Transcat (NASDAQ:TRNS) Inc reported a strong performance in the second quarter of fiscal 2024, with an 11% year-over-year increase in consolidated revenue to $62.8 million. The company's gross margin expanded by 230 basis points to 32%, driven by growth in both the Service and Distribution segments. Adjusted EBITDA grew by 24% to $9.3 million. In the same quarter, Transcat made strategic acquisitions and a successful public offering of common stock.
Key takeaways from the call:
- Transcat acquired Axiom Test Equipment rentals and SteriQual, expanding its market and strengthening its NEXA cost control and optimization services.
- The company expects high single-digit to low double-digit organic service growth for the full fiscal year, along with gross margin expansion.
- Transcat's NEXA business has more than doubled in size since its acquisition, with the integration of SteriQual expected to contribute to future growth.
- The company is making progress in automation and robotics, which is positively impacting margins and productivity.
- Transcat plans to grow its calibration business organically in the Irish market.
In the earnings call, Transcat highlighted the synergies from its recent acquisition of Axiom, including expected revenue synergies and the utilization of marketing expertise to grow the business. The company expects distribution margins to be in the 20% to 30% range and mentioned a solid pipeline for customer base lab (CBL) growth.
Transcat's NEXA business, which has doubled in size since its acquisition 2.5 years ago, was a focal point of the discussion. The executives highlighted the synergies between NEXA and Transcat, with NEXA gaining access to Transcat's customer base and Transcat benefiting from NEXA's presence in proposal discussions. The positive integration of SteriQual into NEXA's suite of services was also noted.
The company's progress in automation and robotics was another key topic. Transcat tracks key performance indicators such as technician productivity and automation usage to measure success. The company compared its progress to a baseball game, stating they are currently in the "fifth inning". Robotics have been implemented in their Philadelphia and LA labs, with plans to expand into other areas such as temperature and pressure calibrations.
Regarding the Irish market, Transcat mentioned plans to grow their calibration business organically. The company concluded by noting their participation in upcoming conferences and invited participants to reach out with any further questions.
InvestingPro Insights
Based on InvestingPro's real-time data, Transcat Inc. (TRNS) has a market capitalization of $783.87 million USD and is trading at a P/E ratio of 65.61, suggesting a high earnings multiple. The company has shown a revenue growth of 11.65% in the last twelve months as of Q1 2024, with a gross profit of $71.03 million USD, which aligns with the strong performance reported in the article.
InvestingPro Tips indicate that the stock is currently in oversold territory. Despite trading at high valuation multiples, the company has been profitable over the last twelve months and analysts predict it will remain profitable this year. In addition, Transcat operates with a moderate level of debt and its liquid assets exceed short term obligations, indicating a healthy financial position.
InvestingPro offers over 12 additional tips for Transcat Inc., which can be accessed by subscribing to the InvestingPro platform. These tips provide more detailed insights into the company's performance and potential investment opportunities.
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