What changed in this filing

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Item 1A. Risk Factors

2026-05-27 compared with 2025-05-27 · 62 added, 59 removed, 225 unchanged (35% of the section changed)

The following disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company, our securities, or could cause actual results to differ materially from those expressed or implied in our forward-looking statements.

References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

You should carefully consider the following risks and all other information included in this report.

The risks and uncertainties described below and elsewhere in this report are not the only ones facing our business.

The risks and uncertainties described below and elsewhere in this report are not the only ones facing our business, and we cannot predict every event and circumstance that may adversely affect our business.

If any of the following risks were to actually occur, our business, financial condition or results of operations would likely suffer.

Macroeconomic and Business Risks

Adverse changes in economic and market conditions, including an ongoing inflationary environment, or uncertainty about future market conditions, may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.

Adverse changes in economic and market conditions, including an ongoing inflationary environment amid rising energy costs, or uncertainty about future market conditions, may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.

Our results of operations and the implementation of our business strategy could be materially and adversely affected by general conditions in the U.S.

and global economy, including financial and economic conditions that are outside of our control.

We are subject to risks arising from adverse changes in general economic market conditions, including supply chain delays or interruptions, labor shortages, wage pressures, the ongoing inflationary environment, changes in interest rates, geopolitical events, political instability, global health crises, including epidemics and pandemics, or interruptions and other force majeure events.

We are subject to risks arising from adverse changes in general economic market conditions, including rising energy costs, supply chain delays or interruptions, labor shortages, wage pressures, the ongoing inflationary environment, changes in interest rates, geopolitical events, political instability, global health crises, including epidemics and pandemics, or interruptions and other force majeure events.

Inflation has persisted in the United States and globally due in part to geopolitical events, a rise in energy prices, and strong consumer demand.

An inflationary environment can increase our cost of labor as well as our energy and other operating costs which may have a material adverse impact on our financial results.

In addition, economic conditions could impact and reduce the number of customers who purchase our products or services as credit becomes more expensive or unavailable.

Although interest rates may remain relatively high for a sustained period, inflation may continue or prices for goods and energy may rise as a result of the imposition or threatened imposition of tariffs.

In addition, economic conditions could impact and reduce the number of customers who purchase our products or services if they implement cost saving measures as credit becomes more expensive or unavailable.

Although interest rates may remain relatively high for a sustained period, inflation may continue or prices for goods and energy may rise as a result of geopolitical events or the imposition or threatened imposition of tariffs.

Further, uncertainty resulting from interest rate policy, trade policy or changes to interest rates in the future could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the market price of our common stock.

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Within our Service segment, we provide calibration services and compete in an industry that is highly fragmented and is composed of companies ranging from internationally recognized and accredited corporations to non-accredited sole proprietors, resulting in a tremendous range of service levels and capabilities.

Also, within our Service segment, we provide compliance services and compete in an industry that is composed of both small local and regional service providers and large multi-national companies who are also OEMs.

Also, within our Service segment, we provide compliance services and compete in an industry that is composed of local and regional service providers, integrated facilities management companies, and large multi-national companies who are also OEMs.

Within our Service segment, some of our larger competitors may have broader service capabilities and may have greater name recognition than us.

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In each of the industries in which we compete, some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully.

In the future, we may be unable to compete successfully and competitive pressures may reduce our sales.

In the future, we may be unable to compete successfully and competitive pressures may reduce our sales and margin profile.

We face significant competition in our Distribution segment, including from suppliers and web-based distributors, to make product sales and to source products.

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A number of our Service segment customers operate life science, pharmaceutical, biotechnology, medical device and other FDA-regulated businesses.

Federal and state budget pressures and changes in grant allocation policies may result in lower funding for certain of our life science customers, which may cause those customers to delay or halt spending on capital-intensive projects.

We also serve the industrial manufacturing, energy and utilities, chemical manufacturing, aerospace and defense industries.

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Determinations of significant write-offs of goodwill or intangible assets because of an impairment test or any accelerated amortization of other intangible assets could have a material negative impact on our results of operations and financial condition.

Tariffs imposed or threatened by the United States and other countries, as well as changing trade relations, regional and international conflicts, and political conditions could have a material adverse effect on our business and results of operations.

Changes in United States and foreign governments’ trade policies, as well as volatility caused by regional and international conflicts, such as the conflict between Russia and Ukraine, Israel and Hamas, and the political climate in the United States, China, and Taiwan, have resulted in, and may continue to result in, tariffs on imports into and exports from the United States.

Changing trade relations, including the imposition of tariffs, regional and international conflicts, and political conditions could have a material adverse effect on our business and results of operations.

Changes in United States and foreign governments’ trade policies, as well as volatility caused by regional and international conflicts, such as the conflicts in Iran and the Middle East and between Russia and Ukraine, Israel and Hamas, and the political climate in the United States, China, and Taiwan, have resulted in, and may continue to result in, economic volatility and coincide with tariffs on imports into and exports from the United States.

For example, the United States has recently instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the United States and other countries.

A number of other nations have proposed or instituted similar measures directed at trade with the United States in response.

Tariffs on certain products can increase our costs of doing business.

Tariffs on certain products and increasing energy costs can increase our costs of doing business.

If we are unable to recover these costs, our profit margins may be negatively impacted.

Similarly, if our customers are negatively impacted by the imposition or threatened imposition of tariffs, it may result in negative sentiment which may negatively impact demand for our products and services, which could negatively impact our results of operations.

Similarly, if our customers are negatively impacted by increasing energy costs or the imposition or threatened imposition of tariffs, it may result in negative sentiment which may negatively impact demand for our products and services, which could negatively impact our results of operations.

If our vendors or suppliers are unable to source products we purchase, our Distribution business may be negatively impacted.

Diminished trade relations, conflicts between the United States and other countries, and any escalation of tariffs could have a material adverse effect on our financial performance and results of operations.

Diminished trade relations, conflicts between the United States and other countries increasing energy costs, and any escalation of tariffs could have a material adverse effect on our financial performance and results of operations.

Negative publicity and other reputational harm could impact the value of our brand and materially and adversely affect our business and results of operations.

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We may not successfully integrate business acquisitions.

We completed two acquisitions during fiscal year 2025 and three acquisitions during fiscal year 2024.

We have a historical track record of completing acquisitions, including acquisitions within our core business segments and in new and adjacent markets.

In fiscal 2026 and 2025, we completed the two largest acquisitions in our history.

We have a robust and diverse acquisition pipeline and may complete additional acquisitions in the future.

If we fail to accurately assess and successfully integrate any recent or future business acquisitions, we may not achieve the anticipated benefits, which could result in lower revenues, unanticipated operating expenses, reduced profitability and dilution of our book value per share.

If we fail to accurately assess and successfully integrate any recent or future business acquisitions particularly as they grow in size and complexity, we may not achieve the anticipated benefits, which could result in lower revenues, unanticipated operating expenses, reduced profitability and dilution of our book value per share.

Successfully integrating acquisitions involves many challenges, including:

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Assessing the technology infrastructure and cyber and data security risk profile of the acquired company and integrating its systems into our IT systems, networks and services;

Assessing acquisitions in adjacent or new markets and integrating such acquisitions due to our level of experience in such markets;

Diverting management’s attention while evaluating, negotiating and integrating acquisitions;

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The potential loss of key employees of an acquired operation.

In addition, we may seek acquisitions in adjacent or new markets where we have limited experience.

Challenges in assessing acquisitions in adjacent or new markets and integrating such acquisitions due to our level of experience in such markets could result in a material adverse impact on our financial condition, operating results and stock price.

For example, the acquisition of NEXA (recently rebranded to Transcat Solutions), a service segment business focused on the technical, consulting and staffing solutions market, expanded the scope of services we offer beyond our traditional calibration services and required more time for us to fully integrate into our operating plan.

In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute shareholder interests for many reasons, including:

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Any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current shareholders.

If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material adverse impact on our operating results and stock price.

If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material adverse impact on our financial condition, operating results and stock price.

Our future business acquisition efforts may not be successful, which may limit our growth or adversely affect our results of operations, and financing future acquisitions could result in shareholder dilution and/or increase our leverage.

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We maintain insurance intended to cover certain cybersecurity events, but such insurance may not cover all risks and losses that we experience.

In addition, the laws and regulations governing security of data on IT systems and otherwise held by companies is evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect IT systems and data and complying with new cybersecurity regulations.

In addition, the laws and regulations governing security of data on IT systems and otherwise held by companies are evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect IT systems and data and complying with new cybersecurity regulations.

If we experience a significant disruption in, or breach in security of, our IT systems, or if we fail to implement new systems and software successfully, our business could be adversely affected.

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Competition for senior management is intense, and we may not be successful in attracting and retaining key personnel.

Qualified skilled service technicians are in high demand and are subject to competing offers.

The ability to meet our labor needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment levels, prevailing wage rates and the available labor pool in locations where we operate.

Qualified skilled service technicians, operations management and leadership, and sales representatives are in high demand and are subject to competing offers.

The ability to meet our labor, management, and leadership needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment levels, current market salary and wage rates, and the availability of skilled technicians in locations where we operate.

The loss of services of any member of our senior management team or key employees, and the inability to attract and retain other qualified personnel, especially skilled service technicians, could affect our ability to achieve our stated corporate objectives and could adversely impact our business and results of operations.

The profitability of our Service segment depends in part on the prices we are able to charge for our services .

The prices we charge for our services, including the Transcat Solutions business, are affected by a number of factors, including:

Customers’ perception of our ability to add value through our services;

The market demand for the services we provide;

Our ability to develop new services and the introduction of new services by competitors;

The pricing policies of our competitors;

The extent to which our customers develop in-house or other capabilities to perform the services that they might otherwise purchase from us;

General financial and economic conditions.

If we are unable to achieve and maintain adequate rates for our services, our profit margin and profitability could decline, and our results of operations could be materially adversely affected.

If we do not effectively compete in the test and measurement equipment market, our operating results may be adversely affected.

We compete in the rental and distribution market on the basis of a number of factors, including equipment availability, price, service and reliability.

Some of our competitors may offer similar equipment for rent or purchase at lower prices and may offer more extensive servicing, or financing options.

In addition, if the supply of equipment available on the market significantly increases, demand for and pricing of our rental and distribution products could be adversely impacted, lowering our gross margins.

Further, customers confronting competing budget priorities and more limited resources could lead to less demand for equipment and increased pressure on pricing.

Failure to adequately forecast the adoption of and demand for equipment may cause us not to meet our customers’ equipment requirements and may adversely affect our operating results.

The profitability of our Transcat Solutions business depends to a large extent on our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers.

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General financial and economic conditions.

For example, in the Transcat Solutions business, our revenue has been negatively impacted in part by delayed starts for customer projects, which has prevented us from fully utilizing all of our technical service providers.

If the utilization rate for our technical service providers declines, our revenues, profit margin and profitability could decline, and our results of operations could be materially adversely affected.

The profitability of our Service segment, including the Transcat Solutions business, depends in part on the prices we are able to charge for our services .

The prices we charge for our services, including the Transcat Solutions business, are affected by a number of factors, including:

Customers’ perception of our ability to add value through our services;

The market demand for the services we provide;

Our ability to develop new services and the introduction of new services by competitors;

The pricing policies of our competitors;

The extent to which our customers develop in-house or other capabilities to perform the services that they might otherwise purchase from us;

General financial and economic conditions.

If we are unable to achieve and maintain adequate rates for our services, our profit margin and profitability could decline, and our results of operations could be materially adversely affected.

If we do not effectively compete in the test and measurement equipment market, our operating results may be adversely affected.

We compete in the rental and distribution market on the basis of a number of factors, including equipment availability, price, service and reliability.

Some of our competitors may offer similar equipment for rent or purchase at lower prices and may offer more extensive servicing, or financing options.

Further, customers confronting competing budget priorities and more limited resources could lead to less demand for equipment and increased pressure on pricing.

Failure to adequately forecast the adoption of and demand for equipment may cause us not to meet our customers’ equipment requirements and may adversely affect our operating results.

If we fail to adapt our technology to meet customer needs and preferences, the demand for our products and services may diminish.

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Our failure to keep pace with changes in technology, industry standards and customer preferences in the markets we serve could diminish our ability to retain and attract customers and retain our competitive position, which could adversely impact our business and results of operations.

We rely on our CalTrak ®, Application Plus (our enterprise resource planning system ( “ ERP ” )) and other management information systems for inventory management, distribution, workflow, accounting and other functions.

If our CalTrak ®, Application Plus or other management information systems fail to adequately perform these functions, experience an interruption in their operation or a security breach, our business and results of operations could be adversely affected.

We rely on management information systems for inventory management, distribution, workflow, accounting and other functions.

If our management information systems fail to adequately perform these functions, experience an interruption in their operation or a security breach, our business and results of operations could be adversely affected.

The efficient operation of our business depends on our management information systems.

We rely on our CalTrak®, Application Plus and other management information systems to effectively manage accounting and financial functions, customer service, warehouse management, order entry, order fulfillment, inventory replenishment, documentation, asset management, and workflow.

Our management information systems are vulnerable to damage or interruption from computer viruses or hackers, natural or man-made disasters, vandalism, terrorist attacks, power loss, or other computer systems, internet, telecommunications or data network failures.

Any such interruptions to our management information systems could disrupt our business and could result in decreased revenues, increased overhead costs, excess inventory or product shortages, causing our business and results of operations to suffer.

We rely on CalTrak®, IndySoft, Application Plus (our enterprise resource planning system ("ERP")) and other management information systems to effectively manage accounting and financial functions, customer service, warehouse management, order entry, order fulfillment, inventory replenishment, documentation, asset management, and workflow.

Any such interruptions to our management information systems could disrupt our business and could result in decreased revenues, increased overhead costs, increased labor costs to mitigate system interruption downtime, excess inventory or product shortages, causing our business and results of operations to suffer.

In addition, our management information systems are vulnerable to security breaches.

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Our future success may be affected by our current and future indebtedness.

Under our credit agreement, as of March 29, 2025 , we owed $32.7 million to our secured creditor, a commercial bank, including $1.8 million borrowed under a $15.0 million term loan to fund acquisitions and provide additional working capital.

Under our credit agreement, as of March 28, 2026, we owed $99.9 million to our secured creditors, commercial banks, under a $150.0 million credit facility.

We may borrow additional funds in the future to support our growth and working capital needs.

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We currently transact a portion of our business in foreign currencies, namely the Canadian dollar and the Euro.

During fiscal years 2025 and 2024, approximat ely 10% of our tot al revenues were denominated in Canadian dollars and Euros.

During fiscal years 2026 and 2025, less than 10% of our total revenues were denominated in Canadian dollars and Euros.

Conducting business in currencies other than U.S.

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dollar relative to one Canadian dollar and to one Euro ranged from 1.35 to 1.44 and from 0.83 to 0.93, respectively.

We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange rates.

However, this strategy does not eliminate our exposure.

If there is a significant or prolonged downturn in the Canadian dollar or the Euro, it could have an adverse impact on our business and financial condition.

As a result of the SCM acquisition, a Costa Rican entity, we will also be exposed to currency exchange rate risk related to Colones starting in fiscal year 2027.

Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete.

We rely on intellectual property in order to maintain a competitive advantage.

Our inability to defend against the unauthorized use of these assets could have an adverse effect on our results of operations and financial condition.

Our inability to defend against the unauthorized use of these assets could have an adverse effect on our ability to compete in the calibration market and results of operations and financial condition.

Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement.

This litigation could result in significant costs and divert our management’s focus away from operations.

This litigation could result in significant costs and divert our management’s focus away from operations, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Hurricanes, other adverse weather events, national or regional catastrophes or natural disasters could negatively affect the local economies we serve or disrupt our operations, which could have an adverse effect on our business or results of operations .

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Future hurricanes, extreme weather events and natural disasters could result in damage to certain of our facilities and the equipment located at such facilities, or equipment on rent with customers in those areas.

Even if our properties suffer no direct damage from such events, the operations of our customers could be disrupted, and our supply chain impacted.

Even if our properties suffer no direct damage from such events, the operations of our customers could be disrupted, and our supply chain could be impacted.

In addition, climate change could lead to an increase in intensity or occurrence of hurricanes or other adverse weather events, including severe winter storms.

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We also may be involved in litigation involving claims related to breach of contract, tortious conduct, employment and labor law matters, and others.

The damages sought against us in these matters could be substantial.

The damages sought against us in these matters could be substantial and an adverse outcome in litigation could have a material adverse effect on how we operate our business.

Although we maintain liability insurance for certain legal claims, if one or more of the claims were to greatly exceed our insurance coverage limits or if our insurance policies do not cover a claim, our expenses could increase significantly and management’s focus could be diverted away from our operations, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Risks Related to our Stock

We expect that our quarterly results of operations will fluctuate.

Such fluctuations could cause our stock price to decline.

We expect that our quarterly results of operations will fluctuate, which could cause our stock price to decline.

A large portion of our expenses for our Service segment, including expenses for facilities, equipment and personnel are relatively fixed.

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Fluctuations in industrial demand for products we sell and services we provide could cause our revenues and operating results to fluctuate.

Project-based service revenue is similarly subject to fluctuation due to longer sales cycles and factors beyond our control, such as customer financial constraints, the regulatory environment, and changes in economic, political, and industry conditions, which can create challenges in forecasting our revenue.

If our operating results in some quarters fail to meet the expectations of stock market analysts and investors, our stock price may decline.

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Regulatory Risks

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to remediate the material weaknesses or maintain an effective system of internal control over financial reporting, our ability to produce timely and accurate financial statements and comply with applicable laws and regulations could be adversely impacted.

As of the end of fiscal 2026, we concluded that our internal control over financial reporting was not effective due to material weaknesses related to our control environment and our control activities.

As a result, there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

The material weaknesses increase the risk that errors, fraud, or misstatements could occur and remain undetected, which could require us to restate our financial statements, result in SEC enforcement actions, litigation, or loss of investor confidence, and impair our ability to timely and accurately report financial results.

Any restatement or delay in reporting could adversely affect our reputation, business relationships, access to capital, regulatory compliance, Nasdaq listing, and stock price.

We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the identified material weaknesses or prevent additional material weaknesses or significant deficiencies from occurring in the future.

Changes in our business, acquisitions, growth, personnel turnover, system implementations, increased transaction complexity, or expansion into new markets could further strain our control environment and increase the risk of control failures.

If we are unable to maintain effective internal control over financial reporting on an ongoing basis, we may not be able to reliably produce accurate financial statements, comply with applicable reporting requirements, or sustain market confidence, which could have a material adverse effect on our business, results of operations, and financial condition.

Tax rates applicable to us may change.

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Tax laws and regulations are extremely complex and subject to varying interpretations.

The Tax Cuts and Jobs Act of 2017 made broad and complex changes to the U.S.

tax code, such as reducing the Federal corporate income tax rate from 35% to 21%.

Any additional modifications to key aspects of the tax code could materially affect our tax obligations and negatively impact our effective tax rate.

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Changes in accounting standards, legal requirements and the Nasdaq Global Market listing standards, or our ability to comply with any existing requirements or standards, could adversely affect our operating results.

Extensive reforms relating to public company financial reporting, corporate governance and ethics, the Nasdaq Global Market listing standards and oversight of the accounting profession have been implemented over the past several years and continue to evolve.

Compliance with these rules, regulations and standards that have resulted from such reforms has increased our accounting and legal costs and has required significant management time and attention.

Compliance with the rules, regulations and standards relating to public company financial reporting, corporate governance and ethics, the Nasdaq Global Market listing standards and oversight of the accounting profession has increased our accounting and legal costs and requires significant management time and attention.

In the event that additional rules, regulations or standards are implemented or any of the existing rules, regulations or standards to which we are subject undergoes additional material modification, we could be forced to spend significant financial and management resources to ensure our continued compliance, which could have an adverse effect on our results of operations.

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Our international operations are governed by various United States laws and regulations, including the Foreign Corrupt Practices Act (“FCPA”), and other foreign anti-bribery laws.

The FCPA and similar anti-corruption laws generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.

The FCPA and similar anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.

Because of our international operations, we are subject to the anti-bribery laws of non-US jurisdictions where we operate.

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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 1A. Risk Factors