Transcat(US:TRNS)2020-11-04 21:00Financial Performance - Consolidated revenue for Q2 FY2021 was $41.6 million, a decrease of 0.4% or $0.2 million compared to Q2 FY2020[64]. - Gross profit increased by $1.1 million or 10.0% to $11.5 million, with gross margin expanding by 260 basis points from 25.0% to 27.6%[65][77]. - Total operating expenses rose by $1.0 million or 13.9% to $8.4 million, representing 20.2% of total revenue, up from 17.7% in Q2 FY2020[66]. - Net income decreased by 14.9% to $2.0 million compared to $2.4 million in Q2 FY2020, primarily due to higher income tax provisions[67]. - Adjusted EBITDA for Q2 FY2021 was $5.2 million, a 9.1% increase from $4.8 million in Q2 FY2020, with Adjusted EBITDA as a percentage of revenue rising to 12.6%[87]. - Net income for the first six months of FY2021 was $2.8 million, a decrease of $1.3 million or 31.1% compared to the same period in FY2020, due to lower operating income and increased provision for income taxes[95]. - Adjusted EBITDA for the first six months of fiscal year 2021 was $8.7 million, flat compared to the same period in fiscal year 2020, with a margin of 10.8% versus 10.4%[99]. Revenue Breakdown - Service revenue accounted for 59.0% of total revenue in Q2 FY2021, increasing by 4.5% year-over-year, while Distribution sales decreased by 6.6%[69][74]. - Organic revenue for the Service segment declined by 0.8% when excluding acquired revenue of $1.2 million[69]. - Service revenue for the first six months of FY2021 was $47.5 million, a 3.5% increase from $45.9 million in the same period of FY2020, driven by demand from the Life Sciences market[88]. - Distribution sales decreased by $5.3 million, or 13.8%, in the first six months of FY2021 compared to the same period in FY2020, impacted by reduced demand due to the COVID-19 pandemic[90]. Profitability Analysis - The Service segment's gross profit increased by 31.4% to $7.9 million, while Distribution gross profit decreased by 18.9% to $3.6 million[76]. - Service gross profit in Q2 FY2021 increased by $1.9 million, or 31.4%, compared to Q2 FY2020, with a gross margin of 32.2%, a 660 basis point increase[78]. - Distribution gross margin was 21.1% in Q2 FY2021, down 320 basis points from 24.3% in Q2 FY2020, primarily due to lower volume and reduced cooperative advertising[80]. - Total gross profit for the first six months of FY2021 was $20.9 million, a 2.0% increase from $20.5 million in the same period of FY2020, with total gross margin improving to 26.0%[92]. Operating Expenses - Total operating expenses for Q2 FY2021 were $8.4 million, a 13.9% increase from $7.4 million in Q2 FY2020, with operating expenses as a percentage of total revenue rising to 20.2% from 17.7%[81]. - The effective tax rate for the first six months of FY2021 was 19.0%, up from 7.6% in FY2020, reflecting decreased discrete tax benefits from stock-based compensation[94]. Cash Flow and Capital Expenditures - Cash provided by operating activities increased significantly to $12.5 million in the first six months of fiscal year 2021, compared to $2.8 million in the same period of fiscal year 2020[109]. - Capital expenditures for fiscal year 2021 are expected to range between $5.5 million and $6.5 million, up from the previous estimate of $5.0 million to $5.5 million[119]. Financial Stability - The leverage ratio was 1.19 as of September 26, 2020, down from 1.53 at the end of fiscal year 2020, indicating improved financial stability[106]. - The company has $40 million available under its Revolving Credit Facility, with $11.1 million outstanding as of September 26, 2020[104]. - The interest rate on the Revolving Credit Facility ranged from 1.4% to 2.7% during the first six months of fiscal year 2021[121]. Tax and Foreign Exchange - The company revised its fiscal year 2021 income tax rate estimate to a range of 22% to 23%, up from the previous estimate of 20% to 21%[118]. - Approximately 90% of total revenues for the first six months of fiscal years 2021 and 2020 were denominated in U.S. dollars, with a 10% change in the Canadian dollar impacting revenue by approximately 1%[122]. - The company reported a loss of $0.1 million from foreign exchange forward contracts during the first six months of fiscal years 2021 and 2020[123]. - As of September 26, 2020, the company had a foreign exchange contract with a notional amount of $4.5 million, which was renewed in October 2020[123]. Internal Controls - There were no changes in internal control over financial reporting that materially affected the company during the last fiscal quarter[125]. - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[124].