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1 June 22 2016 Lee D. Rudow President and CEO Michael J. Tschiderer Chief Financial Officer Midwest Investment Conference

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Page 1: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

1

June 22 2016

Lee D. RudowPresident and CEO

Michael J. TschidererChief Financial Officer

Midwest Investment Conference 

Page 2: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

2© 2016 Transcat Inc.

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.  Forward‐looking statements 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.

Page 3: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

3© 2016 Transcat Inc.

Leader in Fragmented Calibration & Laboratory Instrument Service Market

Value‐Added Distributor of Test, Measurement & Control Instrumentation

Market Capitalization $70.0 Million

52‐Week Price Range $8.70‐ $11.85

Average Volume (3 mo.) 6,000

Recent Price $10.14

Common Shares Outstanding 6.9 MillionOwnership: Institutions 55%

Insiders 8%Adjusted EBITDA* (FY 2016) $10.6 MillionEPS (FY 2016) $0.58

Service segment is our primary growth engine 

Achieved 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 June 17, 2016 [Source: Bloomberg]; ownership as of most recent filing * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers  regarding Adjusted EBITDA

Page 4: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

4© 2016 Transcat Inc.

Two Complementary Segments

$59.2MM(48%)

$63.0MM(52%)

Service Distribution

FY 2016 Revenue: $122.2MM Service

– Double‐digit growth

– Recurring revenue stream

– Strong operating leverage

– Driven by regulation 

Unique value proposition

Strong cash generation

Leverage between segments

Page 5: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

5© 2016 Transcat Inc.

23%22%

10%10%

20%

25%OEMs

35% In‐house 

Laboratories 

1 Estimated Addressable North American Calibration Market2 Percentage of Revenue (North America), management estimates

#2 in Market Share by Revenue for 3rd Party Service Providers2

$1.0 Billion Addressable Market¹

Transcat15%

Tektronix

Transcat

Trescal 

SIMCO Electronics

Calibration Services Market

Regionals ($5mm‐$15mm)

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

40%3rd Party Service Providers

Page 6: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

6© 2016 Transcat Inc.

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

Page 7: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

7© 2016 Transcat Inc.

Broad and Diverse Blue Chip Customer Base

*Revenue and Percentages as of FY 2016

Other24%

Chemical 6%

Industrial24%

Percentage of Service Revenue *

Life Science / FDA‐regulated 

39%Energy / Utilities

7%

Page 8: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

8© 2016 Transcat Inc.

Serve an expanded Life Science market

Mission critical services

Full Suite of Products and Services

Superior Quality

New Instrument Calibration

Calibration Services

Validation & 

LaboratoryServices

Product Distribution and Rental (New & Used Equipment)

Unique Among Competition

Page 9: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

9

Financial Results

Page 10: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

10© 2016 Transcat Inc.

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Consolidated Revenue

$123.6$110.0 $112.3 $118.5 $122.2

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Consolidated Operating Income

$6.3$5.4 $5.9

$6.8$6.7

Distribution Service

Consolidated Results($ in millions)

Page 11: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

© 2016 Transcat Inc.

$36.4 $40.7$48.2 $51.8 $59.2

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Service Revenue

$(0.2)

$1.3 $2.4 

$3.7 $4.2 

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Service Operating Income

Record Service Segment Performance

Revenue increased 14% − Driven by organic growth and 

acquisitions 

Milestone: exceeded distribution in revenue (53% of Q4)

28 consecutive quarters of YOY revenue growth

Operating income grew 13%

− Margin impacted by incremental expenses from acquired businesses and one‐time acquisition costs 

11

($ in millions)

(0.5%)

3.2% 4.9% 7.1% 7.0% % of Service Revenue

Page 12: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

© 2016 Transcat Inc.

Focus: Stabilizing Distribution

$73.6 $71.6 $70.3 $71.8$63.0

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Distribution Sales

$5.6$4.6 $4.3

$3.1$2.1

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Distribution Operating Income

Sales impacted by:− Soft oil and gas market − Strong U.S. dollar− More on‐line distributors

Opportunities– Rental service – Used equipment– Expanding SKUs– Continue our digital 

transformation

12

($ in millions)

7.6% 6.5% 6.2% 4.3% 3.4% % of Distribution Sales

Page 13: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

© 2016 Transcat Inc. 13

$6.8 $5.8 $5.4 $4.1 $3.1

$2.0 $3.1 $4.6 $6.1 $7.5

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

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 – FY2016

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

$10.6

($ in millions)

Service segment Adjusted EBITDA+22% in FY16+39% CAGR

Distribution segment generates significant cash

Consolidated Adjusted EBITDA  margin up 30 bps to 8.6% in FY16

Net income: +6% CAGR$3.3 $3.7 $4.0 $4.0 $4.1

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Income

$0.43          $0.49     $0.54          $0.57         $0.58EPS

Distribution Service

Page 14: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

© 2016 Transcat Inc.

$3.4$8.0 $7.6

$12.2$19.1

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Long Term Debt

10.9%

20.2% 20.2%26.2%

32.9%

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Debt to Total Capitalization

Balance Sheet Supports Acquisition Strategy

14

($ in millions)

~$14 million in acquisitions in FY16

Financial flexibility 

– Strong cash generation and expanded credit facility

– Added $10.0 million term note (subsequent to fiscal year‐end)

– Funded Q1 FY17 Excalibur acquisition with term note

• ~$27M in borrowings after acquisition 

– Total debt < 2x proforma Adjusted EBITDA

Page 15: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

© 2016 Transcat Inc.

$1.4$2.7 $2.0

$3.5 $4.1

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E*

Capital Expenditures

Disciplined Capital Deployment

15

($ in millions)

FY 2017 CapEx– Assets for growing rental 

business– Lab capabilities/maintenance – Software/IT

Objective: Consistently generate returns in excess of cost of capital

10.7% 10.6% 10.4% 9.2% 8.6%

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Return on Invested Capital(ROIC)

* FY 2017 capital expenditure guidance provided as of May 17, 2016

$5.0‐$5.5

Page 16: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

16© 2016 Transcat Inc.

FY 2009 to FY 2016($ in millions)

$0

$10

$20

$30

$40

$50

$60

$70

$80

FY2009 Cash &Investments,

Net

NetIncome

D&A andWorking Capital

Change

Financing/Other FX Effect CapitalExpenditures

BusinessAcquisitions

Repurchase ofCommon Stock

FY2016Cash &

Investments,Net

$0.2

$24.9

$21.6

$2.0 ($17.8)

($43.6)

$0.6

Uses of CashSources of Cash

($8.2)

Generating Cash to Drive Key Investments

$21.5

Page 17: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

17

Growth Strategy and Outlook

Page 18: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

18© 2016 Transcat Inc.

Taking market share

Outsourcing of internal labs

Upgraded sales talent

Integrated sales model –Enterprise sales

Leveraging Distribution segment

Growth‐focused investments

Expanding addressable market

Service Organic Growth Strategy

Organic GrowthStrategy

AcquisitionStrategy

Page 19: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

19© 2016 Transcat Inc.

Customizable, web‐based software integrated with proprietary CalTrak system 

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

Page 20: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

20© 2016 Transcat Inc.

Drivers:

− Geographic Expansion

− Increased Capabilities /Expertise

− Bolt‐On / Leverage Infrastructure

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

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

Service Acquisition Strategy

Organic GrowthStrategy

AcquisitionStrategy

Page 21: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

21© 2016 Transcat Inc.

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

FY 2017

Excalibur Engineering

Page 22: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

22© 2016 Transcat Inc.

Acquisition Drivers

Calibration Technologies

Anmar Metrology

Spectrum Technologies

Dispersion Laboratory

Geographic Expansion

Increased Capabilities

Leveraged Infrastructure

Excalibur Engineering

Page 23: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

23© 2016 Transcat Inc.

Double‐digit Service segment revenue growth− Expect strong organic growth − Achieve sales and costs synergies to drive operating leverage and margin 

expansion− Remain selective and disciplined in acquisition approach  

Stabilize Distribution segment− Still face headwinds − Expand rental business and leverage digital transformation

− Excalibur acquisition brings a used equipment distribution business

$175 million to $200 million revenue Double‐digit Adjusted EBITDA margins

* Outlook provided as of May 17, 2016

FY 2017 Outlook* 

Long‐term Objectives (within 5 years)

Page 24: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

24

June 22 2016 Midwest Investment Conference 

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25

Supplemental Information

Page 26: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

26© 2016 Transcat Inc.

($ 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. 

Adjusted EBITDA ReconciliationFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Service Operating Income (loss) $     (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization 1,959  1,740 2,144 2,362 3,216 +Other (Expense) / Income (37)

263(84)150

(141)230

(138)224

(64)+Noncash Stock Comp 171 

Service Adjusted EBITDA $    2,010  $  3,117  $   4,612 $   6,141 $ 7,478 

Distribution Operating Income $    5,603  $  4,635  $  4,326 $  3,075 $    2,147 +Depreciation & Amortization 937  962  801 728 730 +Other (Expense) / Income (11)

290(27)193

12297

27283

16 +Noncash Stock Comp 188 

Distribution Adjusted EBITDA $   6,819  $    5,763  $  5,436 $  4,113 $    3,081 

Service $    2,010  $   3,117  $  4,612 $    6,141 $ 7,478Distribution $    6,819  $   5,763  $   5,436 $    4,113 $    3,081 Total Adjusted EBITDA $  8,829  $  8,880  $  10,048 $  10,254 $  10,559 

Page 27: Midwest Investment Conference 2016 - Transcat...FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Service Operating Income (loss) $ (175) $ 1,311 $ 2,379 $ 3,693 $ 4,155 +Depreciation & Amortization

27© 2016 Transcat Inc.

Seasoned Executive Team Driving Growth

Scott D. SutterVice President 

of Sales

16 Years Service Segment Experience, SimcoEnterprise Account Development Executive

Joined Transcat in 2013

Rob A. FlackVice President of Operations

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

Joined Transcat in 2014

Jennifer J. Nelson

Vice President of Human Resources

Joined Transcat in 2012

Lee D. RudowPresident and Chief Executive Officer

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

27

Mike W. WestVice President of Marketing

Joined Transcat in 2014

Michael J. TschidererChief Financial 

Officer

Joined Transcat in 2015