Transcat (NASDAQ:TRNS) reported first-quarter fiscal 2027 revenue of $92.9 million, up 22% from a year earlier, as both its calibration services and distribution segments posted double-digit growth. The company said demand remained strong across its regulated end markets, including life sciences, aerospace and defense, and energy.
In his first full quarter as Transcat’s president and chief executive officer, Jaime Irick said his initial 100 days with the company reinforced his view that it has opportunities to build on organic growth, acquisitions and operating improvements. Irick said the company intends to place greater emphasis on operational excellence, including improving customer-facing processes, applying lean principles, optimizing mix and pricing, and using technology and artificial intelligence to support productivity and customer solutions.
Services Segment Drives Growth and Margin Expansion
Service gross profit increased 31%, and service gross margin expanded 90 basis points from the prior-year period. Chief Financial Officer Tom Barbato attributed the improvement to operating leverage in the company’s service model, a focus on operational excellence and maturing relationships with newer customers.
During the question-and-answer session, Barbato said service growth was broad-based across end markets rather than concentrated in a particular laboratory or business area. Irick added that the company sees growth supported by both improving end markets and market-share gains.
“The nice thing is we’ve got a double threat in our favor,” Irick said. “One, the end markets are growing and up from what we saw last year. Two, we’re taking a share.”
Irick said Transcat’s recent acquisition of SCM Metrology & Laboratories is progressing well and provides an opportunity in Central America. The company said strategic mergers and acquisitions will remain central to its growth strategy, with its acquisition pipeline positioned to support deals that can deliver synergies.
Distribution Revenue Rises as Margins Normalize
Distribution revenue increased 11% in the fiscal first quarter, driven by rental-channel performance and product sales. The distribution segment’s gross margin was 31.4%, down 380 basis points from the prior year.
Management said the year-earlier distribution margin was unusually high because of elevated vendor rebates. Looking ahead, the company expects more typical year-over-year comparisons and said it anticipates benefiting from a higher mix of rental revenue, which carries higher margins.
Barbato said Transcat continues to expect rental revenue to grow organically at a high-single-digit to low-double-digit rate. The company has identified growth in the higher-margin rental business as one of its four strategic priorities.
Profitability, Cash Flow and Balance Sheet
Consolidated gross profit increased 19% to $30.7 million. Adjusted EBITDA rose 19% to $14 million, driven primarily by the services segment. Service adjusted operating income increased 35% to $9.6 million, while the service adjusted operating margin increased 80 basis points to 15.4%.
Distribution adjusted operating income was $4.3 million, down 12% from the prior-year quarter.
GAAP diluted earnings per share were $0.14. Barbato said the year-over-year comparison reflected higher tangible asset amortization related to acquisitions, stock-based compensation, interest expense and executive transition costs. Adjusted diluted earnings per share, which excludes certain acquisition-related and transition costs, was $0.51.
Operating free cash flow totaled $4.8 million, improving by $5.8 million from the prior-year period due to higher cash from operations and slightly lower capital expenditures. Capital expenditures were $4 million and were directed toward service capabilities, rental-pool assets, technology and future growth projects.
At quarter-end, Transcat had $110.4 million in total debt, $39.6 million available under its secured revolving credit facility and a leverage ratio of 2.19 times. Barbato said the company believes its capital structure supports organic growth and acquisitions.
Full-Year Priorities and Outlook
Transcat said its first-quarter results position it to deliver high-single-digit organic service revenue growth and service gross-margin expansion for the full fiscal year. Barbato noted that comparisons will become more difficult in the second half, as service organic revenue growth was relatively flat in the first half of the prior fiscal year before rising 7% in the second half.
The company’s strategic priorities include maintaining customer retention and converting new business wins into service growth, expanding service margins through operational improvements, pursuing acquisitions and growing rentals.
Management also said it expects to continue investing in leadership and organizational capabilities. Barbato cited the recent hiring of Roy Simmons to support strategy and mergers and acquisitions, while Irick said the company intends to make targeted investments to capitalize on recurring revenue opportunities in regulated markets and to pursue share gains where competitors have reduced investment in services.
For the full year, Barbato said Transcat continues to expect an effective tax rate of 31% to 32%, after first-quarter results were affected by stock-based compensation items. He also said some CEO transition-related expenses remained in general and administrative costs during the quarter.
About Transcat (NASDAQ:TRNS)
Transcat, Inc (NASDAQ: TRNS) is a leading provider of calibration, laboratory, and metrology services in North America. Founded in 1964 and headquartered in Ronkonkoma, New York, the company specializes in ensuring the accuracy and compliance of measurement instruments across a wide range of industries. Transcat operates a network of ISO/IEC 17025–accredited laboratories and offers on-site field calibration, instrument repair, and preventive maintenance services.
In addition to its calibration services, Transcat distributes precision instrumentation and related software solutions from top manufacturers.
