Transcat(TRNS)2025-02-05 21:05Financial Performance - Consolidated revenue for Q3 FY 2025 was $66.8 million, an increase of $1.6 million or 2.4% compared to Q3 FY 2024, primarily driven by acquisitions[95] - Gross profit for Q3 FY 2025 was $19.7 million, a decrease of $1.3 million or 6.0% year-over-year, with a gross margin of 29.5%, down 260 basis points from the previous year[96] - Operating expenses increased to $17.6 million in Q3 FY 2025, up $0.9 million or 5.6% from the prior year, resulting in an operating income of $2.1 million, a decrease of 51.1%[97] - Net income for Q3 FY 2025 was $2.4 million, down from $3.3 million in Q3 FY 2024, primarily due to lower operating income[98] - Total revenue for the first nine months of FY 2025 was $201.287 million, an increase of $12.719 million or 6.7% compared to the same period in FY 2024[118] - Net income for the first nine months of fiscal year 2025 was $10.1 million, an increase of $3.3 million or 48.7% compared to the same period in fiscal year 2024[125] - Total Adjusted EBITDA for Q3 FY 2025 was $7.9 million, a decrease of $1.2 million or 13.2% from Q3 FY 2024, with Adjusted EBITDA margin decreasing to 11.9%[117] - Total Adjusted EBITDA for the first nine months of fiscal year 2025 was $27.0 million, a slight increase of $0.1 million or 0.2% year-over-year[126] Revenue Breakdown - Service revenue accounted for 62.3% of total revenue in Q3 FY 2025, with a slight increase of $0.1 million or 0.1% year-over-year, while organic revenue decreased by 3.9%[101] - Distribution revenue was $25.2 million in Q3 FY 2025, an increase of $1.5 million or 6.5%, attributed to incremental revenue from the acquisition of Becnel[105] - The trailing twelve-month Service revenue for Q3 FY 2025 was $176.1 million, reflecting a growth of 8.3% compared to the prior year[103] - Service revenue for the first nine months of FY 2025 was $129.418 million, a 5.4% increase from FY 2024, including $4.2 million from recent acquisitions[118] Profitability Metrics - Operating margin decreased from 6.6% in Q3 FY 2024 to 3.1% in Q3 FY 2025, indicating a significant decline in profitability[97] - Total gross profit for Q3 FY 2025 was $19.679 million, a decrease of $1.257 million or 6.0% from Q3 FY 2024, with a gross margin of 29.5%[109] - Service gross profit in Q3 FY 2025 decreased by $1.137 million or 8.4%, with a service gross margin of 29.7%, down 280 basis points from Q3 FY 2024[110] - Distribution gross margin was 29.1% in Q3 FY 2025, a decrease of 240 basis points from 31.5% in Q3 FY 2024, attributed to the mix of non-rental products sold[112] Operating Expenses - Total operating expenses in Q3 FY 2025 were $17.579 million, an increase of $937,000 or 5.6% compared to Q3 FY 2024, with selling, marketing, and warehouse expenses rising by 8.0%[113] - The company plans to subcontract approximately 13% to 15% of Service revenue to third-party vendors while evaluating outsourcing needs and making capital investments[103] Cash Flow and Investments - Cash provided by operating activities was $28.4 million in the first nine months of fiscal year 2025, compared to $26.9 million in the same period of fiscal year 2024[140] - The company invested $10.5 million in capital expenditures during the first nine months of fiscal year 2025, primarily for customer-driven expansion[142] - The company used $86.1 million for business acquisitions in the first nine months of fiscal year 2025, compared to $12.9 million in the same period of fiscal year 2024[142] Balance Sheet and Leverage - As of December 28, 2024, the company had $80.0 million available for borrowing under its revolving credit facility, with $39.5 million outstanding[138] - The company's leverage ratio was 0.97 as of December 28, 2024, compared to 0.10 at March 30, 2024, indicating strong compliance with loan covenants[137] Earnings Per Share - Diluted earnings per share for the first nine months of fiscal year 2025 was $1.09, up from $0.83 in the same period of fiscal year 2024[132] - Adjusted diluted earnings per share for the first nine months of fiscal year 2025 was $1.65, compared to $1.68 in the same period of fiscal year 2024[132] Inventory and Liabilities - Inventory balance decreased by $3.6 million during the first nine months of fiscal year 2025, compared to a decrease of $0.8 million in the same period of fiscal year 2024[30] - Accounts payable increased by $4.7 million during the first nine months of fiscal year 2025, while it decreased by $4.5 million in the first nine months of fiscal year 2024[30] - Accrued compensation and other current liabilities decreased by $6.6 million in the first nine months of fiscal year 2025, compared to an increase of $5.5 million in the same period of fiscal year 2024[30] Future Outlook - Service organic revenue growth is expected to be in the mid-to-low single digits for fiscal year 2025, with a return to historic growth levels anticipated in fiscal year 2026[147] - The company expects its income tax rate to range between 21% and 23% for the full fiscal year 2025[148] Interest Rates and Currency Impact - A 1% change in interest rates would result in a yearly interest expense change of approximately $0.5 million, assuming constant borrowing levels[150] - The interest rate for the revolving credit facility was 5.6% during the first nine months of fiscal year 2025, while the 2018 Term Loan had a fixed interest rate of 3.90%[152] - Approximately 90% of total revenues for the first nine months of fiscal year 2025 were denominated in U.S. dollars, with a 10% change in the value of the Canadian dollar or Euro impacting revenue by approximately 1%[153] - The company utilized short-term foreign exchange forward contracts, resulting in a gain of $0.2 million in both the first nine months of fiscal years 2025 and 2024[154]