March 16, ROTH 28th Annual Conference 2016€¦ · FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016 TTM...
Transcript of 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.
3© 2016 Transcat Inc.
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
4© 2016 Transcat Inc.
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
5© 2016 Transcat Inc.
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)
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
7© 2016 Transcat Inc.
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%
8© 2016 Transcat Inc.
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
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Financial Results
10© 2016 Transcat Inc.
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
© 2016 Transcat Inc.
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
© 2016 Transcat Inc.
$3.4
$8.0 $7.6
$12.2$10.5
FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016
Long Term Debt
10.9%
20.2% 20.2%26.2%
22.2%
FY 2012 FY 2013 FY 2014 FY 2015 Q3 FY 2016
Debt to Total Capitalization
Balance Sheet Supports Acquisition Strategy
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($ 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
© 2016 Transcat Inc.
$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)
16© 2016 Transcat Inc.
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
18© 2016 Transcat Inc.
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
19© 2016 Transcat Inc.
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
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 Target IRR of 15%
Service Acquisition Strategy
Organic GrowthStrategy
AcquisitionStrategy
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
22© 2016 Transcat Inc.
Acquisition Drivers
Cal‐Matrix Metrology
Ulrich Metrology
Calibration Technologies
Anmar Metrology
Spectrum Technologies
Dispersion Laboratory
Geographic Expansion
Increased Capabilities
Leveraged Infrastructure
23© 2016 Transcat Inc.
* Long‐term objectives provided as of January 25, 2016
Financial performance (within 5 years)
− $175 million to $200 million revenue
− Double‐digit EBITDA margins
Service segment
− Acquisition strategy and organic sales plan to drive segment double‐digit top line growth
Distribution Segment
− Moving to more diversified portfolio combined with value‐added initiatives
− Continue as a solid performer and generator of cash
Long‐term Objectives*
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March 16, 2016 ROTH 28th Annual Conference
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Supplemental Information
26© 2016 Transcat Inc.
($ 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.
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
27© 2016 Transcat Inc.
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
Joined Transcat in 2014
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
Joined Transcat in 2012
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