Transcat, Inc.

Greetings, welcome to the Transcat Inc. second quarter fiscal year 2022 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, CFO Mark Doheny. You may begin. Thank you.

Thank you, operator, and good morning, everyone. We appreciate your time and your interest in Transcat. With me here on the call today is our president and CEO, Lee Rudow. We'll begin the call with some prepared remarks, and then we will open up the call for questions. Our earnings release crossed the wire after markets closed yesterday. It can be found on our website, transcat.com, in the investor relations section. The slides that accompany today's discussion are also posted on our website. If you would, please refer to slide two As you are aware, we may make forward-looking statements during the formal presentation and Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the news release, as well as with documents filed by the company with the Securities and Exchange Commission. You can find those on our website, where we regularly post information about the company, as well as on the SEC's website at sec.gov. We undertake no obligation to publicly update or correct any of the forward-looking statements contained in this call, whether as a result of new information, future events, or otherwise, except as required by law. Please review our forward-looking statements in conjunction with these precautionary factors. Additionally, during today's call, we'll discuss certain non-GAAP measures. which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release. So, with that, I'll turn the call over to Lee to begin the discussion. Lee?

Thank you, Mark. Good morning, everyone. Thank you for joining us on the call today. We achieved excellent results in the second quarter on solid operational execution and our ability to capitalize on strong demand across both our service and distribution segments. We generated broad-based growth across a wide range of end markets, resulting in a consolidated Q2 revenue increase of 21% to $50.4 million, a second quarter record for TransCat. In addition to the strong revenue growth, Consolidated gross margin expanded 140 basis points to 29%. Adjusted EBITDA, a very important metric for us, given our level of acquisition activity, grew 36% from prior year to $7.1 million. At the end of August, we acquired Nexa Enterprise Asset Management. The teams are actively working together. We've already identified numerous synergistic growth opportunities, and I'll talk more about Nexa in a few minutes. Turning to our service segment, we performed at a very high level and recorded our 50th straight quarter of year-over-year revenue growth. That record continues to be an amazing accomplishment for both our sales team and the entire TransCat organization. In the second quarter, we achieved approximately 14% organic service growth and 20% overall service growth. Regulated markets where the cost of failure is high continues to be an important driver of our service revenue. Transcat continues to perform exceptionally well in the life sciences market where our value proposition resonates the most. In the second quarter, we expanded our service gross margin to 32.9%. When we compare service gross margin to two years ago in fiscal 2020, our gross margin increased 730 basis points. That's an interesting data point and a testament to our effective deployment of continuous improvement initiatives. as well as the inherent leverage in our service business. Moving on to distribution. Despite elevated levels of backlog due to supply chain constraints, distribution grew 22% on strong demand with particular strength in the wind power generation market. And, of course, we're up against easier comparisons to a COVID-impacted prior year quarter. Still, distribution gross margin improved to 23.5%, a 240 basis point expansion from the prior year, driven largely by favorable product mix. After the completion of NEXA, the acquisition of NEXA, our balance sheet remains strong with a leverage ratio of around one and a half times, up from under one times prior to the acquisition. By any measure, we are pleased with our second quarter performance. And as I mentioned in the past, the talent and commitment of our team continues to be an important strength. and one that we'll continue to leverage. With that, I'll turn things over to Mark.