Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Transcat Reports Third Quarter EBITDA Increase of 20% on 19% Service Revenue Growth and Strong Gross Margin Expansion By: Transcat, Inc. via Business Wire January 30, 2023 at 16:05 PM EST Service revenue up 19.0%, service organic revenue growth of 12.0% Consolidated gross profit increased 20.3%, consolidated gross margin expanded by 180 basis points Consolidated adjusted EBITDA of $6.6 million, an increase of 20.4%. EBITDA margin increased 70 basis points 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 third quarter ended December 24, 2022 (the “third quarter”) of fiscal year 2023, which ends March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021 and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration, effective September 27, 2022 and Galium Limited (d/b/a Complete Calibrations), effective September 28, 2022. “We are pleased with the strong execution of our strategic plan which resulted in 19% Service revenue growth, 12% of which was organic. We expanded, total Gross Margins 180 basis points year over year, expand Service Gross Margins by 30 basis points and grew EBITDA over 20 percent.” commented Lee D. Rudow, President and CEO. “The Transcat Team continues to deliver strong performance over time, which is demonstrated by our consistent revenue and profit growth over the past decade. Demand for our core calibration services remains robust and the NEXA asset management business continues to be a differentiator for Transcat, driving synergies that contributed to double digit organic growth in the 3rd quarter.” “Our Distribution segment also performed very well in the third quarter with revenue increasing 3.7% and gross margin expanding 370 basis points to 26.2%, driven primarily by higher levels of demand in our high-margin rental business. The industry continues to be impacted by global supply chain challenges, so these results reflect Transcat’s ability to work creatively to deliver excellent results and satisfy our customers’ needs. Demand remains strong, as evidenced by a quarter end backlog of $9.5 million, up 7% year over year.” Mr. Rudow added, “Acquisitions continue to be an important part of our overall growth strategy and we added e2b Calibration, located in Cleveland, Ohio, to the Transcat family early in the quarter. e2b Calibration is a proven leader in the aviation industry, with particular strength in avionics and we are already starting to see the benefits that comes by leveraging Transcat’s infrastructure and geographic footprint to further accelerate e2b’s growth. We could not be happier with what we have seen in the early stages of this acquisition.” Third Quarter Fiscal 2023 Review (Results are compared with the third quarter of the fiscal year ended March 26, 2022 (“fiscal 2022”)) ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Distribution Sales 21,425 20,665 760 3.7 % Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % Operating Margin 5.5 % 4.6 % Net Income $ 1,601 $ 1,629 $ (28 ) (1.7 )% Net Margin 2.8 % 3.2 % Adjusted EBITDA* $ 6,585 $ 5,466 $ 1,119 20.5 % Adjusted EBITDA* Margin 11.5 % 10.7 % Diluted EPS $ 0.21 $ 0.21 $ - 0.0 % Adjusted Diluted EPS* $ 0.35 $ 0.36 $ (0.01 ) (2.8 )% *See Note 1 on page 5 for a description of these non-GAAP financial measures and pages 10 and 11 for the reconciliation tables. Consolidated revenue was $57.4 million, an increase of 12.8%. Consolidated gross profit was $16.4 million, an increase of $2.8 million, or 20.3%, while gross margin expanded 180 basis points due to improvements in both operating segments. Operating expenses were $13.2 million, an increase of $2.0 million, or 17.4%, driven by incremental expenses from acquired businesses (including stock expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $6.6 million which represented an increase of $1.1 million or 20.5%. Net income per diluted share was consistent at $0.21 and adjusted diluted earnings per share was $0.35 versus $0.36 last year. Service segment delivers strong third quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (62.7% of total revenue for the third quarter of fiscal 2023). ($ in thousand) Change FY23 Q3 FY22 Q3 $'s % Service Segment Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % Operating Margin 5.1 % 5.5 % Adjusted EBITDA* $ 4,562 $ 4,088 $ 474 11.6 % Adjusted EBITDA* Margin 12.7 % 13.5 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Service segment revenue was $36.0 million, an increase of $5.7 million or 19.0% and included $2.1 million of incremental revenue from acquisitions. Organic revenue growth was 12.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 30 basis points from prior year primarily due to improved productivity offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (37.3% of total revenue for the third quarter of fiscal 2023). ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Distribution Segment Sales $ 21,425 $ 20,665 $ 760 3.7 % Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Operating Income $ 1,327 $ 700 $ 627 89.6 % Operating Margin 6.2 % 3.4 % Adjusted EBITDA* $ 2,023 $ 1,378 $ 645 46.8 % Adjusted EBITDA* Margin 9.4 % 6.7 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Distribution sales were $21.4 million, an increase of 3.7% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 26.2%, an increase of 370 basis points due to a favorable sales mix driven by strength in the Rentals business. Nine Month Review (Results are compared with the first nine months of fiscal 2022) Total revenue was $168.5 million, an increase of $19.4 million or 13.0%. Consolidated gross profit was $49.2 million, up $7.4 million, or 17.8%, and gross margin expanded to 29.2% or 120 basis points. Consolidated operating expenses were $38.8 million, an increase of $6.7 million, or 20.8%, driven by incremental expenses from acquired businesses, (including stock-based compensation expense), increased intangibles amortization expense, and investments in technology and our employee base to support future growth. As a result, consolidated operating income was $10.4 million compared with $9.6 million in last fiscal year’s period, an increase of 7.9%. Adjusted EBITDA was $21.4 million which represented an increase of $2.8 million or 14.8%. Net income per diluted share decreased to $0.92 from $1.10 and adjusted diluted earnings per share was $1.33 versus $1.48 last year. The effective tax rate was 18.8% compared to 7.9% in the prior year, which benefited significantly from share-based payments and stock option activity. The increase in the tax rate had an unfavorable impact of $0.12 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year. Balance Sheet and Cash Flow Overview At December 24, 2022, the Company had $38.8 million available for borrowing under its secured revolving credit facility. Total debt of $49.2 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibration and e2b during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.66 at December 24, 2022, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “we are pleased with the impressive growth across all of our business channels including double-digit organic Service growth in our fiscal third quarter. We expect our unique value proposition to continue to drive a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science and Aerospace and Defense markets. We are confident our work around differentiation, which includes Nexa’s unique service tracks, data analytic capabilities and consulting platform, will foster continued consistent organic revenue growth. Driven by recurring revenue streams and high levels of regulation, we expect our Service segment to outperform through various economic cycles. Our acquisition pipeline is very active. Acquisitions, which have generated compelling returns throughout the fiscal year, will continue to be an important component of Service growth. In addition, in both the quarter and year ahead, we expect organic Service revenue growth to remain in the high-single digit range. We also expect gross margin improvement to continue as a by-product of both growth and successful execution of various ongoing productivity enhancement programs.” Transcat expects its income tax rate to range between 21% and 23% in fiscal 2023. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, January 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, February 7, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13735773, 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 page 10 for the Adjusted EBITDA Reconciliation table. 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 Company’s response to the coronavirus (“COVID-19”) pandemic, 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) Third Quarter Ended Nine Months Ended December 24, December 25, December 24, December 25, 2022 2021 2022 2021 Service Revenue $ 35,977 $ 30,237 $ 105,120 $ 87,338 Distribution Sales 21,425 20,665 63,382 61,741 Total Revenue 57,402 50,902 168,502 149,079 Cost of Service Revenue 25,184 21,254 72,005 59,891 Cost of Distribution Sales 15,818 16,012 47,292 47,421 Total Cost of Revenue 41,002 37,266 119,297 107,312 Gross Profit 16,400 13,636 49,205 41,767 Selling, Marketing and Warehouse Expenses 6,595 5,051 18,315 15,022 General and Administrative Expenses 6,642 6,224 20,497 17,117 Total Operating Expenses 13,237 11,275 38,812 32,139 Operating Income 3,163 2,361 10,393 9,628 Interest and Other Expense, net 1,039 136 1,732 581 Income Before Income Taxes 2,124 2,225 8,661 9,047 Provision for Income Taxes 523 596 1,631 715 Net Income $ 1,601 $ 1,629 $ 7,030 $ 8,332 Basic Earnings Per Share $ 0.21 $ 0.22 $ 0.93 $ 1.11 Average Shares Outstanding 7,559 7,519 7,547 7,487 Diluted Earnings Per Share $ 0.21 $ 0.21 $ 0.92 $ 1.10 Average Shares Outstanding 7,666 7,653 7,644 7,599 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) December 24, March 26, 2022 2022 ASSETS Current Assets: Cash $ 1,593 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $488 and $460 as of December 24, 2022 and March 26, 2022, respectively 37,702 39,737 Other Receivables 377 558 Inventory, net 16,884 12,712 Prepaid Expenses and Other Current Assets 4,141 5,301 Total Current Assets 60,697 59,704 Property and Equipment, net 28,334 26,439 Goodwill 68,826 65,074 Intangible Assets, net 14,843 14,692 Right To Use Assets, net 14,874 11,026 Other Assets 895 827 Total Assets $ 188,469 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 13,845 $ 14,171 Accrued Compensation and Other Current Liabilities 9,012 11,378 Current Portion of Long-Term Debt 2,227 2,161 Total Current Liabilities 25,084 27,710 Long-Term Debt 46,941 46,291 Deferred Tax Liabilities, net 6,672 6,724 Lease Liabilities 12,998 9,194 Other Liabilities 1,490 1,667 Total Liabilities 93,185 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,560,420 and 7,529,078 shares issued and outstanding as of December 24, 2022 and March 26, 2022, respectively 3,780 3,765 Capital in Excess of Par Value 27,123 23,900 Accumulated Other Comprehensive Loss (1,123 ) (233 ) Retained Earnings 65,504 58,744 Total Shareholders' Equity 95,284 86,176 Total Liabilities and Shareholders' Equity $ 188,469 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Nine Months Ended December 24, December 25, 2022 2021 Cash Flows from Operating Activities: Net Income $ 7,030 $ 8,332 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 62 113 Deferred Income Taxes (52 ) 5 Depreciation and Amortization 8,243 6,899 Provision for Accounts Receivable and Inventory Reserves 174 417 Stock-Based Compensation Expense 2,757 1,681 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables 1,850 1,185 Inventory (3,589 ) (1,794 ) Prepaid Expenses and Other Current Assets 1,074 (3,280 ) Accounts Payable (424 ) 689 Accrued Compensation and Other Current Liabilities (3,150 ) (1,470 ) Income Taxes Payable - (399 ) Net Cash Provided by Operating Activities 13,975 12,378 Cash Flows from Investing Activities: Purchases of Property and Equipment (7,149 ) (5,861 ) Proceeds from Sale of Property and Equipment 10 12 Business Acquisitions, net of cash acquired (8,306 ) (20,910 ) Net Cash Used in Investing Activities (15,445 ) (26,759 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,286 22,760 Repayments of Term Loan (1,570 ) (1,565 ) Issuance of Common Stock 503 1,354 Repurchase of Common Stock (437 ) (5,649 ) Net Cash Provided by Financing Activities 782 16,900 Effect of Exchange Rate Changes on Cash 885 (300 ) Net Increase in Cash 197 2,219 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,593 $ 2,779 TRANSCAT, INC. Adjusted EBITDA Reconciliation Table (In thousands) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Interest Expense 360 550 726 1,636 + Other Expense / (Income) (204 ) (13 ) 313 96 + Tax Provision 376 732 523 1,631 Operating Income $ 3,604 $ 3,626 $ 3,163 $ 10,393 + Depreciation & Amortization 2,641 2,778 2,824 8,243 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 204 13 (313 ) (96 ) + Noncash Stock Compensation 828 1,114 815 2,757 Adjusted EBITDA $ 7,307 $ 7,531 $ 6,585 $ 21,423 Segment Breakdown Service Operating Income $ 2,532 $ 2,507 $ 1,836 $ 6,875 + Depreciation & Amortization 2,139 2,246 2,268 6,653 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 134 3 (214 ) (77 ) + Noncash Stock Compensation 638 793 576 2,007 Service Adjusted EBITDA $ 5,473 $ 5,549 $ 4,562 $ - $ 15,584 Distribution Operating Income $ 1,072 $ 1,119 $ 1,327 $ 3,518 + Depreciation & Amortization 502 532 556 1,590 + Other (Expense) / Income 70 10 (99 ) (19 ) + Noncash Stock Compensation 190 321 239 750 Distribution Adjusted EBITDA $ 1,834 $ 1,982 $ 2,023 $ - $ 5,839 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Interest Expense 189 169 194 258 $ 810 + Other Expense / (Income) 6 81 (58 ) 114 $ 143 + Tax Provision (194 ) 313 596 1,095 $ 1,810 Operating Income $ 3,689 $ 3,578 $ 2,361 $ 4,515 $ 14,143 + Depreciation & Amortization 1,990 2,141 2,368 2,578 $ 9,077 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (6 ) (81 ) 58 (114 ) $ (143 ) + Noncash Stock Compensation 437 620 624 647 $ 2,328 Adjusted EBITDA $ 6,110 $ 7,079 $ 5,466 $ 7,652 $ 26,307 Segment Breakdown Service Operating Income $ 2,974 $ 2,647 $ 1,661 $ 3,532 $ 10,814 + Depreciation & Amortization 1,488 1,634 1,861 2,070 $ 7,053 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (2 ) (56 ) 36 (82 ) $ (104 ) + Noncash Stock Compensation 261 414 475 482 $ 1,632 Service Adjusted EBITDA $ 4,721 $ 5,460 $ 4,088 $ 6,028 $ 20,297 Distribution Operating Income $ 715 $ 931 $ 700 $ 983 $ 3,329 + Depreciation & Amortization 502 507 507 508 $ 2,024 + Other (Expense) / Income (4 ) (25 ) 22 (32 ) $ (39 ) + Noncash Stock Compensation 176 206 149 165 $ 696 Distribution Adjusted EBITDA $ 1,389 $ 1,619 $ 1,378 $ 1,624 $ 6,010 TRANSCAT, INC. Adjusted Diluted EPS Reconciliation Table (In Thousands, Except Per Share Amounts) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Amortization of Intangible Assets 1,084 1,147 1,180 3,411 + Acquisition Amortization of Backlog - - - - + Acquisition Deal Costs 299 239 254 792 + Income Tax Effect at 25% (346 ) (346 ) (359 ) (1,051 ) Adjusted Net Income $ 4,109 $ 3,397 $ 2,676 $ 10,182 Average Diluted Shares Outstanding 7,629 7,646 7,666 7,644 Diluted Earnings Per Share $ 0.40 $ 0.31 $ 0.21 $ 0.92 Adjusted Diluted Earnings Per Share $ 0.54 $ 0.44 $ 0.35 $ 1.33 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Amortization of Intangible Assets 620 729 947 1,098 3,394 + Acquisition Amortization of Backlog - 100 300 90 490 + Acquisition Deal Costs - 900 293 265 1,458 + Income Tax Effect at 25% (155 ) (432 ) (385 ) (363 ) (1,335 ) Adjusted Net Income $ 4,153 $ 4,312 $ 2,784 $ 4,138 $ 15,387 Average Diluted Shares Outstanding 7,593 7,595 7,653 7,636 7,589 Diluted Earnings Per Share $ 0.49 $ 0.40 $ 0.21 $ 0.40 $ 1.50 Adjusted Diluted Earnings Per Share $ 0.55 $ 0.57 $ 0.36 $ 0.54 $ 2.03 TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change SERVICE FY 2023 Q3 FY 2022 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Cost of Revenue 25,184 21,254 3,930 18.5 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Selling, Marketing & Warehouse Expenses $ 4,230 $ 3,007 $ 1,223 40.7 % General and Administrative Expenses 4,727 4,315 412 9.5 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % % of Revenue 5.1 % 5.5 % Change DISTRIBUTION FY 2023 Q3 FY 2022 Q3 $'s % Distribution Sales $ 21,425 $ 20,665 $ 760 3.7 % Cost of Sales 15,818 16,012 (194 ) (1.2 )% Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Selling, Marketing & Warehouse Expenses $ 2,365 $ 2,044 $ 321 15.7 % General and Administrative Expenses 1,915 1,909 6 0.3 % Operating Income $ 1,327 $ 700 $ 627 89.6 % % of Sales 6.2 % 3.4 % Change TOTAL FY 2023 Q3 FY 2022 Q3 $'s % Total Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Total Cost of Revenue 41,002 37,266 3,736 10.0 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Selling, Marketing & Warehouse Expenses $ 6,595 $ 5,051 $ 1,544 30.6 % General and Administrative Expenses 6,642 6,224 418 6.7 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % % of Revenue 5.5 % 4.6 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 105,120 $ 87,338 $ 17,782 20.4 % Cost of Revenue 72,005 59,891 12,114 20.2 % Gross Profit $ 33,115 $ 27,447 $ 5,668 20.7 % Gross Margin 31.5 % 31.4 % Selling, Marketing & Warehouse Expenses $ 11,604 $ 8,557 $ 3,047 35.6 % General and Administrative Expenses 14,636 11,608 3,028 26.1 % Operating Income $ 6,875 $ 7,282 $ (407 ) (5.6 )% % of Revenue 6.5 % 8.3 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 63,382 $ 61,741 $ 1,641 2.7 % Cost of Sales 47,292 47,421 (129 ) (0.3 )% Gross Profit $ 16,090 $ 14,320 $ 1,770 12.4 % Gross Margin 25.4 % 23.2 % Selling, Marketing & Warehouse Expenses $ 6,711 $ 6,465 $ 246 3.8 % General and Administrative Expenses 5,861 5,509 352 6.4 % Operating Income $ 3,518 $ 2,346 $ 1,172 50.0 % % of Sales 5.6 % 3.8 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 168,502 $ 149,079 $ 19,423 13.0 % Total Cost of Revenue 119,297 107,312 11,985 11.2 % Gross Profit $ 49,205 $ 41,767 $ 7,438 17.8 % Gross Margin 29.2 % 28.0 % Selling, Marketing & Warehouse Expenses $ 18,315 $ 15,022 $ 3,293 21.9 % General and Administrative Expenses 20,497 17,117 3,380 19.7 % Operating Income $ 10,393 $ 9,628 $ 765 7.9 % % of Revenue 6.2 % 6.5 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230130005676/en/Contacts Tom Barbato Phone: (585) 505-6530 Email: Thomas.Barbato@transcat.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Transcat Reports Third Quarter EBITDA Increase of 20% on 19% Service Revenue Growth and Strong Gross Margin Expansion By: Transcat, Inc. via Business Wire January 30, 2023 at 16:05 PM EST Service revenue up 19.0%, service organic revenue growth of 12.0% Consolidated gross profit increased 20.3%, consolidated gross margin expanded by 180 basis points Consolidated adjusted EBITDA of $6.6 million, an increase of 20.4%. EBITDA margin increased 70 basis points 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 third quarter ended December 24, 2022 (the “third quarter”) of fiscal year 2023, which ends March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021 and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration, effective September 27, 2022 and Galium Limited (d/b/a Complete Calibrations), effective September 28, 2022. “We are pleased with the strong execution of our strategic plan which resulted in 19% Service revenue growth, 12% of which was organic. We expanded, total Gross Margins 180 basis points year over year, expand Service Gross Margins by 30 basis points and grew EBITDA over 20 percent.” commented Lee D. Rudow, President and CEO. “The Transcat Team continues to deliver strong performance over time, which is demonstrated by our consistent revenue and profit growth over the past decade. Demand for our core calibration services remains robust and the NEXA asset management business continues to be a differentiator for Transcat, driving synergies that contributed to double digit organic growth in the 3rd quarter.” “Our Distribution segment also performed very well in the third quarter with revenue increasing 3.7% and gross margin expanding 370 basis points to 26.2%, driven primarily by higher levels of demand in our high-margin rental business. The industry continues to be impacted by global supply chain challenges, so these results reflect Transcat’s ability to work creatively to deliver excellent results and satisfy our customers’ needs. Demand remains strong, as evidenced by a quarter end backlog of $9.5 million, up 7% year over year.” Mr. Rudow added, “Acquisitions continue to be an important part of our overall growth strategy and we added e2b Calibration, located in Cleveland, Ohio, to the Transcat family early in the quarter. e2b Calibration is a proven leader in the aviation industry, with particular strength in avionics and we are already starting to see the benefits that comes by leveraging Transcat’s infrastructure and geographic footprint to further accelerate e2b’s growth. We could not be happier with what we have seen in the early stages of this acquisition.” Third Quarter Fiscal 2023 Review (Results are compared with the third quarter of the fiscal year ended March 26, 2022 (“fiscal 2022”)) ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Distribution Sales 21,425 20,665 760 3.7 % Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % Operating Margin 5.5 % 4.6 % Net Income $ 1,601 $ 1,629 $ (28 ) (1.7 )% Net Margin 2.8 % 3.2 % Adjusted EBITDA* $ 6,585 $ 5,466 $ 1,119 20.5 % Adjusted EBITDA* Margin 11.5 % 10.7 % Diluted EPS $ 0.21 $ 0.21 $ - 0.0 % Adjusted Diluted EPS* $ 0.35 $ 0.36 $ (0.01 ) (2.8 )% *See Note 1 on page 5 for a description of these non-GAAP financial measures and pages 10 and 11 for the reconciliation tables. Consolidated revenue was $57.4 million, an increase of 12.8%. Consolidated gross profit was $16.4 million, an increase of $2.8 million, or 20.3%, while gross margin expanded 180 basis points due to improvements in both operating segments. Operating expenses were $13.2 million, an increase of $2.0 million, or 17.4%, driven by incremental expenses from acquired businesses (including stock expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $6.6 million which represented an increase of $1.1 million or 20.5%. Net income per diluted share was consistent at $0.21 and adjusted diluted earnings per share was $0.35 versus $0.36 last year. Service segment delivers strong third quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (62.7% of total revenue for the third quarter of fiscal 2023). ($ in thousand) Change FY23 Q3 FY22 Q3 $'s % Service Segment Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % Operating Margin 5.1 % 5.5 % Adjusted EBITDA* $ 4,562 $ 4,088 $ 474 11.6 % Adjusted EBITDA* Margin 12.7 % 13.5 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Service segment revenue was $36.0 million, an increase of $5.7 million or 19.0% and included $2.1 million of incremental revenue from acquisitions. Organic revenue growth was 12.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 30 basis points from prior year primarily due to improved productivity offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (37.3% of total revenue for the third quarter of fiscal 2023). ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Distribution Segment Sales $ 21,425 $ 20,665 $ 760 3.7 % Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Operating Income $ 1,327 $ 700 $ 627 89.6 % Operating Margin 6.2 % 3.4 % Adjusted EBITDA* $ 2,023 $ 1,378 $ 645 46.8 % Adjusted EBITDA* Margin 9.4 % 6.7 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Distribution sales were $21.4 million, an increase of 3.7% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 26.2%, an increase of 370 basis points due to a favorable sales mix driven by strength in the Rentals business. Nine Month Review (Results are compared with the first nine months of fiscal 2022) Total revenue was $168.5 million, an increase of $19.4 million or 13.0%. Consolidated gross profit was $49.2 million, up $7.4 million, or 17.8%, and gross margin expanded to 29.2% or 120 basis points. Consolidated operating expenses were $38.8 million, an increase of $6.7 million, or 20.8%, driven by incremental expenses from acquired businesses, (including stock-based compensation expense), increased intangibles amortization expense, and investments in technology and our employee base to support future growth. As a result, consolidated operating income was $10.4 million compared with $9.6 million in last fiscal year’s period, an increase of 7.9%. Adjusted EBITDA was $21.4 million which represented an increase of $2.8 million or 14.8%. Net income per diluted share decreased to $0.92 from $1.10 and adjusted diluted earnings per share was $1.33 versus $1.48 last year. The effective tax rate was 18.8% compared to 7.9% in the prior year, which benefited significantly from share-based payments and stock option activity. The increase in the tax rate had an unfavorable impact of $0.12 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year. Balance Sheet and Cash Flow Overview At December 24, 2022, the Company had $38.8 million available for borrowing under its secured revolving credit facility. Total debt of $49.2 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibration and e2b during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.66 at December 24, 2022, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “we are pleased with the impressive growth across all of our business channels including double-digit organic Service growth in our fiscal third quarter. We expect our unique value proposition to continue to drive a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science and Aerospace and Defense markets. We are confident our work around differentiation, which includes Nexa’s unique service tracks, data analytic capabilities and consulting platform, will foster continued consistent organic revenue growth. Driven by recurring revenue streams and high levels of regulation, we expect our Service segment to outperform through various economic cycles. Our acquisition pipeline is very active. Acquisitions, which have generated compelling returns throughout the fiscal year, will continue to be an important component of Service growth. In addition, in both the quarter and year ahead, we expect organic Service revenue growth to remain in the high-single digit range. We also expect gross margin improvement to continue as a by-product of both growth and successful execution of various ongoing productivity enhancement programs.” Transcat expects its income tax rate to range between 21% and 23% in fiscal 2023. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, January 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, February 7, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13735773, 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 page 10 for the Adjusted EBITDA Reconciliation table. 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 Company’s response to the coronavirus (“COVID-19”) pandemic, 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) Third Quarter Ended Nine Months Ended December 24, December 25, December 24, December 25, 2022 2021 2022 2021 Service Revenue $ 35,977 $ 30,237 $ 105,120 $ 87,338 Distribution Sales 21,425 20,665 63,382 61,741 Total Revenue 57,402 50,902 168,502 149,079 Cost of Service Revenue 25,184 21,254 72,005 59,891 Cost of Distribution Sales 15,818 16,012 47,292 47,421 Total Cost of Revenue 41,002 37,266 119,297 107,312 Gross Profit 16,400 13,636 49,205 41,767 Selling, Marketing and Warehouse Expenses 6,595 5,051 18,315 15,022 General and Administrative Expenses 6,642 6,224 20,497 17,117 Total Operating Expenses 13,237 11,275 38,812 32,139 Operating Income 3,163 2,361 10,393 9,628 Interest and Other Expense, net 1,039 136 1,732 581 Income Before Income Taxes 2,124 2,225 8,661 9,047 Provision for Income Taxes 523 596 1,631 715 Net Income $ 1,601 $ 1,629 $ 7,030 $ 8,332 Basic Earnings Per Share $ 0.21 $ 0.22 $ 0.93 $ 1.11 Average Shares Outstanding 7,559 7,519 7,547 7,487 Diluted Earnings Per Share $ 0.21 $ 0.21 $ 0.92 $ 1.10 Average Shares Outstanding 7,666 7,653 7,644 7,599 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) December 24, March 26, 2022 2022 ASSETS Current Assets: Cash $ 1,593 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $488 and $460 as of December 24, 2022 and March 26, 2022, respectively 37,702 39,737 Other Receivables 377 558 Inventory, net 16,884 12,712 Prepaid Expenses and Other Current Assets 4,141 5,301 Total Current Assets 60,697 59,704 Property and Equipment, net 28,334 26,439 Goodwill 68,826 65,074 Intangible Assets, net 14,843 14,692 Right To Use Assets, net 14,874 11,026 Other Assets 895 827 Total Assets $ 188,469 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 13,845 $ 14,171 Accrued Compensation and Other Current Liabilities 9,012 11,378 Current Portion of Long-Term Debt 2,227 2,161 Total Current Liabilities 25,084 27,710 Long-Term Debt 46,941 46,291 Deferred Tax Liabilities, net 6,672 6,724 Lease Liabilities 12,998 9,194 Other Liabilities 1,490 1,667 Total Liabilities 93,185 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,560,420 and 7,529,078 shares issued and outstanding as of December 24, 2022 and March 26, 2022, respectively 3,780 3,765 Capital in Excess of Par Value 27,123 23,900 Accumulated Other Comprehensive Loss (1,123 ) (233 ) Retained Earnings 65,504 58,744 Total Shareholders' Equity 95,284 86,176 Total Liabilities and Shareholders' Equity $ 188,469 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Nine Months Ended December 24, December 25, 2022 2021 Cash Flows from Operating Activities: Net Income $ 7,030 $ 8,332 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 62 113 Deferred Income Taxes (52 ) 5 Depreciation and Amortization 8,243 6,899 Provision for Accounts Receivable and Inventory Reserves 174 417 Stock-Based Compensation Expense 2,757 1,681 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables 1,850 1,185 Inventory (3,589 ) (1,794 ) Prepaid Expenses and Other Current Assets 1,074 (3,280 ) Accounts Payable (424 ) 689 Accrued Compensation and Other Current Liabilities (3,150 ) (1,470 ) Income Taxes Payable - (399 ) Net Cash Provided by Operating Activities 13,975 12,378 Cash Flows from Investing Activities: Purchases of Property and Equipment (7,149 ) (5,861 ) Proceeds from Sale of Property and Equipment 10 12 Business Acquisitions, net of cash acquired (8,306 ) (20,910 ) Net Cash Used in Investing Activities (15,445 ) (26,759 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,286 22,760 Repayments of Term Loan (1,570 ) (1,565 ) Issuance of Common Stock 503 1,354 Repurchase of Common Stock (437 ) (5,649 ) Net Cash Provided by Financing Activities 782 16,900 Effect of Exchange Rate Changes on Cash 885 (300 ) Net Increase in Cash 197 2,219 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,593 $ 2,779 TRANSCAT, INC. Adjusted EBITDA Reconciliation Table (In thousands) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Interest Expense 360 550 726 1,636 + Other Expense / (Income) (204 ) (13 ) 313 96 + Tax Provision 376 732 523 1,631 Operating Income $ 3,604 $ 3,626 $ 3,163 $ 10,393 + Depreciation & Amortization 2,641 2,778 2,824 8,243 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 204 13 (313 ) (96 ) + Noncash Stock Compensation 828 1,114 815 2,757 Adjusted EBITDA $ 7,307 $ 7,531 $ 6,585 $ 21,423 Segment Breakdown Service Operating Income $ 2,532 $ 2,507 $ 1,836 $ 6,875 + Depreciation & Amortization 2,139 2,246 2,268 6,653 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 134 3 (214 ) (77 ) + Noncash Stock Compensation 638 793 576 2,007 Service Adjusted EBITDA $ 5,473 $ 5,549 $ 4,562 $ - $ 15,584 Distribution Operating Income $ 1,072 $ 1,119 $ 1,327 $ 3,518 + Depreciation & Amortization 502 532 556 1,590 + Other (Expense) / Income 70 10 (99 ) (19 ) + Noncash Stock Compensation 190 321 239 750 Distribution Adjusted EBITDA $ 1,834 $ 1,982 $ 2,023 $ - $ 5,839 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Interest Expense 189 169 194 258 $ 810 + Other Expense / (Income) 6 81 (58 ) 114 $ 143 + Tax Provision (194 ) 313 596 1,095 $ 1,810 Operating Income $ 3,689 $ 3,578 $ 2,361 $ 4,515 $ 14,143 + Depreciation & Amortization 1,990 2,141 2,368 2,578 $ 9,077 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (6 ) (81 ) 58 (114 ) $ (143 ) + Noncash Stock Compensation 437 620 624 647 $ 2,328 Adjusted EBITDA $ 6,110 $ 7,079 $ 5,466 $ 7,652 $ 26,307 Segment Breakdown Service Operating Income $ 2,974 $ 2,647 $ 1,661 $ 3,532 $ 10,814 + Depreciation & Amortization 1,488 1,634 1,861 2,070 $ 7,053 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (2 ) (56 ) 36 (82 ) $ (104 ) + Noncash Stock Compensation 261 414 475 482 $ 1,632 Service Adjusted EBITDA $ 4,721 $ 5,460 $ 4,088 $ 6,028 $ 20,297 Distribution Operating Income $ 715 $ 931 $ 700 $ 983 $ 3,329 + Depreciation & Amortization 502 507 507 508 $ 2,024 + Other (Expense) / Income (4 ) (25 ) 22 (32 ) $ (39 ) + Noncash Stock Compensation 176 206 149 165 $ 696 Distribution Adjusted EBITDA $ 1,389 $ 1,619 $ 1,378 $ 1,624 $ 6,010 TRANSCAT, INC. Adjusted Diluted EPS Reconciliation Table (In Thousands, Except Per Share Amounts) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Amortization of Intangible Assets 1,084 1,147 1,180 3,411 + Acquisition Amortization of Backlog - - - - + Acquisition Deal Costs 299 239 254 792 + Income Tax Effect at 25% (346 ) (346 ) (359 ) (1,051 ) Adjusted Net Income $ 4,109 $ 3,397 $ 2,676 $ 10,182 Average Diluted Shares Outstanding 7,629 7,646 7,666 7,644 Diluted Earnings Per Share $ 0.40 $ 0.31 $ 0.21 $ 0.92 Adjusted Diluted Earnings Per Share $ 0.54 $ 0.44 $ 0.35 $ 1.33 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Amortization of Intangible Assets 620 729 947 1,098 3,394 + Acquisition Amortization of Backlog - 100 300 90 490 + Acquisition Deal Costs - 900 293 265 1,458 + Income Tax Effect at 25% (155 ) (432 ) (385 ) (363 ) (1,335 ) Adjusted Net Income $ 4,153 $ 4,312 $ 2,784 $ 4,138 $ 15,387 Average Diluted Shares Outstanding 7,593 7,595 7,653 7,636 7,589 Diluted Earnings Per Share $ 0.49 $ 0.40 $ 0.21 $ 0.40 $ 1.50 Adjusted Diluted Earnings Per Share $ 0.55 $ 0.57 $ 0.36 $ 0.54 $ 2.03 TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change SERVICE FY 2023 Q3 FY 2022 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Cost of Revenue 25,184 21,254 3,930 18.5 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Selling, Marketing & Warehouse Expenses $ 4,230 $ 3,007 $ 1,223 40.7 % General and Administrative Expenses 4,727 4,315 412 9.5 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % % of Revenue 5.1 % 5.5 % Change DISTRIBUTION FY 2023 Q3 FY 2022 Q3 $'s % Distribution Sales $ 21,425 $ 20,665 $ 760 3.7 % Cost of Sales 15,818 16,012 (194 ) (1.2 )% Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Selling, Marketing & Warehouse Expenses $ 2,365 $ 2,044 $ 321 15.7 % General and Administrative Expenses 1,915 1,909 6 0.3 % Operating Income $ 1,327 $ 700 $ 627 89.6 % % of Sales 6.2 % 3.4 % Change TOTAL FY 2023 Q3 FY 2022 Q3 $'s % Total Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Total Cost of Revenue 41,002 37,266 3,736 10.0 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Selling, Marketing & Warehouse Expenses $ 6,595 $ 5,051 $ 1,544 30.6 % General and Administrative Expenses 6,642 6,224 418 6.7 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % % of Revenue 5.5 % 4.6 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 105,120 $ 87,338 $ 17,782 20.4 % Cost of Revenue 72,005 59,891 12,114 20.2 % Gross Profit $ 33,115 $ 27,447 $ 5,668 20.7 % Gross Margin 31.5 % 31.4 % Selling, Marketing & Warehouse Expenses $ 11,604 $ 8,557 $ 3,047 35.6 % General and Administrative Expenses 14,636 11,608 3,028 26.1 % Operating Income $ 6,875 $ 7,282 $ (407 ) (5.6 )% % of Revenue 6.5 % 8.3 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 63,382 $ 61,741 $ 1,641 2.7 % Cost of Sales 47,292 47,421 (129 ) (0.3 )% Gross Profit $ 16,090 $ 14,320 $ 1,770 12.4 % Gross Margin 25.4 % 23.2 % Selling, Marketing & Warehouse Expenses $ 6,711 $ 6,465 $ 246 3.8 % General and Administrative Expenses 5,861 5,509 352 6.4 % Operating Income $ 3,518 $ 2,346 $ 1,172 50.0 % % of Sales 5.6 % 3.8 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 168,502 $ 149,079 $ 19,423 13.0 % Total Cost of Revenue 119,297 107,312 11,985 11.2 % Gross Profit $ 49,205 $ 41,767 $ 7,438 17.8 % Gross Margin 29.2 % 28.0 % Selling, Marketing & Warehouse Expenses $ 18,315 $ 15,022 $ 3,293 21.9 % General and Administrative Expenses 20,497 17,117 3,380 19.7 % Operating Income $ 10,393 $ 9,628 $ 765 7.9 % % of Revenue 6.2 % 6.5 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230130005676/en/Contacts Tom Barbato Phone: (585) 505-6530 Email: Thomas.Barbato@transcat.com
Service revenue up 19.0%, service organic revenue growth of 12.0% Consolidated gross profit increased 20.3%, consolidated gross margin expanded by 180 basis points Consolidated adjusted EBITDA of $6.6 million, an increase of 20.4%. EBITDA margin increased 70 basis points
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 third quarter ended December 24, 2022 (the “third quarter”) of fiscal year 2023, which ends March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021 and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration, effective September 27, 2022 and Galium Limited (d/b/a Complete Calibrations), effective September 28, 2022. “We are pleased with the strong execution of our strategic plan which resulted in 19% Service revenue growth, 12% of which was organic. We expanded, total Gross Margins 180 basis points year over year, expand Service Gross Margins by 30 basis points and grew EBITDA over 20 percent.” commented Lee D. Rudow, President and CEO. “The Transcat Team continues to deliver strong performance over time, which is demonstrated by our consistent revenue and profit growth over the past decade. Demand for our core calibration services remains robust and the NEXA asset management business continues to be a differentiator for Transcat, driving synergies that contributed to double digit organic growth in the 3rd quarter.” “Our Distribution segment also performed very well in the third quarter with revenue increasing 3.7% and gross margin expanding 370 basis points to 26.2%, driven primarily by higher levels of demand in our high-margin rental business. The industry continues to be impacted by global supply chain challenges, so these results reflect Transcat’s ability to work creatively to deliver excellent results and satisfy our customers’ needs. Demand remains strong, as evidenced by a quarter end backlog of $9.5 million, up 7% year over year.” Mr. Rudow added, “Acquisitions continue to be an important part of our overall growth strategy and we added e2b Calibration, located in Cleveland, Ohio, to the Transcat family early in the quarter. e2b Calibration is a proven leader in the aviation industry, with particular strength in avionics and we are already starting to see the benefits that comes by leveraging Transcat’s infrastructure and geographic footprint to further accelerate e2b’s growth. We could not be happier with what we have seen in the early stages of this acquisition.” Third Quarter Fiscal 2023 Review (Results are compared with the third quarter of the fiscal year ended March 26, 2022 (“fiscal 2022”)) ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Distribution Sales 21,425 20,665 760 3.7 % Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % Operating Margin 5.5 % 4.6 % Net Income $ 1,601 $ 1,629 $ (28 ) (1.7 )% Net Margin 2.8 % 3.2 % Adjusted EBITDA* $ 6,585 $ 5,466 $ 1,119 20.5 % Adjusted EBITDA* Margin 11.5 % 10.7 % Diluted EPS $ 0.21 $ 0.21 $ - 0.0 % Adjusted Diluted EPS* $ 0.35 $ 0.36 $ (0.01 ) (2.8 )% *See Note 1 on page 5 for a description of these non-GAAP financial measures and pages 10 and 11 for the reconciliation tables. Consolidated revenue was $57.4 million, an increase of 12.8%. Consolidated gross profit was $16.4 million, an increase of $2.8 million, or 20.3%, while gross margin expanded 180 basis points due to improvements in both operating segments. Operating expenses were $13.2 million, an increase of $2.0 million, or 17.4%, driven by incremental expenses from acquired businesses (including stock expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $6.6 million which represented an increase of $1.1 million or 20.5%. Net income per diluted share was consistent at $0.21 and adjusted diluted earnings per share was $0.35 versus $0.36 last year. Service segment delivers strong third quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (62.7% of total revenue for the third quarter of fiscal 2023). ($ in thousand) Change FY23 Q3 FY22 Q3 $'s % Service Segment Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % Operating Margin 5.1 % 5.5 % Adjusted EBITDA* $ 4,562 $ 4,088 $ 474 11.6 % Adjusted EBITDA* Margin 12.7 % 13.5 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Service segment revenue was $36.0 million, an increase of $5.7 million or 19.0% and included $2.1 million of incremental revenue from acquisitions. Organic revenue growth was 12.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 30 basis points from prior year primarily due to improved productivity offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (37.3% of total revenue for the third quarter of fiscal 2023). ($ in thousands) Change FY23 Q3 FY22 Q3 $'s % Distribution Segment Sales $ 21,425 $ 20,665 $ 760 3.7 % Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Operating Income $ 1,327 $ 700 $ 627 89.6 % Operating Margin 6.2 % 3.4 % Adjusted EBITDA* $ 2,023 $ 1,378 $ 645 46.8 % Adjusted EBITDA* Margin 9.4 % 6.7 % *See Note 1 on page 5 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table. Distribution sales were $21.4 million, an increase of 3.7% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 26.2%, an increase of 370 basis points due to a favorable sales mix driven by strength in the Rentals business. Nine Month Review (Results are compared with the first nine months of fiscal 2022) Total revenue was $168.5 million, an increase of $19.4 million or 13.0%. Consolidated gross profit was $49.2 million, up $7.4 million, or 17.8%, and gross margin expanded to 29.2% or 120 basis points. Consolidated operating expenses were $38.8 million, an increase of $6.7 million, or 20.8%, driven by incremental expenses from acquired businesses, (including stock-based compensation expense), increased intangibles amortization expense, and investments in technology and our employee base to support future growth. As a result, consolidated operating income was $10.4 million compared with $9.6 million in last fiscal year’s period, an increase of 7.9%. Adjusted EBITDA was $21.4 million which represented an increase of $2.8 million or 14.8%. Net income per diluted share decreased to $0.92 from $1.10 and adjusted diluted earnings per share was $1.33 versus $1.48 last year. The effective tax rate was 18.8% compared to 7.9% in the prior year, which benefited significantly from share-based payments and stock option activity. The increase in the tax rate had an unfavorable impact of $0.12 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year. Balance Sheet and Cash Flow Overview At December 24, 2022, the Company had $38.8 million available for borrowing under its secured revolving credit facility. Total debt of $49.2 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibration and e2b during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.66 at December 24, 2022, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “we are pleased with the impressive growth across all of our business channels including double-digit organic Service growth in our fiscal third quarter. We expect our unique value proposition to continue to drive a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science and Aerospace and Defense markets. We are confident our work around differentiation, which includes Nexa’s unique service tracks, data analytic capabilities and consulting platform, will foster continued consistent organic revenue growth. Driven by recurring revenue streams and high levels of regulation, we expect our Service segment to outperform through various economic cycles. Our acquisition pipeline is very active. Acquisitions, which have generated compelling returns throughout the fiscal year, will continue to be an important component of Service growth. In addition, in both the quarter and year ahead, we expect organic Service revenue growth to remain in the high-single digit range. We also expect gross margin improvement to continue as a by-product of both growth and successful execution of various ongoing productivity enhancement programs.” Transcat expects its income tax rate to range between 21% and 23% in fiscal 2023. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, January 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, February 7, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13735773, 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 page 10 for the Adjusted EBITDA Reconciliation table. 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 Company’s response to the coronavirus (“COVID-19”) pandemic, 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) Third Quarter Ended Nine Months Ended December 24, December 25, December 24, December 25, 2022 2021 2022 2021 Service Revenue $ 35,977 $ 30,237 $ 105,120 $ 87,338 Distribution Sales 21,425 20,665 63,382 61,741 Total Revenue 57,402 50,902 168,502 149,079 Cost of Service Revenue 25,184 21,254 72,005 59,891 Cost of Distribution Sales 15,818 16,012 47,292 47,421 Total Cost of Revenue 41,002 37,266 119,297 107,312 Gross Profit 16,400 13,636 49,205 41,767 Selling, Marketing and Warehouse Expenses 6,595 5,051 18,315 15,022 General and Administrative Expenses 6,642 6,224 20,497 17,117 Total Operating Expenses 13,237 11,275 38,812 32,139 Operating Income 3,163 2,361 10,393 9,628 Interest and Other Expense, net 1,039 136 1,732 581 Income Before Income Taxes 2,124 2,225 8,661 9,047 Provision for Income Taxes 523 596 1,631 715 Net Income $ 1,601 $ 1,629 $ 7,030 $ 8,332 Basic Earnings Per Share $ 0.21 $ 0.22 $ 0.93 $ 1.11 Average Shares Outstanding 7,559 7,519 7,547 7,487 Diluted Earnings Per Share $ 0.21 $ 0.21 $ 0.92 $ 1.10 Average Shares Outstanding 7,666 7,653 7,644 7,599 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) December 24, March 26, 2022 2022 ASSETS Current Assets: Cash $ 1,593 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $488 and $460 as of December 24, 2022 and March 26, 2022, respectively 37,702 39,737 Other Receivables 377 558 Inventory, net 16,884 12,712 Prepaid Expenses and Other Current Assets 4,141 5,301 Total Current Assets 60,697 59,704 Property and Equipment, net 28,334 26,439 Goodwill 68,826 65,074 Intangible Assets, net 14,843 14,692 Right To Use Assets, net 14,874 11,026 Other Assets 895 827 Total Assets $ 188,469 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 13,845 $ 14,171 Accrued Compensation and Other Current Liabilities 9,012 11,378 Current Portion of Long-Term Debt 2,227 2,161 Total Current Liabilities 25,084 27,710 Long-Term Debt 46,941 46,291 Deferred Tax Liabilities, net 6,672 6,724 Lease Liabilities 12,998 9,194 Other Liabilities 1,490 1,667 Total Liabilities 93,185 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,560,420 and 7,529,078 shares issued and outstanding as of December 24, 2022 and March 26, 2022, respectively 3,780 3,765 Capital in Excess of Par Value 27,123 23,900 Accumulated Other Comprehensive Loss (1,123 ) (233 ) Retained Earnings 65,504 58,744 Total Shareholders' Equity 95,284 86,176 Total Liabilities and Shareholders' Equity $ 188,469 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Nine Months Ended December 24, December 25, 2022 2021 Cash Flows from Operating Activities: Net Income $ 7,030 $ 8,332 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 62 113 Deferred Income Taxes (52 ) 5 Depreciation and Amortization 8,243 6,899 Provision for Accounts Receivable and Inventory Reserves 174 417 Stock-Based Compensation Expense 2,757 1,681 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables 1,850 1,185 Inventory (3,589 ) (1,794 ) Prepaid Expenses and Other Current Assets 1,074 (3,280 ) Accounts Payable (424 ) 689 Accrued Compensation and Other Current Liabilities (3,150 ) (1,470 ) Income Taxes Payable - (399 ) Net Cash Provided by Operating Activities 13,975 12,378 Cash Flows from Investing Activities: Purchases of Property and Equipment (7,149 ) (5,861 ) Proceeds from Sale of Property and Equipment 10 12 Business Acquisitions, net of cash acquired (8,306 ) (20,910 ) Net Cash Used in Investing Activities (15,445 ) (26,759 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,286 22,760 Repayments of Term Loan (1,570 ) (1,565 ) Issuance of Common Stock 503 1,354 Repurchase of Common Stock (437 ) (5,649 ) Net Cash Provided by Financing Activities 782 16,900 Effect of Exchange Rate Changes on Cash 885 (300 ) Net Increase in Cash 197 2,219 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,593 $ 2,779 TRANSCAT, INC. Adjusted EBITDA Reconciliation Table (In thousands) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Interest Expense 360 550 726 1,636 + Other Expense / (Income) (204 ) (13 ) 313 96 + Tax Provision 376 732 523 1,631 Operating Income $ 3,604 $ 3,626 $ 3,163 $ 10,393 + Depreciation & Amortization 2,641 2,778 2,824 8,243 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 204 13 (313 ) (96 ) + Noncash Stock Compensation 828 1,114 815 2,757 Adjusted EBITDA $ 7,307 $ 7,531 $ 6,585 $ 21,423 Segment Breakdown Service Operating Income $ 2,532 $ 2,507 $ 1,836 $ 6,875 + Depreciation & Amortization 2,139 2,246 2,268 6,653 + Transaction Expense 30 - 96 126 + Other (Expense) / Income 134 3 (214 ) (77 ) + Noncash Stock Compensation 638 793 576 2,007 Service Adjusted EBITDA $ 5,473 $ 5,549 $ 4,562 $ - $ 15,584 Distribution Operating Income $ 1,072 $ 1,119 $ 1,327 $ 3,518 + Depreciation & Amortization 502 532 556 1,590 + Other (Expense) / Income 70 10 (99 ) (19 ) + Noncash Stock Compensation 190 321 239 750 Distribution Adjusted EBITDA $ 1,834 $ 1,982 $ 2,023 $ - $ 5,839 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Interest Expense 189 169 194 258 $ 810 + Other Expense / (Income) 6 81 (58 ) 114 $ 143 + Tax Provision (194 ) 313 596 1,095 $ 1,810 Operating Income $ 3,689 $ 3,578 $ 2,361 $ 4,515 $ 14,143 + Depreciation & Amortization 1,990 2,141 2,368 2,578 $ 9,077 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (6 ) (81 ) 58 (114 ) $ (143 ) + Noncash Stock Compensation 437 620 624 647 $ 2,328 Adjusted EBITDA $ 6,110 $ 7,079 $ 5,466 $ 7,652 $ 26,307 Segment Breakdown Service Operating Income $ 2,974 $ 2,647 $ 1,661 $ 3,532 $ 10,814 + Depreciation & Amortization 1,488 1,634 1,861 2,070 $ 7,053 + Transaction Expense - 821 55 26 $ 902 + Other (Expense) / Income (2 ) (56 ) 36 (82 ) $ (104 ) + Noncash Stock Compensation 261 414 475 482 $ 1,632 Service Adjusted EBITDA $ 4,721 $ 5,460 $ 4,088 $ 6,028 $ 20,297 Distribution Operating Income $ 715 $ 931 $ 700 $ 983 $ 3,329 + Depreciation & Amortization 502 507 507 508 $ 2,024 + Other (Expense) / Income (4 ) (25 ) 22 (32 ) $ (39 ) + Noncash Stock Compensation 176 206 149 165 $ 696 Distribution Adjusted EBITDA $ 1,389 $ 1,619 $ 1,378 $ 1,624 $ 6,010 TRANSCAT, INC. Adjusted Diluted EPS Reconciliation Table (In Thousands, Except Per Share Amounts) (Unaudited) Fiscal 2023 Q1 Q2 Q3 Q4 YTD Net Income $ 3,072 $ 2,357 $ 1,601 $ 7,030 + Amortization of Intangible Assets 1,084 1,147 1,180 3,411 + Acquisition Amortization of Backlog - - - - + Acquisition Deal Costs 299 239 254 792 + Income Tax Effect at 25% (346 ) (346 ) (359 ) (1,051 ) Adjusted Net Income $ 4,109 $ 3,397 $ 2,676 $ 10,182 Average Diluted Shares Outstanding 7,629 7,646 7,666 7,644 Diluted Earnings Per Share $ 0.40 $ 0.31 $ 0.21 $ 0.92 Adjusted Diluted Earnings Per Share $ 0.54 $ 0.44 $ 0.35 $ 1.33 Fiscal 2022 Q1 Q2 Q3 Q4 YTD Net Income $ 3,688 $ 3,015 $ 1,629 $ 3,048 $ 11,380 + Amortization of Intangible Assets 620 729 947 1,098 3,394 + Acquisition Amortization of Backlog - 100 300 90 490 + Acquisition Deal Costs - 900 293 265 1,458 + Income Tax Effect at 25% (155 ) (432 ) (385 ) (363 ) (1,335 ) Adjusted Net Income $ 4,153 $ 4,312 $ 2,784 $ 4,138 $ 15,387 Average Diluted Shares Outstanding 7,593 7,595 7,653 7,636 7,589 Diluted Earnings Per Share $ 0.49 $ 0.40 $ 0.21 $ 0.40 $ 1.50 Adjusted Diluted Earnings Per Share $ 0.55 $ 0.57 $ 0.36 $ 0.54 $ 2.03 TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change SERVICE FY 2023 Q3 FY 2022 Q3 $'s % Service Revenue $ 35,977 $ 30,237 $ 5,740 19.0 % Cost of Revenue 25,184 21,254 3,930 18.5 % Gross Profit $ 10,793 $ 8,983 $ 1,810 20.1 % Gross Margin 30.0 % 29.7 % Selling, Marketing & Warehouse Expenses $ 4,230 $ 3,007 $ 1,223 40.7 % General and Administrative Expenses 4,727 4,315 412 9.5 % Operating Income $ 1,836 $ 1,661 $ 175 10.5 % % of Revenue 5.1 % 5.5 % Change DISTRIBUTION FY 2023 Q3 FY 2022 Q3 $'s % Distribution Sales $ 21,425 $ 20,665 $ 760 3.7 % Cost of Sales 15,818 16,012 (194 ) (1.2 )% Gross Profit $ 5,607 $ 4,653 $ 954 20.5 % Gross Margin 26.2 % 22.5 % Selling, Marketing & Warehouse Expenses $ 2,365 $ 2,044 $ 321 15.7 % General and Administrative Expenses 1,915 1,909 6 0.3 % Operating Income $ 1,327 $ 700 $ 627 89.6 % % of Sales 6.2 % 3.4 % Change TOTAL FY 2023 Q3 FY 2022 Q3 $'s % Total Revenue $ 57,402 $ 50,902 $ 6,500 12.8 % Total Cost of Revenue 41,002 37,266 3,736 10.0 % Gross Profit $ 16,400 $ 13,636 $ 2,764 20.3 % Gross Margin 28.6 % 26.8 % Selling, Marketing & Warehouse Expenses $ 6,595 $ 5,051 $ 1,544 30.6 % General and Administrative Expenses 6,642 6,224 418 6.7 % Operating Income $ 3,163 $ 2,361 $ 802 34.0 % % of Revenue 5.5 % 4.6 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 105,120 $ 87,338 $ 17,782 20.4 % Cost of Revenue 72,005 59,891 12,114 20.2 % Gross Profit $ 33,115 $ 27,447 $ 5,668 20.7 % Gross Margin 31.5 % 31.4 % Selling, Marketing & Warehouse Expenses $ 11,604 $ 8,557 $ 3,047 35.6 % General and Administrative Expenses 14,636 11,608 3,028 26.1 % Operating Income $ 6,875 $ 7,282 $ (407 ) (5.6 )% % of Revenue 6.5 % 8.3 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 63,382 $ 61,741 $ 1,641 2.7 % Cost of Sales 47,292 47,421 (129 ) (0.3 )% Gross Profit $ 16,090 $ 14,320 $ 1,770 12.4 % Gross Margin 25.4 % 23.2 % Selling, Marketing & Warehouse Expenses $ 6,711 $ 6,465 $ 246 3.8 % General and Administrative Expenses 5,861 5,509 352 6.4 % Operating Income $ 3,518 $ 2,346 $ 1,172 50.0 % % of Sales 5.6 % 3.8 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 168,502 $ 149,079 $ 19,423 13.0 % Total Cost of Revenue 119,297 107,312 11,985 11.2 % Gross Profit $ 49,205 $ 41,767 $ 7,438 17.8 % Gross Margin 29.2 % 28.0 % Selling, Marketing & Warehouse Expenses $ 18,315 $ 15,022 $ 3,293 21.9 % General and Administrative Expenses 20,497 17,117 3,380 19.7 % Operating Income $ 10,393 $ 9,628 $ 765 7.9 % % of Revenue 6.2 % 6.5 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230130005676/en/