Financial Data and Key Metrics Changes - Consolidated revenue increased by 12% to $230 million for fiscal 2023, marking a new record for the company [5][11] - Consolidated gross margin expanded by 110 basis points to 29.6% [5][13] - Adjusted EBITDA grew by 16% to $30.4 million [5][16] - Q4 net income rose by 20% to $3.7 million, with diluted earnings per share at $0.48 [14] Business Line Data and Key Metrics Changes - Service segment revenue grew by 19% for the full year, with 10% coming from organic growth [5][12] - Service segment revenue in Q4 increased by 15%, with organic growth of 10% [10][12] - Distribution segment revenue grew by 3% for the full year, driven by strong performance in the rental business [8][12] - Service gross margin in Q4 expanded by 90 basis points to 34% [12] Market Data and Key Metrics Changes - The company experienced strong demand in core calibration and NEXA Enterprise Asset Management businesses [5][6] - The company expanded its service offerings into various parts of Europe, including the Netherlands, Switzerland, and Germany [6] Company Strategy and Development Direction - The company aims for continued margin expansion across service channels, particularly in the latter half of fiscal 2024 [19][20] - The company is focused on M&A activities in the fragmented third-party calibration services market [9][17] - The company plans to maintain a strong balance sheet to support future growth opportunities [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single-digit organic growth in fiscal 2024 despite macroeconomic uncertainties [19][20] - The company highlighted the importance of leadership development and operational excellence as key differentiators [9][19] Other Important Information - The company successfully acquired and integrated three companies in fiscal 2023, expanding its addressable markets [7] - The company expects capital expenditures for fiscal 2024 to be in the range of $10 million to $11 million [17][18] Q&A Session Summary Question: Commentary on near-term investments in NEXA and CBLs - Management indicated that investments are driven by growth and the need for infrastructure build to scale operations [21][22] Question: Synergies from NEXA acquisition - Management noted that the acquisition has exceeded expectations, with significant business opportunities arising from cross-selling [24] Question: Geographic expansion into Europe - Management described the expansion as opportunistic, primarily serving existing customers with locations in Europe [25][26] Question: Drivers of growth and differentiation - Management emphasized the depth and breadth of services, particularly in life sciences, as key growth drivers [29][31] Question: Cross-selling opportunities with NEXA - Management confirmed that there are significant opportunities for cross-selling between NEXA and Transcat's customer base [32][33] Question: Margin expectations for NEXA - Management indicated that NEXA's average margin is higher than Transcat's overall service margin [36] Question: Interest rates impact on capital structure - Management acknowledged that rising interest rates are being evaluated in terms of debt strategy [41] Question: Appetite for larger transformational M&A deals - Management expressed readiness for larger acquisitions if opportunities arise, while maintaining a focus on smaller bolt-on acquisitions [42] Question: Working capital increase and expectations - Management explained that increases in working capital are related to business growth and strategic acquisitions [44][45] Question: Revenue expectations from recent acquisition - Management expects to achieve growth targets without significant revenue impact from the recent acquisition in the first quarter [47][48] Question: Growth in distribution business - Management stated that distribution is viewed as a stable segment, with growth expected primarily in the rental business [49][50] Question: Robotics and automation efforts - Management described ongoing efforts in robotics as a long-term opportunity, with initial installations already in place [52] Question: Growth in other sectors beyond life sciences - Management confirmed growth in aerospace and defense, as well as general manufacturing, contributing to overall growth [54][56] Question: Update on Transcat University - Management reported progress in training programs, with increased productivity among trained employees [59][60] Question: M&A activity outside the U.S. - Management indicated that while there is openness to international M&A, the primary focus remains on U.S.-based opportunities [61]

PART I. FINANCIAL INFORMATION This section presents Transcat, Inc.'s unaudited consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed notes on business operations and key accounting policies [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Transcat, Inc.'s unaudited consolidated financial statements, including statements of income, comprehensive income, balance sheets, cash flows, and changes in shareholders' equity for the third quarter and nine months ended December 24, 2022, and December 25, 2021, along with detailed notes on business operations, accounting policies, long-term debt, stock-based compensation, segment information, and recent business acquisitions [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) This section provides the consolidated statements of income, detailing revenue, net income, and earnings per share for the specified periods | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Revenue | $57,402k | $50,902k | $168,502k | $149,079k | | Net Income | $1,601k | $1,629k | $7,030k | $8,332k | | Basic EPS | $0.21 | $0.22 | $0.93 | $1.11 | | Diluted EPS | $0.21 | $0.21 | $0.92 | $1.10 | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the consolidated statements of comprehensive income, including net income and currency translation adjustments | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :----------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Income | $1,601k | $1,629k | $7,030k | $8,332k | | Currency Translation Adjustment | $393k | $(233)k | $(878)k | $(314)k | | Comprehensive Income | $2,002k | $1,414k | $6,140k | $8,066k | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section outlines the consolidated balance sheets, detailing assets, liabilities, and shareholders' equity at specific fiscal year-ends | Metric | Dec 24, 2022 (in thousands) | Mar 26, 2022 (in thousands) | | :-------------------------- | :----------- | :----------- | | Total Current Assets | $60,697k | $59,704k | | Total Assets | $188,469k | $177,762k | | Total Current Liabilities | $25,084k | $27,710k | | Total Liabilities | $93,185k | $91,586k | | Total Shareholders' Equity | $95,284k | $86,176k | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Net Cash Provided by Operating Activities | $13,975k | $12,378k | | Net Cash Used in Investing Activities | $(15,445)k | $(26,759)k | | Net Cash Provided by Financing Activities | $782k | $16,900k | | Net Increase in Cash | $197k | $2,219k | | Cash at End of Period | $1,593k | $2,779k | [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section details changes in shareholders' equity, including retained earnings and common stock shares issued | Metric | Dec 24, 2022 (in thousands) | Mar 26, 2022 (in thousands) | Dec 25, 2021 (in thousands) | | :-------------------------- | :----------- | :----------- | :----------- | | Total Shareholders' Equity | $95,284k | $86,176k | $82,898k | | Retained Earnings | $65,504k | $58,744k | $56,403k | | Common Stock Shares Issued | 7,560k | 7,529k | 7,521k | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the company's business, accounting policies, debt, compensation, segment performance, and business acquisitions [NOTE 1 – GENERAL](index=8&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) This note provides an overview of Transcat's business, its basis of financial statement presentation, revenue recognition policies, fair value measurements of financial instruments, stock-based compensation accounting, foreign currency translation, earnings per share calculations, and policies for goodwill and intangible assets, also mentioning the anticipated non-material impact of a recently issued accounting pronouncement - Transcat, Inc. is a leading provider of accredited calibration services, enterprise asset management services, and a value-added distributor of professional-grade test, measurement, and control instrumentation, primarily serving highly regulated industries like life sciences[21](index=21&type=chunk) - Non-cash stock-based compensation expense increased to **$2.8 million** for the first nine months of fiscal year 2023, up from **$1.7 million** in the prior year period[27](index=27&type=chunk) - The Company uses short-term foreign exchange forward contracts to reduce the risk of adverse effects from changes in Canadian dollar exchange rates on future earnings, with a gain of **$0.3 million** recognized in 9M FY23[29](index=29&type=chunk) Average Shares Outstanding | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Average Shares Outstanding – Basic | 7,559k | 7,519k | 7,547k | 7,487k | | Average Shares Outstanding – Diluted | 7,666k | 7,653k | 7,644k | 7,599k | Goodwill and Intangible Assets | Metric | Goodwill (Dec 24, 2022) (in thousands) | Intangible Assets (Dec 24, 2022) (in thousands) | Goodwill (Mar 26, 2022) (in thousands) | Intangible Assets (Mar 26, 2022) (in thousands) | | :-------------------------- | :---------------------- | :------------------------- | :---------------------- | :------------------------- | | Net Book Value | $68,826k | $14,843k | $65,074k | $14,692k | | Additions | $4,496k | $3,576k | - | - | | Amortization | - | $(3,411)k | - | - | - The Company anticipates that the adoption of ASU 2016-13, which changes how entities measure credit losses, will not have a material impact on its consolidated financial statements[33](index=33&type=chunk) [NOTE 2 – LONG-TERM DEBT](index=10&type=section&id=NOTE%202%20%E2%80%93%20LONG-TERM%20DEBT) This note details the 2021 Credit Agreement, which significantly increased the revolving credit commitment to $80.0 million and extended its term, also modifying permitted acquisition limits, restricted payment allowances, and adjusting interest rates and covenants, with the Company in compliance with all loan covenants as of December 24, 2022 - The 2021 Credit Agreement increased the revolving credit commitment from **$40.0 million** to **$80.0 million** and extended its term to June 2026[35](index=35&type=chunk)[139](index=139&type=chunk) - Permitted acquisitions limits were increased to **$65.0 million** for fiscal year 2022 and **$50.0 million** for subsequent fiscal years, with an additional **$40.0 million** for UK/EU acquisitions[35](index=35&type=chunk)[139](index=139&type=chunk) - Restricted payments for share repurchases and dividends were increased to **$25.0 million** in aggregate and **$10.0 million** in any single fiscal year[36](index=36&type=chunk)[140](index=140&type=chunk) - The LIBOR floor was reduced from **1.0%** to **0.25%**, and the fixed interest rate on the **$15.0 million term loan** was reduced from **4.15%** to **3.90%**[36](index=36&type=chunk)[140](index=140&type=chunk) - As of December 24, 2022, **$42.2 million** was outstanding on the revolving credit facility and **$7.0 million** on the 2018 Term Loan[39](index=39&type=chunk)[40](index=40&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - The Company was in compliance with all loan covenants, including a leverage ratio of **1.66** at December 24, 2022, down from **1.74** at March 26, 2022[42](index=42&type=chunk)[145](index=145&type=chunk) [NOTE 3 – STOCK-BASED COMPENSATION](index=12&type=section&id=NOTE%203%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note outlines the Company's stock-based compensation plans, including the 2021 Stock Incentive Plan, restricted stock units (RSUs), and stock options, detailing the valuation methods, vesting schedules, and associated expenses for these awards - The 2021 Stock Incentive Plan replaced the 2003 Plan, with **0.7 million shares** available for future grant as of December 24, 2022[45](index=45&type=chunk) - Total expense for restricted stock units was **$1.7 million** for the first nine months of fiscal year 2023, up from **$1.2 million** in the prior year period[50](index=50&type=chunk) - Unearned compensation related to restricted stock units totaled **$2.7 million** as of December 24, 2022[50](index=50&type=chunk) - The expense related to all stock option awards was **$1.1 million** for the first nine months of fiscal year 2023, compared to **$0.4 million** in the prior year period[55](index=55&type=chunk) - Total unrecognized compensation cost related to non-vested stock options as of December 24, 2022, was **$2.2 million**, expected to be recognized over three years[58](index=58&type=chunk) [NOTE 4 – SEGMENT INFORMATION](index=15&type=section&id=NOTE%204%20%E2%80%93%20SEGMENT%20INFORMATION) This note disaggregates the Company's financial performance into its two reportable segments: Service and Distribution, and provides geographic revenue data, highlighting the revenue, gross profit, and operating income contributions from each segment Segment Performance | Metric | 3Q FY23 Service (in thousands) | 3Q FY22 Service (in thousands) | 3Q FY23 Distribution (in thousands) | 3Q FY22 Distribution (in thousands) | 9M FY23 Service (in thousands) | 9M FY22 Service (in thousands) | 9M FY23 Distribution (in thousands) | 9M FY22 Distribution (in thousands) | | :---------------- | :-------------- | :-------------- | :------------------- | :------------------- | :-------------- | :-------------- | :------------------- | :------------------- | | Revenue | $35,977k | $30,237k | $21,425k | $20,665k | $105,120k | $87,338k | $63,382k | $61,741k | | Gross Profit | $10,793k | $8,983k | $5,607k | $4,653k | $33,115k | $27,447k | $16,090k | $14,320k | | Operating Income | $1,836k | $1,661k | $1,327k | $700k | $6,875k | $7,282k | $3,518k | $2,346k | Geographic Revenue | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | US Revenue | $51,209k | $46,005k | $151,242k | $136,359k | | Canada Revenue | $4,221k | $3,749k | $12,075k | $10,849k | | Other International Revenue | $1,972k | $1,148k | $5,185k | $1,871k | [NOTE 5 – BUSINESS ACQUISITIONS](index=16&type=section&id=NOTE%205%20%E2%80%93%20BUSINESS%20ACQUISITIONS) This note details several business acquisitions made by Transcat, Inc., including Complete Calibrations, e2b, Alliance, Tangent, NEXA, and Upstate Metrology, outlining the purchase price, strategic rationale, goodwill allocation, and contributions to revenue and operating income for each acquisition, along with pro forma financial information - Transcat acquired Complete Calibrations (Ireland) for **$1.2 million cash** on September 28, 2022, contributing **$0.1 million revenue** and **< $0.1 million operating income** since acquisition[62](index=62&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - e2b Calibration (Ohio) was acquired for **$3.1 million cash** on September 27, 2022, contributing **$0.9 million revenue** and **$0.2 million operating income** since acquisition[66](index=66&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) - Alliance Calibration (Ohio) was acquired for **$4.7 million** (**$4.0 million cash**, **$0.1 million stock**) on May 31, 2022, contributing **$1.3 million revenue** and **$0.1 million operating income** since acquisition[71](index=71&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - Tangent Labs, LLC was acquired for **$8.9 million cash** on December 31, 2021, contributing **$1.7 million revenue** and **< $0.1 million operating loss** for the first nine months of fiscal year 2023[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) - NEXA Enterprise Asset Management (Ireland/US) was acquired for **$26.2 million** (**$23.9 million cash**, **$2.4 million stock**) on August 31, 2021, contributing **$9.8 million revenue** and **$0.2 million operating income** for the first nine months of fiscal year 2023[80](index=80&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) Pro Forma Financial Information | Metric | 3Q FY23 Pro Forma (in thousands) | 3Q FY22 Pro Forma (in thousands) | 9M FY23 Pro Forma (in thousands) | 9M FY22 Pro Forma (in thousands) | | :----------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Total Revenue | $57,402k | $52,760k | $170,648k | $158,848k | | Net Income | $1,601k | $1,648k | $7,245k | $9,749k | | Basic Earnings Per Share | $0.21 | $0.22 | $0.96 | $1.30 | | Diluted Earnings Per Share | $0.21 | $0.22 | $0.95 | $1.28 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, liquidity, and capital resources for the third quarter and nine months ended December 24, 2022, highlighting revenue growth driven by acquisitions and strong demand, gross margin improvements, and the impact of increased operating and interest expenses on net income, also discussing cash flow dynamics and the Company's future outlook [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding future events, subject to risks and uncertainties such as economic conditions, competition, acquisitions, and foreign currency fluctuations[91](index=91&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=21&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section confirms no material changes to critical accounting policies and estimates since the last annual report - There have been no material changes to the Company's critical accounting policies and estimates since the Annual Report on Form 10-K for the fiscal year ended March 26, 2022[92](index=92&type=chunk) [RESULTS OF OPERATIONS](index=21&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including revenue, gross profit, operating expenses, and net income for the periods presented [Executive Summary](index=21&type=section&id=Executive%20Summary) In the third quarter of fiscal year 2023, Transcat achieved consolidated revenue of $57.4 million, a 12.8% increase, driven by acquisitions and strong demand, with gross profit rising 20.3% to $16.4 million and gross margin expanding to 28.6%, operating income increased 34.0% to $3.2 million, but net income remained flat at $1.6 million due to higher interest expense - Consolidated revenue for 3Q FY23 increased by **$6.5 million** (**12.8%**) to **$57.4 million**, primarily due to recent acquisitions, strong Service segment demand, and improved Distribution segment rentals[93](index=93&type=chunk) - Gross profit for 3Q FY23 increased by **$2.8 million** (**20.3%**) to **$16.4 million**, with consolidated gross margin rising **180 basis points** to **28.6%**[94](index=94&type=chunk) - Operating income for 3Q FY23 increased by **$0.8 million** (**34.0%**) to **$3.2 million**, with operating margin improving from **4.6%** to **5.5%**[95](index=95&type=chunk) - Net income for 3Q FY23 remained flat at **$1.6 million**, as higher operating income was offset by increased interest expense[96](index=96&type=chunk) [THIRD QUARTER ENDED DECEMBER 24, 2022 COMPARED TO THIRD QUARTER ENDED DECEMBER 25, 2021](index=22&type=section&id=THIRD%20QUARTER%20ENDED%20DECEMBER%2024%2C%202022%20COMPARED%20TO%20THIRD%20QUARTER%20ENDED%20DECEMBER%2025%2C%202021) In the third quarter of fiscal year 2023, total revenue grew 12.8% to $57.4 million, driven by strong Service segment performance (19.0% growth) and increased Distribution sales (3.7%), gross profit increased 20.3% to $16.4 million, with both segments showing margin expansion, operating expenses rose 17.4% due to acquisitions and higher employee costs, and despite higher operating income, net income remained flat at $1.6 million due to increased interest expense [Revenue](index=22&type=section&id=Revenue_3Q) This section details the revenue performance for the third quarter, highlighting growth drivers for Service and Distribution segments | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Service Revenue | $35,977k | $30,237k | $5,740k | 19.0% | | Distribution Sales | $21,425k | $20,665k | $760k | 3.7% | | Total Revenue | $57,402k | $50,902k | $6,500k | 12.8% | - Service revenue growth for 3Q FY23 was **19.0%** year-over-year, including **$2.1 million** from acquisitions and **12.0% organic growth**[99](index=99&type=chunk) - Trailing twelve-month Service revenue growth was **20.2%** for 3Q FY23, indicating sustained segment progress[102](index=102&type=chunk) - Distribution sales increased **3.7%** in 3Q FY23, primarily driven by strong demand for rental orders[103](index=103&type=chunk) - Total pending product shipments at the end of 3Q FY23 were **$9.5 million**, an increase of **$0.6 million** year-over-year, attributed to supply chain disruption and increased orders[106](index=106&type=chunk) [Gross Profit](index=24&type=section&id=Gross%20Profit_3Q) This section analyzes gross profit and margin trends for the Service and Distribution segments in the third quarter | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Service Gross Profit | $10,793k | $8,983k | $1,810k | 20.1% | | Distribution Gross Profit | $5,607k | $4,653k | $954k | 20.5% | | Total Gross Profit | $16,400k | $13,636k | $2,764k | 20.3% | - Total gross margin increased **180 basis points** to **28.6%** in 3Q FY23[108](index=108&type=chunk) - Service gross margin increased **30 basis points** to **30.0%** in 3Q FY23, driven by improved productivity[109](index=109&type=chunk) - Distribution segment gross margin increased **370 basis points** to **26.2%** in 3Q FY23, primarily due to a favorable mix of higher margin products sold and rented[111](index=111&type=chunk) [Operating Expenses](index=25&type=section&id=Operating%20Expenses_3Q) This section reviews operating expenses, including selling, marketing, warehouse, and general and administrative costs for the third quarter | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Selling, Marketing and Warehouse | $6,595k | $5,051k | $1,544k | 30.6% | | General and Administrative | $6,642k | $6,224k | $418k | 6.7% | | Total Operating Expenses | $13,237k | $11,275k | $1,962k | 17.4% | - The increase in operating expenses was due to recent acquisitions, higher incentive-based employee costs, and continued investments in technology[112](index=112&type=chunk) - As a percentage of total revenue, operating expenses increased **90 basis points** to **23.1%** in 3Q FY23[113](index=113&type=chunk) [Income Taxes](index=25&type=section&id=Income%20Taxes_3Q) This section presents the provision for income taxes and the effective tax rate for the third quarter | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Provision for Income Taxes | $523k | $596k | $(73)k | (12.2)% | | Effective Tax Rate | 24.6% | 26.8% | - | - | - The decrease in the tax provision and effective tax rate was due to the mix of net income by country[114](index=114&type=chunk) [Net Income](index=26&type=section&id=Net%20Income_3Q) This section details the net income performance for the third quarter, noting factors impacting its change | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :--------- | :--------------------- | :--------------------- | :--------- | :--------- | | Net Income | $1,601k | $1,629k | $(28)k | (1.7)% | - Net income remained flat year-over-year, as higher operating income was offset by increased interest expense[115](index=115&type=chunk) [Adjusted EBITDA](index=26&type=section&id=Adjusted%20EBITDA_3Q) This section provides Adjusted EBITDA and its percentage of revenue for the third quarter, explaining key drivers | Metric | 3Q FY23 (Dec 24, 2022) (in thousands) | 3Q FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :--------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Adjusted EBITDA | $6,585k | $5,466k | $1,119k | 20.5% | | % of Revenue | 11.5% | 10.7% | 0.8% | - | - The increase in Adjusted EBITDA was primarily driven by higher depreciation and amortization expense and interest expense[118](index=118&type=chunk) [Adjusted Diluted Earnings Per Share](index=27&type=section&id=Adjusted%20Diluted%20Earnings%20Per%20Share_3Q) This section presents both GAAP and Adjusted Diluted Earnings Per Share for the third quarter | Metric | 3Q FY23 (Dec 24, 2022) | 3Q FY22 (Dec 25, 2021) | | :-------------------------- | :--------------------- | :--------------------- | | Diluted EPS – GAAP | $0.21 | $0.21 | | Adjusted Diluted EPS | $0.35 | $0.36 | [NINE MONTHS ENDED DECEMBER 24, 2022 COMPARED TO NINE MONTHS ENDED DECEMBER 25, 2021](index=27&type=section&id=NINE%20MONTHS%20ENDED%20DECEMBER%2024%2C%202022%20COMPARED%20TO%20NINE%20MONTHS%20ENDED%20DECEMBER%2025%2C%202021) For the first nine months of fiscal year 2023, total revenue increased 13.0% to $168.5 million, with Service revenue growing 20.4% and Distribution sales up 2.7%, gross profit rose 17.8% to $49.2 million, and total gross margin improved to 29.2%, operating expenses increased 20.8% due to acquisitions and higher costs, and net income decreased 15.6% to $7.0 million, primarily due to higher operating expenses, interest expense, and income taxes, despite higher operating income [Revenue](index=27&type=section&id=Revenue_9M) This section details the revenue performance for the nine-month period, highlighting growth drivers for Service and Distribution segments | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Service Revenue | $105,120k | $87,338k | $17,782k | 20.4% | | Distribution Sales | $63,382k | $61,741k | $1,641k | 2.7% | | Total Revenue | $168,502k | $149,079k | $19,423k | 13.0% | - Service revenue growth included **$9.0 million** of incremental revenue from acquisitions[123](index=123&type=chunk) - Distribution sales increase was due to increased orders and strong demand for rental orders[124](index=124&type=chunk) [Gross Profit](index=28&type=section&id=Gross%20Profit_9M) This section analyzes gross profit and margin trends for the Service and Distribution segments over the nine-month period | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Service Gross Profit | $33,115k | $27,447k | $5,668k | 20.7% | | Distribution Gross Profit | $16,090k | $14,320k | $1,770k | 12.4% | | Total Gross Profit | $49,205k | $41,767k | $7,438k | 17.8% | - Total gross margin increased **120 basis points** to **29.2%**, driven by operating leverage in the Service segment and a favorable product mix in the Distribution segment[125](index=125&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses_9M) This section reviews operating expenses, including selling, marketing, warehouse, and general and administrative costs for the nine-month period | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Selling, Marketing and Warehouse | $18,315k | $15,022k | $3,293k | 21.9% | | General and Administrative | $20,497k | $17,117k | $3,380k | 19.7% | | Total Operating Expenses | $38,812k | $32,139k | $6,673k | 20.8% | - The increase in operating expenses was due to recent acquisitions, higher incentive-based employee costs, new employees, and continued investments in technology[126](index=126&type=chunk) - As a percentage of total revenue, operating expenses increased **140 basis points** to **23.0%** for the first nine months of fiscal year 2023[126](index=126&type=chunk) [Provision for Income Taxes](index=28&type=section&id=Provision%20for%20Income%20Taxes_9M) This section presents the provision for income taxes and the effective tax rate for the nine-month period | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Provision for Income Taxes | $1,631k | $715k | $916k | 128.1% | | Effective Tax Rate | 18.8% | 7.9% | - | - | - The increase in the effective tax rate was due to decreased discrete tax benefits from share-based compensation activity[127](index=127&type=chunk) [Net Income](index=29&type=section&id=Net%20Income_9M) This section details the net income performance for the nine-month period, noting factors impacting its change | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :--------- | :--------------------- | :--------------------- | :--------- | :--------- | | Net Income | $7,030k | $8,332k | $(1,302)k | (15.6)% | - The year-over-year decrease in net income was due to higher operating expenses, increased interest expense, and a higher provision for income taxes, despite higher operating income[129](index=129&type=chunk) [Adjusted EBITDA](index=29&type=section&id=Adjusted%20EBITDA_9M) This section provides Adjusted EBITDA and its percentage of revenue for the nine-month period, explaining key drivers | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | Change ($ thousands) | Change (%) | | :--------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Adjusted EBITDA | $21,423k | $18,655k | $2,768k | 14.8% | | % of Revenue | 12.7% | 12.5% | 0.2% | - | - The increase in Adjusted EBITDA was primarily driven by higher interest expense, tax provision, depreciation and amortization expense, and non-cash stock compensation expense[132](index=132&type=chunk) [Adjusted Diluted Earnings Per Share](index=30&type=section&id=Adjusted%20Diluted%20Earnings%20Per%20Share_9M) This section presents both GAAP and Adjusted Diluted Earnings Per Share for the nine-month period | Metric | 9M FY23 (Dec 24, 2022) | 9M FY22 (Dec 25, 2021) | | :-------------------------- | :--------------------- | :--------------------- | | Diluted EPS – GAAP | $0.92 | $1.10 | | Adjusted Diluted EPS | $1.33 | $1.48 | [LIQUIDITY AND CAPITAL RESOURCES](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The Company expects to meet its liquidity and capital resource requirements through anticipated cash flows from operations and its revolving credit facility, with the 2021 Credit Agreement significantly increasing the revolving credit commitment to $80.0 million and modifying various terms, including permitted acquisitions and restricted payments, and as of December 24, 2022, the Company had $42.2 million outstanding on the revolving credit facility and $7.0 million on the 2018 Term Loan, and was in compliance with all loan covenants - The Company expects to meet foreseeable liquidity and capital resource requirements through anticipated cash flows from operations and borrowings from its **$80.0 million revolving credit facility**[137](index=137&type=chunk)[139](index=139&type=chunk) - As of December 24, 2022, **$42.2 million** was outstanding on the revolving credit facility and **$7.0 million** on the 2018 Term Loan[143](index=143&type=chunk)[144](index=144&type=chunk) - The Company was in compliance with all loan covenants and requirements during the third quarter of fiscal year 2023, with a leverage ratio of **1.66** at December 24, 2022[145](index=145&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) For the first nine months of fiscal year 2023, net cash provided by operating activities increased to $14.0 million, primarily due to changes in net working capital, net cash used in investing activities decreased to $15.4 million, mainly due to lower business acquisition spending, and net cash provided by financing activities significantly decreased to $0.8 million, driven by reduced revolving credit facility borrowings and common stock issuance compared to the prior year | Metric | 9M FY23 (Dec 24, 2022) (in thousands) | 9M FY22 (Dec 25, 2021) (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Net Cash Provided by Operating Activities | $13,975k | $12,378k | | Net Cash Used in Investing Activities | $(15,445)k | $(26,759)k | | Net Cash Provided by Financing Activities | $782k | $16,900k | - The year-over-year increase in cash provided by operations was primarily the result of changes in net working capital, including a **$2.0 million decrease** in accounts receivable and a **$4.2 million increase** in inventory[147](index=147&type=chunk)[148](index=148&type=chunk) - Cash used for business acquisitions decreased to **$8.3 million** in 9M FY23 from **$20.9 million** in 9M FY22[150](index=150&type=chunk) - Net cash provided by financing activities decreased significantly due to lower proceeds from the revolving credit facility (**$2.3 million** in 9M FY23 vs. **$22.8 million** in 9M FY22) and reduced common stock issuance[151](index=151&type=chunk)[152](index=152&type=chunk) [OUTLOOK](index=33&type=section&id=OUTLOOK) Transcat anticipates continued double-digit organic Service growth, driven by its unique value proposition in highly regulated markets and differentiation strategies, with acquisitions remaining a key growth component, projecting high-single digit organic Service revenue growth for Q4 FY23 and FY24, along with ongoing gross margin improvement, and an estimated full fiscal year 2023 income tax rate between 21% and 23% - The Company expects continued **double-digit organic Service growth**, driven by its unique value proposition in highly regulated markets, particularly Life Science and Aerospace and Defense[153](index=153&type=chunk)[154](index=154&type=chunk) - Acquisitions will continue to be an important component of Service growth, with an active acquisition pipeline[155](index=155&type=chunk) - Organic Service revenue growth is expected to remain in the **high-single digit range** for Q4 FY23 and fiscal year 2024, accompanied by continued gross margin improvement[155](index=155&type=chunk) - The estimated income tax rate for full fiscal year 2023 is expected to range between **21%** and **23%**[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses Transcat's exposure to market risks, specifically interest rate and foreign currency fluctuations, quantifying the potential impact of interest rate changes on debt and outlining the Company's strategy for managing foreign currency risk through hedging instruments [INTEREST RATES](index=33&type=section&id=INTEREST%20RATES) This section analyzes the company's exposure to interest rate fluctuations and their potential impact on interest expense - A **1% change** in interest rates would impact the Company's yearly interest expense by approximately **$0.4 million**, assuming constant average borrowing levels[157](index=157&type=chunk) - The revolving credit facility has a variable interest rate (LIBOR plus margin), while the **$15.0 million 2018 Term Loan** has a fixed rate of **3.90%**[158](index=158&type=chunk) - The Company had no hedging arrangements in place for its revolving credit facility to limit exposure to upward interest rate movements as of December 24, 2022[158](index=158&type=chunk) [FOREIGN CURRENCY](index=34&type=section&id=FOREIGN%20CURRENCY) This section discusses the company's exposure to foreign currency fluctuations and its hedging strategies - Approximately **90% of total revenues** are denominated in U.S. dollars, with the remainder in Canadian dollars and Euros; a **10% currency fluctuation** would impact revenue by about **1%**[159](index=159&type=chunk) - The Company uses short-term foreign exchange forward contracts to reduce the risk of Canadian dollar fluctuations, recognizing a gain of **$0.3 million** in 9M FY23[160](index=160&type=chunk) - As of December 24, 2022, a foreign exchange contract with a notional amount of **$3.0 million** was outstanding and subsequently renewed in January 2023[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Transcat's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the third quarter of fiscal year 2023 [Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures](index=34&type=section&id=Conclusion%20Regarding%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of December 24, 2022[161](index=161&type=chunk) [Changes in Internal Control over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the third fiscal quarter - There were no material changes in internal control over financial reporting during the third quarter of fiscal year 2023[162](index=162&type=chunk) PART II. OTHER INFORMATION This section includes additional information and exhibits required for the Form 10-Q filing [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various certifications and interactive data files - The exhibits include Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Interactive Data Files (XBRL)[164](index=164&type=chunk) SIGNATURES This section contains the official certifications and signatures of the company's executive officers [Signatures](index=36&type=section&id=Signatures_Details) This section contains the official signatures of the registrant's principal executive officer and principal financial officer, certifying the report - The report was signed by Lee D. Rudow, President and Chief Executive Officer, and Thomas L. Barbato, Senior Vice President of Finance and Chief Financial Officer, on February 1, 2023[170](index=170&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenue increased by 13% to $57.4 million, with service revenue growth of 19% and organic growth of 12% [5][11] - Consolidated gross margin expanded by 180 basis points to 28.6%, driven by margin improvements in both distribution and service segments [6][12] - Adjusted EBITDA grew by 20% year-over-year to $6.6 million [6][13] - Net income remained flat at $1.6 million, with diluted earnings per share of $0.21 and adjusted diluted earnings per share of $0.35 [12] Business Line Data and Key Metrics Changes - Service segment revenue grew by 19%, marking the 55th consecutive quarter of year-over-year revenue growth, with service gross margins at 30% [6][7] - Distribution segment revenue increased by 4% to $21.4 million, with distribution gross margin expanding by 370 basis points to 26.2% [8][11] Market Data and Key Metrics Changes - Open order backlog in the distribution segment rose by 7% to $9.5 million [11] - The company reported strong performance in regulated markets, particularly in life sciences and aerospace and defense sectors [6][15] Company Strategy and Development Direction - The company aims to expand its addressable markets and leverage acquisitions to drive growth, with a focus on differentiation and strong execution [15][16] - Strategic acquisitions are a key part of the growth strategy, with recent acquisitions enhancing capabilities in calibration services and expanding geographic presence [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience amid economic uncertainty, highlighting the durability of its business model [15][39] - The company anticipates continued organic growth in the high single-digit range and expects to maintain strong demand for its services [15][39] Other Important Information - The company generated $6.8 million of free cash flow year-to-date [10] - The leverage ratio stands at 1.66 times, indicating a strong balance sheet supportive of acquisition strategies [10][14] Q&A Session Summary Question: Service growth acceleration and contributing factors - Management noted that the acceleration in service growth was due to a combination of factors, including strong retention and growth across various businesses, particularly NEXA [17] Question: Update on CBLs and their impact - Management indicated that while CBLs contributed to growth, they do not represent a high percentage of overall growth, and any drag from recent CBLs is expected to normalize in upcoming quarters [18][19] Question: Distribution margin strength and rental business contribution - Management stated that both rental business and strategic acquisitions contributed equally to the strong distribution margin performance [20] Question: CapEx expectations for the rental business - Management expects CapEx for the rental business to remain in the $2 million to $3 million range [23] Question: Efficiency gains on the service side - Management indicated that they are still in the early stages of their margin enhancement journey, aiming for mid-30s gross margins in the future [24][25] Question: Opportunities for cross-selling with NEXA - Management expressed optimism about substantial cross-selling opportunities with NEXA, noting early successes since the acquisition [26][27] Question: Expansion plans in Europe - Management confirmed that the acquisition in Ireland is a foothold for further expansion, with potential for growth in calibration services and professional services [28][29] Question: Comfort level with leveraging the balance sheet for acquisitions - Management indicated comfort with leveraging up to 3 times, currently at 1.66 times, and remains active in pursuing acquisitions [32][34] Question: Performance in the Canadian market - Management reported strong performance in Canada, exceeding expectations, and noted ongoing investments in the Toronto lab to enhance capabilities [36][37] Question: Potential headwinds for fiscal 2024 - Management acknowledged economic factors such as rising interest rates and inflation as potential headwinds but expressed confidence in the company's recession-resistant business model [39]

Financial Performance - Consolidated revenue increased by 13% year-over-year, reaching $57.4 million in Q3 FY23 compared to $50.9 million in Q3 FY22 [7] - Adjusted EBITDA grew by 20% from the prior year, totaling $6.6 million [4, 14] - Gross margin expanded by 180 basis points to 28.6% [4] - Net income was $1.6 million, resulting in $0.21 per diluted share [4] Segment Performance - Service segment revenue increased by 19%, with organic growth of 12% [4, 7] - Service segment gross profit grew by 20%, with gross margin expanding 30 basis points to 30.0% [4] - Distribution segment revenue grew by 4%, with backlog increasing by 7% to over $9.5 million [4] - Distribution segment gross margin expanded by 370 basis points [4] - Service segment adjusted EBITDA increased 12% from prior year to $4.6 million [14] - Distribution adjusted EBITDA increased 47% from prior year to $2.0 million [14]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: September 24, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 000-03905 TRANSCAT, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction ...

Transcat, Inc. (NASDAQ:TRNS) Q2 2023 Results Conference Call November 1, 2022 11:00 AM ET Company Participants Tom Barbato - CFO Lee Rudow - President, CEO and Director Mark Doheny - COO Conference Call Participants Greg Palm - Craig-Hallum Capital Group Gerry Sweeney - ROTH Capital Scott Buck - H.C. Wainwright Ted Jackson - Northland Securities Mitra Ramgopal - Sidoti Operator Greetings and welcome to Transcat, Inc. Second Quarter 2023 Financial Results. At this time, all participants are in a listen-only ...

Fiscal 2023 Q2 Financial Results | --- | --- | --- | |-------|----------------------------------------|-------| | | | | | | Lee D. Rudow | | | | President and CEO | | | | Mark A. Doheny Chief Operating Officer | | | | Tom L. Barbato Chief Financial Officer | | | | | | Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and thus are subject to ri ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 25, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (585) 352-7777 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: For the transition period from to Commission File Number ...

Transcat Inc (NASDAQ:TRNS) Q1 2023 Earnings Conference Call August 2, 2022 11:00 AM ET Company Participants Tom Barbato - SVP of Finance Lee Rudow - President, CEO and Director Mark Doheny - VP of Finance, CFO and Treasurer Conference Call Participants Greg Palm - Craig-Hallum Capital Group Scott Buck - H.C. Wainwright Gerry Sweeney - ROTH Capital Operator Greetings, and welcome to Transcat, Inc. First Quarter 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Transcat, Inc. is a leading distributor of accredited calibration services, enterprise asset management services, and professional test, measurement, and control instruments, primarily serving highly regulated industries like life sciences. The company operates through its Service and Distribution segments, focusing on expanding capabilities and market reach through organic growth and strategic acquisitions [Business Overview](index=4&type=section&id=BUSINESS%20OVERVIEW) Transcat operates through its Service and Distribution segments, providing calibration services, enterprise asset management, and test and measurement instruments to highly regulated industries such as life sciences, aerospace, and energy, with **20-25%** of customers utilizing both segments - Transcat operates through two main segments, Service and Distribution, serving approximately **30,000** customers, with **20% to 25%** utilizing both segments' services[15](index=15&type=chunk) - The Service segment provides calibration, repair, inspection, analytical qualification, preventive maintenance, consulting, and related services, primarily managed through proprietary asset management system CalTrak® and customer portal C3®[16](index=16&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - The Distribution segment sells and leases over **150,000** test, measurement, and control instruments from approximately **500** leading brands worldwide, offering value-added services like pre-sale calibration[21](index=21&type=chunk) - The company focuses on highly regulated industries, including life sciences (pharmaceutical, biotechnology, medical devices), FAA-regulated aerospace and defense manufacturing, and energy and utilities[14](index=14&type=chunk) [Company Strategy](index=6&type=section&id=OUR%20STRATEGY) Transcat's strategy leverages its complementary Service and Distribution segments to enhance productivity and operational efficiency through its 'Operational Excellence' program, aiming for double-digit revenue growth via organic expansion and strategic acquisitions, particularly in the Service segment, while diversifying the Distribution segment - The company's strategy leverages the complementary nature of its Service and Distribution segments to create customer value and build competitive barriers[26](index=26&type=chunk) - The 'Operational Excellence' program enhances productivity and operational efficiency through technology, automation, and process improvements, while providing training and career development opportunities for employees[27](index=27&type=chunk) - The Service segment's growth strategy aims for double-digit revenue growth through organic expansion (market share capture, outsourcing internal calibration labs) and acquisitions (geographic expansion, increased capabilities, infrastructure utilization)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The Distribution segment's strategy is to be a leading test and measurement equipment distributor and rental source, offering cross-selling opportunities and differentiating through rentals and used equipment sales to mitigate price competition[31](index=31&type=chunk)[32](index=32&type=chunk) - In FY2022, three acquisitions were completed: Tangent Labs, LLC, Cal OpEx Limited (NEXA), and Upstate Metrology Inc.; in FY2021, BioTek Services, Inc. was acquired, primarily to expand the Service segment's geographic reach and capabilities[34](index=34&type=chunk)[35](index=35&type=chunk) [Business Segments](index=8&type=section&id=SEGMENTS) Transcat's business segments include Service and Distribution, with the Service segment offering accredited calibration and asset management services centered on quality and proprietary software, while the Distribution segment sells and leases test and measurement instruments, differentiated by value-added services and multi-channel marketing [Service Segment](index=8&type=section&id=Service%20Segment) The Service segment provides calibration, repair, inspection, consulting, and enterprise asset management services primarily to regulated industries, with all calibration centers ISO/IEC **17025:2017** accredited and utilizing proprietary software like CalTrak® and C3® for comprehensive asset management solutions - The Service segment provides calibration, repair, inspection, analytical qualification, preventive maintenance, consulting, and other related services, as well as enterprise asset management solutions[16](index=16&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) - All calibration service centers are ISO/IEC **17025:2017** accredited, forming a cornerstone of the company's quality program and providing consistent, uniform service to customers[20](index=20&type=chunk)[54](index=54&type=chunk) - The company performs approximately **800,000** calibrations annually, with about **13% to 15%** of services outsourced to third-party vendors for specialized needs[39](index=39&type=chunk) - Proprietary asset management software CalTrak® and C3® are validated to U.S. Federal Regulations **21 CFR Part 820.75** and **21 CFR Part 11**, providing customers with online access to asset management and calibration records[46](index=46&type=chunk)[47](index=47&type=chunk) [Distribution Segment](index=11&type=section&id=Distribution%20Segment) The Distribution segment globally sells and leases professional-grade test, measurement, and control instruments, offering value-added services such as pre-sale calibration, equipment rental, and used equipment sales, striving to be a one-stop solution provider through multi-channel marketing and technical support - The Distribution segment sells and leases over **150,000** test, measurement, and control instruments from approximately **500** leading brands worldwide[21](index=21&type=chunk) - Value-added services include pre-sale calibration/certification, equipment rental, used equipment sales, and equipment kitting to meet customer needs and reduce downtime[21](index=21&type=chunk)[60](index=60&type=chunk)[62](index=62&type=chunk) - Multi-channel marketing and sales are conducted through websites, inside sales teams, print and digital marketing materials, and industry-specific websites such as www.pipettes.com[21](index=21&type=chunk)[64](index=64&type=chunk) - In FY2022, the top ten suppliers accounted for approximately **64%** of total distribution sales; supply chain disruptions led to increased lead times and a growing backlog of orders[70](index=70&type=chunk) Distribution Segment Backlog Status | Metric | March 26, 2022 (million dollars) | March 27, 2021 (million dollars) | | :----------------------- | :----------------------- | :----------------------- | | Total Backlog Orders | 7.7 | 6.3 | | Backlog Orders | 6.4 | 4.9 | [Customer Service and Support](index=13&type=section&id=CUSTOMER%20SERVICE%20AND%20SUPPORT) Transcat provides multi-channel customer support through business development, outbound sales, account management, and inbound sales/customer service teams, continuously monitoring service quality via customer surveys, call monitoring, and daily reports - Customers can place orders via mail, phone (**1-800-828-1470**), email (sales@transcat.com), online (www.transcat.com), or fax[83](index=83&type=chunk) - Customer service quality is monitored through customer surveys, call monitoring, and daily statistical reports[75](index=75&type=chunk) [Export Sales Information](index=14&type=section&id=INFORMATION%20REGARDING%20EXPORT%20SALES) Export sales accounted for approximately **10%** of total revenue in FY2022 and FY2021, primarily denominated in Canadian dollars and Euros, exposing the company to international operating risks such as exchange rate fluctuations and trade restrictions - Export sales accounted for approximately **10%** of total revenue in FY2022 and FY2021[77](index=77&type=chunk) - In FY2022, approximately **81%** of export sales were denominated in Canadian dollars, **11%** in Euros, and **8%** in U.S. dollars[77](index=77&type=chunk) - International operations face risks such as trade or foreign exchange restrictions, increased tariffs, exchange rate fluctuations, and political instability[77](index=77&type=chunk) [Information Systems](index=14&type=section&id=INFORMATION%20SYSTEMS) Transcat utilizes Infor's Application Plus as its enterprise software solution, integrated with SalesForce.com CRM, and employs proprietary CalTrak® and C3® systems for documentation and asset management to support calibration services - The company uses Infor's Application Plus as its enterprise software solution, managing business functions such as customer service, warehouse management, inventory management, financial management, customer relationship management, and business intelligence[78](index=78&type=chunk) - SalesForce.com's CRM software is fully integrated with the Infor enterprise software[78](index=78&type=chunk) - Proprietary documentation and asset management system CalTrak® manages calibration service center workflows and customer assets, with C3® providing web-based asset management and access to service records for customers[79](index=79&type=chunk) [Intellectual Property](index=14&type=section&id=INTELLECTUAL%20PROPERTY) Transcat owns federally registered trademarks including Transcat®, CalTrak®, C3®, and Procision®, along with several internet domain names, all critical intellectual property that the company plans to renew as needed - The company owns federally registered trademarks including Transcat®, CalTrak®, C3®, and Procision®, with CalTrak® also registered in Canada and Puerto Rico[80](index=80&type=chunk) - The company owns internet domain names such as www.transcat.com, www.transcat.ca, and pipettes.com[81](index=81&type=chunk) - Changes in domain name regulations could prevent the company from maintaining or obtaining comparable domain names, thereby harming the business[81](index=81&type=chunk) [Seasonality](index=14&type=section&id=SEASONALITY) Transcat's business exhibits seasonality, with the third and fourth fiscal quarters typically stronger than the first and second, primarily influenced by the operating cycles of industrial sector customers - Historical data indicates that the company's third and fourth fiscal quarters are typically stronger than the first and second[82](index=82&type=chunk) - The Distribution segment performs strongest in the third fiscal quarter, while the Service segment performs strongest in the fourth fiscal quarter[82](index=82&type=chunk) [Fiscal Year](index=15&type=section&id=FISCAL%20YEAR) Transcat operates on a **52/53-week** fiscal year, ending on the last Saturday in March, with FY2022, FY2021, and FY2023 all comprising **52** weeks - The company operates on a **52/5