What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-05-27 compared with 2024-05-28 · 92 added, 89 removed, 305 unchanged (37% of the section changed)

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Our common stock is traded on the Nasdaq Global Market under the symbol “TRNS”.

As of May 22, 2024, we had approximat ely 500 sh areholders of record.

As of May 22, 2025, w e had approximately 500 shareholders of r ecord.

Our credit agreement limits our ability to pay cash dividends to certain amounts in any single fiscal year and over the term of the credit agreement.

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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 2024 with its 60th consecutive quarter of year-over-year growth.

This segment has benefited from both organic growth as well as acquisitions over those 60 quarters.

Our Service segment has shown consistent revenue growth over the past several years, ending fiscal ye ar 2025 with its 64th consecutive quarter of year-over-year growth.

This segment has benef ited from both organic growth as well as acquisitions over those 64 quarters.

The business acquisitions that we made have been 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 7.0% for fiscal year 2025 from fiscal year 2024.

This increase was primarily due to recently completed acquisitions and strong organic demand in our highly-regulated end markets.

The Service segment gross margin increased by 160 basis poin ts.

Service segment gross profit and gross margin increases were primarily due to operating leverage on our fixed costs and increased technician productivity.

This increase was primarily due to the acquisitions of Martin and Becnel.

Acquired revenue, which represents revenue from acquisitions completed after the end of the prior year, was $10.4 million.

Service Segment revenue was also impacted by the number of weeks.

Fiscal year 2025 had 52 weeks, while fiscal year 2024 had 53 weeks.

When adjusted for the 52/53 week impact, organic service revenue increased by 2.7%.

The Service segment gross margin decreased by 40 basis poin ts.

Service segment gross margin decreases were primarily due to small organic revenue increases offset by decreased margins in the Transcat Solutions business.

In our Distribution segment, we sell and offer for rent, professional grade handheld test and measurement instruments.

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In fiscal year 2025, Distribution segment sales increased by 7.8%.

This increase in sales primarily due to sales from the acquisition of Axiom.

This increase in sales primarily due to sales from the acquisition of Becnel and increases in traditional rental products.

The Distribution segment gross margin in fiscal year 2025 increased by 20 basis points.

The increase in segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom, and a favorable mix of higher margin products sold.

The increase in segment gross margin was primarily due to increased margins from rental revenue, which now includes Becnel, and a favorable mix of higher margin products sold.

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.

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Fiscal year 2025 consisted of 52 weeks and fiscal year 2024 consisted of 53 weeks.

A discussion regarding our financial condition and results of operations for the fiscal year ended March 25, 2023 and year-to-year comparisons between fiscal year 2023 and fiscal year 2022, which are not included in this Form 10-K, can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 25, 2023 and are incorporated by reference herein.

On September 25, 2023, we closed an underwritten public offering of our common stock for aggregate gross proceeds of $80.5 million (the “Offering”).

In the Offering, we sold an aggregate of 847,371 shares at $95.00 per share.

We received net proceeds of $75.2 million in the Offering, a portion of which was used during the third quarter of fiscal year 2024 to repay in full our revolving credit facility.

See “Liquidity and Capital Resources” below for more information.

A discussion regarding our financial condition and results of operations for the fiscal year ended March 30, 2024 and year-to-year comparisons between fiscal year 2024 and fiscal year ended March 25, 2023 ("fiscal year 2023"), which are not included in this Form 10-K, can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2024 and are incorporated by reference herein.

Total revenue for fiscal year 2025 was $278.4 million.

This represented an increase of $18.9 million or 7.3% versus total revenue of $259.5 million for fiscal year 2024.

This increase was primarily due to recently completed acquisitions, strong demand in our Service segment’s highly-regulated end markets and increased rental sales, which includes incremental revenue from an acquisition completed in fiscal year 2024.

This increase was primarily due to recently completed acquisitions, and increased rental sales, which includes incremental revenue from an acquisition completed in fiscal year 2025.

Service revenue was $181.4 million in fiscal year 2025, an increase of $11.9 million or 7.0%.

Service revenue accounted for 65.2% of our total revenue during fiscal year 2025.

Of our Service revenue in fiscal y ear 2024 , 86.6% was generated by our Calibration Service Centers and cost control and optimization services while 12.3% was generated through subcontracted third-party vendors, compared with 86.2% and 12.6% , respectively, in fiscal year 2023 .

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

Of our Service revenue in fiscal year 2025 , 86.0% was generated by our Calibration Service Centers and cost control and optimization services while 12.8% was generated through subcontracted third-party vendors, compared with 86.6% and 12.3% , respectively, in fiscal year 2024 .

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

Distribution sales were $97.0 million in fiscal year 2025, an increase of $7.0 million or 7.8%.

Distribution sales accounted for 34.8% of our total revenue in fiscal year 2025.

Sales to domestic customers com prised 92.6% of total Distribution sales in fiscal year 2024 , while 5.9% were to Canadian customers and 1.5% were to customers in other international markets.

Sales to d omestic customers comprised 93.3% of total Distribution sales in fiscal year 2025 , while 5.7% were to Canadian customers and 1.0% were to customers in other international markets.

Total gross profit was $89.5 million in fiscal year 2025 compared to $83.8 million in fiscal year 2024 , an increase of $5.6 million or 6.7% .

Total gross margin was 32.3%, whic h is a 270 basis point inc rease versus fiscal year 2023.

Service gross margin was 33.8% in fiscal year 2024 compared with 32.2% in fiscal year 2023, a 160 basis point in crease.

Distribution gross margin was 29.5% in fiscal year 2024 compared with 25.3% in fiscal year 2023, a 420 basis poin t increase.

This increase in service gross margin in fiscal year 2024 was primarily largely the result of operating leverage on our fixed costs and increased technician productivity.

The increase in the distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom, and a favorable mix of higher margin products sold.

Total gross margin was 32.1% , which is a 20 basis point decrease versus fiscal year 2024 .

Service gross margin was 33.4% in fiscal year 2025 compared with 33.8% in fiscal year 2024 , a 40 basis point decrease.

Distribution gross margin was 29.7% in fiscal year 2025 compared with 29.5% in fiscal year 2024 , a 20 basis point increase.

This decrease in service gross margin in fiscal year 2025 was primarily largely the result of lower revenue and gross margins for Transcat Solutions.

The increase in the distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Becnel.

Operating expenses were $71.6 million, or 25.7% of total revenue, in fiscal year 2025 compared with $64.0 million, or 24.7% of total revenue, in fiscal year 2024 .

Operating income was $17.9 million, or 6.4% of total revenue, in fiscal year 2025 compared with $19.8 million, or 7.6% of total revenue, in fiscal year 2024 .

The year-over-year increase in sell ing, marketing and warehouse expens es was due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales.

The year-over-year increase in general and administrative expense s was due to incremental expe nses from acquired businesses (including stock expense), increased payroll costs for new employees and continued investments in technology.

The year-over-year increase in selling, marketing and warehouse expenses was due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales.

The year-over-year increase in general and administrative expenses was due to incremental expenses from acquired businesses (including stock expense), increased payroll costs for new employees and continued investments in technology.

Net income for fiscal year 2025 was $14.5 million compared with $13.6 million in fiscal year 2024 , a $0.9 million increase.

Diluted earnings per share for fiscal year 2024 was $1.63 compared with $1.40 for fiscal year 2023, a $0.23 per diluted share increase.

Diluted earnings per share for fiscal year 2025 was $1.57 compared with $1.63 for fiscal year 2024 , a $0.06 per diluted share decrease.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Accounts Receivable.

Accounts receivable represent amounts due from customers in the ordinary course of business.

Accounts receivable represents amounts due from customers in the ordinary course of business.

These amounts are recorde d net of the allowance for credit losses and returns in the Consolidated Balance Sheets.

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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.

As of March 30, 2024, we had $105.6 mill ion of recorded goodwill.

Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortiz ed.

As of March 29, 2025 , we had $176.9 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.

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We record deferred income taxes for the effects of timing differences between financial and tax reporting.

These differences relate primarily to accrued expenses, reserves for credit losses, inventory reserves, operating leases, goodwill and intangible assets, depreciation and amortization and stock-based compensation.

These differences relate primarily to 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.

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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.

We have been 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.

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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 .

Recently Issued Accounting Pronounce ments .

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) to determine the potential impact they may have on our consolidated financial statements.

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Total revenue was $278.4 million in fiscal year 2025 compared to $259.5 million in fiscal year 2024 , an increase of $18.9 million or 7.3% .

When normalizing for the extra days from fiscal year 2024’s 53 weeks, the Company estimates that its full year revenue growth was approximately 10.4%.

Service revenue, which accounted for 65.3% and 62.8% of our total revenue in fiscal years 2024 and 2023, respective ly, increased $24.6 million, or 17.0% from fiscal year 2023 to fiscal year 2024 .

This year-over-year increase included $5.9 million of incremental revenue from the acquisitions of TIC-MS, SteriQual and Axiom, and also included organic revenue growth of 11.3% driven by strong end-market demand and continued market share gains.

When normalizing for the fewer days from fiscal year 2025's 52 weeks versus fiscal year 2024’s 53 weeks, the Company estimates that its full year revenue growth was approximately 9.1%.

Service revenue, which accounted for 65.2% and 65.3% of our total revenue in fiscal years 2025 and 2024 , respectively, increased $11.9 million, or 7.0% from fiscal year 2024 to fiscal year 2025 .

This year-over-year increase included $10.4 million of incremental revenue from the acquisitions of Becnel and Martin.

It also included organic revenue growth of 2.7% when adjusted for the 52/53 week impact, which was driven by continued market share gains, offset by comparatively lower revenue from the Transcat Solutions business.

Our fiscal years 2025 and 2024 Service revenue growth in relation to prior fiscal year quarter comparisons, was as follows:

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The growth in fiscal year 2025 and fiscal year 2024 reflected both organic growth and acquisitions.

The growth in Service segment revenue in fiscal year 2025 includes revenue from Becnel and Martin.

The growth in Service segment revenue in fiscal year 2024 includes revenue from TIC-MS and SteriQual.

The growth in Service segment revenue in fiscal year 2023 includes revenue from Alliance, e2b and Complete Calibration.

The lower growth percentages in fiscal year 2025 are due to lower organic revenue growth compared to fiscal year 2024.

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.

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Distribution sales increased $7.0 million, or 7.8% in fiscal year 2025 compared to fiscal year 2024 .

This year-over-year increase is primarily due to $7.0 million of incremental revenue from the acquisition of Axiom offset by slower demand for our non-ren tal products.

The change in fiscal year 2023 versus fiscal year 2022 was due to increased demand for rental products and was all organic.

Our fiscal years 2024 and 2023 Distribution sales growth in relation to prior fiscal year quarter comparisons were as fo llows:

This year-over-year increase is primarily due to $7.2 million of incremental revenue from the acquisitions of Becnel and Martin offset by slower demand for our non-rental products.

The change in fiscal year 2024 versus fiscal year 2023 was due to incremental revenue from the acquisition of Axiom offset by slower demand for our non-rental products.

Our fiscal years 2025 and 2024 Distribution sales growth in relation to prior fiscal year quarter comparisons were as follows:

Distribution Sales Growth

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Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the Distribution segment.

Our total pending product shipments decreased $3.0 million, or 37.3%, at th e end of fiscal year 2024 compared to the end of fiscal year 2023.

Backorders at the end of fiscal year 2024 wer e $4.5 million, c ompared to $6.9 million at the end of fiscal year 2023.

The year-over-year decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.

Our total pending product shipments decreased $1.8 million, or 34.7%, at the end of fiscal year 2025 compared to the end of fiscal year 2024 .

Backorders at the end of fiscal year 2025 were $2.7 million, compared to $4.5 million at the end of fiscal year 2024 .

The year-over-year decrease in pending product shipments and backorders was a result of improved fulfillment of existing or ders.

The following table presents the percentage of total pending product shipments that were backorders at the end of each quarter in fiscal years 2025 and 2024 and our historical trend of total pending product shipments:

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Total gross profit in fiscal year 2025 was $89.5 million compared to $83.8 million in fiscal year 2024, an increase of $5.6 million or 6.7%.

As a percentage of total revenue, total gross margin was 32.3% in fiscal year 2024 compared to 29.6% in fiscal y ear 2023 , a 270 basis point increase.

As a percentage of total revenue, total gross margin was 32.1% in fiscal year 2025 compared to 32.3% in fiscal y ear 2024 , a 20 basis point decrease.

Service gross profit was $60.7 million, an increase of $3.4 million, or 5.9%, from fiscal year 2024 to fiscal year 2025.

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The mix of services provided to customers may also affect gross margins in any given period.

Service gross margin increas ed by 160 basis poin ts in fiscal year 2024 versus fiscal year 2023.

This increase in service gross margin in fiscal year 2024 was the result of increased revenue which allows us to leverage our fixed costs and improved technician productivity.

Service gross margin decreas ed by 40 basis poin ts in fiscal year 2025 versus fiscal year 2024.

This decrease in service gross margin in fiscal year 2025 was the result of lower revenue and gross margins from Transcat Solutions.

The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:

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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.

We recorded vendor rebates of $0.6 m illion in both fiscal years 2024 and 2023, as a reduction of cost of Distribution sales.

We recorded vendor rebates of $0.9 million in fisca l year 2025 and $0.6 million in fiscal year 2024 , 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.

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Distribution segment gross margin incre ased 20 basis poi nts in fiscal year 2025 compared to fiscal year 2024.

The increase in the Distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom and a favorable mix of higher margin products sold.

The increase in the Distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Becnel and a favorable mix of higher margin products sold.

Operating Expenses:

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Our effective tax rate for fiscal years 2025 and 2024 was 20.8% and 26.0% , respectiv ely.

The increase in effective tax rate is due to tax expense recognized in fiscal year 2024 associated with executive compensation limitations that resulted from share-based awards.

The decrease in effective tax rate is due to the timing of our discrete items in relation to the timing of our pre-tax net income and due to tax expense recognized in fiscal year 2024 associated with executive compensation limitations that resulted from share-based awards.

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.

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Net income for fiscal year 2025 increased by $0.9 million or 6.4% compared to fiscal year 2024.

As a percentage of revenue, net income was 5.3% in fiscal year 2024, up f rom 4.6% in fiscal year 2023.

This year-over-year change reflects higher operating income discussed, lower interest expense, offset by a higher provision for income taxes.

As a percentage of revenue, net income was 5.2% in fiscal year 2025, down f rom 5.3% in fiscal year 2024.

The year-over-year increase in net income was primarily due to lower operating income, offset by lower interest expense, net and higher other income related to the sale of assets related to our United Scale division.

Non-GAAP Financial Measures

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

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, contingent consideration, and certain other expenses), 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.

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During fiscal year 2025, Adjusted EBITDA was $39.7 million, an increase of $1.1 million or 2.9% compared to fiscal year 2024.

As a percentage of revenue, Adjusted EBITDA was 14.9% during fiscal year 2024 versus 13.2% during fisca l year 2023 , a 170 bas is point increase.

The increase in Adjusted EBITDA during fiscal year 2024 was primarily driven by the increase in operating income, depreciation and amortization expense, transaction expense and non-cash stock compensation expense.

As a percentage of revenue, Adjusted EBITDA was 14.3% during fiscal year 2025 versus 14.9% during fisca l year 2024 , a 60 bas is point decrease.

The dollar increase in Adjusted EBITDA during fiscal year 2025 was primarily driven by increases in depreciation and amortization expense offset by lower operating income and lower noncash stock compensation.

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;

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, contingent consideration, and acquisition amortization of backlog;

divided by the average diluted shares outstanding during the period), which is a non-GAAP measure.

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+ Income Tax Effect @ 25%

+ Acquisition Earn-out Adjustment

+ Acquisition Earn-out/Contingent Consideration Adjustment

Adjusted Net Income

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The Credit Agreement has certain covenants with which we must comply, including a fixed charge ratio covenant, which prohibits our fixed charge coverage ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits our leverage ratio from exceeding 3.00 to 1.00.

Our leverage ratio, as defined in the Credit Agreement, was 0.10 at March 30, 2024, compared with 1.60 at March 25, 2023.

We were in compliance with all loan covenants and requirements during fiscal years 2024 and 2023.

As of March 30, 2024 , $80.0 million was available for borrowing under the revolving credit facility.

As of March 30, 2024, there were no amounts outstanding under the revolving credit facility.

After the closing of the Offering, we used approximately $50.0 million of the net proceeds to repay in full the amounts outstanding under the revolving credit facility.

During fiscal year 2024 and 2023 we used $12.9 million and $9.1 million, respectively, from the revolving credit facility for business acquisitions.

As of March 30, 2024,$4.2 million was outstanding on the 2018 Term Loan, of which $2.3 m illion was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt.

Our leverage ratio, as defined in the Credit Agreeme nt, was 0.78 at March 29, 2025 , compared with 0.10 at March 30, 2024 .

We were in comp liance with all loan covenants and requirements during fiscal years 2025 and 2024.

As of March 29, 2025 , $80.0 million was available for borrowing under the revolving credit facility, of which, $30.9 million wa s outstanding.

On September 25, 2023, we closed an underwritten public offering of our common stock for aggregate gross proceeds of $80.5 million (the “Offering”).

In the Offering, we sold an aggregate of 847,371 shares at $95.00 per share for net proceeds of $75.2 million.

Af ter the closing of the Offering, we used approximately $50.0 million of the net proceeds to repay in fu ll the amounts outstanding under the revolving credit facility.

During fiscal year 2025 and 2024 we used $87.4 million and $12.9 million, respectively, drawn from cash on hand and from the revolving credit facility for business acquisitions.

As of March 29, 2025 , $1.8 million was outstanding on the 2018 Term Loan, which was included in current liabilities on the C onsolidated 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.

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.

The Company repaid $1.0 million of the deferred amounts and during each of fiscal year 2023 and fiscal year 2022.

The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):

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Net cash provided by operating activities was $39.0 million during fiscal year 2025 compared to $32.6 million during fiscal year 2024 .

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

The year-over-year increase in cash provided by operations is primarily the result of increases in depreciation and amortization.

The significant working capital fluctuations were as follows:

Accounts receivable increased by a net amount of $3.1 million during fiscal year 2024 , inclusive of $2.1 million of accounts receivable acquired as part of three acquisitions completed during the year.

Accounts receivable increased by a net amount of $5.0 million during fiscal year 2023 , inclusive of $0.8 million of acco unts receivable acquired as part of acquisitions completed during the period.

Accounts receivable increased by a net amount of $8.2 million during fiscal year 2025 , inclusive of $7.7 million of accounts receivable acquired as part of two acquisitions completed during the year.

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

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

Our inventory balance increas ed $0.5 million du ring fiscal year 2024, inclusive of $1.8 million of inventory acquired during the year.

Our inventory balance increased $4.2 million during fiscal year 2023.

Our inventory balance decreased $2.9 million during fiscal year 2025.

Our inventory balance during fiscal year 2024 increased $0.5 million inclusive of $1.8 million of inventory acquired during the year .

The year-over-year change is a result of strategic inventory purchases during fiscal year 2024 .

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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.

Acc ounts payable decreased $4.4 million during fiscal year 2024 , inclusive of $0.6 million of accounts payable acquired during the year.

Accounts payable increased by $1.7 million during fiscal year 2023 , inclusive of $0.1 million of accounts payable acquired during the year.

Accounts payable increased $5.3 million during fiscal year 2025 , inclusive of $0.3 million of accounts payable acquired during the year.

Accounts payable decreased by $4.4 million during fiscal year 2024 , inclusive of $0.6 million of accounts payable acquired during the year .

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

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At the end of any particular period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, changes in expected performance levels, the performance measurement period, and the timing of payments to employees.

During fiscal year 2025 , accrued compensation and other liabilities decreased by $1.3 million, inclusive of $1.2 million from assumed liabilities, contingent consideration and purchase price holdbacks from acquisition transactions.

During fiscal year 2024 , accrued compensation and other liabilities increased by $6.5 million, inclusive of $3.1 million from assumed liabilities, contingent consideration and purchase price holdbacks from acquisition transactions.

During fiscal year 2023 , accrued compensation and other liabilities decreased by $1.2 million.

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 2024, income taxes payable increased $2.9 million.

During fiscal year 2023, income taxes payable decreas ed by $0.4 milli on.

During fiscal year 2025 , income taxes payable decreased $2.9 million.

During fiscal year 2024 , income taxes payable increased by $2.9 million.

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

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During each of fiscal year 2025 and fiscal year 2024, no contingent consideration was paid related to a business acquisition.

During fiscal year 2024, $0.8 million of holdback amounts were paid.

During fiscal year 2023, no holdback amounts were paid.

During fiscal year 2024, we purchased $15.5 million of marketable securities with the proceeds from our stock offering.

$0.4 million and $0.8 million of holdback amounts were paid during fiscal year 2025 and fiscal year 2024, respectively.

During fiscal year 2025, we sold $15.5 million of marketable securities to partially fund acquisitions.

During fiscal year 2024, we purchased $15.5 million of marketable securities with the proceeds from the Offering.

Financing Activities :

During fiscal year 2025 , $30.9 million in cash was generated from the proceeds from our revolving credit facility and $1.9 million from the issuance of common stock from stock option exercises and the Employee Stock Purchase Plan.

In addition, we used $2.3 million for scheduled repayments of our term loan and $3.6 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 2025 , which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.

During fiscal year 2024, $77.2 million in cash was generated from the issuance of common stock, net of direct costs, inclusive of $75.2 million from the Offering.

In addition, we used $42.7 million to repay our revolving credit facility, $2.2 million for scheduled repayments of our term loan and $4.9 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 2024, which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.

During fiscal year 2023, $2.8 million was borrowed from the revolving line of credit and $0.7 million in cash was generated from the issuance of our common stock.

In addition, we used $2.1 million for scheduled repayments of our term loan and $0.4 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 15, 2024, the Company acquired Becnel Rental Tools LLC (“Becnel”).

This transaction aligned with a key component of our acquisition strategy of targeting businesses that expand the depth and breadth of our rental capabilities.

The total purchase price of $50.8 million was paid in combination of $33.3 million in Company common stock and $17.5 million in cash, and is subject to certain customary holdback provisions, post-closing adjustments, and indemnification claims, if any.

See Note 11 to our Consolidated Financial Statements in this report for further details.

The Transcat team continues to deliver strong revenue growth and sustainable gross margin expansion as can be seen over the past decade and a half of profitable growth.

As we think ahead into fiscal 2025, our business will continue to benefit from recurring revenue streams in highly regulated end markets, including life sciences, along with a growing Rentals business that performs well throughout various economic cycles.

We expect another year of organic Service revenue growth in the high-single digit to low double-digit range when normalized for the extra week in fiscal 2024 and gross margin expansion.

Automation of our calibration processes and overall process improvement will continue to be key enablers of future margin expansion.

Acquisitions continued to play a key role in Service revenue, including most recently Martin Calibration which we are swiftly integrating into our operations.

Service organic growth was in the high single-digit range for the fourth quarter of fiscal year 2025 and the full fiscal year, when normalized for the 53rd week and excluding Transcat Solutions, driven by consistent demand in the Calibration business.

Revenue growth in both segments combined with continued productivity gains from increased automation and process improvements drove EBITDA growth for the fourth quarter of fiscal year 2025 and the full fiscal year.

The macroeconomic backdrop, including tariffs, has become more uncertain since the beginning of the year.

However, we believe our business model is resilient in any market environment due to the highly regulated markets we serve, particularly life science, aerospace, and defense, as our services are mandated.

The stringent regulatory standards for manufacturers imposed by entities including the FDA, FAA and Department of Defense to ensure product safety and environmental protection drive the organic growth for our high-value calibration services.

Our dedicated team has a proven track record of delivering profitable revenue growth over the past decade and a half.

We believe our proven team in combination with the industry mandated service model, diversified portfolio with a Fortune 500 client base, and strong balance sheet will continue to differentiate us during fiscal year 2026 and beyond.

Looking ahead, while macroeconomic impacts on our business such as changes in product costs and customer demand for services are uncertain, we anticipate a return to high single-digit organic Service revenue growth once the environment normalizes.

Automation of our calibration processes and focus on productivity remain key enablers of margin expansion.

We have demonstrated the ability to leverage these tools to improve our operational efficiency and drive margin expansion over an extended period.

We will continue to leverage our acquisition expertise and are pleased with the current flow of strategic opportunities.

We believe strong execution, paired with strategic acquisitions, positions us well to drive long-term shareholder value.

Transcat expects its income tax rate to range between 27.0% and 29.0% in fiscal 2026.

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Item 5. Market for Registrant’s Common Equity