TRANSCAT INC (TRNS Q3 FY2025 earnings call

• Fiscal 2025 third quarter consolidated revenue up 2% to $66.8 million. Organic service revenue declined 4% due to softness in NEXA Solutions channel and December holiday closures affecting calibration service demand. - Acquired Martin Calibration on December 10, which has annual revenues over $25 million and complements Transcat's capabilities. - Distribution revenue grew 7% in the quarter, but rental channel was impacted by customer closures in December. - Transcat team focused on overcoming near-term challenges, with strong pipeline of new opportunities in calibration services for fiscal 2026.

Consolidated revenue for the third quarter was $66.8 million, up 2%. Service revenue grew slightly 3.8%, with organic decline offset by acquisitions. Distribution revenue was $25.2 million, up 7%. Service gross profit declined 8% versus prior year, while distribution segment gross profit was down 2% due to mix pressures.

• Fiscal 2025 organic service revenue expected in low to mid-single-digits. - Anticipate organic service growth in fiscal 2026 to be more in line with historical performance. - Focus on full integration of Martin Calibration to capitalize on service growth and productivity gains.

• Softness in the solutions channel negatively impacting organic growth rates. - Unexpected December holiday closures affecting service revenue and distribution rental channel demand.

Q: Near term outlook and guide reduction, what's the incremental weakness?

A: Slowness in December impacted numbers, business busy in January but guidance adjusted due to solutions impact and delays in order closures. Pipeline for core calibration strong but some delays.

Q: Update on NEXA Transcat Services actions?

A: Solutions business needs better pipeline development, different selling approach, marketing involvement. Pipeline better now, expected to improve next fiscal year.

Q: Service gross margins, outlook for next quarter and year?

A: Expect service margins to rebound in fourth quarter and carry into 2026, with margin recovery expected.

Q: Distribution, rental vs non-rental growth, seasonal patterns?

A: Rental business in distribution impacted similarly to service in December. Core distribution expected to decline slowly, rental to grow at similar rate to service. Seasonal patterns in service higher in fourth quarter, distribution core stronger in third quarter, but December holiday was an anomaly.