Transcat NASDAQ: TRNS reported double-digit revenue growth in both of its business segments for the fiscal fourth quarter, as newly appointed President and CEO Jaime Irick told investors the company plans to continue emphasizing organic service growth, margin expansion, acquisitions and rentals.
On the company’s fiscal fourth-quarter earnings call, Irick said Transcat delivered “strong performance across our entire business portfolio,” citing continued demand in highly regulated end markets including life sciences, aerospace and defense, and energy. Consolidated revenue rose 16% to $89.3 million in the fourth quarter, while full-year revenue increased 19% to $331.9 million.
Irick, who joined the company at the end of March, said he has spent much of his initial time visiting calibration labs, meeting employees, speaking with the board and engaging customers and partners. He described Transcat as “the most attractive growth platform in our industry” and said the company’s current strategy remains intact.
“The strategy is working, and we are going to keep executing and accelerating against our four clear strategic imperatives: high single-digit service organic revenue growth, service gross margin expansion, strategic M&A, and rentals growth,” Irick said.
Service Segment Extends Growth Streak
Transcat’s service segment remained the company’s largest growth driver. Irick said service revenue increased 18% in the fiscal fourth quarter, including 7% organic growth. He noted the quarter marked the company’s 68th consecutive quarter of year-over-year service revenue growth.
For the full fiscal year, service revenue rose 20%, supported by what management described as a differentiated value proposition and continued integration of acquired businesses. CFO Thomas Barbato said the balance of fourth-quarter service growth beyond the organic portion was attributable to the Essco Calibration acquisition.
Service gross profit increased 16% in the fourth quarter and for the full year. Barbato said service gross margin was 35.5% in the fourth quarter, improving sequentially by 670 basis points from the fiscal third quarter as the company leveraged technician productivity and absorbed costs tied to onboarding new customer wins.
During the question-and-answer portion of the call, Barbato said new customer onboarding continued to weigh on service margins in the fourth quarter, similar to the third quarter. However, he said management expects conditions to normalize in the first half of fiscal 2027 and expects full-year service margins to improve year over year in fiscal 2027 versus fiscal 2026.
Distribution Benefits From Rentals Mix
The distribution segment also posted strong results. Irick said distribution revenue grew 11% in the fourth quarter and 18% for the full year, driven by rental demand and product sales.
Distribution gross margin expanded 280 basis points year over year in the fourth quarter and 330 basis points for the full year. Management attributed the improvement primarily to a favorable shift toward higher-margin rental revenue within the segment.
Barbato said the rental business continues to perform well, though the company does not disclose specific rental growth figures. He said Transcat has previously characterized rentals as a low double-digit growth business and confirmed during the call that the growth expectation is organic.
Energy demand has become a more visible contributor, Barbato said, including opportunities tied to power generation, power consumption and power conditioning. He cited data centers as an example, noting that equipment used to monitor and condition power supplies requires calibration and may be needed periodically rather than continuously, supporting demand for rentals.
Earnings, Cash Flow and Balance Sheet
Transcat reported fourth-quarter diluted earnings per share of $0.21 and full-year diluted EPS of $0.57. Barbato said the year-over-year change reflected higher intangible amortization, stock-based compensation, interest expense and executive transition costs.
Adjusted diluted EPS was $0.56 for the fourth quarter and $1.84 for the full year. Barbato said the company uses adjusted measures to normalize for acquisition-related costs, executive transition costs and other items not directly tied to ongoing operations.
Fourth-quarter adjusted EBITDA increased 16% to $14.8 million, with adjusted EBITDA margin expanding by 10 basis points. For the full year, adjusted EBITDA rose 23% to $48.7 million, with adjusted EBITDA margin expanding by 40 basis points.
Operating free cash flow for fiscal 2026 was $19.6 million, reflecting working capital investments to support revenue growth in the second half of the year. Capital expenditures totaled $15.3 million, focused on service capabilities, rental pool assets, technology and future growth projects.
At quarter-end, the company had $99.9 million of total debt, $50.1 million available under its revolving credit facility and a leverage ratio of 2.03x. Barbato said adjusted EBITDA growth allowed Transcat to continue reducing leverage sequentially and that the company is positioned to support both organic growth and acquisitions.
Acquisition Strategy Remains a Focus
Irick and Barbato both emphasized that mergers and acquisitions remain central to Transcat’s strategy. The company recently acquired SCM Metrology and Laboratories, establishing its first operating presence in Latin America.
Irick said the acquisition is consistent with Transcat’s strategy of expanding alongside customers in high-growth, highly regulated markets. Barbato said SCM’s location in Costa Rica provides access to free trade zones with a high concentration of life sciences and medical device customers, and he said SCM also serves customers in markets such as Panama, Colombia and the Dominican Republic.
Barbato said the SCM deal returned Transcat closer to its historical range of acquisition multiples and presents an opportunity to generate a “nice return on investment.” Irick added that early inbound customer interest following the deal suggests the company may have new opportunities with multinational customers in Latin America.
Management said future acquisition priorities remain consistent, including expansion into new geographies and additional capabilities. Barbato named Northern California, Dallas, Atlanta and the Mid-Atlantic region around Baltimore as areas where the company sees potential future opportunities.
Fiscal 2027 Outlook Centers on Service Momentum
Looking ahead, Irick said increased customer activity, solid retention and new business wins support expectations for a higher level of service organic growth in the fiscal first quarter compared with the fourth quarter. Barbato clarified during the Q&A that management expects first-quarter organic service growth to exceed the fourth quarter’s 7% rate, not necessarily that total revenue would be sequentially higher.
Barbato said the company is not pulling demand forward and described the pipeline as strong, with opportunities converting into wins. He said management is comfortable with its expectations for the first quarter and full year.
Irick also said Transcat is investing in technology, data and artificial intelligence to improve customer-facing processes, increase productivity and support margin expansion. In response to an analyst question, he cited potential improvements in sales pipeline tracking, cycle time reduction, customer experience, order-to-cash processes and on-time delivery.
“Sixty-eight consecutive quarters of service revenue growth is not an accident,” Irick said. “It is a result of a clear strategy, disciplined execution, and an exceptional team that has been doing the work for years.”
About Transcat NASDAQ: TRNS
Transcat, Inc NASDAQ: TRNS is a leading provider of calibration, laboratory, and metrology services in North America. Founded in 1964 and headquartered in Ronkonkoma, New York, the company specializes in ensuring the accuracy and compliance of measurement instruments across a wide range of industries. Transcat operates a network of ISO/IEC 17025–accredited laboratories and offers on-site field calibration, instrument repair, and preventive maintenance services.
In addition to its calibration services, Transcat distributes precision instrumentation and related software solutions from top manufacturers.
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