Group 1 - Diamond Hill Capital's "Small Cap Strategy" reported a favorable performance in Q4 2025, with the Russell 2000 Index returning 2.19% and a yearly gain of 12.81% [1] - The health care sector was the best performer in the Russell 2000 Index, achieving an 18.6% return [1] - The Strategy outperformed the Russell 2000 Index in Q4 2025, returning 4.88% net of fees [1] Group 2 - Transcat, Inc. (NASDAQ:TRNS) was highlighted in the investor letter, providing calibration and laboratory instrument services to regulated industries [2][3] - Transcat, Inc. experienced a one-month return of 11.70% but saw a 52-week decline of 9.21%, with a market capitalization of $659.226 million as of February 4, 2026 [2] - The company reported a 21% increase in consolidated revenue to $83 million in the fiscal second quarter of 2026 [5] Group 3 - Transcat, Inc. has strong recurring revenue streams due to regulatory demands and a successful acquisition track record, alongside a solid balance sheet [3] - The company was held by 18 hedge fund portfolios at the end of Q3 2025, an increase from 12 in the previous quarter [5]

Group 1: Market Overview - The fourth quarter of 2025 saw favorable gains in equity markets, with the Russell 2000 Index returning 2.19% and the Russell 1000 Index gaining 2.41% [1] - Health care was the best-performing sector in the Russell 2000 Index, with an increase of 18.6% [1] - Despite heightened uncertainty and geopolitical risks, the Russell 2000 Index posted a 12.81% gain for the year [1] Group 2: Diamond Hill Small Cap Strategy Performance - The Diamond Hill Small Cap Strategy achieved a return of 4.88% (net of fees) in the fourth quarter, outperforming the Russell 2000 Index [1] - The firm continues to focus on resilient businesses capable of sustaining earnings in a volatile market environment as it heads into 2026 [1] Group 3: Transcat, Inc. Overview - Transcat, Inc. (NASDAQ:TRNS) provides calibration and laboratory instrument services to highly regulated industries, including life sciences, aerospace, and defense [3] - The company has strong recurring revenue streams driven by regulation and a successful acquisition track record while maintaining a strong balance sheet [3] Group 4: Transcat, Inc. Stock Performance - Transcat, Inc. had a one-month return of 11.70%, but its shares lost 9.21% of their value over the last 52 weeks [2] - As of February 4, 2026, Transcat, Inc. stock closed at $70.64 per share, with a market capitalization of $659.226 million [2] Group 5: Hedge Fund Interest and Revenue Growth - Transcat, Inc. was held by 18 hedge fund portfolios at the end of the third quarter, an increase from 12 in the previous quarter [5] - In the fiscal second quarter of 2026, Transcat, Inc.'s consolidated revenue increased by 21% to $83 million [5]

For the quarter ended December 2025, Transcat, Inc. (TRNS) reported revenue of $83.86 million, up 25.6% over the same period last year. EPS came in at $0.26, compared to $0.45 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $81.13 million, representing a surprise of +3.36%. The company delivered an EPS surprise of -11.86%, with the consensus EPS estimate being $0.30.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- an ...

Transcat, Inc. (TRNS) came out with quarterly earnings of $0.26 per share, missing the Zacks Consensus Estimate of $0.3 per share. This compares to earnings of $0.45 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -11.86%. A quarter ago, it was expected that this company would post earnings of $0.46 per share when it actually produced earnings of $0.44, delivering a surprise of -4.35%.Over the last four quarters, the company h ...

Financial Data and Key Metrics Changes - Consolidated revenue increased by 26% to $83.9 million, driven by double-digit growth in both distribution and service segments [5][10] - Consolidated gross profit grew by 28%, with gross margins expanding by 60 basis points [5][10] - Adjusted EBITDA rose by $2.2 million or 27.2% to $10.1 million, with a slight margin expansion [5][13] - Net loss decreased to $1.1 million, influenced by higher amortization and interest expenses [11][12] Business Line Data and Key Metrics Changes - Service revenue grew by 29%, with organic growth of 7%, supported by acquisitions [10][11] - Distribution revenue increased by 20%, driven by strong demand in rentals and product sales, with gross margin expanding by 330 basis points [9][10] Market Data and Key Metrics Changes - Strong demand observed in regulated end markets such as life sciences, aerospace and defense, and energy [5][6] - The service segment marked its 67th consecutive quarter of year-over-year growth, indicating sustained demand [7] Company Strategy and Development Direction - The company aims to continue its growth through acquisitions, enhancing geographic footprint and technical capabilities [6][16] - Investments in leadership, technology, and process improvement are expected to drive differentiation and sustainable long-term value [16] - The company is well-positioned to capitalize on the increasing demand in regulated markets due to onshoring trends [49][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining high single-digit organic service revenue growth expectations for the fourth quarter [15][32] - The company anticipates continued growth momentum into the next fiscal year, supported by a strong new business pipeline [32][33] - Management acknowledged the challenges of onboarding new customers but expects normalization of costs over the next few quarters [38] Other Important Information - The company is in the process of selecting a new CEO, with expectations to conclude the search soon [57][58] - Additional one-time expenses related to the CEO search are anticipated in the fourth quarter [58] Q&A Session Summary Question: Drivers of Service Segment Growth - Management highlighted that delayed service orders began to trend positively, contributing to the return to high single-digit growth [19][24] Question: Impact of Startup Costs - Management indicated that startup costs are not significant but are a reality of onboarding new customers, with normalization expected in the coming quarters [20][22] Question: Distribution Segment and AI Opportunities - Management discussed strong execution in distribution, particularly in power generation and data center markets, with ongoing opportunities in calibration services [25][26] Question: Future Service Growth Expectations - Management reaffirmed guidance for high single-digit growth in Q4, with a strong pipeline for future business [31][32] Question: M&A Strategy and Geographic Expansion - Management outlined gaps in geographic presence, particularly in Northern California, Dallas, Atlanta, and the Mid-Atlantic, with ongoing efforts to fill these voids [34][35] Question: Gross Margin Expectations - Management noted that Q4 typically sees the highest gross margins of the year, with expectations for normalization of startup costs [37][38] Question: Long-term Growth Outlook - Management acknowledged potential for increased organic growth due to significant investments in life sciences and defense sectors [46][51]

Financial Data and Key Metrics Changes - Consolidated revenue increased by 26% to $83.9 million, driven by double-digit growth in both distribution and service segments [5][10] - Consolidated gross profit grew by 28%, with gross margins expanding by 60 basis points [5][10] - Adjusted EBITDA rose by $2.2 million or 27.2% to $10.1 million, with a slight margin expansion [5][13] - Net loss decreased to $1.1 million, influenced by higher amortization and interest expenses [11] Business Line Data and Key Metrics Changes - Service revenue grew by 29%, with organic growth of 7%, supported by acquisitions [10] - Distribution revenue increased by 20%, driven by strong demand in rentals and product sales, with gross margin expanding by 330 basis points [9][10] Market Data and Key Metrics Changes - Strong demand observed in regulated end markets such as life sciences, aerospace and defense, and energy [5][6] - The service segment continues to show substantial growth potential, both organically and through acquisitions [9] Company Strategy and Development Direction - The company aims to leverage its acquisitions to expand geographic footprint and technical capabilities, focusing on capturing sales and cost synergies [6][16] - Investments in leadership, technology, and process improvement are expected to enhance competitive differentiation [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining high single-digit organic service revenue growth expectations for the fourth quarter [15] - The company is well-positioned for future growth, with a strong acquisition pipeline and a focus on recurring revenue streams [16][50] Other Important Information - The CEO succession plan is nearing completion, with a search committee evaluating candidates [11][58] - Additional one-time expenses related to the CEO search are expected in the fourth quarter [60] Q&A Session Summary Question: Drivers of service segment growth - Management highlighted the ramp-up of delayed service orders and strong performance in regulated markets as key drivers [19][24] Question: Impact of startup costs on margins - Management indicated that startup costs are not significant but affect margins temporarily as new customers are onboarded [21][22] Question: Distribution segment performance and AI opportunities - Management noted strong execution in distribution, particularly in power generation markets, and emphasized the potential for recurring calibration opportunities [25][26] Question: Expectations for Q4 service growth - Management reaffirmed guidance for high single-digit growth in Q4, with a strong pipeline for new business [32] Question: M&A strategy and geographic expansion - Management discussed gaps in geographic presence, particularly in Northern California, Dallas, Atlanta, and the Mid-Atlantic region, and highlighted recent expansion in Ireland [34][36] Question: Long-term growth outlook in life sciences and defense - Management acknowledged that onshoring of manufacturing in regulated spaces is beneficial and that increased defense spending presents opportunities for calibration services [49][51]

Financial Data and Key Metrics Changes - Consolidated revenue increased by 26% to $83.9 million, driven by double-digit growth in both distribution and service segments [5][10] - Consolidated gross profit grew by 28%, with gross margins expanding by 60 basis points [5][10] - Adjusted EBITDA rose by $2.2 million or 27.2% to $10.1 million, with a slight margin expansion [5][13] - Net loss decreased to $1.1 million, influenced by higher amortization and interest expenses [11] Business Line Data and Key Metrics Changes - Service revenue grew by 29%, with organic growth of 7%, marking the 67th consecutive quarter of year-over-year growth [6][10] - Distribution revenue increased by 20%, supported by strong demand in rentals and product sales, with gross margin expanding by 330 basis points [9][10] Market Data and Key Metrics Changes - Strong demand for calibration services in regulated markets such as life sciences, aerospace, defense, and energy [5][6] - The service segment is expected to maintain growth momentum into the fourth quarter, driven by high customer activity and retention [15] Company Strategy and Development Direction - The company aims to continue its acquisition strategy to expand geographic footprint and technical capabilities, with a strong acquisition pipeline [17] - Investments in leadership, technology, and process improvement are expected to enhance competitive differentiation and long-term shareholder value [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to sustain high single-digit organic service revenue growth, reaffirming expectations for the fourth quarter [15][33] - The company is well-positioned to benefit from increased manufacturing and defense spending, which are expected to drive future growth [49][52] Other Important Information - The CEO succession plan is nearing completion, with a search committee evaluating candidates [11][12] - Additional one-time expenses related to the CEO search are anticipated in the fourth quarter [60] Q&A Session Summary Question: Drivers of Service Segment Growth - Management highlighted that delayed service orders began to trend positively, contributing to the return to high single-digit growth [20][21] Question: Impact of Startup Costs - Management indicated that startup costs are not significant but are a reality of onboarding new customers, with normalization expected in the coming quarters [22][39] Question: Distribution Segment Performance - Management discussed strong execution in distribution, particularly in power generation and data center markets, with ongoing opportunities in calibration services [26][27] Question: Future Growth Expectations - Management confirmed commitment to high single-digit growth for Q4, with a strong new business pipeline supporting future growth [33][34] Question: M&A Opportunities - Management identified geographic gaps for potential acquisitions, including Northern California, Dallas, Atlanta, and the Mid-Atlantic region [36] Question: Long-term Growth from Life Sciences and Defense - Management acknowledged that onshoring of manufacturing in regulated sectors is beneficial for the company, with opportunities in calibration and validation services [49][50]

Revenue Growth - Q3 2026 revenue increased 26% to $83.9 million, driven by strong growth in both service and distribution segments[7] - Service revenue rose 29% to $53.7 million, while distribution revenue grew 20% to $30.2 million, reflecting increased demand for rentals[3][7] - Total Revenue for the third quarter ended December 27, 2025, was $83.856 million, a 25.6% increase from $66.754 million in the same period last year[35] - Service Revenue reached $53.659 million, up 29.1% from $41.557 million year-over-year[35] - Distribution Revenue increased by 19.5% to $30.197 million compared to $25.197 million in the prior year[35] Profitability Metrics - Adjusted EBITDA increased by 27% to $10.1 million, with an adjusted EBITDA margin of 12.0%[10][19] - Gross margin expanded 60 basis points to 30.1%, with service segment gross margin at 28.8% and distribution segment gross margin at 32.4%[7][16] - The company reported a net loss of $1.1 million, compared to a net income of $2.4 million in the prior year, resulting in a net margin of -1.3%[10][8] - Adjusted diluted EPS decreased to $0.26 from $0.45, reflecting the impact of increased operating expenses and net loss[10] - Operating Income decreased to $88 thousand from $2.1 million year-over-year, indicating a decline in operational efficiency[35] Operating Expenses and Debt - Operating expenses rose 43.2% to $25.2 million, driven by costs associated with acquired businesses and increased stock-based compensation[9] - Total debt increased to $99.9 million from $32.7 million, with a leverage ratio of 2.00 as of December 27, 2025[18] - The company incurred stock-based compensation expenses of $5,030,000 for the nine months ended December 27, 2025, compared to $2,075,000 in 2024[39] Cash Flow and Investments - Net cash provided by operating activities was $28,649,000 for the nine months ended December 27, 2025, slightly up from $28,357,000 in 2024[39] - Total cash used in investing activities amounted to $94,233,000, compared to $79,964,000 in the previous year, indicating increased investment outflows[39] - Net cash provided by financing activities increased to $66,989,000 from $36,308,000 year-over-year, driven by higher proceeds from the revolving credit facility[39] Future Outlook - Management expects continued high single-digit service organic revenue growth for Q4 2026, barring increased economic uncertainty[5] - The Company plans to expand its addressable calibration market through acquisitions and capability investments[31] - Transcat's strategy includes leveraging its strong brand and unique value proposition to drive organic sales growth[31] Asset and Equity Changes - Total Assets increased to $472.891 million as of December 27, 2025, from $385.242 million in March 2025[37] - Net income for the nine months ended December 27, 2025, was $3,429,000, compared to $10,051,000 for the same period in 2024, reflecting a significant decrease[39] - Cash and cash equivalents at the end of the period were $3,471,000, down from $4,640,000 at the end of the previous year[39] Segment Performance - The service segment accounted for 64.0% of total revenue, with $9.0 million of incremental revenue from acquisitions contributing to growth[12][14] - Gross Profit for the third quarter was $25.253 million, representing a 28.4% increase from $19.679 million in the previous year[35] - Gross profit margin for the service segment in Q3 FY 2026 was 28.8%, down from 29.7% in Q3 FY 2025[47] - Selling, marketing, and warehouse expenses in the service segment increased by 71.6% to $7,516 million in Q3 FY 2026 compared to $4,380 million in Q3 FY 2025[47]

Financial Performance - Consolidated revenue for the third quarter of fiscal year 2026 was $83.9 million, an increase of $17.1 million or 25.6% compared to the same quarter in fiscal year 2025[101]. - Total revenue for the first nine months of FY 2026 was $242.6 million, an increase of $41.3 million or 20.5% compared to the same period in FY 2025[122]. - Service revenue accounted for 64.2% of total revenue in the first nine months of FY 2026, increasing by $26.2 million or 20.3% year-over-year[123]. - Total gross profit for the first nine months of FY 2026 was $77.8 million, an increase of $14.3 million or 22.5% compared to the first nine months of FY 2025[126]. - Adjusted Diluted Earnings Per Share for the first nine months of fiscal year 2026 was $1.29, compared to $1.65 for the same period in fiscal year 2025[143]. Revenue Breakdown - Service revenue accounted for 64.0% of total revenue in Q3 FY 2026, increasing by $12.1 million or 29.1% year-over-year, driven by acquisitions and organic growth[106]. - Distribution revenue was $30.2 million in Q3 FY 2026, up $5.0 million or 19.8% from the prior year, primarily due to increased rental revenue and non-rental products[109]. - The trailing twelve-month service revenue for Q3 FY 2026 was $207.6 million, with a growth rate of 17.8% compared to the prior year[108]. - Service organic revenue for the third quarter ended December 27, 2025, was $43.9 million, reflecting a growth of $2.993 million or 7% compared to the prior year[136]. - The company reported a 7% organic revenue growth in the service segment and a 19.8% growth in distribution revenue with a gross margin of 32.4%[162]. Profitability and Expenses - Gross profit for Q3 FY 2026 was $25.3 million, reflecting a 28.3% increase from the previous year, with a gross margin of 30.1%[102]. - Total operating expenses rose to $25.2 million, an increase of $7.6 million or 43.2% year-over-year, leading to a significant decline in operating income to $0.1 million[103]. - Operating margin decreased from 3.1% in Q3 FY 2025 to 0.1% in Q3 FY 2026, indicating increased pressure on profitability[103]. - Total operating expenses for the first nine months of FY 2026 were $68.9 million, an increase of $16.3 million or 31.0% compared to the same period in FY 2025[129][130]. - Adjusted EBITDA grew by 27% year-over-year, despite a decrease in net income of more than 100% compared to the prior year[162]. Net Income and Loss - Net loss for Q3 FY 2026 was $1.1 million, compared to net income of $2.4 million in Q3 FY 2025, attributed to increased amortization and transition costs[104]. - Net income for the first nine months of fiscal year 2026 decreased by $6.6 million or 65.9% compared to the same period in fiscal year 2025, with net income as a percentage of revenue dropping from 5.0% to 1.4%[132]. - Net loss for Q3 FY 2026 was $1.1 million, a decrease of $3.5 million or 146.7% compared to net income of $2.4 million in Q3 FY 2025[120]. Capital and Liquidity - As of December 27, 2025, $150.0 million was available for borrowing under the new Credit Facility, with $99.9 million outstanding, and approximately $83.0 million drawn for a business acquisition during the first nine months of fiscal year 2026[148]. - The company entered into a new five-year $150.0 million secured revolving credit facility on July 29, 2025, replacing a former $80.0 million credit facility[146]. - The company expects to meet foreseeable liquidity and capital resource requirements through cash and cash equivalents, anticipated cash flows from operations, and borrowings from the revolving credit facility[145]. - The company's leverage ratio was 2.00 as of December 27, 2025, up from 0.78 on March 29, 2025, and must maintain a fixed charge coverage ratio of no less than 1.20[150]. - Net cash provided by operating activities was $28.6 million for the first nine months of fiscal year 2026, compared to $28.4 million for the same period in fiscal year 2025[151]. Taxation - The effective tax rate for the first nine months of fiscal years 2026 and 2025 was 33.5% and 16.7%, respectively, with the increase attributed to the timing of discrete items and pre-tax net income[131]. - The estimated income tax rate for the full fiscal year 2026 is projected to be between 30% and 32%[165]. - The company continues to evaluate its tax provision quarterly and adjust the effective tax rate as necessary based on changes in facts and circumstances[131]. Interest and Borrowing - Interest expense increased due to borrowing for the acquisition of Essco and rising interest rates on the company's Credit Agreement[132]. - The weighted average interest rate for the Credit Facility was 5.7% for the third quarter of fiscal year 2026[168]. - Approximately 93% of total revenues for the first nine months of fiscal year 2026 were denominated in U.S. dollars[169].

Group 1 - Transcat will host a conference call and webcast for the third quarter of fiscal year 2026 on February 3, 2026, at 4:30 p.m. Eastern Time [1]