Transcat (TRNS) investor relations material

Executive summary

• Q2 FY26 consolidated revenue rose 21.3% year-over-year to $82.3 million, driven by strong service and distribution segment growth and recent acquisitions, including Essco Calibration.

• Adjusted EBITDA increased 36.7% to $12.1 million, while net income declined 61.4% to $1.3 million due to higher interest expense, tax rates, and one-time CEO succession costs.

• Gross profit grew 26.2% to $26.8 million, with gross margin expanding to 32.5% year-over-year, primarily from higher-margin rentals.

• Strategy focuses on organic service growth, operating leverage, strategic acquisitions, and rental channel expansion, providing resilience amid economic uncertainty.

• Closed a new $150 million five-year syndicated secured credit facility to support acquisitions, automation, and AI initiatives.

Financial highlights

• Service revenue grew 19.9% to $52.8 million; distribution revenue increased 24% to $29.4 million, with distribution gross margin up 530 basis points to 33.2%.

• Adjusted EBITDA margin expanded to 14.7% from 13.1% year-over-year.

• Adjusted diluted EPS was $0.44, while reported diluted EPS was $0.14.

• Operating cash flow increased year-over-year; CapEx focused on service, rental assets, and technology.

• Total debt stood at $111.9 million, with $38.1 million available under the credit facility.

Outlook and guidance

• Management expects a return to high single-digit organic service revenue growth and margin expansion in H2 FY26, barring further economic uncertainty.

• Fiscal 2026 income tax rate projected between 30% and 32%.

• Strong acquisition pipeline and continued focus on integration and portfolio differentiation.

• Anticipate continued strong distribution performance, with some moderation in growth and margin expansion in H2.

• Optimism for sustained performance despite macroeconomic headwinds, leveraging a diversified portfolio.