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 Record Revenue and Gross Margins for Fourth Quarter and Full Year 2023 By: Transcat, Inc. via Business Wire May 22, 2023 at 16:07 PM EDT Fourth Quarter Service revenue up 14.7%, Service organic revenue growth of 10.0% Fourth Quarter Service gross profit increased 17.9%, Service gross margin expanded 90 basis points Fourth Quarter consolidated adjusted EBITDA grew 17.6% with margins expanding 80 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 fourth quarter and fiscal year ended March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Upstate Metrology, Inc. ("Upstate Metrology") effective April 29, 2021, Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021, Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration ("e2b"), effective September 27, 2022, and Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), effective September 28, 2022. “Despite macroeconomic headwinds and uncertainty, Transcat delivered strong performance across our entire business portfolio again in Fiscal 2023. The year was highlighted by record revenue and gross margins in the Service segment as well as on a consolidated basis. We are especially pleased with our Service revenue growth of 19%, which included 10% organic Service growth” commented Lee D. Rudow, President and CEO. “Service margins benefited from our differentiated value proposition, which continued to resonate throughout our expanded addressable markets. The expansion of NEXA's suite of professional services has been well received throughout the U.S. and Ireland and for the first time, we opportunistically performed work in various parts of Europe including the Netherlands, Switzerland, and Germany. Adjusted EBITDA growth of 16% for the fiscal year is a testament to the successful execution of our automation and process improvement productivity initiatives.” Mr. Rudow added, “In the fiscal year we completed three acquisitions, Alliance Calibration in Cincinnati, e2B Calibration in Cleveland, and Complete Calibration in Ireland that have expanded our addressable markets, widened the breadth of our service offerings, and allowed us to leverage our existing infrastructure. Our acquisition strategy continues to be a differentiator as a result of the effectiveness of our integration processes, which has resulted in all of these recent long-term strategic investments meeting or exceeding our expectations to date.” “On a final note, our rental business once again delivered strong performance versus prior year. Since being launched seven years ago, the high margin Rental business has experienced tremendous growth that we expect to continue.” Fourth Quarter Fiscal 2023 Review (Results are compared with the fourth quarter of the fiscal year ended March 26, 2022 ("fiscal 2022")) ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Distribution Sales 22,304 21,213 1,091 5.1 % Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % Operating Margin 9.4 % 8.1 % Net Income $ 3,658 $ 3,048 $ 610 20.0 % Net Margin 5.9 % 5.5 % Adjusted EBITDA* $ 8,998 $ 7,652 $ 1,346 17.6 % Adjusted EBITDA* Margin 14.5 % 13.7 % Diluted EPS $ 0.48 $ 0.40 $ 0.08 20.0 % Adjusted Diluted EPS* $ 0.60 $ 0.54 $ 0.06 11.1 % *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 $62.1 million, an increase of 11.1%. Consolidated gross profit was $19.2 million, an increase of $2.5 million, or 14.9%, while gross margin expanded 110 basis points due to margin improvements in both operating segments. Operating expenses were $13.3 million, an increase of $1.1 million, or 9.4%, driven by incremental expenses from acquired businesses (including stock-based compensation expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $9.0 million which represented an increase of $1.3 million or 17.6%. Net income per diluted share of $0.48 was up from $0.40 and adjusted diluted earnings per share increased to $0.60 versus $0.54 last year. Service segment delivers record fourth quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (64.1% of total revenue for the fourth quarter of fiscal 2023). ($ in thousand) Change FY23 Q4 FY22 Q4 $'s % Service Segment Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % Operating Margin 11.4 % 10.2 % Adjusted EBITDA* $ 7,039 $ 6,028 $ 1,011 16.8 % Adjusted EBITDA* Margin 17.7 % 17.4 % *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. Service segment revenue was $39.8 million, an increase of $5.1 million or 14.7% and included $1.6 million of incremental revenue from acquisitions. Organic revenue growth was 10.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 90 basis points from prior year primarily due to continued productivity improvements offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (35.9% of total revenue for the fourth quarter of fiscal 2023). ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Distribution Segment Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Operating Income $ 1,308 $ 983 $ 325 33.1 % Operating Margin 5.9 % 4.6 % Adjusted EBITDA* $ 1,959 $ 1,624 $ 335 20.6 % Adjusted EBITDA* Margin 8.8 % 7.7 % *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. Distribution sales were $22.3 million, an increase of 5.1% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 25.2%, an increase of 70 basis points due to a favorable sales mix driven by strength in the Rentals business. Full-Year Fiscal 2023 Review (Results are compared with full-year fiscal 2022) ($ in thousands) Change FY 2023 FY 2022 $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Distribution Sales 85,686 82,954 2,732 3.3 % Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % Operating Margin 7.0 % 6.9 % Net Income $ 10,688 $ 11,380 $ (692 ) (6.1 )% Net Margin 4.6 % 5.6 % Adjusted EBITDA* $ 30,421 $ 26,307 $ 4,114 15.6 % Adjusted EBITDA* Margin 13.2 % 12.8 % Diluted EPS $ 1.40 $ 1.50 $ (0.10 ) (6.7 )% Adjusted Diluted EPS* $ 1.93 $ 2.03 $ (0.10 ) (4.9 )% *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. Total revenue was $230.6 million, an increase of $25.6 million or 12.5%. Consolidated gross profit was $68.4 million, up $9.9 million, or 17.0%, and gross margin expanded to 29.6% or 110 basis points. Consolidated operating expenses were $52.1 million, an increase of $7.8 million, or 17.6%, 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 $16.2 million compared with $14.1 million in last fiscal year’s period, an increase of 14.9%. Adjusted EBITDA was $30.4 million which represented an increase of $4.1 million or 15.6%. Net income per diluted share decreased to $1.40 from $1.50 and adjusted diluted earnings per share was $1.93 versus $2.03 last year. The effective tax rate was 20.8% compared to 13.7% 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 March 25, 2023, the Company had $37.3 million available for borrowing under its secured revolving credit facility. Total debt of $49.1 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibrations, e2b and Elite during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.60 at March 25, 2023, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “We are proud of our dedicated team, which has consistently delivered exceptional results through various economic cycles as can be seen over the past 10 plus years of profitable growth. As we think ahead into fiscal 2024, despite macroeconomic uncertainty that looms over the business world, we expect another year of growth and margin expansion across our Service channels. Our business continues to benefit from a predominately life science-oriented market, driven by high levels of regulation and recurring revenue streams, along with a growing Rentals business that tends to perform well throughout various economic cycles including more challenged economic environments. In the year ahead, we expect organic Service revenue growth in the high single-digits and gross margin improvement to continue. We are investing in our high-growth NEXA business as well as new client-based labs, which will support additional organic revenue growth and margin expansion in the second half of the year but will temporarily weigh on year-over-year gross margin expansion in the first quarter of FY24. Accretive acquisitions that strengthen our fundamental value proposition will be a key component of our go-forward strategy. Our robust and diverse acquisition pipeline enables opportunities for Transcat to expand addressable markets and increase our capabilities like we did with NEXA and the pipettes business. Transcat has generated consistent margin improvement over the past several years and we believe the improvement will continue. Automation of our calibration processes and overall process improvement will be key enablers to future margin expansion. We anticipate demonstrating more selling, general and administrative expense leverage in the second half of fiscal 2024. We believe the Service segment has substantial runway ahead for growth, both organically and through acquisition. We have a long history of generating sustainable value for our shareholders and providing a dynamic, rewarding workplace for our team.” Transcat expects its income tax rate to range between 21% and 23% 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. Although the tax rate is consistent with recent years, there will be a difference in calendarization of the tax benefit from vesting of share-based payments in fiscal 2024. These benefits are normally realized in the fiscal first quarter, but in fiscal 2024, we will see the benefit in quarter two, due to a timing difference of when the awards were made. In the first quarter of fiscal 2023, this benefit positively impacted the tax rate by approximately 13% and we would expect a similar impact in second quarter of fiscal 2024. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, May 23, 2023 at 11:00 a.m. ET. Management will review the financial and operating results for the fourth quarter and full fiscal year, 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, May 30, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13738813, 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) Fourth Quarter Ended Fiscal Year Ended March 25, March 26, March 25, March 26, 2023 2022 2023 2022 Service Revenue $ 39,763 $ 34,667 $ 144,883 $ 122,005 Distribution Sales 22,304 21,213 85,686 82,954 Total Revenue 62,067 55,880 230,569 204,959 Cost of Service Revenue 26,240 23,193 98,245 83,084 Cost of Distribution Sales 16,677 16,015 63,969 63,436 Total Cost of Revenue 42,917 39,208 162,214 146,520 Gross Profit 19,150 16,672 68,355 58,439 Selling, Marketing and Warehouse Expenses 6,446 5,627 24,761 20,649 General and Administrative Expenses 6,849 6,530 27,346 23,647 Total Operating Expenses 13,295 12,157 52,107 44,296 Operating Income 5,855 4,515 16,248 14,143 Interest and Other Expense, net 1,029 372 2,761 953 Income Before Income Taxes 4,826 4,143 13,487 13,190 Provision for Income Taxes 1,168 1,095 2,799 1,810 Net Income $ 3,658 $ 3,048 $ 10,688 $ 11,380 Basic Earnings Per Share $ 0.48 $ 0.41 $ 1.42 $ 1.52 Average Shares Outstanding 7,562 7,523 7,551 7,496 Diluted Earnings Per Share $ 0.48 $ 0.40 $ 1.40 $ 1.50 Average Shares Outstanding 7,688 7,636 7,645 7,589 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) March 25, March 26, 2023 2022 ASSETS Current Assets: Cash $ 1,531 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $457 and $460 as of March 25, 2023 and March 26, 2022, respectively 44,698 39,737 Other Receivables 506 558 Inventory, net 16,929 12,712 Prepaid Expenses and Other Current Assets 3,935 5,301 Total Current Assets 67,599 59,704 Property and Equipment, net 29,064 26,439 Goodwill 69,360 65,074 Intangible Assets, net 13,799 14,692 Right To Use Assets, net 14,876 11,026 Other Assets 1,051 827 Total Assets $ 195,749 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 15,869 $ 14,171 Accrued Compensation and Other Current Liabilities 10,201 11,378 Current Portion of Long-Term Debt 2,248 2,161 Total Current Liabilities 28,318 27,710 Long-Term Debt 46,869 46,291 Deferred Tax Liabilities, net 6,538 6,724 Lease Liabilities 12,960 9,194 Other Liabilities 1,434 1,667 Total Liabilities 96,119 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,562,604 and 7,529,078 shares issued and outstanding as of March 25, 2023 and March 26, 2022, respectively 3,781 3,765 Capital in Excess of Par Value 27,886 23,900 Accumulated Other Comprehensive Loss (1,200 ) (233 ) Retained Earnings 69,163 58,744 Total Shareholders' Equity 99,630 86,176 Total Liabilities and Shareholders' Equity $ 195,749 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Fiscal Year Ended March 25, March 26, 2023 2022 Cash Flows from Operating Activities: Net Income $ 10,688 $ 11,380 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 88 88 Deferred Income Taxes (186 ) 559 Depreciation and Amortization 10,955 9,567 Provision for Accounts Receivable and Inventory Reserves 74 34 Stock-Based Compensation Expense 3,377 2,329 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables (5,226 ) (3,392 ) Inventory (3,377 ) (122 ) Prepaid Expenses and Other Current Assets 1,119 (2,960 ) Accounts Payable 1,600 1,901 Accrued Compensation and Other Current Liabilities (2,161 ) (1,113 ) Income Taxes Payable - (653 ) Net Cash Provided by Operating Activities 16,951 17,618 Cash Flows from Investing Activities: Purchases of Property and Equipment (9,414 ) (10,152 ) Proceeds from Sale of Property and Equipment 10 109 Business Acquisitions, net of cash acquired (9,109 ) (29,808 ) Net Cash Used in Investing Activities (18,513 ) (39,851 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,786 31,005 Repayments of Term Loan (2,121 ) (2,114 ) Issuance of Common Stock 658 1,486 Repurchase of Common Stock (447 ) (6,683 ) Net Cash Provided by Financing Activities 876 23,694 Effect of Exchange Rate Changes on Cash 821 (625 ) Net Increase in Cash 135 836 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,531 $ 1,396 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 EBITDA Reconciliation Table (In thousands) (Unaudited) 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 $ 3,658 $ 10,688 + Amortization of Intangible Assets 1,084 1,147 1,180 1,043 4,454 + Acquisition Amortization of Backlog - - - - - + 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 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 Q4 FY 2022 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Cost of Revenue 26,240 23,193 3,047 13.1 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Selling, Marketing & Warehouse Expenses $ 4,121 $ 3,490 $ 631 18.1 % General and Administrative Expenses 4,855 4,452 403 9.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % % of Revenue 11.4 % 10.2 % Change DISTRIBUTION FY 2023 Q4 FY 2022 Q4 $'s % Distribution Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Cost of Sales 16,677 16,015 662 4.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Selling, Marketing & Warehouse Expenses $ 2,325 $ 2,137 $ 188 8.8 % General and Administrative Expenses 1,994 2,078 (84 ) (4.0 )% Operating Income $ 1,308 $ 983 $ 325 33.1 % % of Sales 5.9 % 4.6 % Change TOTAL FY 2023 Q4 FY 2022 Q4 $'s % Total Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Total Cost of Revenue 42,917 39,208 3,709 9.5 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Selling, Marketing & Warehouse Expenses $ 6,446 $ 5,627 $ 819 14.6 % General and Administrative Expenses 6,849 6,530 319 4.9 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % % of Revenue 9.4 % 8.1 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Cost of Revenue 98,245 83,084 15,161 18.2 % Gross Profit $ 46,638 $ 38,921 $ 7,717 19.8 % Gross Margin 32.2 % 31.9 % Selling, Marketing & Warehouse Expenses $ 15,725 $ 12,047 $ 3,678 30.5 % General and Administrative Expenses 19,491 16,060 3,431 21.4 % Operating Income $ 11,422 $ 10,814 $ 608 5.6 % % of Revenue 7.9 % 8.9 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 85,686 $ 82,954 $ 2,732 3.3 % Cost of Sales 63,969 63,436 533 0.8 % Gross Profit $ 21,717 $ 19,518 $ 2,199 11.3 % Gross Margin 25.3 % 23.5 % Selling, Marketing & Warehouse Expenses $ 9,036 $ 8,602 $ 434 5.0 % General and Administrative Expenses 7,855 7,587 268 3.5 % Operating Income $ 4,826 $ 3,329 $ 1,497 45.0 % % of Sales 5.6 % 4.0 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Total Cost of Revenue 162,214 146,520 15,694 10.7 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Selling, Marketing & Warehouse Expenses $ 24,761 $ 20,649 $ 4,112 19.9 % General and Administrative Expenses 27,346 23,647 3,699 15.6 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % % of Revenue 7.0 % 6.9 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230522005664/en/Contacts For more information: 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 Record Revenue and Gross Margins for Fourth Quarter and Full Year 2023 By: Transcat, Inc. via Business Wire May 22, 2023 at 16:07 PM EDT Fourth Quarter Service revenue up 14.7%, Service organic revenue growth of 10.0% Fourth Quarter Service gross profit increased 17.9%, Service gross margin expanded 90 basis points Fourth Quarter consolidated adjusted EBITDA grew 17.6% with margins expanding 80 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 fourth quarter and fiscal year ended March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Upstate Metrology, Inc. ("Upstate Metrology") effective April 29, 2021, Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021, Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration ("e2b"), effective September 27, 2022, and Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), effective September 28, 2022. “Despite macroeconomic headwinds and uncertainty, Transcat delivered strong performance across our entire business portfolio again in Fiscal 2023. The year was highlighted by record revenue and gross margins in the Service segment as well as on a consolidated basis. We are especially pleased with our Service revenue growth of 19%, which included 10% organic Service growth” commented Lee D. Rudow, President and CEO. “Service margins benefited from our differentiated value proposition, which continued to resonate throughout our expanded addressable markets. The expansion of NEXA's suite of professional services has been well received throughout the U.S. and Ireland and for the first time, we opportunistically performed work in various parts of Europe including the Netherlands, Switzerland, and Germany. Adjusted EBITDA growth of 16% for the fiscal year is a testament to the successful execution of our automation and process improvement productivity initiatives.” Mr. Rudow added, “In the fiscal year we completed three acquisitions, Alliance Calibration in Cincinnati, e2B Calibration in Cleveland, and Complete Calibration in Ireland that have expanded our addressable markets, widened the breadth of our service offerings, and allowed us to leverage our existing infrastructure. Our acquisition strategy continues to be a differentiator as a result of the effectiveness of our integration processes, which has resulted in all of these recent long-term strategic investments meeting or exceeding our expectations to date.” “On a final note, our rental business once again delivered strong performance versus prior year. Since being launched seven years ago, the high margin Rental business has experienced tremendous growth that we expect to continue.” Fourth Quarter Fiscal 2023 Review (Results are compared with the fourth quarter of the fiscal year ended March 26, 2022 ("fiscal 2022")) ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Distribution Sales 22,304 21,213 1,091 5.1 % Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % Operating Margin 9.4 % 8.1 % Net Income $ 3,658 $ 3,048 $ 610 20.0 % Net Margin 5.9 % 5.5 % Adjusted EBITDA* $ 8,998 $ 7,652 $ 1,346 17.6 % Adjusted EBITDA* Margin 14.5 % 13.7 % Diluted EPS $ 0.48 $ 0.40 $ 0.08 20.0 % Adjusted Diluted EPS* $ 0.60 $ 0.54 $ 0.06 11.1 % *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 $62.1 million, an increase of 11.1%. Consolidated gross profit was $19.2 million, an increase of $2.5 million, or 14.9%, while gross margin expanded 110 basis points due to margin improvements in both operating segments. Operating expenses were $13.3 million, an increase of $1.1 million, or 9.4%, driven by incremental expenses from acquired businesses (including stock-based compensation expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $9.0 million which represented an increase of $1.3 million or 17.6%. Net income per diluted share of $0.48 was up from $0.40 and adjusted diluted earnings per share increased to $0.60 versus $0.54 last year. Service segment delivers record fourth quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (64.1% of total revenue for the fourth quarter of fiscal 2023). ($ in thousand) Change FY23 Q4 FY22 Q4 $'s % Service Segment Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % Operating Margin 11.4 % 10.2 % Adjusted EBITDA* $ 7,039 $ 6,028 $ 1,011 16.8 % Adjusted EBITDA* Margin 17.7 % 17.4 % *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. Service segment revenue was $39.8 million, an increase of $5.1 million or 14.7% and included $1.6 million of incremental revenue from acquisitions. Organic revenue growth was 10.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 90 basis points from prior year primarily due to continued productivity improvements offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (35.9% of total revenue for the fourth quarter of fiscal 2023). ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Distribution Segment Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Operating Income $ 1,308 $ 983 $ 325 33.1 % Operating Margin 5.9 % 4.6 % Adjusted EBITDA* $ 1,959 $ 1,624 $ 335 20.6 % Adjusted EBITDA* Margin 8.8 % 7.7 % *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. Distribution sales were $22.3 million, an increase of 5.1% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 25.2%, an increase of 70 basis points due to a favorable sales mix driven by strength in the Rentals business. Full-Year Fiscal 2023 Review (Results are compared with full-year fiscal 2022) ($ in thousands) Change FY 2023 FY 2022 $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Distribution Sales 85,686 82,954 2,732 3.3 % Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % Operating Margin 7.0 % 6.9 % Net Income $ 10,688 $ 11,380 $ (692 ) (6.1 )% Net Margin 4.6 % 5.6 % Adjusted EBITDA* $ 30,421 $ 26,307 $ 4,114 15.6 % Adjusted EBITDA* Margin 13.2 % 12.8 % Diluted EPS $ 1.40 $ 1.50 $ (0.10 ) (6.7 )% Adjusted Diluted EPS* $ 1.93 $ 2.03 $ (0.10 ) (4.9 )% *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. Total revenue was $230.6 million, an increase of $25.6 million or 12.5%. Consolidated gross profit was $68.4 million, up $9.9 million, or 17.0%, and gross margin expanded to 29.6% or 110 basis points. Consolidated operating expenses were $52.1 million, an increase of $7.8 million, or 17.6%, 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 $16.2 million compared with $14.1 million in last fiscal year’s period, an increase of 14.9%. Adjusted EBITDA was $30.4 million which represented an increase of $4.1 million or 15.6%. Net income per diluted share decreased to $1.40 from $1.50 and adjusted diluted earnings per share was $1.93 versus $2.03 last year. The effective tax rate was 20.8% compared to 13.7% 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 March 25, 2023, the Company had $37.3 million available for borrowing under its secured revolving credit facility. Total debt of $49.1 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibrations, e2b and Elite during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.60 at March 25, 2023, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “We are proud of our dedicated team, which has consistently delivered exceptional results through various economic cycles as can be seen over the past 10 plus years of profitable growth. As we think ahead into fiscal 2024, despite macroeconomic uncertainty that looms over the business world, we expect another year of growth and margin expansion across our Service channels. Our business continues to benefit from a predominately life science-oriented market, driven by high levels of regulation and recurring revenue streams, along with a growing Rentals business that tends to perform well throughout various economic cycles including more challenged economic environments. In the year ahead, we expect organic Service revenue growth in the high single-digits and gross margin improvement to continue. We are investing in our high-growth NEXA business as well as new client-based labs, which will support additional organic revenue growth and margin expansion in the second half of the year but will temporarily weigh on year-over-year gross margin expansion in the first quarter of FY24. Accretive acquisitions that strengthen our fundamental value proposition will be a key component of our go-forward strategy. Our robust and diverse acquisition pipeline enables opportunities for Transcat to expand addressable markets and increase our capabilities like we did with NEXA and the pipettes business. Transcat has generated consistent margin improvement over the past several years and we believe the improvement will continue. Automation of our calibration processes and overall process improvement will be key enablers to future margin expansion. We anticipate demonstrating more selling, general and administrative expense leverage in the second half of fiscal 2024. We believe the Service segment has substantial runway ahead for growth, both organically and through acquisition. We have a long history of generating sustainable value for our shareholders and providing a dynamic, rewarding workplace for our team.” Transcat expects its income tax rate to range between 21% and 23% 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. Although the tax rate is consistent with recent years, there will be a difference in calendarization of the tax benefit from vesting of share-based payments in fiscal 2024. These benefits are normally realized in the fiscal first quarter, but in fiscal 2024, we will see the benefit in quarter two, due to a timing difference of when the awards were made. In the first quarter of fiscal 2023, this benefit positively impacted the tax rate by approximately 13% and we would expect a similar impact in second quarter of fiscal 2024. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, May 23, 2023 at 11:00 a.m. ET. Management will review the financial and operating results for the fourth quarter and full fiscal year, 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, May 30, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13738813, 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) Fourth Quarter Ended Fiscal Year Ended March 25, March 26, March 25, March 26, 2023 2022 2023 2022 Service Revenue $ 39,763 $ 34,667 $ 144,883 $ 122,005 Distribution Sales 22,304 21,213 85,686 82,954 Total Revenue 62,067 55,880 230,569 204,959 Cost of Service Revenue 26,240 23,193 98,245 83,084 Cost of Distribution Sales 16,677 16,015 63,969 63,436 Total Cost of Revenue 42,917 39,208 162,214 146,520 Gross Profit 19,150 16,672 68,355 58,439 Selling, Marketing and Warehouse Expenses 6,446 5,627 24,761 20,649 General and Administrative Expenses 6,849 6,530 27,346 23,647 Total Operating Expenses 13,295 12,157 52,107 44,296 Operating Income 5,855 4,515 16,248 14,143 Interest and Other Expense, net 1,029 372 2,761 953 Income Before Income Taxes 4,826 4,143 13,487 13,190 Provision for Income Taxes 1,168 1,095 2,799 1,810 Net Income $ 3,658 $ 3,048 $ 10,688 $ 11,380 Basic Earnings Per Share $ 0.48 $ 0.41 $ 1.42 $ 1.52 Average Shares Outstanding 7,562 7,523 7,551 7,496 Diluted Earnings Per Share $ 0.48 $ 0.40 $ 1.40 $ 1.50 Average Shares Outstanding 7,688 7,636 7,645 7,589 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) March 25, March 26, 2023 2022 ASSETS Current Assets: Cash $ 1,531 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $457 and $460 as of March 25, 2023 and March 26, 2022, respectively 44,698 39,737 Other Receivables 506 558 Inventory, net 16,929 12,712 Prepaid Expenses and Other Current Assets 3,935 5,301 Total Current Assets 67,599 59,704 Property and Equipment, net 29,064 26,439 Goodwill 69,360 65,074 Intangible Assets, net 13,799 14,692 Right To Use Assets, net 14,876 11,026 Other Assets 1,051 827 Total Assets $ 195,749 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 15,869 $ 14,171 Accrued Compensation and Other Current Liabilities 10,201 11,378 Current Portion of Long-Term Debt 2,248 2,161 Total Current Liabilities 28,318 27,710 Long-Term Debt 46,869 46,291 Deferred Tax Liabilities, net 6,538 6,724 Lease Liabilities 12,960 9,194 Other Liabilities 1,434 1,667 Total Liabilities 96,119 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,562,604 and 7,529,078 shares issued and outstanding as of March 25, 2023 and March 26, 2022, respectively 3,781 3,765 Capital in Excess of Par Value 27,886 23,900 Accumulated Other Comprehensive Loss (1,200 ) (233 ) Retained Earnings 69,163 58,744 Total Shareholders' Equity 99,630 86,176 Total Liabilities and Shareholders' Equity $ 195,749 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Fiscal Year Ended March 25, March 26, 2023 2022 Cash Flows from Operating Activities: Net Income $ 10,688 $ 11,380 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 88 88 Deferred Income Taxes (186 ) 559 Depreciation and Amortization 10,955 9,567 Provision for Accounts Receivable and Inventory Reserves 74 34 Stock-Based Compensation Expense 3,377 2,329 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables (5,226 ) (3,392 ) Inventory (3,377 ) (122 ) Prepaid Expenses and Other Current Assets 1,119 (2,960 ) Accounts Payable 1,600 1,901 Accrued Compensation and Other Current Liabilities (2,161 ) (1,113 ) Income Taxes Payable - (653 ) Net Cash Provided by Operating Activities 16,951 17,618 Cash Flows from Investing Activities: Purchases of Property and Equipment (9,414 ) (10,152 ) Proceeds from Sale of Property and Equipment 10 109 Business Acquisitions, net of cash acquired (9,109 ) (29,808 ) Net Cash Used in Investing Activities (18,513 ) (39,851 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,786 31,005 Repayments of Term Loan (2,121 ) (2,114 ) Issuance of Common Stock 658 1,486 Repurchase of Common Stock (447 ) (6,683 ) Net Cash Provided by Financing Activities 876 23,694 Effect of Exchange Rate Changes on Cash 821 (625 ) Net Increase in Cash 135 836 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,531 $ 1,396 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 EBITDA Reconciliation Table (In thousands) (Unaudited) 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 $ 3,658 $ 10,688 + Amortization of Intangible Assets 1,084 1,147 1,180 1,043 4,454 + Acquisition Amortization of Backlog - - - - - + 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 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 Q4 FY 2022 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Cost of Revenue 26,240 23,193 3,047 13.1 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Selling, Marketing & Warehouse Expenses $ 4,121 $ 3,490 $ 631 18.1 % General and Administrative Expenses 4,855 4,452 403 9.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % % of Revenue 11.4 % 10.2 % Change DISTRIBUTION FY 2023 Q4 FY 2022 Q4 $'s % Distribution Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Cost of Sales 16,677 16,015 662 4.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Selling, Marketing & Warehouse Expenses $ 2,325 $ 2,137 $ 188 8.8 % General and Administrative Expenses 1,994 2,078 (84 ) (4.0 )% Operating Income $ 1,308 $ 983 $ 325 33.1 % % of Sales 5.9 % 4.6 % Change TOTAL FY 2023 Q4 FY 2022 Q4 $'s % Total Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Total Cost of Revenue 42,917 39,208 3,709 9.5 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Selling, Marketing & Warehouse Expenses $ 6,446 $ 5,627 $ 819 14.6 % General and Administrative Expenses 6,849 6,530 319 4.9 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % % of Revenue 9.4 % 8.1 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Cost of Revenue 98,245 83,084 15,161 18.2 % Gross Profit $ 46,638 $ 38,921 $ 7,717 19.8 % Gross Margin 32.2 % 31.9 % Selling, Marketing & Warehouse Expenses $ 15,725 $ 12,047 $ 3,678 30.5 % General and Administrative Expenses 19,491 16,060 3,431 21.4 % Operating Income $ 11,422 $ 10,814 $ 608 5.6 % % of Revenue 7.9 % 8.9 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 85,686 $ 82,954 $ 2,732 3.3 % Cost of Sales 63,969 63,436 533 0.8 % Gross Profit $ 21,717 $ 19,518 $ 2,199 11.3 % Gross Margin 25.3 % 23.5 % Selling, Marketing & Warehouse Expenses $ 9,036 $ 8,602 $ 434 5.0 % General and Administrative Expenses 7,855 7,587 268 3.5 % Operating Income $ 4,826 $ 3,329 $ 1,497 45.0 % % of Sales 5.6 % 4.0 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Total Cost of Revenue 162,214 146,520 15,694 10.7 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Selling, Marketing & Warehouse Expenses $ 24,761 $ 20,649 $ 4,112 19.9 % General and Administrative Expenses 27,346 23,647 3,699 15.6 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % % of Revenue 7.0 % 6.9 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230522005664/en/Contacts For more information: Tom Barbato Phone: (585) 505-6530 Email: Thomas.Barbato@transcat.com
Fourth Quarter Service revenue up 14.7%, Service organic revenue growth of 10.0% Fourth Quarter Service gross profit increased 17.9%, Service gross margin expanded 90 basis points Fourth Quarter consolidated adjusted EBITDA grew 17.6% with margins expanding 80 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 fourth quarter and fiscal year ended March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Upstate Metrology, Inc. ("Upstate Metrology") effective April 29, 2021, Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021, Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022, e2b Calibration ("e2b"), effective September 27, 2022, and Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), effective September 28, 2022. “Despite macroeconomic headwinds and uncertainty, Transcat delivered strong performance across our entire business portfolio again in Fiscal 2023. The year was highlighted by record revenue and gross margins in the Service segment as well as on a consolidated basis. We are especially pleased with our Service revenue growth of 19%, which included 10% organic Service growth” commented Lee D. Rudow, President and CEO. “Service margins benefited from our differentiated value proposition, which continued to resonate throughout our expanded addressable markets. The expansion of NEXA's suite of professional services has been well received throughout the U.S. and Ireland and for the first time, we opportunistically performed work in various parts of Europe including the Netherlands, Switzerland, and Germany. Adjusted EBITDA growth of 16% for the fiscal year is a testament to the successful execution of our automation and process improvement productivity initiatives.” Mr. Rudow added, “In the fiscal year we completed three acquisitions, Alliance Calibration in Cincinnati, e2B Calibration in Cleveland, and Complete Calibration in Ireland that have expanded our addressable markets, widened the breadth of our service offerings, and allowed us to leverage our existing infrastructure. Our acquisition strategy continues to be a differentiator as a result of the effectiveness of our integration processes, which has resulted in all of these recent long-term strategic investments meeting or exceeding our expectations to date.” “On a final note, our rental business once again delivered strong performance versus prior year. Since being launched seven years ago, the high margin Rental business has experienced tremendous growth that we expect to continue.” Fourth Quarter Fiscal 2023 Review (Results are compared with the fourth quarter of the fiscal year ended March 26, 2022 ("fiscal 2022")) ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Distribution Sales 22,304 21,213 1,091 5.1 % Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % Operating Margin 9.4 % 8.1 % Net Income $ 3,658 $ 3,048 $ 610 20.0 % Net Margin 5.9 % 5.5 % Adjusted EBITDA* $ 8,998 $ 7,652 $ 1,346 17.6 % Adjusted EBITDA* Margin 14.5 % 13.7 % Diluted EPS $ 0.48 $ 0.40 $ 0.08 20.0 % Adjusted Diluted EPS* $ 0.60 $ 0.54 $ 0.06 11.1 % *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 $62.1 million, an increase of 11.1%. Consolidated gross profit was $19.2 million, an increase of $2.5 million, or 14.9%, while gross margin expanded 110 basis points due to margin improvements in both operating segments. Operating expenses were $13.3 million, an increase of $1.1 million, or 9.4%, driven by incremental expenses from acquired businesses (including stock-based compensation expense), increased intangibles amortization expense, and higher incentive-based employee costs due to higher sales. Adjusted EBITDA was $9.0 million which represented an increase of $1.3 million or 17.6%. Net income per diluted share of $0.48 was up from $0.40 and adjusted diluted earnings per share increased to $0.60 versus $0.54 last year. Service segment delivers record fourth quarter results Represents the accredited calibration, repair, inspection and laboratory instrument services business (64.1% of total revenue for the fourth quarter of fiscal 2023). ($ in thousand) Change FY23 Q4 FY22 Q4 $'s % Service Segment Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % Operating Margin 11.4 % 10.2 % Adjusted EBITDA* $ 7,039 $ 6,028 $ 1,011 16.8 % Adjusted EBITDA* Margin 17.7 % 17.4 % *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. Service segment revenue was $39.8 million, an increase of $5.1 million or 14.7% and included $1.6 million of incremental revenue from acquisitions. Organic revenue growth was 10.0% and was driven by strong end market demand and continued market share gains. The segment gross margin increased 90 basis points from prior year primarily due to continued productivity improvements offset by increased start-up costs from new client-based lab implementations. Distribution segment shows continued margin improvement Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (35.9% of total revenue for the fourth quarter of fiscal 2023). ($ in thousands) Change FY23 Q4 FY22 Q4 $'s % Distribution Segment Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Operating Income $ 1,308 $ 983 $ 325 33.1 % Operating Margin 5.9 % 4.6 % Adjusted EBITDA* $ 1,959 $ 1,624 $ 335 20.6 % Adjusted EBITDA* Margin 8.8 % 7.7 % *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. Distribution sales were $22.3 million, an increase of 5.1% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 25.2%, an increase of 70 basis points due to a favorable sales mix driven by strength in the Rentals business. Full-Year Fiscal 2023 Review (Results are compared with full-year fiscal 2022) ($ in thousands) Change FY 2023 FY 2022 $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Distribution Sales 85,686 82,954 2,732 3.3 % Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % Operating Margin 7.0 % 6.9 % Net Income $ 10,688 $ 11,380 $ (692 ) (6.1 )% Net Margin 4.6 % 5.6 % Adjusted EBITDA* $ 30,421 $ 26,307 $ 4,114 15.6 % Adjusted EBITDA* Margin 13.2 % 12.8 % Diluted EPS $ 1.40 $ 1.50 $ (0.10 ) (6.7 )% Adjusted Diluted EPS* $ 1.93 $ 2.03 $ (0.10 ) (4.9 )% *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. Total revenue was $230.6 million, an increase of $25.6 million or 12.5%. Consolidated gross profit was $68.4 million, up $9.9 million, or 17.0%, and gross margin expanded to 29.6% or 110 basis points. Consolidated operating expenses were $52.1 million, an increase of $7.8 million, or 17.6%, 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 $16.2 million compared with $14.1 million in last fiscal year’s period, an increase of 14.9%. Adjusted EBITDA was $30.4 million which represented an increase of $4.1 million or 15.6%. Net income per diluted share decreased to $1.40 from $1.50 and adjusted diluted earnings per share was $1.93 versus $2.03 last year. The effective tax rate was 20.8% compared to 13.7% 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 March 25, 2023, the Company had $37.3 million available for borrowing under its secured revolving credit facility. Total debt of $49.1 million was up $0.7 million from fiscal 2022 year-end due to the acquisitions of Alliance, Complete Calibrations, e2b and Elite during the current fiscal year. The Company’s leverage ratio, as defined in the credit agreement, was 1.60 at March 25, 2023, compared with 1.74 at March 26, 2022. Outlook Mr. Rudow concluded, “We are proud of our dedicated team, which has consistently delivered exceptional results through various economic cycles as can be seen over the past 10 plus years of profitable growth. As we think ahead into fiscal 2024, despite macroeconomic uncertainty that looms over the business world, we expect another year of growth and margin expansion across our Service channels. Our business continues to benefit from a predominately life science-oriented market, driven by high levels of regulation and recurring revenue streams, along with a growing Rentals business that tends to perform well throughout various economic cycles including more challenged economic environments. In the year ahead, we expect organic Service revenue growth in the high single-digits and gross margin improvement to continue. We are investing in our high-growth NEXA business as well as new client-based labs, which will support additional organic revenue growth and margin expansion in the second half of the year but will temporarily weigh on year-over-year gross margin expansion in the first quarter of FY24. Accretive acquisitions that strengthen our fundamental value proposition will be a key component of our go-forward strategy. Our robust and diverse acquisition pipeline enables opportunities for Transcat to expand addressable markets and increase our capabilities like we did with NEXA and the pipettes business. Transcat has generated consistent margin improvement over the past several years and we believe the improvement will continue. Automation of our calibration processes and overall process improvement will be key enablers to future margin expansion. We anticipate demonstrating more selling, general and administrative expense leverage in the second half of fiscal 2024. We believe the Service segment has substantial runway ahead for growth, both organically and through acquisition. We have a long history of generating sustainable value for our shareholders and providing a dynamic, rewarding workplace for our team.” Transcat expects its income tax rate to range between 21% and 23% 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. Although the tax rate is consistent with recent years, there will be a difference in calendarization of the tax benefit from vesting of share-based payments in fiscal 2024. These benefits are normally realized in the fiscal first quarter, but in fiscal 2024, we will see the benefit in quarter two, due to a timing difference of when the awards were made. In the first quarter of fiscal 2023, this benefit positively impacted the tax rate by approximately 13% and we would expect a similar impact in second quarter of fiscal 2024. Webcast and Conference Call Transcat will host a conference call and webcast on Tuesday, May 23, 2023 at 11:00 a.m. ET. Management will review the financial and operating results for the fourth quarter and full fiscal year, 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, May 30, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13738813, 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) Fourth Quarter Ended Fiscal Year Ended March 25, March 26, March 25, March 26, 2023 2022 2023 2022 Service Revenue $ 39,763 $ 34,667 $ 144,883 $ 122,005 Distribution Sales 22,304 21,213 85,686 82,954 Total Revenue 62,067 55,880 230,569 204,959 Cost of Service Revenue 26,240 23,193 98,245 83,084 Cost of Distribution Sales 16,677 16,015 63,969 63,436 Total Cost of Revenue 42,917 39,208 162,214 146,520 Gross Profit 19,150 16,672 68,355 58,439 Selling, Marketing and Warehouse Expenses 6,446 5,627 24,761 20,649 General and Administrative Expenses 6,849 6,530 27,346 23,647 Total Operating Expenses 13,295 12,157 52,107 44,296 Operating Income 5,855 4,515 16,248 14,143 Interest and Other Expense, net 1,029 372 2,761 953 Income Before Income Taxes 4,826 4,143 13,487 13,190 Provision for Income Taxes 1,168 1,095 2,799 1,810 Net Income $ 3,658 $ 3,048 $ 10,688 $ 11,380 Basic Earnings Per Share $ 0.48 $ 0.41 $ 1.42 $ 1.52 Average Shares Outstanding 7,562 7,523 7,551 7,496 Diluted Earnings Per Share $ 0.48 $ 0.40 $ 1.40 $ 1.50 Average Shares Outstanding 7,688 7,636 7,645 7,589 TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts) (Unaudited) (Audited) March 25, March 26, 2023 2022 ASSETS Current Assets: Cash $ 1,531 $ 1,396 Accounts Receivable, less allowance for doubtful accounts of $457 and $460 as of March 25, 2023 and March 26, 2022, respectively 44,698 39,737 Other Receivables 506 558 Inventory, net 16,929 12,712 Prepaid Expenses and Other Current Assets 3,935 5,301 Total Current Assets 67,599 59,704 Property and Equipment, net 29,064 26,439 Goodwill 69,360 65,074 Intangible Assets, net 13,799 14,692 Right To Use Assets, net 14,876 11,026 Other Assets 1,051 827 Total Assets $ 195,749 $ 177,762 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 15,869 $ 14,171 Accrued Compensation and Other Current Liabilities 10,201 11,378 Current Portion of Long-Term Debt 2,248 2,161 Total Current Liabilities 28,318 27,710 Long-Term Debt 46,869 46,291 Deferred Tax Liabilities, net 6,538 6,724 Lease Liabilities 12,960 9,194 Other Liabilities 1,434 1,667 Total Liabilities 96,119 91,586 Shareholders' Equity: Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,562,604 and 7,529,078 shares issued and outstanding as of March 25, 2023 and March 26, 2022, respectively 3,781 3,765 Capital in Excess of Par Value 27,886 23,900 Accumulated Other Comprehensive Loss (1,200 ) (233 ) Retained Earnings 69,163 58,744 Total Shareholders' Equity 99,630 86,176 Total Liabilities and Shareholders' Equity $ 195,749 $ 177,762 TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Fiscal Year Ended March 25, March 26, 2023 2022 Cash Flows from Operating Activities: Net Income $ 10,688 $ 11,380 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Loss on Disposal of Property and Equipment 88 88 Deferred Income Taxes (186 ) 559 Depreciation and Amortization 10,955 9,567 Provision for Accounts Receivable and Inventory Reserves 74 34 Stock-Based Compensation Expense 3,377 2,329 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables (5,226 ) (3,392 ) Inventory (3,377 ) (122 ) Prepaid Expenses and Other Current Assets 1,119 (2,960 ) Accounts Payable 1,600 1,901 Accrued Compensation and Other Current Liabilities (2,161 ) (1,113 ) Income Taxes Payable - (653 ) Net Cash Provided by Operating Activities 16,951 17,618 Cash Flows from Investing Activities: Purchases of Property and Equipment (9,414 ) (10,152 ) Proceeds from Sale of Property and Equipment 10 109 Business Acquisitions, net of cash acquired (9,109 ) (29,808 ) Net Cash Used in Investing Activities (18,513 ) (39,851 ) Cash Flows from Financing Activities: Proceeds from Revolving Credit Facility, net 2,786 31,005 Repayments of Term Loan (2,121 ) (2,114 ) Issuance of Common Stock 658 1,486 Repurchase of Common Stock (447 ) (6,683 ) Net Cash Provided by Financing Activities 876 23,694 Effect of Exchange Rate Changes on Cash 821 (625 ) Net Increase in Cash 135 836 Cash at Beginning of Period 1,396 560 Cash at End of Period $ 1,531 $ 1,396 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 EBITDA Reconciliation Table (In thousands) (Unaudited) 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 $ 3,658 $ 10,688 + Amortization of Intangible Assets 1,084 1,147 1,180 1,043 4,454 + Acquisition Amortization of Backlog - - - - - + 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 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 Q4 FY 2022 Q4 $'s % Service Revenue $ 39,763 $ 34,667 $ 5,096 14.7 % Cost of Revenue 26,240 23,193 3,047 13.1 % Gross Profit $ 13,523 $ 11,474 $ 2,049 17.9 % Gross Margin 34.0 % 33.1 % Selling, Marketing & Warehouse Expenses $ 4,121 $ 3,490 $ 631 18.1 % General and Administrative Expenses 4,855 4,452 403 9.1 % Operating Income $ 4,547 $ 3,532 $ 1,015 28.7 % % of Revenue 11.4 % 10.2 % Change DISTRIBUTION FY 2023 Q4 FY 2022 Q4 $'s % Distribution Sales $ 22,304 $ 21,213 $ 1,091 5.1 % Cost of Sales 16,677 16,015 662 4.1 % Gross Profit $ 5,627 $ 5,198 $ 429 8.3 % Gross Margin 25.2 % 24.5 % Selling, Marketing & Warehouse Expenses $ 2,325 $ 2,137 $ 188 8.8 % General and Administrative Expenses 1,994 2,078 (84 ) (4.0 )% Operating Income $ 1,308 $ 983 $ 325 33.1 % % of Sales 5.9 % 4.6 % Change TOTAL FY 2023 Q4 FY 2022 Q4 $'s % Total Revenue $ 62,067 $ 55,880 $ 6,187 11.1 % Total Cost of Revenue 42,917 39,208 3,709 9.5 % Gross Profit $ 19,150 $ 16,672 $ 2,478 14.9 % Gross Margin 30.9 % 29.8 % Selling, Marketing & Warehouse Expenses $ 6,446 $ 5,627 $ 819 14.6 % General and Administrative Expenses 6,849 6,530 319 4.9 % Operating Income $ 5,855 $ 4,515 $ 1,340 29.7 % % of Revenue 9.4 % 8.1 % TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited) Change FY 2023 FY 2022 SERVICE YTD YTD $'s % Service Revenue $ 144,883 $ 122,005 $ 22,878 18.8 % Cost of Revenue 98,245 83,084 15,161 18.2 % Gross Profit $ 46,638 $ 38,921 $ 7,717 19.8 % Gross Margin 32.2 % 31.9 % Selling, Marketing & Warehouse Expenses $ 15,725 $ 12,047 $ 3,678 30.5 % General and Administrative Expenses 19,491 16,060 3,431 21.4 % Operating Income $ 11,422 $ 10,814 $ 608 5.6 % % of Revenue 7.9 % 8.9 % Change FY 2023 FY 2022 DISTRIBUTION YTD YTD $'s % Distribution Sales $ 85,686 $ 82,954 $ 2,732 3.3 % Cost of Sales 63,969 63,436 533 0.8 % Gross Profit $ 21,717 $ 19,518 $ 2,199 11.3 % Gross Margin 25.3 % 23.5 % Selling, Marketing & Warehouse Expenses $ 9,036 $ 8,602 $ 434 5.0 % General and Administrative Expenses 7,855 7,587 268 3.5 % Operating Income $ 4,826 $ 3,329 $ 1,497 45.0 % % of Sales 5.6 % 4.0 % Change FY 2023 FY 2022 TOTAL YTD YTD $'s % Total Revenue $ 230,569 $ 204,959 $ 25,610 12.5 % Total Cost of Revenue 162,214 146,520 15,694 10.7 % Gross Profit $ 68,355 $ 58,439 $ 9,916 17.0 % Gross Margin 29.6 % 28.5 % Selling, Marketing & Warehouse Expenses $ 24,761 $ 20,649 $ 4,112 19.9 % General and Administrative Expenses 27,346 23,647 3,699 15.6 % Operating Income $ 16,248 $ 14,143 $ 2,105 14.9 % % of Revenue 7.0 % 6.9 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230522005664/en/