Investor Presentation July 2015 Lee D. Rudow John J. Zimmer President and CEO Sr. Vice President of Finance and CFO 1
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 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. 2
Leader in Fragmented Calibration & Compliance Service Market and Distributor of Test, Measurement and Control Instrumentation Built infrastructure and value position over 10 years Long-term operating earnings to grow faster than revenue Strong leadership in place to drive company to next level Market Capitalization $64.0 Million Common Shares Outstanding 6.9 Million Ownership: Institutions 54.8% 52-Week Price Range $8.57- $10.90 Insiders 8.5% Average Volume (3 mo.) 5,400 Adjusted EBITDA* (FY 2015) $10.3 Million Recent Price $9.31 EPS (FY 2015) $0.57 Market data as of June 25, 2015 [Source: Bloomberg]; ownership as of most recent filing * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers 3 regarding Adjusted EBITDA 3
Two Complementary Segments Service - $51.8MM (FY 2015) • Full suite of services with a strong Distribution Service customer base across multiple industries 58% • Unique value proposition 42% • Double digit growth through organic and acquisition strategy • Strong operating leverage Distribution - $71.8MM (FY 2015) • Test Equipment used in R&D and manufacturing (Temperature, Pressure and Electrical) • 40 year old market leading, core business with large customer base Record FY 2015 Revenue: $123.6mm • Strong cash generator • Supports Service Segment growth 4 4
Executing our Strategy Growing Revenue & Operating Income ($ in millions) Consolidated Revenue • Achieved annual revenue $118.5 $123.6 $112.3 $110.0 growth for 11th consecutive $91.2 year in FY 2015 • Record Q4 FY 2015 revenue driven by growth in the Service FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 segment Consolidated Operating Income • 7.9% consolidated revenue CAGR* $6.7 $6.8 $5.9 $5.4 $4.6 • 10.2% consolidated operating income CAGR* FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Distribution Service All figures are rounded to the nearest million. Therefore totals shown in graphs may not equal the sum of the segments. * CAGR calculated FY 2011 – FY 2015 5
Service Segment Operating Leverage ($ in millions) Revenue $51.8 • $48.2 Fiscal 2015 revenue $40.7 $36.4 – Driven by organic and acquisition- $31.3 related growth • 24 consecutive quarters of year- over-year Service segment FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 revenue growth Operating Income • Significant operating leverage: FY 2015 operating income $3.7 increased 55.2% over the prior $2.4 fiscal year period $1.3 $0.2 ($0.2) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 6
Leveraging Distribution to Drive Growth Revenue • Distribution business continues $73.6 $71.6 $71.8 $70.3 $59.9 to perform relatively well in highly competitive market • Distribution gross margin impacted by lower vendor rebates FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 – FY 2016 will not have rebate impact Operating Income • Cost discipline and lower performance-based compensation $5.6 expense helped to partially offset $4.6 $4.3 $4.4 $3.1 Distribution gross margin pressure FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 7
Strong Cash Generation ($ in millions) Adjusted EBITDA* $10.0 $10.3 $8.8 $8.9 • Consolidated Adjusted EBITDA $7.1 CAGR of 9.7%** $2.0 $4.6 $3.1 $6.1 $1.8 • 36.5% CAGR for Service segment** $6.8 $5.8 $5.3 $5.4 $4.1 • Distribution segment continues to generate significant cash FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Distribution Service All figures are rounded to the nearest million. Therefore totals shown in graphs may not equal the sum of the segments. * See supplemental slides for Adjusted EBITDA reconciliation and other important disclaimers regarding Adjusted EBITDA. ** CAGR calculated FY 2011 – FY 2015 8
Bottom-line Performance ($ in millions) Net Income $4.0 $4.0 $3.7 $3.3 • 9.6% CAGR for net income* $2.8 3.4% 3.3% 3.3% 3.1% 3.0% % of sales FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 EPS $0.37 $0.43 $0.49 $0.54 $0.57 * CAGR calculated FY 2011 – FY 2015 9
Balance Sheet Supports Acquisition Strategy ($ in millions) Long Term Debt • $12.2 $16.0 million in availability under revolving credit facility $8.0 $7.6 $5.3 $3.4 • FY 2015 CapEx focused on service capabilities and IT upgrades FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 • FY 2016 CapEx to focus on increasing lab capabilities and Capital Expenditures capacity; Also includes additional assets for rental business $4.0 $3.5 • Financial flexibility to facilitate $2.7 $2.0 $1.6 $1.4 acquisition strategy, satisfy working capital and capital expenditure needs FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016E* * FY 2016 capital expenditure guidance provided as of May 19, 2015 10 10
Generating Cash to Drive Key Investments Historical Trailing 12 Month Key Investments and Current Quarter Debt Balance ($ in thousands) $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Capital Spend Acquisitions Shares Repurchase Current Quarter Ending Debt Balance 11 11
MARKET, STRATEGY AND OUTLOOK
Calibration Services Market $1.0 Billion Addressable Market ¹ #2 in Market Share by Revenue for 3 rd Party Service Providers 2 25% 22% 25% 40% Transcat 13% 20% 35% 10% 10% OEMs Tektronix Regionals Transcat 3 rd Party Service Providers Others (Highly fragmented) Trescal In-house Laboratories SIMCO Electronics 1 Estimated Addressable Calibration Market 2 Percentage of Revenue (North America), management estimates 13
Unique Service Value Proposition Fully Accredited Calibration Provider with Highest Quality in the Industry Flexible Service Delivery Options: • Permanent on-site • Periodic on-site • Mobile • In-house • Pickup & Delivery 14
Broad and Diverse Blue Chip Customer Base Percentage of Service Revenue * Industrial Healthcare & 29% Pharmaceutical 32% Energy 8% Chemical Other 7% 24% *Revenue and Percentages as of FY 2015 15
Service Growth Strategy Organic Growth Acquisition Strategy Strategy • Outsourcing of Internal Labs • Integrated Sales Model – • Geographic Expansion Enterprise Sale • Increased Capabilities /Expertise • Leveraging Distribution Segment • Bolt-On - Leverage Infrastructure • Majority of opportunities: Revenue range of $1 – $5 million • Criteria: 4-6x EBITDA, Target IRR of 15% 16
Serve an Expanded Healthcare Market Typical Suite of Services • Transcat now provides the entire suite of services Standard Calibration • Unique among competition Services Analytical • Acquired Process Calibration, Validation, Pipettes, and Analytical Services in July 2012 Process Pipettes • Calibration Recently closed two significant organic deals in the analytical space Validation 17
Full Suite of Products and Services Calibration Services Consultation A Total Product & Solution Distribution Remediation Validation & Analytical Services 18
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