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Sep 28, 2024
Transcat Q2 2025 Earnings Report
Reported revenue and gross profit growth in the second quarter.
Key Takeaways
Transcat reported an 8% increase in consolidated revenue, driven by growth in both service and distribution segments. Service revenue grew by 6%, and distribution revenue grew by 11%. Consolidated gross profit increased by 5.4%, but gross margin decreased due to softness in Nexa and Becnel revenues. Net income per diluted share was $0.35, compared to $0.06 in the previous year.
Consolidated revenue increased by 8% driven by service and distribution growth.
Service revenue grew by 6%, marking the 62nd consecutive quarter of growth.
Distribution revenue increased by 11%, but was negatively impacted by hurricanes.
The company expects a return to high single digit organic growth by the first half of fiscal 2026.
Transcat
Transcat
Transcat Revenue by Segment
Revenue by Segment
Service Revenue
CapyFin.comDistribution Revenue
CapyFin.com Forward Guidance
Transcat expects mid-single-digit organic service revenue growth for fiscal year 2025, normalized for the extra week in fiscal 2024, along with gross margin expansion. The company anticipates a return to high single-digit organic growth by the first half of fiscal year 2026. They also expect their income tax rate to range between 21% and 23% in fiscal 2025.
Positive Outlook
- Expects FY25 organic Service revenue growth in the mid-single digits when normalized for the extra week in fiscal 2024 and gross margin expansion.
- Anticipates a return to high single digit organic growth by the first half of fiscal 2026.
- Automation of calibration processes and focus on productivity remain key enablers of margin expansion.
- Demonstrated the ability to leverage these tools to improve operational efficiency.
- Continue to work robust acquisition pipeline and are pleased with the current flow of strategic opportunities.
Challenges Ahead
- Disappointed with the Nexa-impacted aggregated results in fiscal Q2.
- Experienced short term, isolated revenue challenges in the Nexa services channel in the quarter
- Becnel revenue was negatively impacted by two hurricanes in the Gulf of Mexico, which pressured second quarter Distribution margins.
- Service segment gross margin was 33.1%, a decrease of 90 basis points from prior year primarily due to lower revenue from Nexa.
- Distribution segment gross margin was 27.9%, a decrease of 40 basis points due to Becnel revenue impacted by the Gulf of Mexico hurricanes.
Revenue & Expenses
Visualization of income flow from segment revenue to net income