Note 1 - Nature of Operations

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Nature of Operations [Text Block]

(1) NATURE OF OPERATIONS

We are a global supplier of innovative test and process solutions for use in manufacturing and testing across a wide range of markets including automotive, defense/aerospace, industrial, life sciences, security and semiconductor. We manage our business as two operating segments which are also our reportable segments and reporting units: Thermal Products ("Thermal") and Electromechanical Solutions ("EMS"). As discussed further in Note 3, during the fourth quarter of 2021, we acquired Z-Sciences Corp (“Z-Sciences”), Videology Imaging Solutions Inc. and Videology Imaging Solutions Europe B.V. (collectively, “Videology”) and Acculogic Inc. and its affiliates (collectively “Acculogic”). The results of Z-Sciences and Videology are included in our Thermal segment. The results of Acculogic are included in our EMS segment.

Our Thermal segment designs, manufactures and sells our thermal test and thermal process products, ultra-cold storage solutions and digital streaming and image capturing solutions. Our EMS segment designs, manufactures and sells our semiconductor test products and our robotics-based electronic production test equipment. We manufacture our products in the U.S, Canada and the Netherlands. Marketing and support activities are conducted worldwide from our facilities in the U.S., Canada, Germany, Singapore, the Netherlands and the U.K. The consolidated entity is comprised of inTEST Corporation and our wholly-owned subsidiaries.

Both of our operating segments have multiple products that we design, manufacture and market to our customers. Due to a number of factors, our products have varying levels of gross margin. The mix of products we sell in any period is ultimately determined by our customers' needs. Therefore, the mix of products sold in any given period can change significantly from the prior period. As a result, our consolidated gross margin can be significantly impacted in any given period by a change in the mix of products sold in that period.

Our markets include the semiconductor market (“Semi Market”) which includes both the broader semiconductor market as well as the more specialized ATE and wafer processing sectors within the broader semiconductor market. All other markets are designated as “Multimarket.” The Semi Market, which has historically been the largest single market in which we operate, is characterized by rapid technological change, competitive pricing pressures and cyclical as well as seasonal market patterns. This market is subject to significant economic downturns at various times.

Our EMS segment sells its products to semiconductor manufacturers and third-party test and assembly houses (end user sales) and to automated test equipment (“ATE”) manufacturers (original equipment manufacturer (“OEM”) sales), who ultimately resell our equipment with theirs to both semiconductor manufacturers and third-party test and assembly houses. These sales all fall within the ATE sector of the Semi Market. With the acquisition of Acculogic, our EMS segment also sells its products to customers in markets outside the semiconductor market including the defense/aerospace and life science markets. Our Thermal segment sells its thermal test products to end users and OEM customers within the ATE sector of the Semi Market. It sells its thermal process products to customers in the wafer processing sector within the Semi Market; however, it also sells its products to customers in a variety of other markets outside the Semi Market, including the automotive, defense/aerospace, industrial, life sciences and security markets.

Our financial results are affected by a wide variety of factors, including, but not limited to, general economic conditions worldwide and in the markets in which we operate, economic conditions specific to the Semi Market and the other markets we serve, our ability to safeguard patented technology and intellectual property in a rapidly evolving market, downward pricing pressures from customers, and our reliance on a relatively few number of customers for a significant portion of our sales. In addition, we are exposed to the risk of obsolescence of our inventory depending on the mix of future business and technological changes within the markets that we serve. Part of our strategy for growth includes potential acquisitions that may cause us to incur substantial expense in reviewing and evaluating potential transactions. We may or may not be successful in locating suitable businesses to acquire and in closing acquisitions of businesses we pursue. In addition, we may not be able to successfully integrate any business we do acquire with our existing business and we may not be able to operate the acquired business profitably. As a result of these or other factors, we may experience significant period-to-period fluctuations in future operating results.

COVID-19 Pandemic

We are following the guidance of the Centers for Disease Control and Prevention and the local regulatory authorities in regions outside the U.S. While we are no longer requiring employees to wear masks indoors in our domestic locations, we are encouraging all employees to receive COVID-19 vaccinations and boosters, if possible. We are continuing to conduct temperature screenings and encourage all employees to maintain social distancing when applicable. We are also continuing to allow employees to work remotely either part-time or full-time in circumstances when possible. While the negative impact of COVID-19 on our business was reduced significantly throughout 2021, the spread of the virus or variants of the virus could worsen and one or more of our significant customers or suppliers could be impacted, or significant additional governmental regulations and restrictions could be imposed, thus negatively impacting our business in the future. We continue to monitor the situation closely in the regions in which we operate in the U.S. and abroad and will adjust our operations as necessary to protect the health and well-being of our employees. To the extent that further governmental mandates or restrictions are implemented in the future, we currently expect to be able to continue to operate our business in a manner similar to how we have operated over the past year.