Transcat, Inc.

Greetings and welcome to Transcat Inc. First Quarter Fiscal Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom Barbato, Chief Financial Officer. Thank you, Mr. 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, Mike West. We will 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 will be referenced during our prepared remarks can 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 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 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 their earnings release. With that, I'll turn the call over to Lee.

Thank you, Tom. Good morning, everyone. Thank you for joining us on the call today. Transcat delivered strong performance across our entire portfolio in the first quarter of fiscal 2025 as we continue to demonstrate our ability to effectively execute our strategy and to drive differentiation throughout our business platform. Consolidated revenue was up 10% to $66.7 million driven by continued demand for our services as well as strong rental performance. Consolidated gross margin expanded 310 basis points to 34%. It was driven by significant margin expansion in both our service and distribution segments. Adjusted EBITDA in the quarter grew 20% from prior year to $10.2 million. Service continued to perform at a high level and recorded its 61st straight quarter of year-over-year revenue growth. That's more than 15 straight years. In the first quarter of fiscal 2025, service revenue grew 10% overall and 6.4% organically. We continue to focus on recurring revenue streams with highly regulated industries that include life science and aerospace and defense. And internally, we rally around the theme of get bigger and get better. To that point, service gross margins in the first quarter grew 150 basis points versus prior year to 34%. Our consistent service gross margin improvement over time reflects our ability to drive continuous process improvement throughout our operation. Specific drivers of service gross margin improvement include increased productivity through higher levels of automation and technical training, as well as system and software enhancements. And as we talked about in the past, the constant driver of service margin gain is the inherent leverage in the operating model as service revenue grows. Turning to distribution and rentals, gross margins expanded 620 basis points from prior year, driven primarily by the higher margin rental business, which now includes both Axiom, which we acquired in August almost one year ago, and Becknell, acquired this past April at the start of our first quarter. The integration with Axiom has been excellent. And on the Becknell front, we're off to a strong start, making early, meaningful progress. In fact, In the first quarter since the acquisition of Becknell, we can already point to several synergistic service opportunities that we've encountered from the Becknell customers. While this was anticipated to occur at some point, the strong early start is great news. Becknell is a very well-run company that has cultivated a loyal customer base, most of which are heavy users of instrumentation and calibration services. In addition to its rental platform, Becknell offers a very profitable, growing operator-based service model that we anticipate will contribute to service margin expansion over time. Overall, we're pleased with our start, our strong start across the business in fiscal 2025, the 10% growth we generated in consolidated revenue, the 310 basis point expansion in consolidated gross margin, and the 20% growth in adjusted EBITDA. It's all a testament to the strength of Transcat, our brand, and the uniqueness of our value proposition. Transcat continues to be recognized and rewarded for the delivery of our risk-mitigating services across high-cost-to-failure manufacturing environments. Customer attention has been and continues to be a hallmark of Transcat and a major contributor of our consistent top-line performance over time. Lastly, the first quarter fiscal 2025 was also benefited from the expansion of addressable markets, which contributed significantly to both revenue and margin growth. We ended the quarter with a strong balance sheet, and we were well-positioned to execute our growth initiatives, including the acquisition of companies that enhance our geographic footprint, expand our current capabilities, expertise, and markets. With that, I'll turn things over to Tom to provide additional detail on the first quarter financials.