Transcat, Inc. (NASDAQ:TRNS) Q2 2024 Earnings Call Transcript

This is just the early read, and the early read has been strong. SteriQual folds up really nicely under the NEXA suite because NEXA didn’t offer commissioning services, and now — now they can. And they do validation as well, which is something that NEXA did offer, but advances that value proposition. As far — working together, we expect growth to obviously be at a higher rate, since we have more to offer, and we’re not going to guide beyond that at this point other than to say that the outlook, you know, with NEXA and SteriQual together is stronger than just NEXA by itself, because the suite of services has expanded. And SteriQual is a really nice small boutique company. I think we can help them with some of the traditional ways we run and grow the business, will be beneficial to them.

And it’s also been beneficial to NEXA. So we expect that trend to continue for those reasons as well. Does that answer your question, Martin?

Martin Yang: Yes, sorry, I was on mute. Thanks, Lee. So, one more question from me is on gross margin, Axiom. Can you talk about the positive benefit on gross margin due to Axiom’s integration last quarter? And then do you expect a meaningful contribution or gross margin uplift from the full integration of Axiom in fiscal 3Q?

Thomas Barbato: Yeah, so Martin, the impact, you know, the impact in this past quarter was not significant. We only had seven weeks in the quarter. So it did positively impact distribution margins. But we’ll see more of a full-quarter impact in this upcoming — this upcoming quarter. But you know our intent is not to really talk about the specifics of margin in distribution and break it down into the individual pieces kind of on a go-forward basis. So we expect, as we’ve said before that, going forward we expect distribution margins in total to be in that 28% to 30% range. And we’re already in the low end of that range. So I think, you kind of take it from there.

Martin Yang: Thank you, Tom. That’s all from me.

Operator: And our final question is a follow-up question from Ted Jackson with Northland Securities. Please proceed.

Ted Jackson: Great, thanks. Hey, I just wanted to touch base on both automation and kind of what’s going on within Ireland with, you know, kind of the acquisitions you had in that front. You brought up — excuse me, automation as one of the drivers for margin. I know it’s been an area, Lee, that you’ve been focused on, and you kind of, been kind of slow and methodical with it. So maybe kind of an update on, you know, kinds of things that you’re automating and kind of, you know, where things stand with regards to that effort. And then behind that, kind of, you know, the — a progress report with regards to the penetration of the Irish market. Thanks.

Lee Rudow: Okay. First I’ll talk about automation and a small subset of that will be robotics. So automation is a very difficult initiative to execute. We knew that going in, but we also knew that once we did it, and for each, you know, when we made progress each element of progress that we make would (Technical Difficulty) going and arduous. But the results in the last few quarters, you could just see the margins and we can track it back to the number of technicians that we have, how efficient they are, we have productivity ratings for each technician, how often are they on the bench, how effective are they when they’re on the bench, how much automation are they using, how many calibrations are they doing that are redundant to the time they spent doing automated cal, these are type of KPIs we’re tracking.