Transcat, Inc.

Greetings. Welcome to the TransCat Inc. fourth quarter and full fiscal year 2023 financial results. At this time, all participants are on 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, Tom Barbato. You may begin.

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, and our Chief Operating Officer, Mark Doheny. 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. Both the earnings release and the slides that we will be referenced during our prepared remarks will be found on our website, transcat.com, in the investor relations section. If you would please refer to slide number two, as you are aware, we make forward-looking statements during the formal presentation and Q&A portion of this teleconference. These statements apply to future events, which are subject to risk 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 in the documents filed by the company with the SEC. 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. Expect is required by law. Please review our forward-looking statements in conjunction with these precautionary factors. Additionally, during today's call, we will 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've provided reconciliations of non-GAAP to compare GAAP measures in the tables accompanying the earnings release. With that, I'll turn the call over to Lee.

Thank you, Tom. Good morning, everyone. We appreciate you joining us on the call today. Our strong performance in the fourth quarter rounded out another great year for TransCat. Broad-based strength across our business platforms drove an increase in consolidated revenue of 12% to $230 million for fiscal 2023, a new record for TransCat. The results also included record revenue and gross margin in our service segment, as well as on a consolidated basis. Consolidated gross margin expanded 110 basis points to 29.6%. It was driven by margin expansion in both our service and distribution segments. Adjusted EBITDA, a key metric for us given our acquisition strategy, grew 16% in the prior year to $30.4 million. So another good year in the books, demonstrating the continued durability and resiliency of our business model and the attractive regulated end markets we serve. For the full year, our service segment generated 19% overall revenue growth, including 10% organic growth. Demand in both our core calibration business as well as our NEXA enterprise asset management business remains strong. Our ability in fiscal 2023 to capture a significant number of revenue synergies between NEXA's professional services platform and Transca's technical services platform continue to drive a sustainable, long-term competitive advantage in the highly regulated, high cost of failure industries that we serve. The expansion of Nexus Suite of professional services has been well received throughout the United States, Ireland, and for the first time, we opportunistically perform work in various parts of Europe, including the Netherlands, Switzerland, and Germany. For the full year, we expanded service gross margin by 30 basis points to 32.2%. Service margins continue to benefit from our differentiated value proposition, inherent operating leverage, and our continued focus on automation and operational excellence, primarily through process improvement. In fiscal 2023, we successfully acquired and integrated three companies, Alliance Calibration in Cincinnati, E2B Calibration in Cleveland, and Complete Calibration in Ireland. The acquisitions expanded our addressable markets, widened the breadth of our service offerings, and allowed us to leverage our existing infrastructure. We are very proud of the success our various teams are having around integration. The process of successfully joining multiple companies together into a cohesive, well-integrated system is one of the ways we continually differentiate TransCat. Capitalizing on both sales synergies, which is our typical and primary objective, along with practical cost synergies is a nuanced process. The alignment of both synergies delivers operational excellence and a superior customer and employee experience. Turning to our fourth quarter service segment performance, steady demand drove service segment revenue growth of 15% and organic growth of 10%. This represented our 56th straight quarter of year-over-year service revenue growth. Recurring revenue streams in the highly regulated environments that we serve continue to benefit our service segment. Service gross margin in the fourth quarter expanded 90 basis points to 34%. Turning to distribution for the full year, despite continued challenges with supply chain shortages, revenue grew 3%. Gross margin expanded 180 basis points from prior year, driven primarily by significant growth in our high-margin rental business. The $30.4 million in EBITDA supported a strong balance sheet. Our leverage ratio of 1.6 times positions us to capitalize on growth opportunities, which include M&A activities in the highly fragmented third-party calibration services market and the NEXA-oriented professional services market. Behind the numbers, we continue to focus on leadership development. Strong financial performance over the past several years has supported investments in our people on a continuous basis. Leadership is another differentiator that widens the moat around TransCat fortifies our ability to execute our strategic plan well into the future. With that, I'll turn things over to Tom for a deeper look into the fiscal 2023 fourth quarter and full year financial performance.