Transcat Q3 2022 Earnings Report
Key Takeaways
Transcat reported strong third-quarter results, driven by the Service business, which saw a 22% revenue increase. The Distribution segment also experienced growth, and the company's adjusted EBITDA increased by 20% compared to the previous year.
Service revenue grew by 22%, including 10.2% organic growth and 12% from acquisitions.
Gross margin expanded 180 basis points to a record 29.7% due to operating leverage and accretive margins from acquisitions.
Distribution segment revenue increased by 7.2% with a record $9 million backlog.
Consolidated adjusted EBITDA increased by 20% to $5.5 million.
Transcat
Transcat
Transcat Revenue by Segment
Forward Guidance
For the fourth quarter of fiscal 2022, Transcat expects Service revenue growth to be in the high-teens and Service gross margin to be in the range of 35%. Distribution revenue is expected to grow high single-digits. Total operating expenses are expected to increase approximately $0.5 million sequentially from the third quarter.
Positive Outlook
- Service revenue growth expected to be in the high-teens.
- Service gross margin expected to be in the range of 35%.
- Distribution revenue is expected to grow high single-digits.
- Strong balance sheet
- Sustainable Service segment gross margins
Challenges Ahead
- Total operating expenses are expected to increase approximately $0.5 million sequentially from the third quarter.
- Vendor lead times extended further toward the end of the calendar year.
- Impact of COVID-19 pandemic.
- Increases in employee and stock compensation costs
- Investments in technology
Revenue & Expenses
Visualization of income flow from segment revenue to net income