Transcat(TRNS) - 2026 Q1 - Quarterly Results

Performance Overview & Outlook This section provides an executive summary of the company's recent financial performance and strategic direction Management Commentary & Strategy 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] - 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] - 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] Q1 FY2026 Key Highlights 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] Financial Performance This section details the company's consolidated and segment-specific financial results for the reporting period Consolidated Financial Results 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] Service Segment Performance 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] Distribution Segment Performance 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] Financial Position and Cash Flow This section provides an overview of the company's balance sheet, liquidity, and cash flow activities Balance Sheet and Liquidity 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][17] Cash Flow Overview 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 This section explains the company's use of non-GAAP financial measures and their reconciliation to GAAP equivalents Definition and Rationale 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] - 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] Appendix: Detailed Financial Statements This appendix provides comprehensive financial statements and reconciliations for the reported period Consolidated Statements of Income 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 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 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 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 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 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% |