Transcat Reports Strong Second Quarter Results on 19% Service Revenue Growth

Rhea-AI Summary

Transcat, Inc. (Nasdaq: TRNS) reported a strong second quarter for fiscal 2023, with consolidated revenue of $56.4 million, representing a 12% increase year-over-year. Service segment revenue rose 19.4% to $35.3 million, while organic revenue growth was 9.3%. Gross profit expanded by 14.8% to $16.8 million, with gross margin improving to 29.7%. However, net income decreased to $2.4 million, down 21.8% compared to the previous year, impacted by a higher effective tax rate of 23.7%.

Positive

• Consolidated revenue increased by 12% to $56.4 million.
• Service segment revenue grew 19.4% to $35.3 million.
• Organic revenue growth of 9.3% driven by strong market demand.
• Gross profit increased by 14.8% to $16.8 million.
• Gross margin improved to 29.7%, up 70 basis points.

Negative

• Net income decreased by 21.8% to $2.4 million.
• Operating expenses rose 19.1%, impacting profitability.
• Operating income slightly decreased by 1.3% to $3.6 million.
• Effective tax rate increased to 23.7% from 9.4%, reducing EPS.

• Consolidated revenue of $56.4 million, up 12.0% from prior year
• Service segment revenue of $35.3 million, up 19.4%; organic revenue grew 9.3%
• Consolidated gross profit of $16.8 million, up 14.8%; gross margin increased 70 basis points to 29.7%

ROCHESTER, N.Y.--(BUSINESS WIRE)-- Transcat, Inc. (Nasdaq: TRNS) (“Transcat” or the “Company”), a leading provider of accredited calibration, repair, inspection and laboratory instrument services and value-added distributor of professional grade handheld test, measurement and control instrumentation, today reported financial results for its second quarter ended September 24, 2022 (the “second quarter”) of fiscal year 2023, which ends March 25, 2023 (“fiscal 2023”). Results include the previously reported acquisitions of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management) (“NEXA”) effective August 31, 2021, Tangent Labs, LLC (“Tangent”) effective December 31, 2021 and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. (d/b/a Alliance Calibration) (“Alliance”) effective May 31, 2022.

“Our Service business continued to perform at a high level in the second quarter, despite growing economic uncertainty.” commented Lee D. Rudow, President and CEO. “Service segment revenue grew 19%, 9% organically, as demand in both our core calibration and NEXA asset management businesses remained strong. Service gross margin was a solid 32.6%, relatively flat with prior year, despite start-up costs primarily driven by the implementation of new client-based labs and an influx of new technicians to support future growth. As we have previously discussed, client-based labs can weigh on margins in the early stages of ramp-up and new technicians typically take several months to achieve expected productivity levels.”

“Our Distribution segment performed very well in the second quarter with revenue increasing 1.6% and gross margin expanding 140 basis points to 24.9%, largely driven by continued strength in our high-margin rental business and the sell-through of prior strategic inventory buys at higher prices. We are pleased that we were able to turn in such a strong performance despite the ongoing supply chain challenges that are impacting the industry on a macro level. Demand remained strong as our backlog increased 18% from prior year to a record $9.1 million. In total, continued growth in both operating segments drove second quarter EBITDA of $7.5 million, an increase of 6% from prior year.

Mr. Rudow added, “Acquisitions continue to be an important part of Transcat’s long-term growth strategy and we closed on two deals right after the end of the second quarter. Complete Calibrations is a small, but very strategic acquisition for Transcat. It provides Transcat with a local calibration presence to support the robust and growing life science market in Ireland and also brings us over 10 years of experience in developing robotics for calibrations. Our vision is to leverage this promising robotics technology over time in both Ireland and North America to further enhance our automation initiatives and differentiate Transcat from our competitors by driving gains in efficiency and quality while improving turnaround times for our customers.”

“e2b Calibration, located in Cleveland, Ohio, is a proven industry leader in calibration services related to the aviation industry, with particular strength in avionics. We believe that we can leverage Transcat’s current infrastructure and significant geographic footprint to further accelerate the growth in e2b’s capabilities across the U.S and Canada. In addition, there is an attractive life sciences market in the greater Cleveland area, which we are now nicely positioned to capitalize on.”

Second Quarter Fiscal 2023 Review (Results are compared with the second quarter of the fiscal year ended March 26, 2022 (“fiscal 2022”))

($ in thousands)								Change
		FY23 Q2			FY22 Q2			$'s			%
Service Revenue		$	35,267		$	29,544		$	5,723		19.4%
Distribution Sales			21,172			20,843			329		1.6%
Revenue		$	56,439		$	50,387		$	6,052		12.0%
Gross Profit		$	16,767		$	14,611		$	2,156		14.8%
Gross Margin			29.7%			29.0%
Operating Income		$	3,626		$	3,578		$	48		1.3%
Operating Margin			6.4%			7.1%
Net Income		$	2,357		$	3,015		$	(658)		(21.8%)
Net Margin			4.2%			6.0%
Adjusted EBITDA*		$	7,531		$	7,079		$	452		6.4%
Adjusted EBITDA* Margin			13.3%			14.0%

*See Note 1 on page 4 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table.

Consolidated revenue was $56.4 million, an increase of 12.0%. Consolidated gross profit was $16.8 million, an increase of $2.2 million, or 14.8%, and gross margin expanded 70 basis points to 29.7% due to strong performance in the Distribution segment. Operating expenses increased $2.1 million, or 19.1%, 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. Adjusted EBITDA was $7.5 million which represented an increase of $0.5 million or 6.4%. Net income per diluted share decreased to $0.31 from $0.40 and adjusted diluted earnings per share was $0.44 versus $0.57 last year. The effective tax rate was 23.7% compared to 9.4% 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 $0.06 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year.

Service segment delivers strong second quarter results

Represents the accredited calibration, repair, inspection and laboratory instrument services business (62.5% of total revenue for the second quarter of fiscal 2023).

($ in thousands)								Change
		FY23 Q2			FY22 Q2			$'s			%
Service Segment Revenue		$	35,267		$	29,544		$	5,723		19.4%
Gross Profit		$	11,487		$	9,712		$	1,775		18.3%
Gross Margin			32.6%			32.9%
Operating Income		$	2,507		$	2,647		$	(140)		(5.3%)
Operating Margin			7.1%			9.0%
Adjusted EBITDA*		$	5,549		$	5,460		$	89		1.6%
Adjusted EBITDA* Margin			15.7%			18.5%

* See Note 1 on page 4 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table.

Service segment revenue was $35.3 million, an increase of $5.7 million or 19.4% and included $3.0 million of incremental revenue from acquisitions. Organic revenue growth was 9.3% and was driven by strong end market demand and continued market share gains. The segment gross margin decreased 30 basis points from prior year primarily due to increased start-up costs from new client-based lab implementations.

Distribution segment shows continued margin improvement

Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (37.5% of total revenue for the second quarter of fiscal 2023).

($ in thousands)								Change
		FY23 Q2			FY22 Q2			$'s			%
Distribution Segment Sales		$	21,172		$	20,843		$	329		1.6%
Gross Profit		$	5,280		$	4,899		$	381		7.8%
Gross Margin			24.9%			23.5%
Operating Income		$	1,119		$	931		$	188		20.2%
Operating Margin			5.3%			4.5%
Adjusted EBITDA*		$	1,982		$	1,619		$	363		22.4%
Adjusted EBITDA* Margin			9.4%			7.8%

* See Note 1 on page 4 for a description of this non-GAAP financial measure and page 10 for the Adjusted EBITDA Reconciliation table.

Distribution sales increased 1.6% on improved end market demand and strength in our Rentals business. Distribution segment gross margin was 24.9%, an increase of 140 basis points due to a favorable sales mix driven by strength in the Rentals business.

Six Month Review (Results are compared with the first six months of fiscal 2022)

Total revenue was $111.1 million, an increase of $12.9 million or 13.2%. Consolidated gross profit was up $4.7 million, or 16.6%, and gross margin expanded to 29.5% or 800 basis points. Consolidated operating expenses increased $4.7 million, or 22.6%, 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 $7.2 million compared with $7.3 million in last fiscal year’s period.

Adjusted EBITDA was $14.8 million which represented an increase of $1.6 million or 12.5%. Net income per diluted share decreased to $0.71 from $0.88 and adjusted diluted earnings per share was $0.98 versus $1.12 last year. The effective tax rate was 16.9% compared to 1.7% 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 $0.13 per diluted earnings per share and adjusted diluted earnings per share when compared to the prior year.

Balance Sheet and Cash Flow Overview

At September 24, 2022, the Company had $36.7 million available for borrowing under its secured revolving credit facility. Total debt of $50.8 million was up $2.3 million from fiscal 2022 year-end due to the acquisition of Alliance in the first quarter. The Company’s leverage ratio, as defined in the credit agreement, was 1.81 at September 24, 2022, compared with 1.74 at March 26, 2022.

Outlook

Mr. Rudow concluded, “As economic uncertainty continues to ramp up, we are pleased with the strong demand levels we experienced in our fiscal second quarter. We continue to demonstrate our ability to drive growth through various economic cycles as can be seen over the past 10 plus years, which provides us confidence that will continue. The business continues to benefit from significant participation in the life-science, aerospace and defense and other highly regulated industries, where there are extremely high costs of failure and where there are high recurring revenue streams. Additionally, we also expect Nexa Enterprise Asset Management to perform very well through various economic cycles. As a result, we remain confident that in the year ahead, we expect organic Service revenue growth in the high-single digit range and we expect gross margin improvement to continue over time.”

Transcat expects its income tax rate to range between 22% and 24% in fiscal 2023. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards.

Webcast and Conference Call

Transcat will host a conference call and webcast on Tuesday, November 1, 2022 at 11:00 a.m. ET. Management will review the financial and operating results for the second quarter, as well as the Company’s strategy and outlook. A question and answer session will follow the formal discussion. The review will be accompanied by a slide presentation, which will be available at www.transcat.com/investor-relations. The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.transcat.com/investor-relations.

A telephonic replay will be available from 2:00 p.m. ET on the day of the call through Tuesday, November 8, 2022. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13733840, access the webcast replay at www.transcat.com/investor-relations, where a transcript will be posted once available.

NOTE 1 – Non-GAAP Financial Measures

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

In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense), which is a non-GAAP measure. Our management believes Adjusted Diluted Earnings Per Share is an important measure of our operating performance because it provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted Diluted Earnings Per Share is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted Diluted Earnings Per Share, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. See page 11 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 24 Calibration Service Centers strategically located across the United States, Puerto Rico, Canada, and Ireland. In addition, Transcat operates calibration labs in 21 imbedded customer-site locations. The breadth and depth of measurement parameters addressed by Transcat’s ISO/IEC 17025 scopes of accreditation are believed to be the best in the industry.

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

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

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and assumptions. Forward-looking statements are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” “plans,” “aims” and other similar words. All statements addressing operating performance, events or developments that Transcat expects or anticipates will occur in the future, including but not limited to statements relating to anticipated revenue, profit margins, the Company’s response to the coronavirus (“COVID-19”) pandemic, the commercialization of software projects, sales operations, capital expenditures, cash flows, operating income, growth strategy, segment growth, potential acquisitions, integration of acquired businesses, market position, customer preferences, outlook and changes in market conditions in the industries in which Transcat operates are forward-looking statements. Forward-looking statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties include those more fully described in Transcat’s Annual Report and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize or should any of the Company’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Company’s forward-looking statements, which speak only as of the date they are made. Except as required by law, the Company disclaims any obligation to update, correct or publicly announce any revisions to any of the forward-looking statements contained in this news release, whether as the result of new information, future events or otherwise.

FINANCIAL TABLES FOLLOW.

TRANSCAT, INC. CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts)
			(Unaudited)						(Unaudited)
			Second Quarter Ended						Six Months Ended
			September 24,			September 25,			September 24,			September 25,
			2022			2021			2022			2021
Service Revenue			$	35,267		$	29,544		$	69,143		$	57,101
Distribution Sales				21,172			20,843			41,957			41,076
	Total Revenue			56,439			50,387			111,100			98,177
Cost of Service Revenue				23,780			19,832			46,821			38,637
Cost of Distribution Sales				15,892			15,944			31,474			31,409
	Total Cost of Revenue			39,672			35,776			78,295			70,046
Gross Profit				16,767			14,611			32,805			28,131
Selling, Marketing and Warehouse Expenses				5,900			4,974			11,720			9,971
General and Administrative Expenses				7,241			6,059			13,855			10,893
	Total Operating Expenses			13,141			11,033			25,575			20,864
Operating Income				3,626			3,578			7,230			7,267
Interest and Other Expense, net				537			250			693			445
Income Before Income Taxes				3,089			3,328			6,537			6,822
Provision for Income Taxes				732			313			1,108			119
Net Income			$	2,357		$	3,015		$	5,429		$	6,703
Basic Earnings Per Share			$	0.31		$	0.40		$	0.72		$	0.90
Average Shares Outstanding				7,550			7,482			7,542			7,473
Diluted Earnings Per Share			$	0.31		$	0.40		$	0.71		$	0.88
Average Shares Outstanding				7,646			7,595			7,635			7,578

TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Amounts)
			(Unaudited)				(Audited)
			September 24,				March 26,
			2022				2022
ASSETS
Current Assets:
	Cash		$	909			$	1,396
	Accounts Receivable, less allowance for doubtful accounts of $515
		and $460 as of September 24, 2022, and March 26, 2022, respectively		39,744				39,737
	Other Receivables			780				558
	Inventory, net			16,764				12,712
	Prepaid Expenses and Other Current Assets			4,419				5,301
		Total Current Assets		62,616				59,704
Property and Equipment, net				27,770				26,439
Goodwill				66,118				65,074
Intangible Assets, net				14,880				14,692
Right To Use Asset, net				14,532				11,026
Other Assets				805				827
	Total Assets		$	186,721			$	177,762
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Accounts Payable		$	13,599			$	14,171
	Accrued Compensation and Other Liabilities			9,086				11,378
	Current Portion of Long-Term Debt			2,205				2,161
		Total Current Liabilities		24,890				27,710
Long-Term Debt				48,608				46,291
Deferred Tax Liabilities				6,670				6,724
Lease Liabilities				12,733				9,194
Other Liabilities				1,492				1,667
	Total Liabilities			94,393				91,586
Shareholders' Equity:
	Common Stock, par value $0.50 per share, 30,000,000 shares authorized:
		7,557,626 and 7,529,078 shares issued and outstanding
		as of September 24, 2022, and March 26, 2022, respectively		3,779				3,765
	Capital in Excess of Par Value			26,170				23,900
	Accumulated Other Comprehensive Loss			(1,524	)			(233	)
	Retained Earnings			63,903				58,744
		Total Shareholders' Equity		92,328				86,176
		Total Liabilities and Shareholders' Equity	$	186,721			$	177,762

TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
					(Unaudited) For the Six Months Ended
					September 24,				September 25,
					2022				2021
Cash Flows from Operating Activities:
	Net Income				$	5,429			$	6,703
	Adjustments to Reconcile Net Income to Net Cash Provided
		by Operating Activities:
			Net Loss on Disposal of Property and Equipment			34				84
			Deferred Income Taxes			(54	)			7
			Depreciation and Amortization			5,419				4,131
			Provision for Accounts Receivable and Inventory Reserves			94				499
			Stock-Based Compensation Expense			1,942				1,057
	Changes in Assets and Liabilities, net of acquisitions:
		Accounts Receivable and Other Receivables				(1,238	)			(374	)
		Inventory				(3,724	)			1,739
		Prepaid Expenses and Other Current Assets				881				(1,847	)
		Accounts Payable				(586	)			(1,293	)
		Accrued Compensation and Other Current Liabilities				(2,962	)			(2,812	)
		Income Taxes Payable				-				(392	)
			Net Cash Provided by Operating Activities			5,235				7,502
Cash Flows from Investing Activities:
	Purchase of Property and Equipment					(4,772	)			(3,770	)
	Proceeds from Sale of Property and Equipment					10				-
	Business Acquisitions, net of cash acquired					(4,040	)			(20,910	)
			Net Cash Used in Investing Activities			(8,802	)			(24,680	)
Cash Flows from Financing Activities:
	Proceeds from Revolving Credit Facility, net					3,387				24,511
	Repayments of Term Loan					(1,026	)			(1,021	)
	Issuance of Common Stock					364				1,238
	Repurchase of Common Stock					(437	)			(5,649	)
			Net Cash Provided by Financing Activities			2,288				19,079
Effect of Exchange Rate Changes on Cash						792				90
Net (Decrease) Increase in Cash						(487	)			1,991
Cash at Beginning of Period						1,396				560
Cash at End of Period					$	909			$	2,551

TRANSCAT, INC. Adjusted EBITDA Reconciliation Table (in thousands) (Unaudited)
											Fiscal 2023
			Q1				Q2				Q3				Q4				YTD
Net Income			$	3,072			$	2,357											$	5,429
	+ Interest Expense			360				550												910
	+ Other Expense / (Income)			(204	)			(13	)											(217	)
	+ Tax Provision			376				732												1,108
Operating Income			$	3,604			$	3,626											$	7,230
	+ Depreciation & Amortization			2,641				2,778												5,419
	+ Transaction Expense			30				-												30
	+ Other (Expense) / Income			204				13												217
	+ Noncash Stock Compensation			828				1,114												1,942
Adjusted EBITDA			$	7,307			$	7,531											$	14,838
Segment Breakdown
Service Operating Income			$	2,532			$	2,507											$	5,039
	+ Depreciation & Amortization			2,139				2,246												4,385
	+ Transaction Expense			30				-												30
	+ Other (Expense) / Income			134				3												137
	+ Noncash Stock Compensation			638				793												1,431
Service Adjusted EBITDA			$	,473			$	5,549											$	11,022
Distribution Operating Income			$	1,072			$	1,119											$	2,191
	+ Depreciation & Amortization			502				532												1,034
	+ Other (Expense) / Income			70				10												80
	+ Noncash Stock Compensation			190				321												511
Distribution Adjusted EBITDA			$	1,834			$	1,982											$	3,816
											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											$	5,429
	+ Amortization of Intangible Assets			1,084				1,147												2,231
	+ Acquisition Amortization of Backlog			-																-
	+ Acquisition Deal Costs			299				239												538
	+ Income Tax Effect at 25%			(346	)			(346	)											(692	)
Adjusted Net Income			$	4,109				3,397											$	7,506
Average Diluted Shares Outstanding				7,629				7,646												7,635
Diluted Earnings Per Share			$	0.40			$	0.31											$	0.71
Adjusted Diluted Earnings Per Share			$	0.54			$	0.44											$	0.98
											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 Q2			FY 2022 Q2			$'s			%
Service Revenue	$	35,267		$	29,544		$	5,723		19.4%
Cost of Service Revenue		23,780			19,832			3,948		19.9%
Gross Profit	$	11,487		$	9,712		$	1,775		18.3%
Gross Margin		32.6%			32.9%
Selling, Marketing & Warehouse Expenses	$	3,791		$	2,835		$	956		33.7%
General and Administrative Expenses		5,189			4,230			959		22.7%
Operating Income	$	2,507		$	2,647		$	(140)		(5.3%)
% of Revenue		7.1%			9.0%
							Change
DISTRIBUTION	FY 2023 Q2			FY 2022 Q2			$'s			%
Distribution Sales	$	21,172		$	20,843		$	329		1.6%
Cost of Distribution Sales		15,892			15,944			(52)		(0.3%)
Gross Profit	$	5,280		$	4,899		$	381		7.8%
Gross Margin		24.9%			23.5%
Selling, Marketing & Warehouse Expenses	$	2,109		$	2,139		$	(30)		(1.4%)
General and Administrative Expenses		2,052			1,829			223		12.2%
Operating Income	$	1,119		$	931		$	188		20.2%
% of Sales		5.3%			4.5%
							Change
TOTAL	FY 2023 Q2			FY 2022 Q2			$'s			%
Total Revenue	$	56,439		$	50,387		$	6,052		12.0%
Total Cost of Revenue		39,672			35,776			3,896		10.9%
Gross Profit	$	16,767		$	14,611		$	2,156		14.8%
Gross Margin		29.7%			29.0%
Selling, Marketing & Warehouse Expenses	$	5,900		$	4,974		$	926		18.6%
General and Administrative Expenses		7,241			6,059			1,182		19.5%
Operating Income	$	3,626		$	3,578		$	48		1.3%
% of Revenue		6.4%			7.1%

TRANSCAT, INC. Additional Information - Business Segment Data (Dollars in thousands) (Unaudited)
							Change
SERVICE	FY 2023 YTD			FY 2022 YTD			$'s			%
Service Revenue	$	69,143		$	57,101		$	12,042		21.1%
Cost of Service Revenue		46,821			38,637			8,184		21.2%
Gross Profit	$	22,322		$	18,464		$	3,858		20.9%
Gross Margin		32.3%			32.3%
Selling, Marketing & Warehouse Expenses	$	7,374		$	5,550		$	1,824		32.9%
General and Administrative Expenses		9,909			7,293			2,616		35.9%
Operating Income	$	5,039		$	5,621		$	(582)		(10.4%)
% of Revenue		7.3%			9.8%
							Change
DISTRIBUTION	FY 2023 YTD			FY 2022 YTD			$'s			%
Distribution Sales	$	41,957		$	41,076		$	881		2.1%
Cost of Distribution Sales		31,474			31,409			65		0.2%
Gross Profit	$	10,483		$	9,667		$	816		8.4%
Gross Margin		25.0%			23.5%
Selling, Marketing & Warehouse Expenses	$	4,346		$	4,421		$	(75)		(1.7%)
General and Administrative Expenses		3,946			3,600			346		9.6%
Operating Income	$	2,191		$	1,646		$	545		33.1%
% of Sales		5.2%			4.0%
							Change
TOTAL	FY 2023 YTD			FY 2022 YTD			$'s			%
Total Revenue	$	111,100		$	98,177		$	12,923		13.2%
Total Cost of Revenue		78,295			70,046			8,249		11.8%
Gross Profit	$	32,805		$	28,131		$	4,674		16.6%
Gross Margin		29.5%			28.7%
Selling, Marketing & Warehouse Expenses	$	11,720		$	9,971		$	1,749		17.5%
General and Administrative Expenses		13,855			10,893			2,962		27.2%
Operating Income	$	7,230		$	7,267		$	(37)		(0.5%)
% of Revenue		6.5%			7.4%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221031005656/en/

For more information contact:

Audrey Calzolaio

Phone: (585) 866-1969

Email: Audrey.vanzummeren@transcat.com

Source: Transcat, Inc.

FAQ

What were Transcat's revenue figures for Q2 fiscal 2023?

Transcat reported consolidated revenue of $56.4 million for Q2 fiscal 2023, a 12% increase from the previous year.

How did the service segment perform in the second quarter of 2023?

The service segment revenue increased by 19.4% to $35.3 million, with organic revenue growth at 9.3%.

What is Transcat's outlook for organic service revenue growth?

Transcat expects organic service revenue growth in the high-single digit range for the upcoming year.

What was the net income for Transcat in Q2 fiscal 2023?

Net income for Q2 fiscal 2023 was $2.4 million, a decrease of 21.8% from the prior year.

How did the gross margin change in the second quarter of 2023?

Gross margin improved to 29.7%, which is a 70 basis point increase from the previous year.