Transcat, Inc. · NASDAQ:TRNS
Transcat — Sidoti Emerging Growth Conference 2016
28 slides from Transcat's conference presentation, Nov 1, 2016
Slide 1: Sidoti Emerging Growth Conference
Nov 1 Sidoti Emerging Growth 2016 Conference Lee D. Rudow President and CEO Michael J. Tschiderer Chief Financial Officer 1
Slide 2: Safe Harbor Statement
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 state
Slide 3: A Leader in Fragmented Calibration & Laboratory Instrument Service Market
A Leader in Fragmented Calibration & Laboratory Instrument Service Market Value-Added Distributor of Test, Measurement & Control Instrumentation Service segment is our primary growth engine Achieved critical revenue mass in the Service segment Distribution gaining traction through diversificat
Slide 4: Two Complementary Segments
Two Complementary Segments Q2 FY 2017 TTM Revenue: $130.7MM Service – Double-digit growth – Recurring revenue stream – Strong operating leverage Service Distribution – Driven by regulation $65.6MM $65.1MM (50%) (50%) Unique value proposition Strong cash generation Leverage between segments ©
Slide 5: Calibration Services Market
Calibration Services Market $1.0 Billion Addressable Market¹ #2 in Market Share by Revenue for 3rd Party Service Providers2 22% 25% 40% 20% OEMs 3rd Party Service Transcat Providers 18% 19% 35% 11% In-house 10% Laboratories Tektronix Transcat Regionals ($5mm-$15mm) Trescal Others (highly fragmented;
Slide 6: Unique Service Value Proposition
Unique Service Value Proposition 22 Locations to Serve Customers in the U.S., Canada and Puerto Rico Flexible Service Delivery Options: Permanent on-site Periodic on-site Mobile In-house Pickup & Delivery © 2016 Transcat Inc. 6
Slide 7: Broad and Diverse Blue Chip Customer Base
Broad and Diverse Blue Chip Customer Base Percentage of Service Revenue* Other 18% Aerospace & Defense Life Science / 5% FDA-regulated 43% Chemical 6% Energy/Utilities Industrial 7% 21% * Company estimates © 2016 Transcat Inc. 7
Slide 8: Full Suite of Products and Services
Full Suite of Products and Services Unique Among Competition Validation Product New Distribution Calibration & Instrument and Rental Services Laboratory Calibration (New & Used Services Equipment) Superior Quality Serve an expanded Life Science market Mission critical services © 2016 Transcat In
Slide 9: Financial Results
Financial Results TRANSCAT Trust in ever} 'y measure
Slide 10: Consolidated Results
Consolidated Results ($ in millions) Consolidated Revenue Consolidated Operating Income $130.7 $118.5 $123.6 $122.2 $112.3 $6.7 $6.8 $6.9 $6.3 $5.9 FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY2017 FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY2017 TTM TTM Distribution Service © 2016 Transcat Inc. *FY 2013 – Q2 FY 2
Slide 11: Record Service Segment Performance
Record Service Segment Performance ($ in millions) Service Revenue $65.6 Revenue increase driven by $59.2 $48.2 $51.8 organic and acquisition-related $40.7 growth 30 consecutive quarters of YOY revenue growth FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY2017 TTM Revenue: +19% Service Operating Income
Slide 12: Distribution Rebound
Distribution Rebound ($ in millions) Distribution Sales Sales rebounded in Q2 FY17 $71.6 $70.3 $71.8 − Incremental Excalibur sales $63.0 $65.1 − Expansion of used equipment and rental business − Organic growth: Strong demand FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY2017 from alternative energy markets
Slide 13: Strong Cash Generation and Bottom-Line
Strong Cash Generation and Bottom-Line ($ in millions) Adjusted EBITDA¹ $12.6 Service segment Adjusted EBITDA $10.0 $10.3 $10.6 $8.9 +25% in Q2 FY17 $4.6 $8.9 $3.1 $6.1 $7.5 +35% CAGR $5.8 $5.4 Distribution segment generates $4.1 $3.1 $3.7 significant cash FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY20
Slide 14: Balance Sheet Supports Acquisition Strategy
Balance Sheet Supports Acquisition Strategy ($ in millions) Total Debt $23.8 Acquisitions $19.1 − $13.9 million in FY16 $12.2 $8.0 $7.6 − $7.6 million in Q1 FY17 Financial flexibility FY 2013 FY 2014 FY 2015 FY 2016 Q2 FY 2017 – Strong cash generation from Debt to Total Capitalization operations
Slide 15: Disciplined Capital Deployment
Disciplined Capital Deployment ($ in millions) Capital Expenditures FY 2017 CapEx $5.0-$5.5 – Assets for growing rental $3.5 $4.1 business $2.7 $2.0 – Lab capabilities/maintenance $2.5 FY17 YTD – Software/IT FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E* Objective: Consistently generate Return on Inv
Slide 16: Generating Cash to Drive Key Investments
Generating Cash to Drive Key Investments FY 2009 to Q2 FY 2017 ($ in millions) $90 $2.0 ($20.3) $80 $26.2 $70 ($50.6) $60 $24.9 $50 $40 $30 $26.7 $20 ($8.5) $10 $0.2 $0.6 $0 FY2009 Cash & Net D&A and Financing/Other FX Effect Capital Business Repurchase of Q2 FY2017 Investments, Income Working Capit
Slide 17: Growth Strategy and Outlook
Growth Strategy and Outlook 17
Slide 18: Distribution Strategy Pivot
Distribution Distribution Strategy Pivot New Instrument Sales Why the pivot in strategy? Great synergies between accounts Rental of Test Leverage of current infrastructure Instruments New Higher gross margins on used and Instrument rental equipment Sales Faster ramp up in new business Only U
Slide 19: Service Organic Growth Strategy
Service Organic Growth Strategy Taking market share from 3rd party providers and OEMs Organic Growth Strategy Capture outsourcing of internal labs Upgraded sales talent and integrated sales model Leveraging Distribution segment Acquisition Expanding addressable market Strategy through capa
Slide 20: Service Acquisition Strategy
Service Acquisition Strategy Drivers: Organic Growth Strategy − Geographic expansion − Increased capabilities /expertise − Bolt-on / leverage infrastructure Majority of opportunities: Acquisition Revenue range of $500K – $5MM Strategy Criteria: 4-6x EBITDA Minimum IRR of 15% © 2016 Transcat In
Slide 21: Executing Acquisition Strategy
Executing Acquisition Strategy Calibration Excalibur Technologies Engineering CMC Anacor ACA Instrument Compliance Ulrich Spectrum Westcon Tmetrix Services Services Metrology Technologies FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2015 FY 2016 FY 2017 United Wind Newark Cal-Matrix Apex Dispersion Sc
Slide 22: Recent Acquisition Drivers
Recent Acquisition Drivers Geographic Increased Leveraged Expansion Capabilities Infrastructure Excalibur Engineering Dispersion Laboratory Spectrum Technologies Anmar Metrology Calibration Technologies © 2016 Transcat Inc. 22
Slide 23: FY 2017 Outlook
FY 2017 Outlook* Double-digit Service segment revenue growth − Growth supported by recent acquisitions − Continued focus on organic growth into the highly regulated life sciences and A&D − Achieve sales and cost synergies to drive operating leverage and margin expansion Optimistic Distribution s
Slide 24: Sidoti Emerging Growth Conference
Nov 1 Sidoti Emerging Growth 2016 Conference 24
Slide 25: Supplemental Information
Supplemental Information 25
Slide 26: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($ in thousands) Q2 FY 2017 FY 2013 FY 2014 FY 2015 FY 2016 TTM Net Income $ 3,704 $ 3,984 $ 4,026 $ 4,124 $ 4,375 + Interest 117 130 234 247 465 + Other Expense / (Income) 111 129 111 48 58 + Tax Provision 2,014 2,462 2,397 1,883 2,023 Operating Income $ 5,946 $ 6,705
Slide 27: Segment Adjusted EBITDA Reconciliation
Segment Adjusted EBITDA Reconciliation ($ in thousands) Q2 FY 2017 FY 2013 FY 2014 FY 2015 FY 2016 TTM Service Operating Income (loss) $ 1,311 $ 2,379 $ 3,693 $ 4,155 $ 4,505 +Depreciation & Amortization 1,740 2,144 2,362 3,216 4,203 +Other (Expense) / Income (84) (141) (138) (64) (65) +Noncash Stoc
Slide 28: Seasoned Executive Team Driving Growth
Seasoned Executive Team Driving Growth Lee D. Rudow More than 30 years of industry experience President and Demonstrated growth record Chief Executive Officer Joined Transcat in 2011 Rob A. Flack Jennifer J. Mike W. West Michael J. Vice President Nelson Vice President Tschiderer of Operations