TRANSCAT INC
For the period ended Jun 28, 2025. Filed Aug 6, 2025.
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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.
Jun 28, 2025 · Filed Aug 6, 2025
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 2024-12-28; filed 2025-02-05.
0001437749-25-002899
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-28; filed 2025-08-06.
0001437749-25-025074
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 80 previous paragraphs and 68 current paragraphs.
22 unchanged; 35 reworded; 10 added; 20 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 26 previous and 21 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 (10)
Current report
CRITICAL ACCOUNTING ESTIMATES
Current report
As a percentage of total revenue, operating expenses were 26.8% in the first quarter of fiscal year 2026 and 26.3% in the first quarter of fiscal year 2025, an increase of 50 basis points.
Current report
Net income for the first quarter of fiscal year 2026 decreased $1.1 million or 26.0% versus the first quarter of fiscal year 2025. As a percentage of revenue, net income was 4.3% in the first quarter of fiscal year 2026, down from 6.6% in the first quarter of fiscal year 2025. The year-over-year decrease in net income was primarily due to higher operating income, offset by higher interest expense, net and provision for income taxes.
Current report
On July 29, 2025, we entered into a Credit Agreement (the “Credit Agreement”) with a group of three lenders establishing a new five-year $150.0 million secured revolving credit facility (the “Credit Facility”). Borrowing options under the Credit Facility include: (i) a revolving loan option; (ii) a swingline loan option; and (iii) letters of credit, each of which is provided on a committed basis. The Credit Facility replaced the Company’s former $80.0 million credit facility (the “Replaced Facility”), which included a letter of credit subfacility of $10.0 million and our 2018 term loan, with an original principal amount of $15.0 million (the “2018 Term Loan”). We used initial borrowings under the Credit Facility to repay amounts due under the Replaced Facility, including the remaining amounts under the 2018 Term Loan.
Current report
Most borrowings under the new Credit Facility bear interest, at our election, at a fixed base rate or the daily simple SOFR rate, plus a margin. Any swingline loan will bear interest at the fixed base rate plus a margin. The applicable margin is based on our then-current leverage ratio. Under the Credit Facility, the applicable margin was reduced for most levels of leverage ratio for comparable categories of borrowings under the Replaced Facility. The applicable margin ranges from 0.00% to 0.75% for base rate loans and 1.00% to 1.75% for SOFR loans. We will pay a commitment fee based on the daily unused amount under the Credit Facility multiplied by the applicable margin, which ranges from 0.10% to 0.20% for the commitment fee.
Current report
The Credit Agreement has certain financial covenants with which we must comply. The leverage ratio covenant under the Credit Facility requires us to maintain our ratio of outstanding indebtedness to consolidated EBITDA to be no greater than 3.00 to 1.00, provided that we may temporarily increase the leverage ratio covenant if we complete a material permitted acquisition under the terms of the Credit Agreement. We must also maintain a fixed charge coverage ratio of no less than 1.20 to 1.00.
Current report
During the first quarter of fiscal year 2025, we used $16.0 million for a business acquisition.
Current report
Our team delivered solid revenue and adjusted EBITDA performance in the fiscal first quarter highlighted by double-digit service revenue growth and better-than-expected demand in our distribution segment. Distribution revenue grew 19% in the quarter with a record 35% gross margin driven primarily by strong rentals performance and strategic inventory purchases. Rentals are benefiting from more efficient sales and marketing processes and post-integration synergies. We continue to see measured improvement from our organic and inorganic initiatives, paired with another quarter of robust revenue growth and disciplined cost management that enabled us to deliver 15% adjusted EBITDA growth.
Current report
Acquisitions continue to be a cornerstone of our growth strategy. We are extremely excited about the recent acquisition of Essco Calibration, the largest deal in our history, supported by our new, larger credit facility. Essco is a perfect fit into our calibration service portfolio and creates a strong presence for us in the New England market. With the Essco deal following the acquisition of Martin Calibration in December, we have acquired two leading regional calibration providers in an 8-month period. This demonstrates our ability to attract and acquire highly sought-after calibration companies to expand our capabilities and geographic reach, while increasing market share. Martin Calibration had another strong quarter in the Midwest, driven in part, by synergies with us. The integration of Martin is ahead of schedule as we deploy our well-honed integration playbook.
Current report
Looking forward, the macro environment continues to be a challenge, but our diversified portfolio of product and services along with a strong financial profile will continue to differentiate us in fiscal 2026 and beyond. We expect continued revenue growth, benefiting from our new strength in the Midwest, larger presence in the New England market, and progressively improving Service organic revenue. Barring any further economic deterioration, we are confident in our expectation of a return to high single-digit Service organic revenue growth in the second half of Fiscal 2026. The inherent operating leverage in our Service model, along with automation of our calibration processes and focus on productivity, remain key enablers of Service margin expansion. Our acquisition pipeline remains strong, and we will continue to leverage our integration expertise. We believe strong execution combined with the differentiation of our portfolio, positions us well to drive sustainable, long-term shareholder value
Removed paragraphs (20)
Previous report
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Previous report
Service revenue, which accounted for 62.3% and 63.7% of our total revenue in the third quarter of fiscal years 2025 and 2024, respectively, increased $0.1 million or 0.1% from the third quarter of fiscal year 2024 to the third quarter of fiscal year 2025. This year-over-year increase included $2.0 million in revenue from the acquisitions of Martin and Becnel. Organic revenue decreased by 3.9% 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 lower revenue from NEXA.
Previous report
As a percentage of total revenue, operating expenses were 26.3% in the third quarter of fiscal year 2025 and 25.5% in the third quarter of fiscal year 2024, an increase of 80 basis points.
Previous report
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 report
Nine Months Ended December 28, 2024*** COMPARED TONine Months Ended December 23, 2023 (dollars in thousands):** ***
Previous report
Revenue:
Previous report
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 report
Gross Profit:
Previous report
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 report
Operating Expenses:
Previous report
As a percentage of total revenue, operating expenses were 26.1% in the first nine months of both fiscal year 2025 and fiscal year 2024.
Previous report
Income Taxes:
Previous report
Net Income:
Previous report
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 report
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 report
Adjusted EBITDA
Previous report
Under our Second Amended and Restated Credit Facility Agreement (the “Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), we have access to a revolving credit commitment (the “Revolving Credit Commitment”) of $80.0 million through June 2026, with a letter of credit subfacility of $10.0 million. Our 2018 term loan, with an original principal amount of $15.0 million (the “2018 Term Loan”), is also provided for under the Credit Agreement.
Previous report
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 report
During the first nine months of fiscal year 2024, we paid $0.8 million of other holdbacks related to business acquisitions.
Previous report
The Transcat team has consistently delivered excellent results over an extended period. We are disappointed with the Service organic revenue decline in the third quarter of fiscal year 2025 as the timing of the holiday impacted the quarter’s results. Looking ahead, we believe our growth investments, track record of strong execution, and diversified portfolio will drive sustainable organic revenue growth. We expect fiscal year 2025 Service organic revenue growth in the mid-to-low single digits and gross margin expansion, when normalized for the extra week in fiscal year 2024. Due to our strong Service sales pipeline, we anticipate a return to more historic organic growth levels in fiscal year 2026. We have demonstrated the ability to leverage automation of our calibration processes and focus on productivity to improve our operational efficiency. These tools remain key enablers of gross margin expansion. We are very excited about the acquisition of Martin Calibration due to Martin’s commitment to quality, extensive customer base, geographic coverage, and strong culture. We believe that Transcat, together with Martin, is a perfect match.
Reworded paragraphs (35)
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,” "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.
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,” "continue," “estimates,” “expects,” "focus," “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 businesses as well as the industrial manufacturing, aerospace, defense, energy and utilities industries, the significant competition we face in our Distribution segment, any impairment of our goodwill or intangible assets, tariffs and changing trade relations, regional and international conflicts and political conditions, negative publicity and other reputational harm our ability to successfully complete and integrate business acquisitions, potential unexpected liabilities associated with companies we acquire, 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, our ability to adapt our technology, reliance on our enterprise resource planning system, technology updates, supply chain delays, disruptions or product shortages, the risks related to current and future indebtedness, foreign currency rate fluctuations, risks related to protecting 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 fu…
Excerpt shortened here; the source contains the full paragraph.
Previous 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.
Current wording
During our first quarter of fiscal year 2026, we had consolidated revenue of $76.4 million. This represented an increase of $9.7 million or 14.6% versus the first quarter of fiscal year 2025. This increase was primarily due to acquisitions. Acquired revenue, which represents revenue from acquisitions completed after the end of the prior period, was $7.9 million. Organic revenue increased by 4.1% versus the first quarter of fiscal year 2025. 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 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.
Current wording
Our first quarter of fiscal year 2026 gross profit was $25.8 million. This was an increase of $3.2 million or 14.0% versus the first quarter of fiscal year 2025. Consolidated gross margin was 33.8%, a decrease of 20 basis points versus the first quarter of fiscal year 2025. This decrease in gross profit percentage was due to low organic revenue increases and lower margins from the Transcat Solutions business.
Previous 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.
Current wording
Total operating expenses were $20.5 million in the first quarter of fiscal year 2026, an increase of $2.9 million or 16.7% when compared to the prior fiscal year first quarter. Included in operating expenses during the first quarter of fiscal year 2026 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 26.8% in the first quarter of fiscal year 2026, up 50 basis points from 26.3% in the first quarter of fiscal year 2025. Operating income was $5.3 million, an increase of $0.2 million, or 4.7% and operating margin decreased from 7.6% to 7.0% in the first quarter of fiscal year 2026.
Previous 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.
Current wording
Net income was $3.3 million in the first quarter of fiscal year 2026 versus $4.4 million in the first quarter of fiscal year 2025. The decrease was primarily due to higher operating income offset by increases in interest expense and provision for income taxes.
Previous 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:
Current wording
The following table presents, for the first quarter of fiscal year 2026 and fiscal year 2025, the components of our Condensed Consolidated Statements of Income:
Previous wording
Third QUARTER ENDED December 28, 2024 COMPARED TOThird QUARTER ENDED December 23, 2023* (dollars in thousands):**** ***
Current wording
First QUARTER ENDED June 28, 2025 COMPARED TOFirst QUARTER ENDED June 29, 2024* (dollars in thousands):**** ***
Previous 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.
Current wording
Total revenue was $76.4 million, an increase of $9.7 million, or 14.6%, in our fiscal year 2026 first quarter compared to the prior fiscal year first quarter.
Previous 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.
Current wording
Service revenue, which accounted for 64.3% and 65.6% of our total revenue in the first quarter of fiscal years 2026 and 2025, respectively, increased $5.4 million or 12.3% from the first quarter of fiscal year 2025 to the first quarter of fiscal year 2026. This year-over-year increase included $6.4 million in service revenue from the acquisition of Martin. Organic revenue decreased by 1.0% due to lower revenue from the Transcat Solutions business.
Previous 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.
Current 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.
Previous 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:
Current wording
The following table presents the trailing twelve-month Service segment revenue for the first quarter of fiscal year 2026 and each quarter in fiscal year 2025 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 three quarters 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 quarter of fiscal year 2026 and for each quarter during fiscal year 2025:
Previous 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.
Current wording
Our Distribution revenue accounted for 35.7% of our total revenue in the first quarter of fiscal year 2026 and 34.4% of our total revenue in the first quarter of fiscal year 2025. During the first quarter of fiscal year 2026, Distribution segment revenue was $27.3 million which was an increase of $4.4 million or 19.0%. This increase was due to $1.5 million of incremental revenue from the acquisition of Martin, incremental traditional rental revenue, and higher revenue from our non-rental products.
Previous 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.
Current wording
The Distribution segment revenue increase for the first quarter of fiscal year 2026 versus the first quarter of fiscal year 2025 was due to revenue from the acquisition of Martin, increases in traditional rental products and higher revenue from non-rental products.
Previous 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.
Current wording
Distribution revenue includes 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 and third 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 quarter of fiscal year 2026 and each quarter of fiscal year 2025:
Previous 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.
Current wording
Our total pending product shipments at the end of the first quarter of fiscal year 2026 were $4.2 million, a decrease of $0.5 million versus the end of the first quarter of fiscal year 2025 and an increase of $0.9 million since March 29, 2025. The increase in pending product shipments and backorders since March 29, 2025 was a result of increased orders.
Previous 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.
Current wording
Total gross profit for the first quarter of fiscal year 2026 was $25.8 million, an increase of $3.2 million or 14.0% versus the first quarter of fiscal year 2025. Total gross margin was 33.8% in the first quarter of fiscal year 2026, slightly down from 34.0% in the first quarter of fiscal year 2025, a 20 basis point decrease.
Previous 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.
Current wording
Service gross profit in the first quarter of fiscal year 2026 increased $1.3 million, or 8.9%, from the first quarter of fiscal year 2025. Service gross margin was 33.0% in the first quarter of fiscal year 2026, a 100 basis point decrease versus the 34.0% in the first quarter of fiscal year 2025. This decrease in Service gross margin was the result of organic revenue decreases and lower margins from the Transcat Solutions business.
Previous 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.
Current wording
Distribution segment gross margin was 35.2% in the first quarter of fiscal year 2026 versus 33.9% in the first quarter of fiscal year 2025, an increase of 130 basis points. The increase in Distribution gross margin was due to increased rental revenue and the mix of non-rental products sold.
Previous 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.
Current wording
Total operating expenses were $20.5 million in the first quarter of fiscal year 2026 versus $17.6 million during the first quarter of fiscal year 2025. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions, primarily attributable to acquisition related amortization expense. 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 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.
Current wording
Our effective tax rate for the first quarter of fiscal years 2026 and 2025 was 28.6% and 15.7%, respectively. 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 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 2026 and 2025 was less than $0.1 million and $0.6 million, respectively. We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective tax rate given changes in facts and circumstances expected in the future.
Previous 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.
Current wording
Total Adjusted EBITDA, a non-GAAP measure, for the first quarter of fiscal year 2026 was $11.8 million, an increase of $1.6 million or 15.2% versus the first quarter of fiscal year 2025. 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 15.4% for the first quarter of fiscal year 2026 from 15.3% for the first quarter of fiscal year 2025. The increase in Adjusted EBITDA during the first quarter of fiscal year 2026 was primarily driven by increases in operating income, depreciation and amortization expense and non-cash stock compensation.
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 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.
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, contingent consideration, 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
We expect that foreseeable liquidity and capital resource requirements will be met through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility. We believe that these sources of financing will be adequate to meet our future requirements.
Current wording
We expect that foreseeable liquidity and capital resource requirements will be met through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility. We believe that these sources of financing will be adequate to meet our future requirements including anticipated operating expenses, capital expenditures, interest payments on our long-term debt, and planned business acquisitions. To the extent that we do not satisfy our liquidity requirements through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility, we intend to satisfy such requirements through proceeds from the issuance of common stock.
Previous wording
The Credit Agreement allows us to use up to $50.0 million under the Revolving Credit Commitment for acquisitions in any single fiscal year. The Credit Agreement restricts our ability to complete acquisitions of businesses with a principal place of business located in the United Kingdom or the European Union to an aggregate purchase price of $40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the Revolving Credit Commitment. Under the Credit Agreement, we may make restricted payments up to $25.0 million in the aggregate over the term of the Credit Agreement and $10.0 million in any single fiscal year to repurchase shares and pay dividends.
Current wording
Under the Replaced Facility, we could use up to $50.0 million for acquisitions in any single fiscal year. The Replaced Facility restricted our ability to complete acquisitions of businesses with a principal place of business located in the United Kingdom or the European Union to an aggregate purchase price of $40.0 million during the term of the Replaced Facility, if the acquisition was financed directly or indirectly with funds borrowed under the Replaced Facility. Under the Replaced Facility, we were permitted to make restricted payments up to $25.0 million in the aggregate over the term and $10.0 million in any single fiscal year to repurchase shares and pay dividends.
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 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.
Current wording
Effective July 1, 2023, interest on outstanding borrowings under the Replaced Facility accrued, 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 accrued based on the average daily amount of unused credit available on the Replaced Facility. Interest rate margins and unused fees were determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the Replaced Facility for the first quarter of fiscal year 2026 was 5.2%. 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 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.
Current wording
The Replaced Facility had certain covenants with which we were required to 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 under the Replaced Facility during the first quarter of fiscal year 2026.
Previous 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.
Current wording
As of June 28, 2025, $80.0 million was available for borrowing under the Replaced Facility, of which, $33.2 million was outstanding. 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.
Previous 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.
Current wording
As of June 28, 2025, $1.2 million was outstanding on the 2018 Term Loan, which was included in current liabilities on the Condensed Consolidated Balance Sheets. The 2018 Term Loan required total repayments (principal plus interest) of $0.2 million per month through December 2025.
Previous wording
**Cash Flows:**The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):
Current wording
**Cash Flows:**The following table is a summary of our Condensed Consolidated Statements of Cash Flows (dollars in thousands):
Previous 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:
Current wording
Operating Activities: Net cash provided by operating activities was $3.6 million during the first quarter of fiscal year 2026 compared to $8.9 million of net cash provided by operating activities during the first quarter of fiscal year 2025. 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 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.
Current wording
Investing Activities: During the first quarter of fiscal years 2026 and 2025, we invested $4.6 million and $3.7 million, respectively, in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.
Previous 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.
Current wording
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.
Previous 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.
Current wording
We expect our income tax rate to range between 27% and 29% for full fiscal year 2026. 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 (1)
Current report — wording carried from elsewhere
Financing Activities: During the first quarter of fiscal year 2026, $2.3 million was borrowed from our revolving line of credit and $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.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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.