Transcat, Inc. — Fiscal Second Quarter 2027 Earnings Summary

Financial Performance:

• Total revenue increased 18.0% year-over-year to $97.1 million, driven by a 22.6% increase in Service revenue to $64.8 million and a 9.8% increase in Distribution revenue to $32.3 million.
• Service revenue included $3.5 million from acquisitions, resulting in 16% organic Service revenue growth.
• Consolidated gross profit rose 21.9% to $32.6 million, with consolidated gross margin expanding 110 basis points to 33.6% (up from 32.5%).
• Service segment gross margin expanded 220 basis points year-over-year to 34.4% (up from 32.2%).
• Distribution segment gross margin decreased 120 basis points year-over-year to 32.0% (down from 33.2%), attributed to lower-margin used equipment sales.
• Operating income increased 43.6% to $5.0 million, with operating margin expanding to 5.2% from 4.3%.
• Net income increased 90.1% to $2.4 million, with net margin improving to 2.5% from 1.5%.
• Adjusted EBITDA increased 23.1% to $14.9 million, with Adjusted EBITDA margin expanding 70 basis points to 15.4% (up from 14.7%).
• Diluted EPS was $0.25 compared to $0.14 in the prior year period.
• Adjusted Diluted EPS was $0.64 compared to $0.44 in the prior year period.
• Net cash provided by operating activities for the six months ended September 26, 2026, was $19.0 million, up from $16.5 million in the prior year period.
• Operating free cash flow for the six months ended September 26, 2026, was $10.9 million.
• Total long-term debt increased to $116.9 million as of September 26, 2026, from $99.9 million as of March 28, 2026.
• Cash and cash equivalents were $5.8 million as of September 26, 2026, with $33.1 million available for borrowing under the secured revolving credit facility.

Guidance and Future Outlook:

• Management raised full-year fiscal 2027 Service organic revenue growth outlook to low double digits, up from the prior outlook of high single digits.
• Management expects Service gross margin expansion of at least 100 basis points in the second half of fiscal 2027.
• Future margin expansion is expected to be driven by Lean principles, business mix optimization, pricing initiatives, and technology including AI to improve productivity.
• Outlook assumes the broader economic environment remains stable.

Business Segments and Product Lines:

• Service Segment: Represents 66.7% of total revenue; includes accredited calibration, repair, inspection, and laboratory instrument services. Strength in the Calibration business drove the 23% revenue increase.
• Distribution Segment: Represents 33.3% of total revenue; involves the sale and rental of new and used professional-grade test, measurement, and control instrumentation. Growth was fueled by strength in Rentals and Product sales.
• Acquisitions: The August acquisition of Southeastern Biomedical advanced the strategy of building scale in regulated, high cost-of-failure end markets, extending reach to hospital networks in the southeastern United States.

Market and Competitive Landscape:

• Transcat serves highly regulated industries including life sciences (pharmaceutical, biotechnology, medical device, FDA-regulated), aerospace and defense, and energy and utilities.
• Management believes the company is gaining market share in calibration services through organic growth, disciplined M&A, and a more productive sales organization.
• The company cites a "substantial competitive moat" and aims to be as well known for operational excellence as it is for growth.

Risks and Challenges:

• Operating expenses increased 18.7% to $27.6 million, driven by incremental expenses from acquired businesses (including intangible assets amortization), increased stock-based compensation, and executive transition costs.
• Forward-looking statements are subject to risks and uncertainties, including market conditions, customer preferences, and the successful integration of acquired businesses.

Management Commentary and Tone:

• Jaime Irick, President and CEO, highlighted the 70th consecutive quarter of Service revenue growth and expressed confidence in continued progress driven by high customer retention and new business wins.
• Tom Barbato, CFO, noted excellent results with strong profit flow-through and operating leverage, stating that cash generation and a strong balance sheet provide flexibility to accelerate organic growth and pursue M&A.
• Management expressed optimism regarding Service segment momentum supported by demand in life sciences, aerospace, defense, and other regulated end markets.

Other Key Points:

• The company marked its 70th consecutive quarter of Service revenue growth.
• Executive transition costs and transaction expenses related to acquisitions were significant non-GAAP adjustments in the period.
• The company operates calibration labs in embedded customer-site locations and has ISO/IEC 17025 scopes of accreditation believed to be the best in the industry.
• A conference call and webcast were hosted on November 3, 2026, to review results and strategy.