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Transcat Reports Strong Second Quarter Results on Double-Digit Organic Service Growth and Expanding Gross Margins

  • Second quarter consolidated revenue up 11.3% with 230 basis points gross margin expansion
  • Second quarter service revenue up 17.5%; service organic revenue growth of 10.0%
  • Second quarter service gross profit increased 22.6%; service gross margin expanded 140 basis points
  • Second quarter consolidated adjusted EBITDA grew 23.9%; adjusted EBITDA margin expanded 160 basis points
  • Second quarter adjusted diluted earnings per share of $0.60 increased $0.16 versus prior year

Transcat, Inc. (Nasdaq: TRNS) (“Transcat” or the “Company”), a leading provider of accredited calibration, repair, inspection and laboratory instrument services and value-added distributor of professional grade handheld test, measurement, and control instrumentation, today reported financial results for its second quarter ended September 23, 2023 (the “second quarter”) of fiscal year 2024, which ends March 30, 2024 (“fiscal 2024”). Results include the previously reported acquisitions of TIC-MS, Inc. ("TIC-MS") effective March 27, 2023, SteriQual, Inc. ("SteriQual"), effective July 12, 2023 and Axiom Test Equipment, Inc. (“Axiom”), effective August 8, 2023.

“We are extremely pleased with our strong second quarter results as Service gross margin expanded 140 basis points driven by double-digit organic Service growth of 10% and increased productivity throughout our network of labs. Service segment revenue grew 17% as demand in our highly regulated end markets, including life sciences, remained strong and our recent acquisitions continued to perform at a high level. Consolidated revenue was up 11% with gross margin expansion of 230 basis points year over year driven by our differentiated value proposition and execution of our automation and process improvement initiatives,” commented Lee D. Rudow, President and CEO. “Adjusted EBITDA growth of 24% for the second quarter reflects our ability to leverage organic Service revenue growth and the successful integration of acquired companies. The Transcat Team continues to deliver strong revenue growth and sustainable gross margin expansion.”

“We recently completed a public offering of our common stock, which was used to repay our credit facility, for working capital, and for other general corporate purposes. The successful offering displayed robust demand for Transcat stock among institutional investors due to our consistent long-term track record of profitable revenue growth,” stated Mr. Rudow.

Mr. Rudow added, “Transcat’s differentiated and proven formula for success with acquisitions centers around our disciplined and selective approach to identify, acquire, and integrate strong companies that will be accretive over the long term, the Transcat way. We completed two acquisitions in the second quarter, including SteriQual, a provider of expert consulting services to the life sciences industry that specializes in commissioning, qualification, and validation (“CQV”), as well as Axiom Test Equipment, the largest acquisition in the history of Transcat. Axiom is a well-established, fast-growing player in the test equipment rental market that will expand our existing Rental offering. We believe Axiom will create opportunities for accelerated growth while improving the margin profile of our Distribution segment as the rental business continues to grow faster than the traditional distribution business. The two rental businesses are complementary to one another in that there is minimal overlap in the rental asset portfolios, as well as little overlap in customers. We believe this presents a compelling cross sell opportunity to quickly leverage in the rental business, but more importantly provides additional opportunity to drive organic calibration service growth into this newly acquired customer base.”

Second Quarter Fiscal 2024 Review

(Results are compared with the second quarter of the fiscal year ended March 25, 2023 (fiscal 2023))

($ in thousands)

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY24 Q2

 

 

FY23 Q2

 

 

$'s

 

 

%

 

Service Revenue

 

$

41,431

 

 

$

35,267

 

 

$

6,164

 

 

 

17.5

%

Distribution Sales

 

 

21,373

 

 

 

21,172

 

 

 

201

 

 

 

0.9

%

Revenue

 

$

62,804

 

 

$

56,439

 

 

$

6,365

 

 

 

11.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

20,125

 

 

$

16,767

 

 

$

3,358

 

 

 

20.0

%

Gross Margin

 

 

32.0

%

 

 

29.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

$

1,643

 

 

$

3,626

 

 

$

(1,983

)

 

 

(54.7

)%

Operating Margin

 

 

2.6

%

 

 

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

460

 

 

$

2,357

 

 

$

(1,897

)

 

 

(80.5

)%

Net Margin

 

 

0.7

%

 

 

4.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA*

 

$

9,330

 

 

$

7,531

 

 

$

1,799

 

 

 

23.9

%

Adjusted EBITDA* Margin

 

 

14.9

%

 

 

13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$

0.06

 

 

$

0.31

 

 

$

(0.25

)

 

 

(80.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted EPS*

 

$

0.60

 

 

$

0.44

 

 

$

0.16

 

 

 

36.4

%

*See Note 1 on page 5 for a description of these non-GAAP financial measures and pages 10, 11 and 12 for the reconciliation tables.

Consolidated revenue was $62.8 million, an increase of 11.3%. Consolidated gross profit was $20.1 million, an increase of $3.4 million, or 20.0%, while gross margin expanded 230 basis points due to improvements in both operating segments. Operating expenses were $18.5 million, an increase of $5.3 million, or 40.6%, driven by incremental expenses from acquired businesses (including stock-based compensation expense), higher incentive-based employee costs due to higher sales and a non-cash charge related to the amended NEXA Earn-Out agreement. Adjusted EBITDA was $9.3 million which represented an increase of $1.8 million or 23.9%. Net income per diluted share was $0.06 compared to $0.31 last year, which includes the non-cash charge of $2.8 million for the amended NEXA Earn-Out agreement. Adjusted diluted earnings per share was $0.60 versus $0.44 last year impacted by the stock-based tax benefit move from Q1 of last year to Q2 this year and higher interest expense.

Service segment delivers strong second quarter results

Represents the accredited calibration, repair, inspection and laboratory instrument services business (66.0% of total revenue for the second quarter of fiscal 2024).

($ in thousand)

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY24 Q2

 

 

FY23 Q2

 

 

$'s

 

 

%

 

Service Segment Revenue

 

$

41,431

 

 

$

35,267

 

 

$

6,164

 

 

 

17.5

%

Gross Profit

 

$

14,084

 

 

$

11,487

 

 

$

2,597

 

 

 

22.6

%

Gross Margin

 

 

34.0

%

 

 

32.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

$

742

 

 

$

2,507

 

 

$

(1,765

)

 

 

(70.4

)%

Operating Margin

 

 

1.8

%

 

 

7.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA*

 

$

6,798

 

 

$

5,549

 

 

$

1,249

 

 

 

22.5

%

Adjusted EBITDA* Margin

 

 

16.4

%

 

 

15.7

%

 

 

 

 

 

 

 

 

*See Note 1 on page 5 for a description of this non-GAAP financial measure and pages 10 and 11 for the Adjusted EBITDA Reconciliation tables.

Service segment revenue was $41.4 million, an increase of $6.2 million or 17.5%, and included $2.6 million of incremental revenue from acquisitions. Organic revenue growth was 10.0% and was driven by strong end-market demand and continued market share gains. The segment gross margin increased 140 basis points from prior year primarily due to continued productivity improvements offset by increased start-up costs from new client-based lab implementations.

Distribution segment shows continued margin improvement

Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (34.0% of total revenue for the first quarter of fiscal 2024).

($ in thousands)

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY24 Q2

 

 

FY23 Q2

 

 

$'s

 

 

%

 

Distribution Segment Sales

 

$

21,373

 

 

$

21,172

 

 

$

201

 

 

 

0.9

%

Gross Profit

 

$

6,041

 

 

$

5,280

 

 

$

761

 

 

 

14.4

%

Gross Margin

 

 

28.3

%

 

 

24.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

$

901

 

 

$

1,119

 

 

$

(218

)

 

 

(19.5

)%

Operating Margin

 

 

4.2

%

 

 

5.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA*

 

$

2,532

 

 

$

1,982

 

 

$

550

 

 

 

27.7

%

Adjusted EBITDA* Margin

 

 

11.8

%

 

 

9.4

%

 

 

 

 

 

 

 

 

*See Note 1 on page 5 for a description of this non-GAAP financial measure and pages 10 and 11 for the Adjusted EBITDA Reconciliation tables.

Distribution sales were $21.4 million, relatively flat compared to the prior year. Distribution segment gross margin was 28.3%, an increase of 340 basis points due to a favorable sales mix driven by strength in the Rentals business.

Six Month Review (Results are compared with the first six months of fiscal 2023)

Total revenue was $123.4 million, an increase of $12.3 million or 11.1%. Consolidated gross profit was up $6.0 million, or 18.4%, and gross margin expanded to 31.5% or 200 basis points. Consolidated operating expenses increased $7.0 million, or 27.3%, driven by incremental expenses from acquired businesses, (including stock-based compensation expense), increased intangibles amortization expense, investments in technology and our employee base to support future growth, and a non-cash charge related to the amended NEXA Earn-Out agreement. As a result, consolidated operating income was $6.3 million compared with $7.2 million in last fiscal year’s period.

Adjusted EBITDA was $17.8 million which represented an increase of $3.0 million or 20.0%. Net income per diluted share decreased to $0.43 from $0.71 and adjusted diluted earnings per share was $1.13 versus $0.98 last year. The effective tax rate was 25.3% compared to 16.9% in the prior year, due to the discrete tax treatment of the non-cash charge related to the amended NEXA Earn-Out agreement. The increase in the tax rate had an unfavorable impact of $0.01 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year.

Balance Sheet and Cash Flow Overview

On September 23, 2023, the Company had $32.0 million available for borrowing under its secured revolving credit facility. Total debt of $53.3 million was up $4.2 million from fiscal 2023 year-end due to cash used for acquisitions, partially offset by increased cash flow from operations. The Company’s leverage ratio, as defined in the credit agreement, was 1.37 on September 23, 2023, compared with 1.60 on March 25, 2023. Subsequent to the end of the quarter, the revolving credit facility was paid off using funds from the secondary offering. As previously disclosed, the NEXA Earn-Out agreement was amended to recognize the expanded scope of the NEXA portfolio, which includes the acquisition of SteriQual. The amendment required a non-cash charge of $2.8 million in the fiscal second quarter.

Outlook

Mr. Rudow added, “We have demonstrated our ability to drive growth through various economic cycles over the past decade and a half, and we are confident that will continue. We expect organic Service revenue growth in the high-single digit to low double-digit range and gross margin expansion for the fiscal 2024 year. We believe our unique value proposition drives a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science, Aerospace, and Defense markets. Additionally, we expect our successful and unique acquisition strategy will continue to drive synergistic growth opportunities and expand our addressable markets.”

Transcat expects its income tax rate to range between 24% and 26% in fiscal 2024. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. The tax rate is higher than in recent years and is an increase versus the estimate provided last quarter due to the amended NEXA Earn-Out agreement. The NEXA Earn-Out charge is non-deductible for tax purposes and impacts the full year rate for fiscal year 2024, however this does not impact the actual amount of taxes paid.

Webcast and Conference Call

Transcat will host a conference call and webcast on Tuesday, October 31, 2023 at 11:00 a.m. ET. Management will review the financial and operating results for the second quarter, as well as the Company’s strategy and outlook. A question and answer session will follow the formal discussion. The review will be accompanied by a slide presentation, which will be available at www.transcat.com/investor-relations. The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.transcat.com/investor-relations.

A telephonic replay will be available from 2:00 p.m. ET on the day of the call through Tuesday, November 7, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13742041, access the webcast replay at www.transcat.com/investor-relations, where a transcript will be posted once available.

NOTE 1 Non-GAAP Financial Measures

In addition to reporting net income, a U.S. generally accepted accounting principle (“GAAP”) measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, non-cash loss on sale of building and restructuring expense), which is a non-GAAP measure. The Company’s management believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the performance of its core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense and other items, which is not always commensurate with the reporting period in which it is included. As such, the Company uses Adjusted EBITDA as a measure of performance when evaluating its business segments and as a basis for planning and forecasting. Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. See pages 10 and 11 for the Adjusted EBITDA Reconciliation tables.

In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense), which is a non-GAAP measure. Our management believes Adjusted Diluted Earnings Per Share is an important measure of our operating performance because it provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted Diluted Earnings Per Share is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted Diluted Earnings Per Share, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. See page 12 for the Adjusted Diluted EPS Reconciliation table.

ABOUT TRANSCAT

Transcat, Inc. is a leading provider of accredited calibration, reliability, maintenance optimization, quality and compliance, validation, Computerized Maintenance Management System (CMMS), and pipette services. The Company is focused on providing best-in-class services and products to highly regulated industries, particularly the Life Science industry, which includes pharmaceutical, biotechnology, medical device, and other FDA-regulated businesses, as well as aerospace and defense, and energy and utilities. Transcat provides periodic on-site services, mobile calibration services, pickup and delivery, in-house services at its 27 Calibration Service Centers strategically located across the United States, Puerto Rico, Canada, and Ireland. In addition, Transcat operates calibration labs in 21 imbedded customer-site locations. The breadth and depth of measurement parameters addressed by Transcat’s ISO/IEC 17025 scopes of accreditation are believed to be the best in the industry.

Transcat also operates as a leading value-added distributor that markets, sells and rents new and used national and proprietary brand instruments to customers primarily in North America. The Company believes its combined Service and Distribution segment offerings, experience, technical expertise, and integrity create a unique and compelling value proposition for its customers.

Transcat’s strategy is to leverage its strong brand and unique value proposition that includes its comprehensive instrument service capabilities, enterprise asset management, and leading distribution platform to drive organic sales growth. The Company will also look to expand its addressable calibration market through acquisitions and capability investments to further realize the inherent leverage of its business model. More information about Transcat can be found at: Transcat.com.

Safe Harbor Statement

This news release 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 risks, uncertainties and assumptions. Forward-looking statements are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” “plans,” “aims” and other similar words. All statements addressing operating performance, events or developments that Transcat expects or anticipates will occur in the future, including but not limited to statements relating to anticipated revenue, profit margins, the commercialization of software projects, sales operations, capital expenditures, cash flows, operating income, growth strategy, segment growth, potential acquisitions, integration of acquired businesses, market position, customer preferences, outlook and changes in market conditions in the industries in which Transcat operates are forward-looking statements. Forward-looking statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties include those more fully described in Transcat’s Annual Report and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize or should any of the Company’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Company’s forward-looking statements, which speak only as of the date they are made. Except as required by law, the Company disclaims any obligation to update, correct or publicly announce any revisions to any of the forward-looking statements contained in this news release, whether as the result of new information, future events or otherwise.

FINANCIAL TABLES FOLLOW.

TRANSCAT, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Second Quarter Ended

 

 

Six Months Ended

 

 

 

September 23,

 

 

September 24,

 

 

September 23,

 

 

September 24,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Revenue

 

$

41,431

 

 

$

35,267

 

 

$

81,284

 

 

$

69,143

 

Distribution Sales

 

 

21,373

 

 

 

21,172

 

 

 

42,118

 

 

 

41,957

 

Total Revenue

 

 

62,804

 

 

 

56,439

 

 

 

123,402

 

 

 

111,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Service Revenue

 

 

27,347

 

 

 

23,780

 

 

 

54,229

 

 

 

46,821

 

Cost of Distribution Sales

 

 

15,332

 

 

 

15,892

 

 

 

30,338

 

 

 

31,474

 

Total Cost of Revenue

 

 

42,679

 

 

 

39,672

 

 

 

84,567

 

 

 

78,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

20,125

 

 

 

16,767

 

 

 

38,835

 

 

 

32,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing and Warehouse Expenses

 

 

6,856

 

 

 

5,900

 

 

 

13,325

 

 

 

11,720

 

General and Administrative Expenses

 

 

11,626

 

 

 

7,241

 

 

 

19,227

 

 

 

13,855

 

Total Operating Expenses

 

 

18,482

 

 

 

13,141

 

 

 

32,552

 

 

 

25,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

1,643

 

 

 

3,626

 

 

 

6,283

 

 

 

7,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and Other Expense, net

 

 

841

 

 

 

537

 

 

 

1,719

 

 

 

693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

802

 

 

 

3,089

 

 

 

4,564

 

 

 

6,537

 

Provision for Income Taxes

 

 

342

 

 

 

732

 

 

 

1,155

 

 

 

1,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

460

 

 

$

2,357

 

 

$

3,409

 

 

$

5,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.06

 

 

$

0.31

 

 

$

0.44

 

 

$

0.72

 

Average Shares Outstanding

 

 

7,819

 

 

 

7,550

 

 

 

7,732

 

 

 

7,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

0.06

 

 

$

0.31

 

 

$

0.43

 

 

$

0.71

 

Average Shares Outstanding

 

 

7,948

 

 

 

7,646

 

 

 

7,840

 

 

 

7,635

 

TRANSCAT, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Amounts)

 

 

 

(Unaudited)

 

 

(Audited)

 

 

 

September 23,

 

 

March 25,

 

 

 

2023

 

 

2023

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash

 

$

1,246

 

 

$

1,531

 

Accounts Receivable, less allowance for credit losses of $614 and $457 as of September 23, 2023 and March 25, 2023, respectively

 

 

44,382

 

 

 

44,698

 

Other Receivables

 

 

335

 

 

 

506

 

Inventory, net

 

 

15,685

 

 

 

16,929

 

Prepaid Expenses and Other Current Assets

 

 

3,525

 

 

 

3,935

 

Total Current Assets

 

 

65,173

 

 

 

67,599

 

Property and Equipment, net

 

 

35,648

 

 

 

29,064

 

Goodwill

 

 

106,366

 

 

 

69,360

 

Intangible Assets, net

 

 

23,156

 

 

 

13,799

 

Right To Use Assets, net

 

 

16,784

 

 

 

14,876

 

Other Assets

 

 

1,083

 

 

 

1,051

 

Total Assets

 

$

248,210

 

 

$

195,749

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts Payable

 

$

12,523

 

 

$

15,869

 

Accrued Compensation and Other Current Liabilities

 

 

13,295

 

 

 

10,201

 

Current Portion of Long-Term Debt

 

 

2,293

 

 

 

2,248

 

Total Current Liabilities

 

 

28,111

 

 

 

28,318

 

Long-Term Debt

 

 

51,000

 

 

 

46,869

 

Deferred Tax Liabilities, net

 

 

10,836

 

 

 

6,538

 

Lease Liabilities

 

 

14,534

 

 

 

12,960

 

Other Liabilities

 

 

5,477

 

 

 

1,434

 

Total Liabilities

 

 

109,958

 

 

 

96,119

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,978,401 and 7,562,604 shares issued and outstanding as of September 23, 2023 and March 25, 2023, respectively

 

 

3,989

 

 

 

3,781

 

Capital in Excess of Par Value

 

 

64,310

 

 

 

27,886

 

Accumulated Other Comprehensive Loss

 

 

(1,064

)

 

 

(1,200

)

Retained Earnings

 

 

71,017

 

 

 

69,163

 

Total Shareholders' Equity

 

 

138,252

 

 

 

99,630

 

Total Liabilities and Shareholders' Equity

 

$

248,210

 

 

$

195,749

 

TRANSCAT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

 

 

 

(Unaudited)

 

 

 

Six Months Ended

 

 

 

September 23,

 

 

September 24,

 

 

 

2023

 

 

2022

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

3,409

 

 

$

5,429

 

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

 

 

 

 

 

 

 

 

Net Loss on Disposal of Property and Equipment

 

 

11

 

 

 

34

 

Deferred Income Taxes

 

 

23

 

 

 

(54

)

Depreciation and Amortization

 

 

6,078

 

 

 

5,419

 

Provision for Accounts Receivable and Inventory Reserves

 

 

347

 

 

 

94

 

Stock-Based Compensation Expense

 

 

2,171

 

 

 

1,942

 

Changes in Assets and Liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts Receivable and Other Receivables

 

 

2,384

 

 

 

(1,238

)

Inventory

 

 

3,376

 

 

 

(3,724

)

Prepaid Expenses and Other Current Assets

 

 

465

 

 

 

881

 

Accounts Payable

 

 

(3,969

)

 

 

(586

)

Accrued Compensation and Other Current Liabilities

 

 

1,677

 

 

 

(2,962

)

Net Cash Provided by Operating Activities

 

 

15,972

 

 

 

5,235

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchases of Property and Equipment

 

 

(5,444

)

 

 

(4,772

)

Proceeds from Sale of Property and Equipment

 

 

-

 

 

 

10

 

Business Acquisitions, net of cash acquired

 

 

(12,882

)

 

 

(4,040

)

Net Cash Used in Investing Activities

 

 

(18,326

)

 

 

(8,802

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from Revolving Credit Facility, net

 

 

5,288

 

 

 

3,387

 

Repayments of Term Loan

 

 

(1,112

)

 

 

(1,026

)

Issuance of Common Stock

 

 

384

 

 

 

364

 

Repurchase of Common Stock

 

 

(2,247

)

 

 

(437

)

Net Cash Provided by Financing Activities

 

 

2,313

 

 

 

2,288

 

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash

 

 

(244

)

 

 

792

 

 

 

 

 

 

 

 

 

 

Net Decrease in Cash

 

 

(285

)

 

 

(487

)

Cash at Beginning of Period

 

 

1,531

 

 

 

1,396

 

Cash at End of Period

 

$

1,246

 

 

$

909

 

TRANSCAT, INC.

Adjusted EBITDA Reconciliation Table

(In thousands)

(Unaudited)

 

 

 

Fiscal 2024

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

 

Net Income

 

$

2,949

 

 

$

460

 

 

 

 

 

 

 

 

 

 

$

3,409

 

+ Interest Expense

 

 

814

 

 

 

890

 

 

 

 

 

 

 

 

 

 

 

1,704

 

+ Other Expense / (Income)

 

 

64

 

 

 

(49

)

 

 

 

 

 

 

 

 

 

 

15

 

+ Tax Provision

 

 

813

 

 

 

342

 

 

 

 

 

 

 

 

 

 

 

1,155

 

Operating Income

 

$

4,640

 

 

$

1,643

 

 

$

-

 

 

$

-

 

 

$

6,283

 

+ Depreciation & Amortization

 

 

2,790

 

 

 

3,269

 

 

 

 

 

 

 

 

 

 

 

6,059

 

+ Transaction Expense

 

 

185

 

 

 

328

 

 

 

 

 

 

 

 

 

 

 

513

 

+ Acquisition Earn-Out Adjustment

 

 

-

 

 

 

2,800

 

 

 

 

 

 

 

 

 

 

 

2,800

 

+ Other (Expense) / Income

 

 

(64

)

 

 

49

 

 

 

 

 

 

 

 

 

 

 

(15

)

+ Noncash Stock Compensation

 

 

930

 

 

 

1,241

 

 

 

 

 

 

 

 

 

 

 

2,171

 

Adjusted EBITDA

 

$

8,481

 

 

$

9,330

 

 

$

-

 

 

$

-

 

 

$

17,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Breakdown

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Operating Income

 

$

3,192

 

 

$

742

 

 

 

 

 

 

 

 

 

 

$

3,934

 

+ Depreciation & Amortization

 

 

2,226

 

 

 

2,325

 

 

 

 

 

 

 

 

 

 

 

4,551

 

+ Transaction Expense

 

 

185

 

 

 

76

 

 

 

 

 

 

 

 

 

 

 

261

 

+ Acquisition Earn-Out Adjustment

 

 

-

 

 

 

2,800

 

 

 

 

 

 

 

 

 

 

 

2,800

 

+ Other (Expense) / Income

 

 

(47

)

 

 

29

 

 

 

 

 

 

 

 

 

 

 

(18

)

+ Noncash Stock Compensation

 

 

676

 

 

 

826

 

 

 

 

 

 

 

 

 

 

 

1,502

 

Service Adjusted EBITDA

 

$

6,232

 

 

$

6,798

 

 

$

-

 

 

$

-

 

 

$

13,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution Operating Income

 

$

1,448

 

 

$

901

 

 

 

 

 

 

 

 

 

 

$

2,349

 

+ Depreciation & Amortization

 

 

564

 

 

 

944

 

 

 

 

 

 

 

 

 

 

 

1,508

 

+ Transaction Expense

 

 

-

 

 

 

252

 

 

 

 

 

 

 

 

 

 

 

252

 

+ Other (Expense) / Income

 

 

(17

)

 

 

20

 

 

 

 

 

 

 

 

 

 

 

3

 

+ Noncash Stock Compensation

 

 

254

 

 

 

415

 

 

 

 

 

 

 

 

 

 

 

669

 

Distribution Adjusted EBITDA

 

$

2,249

 

 

$

2,532

 

 

$

-

 

 

$

-

 

 

$

4,781

 

TRANSCAT, INC.

Adjusted EBITDA Reconciliation Table

(In thousands)

(Unaudited)

 

 

 

Fiscal 2023

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

 

Net Income

 

$

3,072

 

 

$

2,357

 

 

$

1,601

 

 

$

3,658

 

 

$

10,688

 

+ Interest Expense

 

 

360

 

 

 

550

 

 

 

726

 

 

 

781

 

 

 

2,417

 

+ Other Expense / (Income)

 

 

(204

)

 

 

(13

)

 

 

313

 

 

 

248

 

 

 

344

 

+ Tax Provision

 

 

376

 

 

 

732

 

 

 

523

 

 

 

1,168

 

 

 

2,799

 

Operating Income

 

$

3,604

 

 

$

3,626

 

 

$

3,163

 

 

$

5,855

 

 

$

16,248

 

+ Depreciation & Amortization

 

 

2,641

 

 

 

2,778

 

 

 

2,824

 

 

 

2,712

 

 

 

10,955

 

+ Transaction Expense

 

 

30

 

 

 

-

 

 

 

96

 

 

 

59

 

 

 

185

 

+ Other (Expense) / Income

 

 

204

 

 

 

13

 

 

 

(313

)

 

 

(248

)

 

 

(344

)

+ Noncash Stock Compensation

 

 

828

 

 

 

1,114

 

 

 

815

 

 

 

620

 

 

 

3,377

 

Adjusted EBITDA

 

$

7,307

 

 

$

7,531

 

 

$

6,585

 

 

$

8,998

 

 

$

30,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Breakdown

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Operating Income

 

$

2,532

 

 

$

2,507

 

 

$

1,836

 

 

$

4,547

 

 

$

11,422

 

+ Depreciation & Amortization

 

 

2,139

 

 

 

2,246

 

 

 

2,268

 

 

 

2,147

 

 

 

8,800

 

+ Transaction Expense

 

 

30

 

 

 

-

 

 

 

96

 

 

 

59

 

 

 

185

 

+ Other (Expense) / Income

 

 

134

 

 

 

3

 

 

 

(214

)

 

 

(170

)

 

 

(247

)

+ Noncash Stock Compensation

 

 

638

 

 

 

793

 

 

 

576

 

 

 

456

 

 

 

2,463

 

Service Adjusted EBITDA

 

$

5,473

 

 

$

5,549

 

 

$

4,562

 

 

$

7,039

 

 

$

22,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution Operating Income

 

$

1,072

 

 

$

1,119

 

 

$

1,327

 

 

$

1,308

 

 

$

4,826

 

+ Depreciation & Amortization

 

 

502

 

 

 

532

 

 

 

556

 

 

 

565

 

 

 

2,155

 

+ Other (Expense) / Income

 

 

70

 

 

 

10

 

 

 

(99

)

 

 

(78

)

 

 

(97

)

+ Noncash Stock Compensation

 

 

190

 

 

 

321

 

 

 

239

 

 

 

164

 

 

 

914

 

Distribution Adjusted EBITDA

 

$

1,834

 

 

$

1,982

 

 

$

2,023

 

 

$

1,959

 

 

$

7,798

 

TRANSCAT, INC.

Adjusted Diluted EPS Reconciliation Table

(In Thousands, Except Per Share Amounts)

(Unaudited)

 

 

 

Fiscal 2024

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

 

Net Income

 

$

2,949

 

 

$

460

 

 

 

 

 

 

 

 

 

 

$

3,409

 

+ Amortization of Intangible Assets

 

 

1,093

 

 

 

1,416

 

 

 

 

 

 

 

 

 

 

 

2,509

 

+ Acquisition Amortization of Backlog

 

 

-

 

 

 

19

 

 

 

 

 

 

 

 

 

 

 

19

 

+ Acquisition Deal Costs

 

 

367

 

 

 

602

 

 

 

 

 

 

 

 

 

 

 

969

 

+ Income Tax Effect at 25%

 

 

(365

)

 

 

(509

)

 

 

 

 

 

 

 

 

 

 

(874

)

+ Acquisition Earn-Out Adjustment

 

 

-

 

 

 

2,800

 

 

 

 

 

 

 

 

 

 

 

2,800

 

Adjusted Net Income

 

$

4,044

 

 

$

4,788

 

 

$

-

 

 

$

-

 

 

$

8,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Diluted Shares Outstanding

 

 

7,762

 

 

 

7,948

 

 

 

 

 

 

 

 

 

 

 

7,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

0.38

 

 

$

0.06

 

 

$

-

 

 

$

-

 

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share

 

$

0.52

 

 

$

0.60

 

 

$

-

 

 

$

-

 

 

$

1.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2023

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

 

Net Income

 

$

3,072

 

 

$

2,357

 

 

$

1,601

 

 

$

3,658

 

 

$

10,688

 

+ Amortization of Intangible Assets

 

 

1,084

 

 

 

1,147

 

 

 

1,180

 

 

 

1,043

 

 

 

4,454

 

+ Acquisition Deal Costs

 

 

299

 

 

 

239

 

 

 

254

 

 

 

226

 

 

 

1,018

 

+ Income Tax Effect at 25%

 

 

(346

)

 

 

(346

)

 

 

(359

)

 

 

(317

)

 

 

(1,368

)

Adjusted Net Income

 

$

4,109

 

 

$

3,397

 

 

$

2,676

 

 

$

4,610

 

 

$

14,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Diluted Shares Outstanding

 

 

7,629

 

 

 

7,646

 

 

 

7,666

 

 

 

7,688

 

 

 

7,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

0.40

 

 

$

0.31

 

 

$

0.21

 

 

$

0.48

 

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share

 

$

0.54

 

 

$

0.44

 

 

$

0.35

 

 

$

0.60

 

 

$

1.93

 

TRANSCAT, INC.

Additional Information - Business Segment Data

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Change

 

SERVICE

 

FY 2024

Q2

 

 

FY 2023

Q2

 

 

$'s

 

 

%

 

Service Revenue

 

$

41,431

 

 

$

35,267

 

 

$

6,164

 

 

 

17.5

%

Cost of Revenue

 

 

27,347

 

 

 

23,780

 

 

 

3,567

 

 

 

15.0

%

Gross Profit

 

$

14,084

 

 

$

11,487

 

 

$

2,597

 

 

 

22.6

%

Gross Margin

 

 

34.0

%

 

 

32.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

4,143

 

 

$

3,791

 

 

$

352

 

 

 

9.3

%

General and Administrative Expenses

 

 

9,199

 

 

 

5,189

 

 

 

4,010

 

 

 

77.3

%

Operating Income

 

$

742

 

 

$

2,507

 

 

$

(1,765

)

 

 

(70.4

)%

% of Revenue

 

 

1.8

%

 

 

7.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

DISTRIBUTION

 

FY 2024

Q2

 

 

FY 2023

Q2

 

 

$'s

 

 

%

 

Distribution Sales

 

$

21,373

 

 

$

21,172

 

 

$

201

 

 

 

0.9

%

Cost of Sales

 

 

15,332

 

 

 

15,892

 

 

 

(560

)

 

 

(3.5

)%

Gross Profit

 

$

6,041

 

 

$

5,280

 

 

$

761

 

 

 

14.4

%

Gross Margin

 

 

28.3

%

 

 

24.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

2,713

 

 

$

2,109

 

 

$

604

 

 

 

28.6

%

General and Administrative Expenses

 

 

2,427

 

 

 

2,052

 

 

 

375

 

 

 

18.3

%

Operating Income

 

$

901

 

 

$

1,119

 

 

$

(218

)

 

 

(19.5

)%

% of Sales

 

 

4.2

%

 

 

5.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

TOTAL

 

FY 2024

Q2

 

 

FY 2023

Q2

 

 

$'s

 

 

%

 

Total Revenue

 

$

62,804

 

 

$

56,439

 

 

$

6,365

 

 

 

11.3

%

Total Cost of Revenue

 

 

42,679

 

 

 

39,672

 

 

 

3,007

 

 

 

7.6

%

Gross Profit

 

$

20,125

 

 

$

16,767

 

 

$

3,358

 

 

 

20.0

%

Gross Margin

 

 

32.0

%

 

 

29.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

6,856

 

 

$

5,900

 

 

$

956

 

 

 

16.2

%

General and Administrative Expenses

 

 

11,626

 

 

 

7,241

 

 

 

4,385

 

 

 

60.6

%

Operating Income

 

$

1,643

 

 

$

3,626

 

 

$

(1,983

)

 

 

(54.7

)%

% of Revenue

 

 

2.6

%

 

 

6.4

%

 

 

 

 

 

 

 

 

TRANSCAT, INC.

Additional Information - Business Segment Data

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY 2024

 

 

FY 2023

 

 

 

 

 

 

 

 

 

SERVICE

 

YTD

 

 

YTD

 

 

$'s

 

 

 %

Service Revenue

 

$

81,284

 

 

$

69,143

 

 

$

12,141

 

 

 

17.6

%

Cost of Revenue

 

 

54,229

 

 

 

46,821

 

 

 

7,408

 

 

 

15.8

%

Gross Profit

 

$

27,055

 

 

$

22,322

 

 

$

4,733

 

 

 

21.2

%

Gross Margin

 

 

33.3

%

 

 

32.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

8,250

 

 

$

7,374

 

 

$

876

 

 

 

11.9

%

General and Administrative Expenses

 

 

14,871

 

 

 

9,909

 

 

 

4,962

 

 

 

50.1

%

Operating Income

 

$

3,934

 

 

$

5,039

 

 

$

(1,105

)

 

 

(21.9

)%

% of Revenue

 

 

4.8

%

 

 

7.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY 2024

 

 

FY 2023

 

 

 

 

 

 

 

 

 

DISTRIBUTION

 

YTD

 

 

YTD

 

 

$'s

 

 

%

 

Distribution Sales

 

$

42,118

 

 

$

41,957

 

 

$

161

 

 

 

0.4

%

Cost of Sales

 

 

30,338

 

 

 

31,474

 

 

 

(1,136

)

 

 

(3.6

)%

Gross Profit

 

$

11,780

 

 

$

10,483

 

 

$

1,297

 

 

 

12.4

%

Gross Margin

 

 

28.0

%

 

 

25.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

5,075

 

 

$

4,346

 

 

$

729

 

 

 

16.8

%

General and Administrative Expenses

 

 

4,356

 

 

 

3,946

 

 

 

410

 

 

 

10.4

%

Operating Income

 

$

2,349

 

 

$

2,191

 

 

$

158

 

 

 

7.2

%

% of Sales

 

 

5.6

%

 

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY 2024

 

 

FY 2023

 

 

 

 

 

 

 

 

 

TOTAL

 

YTD

 

 

YTD

 

 

$'s

 

 

%

Total Revenue

 

$

123,402

 

 

$

111,100

 

 

$

12,302

 

 

 

11.1

%

Total Cost of Revenue

 

 

84,567

 

 

 

78,295

 

 

 

6,272

 

 

 

8.0

%

Gross Profit

 

$

38,835

 

 

$

32,805

 

 

$

6,030

 

 

 

18.4

%

Gross Margin

 

 

31.5

%

 

 

29.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, Marketing & Warehouse Expenses

 

$

13,325

 

 

$

11,720

 

 

$

1,605

 

 

 

13.7

%

General and Administrative Expenses

 

 

19,227

 

 

 

13,855

 

 

 

5,372

 

 

 

38.8

%

Operating Income

 

$

6,283

 

 

$

7,230

 

 

$

(947

)

 

 

(13.1

)%

% of Revenue

 

 

5.1

%

 

 

6.5

%

 

 

 

 

 

 

 

 

 

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