Transcat(US:TRNS)2025-11-05 21:07Revenue and Growth - Consolidated revenue for Q2 FY 2026 was $82.3 million, an increase of $14.4 million or 21.3% compared to Q2 FY 2025, driven by acquisitions and a $5.7 million increase in distribution revenue[100]. - Total revenue for the first six months of FY 2026 was $158.7 million, an increase of $24.2 million or 18.0% compared to the same period in FY 2025[121]. - Service revenue accounted for 64.2% of total revenue in Q2 FY 2026, increasing by $8.8 million or 19.9% year-over-year, despite economic volatility[105]. - Service revenue accounted for 64.3% of total revenue in the first six months of FY 2026, increasing by $14.1 million or 16.1%[122]. - The trailing twelve-month service revenue for Q2 FY 2026 was $195.5 million, reflecting a growth of 11.0% compared to the prior fiscal year[107]. Profitability - Gross profit for Q2 FY 2026 was $26.8 million, up $5.6 million or 26.2% year-over-year, with a consolidated gross margin of 32.5%, an increase of 1.2% from the previous year[101]. - Total gross profit for Q2 FY 2026 was $26.8 million, an increase of $5.6 million or 26.2% compared to Q2 FY 2025, with a gross margin of 32.5%[112]. - Net income for Q2 FY 2026 was $1.3 million, down from $3.3 million in Q2 FY 2025, primarily due to increased administrative costs and interest expenses[103]. - Net income for the first six months of fiscal year 2026 decreased by $3.2 million or 41.1% compared to the same period in fiscal year 2025, with net income as a percentage of revenue dropping from 5.7% to 2.9%[130]. - Adjusted EBITDA for the first six months of fiscal year 2026 was $23.9 million, an increase of $4.8 million or 25.2% from the prior year, with Adjusted EBITDA as a percentage of revenue rising from 14.2% to 15.0%[131]. Operating Expenses - Total operating expenses in Q2 FY 2026 were $23.3 million, an increase of $5.8 million or 33.1% compared to Q2 FY 2025, leading to an operating income of $3.5 million, a decrease of 6.2%[102]. - Total operating expenses for the first six months of FY 2026 were $43.7 million, an increase of $8.7 million or 24.9% compared to the first six months of FY 2025[127]. Margins - Operating margin decreased from 5.5% in Q2 FY 2025 to 4.3% in Q2 FY 2026, indicating increased pressure on profitability[102]. - Service gross profit in Q2 FY 2026 increased by $2.4 million or 16.5%, while service gross margin decreased to 32.2%[113]. - Distribution gross margin in Q2 FY 2026 was 33.2%, an increase of 5.3% from 27.9% in Q2 FY 2025[115]. Cash Flow and Investments - Cash provided by operating activities was $16.5 million in the first six months of fiscal year 2026, up from $15.8 million in the same period of fiscal year 2025, attributed to changes in net working capital[144]. - The company invested $9.0 million in capital expenditures during the first six months of fiscal year 2026, compared to $7.6 million in the same period of fiscal year 2025, focusing on customer-driven expansion[146]. - The company utilized $82.5 million for business acquisitions in the first six months of fiscal year 2026, significantly higher than $15.9 million in the same period of fiscal year 2025[146]. Debt and Financing - As of September 27, 2025, the company had $150.0 million available for borrowing under a new five-year secured revolving credit facility, with $111.9 million outstanding[141]. - The leverage ratio was 2.26 as of September 27, 2025, compared to 0.78 on March 29, 2025, indicating an increase in debt relative to EBITDA[143]. Tax and Interest - The effective tax rate increased to 31.3% in the first six months of fiscal year 2026 from 13.9% in the same period of fiscal year 2025, primarily due to the timing of discrete items[129]. - A 1% change in interest rates would result in a yearly interest expense change of approximately $1.1 million[154]. Other Key Points - Total pending product shipments at the end of Q2 FY 2026 were $7.5 million, an increase of $3.4 million or 82.5% compared to Q2 FY 2025[111]. - Days sales outstanding increased to 62 days as of September 27, 2025, from 59 days as of September 28, 2024, reflecting changes in the timing of collections[144]. - Adjusted diluted earnings per share for the first six months of fiscal year 2026 was $1.03, compared to $1.20 in the same period of fiscal year 2025[137]. - Approximately 90% of total revenues for the first six months of fiscal year 2026 were denominated in U.S. dollars[156]. - The acquisition of Essco Calibration is the largest deal in the company's history, enhancing its calibration service portfolio and market presence[150]. - The company expects a return to single-digit service organic revenue growth in the second half of fiscal 2026[151]. - The estimated income tax rate for the full fiscal year 2026 is projected to be between 30% and 32%[152].