Fiscal Q2 2027
Filed Nov 3, 2026Transcat Reports Strong Fiscal Second Quarter 2027 Financial Results with Double-Digit Service Organic Revenue Growth and Significant Service Gross Margin Expansion
Total revenue increased 18.0%, Service organic revenue increased 16%, consolidated gross margin expanded to 33.6%, operating income increased 43.6%, and Adjusted EBITDA increased 23.1%. Management increased its full-year Service organic revenue growth outlook to low double digits from high single digits.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q2 total revenueGAAP | $97.09M | – | 18.0 % |
| Q2 service revenueGAAP | $64.77M | – | 22.6 % |
| Q2 distribution revenueGAAP | $32.32M | – | 9.8 % |
| Q2 total cost of revenueGAAP | $64.46M | – | 16.1 % |
| Q2 gross profitGAAP | $32.63M | – | 21.9 % |
| Q2 gross marginGAAP | 33.6 % | – | increased 110 bps |
| Q2 selling, marketing and warehouse expensesGAAP | $11.75M | – | 10.6 % |
| Q2 general and administrative expensesGAAP | $15.85M | – | 25.5 % |
| Q2 total operating expensesGAAP | $27.60M | – | 18.7 % |
| Q2 operating incomeGAAP | $5.03M | – | 43.6 % |
| Q2 operating marginGAAP | 5.2 % | – | – |
| Q2 net incomeGAAP | $2.41M | – | 90.1 % |
| Q2 net marginGAAP | 2.5 % | – | – |
| Q2 diluted earnings per shareGAAP | $ 0.25 | – | 78.6 % |
| Q2 adjusted net incomenon-GAAP | $6.09M | – | 46.5 % |
| Q2 adjusted net marginnon-GAAP | 6.3 % | – | – |
| Q2 adjusted EBITDAnon-GAAP | $14.91M | – | 23.1 % |
| Q2 adjusted EBITDA marginnon-GAAP | 15.4 % | – | expanded 70 bps |
| Q2 adjusted diluted earnings per sharenon-GAAP | $ 0.64 | – | 45.5 % |
| Q2 service organic revenuenon-GAAP | $60.38M | – | 16 % |
| Q2 service segment gross profitGAAP | $22.27M | – | 31.1 % |
| Q2 service segment gross marginGAAP | 34.4 % | – | increase of 220bps |
| Q2 service segment operating incomeGAAP | $3.67M | – | 299.1 % |
| Q2 service segment operating marginGAAP | 5.7 % | – | – |
| Q2 service segment adjusted operating incomenon-GAAP | $10.56M | – | 45.1 % |
| Q2 service segment adjusted operating marginnon-GAAP | 16.3 % | – | – |
| Q2 distribution segment gross profitGAAP | $10.36M | – | 6.0 % |
| Q2 distribution segment gross marginGAAP | 32.0 % | – | decrease of 120bps |
| Q2 distribution segment operating incomeGAAP | $1.36M | – | (47.3 %) |
| Q2 distribution segment operating marginGAAP | 4.2 % | – | – |
| Q2 distribution segment adjusted operating incomenon-GAAP | $4.61M | – | (8.6 %) |
| Q2 distribution segment adjusted operating marginnon-GAAP | 14.3 % | – | – |
| Six months total revenueGAAP | $190.0M | – | – |
| Six months gross profitGAAP | $63.36M | – | – |
| Six months operating incomeGAAP | $8.75M | – | – |
| Six months net incomeGAAP | $3.74M | – | – |
| Six months diluted earnings per shareGAAP | $ 0.40 | – | – |
| Six months adjusted EBITDAnon-GAAP | $28.92M | – | – |
| Six months adjusted EBITDA marginnon-GAAP | 15.2% | – | – |
| Six months adjusted net incomenon-GAAP | $10.72M | – | – |
| Six months adjusted diluted earnings per sharenon-GAAP | $ 1.13 | – | – |
| Six months net cash provided by operating activitiesGAAP | $18.96M | – | – |
| Six months capital expendituresother | $8.07M | – | – |
| Six months operating free cash flownon-GAAP | $10.89M | – | grown 46% year over year |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| ServiceStrength in the Calibration business lifted Service revenue. Revenue included $ 3.5 million of incremental revenue from acquisitions, while Service organic revenue growth was 16 %. | $64.77M | – | 22.6 % |
| DistributionContinued strength in rentals and product sales drove revenue growth. Lower-margin used equipment sales enabled reinvestment in the rental asset portfolio. | $32.32M | – | 9.8 % |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Full fiscal year 2027 and second half of fiscal year 2027 outlook
- Gross marginService gross margin expansion; year-over-year Service gross margin expansion of at least 100 bps in the second half
- NoteFull fiscal year 2027 Service organic revenue growth in the low double digits, up from prior outlook of high single digits.
- NoteGuidance assumes the broader economic environment remains stable.
What drove it
- Service revenue increased 22.6 %, including 16 % Service organic revenue growth and $ 3.5 million of incremental acquired revenue.
- Service gross margin increased 220bps to 34.4%, supported by productivity gains, business mix and pricing initiatives.
- Distribution revenue increased 9.8% on continued strength in rentals and product sales.
- Management cited high customer retention, conversion of new business wins into revenue, and demand in life sciences, aerospace and defense, and other regulated end markets.
- The August acquisition of Southeastern Biomedical expanded Transcat's biomedical calibration reach in hospital networks across the southeastern United States and beyond.
Concerns
- Distribution gross margin decreased 120bps compared with the prior-year period, primarily due to lower-margin used equipment sales.
- Distribution operating income decreased (47.3 %) and adjusted operating income decreased (8.6 %).
- Q2 general and administrative expenses increased 25.5 %, driven in part by acquired-business expenses, intangible assets amortization, stock-based compensation and executive transition costs.
- Long-term debt was $ 116,885 as of September 26, 2026, versus $ 99,885 as of March 28, 2026.
- Six-month operating income was $ 8,752, compared with $ 8,843, and six-month net income was $ 3,744, compared with $ 4,530.
What to watch
- Delivery against the full-year Service organic revenue growth outlook of low double digits.
- Whether Service gross margin expansion reaches at least 100 bps year over year in the second half.
- Margin and operating-income progression in Distribution following the mix effect from used equipment sales.
- Revenue conversion from new customer wins, customer retention and regulated end-market demand.
- Integration and revenue contribution from Southeastern Biomedical, as well as further strategic M&A activity.
Balance sheet and cash flow
- Cash and cash equivalents as of September 26, 2026: $ 5,758; March 28, 2026: $ 4,942.
- Long-term debt as of September 26, 2026: $ 116,885; March 28, 2026: $ 99,885.
- Net debt as of September 26, 2026: $ 111,127; March 28, 2026: $ 94,943.
- $33.1 million available for borrowing, subject to covenant restrictions, under its secured revolving credit facility.
- Six months net cash provided by operating activities: $ 18,965, compared with $ 16,504.
- Six months operating free cash flow: $ 10,895, compared with $ 7,474.
- Six months business acquisitions, net of cash acquired: $ 25,878, compared with $ 82,526.
- Six months purchase of property and equipment: $ 8,070, compared with $ 9,030.
- Cash and cash equivalents at the end of the six months: $ 5,758, compared with $ 5,082.
Analysis
Transcat reported a strong fiscal second quarter, with total revenue of $ 97,090 versus $ 82,272 and gross profit of $ 32,630 versus $ 26,762. Consolidated gross margin expanded to 33.6 % from 32.5 %, while operating income increased to $ 5,033 from $ 3,505 and net income increased to $ 2,413 from $ 1,269. Adjusted EBITDA increased to $ 14,909 from $ 12,115, and Adjusted EBITDA margin expanded to 15.4 % from 14.7 %.
Service remained the principal growth and margin driver. Service revenue increased to $ 64,770 from $ 52,836, including Service organic revenue of $ 60,375 versus $ 52,130 and $ 3.5 million of incremental acquired revenue. Service gross profit increased to $ 22,272 from $ 16,993, and Service gross margin expanded to 34.4 % from 32.2 %. Management attributed the performance to Calibration strength, productivity gains, optimized business mix, pricing and operational initiatives.
Distribution revenue increased to $ 32,320 from $ 29,436, supported by rentals and product sales, but profitability moved in the opposite direction. Distribution gross margin was 32.0 % versus 33.2 %, and Distribution operating income was $ 1,361 versus $ 2,585. The company attributed the margin decline to lower-margin used equipment sales that support reinvestment in the rental asset portfolio. Consolidated general and administrative expenses increased to $ 15,846 from $ 12,630, reflecting acquired-business expenses, intangible assets amortization, stock-based compensation and executive transition costs.
Cash generation increased during the six months ended September 26, 2026. Net cash provided by operating activities was $ 18,965 versus $ 16,504, while operating free cash flow was $ 10,895 versus $ 7,474. The balance sheet included $ 5,758 of cash and cash equivalents and $ 116,885 of long-term debt, with net debt of $ 111,127. The company also reported $33.1 million of revolver availability, subject to covenant restrictions.
Management raised its full-year fiscal 2027 outlook for Service organic revenue growth to the low double digits from high single digits, assuming a stable broader economic environment. It also expects Service gross margin expansion and at least 100 bps of year-over-year Service gross-margin expansion in the second half. The central execution markers are continued Service organic growth, realization of productivity and pricing actions, and whether Distribution margins stabilize as the rental asset portfolio is replenished.
Management, verbatim
Fiscal second quarter 2027 marked our seventieth consecutive quarter of Service revenue growth.
Jaime Irick, President and CEO
Revenue momentum, combined with productivity gains, enabled a 23% increase in adjusted EBITDA* and 70 bps of Adjusted EBITDA margin* expansion.
Jaime Irick, President and CEO
Fiscal year-to-date operating free cash flow has grown 46% year over year, further strengthening our financial position.
Tom Barbato, Chief Financial Officer
Not in the filing
stated, not guessed- Absolute total revenue guidance for fiscal year 2027.
- Operating expense guidance for fiscal year 2027.
- Tax-rate guidance for fiscal year 2027.
- GAAP EPS guidance and non-GAAP adjusted EPS guidance.
- Prior-quarter total revenue, gross profit, gross margin, operating income, net income and diluted EPS.
- Capital return activity, including share repurchases and dividends.
- Prior-year six-month adjusted EBITDA and adjusted EBITDA margin comparisons.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.