inTEST Corporation (AMEX:INTT) Q4 2025 Earnings Call Transcript

inTEST Corporation (AMEX:INTT) Q4 2025 Earnings Call Transcript February 27, 2026

inTEST Corporation misses on earnings expectations. Reported EPS is $0.1012 EPS, expectations were $0.16.

Operator: Greetings. Welcome to inTEST Corporation’s fourth quarter 2025 financial results conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note that today’s conference is being recorded. At this time, I will now turn the conference over to Sanjay Hurry, Investor Relations. Please go ahead, Sanjay.

Sanjay Hurry: Good morning, everyone, and thank you for joining us. With me on the call are Nick Grant, President and Chief Executive Officer, and Duncan Gilmour, Chief Financial Officer and Treasurer. The earnings press release was issued this morning as well as the slides that management will use during this call. Both can be found in the Investor Relations section of the intest.com website. Please turn to slide two for a review of the safe harbor statement. During this call, management will make some forward-looking statements about our current plans, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is stated here today.

These risks, uncertainties, and other factors are provided in the earnings release as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. Also, as covered in slide three, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating the company’s performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today’s release and slides. With that, I will turn the call over to Nick. Good morning, Nick.

Nick Grant: Good morning, Sanjay, and thank you. Good morning, everyone. Thanks for joining us on our fourth quarter and year-end 2025 earnings call. We will begin today’s discussion on slide four of the presentation. Our fourth quarter results represent a strong finish to a challenging year. Much of this challenge stemmed from customer hesitation to spend on capital projects driven by tariff and macroeconomic uncertainties as well as ongoing soft demand in our semi business. After seeing some pockets of customers move forward, with capital projects in the third quarter, we continue to see strong demand in the fourth quarter as our orders once again exceeded $37 million. As a result, we delivered revenue of $32.8 million that was above our guidance range, and we ended the year with a healthy year-end backlog of $53.9 million, representing a 36% increase over year-end 2024.

I want to personally thank the entire inTEST Corporation team for their hard work and steadfast dedication. Revenue for the fourth quarter was at the highest quarterly level for the year, which benefited from approximately $2 million related to orders that slipped out from the third quarter. Demonstrating the effectiveness of our diversification strategy, fourth quarter revenue reflected strength in industrial, defense and aerospace, and life sciences end markets. In addition, growing market acceptance of our new products introduced over the past several quarters, particularly from Alphamation and from Archaeologic, contributed meaningfully to the top line and progressed us towards our Vision 2030 target of generating 25% of revenue from new products.

During the fourth quarter, we benefited from the cost actions taken across the businesses throughout the year. We continue to execute manufacturing efficiency initiatives and further scaled our Malaysia operation to support customers in the region. Our efforts were further complemented by growing customer adoption of new products that drove incremental revenue and a margin lift. Through effective execution of our diversification strategy, we delivered gross margins of 45.4%. Notably, this was achieved without a significant contribution from our semi business, historically one of our highest margin end markets. Revenue diversification and new product innovation are two key pillars of our Vision 2030 growth strategy. With nearly 80% of fourth quarter revenue derived from non-semi end markets and momentum in new product sales contributing to revenue and gross margin, we believe our strategy is working.

Market diversification is creating broader order opportunities for us and fertile ground for new product adoption, while our innovative new products are resonating with customers and earning their place in their purchasing decisions. With that context in place, let’s go deeper on orders and backlog for the fourth quarter on slide five. After deferring spending plans due to tariffs and macroeconomic uncertainties in the first half of the year, we continue to see customers move away from a wait-and-see mode in the fourth quarter as they recognized that the cost of delay increasingly outweighed perceived market risk. The momentum in our order book demonstrated demand engineered through deliberate end-market focus. This strategy enables us to expand our addressable market and diversification into higher growth, less semi-correlated verticals.

In fact, over the past five years, our non-semi revenues have grown at approximately a 20% CAGR, which is something we are quite proud of. Equally important, the momentum in our order book also reflects customer adoption in end markets where we are still in the early stages of penetration. During the fourth quarter, we saw continued strength in our life sciences orders as they tripled sequentially, reflecting strong bookings for new alkylation products. Encouragingly, semi orders were up about 18% sequentially as some customers began to move forward with plans to provision new test facilities, a trend that builds on the modest order growth recorded between the second and third quarters. Year over year, Q4 orders were up 22%, an increase of $800,000 versus Q4 2024.

This improvement was broad based with strength in auto EV, life sciences, defense and aerospace, and safety and security, partially offset by continued softness in semi. On a full-year basis, life sciences orders were up 137% year over year, auto EV orders were up 89%, and industrial was up 53%. Touching on our semi business, year-over-year orders were down from a year-ago period and represented about 25% of total orders this past Q4, compared to 40% for 2024. This is a compelling testament to our deliberate market diversification strategy succeeding in lessening our exposure to the cyclicality of the semi business. We ended the year with a healthy backlog of $53.9 million, up 9% sequentially and 36% year over year. Backlog bottomed in 2025 and has steadily improved since.

Approximately 60% of our backlog is expected to ship beyond 2026, providing forward visibility into the year. With a higher and more diversified backlog exiting 2025, we are in a solid position for recovering growth in 2026. With that, I will turn it over to Duncan to walk through the financial results in detail, starting with revenue on slide six. Duncan, over to you.

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

Although demand trends in 2025 dampened volume and revenue, roughly three quarters of the nearly $17 million decline between our 2024 revenue and our 2025 revenue was directly attributable to semiconductor market weakness. The remainder reflected a slower-than-anticipated capital spending recovery in our non-semiconductor end markets. Moving to slide seven. Gross margin expanded 350 basis points sequentially from 41.9% in Q3 2025 to 45.4% in Q4 2025. This improvement was driven by volume gains and higher sales of new Alphamation products, which provided a lift to consolidated gross margin as these differentiated, innovative solutions carry higher margin profiles relative to our legacy product portfolio. Notably, as Nick previously mentioned, we achieved Q4’s gross margin level without a significant contribution from Semi.

On a year-over-year basis, fourth quarter gross margin expanded by 570 basis points. The expansion was driven by the lapping of a $1.6 million one-time acquisition-related inventory step-up charge that pushed the Q4 2024 margin down 430 basis points, and the remaining 140 basis point increase reflected improved operating leverage because of cost reduction and manufacturing efficiency initiatives implemented throughout 2025. It also reflects a favorable product mix shift toward higher margin Alphamation products. On a full-year basis, normalizing for the 120 basis point full-year impact of the inventory step-up, full-year 2025 gross margin of 43% reflected a modest underlying decline versus the prior year, driven primarily by lower revenue volume in our Semi end market that reduced our ability to spread fixed manufacturing costs across a larger revenue base.

Moving on to slide eight. Operating expenses for the fourth quarter were $13.6 million, an increase of $1.4 million sequentially, driven primarily by higher sales commissions and marketing activity commensurate with the higher levels of revenue in the quarter. We generated $6.6 million in incremental revenue while absorbing only $1.4 million in incremental operating expenses, which resulted in a reduction in operating expenses as a percentage of revenue to 41.5%. This reduction is the operating leverage profile we expect to see as revenue scales, and it reinforces our confidence that the cost discipline we have maintained throughout this cycle positions inTEST Corporation to expand margins as market conditions continue to improve. Fourth quarter 2025 operating expenses increased $1.2 million year over year, rising from $12.5 million in Q4 2024 to $13.6 million in Q4 2025.

The comparison includes a nonrecurring $800,000 amortization credit recorded in Q4 2024 tied to the finalization of Alphamation purchase accounting, while Q4 2025 absorbed $200,000 of restructuring charges. Stripping out these nonrecurring and acquisition-related items, underlying operating expenses remained effectively flat year over year. Slides nine and ten collectively illustrate our Q4 profitability. Starting with slide nine, for the fourth quarter, net income was $1.2 million. Adjusted EBITDA was $3.2 million, representing an adjusted EBITDA margin of 9.7%. You can see here the improvements in adjusted EBITDA for Q4 2025 from the Q3 2025 trough of $400,000 at a 1.5% margin. This demonstrates our operational leverage as revenue recovers.

For the full year 2025, net loss was $2.5 million. Adjusted EBITDA was $4.0 million, representing an adjusted EBITDA margin of 3.5%, compared to $10.8 million and an 8.3% margin in full year 2024. On slide 10, on a per-share basis, net income was $0.10 per diluted share. Adjusted EPS, which adds back tax-affected acquired intangible amortization charges and restructuring charges, was $0.16 per diluted share. For the full year 2025, net loss was $0.21 per share. Adjusted net income, which adds back tax-affected acquired intangible amortization charges and restructuring charges, was $800,000, or $0.06 adjusted EPS. This compares to an adjusted EPS of $0.51 in the prior year. Slide 11 shows our capital structure and cash flow. We reduced debt by $1.4 million in Q4 and by $7.6 million in 2025.

Total debt outstanding at the end of the year was $7.5 million. We ended the year with approximately $58 million in liquidity, including cash, cash equivalents, and restricted cash of $18.1 million. We also maintain full access to our $30 million delayed draw term loan facility and our $10 million revolver. Our ability to generate cash and maintain substantial liquidity even in a challenging macroeconomic environment positions us well to scale the business and achieve our Vision 2030 goals. With respect to the waiver on our term loan entered into last August, we expect to return to full compliance with our original covenant terms by midyear, with no anticipated impact on interest expense or reported profitability. Turning to slide 12 and our 2026 guidance.

We entered the year with a healthy backlog, 60% of which we expect to ship after the first quarter. Combined with positive indications of a gradual broadening recovery in capital spending that began to take shape in 2025, we expect 2026 will be a year of returning growth. As a result, we are comfortable resuming our practice of offering guidance for the full year 2026 as well as the first quarter of the year. Against this backdrop—strong backlog, improving demand, a leaner cost structure, and growing new product contributions—we are well positioned for profitable growth throughout 2026. For Q1 2026, we project revenue of $31 million to $33 million, gross margin of approximately 44%—this is a step down from the 45.4% we delivered in Q4, primarily reflecting expected Q1 product and customer mix versus Q4’s particularly favorable Alphamation contribution—operating expenses of $13.3 million to $13.7 million, Q1 operating expenses reflect the typical first-quarter annual compensation resets, and amortization of $800,000.

Before walking through the specifics of our full-year guidance, I note that our guidance does not contemplate any material impact, positive or negative, from changes in tariff policy or the broader geopolitical environment. For the full year 2026, we project revenue of $125 million to $130 million. At the midpoint, this represents growth of approximately 12% over 2025, or $113.8 million. This guidance reflects the diversified demand, particularly in Industrial, Aerospace and Defense, Auto EV, and Life Sciences, supported by our growing backlog, but does not contemplate a meaningful rebound in Semi sales; gross margin of approximately 45%—this reflects the combination of higher volume, the capture of continued manufacturing efficiency, and the expanding contribution of new higher-margin products; and operating expenses of $53 million to $55 million, reflecting higher variable selling costs, amortization of $2.6 million, and interest expense of approximately $300,000, with an effective tax rate of approximately 18%.

We expect amortization expenses to be higher in the first half of the year than in the second half as certain intangible assets reach the end of their amortization lives. And finally, we expect capital expenditures of 1% to 2% of revenue, consistent with our historical investment levels. With that, if you turn to slide 13, I will now turn the call back over to Nick.

Nick Grant: Thanks, Duncan. In summary, the momentum we are seeing across new product and market diversification and geographic reach is the direct result of a deliberate strategy and disciplined execution. Our non-semiconductor business has grown meaningfully, improving inTEST Corporation’s long-term earnings profile with less dependency on semi cyclicality. The establishment of our Malaysia manufacturing hub in 2023 and expanded European footprint due to the acquisition of Alphamation in 2024 positions us to better serve customers. They also enable us to deepen relationships in these regions that represent significant long-term opportunities. In addition, our operational excellence initiatives, which are a contributor to our margin improvement story, give us confidence that as conditions improve and we scale the business, we will realize greater operating leverage inherent in our business model.

New product revenue contribution is trending in the right direction, reinforcing our confidence that we are on pace towards our Vision 2030 goal of generating 25% of revenue from new product sales. In Southeast Asia, in Europe, and in the U.S., a local presence enables the engineering collaboration that drives higher-value, long-cycle relationships. And increasingly, it is our new products themselves that are opening doors to customers who are discovering us for the first time and to others who are rediscovering inTEST Corporation. We enter 2026 well positioned for diversified growth as capital spending strengthens, with an expanding portfolio of highly valued engineered solutions, a growing in-region presence across key geographies, and a strong balance sheet.

We are poised to translate the structural changes we have made to inTEST Corporation over the past two years into sustainable, profitable growth for our shareholders. With that, operator, please open the call for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question at this time, you may press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question is from the line of Maxwell Michaelis with Lake Street Capital Markets. Please proceed with your question.

Q&A Session

Maxwell Michaelis: Hey, guys. Congratulations on the good quarter and the solid guide for 2026. First question is just around the semi space here. I was hoping you can elaborate a little bit. You talked about modest growth picking up in the back half of 2026. A lot of the companies that I am following have been talking about sort of a strong order rebound in the back half of 2026. Is your language in the press release sort of just a case of you guys being ultra conservative? Or, I mean, what else can you guys kind of provide us around the semi space?

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

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

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

Maxwell Michaelis: Great. Last one for me, guys. Life sciences has really taken off here. I mean, is there anything else you can share? I mean, pockets of strength that you are seeing in life sciences that is really driving this solid growth in orders and revenue?

Nick Grant: Yeah. No. Life science is a bright spot for sure. And this really concentrated effort we have made to go after the med tech space, testing various technology in this area, and, you know, it is really broader across all the businesses, had really nice success with Alphamation diversifying them in the med tech space with some glucometer electronic testing. We did a press release on that in the second half last year and continue to see good momentum there. We have been winning applications at our Archaeologic group around med tech and, you know, even in process technology. We are gaining applications there around induction heating and imaging in the med tech area. So really pleased with the progress. It is one of the areas that we highlighted as, you know, still a low-penetration area for us, so we think it will be a good growth avenue for us.

Maxwell Michaelis: Alrighty. Thanks, guys.

Nick Grant: Thanks, Max.

Operator: Our next question is from the line of Dick Ryan with Oak Ridge. Please proceed with your questions.

Dick Ryan: Thank you. And also good job on a strong finish, guys. I have a—I want to go back to the semi side. If we can talk a little bit about the back end and your front end, and maybe it focuses more on the positioning, you know, up and down the line, semicap is talking about a strong WFE for this year. Your back end, you know, typically is kind of lagged back as back end test is a little bit out of sync with what happens in the front end. But nonetheless, you know, you brought automation into the back end. And how do you think you are positioned on your back end test with some of the new products you have rolled out, the automation?

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

Dick Ryan: Okay. And probably more importantly, I am more interested maybe on the front end. You know, the comments coming out of the silicon carbide space is pretty encouraging. You know, one of the players saying that after the downfall, they are looking for a ramp in ’26 with getting back to the ’24 levels by ’27. I mean, you guys generated, you know, a lot of revenue in that silicon carbide space in the payday ’23, ’24. How are you positioned there? And would you also, you know, kind of echo those comments that you are—you may be seeing some growth come back in, not necessarily ’26, but ’27 and beyond?

Nick Grant: Yeah. We are very well positioned in that space. You know, we are really serving a number of players in the silicon carbide, gallium nitride space, not only on the crystal growth, but on the epitaxy side of things as well. And as those—we have been talking about it—as these technologies get adopted into new applications. You know,

Duncan Gilmour: No. Agreed. As we said, modest increases in Semi baked in. The front end side has been slow. We think the outlook looks great, but we are really not banking on a great deal in 2026.

Dick Ryan: Oh, that is encouraging. Good. Alright. Thanks, guys.

Nick Grant: Thanks, Dick.

Operator: The next question is from the line of Ted Jackson with Northland Securities. Please proceed with your question.

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

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

But we would certainly expect positive margin contribution as and when back end Semi in particular bounces back up. So, I mean, summary, I would say almost yes, yes, and yes to what you have said. Albeit 50 would be probably spectacular. I am not going to say unachievable, but would require a high percentage of that back end Semi contribution.

Ted Jackson: Okay. And then, going kinda into guide, and I am going to keep with this theme, is, you know, the guide you provided shows some, you know, nice solid year-over-year growth. Can you talk a bit about the cadence? Is it the kind of thing where we will see—you have given first-quarter guidance—that we will see continued sequential improvement as we roll through the year? Will there be any type of seasonality within it? And then going back into the revenue guidance, if it is going to be building over the year, and then the back half of the year is going to have more contribution from Semi, should we be thinking of, you know, a bit more of a step up in terms of margin improvement in 2026 vis-à-vis the first?

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

Ted Jackson: Just—okay. Next question. You know, we are well into the first quarter. You have had two quarters in a row now of really nice bookings. Can you give us a little color in terms of what you are seeing with regards to bookings activity, you know, quarter to date and, you know, both in terms of momentum and maybe in terms of sector?

Nick Grant: Yeah. So as noted, we have had really two strong quarters of bookings, and, let us say, really fueled by our automotive exposure at Alphamation on these 2027 model year programs. Our overall funnel is healthy, and, you know, but I would expect Alphamation’s order rate to kind of moderate back a little bit. They have been running at, you know, $12–13 million the last two quarters. That business was, you know, in the $25 million when we bought it, kind of run rate there. So really strong quarters. I think, you know, they are going to continue to see nice booking levels, but more traditional for that kind of business. We also, in Q1, have a little bit of the Lunar New Year kind of impact on some activities out of Asia there.

But slower. But for the most part, the funnels are healthy, and the opportunities are there. If customers move forward with spending as we believe they will here, you know, orders—we are well positioned to deliver on the year we have laid out.

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

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

Ted Jackson: Okay. Alright. Great. Thanks for the time, and, you know, congrats on the quarter and looking forward to 2026.

Nick Grant: Same here, Ted. Thanks.

Operator: At this time, if you would like to ask a question, you may press star 1 from your telephone keypad. Once again, if you would like to ask a question, you can press star 1 at this time. Thank you. At this time, I will turn the floor back to Nick for closing comments.

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

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.