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We appreciate your time and your interest in Transcat. With me here on the call today is our President and CEO, Lee Rudow our Chief Operating Officer, Mike West. We'll begin the call with some prepared remarks, and then we'll open the call for questions. Our earnings release crossed the wire after market closed yesterday. Both the earnings release and the slides that we will reference during our prepared remarks can be found on our website. Transcat.com, in the Investor Relations section. If you would please refer to Slide two, as you are aware, we may make forward looking statements during the formal presentation and Q and A portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the news, release as well as the documents filed by the company with the SEC. You can find those on our website we regularly post information about the company as well as on the SEC's website at sec.gov. We undertake no obligation to publicly update or correct any of the forward looking statements contained in this call.
11m 46s
Whether as a result of new information, future events or otherwise, except as required by law. Please review our forward looking statements in conjunction with these precautionary factors. Additionally, during today's call, we will discuss certain non GAAP measures, we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We provide reconciliations of non GAAP to compared GAAP measures in the tables accompanying the earnings release. With that, I'll turn the call over to Lee.
12m 23s
Thank you, Tom. Good morning, everyone. Thank you for joining us on the call today. Fiscal twenty twenty five consolidated revenue was up 7% to $278,400,000 on continued consistent demand for both our services and products. Service revenue grew 7% to $181,400,000 driven by strength in our core calibration business. Distribution revenue grew 8% to $97,000,000 on continued growth in our rental platform. Operating cash flow for the full fiscal twenty twenty five year was a record $38,600,000 a year over year increase of 18%. Additionally, on December 9, we acquired the coveted Martin Calibration, the largest acquisition Transcat's history. Martin is a very profitable well run company with over $25,000,000 of mostly calibration service revenue. The Martin deal is highly synergistic and fulfills all three of our strategic acquisition drivers including geographic expansion into the Minneapolis and Chicago regions of the Midwest, expanded capabilities and expertise, particularly on the dimensional and mechanical measuring side of the business and finally, two bolt on opportunities where we can leverage our current infrastructure in Southern California and Phoenix, Arizona. Turning to the fourth quarter results for our Service segment. Transcat's calibration services business continues to perform well. And benefit from high levels of regulation and recurring revenue streams.
14m 2s
In the fourth quarter, Calibration Services achieved double digit revenue growth of 11% of which organic growth was in the high single digit range when normalized for the fifty third week and excluding Solutions. We reported service gross margin of 36.2% in the fourth quarter which expanded 50 basis points versus the prior year. Margin expansion was driven by organic revenue growth and the associated inherent leverage in our calibration lab operating model, along with increased productivity from continued automation and process improvement. Turning to the fourth quarter results for our Distribution segment. Distribution revenue grew 4% driven by growth in the rental channel. It's important to note our associated e commerce platform continues to be an important component to lead generation for the service segment. Transcat's distribution platform including rentals, uniquely positions the company to achieve its consistent organic service growth. Barriers to entry in this respect have defended we expect we'll continue to defend both our unique value proposition and strong brand across both operating segments. With that, I'll turn things over to Tom for more detailed look at our Q4 and full year financial performance.
15m 20s
Thanks, Lee. I'll start on Slide four of the earnings deck. Which provides detail regarding our revenue on a consolidated basis and by segment for the fourth quarter and full year. Fourth quarter consolidated revenue of 77,100,000.0 was up 9% versus the prior year on service segment strength and growth in our Distribution segment. Looking at it by segment, Service revenue grew 11% to 52,000,000 which included $6,800,000 from acquisitions in the quarter. As Lee mentioned, growth was driven by strong performance in our calibration business, and service organic revenue growth was in the high single digit range when normalized for the fifty third week and excluding Transcat Solutions. Turning to distribution. Revenue of 25,100,000.0 was up 4% versus the prior year. We continue to see growth in the rental channel. Finally, on a full year basis, the consolidated revenue total consolidated revenue was $278,400,000 an increase of 7% compared to the prior fiscal year. Our Service segment saw continued demand in our calibration business, resulting in year over year growth of 7% On a full year basis, service revenue benefited by $10,400,000 resulting from acquisition. Distribution segment revenue grew 8% driven by rentals. Turning to slide five, our consolidated gross profit for the fourth quarter of $20.25900000.0 dollars was up 8% from the prior year.
16m 52s
And our gross margin declined 30 basis points. Service gross margin expanded 50 basis points to 36.2%. The service margin increase further demonstrated the inherent leverage in our business model as well as our ability to leverage higher levels of automation and technician productivity. The Distribution segment gross margin of 28.2% was down two ten basis points. For the full year, our consolidated gross profit increased 7% to $89,500,000 and our gross margin declined 20 basis points to 32.1%. Service gross margins was 33.4%, which represented a decrease of 30 basis points compared to the prior year. Distribution segment gross margin of 29.7% was up 20 basis points as the segment benefited from the growth in the higher margin rental channel. Turning to slide six, Q4 net income of 4,500,000.0 decreased from $6,900,000 in the prior year. And our diluted earnings per share decreased to $0.48 from $0.77 The prior year net income included a non cash profit increase of 2,400,000.0 for the amended NEXA earnout agreement. We report adjusted diluted earnings per share as well to normalize for the impact of upfront and ongoing acquisition related costs. Q4 adjusted diluted earnings per share was $0.64 Lastly, full year net income increased 6%.
18m 21s
To 14,500,000.0 Flipping to Slide seven, where we show our adjusted EBITDA and adjusted EBITDA margin. We use adjusted EBITDA, which is non GAAP to gauge the performance of our business because we believe it is the best measure of our operating performance and ability to generate cash. We continue to execute on our acquisition strategy, this metric becomes even more important to highlight as it does adjust for onetime deal related [indiscernible] transaction costs as well as the increased levels of noncash expense that will hit our income statement from acquisition purchase accounting. With that in mind, fourth quarter consolidated adjusted EBITDA of $12,700,000 was up 9% from the same quarter in the prior year, driven by growth of 16% in the service segment. Q4 EBITDA margin of 16.5% was consistent with last year. Full year EBITDA of 39,700,000.0 was up 3% compared to the prior year driven by strength in the calibration business. As always, a reconciliation of adjusted EBITDA to operating income and net income can be found in the supplemental section of this presentation. Moving to slide eight, Operating free cash flow of $25,400,000 improved 31% versus the prior year. Full year capital expenditures were consistent with the prior year and continued to be centered around service segment capabilities rental pool assets, technology and future growth projects.
19m 51s
The spend was in line with expectations for fiscal year 2026 we expect our net CapEx to be in the range of 14,000,000 to $16,000,000 Slide nine highlights our strong balance sheet At year end, we had a total net debt of $31,000,000 with a leverage ratio of 0.7x. Had $49,000,000 available from our credit facility at quarter end. Lastly, we expect to file our 10 ks on May 27. With that, I'll turn it back to you, Lee.
20m 22s
Thanks, Tom. Those of you who follow Transcat know we have consistently delivered strong results through various economic cycles over the past decade and a half. We have a proven track record of delivering profitable growth and being disciplined capital allocators. Our strategy is differentiated, and our leadership team is poised to execute our plan and to drive excellent performance. While the macroeconomic backdrop including tariffs, have become more uncertain since the beginning of the year over time, Transcat's business, particularly our calibration services channel has been resilient as it continues to benefit from recurring revenue streams highly regulated markets. Put simply, in the past, the business holds up well. Holds up well because our organic growth typically returns to growth levels more in line with the historical high single digit growth range. As macro trends normalize. As we look at the landscape for strategic accretive acquisitions, we are excited by our current pipeline our opportunity to drive both synergistic growth opportunities and strengthen our foundation for future growth. And as I mentioned, we're particularly excited with the recent Martin acquisition, which is both sizable and right down the fairway for Transcat. The early Martin integration activities are going very well and ahead of schedule.
21m 48s
We continue to believe the service segment has a substantial runway for growth both organically and through acquisition. Our Solutions business is making slow and steady progress towards the short term goals we communicated over the last couple of quarters. We are now actively operating the proven Transcat sales playbook in the solutions channel, And as we integrate the Solutions channel into our overall service platform, expectations are for improved results, stabilization, and ultimately growth, which will contribute to our overall organic service goals. I'll close by saying that our leadership team has never been stronger. Across the organization, we've invested in recruiting and developing a higher level of leadership in sales, technology and operations. All commensurate with our ambitious long term expectation for Transcat. It all starts with strong leadership and culture And in our business space, we believe our leadership team is second to none. We intend to leverage these strengths as we create communicate and execute our strategy and vision for the future. A future we feel is incredibly exciting. And with that, operator, you can open the call for questions.
23m 5s
Thank you. Star one on your telephone keypad. A confirmation tone will indicate your line is in the to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before One moment while we poll for questions. Our first question is from Greg Palm with Craig Hallum Capital Group. Please proceed.
23m 36s
Yes, good morning. Thanks for taking the questions and congrats on the results. Thanks, Greg. Thanks, Greg. Can we maybe just start with in terms of like the cadence thinking about thinking back to December and some of the timing issues you had and back in late January, you talked about a big bounce back in January. How did the rest of the quarter flow? And then I guess more importantly, over the last call it, five, six weeks, any change versus what you saw back in February and March?
24m 13s
I would characterize the fourth quarter February, March, I would just include in my characterization as good, solid, kind of what we expected We probably saw some of the pent up demand from the December timeframe that I think you're referring to make its way into the fourth quarter.
24m 32s
And that helped contribute to the high single digit organic growth. I don't think we saw it all. And I think that will play out over time. That's a kind of interesting thing, I mean, given the backdrop we have and some of the volatility. This work has to be done and we're going to do it, but there is some flexibility in the short term for customers to kind of wiggle around certain dates and extend intervals when necessary. So I think it all plays out as we'll get the work But from a quarter to quarter, month to month basis, it's hard to predict, particularly with the volatility. So we're pleased with the high single digit growth. We think there's probably more over time, but it's going take a couple of quarters to get past current volatility before we probably see it all.
25m 15s
Yes, that's fair. And I remember last quarter, you in the service business specifically, you had talked about that there were kind of several big opportunities looming out there. Did any of those close? Or is that kind of what you're referring to in terms of still opportunities and things are shifting around timing wise, etcetera?
25m 35s
Yes. I mean, we have a healthy pipeline. Currently of new opportunities we're working on. We've had a number of new wins contributing to what we think will be momentum primarily or particularly in the back half of the year as we kind of look out at some of the potentiality of it. Yes, think again, I've said this for many, many years and it's difficult to look at any business, it's difficult to look at our business. Every ninety days and get a full picture. It's a regulated market, the recurring revenue streams, if do the work well, and your customers are satisfied, you'll get the work back. Most of the time. And so I think if you go beyond quarter to quarter, look at the whole year, would expect to hit our targets of high single digit growth as we exit this year and go into next. And how soon we get there and the volatility in the first quarter, these are things that are very difficult to determine. Given the current economic backdrop. I'm not we don't have any concerns when we look beyond that.
26m 38s
Fair enough. Okay. And then just on on distribution, I'm just curious, just given some of the tariff announcements, from a a procurement standpoint, just remind us kind of where that that sits? Maybe more importantly, are you seeing any kind of changes in behavior from customers, Aladd? Are you seeing more demand for or more interest in rentals versus buying outright? I'm just kind of curious to see what you're seeing in that segment as well.
27m 8s
Right now, if I look at the current environment, we're working in distribution. Has held up really well. And what I mean by that is we're getting a fair amount of orders and volume in. But it's hard to determine even a little bit of an uptick. So it's hard to determine whether people are getting ahead of some tariffs. So some momentum is the that's the impetus for some of the momentum that you know, we always used to say that the distribution business was kind of a leading indicator. When the business was slow, you know, that might tell you something about the economy. When you're doing well, it tells you something else. In this environment where you've got the tariff discussion going on, I think sort of all bets are off. I think the uptick and the solid results that we're seeing kind of currently may be a leading indicator, but may also be a reaction to tariffs. So I think we're going to need more time before we determine how that business is going to play out this year and what the current kind of steadiness means, I don't know. But we're not overly thinking it because there's just too much volatility.
28m 10s
But right now, we're doing okay.
28m 13s
But to be clear, when you're talking about uptick, are you talking like current quarter, like quarter to date? Or are you putting more Yes. I'm just saying currently yes, the current read is distribution is holding up well.
28m 25s
Yeah. Okay. Alright. I will leave it there.
28m 28s
Thanks.
28m 29s
You got it. Thanks, Greg. Thanks, Greg.
28m 31s
Our next question is from Ted Jackson with Northland Securities. Please proceed.
28m 37s
Great. Thanks for taking my questions.
28m 40s
Thanks, Ted.
28m 42s
My first question, you did a really nice job with regards to expense control in the OpEx side. I was kind of curious, what were the levers you pulled in there and how would we think about those line items as we put together our estimates for '26.
28m 58s
Yeah, I think, obviously it's something that we focus on regularly, Ted, and always trying to make sure that our costs are aligned with the levels of revenue we're seeing and also aligned with some of what we're seeing from the economic backdrop here, right? So some of it is delayed hires, some of it is just good cost management and we'll continue to do that. I mean, the on the hiring front, you can only do that for so long, right, because we want to make sure that we have the right teams in place to deliver our long term plan. So but we'll continue to focus on costs, we'll continue to make good decisions. [indiscernible] as we go into this year, I would expect some nominal increases and [indiscernible] there will be some items that kind of return, I'll just say to more normal levels, right. So as an example, based on our performance last year, we didn't pay incentives at the level that we normally would. But we would expect this year with our expectations that we would see an uptick in some of those lines. But where we can be focused on cost savings and being very cost conscious, we absolutely will.
30m 23s
Well, was impressive. Next question, I'm gonna kind of go back to Greg was dancing around with. When I listened to the the prepared remarks and the commentary that's in your slide deck, the discussion with regards to expect expectation of high single digit growth for services. With the caveat that once the macro environment excuse me, pumped I did it.
30m 49s
The macro environment normalizes Is that just boilerplate? We're just being conservative because [indiscernible] as you're kind of been rolling through the spring, have you seen [indiscernible] Disruption maybe turmoil within the business that gives you pause where you you've actually seen, since we've kind of rolled into April.
31m 13s
And now we're in May the last two months, we've seen things kind of just be a little more turbulent and when you're thinking about how you're going to lay out that growth, you're expecting that things will come down and you're going to see maybe a stronger back part of the fiscal year than the front part. Fiscal This is Lee of course and I think a lot of what you said I would agree with the way you said it. I think the bigger overall, yes, there's short term volatility, short term disruption, There are some customers that are going to you know, delay some work and we will call them push outs, you know, into the second quarter from the first or even into the third or the fourth. That's going to happen. This is a pretty unusual environment. But what we're focused on and we've always been focused on is our value proposition, the way we approach the market, the quality of our services that we offer. And it's very, very strong. In fact, I would say, that entering this year and through the year, our ability to sell calibration services to satisfy our customers, type of data we're getting from our technology, the type of structuring we're doing on how we approach the customer these are all getting better.
32m 30s
I mean, there's process improvement opportunities we've been talking about. We don't just say that, because it's sort of boilerplate. We say it because we're focused on it. And I expect this company to get better and to be better and to have stronger sales in the future than even in the past. Now all bets are off over the next quarter or two, and I'm not gonna, you know, you know, pretend that I I know every possible outcome. But I will tell you with high level confidence, that the things we're doing are the right things for the business, our value proposition is second to none. I like what we're doing on the leadership front. Like what we're doing on the sales front. The pipelines look good. And I expect this business to perform well once we get over some of the volatility And so, nothing has changed. And if anything has changed, I see a bright future that could get better. I'll just leave it at that. I'm not going put numbers around it. I just like the direction we're going. And I like who we are and what we're doing. And so I look out much further than the next quarter or two I like what I see.
33m 30s
I'd be concerned if you didn't look longer than a quarter or two. I'm gonna ask one more question.
33m 35s
I do have more, but I'm gonna let other people ask and then if they get asked, I'll circle back in. So the next question is just kind of on, Transcat Solutions or the Nixa business. Been an area that you've been repairing [indiscernible] talk a little bit about where things stand with that portion of your world and kinda how to think about [indiscernible] [indiscernible] Yeah. Sure. I will. And, there are two goals with Next. Coming off of some of the the problems. We call it solutions now. And the change from Nexa solutions is important because it's a change in how we view the business. And so there's two pieces to it. One is sales. So we have integrated. We are integrating. We put a lot of work into making sure that every salesperson in this company understands the value proposition around solutions, and it every sales person is capitalizing on the opportunities they encounter relative to the solutions channel. And that was not in place before. It doesn't happen overnight. But I think we get better every day. So I'm fairly pleased with the progress we've made in terms of the recognition of how to sell, when to sell and why to sell solutions.
34m 56s
That I would not have said that a year ago. I don't think I would have said it six months ago. But I like the progress we've made. On the operations front, we see total integration where solutions is not only stands on its own two feet as a channel, small channel, but that it's a means to an end. And it's a means to an end, and we say a lot here at at Transcat internally, all roads lead to calibration. When we're in front of a customer and we're trying to solve problems for them on their database, on their reliability, if you will, looking at their intervals, it all leads to a calibration discussion. And so we see it as a means to an end. Solution and in and of itself, and that's an important distinction. Sales understands this, operations understands this, it's an important part of of making Transcat a better company. So I'm pleased with the progress. We'll continue to stabilize it. And eventually, the growth that we see in that area contribute to our overall organic growth in service. Okay. I'm going to step aside and I may jump back in later. Thanks. Thanks, Ted.
35m 58s
Our next question is from Scott Buck with h C. Wainwright. Please proceed.
36m 4s
Hi, good morning guys. Thanks for taking my questions. Lee, I'm curious, you've been integrating automation now for a few quarters. How much juice is there left to squeeze out of that? It's a great question. I mean, started probably three, four years ago. We said we were in the first inning. Appreciate the question. I think it's an important one. We are proud we have made so much progress that I'm really proud of the team. And it's contributed to some of the margin improvement without question. And I would characterize where we are, Scott, today is around the fourth or fifth inning. I mean, I I feel like we're in the midpoint. Maybe not quite, maybe just under midpoint, so maybe fourth inning is probably better than fifth. We got a lot of work to do. It's arduous, it's slow, it's hard, But when you do it and you get it done, it's it's coding. You've got it. [indiscernible] theoretically lasts forever and you move on to the next one. We've invested a lot of time and effort and money. I think it's a differentiator for us. And when we talk about getting consistently into mid high single digits and beyond that, it's a big important component.
37m 10s
Of that progress. And so, yeah, let's let's call it the fourth inning with one out. How about that? That that's helpful and great to hear there's some some more room there.
37m 23s
Second, can you remind us in a more challenging macro environment, the mechanics of distribution? I mean, you see customers put off [indiscernible] go the rental route instead to save some of their own CapEx? Or what are the mechanics on that side of the business in a more challenging macro environment?
37m 45s
I think the short answer is yes, you do see that. We're not seeing it right now. And I think the reason may be, and this is not a definitive answer, but our gut tells us we're not seeing it right now because we all know this is a challenging environment. So why is it in distribution? You know, feeling more pressure? We think it might be people trying to get ahead of tariffs. People are ordering equipment now at price levels that they anticipate are lower than they're going to be in the near future. So even though the long or the midterm outlook of distribution may not be as favorable, Just in theory, we're not seeing that because I think this tariff the macros driven by tariffs are different than macros driven by more of a long term recession oriented environment. So I think that's the reason we're not seeing it because normally you would expect distribution sales to be at the front, the tip of the spear and to be declining and to feel some headwinds. That we're not feeling today but that we might feel as soon as we kind of get over the tariff hump where the orders have been placed higher costs are hitting the market and then you will see distribution maybe later in the year.
38m 55s
But this is speculation. This is what we're thinking.
38m 59s
Great. I mean, makes a ton of sense. And then last one, Lee, the business query looks fairly different than it did three or four years ago. Has the M and A criteria changed at all, just given the scale and scope of the business today versus maybe 2020 or 2021?
39m 20s
I think I think we have we spent a lot of time on our m and a plan. And there are you know, there's hundreds of small companies You know, it's very it's still a fragmented industry. So in general, much of the narrative is the same. There's more PE involvement in our space. We're a public company. Transcat has had outstanding performance for a really long time. Really consistent. We got a great model. And of course, PE is attracted to that. So we've seen more private equity scoop up some small company but in almost every case, and there's a few exceptions, not many. It's companies that we took a pass on. For good reason, from our perspective. So So there are companies being acquired and the the the field, the pond is getting a little bit smaller, but still think there's a lot of work to be done on the more desirable regionals like Martin for example. And there's still enough fragmentation that we have a plan, and we should be able to execute. So I think it's yes, it's changed a little bit, everything changes. But not to some extent where I would say our acquisition plan has changed.
40m 34s
Or our outlook or expectations to get important synergistic deals done. I still see a pretty good opportunity for that.
40m 43s
Great. Well, I appreciate the added color, guys, and and congrats on the quarter. All right, Scott. Thanks for the questions.
40m 51s
Our next question is a follow-up from Ted Jackson with Northland Securities. Please proceed.
40m 57s
Great. Thanks again. I got two follow ups The first going into kind of the distribution and rental. Maybe if you could give more color of what you're seeing within the rental market. Know you don't break it out in terms of the size, but we'll kind of continue to take a bigger chunk of the line item as we go forward. And then now that it's become such a more important part of your business, How do you see rental performing in a more challenging macroeconomic environment? I mean, I would think that you know, it's kind of it could be something that could do well and you would see the equipment distribution side maybe be weaker, but perhaps the rental market stronger.
41m 38s
Yeah. That's my first question.
41m 39s
Yeah.
41m 40s
And I think Ted that you know it kind of gets back to to Lee's comment earlier, right? Is that in a time of uncertainty like this, we would have expected kind of a pullback in core distribution [indiscernible] [indiscernible] maybe rentals to to pick up the pace because of restrictions on CapEx.
42m 2s
But we haven't seen that pullback in distribution yet. I think we are seeing a little bit of an uptick in rentals. And we would expect that the longer you know, things remain kind of in this uncertain environment that that would be a benefit. But we've had and we continue to have expectations for the rental business to grow kind of in line with our historical trends on the services business, high single digits [indiscernible] we're making the investments that we need to kind of ensure that growth will continue, not only in making investments in our asset pool, but also making investments in people to help enable that.
42m 50s
And put in some ways, mean, given that it's you've know, target, you know, generally a better margin revenue stream than actual distribution, you know, mean, could be a case to where even though you might see some softness in distribution, you might pick it up gross profit level just with a big shift towards rentals. Fair way to kind of think about it.
43m 12s
For sure.
43m 13s
For sure. And I think as we as we look forward, I mean assuming that it plays out the way you described Ted, then I think we will definitely be in a position where we can or we should be in a position, I should say, where we consistently see distribution margins north of 30%. And then my last question is actually one that's hopefully a little bit more fun, I liked the commentary with regards to the impact of automation, improving some of your margin structure. I know that you made that acquisition in Ireland and it's over something that we used to talk about quite a bit. I think too much. So maybe a little discussion about what are some of the things you've done on the automation front that have allowed you to drive you know, a better return on your business and kind of where you see that going. Very open ended.
44m 5s
Thanks.
44m 6s
I think I think there's two parts to automation. One is the technical side. And that is just coding. Right? Taking a known standard with electronic outputs and writing code so it can talk to the unit under test is how we would describe it internally. And that's just blocking and tackling on the coding front. I don't think there's any magic to it. Identifying where the opportunities are, and then it's getting, you know, how much what are the resources? How much cap you can allocate towards this initiative. You know, we're a public company, so everything's balanced, right? Want to go up into the right, you can't you just have to balance expectations and funding for even important initiatives like automation. So we're doing that. And then the back half of it is, okay, now you've got this code written, Ted. What are going to do with it? And how are you going to execute? Part of the execution is getting the code written so you have automation. But probably equal to or more important is getting it into your 33 operations throughout primarily North America. Of course, we have an an opportunity, a lab in Ireland as well.
45m 5s
But getting that code disseminated and every technician in every place to be using it, because once they the value of this, in theory you could be doing two calibrations at once, and you get some multiplier. So, I think you write the code, you determine where that opportunity exists, and then you've got to get that code disseminated and into your operation on a consistent basis. The incentives have to be in place to do that. The leadership has to be in place to do that. The day to day management to be in place. And when you do it and to the degree that you do it well, you will see margin gain. And so, you know, it's kind of a two different stories going on at the same time.
45m 42s
Okay. Thanks very much, guys.
45m 45s
Thanks, Todd. Appreciate the question.
45m 47s
There are no further questions at this time. I would like to turn the call back over to Cleef. To leave for closing comments.
45m 56s
Okay. Well, thank you all for joining us on the call today. We appreciate it. We will be attending the upcoming twenty second Annual Craig Hallum Institutional Investor Conference, which is in Minneapolis on the twenty eighth. So we hope to see you there. We appreciate everyone's continued interest in Transcat and feel free to check check-in with us really anytime. We look forward to talking to you guys again after the first So thanks again for participating.
46m 20s
Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.
Key Insights
Fiscal 2025 consolidated revenue increased 7% to $278.4M, with service revenue up 7% to $181.4M and distribution revenue up 8% to $97M, driven by strong calibration business and rental platform growth.
Fourth quarter consolidated revenue rose 9% to $77.1M; service revenue grew 11% (including $6.8M from acquisitions), and distribution revenue increased 4%, with continued strength in rentals.
Operating cash flow for the full year reached a record $38.6M (up 18% YoY), and operating free cash flow for Q4 was $25.4M (up 31% YoY); net debt at year-end was $31M with a leverage ratio of 0.7x.
Service gross margin expanded 50 bps in Q4 to 36.2%, while consolidated gross margin declined slightly; automation and process improvements contributed to margin gains, with further automation opportunities remaining.
Management expects continued high single-digit organic growth in services as macro volatility normalizes, ongoing investment in rental and automation, and sees a strong acquisition pipeline following the sizable Martin Calibration acquisition. Net CapEx for FY26 is expected to be $14M–$16M.
