TRANSCAT INC (TRNS Q4 FY2025 earnings call

• Consolidated revenue in fiscal 2025 was $278.4 million, up 7%, with service revenue up 7% and distribution revenue up 8%.
• Service segment gross margin in the fourth quarter was 36.2%, expanding 50 basis points due to organic revenue growth, leverage in the calibration lab model, and automation/process improvements.
• Acquired Martin Calibration in December 2025, a highly profitable company with over $25 million in calibration service revenue, providing geographic expansion and expanded capabilities.
• Solutions business is making progress with integration of the sales playbook and alignment with the service platform to drive future growth.
• Leadership team has invested in recruiting and developing leadership in sales, technology, and operations to support long-term growth.

Service Segment: Fourth quarter service revenue was $52 million, up 11%, with organic growth in the high-single digit range when normalized for the 53 week and excluding solutions. Full year service revenue grew 7% to $181.4 million, driven by strength in the core calibration business. Distribution Segment: Fourth quarter distribution revenue was $25.1 million, up 4%, driven by growth in the rental channel. Full year distribution revenue was $97 million, up 8%, with the rental platform contributing to growth.

• Expect high-single digit organic growth in the service segment once macroeconomic conditions normalize.
• Rental business is expected to grow in line with historical high-single digit trends for the services business.
• Active pipeline of strategic accretive acquisitions with focus on synergistic growth opportunities.

• Volatility in macroeconomic conditions, including tariff uncertainties, which can impact customer spending and timing of work.
• Uncertainty in determining the impact of tariffs on the distribution business and whether rental growth will offset potential distribution pullback.
• Timing variability in customer work, making it difficult to predict short-term performance with certainty.

Q: How did the rest of the fourth quarter flow after December timing issues and any changes in the last few weeks?

A: Fourth quarter, February, March were solid with good growth, though short-term volatility exists due to customer flexibility in work timing. High-single digit growth expected long-term but hard to predict short-term due to macro volatility.

Q: What's the status of the solutions business and its integration?

A: Solutions business is integrating the sales playbook, with sales teams understanding the value proposition of solutions and operations aligning solutions as a means to calibration discussions. Progress is being made towards stabilization and future growth.

Q: How much room is left for automation to drive margin improvement?

A: Automation is in the midpoint of progress, with coding and dissemination of technology in operations still ongoing, expected to continue driving margin gains as it progresses further.

Q: How is the rental market performing and expected in a challenging macro environment?

A: Rental market is seeing a slight uptick, and in a challenging environment, rentals could pick up as customers restrict CapEx, though current distribution hasn't seen significant pullback yet, likely due to tariff-related ordering.