TRANSCAT INC
For the period ended Sep 28, 2024. Filed Nov 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 28, 2024 · Filed Nov 6, 2024
TRNS$101.51+1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-29; filed 2024-08-07.
0001437749-24-025176
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-28; filed 2024-11-06.
0001437749-24-033612
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 65 previous paragraphs and 83 current paragraphs.
26 unchanged; 36 reworded; 17 added; 3 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 22 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Distribution segment gross margin was 27.9% in the second quarter of fiscal year 2025 versus 28.3% in the second quarter of fiscal year 2024, a 40 basis point decrease. The decrease in Distribution gross margin was due to lower revenue and margins from Becnel which were impacted by hurricanes in the Gulf of Mexico.
Current report
As a percentage of total revenue, operating expenses were 25.8% in the second quarter of fiscal year 2025 and 29.4% in the second quarter of fiscal year 2024, a decrease of 360 basis points.
Current report
Six Months Ended September 28, 2024*** COMPARED TOSix Months Ended September 23, 2023 (dollars in thousands):** ***
Current report
Revenue:
Current report
Distribution revenue, which accounted for 34.7% and 34.1% of our total revenue in the first six months of fiscal years 2025 and 2024, respectively, increased $4.6 million, or 10.8%, from the first six months of fiscal year 2024 to the first six months of fiscal year 2025. This year-over-year increase is primarily due to $3.8 million of incremental revenue from the acquisitions of Axiom and Becnel, and increases in rental revenue offset by slower demand for our non-rental products.
Current report
Gross Profit:
Current report
Total gross profit for the first six months of fiscal year 2025 was $43.9 million, an increase of $5.0 million or 12.9% versus the first six months of fiscal year 2024. Total gross margin was 32.6% in the first six months of fiscal year 2025, up from 31.5% in the first six months of fiscal year 2024, a 110 basis point increase. This increase in gross margin was primarily due to increased revenue in our Service segment, which allows us to leverage our fixed costs, continued technician productivity improvements, and a favorable sales mix driven by increases in rental revenue in the Distribution segment.
Current report
Operating Expenses:
Current report
As a percentage of total revenue, operating expenses were 26.0% in the first six months of fiscal year 2025 and 26.4% in the first six months of fiscal year 2024, a decrease of 40 basis points.
Current report
Income Taxes:
Current report
Net Income:
Current report
Net income for the first six months of fiscal year 2025 was $7.7 million, an increase of $4.3 million versus the first six months of fiscal year 2024. The year-over-year increase in net income was primarily due to higher operating income and lower interest expense, net.
Current report
Adjusted EBITDA
Current report
We are very proud of the consistent results the Transcat team has delivered year in and year out over an extended period of time. That said, it goes without saying we are disappointed with the NEXA-impacted aggregated results in fiscal year 2025 second quarter. We experienced isolated revenue challenges in the NEXA services channel in the quarter but believe the swift actions our team is already taking will rectify the situation as we continue to execute on our highly successful core growth strategy.
Current report
We expect fiscal year 2025 organic Service revenue growth to be in the mid-single digits when normalized for the extra week in fiscal 2024 and gross margin expansion. We anticipate a return to high single digit organic growth by the second quarter of fiscal year 2026.
Current report
Automation of our calibration processes and focus on productivity remain key enablers of margin expansion. We have demonstrated the ability to leverage these tools to improve our operational efficiency, which has become visible in our financial performance over time.
Current report
We continue to work our robust acquisition pipeline and are pleased with the potential flow of opportunities.
Removed paragraphs (3)
Previous report
Distribution segment gross margin was 33.9% in the first quarter of fiscal year 2025 versus 27.7% in the first quarter of fiscal year 2024, a 620 basis point increase. The increase in Distribution gross margin was due to increased sales from higher-margin rental sales, which now includes the acquisitions of Axiom and Becnel.
Previous report
As a percentage of total revenue, operating expenses were 26.3% in the first quarter of fiscal year 2025 and 23.2% in the first quarter of fiscal year 2024, an increase of 310 basis points.
Previous report
We are proud of our dedicated team, which has consistently delivered exceptional results through various economic cycles as can be seen over the past decade and a half of profitable growth. We believe our unique value proposition drives a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science, Aerospace, and Defense markets, along with a growing Rentals business. We expect another year of organic Service revenue growth in the high single-digit to low double-digit range when normalized for the extra week in fiscal 2024 and gross margin expansion. Automation of our calibration processes and overall process improvement will continue to be key enablers of future margin expansion. We will continue to leverage our expertise and proven track record of successful acquisitions to drive synergistic growth opportunities with a sharp focus on integration. Our robust and diverse acquisition pipeline enables strategic, accretive acquisitions that will be a key component of our go-forward strategy.
Reworded paragraphs (36)
Previous wording
Forward-Looking Statements. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, estimates, beliefs, assumptions and predictions of future events and are identified by words such as “anticipate,” “believes,” “estimates,” “expects,” “potential,” “outlook,” “seek,” “strategy,” “target,” “could,” “may,” “will,” “would,” and other similar words. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or those expressed in such forward-looking statements. You should evaluate forward-looking statements in light of important risk factors and uncertainties that may affect our operating and financial results and our ability to achieve our financial objectives. These factors include, but are not limited to, general economic conditions applicable to our business, inflationary impacts and changes in interest rates, the highly competitive nature of the industries in which we compete and in the nature of our two business segments, the concentration of Service segment customers in the life science and other FDA-regulated and industrial manufacturing industries, the significant competition we face in our Distribution segment, any impairment of our goodwill or intangible assets, tariffs and trade relations, our ability to successfully complete and integrate business acquisitions, cybersecurity risks, the risk of significant disruptions in our information technology systems, our ability to recruit, train and retain quality employees, skilled technicians and senior management, fluctuations in our operating results, our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers, the prices we are able to charge for our services in our Service segment, competition in the rental market, our ability to adapt our technology, reliance on our enterprise resource planning system, technology updates, supply chain delays or disruptions, the risks related to current and future indebtedness, foreign currency rate fluctuations, risks related to our intellectual property, geopolitical events, adverse weather events or other catastrophes, natural disasters or widespread public health crises, the volatility of our stock price, the relatively low trading volume of our common stock, changes in tax rates, changes in accounting standards, legal requirements and listing standards, and legal and regulatory risks related to our international operations. These risk factors and uncertainties are more fully described by us under the heading “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 30, 2024. You should not place undue reliance on our forward-looking statements, which…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Forward-Looking Statements. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, estimates, beliefs, assumptions and predictions of future events and are identified by words such as “anticipate,” “believes,” “estimates,” “expects,” “potential,” “outlook,” “seek,” “strategy,” “target,” “could,” "can," “may,” “will,” “would,” and other similar words. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or those expressed in such forward-looking statements. You should evaluate forward-looking statements in light of important risk factors and uncertainties that may affect our operating and financial results and our ability to achieve our financial objectives. These factors include, but are not limited to, general economic conditions applicable to our business, inflationary impacts and changes in interest rates, the highly competitive nature of the industries in which we compete and in the nature of our two business segments, the concentration of Service segment customers in the life science and other FDA-regulated and industrial manufacturing industries, the significant competition we face in our Distribution segment, any impairment of our goodwill or intangible assets, tariffs and trade relations, our ability to successfully complete and integrate business acquisitions, cybersecurity risks, the risk of significant disruptions in our information technology systems, our ability to recruit, train and retain quality employees, skilled technicians and senior management, fluctuations in our operating results, our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers, the prices we are able to charge for our services in our Service segment, competition in the rental market, our ability to adapt our technology, reliance on our enterprise resource planning system, technology updates, supply chain delays or disruptions, the risks related to current and future indebtedness, foreign currency rate fluctuations, risks related to our intellectual property, geopolitical events, adverse weather events or other catastrophes, natural disasters or widespread public health crises, the volatility of our stock price, the relatively low trading volume of our common stock, changes in tax rates, changes in accounting standards, legal requirements and listing standards, and legal and regulatory risks related to our international operations. These risk factors and uncertainties are more fully described by us under the heading “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 30, 2024. You should not place undue reliance on our forward-looking statements…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
During our first quarter of fiscal year 2025, we had consolidated revenue of $66.7 million. This represented an increase of $6.1 million or 10.1% versus the first quarter of fiscal year 2024. This increase was primarily due to acquisitions, strong demand in our Service segment’s highly-regulated end markets and increased rental sales, which includes incremental revenue from acquisitions. See Note 5 – “Business Acquisitions” to our unaudited consolidated financial statements in this report for more information about the impact of our acquisitions.
Current wording
During our second quarter of fiscal year 2025, we had consolidated revenue of $67.8 million. This represented an increase of $5.0 million or 8.0% versus the second quarter of fiscal year 2024. This increase was primarily due to acquisitions, demand in our Service segment’s highly-regulated end markets and increased rental sales, which includes incremental revenue from acquisitions. See Note 5 – “Business Acquisitions” to our unaudited consolidated financial statements in this report for more information about the impact of our acquisitions.
Previous wording
Our first quarter of fiscal year 2025 gross profit was $22.7 million. This was an increase of $3.9 million or 21.1% versus the first quarter of fiscal year 2024. In addition, consolidated gross margin was 34.0%, an increase of 310 basis points versus the first quarter of fiscal year 2024. This increase was largely the result of operating leverage on our fixed costs, increased technician productivity and accretive gross margins from our rental business.
Current wording
Our second quarter of fiscal year 2025 gross profit was $21.2 million. This was an increase of $1.1 million or 5.4% versus the second quarter of fiscal year 2024. In addition, consolidated gross margin was 31.3%, a decrease of 70 basis points versus the second quarter of fiscal year 2024. This decrease was due to lower margins from NEXA and Becnel.
Previous wording
Total operating expenses were $17.6 million in the first quarter of fiscal year 2025, an increase of $3.5 million or 24.8% when compared to the prior fiscal year first quarter. Included in operating expenses during the first quarter of fiscal year 2025 were incremental operating expenses from the acquisitions of Becnel, Axiom and SteriQual, investments in technology and higher incentive-based employee costs due to higher sales. As a percentage of total revenue, operating expenses were 26.3% in the first quarter of fiscal year 2025, up 310 basis points from 23.2% in the first quarter of fiscal year 2024. Operating income was $5.1 million, an increase of $0.5 million, or 9.9% and operating margin decreased from 7.7% to 7.6% in the first quarter of fiscal year 2025.
Current wording
Total operating expenses were $17.5 million in the second quarter of fiscal year 2025, a decrease of $1.0 million or 5.5% when compared to the prior fiscal year second quarter. Included in operating expenses during the second quarter of fiscal year 2025 were incremental operating expenses from the acquisitions of Becnel, Axiom and SteriQual, investments in technology and higher incentive-based employee costs due to higher sales. Included in operating expenses during the second quarter of fiscal year 2024 was a $2.8 million non-cash charge related to the amended NEXA earn-out agreement. As a percentage of total revenue, operating expenses were 25.8% in the second quarter of fiscal year 2025, down 360 basis points from 29.4% in the second quarter of fiscal year 2024. Operating income was $3.7 million, an increase of $2.1 million, or 127.3% and operating margin increased from 2.6% to 5.5% in the second quarter of fiscal year 2025.
Previous wording
Net income was $4.4 million in the first quarter of fiscal year 2025 versus $2.9 million in the first quarter of fiscal year 2024. The increase was primarily due to higher operating income and lower interest expense.
Current wording
Net income was $3.3 million in the second quarter of fiscal year 2025 versus $0.5 million in the second quarter of fiscal year 2024. The increase was primarily due to higher operating income and lower interest expense.
Previous wording
The following table presents, for the first quarter of fiscal year 2025 and fiscal year 2024, the components of our Consolidated Statements of Income:
Current wording
The following table presents, for the second quarter and for the first six months of fiscal year 2025 and fiscal year 2024, the components of our Consolidated Statements of Income:
Previous wording
FIRST QUARTER ENDED June 29, 2024*** COMPARED TOFIRST QUARTER ENDED June 24, 2023 (dollars in thousands):** ***
Current wording
Second QUARTER ENDED September 28, 2024 COMPARED TOSecond QUARTER ENDED September 23, 2023* (dollars in thousands):**** ***
Previous wording
Total revenue was $66.7 million, an increase of $6.1 million, or 10.1%, in our fiscal year 2025 first quarter compared to the prior fiscal year first quarter.
Current wording
Total revenue was $67.8 million, an increase of $5.0 million, or 8.0%, in our fiscal year 2025 second quarter compared to the prior fiscal year second quarter.
Previous wording
Service revenue, which accounted for 65.6% and 65.8% of our total revenue in the first quarter of fiscal years 2025 and 2024, respectively, increased $3.9 million or 9.8% from the first quarter of fiscal year 2024 to the first quarter of fiscal year 2025. This year-over-year increase included $1.3 million in revenue from the acquisitions of SteriQual and Becnel, and also included organic revenue growth of 6.4% driven by strong end-market demand and continued market share gains.
Current wording
Service revenue, which accounted for 65.0% and 66.0% of our total revenue in the second quarter of fiscal years 2025 and 2024, respectively, increased $2.7 million or 6.4% from the second quarter of fiscal year 2024 to the second quarter of fiscal year 2025. This year-over-year increase included $0.8 million in revenue from the acquisition of Becnel, and also included organic revenue growth of 4.4% driven by end-market demand and continued market share gains.
Previous wording
Within any fiscal year, while we add new customers, we also have customers from the prior fiscal year whose service orders may not repeat for any number of factors. Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe trailing twelve-month information provides a better indication of the progress of this segment.
Current wording
The lower growth in Service revenue during the second quarter of fiscal year 2025 was primarily due to a decline in our NEXA cost control and optimization services business as compared to the prior year quarter. We expect to fully integrate NEXA’s sales and marketing into our existing process to drive anticipated revenue growth. Within any fiscal year, while we add new customers, we also have customers from the prior fiscal year whose service orders may not repeat for any number of factors. Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe trailing twelve-month information provides a better indication of the progress of this segment.
Previous wording
The following table presents the trailing twelve-month Service segment revenue for the first quarter of fiscal year 2025 and each quarter in fiscal year 2024 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:
Current wording
The following table presents the trailing twelve-month Service segment revenue for the first and second quarter of fiscal year 2025 and each quarter in fiscal year 2024 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:
Previous wording
Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines. We expect to subcontract approximately 13% to 15% of our Service revenue to third-party vendors for calibration beyond our chosen scope of capabilities. We continually evaluate our outsourcing needs and make capital investments, as deemed necessary, to add more in-house capabilities and reduce the need for third-party vendors. Capability expansion through business acquisitions is another way that we seek to reduce the need for outsourcing. The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for the first quarter of fiscal year 2025 and for each quarter during fiscal year 2024:
Current wording
Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines. We expect to subcontract approximately 13% to 15% of our Service revenue to third-party vendors for calibration beyond our chosen scope of capabilities. We continually evaluate our outsourcing needs and make capital investments, as deemed necessary, to add more in-house capabilities and reduce the need for third-party vendors. Capability expansion through business acquisitions is another way that we seek to reduce the need for outsourcing. The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for the first and second quarter of fiscal year 2025 and for each quarter during fiscal year 2024:
Previous wording
Our Distribution sales accounted for 34.4% of our total revenue in the first quarter of fiscal year 2025 and 34.2% of our total revenue in the first quarter of fiscal year 2024. During the first quarter of fiscal year 2025, Distribution segment sales were $22.9 million which was an increase of 10.5% or $2.2 million. This increase was due to $4.4 million of incremental revenue from the acquisitions of Axiom and Becnel offset by slower demand for our non-rental products.
Current wording
Our Distribution revenue accounted for 35.0% of our total revenue in the second quarter of fiscal year 2025 and 34.0% of our total revenue in the second quarter of fiscal year 2024. During the second quarter of fiscal year 2025, Distribution segment revenue was $23.7 million which was an increase of $2.3 million or 11.1%. This increase was due to $2.0 million of incremental revenue from the acquisitions of Axiom and Becnel, incremental rental revenue, offset by slower demand for our non-rental products.
Previous wording
The following table presents the quarterly historical trend of Distribution sales in fiscal years 2025 and 2024 compared to the prior year fiscal quarter:
Current wording
The following table presents the quarterly historical trend of Distribution revenue in fiscal years 2025 and 2024 compared to the prior year fiscal quarter:
Previous wording
The Distribution segment sales increase for the first quarter of fiscal year 2025 versus the first quarter of fiscal year 2024 was due to sales from the acquisitions of Axiom and Becnel.
Current wording
The Distribution segment revenue increase for the second quarter of fiscal year 2025 versus the second quarter of fiscal year 2024 was due to revenue from the acquisitions of Axiom and Becnel and increases in traditional rental products.
Previous wording
Distribution sales orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock. Product backorders are the total dollar value of orders received for which revenue has not yet been recognized. Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in our service centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment. Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the distribution segment.
Current wording
Distribution revenue orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock. Product backorders are the total dollar value of orders received for which revenue has not yet been recognized. Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in our service centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment. Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the distribution segment.
Previous wording
The following table presents our total pending product shipments and the percentage of total pending product shipments that were backorders at the end of the first quarter of fiscal year 2025 and each quarter of fiscal year 2024:
Current wording
The following table presents our total pending product shipments and the percentage of total pending product shipments that were backorders at the end of the first and second quarter of fiscal year 2025 and each quarter of fiscal year 2024:
Previous wording
Our total pending product shipments at the end of the first quarter of fiscal year 2025 were $4.7 million, a decrease of $2.4 million versus the end of the first quarter of fiscal year 2024 and a decrease of $0.4 million since March 30, 2024. The decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.
Current wording
Our total pending product shipments at the end of the second quarter of fiscal year 2025 were $4.1 million, a decrease of $2.2 million versus the end of the second quarter of fiscal year 2024 and a decrease of $1.0 million since March 30, 2024. The decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.
Previous wording
Total gross profit for the first quarter of fiscal year 2025 was $22.7 million, an increase of $3.9 million or 21.1% versus the first quarter of fiscal year 2024. Total gross margin was 34.0% in the first quarter of fiscal year 2025, up from 30.9% in the first quarter of fiscal year 2024, a 310 basis point increase.
Current wording
Total gross profit for the second quarter of fiscal year 2025 was $21.2 million, an increase of $1.1 million or 5.4% versus the second quarter of fiscal year 2024. Total gross margin was 31.3% in the second quarter of fiscal year 2025, down from 32.0% in the second quarter of fiscal year 2024, a 70 basis point decrease.
Previous wording
Service gross profit in the first quarter of fiscal year 2025 increased $1.9 million, or 14.7%, from the first quarter of fiscal year 2024. Service gross margin was 34.0% in the first quarter of fiscal year 2025, a 150 basis point increase versus the 32.5% in the first quarter of fiscal year 2024. This increase in Service gross margin was the result of increased revenue, which allows us to leverage our fixed-costs, and increases in technician productivity and automation.
Current wording
Service gross profit in the second quarter of fiscal year 2025 increased $0.5 million, or 3.6%, from the second quarter of fiscal year 2024. Service gross margin was 33.1% in the second quarter of fiscal year 2025, a 90 basis point decrease versus the 34.0% in the second quarter of fiscal year 2024. This decrease in Service gross margin was the result of lower than expected revenue and lower margins from NEXA.
Previous wording
The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution sales:
Current wording
The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution revenue:
Previous wording
Our effective tax rate for the first quarter of fiscal years 2025 and 2024 was 15.7% and 21.6%, respectively. The tax provision is impacted by higher operating income and lower interest expense. The decrease in effective tax rate is due to the increase in our discrete items. Our quarterly provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete benefits related to share-based compensation activity in the first quarter of fiscal years 2025 and 2024 was $0.6 million and less than $0.1 million, respectively.
Current wording
Our effective tax rate for the second quarter of fiscal years 2025 and 2024 was 11.5% and 42.6%, respectively. The tax provision is impacted by higher operating income and lower interest expense. The decrease in effective tax rate is due to the increase in our discrete items. Our quarterly provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete benefits related to share-based compensation activity in the second quarter of fiscal years 2025 and 2024 was $0.6 million and less than $0.1 million, respectively.
Previous wording
Net income for the first quarter of fiscal year 2025 increased from the first quarter of fiscal year 2024 primarily due to higher operating income and lower interest expense.
Current wording
Net income for the second quarter of fiscal year 2025 increased from the second quarter of fiscal year 2024 primarily due to higher operating income and lower interest expense.
Previous wording
Total Adjusted EBITDA, a non-GAAP measure, for the first quarter of fiscal year 2025 was $10.2 million, an increase of $1.7 million or 20.4% versus the first quarter of fiscal year 2024. See “Non-GAAP Financial Measures” below for a description of the non-GAAP measures we use and a reconciliation to the most directly comparable GAAP measures. As a percentage of revenue, Adjusted EBITDA increased to 15.3% for the first quarter of fiscal year 2025 from 14.0% for the first quarter of fiscal year 2024. The increase in Adjusted EBITDA during the first quarter of fiscal year 2025 was primarily driven by increases in operating income, depreciation and amortization expense and acquisition transaction expenses.
Current wording
Total Adjusted EBITDA, a non-GAAP measure, for the second quarter of fiscal year 2025 was $8.9 million, a decrease of $0.5 million or 5.0% versus the second quarter of fiscal year 2024. See “Non-GAAP Financial Measures” below for a description of the non-GAAP measures we use and a reconciliation to the most directly comparable GAAP measures. As a percentage of revenue, Adjusted EBITDA decreased to 13.1% for the second quarter of fiscal year 2025 from 14.9% for the second quarter of fiscal year 2024. The decrease in Adjusted EBITDA during the second quarter of fiscal year 2025 was primarily driven by increases in operating income and depreciation and amortization expense, offset by the decrease in the NEXA earn-out adjustment.
Previous wording
Total operating expenses were $17.6 million in the first quarter of fiscal year 2025 versus $14.1 million during the first quarter of fiscal year 2024. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
Current wording
Total operating expenses were $35.0 million in the first six months of fiscal year 2025 versus $32.6 million during the first six months of fiscal year 2024, an increase of $2.5 million or 7.6%. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions and higher incentive-based employee costs due to higher sales. The decrease in general and administrative expenses is due to the decrease in the non-cash charge related to the NEXA earn-out, offset by incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
Previous wording
Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrue, at our election, at either the variable Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the revolving credit facility for the first three months of fiscal year 2025 was 7.1%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan.
Current wording
Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrue, at our election, at either the variable Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the revolving credit facility for the first six months of fiscal year 2025 was 7.1%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan.
Previous wording
The Credit Agreement has certain covenants with which we must comply, including a fixed charge ratio covenant, which prohibits our fixed charge coverage ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits our leverage ratio from exceeding 3.00 to 1.00. We were in compliance with all loan covenants and requirements during the first three months of fiscal year 2025. Our leverage ratio, as defined in the Credit Agreement, was 0.08 at June 29, 2024, compared with 0.10 at March 30, 2024.
Current wording
The Credit Agreement has certain covenants with which we must comply, including a fixed charge ratio covenant, which prohibits our fixed charge coverage ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits our leverage ratio from exceeding 3.00 to 1.00. We were in compliance with all loan covenants and requirements during the first six months of fiscal year 2025. Our leverage ratio, as defined in the Credit Agreement, was 0.08 at September 28, 2024, compared with 0.10 at March 30, 2024.
Previous wording
As of June 29, 2024, $80.0 million was available for borrowing under the revolving credit facility. As of June 29, 2024, there were no amounts outstanding under the revolving credit facility. During the first quarter of fiscal year 2025 , we used $16.0 million, drawn from cash and cash equivalents on hand for a business acquisition. During the first quarter of fiscal year 2024, we used $2.9 million, drawn from the revolving credit facility for a business acquisition.
Current wording
As of September 28, 2024, $80.0 million was available for borrowing under the revolving credit facility. As of September 28, 2024, there were no amounts outstanding under the revolving credit facility. During the first six months of fiscal year 2025 , we used $15.9 million, drawn from cash and cash equivalents on hand for a business acquisition. During the first six months of fiscal year 2024, we used $12.9 million, drawn from the revolving credit facility for business acquisitions.
Previous wording
As of June 29, 2024, $3.6 million was outstanding on the 2018 Term Loan, of which $2.4 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total repayments (principal plus interest) of $0.2 million per month through December 2025.
Current wording
As of September 28, 2024, $3.0 million was outstanding on the 2018 Term Loan, of which $2.4 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total repayments (principal plus interest) of $0.2 million per month through December 2025.
Previous wording
Operating Activities: Net cash provided by operating activities was $8.9 million during the first quarter of fiscal year 2025 compared to $7.5 million of net cash provided by operating activities during the first quarter of fiscal year 2024. The year-over-year increase in cash provided by operating activities was primarily the result of changes in net working capital (defined as current assets less current liabilities). The significant working capital fluctuations were as follows:
Current wording
Operating Activities: Net cash provided by operating activities was $15.8 million during the first six months of fiscal year 2025 compared to $16.0 million of net cash provided by operating activities during the first six months of fiscal year 2024. The year-over-year decrease in cash provided by operating activities was primarily the result of changes in net working capital (defined as current assets less current liabilities). The significant working capital fluctuations were as follows:
Previous wording
Investing Activities: During the first quarter of fiscal years 2025 and 2024, we invested $3.7 million and $2.8 million, respectively, in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.
Current wording
Investing Activities: During the first six months of fiscal years 2025 and 2024, we invested $7.6 million and $5.4 million, respectively, in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.
Previous wording
During the first quarter of fiscal years 2025 and 2024, we used $16.0 million and $2.9 million, respectively, for business acquisitions.
Current wording
During the first six months of fiscal years 2025 and 2024, we used $15.9 million and $12.9 million, respectively, for business acquisitions.
Previous wording
During the first quarter of fiscal year 2025, we paid $0.5 million of contingent consideration relating to business acquisitions. During the first quarter of fiscal year 2024, we paid $0.3 million of other holdbacks related to business acquisitions.
Current wording
During the first six months of fiscal year 2024, we paid $0.3 million of other holdbacks related to business acquisitions.
Previous wording
Financing Activities: During the first quarter of fiscal year 2025, $0.3 million in cash was generated from the issuance of common stock. In addition, we used $0.6 million for scheduled repayments of our term loan and $1.6 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2025, which are shown as a repurchase of shares of our common stock.
Current wording
Financing Activities: During the first six months of fiscal year 2025, $0.8 million in cash was generated from the issuance of common stock. In addition, we used $1.2 million for scheduled repayments of our term loan and $3.0 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2025, which are shown as a repurchase of shares of our common stock.
Previous wording
During the first quarter of fiscal year 2024, $0.2 million in cash was generated from the issuance of common stock. In addition, we used $0.6 million for scheduled repayments of our term loan, $0.2 million to repay our revolving line of credit and $0.3 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2024, which are shown as a repurchase of shares of our common stock.
Current wording
During the first six months of fiscal year 2024, $5.3 million was borrowed from our revolving line of credit and $0.4 million in cash was generated from the issuance of common stock. In addition, we used $1.1 million for scheduled repayments of our term loan and $2.2 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2024, which are shown as a repurchase of shares of our common stock.
Previous wording
We expect our income tax rate to range between 24% and 26% for full fiscal year 2025. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards.
Current wording
We expect our income tax rate to range between 21% and 23% for full fiscal year 2025. This estimate includes federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Total operating expenses were $17.5 million in the second quarter of fiscal year 2025 versus $18.5 million during the second quarter of fiscal year 2024. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions and higher incentive-based employee costs due to higher sales. The decrease in general and administrative expenses is due to the reduction in the non-cash charge related to the NEXA earn-out in the second quarter of fiscal year 2024 offset by incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
Current report — wording carried from elsewhere
Service revenue, which accounted for 65.3% and 65.9% of our total revenue in the first six months of fiscal years 2025 and 2024, respectively, increased $11.1 million or 9.0% from the first six months of fiscal year 2024 to the first six months of fiscal year 2025. This year-over-year increase included $2.2 million in revenue from the acquisitions of SteriQual and Becnel, and also included organic revenue growth of 5.4% driven by end-market demand and continued market share gains.
Current report — wording carried from elsewhere
Our effective tax rate for the first six months of fiscal years 2025 and 2024 was 13.9% and 25.3%, respectively. The tax provision is impacted by higher operating income and lower interest expense. The decrease in effective tax rate is due to the increase in our discrete items. Our quarterly provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete benefits related to share-based compensation activity in the first six months of fiscal years 2025 and 2024 was $1.1 million and $0.6 million, respectively.
Current report — wording carried from elsewhere
Total Adjusted EBITDA, a non-GAAP measure, for the first six months of fiscal year 2025 was $19.1 million, an increase of $1.3 million or 7.1% versus the first six months of fiscal year 2024. See “Non-GAAP Financial Measures” below for a description of the non-GAAP measures we use and a reconciliation to the most directly comparable GAAP measures. The increase in Adjusted EBITDA during the first six months of fiscal year 2025 was primarily driven by increases in operating income and depreciation and amortization expense offset by the reduction in the NEXA earn-out adjustment. As a percentage of revenue, Adjusted EBITDA decreased to 14.2% for the first six months of fiscal year 2025 from 14.4% for the first six months of fiscal year 2024, driven by the reduction in the NEXA earn-out adjustment.