Description of Business: Transcat, Inc. (“Transcat,” “we,” “us,” “our” or the “Company”) is 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. The Company is focused on providing services and products to highly regulated industries, particularly the life sciences industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated businesses. Additional industries served include industrial manufacturing; energy and utilities, including oil and gas; chemical manufacturing; FAA-regulated businesses, including aerospace and defense and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment, and for which the risk of failure is very costly.

Basis of Presentation: Transcat’s unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for the interim periods are not necessarily indicative of what the results will be for the fiscal year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements as of and for the fiscal year ended March 28, 2026 (“fiscal year 2026”) contained in the Company’s Annual Report on Form 10-K for fiscal year 2026 filed with the SEC.

Use of Estimates: The preparation of Transcat’s Condensed Consolidated Financial Statements in accordance with GAAP requires that the Company make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to, revenue recognition, estimated lives of intangible assets, fair value of the Company's reporting units, income taxes, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Condensed Consolidated Financial Statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Condensed Consolidated Financial Statements.

Accounts Receivable: Accounts receivable represents amounts due from customers in the ordinary course of business. These amounts are recorded net of the allowance for credit losses in the Condensed Consolidated Balance Sheets. The Company has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when it develops the estimate of expected credit losses. The allowance for credit losses is based upon the expected collectability of accounts receivable. The Company applies a specific formula to its accounts receivable aging, which may be adjusted on a specific account basis where the formula may not appropriately reserve for loss exposure. After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for credit losses.


	Three Months Ended
	June 27, 2026		June 28, 2025

Allowance for Credit Losses, Beginning Balance	$	(851)	$	(659)
Additions from Acquisitions	$	(50)	$	-
Provision for Credit Losses	$	(94)	$	(132)
Write-offs, net of Recoveries	$	57	$	157
Effect of Foreign Exchange on Allowance for Credit losses	2		(8)
Allowance for Credit Losses, Ending Balance	$	(936)	$	(642)

Inventory: Inventory consists of finished goods purchased for resale and is valued at the lower of average cost or net realizable value. In the normal course of business, certain inventory items are transferred to property and equipment to be rented to customers. Costs are determined using the average cost method of inventory valuation. The Company performs physical inventory counts and cycle counts on inventory throughout the year and adjusts the recorded balance to reflect the results. Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based on historical experience and current demand, to specific categories of inventory. The Company evaluates the valuation of inventory on a quarterly basis.

Goodwill and Intangible Assets: Goodwill represents the excess of the purchase price over the fair values of the underlying net assets of an acquired business. Goodwill is allocated to the Company's two reporting units: Service and Distribution. The Company tests goodwill for impairment for each reporting unit on an annual basis as of the first day of the fourth quarter of each fiscal year, or more frequently if conditions indicate that such impairment could exist. As of June 27, 2026, no accumulated impairment loss has been recognized for the Company's goodwill.

A summary of changes in the Company’s goodwill is as follows (amounts in thousands):


	Goodwill
	Distribution		Service		Total
Net Book Value as of March 28, 2026	$	59,999	$	158,186	$	218,185
Additions	2,696		6,289		8,985
Currency Translation Adjustment	(54)		(308)		(362)
Net Book Value as of June 27, 2026	$	62,641	$	164,167	$	226,808

Intangible assets, namely customer base, covenants not to compete, and tradenames/trademarks, represent an allocation of purchase price to identifiable intangible assets of an acquired business. 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.

Amortization expense relating to intangible assets was $3.5 million and $2.8 million in the three months ended June 27, 2026 and June 28, 2025, respectively, and is recorded in Selling, Marketing and Warehouse Expenses in the Company's Condensed Consolidated Statements of Income.

Other Liabilities: A summary of other current and non-current liabilities is as follows (amounts in thousands):


	(Unaudited)		(Audited)
	June 27, 2026		March 28, 2026
Current Liabilities:
Accrued Payroll and Employee Benefits	$	5,049	$	5,938
Accrued Incentives	3,878		5,534
Current Portion of Lease Liabilities - Operating	4,402		4,107
Current Portion of Lease Liabilities - Financing	71		270
Accrued Acquisition Holdbacks	2,247		2,247
Accrued Sales Tax	549		609
Other Current Liabilities	1,919		2,992
Accrued Compensation and Other Current Liabilities	$	18,115	$	21,697

Non-Current Liabilities:
Postretirement Benefit Obligation	$	1,175	$	1,188
Other Liabilities	$	1,175	$	1,188

Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company generates revenue from distribution product sales, equipment rental arrangements, and service offerings.

unbilled revenue, and deferred contract costs recorded on the Company’s Condensed Consolidated Balance Sheets as of June 27, 2026 and March 28, 2026 were immaterial. Revenue recognized during the three months ended June 27, 2026 from performance obligations satisfied in prior periods was immaterial.

The application of ASC 606 requires management to exercise judgment in identifying performance obligations, determining whether such obligations are satisfied at a point in time or over time, and estimating transaction prices. These judgments primarily relate to product shipment terms, service completion criteria, and the determination of the appropriate pattern of revenue recognition for rental and managed service arrangements.

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period was $6.7 million and $7.3 million as of June 27, 2026 and March 28, 2026, respectively. These are expected to be recognized revenue in one year or less. As of June 27, 2026, the Company had a de minimis amount of unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Accordingly, the Company has elected to not disclose information about remaining performance obligations.

Stock-Based Compensation: The Company measures the cost of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair value of the award as of the grant date. The Company records compensation cost related to unvested equity awards by recognizing, on a straight-line basis, the unamortized grant date fair value over the remaining service period for awards expected to vest. Excess tax benefits for share-based award activity are reflected in the Condensed Consolidated Statements of Income as a component of the provision for income taxes. Excess tax benefits are realized benefits from tax deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards. The Company did not capitalize any stock-based compensation costs as part of an asset. The Company estimates forfeiture rates based on its historical experience. During the first three months of fiscal year 2027 and fiscal year 2026, the Company recorded non-cash stock-based compensation cost of $2.0 million and $1.1 million, respectively, in the Condensed Consolidated Statements of Income.

Earnings Per Share: Basic earnings per share of the Company's common stock, par value $0.50 per share ("common stock"), are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock reflect the assumed conversion of stock options, unvested restricted stock units using the treasury stock method and contingent consideration classified as equity in periods in which they have a dilutive effect. In computing the per share effect of assumed conversion, proceeds received from the exercise of options and unvested restricted stock units are considered to have been used to purchase shares of common stock at the average market prices during the period, and the resulting net additional shares of common stock are included in the calculation of average shares of common stock outstanding.

For the first three months of fiscal year 2027 and fiscal year 2026, the net additional common stock equivalents had no effect on the calculation of diluted earnings per share. The average shares outstanding used to compute basic and diluted earnings per share are as follows (amounts in thousands):

In July 2025, the FASB issued Accounting Standards Update ("ASU") 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. The ASU introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. ASU 2025-05 is effective for interim and annual reporting periods beginning in fiscal 2027. The Company has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when it develops the estimate of expected credit losses. The adoption of the ASU did not have a material impact on the Company’s financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which requires public entities to disclose specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning in fiscal 2028, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is assessing the impact the ASU will have on its financial statement disclosures.