Investor Presentation July 2015 Lee D. Rudow John J. Zimmer - - PowerPoint PPT Presentation

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Investor Presentation July 2015 Lee D. Rudow John J. Zimmer President and CEO Sr. Vice President of Finance and CFO 1 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities

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1

Investor Presentation

July 2015 Lee D. Rudow

President and CEO

John J. Zimmer

  • Sr. Vice President of Finance and CFO
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2

Safe Harbor Statement

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and assumptions that often are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” and other similar words. All statements addressing operating performance, events,

  • r developments that Transcat, Inc. expects or anticipates will occur in the future, including

but not limited to statements relating to anticipated revenue, profit margins, sales

  • perations, capital expenditures, growth strategy, potential acquisitions, customer

preferences and changes in market conditions in the industries in which Transcat operates are forward-looking statements. Forward-looking statements should be evaluated in light

  • f important risk factors and uncertainties. These risk factors and uncertainties are more

fully described in Transcat’s Annual and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the Company’s underlying assumptions prove incorrect, actual results may vary materially from those currently

  • anticipated. In addition, undue reliance should not be placed on the Company’s forward-

looking statements. Except as required by law, the Company disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this presentation.

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3 3

Leader in Fragmented Calibration & Compliance Service Market and Distributor of Test, Measurement and Control Instrumentation

Market Capitalization $64.0 Million 52-Week Price Range $8.57- $10.90 Average Volume (3 mo.) 5,400 Recent Price $9.31 Common Shares Outstanding 6.9 Million Ownership: Institutions 54.8% Insiders 8.5% Adjusted EBITDA* (FY 2015)

$10.3 Million

EPS (FY 2015) $0.57

Market data as of June 25, 2015 [Source: Bloomberg]; ownership as of most recent filing * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA

 Built infrastructure and value position over 10 years  Long-term operating earnings to grow faster than revenue  Strong leadership in place to drive company to next level

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  • Full suite of services with a strong

customer base across multiple industries

  • Unique value proposition
  • Double digit growth through organic and

acquisition strategy

  • Strong operating leverage

Service - $51.8MM

(FY 2015)

Two Complementary Segments

58% 42%

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Service Distribution

  • Test Equipment used in R&D and

manufacturing (Temperature, Pressure and Electrical)

  • 40 year old market leading, core

business with large customer base

  • Strong cash generator
  • Supports Service Segment growth

Distribution - $71.8MM (FY 2015)

Record FY 2015 Revenue: $123.6mm

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5 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Consolidated Revenue

Executing our Strategy

Growing Revenue & Operating Income

($ in millions)

$118.5 $91.2 $110.0 $112.3 $123.6

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Consolidated Operating Income

Distribution Service

$6.8 $4.6 $5.4 $6.7 $5.9

All figures are rounded to the nearest million. Therefore totals shown in graphs may not equal the sum of the segments. * CAGR calculated FY 2011 – FY 2015

  • Achieved annual revenue

growth for 11th consecutive year in FY 2015

  • Record Q4 FY 2015 revenue

driven by growth in the Service segment

  • 7.9% consolidated revenue

CAGR*

  • 10.2% consolidated operating

income CAGR*

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$0.2 ($0.2) $1.3 $2.4 $3.7

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Operating Income

($ in millions)

Service Segment Operating Leverage

$31.3 $36.4 $40.7 $48.2 $51.8

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Revenue

  • Fiscal 2015 revenue

– Driven by organic and acquisition- related growth

  • 24 consecutive quarters of year-
  • ver-year Service segment

revenue growth

  • Significant operating leverage:

FY 2015 operating income increased 55.2% over the prior fiscal year period

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Leveraging Distribution to Drive Growth

$59.9 $73.6 $71.6 $70.3 $71.8

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Revenue

$4.4 $5.6 $4.6 $4.3 $3.1

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Operating Income

  • Distribution business continues

to perform relatively well in highly competitive market

  • Distribution gross margin

impacted by lower vendor rebates

– FY 2016 will not have rebate impact

  • Cost discipline and lower

performance-based compensation expense helped to partially offset Distribution gross margin pressure

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Strong Cash Generation

($ in millions)

  • Consolidated Adjusted EBITDA

CAGR of 9.7%**

  • 36.5% CAGR for Service

segment**

  • Distribution segment continues

to generate significant cash

$5.3 $6.8 $5.8 $5.4 $4.1 $1.8 $2.0 $3.1 $4.6 $6.1 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Distribution Service

Adjusted EBITDA*

$8.9 $7.1 $8.8 $10.0

* See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA. All figures are rounded to the nearest million. Therefore totals shown in graphs may not equal the sum of the segments.

$10.3

** CAGR calculated FY 2011 – FY 2015

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$2.8 $3.3 $3.7 $4.0 $4.0

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

3.1% 3.0% 3.3% 3.4% 3.3%

Bottom-line Performance

% of sales

$0.37 $0.43 $0.49 $0.54 $0.57

EPS

Net Income

  • 9.6% CAGR for net income*

($ in millions)

* CAGR calculated FY 2011 – FY 2015

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$5.3 $3.4 $8.0 $7.6 $12.2

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Long Term Debt

  • $16.0 million in availability under

revolving credit facility

  • FY 2015 CapEx focused on service

capabilities and IT upgrades

  • FY 2016 CapEx to focus on

increasing lab capabilities and capacity; Also includes additional assets for rental business

  • Financial flexibility to facilitate

acquisition strategy, satisfy working capital and capital expenditure needs

$1.6 $1.4 $2.7 $2.0 $3.5 $4.0

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016E*

Capital Expenditures

Balance Sheet Supports Acquisition Strategy

($ in millions)

10 10

* FY 2016 capital expenditure guidance provided as of May 19, 2015

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$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Capital Spend Acquisitions Shares Repurchase Current Quarter Ending Debt Balance

Historical Trailing 12 Month Key Investments and Current Quarter Debt Balance

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Generating Cash to Drive Key Investments

($ in thousands)

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MARKET, STRATEGY AND OUTLOOK

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13

25% 22% 10% 10% 20% 25% 40% 35%

1 Estimated Addressable Calibration Market 2 Percentage of Revenue (North America), management estimates

OEMs 3rd Party Service Providers In-house Laboratories

#2 in Market Share by Revenue for 3rd Party Service Providers2 $1.0 Billion Addressable Market¹

Transcat 13%

Tektronix Transcat Trescal SIMCO Electronics

Calibration Services Market

Regionals Others (Highly fragmented)

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Unique Service Value Proposition

Flexible Service Delivery Options:

  • Permanent on-site
  • Periodic on-site
  • Mobile
  • In-house
  • Pickup & Delivery

Fully Accredited Calibration Provider with Highest Quality in the Industry

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Broad and Diverse Blue Chip Customer Base

Industrial 29% Energy 8% Chemical 7% Other 24%

Percentage of Service Revenue *

Healthcare & Pharmaceutical 32%

*Revenue and Percentages as of FY 2015

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  • Outsourcing of Internal Labs
  • Integrated Sales Model –

Enterprise Sale

  • Leveraging Distribution Segment
  • Geographic Expansion
  • Increased Capabilities /Expertise
  • Bolt-On - Leverage Infrastructure
  • Majority of opportunities:

Revenue range of $1 – $5 million

  • Criteria: 4-6x EBITDA, Target IRR of 15%

Acquisition Strategy Organic Growth Strategy

Service Growth Strategy

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Serve an Expanded Healthcare Market

  • Transcat now provides the

entire suite of services

  • Unique among competition
  • Acquired Process Calibration,

Validation, Pipettes, and Analytical Services in July 2012

  • Recently closed two significant
  • rganic deals in the analytical

space

Typical Suite of Services

Standard Calibration Services Process Calibration Validation Pipettes Analytical

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Full Suite of Products and Services

Calibration Services Product Distribution Validation & Analytical Services Consultation & Remediation

A Total Solution

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Investments Focused on Growth

Calibration Technologies, Inc. Acquisition

2015 2010 2010 2011 2011 2011 2012 2013 2008 Westcon, Inc. United Scale and Engineering Corp. ACA Tmetrix Inc. Wind Turbine Tools Inc. CMC Instrument Services, Inc. Newark Calibration Services Anacor Compliance Services Cal-Matrix Metrology Inc. Ulrich Metrology, Inc. 2014

Acquired Apex Metrology Solutions March 6, 2015

  • A provider of accredited and commercial calibrations that specializes in providing 3D

metrology services

  • Expands mid-west footprint to serve the healthcare and life science industries in the region

2015

Acquired Calibration Technologies, Inc. June 22, 2015

  • Specializes in analytical instrument services: qualification, validation, calibration and repair
  • Deepens presence in the Life Science industry by expanding the breadth and depth of
  • fferings and provides a valued customer base deeply rooted in the pharmaceutical industry
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  • Customizable, web-based

software

  • Designed to meet the critical

needs of highly regulated manufacturing environments

  • Strengthened value

proposition

  • Positive customer reaction to

software capabilities

Cost • Compliance • Control

Investments Focused on Growth

C3 Asset Management Software

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Robust promotional and lead nurturing engine Provides greater flexibility to adapt to rapidly changing e-commerce market Increased efficiency in content management Strong SEO integration resulting in greater relevant traffic End goal of increased relevant traffic with a greater conversion rate

Investments Focused on Growth

Web 3.0 – new e-commerce and CMS platform

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FY 2016 Outlook*

  • Expect double-digit Service segment revenue growth

− Leverage recent acquisitions and investments such as the new website and C3 software − Continue to develop and grow Service pipeline, particularly in the Life Science space

  • Expect Distribution sales growth in the low single digit range

− Capture Distribution market share by expanding product lines and introducing innovative product bundles

  • Continue to evaluate service market acquisition opportunities

Consolidated operating income growth in the mid-teens

* FY 2016 outlook and guidance provided as of May 19, 2015

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Investor Presentation

July 2015

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SUPPLEMENTAL INFORMATION

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FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Service Operating Income (loss) $ 192 $ (175) $ 1,311 $ 2,379 $ 3,693 +Depreciation & Amortization 1,377 1,959 1,740 2,144 2,362 +Other (Expense) / Income

  • (37)

(84) (141) (138) +Noncash Stock Comp 202 263 150 230 224 Service Adjusted EBITDA $ 1,771 $ 2,010 $ 3,117 $ 4,612 $ 6,141 Distribution Operating Income $ 4,395 $ 5,603 $ 4,635 $ 4,326 $ 3,075 +Depreciation & Amortization 673 937 962 801 728 +Other (Expense) / Income

  • (11)

(27) 12 27 +Noncash Stock Comp 226 290 193 297 283 Distribution Adjusted EBITDA $ 5,312 $ 6,819 $ 5,763 $ 5,436 $ 4,113 Service $ 1,771 $ 2,010 $ 3,117 $ 4,612 $ 6,141 Distribution $ 5,312 $ 6,819 $ 5,763 $ 5,436 $ 4,113 Total Adjusted EBITDA $ 7,083 $ 8,829 $ 8,880 $ 10,048 $ 10,254

Adjusted EBITDA Reconciliation

($ in thousands)

The Company believes that when used in conjunction with GAAP measures, Adjusted EBITDA, or earnings before interest, income taxes, depreciation and amortization, other income and expenses, and noncash stock compensation expense, which is a non-GAAP measure, allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its

  • perating results. Adjusted EBITDA is not calculated through the application of GAAP and is not the required form of disclosure by the

Securities and Exchange Commission. As such, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. The Adjusted EBITDA chart excludes an unallocated amount of $0.2 million for FY 2011. This amount includes previously unallocated administrative-related depreciation, amortization and other non-operating expense. These items have been allocated by segment beginning in FY 2012.

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Scott Sutter

Vice President of Sales

  • 16 Years Service

Segment Experience, Simco Enterprise Account Development Executive

  • Joined Transcat in 2013

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Seasoned Executive Team Driving Growth

Rob Flack

Vice President of Operations

  • 17 Years Service Segment

Experience, Davis Calibration and Tektronix Service Solutions

  • Joined Transcat in 2014

John Zimmer

Senior VP, Finance and CFO Joined Transcat in 2006

Jay Woychick

Vice President of Inside Sales Joined Transcat in 2000

Mike West

Vice President of Marketing Joined Transcat in 2014

Jennifer Nelson

Vice President of Human Resources Joined Transcat in 2012

Lee Rudow

President & CEO

  • 27 Years of Industry Experience
  • Demonstrated Growth Record
  • Joined Transcat in 2011

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