Business Wire | Oct 27, 2020 04:17PM EDT

Transcat Reports Record Second Quarter Operating Income of $3.1 Million on Strong Service Gross Margin

Oct. 27, 2020

ROCHESTER, N.Y.--(BUSINESS WIRE)--Oct. 27, 2020--Transcat, Inc. (Nasdaq: TRNS) ("Transcat" or the "Company"), a leading provider of accredited calibration, repair, inspection and laboratory instrument services and value-added distributor of professional grade handheld test, measurement and control instrumentation, today reported financial results for its second quarter ended September 26, 2020 (the "second quarter") of fiscal year 2021, which ends March 27, 2021 ("fiscal 2021"). Results include the previously-reported acquisition of TTE Laboratories, Inc. (referred to as "pipettes.com") effective February 21, 2020.

"Our Service segment delivered another excellent quarter, reaching the second highest gross margin level in company history at 32.2%, an increase of 660 basis points year-over-year," commented Lee D. Rudow, President and CEO. "Technician productivity, expense reductions and strategic pricing drove the margin improvement, which was further helped by a favorable mix and the results of pipettes.com. Our teams have done a tremendous job leveraging our technology investments and have remained focused on driving efficiencies and better cost controls in our lab network."

"In addition to the high level of performance in our Service segment, we were certainly encouraged with the Distribution segment, where sales grew significantly over our first quarter of fiscal 2021. Overall, our Service margin performance helped drive record second quarter consolidated operating income of more than $3 million, exceeding our expectations. Additionally, we continued to generate strong cash from operations, which was used in part to reduce debt and fund technology investments."

Second Quarter Fiscal 2021 Review(Results are compared with the second quarter of the fiscal year ended March 28, 2020 ("fiscal 2020"))

($ in thousands) Change

FY21 Q2 FY20 Q2 $'s %

Service Revenue $ 24,554 $ 23,502 $ 1,052 4.5 %

Distribution Sales 17,053 18,261 (1,208 ) (6.6 %)

Revenue $ 41,607 $ 41,763 $ (156 ) (0.4 %)

Gross Profit $ 11,494 $ 10,445 $ 1,049 10.0 %

Gross Margin 27.6 % 25.0 %



Operating Income $ 3,078 $ 3,059 $ 19 0.6 %

Operating Margin 7.4 % 7.3 %



Net Income $ 2,024 $ 2,379 $ (355 ) (14.9 %)

Net Margin 4.9 % 5.7 %



Adjusted EBITDA* $ 5,223 $ 4,788 $ 435 9.1 %

Adjusted EBITDA* Margin 12.6 % 11.5 %

*See Note 1 on page 4 for a description of this non-GAAP financial measure and page 9 for the Adjusted EBITDA Reconciliation table.

Despite the ongoing impact from the COVID-19 pandemic, consolidated revenue remained stable year-over-year. Consolidated gross profit increased $1.0 million, or 10.0%, and gross margin expanded 260 basis points as a result of continued productivity improvements in the Service Segment, strategic pricing and cost controls, which offset continued softness in the Distribution segment. Operating expenses grew $1.0 million, or 13.9%, due to investments to further technology initiatives and incremental expenses related to pipettes.com. Net income per diluted share was $0.27 compared with $0.32 in last fiscal year's second quarter with the prior period benefiting by $0.05 from a lower tax rate due to increased discrete income tax benefits related to stock-based awards.

Service segment margins saw significant expansion

Represents the accredited calibration, repair, inspection and laboratory instrument services business (59% of total revenue for the second quarter of fiscal 2021).

($ in thousands) Change

FY21 Q2 FY20 Q2 $'s %



Service Segment Revenue $ 24,554 $ 23,502 $ 1,052 4.5 %

Gross Profit $ 7,900 $ 6,012 $ 1,888 31.4 %

Gross Margin 32.2 % 25.6 %



Operating Income $ 2,977 $ 1,837 $ 1,140 62.1 %

Operating Margin 12.1 % 7.8 %



Adjusted EBITDA* $ 4,475 $ 3,101 $ 1,374 44.3 %

Adjusted EBITDA* Margin 18.2 % 13.2 %

*See Note 1 on page 4 for a description of this non-GAAP financial measure and page 9 for the Adjusted EBITDA Reconciliation table.

The increase in Service revenue reflected new Life Science business, including $1.2 million of incremental revenue from pipettes.com, which more than offset softness from other markets. On a trailing twelve-month basis, Service revenue was $94.6 million, up 4.3% when compared with the trailing twelve-month period ending with the prior-fiscal year second quarter.

Service segment gross margin improved 660 basis points due to continued productivity initiatives and technology enhancements, more seasoned technicians, optimized client-based lab operations, strategic pricing, and a favorable mix of Service work performed in the quarter.

Distribution segment revenue and margins continued to be impacted by COVID-19 pandemic

Represents the sale and rental of new and used professional grade handheld test, measurement and control instrumentation (41% of total revenue for the second quarter of fiscal 2021).

($ in thousands) Change

FY21 Q2 FY20 Q2 $'s %

Distribution Segment Sales $ 17,053 $ 18,261 $ (1,208 ) (6.6 %)

Gross Profit $ 3,594 $ 4,433 $ (839 ) (18.9 %)

Gross Margin 21.1 % 24.3 %



Operating Income $ 101 $ 1,222 $ (1,121 ) (91.7 %)

Operating Margin 0.6 % 6.7 %



Adjusted EBITDA* $ 748 $ 1,687 $ (939 ) (55.7 %)

Adjusted EBITDA* Margin 4.4 % 9.2 %

*See Note 1 on page 4 for a description of this non-GAAP financial measure and page 9 for the Adjusted EBITDA Reconciliation table.

Distribution segment sales continued to be impacted by the COVID-19 pandemic, with reduced demand from oil and gas related businesses and other industrial manufacturing sectors. Rental revenue was up 32% sequentially from the first quarter of fiscal 2021 and was up 1.2% over the prior-year period. Distribution gross margin reflects lower volume from core product sales and reduced co-operative advertising and rebate programs as vendors reduced these programs to lower their costs.

Six Month Review(Results are compared with the first six months of fiscal 2020)

Total revenue was $80.5 million, a decrease of 4.3%, or $3.6 million, primarily due to a reduction in demand for Distribution products as a result of the COVID-19 pandemic which commenced at the beginning of the Company's fiscal 2021 year. Despite the lower revenue, consolidated gross profit was up $0.4 million, or 2.0%, and gross margin expanded 160 basis points to 26.0%. Consolidated operating expenses increased $1.4 million, or 8.9%, as the Company continued to invest in technology initiatives. As a result, operating income was $4.0 million compared with $5.0 million in last fiscal year's period.

Net income was $2.8 million, or $0.38 per diluted share, compared with $4.1 million, or $0.55 per diluted share. Adjusted EBITDA was consistent at $8.7 million. See Note 1 on page 4 for a description of this non-GAAP financial measure and page 9 for the Adjusted EBITDA Reconciliation table.

Strong Balance Sheet and Liquidity

Year-to-date net cash provided by operations of $12.5 million increased from $2.8 million in the prior-year period and was used to fund $3.1 million of capital expenditures and $7.6 million of debt repayment. Capital expenditures were primarily focused on technology, Service segment capabilities and rental pool assets.

At the end of the second quarter, Transcat had $28.9 million available for borrowing under its secured revolving credit facility. Total debt of $22.7 million was down $7.6 million from fiscal 2020 year-end. The Company's leverage ratio, as defined in its credit agreement, was down to 1.19 at quarter end compared with 1.53 at fiscal 2020 year-end.

Outlook

Mr. Rudow concluded, "The results of the second quarter were strong and we are pleased with the significant progress made in our Service margin expansion initiatives. Our balance sheet is solid and the M&A pipeline is active. Additionally, we believe our new customer pipeline positions us well for strong organic growth as we work through these current challenging times. We are equally focused on continuing to advance our initiatives aimed at further enhancing our Service business, including additional technology deployments to drive productivity.

"As we head into the winter months, we remain cautious given the high degree of uncertainty that still exists in today's COVID-19 impacted economic environment. For the third quarter of fiscal 2021, we expect Service revenue to grow modestly versus last fiscal year's third quarter, and we anticipate solid improvement in gross margin year-over-year. Distribution is likely to continue to be negatively impacted by the current economic environment. We expect operating income for the third quarter of fiscal 2021 to be similar to the third quarter of fiscal 2020."

Transcat adjusted its expected income tax rate for fiscal 2021 to a range of 22% to 23% from the previously provided range of 20% to 21%, largely due to profitability exceeding previous estimates.

The Company now expects capital expenditures to be approximately $5.5 million to $6.5 million, up from the previous estimated range of $5.0 million to $5.5 million. Capital investments are expected to be primarily for technology, growth-oriented opportunities within both of its operating segments, and rental pool assets. Maintenance and existing asset replacements are expected to be consistent with fiscal 2020 at approximately $1.0 million to $1.5 million.

Webcast and Conference Call

Transcat will host a conference call and webcast on Wednesday, October 28, 2020 at 11:00 a.m. ET. Management will review the financial and operating results for the second quarter, as well as the Company's strategy and outlook. A question and answer session will follow the formal discussion. The review will be accompanied by a slide presentation, which will be available at www.transcat.com/investor-relations. The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.transcat.com/investor-relations.

A telephonic replay will be available from 2:00 p.m. ET on the day of the call through Wednesday, November 4, 2020. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13710941, or access the webcast replay at www.transcat.com/investor-relations, where a transcript will be posted once available.

NOTE 1 - Non-GAAP Financial Measures

In addition to reporting net income, a U.S. generally accepted accounting principle ("GAAP") measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, restructuring expense, and non-cash loss on sale of building), which is a non-GAAP measure. The Company's management believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the performance of its core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense and other items, which is not always commensurate with the reporting period in which it is included. As such, the Company uses Adjusted EBITDA as a measure of performance when evaluating its business segments and as a basis for planning and forecasting. Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, rather in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. See the attached Adjusted EBITDA Reconciliation table below.

ABOUT TRANSCAT

Transcat, Inc. is a leading provider of accredited calibration, repair, inspection and laboratory instrument services. The Company is focused on providing best-in-class services and products to highly regulated industries, particularly the Life Science industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated businesses; as well as aerospace and defense, and energy and utilities. Transcat provides periodic on-site services, mobile calibration services, pickup and delivery, in-house services at its 22 Calibration Service Centers strategically located across the United States, Puerto Rico and Canada, and services at 20 imbedded customer-site locations. The breadth and depth of measurement parameters addressed by Transcat's ISO/IEC 17025 scopes of accreditation are believed to be the best in the industry.

Transcat also operates as a leading value-added distributor that markets, sells and rents new and used national and proprietary brand instruments to customers primarily in North America. The Company believes its combined Service and Distribution segment offerings, experience, technical expertise and integrity create a unique and compelling value proposition for its customers.

Transcat's strategy is to leverage the complementary nature of its two operating segments, its comprehensive service capabilities, strong brand, enhanced e-commerce capabilities and leading distribution platform to drive organic sales growth. The Company will also look to expand its addressable calibration market through acquisitions and capability investments to further realize the inherent leverage of its business model.

More information about Transcat can be found at: Transcat.com.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and assumptions. Forward-looking statements are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," "plans," "aims" and other similar words. All statements addressing operating performance, events or developments that Transcat expects or anticipates will occur in the future, including but not limited to statements relating to anticipated revenue, profit margins, the impact of and the Company's response to the COVID-19 pandemic, the commercialization of software projects, sales operations, capital expenditures, cash flows, operating income, growth strategy, segment growth, potential acquisitions, integration of acquired businesses, market position, customer preferences, outlook and changes in market conditions in the industries in which Transcat operates are forward-looking statements. Forward-looking statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties include those more fully described in Transcat's Annual Report and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled "Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of the Company's underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Company's forward-looking statements, which speak only as of the date they are made. Except as required by law, the Company disclaims any obligation to update, correct or publicly announce any revisions to any of the forward-looking statements contained in this news release, whether as the result of new information, future events or otherwise.

FINANCIAL TABLES FOLLOW.

TRANSCAT, INC.CONSOLIDATED STATEMENTS OF INCOME(In Thousands, Except Per Share Amounts)

(Unaudited) (Unaudited) Second Quarter Ended Six Months Ended

September September September September 26, 28, 26, 28, 2020 2019 2020 2019

Service Revenue $ 24,554 $ 23,502 $ 47,521 $ 45,900

Distribution Sales 17,053 18,261 32,990 38,258

Total Revenue 41,607 41,763 80,511 84,158

Cost of Service Revenue 16,654 17,490 33,552 34,516

Cost of Distribution Sales 13,459 13,828 26,056 29,145

Total Cost of Revenue 30,113 31,318 59,608 63,661

Gross Profit 11,494 10,445 20,903 20,497

Selling, Marketing and Warehouse 4,291 4,231 8,365 8,703Expenses

Administrative Expenses 4,125 3,155 8,496 6,777

Total Operating Expenses 8,416 7,386 16,861 15,480

Operating Income 3,078 3,059 4,042 5,017

Interest and Other Expense, net 317 297 560 582

Income Before Income Taxes 2,761 2,762 3,482 4,435

Provision for Income Taxes 737 383 660 338

Net Income $ 2,024 $ 2,379 $ 2,822 $ 4,097

Basic Earnings Per Share $ 0.27 $ 0.32 $ 0.38 $ 0.56

Average Shares Outstanding 7,417 7,331 7,405 7,293

Diluted Earnings Per Share $ 0.27 $ 0.32 $ 0.38 $ 0.55

Average Shares Outstanding 7,549 7,484 7,525 7,441

TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

September 26,2020

March 28,2020

ASSETS

Current Assets:

Cash$

962

$

499

Accounts Receivable, less allowance for doubtful accounts of $589and $480 as of September 26, 2020 and March 28, 2020, respectively27,647

30,952

Other Receivables717

1,132

Inventory, net13,685

14,180

Prepaid Expenses and Other Current Assets2,369

1,697

Total Current Assets45,380

48,460

Property and Equipment, net

21,475

20,833

Goodwill

41,773

41,540

Intangible Assets, net

6,737

7,977

Right To Use Asset, net

10,010

8,593

Other Assets

685

719

Total Assets$

126,060

$

128,122

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts Payable$

11,055

$

11,947

Accrued Compensation and Other Liabilities7,118

6,907

Income Taxes Payable438

86

Current Portion of Long-Term Debt2,024

1,982

Total Current Liabilities20,635

20,922

Long-Term Debt

20,709

28,362

Deferred Tax Liabilities

3,072

3,025

Lease Liabilities

8,197

6,832

Other Liabilities

3,345

1,894

Total Liabilities55,958

61,035

Shareholders' Equity:

Common Stock, par value $0.50 per share, 30,000,000 shares authorized;7,432,582 and 7,381,180 shares issued and outstandingas of September 26, 2020 and March 28, 2020, respectively3,716

3,691

Capital in Excess of Par Value18,453

17,929

Accumulated Other Comprehensive Loss(682

)

(1,010

)

Retained Earnings48,615

46,477

Total Shareholders' Equity70,102

67,087

Total Liabilities and Shareholders' Equity$

126,060

$

128,122

TRANSCAT, INC.CONSOLIDATED BALANCE SHEETS(In Thousands, Except Share and Per Share Amounts)



(Unaudited)

September March 28, 26, 2020 2020

ASSETS

Current Assets:

Cash $ 962 $ 499

Accounts Receivable, less allowance for doubtfulaccounts of $589and $480 as of September 26, 2020 and March 28, 2020, 27,647 30,952 respectivelyOther Receivables 717 1,132

Inventory, net 13,685 14,180

Prepaid Expenses and Other Current Assets 2,369 1,697

Total Current Assets 45,380 48,460

Property and Equipment, net 21,475 20,833

Goodwill 41,773 41,540

Intangible Assets, net 6,737 7,977

Right To Use Asset, net 10,010 8,593

Other Assets 685 719

Total Assets $ 126,060 $ 128,122

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts Payable $ 11,055 $ 11,947

Accrued Compensation and Other Liabilities 7,118 6,907

Income Taxes Payable 438 86

Current Portion of Long-Term Debt 2,024 1,982

Total Current Liabilities 20,635 20,922

Long-Term Debt 20,709 28,362

Deferred Tax Liabilities 3,072 3,025

Lease Liabilities 8,197 6,832

Other Liabilities 3,345 1,894

Total Liabilities 55,958 61,035

Shareholders' Equity:

Common Stock, par value $0.50 per share, 30,000,000shares authorized;7,432,582 and 7,381,180 shares issued and outstandingas of September 26, 2020 and March 28, 2020, 3,716 3,691 respectivelyCapital in Excess of Par Value 18,453 17,929

Accumulated Other Comprehensive Loss (682 ) (1,010 )

Retained Earnings 48,615 46,477

Total Shareholders' Equity 70,102 67,087

Total Liabilities and Shareholders' Equity $ 126,060 $ 128,122

TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)

(Unaudited)

For the Six Months Ended

September 26,2020

September 28,2019

Cash Flows from Operating Activities:

Net Income$

2,822

$

4,097

Adjustments to Reconcile Net Income to Net Cash Providedby Operating Activities:Loss on Sale of Property and Equipment68

240

Deferred Income Taxes47

10

Depreciation and Amortization3,736

3,303

Provision for Accounts Receivable and Inventory Reserves523

201

Stock-Based Compensation Expense678

305

Changes in Assets and Liabilities:Accounts Receivable and Other Receivables3,543

778

Inventory623

(807

)

Prepaid Expenses and Other Assets(625

)

(1,149

)

Accounts Payable(892

)

(3,433

)

Accrued Compensation and Other Liabilities1,626

(475

)

Income Taxes Payable327

(236

)

Net Cash Provided by Operating Activities12,476

2,834

Cash Flows from Investing Activities:

Purchase of Property and Equipment(3,116

)

(4,048

)

Proceeds from Sale of Property and Equipment-

184

Business Acquisitions, Net of cash acquired-

(452

)

Payment of Contingent Consideration & Holdbacks Related to

Business Acquisition

-

(484

)

Net Cash Used in Investing Activities(3,116

)

(4,800

)

Cash Flows from Financing Activities:

(Repayments of) Proceeds from Revolving Credit Facility, net(6,632

)

4,598

Repayments of Term Loan(979

)

(938

)

Issuance of Common Stock474

1,372

Repurchase of Common Stock(1,287

)

(2,822

)

Net Cash (Used in)/Provided by Financing Activities(8,424

)

2,210

Effect of Exchange Rate Changes on Cash

(473

)

(112

)

Net Increase in Cash

463

132

Cash at Beginning of Period

499

788

Cash at End of Period

$

962

$

920

TRANSCAT, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)



(Unaudited)

For the Six Months Ended

September September 26, 28, 2020 2019

Cash Flows from Operating Activities:

Net Income $ 2,822 $ 4,097

Adjustments to Reconcile Net Income to Net Cash Providedby Operating Activities:Loss on Sale of Property and Equipment 68 240

Deferred Income Taxes 47 10

Depreciation and Amortization 3,736 3,303

Provision for Accounts Receivable and Inventory 523 201 ReservesStock-Based Compensation Expense 678 305

Changes in Assets and Liabilities:Accounts Receivable and Other Receivables 3,543 778

Inventory 623 (807 )

Prepaid Expenses and Other Assets (625 ) (1,149 )

Accounts Payable (892 ) (3,433 )

Accrued Compensation and Other Liabilities 1,626 (475 )

Income Taxes Payable 327 (236 )

Net Cash Provided by Operating Activities 12,476 2,834

Cash Flows from Investing Activities:

Purchase of Property and Equipment (3,116 ) (4,048 )

Proceeds from Sale of Property and Equipment - 184

Business Acquisitions, Net of cash acquired - (452 )

Payment of Contingent Consideration & HoldbacksRelated to - (484 )

Business Acquisition

Net Cash Used in Investing Activities (3,116 ) (4,800 )

Cash Flows from Financing Activities:

(Repayments of) Proceeds from Revolving Credit (6,632 ) 4,598 Facility, netRepayments of Term Loan (979 ) (938 )

Issuance of Common Stock 474 1,372

Repurchase of Common Stock (1,287 ) (2,822 )

Net Cash (Used in)/Provided by Financing Activities (8,424 ) 2,210

Effect of Exchange Rate Changes on Cash (473 ) (112 )

Net Increase in Cash 463 132

Cash at Beginning of Period 499 788

Cash at End of Period $ 962 $ 920

TRANSCAT, INC. Adjusted EBITDA Reconciliation Table(Dollars in thousands) (Unaudited)

Fiscal 2021

Q1

Q2

Q3

Q4

YTD

Net Income

$

798

$

2,024

$

2,822

+ Interest Expense224

233

457

+ Other Expense / (Income)19

84

103

+ Tax Provision(77

)

737

660

Operating Income

$

964

$

3,078

$

4,042

+ Depreciation & Amortization1,871

1,864

3,735

+ Restructuring Expense

360

-

360

+ Other (Expense) / Income(19

)

(85

)

(104

)

+ Noncash Stock Compensation312

366

678

Adjusted EBITDA

$

3,488

$

5,223

$

8,711

Segment Breakdown

Service Operating Income

$

1,129

$

2,977

$

4,106

+ Depreciation & Amortization1,394

1,359

2,753

+ Restructuring Expense

193

-

193

+ Other (Expense) / Income(15

)

(57

)

(72

)

+ Noncash Stock Compensation162

196

358

Service Adjusted EBITDA

$

2,863

$

4,475

$

7,338

Distribution Operating Income

$

(165

)

$

101

$

(64

)

+ Depreciation & Amortization477

505

982

+ Restructuring Expense

167

167

+ Other (Expense) / Income(4

)

(28

)

(32

)

+ Noncash Stock Compensation150

170

320

Distribution Adjusted EBITDA

$

625

$

748

$

1,373

Fiscal 2020

Q1

Q2

Q3

Q4

YTD

Net Income

$

1,718

$

2,379

$

1,477

$

2,493

$

8,067

+ Interest Expense244

243

216

231

934

+ Other Expense / (Income)41

54

(22

)

113

186

+ Tax Provision(45

)

383

420

905

1,663

Operating Income

$

1,958

$

3,059

$

2,091

$

3,742

$

10,850

+ Depreciation & Amortization1,622

1,681

1,648

1,707

6,658

+ Other (Expense) / Income159

(54

)

22

(112

)

15

+ Noncash Stock Compensation203

102

305

274

884

Adjusted EBITDA

$

3,942

$

4,788

$

4,066

$

5,611

$

18,407

Segment Breakdown

Service Operating Income

$

738

$

1,837

$

488

$

2,609

$

5,672

+ Depreciation & Amortization1,220

1,246

1,206

1,257

4,929

+ Other (Expense) / Income77

(38

)

13

(72

)

(20

)

+ Noncash Stock Compensation112

56

159

143

470

Service Adjusted EBITDA

$

2,147

$

3,101

$

1,866

$

3,937

$

11,051

Distribution Operating Income

$

1,220

$

1,222

$

1,603

$

1,133

$

5,178

+ Depreciation & Amortization401

436

442

450

1,729

+ Other (Expense) / Income83

(17

)

9

(40

)

35

+ Noncash Stock Compensation91

46

146

131

414

Distribution Adjusted EBITDA

$

1,795

$

1,687

$

2,200

$

1,674

$

7,356

TRANSCAT, INC.Adjusted EBITDA Reconciliation Table(Dollars in thousands)(Unaudited)

Fiscal 2021

Q1 Q2 Q3 Q4 YTD

Net Income $ 798 $ 2,024 $ 2,822

+ Interest Expense 224 233 457

+ Other Expense / (Income) 19 84 103

+ Tax Provision (77 ) 737 660

Operating Income $ 964 $ 3,078 $ 4,042

+ Depreciation & 1,871 1,864 3,735 Amortization+ Restructuring Expense 360 - 360

+ Other (Expense) / Income (19 ) (85 ) (104 )

+ Noncash Stock 312 366 678 CompensationAdjusted EBITDA $ 3,488 $ 5,223 $ 8,711

Segment Breakdown

Service Operating Income $ 1,129 $ 2,977 $ 4,106

+ Depreciation & 1,394 1,359 2,753 Amortization+ Restructuring Expense 193 - 193

+ Other (Expense) / Income (15 ) (57 ) (72 )

+ Noncash Stock 162 196 358 CompensationService Adjusted EBITDA $ 2,863 $ 4,475 $ 7,338

Distribution Operating $ (165 ) $ 101 $ (64 )Income

+ Depreciation & 477 505 982 Amortization+ Restructuring Expense 167 167

+ Other (Expense) / Income (4 ) (28 ) (32 )

+ Noncash Stock 150 170 320 CompensationDistribution Adjusted $ 625 $ 748 $ 1,373 EBITDA

Fiscal 2020

Q1 Q2 Q3 Q4 YTD

Net Income $ 1,718 $ 2,379 $ 1,477 $ 2,493 $ 8,067

+ Interest Expense 244 243 216 231 934

+ Other Expense / (Income) 41 54 (22 ) 113 186

+ Tax Provision (45 ) 383 420 905 1,663

Operating Income $ 1,958 $ 3,059 $ 2,091 $ 3,742 $ 10,850

+ Depreciation & 1,622 1,681 1,648 1,707 6,658 Amortization+ Other (Expense) / Income 159 (54 ) 22 (112 ) 15

+ Noncash Stock 203 102 305 274 884 CompensationAdjusted EBITDA $ 3,942 $ 4,788 $ 4,066 $ 5,611 $ 18,407

Segment Breakdown

Service Operating Income $ 738 $ 1,837 $ 488 $ 2,609 $ 5,672

+ Depreciation & 1,220 1,246 1,206 1,257 4,929 Amortization+ Other (Expense) / Income 77 (38 ) 13 (72 ) (20 )

+ Noncash Stock 112 56 159 143 470 CompensationService Adjusted EBITDA $ 2,147 $ 3,101 $ 1,866 $ 3,937 $ 11,051

Distribution Operating $ 1,220 $ 1,222 $ 1,603 $ 1,133 $ 5,178 Income

+ Depreciation & 401 436 442 450 1,729 Amortization+ Other (Expense) / Income 83 (17 ) 9 (40 ) 35

+ Noncash Stock 91 46 146 131 414 CompensationDistribution Adjusted $ 1,795 $ 1,687 $ 2,200 $ 1,674 $ 7,356 EBITDA

TRANSCAT, INC. Additional Information - Business Segment Data(Dollars in thousands) (Unaudited)

Change

SERVICE

FY 2021 Q2

FY 2020 Q2

$'s

%

Service Revenue

$

24,554

$

23,502

$

1,052

4.5

%

Cost of Service Revenue

16,654

17,490

(836

)

(4.8

%)

Gross Profit

$

7,900

$

6,012

$

1,888

31.4

%

Gross Margin

32.2

%

25.6

%

Selling, Marketing & Warehouse Expenses

$

2,427

$

2,227

$

200

9.0

%

General and Administrative Expenses

2,496

1,948

548

28.1

%

Operating Income

$

2,977

$

1,837

$

1,140

62.1

%

% of Revenue

12.1

%

7.8

%

Change

DISTRIBUTION

FY 2021 Q2

FY 2020 Q2

$'s

%

Distribution Sales

$

17,053

$

18,261

$

(1,208

)

(6.6

%)

Cost of Distribution Sales

13,459

13,828

(369

)

(2.7

%)

Gross Profit

$

3,594

$

4,433

$

(839

)

(18.9

%)

Gross Margin

21.1

%

24.3

%

Selling, Marketing & Warehouse Expenses

$

1,864

$

2,004

$

(140

)

(7.0

%)

General and Administrative Expenses

1,629

1,207

422

35.0

%

Operating Income

$

101

$

1,222

$

(1,121

)

(91.7

%)

% of Sales

0.6

%

6.7

%

Change

TOTAL

FY 2021 Q2

FY 2020 Q2

$'s

%

Total Revenue

$

41,607

$

41,763

$

(156

)

(0.4

%)

Total Cost of Revenue

30,113

31,318

(1,205

)

(3.8

%)

Gross Profit

$

11,494

$

10,445

$

1,049

10.0

%

Gross Margin

27.6

%

25.0

%

Selling, Marketing & Warehouse Expenses

$

4,291

$

4,231

$

60

1.4

%

General and Administrative Expenses

4,125

3,155

970

30.7

%

Operating Income

$

3,078

$

3,059

$

19

0.6

%

% of Revenue

7.4

%

7.3

%

TRANSCAT, INC.Additional Information - Business Segment Data(Dollars in thousands)(Unaudited)

Change

SERVICE FY 2021 Q2 FY 2020 Q2 $'s %



Service Revenue $ 24,554 $ 23,502 $ 1,052 4.5 %

Cost of Service Revenue 16,654 17,490 (836 ) (4.8 %)

Gross Profit $ 7,900 $ 6,012 $ 1,888 31.4 %

Gross Margin 32.2 % 25.6 %



Selling, Marketing & Warehouse $ 2,427 $ 2,227 $ 200 9.0 %Expenses

General and Administrative 2,496 1,948 548 28.1 %Expenses

Operating Income $ 2,977 $ 1,837 $ 1,140 62.1 %

% of Revenue 12.1 % 7.8 %



Change

DISTRIBUTION FY 2021 Q2 FY 2020 Q2 $'s %

Distribution Sales $ 17,053 $ 18,261 $ (1,208 ) (6.6 %)

Cost of Distribution Sales 13,459 13,828 (369 ) (2.7 %)

Gross Profit $ 3,594 $ 4,433 $ (839 ) (18.9 %)

Gross Margin 21.1 % 24.3 %



Selling, Marketing & Warehouse $ 1,864 $ 2,004 $ (140 ) (7.0 %)Expenses

General and Administrative 1,629 1,207 422 35.0 %Expenses

Operating Income $ 101 $ 1,222 $ (1,121 ) (91.7 %)

% of Sales 0.6 % 6.7 %



Change

TOTAL FY 2021 Q2 FY 2020 Q2 $'s %



Total Revenue $ 41,607 $ 41,763 $ (156 ) (0.4 %)

Total Cost of Revenue 30,113 31,318 (1,205 ) (3.8 %)

Gross Profit $ 11,494 $ 10,445 $ 1,049 10.0 %

Gross Margin 27.6 % 25.0 %



Selling, Marketing & Warehouse $ 4,291 $ 4,231 $ 60 1.4 %Expenses

General and Administrative 4,125 3,155 970 30.7 %Expenses

Operating Income $ 3,078 $ 3,059 $ 19 0.6 %

% of Revenue 7.4 % 7.3 %

TRANSCAT, INC. Additional Information - Business Segment Data(Dollars in thousands) (Unaudited)

Change

SERVICE

FY 2021 YTD

FY 2020 YTD

$'s

%

Service Revenue

$

47,521

$

45,900

$

1,621

3.5

%

Cost of Service Revenue

33,552

34,516

(964

)

(2.8

%)

Gross Profit

$

13,969

$

11,384

$

2,585

22.7

%

Gross Margin

29.4

%

24.8

%

Selling, Marketing & Warehouse Expenses

$

4,775

$

4,613

$

162

3.5

%

General and Administrative Expenses

5,088

4,196

892

21.3

%

Operating Income

$

4,106

$

2,575

$

1,531

59.5

%

% of Revenue

8.6

%

5.6

%

Change

DISTRIBUTION

FY 2021 YTD

FY 2020 YTD

$'s

%

Distribution Sales

$

32,990

$

38,258

$

(5,268

)

(13.8

%)

Cost of Distribution Sales

26,056

29,145

(3,089

)

(10.6

%)

Gross Profit

$

6,934

$

9,113

$

(2,179

)

(23.9

%)

Gross Margin

21.0

%

23.8

%

Selling, Marketing & Warehouse Expenses

$

3,590

$

4,090

$

(500

)

(12.2

%)

General and Administrative Expenses

3,408

2,581

827

32.0

%

Operating Income

$

(64

)

$

2,442

$

(2,506

)

(102.6

%)

% of Sales

(0.2

%)

6.4

%

Change

TOTAL

FY 2021 YTD

FY 2020 YTD

$'s

%

Total Revenue

$

80,511

$

84,158

$

(3,647

)

(4.3

%)

Total Cost of Revenue

59,608

63,661

(4,053

)

(6.4

%)

Gross Profit

$

20,903

$

20,497

$

406

2.0

%

Gross Margin

26.0

%

24.4

%

Selling, Marketing & Warehouse Expenses

$

8,365

$

8,703

$

(338

)

(3.9

%)

General and Administrative Expenses

8,496

6,777

1,719

25.4

%

Operating Income

$

4,042

$

5,017

$

(975

)

(19.4

%)

% of Revenue

5.0

%

6.0

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006167/en/

CONTACT: Michael J. Tschiderer, Chief Financial Officer Phone: (585) 563-5766 Email: mtschiderer@transcat.com

CONTACT: Deborah K. Pawlowski, Investor Relations Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com