving to try to lead automation on the test floor, with the manipulators -- the automated manipulators that we've launched as well as entering new markets with our high-powered interface solutions, which we call ECO Lightning out there. So great work. You're going to hear more about them about excellent progress in year 1 on this part of our strategy. Next, service and support. I talked about this. It's about getting better coverage. It's about being with the customer through the life cycle. It's about helping them to keep their plants up and running and good progress on this front. Although I would admit that COVID did have a kind of a slow start, if you will. We couldn't get out and do some of the on-site initiatives on the service side of things that we wanted to do. So focus more on developing these remote solutions and capabilities which again will continue to build upon going forward. You'll hear about some master service agreements that we're driving with key accounts that have a large installed base and then embedding engineers on-site to better support them and keep them up and running. And just about expanding our service offerings that we have out there. which we really did a nice gain here with the acquisition of Acculogic last year as a portion of their revenue is driven by test programming services that they offer to customers to help them develop their test programs, their solutions, customized testing, if you will, and we provide that as a service out there. And really, about 20% of their business when we acquired them. So excited where service is heading, although, as I said, not quite as much progress as I would like on this 1 due to the COVID pandemic. One that I've spent a lot of time this past year since joining the company is really about getting that right culture and ensuring we have the right talent, the right people in the right seats on the bus. And -- what we wanted to make it clear is change starts at the top, and we got to drive it, and we have to have the right people driving it. We have to move from this sleepy conservative company to more of a results-driven account holding people accountable, which we've been driving across that. And one area that we've put a lot of emphasis on this past year was diversity. And I'm really pleased with the progress we did this past year, and I'll touch on that in just a minute. And making sure we've got aligned incentives. This is where we want to go and make sure people are rewarded out there. So we did a lot this past year. This is just some of them. I implemented actually, in Q4, when I started, the first company-wide town hall meaning across all of inTEST, which hadn't been done in the past. So we rolled out our strategy. We communicated that in our first town hall -- first quarter town hall. And then each hall, we're updating our progress. So everyone knows where we're going, everyone's clear about this. We also did our first-ever employee engagement survey out there where we've got a little deeper insight. Are they truly committed to where we're going and are they satisfied with the direction? And really pleased about the participation and the feedback we got out of that. We put a new performance management system, and this is about driving that accountability, driving rewards for meeting goals and objectives. We -- on the diversity hiring, I mentioned we did good progress of our -- 2/3 of our hires that we did across the entire company last year were diverse candidates. So great progress there. And then thanks to our shareholders, we implemented an employee stock purchase plan. So they all -- everyone can benefit as the company drives success out there. So really pleased to have that in place. And the last one I'll touch on is really the addition of senior talent -- strong senior talent additions into the company. And as you guys know there's a number of new leaders into the business. At least I have Duncan join us in mid last year. Joe McManus, who is heading up our electronic test came at the beginning of last year. Rich Rogoff joined at the end of last year as our M&A leader and corporate development leader and -- just most recently, Meghan Blount has joined the company to head up our corporate development -- our corporate HR activities. So excited about the new team in place and I really believe we've got some of the best talent out there and are ready to -- poised to execute going forward. Last but not least is the strategic acquisition and partnerships, and this is something I have a passion for throughout my career. I have been driving it at Emerson and AMETEK. I didn't get the opportunity of ABB to do much on the acquisition front. But having done over a dozen deals, the importance of adding technologies, penetrating new markets, building out your portfolios is just crucial. And something the company did, I'd say, opportunistically in the past and has a very different approach going forward. As you can see, we were quite successful in our year 1 with the 3 deals we completed in the fourth quarter. And you might ask why in the fourth quarter, we started working these opportunities well early in the year or even some the start of 2020 -- at the end of 2020, and it just takes time. And you got to have a willing seller, you got to have the right price. And I'm really pleased about the -- all 3 of these deals that we got done and like -- really pleased with the valuations that we got them at. The first one we completed was the Z-Sciences Corporation, which it was really about penetrating new markets but allowing us to leverage our ultra-cold technology -- temperature technology, ultra low-temperature tech, at minus ADC that we were doing on the test side, but we weren't playing over on the storage side. So they opened that up for us, and we also brought -- with that was able to bring in some talent into the company that positions us well. Videology, the -- it was about expanding our process technology solutions and opening up image capture, which is again, an application that's growing so rapidly out there. I mean, everything is getting some camera, some image on it and that. So but it also aligns with our existing portfolio. What you'll hear from Joe about our Acculogic team with their systems that they use for flying probes. They have cameras that they're trying to embed now with these Videology solutions. So great opportunity to drive more collaboration out there. But really opened up a $1 billion served market opportunity more than $1 billion, but it's a large space that we can go after and we intend to go after. And then Acculogic was the 1 we completed at the end of the year on 21st of December, and this was all about expanding our electronic test capabilities and moving beyond semi solutions and now into integrated circuits that are serving a wide variety of industries and you're going to see more about that in just a minute with Joe's section here. So before I turn it over to Joe, let me just kind of summarize here where we are. We've got a strong foundation that we're building from. We get highly valued solutions, a strong blue chip base of customers. The business is absolutely not broken. It makes -- it generates strong margins and cash flow on that. But with the transformational pillars we've put in place, the new leadership team, our 5-point strategy, our recent acquisitions, this new organization structure that really around technology divisions that drives our focus and growth going forward. And we believe we can take this business to -- between $200 million and $220 million -- $200 million and $250 million by 2025. That's our objective. We've got a clear plan behind that, that we're executing on. And as we drive this top line growth, which you'll learn more about in Duncan's section here, our expectations is to maintain strong margins and cash flows throughout. So excited about the journey we're on. And with that, I'll play a short video and then we would kind of give you more perspective of our 3 divisions, and then Joe is going to get up, followed by Greg and then Scott on each of the divisions. Thank you. [Presentation]

Good morning. Thank you, Nick. Thank you all for being here to learn more about inTEST. I am Joe McManus, the President of inTEST Electronic Test division. I joined the company just about 13 months ago, after spending 4 years at CECO Environmental leading their sales and marketing for the Fluid Handling division. Before that, I spent 20 years at a company called Akrion Systems that made capital equipment for the semiconductor industry. I'm really excited to be part of inTEST and working with so many of the customers that I got to work with through that -- throughout my career. I was fortunate to join inTEST soon after the launch of the strategic plan and to be involved with making the investments needed to get our growth into high gear. We had an incredible first year. I inhered an amazing team -- we executed well on the 5-point plan, and we delivered a year of amazing growth. At the end of 2021, we acquired the Acculogic business, which had a great group of people with a DNA that was similar to that of the EMS business. I'm honored to be leading a fantastic team whose knowledge and passion for the business has been very excited about what we can accomplish together. Electronic Test was the largest division within inTEST last year with 38% of the company sales. 80% of our sales went to Asia. We have manufacturing in New Jersey, outside of Toronto in Canada and in Germany. We have over 90 employees, approximately 30 of which are engineers. The #1 reason customers work with us is our engineers. They are a huge part of the DNA that I mentioned earlier. Our engineers are known for being the ones you want to work with to help you solve your toughest electronic test challenges. We have close ties to our customers through our sales, service and application engineers, both direct and through our channel partners. Our strong responsiveness, knowledge, applications and understanding of customers' challenges are critical not only for ensuring that our customers are successful today, but that we are the ones they want to work with and partner to meet their future needs. Historically, the division was 100% back end semi. Since joining, we've grown that part of the business, but we've really broadened our reach beyond that with the Acculogic acquisition. We now have exposure to a large variety of diverse markets, including the rapidly growing EV battery market. This diversification of our revenue stream can be seen that in 2022, we expect 30% of our business to come from new markets. And by 2025, it's going to be 40%. During this period, we expect all markets to grow, but we expect outsized growth in the EV battery and the industrial markets. As I touched on earlier, our engineers are what sets us apart. We have the expertise that is unmatched amongst our competitors. Engineers and our customers seek out our engineers to work with on their most challenging issues. In many cases, they've been working together for decades. An engineer at one of our major European customers reached out to our Director of Engineering about 1.5 years ago as they were putting in a new tester for RF and automotive products. They had worked together many times in the past, and they were having issues. After a development process and a successful implementation at this customer, we approached 2 more customers. We were successful with them, and then we approached the OEM that was supplying the tester. Now our interface is the tester -- is the interface that the OEM goes to market with. That's how our engineers working with our customers, get us to grow our market. So the core of the business has historically been semiconductor tests. Our semiconductor solutions are enabling testers from companies such as Teradyne and National Instruments to work with probers from companies like Tel and Acrotech, probe cards from FormFactor and Technoprobe and handlers from Advantest and Cohu. We do this with manipulators that move the tester into place. In 2020, we launched industry's first fully automated manipulator. This automation is helping to improve the safety and the efficiency of the test floor. Our sales with this product are growing year-over-year. We provide docking solutions that create the precise and repeatable mechanical connections between the tester and the peripheral equipment and the electrical interface between the tester and the device under test. Why is this important? Well, if you look at a device that's probably in your pocket or your hand or right in front of you or your phone, you're going to see that there's dozens of different chips in there. They are made by different manufacturers with different processes. They have to be tested right to make sure it works when you pick up your phone. We've also been hearing a lot in the market about the revolutionary changes in power management. This is an area that we're very focused on with our interface products for high power management -- for high-power, high-current applications like batteries. In this market, we are integrating our solutions with a major tester OEM so that every time they sell one of their testers for this application, the customer will be purchasing an electronic test interface designed for high-voltage connections. With the Acculogic acquisition, we acquired the Scorpion flying probe system, which is focused on the printed circuit board market. The Scorpion system, its flexibility is what sets it apart from the competition. The number of probes on the top and the bottom of the Board, along with the variable angles that it moves at provides it the best board coverage in the industry. Additionally, our systems through board programming and use a vision system for LED validation. These capabilities make the system great for both product development and high-volume production. Systems can be integrated with factory automation, systems like conveyors. We're also a leader in the adoption of the latest IPC communication, factory communication and control standards. We're partnering with a Fortune 100 company in the defense industry in that effort, we expect this leadership position and the capability that comes with it to open up additional customers to us. Flying probe systems are used in the semiconductor industry to test load boards. Acculogic has had success with a limited number of customers in this market. Last month, we held a training session for our EMS sales team so that they can now work to identify opportunities for the Scorpion system within the customers -- their customers' test facilities. It's this kind of synergy that's really helping to get the Acculogic business growing. We've been mentioning the EV battery market. Our Stingray automated battery tester has been used by technology leaders in the market since 2015. Our patent multi-point testing system provides the high throughput needed in the world's Giga factories. We're partnering with leading customers to expand beyond just interconnect verification. In one of the roadmap projects we're currently working on, we're working with the Videology team to integrate some of their camera solutions into our automated testing platform. Our success in this market has been limited by Acculogic's reach and their commitment. Most opportunities were kind of found by word of mouth, where engineers who left one company went to another, they had liked working with our product, like working with our engineers and then they would reach out we've left a lot on the table with that. So inTEST has the reputation, the engineering and the resources needed to really unlock the potential for this market with our solution. We've accomplished a lot in our first year. One of the most critical was the creation of a market-driven road map. We're expanding on the progress we've made in automating the test floor, which increases both throughput and reduces the cost of tests to our customers. With this investment, we are planning on growing new product sales by 20% per year. We also started a strategic account management program to make sure that we're maximizing our business with market leaders and OEMs. With the Acculogic acquisition, we've diversified into multiple attractive markets including the EV battery market. Electronic test was also able to get an important source of recurring revenue with aftermarket and service that really was missing from our business. We've begun implementing the best practices from the EMS business like a market-driven road map and strategic account management just in the first few months since the Acculogic acquisition. Expanding our addressable markets. As Nick talked about, that's a big focus for the company. We made great progress in our traditional market last year, increasing it by about 25%. We did this with new products and working with OEMs to increase what was available for us. It's kind of tricky with OEMs because sometimes they provide some of the things that we do, and if they're exclusively providing their own manipulators or docking solutions, we don't necessarily count that as part of our available market. However, if we get them to start providing it, then we say, okay, we've got more market available to us. There are cases where they're now using -- utilizing our equipment directly with theirs. A tester manufacturer that does very well in the RF market included over 60 of our interfaces with testers they sold last year. This has gotten us into a top 5 semi customer that we had no installed base with. I was talking to a tester manufacturer at SEMICON in December. We've just seen our intelligent test cell, which is our fully automated LS manipulator along with our IntelliDOCK and a customer. He asked how do we work together, how has our products really complement each other. My first question to him was, why are you asking me this? You have your own manipulators. And his response was, we don't make manipulators like that. Yours are much, much better, much more sophisticated, much more robust. We're now working with them trying to plan how we're going to approach customers together. As we've discussed through this presentation, the acquisition of the Acculogic flying probe system has opened up significant new market to us as well. It's -- we view it as approximately an additional $200 million in served market between the printed circuit board and the battery testing. I hope this has helped you understand what inTEST Electronic Test is and why we're so excited about the business. It starts with the great team and the solutions that our customers value so much. We accomplished a lot in our first year, tripling our served market, diversifying into new markets like electronic vehicle testing for electronic vehicles, and batteries, printed circuit boards, progressing on our goals to help customers lower the cost of tests with automation. Finally, expanding on what has made us successful, and that is partnering with market leaders to help solve their most challenging issues. Thank you for your time, and I'd like to introduce Greg Martel to talk about our Environmental Technologies division.

Good morning, everybody. I guess I'll say again, thank you all for joining us today. My name is Greg Martel, and I'm the Vice President and General Manager of the Environmental Technologies division. I've actually been with inTEST for about 19 years now. I've served a variety of customer-facing and internal roles during that time from sales to service and applications, some time in operations and also in business development. And one of the things I'm really excited about is when Nick joined the organization, he really saw a lot of potential that I've kind of felt was always residing within inTEST. And I'm really energized to be part of the strategic vision, helping to craft that and to be taking actions to execute on the plan. Let me tell you a little bit about the Environmental Technologies division. For those of you that have been following inTEST for a long time, we are essentially what was inTEST Thermal Solutions with the acquisition of Z-Sciences last year rolled into it. We're roughly 1/3 of the total inTEST business last year. Our manufacturing is done in Mansfield, Massachusetts, and we have sales and service offices just outside of Berlin, Germany and also in Singapore. Our sales are relatively diversified. The Americas did make up our largest portion last year at about 45%. And really the backbone of our division is the strong multi-disciplinary engineering team that we have. We do our own thermal designs, but we also do our own board layouts. We do our own firmware design. And that really allows us to maintain a lot of positive control of the products that we offer or the solutions that we offer. And in addition, it gives us some ability to create differentiated controls that really add value for our customer base. As far as going to market, we are a combination of direct sales and application support with also a wide variety of channel partners throughout the globe. Everything that we do, we give a nod towards the environmental responsibility that is intrinsic to working with refrigeration technologies. We use natural refrigerants where it makes sense to do so that have a very low environmental impact. When we're not able to do that, we try to choose environmentally friendly synthetic refrigerants. Wherever physics allows us to do it, we try to maintain our refrigerant content below the European F-Gas regulations. And not only does that create environmental benefit, but it also creates benefit to our customer base because they're able to avoid costly and time delays associated with the third-party certifications that are required for those that don't fall within those guidelines. We deliver some of the lowest current draw products in the market. And we do that with a variety of technologies, including some bypass technologies. We try to minimize the current draw on the components that we use wherever possible. And we also offer an array of cryogenic products as well. Those products avoid refrigeration circuits completely by using liquid nitrogen for heat transfer. So not only does that have no impact from the refrigeration basis, but it also again, minimize the electricity requirement by avoiding high current draw components like mechanical refrigeration compressors. We are compliant with some of the European guidelines like RoHS and REACH, which essentially govern electronic hazards as well as chemicals. We are a fairly diversified business. Our core and our history is in semi, as many people know already, and as Nick has alluded to. But even back in 2020, we were a fairly diversified group. We intend to continue to grow across all segments, and I'll be taking actions to do that as we move towards 2025. But we're going to put a particular focus on the growth opportunities afforded to us in the life science markets both with the freezers and refrigerator technology that comes along with the Z-Science acquisition, but also with the ever-expanding opportunities that the cannabis market provides us. As this diversification continues, we expect Semi to become roughly 1/3 of our business by 2025, with Life Science, as I said, being the fastest growth potential, and we expect that to consume about 30% of our business in that time frame. I'd like to talk to you about a couple of the key markets that we serve now. The first and the backbone again being the semiconductor market. We are a market leader in the back-end semi lab space. Our products are there to drive R&D, to drive life cycle testing, to drive failure analysis. They work in a variety of standards, including the standards the military expects, the standard the automotive industry expects, the standard the commercial sector expects. Essentially, what our goal is and what we are doing is helping our customers understand their designs better, allowing them to be robust and reliable for their customers. To put it in a little bit more common language, we all know that there's more electronics and more chips in cars than there ever have been before. Nobody would be very pleased if you turned your car on and it only worked inside your 70-degree climate-controlled garage. It's going to work at 120 in Phoenix in July. It's going to work and turn on at minus 40 in Alaska in February. Our products help our customers make designs that work reliably in all the environments they need to operate in. Within the Life Science market, our focus is going to be on driving high-value solutions and differentiated solutions. What we're trying to do here is look at areas where customers have unique requirements in the freezer market. This could be vaccine storage, for example, it could be human tissue storage and try to give differentiated products that give customers the ability and the confidence in total sample security. Our freezer product line has completely redundant refrigeration systems such that even if there is a failure, the freezer is able to maintain temperature for an extended period of time. The customer can make an intelligent decision, do they want to move their samples into another location? Are they able to repair the equipment on the fly? But at the end of the day, it's all about total sample integrity and security. When you're storing human tissue samples that are literally unique, there is no recovery path if the product fails. Within the cannabis subset of this market what we're trying to do is drive ultra-high capacity refrigeration systems that allow enhanced extraction processes for both THC and CBD products. We do this in some of the industry-leading smallest footprints, which minimize floor space requirements in production. We do it with ultra-high capacity, which allows them to do more extraction more quickly. Additionally we have remote control temperature sensing technology that allows them to enhance and tighten their process control for better quality products. Within the defense and aerospace market, we really are targeting kind of customer specific solutions for some of the most challenging thermal applications in the space. What we're trying to drive is about highly engineered solutions, maintaining temperature ranges, rapid temperature transitions that some of these tough applications require. We always want to become a strong relationship builder, we want to be driving the opportunity to be top of mind in our key customers. A great example that I'd like to talk about with this is a number of years ago, we received an opportunity to deliver some systems that do air climate control. It was a customer that wanted to put a device in a box. They needed the air around that to be a very specific order. Since that time, it's proliferated into over 80 systems in 5 of their factories in the United States. The project was so successful that they took on additional products to put into this line, then some of which require liquid cooling as well. They came back to us, and we developed some liquid chillers that subsidize that. We've delivered several dozen of those now. They now have come back to us for additional test cells that are purely dummy systems that populate the line when real thermal capability is not required. And they're even approaching us for other products that have nothing to do with this production line at this point. We've essentially become their go-to guys for thermal challenges. We want to continue to develop with that throughout the entire customer base that's available to us. Very pleased with the strategic process we have made in the last year -- progress we have made in the last year. As far as the global and market expansion piece. We've added an Asia sales leader based in Asia to drive business there. We've also enhanced focus on our chiller line by putting a dedicated sales leader in place. We've expanded with additional channel partners and the expansion that Nick referred to in developing more standard chillers allows us to drive more business focus there. Specifically within the chillers, our focus really will be on continuing to find OEM applications and high-volume end user applications. With regard to innovation and differentiation, we've released a new ECO ThermoStream that Nick mentioned, that really kind of fills a product gap for us, both in terms of temperature capability and also price point in the market space, we believe that that's going to be nice fit for some customers that don't need the full capability of our larger systems. We also launched several OEM thermal platforms that get used with curve trace analyzers. Those are used for high-power switching technologies like the components that you might find in electric vehicles or in electric trains. And finally, as Nick again mentioned, we've talked about really kind of standardizing and expanding the chillers that we offer for the cannabis market platform. We'll continue to drive that as we move forward, but we offer some of the highest capacity chillers in the market space and some of the smallest footprints, which our customers our finding tremendous value in. The acquisition of Z-Sciences really further expands Life Sciences to us. When we looked at this, it was really a make versus buy decision for us. We acquired some technology. We acquired know-how. We acquired Market Access that would've taken us substantially longer to get to from an organic pathway. inTEST is able to provide some of the financial backing that they didn't necessarily have, some of the marketing acumen and just some of the more mature, larger company processes to put in place to make sure that we're driving this in a disciplined way. This is a high growth potential market segment for us and our focus is really going to be on about a $200 million slice of what we consider a $0.5 million pie in that -- $0.5 billion pie in that segment. And finally, within service and support, we have added additional field service engineers within the United States, we found a new refrigeration service channel partner in China, and we've launched some U.S. rental programs for the first time. As we move forward, and we started to really try to create focus on creating master service agreements for our key volume customers. As far as expanding addressable markets, the first piece of this came with the standardization of chillers as we begin to have more standard product, it really opens up some of that chiller value pyramid for us and allows us to serve segments that we weren't able to previously. And then obviously, the big jump comes with the acquisition of Z-Sciences, selling the ultra-low temperature freezers, selling their refrigerators and even cold chain portable solutions one of which is over there on the table. That system allows somebody to take a sample, you can run it -- from plugged into the wall, you can run it in your car on a DC outlet or even has a battery backup where you can transport it with no external power source for up to an hour. That really opens up substantially more market for us. I guess the other comment I'd like to make is well today, we are predominantly a thermal solutions provider. As we move forward we really want to look to see what opportunities present themselves in the broader Environmental Technologies market, whether that's humidity control. whether it's climate control or altitude control rather talking about vibration testing or salt spray and corrosion testing. These are all things that we want to consider as we move further into a true Environmental Technologies company. What I'd like to leave you with today is that we're aggressively diversifying into the high-growth life sciences market space. The Z-Sciences acquisition is key to this. We'll also continue to drive it through the cannabis opportunities, that more than triples our SAM. Standardizing chiller process -- pardon me, standardizing chiller products also expands our SAM by opening up sections of the chiller value pyramid that were previously unavailable to us. We have a wide range of thermal and controls technologies backed by strong IP and the strength of our engineering team that allows us to design systems, develop systems that are customer appropriate, that are market appropriate to get the job done the right way. And finally, we do all of this with a focus on environmental responsibility, making sure that we're a partner that people want to work with. Thank you very much, and I'd like to turn it over to you, Scott Nolen to talk a little bit about process technologies.

All right. Thank you, Greg, and welcome, and thank you for coming. My name is Scott Nolen. I joined in test 2.5 years ago to lead the induction heating business based in Rochester, New York. Previously, I had worked at energy equipment supply companies, very large companies and had various growth roles in there. When I came to inTEST in 2019, I found a business with great people, great products but really lacked an overall growth strategy, lacked the overall plan for where we are going to take the business. And I think you're seeing today, we've turned that around, and I hope you'll see in the future presentations that we continue to do that. So, Process Technologies today is made up of 2 businesses. We have an Induction Heating business that we purchased about 5 years ago. This is a business that supplies induction heating solutions to customers to replace their existing heating processes or solve their existing heating needs. We have a video imaging corporation in Videology, which we acquired just at the end of last year. And once again, similar to the Ambrell business, we supply solutions. We don't supply just products, we supply an actual solution that customers then can take our technology, apply it into their systems and then come back for more and more as they have more and more issues coming forward. I can tell you that after working 30 years in the energy space, I really am very proud of working for a business that has such a great environmental story. Our induction heating systems, we only use electricity. We replace systems that use heating using hydrocarbons. And not only our systems electric only, but gas heating systems, gas ovens, they tend to be very low efficiency, 30%, 40%. Induction heating systems, if they're done correctly can be in the 80s% and 90% overall efficiency. So great environmental story for induction heating customers when they move away from their hydrocarbon heating sources. From a safety standpoint, induction heating offers great safety benefits. There's not a lot of waste heat. There's not a lot of unsafe areas that can cause burns and issues in the field. And then also with our camera systems, we offer safety systems, some of which I'll talk about in a second, that really provide a safer transportation systems and a safer workplace. Additionally, our induction heating systems are used by OEMs to manufacture green energy technology, solar panels, wind turbines, hydro turbine parts are we use induction heating consistently in those applications to make those components. So really, the strength of our division is our diversity. We're not reliant on one market. When we had Ambrell, that was the case, Videology actually brings us even more diversity. We had a very minor play in security. Now with the camera systems, we have a big opportunity to grow into security. So really, we see our diversity there being a strength of this business that we're not tied to one industry. Believe me, being an oil and gas guy, you're living to die in the price of oil. Very good times right now for them, but I can tell you it can be bad times in different times. So now I'll take you through a few applications that we do in our business. This one is labeled EV automotive, but it can be basically all ground-based transportation. This is a car, you can see the numerous applications that we supply in [ these ] systems to people that make those components or actually camera systems into those cars, applies to trains, applies to semi-tractor trailer trucks across the board. One of the hot applications right now, of course, is the transformation to internal combustion engines to EV engine -- to EV motors. A lot of new technology being developed right there every day. We just had a customer that came to us right before Christmas that makes batteries and they were having a problem with their process of making the materials that are used in those batteries. They weren't getting good yield. They brought those pieces into our lab, it is a very critical part of our business in Rochester, New York. We used that lab to actually prove out the technology and we then picked it up, took it out to their site. And right before Christmas, we showed that, that induction heating system could significantly improve the way they manufacture to these batteries. And as a result, we've received some very nice orders in the beginning of the year from this customer, that we're fulfilling now in this first and second quarter. Aerospace is another key segment for us, not growing quite as quickly right now, a little bit more flat, but we expect to grow in the future. But definitely has customers that have longer development cycle times because of the need to get that certification, to get that FAA approval, which is people that probably like me, we fly a lot, we're happy that they do that. But very important segment for us because demanding specifications, demanding approval cycles. We have a customer there that we're working with them on developing technology to build the carbon fiber struts that are used in these current generation of aircraft. And actually one of the units that we use today is right over here, which I'll demonstrate at the break for those of you that are in the room. But great technology there, it's really radically improving their overall speed that they can make these really next-generation struts for these aircraft. Life Sciences is another very demanding space. It's a space that really requires tight tolerance, tight specifications. And once again, as a consumer of this, unfortunately, from time to time, you're happy that they do. It can be very low-tech applications for just material or just instrumentation, all the way up to very high resolution imaging or the borescopes that go into patients when they do surgery now as we move more and more into robotic surgery with an aging population. We have one OEM there that they use our induction heating systems to go and develop catheters. They actually do multiple catheter tipping, which is a big consumable industry and they use our induction heating to very accurately make these catheters make sure that they're of high quality and used in patients correctly. Last segment I'll talk about security. Like I mentioned, we really didn't have much of a play in the before we purchased Videology. With the purchase of Videology, this brings us a whole new opportunity to enter this space. A lot of different expanding markets out there, whether it's from ATM security, road security, workplace security, it's really expanding day to day. We have one customer that actually came to us with a need to -- for a specific camera to use in their traffic control devices. And for like everybody that we said a traffic light -- there's nobody coming in the other direction, like why is this light not changing. These guys built camera systems that actually look at the intersections not only look at what's there, but look at the type of person that's there, if it's a crosswalk; change the light cycles, change the timing so that way increases the safety of crosswalks, increases the safety of the traffic intersection and also cuts down on the idle time. So you're not just sitting there waiting when there is nobody in the other direction. So really, before we acquired Videology, we had a marketplace that was expanding, but it was really expanding as fast as almost we could take it. We have global sales -- but even more importantly, we have labs. We have labs that are directly installed in our facilities in U.S., Europe, and we're building one in Mexico right now. And bringing customers into these labs, introducing them to these products just like I can show you today, hey, really introduces technology that a lot of people never realized existing. Even though it's been around a lot of time, they just never thought of it. So our market really, in many cases, grew as fast as we could introduce this technology to them. And that's why it's been so critical for us to expand our labs out there in the globe, both directly and through our partners and also make sure we introduce our technology. With the acquisition of Videology, we've entered into a much larger space, a space that's growing very rapidly right now. We're very excited to take this relatively small business today and expand it into this space. So how have we done in year 1? We've accomplished a lot, still a ways to go, but still a lot, but still a great accomplishment. We've expanded our market. We've added more sales, head direct and indirect. We've expanded our lab footprint, which is really key to getting that customer in to get that customer experience where they understand our products and our technology. We've launched new products. As Nick mentioned, we had a #1 customer feedback item was our work head, which is that small component there. You see next the easy heat for those of you in the room, that's the piece that's marred right next to the customers part that they're heating. This being only 1 kilowatt that gets much larger as you get into the bigger power ranges. They were too big in many cases for customers decreased the size of that. So we've met that customer need, and we've really checked that box. We have had a great acquisition with the purchase of Videology, very excited about taking that business to the next level in the months and years to come. And we've also extended our service and support operation. Previously, we kind of did service as customers came to us, now we're going to them. We have a very large fleet of induction heating systems out there at customer sites. We're actually bringing opportunities to do more proactive service with them, old spares at their site, train them, get them up to speed. So we're really aggressively going after the service annuity as well. So in summary, we have a very large, diverse market. We're not tied to 1 industry. That's exciting for me coming from the energy space that we don't have to worry about other ones that are growing at different rates. We supply high-value solutions. We don't supply just products. We supply solution and then the products that go behind that and it keeps that relationship with the customers and does a lot of word-of-mouth selling. It's amazing how many times we have people come to us and say "Hey, we talked to this guy, you solved their problems, can you do the same for us?" Or even better, they come to and say, "you can't solve this problem, it's impossible." And then a day later they realize we can. So it's quite impressive. We have a great product road map. We just had a few launches last year. We got some great stuff coming out this year, very excited about it, both from our imaging business and our heating business. And we're really designed to scale globally. We're a business that we have a footprint today that can scale even with our existing space. We can take this out to the next level into different organizations across the world if we have to, and we can really meet the customers' needs without too much more investment. So that's my presentation. Thank you very much. Now I believe we have a 15 minute break and when we come back Rich Rogoff will be giving us an update on our M&A activity. Thank you. Actually, for those of you in the room, I'll be happy to show you a demonstration of the easy heat here and eat up something very quick. [Break]

Good morning, and welcome back. Just want to clarify for those of you in the room, please do stop by at the conclusion of the question and answers to our displays on the side of the room. We do have some pretty interesting products to demonstrate, so we'll be doing that. My name is Rich Rogoff. As mentioned, I joined the company in October of last year after supporting the group with M&A activities throughout 2021. I bring with me about 30 years or more of experience in the capital equipment industry for semiconductors and optics manufacturing areas through on to innovation and ASML where I held leadership positions in all product life cycle and business life cycle areas including sales, engineering, operations and strategy. Really excited to be a part of the inTEST team, and Nick's laid out a vision here of the 5 point strategy. It's an exciting time to be at the company and see the transformation and look forward to what the future holds. Today, I'm going to talk to you a little bit about making M&A as a core competency of the organization as you heard, that's one of our points on our 5 point strategy and we want to make sure it's really a core competency of the company going forward. So we started this last year by asking ourselves a question or 2, that most likely those of you in the room and on the webcast asked as well is target customer or target companies would probably ask, why inTEST? Why would we want to be acquired by inTEST? Why would you guys go out and acquire somebody? And the simple question is -- simple answer to that is, one, we've had a long history of the company, it's a pretty established company as you've heard. We have a good financial portfolio and background so we're stable. We can afford that investment. As well as we have a large stable of technologies, one, that we can offer to an acquisition target ; and two, that the acquisition target could blend in with and enhance our product lines. So these 2 or 3 things combined make us a good area. The second question was, why now? Why not 10 years ago? Well, I think Nick also answered that a little bit earlier with the change in leadership that he's brought to the company and the change of focus. Of the new leaders on Board, we all come with varying degrees of experience in leadership through our companies, growing high-tech companies, also experience in M&A, and we feel that best suits us for continuing this process and bringing it here to inTEST. And so with those 2 questions sort of answered, and we'll continue to adapt those answers. We move on to how are we actually going to do that and make ecosystem performance for M&A and so more or less a 3-pillared approach. Strategy being the first one. We want to define the strategy, one that is adaptable as the company grows overtime, but one that gives us a good foundation of a direction to head. And we've done that over the course of the last 18 months, we've defined that strategy. We refined it again, and we're now on path and I'll come back to some of the ideas and goals behind that. The second piece was to add an M&A pipeline. We want to ensure that we're getting good target companies and partnerships to come in to our portfolio so we can review them. As many of you know, it takes a lot of companies to find the one that's the right fit. And we'll, again, describe some of those characteristics of right fit in a minute. And the last but not least and probably the most important part is the execution phase. We want to execute well when we do these acquisitions and we want to have templates and processes in place that ensure that execution delivers on the value and propositions that we've outlined. So with that, we set some goals in mind. First of all we want to expand in the markets that are fast growing. We don't want to pick something that's not going to be fast growing. We want to offer broader product portfolios to our existing companies as well as acquire new companies through these acquisitions. We want to drive further market diversification. You heard that from some of the division leaders that they are in markets but how we expand that wallet share that we get in that current market as well as going into additional marketplaces. We want to enhance our value proposition to the customers with new product lines. And of course, last but not least, we want to make sure the financial profile of the company continues. We want to continue to grow the company's cash positions, margins, et cetera, as Duncan will talk about later. So with that, we set off to make a playbook, which we've implemented over the course of the last 6 to 9 months so that we ensure that the execution of the -- of any acquisition targets are done properly. We've implemented governance processes in place. We've put processes and tools in place that we can follow through the life cycle of an acquisition and, of course, manage our engagement. As an example, we've put in place due diligence and integration dashboards and the accompanying work plans that go along with them. The dashboards are able to be communicated both internally and externally. Externally being with the target company or a partner so that we can address challenges that come up as they always do in acquisitions. We want to make sure we catch those challenges before they become issues. And so this communication tool allows us to communicate freely between the groups and address and review cycles at a higher level, even we can anticipate where maybe challenges are going to arise. We also developed a comprehensive plan for valuation. And any company that we look at, we want to make sure that there's a good strategic fit with our organization as it is today and has achievable synergies that we can approach. We want to make sure that they have a solid management team that one that will stay on for at least a period of time after the acquisition, and we want to make sure that it's a good cultural fit. I'll tell you right now, we're not looking for a fixer-upper. We're looking for a diamond in the rough, something that has a potential to be unlocked that hasn't been unlocked for various reasons of their current situation, whether it's funding, private ownership, access to markets, et cetera, something that we can offer at inTEST that we can broaden that portfolio, polish it up and see the results. And of course, we want to make sure that, again, the financial performance of the acquisition target adds to inTEST. I'll highlight the one -- the second bullet on the bottom, our goal is to make it accretive in the first year. We won't always achieve that. So don't hold me to it, but our goal is certainly in that case. If it's not accretive in the first year, there has to be even stronger strategic value, technology value, et cetera, behind that acquisition so that we plan that going into the process. So now that we have the M&A playbook in place, we have a strategy in place, we're continuing to build the ecosystem, we got off to a great start. You've heard about this from Nick and the division leaders, I won't spend a lot of time here. The 3 acquisitions that we closed at the end of last year, more or less the fourth quarter of last year. And yes, we are crazy for doing 3 in 1 quarter, no. In all seriousness, I think Nick mentioned it, they happen when they happen. The good news here is we have 3 divisions. We have the process and the capability to handle 3 at one time. I won't tell you we're going to go out and look for 3 to happen in synchronization again. But we do have that capability and the manpower to do that. All 3 are progressing very well through integration phase with moving towards what I'll call a standard operating business within the organization. and we'll look to continue that. And I think maybe Joe mentioned it earlier, to give you an example, the Videology team and the Acculogic team are now actually working together on a product development. So that -- I mean we purchased Acculogic at the end of last year, literally Christmas present, and it's 2, 3 months later, and they're already working together. So you can see the benefits already being realized. So we congratulated ourselves for about 10 seconds on the acquisitions, and then we moved on. So the integration teams are working well. My focus has changed back a little bit right now to growing that pipeline. Around the end of last year, we had about 30 companies that we had been evaluating through various forms and filters and things like that. And that evaluation occurs with myself and the business leaders and their teams. We try to get those through those first level of filters and discussions. And once it passes those first few levels, that's when we'll engage Nick and Duncan. We don't want to put every company on their plate because that's all they would do. They have more important things to do than that. So our focus is to try to get it, whittle it down to the right companies we feel, meeting those targets, then we'll engage the senior leadership in that perspective. You can see here, we focused on the graph between Electronic Test, Environmental Technologies and Process. We have companies in various forms and shapes throughout the process. Maybe one or 2 will end up as an acquisition, maybe none. At this point, we're not close to anything at that point, but we'll continue the evaluation process. The sources of pipeline for these targets is also important. So we want to get a name -- make a name for ourselves. We use advisers to get those targets. We use bankers. We want to expand that horizon. But more importantly as well, we're going back to our teams. So as all 3 segment leaders mentioned, engineering is a core part of the company. And so sitting with those team members and giving them the opportunity to tell us, hey, we missed this technology or this would be a great additional or did have you looked at this company because they would be a great fit for the company. So we're also using that internal process. to generate some ideas of companies to approach. And we'll continue to do that. Our goal is to have a very strong pipeline to achieve our 5-year target. So what are we looking for? Well, it varies, of course, based on the business a little bit, the segment or the division rather. In Electronic Tests, we would be interested in things that improve automation around testing capabilities in circuit test, electronic functional testing, et cetera, whether it's for PCBs or batteries or other things that we haven't dreamt of yet. Environmental Technologies, I think Greg had mentioned earlier, moving beyond temperature only into different areas like vibration and altitude and corrosion testing is of interest. From a Process Technologies perspective, enhancing our heating process and process controls around the heating process for induction heating and other things, and image capture and image processing are definitely areas that we would be focusing on. Markets, as you've heard from the 3 division leaders, we're in a lot of markets already. We will continue to focus on some of those fast-growing markets like automotive and life sciences and of course, continue to strengthen our semiconductor position as we go forward. And as other markets or other factions of those markets come up, we'll still look at those as, again, needing to be a fast-growing environment. As an example, automotive was interesting. EV is really interesting for us as it's really fast growing at this point. So to this point, I've talked about -- almost changed slides on the computer, which would have been a no, no. We've talked pretty much about acquisitions. And I just wanted to point out here, it's not all about acquisitions. We're very open to partnerships, JVs, et cetera, as they're appropriate. And we have talked and engaged with talks with different people, whether it's being an OEM partner or a partner to an OEM or special private label type of project. These are things that we would be interested in. And that would need, again, to pass muster from a financial perspective and a valuation sort of point of view where it needs to be providing us access to a technology that maybe we don't have today or a market we don't have today, which would lead to revenue growth or more importantly, even try out of the company for a future acquisition potential. So it gives us the broad depth to be able to look at those things and maybe minimize risk in some cases through that partnership. So I'd just like to conclude with you today saying 2021 was off to a great start on that 5-point target and the strategic growth inorganic piece, if you will. We completed the acquisition of the 3 companies in the fourth quarter of last year. We've developed a disciplined approach to the M&A life cycle, one that's adaptable. So as we learn from each acquisition, we can apply going forward. We've got an ecosystem under development. I won't say it's there yet. There's still a lot of growth to go, and it will continue to evolve as the company evolves. And lastly, I think we maintain throughout this whole cycle, a focus on enhancing the financial profile of the company. So 2021 was a good start, and we look forward to the future, and I will now turn it over to Duncan Gilmour to give you a little bit more about our financial successes for the future.

Thanks, Rich. How's everyone doing? Good? Thanks again to all of you who are here today for coming along. Also I'd like to thank everyone who's joining us on the web. We really appreciate your interest in the company. And hopefully, you're finding out a few new things about us. My name is Duncan Gilmour, CFO. I've been with inTEST for 9 months. I joined in June of 2021. Previous to inTEST, I was at ABB for 4 years. I actually worked with Nick for 3 of those years. And before that, I spent 13 years with Tyco in a variety of different financial roles both corporate -- within corporate finance roles as well as within a number of operating businesses. And then before that, I spent 10 years in public accounting with PwC in the U.S. and in the U.K. I'm going to start and just talk a little bit about our financial priorities, our overarching financial priorities. I mean the main thing is how do we allocate our capital, how are we going to spend our money? Our north star there is always has to be, are we executing towards our 5-point strategy? On the organic side, we want we want to drive our revenue growth. And we've already heard from many of the division leaders about some of the areas where we've been spending money. We've been investing in sales resources, direct sales resources, investing in new sales channels. We've also been spending money on product innovation. And we have done and we'll continue to do that in order to grow market share and expand our serviceable addressable markets from an organic perspective. We also have inorganic strategies. You just heard from Rich talking a little bit about that. Clearly, we executed 3 acquisitions in 2021, and we continue to look at the pipelines and inorganic growth is also an important piece of the overall growth story. In doing that and doing these things, it's important that we maintain the strong margins that this business has always had. We want to make sure we're maintaining strong margins, continuing to make sure we're delivering strong operational cash flow. And then as we grow, we can also scale our business, operating leverage should help increase our profitability over time. In doing those things, that ensures that we can manage our balance sheet, which means we'll have ongoing flexible access to capital, whether it be via debt or equity. In doing that, we can then quite honestly, lather, rinse, repeat. And I keep going more capital to allocate, and so it goes on. So those, I'd say, there are overarching kind of principles that should always be grounding us, our north star, so to speak. Nick talked about a lot of these numbers. So I'll quickly kind of reiterate. So 2021, revenue grew to $85 million, a 58% growth rate versus 2020. From a profitability standpoint, our adjusted EPS, which is adjusting for nontangible -- intangible amortization increased from $0.03 to $0.81. Our orders exceeded $100 million during the year, which was a great benchmark to exceed. We completed 3 acquisitions our adjusted EBITDA margin, which we really look at as a liquidity metric, something that gives us a barometer of our operational -- ongoing operational cash flow go up to just over 14%. And we also made progress improving our capital structure by leveraging the balance sheet. We actually borrowed money to finance the acquisition, something that the company had never done before, given the favorable debt markets that existed in 2021, it seemed like that made a lot of sense. Talking about revenue in a little bit more detail. The division leaders have all given you some great insight into their kind of businesses. Shown here is a split of the $85 million of revenue in 2021 versus 2020. You can see by division, you can see that we saw growth across all of our divisions. There's semiconductor activity across all of our new operating divisions. Obviously, the tailwinds there were certainly helpful. But we also saw from whether it be new products, introductions, some of the market initiatives that the teams have talked about, we also saw kind of growth outside of semi as well. It's certainly nice to see that growth across all of our new divisions and product platforms and product families. From a profitability standpoint, those increased revenues translated very nicely into the bottom line. Three key metrics I just want to highlight here, net income or GAAP net income, to be clear, came in at 9% of revenues in 2021 versus a negative 2% in the prior year. And then adjusted EBITDA that I've talked about 14% versus 2% in 2020. I've also shown on here division operating income which is going to be an important metric going forward and certainly something I kind of look at. That is our net income, adding back tax, adding back intangible amortization and also adding back our corporate G&A and restructuring costs. It really represents the operating income that's being delivered by our businesses -- by our various divisions. And it's 100% controllable, by the leaders that you heard from here this morning. On the right-hand side there is just as a percentage of revenue, a high-level P&L to give you a better flavor for that. There are also materials in the supplemental section to break out some of the expenses. Just to give you a better perspective of how the expense is going to break out. From a capital structure perspective, we ended 2021 with a strong balance sheet. Strong cash flow, you'll have close to $11 million of operating cash. We're not a super heavy capital-intensive business, around $1 million of capital spend in 2021. And as I said, we leveraged our balance sheet at very favorable rates to finance the acquisitions we made in 2021. And we believe we continue to have the financial flexibility for future long-term growth. We think that it's not unreasonable to look at our borrowing capacity as being around 2.5% -- 2.5x EBITDA is something that we feel would be a kind of reasonable level on an ongoing basis. And we're not at that level right now. In terms of outlook, we talked a little bit about historicals, let's talk about outlook. Shown here is the Q1 guidance that we issued during our earnings call earlier this month, Revenue of $23 million to $25 million, EPS in the ranges presented on the slide here. We also, for the first time, did present full year guidance. We presented some revenue ranges, operating expense ranges, all the different kind of primary elements of our P&L. We're now getting really forward thinking, and we're talking about 2025 numbers, $200 million to $250 million revenue range, as Nick talked about earlier, how do we get there? Well, I think you heard from a number of the business leaders about the initiatives going on within the business, as you heard from Joe about the opportunities within EV battery testing, the Acculogic brings to the table. You also heard about some of the work going on in the existing legacy business around new products and driving kind of growth there as well as partnering with OEMs. You heard from Greg about what's going on in Life Sciences, not only with Life Sciences but also with the existing business and the opportunities we have there. And then Scott, you talked about the imaging opportunities with the new acquisition as well as, again, your EV opportunities with the existing induction heating product lines. And all of those engines are going to be driving organic kind of growth over the course of the next 5 years. On top of that, we do expect to continue our inorganic activities. And all in all, we think that $200 million to $250 million range for 2025, that's what we're targeting. How does that translate into profits? We think about the key metrics I presented for 2021. A rough kind of barometer there is we're looking at $200 million to $250 million. If I look at the bottom end of that range, our divisional operating income at around GBP 200 million, getting all of our portfolio businesses, including new acquisitions to 20%, represents $40 million of division operating income. I would expect that to translate into about 10% or so of overall GAAP net income, about $20 million or so versus $7 million where we are today. And then adjusted EBITDA, assuming around 15%, 5% kind of spread seems to be where we're running there, $30 million or so of adjusted EBITDA as I said, a reasonable benchmark, I believe, for kind of an operational cash flow number. But these are the kind of profitability numbers that I believe we're looking at or are certainly very reasonable. On this slide here, I've just presented some data that shows enterprise value at the end of December versus 12-month forward-looking revenue and EBITDA. We're inTEST in the red bar and then a handful of peers that are detailed on the slide for semi and industrial. I'll let the charts on this one speak for itself. And then to wrap up, we believe we've got the strategy, financial flexibility to substantially increase value over the course of the next 5 years. We think we have operationally a strong foundation. We've got new leadership, new organizational structure behind that, a clear and robust 5-point strategy, and we have a compelling story around growth in ever-diversifying markets. From a financial standpoint, the business has always been solid, nice margins, nice cash flow, proven track record. Revenue and earnings momentum in 2021 certainly very strong. We plan to build off of that. And we believe we have a strong balance sheet in order to finance future growth and financial flexibility with respect to driving that as well. With that, I'm going to hand it back over to Nick, who's going to take us home here. And then we'll be back up for Q&A.

Thanks, Duncan. And yes, a lot of information at you here. And before I bring the team back up, and we'll open it up for Q&A. I wanted to just kind of recap high level what you heard today. First and foremost is the journey is underway. We're on a path to transforming this business, and we know how to get there. We've got the roadmap and the recipe in place. We're building off of a strong foundation, which includes diversified markets we're serving, blue-chip customers, innovative technologies, a global presence, all this is a great foundation to build upon. Our elements around the transformation, building from the foundation, adding the management team -- the right management team in place, executing on our 5-point strategy, driving more aggressive focus on acquisitions to accelerate our growth in the new markets and build out our portfolios, this new organization structure that I discussed relative to technology-aligned divisions so we can capture synergies and cost efficiencies across the businesses is -- position us well as we head forward here. But again, it comes down to an energized workforce and the people, and I'm really excited about our entire organization, the enthusiasm, the commitment, and I believe we're well positioned to drive our plans. And our 5-point strategy, while it's not revolutionary by any means, it's exactly what inTEST needs to take this business globally expand, drive more innovation, enhance our customers' service and support initiatives to drive greater customer satisfaction and repeat business, ensuring we've got the best people to support them, and building out our organization through strategic partnerships is exactly what the recipe for success is for us. We're serving in the large markets, $2 billion plus now with the acquisition. So we've got plenty of room to grow in our sandbox organically, and we'll continue to build around these divisions with the technologies and focuses that Rich highlighted that we're looking to expand, again, to widen our portfolios in these spaces. So plenty of room to grow, and we truly believe our targeted markets of electric vehicle, battery testing cannabis, medical cold chain. These are all segments in these markets that are going to drive accelerated growth for us. And these -- we're not just a semi company. Again, we've got to break that mantra or perception that inTEST is semi. We are a diversified company. We'll continue to drive further diversification. We'll be able to weather the storms that happen out there as we're better positioned in markets and with our sandbox providing plenty of room for growth. We truly believe that we have the ability to achieve our $200 million and $250 million bogey that we've laid out there for 2025. And the teams are executing great progress in year 1 on all 5 strategies. Hopefully, you got a sense of that today as we laid out some of the achievements. And again, those were just a few. But a lot's happening in inTEST. It's not the same old inTEST. For us, it's about scaling. It's about scaling the businesses we have and then adding new businesses to fuel that scalability and as we scale, it will drive the opportunity to deliver the profit to the bottom line that Duncan has laid out here. So the transformation is underway, and more to come. Obviously, I look forward to updating you guys on our progress on our earnings calls as we go forward here. But at this point, let me just open -- bring my executive team up to the stage, including Meghan Blount, who again has been here 5 weeks. So let's not throw too many hard questions at her. But we'll open it up for Q&A. Thank you.

We've got out spots on the floor. So all right. All right. What questions can we field?

I'll start. Out of the revenue target Of $200 million to $250 million, it looked like the acquired revenue was more than the organic growth. Can you break that down for us?

Yes. No, it's actually -- it's a -- about an equal split. Duncan, do you want to?

Yes. Yes, I can [indiscernible] give me the mic. Yes. So there's about -- that $200 million or so, if we take the bottom end of that range, around $200 million, we're talking about roughly about $50 million coming from future acquisitions if you want to look at it that way. And then in terms of the businesses we have on board right now, we have a mid-teens kind of growth rate going from 2021 of the $85 million up to the targets we've kind of outlined there. Does that help?

Thank you. If I could ask a question. Can I go down the line? Is that allowed? .

Yes. Well, we got to open it up for others as well. You can come back.

I'll come back. So I'll start with the first 2. So Nick, if I look at your SAM, which is quadrupled, and your growth trajectory. One of the things that we noticed is that you might become a smaller piece of the markets that you serve. And you've got a big brand, you're very well known, you're 15% of your SAM today, inTEST in the past. How does that change kind of your strategy and make sure you're important always -- your customer always realizes how important you are to their solution?

Yes. No, excellent. And in our existing served markets, we are not going backwards. Obviously, we continue to gain more share with the initiatives these gentlemen are describing. What we've done is really with our acquisitions, opened up large playgrounds with companies that were managed really is lifestyle businesses got to a small part of these markets that are very scalable in our minds. That's where we approach these things. What can we bring to the table? So it's about grabbing market share in these spaces that are, yes, really underserved today, as well as in our core markets using those technologies to continue to expand our market shares.

My next one, and I'll leave it at that. Joe, your customers in semiconductor are numerous and in EV, less so. How does that change your approach when you go to a more concentrated customer base to service? And the second part of that is if you think of kind of the EV test stack. What portion of all test dollars that go into an EV do you guys represent today?

So with the -- I guess I'll answer the second part first. It's a pretty small portion of the overall test in EV that we're involved with right now. We're just involved in 1 step at the moment, but we're working hard with a couple of customers to add in additional steps over the coming months or years. I would actually say that from the customers we deal with in the semiconductor market, it's not a huge number of different customers. It's mostly in the -- it's less than 100, really, of potential target customers. And I would say with the EV market, it's growing. There's people that are getting added all the time. It feels pretty similar to us in terms of total number of customers.

Great. One last one. So Greg, your market in life science is maybe more fragmented. And so if you look at kind of a distribution model versus direct, is there anything noticeable changing in kind of the sales approach of your business? And the second part of that is, as your customer base gets diversified very quickly, is there anything that you're tracking usage or utilization of your systems out there? And is there any kind of razor blade type model that you're going after?

So I won't say that there's a specific model that we're going after. What we're really trying to focus on within the life science market is where are the customers that will see high value from the differentiated products that we're manufacturing and offering. Quite specifically, we want to go after the volume opportunities as well, whether it's in bio-banking space, whether it's in production cannabis space, if we move to another segment of the market, vaccine storage, for example. So you touched on the direct versus distributor models. Those are going to vary regionally quite frankly, and in areas of greatest potential customer concentration, we'll certainly look to go direct in those because financially, it makes a lot of sense to do so. But we're also going to be actively building out the service network to make sure that we can support those globally as well.

And then just thinking about capacity as you march towards that $200 million to $250 million. How should we think about capacity expansion plans? And what's the current capacity for what revenue you can take in today?

Yes. I would say all of our sites are -- have capacity expansion opportunities today. We are no sites operating more than 1 shift on -- and we have additional space in certain facilities that we can expand into. As you guys know, we did some restructuring at the end of 2020, but we still have adequate space for capacity addition. Now where we'll see is really some investments to try to, again, position us closer to customers, better served markets. So there will be some additional capacity build-out that we anticipate in our plan to again better position us for growth. Duncan, any comment?

I'd just say, we don't anticipate having to buy a new factory in order to support that growth. Our existing infrastructure for the most part can cover it. There may be some expansion, as Nick indicated, service sales, small footprint type stuff in different markets. But we're not looking at building a 100,000 square foot factory anywhere in order to kind of drive that.

Okay. I'll ask a question that's sort of continuation of my neighbor. Historically, inTEST has been in markets where you have very high market share, right, whether it's the manipulators or the iTS space with Ambrell, which was done prior to most of you guys being here. It was a big opportunity, big TAM, but a lot of players in there, and you were 1 of 10 or 15 in that space. Then with the -- then you did 2 acquisitions that have really tuck-in and seems to fit very well with what you're doing. And then you do Videology that seems to be very different, a massive opportunity, but spread across a whole number of different industries in which you guys are not really players. So I'm trying to see how that came about. And it's kind of a little bit of a continuation of that, and how do you go to market. Videology can augment what you're doing at Ambrell, but the core business of Videology is kind of separate, it seems, from what the rest of the business does. So how do you manage that?

Yes. No, great question. So again, as we lay down our division of technology platforms, knowing that really process technology is something we have a know-how and expertise, Ambrell was a great addition to bring that, in fact, iTS has been doing temperature testing in process applications for quite some time, is how do we build out around that. And so we started looking at a whole variety of technologies. And as Rich kind of said, we're looking for those diamonds in the rough out there, and we truly believe that's what we got with Videology. They're not a camera company that's a commodity. They're supplying image capture capabilities into OEM systems very similar to our other businesses. So the DNA fit extremely well with us, right? So it's not a -- you'll never see one of their products in a cellphone or anything like that, right? It's not -- the highest volume they make is a few 10,000 or so. Yes, so.

And I was going to mention, we actually are finding that there is a lot of overlap in customers that we talk to customers that we supply in Dutch and heating systems to or even other test equipment to, they need cameras. And so there is some overlap there. Really, I think the key thing is the diamond in the rough aspect. This is a business that was screaming for a lot of the great things that we've done at Ambrell. We've been able to leverage that knowledge base, even though it's a different product, for sure, we've been able to leverage that knowledge base, bring it into this business and really build it up very quickly, whereas if we try to do that with a business without that support would have been much more difficult.

Diamond in the rough totally, the question is the fit. But you seem to say that there is more fit than appears at first.

Exactly. And hopefully, as mentioned a couple of times about, we do see those opportunities across the businesses. from an imaging perspective. And as we build out more automation in our semi solutions or electronic test solutions, image capture is also a key part of that and process technologies, so.

The front-end semi market seems to be fairly interesting at the moment, companies addressing kind of the silicon carbide space tend to be growing fairly nicely. I know I think inTEST kind of wants to play into this area. Do they haven't. Do you guys have any foray into this right now? Is there room for expansion into that?

Yes, we do with our Ambrell induction heating technology or -- that technology is used to draw the ingots. Greg give you a lot more details for certain customers. And in fact, one -- our large order we got in Q4 was associated with that silicon carbide application, if you will. So we are on the front end of, very front end of semi where you're drawing the ingots and as well as in back-end test. So the diversification we have in semis, we believe is extremely positions us well. Would Scott have anything to...

Yes. And that is the classic example of a long-cycle development process. The customer that placed a large order with us last year. We've been working with them for 4 or 5 years on that technology and that really came to fruition. We have a number of more of those in the hopper right now that we're working on getting that same type of order volume. So it's really a great opportunity for us to get in with these customers, develop their technology. And then once they are ready to move, they move with us.

Yes, exactly. But you're exactly right. And then I'd say that silicon carbide, again it's all driving business in the other areas as we do power management testing and really the electronic test of temperature chambers, et cetera, that we do. So we do -- we are benefiting from that front-end investment area.

Okay. We've got a question from the webcast. Looking at your M&A pipeline, what company sizes are you seeing in there? And how big of a transaction are you comfortable taking on?

Rich, answer the first part and Duncan can answer the second.

Yes, absolutely. So from the pipeline today, as you see from the 3 that we completed last year, there are varying sizes. I would say on the smaller end, somewhere in the $1 million to $3 million kind of range, which would be more of like a Z-Sciences type of tuck-in product acquisition, to upwards of $30 million, $35 million kind of range and somewhere in that. We, I think, be very comfortable with looking again for that diamond in the rough that we can polish and see the growth. And maybe I'll turn it over to you to Duncan to talk about the financial.

Yes, sure. And those ranges make sense. I mean, obviously, the lower end of that range, we can probably move a lot quicker as of right now, as we go up that range, then looking at additional sources of capital comes into play, but anything in that range is certainly something that's doable. As you get above and beyond that, then it becomes a slightly different story, but it doesn't mean that that's necessarily off the table for the right opportunity. I mean any M&A activity is about -- is at good valuation, a good technology, a good fit. Does it make sense? So we always have to assess that. We don't have a prescribed number that we're necessarily looking at.

Yes, I think that's a good point. We don't exclude something, let's say, $50 million or $100 million. We'll still do the evaluation, and then we'll discuss it.

So Scott, one of the questions I have is when you look at heat and when you look at cameras, what is the obvious synergy that I might be missing in that? Is there anything on the product side? Is it sales side?

So it's more on the sales side. It's more on the structure of actually how we go to market. I don't see a whole lot of cameras on our induction heating systems today. But what you do see is the same integrators that are doing heating solutions that buy from us today also do cameras for their mechanical handling lines or systems. So we're talking to the same people that we built relationships up through the years through Ambrell. Now we can introduce Videology, an opportunity that they never had before, as a sole proprietorship business at limited scope. So it really gives a bigger sales footprint, sales introduction footprint out there that this smaller business didn't have. And as I mentioned before, the other key thing that we've done is been able to take the knowledge base that we have in Ambrell, expand that into Videology, something that they were desperate for before we got there.

Okay. Another one from the webcast. Do you foresee potential impacts of de-globalization on the 5-point strategy?

Yes, there is a lot of regionalization efforts going on, as we all know, across the globe, which we believe will absolutely benefit us depending on where we're located. And if we get the right infrastructure in place in other regions, we can benefit from that as well. So we don't see it as a threat, to be honest with you. We see it as an opportunity.

Duncan, the numbers guy, I saved the hardest question for you. Without looking at numbers, do you have any idea on kind of the volatility within your sales on a year-by-year basis within the cycle backwards looking and where you think that's going with the diversification that you now have?

Sure. I mean, obviously, historically, when this business was very squarely in the back-end, semi space, the volatility fairly significant based upon that particular sector. I think there's 2 things. Obviously, we're driving towards greater diversification, both within semi, by the way, we talk about front end and back end as well as outside of semi. So that, in and of itself, helps smooth that volatility. Also, I think it's fair to say. I mean, the secular trends in semi is a very broad sector. It looks like they're going to smooth out. The long-term trends there are certainly positive. I mean yes, there's going to be volatility. But I think as that sector continues to mature and is ever maturing, that volatility will lessen over time. So the combination of that combined with the diversification into more front-end applications, the diversification outside of semi and the growth opportunities we're seeing there, I think that helps give us more predictability than we've had in the past. Does that help?

And then maybe just a question for Rich. I know you mentioned you're targeting accretive acquisitions. Obviously, gross margin is a component of that. But how do you prioritize sort of the gross margin profile of target companies?

Yes. That's a good question. I think the major focus that we focus on less so on the gross margin and more on the strategic fit. The strategic fit in the technology components that it adds, we'll combine that together with the financial performance, of course. But also areas where we think we can add to the improvement of that gross margin, again, polishing that diamond.

Yes. And with that strategic fit, because we are a technology company delivering the highly valued solutions. We're looking for companies that fit in that, that are aligned. And typically, their margins aren't too far deviant from where we are. Typically, if we're not going out and looking for a commodity, one that's going to be very dilutive to us. So it's again, that, that strategic fit aligns -- they'll -- won't have a big impact. I don't know, Duncan, anything to add?

Yes. And I'd just say you obviously talked about the fact that your revenue growth is the number one, and we want to maintain our profitability and cash flow. So I think the story here is a top line growth story. With that top line growth comes operational leverage opportunities around leveraging corporate costs, leveraging operational SG&A within the businesses. And obviously, we'd look to continue to do that. We're not looking to squeeze cost to drive your margin percentages. We're relatively comfortable with that overall profitability of the business. So really that we want to maintain that, grow that top line and the profitability will, well to some extent, take care of itself with that growth.

That's a question for Scott. I want to take you back to Ambrell to a time where before you were there, right? So there was the acquisition, the purchase price, I remember Westing was $40 million. There was an earn-out, was based on 8x EBITDA 5. It was earned. And literally, the quarter after that, the business went south and somehow didn't deliver, to the puzzlement of a lot of people. And since then, it seems like you came in, and it seems like now we -- on a new growth trajectory for that business, and you've announced some really amazing kind of relationships. And Help us understand what happened and what was that dip and how are you growing again? Is it new customers, new partnerships, new relationships?

Right. So of course, it's all me. No. So it's interesting. When I was at GE, they had a very simple rule they would never do an earn-out ever. And I think this is a good example of why. They did the earn out. None of the leadership is here that did any of this anymore, and I don't like to speak ill of people's decisions at the time, but what happens, so 2020 hindsight. They did an earn-out. They left the leadership in place of the business that had a very large stake in the success of that earn-out. So they squeezed the business down to as minimal as possible to maximize that earn-out and they achieved it. Unfortunately, to the detriment of any future growth near term, when I arrived in the business, we were coming down. we had really damaged the sales force. We reduced our relationships with our distributors out there. We stopped our development pipeline. I was brought in to turn that around. And we've been successful with that. We've definitely been able to build our relationship with some key OEMs that can always drive that baseload of your business, although risky because, of course, if they stop, you you've come down, but that's why we've made sure that we have not let our foot off the gas when we've gotten some nice OEM orders recently, we continue to expand into new spaces, expand our sales footprint and expand our products.

So you'll do earn-outs going forward?

Not if I have it.

Differently. I'm against the stu**d earn-outs...

It's got to be a right earn-out.

You've got to be very, very careful on how you structure the earn-out. There's no question about it.

Prior management bragged about that, how good that earn-out.

Yes. And then they probably didn't say too much about it afterwards. Did they?

No, but absolutely. If it's -- if the individuals staying on or has an impact to help try take us to the next level, but it's got to be structured properly.

Structural revenue growth, EBITDA, all kinds of stuff.

Exactly.

I'm more interested in the -- and if you're going to -- like you say, purchase a business where the leadership stays on. You got to give them encouragement that grows the overall business of inTEST, not just that division, which is what they have done at that time.

And then maybe for Nick and Duncan. I'm not trying to put you guys on the spot. But if we look at that slide for Q1 and 2022 guidance, is that just a statement of fact? Or should we assume you still feel comfortable with those ranges?

I haven't changed the numbers. I didn't come out and say those numbers have changed. So I'll let that statement stand by itself.

Given that was 3 weeks old, too. It was...

So's it seems like your service offerings can increase nicely, especially with Acculogic and there's some like nice low-hanging fruit there. With the slow uptake, is that largely just due to the pandemic? Or is there maybe some like labor necessity, needing to increase the labor pool to get on sites and whatnot?

Yes. No, absolutely, the pandemic was an inhibitor, slowed us down. The labor talent throughout '21, first, at least -- heavily in the first half, we struggled to get the talent we needed that improved in the second half, and we're in a pretty good position here in 2021. It's now more, I'd say, supply chain is the bigger challenge than labor now. But yes, no, definitely talent was part of the inhibitor as well as the COVID out there. I don't know if you guys have any other comments.

Yes. I was just really tough last year to get customers to let you on-site to talk through different ways she can support them. And it was almost -- for most of the year, you're only going if it was an emergency.

Yes. And I'll even add that varied from region to region throughout the world as well. Travel in the U.S. was different than travel in Europe was different than travel in Asia, and we had to approach each specific scenario in a different way.

So from the webcast, somebody's asking relative to a comment that you made, Joe, you mentioned an exciting opportunity where a tester OEM that has its own line of manipulators is looking to adopt some of your advanced technology. So how big is this captive market? And what percent of that market is right for share gains or a move to outsourcing merchant suppliers like inTEST?

Bunch of different parts there to that. It's a significant opportunity. We don't necessarily expect them to go to our manipulator for everything. It's going to be a gradual process where we'll be ramping it up over time, at least that's the plan for it. So that's -- it will be -- it will grow over time. That's our expectation with it. It's not something that's going to come in and fundamentally change the business this year or next year from something like that. What was the other parts of it? Okay. Yes, we're working very closely with a number of OEMs in the test space. We've got a number of our global account managers focused on OEMs and trying to partner with them on specific projects so that we can get in different niches. I mentioned the power management. We've got different applications there that we're doing. We've got things that are going on with certain RF products. So we're trying to be product specific, where we can add value to them and where we can provide something that's better than what they have today.

The margins in that business would be similar or less lower growth below OpEx. Just...

Yes.

Just repeat the question.

The margin in the OEM business would be equal to corporate averages or would it be a different mix and a similar pretax?

I would say it would be -- as far as corporate averages, yes, equal to that. Some of the margins or some of the products are pretty strong. So if we got a high-volume OEM, it wouldn't be quite as good. But overall, I think that we would work out pretty well.

Can you talk a little bit about how you prioritize your OpEx spending as you move towards that $200 million sales goal?

Yes. I mean, as I think as I tried to touch on a little bit, I mean, whenever we're investing dollars, whether it's OpEx, CapEx, we need to be thinking about, well, what we're getting for that is aligned with our strategy. So if we're investing in additional selling resources, marketing resources, what we're going to get from that, what's the likely return. So constantly thinking about it that way, I mean there are some additional elements as we scale that we have to think about supporting the overall business. But keeping that kind of modest. We do believe there's good operating leverage opportunity over the piece with respect to leveraging our existing kind of cost base. But we really should be keeping as the north star, as I kind of said, let's focus on the 5-point strategy, which is primarily focused on driving that top line. Are we growing market share? Are we increasing serviceable addressable market? So whether it be spend towards innovation or around the sales and marketing side. I mean that's what we constantly need to think about. And if people are wanting to add headcount or want to do that, that's always the question that we need to be asking ourselves and are asking ourselves.

Another question for Scott. You have quite a few competitors. It seems like you develop solutions for specific customers and you work hard at it. And how sticky is the customer I mean, once you have a customer, are they then doing an RFP and trying to say, okay, now we know how to do it, and we'll tell people how to do it and they try to bid you out. And it goes both ways, right? If your customers are sticky, your competitors' customers are sticky, so how does that market -- what's the dynamics of the market from a stickiness and a growth perspective?

So the answer very simply is it's very sticky. The secret to the induction heating business is our labs and our ability to be able to show that solution to customers. And in many cases, customers have told us this is going to pay for itself in weeks. So would you go to somebody else that maybe knows how to do it and try to tell them how we did it and find out 5 weeks later that, oh, this is all screwed up and come back to Ambrell, no. So once we prove out that technology in our lab, we get sales. And they don't spend a whole lot of time going out there. Now granted, yes, if you have an OEM that's going to purchase a large volume, they're going to look around, but we can be very competitive. And we bring a great history of products availability, meantime between failure that really second to none, we believe, in the marketplace. So we -- the stickiness is absolutely there. And the great thing is once we solve 1 problem for us, they realize, oh, my gosh, I have 10 other applications that I can bring to them as well, and they do.

So you have labs in Rochester?

So I have multiple labs. I have a lab in Rochester. I have a lab in Europe, in the Netherlands, and I have a partner lab in Italy that we're supporting directly, a partner lab in Mexico that we're supporting directly. And then I have another distributors across Asia and in Eastern Europe that we have labs located that we have done a lot of training with those partners. And if they ever get into a difficult situation, they'll either bring us in directly or virtually these days, but those labs are really the key to the solution.

So another one from our webcast audience. What valuations are you seeing in the acquisition pipeline?

Yes. The valuations are varying depending on where the companies are coming from. So usually, if the process is coming from investment banker kind of strategy. It's a little bit on the higher side, say, in the mid 12% to 15% range, something like that, times EBITDA. If it's a private company or acquisition in that range, it's usually in the single digits in that space. We try to look at those valuations and address them accordingly and of course, look to the lower ones, if we can, so.

When you came aboard you used the phrase low-hanging fruit for organic revenue growth. So if this -- let's change that. If this were a baseball game, which inning would each division be in for organic revenue growth in...

Excellent question because the Board and I use this analogy as well. And overall, we feel like we're probably in the bottom of the second, top of the third inning from that perspective. You heard a lot. We made tremendous progress this past year, but we've got pretty big ambitions, so.

I just don't think we've seen it in the numbers yet.

We grew 58% last year.

It was the cycle.

No, some of it was the cycle. Some of it was our innovation, our investments to get better coverage out there. The markets we're going after and penetrating into was absolutely not just market tailwinds. So we're in the, like I said, overall in the early innings of this. And we believe the investments we made are going to continue to drive that, and that's why we're very comfortable in our targets that we've laid out there.

And a follow-up. Without any future acquisitions, which division has the most revenue in 2025?

Future acquisitions, I don't know. Duncan, what's your take?

Well, these guys are -- well, should we go out in the hallway and wrestle, guys?

Because each of them are 1/3 of us roughly today. We've got pretty solid growth across all 3 out there. So it's not going to be like 1 is just tremendously taking all the growth and the other 2 were just relatively flat. All 3 are aggressively growing in their markets. I would -- and even though the small Z-Sciences was a product line acquisition, it opens up tremendous growth opportunity for iTS. The Videology, we've talked about, the Acculogic, again, more lifestyle businesses that just underpenetrated. So we see all 3 growing. And in fact, I would say there's not one that stands out better than the others.

Yes. It's usually another sporting analogy. I mean it's a good horse race between all 3, to be honest with you. There's opportunity in all 3, and let's keep an eye on that.

It's a good question, though.

One place and show.

I was taking the steel cage match.

Yes, another one from the webcast. You spoke about how the organization structure is evolving at the business. Can you discuss how incentives are changing at the divisional and Board level? Is there an example -- is there, for example, an incentive payment tied to the long-term revenue goal of $250 million?

So I'll talk about the company. The Board's incentives are decided by the comp committee out there, and that -- but from a company perspective, we absolutely have aligned our incentives relative to bonuses and stock around our objectives that we're growing the company, each of the leaders, and we've gone deeper into the organization to the next layers to incentivize and provide that. And we use a mixture of annual target setting as well as 3-year performance objectives laid out there in our stock awards in that. So yes, we are aligning and it's all about paper performance, that mentality we're driving.

So following up on kind of the volatility in fixed income control as you grow inorganically. If you think of kind of the average cycle going from 100% down to 40% peak quarter to trough quarter, and you roll that forward to your $250 million number. The question is inTEST has clearly been profitable on a cross-cycle basis historically. Can you actually think in this next cycle, you'll attain profitability in your trough quarter?

I mean I believe those historic cycles somewhat overlap a little bit. I mean I think this front-end semi back-end, semi dynamic is actually a very important one because we do see those moving in a slightly different fashion. So back-end moderating a little bit, which we've kind of talked about coming off the historic highs of last year, but we're still seeing high record kind of numbers there. But as that starts to moderate, we're seeing the opportunities in front end, you're all looking strong. And then as that cycle continues, we expect to see again a similar flip flop. So we're certainly, as we project out 12 months, 24 months, we're looking at that dynamic. Obviously, as that dynamic evolves and if it's not evolving that way, then we need to adjust as appropriate but the growth in the other sectors that we see as coming on board helps kind of reduce that. So we're looking a little bit further out looking at it on that kind of basis, and really seeing, as I answered previously, that, that volatility stabilizes somewhat versus what we've seen before, where the exposure purely on back-end semi led to the dynamic that you're talking about.

And I would say that with that lessening or dampening of the volatility or what have you, the company has demonstrated it's been able to deliver profitability before years through the cycles on that. So that only positions us better going forward.

All right. Again, from the webcast. Can you talk about the impact of rising interest rates?

It sounds like a Duncan question.

Sure. I mean last year, obviously, interest rate is a very favorable environment. As you've seen, as I talked about, we did go out, borrowed money on the back of that. I think we borrowed $20 million. We effectively fixed the interest rate of $12 million of that. The $8 million is kind of floating. I mean we will deal with the market environment at the time with respect to interest rates. And we have flexibility around raising capital, as I talked about in terms of debt versus equity, I mean there's different mechanisms. So we'll have to assess a particular point in time what makes sense. I mean if interest rates are crazy, and doesn't make sense to enter into more debt, then we'll look into different avenues. So I mean it depends. I mean we have to look at the market conditions that prevail at the time.

Any more questions?

I think I'm okay still with this. But no, then that will conclude our Investor Day today. Again, first ever for the company. Hopefully, you really get a sense that things are different here at inTEST. And I'm excited about what the future holds, excited about the team we've got in place. And yes, I look forward to updating you in the quarters and years ahead. So thank you all. For those that are in the room here present, we have the demos, which we will be now be able to show you in that and then lunch immediately following. So thank you again.