Transcat, Inc.

Greetings. Welcome to TransCal Inc. Second Quarter Fiscal 2024 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 will now turn the conference over to Tom Barbato, CFO. Thank you. 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 will begin the call with some prepared remarks, and then we'll open up the call for questions. Our earnings release crossed the wire after the market closed yesterday. Both the earnings release and the slides that we'll reference During our prepared remarks can be found on our website, transcat.com, in the investor relations section. 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. These 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 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, except as 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.

Okay, thank you, Tom. Good morning, everyone. Thank you for joining us on the call today. TransCat delivered strong performance across our entire business portfolio, again, in the second quarter of fiscal 2024. Consolidated revenue was up 11% to $62.8 million as demand for TransCat services continued to be strong. Consolidated gross margin expanded 230 basis points to 32%. as margins expanded in both our service and distribution segments. Adjusted EBITDA, a key metric for us given our successful acquisition strategy, grew 24% from the prior year to $9.3 million. Operating cash flow in the second quarter was $8.5 million and $16 million year-to-date. Turning to our second quarter service segment performance, Our differentiated suite of services continued to support performance at a very high level. We recorded our 58th straight quarter of year-over-year service revenue growth. Service revenue grew 17%, including double-digit organic service growth of 10%. Recurring revenue streams and a differentiated, defendable value proposition continue to foster durability and resiliency in our service growth model. And we continue to benefit from strong demand throughout multiple regulated service industries that include pharmaceutical, medical device, biomedical, and as well aerospace and defense. Service gross margin was 34% in the second quarter, which represents 140 basis point increase over prior year. Margin expansion was primarily driven by leverage on double digit organic growth increased productivity from automation, and significant process improvements throughout our network of calibration labs. Turning to distribution for the second quarter, gross margins expanded 340 basis points from prior year, driven by growth and an increase in mix of our high-margin rental business. Both core distribution and rentals continue to drive a significant number of leads and opportunities into our service segment, supporting consistent, strong organic growth. The combination of products, rentals, along with calibration and Nexus cost control and optimization services remains unique. We've executed well expanding our addressable markets and our value proposition has never been stronger. Overall strong performance for Transcat in the second quarter of fiscal 2024. The 24% increase in EBITDA is due in part to our ability to achieve our revenue and cost synergy objectives on the companies we acquire. We start by identifying and acquiring companies that are a good strategic fit for TransCap, but those are only the first two steps. Whether we acquire an adjacent company to expand our markets, a geographic footprint addition, or a classic bolt-on to our core calibration services, it is through integration that TransCap drives differentiation. And we're very proud of the work our team has done on this front. You can see it, you can see it in the results, the results of their work as margins and profits increase. And of course, acquisitions will continue to be an important part of our overall growth strategy. In the second quarter, we acquired Axiom Test Equipment Rentals, the largest acquisition in TransCAT's history, and SteriQual, a life science service company specializing in commissioning, qualification, and validation services. Axiom is a great synergistic fit with Transcat's traditional rental business that was launched organically in 2015. Growth synergies between Axiom and Transcat's traditional rental business include go-to-market selling and marketing strategies with complimentary inventories and customer base. We expect the combined rental business to perform well as we capitalize on what we consider a one plus one equals three opportunity. Steriqua expands our adjustable market within the NEXA cost control and optimization space. Steriqua also fortifies NEXA's differentiated single source solutions model, NS3. In addition to the two acquisitions in the second quarter fiscal 2024, perhaps what stands out most is the completion of a public offering of our common stock, which was used to repay our credit facility. The highly successful offering displayed robust demand for Transcat stock among institutional investors who recognize, understand, and value our long-term demonstrated track record of profitable revenue growth, expansion of addressable markets, and sustainable margin improvement. And with that, I'll turn things over to Tom for a more detailed view of our fiscal 2023 second quarter results.