About Transcat

Transcat, Inc. (Transcat) 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. The company focuses 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; and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment. The company concentrates on attracting new customers in each segment, retaining existing customers and cross-selling to customers to increase its total revenue. The company serves approximately 30,000 customers through its Service and Distribution segments, with approximately 20% to 25% of those customers transacting with it through both of its business segments. Segments The company conducts its business through two operating segments: service (Service) and distribution (Distribution). Service Through its Service segment, the company offers calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services, a majority of which are processed through its proprietary asset management system, CalTrak and its online customer portal, C3. The company’s Service model is flexible, and it caters to its 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 the company’s fiscal year ended March 25, 2023 (fiscal year 2023), the company operated twenty-seven calibration service centers (Calibration Service Centers) strategically located across the United States, Puerto Rico, Canada and Ireland. The company also serves its customers onsite at their facilities for daily, weekly or longer-term periods. In addition, the company has several imbedded customer-site locations that it refers to as client-based labs, where it provides calibration services, and in some cases other related services, exclusively for the customer and where it resides and works every day. The company also has a fleet of mobile calibration laboratories that can provide service at customer sites which may not have the space or utility capabilities it requires to service their equipment. Through the company’s acquisition strategy, the company has been focused on building out its Services segment by entering adjacent and complimentary markets. This has been demonstrated by the acquisitions of Elite Calibration, LLC (Elite), Galium Limited (doing business as Complete Calibrations) (Complete Calibrations), e2b Calibration (e2b), and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. doing business as Alliance Calibration (Alliance) in fiscal year 2023 (year ended March 25, 2023), and the acquisitions of Tangent Labs, LLC (Tangent), Cal OpEx Limited (doing business as Transcat Ireland) which owns all of the issued and outstanding capital stock of its U.S. based subsidiary, Cal OpEx Inc. (doing business as NEXA EAM), a Delaware corporation (collectively, NEXA), and Upstate Metrology Inc. (Upstate Metrology) in its fiscal year ended March 26, 2022 (fiscal year 2022). NEXA provides asset management services to the biopharmaceutical industry by leveraging its six service tracks: calibration, maintenance and spare, reliability, computerized maintenance management systems solutions (CMMS), quality and compliance, and 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. 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. All of the company’s Calibration Service Centers have obtained ISO/IEC 17025:2017 scopes of accreditation. Distribution Through its Distribution segment, the company sells and rents national and proprietary brand instruments to customers globally. Through its website, in-house sales team and printed and digital marketing materials, the company offers access to more than 140,000 test, measurement and control instruments, including products from approximately 550 leading brands. Most instruments the company sell and rent require calibration service to ensure that they maintain the most precise measurements. The company’s customers include leading manufacturers in the life science/pharmaceutical, energy, defense, aerospace and industrial process control sectors. Strategy The company’s strategy is to leverage the complementary nature of its 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. Within the Service segment, the company’s strategy is to drive double-digit revenue growth through both organic expansion and acquisitions. The company expects to continue to grow its 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. The other component to our Service growth strategy is acquisitions. There are three drivers of our acquisition strategy: geographic expansion, increased capabilities and infrastructure leverage. The majority of its 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. 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. The company’s 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 its Service segment. Through its vendor relationships the company has access to more than 140,000 products, which it markets to its 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, the company offers its customers the options of renting selected test and measurement equipment or buying used equipment, furthering its ability to answer all of its customers’ test and measurement equipment needs. The company continuously evaluates its offerings to add new in-demand vendors or products, or remove less relevant vendors and products. Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (Elite), a California based provider of pipette calibration services. The company’s acquisition strategy primarily targets service businesses that expand its geographic reach, increase the depth and/or breadth of its service capabilities and expertise and leverage its infrastructure. Segments Service segment Calibration: The company specifically targest 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 its target industries, its 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. Through its Service segment, the company performs recurring periodic calibrations (typically ranging from three-month to twenty-four month intervals) on new and customer-owned instruments. The company performs approximately 800,000 calibrations annually and can address a significant majority of the items requested to be calibrated with its in-house capabilities. For customers’ calibration needs in less common and highly specialized disciplines, the company subcontracts some calibrations to third-party vendors that have unique or proprietary capabilities. Continuous Improvement: Through NEXA the company provides technical, consulting, and staffing solutions in the U.S., Canada, Ireland, Europe, and the Asia Pacific to improve asset management programs for its 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 the company’s 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 its customer’s unique needs. Other Services: The company provides other services to its customers such as inspection, repair and consulting services, which appeal to customers across all sectors in its customer base. These are generally value-added services and allow the company to provide one-stop shopping for its customers. Service Value Proposition: The company’s calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs: The company offers 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 the company’s twenty-seven 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; and Mobile Calibration Services: Services are completed on a customer’s property within one of the company’s mobile calibration units. For companies that maintain an internal calibration operation, the company can provide: calibration of their primary calibration assets, also called standards; and overflow capability, either onsite or at one of the company’s Calibration Service Centers, during periods of high demand. Enterprise Asset Management Calibration – criticality risk assessment; calibration interval analysis; calibration plans/task lists; planning and scheduling. Maintenance and Spares – PM optimization; spares/BOM management; PM plans/task lists; planning and scheduling. Reliability – asset criticality assessments; asset hierarchy development; PdM plans/task lists; FMECA/RCA. CMMS – implementation and migration; data optimization; business intelligence; CMMS KPIs/reporting. Quality and Compliance – technical writing; compliance audits; remediation; compliance management. Validation – validation master plan; confidence assessment model; validation interval analysis; validation method/process optimization. The company provides total program management, including logistics, remediation and consultation services when needed. The company strives to provide the broadest accredited calibration offering to its targeted markets, which includes certification of its technicians pursuant to the American Society for Quality standards, complete calibration management encompassing the entire metrology function, and access to its complementary service and product offerings. The company’s compliance services strategy is to identify and establish long-term relationships with life science research and development and manufacturing customers who require analytical qualifications, validation, remediation and/or preventative maintenance services. 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 the company provides 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. This requirement allows a natural synergy between the company’s laboratory instrument and calibration services. The company’s strategy includes cross-selling its services within its customer accounts to maximize its revenue opportunities with each customer. Proprietary Asset Management Software: CalTrak is the company’s proprietary documentation and asset management software which is used to integrate and manage both the workflow of its Calibration Service Centers and its customers’ assets. With CalTrak, the company is able to provide its customers with timely and consistent calibration service while optimizing its 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 the company’s 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 its secure password-protected website. C3 stands for Compliance, Control and Cost, and we see these as the major areas of focus for the company’s clients within the regulatory environment as it relates to instrument calibration. The company specifically designed C3 to assist its 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 the company’s clients operate within, it 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. 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 its integrated sales model, the company has both inside and outside sales teams that seek to acquire new customers in its targeted markets by leveraging its unique value proposition, including its broad geographic footprint and comprehensive suite of services. The company targets regulated, enterprise customers with multiple manufacturing operations throughout North America and Europe. The company utilizes print media, trade shows and web-based initiatives to market its services to customers and prospective customers with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing. The company also targets industrial manufacturing and other industries that appreciate the value of quality calibrations. Distribution segment Distribution Summary: The company distributes professional grade test, measurement and control instrumentation throughout North America and internationally. The company’s customers use test and measurement instruments to ensure that their processes, and ultimately their end products, are within specification. Utilization of such diagnostic instrumentation also allows for continuous improvement processes to be in place, increasing the accuracies of their measurements. The industrial test and measurement instrumentation market, in those geographic areas where the company predominately operates, has historically been serviced by broad-based national equipment distributors and niche or specialty-focused organizations such as Transcat. The company offers value-added services, such as calibration/certification of equipment purchases, equipment rentals, used equipment for sale, and equipment kitting. The company’s online presence, including its website and e-newsletters, master catalog, supplemental mailings, and other sales and marketing activities are designed to create interest and maintain a constant presence in front of its customers to ensure it receives the order when they are ready to purchase. The company provides its customers with value-added services, including technical support, to ensure its customers receive the right product for their application, and more comprehensive instrument suitability studies to customers in regulated industries who are concerned about the technical uncertainties that their testing or in-process instruments may bring to a process. The company considers its biggest value-added service for its Distribution customers is the option to have calibration service performed on their new product purchases prior to shipment, allowing them to place newly acquired equipment directly into service upon receipt, saving downtime. The company also offers online procurement, credit card payment options, same day shipment of in-stock items, kitted products, the option to rent, training programs and a variety of custom product offerings. Items are regularly added to and deleted from its product offerings on the basis of customer demand, recommendations of suppliers, sales volumes and other factors. Because of the breadth of its product and service offerings, the company is often a one-stop shop for its customers who gain operational efficiency by dealing with just one distributor for most or all of their test and measurement instrumentation needs. The company continues to focus on higher margin channels, such as rentals to bolster profitability in the Distribution segment. The company focuses on brand consolidation along with inventory investments to support its overall strategy of being a value-added distributor that supports our customers and Service segment. Additional areas of focus include consumable products within the life science market which is intended to offset competitive pressures in the company’s legacy distribution business. Distribution Marketing and Sales: The company markets, creates demand and sells to its customers through multiple direct sales channels, including its website, digital and print advertising, proactive outbound sales and an inbound call center. The company’s outbound and inbound sales teams are staffed with technically trained personnel who are available to help guide product selection. The company’s website serves as a sales channel for its products and services, and provides search capability, detailed product information, in-stock availability, selection guides, demo videos and downloadable product specification sheets. The company has made investments in our website to implement the latest marketing technologies which allow it to provide an intuitive customer experience, with simple product comparison and quoting, ease at checkout and automated post-order follow-up. The company also operates and maintains several industry-specific service websites, obtained through recent acquisitions. For example, the URL www.pipettes.com was obtained in connection with the acquisition of TTE Laboratories, Inc. (now known as pipettes.com). Pipettes.com focuses on selling pipettes, pipette supplies and related services to customers. The company uses a multichannel approach to reach its customers and prospective customers including its master catalog, periodic supplemental catalogs, website, e-newsletters, and other direct sales and marketing programs. The company’s 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. The company continues to invest in back-end technologies designed to provide a seamless customer experience across all its marketing channels. As a result of strong relationships with the company’s product vendors and its historical marketing program results, it has the opportunity to carry out co-branded marketing initiatives, aimed at its existing customers and its prospective customer base, for which it receives cooperative advertising support. These co-branded marketing initiatives typically feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound sales efforts. Distribution Vendor Rebates: The company has agreements with certain product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales. Purchase rebates are calculated and recorded quarterly based upon the company’s 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. 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. Information Regarding Export Sales In fiscal year 2023 (year ended March 25, 2023), approximately 10% of the company’s total revenue resulted from sales to customers outside the United States. Of those export sales in fiscal year 2023, approximately 7% were denominated in U.S. dollars, 69% were denominated in Canadian dollars and 24% were denominated in Euros. Intellectual Property The company has federally registered trademarks for Transcat, CalTrak, C3 and Procision, which it considers to be of material importance to its business. The registrations for these trademarks are in good standing with the U.S. Patent & Trademark Office. The company’s CalTrak trademark is also registered in Canada for one class with the Canada Intellectual Property Office and in Puerto Rico. The company owns www.transcat.com, www.transcat.ca and pipettes.com among other Internet domain names. Seasonality The company’s business has certain historical seasonal factors. Historically, the company’s fiscal third and fourth quarters have been stronger than its fiscal first and second quarters due to the operating cycles of its industrial sector customers. The company’s Distribution segment has historically been strongest in its third fiscal quarter while Service has historically been strongest in its fourth fiscal quarter (year ended March 25, 2023). History Transcat, Inc. was founded in 1964. The company was incorporated in Ohio in 1964.