10/29/2024

speaker
Operator

Greetings and welcome to Transcat Inc. second 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 Barbeto, chief financial officer. Thank you, Mr. Barbeto. You may begin.

speaker
Tom Barbeto

Thank you, operator. 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 Ruto, 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 market closed yesterday. Both the earnings release and the slides that will be referenced during our prepared remarks

speaker
Lee Ruto

can be found on our website, Transcat.com,

speaker
Tom Barbeto

in the investor relations section. If you would please refer to slide 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 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-GAP measures, which we will be 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 GAP. We've provided reconciliations of non-GAP to compared GAP measures in the tables accompanying this earnings release. With that, I'll turn the call over to

speaker
Becknell

Lee. Thank you, Tom. Good morning, everyone. Thank you for joining us on the call today. Transcat delivered strong performance from our core calibration services business again in the second quarter of fiscal 2025. Consolidated revenue was up 8% to $67.8 million, driven by consistent demand for our calibration services, as well as solid performance in our traditional rental business, which includes both our Transcat and Axiom rental platforms. Consolidated gross profit grew 5% and was driven by growth in both our service and distribution segments. In the second quarter, service recorded its 62nd straight quarter of -over-year revenue growth as our calibration services continued to perform at a very high level. Overall, service revenue growth was 6% and 4% organic growth. The 6% growth is below historical trends and was significantly impacted by a decline in our NEXA cost control and optimization services business that was beyond the magnitude of what we anticipated. We've identified the root causes that need to be addressed, which primarily center around the immediate need for NEXA to be fully integrated into Transcat's dynamic and proven sales and marketing processes. In addition, we are renaming the business Transcat Solutions to fully leverage Transcat's industry-leading brand. All of these actions are underway with NEXA. We are making meaningful progress and we're committed to reverting back to growth in the near future. On a positive note, when excluding NEXA in the second quarter, we generated organic service growth of 9% versus prior year, we have a strong pipeline of new business opportunities entering the back half of the fiscal year. The core service business continues to benefit from recurring revenue streams as well as our industry-leading value proposition, which continues to resonate throughout the highly regulated markets we serve, including both life sciences and aerospace and defense. Turning to distribution in the second quarter, gross profits grew 10% on double-digit revenue growth. However, Fecnell revenue and profit was negatively impacted by two hurricanes in the Gulf of Mexico, which pressured second quarter distribution margins. Overall, Transcat's core business performed well in the second quarter of fiscal 2025 and our exceptional team is working to overcome the near-term NEXA challenges, which we believe are very fixable and include channel marketing and pipeline expansion, which is already strengthening. We are confident that business will return to growth

speaker
Lee Ruto

in the first quarter

speaker
Becknell

of fiscal 2026. Fecnell continues to be a well-run company and a strong niche market with a significant opportunity for sustainable growth. We fully expect Fecnell to deliver sequential improvements in the third and fourth quarters and distribution margins to return to levels consistent with the second half of fiscal 2024. The balance sheet remains strong. Our revolving credit facility was paid off last year and we are in an excellent capital position to support our strategic growth plan that includes a very active M&A initiative. With that, I'll turn things over to Tom for a more detailed look at the second quarter financial results.

speaker
Tom Barbeto

Thanks, Lee. I'll start on slide four of the earnings deck posted on our website, which provides detail regarding our revenue on a consolidated basis and by segment for the second quarter of fiscal 2025. Second quarter consolidated revenue of $67.8 million was up 8% versus prior year. Looking at it by segment, service revenue grew 6% with 4% of the growth coming organically and the other 2% from acquisition. As Lee mentioned, service revenue grew 9% organically when excluding NEXA. Turning to distribution revenue of $23.7 million grew 11% and we continue to see good performance from the higher margin traditional rental businesses. Turning to slide five, our consolidated gross profit for the second quarter of $21.2 million was up 5% from prior year. Service gross profit increased 4% versus prior year. We continue to leverage higher levels of technician productivity and our differentiated value proposition, but that could not offset the pressure we saw as a result of the lower than expected NEXA revenue. Distribution segment gross profit of $6.6 million was up 10%, but margins were lower than expected as a result of the two Gulf of Mexico hurricanes impacting Becknell results in the quarter. Turning to slide six, Q2 net income of $3.3 million was up from half a million dollars in the prior year. Q2 of last year included a $2.8 million non-cash charge related to the amended NEXA earn-out agreement. Diluted earnings per share came in at $0.35 of $0.29 for the prior year. We report adjusted diluting earnings per share as well to normalize for the impact of upfront and ongoing acquisition related costs. Q2 adjusted diluted earnings per share was $0.52. Flipping to slide seven, where we show our adjusted EBITDA and adjusted EBITDA margin, we use adjusted EBITDA, which is non-GAAP, to gauge the performance of our business because we believe it is the best measure of our operating performance and ability to generate cash. As we continue to execute on our acquisition strategy, this metrics becomes even more important to highlight as it does adjust for one time deal related transaction costs as well as the increased level of non-cash expenses that will hit our income statement from acquisition purchase accounting. With that in mind, second quarter consolidated adjusted EBITDA of $8.9 million was down 5% from the same quarter in the prior year. As lower than expected NEXA revenue negatively impacted services EBITDA and back no pressure distribution EBITDA. As always, a reconciliation of adjusted EBITDA to operating income and net income can be found in the supplemental section of this presentation. Moving to slide eight, operating cash flow was mostly consistent with last year. Q2 capital expenditures were $2.2 million higher than prior year. It continues to be centered around service segment capabilities, rental pool assets, technology, and future growth projects. The spend was in line with expectations. Slide nine highlights our strong balance sheet. At quarter end we had total net cash of $20.8 million with a leverage ratio of .08x. We had $80 million available from our credit facility. Lastly, we expect to file our Form 10Q on November 6th. With that, I'll turn it back to you,

speaker
Becknell

Lee. Okay, thanks, Tom. Over the past 12 years, we've successfully and consistently delivered organic service revenue growth, sustainable gross margin expansion, and delivered strong free cash flow. We expect these metrics to improve in the back half of fiscal 2025 and return to more normal levels in the first half of fiscal 2026. Given the temporary setback in the nexus sales channel, for the full 2025 fiscal year, we expect organic service revenue growth in the mid-single digits when normalized for the week in fiscal 2024. Our M&A strategy has been very successful and will continue to be an important component of our overall growth plan as we look to continue to strengthen our core business and expand our adjustable markets. Through acquisitions, we expect to expand our geographical footprint, capabilities, and expertise, and of course, we're always interested in bolt-on opportunities where we can leverage our current infrastructure to drive both cost energies and growth opportunities. We currently have a very robust acquisition pipeline with the potential to increase the trajectory of our business, and as I mentioned earlier, we have a strong balance sheet which will continue to support the conversion of our M&A pipeline. We will continue to leverage continuous process improvement and automation as key enablers to future margin expansion, and we expect service growth margin expansion for the full 2025 fiscal year. As we move through the back half of fiscal 2025, our dedicated and talented team will continue to focus on generating sustainable long-term value for our shareholders. With that, operator, please open the line for questions.

speaker
Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from the line of Scott Buck with HCVN Right. Please go ahead.

speaker
Scott Buck

Good morning, guys. Thanks for taking my questions. Lee, can you give us a sense of when you started to recognize that Nexo was kind of falling short of expectations? Well, listen,

speaker
Becknell

Scott, we have multiple sales channels throughout the organization, probably 10 or so. And at any given time, in any given quarter, they're not all going to be operating to full capacity, all cylinders, if you will. So there's always little pockets that you keep your eye on. I think we probably saw some of that in the first quarter, but nothing that would have led us to believe that we would have the drop off we had in Q2. So that kind of came up a little unexpected. Like I said in the earnings script, we dove right into the root causes. It's a really good business, but we dove right into the root causes and just saw that there was just some very fixable processes within the way they manage their pipeline. And so we're all over it and we'll get them turned around pretty quickly. But that, you know, it's kind of subtle in the first quarter and just kind of hit us a little bit unexpected in a second. That's how I would characterize it.

speaker
Scott Buck

I appreciate that. And it sounds like there's no additional read through on the rest of the business or any kind of macroeconomic read through based on the softness you saw in the second quarter there, right? No, I don't think so.

speaker
Becknell

I mean, like I said, the core calibration business organically grew 9%. So we like not only the performance in the second quarter, we like the pipeline going into the back half of the year. So that's steady. Certainly the rental business, which is a big component these days of the distribution segment, that's very strong. And we expect, you know, back now to perform well. So as we look in the back half of the year now, I think the other areas of the company are performing as we would expect. We just have this sort of isolated miss that we're going to fix.

speaker
Scott Buck

No, that's helpful. And then on M&A, besides the larger deal at the beginning of the year, it's been relatively slow. Can you talk a little bit about pricing and what you're seeing there? Clearly, you guys are open to doing deals. I'm just curious what the other side of those transactions look like today.

speaker
Becknell

Right. So from an M&A pipeline perspective, I don't have any concern. We have as good of an M&A pipeline as Robust. We like to use that word. I think it characterizes it well and accurately. We have a great pipeline. We're working, you know, strategic deals that we think are a good fit for the company. And, you know, it appears quiet externally. I get that. Internally, it's not quiet at all. And we'll continue to work that pipeline. And I think you'll see, you know, this, you know, you look at what we've done in the past, you'll see that layout in the near future as time goes by. And you know, we have the capacity to get even more deals done if they're appropriate and they're a good fit than we've got done in the past because we built the infrastructure, Scott, to do that. So no, no concern on my end. I like the way the pipeline looks.

speaker
Scott Buck

Great. Appreciate that, Lee. And then last one, Tom, just curious, affects for the second half of the year, is the first half a fair run rate? Or should we see some, you know, operating expense creep there as you support some of these growth initiatives?

speaker
Tom Barbeto

Yeah, I would expect, you know, some increase, you know, sequentially, you know, in the Q3 and Q4.

speaker
Scott Buck

Okay, perfect. I appreciate the time, guys. Thank you. Thank you.

speaker
Operator

Thank you. Next question comes from the line of Craig Palm with Craig Hallum Capital Group. Please go ahead.

speaker
Craig Palm

Yeah, thanks. Good morning. Thanks for taking the questions. I wanted to follow up a little bit on Nexa. You know, it wasn't too long ago that you were, you know, kind of characterizing that business as, you know, exceeding expectations. I think it was even, I don't know, end of last year or earlier this year where you were talking about, you know, that business more than doubled since being acquired. So I guess I'm still a little bit confused on what went wrong in such a short amount of time. Maybe you can just dig into that a little bit more if you can.

speaker
Becknell

Yeah, I get the question. Thanks, Greg. Yeah, look, this business, the first couple of years since we acquired them, the first couple of years was really flying high. We're talking about high growth rates, really performing well. And I think because of that, you know, we probably gave them more autonomy than we typically would for an acquisition. You know, Greg, we integrate quickly. We do a good job integrating. We get the synergies. We bring these companies together. And that's what makes us different. And I think we didn't run that playbook, to be honest, with Nexa because we have a company that was doing so well for the first couple of years. You know, we're not talking quarters. We're talking years. So four quarters, I made the decision. It's kind of on me and the team made the decision to support me. Let's let them keep doing what they're doing. We collaborated. They helped us win calibration business. But we didn't get involved with the -to-day operations, the processes, the procedures, the pipeline, the marketing. We just kind of let them do their thing. And I think that was probably a mistake. We probably went too long. We got it now. I mean, we get it. And we have all of our top people working on expanding their pipeline, coordinating the marketing, and making them a Transcat company under the name Transcat Solutions. We're very confident that'll solve the problem. So I guess sometimes success hides some flaws. And that's probably a fair way to characterize it. But again, high flyer for two-plus years. And that's why it kind of costs a little bit off guard. But we'll get it fixed up.

speaker
Craig Palm

Yeah. No, I appreciate that. That's helpful, Coller. I mean, if you're able to, can you provide the revenue decline specific to Nexa? I don't know if you've got the -to-date level as well. And just remind us, is it mostly project-based revenue? I'm just kind of curious to know kind of what the visibility is like.

speaker
Becknell

Yeah, we're not going to get into the specific numbers. But it's a combination. So they've got some project-based business. They've got some sort of ongoing business. It depends on what channel within their company. But it's a mix that leans towards project-based, which is probably some of the sort of core issues around what we got behind on without the recognition. So yeah, we know how to combat that and fix it. So hopefully it won't be an issue once we get them kind of turned around.

speaker
Craig Palm

Yeah, but just to be clear, it sounds like you're characterizing this as more company-specific than something market-related, competitively related, something of that nature. It sounds fixable. I guess that's what I'm trying to get at.

speaker
Becknell

I think so. I don't see a problem with the industry. We have other areas of our company that serve the exact same industry, almost in the exact same way, if you remember. We acquired a company called Sericlaw. We've got a validation business that operates in the same space with some of the same attributes and characteristics as the next of business, and they're performing well. So we don't see it. I mean, that's not to say there aren't certain pockets of industry slowdown within life sciences that cycle in and out quarter to quarter, but nothing systemic. So I think that's why it's isolated and fixable.

speaker
Tom Barbeto

One thing I want to just mention, Greg, and maybe just correct something, is when Lee, in his prepared remarks, talked about, you know, we're confident the business will return to growth. I think you might have misspoken it. We said that business, we believe, will return to growth in the first half of fiscal 2026. So when we talk about it being fixable, we talk about the timeframe to fix it. It's kind of a near-term fix in our mind.

speaker
Craig Palm

Yeah. Okay. And then I guess my other last question, just on Becno, you talked about a little bit of, you know, issues related to the hurricanes. Was there a revenue issue as well, or was it mostly on the cost side? And are you able to kind of quantify what that impact was? I don't know if you can give a gross margin. I think that's a good question. You know, Becno, kind of like you gave the organic service, you know, ex-nexa, but any sort of clarification there would be helpful as well.

speaker
Tom Barbeto

Yeah, well, just to clarify, Greg, right, so the issue with the hurricanes caused a revenue issue, right? So it's both a revenue and profit issue. And had we not seen those issues, and I think, you know, the way we've guided in the press releases is that we expect distribution margins, you know, in the second half of this year to be kind of more in line with what we saw in the second half of last year. So certainly, you know, north of 30%.

speaker
Greg

Got it. Okay. All right. I will leave it there. Thanks. Thanks, Greg.

speaker
Operator

Thank you. Next question comes from the line of Ted Jackson with Northland Securities. Please go ahead.

speaker
Ted Jackson

Hey, good morning. Thanks for taking my questions.

speaker
Tom Barbeto

Hey,

speaker
Operator

Ted.

speaker
Ted Jackson

Good morning, Ted. I'm going to beat the dead horse of Nexa or Transcat Services now. So with the fall-off in business there and the things that you're doing to kind of, you know, repair it, you mentioned a couple things, and one of them was sales channels. And now you have the very good sales channels, and some are stronger and some are weaker, and that you were going to basically go in in terms of management of those channels, kind of make some repairs there. And so on that front, I'm kind of curious when you get into maybe some discussion around what are the different kind of channels from which you go to market with that business and where were the issues. And then with regards to pipeline management, what's the difference between how Transcat manages the pipeline, you know, in your processes -a-vis Nexa? What are the kind of the actual changes that you're making there to refill the pipeline? And then I've got some things outside of Nexa to ask after that. Thanks.

speaker
Becknell

Well, let me start with your last question first. When you think about pipeline development and you look at the way Nexa performs sales, execute their sales and marketing plan, you know, they had one salesperson, for example, and they grew with that salesperson, like I said. Transcat has 80 salespeople. So if you count inside salespeople and customer service people as well and business development people, strategic account managers, we've got a lot of touches into the marketplace, particularly in life sciences where you see the Nexa services soon to be Transcat solutions, you know, operate. And so it's the difference of had we gotten our sales engine behind this sooner, it just would have helped, you know, it would have helped in a big way. And so that's the most obvious and clear solution. Plus, from a marketing perspective, from a brand perspective, I mean, Transcat has such a strong, strong brand within the instrumentation world. So whether you're talking distribution or calibration services, there's just no, we're second to none in terms of brand strength. And so when you put that brand strength behind the solutions business, which was Nexa, you're going to get a lot of benefit. We have a core, we do work with almost every single pharmaceutical company, med device company in North America. I mean, maybe not all of them, but most. And so had we opened up those channels earlier and instead of collaborating really integrated, I think we wouldn't have this problem today. So that's what we're doing now. As far as one of your other questions, Ted, about channels, I know we have pipe back channels, we have rental channels, biomedical, marine. And like I said, generally most of them perform well. But in any given quarter, you might see softness here or timing there. I mean, you could have ships deployed to the Middle East, which could affect our marine business. There's just different things that can happen. But that's normal. That's normal. And you don't dive into those numbers as long as you think you're going to hit your aggregated organic number, which we have just very, very consistently. So but there's a kind of type of channels that we were talking about. You know, again, that's how we characterize. I hope I got to all your questions. If I didn't just shoot back at me.

speaker
Ted Jackson

No, you did. And I do. I actually am going to ask a little bit more around next before I move on. You know, my perception with regards to kind of how you were managing next, you know, granted, you know, it was it was it was being very successful was that you were were letting them kind of you're building a business around them, if you would, and really kind of letting them operate. And you can correct me if I'm wrong. And so to me, you know, like to me, this is why I think, you know, it seems like such a shift for us on the outside, because we're not on the inside seeing everything that happens. But next, you know, with such a shift in kind of bringing Transcap processes and channels and because at the end of the day, it really is somewhat of a restructuring for next. Next is at its core consulting business, which is really more of a person business. Should there be some concern with regards to turnover within some of the talent base of next? You know, if you go through and if you change, you know, your your your go to market and your pipeline management and bring it in to have it be more managed in

speaker
spk00

the structure, like

speaker
Ted Jackson

Transcap, you know, like it's a culture change. And that's where I'm going with it. Just some discussion on that, then I'll drop next. I promise.

speaker
Becknell

OK, I don't see that as concern at all. You know, when I look at what next it does well and still does well, it's the capabilities they have and the delivery of their services. You mentioned consulting services and some of them fit well with that with that with that characterizing it that way. They've always had strong delivery of their services. So I don't see and probably 90 percent of their staff in ninety five. That's exactly what they do. You know, they do the CMS work. They do the reliability work. They do the interval and optimization adjustments. That's not going to change. I mean, what we're bringing is really incremental. We're bringing sales and marketing leadership and a strong brand incrementally to the process that they have, because where their problem is with sales and like in hindsight, it was it was predictable this was going to happen at some point. So I think when we put the companies together, it really starts to become a one plus one equals three. They'll keep doing what they do well. We'll interject, intercede and integrate where where we have the expertise. And I think both companies get better. That's different than the collaboration we've done in the past. That's integration and albeit late to the game by a quarter or two. But that's where we are today. So that's why my confidence level is high. So we bring the incremental benefits and brand to to to their core delivery of their services, which has always been strong. So I don't I don't see a cultural change at all.

speaker
Ted Jackson

OK, the other ones won't be as like sort of Lucy going over to back now. The the hurricanes impacted the business. And this is just because I'm ignorant with regards to kind of how the business might flow. But, you know, say you get into like construction equipment and things like that. A lot of times after you have an event, in this case, two events that there's actually, you know, that it's more than just the business. You have a disruption in the business. But then because there's, you know, additional kind of maintenance, additional things that need to be done to actually repair. Because of the hurricanes that you actually have some extra wind in your sails, would that be the case with Becknell? Or is it just to get it back to its it'll just bounce back to kind of its normal, you know, state to where it would have been. Do you understand what I'm asking?

speaker
Tom Barbeto

Yeah, it'll be more normal state, Ted. You know, the the amount of incremental that could be generated is not meaningful.

speaker
Ted Jackson

OK, OK. The next question, your inventory dropped by close to three million dollars sequentially. Is there something that drove that down? How would we think about that? If we go beyond, you know, we go into third quarter, fourth quarter and beyond.

speaker
Tom Barbeto

No, it's just, you know, it's something that myself and Mike West have been hyper focused on the past couple of quarters. And as you know, you know, when you get focused on inventory, it it takes a little time to build some momentum. But obviously, you know, that's it's just looking to improve the cash conversion cycle. Right. So we've been hyper focused on that. And it's not indicative of, you know, any changes in that distribution business.

speaker
Ted Jackson

Well, but so but would that be kind of the new norm then? If I would, you know, you know how much I care about cash. Yeah, no,

speaker
Tom Barbeto

no, no, absolutely. I'm sorry. I missed I missed making that point. Right. Is that yes, we would expect that to be the new norm. And, you know, on occasion, as you know, we get opportunities to to make strategic buys at additional discounts and we'll continue to do that where it makes good financial sense. But hopefully, when we do that, it'll kind of work its way through in the current quarter or maybe the subsequent quarter. But, you know, think of it as more of the norm.

speaker
Ted Jackson

And then on the gross margin side, particularly as it relates to the distribution business, you know, your number there was at a level not seen since, I guess, the first quarter of last year. Is that all that now? Is there anything else that went on in there that caused that to go down or was just really just this, you know, this one time? No, it's primarily

speaker
Tom Barbeto

back now. It's primarily back now. And that's why we're comfortable saying that, you know, for the second half of the year, we should be back more to levels we had in the second half of last year, which are north of 30%.

speaker
Ted Jackson

Okay. And that's it for me. I mean, your 10 Q will be out later today.

speaker
Tom Barbeto

No, I'm Wednesday, the November 6th.

speaker
Ted Jackson

Oh, okay.

speaker
spk00

All right.

speaker
Ted Jackson

Thank you. Thank you. Thanks. Bye.

speaker
Operator

Bye. Thank you. Next question comes from the line of Martin Yang with open. I'm or uncle. Please go ahead.

speaker
Greg

Hi. Good morning. Thanks for taking the question. Can you help us get a sense of how big is next in your revenue contribution on an annual basis?

speaker
Becknell

Yeah, it's when we look at services, I'm going to say, and Tom correct me if I'm wrong, but it's somewhere between five and 10%, probably right in the middle

speaker
Tom Barbeto

closer to 10 closer

speaker
Becknell

to 10. And that's what's so interesting. You know, it's just a small part of the business, but, you know, where you didn't get labor out and you didn't, you know, kind of anticipate that some of the changes in revenue Martin, it just that you can see the effect it has on the business. But again, we'll we got arms around now. But, yeah, I think that that range is accurate. Yep.

speaker
Greg

Thanks. One more question on organic growth for services in the past quarters as well as this just reported quarter. When you track all the other acquired business, are they all of them growing have grown organically?

speaker
Tom Barbeto

So, so the way we don't really talk about performance at the individual unit level. So, but, you know, keep in mind that from a from a service standpoint, you know, most of our growth is impacted or by organic by organic growth, right? Because we didn't, we haven't had a, we haven't acquired a services business since April of of last year. So, you know, we're the, the point we made is that when you back out next, you know, organic growth was at 9%. And the businesses are all contributing contributing to that to that growth.

speaker
Greg

So. Got it 1 last question for me. So, given what you have seen and next, would you apply. Perhaps a bit more scrutiny to other acquired business in terms of sales marketing or other business processes.

speaker
Becknell

So, interesting, I get the question. I mean, my knee jerk reaction is, of course, we always will and do, but but remember, we integrate all the businesses we acquire when we run the Transcat acquisition playbook. It's always our intention to integrate fast. And integrate completely and we think we're really good at it and historically attract record shows that next. It was an exception. It was a different business, although related and very much in the ecosystem in which we perform our calibration services. They were a high flyer. They were performing very, very well for an extended period of time and we kind of decided not to run the playbook Martin. So, I don't think this applies the other businesses while some businesses have better quarters than others. Generally speaking, we always review this at the board level and internally as well. These businesses perform very well, I mean, across the board and through the year. So I think next is more of an outlier and exception and we did learn from it. There's no question about that. And I wouldn't expect that to happen again. So we'll, I think we'll get better in that respect for sure.

speaker
Greg

Thanks Lee.

speaker
Operator

Okay, no problem. Thank you. Reminder to all the participants that you may press star and one to ask a question. As there are no further questions at this time, ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to lead Rudolph for closing comments.

speaker
Becknell

Well, thank you all for joining us on today's call. We appreciate your continued interest in Transcap. We'll be attending the Craig Howell 15th annual Alpha Select Conference. Which is in New York City on November 19th. Tom and I will be there. Feel free to check in with us at the conference or really any other time. Otherwise, we'll talk to everybody after the third quarter results. So again, thanks for participating. Take care.

speaker
Operator

Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer

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