Given the market’s ability to turn otherwise disappointing results into what everybody seems to believe is a “buying opportunity” I thought I would make a couple of comments on yesterdays Q1 2025 results from the folks over at TRNS. The shares may currently be down 10%+, but have no fear, perhaps the market is still searching for the silver lining in their press release or perhaps investors will glean some hidden meaning from a comment in the conference call as the excuse to hit the bid and buy, just as they seem to do in practically every other company we seem to be following.
Transcat (TRNS) announced revenues of $66.7M in Q1 2025 vs. $60.6M in Q1 2024. Gross margins, likewise, were higher, coming in at 34% vs. 30.9%%, and “adjusted” EBITDA margins were 15.3% vs. 14.0%. EPS hit 48 cents a shares vs. 38 cents, and “adjusted” EPS hit 68 cents vs. 52 cents.
What’s not to love, right? Revenues up 10%, gross profits up 21.1%, “adjusted” EBITDA up 20.4%, and the company expecting “another year of organic Service revenue growth in the high single-digit to low double-digit range when normalized for the extra week in fiscal 2024 and gross margin expansion.” Though no mention of their distribution business, it sounds like business couldn’t be better.
Well, not so fast.