8-K: inTEST Corp Reports Strong Q4 2024 Results; Renews $10 Million Stock Repurchase Plan

inTEST Corporation announced a 31% increase in fourth-quarter revenue and an 87% increase in operating income year-over-year, while also renewing its stock repurchase plan.

Summary

• inTEST Corporation reported a record revenue of $36.6 million for the fourth quarter of 2024, a 31% increase year-over-year.
• Operating income increased by 87% to $2.1 million, representing 5.7% of sales.
• Net earnings saw a 3% increase to $1.5 million, while adjusted EBITDA increased by 82% to $4.4 million.
• Orders improved by 11% year-over-year and 9% sequentially to $30.7 million.
• The company generated $3.8 million in cash from operations in 2024 and paid down $7.8 million in debt.
• For the full year 2024, revenue increased by 6% to $130.69 million.
• The Board authorized the renewal of its share repurchase plan, allowing the company to repurchase up to $10 million of its common stock, with approximately $9 million remaining available.
• The company expects full-year 2025 revenue to be approximately $125 million to $135 million.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While the company reported strong Q4 results and renewed its stock repurchase plan, the full-year results show a decline in operating income and net earnings. The cautious outlook for 2025 also tempers the positive aspects.

Positives

• Record revenue achieved in the fourth quarter of 2024.
• Significant increase in operating income and adjusted EBITDA.
• Improved order numbers compared to the previous year and quarter.
• Successful debt reduction of $7.8 million during the year.
• Renewal of the stock repurchase plan signals management's confidence in the company's future.
• Growth in sales from core business driven by defense/aerospace, semi and life sciences.
• Automotive/EV sales grew from the addition of Alfamation.

Negatives

• A one-time acquisition inventory step-up expense negatively impacted gross margin by 430 basis points in the fourth quarter.
• Gross margin contracted 490 basis points year-over-year primarily due to the inventory step-up charge.
• Full-year operating income decreased by 67.5% compared to 2023.
• Net earnings for the year decreased by 69.1% compared to the previous year.
• Backlog at December 31, 2024, was $39.5 million, down from $40.13 million the prior year.

Risks

• The company's outlook for 2025 is cautious due to stubbornly soft end markets.
• Customer delivery pushouts of orders in backlog to the latter half of the year.
• Slowing receipt of orders due to uncertainty in end markets as a result of recent and impending tariffs.
• The company is exposed to risks related to changes in business conditions, economic conditions, and demand for semiconductors.
• The company's ability to execute its 5-Point Strategy and integrate acquired operations could impact future performance.

Future Outlook

The company expects full-year 2025 revenue to be approximately $125 million to $135 million and expects profitability to gradually improve throughout the year. First quarter 2025 revenue is forecasted to be $27 million to $29 million with gross margin of approximately 41% and operating expenses of $13.6 million to $14.0 million.

Management Comments

• Nick Grant, President and CEO, stated that the team delivered record revenue and strong operational results in the fourth quarter, validating the effectiveness of their market and customer diversification strategy.
• Mr. Grant concluded that while 2024 was challenging, it represents the third consecutive year of record revenue for inTEST since launching their 5-Point Strategy in 2021.
• Nick Grant, President and CEO of inTEST Corporation, stated that renewing the stock repurchase plan is a confirmation of their belief in the long-term value they are creating.

Industry Context

inTEST operates in the semiconductor, industrial, automotive/EV, life sciences, defense/aerospace, and security markets. The company's performance is influenced by the cyclical nature of the semiconductor industry and broader economic conditions. The acquisition of Alfamation has expanded inTEST's presence in the automotive/EV market. The company's diversification strategy aims to mitigate the impact of downturns in specific markets.

Comparison to Industry Standards

• Comparing inTEST to companies like Advantest and Teradyne, which are major players in the semiconductor testing equipment market, inTEST's revenue growth rate of 31% in Q4 2024 is competitive.
• However, inTEST's overall revenue of $130.69 million for 2024 is significantly smaller than these larger competitors, highlighting its position as a smaller, more specialized player.
• Compared to companies like National Instruments (now NI), which also serve diverse markets including industrial and automotive, inTEST's focus on specific niches within these markets allows for targeted growth and innovation.
• The adjusted EBITDA margin of 12.1% in Q4 2024 is a good result, but is lower than some of the larger players in the industry, reflecting inTEST's smaller scale and higher operating costs.

Stakeholder Impact

• Shareholders may be positively impacted by the stock repurchase plan and the company's focus on long-term value creation.
• Employees may be affected by the consolidation of Videology operations.
• Customers can expect continued innovation and solutions to challenging problems.
• Suppliers may see changes in demand based on market conditions and the company's performance.
• Creditors will benefit from the company's debt reduction efforts.

Next Steps

• The company plans to consolidate the Netherlands-based operations of its Videology image capture business into its Mansfield, MA, facility.
• The company will continue to execute on its strategy to organically grow inTEST.
• The company will monitor market conditions and evaluate potential share repurchases under the renewed plan.

Key Dates