march 16, roth 28th annual conference 2016€¦ · fy 2012 fy 2013 fy 2014 fy 2015 q3 fy 2016 ttm...

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March 16, 2016

Lee D. RudowPresident and CEO

Michael J. TschidererVice President of Finance

ROTH 28th Annual Conference

2© 2016 Transcat Inc.

Safe Harbor StatementThis 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, cash flows, operating income, growth strategy, segment growth, potential acquisitions, market position, 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.


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

Market Capitalization $67.3 Million

52‐Week Price Range $8.70‐ $10.50

Average Volume (3 mo.) 8,200

Recent Price $9.75

Common Shares Outstanding 6.9 MillionOwnership: Institutions 55%

Insiders 8%Adjusted EBITDA* (Q3 FY16 TTM) $11.0 MillionEPS (Q3 FY16 TTM) $0.63

Achieving critical revenue mass in the Service segment

Long‐term operating earnings to grow faster than revenue

Strong leadership in place to drive company to next level

Market data as of March 9, 2016 [Source: Bloomberg]; ownership as of most recent filing * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA


Two Complementary Segments

$56MM(46%)

$65MM(54%)

Service Distribution

Double digit Service growth Unique value proposition Strong operating leverage

Service driven by regulation Strong cash generation Leverage between segments

Q3 FY 2016 TTM Revenue: $121.6MM


24% 22%

10%10%

20%

25% 40%

35%

1 Estimated Addressable North American Calibration Market2 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

Transcat14%

Tektronix

Transcat

Trescal

SIMCO Electronics

Calibration Services Market

Regionals ($5mm‐$15mm)

Others (highly fragmented; $500k‐$5mm)


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


Broad and Diverse Blue Chip Customer Base

*Revenue and Percentages as of FY 2015

Industrial 29%

Chemical 7%Other

24%

Percentage of Service Revenue *

Life Science / FDA‐regulated

32% Energy / Utilities8%


Serve an expanded Life Science market

Mission critical services

Full Suite of Products and Services

Superior Quality

New Instrument Calibration &

Rental

Calibration Services

Validation & LaboratoryServices

Product Distribution

Unique Among Competition

9

Financial Results


FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Consolidated Revenue

Executing our StrategyGrowing Revenue & Operating Income

$123.6$110.0 $112.3 $118.5 $121.6

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Consolidated Operating Income

$7.2

$5.4 $5.9$6.8$6.7

($ in millions)

Distribution Service

© 2016 Transcat Inc.

$36.4 $40.7$48.2 $51.8 $56.1

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Service Revenue

$(0.2)

$1.3 $2.4

$3.7 $4.5

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Service Operating Income

Service Segment Operating Leverage

Has grown to 46% of total revenue

27 consecutive quarters of year‐over‐year growth

Strong operating leverage: Revenue: +11% Operating Income: +49% (on TTM basis)

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($ in millions)

(0.5%)

3.2% 4.9% 7.1% 8.0%% of Service Revenue


Leveraging Distribution to Drive Growth

$73.6 $71.6 $70.3 $71.8$65.5

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Distribution Sales

$5.6$4.6 $4.3

$3.1 $2.7

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Distribution Operating Income

Sales impacted by:− Soft oil and gas market − Strong U.S. dollar

Opportunities– Rental service – Expanding SKUs– Web platform

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($ in millions)

7.6% 6.5% 6.2% 4.3% 4.1% % of Distribution Sales

© 2016 Transcat Inc. 13

$6.8 $5.8 $5.4 $4.1 $3.7

$2.0 $3.1 $4.6 $6.1 $7.3

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Adjusted EBITDA*

Strong Cash Generation and Bottom‐Line

$10.0$8.8 $8.9$10.3

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

CAGR calculated FY2012 – Q3 FY 2016 TTM

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

$11.0

($ in millions)

Consolidated Adjusted EBITDA CAGR of 6%

Service: +41% CAGR

Distribution segment generates significant cash

Net income: +8% CAGR

$3.3 $3.7 $4.0 $4.0 $4.5

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Net Income

$0.43 $0.49 $0.54 $0.57 $0.63EPS

Distribution Service


$3.4

$8.0 $7.6

$12.2$10.5

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016

Long Term Debt

10.9%

20.2% 20.2%26.2%

22.2%

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016

Debt to Total Capitalization

Balance Sheet Supports Acquisition Strategy

14

($ in millions)

$30 million revolving credit facility

Financial flexibility

– Meets working capital and capital expenditure needs

Completed two acquisitions for ~$12 million in Q4 FY16


$1.4

$2.7$2.0

$3.5

$3.8

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

Capital Expenditures$4.0‐$4.5

FY 2016 YTD

Disciplined Capital Deployment

15* FY 2016 capital expenditure guidance provided as of January 25, 2016

($ in millions)

FY 2016 CapEx– Increasing lab capabilities – Adding lab capacity– Assets for rental business

Objective: Consistently generate returns in excess of cost of capital

10.7% 10.6% 10.4% 9.2% 9.8%

FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016TTM

Return on Invested Capital(ROIC)


FY 2009 to Q3 FY 2016($ in millions)

$0

$10

$20

$30

$40

$50

$60

$70

FY2009 Cash &Investments,

Net

NetIncome

D&A andWorking Capital

Change

Financing/Other FX Effect CapitalExpenditures

BusinessAcquisitions

Repurchase ofCommon Stock

Q3 FY2016Cash &

Investments,Net

$0.2

$23.4

$19.6

$2.4 ($17.5)

($32.6)

$0.2

Uses of CashSources of Cash

($8.2)

Generating Cash to Drive Key Investments

$12.9

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Growth Strategy and Outlook


Taking market share

Expanding addressable market

Outsourcing of internal labs

Upgraded sales talent

Integrated sales model –Enterprise sales

Leveraging Distribution segment

Growth‐focused investments

Service Organic Growth Strategy

Organic GrowthStrategy

AcquisitionStrategy


Customizable, web‐based software Meets the critical needs of highly regulated

manufacturing environments Strengthened value proposition Positive customer reaction to software capabilities

C3 Asset Management Software

E‐commerce and CMS platform Flexible and adaptable to changing e‐commerce market Robust promotional and lead nurturing engine Strong SEO integration Increased efficiency in content management Goals: ‐ Increase relevant traffic

‐ Higher conversion rate

Digital Transformation to Drive Growth


Drivers:

− Geographic Expansion

− Increased Capabilities /Expertise

− Bolt‐On – Leverage Infrastructure

Majority of opportunities: Revenue range of $500K – $5MM

Criteria: 4‐6x EBITDA Target IRR of 15%

Service Acquisition Strategy

Organic GrowthStrategy

AcquisitionStrategy


FY 2011 FY 2013FY 2009

Westcon

United Scale and Engineering

ACA Tmetrix

Wind Turbine Tools

CMC Instrument Services

Newark Calibration Services

Anacor Compliance Services

Cal‐Matrix Metrology

Ulrich Metrology

Calibration Technologies

Apex Metrology Solutions

Anmar Metrology

FY 2015 FY 2016FY 2012

Executing Acquisition Strategy

FY 2010

Spectrum Technologies

Dispersion Laboratory


Acquisition Drivers

Cal‐Matrix Metrology

Ulrich Metrology

Calibration Technologies

Anmar Metrology

Spectrum Technologies

Dispersion Laboratory

Geographic Expansion

Increased Capabilities

Leveraged Infrastructure


* Long‐term objectives provided as of January 25, 2016

Financial performance (within 5 years)

− $175 million to $200 million revenue

− Double‐digit EBITDA margins

Service segment

− Acquisition strategy and organic sales plan to drive segment double‐digit top line growth

Distribution Segment

− Moving to more diversified portfolio combined with value‐added initiatives

− Continue as a solid performer and generator of cash

Long‐term Objectives*

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March 16, 2016 ROTH 28th Annual Conference

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Supplemental Information


($ 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 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.

FY 2012 FY 2013 FY 2014 FY 2015Q3 FY 2016

TTM

Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,483+Depreciation & Amortization 1,959 1,740 2,144 2,362 2,769+Other (Expense) / Income (37)

263(84)150

(141)230

(138)224

(61)+Noncash Stock Comp 144

Service Adjusted EBITDA $ 2,010 $ 3,117 $ 4,612 $ 6,141 $ 7,335

Distribution Operating Income $ 5,603 $ 4,635 $ 4,326 $ 3,075 $ 2,712+Depreciation & Amortization 937 962 801 728 764+Other (Expense) / Income (11)

290(27)193

12297

27283

21+Noncash Stock Comp 173

Distribution Adjusted EBITDA $ 6,819 $ 5,763 $ 5,436 $ 4,113 $ 3,670

Service $ 2,010 $ 3,117 $ 4,612 $ 6,141 $ 7,335Distribution $ 6,819 $ 5,763 $ 5,436 $ 4,113 $ 3,670Total Adjusted EBITDA $ 8,829 $ 8,880 $ 10,048 $ 10,254 $ 11,005

Adjusted EBITDA Reconciliation


Seasoned Executive Team Driving Growth

Scott D. SutterVice President of Sales

16 Years Service Segment Experience, Simco Enterprise Account Development Executive

Joined Transcat in 2013

Rob A. FlackVice President of Operations

17 Years Service Segment Experience, Davis Calibration and Tektronix Service Solutions


John J. ZimmerSenior VP of Finance and CFO

Joined Transcat in 2006Retiring 3/27/2016

Mike W. WestVice President of MarketingJoined Transcat in 2014

Jennifer J. NelsonVice President of Human Resources


Lee D. RudowPresident & CEO

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

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Michael J. TschidererVice President of FinanceJoined Transcat in 2015

Will become CFO on 3/27/2016

march 16, roth 28th annual conference 2016€¦ · fy 2012 fy 2013 fy 2014 fy 2015 q3 fy 2016 ttm...

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