Transcat(US:TRNS)2026-02-03 21:06Financial 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].