Transcat, Inc. (NASDAQ:TRNS) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals solid financial performance with increased operating cash flow and net income. The Q&A section highlights a healthy pipeline and organic growth, though some short-term volatility is expected. Despite unclear management responses on certain aspects, the company's strong service segment growth and strategic acquisition position it well. Considering the small market cap, the positive financial metrics and optimistic outlook suggest a likely stock price increase in the range of 2% to 8%.

Key Financial Performance

Consolidated Revenue Q4 2025 $77.1 million, up 9% year-over-year, driven by Service segment strength and growth in the distribution segment.

Service Revenue Q4 2025 $52 million, up 11% year-over-year, including $6.8 million from acquisitions, driven by strong performance in the calibration business.

Distribution Revenue Q4 2025 $25.1 million, up 4% year-over-year, driven by growth in the rental channel.

Consolidated Gross Profit Q4 2025 $25.9 million, up 8% year-over-year, with a gross margin decline of 30 basis points.

Service Gross Margin Q4 2025 36.2%, expanded 50 basis points year-over-year, driven by organic revenue growth and increased productivity.

Distribution Segment Gross Margin Q4 2025 28.2%, down 210 basis points year-over-year.

Net Income Q4 2025 $4.5 million, decreased from $6.9 million in the prior year, impacted by a non-cash profit increase of $2.4 million from the amended NEXA earn-out agreement.

Diluted Earnings Per Share Q4 2025 $0.48, decreased from $0.77 in the prior year.

Adjusted Diluted Earnings Per Share Q4 2025 $0.64, normalizing for acquisition-related costs.

Operating Cash Flow Full Year 2025 $38.6 million, up 18% year-over-year.

Full Year Net Income 2025 $14.5 million, increased 6% year-over-year.

Adjusted EBITDA Q4 2025 $12.7 million, up 9% year-over-year, driven by growth of 16% in the Service segment.

Full Year EBITDA 2025 $39.7 million, up 3% year-over-year, driven by strength in the calibration business.

Operating Free Cash Flow Full Year 2025 $25.4 million, improved 31% year-over-year.

Total Net Debt Year-End 2025 $31 million, with a leverage ratio of 0.7x.

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Operating Highlights

Acquisition of Martin Calibration: On December 9, Transcat acquired Martin Calibration, the largest acquisition in the company's history, which is expected to enhance geographic expansion into the Midwest and expand capabilities in dimensional and mechanical measuring.

Service Revenue Growth: Service revenue grew 7% to $181.4 million, driven by strength in the core calibration business.

Operating Cash Flow: Operating cash flow for fiscal 2025 was a record $38.6 million, an 18% year-over-year increase.

Calibration Services Growth: Calibration services achieved double-digit revenue growth of 11% in Q4, with organic growth in the high-single digit range.

Gross Margin Expansion: Service gross margin expanded 50 basis points to 36.2% in Q4, driven by organic revenue growth and increased productivity.

Strategic Acquisition Drivers: The Martin acquisition fulfills all three strategic acquisition drivers: geographic expansion, expanded capabilities, and bolt-on opportunities.

Leadership and Culture Investment: Transcat has invested in recruiting and developing leadership in sales, technology, and operations to align with long-term growth expectations.

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Risk or Challenges

Macroeconomic Factors: The macroeconomic backdrop, including tariffs, has become more uncertain since the beginning of the year, which could impact business operations.

Regulatory Environment: The calibration services channel benefits from high levels of regulation, which can also pose challenges if regulations change or become more stringent.

Acquisition Integration Risks: While the integration of the Martin acquisition is currently ahead of schedule, there are inherent risks associated with integrating new businesses into existing operations.

Competitive Pressures: The company faces competitive pressures in both its service and distribution segments, which could affect market share and pricing strategies.

Supply Chain Challenges: There are potential supply chain challenges that could arise, particularly in the context of economic fluctuations and increased demand for services.

Organic Growth Expectations: While the company expects organic growth to return to historical levels, any delays or setbacks in achieving these growth targets could impact overall performance.

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Guidance & Outlook

Acquisition of Martin Calibration: Transcat acquired Martin Calibration, the largest acquisition in its history, which is expected to enhance geographic expansion, capabilities, and provide bolt-on opportunities.

Service Segment Growth: The Service segment, particularly calibration services, is expected to continue benefiting from recurring revenue streams and high levels of regulation.

Leadership Development: Transcat has invested in recruiting and developing leadership across sales, technology, and operations to support long-term growth.

Integration of Solutions Channel: The integration of the solutions channel into the overall service platform is expected to stabilize and improve results, contributing to organic service growth.

Revenue Growth Expectations: Transcat anticipates organic growth to return to historical high-single digit growth levels as macro trends normalize.

Capital Expenditures: Net CapEx is expected to be in the range of $14 million to $16 million for fiscal year 2026.

Adjusted EBITDA: Full year adjusted EBITDA is projected to continue growing, driven by strength in the calibration business.

Debt and Leverage: Transcat ended the year with a total net debt of $31 million and a leverage ratio of 0.7x, indicating a strong balance sheet.

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Shareholder Return Plan

Share Repurchase Program: None

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Key Q&A

Q: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, four, five, six weeks, any change versus what you saw back in February and March?

A: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 and that helped contribute to the high-single digit organic growth.

Q: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, etc.?

A:Yeah. 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.

Q:Just on distribution, I’m just curious, just given some of the tariff announcements from a procurement standpoint, just remind us kind of where that sits? And maybe more importantly, are you seeing any kind of changes in behavior from customers?

A: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.

Q: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?

A: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 a — the economic backdrop here.

Q:When you’re thinking about how you’re going to lay out that growth that you’re expecting that the things will calm down and you’re going to see maybe a stronger back part of the fiscal year than the front part of the fiscal year?

A:Yes, there’s short-term volatility, short-term disruption, there are some customers that are going to delay some work and we will call them pushouts into the second quarter from the first or those — even into the third or the fourth, that’s going to happen.

Q:Could you talk a little bit about where things stand with that portion of your world and kind of how to think about it for kind of the next 12 to 18 months?

A:There were two goals with NEXA coming off of some of 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.

Q:How much juice is there left to squeeze out of that?

A:I would characterize where we are, Scott, today is around the fourth or fifth inning. I mean, I feel like we’re in the midpoint, maybe not quite, maybe just under the midpoint.

Q:Do you see customers put off sales and 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?

A:I think the short answer is yes, you do see that. We’re not seeing it right now.

Q:Has the M&A criteria changed at all, just given the scale and scope of the business today versus maybe 2020 or 2021?

A:I think we have — we spent a lot of time on our M&A plan. And there are — there’s hundreds of small companies — it’s very — it’s still a fragmented industry.

Q:Review of Unclear Management Responses

A:Management's responses lacked clarity on several occasions, particularly regarding the impact of tariffs on distribution and the future performance of the rental market. They also avoided providing specific numbers or timelines for expected growth, instead using vague language about 'high-single digit growth' and 'short-term volatility' without concrete data.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

TRNS Transcript

Transcat, Inc. (TRNS) Q2 2026 Earnings Call Transcript

Positive11-3

The earnings call reveals positive growth in distribution revenue and rental channels, supported by successful acquisitions. Despite a slight decline in net income due to one-time expenses, operating cash flow increased, and the company holds a manageable debt level. The Q&A section highlights confidence in future growth, driven by new accounts and stable customer retention. Although there are economic uncertainties, the company anticipates margin expansion and high single-digit organic growth. The market cap suggests moderate stock price sensitivity, leading to a positive sentiment rating.

Transcat, Inc. (TRNS) Q1 2026 Earnings Call Transcript

Unknown8-8

The earnings call reflects a mix of positive and negative elements. While service and distribution segments show strong growth, net income and EPS have declined. The management's optimistic outlook on acquisitions and organic growth is tempered by unclear guidance on rental distribution sustainability. The Q&A reveals consistent demand but also uncertainty in future margins. Given the company's market cap, the stock is likely to experience a mild reaction, hence a neutral sentiment.

Transcat, Inc. (NASDAQ:TRNS) Q4 2025 Earnings Call Transcript

Positive5-21

Earnings call transcript: Transcat Q4 2025 beats EPS, stock surges 18%

Unknown5-20

The earnings call reveals mixed signals: strong revenue growth and cash flow, but concerns about supply chain challenges, customer behavior changes, and integration risks. The Q&A section highlights management's confidence in growth, but also avoidance of direct answers on key issues. The lack of a share repurchase program and absence of a new partnership announcement further temper optimism. Given the small-cap nature of the company, the stock is likely to experience some volatility, but overall, a neutral movement (-2% to 2%) is expected over the next two weeks.

TRNS Slides

Transcat Q1 2026 slides: record acquisition and double-digit revenue growth

2025-08-06

TRNS Report

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