If you like to see more ideas, please subscribe to the premium service "Value in Corporate Events" here and try the free trial. In this service we cover major earnings events, M&A, IPOs and other significant corporate events with actionable ideas. Furthermore, we provide coverage of situations and names on request!In July, I concluded that Transcat (NASDAQ: TRNS ) was struggling. This came after the business has been able to double sales over the past decade, in between organic growth and M&A efforts, drive ...

Financial Data and Key Metrics Changes - Consolidated revenue increased by 15% to $76.4 million, driven by strong demand for calibration and rental services [7][15] - Adjusted EBITDA grew by 15% to $11.8 million, with a margin expansion of 10 basis points [17][18] - Net income decreased by $1.1 million to $3.3 million, primarily due to higher interest expenses and taxes [16] Business Line Data and Key Metrics Changes - Service revenue grew by 12%, marking the 65th consecutive quarter of year-over-year growth [8][15] - Distribution revenue increased by 19% to $27.3 million, with gross profits rising by 24% and gross margins expanding to 35.2% [13][15] - Total organic service growth, excluding Transcat Solutions, was 2% [9] Market Data and Key Metrics Changes - The acquisition of ESCO Calibration is expected to enhance Transcat's capabilities in specialized high-end electronic calibrations, particularly in regulated markets [10][11] - The company anticipates a return to high single-digit organic service revenue growth as the fiscal year progresses [21] Company Strategy and Development Direction - The company aims to leverage acquisitions to fortify its core calibration business and expand addressable markets [21] - Continuous process improvement and automation are identified as key drivers for future service margin expansion [21] - The focus remains on generating sustainable long-term value for shareholders [21] Management's Comments on Operating Environment and Future Outlook - The macro environment presents challenges, but the diversified portfolio and strategic acquisitions position the company well for future growth [21] - Management expects to progressively improve organic revenue growth during the fiscal year, barring further economic deterioration [21][58] Other Important Information - The company closed a new five-year credit facility that nearly doubles its capital resources, providing significant financial flexibility [19] - The integration of ESCO is expected to be swift, with anticipated sales and cost synergies [11][12] Q&A Session Summary Question: What drove the strong distribution results? - Management indicated consistent demand across both core distribution and rentals, suggesting that the growth is indicative of more than just pull-in revenue due to tariffs [26][27] Question: How does ESCO compare to Martin in terms of growth potential? - Management believes ESCO can be a similarly successful acquisition as Martin, with both companies having strong regional dominance but differing specialties [31][32] Question: What is the expected growth rate for ESCO? - Management characterized ESCO's growth rate as similar to Transcat's, indicating a high-quality company with consistent growth [38] Question: How will Transcat Solutions impact overall growth? - Management expects stabilization in the solutions business, contributing to high single-digit growth in the back half of the year [41][42] Question: Is there a potential for pricing power in the current market? - Management noted that there are opportunities for growth, particularly in outsourcing calibration services to in-house labs, which could enhance pricing power [85][88] Question: How does onshoring manufacturing in the U.S. affect Transcat? - Management confirmed that any onshoring of manufacturing is beneficial for Transcat, with ongoing discussions indicating potential future growth opportunities [72][76]

Financial Performance - Consolidated revenue increased by 15% year-over-year to $76.4 million[9, 12] - Service segment revenue grew by 12% to $49.1 million[9, 12] - Distribution segment revenue increased by 19% to $27.3 million[9, 12] - Consolidated gross profit increased by 14% to $25.8 million[15, 16] - Adjusted EBITDA increased by 15% to $11.8 million[9, 21, 23] - Net income decreased by 26% to $3.3 million[9, 19] Segment Performance - Service segment gross profit increased by 9% to $16.2 million[9, 15, 16] - Distribution segment gross profit increased by 24% to $9.6 million, with gross margin expansion of 130bps to 35.2%[9, 15, 16] - Distribution adjusted EBITDA increased by 49% to $4.8 million[21, 23] Strategic Initiatives - Transcat acquired Essco Calibration Laboratory for $84 million in cash[10] - A new 5-year $150 million syndicated secured credit facility was established[9, 10, 28]

[Performance Overview & Outlook](index=1&type=section&id=Performance%20Overview%20%26%20Outlook) This section provides an executive summary of the company's recent financial performance and strategic direction [Management Commentary & Strategy](index=1&type=section&id=Management%20Commentary%20%26%20Strategy) Management highlighted strong Q1 FY26 results with double-digit revenue growth, particularly a 19% increase in Distribution revenue driven by rentals, and the Essco Calibration acquisition strengthens their New England market presence - The company delivered solid performance in Q1 FY26, highlighted by **double-digit service revenue growth** and a **19% increase in distribution revenue**, driven by strong rentals performance[4](index=4&type=chunk) - Acquisitions remain a cornerstone of the growth strategy, exemplified by the recent acquisition of Essco Calibration, the largest in Transcat's history, aiming to create a dominant presence in the New England market[4](index=4&type=chunk) - The company is confident in a return to **high single-digit Service organic revenue growth** in the second half of Fiscal 2026, assuming no further economic uncertainty[4](index=4&type=chunk) [Q1 FY2026 Key Highlights](index=1&type=section&id=Q1%20FY2026%20Key%20Highlights) Transcat reported a 15% increase in Adjusted EBITDA to $11.8 million for Q1 FY26, with Service revenue growing 12% to $49.1 million and Distribution revenue up 19% to $27.3 million, achieving record gross margins of 35.2% Q1 FY26 Performance Highlights | Metric | Value | Growth vs. Q1 FY25 | | :--- | :--- | :--- | | **Adjusted EBITDA** | $11.8 Million | +15% | | **Service Revenue** | $49.1 Million | +12% | | **Distribution Revenue** | $27.3 Million | +19% | | **Distribution Gross Margin** | 35.2% | +130 bps | - Completed the acquisition of Essco Calibration Laboratory, which contributes **$22 million in annual, margin-accretive revenue**[5](index=5&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) This section details the company's consolidated and segment-specific financial results for the reporting period [Consolidated Financial Results](index=2&type=section&id=Consolidated%20Financial%20Results) In Q1 FY26, consolidated revenue increased by 14.6% year-over-year to $76.4 million, while net income declined 26.0% to $3.3 million, primarily due to a 16.7% rise in operating expenses, despite a 15.2% growth in Adjusted EBITDA Q1 FY26 Consolidated Financials (YoY) | Metric | Q1 FY26 | Q1 FY25 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | $76.4M | $66.7M | +14.6% | | **Gross Profit** | $25.8M | $22.7M | +14.0% | | **Operating Income** | $5.3M | $5.1M | +4.7% | | **Net Income** | $3.3M | $4.4M | -26.0% | | **Diluted EPS** | $0.35 | $0.48 | -27.1% | | **Adjusted EBITDA** | $11.8M | $10.2M | +15.2% | | **Adjusted Diluted EPS** | $0.59 | $0.68 | -13.2% | - Operating expenses increased by **$2.9 million, or 16.7%**, driven by incremental expenses from acquired businesses, increased intangibles amortization, and higher sales-based incentives[8](index=8&type=chunk) [Service Segment Performance](index=3&type=section&id=Service%20Segment%20Performance) The Service segment's revenue grew 12.3% year-over-year to $49.1 million in Q1 FY26, including $6.4 million from acquisitions, but gross margin contracted by 100 basis points to 33.0%, leading to a 37.2% decrease in operating income Q1 FY26 Service Segment Financials (YoY) | Metric | Q1 FY26 | Q1 FY25 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | $49.1M | $43.8M | +12.3% | | **Gross Profit** | $16.2M | $14.9M | +8.9% | | **Gross Margin** | 33.0% | 34.0% | -100 bps | | **Operating Income** | $2.6M | $4.1M | -37.2% | | **Adjusted EBITDA** | $6.9M | $7.0M | -0.5% | - The **12.3% revenue growth** included **$6.4 million of incremental revenue from acquisitions**[12](index=12&type=chunk) [Distribution Segment Performance](index=3&type=section&id=Distribution%20Segment%20Performance) The Distribution segment delivered a strong performance in Q1 FY26, with revenue increasing 19.0% year-over-year to $27.3 million, driven by growth in rentals and products, leading to a 130 basis point expansion in gross margin to a record 35.2% Q1 FY26 Distribution Segment Financials (YoY) | Metric | Q1 FY26 | Q1 FY25 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | $27.3M | $22.9M | +19.0% | | **Gross Profit** | $9.6M | $7.8M | +23.7% | | **Gross Margin** | 35.2% | 33.9% | +130 bps | | **Operating Income** | $2.8M | $1.0M | +174.6% | | **Adjusted EBITDA** | $4.8M | $3.2M | +49.0% | - The strong revenue growth was driven by increased demand for rentals and products, with **higher-margin rentals contributing to the gross margin expansion**[15](index=15&type=chunk) [Financial Position and Cash Flow](index=4&type=section&id=Financial%20Position%20and%20Cash%20Flow) This section provides an overview of the company's balance sheet, liquidity, and cash flow activities [Balance Sheet and Liquidity](index=4&type=section&id=Balance%20Sheet%20and%20Liquidity) As of June 28, 2025, Transcat maintained a strong balance sheet with a leverage ratio of 0.82x and $46.8 million available for borrowing, subsequently securing a new $150 million syndicated credit facility to support the Essco acquisition and future growth Key Balance Sheet & Liquidity Metrics | Metric | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | **Cash and Cash Equivalents** | $1.9 million | $1.5 million | | **Total Debt** | $34.4 million | $32.7 million | | **Leverage Ratio** | 0.82x | 0.78x | - On July 29, 2025, the company replaced its $80 million credit facility with a new **5-Year $150 million syndicated secured credit facility**, nearly doubling its access to available capital[16](index=16&type=chunk)[17](index=17&type=chunk) [Cash Flow Overview](index=9&type=section&id=Cash%20Flow%20Overview) For the first three months of FY26, net cash provided by operating activities was $3.6 million, a decrease from $8.9 million in the prior year, with net cash used in investing activities at $4.6 million and net cash from financing activities at $1.9 million Q1 FY26 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 FY26 | Q1 FY25 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $3,623 | $8,924 | | **Net Cash Used in Investing Activities** | ($4,598) | ($4,094) | | **Net Cash from Financing Activities** | $1,946 | ($1,935) | | **Net Increase in Cash** | $344 | $3,011 | [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial measures and their reconciliation to GAAP equivalents [Definition and Rationale](index=5&type=section&id=Definition%20and%20Rationale) Transcat utilizes non-GAAP measures such as Adjusted EBITDA and Adjusted Diluted Earnings Per Share to provide investors with a clearer view of its core operating performance by excluding items like interest, taxes, depreciation, amortization, stock-based compensation, and acquisition-related expenses - The company presents Adjusted EBITDA to allow for evaluation of core operations by removing the impact of capital structure, asset base, taxes, and stock-based compensation[20](index=20&type=chunk) - Adjusted Diluted EPS is used to provide a basis for comparison between periods by excluding items not indicative of core operating performance, such as acquisition-related amortization and transaction expenses[21](index=21&type=chunk) [Appendix: Detailed Financial Statements](index=7&type=section&id=Appendix%3A%20Detailed%20Financial%20Statements) This appendix provides comprehensive financial statements and reconciliations for the reported period [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) The detailed income statement shows total revenue of $76.4 million and net income of $3.3 million for the quarter ended June 28, 2025, compared to $66.7 million and $4.4 million, respectively, for the prior-year period Consolidated Statements of Income (Unaudited, in thousands) | | First Quarter Ended June 28, 2025 | First Quarter Ended June 29, 2024 | | :--- | :--- | :--- | | **Total Revenue** | $76,424 | $66,707 | | **Gross Profit** | $25,821 | $22,655 | | **Operating Income** | $5,338 | $5,099 | | **Net Income** | $3,261 | $4,408 | | **Diluted Earnings Per Share** | $0.35 | $0.48 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet as of June 28, 2025, shows total assets of $392.5 million and total shareholders' equity of $292.5 million Consolidated Balance Sheets (Unaudited, in thousands) | | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | **Total Current Assets** | $79,654 | $78,009 | | **Total Assets** | $392,536 | $385,242 | | **Total Current Liabilities** | $27,280 | $34,037 | | **Total Liabilities** | $100,000 | $98,362 | | **Total Shareholders' Equity** | $292,536 | $286,880 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statement for the three months ended June 28, 2025, details a net cash inflow from operations of $3.6 million, an outflow from investing of $4.6 million, and an inflow from financing of $1.9 million Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $3,623 | $8,924 | | **Net Cash Used in Investing Activities** | ($4,598) | ($4,094) | | **Net Cash Provided by/(Used in) Financing Activities** | $1,946 | ($1,935) | | **Net Increase in Cash and Cash Equivalents** | $344 | $3,011 | [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) The reconciliation table shows the calculation of Adjusted EBITDA, starting from Net Income ($3.3M) and adding back items like interest, taxes, D&A, and stock compensation to arrive at a total Adjusted EBITDA of $11.8 million for Q1 FY26 Q1 FY26 Adjusted EBITDA Reconciliation (in thousands) | | Q1 FY26 | | :--- | :--- | | **Net Income** | $3,261 | | + Interest Income | $440 | | + Tax Provision | $1,304 | | + Depreciation & Amortization | $5,605 | | + Transaction Expenses | $28 | | + Non-cash Stock Compensation | $1,130 | | **Adjusted EBITDA** | **$11,768** | [Adjusted Diluted EPS Reconciliation](index=12&type=section&id=Adjusted%20Diluted%20EPS%20Reconciliation) This table reconciles GAAP Net Income ($3.3M) to Adjusted Net Income ($5.5M) by adding back acquisition-related amortization and costs, resulting in an Adjusted Diluted EPS of $0.59 for Q1 FY26, compared to the GAAP Diluted EPS of $0.35 Q1 FY26 Adjusted Diluted EPS Reconciliation (in thousands, except per share) | | Q1 FY26 | | :--- | :--- | | **Net Income** | $3,261 | | + Amortization of Intangible Assets | $2,844 | | + Acquisition Deal Costs | $28 | | + Acquisition Stock Expense | $145 | | + Income Tax Effect at 25% | ($754) | | **Adjusted Net Income** | **$5,524** | | **Diluted Earnings Per Share** | **$0.35** | | **Adjusted Diluted Earnings Per Share** | **$0.59** | [Business Segment Data](index=13&type=section&id=Business%20Segment%20Data) This section provides a detailed breakdown of revenue, cost, gross profit, and operating income for both the Service and Distribution segments for Q1 FY26 compared to Q1 FY25 Q1 FY26 vs Q1 FY25 Segment Performance (in thousands) | Segment | Metric | Q1 FY26 | Q1 FY25 | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **SERVICE** | **Revenue** | $49,144 | $43,778 | 12.3% | | | **Operating Income** | $2,567 | $4,090 | (37.2)% | | **DISTRIBUTION** | **Revenue** | $27,280 | $22,929 | 19.0% | | | **Operating Income** | $2,771 | $1,009 | 174.6% | | **TOTAL** | **Revenue** | $76,424 | $66,707 | 14.6% | | | **Operating Income** | $5,338 | $5,099 | 4.7% |

Core Insights - Transcat, Inc. reported revenue of $76.42 million for the quarter ended June 2025, marking a year-over-year increase of 14.6% and exceeding the Zacks Consensus Estimate of $72.43 million by 5.51% [1] - The company achieved an EPS of $0.59, up from $0.48 a year ago, representing a surprise of 47.5% compared to the consensus estimate of $0.40 [1] Revenue Breakdown - Distribution Sales reached $27.28 million, surpassing the three-analyst average estimate of $23.56 million, with a year-over-year change of 19% [4] - Service Revenue was reported at $49.14 million, slightly above the average estimate of $48.86 million, reflecting a year-over-year increase of 12.3% [4] Profit Metrics - Gross Profit from Distribution was $9.61 million, exceeding the average estimate of $7.3 million from three analysts [4] - Gross Profit from Service was reported at $16.21 million, which is close to the average estimate of $16.27 million [4] Stock Performance - Transcat's shares have returned -13.8% over the past month, contrasting with the Zacks S&P 500 composite's increase of 0.5% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - Transcat, Inc. reported quarterly earnings of $0.59 per share, exceeding the Zacks Consensus Estimate of $0.40 per share, and showing an increase from $0.48 per share a year ago, resulting in an earnings surprise of +47.50% [1][2] Group 1: Earnings Performance - The company posted revenues of $76.42 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.51%, compared to $66.71 million in the same quarter last year [2] - Over the last four quarters, Transcat has surpassed consensus EPS estimates just once [2] Group 2: Stock Performance and Outlook - Transcat shares have declined approximately 28.5% since the beginning of the year, while the S&P 500 has gained 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.45 on revenues of $74.45 million, and for the current fiscal year, it is $1.90 on revenues of $302.41 million [7] Group 3: Industry Context - The Instruments - Control industry, to which Transcat belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the stock may outperform the market in the near future [5][6]

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company reported a 14.6% revenue increase to $76.4 million for Q1 FY26, though net income declined to $3.3 million [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 FY26 revenue grew 14.6% YoY to $76.4 million, but higher expenses led to a net income decline to $3.3 million Q1 FY26 vs Q1 FY25 Income Statement Highlights (In Thousands, Except Per Share) | Metric | Q1 Ended June 28, 2025 | Q1 Ended June 29, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$76,424** | **$66,707** | **+14.6%** | | Service Revenue | $49,144 | $43,778 | +12.3% | | Distribution Revenue | $27,280 | $22,929 | +19.0% | | **Gross Profit** | **$25,821** | **$22,655** | **+14.0%** | | Operating Income | $5,338 | $5,099 | +4.7% | | **Net Income** | **$3,261** | **$4,408** | **-26.0%** | | Diluted EPS | $0.35 | $0.48 | -27.1% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $392.5 million as of June 28, 2025, alongside increases in total liabilities and shareholders' equity Balance Sheet Summary (In Thousands) | Account | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | **Total Assets** | **$392,536** | **$385,242** | | Total Current Assets | $79,654 | $78,009 | | Goodwill | $177,114 | $176,928 | | **Total Liabilities** | **$100,000** | **$98,362** | | Long-Term Debt | $33,182 | $30,892 | | **Total Shareholders' Equity** | **$292,536** | **$286,880** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased significantly to $3.6 million in Q1 FY26 from $8.9 million in the prior year Cash Flow Summary (In Thousands) | Activity | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,623 | $8,924 | | Net Cash Used in Investing Activities | ($4,598) | ($4,094) | | Net Cash Provided by/(Used in) Financing Activities | $1,946 | ($1,935) | | **Net Increase in Cash** | **$344** | **$3,011** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment performance, recent acquisitions, and a new $150 million credit facility - The company's two reportable segments are **Service** (calibration, repair, etc) and **Distribution** (sales and rentals of instruments)[61](index=61&type=chunk) - The acquisition of Martin Calibration (Dec 2024) for **~$81.8 million** contributed **$7.9 million in revenue** in Q1 FY26[69](index=69&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The acquisition of Becnel Rental Tools (Apr 2024) for **~$49.8 million** contributed **$3.4 million in revenue** in Q1 FY26[74](index=74&type=chunk)[77](index=77&type=chunk)[80](index=80&type=chunk) - Subsequent to the quarter end, on July 29, 2025, the company entered a new five-year **$150.0 million secured revolving credit facility**, replacing its former $80.0 million facility[85](index=85&type=chunk) - On August 5, 2025, the company acquired Essco Calibration Laboratory for approximately **$84.0 million in cash**[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes 14.6% revenue growth to acquisitions, while rising operating expenses compressed operating margin to 7.0% [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q1 FY26 revenue rose 14.6% driven by acquisitions, but lower Service gross margin and higher operating expenses reduced net income Q1 FY26 Revenue Performance (in thousands) | Segment | Q1 FY26 Revenue | Q1 FY25 Revenue | YoY Change ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service | $49,144 | $43,778 | +$5,366 | +12.3% | | Distribution | $27,280 | $22,929 | +$4,351 | +19.0% | | **Total** | **$76,424** | **$66,707** | **+$9,717** | **+14.6%** | - Acquired revenue from businesses bought after the prior period was **$7.9 million**, while **organic revenue increased by 4.1%**[91](index=91&type=chunk) - Service revenue **organic growth was negative 1.0%** due to lower revenue from the Transcat Solutions business[96](index=96&type=chunk) - The effective tax rate increased significantly to **28.6% from 15.7%** in the prior-year quarter, mainly due to the timing of discrete tax items relative to pre-tax income[109](index=109&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA increased 15.2% to $11.8 million, while Adjusted Diluted EPS decreased to $0.59 from $0.68 YoY Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 Ended June 28, 2025 | Q1 Ended June 29, 2024 | | :--- | :--- | :--- | | Net Income | $3,261 | $4,408 | | + Interest Expense (Income), Net | $440 | ($260) | | + Tax Provision | $1,304 | $820 | | + Depreciation & Amortization | $5,605 | $4,113 | | + Transaction Expense | $28 | $434 | | + Non-cash Stock Compensation | $1,130 | $697 | | **Adjusted EBITDA** | **$11,768** | **$10,212** | Adjusted Diluted Earnings Per Share | Metric | Q1 Ended June 28, 2025 | Q1 Ended June 29, 2024 | | :--- | :--- | :--- | | Diluted EPS – GAAP | $0.35 | $0.48 | | **Adjusted Diluted EPS** | **$0.59** | **$0.68** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company secured a new $150 million credit facility while cash from operations declined due to working capital changes - On July 29, 2025, the company established a new five-year, **$150.0 million secured revolving credit facility**, replacing the previous $80.0 million facility[120](index=120&type=chunk) - Net cash from operating activities **decreased to $3.6 million from $8.9 million YoY**, primarily due to changes in working capital[128](index=128&type=chunk) - Capital expenditures were **$4.6 million in Q1 FY26**, up from $3.7 million in Q1 FY25, used for expanding Service capabilities and the rental business[130](index=130&type=chunk) [Outlook](index=33&type=section&id=Outlook) Management anticipates a return to high single-digit Service organic growth in H2 FY26, supported by a strong acquisition pipeline - The company expects a return to **high single-digit Service organic revenue growth** in the second half of Fiscal 2026[135](index=135&type=chunk) - The acquisition of Essco Calibration is the **largest deal in the company's history** and establishes a strong presence in the New England market[134](index=134&type=chunk) - The estimated income tax rate for the full fiscal year 2026 is expected to be between **27% and 29%**[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks stem from interest rate fluctuations and foreign currency exchange rates - A **1% change in interest rates** would increase or decrease annual interest expense by approximately **$0.3 million**, assuming constant borrowing levels as of June 28, 2025[137](index=137&type=chunk) - About **90% of total revenues are denominated in U.S. dollars**, with the rest in Canadian dollars and Euros; a 10% change in these foreign currencies' value would impact total revenue by about 1%[139](index=139&type=chunk) - The company utilizes **short-term foreign exchange forward contracts** to hedge against Canadian dollar currency fluctuations[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of June 28, 2025[141](index=141&type=chunk) - **No changes occurred** during the first quarter of fiscal 2026 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[142](index=142&type=chunk) PART II. OTHER INFORMATION [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including the Essco acquisition agreement and the new credit facility agreement - Key exhibits filed include the purchase agreement for Essco Holdings Inc and the new Credit Agreement with Manufacturers and Traders Trust Company[145](index=145&type=chunk) [Signatures](index=37&type=section&id=SIGNATURES) The report was duly signed and authorized by the CEO and CFO on August 6, 2025 - The report was signed on **August 6, 2025**, by the company's CEO and CFO[151](index=151&type=chunk)

Revenue and Growth - Total revenue for fiscal year 2025 was $278.4 million, an increase of $18.9 million or 7.3% compared to $259.5 million in fiscal year 2024[182]. - Service revenue reached $181.4 million in fiscal year 2025, up $11.9 million or 7.0%, accounting for 65.2% of total revenue[183]. - Distribution segment sales increased by 7.8% to $97.0 million in fiscal year 2025, representing 34.8% of total revenue[184]. - Service revenue increased by $11.9 million, or 7.0%, in fiscal year 2025, with $10.4 million attributed to acquisitions[209]. - Distribution sales rose by $7.0 million, or 7.8%, in fiscal year 2025, primarily due to $7.2 million from acquisitions[213]. - Service organic growth was in the high single-digit range for both the fourth quarter and full fiscal year 2025, driven by consistent demand in the Calibration business[246]. - The company expects a return to high single-digit organic Service revenue growth once the macroeconomic environment normalizes[248]. Profitability - Total gross profit was $89.5 million in fiscal year 2025, a 6.7% increase from $83.8 million in fiscal year 2024[185]. - Service gross profit was $60.7 million, reflecting a 5.9% increase from fiscal year 2024[216]. - Net income for fiscal year 2025 was $14.5 million, an increase of $0.9 million from $13.6 million in fiscal year 2024[187]. - Net income for fiscal year 2025 was 5.2% of total revenue, slightly down from 5.3% in fiscal year 2024[207]. - Adjusted EBITDA for FY 2025 was $39.7 million, a 2.9% increase from $38.6 million in FY 2024[226]. - Adjusted diluted earnings per share for FY 2025 was $2.29, down from $2.36 in FY 2024[230]. Expenses and Margins - Operating expenses were $71.6 million, or 25.7% of total revenue, compared to $64.0 million, or 24.7% of total revenue, in fiscal year 2024[186]. - Total operating expenses increased by $7.6 million, or 11.8%, to $71.6 million in FY 2025 compared to FY 2024[220]. - The Service segment gross margin decreased by 40 basis points to 33.4% in fiscal year 2025, while the Distribution segment gross margin increased by 20 basis points to 29.7%[185]. - Service gross margin for FY 2025 was 36.2% in Q4, up from 35.7% in Q4 FY 2024[217]. - Distribution gross margin for FY 2025 was 28.2% in Q4, an increase of 20 basis points compared to FY 2024[219]. Cash Flow and Financial Position - Cash provided by operating activities was $39.0 million in FY 2025, up from $32.6 million in FY 2024[238]. - Net cash provided by operating activities increased to $39.0 million in fiscal year 2025 from $32.6 million in fiscal year 2024, primarily due to increases in depreciation and amortization[240]. - Accounts receivable rose by $8.2 million in fiscal year 2025, including $7.7 million from acquisitions, compared to a $3.1 million increase in fiscal year 2024[240]. - The inventory balance decreased by $2.9 million in fiscal year 2025, following a $0.5 million increase in fiscal year 2024[240]. - The company has access to a revolving credit facility of $80.0 million through June 2026[232]. - The interest rate for the revolving credit facility ranged from 5.1% to 6.2% during fiscal year 2025, with a fixed rate of 3.90% on the 2018 Term Loan[251]. - As of March 29, 2025, the leverage ratio was 0.78, compared to 0.10 at March 30, 2024[235]. Acquisitions and Strategic Initiatives - Acquired revenue from recent acquisitions, including Martin and Becnel, contributed $10.4 million to the Service segment's growth[175]. - Business acquisitions totaled $87.4 million in fiscal year 2025, significantly higher than $12.9 million in fiscal year 2024[242]. - Management is implementing a diversification strategy in the Distribution segment to mitigate impacts from specific industries and enhance competitive differentiation[179]. Tax and Currency - The company expects an effective tax rate of 27.0% to 29.0% for FY 2026[222]. - The anticipated income tax rate for fiscal year 2026 is projected to range between 27.0% and 29.0%[249]. - Approximately 90% of total revenues for fiscal years 2025 and 2024 were denominated in U.S. dollars, with a 10% change in the value of the Canadian dollar or Euro impacting revenue by approximately 1%[253]. - A foreign exchange contract with a notional amount of $1.1 million was outstanding as of March 29, 2025, to mitigate currency risk[254]. Product Shipments and Backorders - Total pending product shipments decreased by $1.8 million, or 34.7%, at the end of fiscal year 2025 compared to fiscal year 2024[214]. - Backorders at the end of fiscal year 2025 were $2.7 million, down from $4.5 million at the end of fiscal year 2024[214].

Financial Performance Highlights - Q4 Revenue increased by 9% year-over-year to $77.1 million [8], while full-year revenue grew by 7% [8] to $278.4 million [11] - Adjusted EBITDA increased by 9% in Q4 to $12.7 million [8] - Full-year Net Income reached $14.5 million, or $1.57 per diluted share [8] - Consolidated Gross Profit for Q4 increased by 8% to $25.9 million [18], with full-year Gross Profit growing by 7% to $89.5 million [16] Segment Performance - Service Revenue increased by 11% in Q4 and 7% for the full year [8], reaching $52.0 million and $181.4 million respectively [10, 11] - Distribution Revenue grew by 4% in Q4 and 8% for the full year [8], reaching $25.1 million and $97.0 million respectively [10, 11] - Service segment adjusted EBITDA up Q4 16% [28] - Distribution adjusted EBITDA down Q4 13% [28] Cash Flow and Balance Sheet - Operating Free Cash Flow significantly improved by $6.5 million year-over-year, reaching $25.8 million [29] - The company had $49.1 million available from its credit facility at quarter-end [33]

Revenue Performance - Consolidated revenue for Q4 FY2025 was $77.1 million, an increase of 8.8% compared to Q4 FY2024[10] - Full fiscal year 2025 revenue reached $278.4 million, up 7.3% from $259.5 million in FY2024[20] - Total revenue for the fourth quarter ended March 29, 2025, was $77.134 million, a 8.4% increase from $70.913 million in the same quarter of the previous year[35] - Service revenue increased by 11.3% to $52.0 million in Q4 FY2025, driven by double-digit growth in the Calibration business[15] - Service revenue reached $52.010 million, up 11.6% from $46.732 million year-over-year, while distribution sales increased by 3.9% to $25.124 million[35] - Total revenue for Fiscal 2025 was $278,421 million, up 7.3% from $259,481 million in Fiscal 2024[49] Profitability Metrics - Adjusted EBITDA for Q4 FY2025 was $12.7 million, reflecting a 9.1% increase driven by strength in the Calibration business[12] - Gross profit for the fiscal year ended March 29, 2025, was $89.453 million, representing a 6.5% increase compared to $83.806 million in the prior year[35] - Adjusted EBITDA for the fiscal year 2025 reached $39,732,000, compared to $38,613,000 in fiscal 2024, indicating a year-over-year increase of 2.9%[41] - The service segment adjusted EBITDA for fiscal 2025 was $28,694,000, compared to $27,750,000 in fiscal 2024, representing a growth of 3.4%[41] - The distribution segment adjusted EBITDA for fiscal 2025 was $11,038,000, a decrease from $10,863,000 in fiscal 2024, indicating a decline of 1.6%[41] Net Income and Earnings Per Share - Net income for Q4 FY2025 decreased to $4.5 million, down 35.2% from $6.9 million in Q4 FY2024[9] - Net income for the fiscal year ended March 29, 2025, was $14,515,000, an increase of 6.35% from $13,647,000 in the previous year[39] - Adjusted diluted earnings per share for the fiscal year was $1.57, compared to $1.63 in the previous year, reflecting a decrease of 3.7%[35] - Fiscal 2025 net income reached $14,515 million, a significant increase from $13,647 million in Fiscal 2024, representing a year-over-year growth of 6.3%[45] - Diluted earnings per share (EPS) for Fiscal 2025 was $1.57, up from $1.63 in Fiscal 2024, while adjusted diluted EPS increased to $2.29 from $2.36[45] Expenses and Liabilities - Operating expenses increased by 27.9% to $19.0 million in Q4 FY2025, influenced by expenses from acquired businesses[11] - General and administrative expenses increased by 39.7% in Q4 of Fiscal 2025, totaling $9,733 million compared to $6,965 million in Q4 of Fiscal 2024[47] - Current liabilities slightly increased to $34.037 million from $33.499 million year-over-year, showing a stable financial position[37] Cash Flow and Investments - Net cash provided by operating activities increased to $38,985,000, up from $32,616,000, reflecting a growth of 19.5%[39] - Cash used in investing activities significantly rose to $84,000,000, compared to $41,672,000 in the prior year, marking a 101.5% increase[39] - The company reported a substantial business acquisition net cash outflow of $87,436,000 in fiscal 2025, compared to $12,859,000 in fiscal 2024[39] - Total cash and cash equivalents at the end of the period decreased to $1,517,000 from $19,646,000, reflecting a decline of 92.3%[39] Debt and Financial Position - Total debt increased to $32.7 million as of March 29, 2025, compared to $4.2 million on March 30, 2024[23] - The company reported a leverage ratio of 0.78 on March 29, 2025, indicating a strong balance sheet[24] Strategic Outlook - Management expects to return to high single-digit organic revenue growth as macro-trends normalize[7] - The company plans to expand its addressable calibration market through acquisitions and capability investments, aiming for organic sales growth[31] - Transcat's strategy includes leveraging its strong brand and unique value proposition to drive growth in highly regulated industries, particularly in Life Sciences[31]