TRNS - Earnings call transcript Q4 2024

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Operator

Greetings, and welcome to Transcat, Inc. Fourth Quarter Fiscal Year 2024 financial results. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tom Barbato. Thank you.

begin. may You

Thomas Barbato

and and and operator, the everyone. appreciate Lee We today West. Officer, Thank interest good in time Rudow; CEO, and your our on Chief Transcat. With your Operating is Mike you, President morning, our me call here

the the up for will we'll begin remarks, then with call We questions. prepared some and open call

found we Our on remarks release and earnings earnings both yesterday, the prepared in transcat.com crossed release website, our slides our the will that the closed can section. during wire be after markets Relations reference the Investor

please would, you refer If to Slide #X.

as aware, forward-looking to by cause well are factors materially the Q&A which company today. the the statements As we we you presentation teleconference. to are outlined results formal filed apply during subject factors and to as are SEC. of These news other this release make could documents well where statements the actual risks events, These the from the are in and with future in portion as differ uncertainties as that

of publicly those or can sec.gov. We we about information undertake post website conjunction the in new with forward-looking a well our these by required website in obligation factors. or whether otherwise, the company our as no as to You regularly the statements result as any at where correct on on call, find SEC's precautionary update information, as statements contained this of except events review future law. forward-looking Please

useful during evaluating non-GAAP which our Additionally, measures, we believe will we in will be today's call, certain discuss performance.

Lee. GAAP. We've earnings that, results the GAAP or the prepared this tables non-GAAP to in to as for compared substitute call I'll in provided accompanying consider information of of isolation not should the over the With presentation reconciliations You in turn release. accordance with measures a additional

Lee Rudow

Good was Fiscal everyone. for on you, call strong joining Thank us another you We XXXX the appreciate morning, year Tom. today. Transcat.

very XX.X%, dynamic growth continued great significant our by our cash operating enhancing in strong operating flow. and double-digit differentiated our XXXX, growth team, and of improved role infrastructure. acquired an margin acquisitions of addressable expanded given inherent in acquisitions our breadth to by leverage service allowed our leverage our gross mix Adjusted operating in metric organic EBITDA remain the service our service our grew key segment. products a hard from revenue, of markets a strategy We important expanded gross accomplishments. In acquisition for labs to services included companies: generated existing service total proposition higher expansion double-digit Our million. us of core growth, was to was for our Test margins year, we fortified points we're $XXX their SteriQual XX%. work and XX% offering prior and It Axiom XXX value results organic service rental and excellent and and expanded played X in Distribution in position our XXXX our organic fiscal a service up driven model, basis markets, productivity and XX% EBITDA, markets. their revenue and addressable in proud and the us The XX% to and million. Accretive Consolidated we Consolidated as strong. year TIC-MS, demand growth $XX.X fiscal Equipment, the widened continued

role its customers capitalize where failure top high growth fourth organic and the Margins our of of us growth margins benefited our quarter the quarter XX% Service total quarter servicing segment synergies mitigation I'll fiscal of We results segment. In and by is retention. service by recorded to and value generated for driven quickly continue automation recognize on growth year-over-year addressable the XX.X%. Service to and straight XXXX, Increases markets the XXX expanded streams services which revenue regulated upon As the cross-selling expanded Service effectiveness compelling is from priority. opportunities. In differentiator fiscal service for XXXX, to risk service driven organic XX.X%. margins a improvement, Transcat's points achieve continued differentiated Transcat's throughout our XXth our increases high to basis fourth Transcat primarily resonate fourth continues Service of touch suite highly productivity, markets. year-over-year gross recurring in to and cost growth and integration year-over-year that strategy always, key points XXX drove process XX% is to basis the acquisition growth. gross margin quarter of by expand. enables and in process

XXXX points, margins expanded fiscal and In the benefited the from Axiom the driven revenue XXX for full basis prior the points and of from detailed by turn basis to expanded increased look X% gross margins that, Distribution distribution business. With the I'll financials. the Tom things to more quarter, XXXX rental at high-performing Turning fourth again, a mix XXX over fiscal Barbato year. Revenue grew grew Gross for X% acquisition. year.

Thomas Barbato

start posted Distribution X revenue I'll the and earnings of on on Lee. segment fourth and performance $XX.X was prior million segment quarter a revenue our Slide XX% by the regarding for and revenue Service in consolidated consolidated quarter versus deck detail up provides which strength and year. Fourth basis Thanks, year solid business. our website on of our full

other by remained the it coming XX%, with XX% very segment, growth acquisition. grew from of Service the and organically growth at strong X% -- revenue Looking at

As core Lee business strong. mentioned, calibration our demand for remains

was X% the Turning prior $XX.X million up to Revenue versus Distribution. of year.

benefited in higher-margin acquisition. growth the see from to Axiom continue also rental the Equipment Test which business, We

year. the XX% on Finally, full increase was total prior $XXX.X compared year consolidated revenue to a basis, of fiscal an million,

year, revenue Our segment rental the driven X%, in performance. service Distribution grew XX%. demand of by throughout year-over-year business strong growth very resulting saw strong

Slide X. to Turning

gross margin margin basis of of segment Service Distribution The technician quarter of million XX.X% ability gross expanded XXX year, margin our XXX to Service productivity high $XX was basis prior points. value profit gross XX% up XX.X%. our the basis demonstrates points fourth consolidated differentiated up the leverage our XXX for expanded Our from was gross further proposition. to and margin and increase points. levels

For XX.X%. the basis gross to improved $XX.X consolidated profit gross margin our increased full points million year, to our XX% XXX and

increase was segment which XX.X%, basis benefited in of basis margin represented the the rental growth an compared to margin gross year. points from points XXX significant gross up Service higher-margin as the Our was business. of segment Distribution XX.X% prior XXX

Turning show per normalize for increased because to and noncash We best from operating of income gauge believe of our to prior use earlier Slide we the for $X.XX $X.X our a the of X. per prior our $X.XX. Slide earnings QX net and per 'XX. Flipping from Net interest prior it $XXX,XXX income performance the benefited is cash. secondary million of $X.XX quarter in margin. is adjusted QX report we adjusted year income Full up of fiscal year from EBITDA to the We amended income which to net $X.X the agreement. business adjusted share ability XX% successful and of share from adjusted acquisition-related driven was of NEXA includes earnings adjustment $X.XX, to EBITDA performance million the diluted by year, X, adjusted EBITDA, generate the QX per from our increased same non-GAAP year. offering measure or increased and XX% proceeds diluted ongoing diluted and XX% as our where from Earn-Out costs. share earnings upfront impact of well the share to

our year, important both in by of expansion in even and to on EBITDA highlight As EBITDA to fourth adjusted does strategy, $XX.X EBITDA be last the significant is increased transaction to segments reconciliation net becomes presentation. million that our deal-related XX% found as was year. accounting. With Full to to level supplemental income acquisition a this had onetime the million, the quarter adjusted up well of consolidated always, operating expanded adjust continue section and prior EBITDA execute margin this more XX% margin year-over-year of points, costs compared as up basis EBITDA will segments purchase XXX we of adjusted can as $XX.X the noncash same that metric profit driven hit prior as both expenses it income the acquisition mind, income from EBITDA the year, compared which statement in and in adjusted from was quarter improvement growth for year

X. year, the centered expenditures our were prior to in be rentals. million to of prior pool in capital Full previously capabilities, $XX and balance future around from total segment total X.Xx. our expectations. Slide was higher had fiscal for Service announced, million $XX technology X quarter year, sheet. end. cash. net Capital as million Slide had we than $XX.X credit The flow projects. And free in at facility to with line year spend after of leverage continued stock company strong assets, just cash paid rental year-end, million $X primarily combination in the expenditures of improved At year. acquired cash available Moving versus $XX in $XX.X growth Rental of significantly and we with $XX.X ratio million million support We in Tools million growth of end a Operating the highlights Becnel

our file to Lee. XX. With Form turn May on XX-K to you, expect I'll we back Lastly, that, it

Lee Rudow

right. All Thank you, Tom.

at an of the stated call, start I for was Transcat. year As excellent the XXXX fiscal

drive highly always advantages, regulated which fortify and enhance to continue provide consistent Transcat's for value the includes into and serve. the our customers, leadership life which markets differentiation a in We to highly competitive the we We'll meaningful grow and as to regulated markets continue serve. Our that of concentration position want our sciences. strategy to to is leverage include execution strong we we

organic double-digit We range. recurring continue the and -- to generate to in growth continue single-digit from benefit to high revenue the to low we expect streams service

to expect grow. We business our rental high-margin to continue

continuous continue margin expect our automation sustainable service and in We enable to operation. improvement to process leverage expansion further to

pipeline be our our strategy. robust go-forward to to growth component of diverse acquisition On and we front, the acquisition continue a key expect

to expanded We our strategic value integrate to expect customers bring that the through continue acquire we to enhance acquisitions and capabilities.

to acquisitions drive effectively synergies. expect be and to We accretive

anticipating we market the and adapting a a with TSX on services Solution owner of demonstrated science a Management creative being Strategic about differentiation. to Single life led looking Asset launch different highly strong Solutions. Transcat's integration or for of existing the year. is acquisition and through sold and ahead, midway comprehensive Global services Single stands important profitable and step a makers be space Transcat, will questions. addressable unique Source to life regulated We Partnerships. record. growth his Transcat's and a John suite about capitalizing We're shareholders. And validation, a of excited for core in Source which instrumentation team excited diversifies line for to of a This and NEXA's new with John by commissioning, growth expectations, started. and the new these are durability. Transcat our This It's launch management believe portfolio brand Cummins, strong NEXA is platform that. We're high-level promotion service about operating get continued TSX growing among the spaces long-term Transcat's The areas great our Becnel operations. is It a in large of services strategic calibration, both fit of fiscal expand be example position within rental is users. market. to or generate operator, cycle will the expect for in of and Becnel and provide of environmental continue that. our to please that, addition component. recent markets core projects we And a market, asset for opportunities acquisition services services good many to calibration a full Transcat's our One with capital regulated is synergistic essentially for are Transcat's both. Essentially, offer strengths. The in better manufacturing critical operates open track our decommissioning, increases company, of to President other It's CMMS, with next reliability the of decision further to leaders very We expect initiative, with position, to to all In our an and others. sustainable program with to the is Vice company, love Enterprise approach Becnel course, former able value to integrated will opportunities.

Operator

Our Instructions] [Operator from question with Greg Craig-Hallum. first comes Palm

Danny Eggerichs

seemingly Wanted you as kind to 'XX This Danny again. Eggerichs guess, margin there, start again record and results of about year the the a on I some initiatives fiscal Greg talking automation. pretty outlook is today. side. good on the going good on and growth for Service for and at quarterly Congrats well. about on you kind saw Obviously, process a think talked the in as good improvements internal the XX.X%, I we're of the of

where kind wondering that further pull of we're out kind kind internal margin moving of and initiatives at of in can Just much forward? of terms those of we how

Lee Rudow

Right.

work doing to both like things in that the We progress. continue So automation. we're

certainly a I think or were or to we're or the probably We're in along important. baseball fifth to even improvement, probably an you fourth further not fourth that we're that's of game, than inning use if fourth. no we're probably initiative. closer fifth, analogy of third in the Process

both as operational We're runway leaders. are well. of I those developing But other So there's there our things on think always initiatives.

So the labs, will level, all we're our way management the into the actual leadership on level, eventually their at management make in both that margins. these working things assistant

the that think I established looking So of point. we've range we're in sort we're this at -- mid-XX% at

time. that above think I get over we'll

get we'll the think better. -- that's but to to As into too premature programs to runway of the got improve we've I talk guess, upper be essentially, about probably other mid- it. beyond And But to getting the mature, mentioned, systems it's and I keep some possibility, continue message. XXs. And these I

Danny Eggerichs

That's I And it. sticking Got guess margins, helpful. side. maybe the on with Distribution just maybe

So contribution. Becnel XX% that's over of obviously last quarters the couple here, before over and

XX% it maybe of well. was forward? XX% think about higher-margin that we the of layer going Distribution kind now think previously, as margins progression the I But in of as we range. So business kind should the How to

Thomas Barbato

We're some kind it's we as Yes. forward. entrenched we into impact range. that And well Yes. Becnel, of we Tom. the you would Becnel still But it guidance kind go could idea of could mid-XXs. margin to a addition good have, but of with going total Danny, pretty expect the got digesting what Obviously, of provide obviously. it's low in and that to in we've mid-XXs the for get XXs, additional think of we're

Danny Eggerichs

That's and new gas, on on an side And in is Becnel. that kind you're that there the correct? oil of of market Okay. just rental in kind Great. over that following up entering entirely the

Thomas Barbato

a is, of that a really around done so business to isn't we've that It is but tied work industry about oil gas to business the be it's we right, the we it tied much bit regulation and the this the differently, believe that little think that to around and has as -- done. isn't lot diligence the

equipment and mentioned, As Lee environmental and those providing regulation to important decommissioning support wells there's Becnel's around really industry that activities. renting oil

regulated we standpoint, something we plays end that that serve. as more it And with really it's So of from the regulation same more see -- markets the than different.

Operator

H.C. Our next question is from Scott Buck Wainwright. with

Scott Buck

coming us Can is you what acquisition? from post-Becnel tell segment percentage rentals Distribution of revenue

Thomas Barbato

about acquisition, Distribution Post Yes. it's the of overall XX% business.

Scott Buck

size Okay. Perfect. saw I'm Becnel, of and with about think your way in ask just the given finance I terms want a equity, or that and that does acquisitions. to you And it you we the strength I second deals? That's -- would bit little the acquisitions one, potential change of helpful. view curious, how maybe

Lee Rudow

mean, that the we offering. and put good. had I yes past no. an is what little upon if was than we'd and We that it's larger Lee. so bit execute in found a We position we ourselves to a a in in fit say position was that done the good be opportunity would So strategic this a it. I did

-- we'll of I look at forward, we'll look on we're go an to like think our in. position cash present basis. a our I position. look and will we each we at strength opportunity, the stock. them the individual And different We But as continue at deal

that. I that's execute allows our Our capital key. being good and a do And see position us to just us in structure the to strategy,

always think we'll approach potential each tool. be how depends the a Equity on it. will as individual situation, I table on So it

that So I Scott. answers question, hope your

Scott Buck

sense. one, 'XX. growth the Yes. No, strength for makes general seen the you've then we How And line? versus appreciate that be should that. on last just I Tom, about top there on OpEx thinking that

Thomas Barbato

Yes, Scott.

need point, of jumping a from able the In invest you if that at to growth reasonable grow continue are think some resources to numbers of I of to QX could organically, support going future as level continue you look kind continue the to there. rate we we growth. of to think order to off forward be I at level selling appropriate expect kind in to

a would level I modest point, as off would you kind QX there expect the that growth use some jumping to of So year. and through continue of from growth fiscal

Operator

is next question with from Our Ted Securities. Northland Jackson

Edward Jackson

horses Congrats back we into basically. going I'm quarter. the Can to beat go dead everyone questions all asked my has over rental. the some because on

One of bit trying rental other exploring question base? that into that what of in unpack you of unfold that worth of of maybe efforts how your of got the to was about customer out of could and is least was to And be, thought little little that parts get you the verticals a comments you going press can in kind terms do first kind And talk would where release effort a kind at that I've follow-up. was penetration I bring the see with it? a what you then bit of what think -- and kind my and

Thomas Barbato

Ted, understand make Yes, let me sure question. the I

So Is into additional what for of service opportunities the sort rental cross-selling that business essentially... you are customers? our are saying

Edward Jackson

Yes. Yes.

Lee Rudow

I'll Becnel the we deal. liked something So in you and one example that give

decommissioning and So Halliburton space course, of customer and that gauges. we clearly, is historically with going of users see rents looked Hughes equipment, large Baker But when see these instrumentation, for -- you're to company a Schlumberger, decommissioning the pressure process calibrators, base, going this their this oil equipment of you're regulated at large, all when are you to wells.

the also it's component. the component instrument not And so component, it's just service the and rental

opportunities growth So instrumentation, I calibration for as there's well. think that wherever there's

lead here, we roads internally to all calibration. sometimes And say

that like we with we think do able to an if can. when that. acquisition, were And we check to Becnel look at so I example, like we box And

So you execute time will tell, well. have to

well, what and to certainly the expect but have would You I from we're company. cross-sell of that, doing capable that's

Thomas Barbato

And solve mean just customer to some a business. problems. right? renting effort I base, there's to helps on us And It other would it attractive right? existing customer with path provides say our really way, I going builds customers. obviously, it always a the focused goodwill those And margin

part something do doing course a that of sales regular just efforts. our business normal our as we that's we So -- of in

Edward Jackson

your and with in rates at that variable managing and CapEx detail to in and buying Is and case that's a more OpEx is some business, and rental people there into interest be turning underlying an for business more any such. of that it a looking equipment that the expenditures made Distribution your maybe the environment higher interest little of capital lift there's the because of rate renting an change

Lee Rudow

build Yes, there as and being our at part certainly company, all value prop. our heard Ted, you've it's through could we how look talk we the be. of years us, And recession-resistant, about

So component includes our CapEx rentals, suite of to services, certainly OpEx it. that which has

to life to So in general, sciences, tends resistance. lend some itself

And do these they and value some that cost of control start enhance keep we and look it, sort business so to and what business, portion optimization part of NEXA are all our prop. -- and making and the coordinated it's services we on sure together we and if part and at towards you that we're resistance the the economic cycles, to of lead love going

Edward Jackson

about business. $XX for million revenue with forecast we of haven't year their this layering of into it's their the through It's fiscal incorporated of this would of how assume be taken Is quite we that to seasonality for any XX-month quarter about that over like a really that adjustment those over I top of maybe because an How course a full actually into there Becnel then And just into at Okay. in flows that cycle? the first the that account. us do kind line terms think shifting business be to that sort should point. quarter.

Thomas Barbato

Yes.

take I'll Ted, one. that So

point that business. the the because first lowest right, acquired traditionally seasonality kind And partway think their calendar some correct, seasonality almost April. as for of to actually business, highest this QX, of year teens complementary I So in to an There is right? high adjustment them Transcat's think like because It's business. is quarter your it revenue There is quarter. is of revenue be through which should of somewhat a we Transcat's

reasons to I more the calendar winter. need lightest if all seasonality, guess business. behind their is lightest business for There's on -- weather in There's be the kind concerns there's that, the QX the quarter good for QX operating way fit. going So it's But a other that we And definitely in that's offline. is Gulf. the discuss of But can detail if that. definitely some you

Edward Jackson

pipeline? sounds Okay. line, area mean, there of of And then you on this market, there is I -- in other through be basis. Is did I'll M&A But can for I'm And opportunity in interesting. a put trying obviously, that of kind is into got step It pretty business. this further like you've out organic but you brand-new an there terms you you'll an it M&A? something to it grow it's sure intriguing. do mean I the

Lee Rudow

Yes.

we I certainly to So have And have that that there's make seen, any remains -- company. we that expands as against somewhere in to That acquired Lee, down in and organically, we operate course we Ted. we state be beyond and but would develop an And our we to us. time if and well. action this the is space then a normal potential we're it record is execute acquisition a be markets growth grow that. the think But mind in point addressable acquisitive track we that for also path I a well demonstrated look your of would think

best decisions yes, So as keep this make forward. try match we market, and organically to acquisition go we'll through strategy at looking our the to both and

Operator

next comes with from Our Martin Instructions] Oppenheimer. Yang question [Operator

Martin Yang

on relating year-over-year on anything there to especially CapEx a basis, Is question Becnel? First 'XX. for incremental fiscal

Thomas Barbato

this question. an in CapEx saw great Martin, Yes. increase year Axiom with Obviously, acquisition. we past the

the profile to to the And in you've The acquisition, in business. growing business rent. see to to is right? place see margin increase of 'XX a with expect that mean think the very assets assets a be the key have you returns able those should got I I Becnel are good. on similar to we rental in that

So about would of And the the remainder of a increase yes, the same. support -- but business the then similar to I expect rentals. majority remains

Martin Yang

dollar think or we of similar growth? the percentage terms amount Should about increase in

Thomas Barbato

amount. Dollar

Martin Yang

maybe question integrated reach without give maybe a TSX, more offering little customers positioning not new or trying -- you approach new with relating such positioning to win harder customers you on on us a can to Next that the get bit easy service are more without to to a detail to are brand maybe it? trying overall, is this

Lee Rudow

Yes.

right that's think I the way it. characterize to

when right acquired a we've about, unique value through we're level we the a we been all do at as which time -- the over organically of comprehensive we've have growth, low, the call at in years, that of strength ranges So highly right right nice proposition approach our the customers. servicing decision-makers, really with get position you if to had present result historically, the mid TSX and And high at is now take really the those we of both always is look to and able we compelling what something activities regulated is a to opportunities. be built that but what it's and a so look that that companies, at it's to

what a it game time hundred it different and the right prop, single-source lot about, different time, like of and done transactional And value customer their that's can get say, now million. the and this over work right and time what the have is mitigation. if do But figures you that believe, and $X a an is to there different a at but features a We've place low a from thousand solution business. to, business And with approach let's be, got that's other dollars we We large. save get or a it's something risk X in properly couple all a that opportunity should about. takes takes plan, something money really the of do TSX anywhere

I think well. you've So characterized it

Martin Yang

One to characterizing is on the large. offer customers. verticals. a what it. X Got service quick thinking I'm A you're -- there for follow-up way more potential Is is

other duration the or X is you any customers. maybe the grow maybe X others The business potential size that the that or gave with the you of relationship the Is engage of confidence you of can the with? contract

Lee Rudow

is for for contracts. the of customer. I a things, you're the contract. contracts you're both relationship do there when you length do really of going a Over you something and to the have ultimately make that both combination do the size to ability think these to good at our going think going to you When to price, its fair would contract going way size the length be to your have those -- that's with and based And the to and of the of grow and to it these to the grow upon value. add potential well time, goal unique I be

to assuming you've our you are potentially that So but that, goals. got execute both do well, I would Martin, agree

Operator

session. over comments. question-and-answer for We call back the have reached turn Lee closing like the the I'd end to to Rudow of now

Lee Rudow

look you in Conference with today. presenting all you're Minneapolis to certainly be We'll May our check We joining We Craig-Hallum care. talking after Otherwise, feel welcome in to forward on the Investment on Take it. call appreciate the us thank Well, with first again us join time. XX, free to Okay. quarter. if everyone any us for there. at

Operator

conference. concludes This today's

you your participation. we disconnect at and You time, thank this lines may your for

Transcat (TRNS) 21 May 242024 Q4 Earnings call transcript