Annual Report for Fiscal Year Ending 03-28, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this annual report. In addition to historical information, the following discussion and analysis includes forward looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in "Risk Factors" and elsewhere in this annual report. See the discussion under "Cautionary Note Regarding Forward Looking Statements" beginning on page 1 of this annual report.

OVERVIEW

Operational Overview. We are a leading provider of accredited calibration services, cost control and optimization services, and distribution and rental of value-added professional grade handheld test, measurement, and control instrumentation.

We operate our business through two reportable business segments, Service and Distribution, which offer a comprehensive range of services and products to the same customer base.

Our strength in our Service segment is based upon our wide range of disciplines, our investment in quality systems and our ability to provide accredited calibrations to customers in highly regulated targeted market segments. Our services range from the calibration and repair of a single unit to managing a customer's entire calibration program. We believe our Service segment offers an opportunity for long-term growth and the potential for continuing revenue from established customers with regular calibration cycles and recurring laboratory instrument service requirements.

Our Service segment has shown consistent revenue growth over the past several years, ending fiscal year 2026 with its 68th consecutive quarter of year-over-year growth. This segment has benefited from both organic growth as well as acquisitions over those 68 quarters. The business acquisitions that we made have been focused on expanding our service capabilities, increasing our geographic reach and leveraging our Calibration Service Centers and other infrastructure to create operational synergies.

Our Service segment revenue growth was 19.7% for fiscal year 2026 from fiscal year 2025. This increase was primarily due to the acquisitions of Essco and Martin. Acquired revenue, which represents revenue generated from acquisitions for twelve months subsequent to the acquisition date, was $30.9 million. The Service segment gross margin decreased by 90 basis points. Service segment gross margin decreases were primarily due to costs associated with new customer wins and lower than expected levels of organic growth in the first half of the fiscal year, which rebounded in the second half of the year.

In our Distribution segment, we sell and offer for rent, professional grade handheld test and measurement instruments. Because we specialize in professional grade handheld test and measurement instruments, as opposed to a wide array of industrial products, our sales and customer service personnel can provide value-added technical assistance to our customers to aid them in determining what product best meets their particular application requirements. We have expertise in the procurement and sale of used equipment, furthering our ability to add value for our customers. We also have a higher-end electronic test and measurement equipment rental business that augments our organically grown test and measurement equipment rental business. Through our website and sales teams, customers can place orders for test and measurement instruments and can elect to have their purchased instruments calibrated and certified by our Calibration Service Centers before shipment as well as on regular post-purchase intervals. Pre-shipment calibration and certification allows our customers to place newly purchased instruments into service immediately upon receipt.

Sales in our Distribution segment are generally not consumable items but are instruments purchased as replacements, upgrades or for expansion of manufacturing or research and development facilities. As such, this segment can be heavily impacted by changes in the economic environment. As customers increase or decrease capital and discretionary spending, our Distribution sales will typically be directly impacted.

In fiscal year 2026, Distribution segment sales increased by 18.2%. This increase in sales primarily due to rentals of $7.5 million, product sales of $10.2 million, including contributions from the Martin and Essco acquisitions of $4.4 million.

The Distribution segment gross margin in fiscal year 2026 increased by 320 basis points. The increase in segment gross margin was primarily due to increased margins from rental revenue and a favorable mix of higher margin products sold.

Our focus remains on adding new in-demand vendors and product lines, expanding the number of SKUs that we offer with and without pre-shipment calibration and offering equipment rental and used equipment options. Management believes this diversification strategy will mitigate the impact that any particular industry or sector will have on the overall performance of this segment as well as help to further differentiate us from our competitors going forward.

Financial Overview. A discussion regarding our financial condition and results of operations for the fiscal year ended March 29, 2025 and year-to-year comparisons between fiscal year 2025 and fiscal year ended March 30, 2024 ("fiscal year 2024"), which are not included in this Form 10-K, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 29, 2025 and are incorporated by reference herein.

Total revenue for fiscal year 2026 was $331.9 million. This represented an increase of $53.5 million or 19.2% versus total revenue of $278.4 million for fiscal year 2025. This increase was primarily due to recently completed acquisitions, increased rental sales, subcontracted third-party vendor sales and product/equipment sales.

Service revenue was $217.2 million in fiscal year 2026, an increase of $35.8 million or 19.7%. Service revenue accounted for 65.4% of our total revenue during fiscal year 2026. Of our Service revenue in fiscal year 2026, 85.0% was generated by our Calibration Service Centers and cost control and optimization services while 13.6% was generated through subcontracted third-party vendors, compared with 86.1% and 12.8%, respectively, in fiscal year 2025. The remainder of our Service revenue in each period was derived from freight charges.

Distribution sales were $114.7 million in fiscal year 2026, an increase of $17.7 million or 18.2%. Distribution sales accounted for 34.6% of our total revenue in fiscal year 2026.

Sales to domestic customers comprised 94.4% of total Distribution sales in fiscal year 2026, while 4.6% were to Canadian customers and 1.0% were to customers in other international markets.

Operating expenses were $95.0 million, or 28.6% of total revenue, in fiscal year 2026 compared with $71.6 million, or 25.7% of total revenue, in fiscal year 2025. Operating income was $13.3 million, or 4.0% of total revenue, in fiscal year 2026 compared with $17.9 million, or 6.4% of total revenue, in fiscal year 2025. The year-over-year increase in selling, marketing and warehouse expenses was primarily due to amortization expense of $5.3 million related to recent acquisitions, $3.1 million due to employee compensation, including incentive-based employee costs due to higher sales. The year-over-year increase in general and administrative expenses was due to incremental expenses from acquired businesses (including stock expense of $3.8 million), increased payroll costs of $5.9 million, executive transition costs of $1.7 million and continued investments in technology of $1.1 million.

CRITICAL ACCOUNTING ESTIMATES

An appreciation of our critical accounting policies and estimates is necessary to understand our financial results. These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from volatile geopolitical conditions and the high interest rate and inflationary cost environment, and as a result, such estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. We applied our critical accounting estimation methods consistently in all material respects and for all periods presented.

Our critical accounting estimates are:

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revenue recognition;

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goodwill and other intangible assets;

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business combinations; and

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income taxes.

The following items in our Consolidated Financial Statements require significant estimation or judgment:

Revenue Recognition. Revenues are recorded based on the amount of consideration we expect to be entitled to as a result of satisfying our performance obligations. Revenue on our point in time contracts is recognized when the customer obtains control of the product. Revenue on our over time contracts is recognized using the output method as this portrays the transfer of control to the customer. The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions regarding variable consideration, as applicable. We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information, leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.

We assess the goods and services promised in our contracts to identify separate performance obligations. This evaluation requires judgment, particularly in determining whether goods or services are distinct and should be accounted for separately or combined. Changes in these judgments could affect the timing of revenue recognition. The transaction price may include fixed and variable consideration, such as discounts, rebates, refunds, or credits. We estimate variable consideration using either the expected value or most likely amount method, subject to the constraint that it is probable that a significant reversal of revenue will not occur. Estimating variable consideration requires significant judgment, including historical experience, current and expected market conditions and customer-specific factors.

See Note 1 to our consolidated financial statements for further information on our revenue recognition and related policies.

Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized. As of March 28, 2026, we had $218.2 million of recorded goodwill allocated to the Company's two reporting units - Service and Distribution. We test goodwill for impairment, typically by assessing qualitative factors, for each reporting unit on an annual basis during the fourth quarter of each fiscal year or more frequently if conditions indicate that such impairment could exist. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator.

In addition to a qualitative analysis, accounting guidance allows for a company to elect to perform a quantitative analysis in lieu of the qualitative analysis. The Company elected to perform a quantitative analysis in fiscal year 2026, which considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit's carrying value exceeds its fair value. We estimated the fair value of our two reporting units, Service and Distribution, using the fair market value measurement requirement. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management's strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to volatile geopolitical conditions and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results. Additionally, goodwill resulting from recent acquisitions is more susceptible to impairment because it is recorded at fair value at the time of acquisition. These assumptions could be adversely impacted by certain of the risks described in "Item 1A. Risk Factors". The quantitative analysis showed that the estimated fair values of each of the reporting units exceed the carrying values.

Based on the results of our qualitative impairment testing performed during the fourth quarter of fiscal year 2025, we determined that it was more likely than not that the fair values exceeded the carrying values for each reporting unit and there were no impairments as of March 29, 2025.

Intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business. These intangible assets are amortized over their estimated useful lives and are reviewed for impairment if and when indicators are present. Intangible assets, net of accumulated amortization, were $77.7 million as of March 28, 2026.

Intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. In the event a trigger is identified, the carrying value of the asset group is compared to the undiscounted cash flows from that asset group. There were no intangible asset impairment indicators identified during the years ended March 28, 2026 or March 29, 2025.

Business Combinations. We apply the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Historically, we have relied, in part, upon the use of reports from third-party valuation specialists to assist in the estimation of fair values using assumptions about future revenues and expenses, as well as discount factors and income tax rates. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. The fair value of contingent consideration is determined at each reporting period with changes reflected in the statement of operations.

Income Taxes. We record deferred income taxes for the effects of timing differences between financial and tax reporting. These differences relate primarily to operating leases, goodwill and intangible assets, depreciation and amortization and stock-based compensation. We base our deferred income taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure of our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in which we operate. We file income tax returns in the U.S. federal jurisdiction, various states, Canada and Ireland. We have been audited by federal, state and foreign tax authorities, but a number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. From time to time, these audits result in assessments of additional tax. If a loss is determined to be probable as a result of an audit, an accrual is established.

We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon settlement. Future changes in judgments and estimates related to the expected ultimate resolution of uncertain tax positions will affect income in the quarter of such change. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely outcome.

Recently Issued Accounting Pronouncements. In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") to determine the potential impact they may have on our consolidated financial statements. For a discussion of the newly issued accounting pronouncements see "Recently Adopted Accounting Pronouncements" and "Recent Accounting Guidance Not Yet Adopted" under Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of this report.

RESULTS OF OPERATIONS

The following table sets forth, for fiscal years 2026 and 2025, the components of our Consolidated Statements of Income.

		FY 2026				FY 2025
As a Percentage of Total Revenue:
Service Revenue			65.4	%			65.2	%
Distribution Sales			34.6	%			34.8	%
Total Revenue			100.0	%			100.0	%
Gross Profit Percentage:
Service Gross Profit			32.5	%			33.4	%
Distribution Gross Profit			32.9	%			29.7	%
Total Gross Profit			32.6	%			32.1	%
Selling, Marketing and Warehouse Expenses			12.9	%			12.0	%
General and Administrative Expenses			15.8	%			13.7	%
Total Operating Expenses			28.6	%			25.7	%
Operating Income			4.0	%			6.4	%
Interest and Other Expenses, net			1.6	%			(0.2	)%
Income Before Provision for Income Taxes			2.4	%			6.6	%
Provision for Income Taxes			0.8	%			1.4	%
Net Income			1.6	%			5.2	%

FISCAL YEAR ENDED March 28, 2026 COMPARED TO FISCAL YEAR ENDED March 29, 2025 (dollars in thousands):

Revenue:

		Fiscal Year Ended
		March 28,				March 29,				Change
		2026				2025				$				%
Revenue:
Service		$	217,209			$	181,428			$	35,781				19.7	%
Distribution			114,668				96,993				17,675				18.2	%
Total		$	331,877			$	278,421			$	53,456				19.2	%

Total revenue was $331.9 million in fiscal year 2026 compared to $278.4 million in fiscal year 2025, an increase of $53.5 million or 19.2%.

Service revenue, which accounted for 65.4% and 65.2% of our total revenue in fiscal years 2026 and 2025, respectively, increased $35.8 million, or 19.7% from fiscal year 2025 to fiscal year 2026. This year-over-year increase included $30.9 million of incremental revenue from the acquisitions of Essco and Martin. It also included service organic revenue growth of 3.0%, which was driven by continued market share gains. Service organic revenue is a non-GAAP measure. See "Non-GAAP Financial Measures" below.

Our fiscal years 2026 and 2025 service revenue growth in relation to prior fiscal year quarter comparisons, was as follows:

		FY 2026																FY 2025
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Service Revenue Growth			18.4	%			29.1	%			19.9	%			12.3	%			11.3	%			0.1	%			6.4	%			9.8	%

The growth in fiscal year 2026 and fiscal year 2025 reflected both organic growth and acquisitions. The growth in Service segment revenue in fiscal year 2026 includes revenue from Essco and Martin. The growth in Service segment revenue in fiscal year 2025 includes revenue from Becnel and Martin. The higher growth percentages in fiscal year 2026 are due to higher acquisition and organic revenue growth compared to fiscal year 2025.

Within any year, while we add new customers, we also have customers from the prior year whose service orders may not repeat for any number of factors. Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication of the progress of this segment.

The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2026 and 2025 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:

		FY 2026																FY 2025
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Trailing Twelve-Month:
Service Revenue		$	217,209			$	207,565			$	195,548			$	186,794			$	181,428			$	176,054			$	176,006			$	173,450
Service Revenue Growth			19.7	%			17.8	%			11.0	%			7.7	%			7.0	%			8.3	%			12.1	%			15.0	%

Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines. We expect to subcontract approximately 13% to 15% of our Service revenue to third-party vendors for calibration beyond our chosen scope of capabilities. We continually evaluate our outsourcing needs and make capital investments, as deemed necessary, to add more in-house capabilities and reduce the need for third-party vendors. Capability expansion through business acquisitions is another way that we seek to reduce the need for outsourcing. The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for each quarter during fiscal years 2026 and 2025:

		FY 2026																FY 2025
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
In-House			84.4	%			84.5	%			85.8	%			85.6	%			85.6	%			85.1	%			86.6	%			86.9	%
Outsourced			14.2	%			14.0	%			12.9	%			13.2	%			13.2	%			13.7	%			12.3	%			12.0	%
Freight Billed to Customers			1.4	%			1.5	%			1.3	%			1.2	%			1.2	%			1.2	%			1.1	%			1.1	%
			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

Our Distribution sales accounted for 34.6% and 34.8% of our total revenue in fiscal years 2026 and 2025, respectively. Distribution sales increased $17.7 million, or 18.2% in fiscal year 2026 compared to fiscal year 2025. This year-over-year increase is primarily due to $7.5 million of incremental revenue from rentals and $10.2 million of higher distribution sales orders, including $4.4 million from the acquisitions of Essco and Martin. Our fiscal years 2026 and 2025 Distribution sales growth in relation to prior fiscal year quarter comparisons were as follows:

		FY 2026																FY 2025
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Distribution Sales Growth			10.5%				19.8%				24.0%				19.0%				3.9%				6.5%				11.1%				10.5%

Distribution sales orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock. Backorders are the total dollar value of orders received for which revenue has not yet been recognized. Pending product shipments are primarily backorders, but also include the total dollar value of products that are requested to be calibrated in our service centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment. Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the Distribution segment.

Our total pending product shipments increased $3.9 million, or 118.6%, at the end of fiscal year 2026 compared to the end of fiscal year 2025. Backorders at the end of fiscal year 2026 were $6.3 million, compared to $2.7 million at the end of fiscal year 2025. The increase in pending product shipments and backorders was due to longer lead times.

The following table presents the percentage of total pending product shipments that were backorders at the end of each quarter in fiscal years 2026 and 2025 and our historical trend of total pending product shipments:

		FY 2026																FY 2025
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Total Pending Product Shipments		$	7,251			$	6,346			$	7,510			$	4,182			$	3,317			$	3,992			$	4,102			$	4,713
% of Pending Product Shipments that were Backorders			86.4	%			84.2	%			89.7	%			85.8	%			81.9	%			84.0	%			84.7	%			78.4	%

Gross Profit:

		Fiscal Year Ended
		March 28,				March 29,				Change
		2026				2025				$				%
Gross Profit:
Service		$	70,532			$	60,659			$	9,873				16.3	%
Distribution			37,772				28,794				8,978				31.2	%
Total		$	108,304			$	89,453			$	18,851				21.1	%

Total gross profit in fiscal year 2026 was $108.3 million compared to $89.5 million in fiscal year 2025, an increase of $18.9 million or 21.1%. As a percentage of total revenue, total gross margin was 32.6% in fiscal year 2026 compared to 32.1% in fiscal year 2025, a 50 basis point increase.

Service gross profit was $70.5 million, an increase of $9.9 million, or 16.3%, from fiscal year 2025 to fiscal year 2026. Our annual and quarterly Service segment gross margins are a function of several factors. The mix of services provided to customers may also affect gross margins in any given period, in addition to the volume of throughput. Service gross margin decreased by 90 basis points in fiscal year 2026 versus fiscal year 2025. This decrease in service gross margin in fiscal year 2026 was the result of costs associated with new customer wins and lower than expected levels of organic growth in the first half of the fiscal year, which rebounded in the second half of the year.

Our Distribution gross margin includes net sales less the direct cost of inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in our rental equipment pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed to customers, freight expenses and direct shipping costs. We recorded vendor rebates of $1.4 million in fiscal year 2026 and $0.9 million in fiscal year 2025, as a reduction of cost of Distribution sales. In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers.

Distribution segment gross margin increased 320 basis points in fiscal year 2026 compared to fiscal year 2025. The increase in the Distribution segment gross margin was primarily due to increased margins from rental revenue and a favorable mix of higher margin products sold.

Operating Expenses:

		Fiscal Year Ended
		March 28,				March 29,				Change
		2026				2025				$				%
Operating Expenses:
Selling, Marketing and Warehouse		$	42,765			$	33,341			$	9,424				28.3	%
General and Administrative		$	52,276			$	38,238				14,038				36.7	%
Total		$	95,041			$	71,579			$	23,462				32.8	%

Total operating expenses were $95.0 million in fiscal year 2026 compared to $71.6 million in fiscal year 2025. This represented an increase of $23.5 million, or 32.8%, compared to fiscal year 2025. As a percentage of total revenue, operating expenses increased 290 basis points from 25.7% in fiscal year 2025 to 28.6% in fiscal year 2026. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher payroll related employee costs. The increase in general and administrative expenses includes incremental expenses related to acquired companies (including stock based compensation), increased payroll costs, executive transition costs and continued investments in technology.

Provision for Income Taxes:

		Fiscal Year Ended
		March 28,				March 29,				Change
		2026				2025				$				%
Provision for Income Taxes		$	2,613			$	3,811			$	(1,198	)			(31.4	)%

Our effective tax rate for fiscal years 2026 and 2025 was 32.7% and 20.8%, respectively. The increase in effective tax rate is due to the timing of our discrete items in relation to the timing of our pre-tax net income and due to tax expense recognized in fiscal year 2026 associated with executive compensation limitations that resulted from share-based awards. Our provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete items related to share-based compensation activity in fiscal years 2026 and 2025 were $0.1 million tax expense and $1.1 million tax benefit, respectively. We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective tax rate given changes in facts and circumstances expected in the future.

We expect to receive certain federal, state, Canadian and Irish tax credits in future years. We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal year 2027. As such, we expect our effective tax rate in fiscal year 2027 to be between 31.0% and 33.0%.

Net Income:

		Fiscal Year Ended
		March 28,				March 29,				Change
		2026				2025				$				%
Net Income		$	5,376			$	14,515			$	(9,139	)			(63.0	)%

Net income for fiscal year 2026 decreased by $9.1 million or 63.0% compared to fiscal year 2025. As a percentage of revenue, net income was 1.6% in fiscal year 2026, down from 5.2% in fiscal year 2025. The year-over-year decrease in net income was primarily due to lower operating income and higher interest expense. The interest expense increased due to higher outstanding debt balances. The debt was incurred to fund the Essco acquisition.

Non-GAAP Financial Measures

Service Organic Revenue

In addition to reporting service revenue, a measure that is calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), we present service organic revenue (current period service revenue less freight billed to customer less acquired revenue). Acquired revenue is revenue generated from acquisitions for twelve months subsequent to the acquisition date. The Company's management believes service organic revenue is an important measure of operating performance because the measure provides a basis for comparison of our business operations across periods to assess core operating performance. As such, the Company uses service organic revenue as a measure of performance when evaluating its Service segment and as a basis for planning and forecasting.

Service organic revenue is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of service revenue and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Service organic revenue, as presented, 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.

		Year Ended
		March 28,				March 29,				Change
		2026				2025					$			%
Service Revenue		$	217,209			$	181,428			$	35,781				20	%
Less: Acquired Revenue			(30,934	)			(1,337	)
Less: Freight Billed to Customer			(2,984	)			(2,112	)
Service Organic Revenue		$	183,291			$	177,979			$	5,312				3	%

Adjusted EBITDA:

In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, executive transition costs, and certain other expenses), which is a non-GAAP measure. Our management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and others to evaluate and compare the performance of our core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense and other items, which is not always commensurate with the reporting period in which it is included. As such, our management uses Adjusted EBITDA as a measure of performance when evaluating our business segments and as a basis for planning and forecasting. Adjusted EBITDA is also commonly used by rating agencies, lenders and other parties to evaluate our credit worthiness.

Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, 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.

		Fiscal Year Ended
		March 28,				March 29,
		2026				2025
Net Income		$	5,376			$	14,515
+ Interest Expense (Income), Net			4,579				(27	)
+ Tax Provision			2,613				3,811
+ Executive Transition Costs			1,706				-
+ Depreciation & Amortization			26,172				18,567
+ Transaction Expense			744				1,278
+ Gain on Acquisition/Divestiture-related items			-				(1,660	)
+ Noncash Stock Compensation			7,549				3,248
Adjusted EBITDA		$	48,739			$	39,732

During fiscal year 2026, Adjusted EBITDA was $48.7 million, an increase of $9.0 million or 22.7% compared to fiscal year 2025. As a percentage of revenue, Adjusted EBITDA was 14.7% during fiscal year 2026 versus 14.3% during fiscal year 2025, a 40 basis point increase. The increase in Adjusted EBITDA during fiscal year 2026 was primarily driven by increased revenue.

Adjusted Net Income and Adjusted Diluted Earnings Per Share:

In addition to reporting Net Income and Diluted Earnings Per Share, GAAP measures, we present Adjusted net income (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, executive transition costs, and acquisition amortization of backlog, as applicable) and Adjusted diluted earnings per share (Adjusted net income divided by the average diluted shares outstanding during the period), which are non-GAAP measures. Our management believes Adjusted net income and Adjusted diluted earnings per share are important measures of our operating performance because they provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.

Adjusted net income and Adjusted diluted earnings per share are not measures of financial performance under GAAP and are not calculated through the application of GAAP. As such, they should not be considered as a substitute or alternative for the GAAP measures of Net Income and Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measures. Adjusted net income and Adjusted diluted earnings per share, as presented, may produce results that vary from the GAAP measures and may not be comparable to similarly defined non-GAAP measures used by other companies.

		Fiscal Year Ended
		March 28,				March 29,
		2026				2025
Net Income		$	5,376			$	14,515
+ Amortization of Intangible Assets			13,770				8,422
+ Acquisition Amortization of Backlog			-				28
+ Executive Transition Costs			1,706				-
+ Acquisition Deal Costs			744				1,279
+ Acquisition Stock Expense			952				244
+ Income Tax Effect			(5,251	)			(2,493	)
+ Acquisition Earn-out/Contingent Consideration Adjustment			-				(836	)
Adjusted Net Income			17,297				21,159
Average Diluted Shares Outstanding			9,380				9,254
Diluted Earnings Per Share - GAAP		$	0.57			$	1.57
+ Amortization of Intangible Assets			1.47				0.91
+ Acquisition Amortization of Backlog			-				0.01
+ Executive Transition Costs			0.18				0.14
+ Acquisition Deal Costs			0.08				0.03
+ Acquisition Stock Expense			0.10				(0.27	)
+ Income Tax Effect			(0.56	)			(0.09	)
Adjusted Diluted Earnings Per Share		$	1.84			$	2.29

Operating Free Cash Flow

In addition to reporting net cash provided by operating activities, a GAAP measure, we present Operating Free Cash Flow (net cash provided by operating activities less capital expenditures), which is a non-GAAP measure. The Company's management believes Operating Free Cash Flow is an important liquidity measure that reflects the cash generated by the business, after the purchases of technology, capabilities and assets, that can then be used for, among other things, strategic acquisitions, investments in the business and funding ongoing operations.

Operating Free Cash Flow is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of net cash provided by operating activities and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Operating Free Cash Flow, as presented, 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.

		Year Ended
		March 28,				March 29,
		2026				2025
Net Cash Provided by Operating Activities		$	34,850			$	38,985
Less: Capital Expenditures			(15,298	)			(13,197	)
Operating Free Cash Flow		$	19,552			$	25,788

Net Debt

In addition to reporting debt, a GAAP measure, we present net debt (debt less cash and cash equivalents), which is a non-GAAP measure. The Company's management believes net debt is an important measure of financial leverage.

Net debt is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute or alternative for the GAAP measure of debt and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Net debt, as presented, 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.

		Year Ended
		March 28,				March 29,
		2026				2025
Debt		$	99,885			$	32,708
Less: Cash & Cash Equivalents			(4,942	)			(1,517	)
Net Debt		$	94,943			$	31,191

LIQUIDITY AND CAPITAL RESOURCES

We expect that foreseeable liquidity and capital resource requirements will be met through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility. We believe that these sources of financing will be adequate to meet our future requirements including anticipated operating expenses, capital expenditures, interest payments on our long-term debt, and planned business acquisitions. To the extent that the Company does not satisfy its liquidity requirements through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility, it intends to satisfy such requirements through proceeds from the issuance of common stock.

On July 29, 2025, we entered into a Credit Agreement (the "Credit Agreement") with a group of three lenders establishing a new five-year $150.0 million secured revolving credit facility (the "Credit Facility"). Borrowing options under the Credit Facility include: (i) a revolving loan option; (ii) a swingline loan option; and (iii) letters of credit, each of which is provided on a committed basis. The Credit Facility replaced the Company's former $80.0 million credit facility (the "Replaced Facility"), which included a letter of credit subfacility of $10.0 million and our 2018 term loan, with an original principal amount of $15.0 million (the "2018 Term Loan"). We used initial borrowings under the Credit Facility to repay amounts due under the Replaced Facility, including the remaining amounts under the 2018 Term Loan, and for the acquisition of Essco.

Under the Credit Agreement, we can use up to $50.0 million for acquisitions in any single fiscal year, with an exception for the Essco acquisition. In addition, we are permitted to make restricted payments up to $25.0 million in the aggregate over the term of the Credit Facility and up to $10.0 million in any single fiscal year to repurchase shares and pay dividends.

Most borrowings under the Credit Facility bear interest, at our election, at a fixed base rate or the daily simple SOFR rate, plus a margin. Any swingline loan will bear interest at the fixed base rate plus a margin. The applicable margin is based on our then-current leverage ratio. Under the Credit Facility, the applicable margin was reduced for most levels of leverage ratio for comparable categories of borrowings under the Replaced Facility. The applicable margin ranges from 0.00% to 0.75% for base rate loans and 1.00% to 1.75% for SOFR loans. We pay a commitment fee based on the daily unused amount under the Credit Facility multiplied by the applicable margin, which ranges from 0.10% to 0.20%.

The Credit Agreement has certain financial covenants with which we must comply. The leverage ratio covenant under the Credit Agreement requires us to maintain our ratio of outstanding indebtedness to consolidated EBITDA to be no greater than 3.00 to 1.00, provided that we may temporarily increase the leverage ratio covenant if we complete a material permitted acquisition under the terms of the Credit Agreement. The Company's leverage ratio, as defined in the Credit Agreement, was 2.03 on March 28, 2026, compared with 0.78 on March 29, 2025. We must also maintain a fixed charge coverage ratio of no less than 1.20 to 1.00. We were in compliance with all loan covenants and requirements of the Credit Agreement and the Replaced Facility, as applicable, during fiscal year 2026, and the Company expects to remain in compliance for fiscal year 2027.

As of March 28, 2026, $150.0 million was available for borrowing, subject to covenant restrictions, under the Credit Facility, of which, $99.9 million was outstanding. During fiscal year 2026, we used approximately $83.0 million, drawn from the Credit Facility, for a business acquisition.

Cash Flows: The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):

		Fiscal Year Ended
		March 28,				March 29,
		2026				2025
Cash Provided by (Used in):
Operating Activities		$	34,850			$	38,985
Investing Activities		$	(97,823	)		$	(84,000	)
Financing Activities		$	66,501			$	26,862

Operating Activities: Net cash provided by operating activities was $34.8 million during fiscal year 2026 compared to $39.0 million during fiscal year 2025. The significant working capital fluctuations were as follows:

●

Receivables: Accounts receivable increased by a net amount of $9.2 million during fiscal year 2026, inclusive of $2.9 million of accounts receivable acquired as part of an acquisition completed during the year. Accounts receivable increased by a net amount of $8.2 million during fiscal year 2025, inclusive of $7.7 million of accounts receivable acquired as part of two acquisitions completed during the period. The year-over-year change reflects the timing of collections. The following table illustrates our days sales outstanding as of March 28, 2026 and March 29, 2025:

		As of
		March 28,				March 29,
		2026				2025
Net Sales, for the last two fiscal months		$	66,622			$	57,565
Accounts Receivable, net		$	65,170			$	55,941
Days Sales Outstanding			59				59

●

Inventory: Our inventory strategy includes making appropriate large quantity, high dollar purchases with key manufacturers for various reasons, including maximizing on-hand availability of key products, expanding the number of SKUs stocked in anticipation of customer demand, reducing backorders for products with long lead times and optimizing vendor purchase and sales volume discounts. As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our quarter end.

Our inventory balance decreased $0.8 million and $2.9 million during fiscal years 2026 and 2025, respectively. The year-over-year change is related to the timing of strategic inventory purchases.

●

Accounts Payable: Changes in accounts payable may or may not correlate with changes in inventory balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced Service vendors and capital expenditures.

Accounts payable increased $1.2 million during 2026, inclusive of $0.2 million assumed in an acquisition during the period. Accounts payable increased $5.3 million during fiscal year 2025, inclusive of $0.3 million assumed in acquisitions during the period. The variances are largely due to the timing of inventory purchases, capital expenditures and other payments in the respective periods.

●

Accrued Compensation and Other Current Liabilities: Accrued compensation and other current liabilities include, among other things, amounts paid to employees for non-equity performance-based compensation. At the end of any particular period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, changes in expected performance levels, the performance measurement period, and the timing of payments to employees.

During fiscal year 2026, accrued compensation and other liabilities increased by $6.2 million, inclusive of $3.3 million from assumed liabilities and purchase price holdbacks from acquisition transactions. Accrued payroll and incentives increased $4.2 million, the current portion of lease liabilities increased $0.7 million and other current liabilities increased $1.9 million. Accrued acquisition holdbacks decreased $0.5 million. During fiscal year 2025, accrued compensation and other liabilities decreased by $1.3 million, inclusive of $1.2 million from assumed liabilities, contingent consideration and purchase price holdbacks from acquisition transactions.

●

Income Taxes Receivable/Payable: In any given period, net working capital may be affected by the timing and amount of income tax payments. During fiscal year 2026, income taxes receivable, included in Prepaid expenses and other current assets on the Company's Consolidated Balance Sheets, increased $0.7 million. During fiscal year 2025, income taxes payable decreased by $2.9 million. The year-over-year difference is due to timing of income tax payments.

Investing Activities: During fiscal year 2026, we invested $15.3 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and capacity as well as our rental business.

During fiscal year 2025, we invested $13.2 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.

During fiscal year 2026, we used $82.5 million for business acquisitions. During fiscal year 2025, we used $87.4 million for business acquisitions.

During each of fiscal year 2026 and fiscal year 2025, no contingent consideration was paid related to business acquisitions.

During fiscal year 2025, we sold $15.5 million of marketable securities to partially fund acquisitions.

Financing Activities: During fiscal year 2026, $68.6 million in cash was generated from the net proceeds of our revolving credit facility and $0.8 million from the issuance of common stock. In addition, we used $1.8 million for scheduled repayments of our term loan and $0.4 million for the "net" awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2026, which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.

During fiscal year 2025, $30.9 million in cash was generated from the net proceeds of our revolving credit facility and $1.9 million from the issuance of common stock. In addition, we used $2.3 million for scheduled repayments of our term loan and $3.6 million for the "net" awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2025, which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.

OUTLOOK

Consistent with prior years, acquisitions continued to play a key role in Service revenue, including most recently SCM Metrology and Laboratories, which closed just after the end of our fiscal year. Service organic revenue (a non-GAAP measure) growth was in the high single-digit range for the third and fourth quarters of fiscal year 2026, driven by consistent demand in the Calibration business. Revenue growth in both segments combined with continued organization-wide productivity gains drove EBITDA growth for the fourth quarter of fiscal year 2026 and the full fiscal year.

The stringent regulatory standards for manufacturers imposed by entities including the FDA, FAA and Department of Defense to ensure product safety and environmental protection are a key driver of organic growth for our high-value calibration services. Our dedicated team has a proven track record of delivering profitable revenue growth over the past decade and a half. We believe our proven team, in combination with the industry mandated service model, diversified portfolio with a Fortune 500 client base, and strong balance sheet will continue to differentiate us during fiscal year 2027 and beyond.

Looking ahead, while macroeconomic impacts on our business such as changes in product costs and customer demand for services are uncertain, we anticipate continued high single-digit Service organic revenue growth in Fiscal year 2027, assuming the broader economic environment remains stable. Automation of our calibration processes and focus on productivity remain key enablers of margin expansion. We have demonstrated the ability to leverage these tools to improve our operational efficiency and drive margin expansion over an extended period. We will continue to leverage our acquisition expertise and are pleased with the current flow of strategic opportunities. We believe strong execution, paired with strategic acquisitions, positions us well to drive long-term shareholder value.

Transcat expects its income tax rate to range between 31% and 33% in fiscal 2027. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards.