InTest Corporation (INTT) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to inTEST Corporation's 2025 strategy briefing where we are introducing our Vision 2030. My name is Deborah Pawlowski, I am Investor Relations for InTEST Corp. I'm with Alliance Advisors IR. I want to make note for everybody, whether you're on the webcast watching us or here in the room that this is being webcast, and when we get to the Q&A portion, we'll make sure that questions are captured for the webcast as well. I need to make note for you that we may make some forward-looking statements. Well, we actually will, because we're talking about 2030 during the presentation as well as during the Q&A. I just asked that you recognize that there's a lot of risks and uncertainties related to the forward-looking statements. And you can find our disclaimers and the list of risks in all of our documents that are filed with the SEC, which you can find on our website at intest.com. We'll also discuss some non-GAAP financial measures. Reconciliations of those items can also be found on the investor deck on our website. Let me introduce for you today the team, the executive team that we have here. Nick Grant, our President and CEO; and Duncan Gilmour, our Chief Financial Officer, will be doing the strategy briefing this morning. But also joining us, and they'll be a part of the Q&A, our 3 division presidents, Mike Goodrich, Joe McManus and Mike Tanniru. Also here with us today is Rich Rogoff, our Vice President of Corporate Development. New to the inTEST team are [ Kelly Lock ], our Vice President of Information Technology; and Ingrid Smith, our Vice President of Human Resources. Both Kelly and Ingrid joined the company just 3 months ago and are part of what you'll find as Nick goes through his presentation, the advancement of the team and the capabilities as we are expanding into Vision 2030. We have our agenda here. We're going to start by reviewing the progress that we've made since we launched our 5-point strategy in 2021. And we will be defining what our future direction is and how we get to our Vision 2030. We will have the Q&A and then you're all welcome to join us for lunch. Sorry, guys on the web, you can't. But I'm hoping that most of you will stay. So with that, let me introduce Nick Grant, our President and CEO. [Presentation]

Good morning, everyone, and thank you for joining us for our second ever Investor Day for inTEST Corporation. And it's exciting to be coming to you live here from New York Stock Exchange where we had the pleasure to bring in the opening bell this morning. Certainly, it was a bucket list item of mind, so able to check that off feels great. It was quite an event. So -- and please do take Deb up if interested in the tour of the New York Stock Exchange later for those in the audience here. Again, really appreciate you coming in and a little bit about myself background in case you don't know, I have been running large P&Ls for well-recognized industrial conglomerates like Emerson, ABB, AMETEK prior to joining inTEST. And really excited to bring what I've been successful doing in that scaling businesses, both organically and inorganically across my entire career to the inTEST organization. And excited to share with you our next level strategy, Vision 2030. But before we get into that, I want to talk a little bit about some of the accomplishments we've made with our 5-point strategy. So we launched this strategy in 2021. I joined the company in the summer of 2020. And I was the first external CEO brought into inTEST in its 44-year history to really transform this business and unlock the potential of the company. We put the 5-point strategy together and beginning of '21, we launched it really focused on scaling the business and driving innovation and differentiation in the marketplace here and really pleased with the progress we've made, scaling it more than -- almost 2.5x, I should say, in the last 4 years to over $130 million and 3 years -- delivering 3 years of consecutive revenue -- record revenue for the company. The 5-point strategy has provided us a solid foundation for growth, and we're confident we're going to be able to build upon it here going forward. When we put the strategy together, we put some lofty goals in place back in 2020. And we came out of the gates really strong there and really had some nice momentum going. Unfortunately, in the last couple of years, we hit some headwinds with severe market downturns in our 3 largest markets and that being the semiconductors, the automotive EV space as well as the industrial market seeing a slowdown predominantly last year out there. So -- but despite those headwinds, we continued to drive record revenue, and it really is through the strategy execution that we're driving success. So I'm going to spend a little bit of time on each of the strategies and some of the accomplishments we made here. Starting first with the talent and culture. As Deb introduced the nonexecutive team, I couldn't be more proud to have then with me here today to share with us -- with you all the 2030 Vision. And -- but it is critical for the success of the company to get the right talent and then to instill that the right culture needed to deliver the results. And Joe McManus was my first hire as Division President, now Division President for Electronic Test. Duncan came a few months later as I went to upgrade the CFO position for the company and added Rich Rogoff later that year to really help us focus on our M&A strategies and initiatives, and he's been driving -- delivering good success there. And then more recently, I upgraded our division president for the Environmental Technologies with Mike Tanniru, and then last year with Mike Goodrich heading up our process technologies. And then as Deb mentioned, most recent additions are Kelly and Ingrid. Ingrid is the Vice President of Human Resources, and they will successfully move Ingrid into inTEST here to help us take our talent levels to the next -- our talent strategies to the next level. And then Kelly is a new position that we created for our Corporate Vice President of IT and Cybersecurity. Kelly brings a strong background of cybersecurity, and it's an area that we put a lot of focus and effort into and her expertise is really going to help us to take it to the next level, but also ensure we have the right systems to support our growth plans. The shifting the culture was -- is never easy, but I'm really pleased with the progress we made. We've really changed a conservative sleepy type family, own-type business, if you will, culture to performance-driven results oriented. We did this through a performance management system we put in place. We align pay with performance, objectives we set out tied to pay. We've increased our stock award program. We also launched an employee stock purchase program out there for all of our employees to benefit as inTEST drive success. We implemented talent reviews to ensure we're building the bench strengths that we won. We created the inTEST Leadership Academy, the first-ever talent development program inside the company. And we focused heavily on improving our communications, both internally and externally here, which was evident of the very first Investor Day we had. And now the second one here, in the company's history. So really pleased with the cultural shift and transformation that we've been driving and the team we have in place. Looking at geographic and market expansion. The chart up there really talk speaks to itself. We've made tremendous progress in this area. When I joined the company, back-end SEMI was roughly 2/3 of the business. Shown here is 2021, the first year -- end of the first year out there, but it still was roughly around 2/3. But you can see the progress we made focusing on target markets, driving innovation around those target markets, identifying companies and adding into our portfolio that opened up these markets and gave us a stronger presence in these areas. And really pleased with where we sit today. The company is much more diversified and much better positioned to be able to weather cycles as it just did in the last couple of years here. So I really believe we're in a great position going forward. Shifting to innovation and differentiation, something near and dear to me. This is another area we've made great progress, really putting in new product development processes into the company, creating road maps, product development road maps, having technology reviews, investing in engineering adding companies that brought new engineering know-how and capability into the company that we could leverage across the group. And this whole shift of driving from -- moving from a one-off customer-specific design to more market-driven solutions has really made an impact for our organization, and I believe we're well positioned there. Just highlighting a couple of examples of innovation. These 2 were from our Electronic Test division. The first, the top picture there is an automated manipulator. This back-end semi test space has predominantly done a lot of manual manipulators moving test heads in and out as they change operations. We've been automating that operation. And what you're seeing here is really a manipulator is picking up a 2,500-pound test head and being able to move it over into the operation and precisely place it into its location for the next test operation to begin out there, which is not an easy task when you're talking those kind of weights and precision that's needed out there. So our LS 8 Series manipulators, really a great development that we've done to bring automation to that back-end changeover space in semi test. The bottom is highlighting our power cell. This is a high-power, high-current test interface solution that's really geared towards these higher power modules, power management devices, chips out there that are becoming more and more important, especially as you think about the build-out of data, AI data centers and everything else, these powerful chips are needed and being able to test these chips at these power levels as something we've got a lot of expertise in and we're leveraging out there. So really 2 great examples within the Electronic Test division. Shifting to service and support. The scenario that we've also made good progress, had a bit of a slow start coming out of COVID, we really couldn't get our sales coverage optimized, getting out to see customers like we wanted, but we certainly move the needle afterwards and made some really nice progress more than doubling our service staffing, both through direct investments as well as the acquisitions, more than 2.5x service level growth over the last 4 years, gotten the service revenues up to about 11% of sales. I want to continue to see that climb going forward here. Again, 15% to 20% is kind of where we're targeting. But the teams are doing a great job, developing smarter products, diagnostics built into the products to help customers understand potential needs for maintenance as well as us provide monitoring capabilities as a service to the customers. And the team have now taken it to the next level with -- we've got a lot of data, our testers and systems provide, and we're looking to develop these software solutions to help them leverage that data more effectively, help them gain more better insights into their operations. And so we believe these will be added values for the customers with these software solutions that will be coming. And I should mention, I'm just getting over a cold, so you might hear an occasional cough. I apologize for that. But yes, great progress on service and support here as well. And then last but not least is strategic M&A. In the last 4 years, we've completed 3 deals and Acculogic and Videology being the we did at the end of 2021 and then most recently, Alfamation, basically a year ago in 2024 there. And the timing of Alfamation was very impactful for the company, with this all 3 adding really nice technology expansions for us. Acculogic brought test capabilities for our Electronic Test division beyond back-end semi opened up all kinds of attractive markets and applications with circuit board testing as well as battery testing. Videology, the acquisition expanded our process technologies beyond induction heating, adding image capture and the business hasn't quite performed as we would have liked when we acquired it. We found there was a lot of underinvestment prior to the acquisition there, and we had a first 18, 24 months, really, doing a lot of end-of-life camera updates and dealing with components. We had a supply challenge of 2021, '22 there as well. But the team -- engineering team now is really able to focus and deliver some revolutionary products into the marketplace, the SCAiLX that we introduced is the first ever edge AI camera that the company introduced and really seeing some nice momentum there in that. So we believe that we'll get that right back on track here very soon. And I mentioned Alfamation, the timing and then the company with its large backlog that we were able to bring over. But had a major impact with the $25 million last year, but it's the technology that they bring around testing of infotainment systems, displays, lighting automotive lighting, onboard computing systems of cars that really excites us about this whole electronification of vehicles is going to be a great fit for us. So that's the 5 elements of our strategy, and we've made a lot of good progress. One of the things that enabled us to be able to do that was restructuring the business around 3 technology divisions. If you haven't met the 3 leaders of the divisions are here, please do spend some time with them over lunch. Joe McManus heads up the Electronic Test; Mike Tanniru, the Environmental Technologies; and Mike Goodrich over Process Technologies. And what we did when -- we restructured IT around these technology platforms with the companies we had and we created a bit of a 3-horse race to really focus on our growth strategy or executing our 5-point and seeing who could pull ahead and when we look at Electronic Test as a bit -- is our largest today. We've done a couple of deals in that space. Process technology, also the acquisition of Videology. And we've been working diligently to expand beyond thermal and environmental tests -- or technologies here. Unfortunately, we haven't been successful in getting a deal closed yet, but more to come on that as we -- it's still an objective to move beyond thermal. And what I'm going to do is go into each division a little bit more to give you a little insight into the technologies, but more importantly, give you some examples of the applications. One of the biggest things that we get questions about is how does that technology apply? So hopefully, this will help you understand this a little bit better. Starting first with Electronic Test. The Electronic Test is all about automated test solutions. That's what we've been focused on that we're building up and the solutions range from docking solutions to battery test to flying probe to automotive, electronics and optical test today. And the -- we serve a wide variety of markets in that space as listed there. Why we win is really our engineering expertise, our know-how, our knowledge to be able to solve these difficult challenge for customers. And then you add to that our multiple test capabilities that we can integrate into the systems out there. It really helps to differentiate. And this -- setting the standard for quality is very accurate. Our teams really are delivering some of the best performance out in the marketplace and customers recognize that. So what you see here on the right-hand side of the of the slide is, again, our manipulator that moves test heads in and out. These test heads are used in the back-end semi test space for chips. And these chips end up in a wide variety of applications in the marketplace out there. Looking at our integrated circuit board testing here. This is from our Acculogic acquisition, and they have the most flexible systems on the marketplace today. And our teams have really done a nice job to develop new products, new test heads, new test solutions within these flying probe systems to really enhance the customers' capabilities or test capabilities within one system rather than having to have a different system to test this function and this function, and this function, we can do a lot in one system. And so it provides best-in-class test coverage for the customer. And that is extremely beneficial in their operations but also in their quality control. So they know the systems or the products are working as they should when they come out. The battery test solutions that they've leveraged this flying probe technology around batteries, again, expanding all kinds of testing capabilities around that and opening up a wide variety of battery testing applications. When we acquired the company, it was predominantly automotive EV batteries. And the teams have really diversified moving into batteries for drones, batteries for boats, batteries for golf carts, batteries for hearing aids. These testers are finding homes into a wide variety of battery test applications. And then Alfamation, the leading really automotive test provider for the displays, the infotainment systems, the lighting and onboard computing systems and vehicles as well as some consumer electronic applications and life sciences out there. Types of tests are really audio, video, haptic power management and in-vehicle testing. They're doing all kinds of testing of these devices before they get put into the cars. And typically, these are higher-volume testers, very automated loading, unloading, robotic movements of the testers in and out because you can think about the volumes associated with the automotive industry out there. And automation capability is something we're leveraging across our entire group as we try to drive more automated solutions out there in that. So great addition, excited about, again, as I mentioned, the amount of new technology going in the cars is not going to lessen. And so it positions us extremely well future growth in that space. And then applying it outside of automotive is also an area we wish to focus on here. Shifting to Process Technologies. This is the -- I'd say, the most applicable solutions we have across applications and markets across our portfolio here. Our induction heating solutions can be used anywhere there's a need to join materials, [ bras, ] weld, the slip fitting, you name it, the induction heating but anywhere there's a need for high temperature, precise control and a long duration test temperature applicability is an ideal fit. And we've shown here on the right is the -- our EKOHEAT product, which is our higher end, higher power size induction heating solutions, which is doing a preheat for a weld on utility poles. That's just one example of an application that's been quite successful for us. You can imagine there's a lot of utility poles around the globe out there. Then within the Process Technologies, we've added our image capture solutions with Videology. These are really board-level cameras that get designed into a wide variety of applications out there as well.The -- our expertise, really, is about designing the right camera with around the customer specifications for their specific board that goes into a device or an application out there, and the small footprint of the design is what separates us apart. So I'll give you a little bit more example here. First, so the induction heating, one of the areas we've had really great success over the last 4 years was supporting silicon carbide and gallium nitride with our induction heating solutions. Again, I mentioned about the high temperature, tight control over long periods of time. Our induction heating solutions, really, supports silicon carbide crystal growth which can run up to 3 weeks at high temperatures, very tight control to allow for those boules to grow out there. And so it's really a great fit for it. Another area in that space is epitaxy, GaN epitaxi is once the wafers, the GaN materials [ boules ] are cut into wafers, they are then built up through an epitaxi process, a [ CBD ]. And again, higher temperatures, very controlled environment to allow for a precision building of these wafers. And so that duration of temperature control is critical. And so induction heating is a great solution there. As I mentioned, it helped drive quite a bit of growth for us the last couple of years. And while we're seeing a bit of a pause in that space with -- as the capacity that's been installed is being consumed, and we've -- the slowdown in automotive is certainly driving the less need for products right now, but that's going to change. The products, these technologies, silicon carbide, gallium nitride are finding their homes in a wide variety of new applications, data centers, electrical distribution, charging stations you name it, it's only going to drive the need for more and more of our solutions going forward. So we believe it will be a good growth avenue continued for us in the future. And shifting to the Videology, our industrial cameras or board-level cameras, again, they can range anything from traffic systems to tanks -- cameras on tanks. But what I'm showing here are 3 examples of 1 being an underwater inspection system. This is a -- the cameras embedded into systems that are going and inspecting pipelines under waters, et cetera, the integrity of the systems there that are mounted on trains that really are monitoring the safety around the platforms, these train stations when they come in and out and people loading, unloading on the trains. Another area is health care, where they are used in ophthalmic or optomic inspection, optical inspection of eyes and retinas and et cetera. So just again, the number of applications is numerous. And it's about -- for both of these businesses and it's our technologies, and it's about us identifying the application proving to the customer the right solutions exist in designing the right cameras, et cetera, or the right profile for the induction heating and then getting embedded into their future systems as they go forward, and it delivers a long-term success for us. And so we're excited about the growth ahead for process technology. Last but not least, environmental technologies. This today is really our precision control temperature control division products resides. And as I mentioned, we look to move beyond temperature in the future here, but these temperature solutions are used also in numerous applications, circuit boards, electronic testing, chillers, process chillers and some very critical markets. Why we win is really we are able to offer the broadest range of temperature solutions in the industry out there and leveraging our full portfolio of chambers and chillers and thermo stream-type systems out there. We have the most extreme conditions being able to go 185 negative Celsius up to 500 in a very tightly controlled change -- test change over. We also are able to provide the most rapid changing over of test -- of these temperatures, tightly controlling the speed at which we can fluctuate between that. And as you can imagine, electronics and applications are getting more and more complex and being able to simulate what kind of conditions are out there and putting these things under extreme test is critical. What you see here on the right is an example of that. The -- our -- I'd say, our traditional customers in this back-end semi space, R&D or developing products, they reached out and they've been developing higher-powered chips that create a lot of heat and a traditional cooling of an Air Force system, air cool system isn't enough to cool down the chip during their development cycles and what have you. So we work with them to develop and integrate our process chiller into the application using a direct contact probe on the device which then these allowed the customer to get the results they were looking for. These type chips are used in a wide variety of AI data center-type applications out there in the world, and that space is only going to continue to grow. So we -- again, our broad solution of not only having air force, We now have a chiller-based type solution combination with the customer driving success. And those are the kind of complex challenges we solve. Another example here is just more traditional aerospace, defense, industrial, electronics. Again, these things require site temperature cycling, ensuring product quality. We make them the best chambers in the markets. And these things are able to support some of the most critical applications, such as defense missile systems out there. So yes, really a unique position from our temperature testing solutions out there, and we look to build beyond that. So that's the 3 technology divisions and what we've accomplished out there and not everything goes as to plan. When you put a plan again, Duncan will tell you immediately, it's usually out the window. You just hope to get closer or -- in that. But the -- we've reflected on the last 4 years, what went right, what didn't go so well, what we need to be doing better, and we've kind of generated a list of areas we'll be focusing on, and we've built into our 2030 Vision here. And first and foremost, the speed of talent development and acquisition was one of the areas we said we need to spend a little more time getting more speed at which we move on some of the talent, bringing the talent in. I've got a great team. I only wish I had him 4 years ago, all in place, and we'd be better off here. Operational excellence is another area we said, okay, we've got great technologies. We've made a lot of progress around moving from one-off to more standardized solutions. Now we've got to really focus on driving operational excellence and taking our businesses to the next level from an operations perspective. So that will be a key avenue we spend time on in 2030 here, Vision 2030. And the other I mentioned on it is innovation. We've developed a number of new products, launched successful products in the marketplace. But I'd like to -- we all agree, we want to accelerate that time to market and speed of new products out there. And we've got a new vitality index. We'll be launching here, which part of our 2030 Vision. So I won't cover them all, but I think it's very important to always kind of reflect back and see how we can improve ourselves and continuous improvement out there. Let's move forward here, Vision 2030. We really spent some time over a year working, developing, fine-tuning and really excited about what we've accomplished and where we're going here over the next 5 years. We strongly believe our 5-point strategy has laid a strong foundation for us, a great foundation for us to build off of. If we've got the right areas of focus, we've got the right team. We've really ingrained this into the culture of inTEST. It's kind of become our business operating rhythm, if you will. And so this 5-point strategy is what we're continuing to drive but becoming more of a business operating system for us and then focusing on some different changes within each of the different strategies here to advance our growth plans forward here, accelerate scaling the business, driving innovation and successful M&A going forward, but also operationally moving into the next level. So I'm going to go into a little more detail around these things. And what we said is an aspiration for 2030 is really, basically, doubling the business again by 2030. And we did it before, and I'm confident we can do it again and why are we confident here is because we've got great technologies. We're in the right markets, and we strongly believe our business -- core businesses can grow organically high single digits, 7% to 9%, above market, taking share, but not excessive growth needed to be -- we can deliver the 7% to 9% through the cycle. We also have a healthy pipeline of M&A. We've been putting out -- building relationships, identifying targets and forming the future, hopefully, when they're ready to sell, we're able to bring them in and deliver another $50 million to $60 million of acquired revenue over the next 5 years. And then we would expect those businesses to grow as we bring them in and capture synergies out there. So basically, using the 2025 midpoint of our guidance of $130 million delivering to a midpoint of $260 million by 2030 out there, a 15% CAGR. And we have been smarter at this time, I would say, as well the -- knowing better understanding our markets, our targets, our industries that we're in, we've factored in market cycles, traditional back-end semi cycles, automotive slowdowns in our next 5 years. And we aren't counting on a major rebound in front-end semi silicon carbide gallium nitride. We believe it will be growth, good growth for us, but we aren't banking that in to be able to achieve our $50 million to $70 million of organic growth out there. And our pipeline supports where we want to go there. So we're excited about the new goals we've laid in place here. And Again, we're focused on the right target markets, semi, auto EV, defense aero, industrial, life sciences, safety and security. All these markets have market growth rates forecasted that will support our plans out there. And we're uniquely positioned with our custom solutions or engineered solutions to be able to support customers in these attractive markets. And our playground is plenty big enough, a $2 billion service addressable market. And we believe our solutions will continue to be value for customers going forward here. We also believe there are some nice megatrends that are providing tailwinds for us here. I've touched on electronification. I mean it's about everything, not only in cars, your homes, industrial plants, the automation that's happening across the globe. We're well positioned out there to benefit as new technologies become -- get incorporated into everyday life, it all needs to be tested. That's good for us. The power management. These things require power, batteries, things and more mobility out there, that all requires testing, and it's good for us. Complexity. Our world -- things don't get easier. Chips are getting more and more complex, smaller. The things around us more and more smarter around on that. So again, all creating the need for testing and various applications, defense, aero, the commercial space, you name it. So we're well positioned around these megatrends that we see the benefit going forward here. We have a great global footprint that we can leverage to support our customers around the globe. We've got historically a strong North American footprint from a manufacturing perspective that we support our customers out of, but with the acquisition of Alfamation in Italy, it added really a large footprint in Europe for us that we can do a better job supporting customers out of Europe from. And then the investments we've made in our Malaysia facility gives us a nice manufacturing footprint in Southeast Asia to better support customers with -- in the region for the region type strategy out there. So I believe we're well positioned to support customers around the globe, but we're always challenging ourselves on where do we need to invest in the next manufacturing location to better serve customers, where is the next shared site needed like the Malaysia one we're doing so we can capture economy of scales and benefit across the entire corporation there. And so the teams in the next 5 years, we anticipate we'll be launching another regional site somewhere. The innovation, again, critical. We've made some really good progress. We started tracking new product sales for the company as a percent of total sales in 2023. We started building the NPD processes when I came on board, getting the engineers, getting the road maps launching new products. And -- so we've set a goal here to get new products as a percent of sales up to 25% by 2030. You can see it finished just under 13% last year. And what we define as new products is products that have been launched within the prior 5 years. And why we are using 5 years, some of my past 3 has been more normal. But for our industries and our type products, it's -- we're conservative -- we're dealing with conservative customers, conservative industries, it usually takes a good 18 months of getting customers to accept the products, trying it, work through their processes around the products before we start seeing any kind of scale around the new product launches out there. So 5 years is really the right window for us. And then we want to make sure we're touching and refreshing products every 5 years and keeping evergreen for customers out there. And innovation is indeed the lifeblood of inTEST and setting this goal of 25% is certainly achievable for us. Just a few examples of some new products that we launched over the last few years here. The first one on the left is our benchtop ThermoStream. We had an air cooled system in the past, had been around for over a decade. And we really didn't have a chiller-based benchtop or compressor-based benchtop system. And so the teams worked to develop really the best benchtop on the marketplace out there and really used for cooling electronics during test. And the -- so launched that product really a little over a year ago and seeing some nice interest in the marketplace with that. The middle one is our EKOHEAT compact. This came out about 3 years ago, where we took the footprint of our larger EKOHEAT systems and shrink it by 1/3 to really help support customers that are designing these systems into very critical floor space applications where footprint really matters. And it has been a nice growth engine for us over the last few years with this smaller footprint for that business. And then on the right-hand side is the most recent example from the company we acquired Alfamation out there. They've launched their Flexmedia family of test analyzers. This is a very modular test solution for customers, and we actually use these in our test systems building up our -- the internals of our test systems, but now we can sell these modules to our customers and using their rack-mounted type in-house type test solutions as well. And there's a wide variety of testing, whether it's audio, video, haptic, you name it type test solutions that these things are capable of. So we're excited about that product that got launched within the last couple of years as well from Alfamation. So yes, innovation is key for us. And then strategic M&A will continue to remain an important element of our Vision 2030 growth strategy. We've been successful with the acquisitions we've got. The prior acquisitions focused on adding technology offerings, expanding what we're doing. Going forward here in our $50 million to $60 million of acquired revenue target, we're really focusing more on a roll up now. We've got the existing base, excluding the iTS, we want to move still at some business beyond thermal into -- in that space. But looking to scale the existing businesses we have with more bolt-on roll-up type application -- opportunities, also looking more service revenue enhancing type opportunities as well. We'll keep an eye on the geographic expansion objectives we're setting in place with these companies support us out there. We're looking at companies in that $20 million to $40 million in size. That's really the sweet spot for us. The first couple we did were like $10 million, required a lot of work to get the systems and get them into place, the $25 million acquisition of Alfamation, really a well-established business and a great fit for us. So we're focused in those areas. And we're looking at companies that again, bolt-on but deepen our presence in these target markets we've laid out there and one's with well-defined achievable synergies, of course, roll-ups will have more cost synergy opportunities bringing a chance to potentially rationalize some products, et cetera. But yes, M&A will be extremely important for us going forward as we continue to scale the company. And then I mentioned this earlier, but the shift to operational excellence. I've been part of it throughout my entire career at Emerson and AMETEK and ABB here, taking these businesses, these smaller businesses now and moving them to the next sophisticated level of operational excellence, employing Lean Six Sigma discipline across the groups, really identifying waste, eliminating waste, streamlining the operations cells out there and having a measurable impact on our bottom line as we try to capture these operational improvements and synergies going forward. And the team is fully behind this and really believe this will be a key focus for us and have a nice impact going forward and not only for us but also for our customers as we think about the benefits they see and improve lead times, improved quality, et cetera, out there. So the shift towards operational excellence is something we'll be driving hard going forward. With that, now let me turn it over to Duncan to walk you through the financial strategy since I've discussed high-level growth strategies. Duncan?

Thank you, Nick, and thanks to all of you for being here in person today or a great venue. I think we can win all agree. And I'd also like to thank all the people joining us on the webcast and even those who are watching this on replay. So thanks to everyone for your interest in inTEST. Just a quick personal introduction, Duncan Gilmour, CFO. I've been with inTEST for almost 4 years. Prior to that, I worked for 4 years at ABB, where I actually crossed paths and worked with Nick. Before that, I spent 13 years within the Tyco organization, finance roles with industrial products businesses across ABB and Tyco. Before that, going back into the midst of time, I was in public accounting for about 10 years with PwC. Anyway, that's enough about me. Nick has highlighted how we believe we're poised to succeed. Hopefully, you got a lot out of the last number of slides and presentations, but how does that then translate into the numbers? So first, let's take a look at our financial priorities. And I think as you may have gathered in listening to Nick's presentations, I mean, firstly, we want to manage our organic investments to drive profitable growth. Nick highlighted a number of opportunities around innovation, around favorable megatrends and markets. So ensuring we're getting our share and more of the market growth in the places where we play is one of our #1 priorities. Secondly, you also heard us talk a little bit about operational excellence and focus on Lean Six Sigma and some of those areas. So more focus on driving margin expansion with our existing portfolio of businesses, ensuring we're pricing appropriately, getting the value that we deserve for our products in the marketplace, focusing on balancing demand, the demand situation with our costs and just driving that operational efficiency mentality throughout the organization to help improve that bottom line performance. Another element of that with our existing portfolio is ensuring we're driving working capital velocity, collecting quicker, paying slower, turning our inventory quicker. All of that helps what is a good cash generating business historically and has been over the course of the last number of years, just helps ensure we continue that and do an even better job of generating operating cash. And then with that operating cash, we can then really focus on delivering synergistic M&A that drives future growth and returns. We've done about -- added about $45 million plus of revenue from acquisitions over the course of the last 4 or 5 years. Those businesses, those products, applications are now in our base and are part of our organic opportunity going forward, which delivers nice contribution. We have the cost base there, so organic growth delivers nicely to the bottom line. But we need to continue to fuel that going forward with our M&A and inorganic ambitions as we look to the future of the organization. And then finally, let's not forget we will opportunistically look at returning capital to shareholders as conditions permit. As a reminder, an important piece, our bridge to Vision 2030 in terms of top line. So this actually, I'd just point out, the starting point here is our 2025 guidance, $125 million to $135 million. We are guiding -- we have guided to a relatively flat year at this point. We do see, as Nick highlighted, and as I just talked about, $50 million to $70 million of opportunity, a 7% to 9% CAGR from 2025 in organic growth opportunities. And then on top of that, the $50 million to $60 million new acquisitions, depending on timing, we would then anticipate growth would come with those as well, getting us to the $235 million to $285 million target, let's call it, $260 million, the $130 million to $260 million, doubling the business by 2030. How does this translate into profits? Starting on the left, at the midpoint of those goals, the $260 million and with a blend of organic and inorganic contribution, we're striving to deliver 20% division operating income, profit generated from our operating businesses. That considers that we're growing our spending, slower than we're growing the top line. As I mentioned, with respect to priorities, we have the cost base. Yes, we need to add to that, and we need to invest in innovation, invest in organic growth, but we can do that at a slower rate than we can drive the top line. Inorganic contributions are less impactful in the short term, but they're very important to ongoing process. Again, as I mentioned, we added $45 million of revenue, which then becomes part of our -- is part of our portfolio, helps fuel our organic growth opportunities in this Vision 2030 time frame. We need to continue doing that as we continue to grow the company. Going from division operating income after considering corporate costs, intangible amortization, interest expense and taxes, we target getting to 10% net income on that ballpark $260 million top line. And then on the far right, adjusted EBITDA, adding back those interest assumptions, tax, depreciation, amortization and stock-based compensation. We continue to target a 15% of revenue metric. We do consider adjusted EBITDA is a reasonable proxy for the operating cash generation capability of the business. And on the topic of cash, and moving back to where we are today, let's talk a little bit about our balance sheet and sources of capital. So we ended 2024 with just under $20 million in cash and solid operating cash generation, especially in the second half of '24. As a reminder, we did borrow money about $20 million in 2021 for the first time in the company's history to finance the Videology and Acculogic acquisitions. And we did also assume some debt in conjunction with the Alfamation acquisition. We have been and we'll continue to steadily pay down that debt in line with the terms, and we ended in 2024 with about $15 million of debt or a total debt to trailing 12-month adjusted EBITDA ratio of 1.4x. And I highlight that just because we have talked and when we look at ourselves, we don't want to extend ourselves beyond a 2.5% total debt to pro forma trailing 12-month EBITDA metric. And I say pro forma, we would take into account the financial performance of any target with respect to looking at that leverage ratio. But I think it's important to understand that. We do continue to have $30 million available to us under our acquisition funding facility with our commercial banking partner. And then we also have and have used equity to finance or partially finance M&A for example, with Alfamation, we did pay a small portion of that purchase price by issuing some shares. So overall, between available cash, the ongoing cash generation of the business, our debt capacity and availability as well as our ability to leverage equity, we believe we're in a strong position with respect to sources of capital to fuel our both organic and inorganic investment requirements as we move into Vision 2030. As you might expect, hope, our capital allocation priorities, how do we want to use that does mirror our financial priorities. As I mentioned earlier, driving our organic growth, investing in our existing business, I think Nick talked a lot about the opportunities we have with our product portfolio, applications efforts around innovation, operational excellence, et cetera, to take our existing businesses, our existing portfolio of businesses forward. We'll continue to manage our debt position to utilize debt but without overstretching the organization and fueling synergistic M&A, synergistic being key, again, as Nick articulated. It's important as we go forward, we're really looking at deals that fit in nicely from a technological perspective, we can leverage from a cost, a growth synergy standpoint, really looking at one plus one equals 3 as we're moving forward. And again, opportunistically, we will look at returning our capital to investors. Touching a little more on acquisitions. Nick covered some of this. But from a financial characteristic standpoint, just to provide a little bit more color in terms of what we look at, the $20 million to $40 million in size, Nick touched on in terms of a relative sweet spot there. We do look at trying an internal rate of return. We do look at a fairly long tail of cash flows in our projections, but we're looking to see about a 15% IRR when we're assessing potential targets. We're looking for businesses with gross margin profiles and profitability profiles similar to our own around 40% plus gross margins, 10% bottom line margin. They're profit-making businesses that we're looking at. So operationally, we are looking at deals that are operationally accretive, now taken into account the impact of purchase, price accounting and things like that, then possibly dilutive as some of the intangible amortization and things like that, work their way through our financials, but operationally accretive in the first year. And as I said, we are looking to make sure that we're looking for targets and opportunities where we see clear cost synergies, growth synergies, Alfamation, for example, I think we're really excited about the functional test capability that, that business brings combined with the capabilities on in-circuit testing and so on in our Acculogic business, there's a lot of great technological synergies that we're seeing with those 2 businesses as we project forward. So to wrap up, and before I hand it back to Nick. I do want to note that earlier this month, we did host our Q4 and full year conference call. A replay of that call and the related materials are available on our website. So we're not going to reprise that now. As we did discuss on that call, we have seen a soft start to 2025 and our Q1 and full year guidance, which we're reiterating now reflects this. And just to reiterate that more formally, for Q1, revenue in the $27 million to $29 million range for Q1, gross margins around 41%, operating expenses in that $13.6 million to $14 million range. And then full year, as I mentioned, $125 million to $135 million. We are using that as the baseline for the bridges that we presented on a revenue perspective. We do expect gradual profitability throughout 2025, and then a couple of other numbers for modeling purposes, amortization expense, 3.4% tax rate of around 18% and capital expenditures, the 1% to 2% range similar to what we've seen really in the prior number of years. With that, I will now hand it back over to Nick. Thank you.

Thanks, Duncan. And I'll just quickly wrap up here, and then we're going to open it up for Q&A, and I'll have my executive team come on stage here to assist in addressing any questions you may have in the room as well as on the webcast out there. So yes, we've delivered results. Our 5-point strategy has now become the business operating system for us. It's in our DNA. It's in our culture. These 5 strategies are what we drive day in and day out. And it's having an impact. 3 consecutive years of record revenue for the company. So we've got really the right cadence. We've got the right team. We've got the right plans in place here, and it's delivering results. The Five Point strategy laid the foundation. We're taking it to the next level. We're focusing within these five elements in different areas and accelerating and scaling certain focus areas like operational excellence that is all part of our Vision 2030 strategy here for advancing growth. And the targets we've set out, we feel confident in achieving these things, again, doubling the business again to roughly $260 million is our goals, and I'm confident the -- we're well positioned here. As Duncan mentioned, the starting point being conservative 2025 estimates out there, although there's just a lot of uncertainty in the marketplace that we're -- everyone is dealing with right now. But once that uncertainty stabilizes, we should be right back on our moment and we had building the last 3 quarters there. So with that, let me invite the team up, and we'll open it up for Q&A.

Any questions in the room? Maybe start with one first. Yes. Jaeson, go ahead. Yes.

Yes. Just curious how big the service revenue can be. And obviously, you guys are targeting acquisitions that have some service revenue component, just curious sort of what gross margin profile do you think that line can ultimately be as well?

Yes. So from a -- how big can it get to, we truly believe we can get this on a consolidated basis in the 15% to 20% of the top line out there, we've got some businesses doing north of 20% today in the top line. But collectively, we can get into that range. So if we get this to $260 million, the 15% to 20% is kind of where we're focusing on driving that service revenue. Some of it will come from the acquisitions and some targeting service acquisitions, as you said. But that's a good barometer that we're just trying to get to that 15% to 20% range as for profitability...

And I'd say margin-wise, our existing service offerings. There's a number of items, extended warranty, extended maintenance, spare parts, things like that. The margins do tend to be on the higher end of our ranges, which we've talked before about our margins being ranging from the high 50s to generally the low 40s, a couple a little bit low down, unfortunately, but service certainly on the higher end. There's also opportunities with things like software offerings that we're seeing that and the margins on things like that, if we can do that right, we would arguably be much higher than that. So certainly, higher margin not necessarily easy driving that service growth. But we have seen some nice steady improvement in terms of the percentage of our business. So getting there, but definitely a margin driver as we continue to expand that.

Great. Thanks, Jason. Yes.

When you look at the $50 million to $70 million of organic growth in the 2030 numbers, how much of that do you think is a bounce back in your current markets or your current market share? And how much is organic growth you have to fight for and win?

Yes, a great question. And we have seen our core industries kind of experiencing their down cycles here the last couple of years. So we are coming off of what we believe of low again. So -- if we look at how much the core businesses went backwards, we were talking what, maybe 14% to 15% drop from the prior year, back in semi higher -- or semi in general higher, but...

Yes, I would say. I mean, we've seen -- our semi business has dropped 25%, something like that order of magnitude. So that's probably just under $20-or-so million. Our other businesses have been more stagnant, haven't really seen great growth over the course of the last year or so. So I mean, very roughly, I would say that -- again, to throw out a number, there is a good portion of that $50 million to $70 million, which is fair to say, comes from a bounce back in the markets, which, quite honestly, is why we see that 7% to 9% from 2025 base CAGR as being a very realistic organic growth number because there is an element of that market recovery included in there.

Yes. Duncan was highlighting that semi, even though it's down 25% year-over-year, semi for inTEST is still bigger, is up 30% from when I took over in semi. So even though we've seen this slowdown in the cycles, and the front-end pause out there, semi is still an important market for us, and we've done a really nice job of expanding our technology areas, focus areas in semi, our account penetration efforts, and we're much better positioned in semi when it comes back down the road here. Good point. Yes.

Okay. When you look at your M&A pipeline and you have the different -- your business, your platforms, if you would, of your businesses, can you talk about the sort of the mix of opportunity that you see in that pipeline and where most of the activity is and where most of your targets are in terms of M&A opportunity?

Yes. Let me -- maybe I'll let these guys speak. But just in general, as I've said before, our M&A approach is bottoms up. So these leaders are working with their businesses, identifying targets and technologies, companies that would be a good fit for their divisions and our growth plans out there. So as for -- we won't get into specific names of companies, but maybe, Joe, you start with some of the areas you're looking at from a technology perspective.

Yes. So for electronic tests, I think there's 2 areas we're really focused on is, one, I think we've got a really strong semiconductor team, and we're trying to leverage that. And the team is constantly coming up with ideas of different businesses, maybe some more recurring revenue for that business. So we've got a lot of areas there. And then we've seen a ton of synergies between the Alfamation and the Acculogic teams, and we're saying how can we leverage that more and grow in those spaces. So we're looking very much at the businesses, what works for them and what they can contribute to others and what those businesses can contribute to us.

Yes, Mike...

So as Nick talked, environmental technologies right now is only thermal solutions. When I think about acquisition targets, I look at where can we have synergies with the existing business. And our sales guys are out talking to customers all the time. They see applications outside of thermal that right now we can't address. So things like environmental chambers, things like leak testing, things like vibration testing, these are opportunities that we see in the market when we talk to customers where we believe if we had companies in those spaces, we could be successful selling more.

Yes. And from the process tech side, I look at areas that how can we expand beyond just what we provide today? Are there applications that require some level of automation, things like that, that currently go beyond just the capabilities of the base products we provide today that we can then be looking to provide a more complete solution to the end customer. I feel that's one of the important areas that for my group, we need to be looking at how can we be more important to the end customer, helping provide more complete solutions. And so as we look at acquisition opportunities. That's one of the key areas that I feel is important for my group.

I have a question from the web audience real quick here. On 2030 revenue targets, what is implied in terms of cycle? It seems to imply little to no front-end SiC GAN products? And is this assuming mid-cycle trough or peak at 2030?

Yes. So great question. As I mentioned, we tried to factor in market cycles this time better than when we put our original plans together out there. Our back-end semi test is a little more well-defined structured type timing around cycles. So we've kind of factored that in the second half since we're kind of coming out of out of the low point here or the trough of the current cycle. The front-end silicon carbide gallium nitride, this really was the first cycle for that type of industry and just because these are new products, new technologies. And so we saw a nice build-out of capacity and that capacity multiple companies Russian to try to get their capabilities around building boules and wafers and epitaxi on top of the wafers and everything else. Now with that kind of demand soft, the capacity needs to be consumed, I think it's going to be more modulated or more gradual improvement for that space. We're not expecting a big build-out again of capacity. It will be as needed, they'll add another line or excise wafer, et cetera. So we've factored that into a gradual improvement of the front-end semi cycle throughout this next 5 years. Auto also will be cycling, again, coming off of a bit of the low right now. We believe that we're starting to seeing more traction in our automotive customers there here. so that will be factored in as well. So we've tried to look at timing and everything else, and it just varies over the next 5 years. Would you add anything?

Yes. I mean we certainly did versus our prior Investor Day and projections for '25 where we did not really build in a dip in the market. We absolutely have thought about that, looked at that built in an element of softness somewhere over that 6-year period by industry. On SIC and GaN and the products that go into that space in particular, we have not assumed this recovering to the heights we saw, quite frankly, in '22 and '23. We do think it recovers from what we've been seeing in the last couple of quarters, which where that market has been very quiet. But we don't see it hitting the heights of the activity we saw, but we do see it coming back and being a reasonably robust market. So I think we've been quite tempered overall in our expectations as we've laid out our organic picture.

So in the course of your time at inTEST, you've made a handful of acquisitions. And honestly, I'd say all but one of them have, at a minimum, met your expectations and often exceeded them. But the one that didn't where you've gone through your restructuring efforts and you commented on it in your presentation. I wondered if you could spend a little time talking about the lessons that you learned from that experience and how you're applying them going forward.

Yes. Great question, Ted. So yes, you're talking about the Videology acquisition that we did and some of the lessons learned that we plying forward here from our 2030 was, as I mentioned, the $10 million in size, great for us to start with for inTEST as we launched our strategy and get our feet wet. But really, these smaller businesses, less process-oriented systems needing more investments and what have you. Certainly are time-consuming. And so we were looking more at the larger-sized businesses, $20 million to $40 million in size, just more established, more systems and procedures that better support our growth plans out there. That business was -- when we acquired it, and it's been structured this way as with the prior owner had 2 locations and split manufacturing for $10 million business, trying to support customers and one engineering group that trying to manage across the 2 sites. Having this streamlined now with the most recent announcement that we come up is only going to position engineering, operations, customer support, to better serve our customers and drive the growth that we want out there. We're confident having it in one location will generate what we had envisioned out there. So one of the lessons earned is taking that into account and moving faster on setting up the company for success going forward. I would say as a lesson learned out there. But very pleased with the technology, the diversification that's brought to our process technology group. And all 3 are really great businesses long term for us. George you have...

Yes. Thanks for providing the information on the new products as a percentage of sales, find that's great information. But it's kind of low and you have some really pretty ambitious goals to grow that to double that. But I look at your engineering spend and it's gone from [ 7.5%, 7.5% to like 8%, 8.5% ]. And I'm wondering whether you're actually making the engineering spend and having the resources to be able to drive that growth?

Yes. Great question, George. So again, good observation on it being low, I agree with you. But you got to remember, these businesses were predominantly doing customer-specific one-off kind of products. And we are only looking at market-driven new products that are applicable across a wider variety of customers. And that's why we're capturing -- that's what we're capturing in these numbers here. So the more of those we do, the higher that number is going to get. So yes, 25% is the first level of threshold, but I'd love to see that get to 35%, 45% over time here, but I've got to start walk before we run here, if you will and pleased with the progress that we're making out there so -- as a percent of sales investments out there and the R&D side of things, it's always the challenge now is critical to us, and we were growing that top line. So nice -- so fast there for a while we couldn't keep up and more dollars are going to engineering. It's just that the percent stayed and maybe we went backwards a little bit because the top line grew so fast out there. But yes, we've got to get this into that 10 plus percent range of our investments each year going into R&D. But yes, more to be had there.

I mean I'd also say I mean, Nick, threw a metric up there about vitality, about the amount of revenue coming from new products. I mean measuring something tends to drive some focus. So creating more structure internally around looking at that, making sure we understand where we are with that, driving a little bit more process and structure behind it, we believe will help ensure that we're more successful than we have been taking a more hot hazard perhaps approach. So there's an element of, let's measure it and drive it.

sort of going off of that in terms of organic growth and percentage of sales from new products. What sort of CapEx would be needed to support that? And would this be building out existing facilities or expanding into new geographical reaches.

Yes, you want to add?

Yes. Yes, I can touch on that. I mean we mentioned Malaysia, facility in Malaysia that we've been getting up and running over the course of the last 12 to 18 months or so. The business has been a little bit softer as well as we've mentioned. So from a capacity standpoint, we have the footprint to be able to deliver. Really, all of our organic growth aspirations, we don't see significant capital requirements with respect to facilities or footprint or anything like that. We have the capacity. In terms of things like new product introduction, innovation, I mean, investing in our engineering resources, investing in sales and marketing resources to drive organic growth is something, I think, on the financial priorities. I talked about investing in our organic growth. So yes, there's some spending there. The key is we're spending at a rate that's slower than our growth rate and we can monitor that and ensure we're doing that to ensure we're driving the profitability and seeing that contribution fall. But on innovation and the sales and marketing side, it's more about getting the right people on the bus and in place to drive that. From a capital perspective, we're not particularly capital intensive. And as I said, there's no major capital investments that we see as necessary in order to deliver our organic growth ambitions.

Yes. 100% agree with everything Duncan said there. With the caveat that, as I mentioned, we will be targeting the next region for a Malaysia-type investment at some point. But that will be driving future growth for -- within that region out there, again, minimal investment and we've done Malaysia within our 1% to 2% of each year. And so yes, I think CapEx is not a concern. Question from John, then we'll comeback to...

Can you talk a little bit about what goes on the commercial side and maybe this differs across the business units to drive the organic growth and drive the expansion across other markets as you're also somewhere and maybe it's different by the markets, transitioning from the customer-centric solutions to the more standardized one. Where are you in terms of that transition or if needed on the commercial side, are you at the stage now where investments need to be made to drive that organic growth in the business units or are you at the stage where we'll begin to see more operating leverage there across those units?

Yes. So from an organic growth perspective, it really varies across the businesses. And I can touch high level and then they can comment even more specifics on it. But when you think about our Electronic Test business out there, the really strategic account focus is the name of the game there. The back-end semi players, finite number of them, how do we get more share of their wallet, how do we displace competition. And so that drives our organic growth and innovation gives us more share of wallet as we add more value around our products and also opens up new customers out there. Same for these Tier 1 automotive electronics suppliers, finite number of those companies that are doing electronic dashboards and infotainment systems, et cetera, et cetera. So it's all about key account focus and driving success. When you think about process technologies, the induction heating systems and camera solutions, it's about finding the applications. It's about generating the leads about working with the customer design, the right induction heating solution recipe around their application, the coil needed to heat the product accurately, the onboard camera system that gets designed into their next-generation optical inspection system or whatever it may be. It's about working with the customers, but identifying the companies, finding those leads and that's what the team's focused on is through lead generation more so than key account focus. And then iTS, our Environmental Technologies is somewhere in between. They've got certain products that very well. established leading positions in back-end semi with high -- the number of finite strong customers or well-defined customers and then the chillers are used in a whole wide variety of applications that we got to just find that the leads, the opportunities and convert them over to sales. But you guys, anything to add?

I would say, as Nick said, even within electronic tests, it kind of varies a little bit by business. For our semiconductor business, I think we've got the right team and the right organization and it's just getting much more aggressive with getting our products into customers, taking different approaches than we did in the past to get these leading Tier A semi manufacturers to use our equipment when they use our equipment, we know they're going to like it. We know it's going to be successful for them and then that just promotes the penetration. But just being more aggressive with getting the equipment in is a big change, I think we've made because we've been developing the right equipment. Now it's -- we've got to get them to take it. I'd say on the -- with the Alfamation and the Acculogic businesses, it's a little bit different. We're still, I'll say, investing in the team, getting the exact right team in place to go after the market there with the products and developing the new products. We've got a lot of good new products with Alfamation, we got to get it in front of more people. So it's a different approaches based upon the businesses and the markets.

For environmental tech, if I look historically at our commercial organization, it had been very reactive. We had a certain set of semiconductor customers We were good at servicing them, and we took orders from them, but we weren't as proactive commercial organization as I'm used to. We've made significant upgrades to the commercial organization. We've changed out reps and distributors. We brought in new sales leadership that have that perspective. So if I look at the semiconductor market, Nick highlighted a application where we historically with our air streams have sold to this customer. And for many years, they've been happy with that solution. They're seeing more high-power applications come through their R&D process. And the air streams are not sufficient to provide the cooling capacity for the higher power chips. And we're able to use our expanded portfolio of industrial process chillers to satisfy a new developing market within our semiconductor customers. And then if you look at our industrial and our mil/aero space, we have to get our name out there as a solutions provider. We hear from customers every day that we didn't know that there was thermal solutions available to test this type of product. It really fits what we need to do from a product reliability perspective. So on that side, it is critical for us to get our name out there with marketing and web presence and just visiting more customers to expand our organic sales in that space.

Yes. And from the induction heating side, I think we've done a really good job generally of from the marketing side, webinars, trade shows, things like that. I think one of the areas that we're starting to put more focus on is, okay, there's applications that typically we haven't engaged in just because it's kind of outside of our comfort zone. And looking at those, whether it's things that we can do directly or are there partners that we can work with that are in those spaces already, starting to work with those are starting to establish those kinds of relationships so that we can plug into more an even broader band of applications. That's where a lot of focus is going on right now on the Ambrell side. We always look at our sales partners and evaluating them. I think we've got a really nice sales partner establishment right now. But of course, we always look at them and evaluate, okay, does this make sense? Do we need to make a change, things like that. And so that's kind of an ongoing process. On the Videology side, it's -- we've put a lot of effort into working with partners that can help, again, take our individual solutions, products and develop them into a more complete solution or help sell them as a more complete solution. So taking an example, product like SCAiLX and working with a company that builds AI models. They can take our hardware, match it with their software. And again that becomes a more complete solution to the end customer. And then how can we start to cross market those kinds of opportunities. And so that's where we're putting a lot of time in now. And I think that's going to be one of the key drivers for Videology as we expand some of these new products into the market space.

Okay. I understand. We have 1 from the webcast. And then we'll come back to the front table.

This question is related to profitability and to what extent will profitability vary based on business mix, higher-margin, lower-margin businesses and peak versus trough of the cycles.

Yes. So let me take that. I mean profitability is always going to be driven by volume and mix. So peak trough of the cycle is more of a volume thing to a certain extent. And I would say, volume is probably #1 with mix a close second. We've seen in the past that our higher-margin products. We've talked extensively that our back-end semi test business tends to command higher margins across our portfolio. So when that business is stronger towards a peak, we see slightly higher profitability. But every dollar of revenue drives nice contribution. We see strong operating leverage from every dollar of organic revenue across our businesses because all of our businesses command solid margins. So that volume piece is always important. And unfortunately, in the same way we see lots of positive leverage as volume goes up when volume comes down that's a hard tied to fight as we've been seeing. So yes, we see those things. They've been very visible. I would argue in our numbers over the course of the last number of quarters. But as we look at Vision 2030 and look at the aggregate of where we can get to, I mean, why we believe we can comfortably get to the margin percentages that we're quoting is that we can clearly see the contribution that comes from those incremental revenue streams as they come back up. I touched on, we have the capacity. We don't need to add crazy amounts of cost. Yes, we need to invest in selling and marketing initiatives and engineering, but we don't have massive investments to make in order to drive the growth in our business. So the contribution is there over that aggregate. But yes, short term peaks, troughs mix, absolutely going to have going to have an impact as we clearly see.

Henry, you have a question?

Commentary on the current competitive landscape that inTEST operates in? And then also how is inTEST capitalized relative to the peers?

Yes. I'll just say that and then I'll let the Vision President speak again here. There's not really like a direct inTEST competitor. No one really has a similar profile of technology companies that we have. So they each compete within their divisions with customers that are more fragmented than that. So maybe we'll let you guys speak, Mike go ahead.

For environmental tech, we're similar. We don't have one competitor since we have industrial process chillers. We have competitors in that space. We have the air streams we have competitors in that space, but we don't have somebody who can do that full breadth of solutions. So that's a big advantage for us. When we're in a customer that has a chip application that's a lower power historical using an air stream and they come up and say, "Hey, I have a high-power application, your air stream doesn't seem to have enough, competitors air streams also don't have enough cooling capacity, we have an industrial process chiller. So that gives us an advantage in that space. And when we look outside of that to just the pure industrial process chiller space, it's such a huge market for us. Right now, we're a smaller player in that market. We have plenty of addressable market to be able to grow without directly taking market share because there are just so many opportunities in that space for us. So it varies depending on what market we're playing in.

Yes. And on the induction heating side, there's actually quite a bit in the competitive space. There's a lot of companies that do induction heating. What we see is we get a lot of positive feedback on quality responsiveness, service. I think that's one of the areas that Ambrell has put a lot of focus on and has helped differentiate us against. The other main players that we see in that space. On the Videology side, there's a lot of camera companies out there. What we see is, one of the things that I feel sets us apart is, again, our willingness to work with customers on finding a solution versus more of an off-the-shelf type product. We get a lot of requests interest in, okay, I'm looking for a solution that does X and us being able to work with them and develop those solutions, I think, is one of the key areas that sets us apart, along with understanding that right now, there's a big push against products that come from China. We know we're not going to compete from a price standpoint on products that come from China, but our customers understand that as well. And so it comes down to a decision of am I going to buy a product that, yes, I can get a lower price, but I'm concerned about the origin versus working with videology where products are made in the U.S., products are made in Europe, and it's a more less risk type solution.

So in Electronic Test, we definitely have good competitors out there, strong businesses. that we're running up against. And across all 3 businesses, I'd say the reason we're going to win is our customers know our technology. They know our engineers. They trust our engineers, and it's our engineers that are really developing the solutions, solving the problems for them and getting us engaged to win. And it's -- that's why the customers are going to choose us versus a competitor. And that goes across all 3 of the businesses. We have engineers that have really good relationships with customers. They've been working with them for 5, 10, 15, 20 couple of cases, maybe 30 years where they know these people for a long time and they trust them. And it's -- that's really what sets us apart from the competition.

We have a question from Jason and then we've got 1 more from the webcast.

You guys have done a nice job diversifying between sort of front end and back end semi. But at a high level, and I guess, longer term, or maybe even 2030, is there a sort of target level of exposure you want a semi market because I have to imagine that will influence sort of the M&A pipeline and more importantly, the priorities within that pipeline?

Yes. Good question. So as you saw on that chart, diversification chart, semi went from 65 down to just under 40. Under 40 is at the low cycles in semi right now. But semi, we'll still -- is an extremely important market for us. As I mentioned, Joe has got some opportunities, targets that we're looking to expand and in that space as well. So semi will always be an important piece, but we'd like to manage that 50% or less kind of exposure with our other investments in other targeted markets of automotive, EV, defense, aero, industrials, et cetera, out there in that. So -- but semi is extremely important for us, and we do quite well in semi. So and then the web we have...

Yes. And this is specific to Alfamation. Can you talk about specific vehicle platforms that Alfamation is 1. And what does the pipeline look like for new design wins?

Yes. I don't know if we can talk about specific platforms with the contracts we have. But yes, it's been very visible. We've been sharing information. After the acquisition, that slowdown in semi has really dampened the orders for Alfamation throughout 2024 there. And in automotive, with the uncertainty we're seeing right now still depressed in the beginning of the year, here, although their pipeline of opportunities really has been growing nicely. These companies are building up a lot of activity and ready to move forward once the economy stabilizes, things understand where the investments need to be made and companies can only go so long without their next model year and next displays and technologies going into cars. So we've seen a really nice ramp up of the funnel and we're confident that they'll be back on track here in not too distant future. would have anything to add, Joe?

Yes. I mean without getting into specific models, we are seeing a big ramp-up of companies getting ready for their 2027 models right now, and that's what the investments are coming for is when they have a new infotainment system, a new central computing system, a new power management system for their cars, we're seeing a lot more in-car networking challenges and testing with that. So those are all things that are -- there's more and more of it coming out in the models, let's say, from 2027 on and that's what we're engaged with customers on right now.

George, I think you had a question. We've got 1 from web and we'll come back to...

I don't know if you can really answer that question, but I'll give it a try for the division managers. If you had an extra $3 million to spend, how would you spend it? Would it be more on sales, more in marketing, more on sort of support and engineering or more really based R&D to try to find something very new.

So for me, it would be just continuing to speed up product development. We've done a lot to speed up product development over the last couple of years, putting processes in place. But we've got no shortage of good ideas between our sales teams who are very technical and our engineering teams and our customers. And it's really feeding those in those challenges from our customers. And the more that we can develop, the more solutions we have, the more we can offer them.

I also would speed up new product development. We've done things like leverage the Malaysia facility. I think very well. We've added engineers in Malaysia. You asked a question about spend on R&D. We've added engineers but not necessarily increased our spend because we've added them in Malaysia. But we have a lot of ideas. And it's focusing the engineers on the ones that we'll get more customers from that is critical for us. So that would be a major investment. And then sales channel-wise, specifically in the industrial space, we could use -- we can always use investment and more feet on the street because it's a large market for us in uncovering applications and visiting customers is critical.

Yes. For Process Tech product development, that would be where I would put a lot of emphasis on as with the others, there's no shortage of ideas and things that we could be working on. having -- being able to grow the bandwidth to take on some of those new opportunities would be great. That's where I would look to make such an investment.

Thanks, guys. We've got one from the web and then Ted will get to you.

Yes. This one is in regards to M&A and a question if inTEST has built a reputation yet in the marketplace that is enabling leads to come to us and maybe expound a little bit on the pipeline itself.

Yes. No, great question. And I would absolutely whole hardly have feel as though we've made a really good impression and are getting word of mouth leads of companies owners coming to us, which is which is fantastic to see. And we put those owners in contact with the previous owners of the companies we acquired to get them comfortable with the process and how things go in that. So I think word of mouth is definitely spreading nicely out there. Oh, Rich, anything you would say?

No, I would add to that I routinely get in calls and e-mails from the likes of analysts and bankers now switch 3 years ago, 4 years ago when I joined the company, I didn't say that. So the pipeline coming in is quite strong. varies from things that we will never fit into our organization, and it's a quick phone call to things that we actually acquire as well as, as Nick mentioned earlier, the bottoms up between the 4 of us, we often work on ideas. Their engineers will come up with ideas or salespeople that will put us in contact and we'll reach out to companies that maybe even haven't thought about selling. So the pipeline is strong. we keep getting new ideas every day, literally this morning. So we keep pushing forward on that.

Yes. .

One thing I'd add to that, as Nick said, is I think some of our best sales in terms of getting that word out there is the key technologies from Acculogic, the owner of Alfamation, but they have big networks out there of people and similar points in their career, and they are saying how it's been great for their businesses and for them personally to work with inTEST. And that's -- I think that's really bringing us a lot of opportunities right now.

Agreed. Okay. Ted?

Yes, I want to jump over to the efficiency efforts that you highlighted like the Six Sigma stuff. And I've actually been involved in some of that when I was working in the industry. And I always found that it was interesting that the easiest dollar to make is the oen that's lying on the floor. So if you could spend a little time talking about the -- what your process is to do that -- what are you looking at? I mean, how are you -- the last business that I was involved with operationally, we were actually assigned targets. Like every year, we had to come up with x amount of cost savings. It was -- Initially, it was actually a really good way to go about it because there was so much around. And then at the end of it, it was kind of not a very good way to go about it. But to understand I'm going like -- or how are you structuring out that activity? How are you staffing it? Are you putting specific people in charge to manage it? And are they going to the businesses and providing goals? Are you looking at systems that you can put in place like ERP to make things more efficiently, just however you want to dive into that deeply because I'd imagine in any business, there's a lot of money to be made just by running it better.

Yes. No, 100% agree, and that's why we're going to shift the focus to that operational excellence. Our rollout plan, and I've seen it successfully. It starts with education. where you're going to get the training for the folks in the facilities and around the Six Sigma Lean Six Sigma discipline and have our manufacturing engineers work with the trainers and the operators in the facilities because you have to engage the people in the facility. They are the ones that know what they're doing day in and day out and what's wasteful and what's not wasteful. And I got to walk over here to do this and walk over here to do that versus creating a cell or what have you. So it's -- we start with the education, we start identifying Kaizen events that we can do within the facilities that will have a quick turnaround, so people can see the payback, see the impact and it just starts snowballing and building and building and just going more and more of these smaller programs that then become bigger programs out there. And eventually, everyone's got it in their DNA and operating that way. And we're driving that excellence that we want across the sites. So we're starting with the training and then over the next few years, it will just be a continued morphing of our facilities and operations out there. And then as for systems, we absolutely challenge ourselves on our systems able to support the growth? Are they keeping up when we do these things better putting in the small acquisitions we talked about, the new ERPs that Videology and Acculogic certainly takes time and getting folks and using optimizing those systems in it. So yes, we're constantly looking to -- from a systems perspective, and Kelly is going to help take us to the next level there and making sure we're rolling out the right systems to support our operational excellence plans. Would you say anything?

Yes. No, no, I agree, and I would also agree with what you're saying. I mean, I mean I'd say a other things. Firstly, as I mentioned on new product development, we need to measure it and drive metrics to make sure we're delivering results. But at the same time, and you sort of referenced it in your question, you can go too far. I mean you can strangle an organization by just creating way too much process around it, and I've seen it happen. So we do need to find the sweet spot. We need to institute the discipline, get the measurement metrics right and drive it ensure it's in the DNA, but at the same time, we do need to be careful because I have seen it go too far and you end up having so much waste in the process of managing the process that is self-defeating, so we do need to make sure we get it right. But absolutely, measurement is key. Clarity of targets is key, tracking, making sure we're making progress. Those are the kind of disciplines we're looking to get in place and continue to drive. .

And we've hired expertise to put that forward, if you hire people that have the black belts and things to -- I mean do you have that internally in-house, that type of expertise at this point?

We don't today. And I would say we've had some of our teams members trained in that area rather than bringing in hiring a new black belt on the floor or what have you. But over time, as we get the culture where it needs to be ingraining these black belts, whether it's upgrading talent we have or adding talent will be an important part of the strategy. Okay, we've got a question from the webcast again.

Yes, I guess we couldn't get away with not having a question on the T word.

Tariffs.

You talked a lot about tariffs and customer conversations at the year-end earnings call. any change in those conversations? Any concerns or further pushouts or how tariffs will impact us?

Yes. I would say it's still very fluid day in and day out on the tariff front there. And we'll see what happens April 2 here with this reciprocal tariffs and what impact that has out there. But we're working very closely with our customers, aligning with their plans and what they need to do as they shift their strategies, their global strategies around, we'll be there to support them. And I think we're well positioned to do that given our global footprint as well. So no major change from my perspective. Would you say anything you've seen?

No, I think it's. I think we highlighted, I mean, one of the biggest things we have a manufacturing business in Canada that makes products and sales quite often into the U.S., so understanding where the tariffs ultimately fall. And it seems those products are 1 day they're on, 1 day, they're off. So a little uncertain there. So I think in the balance of probabilities, it will probably be off for those product lines, but it is an uncertain environment, businesses hit uncertainty, right? There's nothing worse than not really knowing the rules of the game, and there's a little bit of well where is this going to fall out. But I mean, that's certainly one of the bigger areas. For the most part, I mean we're a U.S. manufacturing entity, we source somewhat from overseas, but we also source a lot from the U.S. So broadly speaking, big picture, if the administration is trying to incentivize domestic production, manufacturing and for the most part, in the long run, we should benefit from that. But day-to-day, your case is as good as mine as how that's playing out. But we're obviously looking at it very closely and keeping tabs on where things are playing out.

Great. Anyone else? Ted?

I'm going to shift back over on to the sales. So you have 3 different business units, and they do actually kind of cross-sell into different markets. How do you -- is there an overlap with regards to it as a sales function to where you're going into the same company and you're selling different solutions from different business units of inTEST to the same people? How do you manage that? How do you structure for it?

Yes, I can just talk high level and then maybe these guys can chime in. But 1 of the things Rich has done early on was to create a corporate overview that our sales teams leverage on who inTEST is, our breadth of products and solutions and because they're in there speaking as iTS or as Alfamation or Acculogic, but now they go into their sales meetings with a broader presentation of capabilities for who we are. And so that gives them the chance to open the door people ask questions, they'll engage across the divisions of getting the right people to talk because our people aren't trained on every product across inTEST. So we just want to identify those opportunities, get them connected with the right people and then let those people run with it. But guys, what are you seeing out there? I know, Joe, within your business, you've got a lot more activity cross-selling.

Some of examples of how that's happened.

Examples of how it happened. I mean there's a West Coast EV manufacturer that we're selling multiple products into. We're going in as a group now. I'm going in to visit them. So we're talking about all of our solutions. We're also having cross business and cross division sales discussions, where we're getting people on web calls to get trained on other products, just to get familiar with what they have. So they can recognize opportunities, but we're making joint calls across the divisions. The environmental group and the EMS group are jointly working on a couple of customer projects together, where we're combining semiconductor test solutions with thermal solutions for particular customers. And we like something like that, how did that evolve? Like take an opportunity, you have to say to the customer name, but like you started at this, you recognize this. How was it recognized? How did the other person come in? You have -- then you're bringing 2 salespeople and so the initial sales guy is not just doing the only -- just trying -- I'm kind of curious about -- it starts with the industry and the knowledge of our organization, where one customer, we were working with them on a semiconductor test solution, and they saw that there was a thermal challenge. And so then go through me and they can go through Mike, call the Marketing Director in Massachusetts and said, "Hey, do you have something that can do this. They started talking back and forth. They said, okay, then they start -- bring them the other group in front of the customer start saying, okay, this is really what the challenges are. Can we do it? Yes, and we've jointly worked up a solution for them. So it's the people knowing the organization and knowing what the other businesses do and then going to execute on it.

Yes. And 1 thing we've done is really we've created these cross-divisional collaboration summits. So we have an engineering summit, We have a marketing -- sales and marketing summit and operational somewhere the engineers, the operations, the sales and marketing folks get together the leaders and share best practices, to talk about the technologies, talk about their -- what their expertise, areas of expertise are. So awareness is key. So when they know a customer is asking for this, call up that individual and get them in the right hands.

But so along those lines, we put a lead sharing incentive program in place where if a salesperson from one organization finds an opportunity, whether it's joint or completely separate from what they're working on, they can pass that lead on and there's a mechanism to share, for the sales guy who passed it on to benefit from that. And then I see a big opportunity in production thermal testing and we've been working particularly with Alfamation on where they're doing production test systems, we historically have been in the R&D side of thermal testing they'll bring us into thermal production test opportunities.

Yes. From a process tech standpoint, being the applications are different. We haven't we probably haven't had as much as maybe we could. And it's something that we should probably look more into. I mean certainly, we're pushing that, again, as was highlighted making sure that we're communicating not just our specific applications, product portfolio within whether it's Ambrell or Videology, but also communicating the broader inTEST solution base. But again, testing versus the actual process piece, there just hasn't been that much overlap, not that something we shouldn't look at. It just hasn't been one of the areas we've put a lot of focus on yet.

And just to add to that, 1 thing that we've changed over the course of the last couple of years, we've actually started marketing together trade shows, right? So 4 years ago, you'd comment and an EMS and Ambrell might be at the same trade show, but in different booths on different sides of the aisle. Now we're combining things. We're showing the joint development as well as our Malaysia shared facility where we have engineers working on different product lines, but sitting one desk right next to the other. So they're learning more about their products and cross developing that way.

Yes. Good point. Absolutely.

Looking at the short term, back in the Q4 call, there was a comment made about winning an account back, and I was just wondering what was the rationale behind that account leaving? And then how you guys won that account back?

Yes. So it was price when they left, they are lower-priced solution than our -- in this case, it was a battery test solution out there. And so the company decided they will work to try the other companies System has struggled with it. They get the throughput, the quality that our existing systems were doing. So they now come back to us. And then obviously, recognize now the price and the value is much aligned. I don't know, Joe, if you would add anything more?

No. But it really just came down to performance. I mean they went with a cheaper solution. They realized it wasn't yielding as much productivity from the equipment and it's what they were getting from our older systems, and they came back and said, we need this performance, we needed this productivity. So the equipment sold itself. They had it go down a path and learn for themselves that it was not the right decision, but we were super happy to have them back.

Yes. And then a follow-up about the order pushouts. You mentioned that there's no cancellation just pushing out further into the second half of the year. But there was also a comment about product switching. And I was wondering maybe what area that product switching is in? And if this is a business-specific thing you're seeing or if it's a general trend in that industry?

Yes. I would say it's pretty specific to that industry in that particular case with our induction heating systems. So Mike, I don't know if you want to give a high-level.

Yes. So my understanding, the product switching was just an end-use demand requirement. And so moving from 1 specification of heating unit to a different specification unit based on the end customer needs. And so -- yes. I mean those are the things we look at and try to monitor and work with customers on to understand what their demands are and what their needs are. But especially in some of these spaces where there's just a lot of uncertainty right now. It's -- they're trying to best serve their end customers and continue to work with them to drive their business and then some of that falls back with making some of those changes on our side.

All right. Well, that concludes our strategy briefing and hopefully, you guys found this to be beneficial. Hopefully, you can appreciate the accomplishments we've been able to achieve with the 5-point strategy. And hopefully, you're excited about our Vision 2030 and where we're taking the company as we advance our next-level growth strategy. So thank you all.