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Item 1. Business

2021-06-08 compared with 2020-06-08 · 593 added, 254 removed, 80 unchanged (91% of the section changed)

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Transcat, Inc.

(“Transcat”, the “Company , ” “we” or “us”) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade test, measurement and control instrumentation.

We are focused on providing services and products to highly regulated industries, particularly the life science industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated businesses.

(“Transcat”, the “Company,” “we”

or “us”) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor

of professional grade test, measurement and control instrumentation.

We are focused on providing services and products to highly regulated

industries, particularly the life science industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated

Additional industries served include FAA-regulated businesses, including aerospace and defense industrial manufacturing;

energy and utilities, including oil and gas and alternative energy;

and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment, and for which the risk of failure is very costly.

and utilities, including oil and gas and alternative energy;

and other industries that require accuracy in their processes, confirmation

of the capabilities of their equipment, and for which the risk of failure is very costly.

We conduct our business through two operating segments:

service (“Service”) and distribution (“Distribution”).

See Note 7 to our Consolidated Financial Statements in this report for financial information for these segments.

We concentrate on attracting new customers in each segment, retaining existing customers and cross-selling to customers to increase our total revenue.

We serve approximately 25,000 customers through our Service and Distribution segments, with approximately 25% to 30% of those customers transacting with us through both of our business segments.

Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services, a majority of which are processed through our proprietary asset management system, CalTrak® (“CalTrak®” ) and our online customer portal, C3®.

Our Service model is flexible, and we cater to our customers’ needs by offering a variety of services and solutions including permanent and periodic on-site services, mobile calibration services, pickup and delivery and in-house services.

As of the end of our fiscal year ended March 28, 2020 (“ fiscal year 2020 ”), we operated twenty-two calibration service centers (“ Calibration Service Centers”) strategically located across the United States, Puerto Rico, and Canada.

We also serve our customers on-site at their facilities for daily, weekly or longer-term periods.

In addition, we have several imbedded customer-site locations that we ref er to as “client - based labs,” where we provide calibration services, and in some cases other related services, exclusively for the customer and where we reside and work every day.

We also have a fleet of mobile calibration laboratories that can provide service at customer sites which may not have the space or utility capabilities we require to service their equipment.

All of our Calibration Service Centers have obtained ISO/IEC 17025:2017 scopes of accreditation.

service (“Service”)

and distribution (“Distribution”).

See Note 7 to our Consolidated Financial Statements in this report for financial information

for these segments.

We concentrate on attracting new customers in each segment, retaining existing customers and cross-selling to customers

to increase our total revenue.

We serve approximately 26,000 customers through our Service and Distribution segments, with approximately

25% to 30% of those customers transacting with us through both of our business segments.

Through our Service segment, we offer calibration, repair, inspection,

analytical qualifications, preventative maintenance, consulting and other related services, a majority of which are processed through

our proprietary asset management system, CalTrak® (“CalTrak®”) and our online customer portal, C3® (“C3®”).

Our Service model is flexible, and we cater to our customers’ needs by offering a variety of services and solutions including permanent

and periodic onsite services, mobile calibration services, pickup and delivery and in-house services.

As of the end of our fiscal year

ended March 27, 2021 (“fiscal year 2021”), we operated twenty-two calibration service centers (“Calibration Service

Centers”) strategically located across the United States, Puerto Rico, and Canada.

We also serve our customers onsite at their facilities

for daily, weekly or longer-term periods.

In addition, we have several imbedded customer-site locations that we refer to as “client-based

labs,” where we provide calibration services, and in some cases other related services, exclusively for the customer and where we

reside and work every day.

We also have a fleet of mobile calibration laboratories that can provide service at customer sites which may

not have the space or utility capabilities we require to service their equipment.

All of our Calibration Service Centers have obtained ISO/IEC 17025:2017

scopes of accreditation.

Our accreditations are the cornerstone of our quality program, which we believe is among the best in the industry.

Our dedication to quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and other regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent and uniform service, regardless of which of our service centers completes the service.

Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally.

Through our website, in-house sales team and printed and digital marketing materials, we offer access to more than 150,000 test, measurement and control instruments, including products from approximately 500 leading brands.

Most instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements.

By having the capability to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give customers a value-added service that most of our competitors are unable to provide.

Calibrating before shipping means the customer can place their instruments into service immediately upon receipt, reducing downtime.

Other value-added options we offer through our Distribution segment include equipment kitting (which is especially valued in the power generation sector), equipment rentals and used equipment sales.

Our dedication to quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and

other regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent and uniform

service, regardless of which of our service centers completes the service.

Through our Distribution segment, we sell and rent national and proprietary

brand instruments to customers globally.

Through our website, in-house sales team and printed and digital marketing materials, we offer

access to more than 150,000 test, measurement and control instruments, including products from approximately 500 leading brands.

instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements.

By having the capability

to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give customers a value-added service that

most of our competitors are unable to provide.

Calibrating before shipping means the customer can place their instruments into service

immediately upon receipt, reducing downtime.

Other value-added options we offer through our Distribution segment include equipment kitting

(which is especially valued in the power generation sector), equipment rentals and used equipment sales.

Our commitment to quality goes beyond the services and products we deliver.

Our sales, customer service and support teams provide expert advice, application assistance and technical support to our customers.

Since calibration is an intangible service, our customers rely on us to uphold high standards and provide integrity in our people and processes.

Our customers include leading manufacturers in the life science/pharmaceutical, energy, defense, aerospace and industrial process control sectors.

We believe our customers do business with us because of our integrity and commitment to quality service, our broad range of product and service offerings, our proprietary asset management system, CalTrak®, and our online customer portal, C3®.

In our fiscal year ended March 30, 2019 (“ fiscal year 2019 ”) through fiscal year 2020, no customer or controlled group of customers accounted for 5% or more of our total revenue.

The loss of any single customer would not have a material adverse effect on our business, cash flows, balance sheet, or results of operations.

calibration is an intangible service, our customers rely on us to uphold high standards and provide integrity in our people and processes.

Our customers include leading manufacturers in the life science/pharmaceutical,

energy, defense, aerospace and industrial process control sectors.

We believe our customers do business with us because of our integrity

and commitment to quality service, our broad range of product and service offerings, our proprietary asset management system, CalTrak®,

and our online customer portal, C3®.

In our fiscal year ended March 28, 2020 (“fiscal year 2020”) through fiscal year

2021, no customer or controlled group of customers accounted for 5% or more of our total revenue.

The loss of any single customer would

not have a material adverse effect on our business, cash flows, balance sheet, or results of operations.

Transcat was incorporated in Ohio in 1964.

We are headquartered in Rochester, New York and employ 772 people, including approximately 165 in our corporate headquarters.

We are headquartered in Rochester,

Our executive offices are located at 35 Vantage Point Drive, Rochester, New York 14624.

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Our website is www.transcat.com.

Information available on our website is not a part of, and is not incorporated into, this Annual Report

on Form 10-K.

We trade on the Nasdaq Global Market under the ticker symbol “TRNS”.

Our two operating segments are highly complementary in that their offerings are of value to customers within the same industries.

Our strategy is to leverage the complementary nature of our operating segments in ways that add value for all customers who select Transcat as their source for test and measurement equipment and/or calibration and laboratory instrument services.

We strive to differentiate ourselves within the markets we serve and build barriers to competitive entry by offering a broad range of products and services and by integrating our product and service offerings in a value-added manner to benefit our customers’ operations.

During fiscal year 2020, we continued to commit capital, people and leadership investments to advance our “Operational Excellence” initiative.

These initiatives are resulting in increased productivity and operational efficiency and further differentiation from our competitors as we leverage technology and process improvements to improve our effectiveness and our customer s’ experiences.

Our Operational Excellence is a multi-year, ever-evolving program that we believe will deliver certain short-term benefits but is focused on the use of technology and process improvements to create an infrastructure to support our strategic goals over a longer timeframe.

Within the Service segment, our strategy is to drive double-digit revenue growth through both organic expansion and acquisitions.

We expect to achieve mid-to-high single digit organic revenue growth in this segment.

We have adopted an integrated sales model to drive sales and capitalize on the cross-selling opportunities between our two segments, especially leveraging our Distribution relationships to develop new Service relationships.

We leverage these relationships with our unique value proposition which resonates strongly with customers who rely on accredited calibration services and/or laboratory instrument services to maintain the integrity of their processes and/or meet the demands of regulated business environments.

Our customer base values our superior quality programs and requires precise measurement capability in their processes to minimize risk, waste and defects.

We execute this strategy by leveraging our quality programs, metrology expertise, multiple locations, qualified technicians, breadth of capabilities, and on-site and depot service options.

Together, this allows us to meet the most rigorous quality demands of our most highly regulated customers while simultaneously being nimble enough to meet their business needs.

We expect to continue to grow our Service business organically by taking market share from other third-party providers and original equipment manufacturers (“ OEMs ”) , as well as by targeting the outsourcing of in-house calibration labs as multi-year client-based lab contracts.

We believe an important element in taking market share is our ability to expand into new technical capabilities that are in demand by our current and target customer base.

Our two operating segments are highly complementary in that their offerings

are of value to customers within the same industries.

Our strategy is to leverage the complementary nature of our operating segments in

ways that add value for all customers who select Transcat as their source for test and measurement equipment and/or calibration and laboratory

instrument services.

We strive to differentiate ourselves within the markets we serve and build barriers to competitive entry by offering

a broad range of products and services and by integrating our product and service offerings in a value-added manner to benefit our customers’

During fiscal year 2021, we continued to commit capital, people and leadership

investments to advance our “Operational Excellence” initiative.

This initiative is resulting in increased productivity and

operational efficiency and further differentiation from our competitors as we leverage technology and process improvements to improve

our effectiveness and our customers’ experiences.

Our Operational Excellence initiative is a multi-year, ever-evolving program designed

to create an infrastructure that supports our strategic goals over a longer timeframe.

Within the Service segment, our strategy is to drive double-digit revenue

growth through both organic expansion and acquisitions.

Our strategy is to achieve mid-to-high single digit organic revenue growth in

this segment.

We have adopted an integrated sales model to drive sales and capitalize on the cross-selling opportunities between our two

segments, especially leveraging our Distribution relationships to develop new Service relationships.

We leverage these relationships with

our unique value proposition which resonates strongly with customers who rely on accredited calibration services and/or laboratory instrument

services to maintain the integrity of their processes and/or meet the demands of regulated business environments.

Our customer base values

our superior quality programs and requires precise measurement capability in their processes to minimize risk, waste and defects.

this strategy by leveraging our quality programs, metrology expertise, multiple locations, qualified technicians, breadth of capabilities,

and onsite and depot service options.

Together, this allows us to meet the most

rigorous quality demands of our most highly regulated customers while simultaneously

being nimble enough to meet their business needs.

We expect to continue to grow our Service business organically by taking

market share from other third-party providers and original equipment manufacturers (“OEMs”), as well as by targeting the outsourcing

of in-house calibration labs as multi-year client-based lab contracts.

We believe an important element in taking market share is our ability

to expand into new technical capabilities that are in demand by our current and target customer base.

The other component to our Service growth strategy is acquisitions.

There are three drivers of our acquisition strategy:

are three drivers of our acquisition strategy:

geographic expansion, increased capabilities and infrastructure leverage.

The majority of our acquisition opportunities have been in the $500 thousand to $10 million annual revenue range, and we are disciplined in our approach to selecting target companies.

One focus of our Operational Excellence initiative is to strengthen our acquisition integration process, allowing us to capitalize on acquired sales and cost synergies at a faster pace.

Our Distribution segment strategy is to be the premier distributor and rental source of leading test and measurement equipment while also providing cross-selling opportunities for our Service segment.

Through our vendor relationships we have access to more than 150,000 products, which we market to our existing and prospective customers both with and without value-added service options that are unique to Transcat.

In addition to offering pre-shipment value-added services, we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability to answer all of our customers’ test and measurement equipment needs.

We continuously evaluate our offerings and add new in-demand vendors and products.

In recent years we have expanded the number of SKUs that we stock and the number of SKUs that are sold with pre-shipment calibrations and have increased our focus on digital marketing to capitalize on the ever-growing B2B ecommerce trend.

of our acquisition opportunities have been in the $500 thousand to $10 million annual revenue range, and we are disciplined in our approach

to selecting target companies.

One focus of our Operational Excellence initiative is to strengthen our acquisition integration process,

allowing us to capitalize on acquired sales and cost synergies at a faster pace.

Our Distribution segment strategy is to be the premier distributor and

rental source of leading test and measurement equipment while also providing cross-selling opportunities for our Service segment.

our vendor relationships we have access to more than 150,000 products, which we market to our existing and prospective customers both

with and without value-added service options that are unique to Transcat.

In addition to offering pre-shipment value-added services,

we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability

to answer all of our customers’ test and measurement equipment needs.

We continuously evaluate our offerings and add new in-demand

vendors and products.

Our equipment rental business continues to grow, and with it used equipment sales.

Having new, used and rental equipment further differentiates us from our Service segment competitors.

We see these various methods of meeting our Distribution customers’ needs as a way to differentiate ourselves and to di versify this segment’s customer base from its historically niche market.

This differentiation and diversification strategy has been deliberately instituted in recent years as a means to mitigate the effect of price-driven competition and to lessen the impact that any particular industry or market will have on the overall performance of this segment.

As part of our growth strategy, we completed three business acquisitions during our fiscal year 2020 and two acquisitions during our fiscal year 2019:

Effective February 21, 2020, we acquired substantially all of the assets of TTE Laboratories, Inc.

(“TTE"), a Boston, MA-based provider of pipette equipment and services.

Having new, used and rental equipment

further differentiates us from our Service segment competitors.

We see these various methods of meeting our Distribution customers’

needs as a way to differentiate ourselves and to diversify this segment’s customer base from its historically niche market.

differentiation and diversification strategy has been deliberately instituted in recent years as a means to mitigate the effect of price-driven

competition and to lessen the impact that any particular industry or market will have on the overall performance of this segment.

As part of our growth strategy, we completed one acquisition during our

fiscal year 2021 and three business acquisitions during our fiscal year 2020:

Effective December 16, 2020, Transcat acquired substantially all of

the assets of BioTek Services, Inc.

(“BioTek”), a Virginia based provider of pipette calibration services.

Effective February 21, 2020, we acquired substantially all of the

assets of TTE Laboratories, Inc.

(“TTE”, now known as pipettes.com), a Boston, MA-based provider of pipette equipment and

Effective July 19, 2019, we acquired Infinite Integral Solutions Inc.

IIS, a Mississauga, Ontario, Canada company, the owner and developer of the CalTree™ suite of software solutions for the automation of calibration procedures and datasheet generation.

Effective April 1, 2019, we acquired substantially all of the assets of Gauge Repair Service (“GRS”), a Los Angeles, California-based provider of calibration services.

Effective August 31, 2018, we acquired substantially all of the assets of Angel’s Instrumentation, Inc.

(“Angel’s”), a Virginia-based provider of calibration services.

Effective June 12, 2018, we acquired substantially all of the assets of NBS Calibration, Inc.

(“NBS”), an Arizona-based provider of calibration services.

Our acquisition strategy primarily targets service businesses that expand our geographic reach, increase the depth and/or breadth of our service capabilities and expertise and leverage our infrastructure.

The table below illustrates the strategical drivers for the acquisitions described above:

IIS, a Mississauga, Ontario, Canada company, the owner and developer of the CalTree™ suite of software solutions

for the automation of calibration procedures and datasheet generation.

Effective April 1, 2019, we acquired substantially all of the assets

of Gauge Repair Service (“GRS”), a Los Angeles, California-based provider of calibration services.

Our acquisition strategy primarily targets service businesses that expand

our geographic reach, increase the depth and/or breadth of our service capabilities and expertise and leverage our infrastructure.

table below illustrates the strategic drivers for the acquisitions described above:

Infrastructure

We believe our combined Service and Distribution segment offerings, experience, technical expertise and integrity create a unique and compelling value proposition for our customers, and we intend to continue to grow our business through organic revenue growth and business acquisitions.

We consider the attributes of our Service segment which include higher gross margins and recurring revenue streams from customers in regulated industries to be more compelling and scalable than our legacy Distribution segment.

For this reason, we expect our Service segment to be the primary source of revenue and earnings growth in future fiscal years.

We believe our combined Service and Distribution segment offerings, experience,

technical expertise and integrity create a unique and compelling value proposition for our customers, and we intend to continue to grow

our business through organic revenue growth and business acquisitions.

We consider the attributes of our Service segment, which include

higher gross margins and recurring revenue streams from customers in regulated industries to be more compelling and scalable than our

legacy Distribution segment.

For this reason, we expect our Service segment to be the primary source of revenue and earnings growth in

future fiscal years.

The charts below illustrate Service, Distribution and consolidated revenue over the past five years:

Service Revenue Trend (in millions)

Distribution Sales Trend (in millions)

Consolidated Revenue (in millions)

Service Segment

Calibration is the act of comparing a unit or instrument of unknown value to a standard of known value and reporting the result in some specifically defined form.

After the calibration has been completed, a decision is made, based on rigorously defined parameters, regarding what, if anything, should be done to the unit to conform to the required standards or specifications.

Calibration is the act of comparing a unit or

instrument of unknown value to a standard of known value and reporting the result in some specifically defined form.

After the calibration

has been completed, a decision is made, based on rigorously defined parameters, regarding what, if anything, should be done to the unit

to conform to the required standards or specifications.

The decision may be to adjust, optimize or repair a unit;

limit the use, range or rating of a unit;

limit the use, range

or rating of a unit;

scrap the unit;

or leave the unit as is.

The purpose of calibration is to significantly reduce the risk of product or process failures caused by inaccurate measurements.

In addition to its being an element of quality control and risk management, c alibration improves an operation’s productivity and efficiency to optimal levels by assuring accurate, reliable instruments and processes.

The need for calibration is often driven by regulation, which identifies a requirement for quality calibration and laboratory instrument services as a critical component of a compan y’s business operation.

The purpose of calibration is to significantly reduce the risk

of product or process failures caused by inaccurate measurements.

to its being an element of quality control and risk management, calibration improves an operation’s productivity and efficiency

to optimal levels by assuring accurate, reliable instruments and processes.

The need for calibration is often driven by regulation, which identifies

a requirement for quality calibration and laboratory instrument services as a critical component of a company’s business operation.

We specifically target industries and companies that are regulated by the FDA, FAA or other regulatory bodies.

As a result of the various levels of regulation within our target industries, our customers’ calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliabili ty, trust, customer service and documentation of services.

To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality systems, further detailed in the section entitled “ Service Quality” below, and provide our customers with access to proprietary asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility to their service records.

Through our Service segment, we perform recurring periodic calibrations (typically ranging from three-month to twenty-four month intervals) on new and customer-owned instruments.

We perform approximately 500,000 calibrations annually and can address a significant majority of the items requested to be calibrated with our in-house capabilities.

For customers’ calibration needs in less common and highly specialized disciplines, we subcontract some calibrations to third-party vendors that have unique or proprietary capabilities.

While typically representing approximately 13% to 15% of our Service segment revenue, we believe the management of these items is highly valued by our customers and providing this service has enabled us to continue our pursuit of having the broadest calibration offerings in these targeted markets.

As a result of the various

levels of regulation within our target industries, our customers’ calibration and laboratory instrument service sourcing decisions

are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation

To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality

systems, further detailed in the section entitled “Service Quality” below, and provide our customers with access to proprietary

asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility

to their service records.

Through our Service segment, we perform recurring periodic calibrations

(typically ranging from three-month to twenty-four month intervals) on new and customer-owned instruments.

We perform approximately 700,000

calibrations annually and can address a significant majority of the items requested to be calibrated with our in-house capabilities.

customers’ calibration needs in less common and highly specialized disciplines, we subcontract some calibrations to third-party

vendors that have unique or proprietary capabilities.

While typically representing approximately 13% to 15% of our Service segment revenue,

we believe the management of these items is highly valued by our customers and providing this service has enabled us to continue our pursuit

of having the broadest calibration offerings in these targeted markets.

We regularly review outsourced services to identify opportunities

for in-house capability expansion.

Compliance Services.

Our compliance services include analytical qualification, validation, remediation and preventative maintenance services.

Our analytical qualification and validation services provide a comprehensive and highly specialized service offering focused on life science-related industries.

Analytical qualifications and validation services include validations to specifically documented protocols that are commonly used in highly-regulated life science industries including installation qualification ( “ IQ ” ), operational qualification ( “ OQ ” ), and performance qualification ( “ PQ ” ).

Most of the demand for our qualification, validation and preventative maintenance services comes from companies and institutions engaged in pharmaceutical manufacturing and research and development.

Our goal is to deliver specialized technical services with a quality assurance approach, which maximizes document accuracy and on-time job delivery.

These industries demand knowledgeable contract services, and Transcat meets these demands with current good manufacturing practice (“ cGMP ”) and good laboratory practice (“ GLP ”) compliant services.

Companies within these innovative and cutting-edge life science industries need a reliable alternative to the OEMs and the “generalist” service providers who cannot meet the ir industry-specific needs.

We believe our value proposition to the life science industries is unique as a result of offering a comprehensive suite of both traditional calibration and laboratory instrument and other analytical services.

Analytical qualifications and preventative maintenance services are typically based on service agreements for periodic service and tend to generate recurring revenue.

Some validation services are based on certain customer processes.

While some validation services may not be repeated, we generally develop relationships with these customers that lead to demand for additional unique validation services.

Remediation services are based on specific regulatory actions and are generally project-based and required by a customer for a finite period of time.

Our compliance services include analytical

qualification, validation, remediation and preventative maintenance services.

Our analytical qualification and validation services provide

a comprehensive and highly specialized service offering focused on life science-related industries.

Analytical qualifications and validation

services include validations to specifically documented protocols that are commonly used in highly-regulated life science industries including

installation qualification (“IQ”), operational qualification (“OQ”), and performance qualification (“PQ”).

Most of the demand for our qualification, validation and preventative maintenance services comes from companies and institutions engaged

in pharmaceutical manufacturing and research and development.

Our goal is to deliver specialized technical services with a quality assurance

approach, which maximizes document accuracy and on-time job delivery.

These industries demand knowledgeable contract services, and Transcat

meets these demands with current good manufacturing practice (“cGMP”) and good laboratory practice (“GLP”) compliant

Companies within these innovative and cutting-edge life science industries need a reliable alternative to the OEMs and the “generalist”

service providers who cannot meet their industry-specific needs.

We believe our value proposition to the life science industries is unique

as a result of offering a comprehensive suite of both traditional calibration and laboratory instrument and other analytical services.

Analytical qualifications and preventative maintenance services are typically

based on service agreements for periodic service and tend to generate recurring revenue.

Some validation services are based on certain

customer processes.

While some validation services may not be repeated, we generally develop relationships with these customers that lead

to demand for additional unique validation services.

Remediation services are based on specific regulatory actions and are generally project-based

and required by a customer for a finite period of time.

Remediation revenue is not recurring by its nature.

Other Services.

We provide other services to our customers such as inspection, repair and consulting services, which appeal to customers across all sectors in our customer base.

These are generally value-added services and allow us to provide “one - stop shopping” for our customers.

We provide other services to our customers

such as inspection, repair and consulting services, which appeal to customers across all sectors in our customer base.

These are generally

value-added services and allow us to provide “one-stop shopping” for our customers.

Service Value Proposition.

Our calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs:

We offer an “Integrated Calibration Service Solution” that provides a complete wrap-around service, which can be delivered in the following ways:

Our calibration services strategy

encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs:

We offer an “Integrated Calibration Service Solution” that provides a complete wrap-around

service, which can be delivered in the following ways:

in-house services:

services are performed at one of our twenty-two Calibration Service Centers (often accompanied by pick-up and delivery services);

periodic on-site services:

Transcat technicians travel to a customer’s location, including aboard vessels docked at shipyards, and provide bench-top or in-line calibration or laboratory services on predetermined service cycles;

services are performed at one of our twenty-two

Calibration Service Centers (often accompanied by pick-up and delivery services);

periodic onsite services:

Transcat technicians travel to a customer’s

location, including aboard vessels docked at shipyards, and provide bench-top or in-line calibration or laboratory services on predetermined

service cycles;

client-based-laboratory services:

Transcat establishes and manages a calibration service program within a customer’s facility;

Transcat establishes and manages

a calibration service program within a customer’s facility;

mobile calibration services:

services are completed on a customer’s property within one of our mobile calibration units.

services are completed on a customer’s

property within one of our mobile calibration units.

For companies that maintain an internal calibration operation, we can provide:

calibration of their primary calibration assets, also called “standards”;

overflow capability, either on-site or at one of our Calibration Service Centers, during periods of high demand.

Inclusive with all the above services, we provide total program management including logistics, remediation and consultation services when needed.

We strive to provide the broadest accredited calibration offering to our targeted markets, which includes certification of our technicians pursuant to the American Society for Quality standards, complete calibration management encompassing the entire metrology function, and access to our complementary service and product offerings.

We believe our calibration services are of the highest technical and quality levels, with broad ranges of accreditation.

Our Compliance Services strategy is to identify and establish long-term relationships with life science research and development and manufacturing customers who require analytical qualifications, validation, remediation and/or preventative maintenance services.

In most cases, these customers are life science companies, including pharmaceutical and biotechnology companies engaged in research and development and manufacturing, which are subject to extensive government regulation.

overflow capability, either onsite or at one of our Calibration Service Centers, during periods

of high demand.

Inclusive with all the above services, we provide total program management

including logistics, remediation and consultation services when needed.

We strive to provide the broadest accredited calibration offering to our

targeted markets, which includes certification of our technicians pursuant to the American Society for Quality standards, complete calibration

management encompassing the entire metrology function, and access to our complementary service and product offerings.

We believe our calibration

services are of the highest technical and quality levels, with broad ranges of accreditation.

Our Compliance Services strategy is to identify and establish long-term

relationships with life science research and development and manufacturing customers who require analytical qualifications, validation,

remediation and/or preventative maintenance services.

In most cases, these customers are life science companies, including pharmaceutical

and biotechnology companies engaged in research and development and manufacturing, which are subject to extensive government regulation.

The services we provide to these regulated customers are typically a critical component of the customer’s overall compliance program.

Because many laboratory instrument service customers operate in regulated industries, these same customers typically also require accredited calibration services.

Because many laboratory instrument service customers operate in regulated industries, these same customers typically also require accredited

calibration services.

This requirement allows a natural synergy between our laboratory instrument and calibration services.

Our strategy includes cross-selling our services within our customer accounts to maximize our revenue opportunities with each customer.

includes cross-selling our services within our customer accounts to maximize our revenue opportunities with each customer.

Proprietary Asset Management Software.

CalTrak® is our proprietary documentation and asset management software which is used to integrate and manage both the workflow of our Calibration Service Centers and our customers’ assets.

With CalTrak®, we are able to provide our customers with timely and consistent calibration service while optimizing our own efficiencies.

CalTrak® is our

proprietary documentation and asset management software which is used to integrate and manage both the workflow of our Calibration Service

Centers and our customers’ assets.

With CalTrak®, we are able to provide our customers with timely and consistent calibration

service while optimizing our own efficiencies.

CalTrak® has been validated to U.S.

federal regulations 21 CFR Part 820.75 and 21 CFR Part 11, as applicable.

This validation is important to pharmaceutical and other FDA-regulated industries where federal regulations can be particularly stringent.

Additionally, C3® provides our customers with web-based asset management capability and a safe and secure off-site archive of calibration and other service records that can be accessed 24 hours a day through our secure password-protected website.

C3® stands for Compliance, Control and Cost, and we see these as the major areas of focus for our clients within the regulatory environment as it relates to instrument calibration.

We specifically designed C3® to assist our customers in increasing efficiency, driving compliance to quality system and enhancing control of instrumentation, all while bringing their overall metrology costs down.

Understanding the regulated environments that our clients operate within, we customized the platform to allow for single system of record utilization via capabilities that allow clients to track and manage instruments maintained internally in addition to instruments supported by Transcat.

C3® is validated to 21 CFR Part 820.75 and 21 CFR Part 11 to meet stringent FDA requirements.

Through CalTrak® and C3®, each customer calibration is tracked and automatically cross-referenced to the assets used to perform the calibration, providing traceability.

federal regulations 21 CFR Part 820.75 and 21

CFR Part 11, as applicable.

This validation is important to pharmaceutical and other FDA-regulated industries where federal regulations

can be particularly stringent.

Additionally, C3® provides our customers with web-based asset management

capability and a safe and secure off-site archive of calibration and other service records that can be accessed 24 hours a day through

our secure password-protected website.

C3® stands for Compliance, Control and Cost, and we see these as the major areas of focus

for our clients within the regulatory environment as it relates to instrument calibration.

We specifically designed C3® to assist

our customers in increasing efficiency, driving compliance to quality system and enhancing control of instrumentation, all while bringing

their overall metrology costs down.

Understanding the regulated environments that our clients operate within, we customized the platform

to allow for single system of record utilization via capabilities that allow clients to track and manage instruments maintained internally

in addition to instruments supported by Transcat.

C3® is validated to 21 CFR Part 820.75 and 21 CFR Part 11 to meet stringent FDA

requirements.

Through CalTrak® and C3®, each customer calibration is tracked

and automatically cross-referenced to the assets used to perform the calibration, providing traceability.

Service Marketing and Sales.

Under our integrated sales model, we have both inside and outside sales teams that seek to acquire new customers in our targeted markets by leveraging our unique value proposition, including our broad geographic footprint and comprehensive suite of services.

We target regulated, enterprise customers with multiple manufacturing operations throughout North America.

We leverage our ability to manage the complete life cycle of instrumentation from purchase of calibrated equipment to long-term service and maintenance requirements.

Connecting all the dots by using new and used product sales, rentals, and repair and calibration services is the goal of our marketing and sales initiatives.

We also have a team of customer success managers focused on delivering ever-increasing value for our existing customers.

We utilize print media, trade shows and web-based initiatives to market our services to customers and prospective customers with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing.

We also target industrial manufacturing and other industries that appreciate the value of quality calibrations.

Under our integrated sales model,

we have both inside and outside sales teams that seek to acquire new customers in our targeted markets by leveraging our unique value

proposition, including our broad geographic footprint and comprehensive suite of services.

We target regulated, enterprise customers with

multiple manufacturing operations throughout North America.

We leverage our ability to manage the complete life cycle of instrumentation

from purchase of calibrated equipment to long-term service and maintenance requirements.

Connecting all the dots by using new and used

product sales, rentals, and repair and calibration services is the goal

of our marketing and sales initiatives.

We also have a team of customer

success managers focused on delivering ever-increasing value for our existing customers.

We utilize print media, trade shows and web-based

initiatives to market our services to customers and prospective customers with a strategic focus in the highly regulated industries including

life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing.

We also target

industrial manufacturing and other industries that appreciate the value of quality calibrations.

Service Competition .

The calibration services industry is highly fragmented and is composed of companies ranging from internationally recognized and accredited OEM’s, to non-accredited sole proprietors as well as companies that perform their own calibrations in-house, resulting in a tremendous range of service levels and capabilities.

The calibration services industry

is highly fragmented and is composed of companies ranging from internationally recognized and accredited OEMs, to non-accredited sole

proprietors as well as companies that perform their own calibrations in-house, resulting in a tremendous range of service levels and capabilities.

A large percentage of calibration companies are small businesses that generally do not have a range of capabilities as broad as ours.

There are also several companies with whom we compete that have national or regional operations.

We differentiate ourselves from our competitors by demonstrating our commitment to quality, having a wide range of capabilities that are tailored to the markets we serve, having a geographical footprint that spans North America and providing a comprehensive suite of services that spans many manufacturers and is not limited to certain product lines or brands.

Our unique ability to bundle our products with our compliance and calibration services also provides a high level of differentiation from our competitors.

As one of the only North American compliance and calibration service providers who also distributes product, our customers can seamlessly replace instruments that cannot be calibrated or are otherwise deemed to be at end of life.

Our close knowledge of the products we distribute also allows our service staff to consult and advise customers on what products are best suited for their in-house calibration needs.

We differentiate ourselves from our competitors by demonstrating our commitment

to quality, having a wide range of capabilities that are tailored to the markets we serve, having a geographical footprint that spans

North America and providing a comprehensive suite of services that spans many manufacturers and is not limited to certain product lines

Our unique ability to bundle our products with our compliance and calibration services also provides a high level of differentiation

from our competitors.

As one of the only North American compliance and calibration service providers who also distributes product, our

customers can seamlessly replace instruments that cannot be calibrated or are otherwise deemed to be at end of life.

Our close knowledge

of the products we distribute also allows our service staff to consult and advise customers on what products are best suited for their

in-house calibration needs.

We also believe that our proprietary software is a key differentiator from our competitors.

CalTrak® and C3® are utilized by our customers in an integrated manner, providing a competitive barrier as customers realize synergies and efficiencies as a result of this integration.

In fiscal year 2020, we invested in a software solution for the automation of calibration procedures and datasheet generation.

We are in the early testing phases with the rollout for the first limited set of calibration disciplines.

In fiscal year 2019, we expanded our range of capabilities by making significant capital and staffing investments in reference-level radio frequency/microwave calibration capabilities.

This allowed us to increase business with our prestigious clients in the enterprise computer manufacturing and aerospace defense sectors.

In addition, we grew our mobile calibration laboratory fleet and added the ability to carry inventory and sell products while onsite.

and C3® are utilized by our customers in an integrated manner, providing a competitive barrier as customers realize synergies and

efficiencies as a result of this integration.

In fiscal year 2020, we invested in a software solution for the automation

of calibration procedures and datasheet generation.

We are in the testing phases with the rollout for the first set of calibration disciplines.

In fiscal year 2022, we expect to make significant investments in capital equipment, technology, and human resources to increase automation

in performing calibration services.

We believe automation will deliver the next step change in productivity, improve customer experience

in turnaround time and quality, and increase the flexibility of our workforce.

In addition, we have expanded our range of capabilities

by making significant capital and staffing investments in reference-level radio frequency/microwave (“RF/Microwave”) calibration

capabilities.

This allowed us to increase business with our prestigious clients in the enterprise computer manufacturing and aerospace

and defense sectors.

In fiscal year 2021, we made additional capital investments to expand RF/Microwave capability to the East Coast region

of the United States.

Also, we grew our mobile calibration laboratory fleet and added the ability to carry inventory and sell products

while onsite.

This was done to strategically target onsite calibration and instrument sales to the wind energy sector.

We believe this mobile approach combined with our high-quality significantly improves our differentiation in this space.

Competition for laboratory instrument services is composed of both small local and regional service providers and large multi-national OEMs.

We believe we are generally financially stronger, service a larger customer base and are typically able to offer a larger suite of services than many of the small local and regional competitors.

The large OEMs may offer specialized services and brand-specific expertise which we do not offer, but they are generally focused on providing specialized services only for their proprietary brands and product lines, rather than servicing an array of brands and product lines as we do.

We believe our competitive advantages in the laboratory instrument services market are our financial and technical resources, turnaround time, and flexibility to react quickly to customers’ needs .

The breadth of our suite of laboratory instrument service, combined with our calibration service offerings, also differentiates us fro m our competitors by allowing us to be our customers’ one -source accredited services provider for their entire calibration and compliance programs.

We believe this

mobile approach combined with our high-quality services significantly improves our differentiation in this space.

Competition for laboratory instrument services is composed of both small

local and regional service providers and large multi-national OEMs.

We believe we are generally financially stronger, service a larger

customer base and are typically able to offer a larger suite of services than many of the small local and regional competitors.

OEMs may offer specialized services and brand-specific expertise which we do not offer, but they are generally focused on providing specialized

services only for their proprietary brands and product lines, rather than servicing an array of brands and product lines as we do.

believe our competitive advantages in the laboratory instrument services market are our financial and technical resources, turnaround

time, and flexibility to react quickly to customers’ needs.

The breadth of our suite of laboratory instrument service, combined

with our calibration service offerings, also differentiates us from our competitors by allowing us to be our customers’ one-source

accredited services provider for their entire calibration and compliance programs.

Service Quality.

The accreditation process is the only system currently in existence that validates measurement competence.

To ensure that the quality and consistency of our calibrations are consistent with the global metrology network, designed to standardize measurements worldwide, we have sought and achieved international levels of quality and accreditation to provide uniformity across all locations with advanced levels of training for our technical staff.

Our Calibration Service Centers are accredited to ISO/IEC 17025:2017 by ANSI-ASQ National Accreditation Board (“ANAB”) and other accrediting bodies.

These accrediting bodies are International Laboratory Accreditation Cooperation Mutual Recognition Arrangement (“ILAC MRA”) signatories , are proficient in the technical aspects of the chemistry and physics that underlie metrology, and provide an objective, third-party, internationally accepted evaluation of the quality, consistency, and competency of our calibration processes.

Accreditation also requires that all measurement standards used for accredited measurements have a fully documented path, known as Metrological Traceability, through the National Institute of Standards and Technology or the National Research Council (the National Measurement Institutes for the United States and Canada, respectively), or to other national or international standards bodies, or to measurable conditions created in our Calibration Service Centers, or accepted fundamental and/or natural physical constants, ratio type of calibration, or by comparison to consensus standards, all inclusive of measurement uncertainties.

The importance of this international oversight to our customers is the assurance that our service documentation will be accepted worldwide, removing one of the barriers to trade that they may experience if using a calibration laboratory provider whose accrediting body is not an ILAC MRA signatory.

To provide the widest range of services to our customers in our target markets, our ISO/IEC 17025:2017 accreditations extend across many technical disciplines, including working-level and reference-level capabilities.

We believe our scope of accreditation to ISO/IEC 17025:2017 to be the broadest for the industries we serve.

To reinforce our belief in the importance of calibration quality, we are leveraging a branding campaign for our Service segment that is centered around three simple words – “Calibrated by Transcat®”.

We believe we have established a strong, differentiated brand that has a deep and meaningful association with quality, compliance and control.

We want t he phrase “Calibrated by Transcat®” to be synonymous with risk reduction and quality compliance.

The accreditation process is the only

system currently in existence that validates measurement competence.

To ensure that the quality and consistency of our calibrations are

consistent with the global metrology network, designed to standardize measurements worldwide, we have sought and achieved international

levels of quality and accreditation to provide uniformity across all locations with advanced levels of training for our technical staff.

Our Calibration Service Centers are accredited to ISO/IEC 17025:2017 by ANSI-ASQ National Accreditation Board (“ANAB”) and

other accrediting bodies.

These accrediting bodies are International Laboratory Accreditation Cooperation Mutual Recognition Arrangement

(“ILAC MRA”) signatories, are proficient in the technical aspects of the chemistry and physics that underlie metrology, and

provide an objective, third-party, internationally accepted evaluation of the quality, consistency, and competency of our calibration

Accreditation also requires that all measurement standards used for accredited measurements have a fully documented path, known

as Metrological

Traceability, through the National Institute of Standards and Technology

or the National Research Council (the National Measurement Institutes for the United States and Canada, respectively), or to other national

or international standards bodies, or to measurable conditions created in our Calibration Service Centers, or accepted fundamental and/or

natural physical constants, ratio type of calibration, or by comparison to consensus standards, all inclusive of measurement uncertainties.

The importance of this international oversight to our customers is the

assurance that our service documentation will be accepted worldwide, removing one of the barriers to trade that they may experience if

using a calibration laboratory provider whose accrediting body is not an ILAC MRA signatory.

To provide the widest range of services to

our customers in our target markets, our ISO/IEC 17025:2017 accreditations extend across many technical disciplines, including working-level

and reference-level capabilities.

We believe our scope of accreditation to ISO/IEC 17025:2017 to be the broadest for the industries we

To reinforce our belief in the importance of calibration quality, we are

leveraging a branding campaign for our Service segment that is centered around three simple words – “Calibrated by Transcat®”.

We believe we have established a strong, differentiated brand that has a deep and meaningful association with quality, compliance and

We want the phrase “Calibrated by Transcat®” to be synonymous with risk reduction and quality compliance.

Acquired calibration labs might use other quality registration systems.

We continually evaluate when to integrate acquired quality systems with the focus on minimizing business disruptions and disruptions to our customers while maintaining our commitment to quality.

We continually evaluate when to integrate acquired quality systems with the focus on minimizing business disruptions and disruptions to

our customers while maintaining our commitment to quality.

Our scopes of accreditation can be found at http://www.transcat.com/calibration-services/accreditation/calibration-lab-certificates.

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Distribution Summary.

We distribute professional grade test, measurement and control instrumentation throughout North America and internationally.

Our customers use test and measurement instruments to ensure that their processes, and ultimately their end products, are within specification.

Utilization of such diagnostic instrumentation also allows for continuous improvement processes to be in place, increasing the accuracies of their measurements.

The industrial test and measurement instrumentation market, in those geographic areas where we predominately operate, has historically been serviced by broad-based national equipment distributors and niche or specialty-focused organizations such as Transcat.

We offer value-added services such as calibration/certification of equipment purchases, equipment rentals, used equipment for sale, and equipment kitting.

In recent years, online-based distributors have become more prevalent.

To more effectively compete with these online-based distributors, we have continued to make improvements to our digital platform, including enhanced e-commerce capabilities.

We believe that a customer chooses a distributor based on a number of different criteria, including product availability, price, ease of doing business, timely delivery and accuracy of orders, consistent product quality, technical competence of the representative serving them and availability of value-added services.

The decision to buy is generally made by plant engineers, quality managers, or their purchasing personnel, and products are typically obtained from one or more distributors as replacements, upgrades, or for expansion of manufacturing and research and development facilities.

As a result, sales to Distribution customers are somewhat unpredictable and potentially non-recurring.

We distribute professional grade test,

measurement and control instrumentation throughout North America and internationally.

Our customers use test and measurement instruments

to ensure that their processes, and ultimately their end products, are within specification.

Utilization of such diagnostic instrumentation

also allows for continuous improvement processes to be in place, increasing the accuracies of their measurements.

The industrial test

and measurement instrumentation market, in those geographic areas where we predominately operate, has historically been serviced by broad-based

national equipment distributors and niche or specialty-focused organizations such as Transcat.

We offer value-added services such as calibration/certification

of equipment purchases, equipment rentals, used equipment for sale, and equipment kitting.

In recent years, online-based distributors

have become more prevalent.

To compete with these online-based distributors more effectively, we have continued to make improvements to

our digital platform, including enhanced e-commerce capabilities.

We believe that a customer chooses a distributor based on a number of different

criteria, including product availability, price, ease of doing business, timely delivery and accuracy of orders, consistent product quality,

technical competence of the representative serving them and availability of value-added services.

The decision to buy is generally made

by plant engineers, quality managers, or their purchasing personnel, and products are typically obtained from one or more distributors

as replacements, upgrades, or for expansion of manufacturing and research and development facilities.

As a result, sales to Distribution

customers are somewhat unpredictable and potentially non-recurring.

Our online presence, including our website and e-newsletters;

Master Catalog;

supplemental mailings and other sales and marketing activities are designed to create interest and maintain a constant presence in front of our customers to ensure we receive the order when they are ready to purchase.

We provide our customers with value-added services, including technical support, to ensure our customers receive the right product for their application, and more comprehensive instrument suitability studies to customers in regulated industries who are concerned about the technical uncertainties that their testing or in-process instruments may bring to a process.

We consider our biggest value-added service for our Distribution customers is the option to have calibration service performed on their new product purchases prior to shipment, allowing them to place newly acquired equipment directly into service upon receipt, saving downtime.

We also offer online procurement, credit card payment options, same day shipment of in-stock items, kitted products, the option to rent, training programs and a variety of custom product offerings.

Items are regularly added to and deleted from our product offerings on the basis of customer demand, recommendations of suppliers, sales volumes and other factors.

Because of the breadth of our product and service offerings, we are often a “one - stop shop” for our customers who gain operational efficiency by dealing with just one distributor for most or all of their test and measurement instrumentation needs.

In fiscal year 2020, our Distribution segment performed well against our corporate strategy.

We grew our core set of customers while focusing on strategic pricing initiatives that drove incremental gross profit.

Our focus on higher margin channels such as used equipment and rentals will be a continual focus to bolster profitability in the Distribution segment.

This effort is intended to offset competitive pressures in our legacy distribution business.

Distribution Marketing and Sales .

We market, create demand and sell to our customers through multiple direct sales channels including our website, digital and print advertising, proactive outbound sales and an inbound call center.

Our outbound and inbound sales teams are staffed with technically trained personnel who are available to help guide product selection.

Our website serves as a sales channel for our products and services, and provides search capability, detailed product information, in-stock availability, selection guides, demo videos and downloadable product specification sheets.

We have made investments in our website to implement the latest marketing technologies which allow us to provide an intuitive customer experience, with simple product comparison and quoting, ease at checkout and automated post-order follow-up.

We also operate and maintain several industry-specific service websites, obtained through recent acquisitions.

For example, the URL www.pipettes.com was obtained in connection with the acquisition of TTE.

TTE focuses on selling pipettes, pipette supplies and related services to its customers.

We believe with our digital marketing experience we can expand the web traffic and sales through www.pipettes.com.

We use a multichannel approach to reach our customers and prospective customers including our Master Catalog, periodic supplemental catalogs, website, e-newsletters, and other direct sales and marketing programs.

Our digital marketing strategy includes ongoing investment in search engine optimization, application-specific digital content, pay-per-click search engine advertising, and product listings on online marketplaces such as Amazon and Google Shopping.

We continue to invest in back-end technologies designed to provide a seamless customer experience across all our marketing channels.

During fiscal year 2020, we proactively communicated with our customers and prospective customers through direct mail catalogs, email newsletters, vertical email drip campaigns, retargeting ads, educational webinars, and outbound sales calls.

Some of the key factors that determine the marketing materials a customer may receive include relevancy of new product introductions, current promotions, purchase history, the customer’s marke t segment, and the conta ct’s job function.

As a result of strong relationships with our product vendors and our historical marketing program results, we have the opportunity to carry out co-branded marketing initiatives, aimed at our existing customers and our prospective customer base, for which we receive cooperative advertising support.

These co-branded marketing initiatives typically feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound sales efforts.

supplemental mailings and other sales and marketing activities are designed to create interest and maintain a constant presence

in front of our customers to ensure we receive the order when they are ready to purchase.

We provide our customers with value-added services, including technical

support, to ensure our customers receive the right product for their application, and more comprehensive instrument suitability studies

to customers in regulated industries who are concerned about the technical uncertainties that their testing or in-process instruments

may bring to a process.

We consider our biggest value-added service for our Distribution customers is the option to have calibration service

performed on their new product purchases prior to shipment, allowing them to place newly acquired equipment directly into service upon

receipt, saving downtime.

We also offer online procurement, credit card payment options, same day shipment of in-stock items, kitted products,

the option to rent, training programs and a variety of custom product offerings.

Items are regularly added to and deleted from our product

offerings on the basis of customer demand, recommendations of suppliers, sales volumes and other factors.

Because of the breadth of our

product and service offerings, we are often a “one-stop shop” for our customers who gain operational efficiency by dealing

with just one distributor for most or all of their test and measurement instrumentation needs.

Our focus on higher margin channels such as used equipment and rentals

will be a continual focus to bolster profitability in the Distribution segment.

This effort is intended to offset competitive pressures

in our legacy distribution business.

Marketing and Sales .

We market, create demand and

sell to our customers through multiple direct sales channels including our website, digital and print advertising, proactive outbound

sales and an inbound call center.

Our outbound and inbound sales teams are staffed with technically trained personnel who are available

to help guide product selection.

Our website serves as a sales channel for our products and services, and provides search capability,

detailed product information, in-stock availability, selection guides, demo videos and downloadable product specification sheets.

made investments in our website to implement the latest marketing technologies which allow us to provide an intuitive customer experience,

with simple product comparison and quoting, ease at checkout and automated post-order follow-up.

We also operate and maintain several

industry-specific service websites, obtained through recent acquisitions.

For example, the URL www.pipettes.com was obtained in connection

with the acquisition of TTE (now known as pipettes.com).

Pipettes.com focuses on selling pipettes, pipette supplies and related services

to customers.

Within our fiscal year 2021, we were able to increase our distribution sales at pipettes.com through enhancements of the

website and leveraging our historical base of customers.

We use a multichannel approach to reach our customers and prospective customers

including our master catalog, periodic supplemental catalogs, website, e-newsletters, and other direct sales and marketing programs.

Our digital marketing strategy includes ongoing investment in search engine optimization, application-specific digital content, pay-per-click

search engine advertising, and product listings on online marketplaces such as Amazon and Google Shopping.

We continue to invest in back-end

technologies designed to provide a seamless customer experience across all our marketing channels.

During fiscal year 2021, we proactively

communicated with our customers and prospective customers through direct mail catalogs, email newsletters, vertical email drip campaigns,

retargeting ads, educational webinars, and outbound sales calls.

Some of the key factors that determine the marketing materials

a customer may receive include relevancy of new product introductions, current promotions, purchase history, the customer’s market

segment, and the contact’s job function.

As a result of strong relationships with our product vendors and our historical

marketing program results, we have the opportunity to carry out co-branded marketing initiatives, aimed at our existing customers and

our prospective customer base, for which we receive cooperative advertising support.

These co-branded marketing initiatives typically

feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound

sales efforts.

Distribution Competition.

The distribution market for industrial test and measurement instrumentation is fragmented and highly competitive.

Our competitors range from large national distributors and manufacturers that sell directly to customers to small local distributors and online distributors.

Key competitive factors typically include customer service and support, quality, lead time, inventory availability, brand recognition and price.

To address our customers’ needs for technical support and product application assistance, we employ a staff of highly trained technical sales specialists.

In order to maintain this competitive advantage, technical training is an integral part of developing our sales staff.

To differentiate ourselves from competitors, we offer pre-shipment calibration or performance data reports which allow customers to receive our products and immediately place them into service, saving them downtime and money.

Online distributors, including Amazon which sells lower price-point products, have become prominent competitors for sales of handheld test and measurement equipment, competing primarily on price.

While online competitors lack the value-added services we offer in our Distribution segment, they have been successful in capturing some market share in the worldwide market for test and measurement instruments.

To stay ahead of growing competition from these online distributors and in keeping with the general trend of increased use of e-commerce, we continue to invest in our digital platform including a well-indexed website with improved design and functionality.

In addition, we have diversified our offerings by expanding the brands and product lines that we offer and adding higher gross margin equipment rentals and used equipment sales, which we believe makes Transcat unique among our competitors.

The distribution market for industrial

test and measurement instrumentation is fragmented and highly competitive.

Our competitors range from large national distributors and

manufacturers that sell directly to customers to small local distributors and online distributors.

Key competitive factors typically include

customer service and support, quality, lead time, inventory availability, brand recognition and price.

To address our customers’

needs for technical support and product application assistance, we employ a staff of highly trained technical sales specialists.

to maintain this competitive advantage, technical training is an integral part of developing our sales staff.

To differentiate ourselves

from competitors, we offer pre-shipment calibration or performance data reports which allow customers to receive our products and immediately

place them into service, saving them downtime and money.

Online distributors, including Amazon which sells lower price-point products,

have become prominent competitors for sales of handheld test and measurement equipment, competing primarily on price.

While online competitors

lack the value-added services we offer in our Distribution segment, they have been successful in capturing some market share in the worldwide

market for test and measurement instruments.

To stay ahead of growing competition from these online distributors and in keeping with the

general trend of increased use of e-commerce, we continue to invest in our digital platform including a well-indexed website with improved

design and functionality.

In addition, we have diversified our offerings by expanding the brands and product lines that we offer and adding

higher gross margin equipment rentals and used equipment sales, which we believe makes Transcat unique among our competitors.

Distribution Suppliers and Purchasing.

We believe that effective purchasing is a key element to maintaining and enhancing our position as a provider of high-quality test and measurement instruments.

We believe that effective

purchasing is a key element to maintaining and enhancing our position as a provider of high-quality test and measurement instruments.

We frequently evaluate our purchase requirements and suppliers’ offerings to obtain products at the best possible cost.

We obtain our products from approximately 500 suppliers of brand name and private-labeled equipment.

In fiscal year 2020, our top 10 vendors accounted for approximately 73% of our aggregate Distribution business.

We plan our product mix and inventory stock to best serve the anticipated needs of our customers, whose individual purchases vary in size.

We can usually ship our top selling products to our customers the same day they are ordered.

our products from approximately 500 suppliers of brand name and private-labeled equipment.

In fiscal year 2021, our top 10

vendors accounted for approximately 63% of our aggregate Distribution sales.

In fiscal year 2021, the COVID-19 pandemic impacted the supply of products from our vendors resulting in increased lead times and an increase

in our backlog.

We plan our product mix and inventory stock to best serve the anticipated

needs of our customers, whose individual purchases vary in size.

We can usually ship our top selling products to our customers the same

day they are ordered.

Distribution Vendor Rebates.

We have agreements with certain product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales.

We have agreements with certain

product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales.

These rebates are recorded as a reduction of cost of distribution sales.

Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors during the quarter.

Point of sale rebate programs that are based on year-over-year sales performance on a calendar year basis are recorded as earned, on a quarterly basis, based upon the estimated level of annual achievement.

Point of sale rebate programs that are based on year-over-year sales performance on a quarterly basis are recorded as earned in the respective quarter.

Purchase rebates are calculated and recorded quarterly

based upon our volume of purchases with specific vendors during the quarter.

Point of sale rebate programs that are based on year-over-year

sales performance on a calendar year basis are recorded as earned, on a quarterly basis, based upon the estimated level of annual achievement.

Point of sale rebate programs that are based on year-over-year sales performance on a quarterly basis are recorded as earned in the respective

In fiscal 2021, vendors reduced these rebate programs to lower their own costs in response to the COVID-19 pandemic.

recorded vendor rebates of $0.7 million and $1.6 million in fiscal years 2021 and 2020, respectively, as a reduction of cost of distribution

Distribution Operations.

Our Distribution operations primarily take place at our 48,500 square-foot facility in Rochester, New York which includes 17,000 square feet of warehouse space.

The Rochester location also serves as our corporate headquarters, houses our customer service, sales and administrative functions, and is a Calibration Service Center.

Our Distribution operations primarily

take place at our 48,500 square-foot facility in Rochester, New York which includes 17,000 square feet of warehouse space.

The Rochester

location also serves as our corporate headquarters, houses our customer service, sales and administrative functions, and is a Calibration

Service Center.

We also have two smaller warehouse facilities.

Our Wisconsin warehouse fulfills orders for certain large industrial scales and our Fullerton, California warehouse fulfills orders for used equipment and rental equipment.

In fiscal year 2020, we shipped approximately 31,000 product orders.

Our Wisconsin warehouse fulfills orders for certain large industrial scales

and our Houston, Texas warehouse fulfills orders for used equipment and rental equipment.

In fiscal year 2021, we shipped approximately

26,000 product orders.

Distribution Backlog .

Distribution orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock.

Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in one of our Calibration Service Centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment.

Our total backlog was $4.3 million and $3.9 million as of March 28, 2020 and March 30, 2019, respectively.

Distribution orders include

orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which

we do not stock.

Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in

one of our Calibration Service Centers prior to shipment, orders required by the customer to be shipped complete or at a future date,

and other orders awaiting final credit or management review prior to shipment.

Our total backlog was $6.3 million and $4.3 million as

of March 27, 2021 and March 28, 2020, respectively.

CUSTOMER SERVICE AND SUPPORT

Key elements of our customer service approach are our business development sales team, outbound sales team, account management team, inbound sales and customer service organization.

To ensure the quality of service provided, we monitor our customer service through customer surveys, call monitoring and daily statistical reports.

Key elements of our customer service approach are our business development

sales team, outbound sales team, account management team, inbound sales and customer service organization.

To ensure the quality of service

provided, we monitor our customer service through customer surveys, call monitoring and daily statistical reports.

Customers may place orders via:

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Email at sales@transcat.com;

Online at www.transcat.com;

Online at www.

transcat.com ;

Fax at 1-800-395-0543

INFORMATION REGARDING EXPORT SALES

In fiscal years 2020 and 2019, approximately 10% of our total revenue resulted from sales to customers outside the United States.

In fiscal years 2021 and 2020, approximately 10% of our total revenue resulted

from sales to customers outside the United States.

Of those export sales in fiscal year 2021, approximately 9% were denominated in U.S.

dollars and the remaining 91% were in Canadian dollars.

Our revenue is subject to the customary risks of operating in an international environment, including the potential imposition of trade or foreign exchange restrictions, tariff and other tax increases, fluctuations in exchange rates and unstable political situations, any one or more of which could have a material adverse effect on our business, cash flows, balance sheet or results of operations.

Our revenue is subject to the customary risks of operating in an international

environment, including the potential imposition of trade or foreign exchange restrictions, tariff and other tax increases, fluctuations

in exchange rates and unstable political situations, any one or more of which could have a material adverse effect on our business, cash

flows, balance sheet or results of operations.

See “Foreign Currency” in Item 7A.

of Part II and Note 7 to our Consolidated Financial Statements in this report for further details.

of Part II and Note 7 to our Consolidated

Financial Statements in this report for further details.

INFORMATION SYSTEMS

We utilize a turnkey enterprise software solution from Infor, Inc.

(“Infor”) called Application Plus to manage our business and operations segments.

This software includes a suite of fully integrated modules to manage our business functions, including customer service, warehouse management, inventory management, financial management, customer relations management and business intelligence.

This solution is a fully mature business package and has been subject to more than 20 years of refinement.

We utilize customer relationship management (“CRM”) software offered by SalesForce.com, Inc., which is strategically partnered with Infor, allowing us to fully integrate the CRM software with our Infor enterprise software.

We also utilize CalTrak®, our proprietary document and asset management system, to manage documentation, workflow and customers’ assets with in and amongst most of our Calibration Service Centers.

In addition to functioning as an internal documentation, workflow, and asset management system, CalTrak®, through C3®, provides customers with web-based calibration cycle management service and access to documentation relating to services completed by Transcat.

Certain recent acquisitions utilize either third-party or their own proprietary calibration management systems.

We continually evaluate when to integrate these acquired systems with a focus on obtaining operational synergies while imposing minimal disruption to customers.

called Application Plus to manage our business and operations segments.

This software includes a suite of fully integrated modules to

manage our business functions, including customer service, warehouse management, inventory management, financial management, customer

relations management and business intelligence.

This solution is a fully mature business package and has been subject to more than

20 years of refinement.

We utilize customer relationship management (“CRM”) software offered by SalesForce.com, Inc., which

is strategically partnered with Infor, allowing us to fully integrate the CRM software with our Infor enterprise software.

We also utilize CalTrak®, our proprietary document and asset management

system, to manage documentation, workflow and customers’ assets within and amongst most of our Calibration Service Centers.

to functioning as an internal documentation, workflow, and asset management system, CalTrak®, through C3®, provides customers

with web-based calibration cycle management service and access to documentation relating to services completed by Transcat.

Certain recent

acquisitions utilize either third-party or their own proprietary calibration management systems.

We continually evaluate when to integrate

these acquired systems with a focus on obtaining operational synergies while imposing minimal disruption to customers.

INTELLECTUAL PROPERTY

We have federally registered trademarks for Transcat®, CalTrak®, C3® and Procision ™ , which we consider to be of material importance to our business.

The registrations for these trademarks are in good standing with the U.S.

We have federally registered trademarks for Transcat®, CalTrak®,

C3® and Procision™, which we consider to be of material importance to our business.

The registrations for these trademarks

are in good standing with the U.S.

Patent & Trademark Office.

Our CalTrak® trademark is also registered in Canada for one class with the Canada Intellectual Property Office.

Our trademark registrations must be renewed at various times, and we intend to renew our trademarks, as necessary, for the foreseeable future.

In addition, we own www.transcat.com and www.transcat.ca among other Internet domain names.

Our CalTrak® trademark is also registered in Canada for one class

with the Canada Intellectual Property Office.

Our trademark registrations must be renewed at various times, and we intend to renew

our trademarks, as necessary, for the foreseeable future.

In addition, we own www.transcat.com, www.transcat.ca and pipettes.com

among other Internet domain names.

As with phone numbers, we do not have, and cannot acquire any property rights to an Internet address.

The regulation of domain names in the United States and in other countries is also subject to change.

Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.

As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.

Regulatory bodies could establish

additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.

we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.

Our business has certain historical seasonal factors.

Historically, our fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to the operating cycles of our industrial sector customers.

Our Distribution segment has historically been strongest in our third fiscal quarter while Service has historically been strongest in our fourth fiscal quarter.

Historically, our

fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to the operating cycles of our industrial

sector customers.

Our Distribution segment has historically been strongest in our third fiscal quarter while Service has historically

been strongest in our fourth fiscal quarter.

We operate on a 52/53-week fiscal year, ending the last Saturday in March.

1 unchanged sentence

In a 53-week fiscal year, the last quarter is a 14-week period.

Fiscal year 2020 and 2019 both consisted of 52 weeks.

Fiscal year 2021 which ends on March 27, 2021 (“fiscal year 2021”) will also have 52 weeks.

Fiscal year 2021 and fiscal year 2020 both consisted of 52 weeks.

Fiscal year 2022 which ends on March 26, 2022 (“fiscal year 2022”)

will also have 52 weeks.

ENVIRONMENTAL MATTERS

We believe that we are in compliance with federal, state, and local provisions relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or competitive position.

At the end of fiscal year 2020, we had 772 employees, including 50 part-time employees, compared with 685 employees, including 28 part-time employees, at the end of fiscal year 2019.

We believe that we are in compliance with federal, state, and local provisions

relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures,

earnings, or competitive position.

HUMAN CAPITAL MANAGEMENT

As of March 27, 2021, we had 765 employees, of which 685 were employed

in the United States and 80 were employed outside of the United States.

None of our employees are covered by collective bargaining agreements

or work councils.

Overall, we consider our employee relations to be good.

Our culture is important to the overall success of the Company.

Health and Safety The health and safety of our employees is of utmost

importance to us.

We conduct regular self-assessments and audits to ensure compliance with our health and safety guidelines and regulatory

requirements.

ultimate goal is to achieve a level of work-related injuries as close to

zero as possible through continuous investment in our safety programs.

We provide protective gear (e.g.

eye protection, masks and gloves)

as required by applicable standards and as appropriate given employee job duties.

Additionally, during the COVID-19 pandemic, we have

invested heavily in safety measures and other initiatives to help ensure the health of our employees.

Hiring Practices We recruit the best people for the job without

regard to gender, ethnicity or other protected traits and it is our policy to comply fully with all domestic, foreign and local laws relating

to discrimination in the workplace.

Diversity and Inclusion Recognizing and respecting our international

presence, we strive to maintain a diverse and inclusive workforce everywhere we operate.

Our diversity and inclusion principles are also

reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of

bias in the workplace.

In addition, to support mental health and emotional well-being, all employees

and their dependents worldwide have access to an Employee Assistance Program ("EAP"), at no cost to them.

This includes access

to visits with mental health care providers through the EAP.

Compensation and Benefits Our compensation and benefits program

is designed to attract and reward individuals who demonstrate the skills necessary to support our business objectives, assist in the achievement

of our strategic goals and create long-term value for our shareholders.

We provide employees with compensation packages that include base salary

and may also include annual incentive bonuses and/or long-term incentive awards depending upon the employee’s level.

that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and

shareholder interests.

In addition to cash and equity compensation, we also offer employees benefits such as life and health (medical,

dental and vision) insurance, paid time off, paid parental leave, and a 401(k) plan.

In response to the COVID-19 pandemic, we implemented significant changes

that we determined were in the best interest of our employees as well as the communities in which we operate.

This includes having the

vast majority of our corporate employees work from home while also implementing a number of safety measures for employees continuing critical

Employees in our Calibration Service Centers were given additional COVID-19 paid time off as well as incremental pay if they

were required to work offsite at a customer location.

AVAILABLE INFORMATION

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”).

Our filings with the SEC are available on the SEC’s website at www.sec.gov .

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current

Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”).

with the SEC are available on the SEC’s website at www.sec.gov.

We also maintain a website at www.transcat.com.

We make available, free of charge, in the Investor Relations section of our website, documents we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports.

We make this information available as soon as reasonably practicable after we electronically file such materials with, or furnish such information to, the SEC.

We make available,

free of charge, in the Investor Relations section of our website, documents we file with or furnish to the SEC, including our Annual Reports

on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports.

We make this information

available as soon as reasonably practicable after we electronically file such materials with, or furnish such information to, the SEC.

The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

Copies of such documents are available in print at no charge to any shareholder who makes a request.

Such requests should be made to our corporate secretary at our corporate headquarters, 35 Vantage Point Drive, Rochester, New York 14624.

Copies of such

documents are available in print at no charge to any shareholder who makes a request.

Such requests should be made to our corporate secretary

at our corporate headquarters, 35 Vantage Point Drive, Rochester, New York 14624.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business