jefferies global industrials conference - transcat -...

Jefferies Global Industrials Conference

August 14, 2014

Lee D. Rudow President and CEO

John J. Zimmer Sr. Vice President of Finance and CFO

Safe Harbor Statement

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

1. Built Infrastructure and Value Position Over 10 Years

2. Reached Inflection Point – Expect Operating Earnings to Grow Faster than Revenue

3. New Leadership in Place to Drive Company to Next Level

Market Capitalization $61.2 Million

52-Week Price Range $7.24 - $10.90

Average Volume (3 mo.) 23.2 Thousand

Recent Price $9.01

Common Shares Outstanding $6.8 Million

Ownership: Institutions 51% Insiders 9%

Adjusted EBITDA (TTM)* $9.6 Million

EPS (TTM) $0.53

Market data as of August 11, 2014 [Source: Bloomberg]; ownership as of most recent filing * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA

Distribution and Service Segment Revenue

$70.3 $48.6

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Service Distribution

• Test Equipment used in R&D and Manufacturing (Temperature, Pressure and Electrical…)

• 40 Year Old Core Business – Market Leader

• Strong Cash Generator

• Supports Service Segment Growth

Distribution - $70.3MM (Q1 FY15 TTM)

• Calibration is Critical to Quality – Ensures Test Instruments Perform to Manufacture Specification

• Unique Value Proposition

• Achieved Critical Mass

• Double Digit Growth

Service - $48.6MM (Q1 FY15 TTM)

Growing Revenue & Operating Income

Operating Income

($ in millions)

5

FY2011 FY2012 FY2013 FY2014 Q1 FY2015

TTM

Consolidated Revenue

$118.5

$91.2 $110.0 $112.3

FY2011 FY2012 FY2013 FY2014 Q1 FY2015

TTM

$4.6 $5.4

$6.7 $5.9

$6.3

$118.9


*CAGR calculated FY2011 – Q1 FY2015 TTM

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Cost

Volume

Service

Inflection Point

Volume

Distribution

Critical Mass – Service Inflection Point

Now

Moving forward operating income should grow at a faster rate than revenue

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29%

30%

41%

1 Addressable Calibration Market is estimated to be $1.0 billion 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

Expanded Addressable Market¹

24% 23%

Transcat 16%

10% 13%

7%

Others Tektronix Transcat Trescal SIMCO Electronics

Micro Precision Calibration Technical Maintenance, Inc. ESSCO Calibration Precision Measurements, INC.

Calibration Services Market

Unique Service Value Proposition

Fully Accredited Calibration Provider with Highest Quality in the Industry

Service Models: Onsite Pickup & Delivery Outsourcing Solution

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Broad and Diverse Blue Chip Customer Base

Industrial 29%

Energy 8% Chemical

7% Other 22%

Percentage of Service Revenue *

Life Sciences & Pharmaceutical

34%

*Revenue and Percentages as of the end of FY 2014

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Growth Strategy

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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

Acquisition Strategy

Organic Growth Strategy

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Service Growth Strategy

Large number of acquisition prospects due to highly fragmented Services market

Westcon, Inc. August 2008

United Scale & Engineering Corp. Jan 2010

ACA Tmetrix Inc. Lab in Canada Nov 2010

Wind Turbine Tools Inc. Jan 2011

CMC Instrument Services, Inc. April 2011

Newark Calibration Services Sep 2011

Anacor Compliance Services July 2012

Cal-Matrix Metrology Inc. Jan 2013

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Successful Acquisition Strategy

Expandable Life Science Market

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Typical Suite of Services Life Science Company

Calibration Standards

Process Calibration

Validation

Pipettes

Analytical

Scott Sutter Vice President

of Sales

• 15 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

Business Development

• 16 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


John Hennessy Vice President of Marketing


Rainer Stellrecht Vice President of Laboratory

Operations Joined Transcat in 1977

Mike Craig Vice President of Human

Resources Joined Transcat in 2009

Lee Rudow President & CEO

● 26 Years of Industry Experience ● Demonstrated Growth Record ● Started with Transcat 2011

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Top-line Growth

$59.9 $73.6 $71.6 $70.3 $70.3

$31.3

$36.4 $40.7 $48.2 $48.6

FY2011 FY2012 FY2013 FY2014 Q1 FY15 TTM

$118.5

$91.2

$110.0 $112.3 $118.9

• 9% consolidated sales CAGR*

• Q1 Service segment revenue increased 3.4% to $12.1 million due to organic initiatives

• Q1 Distribution segment performed relatively well in very competitive market



Strong Cash Generation ($ in millions)

10% consolidated EBITDA CAGR**

32% Service segment CAGR**

Service segment Q1 FY15 TTM up 7.8% over Q1 FY14 TTM

Strengthened earnings power

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$5.3 $6.8

$5.8 $5.4 $5.2

$1.8

$2.0 $3.1 $4.6 $4.4

FY 2011 FY 2012 FY 2013 FY 2014 Q1 FY 2015 TTM

Distribution Segment Service Segment

* See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA.

1 The chart above excludes unallocated amount of $0.2 million for FY11. This amount includes previously unallocated administrative-related depreciation, amortization and other non-operating expense. These items have been allocated by segment beginning in fiscal year 2012.

Adjusted EBITDA* $10.0

$7.1

$8.8 $8.9

1

All figures are rounded to the nearest million; therefore, totals shown in graphs may not equal the sum of the segments.

$9.6

**CAGR calculated FY2011 – Q1 FY2015 TTM

$2.8 $3.3

$3.7 $4.0 $3.7

FY 2011 FY 2012 FY 2013 FY 2014 Q1 FY15 TTM

Net Income

3.1% 3.0%

3.3% 3.4%

3.1%

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• Net income CAGR of 9% since FY 2011*

Stock Repurchases:

• 100,000 Shares @ $7.00 per share – July 2013

• 700,000 Shares @ $8.10 per share – October 2013

% of sales

Bottom-line Performance

$0.37 $0.43 $0.49 $0.54 $0.53 EPS

($ in millions)


$5.3 $3.4

$8.0 $7.6 $10.8

FY 2011 FY 2012 FY 2013 FY 2014 Q1 FY 2015

Long Term Debt

18

• Low debt levels to facilitate acquisition strategy, satisfy working capital and capital expenditure needs

• $9.2 million in availability under revolving credit facility

• ROA target of 10%

$1.6 $1.4

$2.7 $2.0

$0.7 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Est

Capital Expenditures $3.0-$3.5

7.2% 7.6% 7.4% 7.3% 6.9%

FY 2011 FY 2012 FY 2013 FY 2014 Q1 FY 2015

Return on Assets

Balance Sheet Supports Acquisition Strategy

Q1 Actual

($ in millions)

Why Invest In Transcat?

Expanded Addressable Markets by Vertically Integrating Service Segment Capabilities

Scalable Business Model with Operating Leverage

Experienced Management Team – Demonstrated Track Record

Flexible Balance Sheet and Strong Cash Flow

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Jefferies Global Industrials Conference

August 14, 2014

SUPPLEMENTAL INFORMATION

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Adjusted EBITDA Reconciliation ($ in thousands)

The Company believes that when used in conjunction with GAAP measures, Adjusted EBITDA, or earnings before interest, taxes , depreciation and amortization, 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 operating 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 FY11. This amount includes previously unallocated administrative-related depreciation, amortization and other non-operating expense. These items have been allocated by segment beginning in fiscal year 2012.

FY 2011 FY 2012 FY 2013 FY 2014 Q1 FY15

TTM

Service Operating Income (loss) $ 192 $ (175) $ 1,311 $ 2,379 $ 2,185 +Depreciation & Amortization 1,377 1,959 1,740 2,144 2,077 +Other (Expense) / Income - (37) (84) (141) (142)

+Noncash Stock Comp 202 263 150 230 250 Service Adjusted EBITDA $ 1,771 $ 2,010 $ 3,117 $ 4,612 $ 4,370

Distribution Operating Income $ 4,395 $ 5,603 $ 4,635 $ 4,326 $ 4,127 +Depreciation & Amortization 673 937 962 801 763 +Other (Expense) / Income - (11) (27) 12 (23)

+Noncash Stock Comp 226 290 193 297 319 Distribution Adjusted EBITDA $ 5,312 $ 6,819 $ 5,763 $ 5,436 $ 5,186

Service $ 1,771 $ 2,010 $ 3,117 $ 4,612 $ 4,370 Distribution $ 5,312 $ 6,819 $ 5,763 $ 5,436 $ 5,186 Total Adjusted EBITDA $ 7,083 $ 8,829 $ 8,880 $ 10,048 $ 9,556

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