Transcat, Inc. (NASDAQ: TRNS) reported Q4 EPS of $0.33, $0.05 better than the analyst estimate of $0.28. Revenue for the quarter came in at $45.76 million versus the consensus estimate of $45.33 million.

• Record fourth quarter and full fiscal year revenue of $45.8 million and $173.1 million, respectively
• Service segment continued to deliver revenue growth of 2.9% and 10.7% in the fourth quarter and fiscal 2020, respectively, despite COVID-19 impact in the latter half of the fourth quarter
• Service segment gross margin expanded 120 basis points to 28.9% in the fourth quarter; up 40 basis points for the fiscal year
• Achieved record net income of $8.1 million, or $1.08 per diluted share, in fiscal 2020

Strength of Team and Long-term Strategy Provides Resiliency and Solid Results

Lee D. Rudow, President and CEO, commented, “The Transcat team has responded with agility during these unparalleled times caused by the COVID-19 virus and the impact this global health pandemic has had on us and our customers. Still, we are particularly pleased with the fourth quarter and full fiscal year Service gross margin expansion even with muted Service revenue in March, historically our strongest month of every fiscal year.

“We believe our commitment to technology advancements continues to drive differentiation, boost productivity and position the Company to drive strong performance, even as the operating environment changed significantly. Combined with our strategy to grow the Service business and focus on Life Sciences while diversifying our Distribution sales channels, we were able to produce strong results in the fourth quarter of fiscal 2020 despite the headwinds created by the pandemic.

“Also, the highly complementary and well timed acquisition of TTE, whose services and products are geared almost entirely toward Life Sciences, expanded our capabilities in a specialized area with strong demand.”

He added, “I believe we are in a good position in our markets and with our customers, but we are not immune to the severe economic downturn. It is important to note that despite current challenges that drive the need to manage costs, we made a strategic decision to retain our technical talent and to accelerate our investments in our technology, which include automation and process improvement, both of which we believe drive margin improvement and increase our competitive edge.”

Outlook

Mr. Rudow noted, “We believe our focus on highly-regulated and critical industries, especially within Life Sciences, will continue to provide a degree of resilience as we navigate this unprecedented environment. We are proud to service ventilator and test kit manufacturers as well as pharmaceutical companies conducting research and development on a COVID-19 vaccine.

“We have seen certain Service customers delaying some project decisions, but Service pipelines are robust and general discussions seem to be productive, which we believe indicates forward momentum. However, Distribution segment sales will reflect economic conditions, despite the upside we expect to be provided by rentals and used equipment sales.”

He concluded, “While the duration and ultimate severity of this pandemic is unknown, we have run various scenarios and at this date believe our first quarter ending June 27, 2020 of fiscal 2021 will be the low point of the 2021 fiscal year based on the evolving COVID-19 containment and economic recovery programs being implemented by federal and state authorities. We expect to be in range of breaking even on a consolidated operating income basis for the first quarter of fiscal 2021, which would result in positive Adjusted EBITDA results. Under our analyses, we expect to generate cash even as we continue to invest in our long-term growth initiatives. If the environment were to worsen, we are prepared to take additional actions. In fact, as things improve, we believe our scale will work in our favor to capitalize on growth opportunities, both organic and acquisitions.”

Transcat expects its income tax rate to range between 24% and 25% in fiscal 2021. This estimate includes Federal, various state, and Canadian income taxes and reflects the discrete tax benefit associated with share-based payment awards.

The Company anticipates total capital expenditures to be approximately $5.0 million to $5.5 million in fiscal 2021, with the majority of the capital expenditures planned for technology, growth-oriented opportunities within both of its operating segments, and rental pool assets. Maintenance/existing asset replacements are expected to be consistent with fiscal 2020 at approximately $1.0 million to $1.5 million.

For earnings history and earnings-related data on Transcat, Inc. (TRNS) click here.