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Item 1. Business

2024-05-28 compared with 2023-06-06 · 164 added, 167 removed, 229 unchanged (59% of the section changed)

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Transcat, Inc.

(“Transcat”, the “Company,”

“we”

or “us”) is a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld test, measurement and control instrumentation.

(“Transcat”, the “Company,” “we” or “us”) is a leading provider of accredited calibration services, cost control and optimization services, and distribution and rental of value-added professional grade handheld test, measurement, and control instrumentation.

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

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

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

Additional industries served include industrial manufacturing;

energy and utilities, including oil and gas;

chemical manufacturing;

FAA-regulated businesses, including aerospace and defense;

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

We conduct our business through two operating segments:

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

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

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

We serve approximately 30,000 customers through our Service and Distribution segments, with approximately 20% to 25% of those customers transacting with us through both of our business segments.

Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services, a majority of which are processed through our proprietary asset management system, CalTrak®

and our online customer portal, C3®.

Our Service model is flexible, and we cater to our customers’

needs by offering a variety of services and solutions including permanent and periodic onsite services, mobile calibration services, pickup and delivery and in-house services.

As of the end of our fiscal year ended March 25, 2023 (“fiscal year 2023”), we operated twenty-seven calibration service centers (“Calibration Service Centers”) strategically located across the United States, Puerto Rico, Canada and Ireland.

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

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

where we provide calibration services, and in some cases other related services, exclusively for the customer and where we reside and work every day.

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

Through the Company’s acquisition strategy, we have been focused on building out our Services segment by entering adjacent and complimentary markets.

This has been demonstrated by the acquisitions of Elite Calibration, LLC ("Elite"), Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), e2b Calibration ("e2b"), and Charlton Jeffmont Inc., Raitz Inc.

We serve approximately

customers through our Service and Distribution segments, with approximately

of those customers transacting with us through both of our business segments.

Through the Company’s acquisition strategy, we have been focused on building out our business segments by entering adjacent and complimentary markets.

This has been demonstrated by the acquisitions of Axiom Test Equipment, Inc.

(“Axiom”), SteriQual, Inc.

(“SteriQual”) and TIC-MS, Inc.

("TIC-MS") in the fiscal year 2024, and Elite Calibration, LLC ("Elite"), Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), e2b Calibration ("e2b"), and Charlton Jeffmont Inc., Raitz Inc.

and Toolroom Calibration Inc.

d/b/a Alliance Calibration ("Alliance") in fiscal year 2023, and the acquisitions of Tangent Labs, LLC ("Tangent"), Cal OpEx Limited (d/b/a Transcat Ireland) which owns all of the issued and outstanding capital stock of its U.S.

d/b/a Alliance Calibration ("Alliance") in our fiscal year ended March 25, 2023 (“fiscal year 2023

Prior to fiscal year 2023, the Company acquired Cal OpEx Limited (d/b/a Transcat Ireland) which owns all of the issued and outstanding capital stock of its U.S.

based subsidiary, Cal OpEx Inc.

(d/b/a NEXA EAM), a Delaware corporation (collectively, "NEXA"), and Upstate Metrology Inc.

("Upstate Metrology") in our fiscal year ended March 26, 2022 ("fiscal year 2022").

(d/b/a NEXA EAM), a Delaware corporation (collectively, "NEXA").

NEXA provides asset management services to the biopharmaceutical industry by leveraging its six service tracks:

(i) calibration, (ii) maintenance and spare, (iii) reliability, (iv) computerized maintenance management systems solutions (“CMMS”), (v) quality and compliance, and (vi) validation.

By delivering these services, NEXA is able to provide unique value to their end customers in managing their asset portfolios, avoiding asset downtime and helping to accelerate delivery of their life changing products to market, ultimately driving significant cost savings and improved reliability.

(i) calibration, (ii) maintenance and spare, (iii) reliability, (iv) computerized maintenance management systems solu tions (“CMMS”), (v) quality and compliance, and (vi) validation.

By delivering these services, NEXA is able to provide unique value to our end customers in managing their asset portfolios, avoiding asset downtime and helping to accelerate delivery of their life changing products to market, ultimately driving significant cost savings and improved reliability.

This NEXA suite of services, combined with the existing Transcat service offerings, provides a very comprehensive and robust value proposition to existing and new customers, which allows us to manage the complexity that is tied to doing business in these highly regulated industries.

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

As of the end of our fiscal year ended

March 30, 2024

(“fiscal year

”), we operated twenty-nine calibration service centers (“Calibration Service Centers”) strategically located across the United States, Puerto Rico, Canada and Ireland.

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

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

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

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

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

Through our website, in-house sales team and printed and digital marketing materials, we offer access to more than 140,000 test, measurement and control instruments, including products from approximately 550 leading brands.

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

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

test, measurement and control instruments, including products from approxima

leading brands.

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

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

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

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

In our fiscal years 2023 and 2022, no customer or controlled group of customers accounted for 5% or more of our total revenue.

In our fiscal years 2024 and 2023, no customer or controlled group of customers accounted for 5% or more of our total revenue.

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

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Information available on our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.

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

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

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

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

During fiscal year 2023, we continued our commitment to capital, people and leadership investments, advancing our “Operational Excellence”

This initiative is resulting in increased productivity and operational efficiency and further differentiation from our competitors as we leverage technology, automation, and process improvements to enhance our effectiveness and our customers’

We also continued Transcat University’s build-a-tech program.

During fiscal year 2024, we continued our commitment to capital, people and leadership investments, advancing our “Operational Excellence” initiative.

We also continued Transcat University’s build-a-tech program.

This program attracts fresh talent to the organization and provides training and career advancement opportunities for our existing employees.

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

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

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

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There are three drivers of our acquisition strategy:

geographic expansion, increased capabilities and infrastructure leverage.

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

geographic expansion, increased capabilities and expertise, and infrastructure leverage.

We are disciplined in our approach to selecting target companies.

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

Our Distribution segment strategy is to be the premier distributor and rental source of leading test and measurement equipment while also providing cross-selling opportunities for our Service segment.  Through our vendor relationships we have access to more than 140,000 products, which we market to our existing and prospective customers both with and without value-added service options that are unique to Transcat. 

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

test and measurement equipment needs. We continuously evaluate our offerings to add new in-demand vendors or products, or remove less relevant vendors and products.

Our equipment rental business continues to be a strong growth segment for us and helps support our distribution and service segment growth strategies.

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

In addition to offering new products, we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability to answer all of our customers’ test and measurement equipment needs.

We continuously evaluate our offerings to add new in-demand vendors or products, or remove less relevant vendors and products.

Our equipment rental business continues to be a strong growth offering for us and helps support our distribution and service segment growth strategies.

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

We see these various methods of meeting our Distribution customers’

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

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

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

As part of our growth strategy, we completed four acquisitions during our fiscal year 2023 and three acquisitions during our fiscal year 2022:

As part of our growth strategy, we completed three acquisitions during our fiscal year 2024 and four acquisitions during our fiscal year 2023:

Effective August 8, 2023, Transcat purchased all of the outstanding capital stock of Axiom, a privately-held California rental provider of electronic test equipment to customers across the United States.

Effective July 12, 2023, Transcat purchased all of the outstanding capital stock of SteriQual, a Florida based provider of expert consulting services to pharmaceutical, biopharmaceutical, medical device and diagnostic equipment manufacturers.

Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, a Missouri based provider of calibration services.

Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite, a California based provider of pipette calibration services.

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Effective May 31, 2022, Transcat acquired substantially all of the assets of Alliance, an Ohio based provider of calibration services.

Effective December 31, 2021, Transcat purchased all of the outstanding membership units of Tangent, a privately-held company.

Tangent provides in-house and on-site calibrations of precision measurement and control instrumentation to customers in the life science, aerospace and other regulated industries, and has lab locations in Indianapolis, Indiana and Huntsville, Alabama.

Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of NEXA.

NEXA provides calibration optimization and other technical solutions to improve asset and reliability management programs to pharmaceutical, biotechnology, and medical device companies worldwide.

Effective April 29, 2021, Transcat acquired substantially all of the assets of Upstate Metrology, a New York based provider of calibration services.

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

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

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

Capabilities and Expertise

Infrastructure

Complete Calibrations

Upstate Metrology

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

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

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

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

We specifically target industries and companies that are regulated by the U.S.

FDA, FAA or other regulatory bodies.

As a result of the various levels of regulation within our target industries, our customers’

calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation of services.

To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality systems, further detailed in the section entitled “Service Quality”

below, and provide our customers with access to proprietary asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility to their service records.

As a result of the various levels of regulation within our target industries such as life sciences, pharmaceutical manufacturing and medical device manufacturing, our customers’ calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation of services.

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

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

We perform approximately 850,000 calibrations annually and can address a significant majority of the items requested to be calibrated with our in-house capabilities.

For customers’

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

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

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

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

We regularly review outsourced services to identify opportunities for in-house capability expansion.

Continuous Improvement.

Through NEXA we provide technical, consulting, and staffing solutions in the US, Canada, Ireland, Europe, and Asia Pacific to improve asset management programs for our most highly-regulated customers, especially those in the pharmaceutical, biotechnology, and medical device industries.

NEXA offers six service tracks that support the creation or optimization of our client’s enterprise asset management program.

Whether a facility is in preconstruction, operational or decommissioning stage, NEXA’s experienced teams can deliver results in all phases of the asset lifecycle.

NEXA’s full suite of services or combination solutions are customizable to meet our customer’s unique needs.

Transcat’s most recent investment in capability expansion includes ground support equipment ("GSE"), an integral role in aircraft operations.

The speed, efficiency, and accuracy of this equipment are crucial factors that help minimize downtime for aircraft before, between, and after flights.

At Transcat, we’re proud to offer GSE certification, calibration, maintenance, and repair services for the aviation and aerospace industries.

Driving Continuous Improvement through Transcat’s Cost Control and Optimization Services, we provide technical, consulting, and staffing solutions in the U.S., Canada, Ireland, Europe, and Asia Pacific to improve asset management programs for our most highly-regulated customers, especially those in the pharmaceutical, biotechnology, and medical device industries.

NEXA offers six service tracks that support the creation or optimization of our client’s enterprise asset management program.

Whether a facility is in preconstruction, operational or decommissioning stage, NEXA’s experienced teams can deliver results in all phases of the asset lifecycle.

NEXA’s full suite of services or combination solutions are customizable to meet our customer’s unique needs.

Other Services.

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

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

for our customers.

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

Service Value Proposition.

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

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

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

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

in-house services:

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

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

periodic onsite services:

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

client-based-laboratory services:

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

mobile calibration services:

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

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

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

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

Enterprise Asset Management

Calibration – criticality risk assessment;

Transcat Cost Control and Optimization Services:

Calibration – criticality risk assessment;

calibration interval analysis;

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planning and scheduling.

Maintenance and Spares – PM optimization;

Maintenance and Spares – PM optimization;

spares/BOM management;

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planning and scheduling.

Reliability – asset criticality assessments;

Reliability – asset criticality assessments;

asset hierarchy development;

PdM plans/task lists;

CMMS – implementation and migration;

CMMS – implementation and migration;

data optimization;

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CMMS KPIs/reporting.

Quality and Compliance – technical writing;

Quality and Compliance – technical writing;

compliance audits;

compliance management.

Validation – validation master plan;

confidence assessment model;

validation interval analysis;

validation method/process optimization.

CQV – equipment and facility C&Q;

cleaning and sterilization validation;

process and software validation;

warehouse environmental mapping.

Transcat Single Source Solution:

Commissioning, Qualification and Validation.

Data build for the computerized maintenance and calibration system (CMMS).

Reliability Planning.

Maintenance & Spares delivery.

Execution of initial Calibrations.

Final activities leading to the successful turn-over of the fully completed equipment and systems to the Client in an operationally-ready state.

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

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

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

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

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

We believe our Cost Control and Optimization services is a scalable business as it requires minimal upfront capital investment, and the services can largely be effectively completed via a virtual workforce.

This allows us to follow our customers geographically and provide a high level of service whether a Transcat physical presence in that geography exists or not.

Proprietary Asset Management Software.

CalTrak®

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

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

CalTrak®

has been validated to U.S.

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

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

CalTrak® has been validated to U.S.

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

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

Additionally, C3®

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

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

We specifically designed C3®

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

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

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

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

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

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

Through CalTrak®

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

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

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

Service Marketing and Sales.

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

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

We target regulated customers with multiple manufacturing operations throughout North America and Europe.

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

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

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

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

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

We differentiate ourselves from our competitors by demonstrating our commitment to quality, expanding upon the largest 17025 scope of accreditation and calibration capabilities of any commercial calibration laboratory that are tailored to the markets we serve, leveraging a geographical footprint that spans North America and Puerto Rico providing a comprehensive suite of services that spans many disciplines and hundreds of manufacturers which is not limited to certain product lines or brands.

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

We differentiate ourselves from our competitors by demonstrating our commitment to quality, expanding upon the largest 17025 scope of accreditation and calibration capabilities of any commercial calibration laboratory that are tailored to the markets we serve, leveraging a geographical footprint that spans North America, Puerto Rico and Ireland providing a comprehensive suite of services that spans many disciplines and hundreds of manufacturers which is not limited to certain product lines or brands.

Our unique ability to bundle our products with both Transcat’s Cost Control and Optimization Services and Transcat’s Single Source Solution, provides a high level of differentiation from our competitors.

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

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

CalTrak®

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

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

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

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

The breadth of our suite of laboratory instrument service, combined with our calibration service offerings, also differentiates us from our competitors by allowing us to be our customers’

one-source accredited services provider for their entire calibration and compliance programs.

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

Service Quality.

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

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

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

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

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

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

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

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

“Calibrated by Transcat®”.

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

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

We want the phrase “Calibrated by Transcat®”

to be synonymous with risk reduction and quality compliance.

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

Acquired calibration labs might use other quality registration systems.

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

Because of the breadth of our product and service offerings, we are often a “one-stop shop”

for our customers who gain operational efficiency by dealing with just one distributor for most or all of their test and measurement instrumentation needs.

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

We continue to focus on higher margin channels such as rentals to bolster profitability in the Distribution segment.

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

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

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

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

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

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

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

To address our customers’

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

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

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

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

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

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

Distribution Suppliers and Purchasing.

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

We frequently evaluate our purchase requirements and suppliers’

offerings to obtain products at the best possible cost.

We obtain our products from approximately 550 suppliers of brand name and private-labeled equipment. 

In fiscal year 2023, our top 10 vendors accounted for approximately 60% of our aggregate Distribution sales. 

In fiscal year 2023, lead times for the supply of products from our vendors was still challenging as the backlog increased year-over-year.

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

We obtain our products from approximately 450 suppliers of brand name and private-labeled equipment.

In fiscal year 2024 , our top 10 vendors accounted for approximately 58% of our aggregate Distribution sales.

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

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

These rebates are recorded as a reduction of cost of distribution sales.  Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors during the quarter.

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

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

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

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

During fiscal year 2022, the volume of our Distribution sales resulted in an increase in the rebates earned from our vendors.

During fiscal year 2023, we saw a decrease in the rebates offered by our vendors. 

The Company recorded vendor rebates of $0.6 million and $1.0 million in fiscal years 2023 and 2022, respectively, as a reduction of cost of distribution sales.

The Company recorded vendor rebates of $0.6 million in both fiscal years 2024 and 2023, and $1.0 million in fiscal year 2022, respectively, as a reduction of cost of distribution sales.

Distribution Operations.

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

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

We also have two smaller warehouse facilities.

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

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

We also have three smaller warehouse facilities.

Our Wisconsin warehouse fulfills orders for certain large industrial scales and our Vista, California and Houston, Texas warehouses fulfill orders for used equipment and rental equipment.

In fiscal year 2024 , we shipped approximately 30,000 product orders.

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

Our total backlog was $8.1 million and $7.7 million as of March 25, 2023 and March 26, 2022, respectively.

Our total backl og was $5.1 million and $8.1 million as of March 30, 2024 and March 25, 2023, respectively.

CUSTOMER SERVICE AND SUPPORT

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INFORMATION REGARDING EXPORT SALES

In fiscal year 2023, approximately 10% of our total revenue resulted from sales to customers outside the United States.

In fiscal year 2024, approximatel y 10% of our total revenue resulted from sales to customers outside the United States.

Of those export sales in fiscal year 2024 , approximately 8% were denominated in U.S.

dollars, 69% were denominated in Canadian dollars and 24% were denominated in Euros.

dollars, 67% were denominated in Canadian dollars and 25% were deno minated in Euros.

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

See “Foreign Currency”

See “Foreign Currency” in Item 7A.

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

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

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

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

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

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

We also utilize CalTrak®, our proprietary document and asset management system, to manage documentation, workflow and customers’

assets within and amongst most of our Calibration Service Centers.

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

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

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

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INTELLECTUAL PROPERTY

We have federally registered trademarks for Transcat®, CalTrak®, C3®

and Procision®

federally registered trademarks for Transcat®, CalTrak®, C3®, Procision®, and TIC-MS, INC.

® which we consider to be of material importance to our business.

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Patent & Trademark Office.

Our CalTrak®

trademark is also registered in Canada for one class with the Canada Intellectual Property Office and in Puerto Rico. 

Our Transcat® trademark is also registered in the European Union and Canada for four classes.

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

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

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

We have International trademark registrations for TRANSCAT TRUST IN EVERY MEASURE, CALIBRATED BY TRANSCAT, and TRANSCAT BIOMEDICAL, with pending extensions of protection to Canada and the European Union.

We have pending U.S.

trademark applications for TURBOCAL, TRANSCAT TRUST IN EVERY MEASURE, CALIBRATED BY TRANSCAT, and TRANSCAT BIOMEDICAL.

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

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

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

Fiscal years 2023 and 2022 each consisted of 52 weeks.

Fiscal year 2024 which ends on March 30, 2024 (“fiscal year 2024”) will have 53 weeks.

Fiscal year 2024 consisted of 53 weeks and fiscal year 2023 consisted of 52 weeks.

Fiscal year 2025 which ends on March 29, 2025 (“fiscal year 2025”) will have 52 weeks.

ENVIRONMENTAL MATTERS

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HUMAN CAPITAL MANAGEMENT

As of March 25, 2023, we had 1,030 employees, 899 of whom were employed in the United States and 131 employed outside the United States. 

None of our employees are covered by collective bargaining agreements or work councils. 

As of March 30, 2024, we had 1,104 employees, 976 of whom were employed in the United States and 128 employed outs ide the United States.

None of our employees are covered by collective bargaining agreements or work councils.

Overall, we consider our employee relations to be good and believe our culture to be central to the success of the Company.

Health and Safety The health and safety of our employees is of utmost importance to us.

We are enhancing our Safety Program with additional training and internal risk and hazard assessments. 

We conduct policy and procedure reviews to ensure compliance with health and safety guidelines and regulatory requirements. 

We provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate. 

Health and Safety.

The health and safety of our employees is of utmost importance to us.

We have enhanced our Safety Program with additional training, communications, and internal risk and hazard assessments.

We conduct policy and procedure reviews to ensure compliance with health and safety guidelines and regulatory requirements.

We provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate.

Our goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety program.

Hiring Practices We seek to recruit and hire the most qualified people for our open positions without regard to protected status (age, color, creed, disability, domestic violence victim status, gender identity, genetic predisposition or carrier status, marital status, national origin, pregnancy, race religion, sex, sexual orientation, status as a protected veteran or as a member of any other protected group or status).

Diversity and Inclusion Recognizing and respecting our employees’

backgrounds and experiences, and our international presence, we strive to maintain a diverse workforce and inclusive work environment everywhere we operate.

Hiring Practices.

We seek to recruit and hire the most qualified people for our open positions without regard to protected status (age, color, creed, disability, domestic violence victim status, gender identity, genetic predisposition or carrier status, marital status, national origin, pregnancy, race, religion, sex, sexual orientation, status as a protected veteran or as a member of any other protected group or status).

Diversity and Inclusion.

Recognizing and respecting our employees’ backgrounds and experiences, and our international presence, we strive to maintain a diverse workforce and inclusive work environment everywhere we operate.

Our diversity and inclusion principles are reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace.

Wellness Our Calibrated Wellness Program prioritizes our employees’

well-being and is designed to enhance their health. 

Our program includes wellness resources, health education, pharmaceutical cost guidance, and a no-cost Employee Assistance Program, which includes worldwide access to visits with mental health care providers. 

Our Calibrated Wellness Program prioritizes our employees’ well-being and is designed to enhance their health.

Our program also incentivizes health and well-being by providing reduced health insurance premiums for employees who complete certain actions that encourage health and wellness.

Compensation and Benefits Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability and desire to enhance our workplace culture, support our values, drive our operational and strategic goals, and create long-term value for our shareholders.

We provide employees with competitive compensation packages that include base salary and may also include annual incentive bonuses and/or long-term incentive awards, depending upon the employee’s position.

Compensation and Benefits.

Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability and desire to enhance our workplace culture, support our values, drive our operational and strategic goals, and create long-term value for our shareholders.

We believe that a compensation program with both short-term and long-term incentive awards provides fair and competitive compensation and aligns employee and shareholder interests.

In addition to cash and equity compensation, we also offer employees benefits including health (medical, dental and vision), life, and disability insurance, paid time off, paid parental leave, tuition benefits, and a 401(k) plan.

In addition to salary and equity compensation, we also offer employees benefits including health (medical, dental and vision), life, and disability insurance, paid time off, paid parental leave, tuition benefits, and a 401(k) plan with a Company match.

AVAILABLE INFORMATION

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

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

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

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

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

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

What changed 10-K

Item 1. Business