Greetings. Welcome to inTEST Corporation's Fourth Quarter 2023 Financial Results. Please note that this conference is being recorded. I will now turn the call over to Deborah Pawlowski, Investor Relations for inTEST. Thank you. You may begin.

Good morning, everyone. We certainly appreciate your interest in inTEST Corporation. And thank you for sharing your time with us today. Joining me on our call are Nick Grant, our President and Chief Executive Officer; and Duncan Gilmour, our Chief Financial Officer and Treasurer. You should have the earnings release, which crossed the wires yesterday after market as well as the slides that will accompany our conversation today. The 2023 10-K was filed yesterday as well. These documents are available on the Investor Relations section of our website, intest.com. You will also find there our restated third quarter and 9-months 10-QA. It was also filed yesterday. Duncan will touch on that briefly. But if you would turn to Slide 2, I will review the safe harbor statement. During this call, management may 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 and 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, management will refer to some non-GAAP financial measures. We believe these will be useful in evaluating our performance. 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. So with that, if you would turn to Slide 3, I will turn the call over to Nick.

Thank you, Deb, and good morning, everyone. Thanks for joining us on our fourth quarter 2023 earnings call. I'm pleased to report that 2023 was our second consecutive year of record revenue, achieving $123.3 million, while also reaching net income of $9.3 million for the year, the highest level in over a decade. So I'd like to start by acknowledging and expressing my appreciation to the entire inTEST team across the globe for their outstanding efforts and commitment to our strategy. We believe our effective execution of our 5-point strategy is delivering growth, solid financial performance and strong cash generation. Our strategy provides the framework that drives innovation, deeper penetration into target markets, geographic expansion and attracts top talent. Through the year, we've made good progress at key accounts and strengthened our channel relationships around the world to improve our customer reach. Additionally, we announced a new center of excellence in Malaysia for applications engineering, product development and localized manufacturing that will support all of our divisions and allow us to better serve customers in Southeast Asia. We believe that as we further deepen our presence into our key target markets, we are building greater stability, which is helping to offset our exposure in a more cyclical semiconductor market. Fourth quarter revenue was impacted by the downturn in semiconductor back-end orders that we discussed on our Q3 earnings call. However, we are benefiting from our breadth of innovative solutions, serving the expanding needs of our non-semiconductor customers, especially in the industrial, automotive/EV and defense/aerospace markets. Specifically, compared with the fourth quarter of 2022, the industrial market had sales growth of $3.7 million as our Process Technologies division realized strong demand for several of their innovative products, including our popular EKOHEAT induction heating solutions. Building on that success, we launched the EKOHEAT 2 induction heating product line in December, offering the next generation of this technology. We are excited about the exclusive enhancements that we've made to this popular product line. Additionally, we saw our fourth quarter sales in automotive/EV increased $1.2 million over the prior year, driven by our Environmental Technologies division, where our process chillers are serving specific demands from the expanding need for inverter testing in electric vehicles. In the quarter, we also saw greater adoption of our battery test solutions for this market, offered by our Electronic Test division. Further supporting our diversification, our fourth quarter sales were up 11% in the defense/aerospace market as activity in this segment is on the rise due to global instability. We have seen increasing demand from this market for our environmental test chambers. These products provide high accuracy test capability over a wide temperature range, supporting capacity expansion in various arsenal systems. We were encouraged to see the fourth quarter demand continuing in defense/aerospace and industrial markets, with orders improving 70% and 110% compared to the third quarter, respectively. We also demonstrated strong cash generation, which is inherent in our business in both the quarter and the year, which Duncan will cover in more detail. Organizationally, we continue to add talent to the team and are pleased to have recently announced the addition of Michael Goodrich as President of our Process Technologies division. Mike joined us from Vixar Inc., a subsidiary of ams OSRAM, a manufacturer of high-performance optical components and solutions. He is a proven leader of global cross-functional teams and shares a passion for the customer fostered by his deep industry expertise. We welcome him to the team and look forward to his contributions to our organization. Mike is just one example of how we are building our teams. Throughout the year and across our organization, strong talent has been added in sales, engineering and manufacturing support roles to assist us on our transformational journey. Turning to Slide 4. I want to highlight the progress we've made on our diversification front, which is an important component of our 5-point strategy and one that separates inTEST from its past. As part of our strategy, we have made tremendous strides to strengthen our presence in key target growth markets outside of semiconductors as well as looking to diversify within semiconductors with an eye towards the front end. Our efforts have resulted in increasing our non-semiconductor markets combined share of revenue from around 35% in 2021, up to 47% in 2023. And we accomplished this while also growing our semiconductor revenue by approximately 20% over the same timeframe. As I mentioned earlier, 2023 revenue increased despite the second half slowdown in semiconductors because of our growing presence in key target markets like defense/aerospace, industrial security, life sciences and the electric vehicle market. I'm quite pleased with the diversification progress we have made, which is in line with the strategy we laid out at our inaugural Investor Day back in 2022. With that, let me turn it over to Duncan to review the financials and outlook in more detail. Duncan, over to you.

Thank you, Nick. Before I review the results for the fourth quarter and 2023 as a whole, I want to touch on what caused the third quarter restatements where we are now deferring $1.7 million of previously recognized Q3 revenue along with the associated costs. While we felt we had accounted for this correctly in our earlier Q3 report, subsequent consultation during the year-end audit process ultimately resulted in us reaching a different conclusion. To help everyone's understanding let me give you some additional details. As with most manufacturing companies, we have many carefully chosen and qualified suppliers for materials and components that we use in the build of material for our products. During the year, we had a handful of suppliers notify us of their plans to discontinue some key materials or components that we use within a few customer systems. This is often referred to as a last-time buy notification or opportunity. We notified our customers in the event they wanted to buy more of our systems to utilize these components. While not necessarily ready to commit to placing orders for additional systems at the time, a small number asked us to purchase exclusively on their behalf, a certain amount of these obsoleting components to ensure they would be able to order more of our systems in the future without the need for design changes due to changes within the detailed build of the material. We did this for them and were paid in full for these purchases with full legal ownership and risk transferring to the customers. However, in most cases, it was requested that these materials remain at our production facilities. And despite the fact that, one, this is not guaranteed that we will ever actually get future additional orders from these customers; and two, all future orders are subject to terms unknown at this time and will be for additional consideration, we have determined that the revenue from the pre-purchase and sale of these last-time buy components should more appropriately be deferred until there is certainty as to the ultimate customer use for and physical delivery of the materials and components. As already mentioned, the impact from the third quarter was a deferral of $1.7 million of revenue as well as the associated purchasing costs. After being tax affected, this reduced our previously reported net income in the third quarter by approximately $700,000. On a fully diluted basis, this reduced our third quarter EPS by $0.05 to $0.19. The deferred revenue and costs are now on the balance sheet and will be released if and when future orders using these materials and components are fulfilled or when they are physically shipped to our customers. The restatement has had no impact on our cash balance at the end of the third quarter as the related transactions were 100% paid for by our customers. And with that, let's turn to the fourth quarter and full year review. Starting on Slide 5. Revenue for the full year was a record $123.3 million, up 6% or $6.5 million over the prior year's record. This $6.5 million revenue growth was driven by a $5.5 million increase in the defense/aerospace market, a $4.3 million increase in industrial and increases of 14% and 6% in security and life sciences, respectively. As Nick just touched on, the diversification of revenue more than offset the decline in semiconductors. Fourth quarter revenue was down $4.5 million year-over-year and $3.1 million on a sequential basis. In both cases, this is primarily due to the softness in the semiconductor market, which was partially offset by increases in the industrial and automotive/EV markets. Moving to Slide 6. Gross profit for the year increased 7% to $57 million. Gross margin expanded 50 basis points to 46.2%, reflecting the impact of higher volume, favorable mix, and ongoing pricing and cost actions. For the fourth quarter, gross profit of $12.4 million was down $2.5 million compared with a year ago and $2 million sequentially. Margin contraction was related to product mix and lower volume. As you can see on Slide 7, our operating expenses for 2023 were up $3.8 million over 2022, driven primarily by $1.2 million of higher corporate development expenses. As a percent of sales, OpEx increased 110 basis points to 37.7%. For the fourth quarter, the modest year-over-year increase included approximately $400,000 higher corporate development expenses. Turning to Slide 8. You can see our bottom line and adjusted EBITDA results. For the quarter, net earnings were $1.5 million or $0.12 per diluted share. Adjusted net earnings were $1.9 million or $0.16 per diluted share. Adjusted EBITDA for Q4 was $2.4 million, representing an 8.7% adjusted EBITDA margin. For the full year, net earnings of $9.3 million benefited from interest on higher cash balances, which resulted in other income of $1.3 million. On a per diluted share basis, net earnings for 2023 were up 1% to $0.79 compared with $0.78 in the prior year. Adjusted earnings per diluted share were $0.94 compared with $0.99 in 2022. Adjusted EBITDA for 2023 was $15.8 million, representing a 12.8% adjusted EBITDA margin. Slide 9 shows our capital structure and cash flow. We achieved strong operating cash generation in each quarter of the year, including $4.7 million in the fourth quarter, totaling $16.2 million for the year. Capital expenditures in the fourth quarter were $0.3 million, unchanged from the prior year and $1.3 million for the full year, down from $1.4 million in 2022. Given our modest capital expenditure requirements, free cash flow for 2023 was $14.9 million. Cash and cash equivalents at the end of 2023 were $45.3 million including the $19.2 million raised through our ATM equity offering in the second quarter. We paid down $4.1 million in debt during the year, including $1 million in the fourth quarter. Total debt at year-end was $12 million. We ended 2023 with $85 million in liquidity, which included the $45.3 million in cash and borrowing capacity of $30 million with our delayed growth term loan facility and another $10 million on our revolver. Our leverage ratio at the end of 2023 was about 0.8x. While we are talking about 2023, I should note that in the first quarter of 2024, we used about $19 million of cash for the previously announced acquisition of Alfamation. Turning to Slide 10. Our fourth quarter orders of $27.5 million were down 12% year-over-year and up 2% versus the prior quarter. For sequentially and year-over-year, we experienced strong demand in defense/aerospace and industrial markets as well as front-end semiconductor. Sequentially, orders from defense/aerospace increased 70%, while industrial orders more than doubled. Semiconductor front-end orders were resilient in the fourth quarter, primarily supporting epitaxy applications. Back-end orders declined further year-over-year and sequentially, but began to show stabilization. Combined semiconductor orders were down 10% year-over-year and improved sequentially by 3% to $13.3 million. Backlog at year-end was $40.1 million, 14% lower than the prior year, down 1% compared with the prior quarter. Approximately 45% of the backlog is expected to ship beyond the first quarter of 2024. Turn to Slide 11 as we review our outlook for 2024. This first quarter has had a good number of moving parts as we come to the end of the year, including just over 2 weeks of acquired operations from Alfamation, we are expecting revenue to be about $29 million with gross margin of approximately 45% to 46%. First quarter operating expenses, including amortization, are expected to be approximately $13 million. This is somewhat elevated given corporate development expenses and the higher level of professional fees both from the Alfamation acquisition as well as with the restatement process. Intangible asset amortization after tax is expected to be approximately $0.5 million. We expect our effective tax rate to be between 16% and 17%. We are expecting EPS for the first quarter to be about $0.06 per diluted share, while adjusted EPS should be approximately $0.10 per diluted share. As a reminder, we simply adjust for tax-effected amortization expense. For our full year outlook with the addition of Alfamation, which we acquired on March 12, we expect 2024 revenue to range from $145 million to $155 million. Gross margin for 2024 is expected to be approximately 45% to 46% with expected operating expenses of roughly $57 million to $59 million. This includes tax-adjusted intangible asset amortization expense of approximately $3.5 million. Expected effective tax rate is higher given the jurisdictional impact of the acquisition and is expected to be about 18% to 20%. For capital expenditures, in 2024, we expect to run between 1% to 2% of sales. As usual, our guidance does not include the potential impact from any non-operating expenses such as corporate development that may occur from time to time or the potential impact from any additional acquisitions we may make. With that, if you will turn to Slide 12, I will now turn the call back over to Nick.

Thanks, Duncan. Slide 12 shows how well suited to our 5-point strategy the acquisition of Alfamation was. We view the business as an ideal fit for our electronic test division as it deepens our presence in key target markets such as automotive/EV and life sciences, further diversifies us into the consumer electronics space, extends our geographic reach with a sizable footprint in Europe and broadens our portfolio of differentiated automated test solutions. And if you'll turn to Slide 13, you can see how the additional scale provided by the acquisition furthers our progress towards our 2025 revenue goal of $200 million to $250 million. Assuming all goes to plan this year, 2024 revenue will be over 2.5x what we achieved 4 years ago, while also continuing to deliver on our solid margin profile. Slide 14 shows the translation of revenue growth to strong earnings. Our goals are to maintain our top-tier margin profile, harvest the economies of scale and leverage the diversity of our served markets. We are executing to plan as noted on Slide 15. Our 5-point strategy is delivering results for shareholders. Our engineered solutions are valued by our customers, and we believe our diversification efforts are demonstrating results with our focus on key target market growth. I'm proud of the entire inTEST team for delivering another solid quarter and the year as we continue on our journey to becoming a supplier of choice for innovative tests and process technology solutions. We remain very active in pursuing acquisition opportunities to enhance our product offerings, expand our global footprint and deepen our presence in targeted industries. And our balance sheet is in a solid position to support these efforts. With that, operator, let's open the lines for questions.

Our first question is from Jaeson Schmidt with Lake Street.

I know Q1 is almost over, but just curious if you could just discuss what you've seen from an order pattern perspective? I know orders were up sequentially in Q4. Just curious if that trend has continued here in Q1?

Thanks for the question here. As we have laid out before, we kind of anticipated the first half of the year was going to be slower. And then with the second half kind of ramping up as we see our back-end semi and I would say things are kind of playing out in line with that perspective that we discussed.

Okay. That's really helpful. And then on the semiconductor market, I know you highlighted it's becoming a smaller piece of the pie. But just given the volatility in that end market, I would be curious what you're seeing from a visibility perspective there? And how you're thinking about trends in that market for the year?

I'm sorry, Jaeson, you're talking about the semiconductor market or the automotive, cut out on my end?

Oh, I'm sorry, the semiconductor market.

The semiconductor back-end market has shown signs of stabilization with orders in Q3 and Q4. We believe this trend will continue based on feedback from our customers, who expect to see increased capital expenditures in the second half. We remain confident in our outlined trajectory and are progressing in that direction. For the front-end semiconductor market, we noted that it will stay resilient in Q4, particularly in the epitaxy application, where we are experiencing significant activity. The timing of incoming orders will influence whether they materialize in Q1 or Q2, but we are still actively engaged in the front-end semiconductor sector. Additionally, our diversification efforts to expand into other markets have positioned us advantageously, and we are very satisfied with that progress.

Got it. And then just a last one for me, and I'll jump back in the queue. I know you highlighted sort of all the bullet points on the Alfamation acquisition a couple of weeks ago. But when you look at your outlook for the year, does that assume that you can sort of hit the ground running with Alfamation? Or are you expecting any sort of just general friction out of the gate as things get integrated here?

Yes. It takes time to drive the synergies together that we've kind of identified. What we do have though is a nice backlog coming in with Alfamation there. So I feel like execution is a focus as we integrate the business and then try to build the groundwork around the synergies that we see from the sales side, which should help us continue to accelerate the growth going forward. But we do anticipate that business is going to continue to tick along as it has, which we laid out there.

Our next question is from Ted Jackson with Northland Securities. Yes. It takes time to drive the synergies together that we've identified. However, we do have a strong backlog coming in with Alfamation. I believe execution is key as we integrate the business and work on the foundation for the sales-side synergies, which should help us accelerate growth moving forward. We expect that the business will continue to progress as we’ve outlined.

So Duncan, I have a quick question for you regarding the $1.3 million of deferred revenue on the balance sheet that will be recognized over time. Can you provide a timeline for that? Should we expect to see it unfold over the next 12 months or at some other point, and is it something we should consider in our modeling?

Yes, I believe that the deferred revenue is likely around $2 million. We estimate that over a two-year period, approximately 40% will be recognized within 12 months, with the remainder coming later. This will occur as we receive future orders from customers or when customers clarify that they want to receive the raw materials and components. Therefore, our current estimate indicates that about 40% will be recognized in 12 months and 60% afterward.

Okay. We had a great discussion about the semiconductor market, which was very informative. Could we shift the focus to industrials and the factors driving your business there? It has performed well over the past two years, both in terms of reported results and order levels. What is behind that growth? What do you expect will continue to drive that growth going forward?

Yes. Well, we're serving the industrial across all of our businesses outside of the EMS business there. So we do have a lot of products that we are focused on targeted applications that we believe are the right growth avenues, and it has delivered for us there. And then our innovation of new products that we continue to launch and bring to market is opening up additional opportunities in that industrial space. So yes, it's not like we're one-trick ponies in that race in the industrial, we're covering it at multiple fronts. So we'll have success in some areas one quarter and other areas the other. But overall, collectively, we're moving the needle on that industrials as you point out.

If you move away from kind of your products, which it's nice to have a diversity in terms of the products you're selling into the industrial segment, are there particular industrial markets that are more important to you than others?

We saw some progress last year with our green initiative and induction heating solutions, which have been increasingly utilized in the power utility sector and some oil and gas applications where induction heating is favored over torch flame usage. This approach is a much greener option for our customers. We have a strong pipeline of new projects related to our green initiative. That's just one example of a product performing well. However, products like induction heating solutions, cameras, and chillers can be applied across a broad range of applications, and we are actively pursuing as many opportunities as possible.

Okay. I'll step back in line after this question. I'm looking at the different verticals and end markets. In the security business, the orders saw a significant decline, and I'm curious about what is happening there. What caused the substantial drop in the fourth quarter, and how should we consider that moving into 2024?

Yes, it's all about timing. These are identification cameras and traffic management cameras. Customers will place large orders at various times for multiple quarters, typically three to four quarters out. Depending on when those orders arrive, it will impact our results, but the numbers are still relatively small. So, there's no need to read too much into the significant drops; it's primarily about the timing of incoming orders.

Would you expect the business to grow in 2024 compared to fiscal 2023, considering you had a really good year in 2022 and this year was clearly down a bit?

Absolutely. We continue to pursue opportunities, launch new cameras in this space. And yes, we would expect to continue to drive growth across that vertical.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Nick Grant for closing remarks.

Thank you, Sherry. Before we close, I would like to once again express my sincere gratitude to our global team as they continue to deliver outstanding results. And finally, we will be participating in the LD Micro 2024 Invitational Conference in New York on April 9. We hope to connect with some of you there. We appreciate you taking the time to join us on our call today and for your interest in inTEST. Thank you all, and have a great day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.