TRANSCAT INC

Previous 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.

Current wording

During our third quarter of fiscal year 2025, we had consolidated revenue of $66.8 million. This represented an increase of $1.6 million or 2.4% versus the third quarter of fiscal year 2024. This increase was primarily due to acquisitions. Acquired revenue, which represents revenue from acquisitions completed after the end of the prior period, was $3.7 million. Organic revenue decreased by 3.9% versus the third quarter of fiscal year 2024. 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 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.

Current wording

Our third quarter of fiscal year 2025 gross profit was $19.7 million. This was a decrease of $1.3 million or 6.0% versus the third quarter of fiscal year 2024. In addition, consolidated gross margin was 29.5%, a decrease of 260 basis points versus the third quarter of fiscal year 2024. This decrease was due to organic revenue decreases and lower margins from NEXA.

Previous 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.

Current wording

Total operating expenses were $17.6 million in the third quarter of fiscal year 2025, an increase of $0.9 million or 5.6% when compared to the prior fiscal year third quarter. Included in operating expenses during the third quarter of fiscal year 2025 were incremental operating expenses from the acquisitions of Martin and Becnel, 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 third quarter of fiscal year 2025, up 80 basis points from 25.5% in the third quarter of fiscal year 2024. Operating income was $2.1 million, a decrease of $2.2 million, or 51.1% and operating margin decreased from 6.6% to 3.1% in the third quarter of fiscal year 2025.

Previous 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.

Current wording

Net income was $2.4 million in the third quarter of fiscal year 2025 versus $3.3 million in the third quarter of fiscal year 2024. The increase was primarily due to lower operating income offset by increases in other income.

Previous 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:

Current wording

The following table presents, for the third quarter and for the first nine months of fiscal year 2025 and fiscal year 2024, the components of our Consolidated Statements of Income:

Previous wording

Second QUARTER ENDED September 28, 2024 COMPARED TOSecond QUARTER ENDED September 23, 2023* (dollars in thousands):**** ***

Current wording

Third QUARTER ENDED December 28, 2024 COMPARED TOThird QUARTER ENDED December 23, 2023* (dollars in thousands):**** ***

Previous 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.

Current wording

Total revenue was $66.8 million, an increase of $1.6 million, or 2.4%, in our fiscal year 2025 third quarter compared to the prior fiscal year third quarter.

Previous 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.

Current wording

The lower growth in Service revenue during the third quarter of fiscal year 2025 was primarily due to fewer business days compared to the third quarter of fiscal year 2024, driven by the timing of the Christmas holiday in the current quarter and to a decline in our NEXA cost control and optimization services channel 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 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:

Current wording

The following table presents the trailing twelve-month Service segment revenue for the first three quarters 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 and second 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 three quarters of fiscal year 2025 and for each quarter during fiscal year 2024:

Previous 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.

Current wording

Our Distribution revenue accounted for 37.7% of our total revenue in the third quarter of fiscal year 2025 and 36.3% of our total revenue in the third quarter of fiscal year 2024. During the third quarter of fiscal year 2025, Distribution segment revenue was $25.2 million which was an increase of $1.5 million or 6.5%. This increase was due to $1.7 million of incremental revenue from the acquisition of Becnel, incremental traditional rental revenue, offset by lower revenue from our non-rental products.

Previous 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.

Current wording

The Distribution segment revenue increase for the third quarter of fiscal year 2025 versus the third quarter of fiscal year 2024 was due to revenue from the acquisition of Becnel and increases in traditional rental products.

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 and second 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 third quarter of fiscal year 2025 and each quarter of fiscal year 2024:

Previous 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.

Current wording

Our total pending product shipments at the end of the third quarter of fiscal year 2025 were $4.0 million, a decrease of $0.7 million versus the end of the third quarter of fiscal year 2024 and a decrease of $1.1 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 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.

Current wording

Total gross profit for the third quarter of fiscal year 2025 was $19.7 million, a decrease of $1.3 million or 6.0% versus the third quarter of fiscal year 2024. Total gross margin was 29.5% in the third quarter of fiscal year 2025, down from 32.1% in the third quarter of fiscal year 2024, a 260 basis point decrease.

Previous 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.

Current wording

Service gross profit in the third quarter of fiscal year 2025 decreased $1.1 million, or 8.4%, from the third quarter of fiscal year 2024. Service gross margin was 29.7% in the third quarter of fiscal year 2025, a 280 basis point decrease versus the 32.5% in the third quarter of fiscal year 2024. This decrease in Service gross margin was the result of organic revenue decreases and lower margins from NEXA.

Previous wording

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 wording

Distribution segment gross margin was 29.1% in the third quarter of fiscal year 2025 versus 31.5% in the third quarter of fiscal year 2024, a 240 basis point decrease. The decrease in Distribution gross margin was due to the mix of non-rental products sold.

Previous wording

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 wording

Total operating expenses were $17.6 million in the third quarter of fiscal year 2025 versus $16.6 million during the third 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. The increase in general and administrative expenses is due to incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.

Previous 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.

Current wording

Our effective tax rate for the third quarter of fiscal years 2025 and 2024 was 24.7% and 21.6%, respectively. The tax provision is impacted by lower operating income and lower pretax net income. The increase in effective tax rate is due to the timing of our discrete items in relation to the timing of our pre-tax net income. 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 third quarter of fiscal years 2025 and 2024 was $0.1 million and less than $0.1 million, respectively.

Previous 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.

Current wording

Net income for the third quarter of fiscal year 2025 decreased from the third quarter of fiscal year 2024 primarily due to lower operating income slightly offset by higher other income as a result of the sale of assets related to our United Scale division.

Previous 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.

Current wording

Total Adjusted EBITDA, a non-GAAP measure, for the third quarter of fiscal year 2025 was $7.9 million, a decrease of $1.2 million or 13.2% versus the third 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 11.9% for the third quarter of fiscal year 2025 from 14.0% for the third quarter of fiscal year 2024. The decrease in Adjusted EBITDA during the third quarter of fiscal year 2025 was primarily driven by decreases in operating income and non-cash stock compensation, offset by increased acquisition related transaction expenses.

Previous wording

Six Months Ended September 28, 2024*** COMPARED TOSix Months Ended September 23, 2023 (dollars in thousands):** ***

Current wording

Nine Months Ended December 28, 2024*** COMPARED TONine Months Ended December 23, 2023 (dollars in thousands):** ***

Previous wording

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 wording

Service revenue, which accounted for 64.3% and 65.1% of our total revenue in the first nine months of fiscal years 2025 and 2024, respectively, increased $6.6 million or 5.4% from the first nine months of fiscal year 2024 to the first nine months of fiscal year 2025. This year-over-year increase included $4.2 million in revenue from the acquisitions of SteriQual, Becnel and Martin, and also included organic revenue growth of 2.3% driven by continued market share gains.

Previous wording

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 wording

Distribution revenue, which accounted for 35.7% and 34.9% of our total revenue in the first nine months of fiscal years 2025 and 2024, respectively, increased $6.1 million, or 9.3%, from the first nine months of fiscal year 2024 to the first nine months of fiscal year 2025. This year-over-year increase is primarily due to $8.2 million of incremental revenue from the acquisitions of Axiom and Becnel, and increases in traditional rental revenue offset by lower revenue from our non-rental products.

Previous wording

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 wording

Total gross profit for the first nine months of fiscal year 2025 was $63.5 million, an increase of $3.8 million or 6.3% versus the first nine months of fiscal year 2024. Total gross margin was 31.6% in the first nine months of fiscal year 2025, down from 31.7% in the first nine months of fiscal year 2024, a 10 basis point decrease. This decrease in gross margin was primarily due to increased revenue in our traditional calibration Services offset by lower revenue and gross margins for NEXA and a favorable sales mix driven by increases in rental revenue in the Distribution segment.

Previous 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.

Current wording

Total operating expenses were $52.6 million in the first nine months of fiscal year 2025 versus $49.2 million during the first nine months of fiscal year 2024, an increase of $3.4 million or 6.9%. 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 is due to incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology, offset by the NEXA earn-out adjustment in the second quarter of fiscal year 2024.

Previous wording

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 wording

Our effective tax rate for the first nine months of fiscal years 2025 and 2024 was 16.7% and 23.5%, 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 nine months of fiscal years 2025 and 2024 was $1.3 million and $0.7 million, respectively.

Previous wording

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 wording

Net income for the first nine months of fiscal year 2025 was $10.1 million, an increase of $3.3 million versus the first nine months of fiscal year 2024. The year-over-year increase in net income was primarily due to higher operating income, lower interest expense, net and higher other income related to the sale of assets related to our United Scale division.

Previous wording

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.

Current wording

Total Adjusted EBITDA, a non-GAAP measure, for the first nine months of fiscal year 2025 was $27.0 million, an increase of $0.1 million or 0.2% versus the first nine 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 nine months of fiscal year 2025 was primarily driven by increases in depreciation and amortization expense and acquisition related transaction expenses offset by the reduction in the NEXA earn-out adjustment and non-cash stock compensation. As a percentage of revenue, Adjusted EBITDA decreased to 13.4% for the first nine months of fiscal year 2025 from 14.3% for the first nine months of fiscal year 2024, driven by the reduction in the NEXA earn-out adjustment.

Previous wording

In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, and other expense), which is a non-GAAP measure. Our management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate and compare the performance of our 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, our management uses Adjusted EBITDA as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. Adjusted EBITDA is also commonly used by rating agencies, lenders and other parties to evaluate our credit worthiness.

Current wording

In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, and certain other expenses), which is a non-GAAP measure. Our management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate and compare the performance of our 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, our management uses Adjusted EBITDA as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. Adjusted EBITDA is also commonly used by rating agencies, lenders and other parties to evaluate our credit worthiness.

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 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.

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 nine months of fiscal year 2025 was 5.6%. 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 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.

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 nine months of fiscal year 2025. Our leverage ratio, as defined in the Credit Agreement, was 0.97 at December 28, 2024, compared with 0.10 at March 30, 2024.

Previous 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.

Current wording

As of December 28, 2024, $80.0 million was available for borrowing under the revolving credit facility, of which, $39.5 million was outstanding. During the first nine months of fiscal year 2025, we used $86.1** **million, drawn from cash and cash equivalents on hand and our revolving credit facility, for business acquisitions. During the first nine months of fiscal year 2024, we used $12.9 million, drawn from the revolving credit facility for business acquisitions.

Previous 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.

Current wording

As of December 28, 2024, $2.4 million was outstanding on the 2018 Term Loan, all of which was included in current liabilities on the Consolidated Balance Sheets. 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 $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:

Current wording

Operating Activities: Net cash provided by operating activities was $28.4 million during the first nine months of fiscal year 2025 compared to $26.9 million of net cash provided by operating activities during the first nine months 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:

Previous 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.

Current wording

Investing Activities: During the first nine months of fiscal years 2025 and 2024, we invested $10.5 million and $9.1 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 six months of fiscal years 2025 and 2024, we used $15.9 million and $12.9 million, respectively, for business acquisitions.

Current wording

During the first nine months of fiscal years 2025 and 2024, we used $86.1 million and $12.9 million, respectively, for business acquisitions.

Previous wording

During the first six months of fiscal year 2024, we paid $0.3 million of other holdbacks related to business acquisitions.

Current wording

During the first nine months of fiscal year 2024, we paid $0.8 million of other holdbacks related to business acquisitions.

Previous 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.

Current wording

Financing Activities: During the first nine months of fiscal year 2025, $39.5 million was borrowed from our revolving line of credit and $1.8 million in cash was generated from the issuance of common stock. In addition, we used $1.7 million for scheduled repayments of our term loan and $3.2 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 2025, which are shown as a repurchase of shares of our common stock.

Previous 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.

Current wording

During the first nine months of fiscal year 2024, $75.7 million in cash was generated from the issuance of common stock, net of direct costs of the Offering. In addition, we used $42.7 million to repay our revolving line of credit, $1.7 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.