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Item 7. Management’s Discussion and Analysis

2022-06-09 compared with 2021-06-08 · 637 added, 585 removed, 102 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition

and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this annual

In addition to historical information, the following discussion and analysis includes forward looking statements that involve

risks, uncertainties and assumptions.

Our actual results and the timing of events could differ materially from those anticipated in these

forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere

in this annual report.

See the discussion under “Forward Looking Statements” beginning on page 1 of this annual report

Operational Overview.

We are a leading provider of accredited

calibration, repair, inspection and laboratory instrument services and a value-added distributor of professional grade handheld test,

We are a leading provider

of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld test,

measurement and control instrumentation.

We operate our business through two reportable business segments, Service

and Distribution, which offer a comprehensive range of services and products to the same customer base.

Our strength in our Service segment is based upon our wide range of disciplines,

our investment in quality systems and our ability to provide accredited calibrations to customers in highly-regulated targeted market

Our services range from the calibration and repair of a single unit to managing a customer’s entire calibration program.

We believe our Service segment offers an opportunity for long-term growth and the potential for continuing revenue from established customers

with regular calibration cycles and recurring laboratory instrument service requirements.

Our Service segment has shown consistent revenue growth over the past several

years, ending fiscal year 2021 with its 48th consecutive quarter of year-over-year growth.

This segment has benefited from both organic

growth as well as acquisitions over those 48 quarters.

The business acquisitions that we made have been heavily focused on expanding our

service capabilities, increasing our geographic reach and leveraging our Calibration Service Centers and other infrastructure to create

operational synergies.

Our total Service revenue growth was 8.9% for fiscal year 2021 compared

to fiscal year 2020, despite the COVID-19 pandemic.

The Service segment gross margin increased by 500 basis points.

Service gross profit

and gross margin were positively impacted by ongoing productivity improvements, operating leverage from organic growth, strategic pricing

and accretive margins from the pipettes.com and Bio Tek acquisitions.

In our Distribution segment, we sell and offer for rent, professional grade

handheld test and measurement instruments.

Because we specialize in professional grade handheld test and measurement instruments, as opposed

a wide array of industrial products, our sales and customer service personnel

can provide value-added technical assistance to our customers to aid them in determining what product best meets their particular application

requirements.

We have expertise in the procurement and sale of used equipment, furthering our ability to add value for our customers.

We also have a higher-end electronic test and measurement equipment rental business that augments our organically grown test and measurement

equipment rental business.

Through our website and sales teams, customers can place orders for test and measurement instruments and can

elect to have their purchased instruments calibrated and certified by our Calibration Service Centers before shipment as well as on regular

post-purchase intervals.

Pre-shipment calibration and certification allows our customers to place newly purchased instruments into service

immediately upon receipt.

Sales in our Distribution segment are generally not consumable items but

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

this segment can be heavily impacted by changes in the economic environment.

We operate our business through two reportable business

segments, Service and Distribution, which offer a comprehensive range of services and products to the same customer base.

Our strength in our Service segment is based upon our wide

range of disciplines, our investment in quality systems and our ability to provide accredited calibrations to customers in highly-regulated

targeted market segments.

Our services range from the calibration and repair of a single unit to managing a customer’s entire calibration

We believe our Service segment offers an opportunity for long-term growth and the potential for continuing revenue from established

customers with regular calibration cycles and recurring laboratory instrument service requirements.

Our Service segment has shown consistent revenue growth

over the past several years, ending fiscal year 2022 with its 52nd consecutive quarter of year-over-year growth.

This segment has benefited

from both organic growth as

well as acquisitions over those 52

The business acquisitions that we made have been heavily focused on expanding our service capabilities, increasing our

geographic reach and leveraging our Calibration Service Centers and other infrastructure to create operational synergies.

Our Service segment revenue growth was 20.5% for fiscal year

2022 from fiscal year 2021, and included a combination of organic growth and acquisition related revenue.

The Service segment gross margin

increased by 160 basis points.

Service segment gross profit and gross margin increases were primarily due to operating leverage on our

fixed cost base, accretive margins from recent acquisitions and continued strong technician productivity.

In our Distribution segment, we sell and offer for rent,

professional grade handheld test and measurement instruments.

Because we specialize in professional grade handheld test and measurement

instruments, as opposed to a wide array of industrial products, our sales and customer service personnel can provide value-added technical

assistance to our customers to aid them in determining what product best meets their particular application requirements.

We have expertise

in the procurement and sale of used equipment, furthering our ability to add value for our customers.

We also have a higher-end electronic

test and measurement equipment rental business that augments our organically grown test and measurement equipment rental business.

our website and sales teams, customers can place orders for test and measurement instruments and can elect to have their purchased instruments

calibrated and certified by our Calibration Service Centers before shipment as well as on regular post-purchase intervals.

calibration and certification allows our customers to place newly purchased instruments into service immediately upon receipt.

Sales in our Distribution segment are generally not consumable

items but are instruments purchased as replacements, upgrades or for expansion of manufacturing or research and development facilities.

As such, this segment can be heavily impacted by changes in the economic environment.

As customers increase or decrease capital and discretionary

spending, our Distribution sales will typically be directly impacted.

In fiscal year 2021, Distribution sales decreased by 10.0%.

sales results were impacted by the COVID-19 pandemic, with reduced demand from oil and gas related businesses and most other industrial

manufacturing sectors.

In fiscal year 2020, Distribution sales increased by 4.2%.

These results were driven by increased demand and revenue

in all channels, especially in the alternative energy sector, used equipment and rental revenue.

Overall, the Distribution segment gross

margin in fiscal year 2021 decreased by 230 basis points.

The decrease in segment gross margin was primarily due to reduced cooperative

advertising and rebate programs as certain vendors reduced these programs to lower their costs in response to the COVID-19 pandemic.

Initiatives implemented within this segment include adding new in-demand

vendors and product lines, expanding the number of SKUs that we offer with and without pre-shipment calibration and offering equipment

rental and used equipment options.

Management believes this diversification strategy will mitigate the impact that any particular industry

or sector will have on the overall performance of this segment as well as help to further differentiate us from our competitors going

In fiscal year 2022, Distribution segment sales increased

This increase in sales was due to increased orders in fiscal year 2022 and an easier comparison to fiscal year 2021, which was

adversely impacted by the COVID-19 pandemic.

In fiscal year 2021, Distribution sales decreased by 10.0% and were impacted by the COVID-19

pandemic, with reduced demand from oil and gas related businesses and most other industrial manufacturing sectors.

The Distribution segment gross margin in fiscal year 2022

increased by 210 basis points.

The increase in segment gross margin was primarily due to a favorable mix of products sold, strong demand

for our higher-margin rentals business and an increase in cooperative advertising and rebate programs.

These programs had been reduced

in fiscal year 2021 as certain vendors reduced these programs to lower their costs in response to the COVID-19 pandemic.

Initiatives implemented within this segment include adding

new in-demand vendors and product lines, expanding the number of SKUs that we offer with and without pre-shipment calibration and offering

equipment rental and used equipment options.

Management believes this diversification strategy will mitigate the impact that any particular

industry or sector will have on the overall performance of this segment as well as help to further differentiate us from our competitors

going forward.

Financial Overview.

In evaluating

our results for fiscal year 2021, investors should consider that we operate on a 52/53-week fiscal year, ending the last Saturday

In a 52-week fiscal year, each of the four quarters is a 13-week period.

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

Fiscal years 2021 and 2020 both consisted of 52 weeks.

Management's discussion and analysis of financial condition and results

of operations for the fiscal year ended March 27, 2021 omits a comparative discussion regarding the fiscal year ended March 30, 2019.

Such information is located in Item

7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for

the fiscal year ended March 28, 2020 .

In evaluating our results

for fiscal year 2022, investors should consider that we operate on a 52/53-week fiscal year, ending the last Saturday in March.

fiscal year, each of the four quarters is a 13-week period.

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

2022 and 2021 each consisted of 52 weeks.

Management's discussion and analysis of financial condition

and results of operations for the fiscal year ended March 26, 2022 omits a comparative discussion regarding the fiscal year ended March

Such information is located in Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021.

Total revenue for fiscal year 2022 was $205.0 million.

This represented

an increase of $0.2 million or 0.1% versus total revenue of $173.1 million for fiscal year 2020.

Total revenue was relatively flat year-over-year

due to the combination of increases in Service revenue offset by decreases in Distribution sales.

Service revenue was $101.3 million in fiscal year 2021, an increase of

$8.3 million or 8.9%.

Service revenue now accounts for 58.4% of our total revenue.

Of our Service revenue in fiscal year 2021, 83.6% was

generated by our Calibration Service Centers while 14.9% was generated through subcontracted third-party vendors, compared with 83.5%

and 14.9%, respectively, in fiscal year 2020.

The remainder of our Service revenue in each period was derived from freight charges.

Distribution sales decreased 10.0% to $72.1 million in fiscal year 2021.

Distribution sales accounted for 41.6% of our total revenue.

Sales to domestic customers comprised 92.8% of total Distribution sales in

fiscal year 2021, while 6.1% were to Canadian customers and 1.1% were to customers in other international markets.

Total gross profit was $46.1 million in fiscal year 2021 compared to $42.5

million in fiscal year 2020, an increase of $3.6 million or 8.6%.

Total gross margin was 26.6%, which is a 210 basis point increase versus

fiscal year 2020.

Service gross margin was 30.3% in fiscal year 2021 compared with 25.3% in fiscal year 2020.

Distribution gross margin

was 21.4% in fiscal year 2021 compared with 23.7% in fiscal year 2020.

Operating expenses were $35.0 million, or 20.2% of total revenue, in fiscal

year 2021 compared with $31.6 million, or 18.3% of total revenue, in fiscal year 2020.

Operating income was $11.1 million, or 6.4% of

total revenue, in fiscal year 2021 compared with $10.9 million, or 6.3% of total revenue, in fiscal year 2020.

Net income for fiscal year 2021 was $7.8 million compared with $8.1 million

in fiscal year 2020, a $0.3 million decrease.

Diluted earnings per share for fiscal year 2021 was $1.03 compared with $1.08 for fiscal

year 2020, a $0.05 per diluted share decline.

COVID-19 Impact.

The COVID-19 pandemic had a negative impact

on our fiscal year 2021 operations and financial results, and even with the vaccine roll-outs and mask mandates being lifted, the full

financial impact of the pandemic going forward cannot be reasonably estimated at this time due to uncertainty as to its severity and duration,

especially as new variants continue to appear.

We have taken steps to help mitigate the current impact, as well as the continued uncertainty

regarding the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial position and cash flows.

Currently, our network of labs, distribution center and support facilities

remain fully operational.

We do not anticipate disruptions to the Distribution supply chain in the short-term and are working with partners

to minimize any potential delays.

We have established a cross-functional COVID-19 task force, which meets

regularly, to standardize continuity plans and daily practices across the 42 Calibration Service Centers, client-based labs and our distribution/rental

operations for responding to the rapidly changing issues around this global pandemic.

Actions instituted include:

Adhering to guidelines and recommendations of the Centers for Disease Control and Prevention and

World Health Organization to reduce the spread of COVID-19;

Established a pandemic protocol across the organization to ensure continuous service to customers

and mitigate risk;

Suspended all work-related travel except for direct onsite service to customers.

When performing

necessary onsite service for customers, we are following recommended protocols including self-assessments and travel disclosures and asking

the same from our customers;

Required personnel whose roles allow to work remotely from home in order to adhere to the social

distancing recommendations issued by global health officials;

Aligned variable costs with demand, a freeze on wage increases, and

tightly controlling discretionary spending;

Reduced the CEO’s salary and Board of Director cash retainer fees by 20% and reduced other

executive team members salaries by 10% during the first and second quarters of fiscal 2021;

Leveraging government work programs, tax deferrals and extensions;

Amended our revolving credit facility to provide for, among other things, $10.0 million in additional

borrowing capacity and financial covenant modifications.

represented an increase of $31.6 million or 18.2% versus total revenue of $173.3 million for fiscal year 2021.

Total revenue increased

due to increases in both Service revenue and Distribution sales increases.

Service revenue was $122.0 million in fiscal year 2022,

an increase of $20.7 million or 20.5%.

Service revenue accounted for 59.5% of our total revenue during fiscal year 2022.

Of our Service

revenue in fiscal year 2022, 84.0%

was generated by our Calibration Service Centers and enterprise asset management services while 14.5%

was generated through subcontracted third-party vendors, compared with 83.6% and 14.9%, respectively, in fiscal year 2021.

The remainder

of our Service revenue in each period was derived from freight charges.

Distribution sales increased 15.1% to $83.0 million in fiscal

Distribution sales accounted for 40.5% of our total revenue in fiscal year 2022.

Sales to domestic customers comprised 93.4% of total Distribution

sales in fiscal year 2022, while 5.6% were to Canadian customers and 1.0% were to customers in other international markets.

Total gross profit was $58.4 million in fiscal year 2022

compared to $46.1 million in fiscal year 2021, an increase of $12.3 million or 26.7%.

Total gross margin was 28.5%, which is a 190 basis

point increase versus fiscal year 2021.

Service gross margin was 31.9% in fiscal year 2022 compared with 30.3% in fiscal year 2021, a

160 basis point increase.

Distribution gross margin was 23.5% in fiscal year 2022 compared with 21.4% in fiscal year 2021, a 210 basis

point increase.

This increase in service gross margin in fiscal year 2022 was primarily due to operating leverage on our fixed cost base,

accretive margins from recent acquisitions and continued strong technician productivity.

The increase in distribution segment gross margin

was primarily due to a favorable mix of products sold, strong demand for our higher-margin rentals business and an increase in cooperative

advertising and rebate programs.

Operating expenses were $44.3 million, or 21.6% of total

revenue, in fiscal year 2022 compared with $35.0 million, or 20.2% of total revenue, in fiscal year 2021.

Operating income was $14.1 million,

or 6.9% of total revenue, in fiscal year 2022 compared with $11.1 million, or 6.4% of total revenue, in fiscal year 2021.

The year-over-year

increase in selling, marketing and warehouse expenses was due to higher performance-based sales incentives and direct marketing costs.

The year-over-year increase in general and administrative expenses was due to by incremental expenses from acquired businesses (including

stock expense), increased intangibles amortization expense, investments in technology and our employee base to support future growth and

one-time transaction expenses related to acquisitions that closed in the fiscal year.

Net income for fiscal year 2022 was $11.4 million compared

with $7.8 million in fiscal year 2021, a $3.6 million increase.

Diluted earnings per share for fiscal year 2022 was $1.50 compared with

$1.03 for fiscal year 2021, a $0.47 per diluted share increase.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Use of Estimates.

The preparation of our Consolidated Financial

Statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires that we make

estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates

and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of

achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives

of major catalogs and intangible assets, and the valuation of assets acquired and liabilities assumed in business acquisitions.

events and their effects cannot be predicted with certainty;

accordingly, our accounting estimates require the exercise of judgment.

accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience

is acquired, as additional information is obtained, and as our operating environment changes.

Our estimates are evaluated on an ongoing

basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances.

results could differ from those estimates.

Such changes and refinements in estimation methodologies are reflected in reported results

of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to our Consolidated

Financial Statements.

The following items in our Consolidated Financial Statements require significant

estimation or judgment:

The preparation of our Consolidated

Financial Statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires that

we make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets

and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves,

estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed

assets, estimated lives of major catalogs and intangible assets, and the valuation of assets acquired, liabilities assumed and consideration

transferred in business acquisitions.

Future events and their effects cannot be predicted with certainty;

accordingly, our accounting

estimates require the exercise of judgment.

The accounting estimates used in the preparation of our Consolidated Financial Statements

will change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment

Our estimates are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe

to be reasonable under the circumstances.

Actual results could differ from those estimates.

Such changes and refinements in estimation

methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects

are disclosed in the Notes to our Consolidated Financial Statements.

The following items in our Consolidated Financial Statements

require significant estimation or judgment:

Accounts Receivable.

Accounts receivable represent amounts

due from customers in the ordinary course of business.

These amounts are recorded net of the allowance for doubtful accounts and returns

in the Consolidated

Balance Sheets.

The allowance for doubtful accounts is based upon the expected

collectability of accounts receivable.

We apply a specific formula to our accounts receivable aging, which may be adjusted on a specific

account basis where the formula may not appropriately reserve for loss exposure.

After all attempts to collect a receivable have failed,

the receivable is written-off against the allowance for doubtful accounts.

The returns reserve is calculated based upon the historical

rate of returns applied to revenues over a specific timeframe.

The returns reserve will increase or decrease as a result of changes in

the level of revenues and/or the historical rate of returns.

Management believes that the allowances are appropriate to cover anticipated

losses under current conditions.

However, unexpected changes or deterioration in economic conditions could materially change these expectations.

Inventory consists of products purchased for resale

and is valued at the lower of cost or net realizable value.

Costs are determined using the average cost method of inventory valuation.

Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based on historical experience

and current demand, to specific categories of our inventory.

Inventory is at risk of obsolescence if economic conditions change.

economic conditions include changing consumer demand, customer preferences or increasing competition.

We believe these risks are largely

mitigated because our inventory typically turns several times per year.

We evaluate the adequacy of the reserve on a quarterly basis.

Accounts receivable represent

amounts due from customers in the ordinary course of business.

These amounts are recorded net of the allowance for doubtful accounts and

returns in the Consolidated Balance Sheets.

The allowance for doubtful accounts is based upon the expected collectability of accounts

We apply a specific formula to our accounts receivable aging, which may be adjusted on a specific account basis where the

formula may not appropriately reserve for loss exposure.

After all attempts to collect a

receivable have failed, the receivable is written-off

against the allowance for doubtful accounts.

A returns reserve is calculated based upon the historical rate of returns applied to revenues

over a specific timeframe.

The returns reserve will increase or decrease as a result of changes in the level of revenues and/or the historical

rate of returns.

Management believes that the allowances are appropriate to cover anticipated losses under current conditions.

unexpected changes or deterioration in economic conditions could materially change these expectations.

Inventory consists of products

purchased for resale and is valued at the lower of cost or net realizable value.

Costs are determined using the average cost method of

inventory valuation.

Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based

on historical experience and current demand, to specific categories of our inventory.

Inventory is at risk of obsolescence if economic

conditions change.

Relevant economic conditions include changing consumer demand, customer preferences or increasing competition.

these risks are largely mitigated because our inventory typically turns several times per year.

We evaluate the adequacy of the reserve

on a quarterly basis.

Business Acquisitions.

We apply the acquisition method of

accounting for business acquisitions.

Under the acquisition method, identifiable assets acquired and liabilities assumed are measured

at their acquisition-date fair value.

We apply the acquisition

method of accounting for business acquisitions.

Under the acquisition method, identifiable assets acquired, liabilities assumed and consideration

transferred are measured at their acquisition-date fair value.

We use a valuation hierarchy to determine the fair values used.

Historically, we have relied, in

part, upon the use of reports from third-party valuation specialists to assist in the estimation of fair values.

Purchase price allocations

are subject to revision within the measurement period, not to exceed one year from the date of acquisition.

Administration costs to acquire

a business may include, but are not limited to, fees for accounting, legal and valuation services and are recorded as incurred in our

Consolidated Statement of Income.

Historically,

we have relied, in part, upon the use of reports from third-party valuation specialists to assist in the estimation of fair values.

price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition.

Administration

costs to acquire a business may include, but are not limited to, fees for accounting, legal and valuation services and are recorded as

incurred in our Consolidated Statement of Income.

Goodwill and Intangible Assets.

Goodwill represents the excess

of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized.

27, 2021, we had $43.3 million of recorded goodwill.

Intangible assets, namely customer base and covenants not to compete, represent

an allocation of purchase price to identifiable intangible assets of an acquired business.

These intangible assets are amortized over

their estimated useful lives and are reviewed for impairment if and when indicators are present.

We estimate the fair value of our reporting

units using the fair market value measurement requirement.

We test goodwill for impairment on an annual basis during the fourth quarter

of each fiscal year or immediately if conditions indicate that such impairment could exist.

We have the option to perform a qualitative

assessment to determine if it is more likely than not that the fair value of a segment has declined below its carrying value.

This assessment

considers various financial, macroeconomic, industry and segment specific qualitative factors.

Intangible assets are evaluated for impairment when events or changes in

business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

Based on the results of our reviews,

we have determined that no impairment was indicated as of each of the fiscal years ended March 27, 2021 and March 28, 2020.

Goodwill represents

the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized.

of March 26, 2022, we had $65.1 million of recorded goodwill.

Intangible assets, namely customer base and covenants not

to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business.

These intangible assets

are amortized over their estimated useful lives and are reviewed for impairment if and when indicators are present.

We estimate the fair

value of our reporting units using the fair market value measurement requirement.

We test goodwill for impairment for each reporting unit

on an annual basis during the fourth quarter of each fiscal year or immediately if conditions indicate that such impairment could exist.

We have the option to perform a qualitative assessment to determine if it is more likely than not that the fair value of a segment has

declined below its carrying value.

This assessment considers various financial, macroeconomic, industry and segment specific qualitative

Intangible assets are evaluated for impairment when events

or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

Based on the results

of our qualitative impairment testing reviews, we have determined that it was more likely than not that the fair values exceeded the carrying

values of goodwill and there were no impairments as of each of March 26, 2022 and March 27, 2021.

Income Taxes.

We record deferred income taxes for the effects

of timing differences between financial and tax reporting.

These differences relate primarily to accrued expenses, bad debt reserves,

inventory reserves, operating leases, goodwill and intangible assets, depreciation and amortization and stock based compensation.

our deferred income taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure of

our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in which we operate.

We record deferred income taxes

for the effects of timing differences between financial and tax reporting.

These differences relate primarily to accrued expenses, bad

debt reserves, inventory reserves, operating leases, goodwill and intangible assets, depreciation and amortization and stock-based compensation.

We base our deferred income taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure

of our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in which we operate.

We file income tax returns in the U.S.

federal jurisdiction, various states and Canada.

We are regularly audited by federal, state and

foreign tax authorities, but a number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits,

is audited and finally resolved.

federal jurisdiction, various states, Canada and Ireland.

We are regularly audited by federal,

state and foreign tax authorities, but a number of years may elapse before an uncertain tax position, for which we have unrecognized tax

benefits, is audited and finally resolved.

From time to time, these audits result in assessments of additional tax.

If a loss is determined to be

probable as a result of an audit, an accrual is established.

We apply a more-likely-than-not threshold to the recognition and derecognition

of uncertain tax positions.

Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately

realized upon settlement.

Future changes in judgments and estimates related to the expected ultimate resolution of uncertain tax positions

will affect income in the quarter of such change.

While it is often difficult to predict the final

outcome or the timing of resolution of any particular uncertain tax position,

we believe that our unrecognized tax benefits reflect the most likely outcome.

If a loss is determined

to be probable as a result of an audit, an accrual is established.

We apply a more-likely-than-not threshold to the recognition

and derecognition of uncertain tax positions.

Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood

of being ultimately realized upon settlement.

Future changes in judgments and estimates related to the expected ultimate resolution of

uncertain tax positions will affect income in the quarter of such change.

While it is often difficult to predict the final outcome or

the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely

Stock-Based Compensation.

We measure the cost of services

received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair market value

of the award as of the grant date.

We record compensation cost related to unvested equity awards by recognizing, on a straight-line basis,

the unamortized grant date fair value over the remaining service period of each award.

In accordance with Accounting Standards Updates

(“ASU”) 2016-09, excess tax benefits for share-based award activity are reflected in the Consolidated Statement of Income

as a component of the provision for income taxes.

Excess tax benefits are realized benefits from tax deductions for exercised awards in

excess of the deferred tax asset attributable to stock-based compensation costs for such awards.

We did not capitalize any stock-based

compensation costs as part of an asset.

We measure the cost

of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair

market value of the award as of the grant date.

The Company uses the Black-Scholes option pricing model to estimate the fair value of

stock options granted.

The application of this pricing model involves assumptions that require judgment and are sensitive in the determination

of compensation expense.

The fair market value of our common stock on the date of each option grant is determined based on the most recent

closing price on our primary trading stock exchange, currently the NASDAQ Global Market.

We record compensation cost related to unvested equity awards

by recognizing, on a straight-line basis, the unamortized grant date fair value over the remaining service period of each award.

In accordance

with Accounting Standards Updates (“ASU”) 2016-09, excess tax benefits for share-based award activity are reflected in the

Consolidated Statement of Income as a component of the provision for income taxes.

Excess tax benefits are realized benefits from tax

deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards.

did not capitalize any stock-based compensation costs as part of an asset.

We estimate forfeiture rates based on our historical experience.

We grant timed-based and performance-based restricted stock units

as a component of executive and key employee compensation.

These restricted stock units are either time vested or vest following the third

fiscal year from the date of grant and some of these grants are subject to cumulative diluted earnings per share growth targets over the

eligible period.

Compensation cost ultimately recognized for these restricted stock units will equal the grant-date fair market value

of the unit that coincides with the actual outcome of the performance conditions.

On an interim basis, we record compensation cost based

on the expected level of achievement of the performance conditions.

Stock options vest either immediately or over a period of up

to five years using a straight-line basis, and expire either five years or ten years from the date of grant.

The expense relating to options

is recognized on a straight-line basis over the requisite service period for the entire award.

We grant timed-based and performance-based restricted stock

units as a component of executive and key employee compensation.

These restricted stock units are either time vested or vest following

the third fiscal year from the date of grant subject to cumulative diluted earnings per share growth targets over the eligible period.

Compensation cost ultimately recognized for these restricted stock units will equal the grant-date fair market value of the unit that

coincides with the actual outcome of the performance conditions.

On an interim basis, we record compensation cost based on the expected

level of achievement of the performance conditions.

The expense relating to the time vested restricted stock units is recognized on a

straight-line basis over the requisite service period for the entire award.

Stock options vest either immediately or over a period of

up to five years using a straight-line basis, and expire either five years or ten years from the date of grant.

The expense relating to

options is recognized on a straight-line basis over the requisite service period for the entire award.

See Note 6 to our Consolidated Financial Statements for further

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benefits, and medical premium reimbursement benefits to eligible retired corporate officers and their eligible spouses.

For accounting purposes, the defined benefit post-retirement health care

plan requires assumptions to estimate the projected and accumulated benefit obligations, including the following variables:

For accounting purposes, the defined benefit post-retirement

health care plan requires assumptions to estimate the projected and accumulated benefit obligations, including the following variables:

discount rate;

1 unchanged sentence

and health care cost trend rates.

These and other assumptions

affect the annual expense and obligations recognized for the underlying plans.

Our assumptions reflect our historical experiences and

management's best judgment regarding future expectations.

Increasing the assumed health care cost trend rate by one percentage point

would increase the accumulated post-retirement benefit obligation and the annual net periodic post-retirement benefit cost by $0.2 million.

A one percentage point decrease in the healthcare cost trend would decrease the accumulated post-retirement benefit obligation and the

annual net periodic post-retirement benefit cost by $0.2 million.

These and other

assumptions affect the annual expense and obligations recognized for the underlying plans.

Our assumptions reflect our historical experiences

and management's best judgment regarding future expectations.

Increasing the assumed health care cost trend rate by one

percentage point would increase the accumulated post-retirement benefit obligation and the annual net periodic post-retirement benefit

cost by $0.1 million.

A one percentage point decrease in the healthcare cost trend would decrease the accumulated post-retirement benefit

obligation and the annual net periodic post-retirement benefit cost by $0.1 million.

Recently Issued Accounting Pronouncements .

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RESULTS OF OPERATIONS

The following table sets forth, for fiscal years 2021 and 2020, the components

of our Consolidated Statements of Income.

As a Percentage

of Total Revenue:

The following table sets forth, for fiscal years 2022 and 2021, the

components of our Consolidated Statements of Income.

As a Percentage of Total Revenue:

Service Revenue

1 unchanged sentence

Total Revenue

Service Gross

Distribution Gross

Gross Profit Percentage:

Service Gross Profit

Distribution Gross Profit

Total Gross Profit

Selling, Marketing

and Warehouse Expenses

General and Administrative

Total Operating

Selling, Marketing and Warehouse Expenses

General and Administrative Expenses

Total Operating Expenses

Operating Income

Interest and Other

Expenses, net

Income Before

Interest and Other Expenses, net

Income Before Provision for Income Taxes

Provision for Income Taxes

Provision for

FISCAL YEAR ENDED MARCH 27, 2021 COMPARED TO FISCAL YEAR ENDED MARCH

28, 2020 (dollars in thousands):

the Fiscal Years Ended

Total revenue was $173.3 million in fiscal year 2021 compared to $173.1

million in fiscal year 2020, an increase of $0.2 million or 0.1%.

Service revenue, which accounted for 58.4% and 53.7% of our total revenue

in fiscal years 2021 and 2020, respectively, increased $8.3 million, or 8.9% from fiscal year 2020 to fiscal year 2021.

This year-over-year

growth includes a combination of organic and acquisition-related revenue growth.

This year-over-year increase reflected new life science

business and, combined with $5.2 million of incremental revenue from pipettes.com and BioTek, more than offset reduced demand from other

markets caused primarily by the COVID-19 pandemic.

Excluding acquired revenue of $5.2 million, the Service segment organic revenue increased

Our fiscal years 2021 and 2020 Service revenue growth in relation to prior

fiscal year quarter comparisons, was as follows:

Service Revenue

Within any year, while we add new customers, we also have customers from

the prior year whose service orders may not repeat for any number of factors.

Among those factors are variations in the timing of periodic

calibrations and other services, customer capital expenditures and customer outsourcing decisions.

Because the timing of Service segment

orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication of the progress of

this segment.

The growth in fiscal year 2021 and fiscal year 2020 reflected both organic growth and acquisitions.

The growth in Service

segment revenue during the third and fourth quarters of fiscal year 2021 includes revenue from Bio Tek and pipettes.com.

The growth in

Service segment revenue during

the first and second quarters of fiscal year 2021 and the fourth quarter

of fiscal year 2020 includes revenue from the pipettes.com acquisition.

The following table presents the trailing twelve-month Service segment

revenue for each quarter in fiscal years 2021 and 2020 as well as the trailing twelve-month revenue growth as a comparison to that of

the prior fiscal year period:

FISCAL YEAR ENDED MARCH 26, 2022 COMPARED TO FISCAL

YEAR ENDED MARCH 27, 2021 (dollars in thousands):

For the Fiscal Years Ended

Total revenue was $205.0 million in fiscal year 2022 compared

to $173.3 million in fiscal year 2021, an increase of $31.6 million or 18.2%.

Service revenue, which accounted for 59.5% and 58.4% of

our total revenue in fiscal years 2022 and 2021, respectively, increased $20.7 million, or 20.5% from fiscal year 2021 to fiscal year

This year-over-year growth includes a combination of organic and acquisition-related revenue growth.

This year-over-year increase also reflected increased demand

from the life sciences and other highly-regulated end markets and included $9.0 million of incremental revenue from acquisitions.

acquired revenue of $9.0 million, the Service segment organic revenue increased by 11.6%.

Our fiscal years 2022 and 2021 Service revenue growth in

relation to prior fiscal year quarter comparisons, was as follows:

Service Revenue Growth

Within any year, while we add new customers, we also have

customers from the prior year whose service orders may not repeat for any number of factors.

Among those factors are variations in the

timing of periodic calibrations

and other services, customer capital expenditures and customer outsourcing decisions.

Because the timing

of Service segment orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication

of the progress of this segment.

The growth in fiscal year 2022 and fiscal year 2021 reflected

both organic growth and acquisitions.

The growth in Service segment revenue in the fourth quarter of fiscal year 2022 includes revenue

from Tangent and NEXA.

The growth in Service segment revenue in the third quarter of fiscal year 2022 includes revenue from NEXA.

growth in Service segment revenue during the third and fourth quarters of fiscal year 2021 includes revenue from BioTek and pipettes.com.

The growth in Service segment revenue during the first and second quarters of fiscal year 2021 includes revenue from the pipettes.com

The following table presents the trailing twelve-month Service

segment revenue for each quarter in fiscal years 2022 and 2021 as well as the trailing twelve-month revenue growth as a comparison to

that of the prior fiscal year period:

Trailing Twelve-Month:

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Freight Billed to Customers

Our Distribution sales accounted for 41.6% and 46.3% of our total revenue

in fiscal years 2021 and 2020, respectively.

Distribution sales decreased $8.0 million, or 10.0% in fiscal year 2021 compared to fiscal

Fiscal year 2021 results were impacted by the COVID-19 pandemic, with reduced demand from oil and gas related businesses and

most other industrial manufacturing sectors.

However, rental revenue increased by 1.6% to $5.1 million in fiscal year 2021 compared to

fiscal year 2020.

The change in fiscal year 2021 versus fiscal year 2020 and the increase in fiscal year 2020 versus fiscal year 2019

reflected both organic and acquisition revenue.

Our fiscal years 2021 and 2020 Distribution sales (decline) growth in relation to prior

fiscal year quarter comparisons were as follows:

Distribution Sales

(Decline) Growth

Distribution sales 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 our 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

Our total pending product shipments increased $2.0 million, or 45.2%, at the end of fiscal year 2021 compared to the end

of fiscal year 2020.

Backorders at the end of fiscal year 2021 were $4.9 million, compared to $2.9 million at the end of fiscal year 2020.

The year-over-year increase in pending product shipments and backorders was a result of the COVID-19 pandemic and its disruption to the

supply of products.

The following table presents the percentage of total pending product shipments that were backorders at the end of

each quarter in fiscal years 2021 and 2020 and our historical trend of total pending product shipments:

Total Pending

Our Distribution sales accounted for 40.5% and 41.6% of our

total revenue in fiscal years 2022 and 2021, respectively.

Distribution sales increased $10.9 million, or 15.1% in fiscal year 2022 compared

to fiscal year 2021.

This increase in sales was due to increased orders in fiscal year 2022 and an easier comparison to fiscal year 2021,

which was adversely impacted by the COVID-19 pandemic.

The increase in sales in fiscal year 2022 were all organic.

The change in fiscal

year 2021 versus fiscal year 2020 reflected both organic and acquisition sales.

Our fiscal years 2022 and 2021 Distribution sales growth

(decline) in relation to prior fiscal year quarter comparisons were as follows:

Distribution Sales Growth (Decline)

Distribution sales 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.

are the total dollar value of orders received for which revenue has not yet been recognized.

Pending product shipments are primarily backorders,

but also include products that are requested to be calibrated in our 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.

uses pending product shipments and backorders as measures of our future business performance and financial performance within the distribution

Our total pending product shipments increased $1.5 million,

or 23.6%, at the end of fiscal year 2022 compared to the end of fiscal year 2021.

Backorders at the end of fiscal year 2022 were $6.4

million, compared to $4.9 million at the end of fiscal year 2021.

The year-over-year increase in pending product shipments was a result

of the COVID-19 pandemic and its disruptive impact to the supply of products in fiscal year 2022 as well as overall increased demand.

The following table presents the percentage of total pending

product shipments that were backorders at the end of each quarter in fiscal years 2021 and 2020 and our historical trend of total pending

product shipments:

Product Shipments that were Backorders

Total Pending Product Shipments

% of Pending Product Shipments that were Backorders

Gross Profit:

the Fiscal Years Ended

For the Fiscal Years Ended

March 26, March 27,

Gross Profit:

Total gross profit in fiscal year 2021 was $46.1 million compared to $42.5

million in fiscal year 2020, an increase of $3.6 million or 8.6%.

As a percentage of total revenue, total gross margin was 26.6% in fiscal

year 2021 compared to 24.5% in fiscal year 2020.

Service gross profit increased $7.2 million, or 30.7%, from fiscal year

2020 to fiscal year 2021.

Total gross profit in fiscal year 2022 was $58.4 million

compared to $46.1 million in fiscal year 2021, an increase of $12.3 million or 26.7%.

As a percentage of total revenue, total gross margin

was 28.5% in fiscal year 2022 compared to 26.6% in fiscal year 2021, a 190 basis point increase.

Service gross profit increased $8.2 million, or 26.8%, from

fiscal year 2021 to fiscal year 2022.

Our annual and quarterly Service segment gross margins are a function of several factors.

Our organic Service

revenue growth provides some incremental gross margin growth by leveraging certain fixed costs of this segment.

The mix of services provided

to customers may also affect gross margins in any given period.

Annual Service gross margin increased by 500 basis points from fiscal

year 2020 to fiscal year 2021.

This increase in service gross margin in fiscal year 2021 was primarily due to ongoing productivity improvements,

operating leverage from organic growth, strategic pricing and accretive margins from the pipettes.com and Bio Tek acquisitions.

The following table presents the quarterly historical trend of our Service

gross margin as a percent of Service revenue:

Service Gross

Our Distribution gross margin includes net sales less the direct cost of

inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in our rental equipment

pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed to customers, freight

expenses and direct shipping costs.

During fiscal year 2021, we saw a number of our vendors significantly reduce the rebates offered to

us as they implemented cost cutting measures in response to the COVID-19 pandemic.

We 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 sales.

In general, our Distribution gross

margin can vary based upon the mix of products sold, price discounting, the timing of periodic vendor rebates offered and cooperative

advertising programs from suppliers.

The following table reflects the quarterly historical trend of our Distribution

gross margin as a percent of Distribution sales:

Distribution Gross

Annual Distribution segment gross margin decreased 230 basis points in

fiscal year 2021 compared to fiscal year 2020.

The decrease in segment gross margin was primarily due to reduced cooperative advertising

and rebate programs as certain vendors reduced these programs to lower their costs in response to the COVID-19 pandemic.

Service revenue growth provides some incremental gross margin growth by leveraging certain fixed costs of this segment.

The mix of services

provided to customers may also affect gross margins in any given period.

Service gross margin increased by 160 basis points in fiscal

year 2022 versus fiscal year 2021.

This increase in service gross margin in fiscal year 2022 was primarily due to operating leverage on

our fixed cost base, accretive margins from recent acquisitions and continued strong technician productivity.

The following table presents the quarterly historical trend

of our Service gross margin as a percent of Service revenue:

Service Gross Margin

Our Distribution gross margin includes net sales less the

direct cost of inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in

our rental equipment pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed

to customers, freight expenses and direct shipping costs.

During fiscal year 2022, our Distribution sales were high enough that we saw

an increase in the rebates offered by our vendors.

These rebates had been cut significantly in fiscal year 2021 as our vendors implemented

cost cutting measures in response to the COVID-19 pandemic.

We recorded vendor rebates of $1.0 million and $0.7 million in fiscal years

2022 and 2021, respectively, as a reduction of cost of Distribution sales.

In general, our Distribution gross margin can vary based upon

the mix of products sold, price discounting, the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers.

The following table reflects the quarterly historical trend

of our Distribution gross margin as a percent of Distribution sales:

Distribution Gross Margin

Distribution segment gross margin increased 210 basis points

in fiscal year 2022 compared to fiscal year 2021.

The increase in segment gross margin was primarily due to a favorable mix of products

sold, strong demand for our higher-margin rentals business and an increase in cooperative advertising and rebate programs.

Operating Expenses:

the Fiscal Years Ended

For the Fiscal Years Ended

Operating Expenses:

Selling, Marketing

and Warehouse

Selling, Marketing and Warehouse

General and Administrative

Total operating expenses were $35.0 million in fiscal year 2021 compared

to $31.6 million in fiscal year 2020.

Total operating expenses were $44.3 million in fiscal year

2022 compared to $35.0 million in fiscal year 2021.

This represented an increase of $9.3 million, or 26.4%, compared to fiscal year 2021.

As a percentage

of total revenue, operating expenses increased 190 basis points from 18.3% in fiscal year 2020 to 20.2% in fiscal year 2021.

marketing and warehouse expenses decreases were due to reduced commissions and incentives as a result of the COVID-19 pandemic.

The year-over-year

increase in General and Administrative expenses includes incremental expenses related to the acquisition of pipettes.com and BioTek and

increased expenses related to our continued investment in technology and operational infrastructure.

As a percentage of total revenue, operating expenses increased 140 basis points from 20.2% in fiscal year 2021 to 21.6% in fiscal year

The year-over-year increase in selling, marketing and warehouse expenses is due to higher performance-based sales incentives and

direct marketing costs.

The year-over-year increase in general and administrative expenses is due to incremental expenses from acquired

businesses (including stock expense), increased intangibles amortization expense, investments in technology and our employee base to support

future growth and one-time transaction expenses related to acquisitions that closed in the fiscal year.

Provision for Income Taxes:

the Fiscal Years Ended

Provision for

Our effective tax rates for fiscal years

2021 and 2020 were 21.9% and 17.1%, respectively.

The increase in tax rate is due to the lower discrete tax benefits from share-based

compensation activity.

Our provision for income taxes is affected by discrete items that may occur in any given period but are not consistent

from year to year.

The discrete benefits related to share-based compensation activity in fiscal years 2021 and 2020 were $0.3 million

and $0.9 million, respectively.

We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective

tax rate given changes in facts and circumstances expected in the future.

We expect to receive certain federal, state and Canadian tax credits in

future years.

We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal year 2022.

we expect our effective tax rate in fiscal year 2022 to be between 20.0% and 22.0%.

the Fiscal Years Ended

Net income for fiscal year 2021 decreased by $0.3 million or 3.4% compared

to fiscal year 2020.

As a percentage of revenue, net income was 4.5% in fiscal year 2021, down from 4.7% in fiscal year 2020.

This year-over-year

change reflects higher operating income discussed above offset by a higher effective tax rate.

For the Fiscal Years Ended

Provision for Income Taxes

Our effective tax rates

for fiscal years 2022 and 2021 were 13.7% and 21.9%, respectively.

The decrease in tax rate is due to the higher discrete tax benefits

from share-based compensation activity.

Our provision for income taxes is affected by discrete items that may occur in any given period

but are not consistent from year to year.

The discrete benefits related to share-based compensation activity in fiscal years 2022 and

2021 were $1.4 million and $0.3 million, respectively.

We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed

necessary, our effective tax rate given changes in facts and circumstances expected in the future.

We expect to receive certain federal, state, Canadian and

Irish tax credits in future years.

We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal

As such, we expect our effective tax rate in fiscal year 2023 to be between 22.0% and 24.0%.

For the Fiscal Years Ended

Net income for fiscal year 2022 increased by $3.6 million

or 46.1% compared to fiscal year 2021.

As a percentage of revenue, net income was 5.6% in fiscal year 2022, up from 4.5% in fiscal year

This year-over-year change reflects higher operating income discussed and a lower provision for income taxes.

Adjusted EBITDA:

In addition to reporting net income, a GAAP measure, we present Adjusted

EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, non-cash loss on sale

of building, and restructuring expense), which is a non-GAAP measure.

Our management believes Adjusted EBITDA is an important measure

of our operating performance because it allows management, investors and others to evaluate and compare the performance of our core operations

from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and

amortization), taxes,

stock-based compensation expense and other items, which is not always commensurate

with the reporting period in which it is included.

As such, our management uses Adjusted EBITDA as a measure of performance when evaluating

our business segments and as a basis for planning and forecasting.

Adjusted EBITDA is also commonly used by rating agencies, lenders and

other parties to evaluate our credit worthiness.

Adjusted EBITDA is not a measure of financial performance under GAAP and

is not calculated through the application of GAAP.

As such, it should not be considered as a substitute or alternative for the GAAP measure

of net income and, therefore, should not be used in isolation of, rather in conjunction with, the GAAP measure.

Adjusted EBITDA, as presented,

may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

the Fiscal Years Ended

In addition to reporting net income, a GAAP measure, we

present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition

related transaction expenses, non-cash loss on sale of building, and restructuring expense), which is a non-GAAP measure.

Our management

believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate

and compare the performance of our core operations from period to period by removing the impact of the capital structure (interest), tangible

and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense and other items, which is not always

commensurate with the reporting period in which it is included.

As such, our management uses Adjusted EBITDA as a measure of performance

when evaluating our business segments and as a basis for planning and forecasting.

Adjusted EBITDA is also commonly used by rating agencies,

lenders and other parties to evaluate our credit worthiness.

Adjusted EBITDA is not a measure of financial performance

under GAAP and is not calculated through the application of GAAP.

As such, it should not be considered as a substitute or alternative

for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure.

EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure

used by other companies.

For the Fiscal Years Ended

+ Interest Expense

4 unchanged sentences

+ Restructuring Expense

+ Other (Expense) Income

+ Transaction Expense

+ Other Expense

+ Noncash Stock Compensation

Adjusted EBITDA

During fiscal year 2021, Adjusted EBITDA was $20.6 million, an increase

of $2.2 million or 11.8% compared to fiscal year 2020.

As a percentage of revenue, Adjusted EBITDA was 11.9% during fiscal year 2021 versus

10.6% during fiscal year 2020, a 110 basis point increase.

The increase in Adjusted EBITDA during fiscal year 2021 is primarily driven

by the increase in operating income, depreciation and amortization expense and noncash stock compensation expense.

During fiscal year 2022, Adjusted EBITDA was $26.3 million,

an increase of $5.7 million or 27.9% compared to fiscal year 2021.

As a percentage of revenue, Adjusted EBITDA was 12.8% during fiscal

year 2022 versus 11.9% during fiscal year 2021, a 90 basis point increase.

The increase in Adjusted EBITDA during fiscal year 2022 is

primarily driven by the increase in net income, depreciation and amortization expense, non-cash stock compensation expense and acquisition

transaction expenses.

Adjusted Diluted Earnings Per Share:

In addition to reporting Diluted Earnings Per Share, a GAAP

measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related

transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense, on

a diluted per share basis), which is a non-GAAP measure.

Our management believes Adjusted Diluted Earnings Per Share is an important measure

of our operating performance because it provides a basis for comparison of our business operations between current, past and future periods

by excluding items that we do not believe are indicative of our core operating performance.

Adjusted Diluted Earnings Per Share is not a measure of financial

performance under GAAP and is not calculated through the application of GAAP.

As such, it should not be considered as a substitute or

alternative for the GAAP measure of Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction

with, the GAAP measure.

Adjusted Diluted Earnings Per Share, as presented, may produce results that vary from the GAAP measure and may

not be comparable to a similarly defined non-GAAP measure used by other companies.

For the Fiscal Years Ended

+ Amortization of Intangible Assets

+ Acquisition Amortization of Backlog

+ Acquisition Deal Costs

+ Business Restructuring Expense

+ Income Tax Effect @ 25%

Adjusted Net Income

Average Diluted Shares Outstanding

Diluted Earnings Per Share – GAAP

Adjusted Diluted Earnings Per Share

LIQUIDITY AND CAPITAL RESOURCES

We expect that foreseeable liquidity and capital resource requirements

will be met through anticipated cash flows from operations and borrowings from our Revolving Credit Facility (as defined below).

On May 18, 2020, we entered into an amendment (“Amendment Two”)

to our Amended and Restated Credit Agreement with Manufacturers and Traders Trust Company, as previously amended pursuant to an amendment

dated as of December 10, 2018 (together, the “Credit Agreement”).

Amendment Two extended the term of our $30.0 million revolving

credit facility (the “Revolving Credit Facility”) to October 20, 2022 and increased the revolving credit commitment to $40.0

Amendment Two modified the definition of applicable rate used to determine

interest charges on outstanding and unused borrowings under the Revolving Credit Facility and it amended the definition of permitted acquisitions

to amend borrowings available under the Revolving Credit Facility for acquisitions.

In addition, Amendment Two amended the definition

of restricted payments to exclude amounts up to $2.5 million during each fiscal year used to pay certain employee tax obligations related

to stock-based payment and stock option activity, and modified certain restrictions to our ability to repurchase our shares and pay dividends.

Amendment Two modified the leverage ratio and fixed charge coverage ratio covenants with which we are required to comply.

Amendment Two

also established a LIBOR floor of 1% and included a mechanism for adoption of a different benchmark rate when LIBOR is discontinued.

the third quarter of fiscal year 2021, Manufacturers and Traders Trust Company eliminated the prior requirement included in Amendment

Two that limited capital expenditures to $5.5 million for the fiscal year ending March 27, 2021.

During the fourth quarter of fiscal year

2021, Manufacturers and Traders Trust Company eliminated the prior requirement included in Amendment Two that limited restricted

payments up to $2.5 million to pay certain tax obligations associated with

share-based payment and stock option activity for the fiscal year ending March 27, 2021.

On December 10, 2018, we entered into an Amended and Restated Credit Agreement

Amendment 1 (the “2018 Agreement”) that provides for the 2018 Term Loan in the amount of $15.0 million, which replaced the

previous 2017 Term Loan.

As of March 27, 2021, $10.6 million was outstanding on the 2018 Term Loan, of which $2.0 million was included

in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt.

The 2018 Term Loan requires total

repayments (principal plus interest) of $0.2 million per month through December 2025.

Principal payments relating to the 2018 Term Loan will be $2.1 million

in fiscal year 2022, $2.2 million in fiscal year 2023, $2.2 million in fiscal year 2024, $2.3 million in fiscal year 2025 and $1.8 million

in fiscal year 2026.

As of March 27, 2021, $40.0 million was available under the Revolving Credit

Facility, of which $8.9 million was outstanding and included in long-term debt on the Consolidated Balance Sheets.

Under the Credit Agreement, borrowings that may be used for business acquisitions

are limited to $20.0 million per fiscal year, and during a portion of fiscal year 2021 were limited to $5.5 million.

During fiscal year

2021, $3.6 million of borrowings was used for business acquisitions.

During fiscal year 2020, $13.8 million was used for business acquisitions,

including holdback payments.

The allowable leverage ratio under the Credit Agreement for the first,

second, third and fourth fiscal quarter of fiscal year 2021, and the first quarter of fiscal year 2022 is a maximum multiple of 3.0, 5.0,

5.5, 7.0 and 4.0, respectively, of total debt outstanding compared to EBITDA and non-cash stock-based compensation expense for the preceding

four consecutive fiscal quarters.

After the first quarter of fiscal 2022, the allowable leverage ratio is a maximum multiple of 3.0.

Credit Agreement provides that the trailing twelve-month pro forma EBITDA of an acquired business is included in the allowable leverage

The Credit Agreement has certain covenants with which we must comply, including

a fixed charge ratio covenant and a leverage ratio covenant.

We were in compliance with all loan covenants and requirements during fiscal

years 2021 and 2020.

Our leverage ratio, as defined in the Credit Agreement, was 0.94 at March 27, 2021 compared with 1.53 at March 28,

Interest on the Revolving Credit Facility continues to accrue, at our election,

at either the variable one-month LIBOR (subject to a 1% floor) or a fixed rate for a designated period at the LIBOR corresponding to such

period, in each case, plus a margin.

Interest on outstanding borrowings of the 2018 Term Loan accrues at a fixed rate of 4.15% over the

term of the loan with principal and interest payments made monthly.

Unused fees accrue based on the average daily amount of unused credit

available under the Credit Agreement.

Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated

leverage ratio, as defined in the Credit Agreement.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”)

Act was enacted.

The CARES Act included a provision that allows the Company to defer the employer portion of social security payroll tax

payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable

by December 31, 2022.

During fiscal year 2021, the Company deferred $2.0 million of employer social security payroll taxes, of which $1.0

million is recorded in accrued compensation and other liabilities and $1.0 million is recorded in other liabilities on the Consolidated

Balance Sheets.

We expect that foreseeable liquidity and capital resource

requirements will be met through anticipated cash flows from operations and borrowings from our Revolving Credit Facility (as defined

On July 7, 2021, we entered into the Second Amended and Restated

Credit Facility Agreement (the “2021 Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”),

that amended and restated in its entirety the Company’s Amended and Restated Credit Facility Agreement dated as of October 30, 2017,

as amended by Amended and Restated Credit Facility Agreement Amendment 1 dated December 10, 2018 and Amended and Restated Credit Facility

Agreement Amendment 2 (“Amendment Two”) dated May 18, 2020 (as amended, the “Prior Credit Agreement”).

The 2021 Credit Agreement increased the revolving credit commitment

(the “Revolving Credit Commitment”) from $40.0 million to $80.0 million, with a letter of credit subfacility increased from

$2.0 million to $10.0 million, and extended the term of the Revolving Credit Commitment to June 2026.

The 2021 Credit Agreement amended

the definition of Applicable Margin (formerly Applicable Rate under the Prior Credit Agreement), which is based upon the Company’s

then current leverage ratio and is used to determine interest charges on outstanding and unused borrowings under the revolving credit

the amendments reduced the Applicable Margins payable at the two highest leverage ratio levels.

The 2021 Credit Agreement also

amended the definition of Permitted Acquisitions, that is, acquisitions which are permitted under, and may be financed with proceeds of,

the revolving credit facility, including increasing the aggregate purchase price for acquisitions consummated in any fiscal year from

$1.0 million to $65.0 million during the current fiscal year and $50.0 million during any subsequent fiscal year, and adding an aggregate

purchase price of $40.0 million for acquisitions consummated at any time during the term of the 2021 Credit Agreement related to businesses

with a principal place of business located in the United Kingdom or the European Union.

In addition, the 2021 Credit Agreement provides that, assuming

no event of default, restricted payments up to $25.0 million (increased from $10.0 million in the Prior Credit Agreement) in the aggregate

and $10.0 million (increased from $3.0 million in the Prior Credit Agreement) in any single fiscal year may be used by us to repurchase

our shares and pay dividends.

The 2021 Credit Agreement modified the leverage ratio and fixed charge coverage ratio covenants with which

we are required to comply.

The 2021 Credit Agreement also reduced the LIBOR floor from 1.0% to 0.25% and included a mechanism for adoption

of a different benchmark rate upon the discontinuation of

The 2021 Credit Agreement also reduced the fixed interest rate on our

term loan in the amount of $15.0 million (the “2018 Term Loan”) from 4.15% to 3.90%.

The 2021 Credit Agreement superseded in its entirety, the

Prior Credit Agreement.

Amendment Two to the Prior Credit Agreement had previously extended the term of the revolving credit facility

to October 20, 2022 and increased the revolving credit commitment to $40 million.

Amendment Two also had modified the definition of the applicable

rate used to determine interest charges on outstanding and unused borrowings under the revolving credit facility and it amended the definition

of permitted acquisitions to amend borrowings available under the revolving credit facility for acquisitions.

In addition, Amendment Two

had amended the definition of restricted payments to exclude amounts up to $2.5 million during each fiscal year used to pay certain employee

tax obligations associated with share-based payment and stock option activity, and modified certain restrictions to the Company’s

ability to repurchase its shares and pay dividends.

Amendment Two also had modified the leverage ratio and fixed charge coverage ratio

covenants with which the Company was required to comply and limited capital expenditures to $5.5 million for the fiscal year 2021.

Two also had established a LIBOR floor of 1.0% and included a mechanism for adoption of a different benchmark rate in the event LIBOR

was discontinued.

As of March 26, 2022, $80.0 million was available under

the revolving credit facility, of which $39.9 million was outstanding and included in long-term debt on the Consolidated Balance Sheets.

During fiscal year 2022, we used $29.8 million for business acquisitions.

As of March 26, 2022, $8.5 million was outstanding on the

2018 Term Loan, of which $2.2 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included

in long-term debt.

The 2018 Term Loan requires total repayments (principal plus interest) of $0.2 million per month through December 2025.

Pursuant to the Prior Credit Agreement, we were required to

comply with a fixed charge ratio covenant and a leverage ratio covenant, which were modified by the 2021 Credit Agreement.

The allowable

leverage ratio under the Prior Credit Agreement for the second, third and fourth fiscal quarter of fiscal year 2021 and the first quarter

of fiscal year 2022 was a maximum multiple of 5.0, 5.5, 7.0 and 4.0, respectively, of total debt outstanding compared to EBITDA and non-cash

stock-based compensation expense for the preceding four consecutive fiscal quarters.

The Prior Credit Agreement also had provided that

the trailing twelve-month pro forma EBITDA of an acquired business was included in the allowable leverage calculation.

After the first

quarter of fiscal 2022, pursuant to the 2021 Credit Agreement, the allowable leverage ratio is a maximum multiple of 3.0.

We were in compliance

with all loan covenants and requirements during fiscal years 2022 and 2021.

Our leverage ratio was 1.74 at March 26, 2022, as defined

in the 2021 Credit Agreement, compared with 0.94 at March 27, 2021, as defined in the Prior Credit Agreement.

Interest on the revolving credit facility continues to accrue,

at our election, at either the variable one-month LIBOR (subject to a 1% floor during the first quarter of fiscal year 2022 and a 0.25%

floor for subsequent periods) or a fixed rate for a designated period at the LIBOR corresponding to such period, in each case, plus a

Interest on outstanding borrowings of the 2018 Term Loan accrued at a fixed rate of 3.90% over the term of the loan during the

fourth quarter of fiscal year 2022 with principal and interest payments made monthly.

Unused fees accrued based on the average daily amount

of unused credit available under the revolving credit facility.

Interest rate margins and unused fees were determined on a quarterly basis

based upon our calculated leverage ratio.

On March 27, 2020, the Coronavirus Aid, Relief and Economic

Security (“CARES”) Act was enacted.

The CARES Act included a provision that allows the Company to defer the employer portion

of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by

December 31, 2021 and 50% payable by December 31, 2022.

During fiscal year 2021, the Company deferred $2.0 million of employer social

security payroll taxes.

During fiscal year 2022, the Company repaid $1.0 million on December 31, 2021 and the other $1.0 million is recorded

in accrued compensation and other liabilities on the Consolidated Balance Sheets.

The following table is a summary of our Consolidated

Statements of Cash Flows (dollars in thousands):

the Fiscal Years Ended

Cash Provided

by (Used in):

For the Fiscal Years Ended

Cash Provided by (Used in):

Operating Activities

2 unchanged sentences

Operating Activities:

Net cash provided by operating activities

was $23.6 million during fiscal year 2021 compared to $11.6 million during fiscal year 2020 primarily

due to changes in net working capital (defined as current assets less current liabilities).

The significant changes in net working capital

Cash increased by $0.1 million during fiscal year 2021.

The increase was primarily due to

the timing of payments towards our long-term debt.

Net cash provided by operating

activities was $17.6 million during fiscal year 2022 compared to $23.6 million during fiscal year 2021.

The year-over-year decrease in

cash provided by operations is primarily the result of changes in net working capital (defined as current assets less current liabilities).

The significant working capital fluctuations were as follows:

● Receivables:

Accounts receivable increased by a net amount of $5.7 million during fiscal year 2022,

inclusive of $0.4 million of accounts receivable acquired as part of the BioTek acquisition completed during the period.

inclusive of $2.8 million of accounts receivable acquired as part of three acquisitions completed during the period.

Accounts receivable

increased by a net amount of $3.5 million during fiscal year 2020, including $0.8 million of accounts receivable acquired as part of the

pipettes.com acquisition completed within the period.

increased by a net amount of $3.0 million during fiscal year 2021, inclusive of $0.4 million of accounts receivable acquired as part of

the BioTek acquisition completed during the period.

The year-over-year change reflects the timing of collections.

1 unchanged sentence

illustrates our days sales outstanding as of March 26, 2022 and March 27, 2021:

the Fiscal Years Ended

Net Sales, for

the last two fiscal months

Accounts Receivable,

For the Fiscal Years Ended

Net Sales, for the last two fiscal months

Accounts Receivable, net

Days Sales Outstanding

3 unchanged sentences

As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our

Our inventory balance increased $1.1 million during

fiscal year 2022.

Our inventory balance decreased $2.5 million during fiscal year 2021.

Our inventory balance decreased $0.1 million during

fiscal year 2020, including $0.1 million of inventory acquired from the pipettes.com acquisition completed within the period.

The year-over-year

change is a result of lower distribution sales as a result of lower demand due to COVID-19.

The year-over-year change is a result of strategic

inventory purchases during fiscal year 2022.

● Accounts Payable:

Changes in accounts payable may or may not correlate with changes in inventory

balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced

Service vendors and capital expenditures.

Changes in accounts payable may or may not correlate with changes in inventory balances

at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced Service

vendors and capital expenditures.

Accounts payable increased $1.9 million during fiscal

Accounts payable increased by $0.3 million during fiscal year 2021.

Accounts payable decreased

by $2.6 million during fiscal year 2020.

The variance is largely due to the timing of inventory purchases and other payments in the respective

The variance is largely due to the timing of inventory

and capital expenditure purchases and other payments in the respective periods.

● Accrued Compensation and Other Current Liabilities:

4 unchanged sentences

levels, the performance measurement period, and the timing of payments to employees.

During fiscal year 2021, accrued compensation and

other liabilities increased by $3.5 million, due primarily to increased accrued incentives and payroll related expense and $1.0 million

of deferred employer portion of social security payroll tax payments as part of the CARES Act.

During fiscal year 2020, accrued compensation

and other liabilities increased by $1.5 million, due primarily to the adoption of the new lease accounting standard.

During fiscal year 2022, accrued compensation and other

liabilities increased by $1.0 million, inclusive of $0.5 million of accrued compensation and other liabilities acquired as part of three

acquisitions completed during the period.

During fiscal year 2021, accrued compensation and other liabilities increased by $3.5 million,

due primarily to increased accrued incentives and payroll related expense

and $1.0 million of deferred employer portion of social security

payroll tax payments as part of the CARES Act.

● Income Taxes Payable:

In any given period, net working capital may be affected by the timing and

amount of income tax payments.

During fiscal year 2021, income taxes payable increased by $0.3 million while during fiscal year 2020,

income taxes payable decreased by $0.1 million.

In any given period, net working capital may be affected by the timing and amount

of income tax payments.

During fiscal year 2022, income taxes payable decreased by $0.4 million.

During fiscal year 2021, income taxes

payable increased by $0.3 million.

The year-over-year difference is due to timing of income tax payments.

Investing Activities:

During fiscal year 2021, we

invested $6.6 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and

our rental business.

During fiscal year 2020, we invested $6.6 million in capital expenditures that was used primarily for

technology infrastructure to drive operational excellence,

fund organic growth opportunities within both operating segments and to purchase new equipment to expand the number and type of assets

available to rent.

The purchase of assets from GRS during fiscal year 2020 is included in our capital expenditures above.

During fiscal year 2022,

we invested $10.2 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities

and capacity and our rental business.

During fiscal year 2021, we invested $6.6 million in

capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.

During fiscal year 2022, we used $29.8 million for business

acquisitions.

During fiscal year 2020, we used $13.0 million for business acquisitions.

During fiscal year 2021, no contingent consideration or other

holdback amounts were paid related to a business acquisition.

During fiscal year 2020, we used $0.9 million for holdback payments related

to a business acquisition.

During fiscal year 2021, we used $3.6 million for a business acquisition.

During each of fiscal year 2022 and fiscal year 2021,

no contingent consideration or other holdback amounts were paid related to a business acquisition.

Financing Activities :

During fiscal year 2021, $1.2 million in cash was generated from the issuance of our common stock.

we repaid $8.8 million of our Revolving Credit Facility, we used $2.0 million for scheduled repayments of our term loan, and used $3.0

million for the “net” award of certain share awards to cover tax-withholding obligations for share award activity in the period

which are shown as a repurchase of shares of our common stock.

During fiscal year 2020, we received $11.2 million from our Revolving Credit

Facility and $1.7 million in cash was generated from the issuance of our common stock.

We used $1.9 million for scheduled repayments of

our term loan and used $2.8 million for the “net” award of certain share awards to cover tax-withholding obligations for share

award activity in the period which are shown as a repurchase of shares of our common stock.

During fiscal year 2022, $31.0 million was borrowed from our revolving line of credit and $1.5 million in

cash was generated from the issuance of common stock.

In addition, we used $2.1 million for scheduled repayments of our term loan and

$6.7 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award

and stock option activity in fiscal year 2022, which is shown as a repurchase of shares of our common stock on our Consolidated Statements

of Cash Flows.

During fiscal year 2021, $1.2 million in cash was generated

from the issuance of our common stock.

In addition, we repaid $8.8 million of our Revolving Credit Facility, we used $2.0 million for

scheduled repayments of our term loan, and used $3.0 million for the “net” award of certain share awards to cover tax-withholding

obligations for share award activity in the period which are shown as a repurchase of shares of our common stock on our Consolidated Statements

of Cash Flows.

Recent Events

Effective April 29, 2021, Transcat acquired substantially all of the assets

of Upstate Metrology Inc.

(“Upstate Metrology”), a New York based provider of calibration services.

This transaction aligned

with a key component of our acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s service

capabilities.

The total purchase price paid for the assets of Upstate Metrology was approximately $0.9 million.

We are proud of the performance and dedication of the entire Transcat team

in the fourth quarter and throughout fiscal 2021 as we navigated the most challenging operating environment in the history of our company.

We enter fiscal 2022 with a strong balance sheet, what we believe are sustainable Service segment gross margins and an active M&A

We are optimistic that our disciplined focus on highly-regulated end markets and our new customer pipeline positions us well

for continued strong organic growth.

For the first quarter of fiscal 2022, we expect Service organic growth

to be similar to what we achieved in the fourth quarter of fiscal 2021.

We expect improvement in Service gross margins, but not to the

same degree we experienced in fiscal 2021, largely due to more difficult technician productivity comparisons and the recent anniversary

of our acquisition of pipettes.com which occurred in February 2020.

Distribution is expected to achieve double-digit growth in the first

quarter on modestly improving trends and a prior-year comparison that includes low levels of demand due to the onset of the COVID-19 pandemic.

Total operating expenses are expected to be similar to the trailing fourth quarter of fiscal year 2021.

We expect to receive certain federal, state and Canadian tax credits in

future years.

We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal year 2022.

we expect our effective tax rate in fiscal year 2022 to be between 20.0% and 22.0%.

The Company anticipates total capital expenditures to be approximately

$7.5 million to $8.5 million in fiscal year 2022, with the majority of the capital expenditures planned for growth-oriented opportunities

within both of its operating segments, and for rental pool assets.

On May 31, 2022, Transcat acquired substantially all of

the assets of Charlton Jeffmont Inc., Raitz Inc.

and Toolroom Calibration Inc.

d/b/a Alliance Calibration (“Alliance”), an

Ohio based provider of calibration services.

This transaction aligned with a key component of the Company’s acquisition strategy

of targeting businesses that expand the depth and breadth of the Company’s service capabilities.

The total purchase price paid for

the assets of Alliance was approximately $4.5 million in cash and an amount of the Company’s common stock, par value $0.50 per share

(“Common Stock”), with a value equal to $157,500, or 2,284 shares of Common Stock.

Pursuant to the asset purchase agreement,

the Company will hold back $500,000 of the purchase price for certain potential post-closing adjustments, and the purchase price will

be subject to reduction by $500,000 if a key customer relationship is not retained.

We are proud of our dedicated team, which successfully executed

through the challenges of the past year and consistently delivered excellent results.

As we look ahead into fiscal year 2023 and beyond,

we believe we are well positioned for profitable growth and we expect the strength of our value proposition to continue to increase.

have demonstrated our ability to drive growth through various economic cycles as can be seen over the past 10 years and we are confident

and expect that will continue.

The business continues to benefit from a predominately life science-oriented market, driven by regulation

and recurring revenue streams.

Strong organic Service growth remains a centerpiece of our strategy.

In the year ahead we expect organic

Service growth in the high-single digit range.

Volume increase is an important component to driving the inherent operating leverage in

the Transcat Service model.

Acquisitions that strengthen our fundamental value proposition

will continue to be an important component of our go-forward strategy.

We will identify and pursue opportunities to expand our addressable

markets like we did with

NEXA and our pipettes business.

The NEXA and pipettes acquisitions, along with our recent acquisition of Tangent

and the bolt-on Upstate Metrology acquisition, represent a gain in value which raises the ceiling and trajectory of the business.

Additionally, Transcat has made significant investments

in the quality of our team, including leaders that maintain expertise relating to continuous process improvement and automation.

generated sustainable margin improvement over the past several years and we believe the improvement will continue.

Automation of our calibration

processes and overall process improvement are designed to foster future margin gains.

Relating to selling, general and administrative

expenses, we anticipate demonstrating more leverage in the years ahead.

We believe Transcat has substantial runway ahead for Service

revenue growth and margin expansion.

We have a long history that demonstrates that we know how to succeed on both fronts.

to focus on generating sustainable long-term value for our shareholders and providing a dynamic, rewarding workplace for our team.

We expect to receive certain federal, state, Canadian and

Irish tax credits in future years.

We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal

As such, we expect our effective tax rate in fiscal year 2023 to be between 22.0% and 24.0%.

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 7. Management’s Discussion and Analysis