Transcat, Inc. (TRNS) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed strong financial performance with 29% revenue growth, 28% gross profit increase, and 27.2% EBITDA growth. Despite a net loss, the company is optimistic about future growth, driven by acquisitions and demand in regulated markets. Positive sentiment is reinforced by strategic geographic expansion plans and strong demand in the distribution segment. However, service margins declined, and management was vague on some details. Given the company's small market cap, the positive aspects are likely to result in a stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Consolidated Revenue $83.9 million, up 26% year-over-year. Driven by double-digit revenue growth in both distribution and service segments.
Organic Service Growth 7%, returned to more historic levels. Growth attributed to strong demand in regulated markets like life sciences, aerospace, and defense.
Consolidated Gross Profit $25.3 million, up 28% year-over-year. Gross margins expanded by 60 basis points.
Adjusted EBITDA $10.1 million, up 27.2% year-over-year. Growth driven by strong demand, unique value proposition, and acquisitions.
Service Segment Revenue 29% growth year-over-year, with 7% organic growth. Growth supported by acquisitions and demand in regulated markets.
Service Margins Declined in the third quarter. Decline attributed to onboarding elevated levels of new customers.
Distribution Revenue $30.2 million, up 20% year-over-year. Growth driven by high demand in rentals and product sales.
Distribution Gross Margin Expanded by 330 basis points year-over-year. Driven by an increase in higher-margin rental revenue.
Net Loss $1.1 million, increased year-over-year. Driven by higher amortization expense from acquisitions, higher interest expense, and CEO succession plan costs.
Adjusted Diluted Earnings Per Share $0.26, normalized for acquisition-related costs and non-operational expenses.
Operating Cash Flow Slightly lower year-over-year. Net cash from operations increased but offset by higher capital expenditures.
Total Debt $99.9 million at quarter end. Leverage ratio reduced to 2x due to growth in adjusted EBITDA.
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Operating Highlights
Instrument rental channel: Significant growth and positive mix change in the instrument rental channel contributed to overall revenue growth.
Geographic footprint expansion: Acquisitions of Martin Calibration and Essco Calibration expanded Transcat's geographic footprint and technical capabilities.
Revenue growth: Consolidated revenue increased by 26% to $83.9 million, with double-digit growth in both distribution and service segments.
Service segment growth: Service revenue grew 29%, with 7% organic growth and the rest from acquisitions.
Distribution segment growth: Distribution revenue grew 20%, driven by high demand in rentals and product sales.
Gross profit and margins: Consolidated gross profit grew 28%, with service gross profit up 25% and distribution gross profit up 34%. Gross margins expanded in both segments.
Adjusted EBITDA: Adjusted EBITDA increased by 27% to $10.1 million, with 10 basis points of margin expansion.
Acquisition strategy: Continued focus on acquiring and integrating companies to drive growth and expand market share.
AI and technology investments: Investments in AI and technology have improved data sets and business insights, enhancing competitiveness.
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Risk or Challenges
Geopolitical and Policy Environment: Uncertain geopolitical and policy environment could impact the company's ability to execute its strategies effectively.
Service Margins: Service margins declined in the third quarter due to onboarding elevated levels of new customers, which could lead to higher costs and lower productivity in the short term.
Economic Uncertainty: Continued economic uncertainty could affect demand for services and delay realization of service orders.
Acquisition Integration: Challenges in integrating acquired companies (Martin Calibration and Essco Calibration) to achieve expected sales and cost synergies.
CEO Succession Plan: Ongoing CEO succession process could create leadership uncertainty, potentially impacting strategic decision-making.
Debt Levels: Total debt of $99.9 million and higher interest expenses could strain financial resources and limit flexibility for future investments.
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Guidance & Outlook
Service Revenue Growth: Reaffirmed fourth quarter organic service revenue growth expectations to be in the high single-digit range.
Fiscal Year 2026 Outlook: Anticipates results for the year to demonstrate resilience and a differentiated business model anchored by recurring revenue streams driven by regulation and high cost of failure.
Acquisition Strategy: Plans to continue acquiring and integrating companies to expand geographic footprint and synergistically grow. Strong acquisition pipeline to expand addressable markets and increase market share.
Technology and AI Investments: Investments in leadership, technology, and process improvement are expected to drive differentiation and generate sustainable long-term value. Improved data sets are contributing to incremental business insights.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What were the drivers that enabled the company to return to high single-digit revenue growth in the quarter?
A:The growth was attributed to delayed decisions coming to fruition, ramping income paper, and anticipated deals materializing. The company feels confident about its performance and expects this trend to continue into Q4.
Q:Can you quantify the headwind caused by start-up costs and when will these costs normalize?
A:The start-up costs were not significant in dollar terms. The company emphasized the importance of starting new partnerships correctly, which sometimes incurs costs that normalize over a couple of quarters. These costs are similar to those seen in the past with CBLs.
Q:What is driving the strong revenue growth in the distribution segment, and is there a long-term opportunity in the calibration services segment?
A:The company is executing well in both equipment sales and rentals, particularly in the power generation and EV charging markets. Investments in rentals for these markets have paid off. There are recurring calibration opportunities in these end markets, and the company is aggressively pursuing these opportunities.
Q:Do you expect service growth to accelerate in Q4 2026, and what is the outlook for fiscal year 2027?
A:The company is committed to high single-digit growth for Q4 2026, building off a strong Q4 from the previous year. While no specific guidance is provided for fiscal year 2027, the new business pipeline remains strong, supporting continued growth.
Q:What are the company's plans for M&A and geographic expansion?
A:The company aims to expand into Northern California, Dallas, Atlanta, and the Mid-Atlantic region. They are also exploring opportunities in Europe, North America, and Central America to better serve their existing customer base. Recent expansion in Ireland has been successful.
Q:What is the outlook for gross margins in the next quarter?
A:Gross margins in Q4 are typically the highest of the year. While start-up costs were incurred this quarter, they are expected to normalize over the next few quarters, leading to margin expansion.
Q:What is the long-term growth potential in the life sciences and defense sectors?
A:Onshoring of manufacturing in regulated business spaces like life sciences is beneficial for the company. They can participate in various phases of capital projects, from commissioning to calibration. In defense, the company benefits from increased CapEx budgets and recurring revenue opportunities, despite many contractors having in-house calibration labs.
Q:Could the company’s organic growth rate increase in the long term due to industry trends?
A:The company is comfortable with high single-digit growth but acknowledges the potential for double-digit growth in certain quarters. As the company grows, maintaining consistent high single-digit growth is a realistic goal.
Q:What is the status of the CEO search, and will there be additional expenses related to it?
A:The CEO search is expected to conclude during this quarter, with some additional one-time expenses anticipated in Q4.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the quantification of start-up costs, the exact timeline for normalization, and specific guidance for fiscal year 2027. Additionally, while they discussed geographic expansion and M&A plans, no concrete timelines or targets were provided.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Analysis sir
Barbato remark
CEO process
Conference reminder
Demand service
Distribution demand
Essco calibration
Martin Essco
Martin calibration
Mr Senior
Officer Barbato
Results Conference
Service balance
Service period
Service segment
Slide loss
ability acquisition
ability policy
acquisition element
acquisition footprint
acquisition today
acquisition year
addition share
aerospace defense
afternoon lady
amortization expense
balance Martin
brand mix
calibration Essco
calibration acquisition
candidate CEO
capability company
life science
margin expansion
product sale
rental channel
TRNS Transcript
Transcat, Inc. (TRNS) Q3 2026 Earnings Call Transcript
Positive2-3
The earnings call revealed strong financial performance with 29% revenue growth, 28% gross profit increase, and 27.2% EBITDA growth. Despite a net loss, the company is optimistic about future growth, driven by acquisitions and demand in regulated markets. Positive sentiment is reinforced by strategic geographic expansion plans and strong demand in the distribution segment. However, service margins declined, and management was vague on some details. Given the company's small market cap, the positive aspects are likely to result in a stock price increase of 2% to 8% over the next two weeks.
Transcat, Inc. (TRNS) Q2 2026 Earnings Call Transcript
Positive11-3
The earnings call reveals positive growth in distribution revenue and rental channels, supported by successful acquisitions. Despite a slight decline in net income due to one-time expenses, operating cash flow increased, and the company holds a manageable debt level. The Q&A section highlights confidence in future growth, driven by new accounts and stable customer retention. Although there are economic uncertainties, the company anticipates margin expansion and high single-digit organic growth. The market cap suggests moderate stock price sensitivity, leading to a positive sentiment rating.
Transcat, Inc. (TRNS) Q1 2026 Earnings Call Transcript
Unknown8-8
The earnings call reflects a mix of positive and negative elements. While service and distribution segments show strong growth, net income and EPS have declined. The management's optimistic outlook on acquisitions and organic growth is tempered by unclear guidance on rental distribution sustainability. The Q&A reveals consistent demand but also uncertainty in future margins. Given the company's market cap, the stock is likely to experience a mild reaction, hence a neutral sentiment.
Transcat, Inc. (NASDAQ:TRNS) Q4 2025 Earnings Call Transcript
Positive5-21
The earnings call reveals solid financial performance with increased operating cash flow and net income. The Q&A section highlights a healthy pipeline and organic growth, though some short-term volatility is expected. Despite unclear management responses on certain aspects, the company's strong service segment growth and strategic acquisition position it well. Considering the small market cap, the positive financial metrics and optimistic outlook suggest a likely stock price increase in the range of 2% to 8%.
TRNS Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
