UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

(Mark one)

☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: December ~~24, 2022~~23, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 000-03905

TRANSCAT, INC.

(Exact name of registrant as specified in its charter)

Ohio	16-0874418
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

35 Vantage Point Drive, Rochester, New York 14624

(Address of principal executive offices) (Zip Code)

(585) 352-7777

(~~Registrant’s~~Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 par value	TRNS	Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting ~~company”~~company" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☑
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☐ No ☑

The number of shares of common stock, par value $0.50 per share, of the registrant outstanding as of January ~~27, 2023~~26, 2024 was ~~7,561,512~~.8,829,127.

Table of Contents

	(Unaudited)				(Unaudited)				(Unaudited)						(Unaudited)
	*Third Quarter Ended*				*Nine Months Ended*				*Third Quarter Ended*						*Nine Months Ended*
	*December 24,*		*December 25,*		*December 24,*		*December 25,*		*December 23,*			*December 24,*			*December 23,*			*December 24,*
	*2022*		*2021*		*2022*		*2021*		*2023*			*2022*			*2023*			*2022*

Service Revenue	$	35,977	$	30,237	$	105,120	$	87,338	$	41,509		$	35,977		$	122,793		$	105,120
Distribution Sales		21,425		20,665		63,382		61,741		23,657			21,425			65,775			63,382
Total Revenue		57,402		50,902		168,502		149,079		65,166			57,402			188,568			168,502

Cost of Service Revenue		25,184		21,254		72,005		59,891		28,015			25,184			82,244			72,005
Cost of Distribution Sales		15,818		16,012		47,292		47,421		16,215			15,818			46,553			47,292
Total Cost of Revenue		41,002		37,266		119,297		107,312		44,230			41,002			128,797			119,297

Gross Profit		16,400		13,636		49,205		41,767		20,936			16,400			59,771			49,205

Selling, Marketing and Warehouse Expenses		6,595		5,051		18,315		15,022		7,519			6,595			20,844			18,315
General and Administrative Expenses		6,642		6,224		20,497		17,117		9,123			6,642			28,350			20,497
Total Operating Expenses		13,237		11,275		38,812		32,139		16,642			13,237			49,194			38,812

Operating Income		3,163		2,361		10,393		9,628		4,294			3,163			10,577			10,393

Interest and Other Expense, net		1,039		136		1,732		581
Interest Expense										81			731			1,785			1,651
Interest Income										(347	)		(5	)		(347	)		(15	)
Other Income/Expense										289			313			304			96
Total Interest and Other										23			1,039			1,742			1,732

Income Before Income Taxes		2,124		2,225		8,661		9,047		4,271			2,124			8,835			8,661
Provision for Income Taxes		523		596		1,631		715		923			523			2,078			1,631

Net Income	$	1,601	$	1,629	$	7,030	$	8,332	$	3,348		$	1,601		$	6,757		$	7,030

Basic Earnings Per Share	$	0.21	$	0.22	$	0.93	$	1.11	$	0.39		$	0.21		$	0.84		$	0.93
Average Shares Outstanding		7,559		7,519		7,547		7,487		8,615			7,559			8,060			7,547

Diluted Earnings Per Share	$	0.21	$	0.21	$	0.92	$	1.10	$	0.38		$	0.21		$	0.83		$	0.92
Average Shares Outstanding		7,666		7,653		7,644		7,599		8,752			7,666			8,187			7,644

	(Unaudited)					(Unaudited)						(Unaudited)				(Unaudited)
	*Third Quarter Ended*					*Nine Months Ended*						*Third Quarter Ended*				*Nine Months Ended*
	*December 24,*		*December 25,*			*December 24,*			*December 25,*			*December 23,*		*December 24,*		*December 23,*		*December 24,*
	*2022*		*2021*			*2022*			*2021*			*2023*		*2022*		*2023*		*2022*
Net Income	$	1,601	$	1,629		$	7,030		$	8,332		$	3,348	$	1,601	$	6,757	$	7,030

Other Comprehensive Income (Loss):
Currency Translation Adjustment		393		(233	)		(878	)		(314	)		364		393		488		(878	)
Other, net of tax effects of $2 and $7 for the third quarter ended December 24, 2022 and December 25, 2021, respectively; and $(4) and $17 for the nine months ended December 24, 2022 and December 25, 2021, respectively		8		18			(12	)		48
Other, net of tax effects of $3 and $2 for the third quarter ended December 23, 2023 and December 24, 2022, respectively; and $7 and $(4) for the nine months ended December 23, 2023 and December 24, 2022, respectively													9		8		21		(12	)
Total Other Comprehensive Income (Loss)		401		(215	)		(890	)		(266	)		373		401		509		(890	)

Comprehensive Income	$	2,002	$	1,414		$	6,140		$	8,066		$	3,721	$	2,002	$	7,266	$	6,140

	(Unaudited)			(Audited)			(Unaudited)			(Audited)
	*December 24,*			*March 26,*			*December 23,*			*March 25,*
	*2022*			*2022*			*2023*			*2023*
ASSETS
Current Assets:
Cash	$	1,593		$	1,396
Accounts Receivable, less allowance for doubtful accounts of $488 and $460 as of December 24, 2022 and March 26, 2022, respectively		37,702			39,737
Cash and cash equivalents							$	35,205		$	1,531
Accounts Receivable, less allowance for credit losses of $579 and $457 as of December 23, 2023 and March 25, 2023, respectively								43,307			44,698
Other Receivables		377			558			819			506
Inventory, net		16,884			12,712			16,178			16,929
Prepaid Expenses and Other Current Assets		4,141			5,301			3,295			3,935
Total Current Assets		60,697			59,704			98,804			67,599
Property and Equipment, net		28,334			26,439			37,222			29,064
Goodwill		68,826			65,074			105,700			69,360
Intangible Assets, net		14,843			14,692			21,459			13,799
Right To Use Assets, net		14,874			11,026			16,834			14,876
Other Assets		895			827			1,055			1,051
Total Assets	$	188,469		$	177,762		$	281,074		$	195,749

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	13,845		$	14,171		$	11,355		$	15,869
Accrued Compensation and Other Current Liabilities		9,012			11,378			15,683			10,201
Current Portion of Long-Term Debt		2,227			2,161			2,316			2,248
Total Current Liabilities		25,084			27,710			29,354			28,318
Long-Term Debt		46,941			46,291			2,411			46,869
Deferred Tax Liabilities, net		6,672			6,724			10,855			6,538
Lease Liabilities		12,998			9,194			14,457			12,960
Other Liabilities		1,490			1,667			5,527			1,434
Total Liabilities		93,185			91,586			62,604			96,119

Shareholders' Equity:
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,560,420 and 7,529,078 shares issued and outstanding as of December 24, 2022 and March 26, 2022, respectively		3,780			3,765
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 8,828,515 and 7,562,604 shares issued and outstanding as of December 23, 2023 and March 25, 2023, respectively								4,414			3,781
Capital in Excess of Par Value		27,123			23,900			140,382			27,886
Accumulated Other Comprehensive Loss		(1,123	)		(233	)		(691	)		(1,200	)
Retained Earnings		65,504			58,744			74,365			69,163
Total Shareholders' Equity		95,284			86,176			218,470			99,630
Total Liabilities and Shareholders' Equity	$	188,469		$	177,762		$	281,074		$	195,749

	(Unaudited)						(Unaudited)
	*Nine Months Ended*						*Nine Months Ended*
	*December 24,*			*December 25,*			*December 23,*			*December 24,*
	*2022*			*2021*			*2023*			*2022*
Cash Flows from Operating Activities:
Net Income	$	7,030		$	8,332		$	6,757		$	7,030
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Net Loss on Disposal of Property and Equipment		62			113			24			62
Deferred Income Taxes		(52	)		5			42			(52	)
Depreciation and Amortization		8,243			6,899			9,841			8,243
Provision for Accounts Receivable and Inventory Reserves		174			417			379			174
Stock-Based Compensation Expense		2,757			1,681			3,338			2,757
Changes in Assets and Liabilities, net of acquisitions:
Accounts Receivable and Other Receivables		1,850			1,185			3,819			1,850
Inventory		(3,589	)		(1,794	)		3,208			(3,589	)
Prepaid Expenses and Other Current Assets		1,074			(3,280	)		728			1,074
Accounts Payable		(424	)		689			(5,194	)		(424	)
Accrued Compensation and Other Current Liabilities		(3,150	)		(1,470	)		3,947			(3,150	)
Income Taxes Payable		-			(399	)
Net Cash Provided by Operating Activities		13,975			12,378			26,889			13,975

Cash Flows from Investing Activities:
Purchases of Property and Equipment		(7,149	)		(5,861	)		(9,099	)		(7,149	)
Proceeds from Sale of Property and Equipment		10			12			-			10
Business Acquisitions, net of cash acquired		(8,306	)		(20,910	)		(12,932	)		(8,306	)
Net Cash Used in Investing Activities		(15,445	)		(26,759	)		(22,031	)		(15,445	)

Cash Flows from Financing Activities:
Proceeds from Revolving Credit Facility, net		2,286			22,760
(Repayment of) Proceeds from Revolving Credit Facility, net								(42,713	)		2,286
Repayments of Term Loan		(1,570	)		(1,565	)		(1,678	)		(1,570	)
Issuance of Common Stock		503			1,354
Issuance of Common Stock, net of direct costs								75,714			503
Repurchase of Common Stock		(437	)		(5,649	)		(2,247	)		(437	)
Net Cash Provided by Financing Activities		782			16,900			29,076			782

Effect of Exchange Rate Changes on Cash		885			(300	)
Effect of Exchange Rate Changes on Cash and cash equivalents								(260	)		885

Net Increase in Cash		197			2,219
Cash at Beginning of Period		1,396			560
Cash at End of Period	$	1,593		$	2,779
Net Increase in Cash and cash equivalents								33,674			197
Cash and cash equivalents at Beginning of Period								1,531			1,396
Cash and cash equivalents at End of Period							$	35,205		$	1,593

Supplemental Disclosure of Cash Flow Activity:
Cash paid during the period for:
Interest	$	1,510		$	531		$	1,652		$	1,510
Income Taxes, net	$	957		$	3,263		$	1,884		$	957
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Common stock issued for acquisitions	$	145		$	2,368		$	34,769		$	145
Assets acquired and liabilities assumed in business combinations:
Accrued contingent consideration related to NEXA acquisition	$	-		$	153
Accrued holdback consideration related to Alliance acquisition	$	518		$	-
Accrued holdback and contingent consideration related to acquisitions							$	4,859		$	518
Balance Sheet Reclassification of Property and Equipment, net to Inventory							$	737		$	576

							*Capital*																		*Capital*
	*Common Stock*						In			*Accumulated*									*Common Stock*						In			*Accumulated*
	*Issued*						*Excess*			*Other*									*Issued*						*Excess*			*Other*
	*$0.50 Par Value*						*of Par*			*Comprehensive*			*Retained*						*$0.50 Par Value*						*of Par*			*Comprehensive*			*Retained*
	*Shares*			*Amount*			*Value*			*Income (Loss)*			*Earnings*			*Total*			*Shares*			*Amount*			*Value*			*Income (Loss)*			*Earnings*			*Total*
Balance as of March 27, 2021		7,458		$	3,729		$	19,287		$	(451	)	$	52,513		$	75,078
Issuance of Common Stock		52			26			673			-			-			699
Repurchase of Common Stock		(62	)		(31	)		(755	)		-			(2,591	)		(3,377	)
Stock-Based Compensation		21			10			427			-			-			437
Other Comprehensive Income		-			-			-			182			-			182
Net Income		-			-			-			-			3,688			3,688
Balance as of June 26, 2021		7,469		$	3,734		$	19,632		$	(269	)	$	53,610		$	76,707
Balance as of March 26, 2022																				7,529		$	3,765		$	23,900		$	(233	)	$	58,744		$	86,176
Issuance of Common Stock		72			36			2,871			-			-			2,907			8			3			363			-			-			366
Repurchase of Common Stock		(35	)		(18	)		(403	)		-			(1,851	)		(2,272	)		(7	)		(3	)		(164	)		-			(270	)		(437	)
Stock-Based Compensation		12			7			613			-			-			620			16			8			820			-			-			828
Other Comprehensive Loss		-			-			-			(233	)		-			(233	)		-			-			-			(453	)		-			(453	)
Net Income		-			-			-			-			3,015			3,015			-			-			-			-			3,072			3,072
Balance as of September 25, 2021		7,518		$	3,759		$	22,713		$	(502	)	$	54,774		$	80,744
Balance as of June 25, 2022																				7,546		$	3,773		$	24,919		$	(686	)	$	61,546		$	89,552
Issuance of Common Stock		2			1			115			-			-			116			3			2			141			-			-			143
Repurchase of Common Stock																				-			-			-			-			-			-
Stock-Based Compensation		1			-			624			-			-			624			9			4			1,110			-			-			1,114
Other Comprehensive Loss		-			-			-			(215	)		-			(215	)		-			-			-			(838	)		-			(838	)
Net Income		-			-			-			-			1,629			1,629			-			-			-			-			2,357			2,357
Balance as of December 25, 2021		7,521		$	3,760		$	23,452		$	(717	)	$	56,403		$	82,898
Balance as of September 24, 2022																				7,558		$	3,779		$	26,170		$	(1,524	)	$	63,903		$	92,328
Issuance of Common Stock																				1			-			139			-			-			139
Stock-Based Compensation																				1			1			814			-			-			815
Other Comprehensive Income																				-			-			-			401			-			401
Net Income																				-			-			-			-			1,601			1,601
Balance as of December 24, 2022																				7,560		$	3,780		$	27,123		$	(1,123	)	$	65,504		$	95,284

							*Capital*																		*Capital*
	*Common Stock*						In			*Accumulated*									*Common Stock*						In			*Accumulated*
	*Issued*						*Excess*			*Other*									*Issued*						*Excess*			*Other*
	*$0.50 Par Value*						*of Par*			*Comprehensive*			*Retained*						*$0.50 Par Value*						*of Par*			*Comprehensive*			*Retained*
	*Shares*			*Amount*			*Value*			*Income (Loss)*			*Earnings*			*Total*			*Shares*			*Amount*			*Value*			*Income (Loss)*			*Earnings*			*Total*
Balance as of March 26, 2022		7,529		$	3,765		$	23,900		$	(233	)	$	58,744		$	86,176
Balance as of March 25, 2023																				7,562		$	3,781		$	27,886		$	(1,200	)	$	69,163		$	99,630
Issuance of Common Stock																				82			42			6,988			-			-			7,030
Repurchase of Common Stock																				(3	)		(2	)		(86	)		-			(213	)		(301	)
Stock-Based Compensation																				2			1			929			-			-			930
Other Comprehensive Income																				-			-			-			482			-			482
Net Income																				-			-			-			-			2,949			2,949
Balance as of June 24, 2023																				7,643		$	3,822		$	35,717		$	(718	)	$	71,899		$	110,720
Issuance of Common Stock		8			3			363			-			-			366			313			156			27,967			-			-			28,123
Repurchase of Common Stock		(7	)		(3	)		(164	)		-			(270	)		(437	)		(22	)		(11	)		(593	)		-			(1,342	)		(1,946	)
Stock-Based Compensation		16			8			820			-			-			828			44			22			1,219			-			-			1,241
Other Comprehensive Loss		-			-			-			(453	)		-			(453	)		-			-			-			(346	)		-			(346	)
Net Income		-			-			-			-			3,072			3,072			-			-			-			-			460			460
Balance as of June 25, 2022		7,546		$	3,773		$	24,919		$	(686	)	$	61,546		$	89,552
Issuance of Common Stock		3			2			141			-			-			143
Stock-Based Compensation		9			4			1,110			-			-			1,114
Other Comprehensive Loss		-			-			-			(838	)		-			(838	)
Net Income		-			-			-			-			2,357			2,357
Balance as of September 24, 2022		7,558		$	3,779		$	26,170		$	(1,524	)	$	63,903		$	92,328
Issuance of Common Stock		1			-			139			-			-			139
Balance as of September 23, 2023																				7,978		$	3,989		$	64,310		$	(1,064	)	$	71,017		$	138,252
Proceeds from Issuance of Common Stock																				849			424			80,229			-			-			80,653
Direct Costs of Stock Offering																				-			-			(5,323	)		-			-			(5,323	)
Stock-Based Compensation		1			1			814			-			-			815			2			1			1,166			-			-			1,167
Other Comprehensive Income		-			-			-			401			-			401			-			-			-			373			-			373
Net Income		-			-			-			-			1,601			1,601			-			-			-			-			3,348			3,348
Balance as of December 24, 2022		7,560		$	3,780		$	27,123		$	(1,123	)	$	65,504		$	95,284
Balance as of December 23, 2023																				8,829		$	4,414		$	140,382		$	(691	)	$	74,365		$	218,470

Description of Business: Transcat, Inc. (“Transcat,” “we,” “us,” “our” or the “Company”) is a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor ofand rental source for professional grade handheld test, measurement and control instrumentation. The Company is focused on providing services and products to highly regulated industries, particularly the life science 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 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 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 Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements as of and for the fiscal year ended March ~~26, 2022~~25, 2023 (“fiscal year ~~2022~~2023”) contained in the Company’s Annual Report on Form 10-K for fiscal year ~~2022~~2023 filed with the SEC.

Use of Estimates: The preparation of Transcat’s 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, allowance for credit losses and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, fair value of the goodwill reporting units, 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 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 Consolidated Financial Statements.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity when purchased of three months or less and are stated at cost, which approximates fair value.

Revenue Recognition: Distribution non-rental sales are recorded when an order’s title and risk of loss transfers to the customer, which is generally upon shipment. Distribution rental sales are recognized over time using the output method-time elapsed as this portrays the transfer of control to the customer. The Company recognizes the majority of its Service revenue based upon when the calibration or other activity is performed and then shipped and/or delivered to the customer. The majority of the Company’s revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and/or our obligation has been fulfilled. Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue over time using the output method-time elapsed as this portrays the transfer of control to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for product shipped or services performed. Sales taxes and other taxes billed and collected from customers are excluded from revenue. The Company generally invoices its customers for freight, shipping, and handling charges. Freight billed to customers is included in revenue. Shipping and handling is not included in revenue. Provisions for customer returns are provided for in the period the related revenue is recorded based upon historical data.

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales that include general payment terms that are between net 30 and 90 days.

Revenue recognized from prior period performance obligations for the third quarter of the fiscal year ending March ~~25, 2023~~30, 2024 (“fiscal year ~~2023~~2024”) was immaterial. As of December ~~24, 2022~~23, 2023, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to ASC Topic 606, the Company applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations. Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of December ~~24, 2022~~23, 2023 and March ~~26, 2022~~25, 2023 were immaterial. See Note 4 for disaggregated revenue information.

Fair Value of Financial Instruments: Transcat has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, which is defined as unobservable inputs in which little or no market data exists, requires the Company to develop its own assumptions. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value due to the variable interest rate pricing on a portion of the debt with the balance bearing an interest rate approximating current market rates, and the carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. Investment assets, which fund the Company’s non-qualified deferred compensation plan, consist of mutual funds and are valued based on Level 1 inputs. At each of December ~~24, 2022~~23, 2023 and March ~~26, 2022~~25, 2023, investment assets totaled $0.2 million, and are included as a component of other assets (non-current) on the Consolidated Balance Sheets.

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 market 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 of ~~each award.~~awards expected to vest. Excess tax benefits for share-based award activity are reflected in the 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 nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023, the Company recorded non-cash stock-based compensation ~~expense~~cost of ~~$2.8~~$3.3 million and ~~$1.7~~$2.8 million, respectively, in the Consolidated Statements of Income.

Foreign Currency Translation and Transactions: The accounts of Cal OpEx Limited (d/b/a ~~NEXA Enterprise Asset Management), an Irish company, Galium Limited (d/b/a Complete Calibrations)~~Transcat Ireland), an Irish company, and Transcat Canada Inc., ~~all~~both of which are wholly-owned subsidiaries of the Company, are maintained in the local currencies, the Euro ~~Euro~~ and the Canadian dollar, respectively, and have been translated to U.S. dollars. Accordingly, the amounts representing assets and liabilities have been translated at the period-end rates of exchange and related revenue and expense accounts have been translated at an average rate of exchange during the period. Gains and losses arising from translation of Cal OpEx Limited’s ~~Galium Limited's~~ and Transcat Canada Inc.’s financial statements into U.S. dollars are recorded directly to the accumulated other comprehensive loss component of shareholders’ equity.

Transcat records foreign currency gains and losses on business transactions denominated in foreign currency. The net foreign currency was a net loss ~~was less than~~of $0.1 million infor each of the first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023. The Company continually utilizes short-term foreign exchange forward contracts to reduce the risk that its future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange rates. The Company does not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of $0.1 million and a gain of $0.3 ~~million and less than $0.1~~ million during the first nine months of fiscal years ~~2023~~2024 and ~~2022~~2023, respectively, was recognized as a component of Interest and Other Expenses, net in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On December ~~24, 2022~~23, 2023, the Company had a foreign exchange contract, which matured in January ~~2023,~~2024, outstanding in the notional amount of ~~$3.0~~$2.0 million. This contract was subsequently renewed and remains in place. The Company does not use hedging arrangements for speculative purposes.

Earnings Per Share: Basic earnings per share of the Company's common stock, ispar 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 and unvested restricted stock units using the treasury stock method 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 third quarter of fiscal year ~~2023~~~~, the net additional common stock equivalents had~~ no ~~effect on the calculation of diluted earnings per share. For the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2022,~~2024, the net additional common stock equivalents had a ($0.01) effect on the calculation of diluted earnings per share. For the third quarter of fiscal year 2023, the net additional common stock equivalents had no effect on the calculation of diluted earnings per share. For the first nine months of each of fiscal ~~year~~years ~~2023~~2024, and ~~fiscal year~~ ~~2022,~~2023, the net additional common stock equivalents had a ($0.01) 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):

	*Third Quarter Ended*				*Nine Months Ended*				*Third Quarter Ended*				*Nine Months Ended*
	*December 24,*		*December 25,*		*December 24,*		*December 25,*		*December 23,*		*December 24,*		*December 23,*		*December 24,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
Average Shares Outstanding – Basic		7,559		7,519		7,547		7,487		8,615		7,559		8,060		7,547
Effect of Dilutive Common Stock Equivalents		107		134		97		112		137		107		127		97
Average Shares Outstanding – Diluted		7,666		7,653		7,644		7,599		8,752		7,666		8,187		7,644
Anti-dilutive Common Stock Equivalents		148		-		163		100		37		148		46		163

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. The Company tests goodwill for impairment for each reporting unit on an annual basis during the fourth quarter of its fiscal year, or immediately if conditions indicate that such impairment could exist. The Company is permitted, but not required, to qualitatively assess indicators of a reporting unit’s fair value to determine whether it is necessary to perform the two-step goodwill impairment test. If a quantitative test is deemed necessary, a discounted cash flow analysis is prepared to estimate fair value.

Intangible assets, namely customer base and covenants not to compete, 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. A summary of changes in the Company’s goodwill and intangible assets is as follows (amounts in thousands):

	*Goodwill*								*Intangible Assets*									*Goodwill*						*Intangible Assets*
	*Distribution*		*Service*			*Total*			*Distribution*			*Service*			*Total*			*Distribution*		*Service*		*Total*		*Distribution*			*Service*			*Total*
Net Book Value as of March 26, 2022	$	11,458	$	53,616		$	65,074		$	647		$	14,045		$	14,692
Net Book Value as of March 25, 2023																		$	11,458	$	57,902	$	69,360	$	448		$	13,351		$	13,799
Additions		-		4,496			4,496			-			3,576			3,576			26,707		9,416		36,123		7,900			3,983			11,883
Measurement Period Adjustments		-		(203	)		(203	)		-			-			-
Amortization		-		-			-			(152	)		(3,259	)		(3,411	)		-		-		-		(910	)		(3,317	)		(4,227	)
Currency Translation Adjustment		-		(541	)		(541	)		-			(14	)		(14	)		-		217		217		-			4			4
Net Book Value as of December 24, 2022	$	11,458	$	57,368		$	68,826		$	495		$	14,348		$	14,843
Net Book Value as of December 23, 2023																		$	38,165	$	67,535	$	105,700	$	7,438		$	14,021		$	21,459

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

Recently ~~Issued~~Adopted Accounting Pronouncements: In June 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Allowance for ~~doubtful~~credit losses for accounts receivable is the most significant item for the Company under this ASU. ~~As credit losses from the Company's trade receivables have~~The Company adopted ASU ~~not~~2016-13 ~~historically been significant, the Company anticipates that the~~effective on March 26, 2023. The adoption of ~~the ASU will~~this standard did not have a material impact on ~~its~~our consolidated financial statements.

On July 7, 2021, wethe Company entered into the Second Amended and Restated Credit Facility Agreement (the ~~“2021~~ ~~Credit~~“Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the Company’s ~~Amended and Restated Credit Facility Agreement dated as of~~ ~~October 30, 2017,~~ ~~as amended by Amended and Restated Credit Facility Agreement Amendment~~ 1 ~~dated~~ ~~December 10, 2018~~ ~~and Amended and Restated Credit Facility Agreement Amendment~~ 2 ~~(“Amendment Two”) dated~~ ~~May 18, 2020 (~~~~as amended, the “Prior Credit Agreement”).~~prior credit agreement with M&T.

The ~~2021~~Credit Agreement ~~increased the~~provides for a revolving credit commitment (the “Revolving Credit Commitment”) ~~from $40.0 million to~~of $80.0 million through June 2026, with a letter of credit subfacility ~~increased from $2.0~~of $10.0 million. The Company's 2018 term loan, with an original principal amount of $15.0 million (the "2018 Term Loan"), is also provided for under the Credit Agreement.

The Credit Agreement allows the Company to ~~$10.0~~use up to $50.0 million ~~and extended the term of~~under the Revolving Credit Commitment to ~~June 2026.~~ for acquisitions in any single fiscal year. The~~2021~~ Credit Agreement ~~amended~~restricts the ~~definition~~Company's ability to complete acquisitions of Applicable Margin (formerly Applicable Rate under the Prior Credit Agreement), which is based upon the Company’s then current leverage ratio and is used to determine interest charges on outstanding and unused borrowings under the revolving credit facility; the amendments reduced the Applicable Margins payable at the ~~two~~ ~~highest leverage ratio levels. The~~ ~~2021~~ ~~Credit Agreement also amended the definition of Permitted Acquisitions, that is, acquisitions which are permitted under, and~~ ~~may~~ be financed with proceeds of, the revolving credit facility, including increasing the aggregate purchase price for acquisitions consummated in any fiscal year from $1.0 million to $65.0 million during fiscal year ~~2022~~ ~~and $50.0 million during any subsequent fiscal year, and adding an aggregate purchase price of $40.0 million for acquisitions consummated at any time during the term of the~~ ~~2021~~ ~~Credit Agreement related to~~ businesses with a principal place of business located in the United Kingdom or the European ~~Union.~~Union to an aggregate purchase price of $40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the Revolving Credit Commitment.

~~In addition,~~Under the~~2021~~ Credit Agreement, ~~provides that, assuming~~the Company nomay ~~event of default,~~make restricted payments up to $25.0 million ~~(increased from $10.0 million in the Prior Credit Agreement)~~ in the aggregate over the term of the Credit Agreement and $10.0 million ~~(increased from $3.0 million in the Prior Credit Agreement)~~ in any single fiscal year ~~may~~ ~~be used by us~~ to repurchase ~~our~~ shares and pay dividends. ~~The~~ ~~2021~~ ~~Credit Agreement modified the leverage ratio and fixed charge coverage ratio covenants with which we are required to comply. The~~ ~~2021~~ Credit Agreement also reduced the London Interbank Offered Rate (“LIBOR”) floor from 1.0% to 0.25% and included a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR. The ~~2021~~ ~~Credit Agreement also reduced the fixed interest rate on our term loan in the amount of $15.0 million (the~~ ~~“2018~~ ~~Term Loan”) was reduced from 4.15% to 3.90%.~~

~~The~~ ~~2021~~ ~~Credit Agreement superseded in its entirety, the Prior Credit Agreement. Amendment Two to the Prior Credit Agreement had previously extended the term of the revolving credit facility to~~ ~~October 20, 2022~~~~and increased the revolving credit commitment to $40.0 million.~~

Amendment Two had modified the definition of the applicable rate used to determine interest charges on outstanding and unused borrowings under the revolving credit facility and it amended the definition of permitted acquisitions to amend borrowings available under the revolving credit facility for acquisitions. In addition, Amendment Two had amended the definition of restricted payments to exclude amounts up to $2.5 million during each fiscal year used to pay certain employee tax obligations associated with share-based payment and stock option activity, and modified certain restrictions to the Company’s ability to repurchase its shares and pay dividends. Amendment Two also had modified the leverage ratio and fixed charge coverage ratio covenants with which the Company was required to comply and limited capital expenditures to $5.5 million for fiscal year ~~2021.~~ ~~Amendment Two also had established a LIBOR floor of 1.0% and included a mechanism for adoption of a different benchmark rate in the event LIBOR was discontinued.~~

As of December ~~24, 2022~~23, 2023, $80.0 million was available for borrowing under the revolving credit ~~facility,~~facility. As of ~~which $42.2 million was~~December 23, 2023, there were no amounts outstanding ~~and included in long-term debt on~~under the ~~Consolidated Balance Sheets.~~revolving credit facility. During the first nine months of fiscal year ~~2023~~2024, ~~$8.3~~$12.9 million was drawn from the revolving credit facility and used for~~three~~ business acquisitions.

As of December ~~24, 2022~~23, 2023, ~~$7.0~~$4.7 million was outstanding on the 2018 Term Loan, of which ~~$2.2~~$2.3 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total amortizing repayments (principal plus interest) of $0.2 million per month through its maturity date in December 2025.

Interest and Other Costs: ~~Interest~~Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrue, at Transcat’s election, at either the variable ~~one~~~~-month LIBOR~~Daily Simple SOFR or a fixed rate for a designated period at the ~~LIBOR~~SOFR corresponding to such period (subject to a ~~1% floor during the~~ ~~first~~ ~~quarter of fiscal year~~ ~~2022~~ ~~and a~~ 0.25% ~~floor for subsequent periods)~~floor), in each case, plus a margin. ~~Interest on outstanding borrowings under the~~ ~~2018~~ ~~Term Loan accrued at a fixed rate of 4.15% during the~~ ~~first~~ ~~quarter of fiscal year~~ ~~2022~~ ~~and accrued at a fixed rate of 3.90% during the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2022~~ ~~and accrues at a fixed rate of 3.90% over the term of the loan for subsequent periods.~~ Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon the Company’s calculated leverage ratio. The Company’s interest rate for the revolving credit facility for the first nine months of fiscal year ~~2023~~2024 ranged from ~~1.6%~~6.4% to ~~6.0%~~7.1%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan.

Covenants: The~~2021~~ Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio covenant, which prohibits the Company's fixed charge ratio from being less than 1.15 to 1.00,and a leverage ratio ~~covenant.~~covenant, which prohibits the Company's leverage ratio from exceeding 3.00 to 1.00. The Company was in compliance with all loan covenants and requirements during the ~~third~~first ~~quarter~~nine months of fiscal year ~~2023~~2024. ~~Our~~The Company's leverage ratio, as defined in the ~~2021~~Credit Agreement, was ~~1.66~~0.12 at December ~~24, 2022~~23, 2023, compared with ~~1.74~~1.60 at March ~~26, 2022~~25, 2023.

~~Pursuant to the Prior Credit Agreement, we were required to comply with a fixed charge ratio covenant and a leverage ratio covenant, which were modified by the~~ ~~2021~~ ~~Credit Agreement. The allowable leverage ratio under the Prior Credit Agreement for the~~ ~~first~~ ~~quarter of fiscal year~~ ~~2022~~ ~~was a maximum multiple of 4.0 of total debt outstanding compared to EBITDA and non-cash stock-based compensation expense for the preceding~~ ~~four~~ ~~consecutive fiscal quarters. The Prior Credit Agreement also had provided that the trailing~~ ~~twelve~~~~-month pro forma EBITDA of an acquired business was included in the allowable leverage calculation. After the~~ ~~first~~ ~~quarter of fiscal year~~ ~~2022,~~ ~~pursuant to the~~ ~~2021~~ ~~Credit Agreement, the allowable leverage ratio is a maximum multiple of 3.0.~~

Other Terms: The Company has pledged all of its U.S. tangible and intangible personal property, the equity interests of its U.S.-based subsidiaries, and a majority of the common stock of Transcat Canada Inc. as collateral security for the loans made under the revolving credit facility.

In September 2021, the Transcat, Inc. 2021 Stock Incentive Plan (the “2021 Plan”) was approved by shareholders and became effective. The 2021 Plan replaced the Transcat, Inc. 2003 Incentive Plan (the “2003 Plan”). Shares available for grant under the 2021 Plan include any shares remaining available for issuance under the 2003 Plan and any shares that are subject to outstanding awards under the 2003 Plan that are subsequently canceled, expired, forfeited, or otherwise not issued or are settled in cash. The 2021 Plan provides for, among other awards, grants of restricted stock units and stock options to directors, officers and key employees at the fair market value at the date of grant. At December ~~24, 2022~~23, 2023, ~~0.7~~0.6 million shares of common stock were available for future grant under the 2021 Plan.

The Company receives an excess tax benefit related to restricted stock vesting and stock options exercised and redeemed. The discrete tax benefits related to share-based compensation and stock option activity during the first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023 were ~~$0.5~~$0.7 million and ~~$1.7~~$0.5 million, respectively.

Restricted Stock Units: The Company grants time-based and performance-based restricted stock units as a component of executive and key employee compensation. Expense for restricted stock unit grants is recognized on a straight-line basis for the service period of the stock award based upon fair value of the award on the date of grant. The fair value of the restricted stock unit grants is the quoted market price for the Company’s common stock on the date of grant. These restricted stock units are either time vested, or vest following the third fiscal year from the date of grant subject to cumulative diluted earnings per share or cumulative adjusted EBITDA targets over the eligible period.

Compensation cost ultimately recognized for performance-based restricted stock units will equal the grant date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, the Company records compensation cost based on the estimated level of achievement of the performance conditions. The expense relating to the time vested restricted stock units is recognized on a straight-line basis over the requisite service period for the entire award.

The ~~Company achieved 82% of the target level for the performance-based restricted stock units granted in the fiscal year ended~~ ~~March 28, 2020~~ ~~and as a result, issued 16 thousand shares of common stock to executive officers and certain key employees during the~~ ~~first~~ ~~quarter of fiscal year~~ ~~2023~~~~. The~~ following table summarizes the non-vested restricted stock units outstanding as of December ~~24, 2022~~23, 2023 (in thousands, except per unit data):

		*Total*	*Grant Date*		*Estimated*		*Total*	*Grant Date*		*Estimated*
		*Number*	*Fair*		*Level of*		*Number*	*Fair*		*Level of*
Date	*Measurement*	*of Units*	*Value*		*Achievement at*	*Measurement*	*of Units*	*Value*		*Achievement at*
Granted	*Period*	*Outstanding*	*Per Unit*		*December 24, 2022*	*Period*	*Outstanding*	*Per Unit*		*December 23, 2023*
October 2018	October 2018 – September 2027	6	$	20.81	Time Vested	October 2018 – September 2028	6	$	20.81	Time Vested
April 2020	April 2020 – March 2023	2	$	26.25	Time Vested
July 2020	July 2020 – July 2023	26	$	27.08	Time Vested
September 2020	September 2020 – July 2023	4	$	28.54	Time Vested
September 2020	September 2020 – July 2023	5	$	29.76	Time Vested
September 2020	September 2020 – September 2023	3	$	29.76	Time Vested
January 2021	January 2021 – January 2024	1	$	34.62	Time Vested
May 2021	May 2021 – May 2024	1	$	54.21	Time Vested
June 2021	June 2021 – March 2024	10	$	53.17	150% of target level	June 2021 – March 2024	10	$	53.17	136% of target level
June 2021	June 2021 – March 2024	11	$	53.17	Time Vested	June 2021 – March 2024	11	$	53.17	Time Vested
September 2021	September 2021 – September 2024	4	$	67.76	Time Vested	September 2021 – September 2024	4	$	67.76	Time Vested
December 2021	December 2021 – December 2024	1	$	90.41	Time Vested
January 2022						January 2022 – March 2024	1	$	90.92	136% of target level
January 2022						January 2022 – March 2024	1	$	90.92	Time Vested
January 2022	January 2022 – March 2024	2	$	90.92	Time Vested	January 2022 – January 2025	1	$	90.41	Time Vested
March 2022	March 2022 – March 2025	2	$	76.31	Time Vested	March 2022 – March 2025	1	$	76.31	Time Vested
May 2022	May 2022-March 2025	12	$	63.17	100% of target level	May 2022 – March 2025	11	$	63.17	64% of target level
May 2022	May 2022-March 2025	11	$	63.17	Time Vested	May 2022 – March 2025	12	$	63.17	Time Vested
August 2022	August 2022-August 2025	1	$	78.04	Time Vested	August 2022 – August 2025	1	$	78.04	Time Vested
December 2022	December 2022 -December 2025	1	$	81.26	Time Vested	December 2022 – December 2025	1	$	81.26	Time Vested
December 2022	December 2022 - December 2025	1	$	67.48	Time Vested	December 2022 – December 2025	1	$	67.48	Time Vested
September 2022	September 2022-September 2023	5	$	73.80	Time Vested
May 2023						May 2023 – March 2026	10	$	89.70	150% of target level
May 2023						May 2023 – March 2026	11	$	89.70	Time Vested
May 2023						May 2023 – May 2026	19	$	89.70	Time Vested
August 2023						August 2023 – August 2024	6	$	90.56	Time Vested
September 2023						September 2023 – September 2024	4	$	109.55	Time Vested

Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was ~~$1.7~~$2.4 million and ~~$1.2~~$1.7 million in the first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023, respectively. As of December ~~24, 2022~~23, 2023, unearned compensation, to be recognized over the grants’ respective service periods, totaled ~~$2.7~~$4.4 million.

Stock Options: The Company grants stock options to employees and directors with an exercise price equal to the quoted market price of the Company’s stock at the date of the grant. The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate and the expected term of the option. Expense for stock options is recognized on a straight-line basis over the requisite service period for each award. Options vest either immediately or over a period of up to five years using a straight-line basis and expire either five years or ten years from the date of grant.

We calculate the fair value of the stock options granted using the Black-Scholes model. ~~There were no stock options granted during the~~ ~~three~~ ~~months ended~~ ~~December 24, 2022~~ ~~and~~ ~~December 25, 2021.~~ The following weighted-average assumptions were used to value options granted during the first three and nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023:

	Nine Months Ended						*Third Quarter Ended*					*Nine Months Ended*
	December 24,			December 25,			*December 23,*			*December 24,*		*December 23,*			*December 24,*
	2022			2021			*2023*			*2022*		*2023*			*2022*

Risk-Free Interest Rate		2.65	%		1.00	%		4.84	%		N/A		4.09	%		2.65	%
Volatility Factor		37.62	%		29.95	%		37.31	%		N/A		37.12	%		37.62	%
Expected Term (in Years)		4.58			6.38			6.50			N/A		6.30			4.58
Annual Dividend Rate		0.00	%		0.00	%		0.00	%		N/A		0.00	%		0.00	%

We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on safe harbor rules, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. We assume no expected dividends. Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company has elected to account for forfeitures as they occur.

During the first nine months of fiscal year 2024, the Company granted options for 7,000 shares of common stock in the aggregate to Company employees that vest over three years, an option for 10,000 shares of common stock to a Company employee that vests over five years and options for 20,000 shares of common stock (10,000 each) to two Company directors that vest over five years.

During the firstnine months of fiscal year 2023, the Company granted options for 46,000 shares of common stock in the aggregate to Company employees that vest over three years and an option for 10,000 shares of common stock to a ~~Board of Directors member~~Company director that vests ~~over~~ ~~five~~ ~~years.~~

~~During the~~ ~~first~~~~nine~~ ~~months of fiscal year~~ ~~2022~~~~, the Company granted options for 25,000 shares of common stock in the aggregate to Company employees that vest over~~ ~~three~~ to ~~five~~ ~~years, an option for 2,000 shares of common stock each to~~ ~~five~~ ~~employees (10,000 shares in the aggregate) that vests over~~ ~~three~~ ~~years and options for 90,000 shares of common stock in the aggregate to Company employees that vest~~ over five years.

The expense related to all stock option awards was $0.9 million in the firstnine months of fiscal year 2024 and $1.1 million in the first nine months of fiscal year 2023 ~~and $0.4 million in the~~ ~~first~~~~nine~~ ~~months of fiscal year~~ ~~2022~~.

The following table summarizes the Company’s options as of and for the first nine months ended December ~~24, 2022~~23, 2023 (in thousands, except price per option data and years):

				*Weighted*		*Weighted*							*Weighted*		*Weighted*
				*Average*		*Average*							*Average*		*Average*
	*Number*			*Exercise*		*Remaining*		*Aggregate*		*Number*			*Exercise*		*Remaining*		*Aggregate*
	Of			*Price Per*		*Contractual*		*Intrinsic*		Of			*Price Per*		*Contractual*		*Intrinsic*
	*Options*			*Option*		*Term (in years)*		*Value*		*Options*			*Option*		*Term (in years)*		*Value*
Outstanding as of March 26, 2022		165		$	53.27
Outstanding as of March 25, 2023											217		$	56.25
Granted		56		$	62.46						37		$	93.18
Exercised		(4	)	$	6.19						(4	)	$	24.30
Forfeited		-		$	-						(5	)	$	68.13
Outstanding as of December 24, 2022		217		$	56.25		7	$	2,980
Exercisable as of December 24, 2022		28		$	53.76		9	$	454
Outstanding as of December 23, 2023											245		$	62.06		6	$	11,180
Exercisable as of December 23, 2023											82		$	41.17		6	$	4,984

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of fiscal year ~~2023~~2024 and the exercise price, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all holders exercised their options on December ~~24, 2022~~23, 2023. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Total unrecognized compensation cost related to non-vested stock options as of December ~~24, 2022~~23, 2023 was ~~$2.2~~$2.4 million, which is expected to be recognized over a period of three years. The aggregate intrinsic value of stock options exercised during the first nine months of fiscal year ~~2023~~2024 was $0.3 million and during the firstnine months of fiscal year ~~2022~~2023 was $0.2 ~~million and $6.9 million, respectively.~~million. Cash received from the exercise of options in the first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023 was ~~less than~~ $0.1 million and ~~$1.0~~less than $0.1 million, respectively.

The basis for determining our operating segments is the manner in which financial information is used in monitoring our operations. Transcat has two reportable segments: Service and Distribution. Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services. Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally. The Company has no inter-segment sales. We believe that reporting performance at the operating income level is the best indicator of segment performance. The following table presents segment and geographic data for the third quarter and first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022~~2023 (dollars in thousands):

	*Third Quarter Ended*				*Nine Months Ended*				*Third Quarter Ended*				*Nine Months Ended*
	*December 24,*		*December 25,*		*December 24,*		*December 25,*		*December 23,*		*December 24,*		*December 23,*		*December 24,*
	*2022*		*2021*		*2022*		*2021*		*2023*		*2022*		*2023*		*2022*
Revenue:
Service	$	35,977	$	30,237	$	105,120	$	87,338	$	41,509	$	35,977	$	122,793	$	105,120
Distribution		21,425		20,665		63,382		61,741		23,657		21,425		65,775		63,382
Total		57,402		50,902		168,502		149,079		65,166		57,402		188,568		168,502

Gross Profit:
Service		10,793		8,983		33,115		27,447		13,494		10,793		40,549		33,115
Distribution		5,607		4,653		16,090		14,320		7,442		5,607		19,222		16,090
Total		16,400		13,636		49,205		41,767		20,936		16,400		59,771		49,205

Operating Expenses:
Service ⁽¹⁾		8,957		7,322		26,240		20,165		10,528		8,957		33,649		26,240
Distribution ⁽¹⁾		4,280		3,953		12,572		11,974		6,114		4,280		15,545		12,572
Total		13,237		11,275		38,812		32,139		16,642		13,237		49,194		38,812

Operating Income:
Service		1,836		1,661		6,875		7,282		2,966		1,836		6,900		6,875
Distribution		1,327		700		3,518		2,346		1,328		1,327		3,677		3,518
Total		3,163		2,361		10,393		9,628		4,294		3,163		10,577		10,393

Unallocated Amounts:
Interest and Other Expense, net		1,039		136		1,732		581		23		1,039		1,742		1,732
Provision for Income Taxes		523		596		1,631		715		923		523		2,078		1,631
Total		1,562		732		3,363		1,296		946		1,562		3,820		3,363

Net Income	$	1,601	$	1,629	$	7,030	$	8,332	$	3,348	$	1,601	$	6,757	$	7,030

Geographic Data:
Revenues to Unaffiliated Customers ⁽²⁾
United States ⁽³⁾	$	51,209	$	46,005	$	151,242	$	136,359	$	59,090	$	51,209	$	170,466	$	151,241
Canada		4,221		3,749		12,075		10,849		4,083		4,221		12,226		12,075
Other International		1,972		1,148		5,185		1,871		1,993		1,972		5,876		5,186
Total	$	57,402	$	50,902	$	168,502	$	149,079	$	65,166	$	57,402	$	188,568	$	168,502

Axiom: Effective August 8, 2023, Transcat purchased all of the outstanding capital stock of Axiom Test Equipment, Inc. (“Axiom”), a privately-held California rental provider of electronic test equipment to customers across the United States. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Distribution capabilities.

The Axiom goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the Axiom acquisition has been allocated to the Distribution segment. Intangible assets related to the Axiom acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to twelve years and are not deductible for tax purposes. Amortization of goodwill related to the Axiom acquisition is not deductible for tax purposes.

The total purchase price for Axiom was approximately $38.6 million and was paid with $10.0 million in cash and the issuance of our common stock valued at $28.6 million. Pursuant to the asset purchase agreement, the Company held back approximately $3.9 million of the purchase price for certain potential post-closing adjustments.

The purchase price allocation is subject to revision based upon our final review of tangible and intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed. The amount of goodwill changed since September 23, 2023 due to the finalization of inventory and property and equipment values. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Axiom's assets and liabilities acquired on August 8, 2023 (in thousands):

From the date of acquisition through the end of the third quarter of fiscal year 2024, Axiom has contributed revenue of $4.3 million and operating income of $0.4 million, which includes the negative impact of amortization of the acquired intangible assets.

SteriQual: Effective July 12, 2023, Transcat purchased all of the outstanding capital stock of SteriQual, Inc. (“SteriQual”), a Florida based provider of expert consulting services to pharmaceutical, biopharmaceutical, medical device and diagnostic equipment manufacturers. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.

The SteriQual goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the SteriQual acquisition has been allocated to the Service segment. Intangible assets related to the SteriQual acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are not deductible for tax purposes. Amortization of goodwill related to the SteriQual acquisition is not deductible for tax purposes.

The total purchase price for SteriQual was approximately $4.3 million and was paid by the issuance of our common stock. Pursuant to the asset purchase agreement, the Company held back approximately $0.9 million of the purchase price for certain potential post-closing adjustments. Pursuant to the asset purchase agreement, the purchase price is subject to reduction by $0.5 million if certain revenue targets are not met through July 12, 2024. This contingent consideration is remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be included in the Company’s Consolidated Statements of Income. The purchase price was reduced to $3.8 million as of December 23, 2023 as the Company recorded a receivable in the amount of $0.5 million related to the revenue target contingent consideration. This receivable was recognized based on the facts and circumstances at the date of acquisition and is recognized as a component of goodwill and not recorded in the Consolidated Statement of Income.

The purchase price allocation is subject to revision based upon our final review of intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed. The amount of goodwill changed since September 23, 2023 due to the accounts receivable balance as part of the contingent consideration. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of SteriQual's assets and liabilities acquired on July 12, 2023 (in thousands):

From the date of acquisition through the end of the third quarter of fiscal year 2024, SteriQual has contributed revenue of $1.9 million and operating income of less than $0.1 million, which includes the negative impact of amortization of the acquired intangible assets.

TIC-MS: Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, Inc. (“TIC-MS”), a Missouri based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.

The TIC-MS goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the TIC-MS acquisition has been allocated to the Service segment. Intangible assets related to the TIC-MS acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are not deductible for tax purposes. Amortization of goodwill related to the TIC-MS acquisition is not deductible for tax purposes.

The total purchase price for TIC-MS was approximately $9.8 million and was paid with $2.9 million in cash, including $0.5 million placed in escrow for contingent consideration, certain post-closing adjustments and indemnification claims, if any, and the issuance of 77,387 shares of our common stock valued at $6.9 million. Pursuant to the asset purchase agreement, the purchase price will be subject to reduction by up to $0.5 million if a key customer relationship is not retained through March 27, 2024. This contingent consideration is remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be included in the Company’s Consolidated Statements of Income. As of December 23, 2023, we continued to retain this key customer relationship. As a result, there has not been a receivable recognized relating to the $0.5 million contingent consideration.

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of TIC-MS's assets and liabilities acquired on March 27, 2023 (in thousands):

From the date of acquisition through the end of the third quarter of fiscal year 2024, TIC-MS has contributed revenue of $2.7 million and operating income of $1.1 million, which includes the negative impact of amortization of the acquired intangible assets.

~~NOTE~~Elite: Effective 5February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (“Elite”), a California based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that can leverage the Company’s already existing operating infrastructure.

All the goodwill related to the Elite acquisition has been allocated to the Service segment. Amortization of goodwill related to the Elite acquisition is deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not – ~~BUSINESS ACQUISITIONS~~qualify for separate recognition.

The total purchase price for the assets of Elite was approximately $0.9 million, of which $0.8 million was paid in cash. Pursuant to the asset purchase agreement, the Company held back $0.1 million of the purchase price for certain potential post-closing adjustments. As of December 23, 2023, no amounts have been paid. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Elite’s assets and liabilities acquired on February 2, 2023 (in thousands):

Since this operation was integrated immediately into our existing operations, its separate contributed revenue and operating income is undeterminable.

Complete Calibrations: Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), an Irish company. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.

All the goodwill related to the Complete Calibrations acquisition has been allocated to the Service segment. Amortization of goodwill related to the Complete Calibrations acquisition is not deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

The total purchase price paid for Complete Calibrations was approximately $1.2 million in cash. In connection with this transaction, the Company also entered into a Technology License Agreement with Calibration Robots Limited, an Irish company and related party to Complete Calibrations, for the use of their proprietary robotics in completing calibrations. The Technology License Agreement includes transactional royalties in the amount of 3 Euros ($3)3.19) per calibration performed by technology covered under this license agreement, with a royalty term of up to ten years commencing from the earlier of (i) the date on which cumulative revenue earned from technology covered under this license agreement equals 0.75 million Euros ($0.80 million), and (ii) March 28, 2024. In addition to the transactional royalties, as long as a key employee is employed by the Company, there is an annual royalty fee of 0.1 million Euros ($~~0.1~~0.11 million). For purposes of this paragraph, we used a conversion rate of ~~1.0617~~1.1014 to convert Euro to U.S. dollar as of December ~~24, 2022.~~23, 2023. As of December 23, 2023, the key employee is still employed by the Company.

~~The purchase price allocation is subject to revision based upon our final review of assets acquired, and liabilities assumed.~~ The following is a summary of the ~~preliminary~~ purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Complete Calibrations’ assets and liabilities acquired on September 28, 2022 (in thousands):

~~From~~During the ~~date~~firstnine months of ~~acquisition,~~fiscal year 2024, Complete Calibrations has contributed revenue of ~~$0.1~~$0.3 million and operating ~~income~~loss of less than $0.1 million.

e2b: Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b Calibration (“e2b”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities.

The e2b goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the e2b acquisition has been allocated to the Service segment. Intangible assets related to the e2b acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are deductible for tax purposes. Amortization of goodwill related to the e2b acquisition is deductible for tax purposes.

The total purchase price paid for the assets of e2b was approximately $3.1 million in cash. Pursuant to the asset purchase agreement, the Company ~~has~~held back $0.9 million of the purchase price in escrow for certain potential post-closing adjustments. During the third quarter of fiscal year 2023, $0.6 million of the escrow was released to the sellers. During the third quarter of fiscal year 2024, $0.3 million was released to the sellers. As of December 23, 2023, there is no money remaining in escrow.

~~The purchase price allocation is subject to revision based upon our final review of intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed.~~ The following is a summary of the ~~preliminary~~ purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of e2b’s assets and liabilities acquired on September 27, 2022 (in thousands):

~~From~~During the ~~date~~firstnine months of ~~acquisition,~~fiscal year 2024, e2b has contributed revenue of ~~$0.9~~$2.6 million and operating income of ~~$0.2~~$0.4 million, which includes the negative impact of amortization of the acquired intangible assets.

Alliance: Effective May 31, 2022, Transcat acquired substantially all of the assets of Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. d/b/a Alliance Calibration (“Alliance”), an Ohio based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s ~~service~~Service capabilities.

The Alliance goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the Alliance acquisition has been allocated to the Service segment. Intangible assets related to the Alliance acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are deductible for tax purposes. Amortization of goodwill related to the Alliance acquisition is deductible for tax purposes.

The purchase price for Alliance was approximately $4.7 million and was paid with $4.0 million in cash and the issuance of 2,284 shares of our common stock valued at $0.1 million. Pursuant to the asset purchase agreement, the Company held back $0.5 million of the purchase price for certain potential post-closing adjustments, and the purchase price ~~will be~~would have been subject to reduction by $0.5 million if a key customer relationship iswas not retained. During the first quarter of fiscal year 2024, $0.5 million of the holdback was released to the sellers.

~~The purchase price allocation is subject to revision based upon our final review~~

The following is a summary of the ~~preliminary~~ purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Alliance’s assets and liabilities acquired on May 31, 2022 (in thousands):

From the date of acquisition, Alliance has contributed revenue of $1.3 million and operating income of $0.1 million, which includes the negative impact of amortization of the acquired intangible assets.

~~Tangent~~~~: Effective~~ ~~December 31, 2021,~~ Transcat purchased all the outstanding membership units of Tangent Labs, LLC (“Tangent”). Tangent provides in-house and on-site calibrations of precision measurement and control instrumentation to customers in the life science, aerospace and other regulated industries, and has lab locations in Indianapolis, Indiana and Huntsville, Alabama. This transaction aligned with a key component of the Company’s strategy of acquiring local capabilities in attractive geographies.

~~The Tangent goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do~~ ~~not~~ qualify for separate recognition. All the goodwill and intangible assets relating to the Tangent acquisition has been allocated to the Service segment. Intangible assets related to the Tangent acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to ~~fifteen~~ ~~years and are deductible for tax purposes. Amortization of goodwill related to the Tangent acquisition is~~ ~~not~~ ~~deductible for tax purposes.~~

The purchase price for Tangent was approximately $8.9 million, all paid in cash, and is subject to certain customary holdback provisions and a portion of which was placed in escrow to secure the sellers’ obligations in the event that a key employee terminates employment with Tangent on or before the ~~first~~ ~~anniversary of the closing of the transaction. $7.9 million was paid in cash and $1.0 million of the purchase price has been put into escrow for indemnification claims, if any.~~

~~During the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2023,~~ the key employee terminated their employment with the Company. As a result, the Company took $0.2 million out of the escrow account and it was recorded as a gain in the Company's Consolidated Statement of Income.

~~During the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2023,~~ ~~a measurement period adjustment was recorded to recognize the fair value of Property and Equipment acquired, with a corresponding reduction to Goodwill. There was~~ no ~~remeasurement period adjustment in the~~ ~~third~~ ~~quarter of fiscal year~~ ~~2023.~~ ~~The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level~~ 3 ~~inputs, of Tangent’s assets and liabilities acquired on~~ ~~December 31, 2021 (~~~~in thousands):~~

During the first nine months of fiscal year ~~2023~~2024,~~, Tangent~~ Alliance has contributed revenue of ~~$1.7~~$2.0 million and operating ~~loss~~income of ~~less than $0.1~~$0.6 million, which includes the negative impact of amortization of the acquired intangible assets.

NEXA: Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management), an Irish company, which owns all of the issued and outstanding capital stock of its U.S.-based subsidiary, Cal OpEx Inc., a Delaware corporation (collectively, “NEXA”). ~~NEXA provides calibration optimization~~On September 11, 2023, the Company entered into an amendment (the “Amendment”) to a Share Purchase Agreement dated August 31, 2021 (the “Purchase Agreement”) with John Cummins and ~~other technical solutions to improve asset and reliability management programs to pharmaceutical, biotechnology, and medical device companies worldwide. This transaction aligned~~Ross Lane (the “Sellers”) associated with ~~a key component~~the Company’s purchase of all of the ~~Company’s acquisition strategy~~outstanding capital stock of ~~targeting businesses that expand~~NEXA. As described below, the ~~depth~~Amendment changes the conditions necessary for the Sellers to receive potential earn-out payments, changes the lines of business included in the calculation of earnings before income taxes, depreciation and ~~breadth~~amortization (“EBITDA”), and changes the outside due date of ~~the Company’s Service capabilities.~~any potential earn-out payments.

~~The NEXA goodwill is primarily attributable~~Pursuant to the ~~workforce acquired, as well as operational synergies and other intangibles that do~~ ~~not~~ ~~qualify for separate recognition. All of~~Purchase Agreement, the ~~goodwill and intangible assets relating~~Sellers were entitled to the NEXA acquisition has been allocated to the Service segment. Intangible assets related to the NEXA acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to ~~five~~ ~~years and are deductible for tax purposes. Amortization of goodwill related to the NEXA acquisition is~~ ~~not~~ ~~deductible for tax purposes.~~

The purchase price for NEXA was approximately $26.2 million and was paid with $23.9 million in cash and the issuance of 34,943 shares of our common stock valued at $2.4 million. Additionally, there are potential earn-out payments in an aggregate amount of up to $7.5 million ~~over~~for the ~~four-year period following~~calendar years ending December 31, 2022, 2023,2024, and 2025 (each, an “Earn-Out Year”) if NEXA’s consolidated gross revenue, as defined in the ~~closing~~Purchase Agreement, equaled or exceeded 70% of the ~~transaction based upon NEXA achieving certain annual~~target revenue specified in the Purchase Agreement and NEXA’s consolidated EBITDA ~~goals. If achieved,~~percentage, as defined in the Purchase Agreement, equaled or exceeded 25% for a given earn-out year. The potential earn-out payment of up to $0.4 million for the 2022 Earn-Out Year was not earned under the Purchase Agreement.

Pursuant to the Amendment, the Sellers are now entitled to potential earn-out payments in an aggregate amount of up to $7.1 million for the remaining Earn-Out Years (2023,2024 and 2025) if NEXA’s consolidated EBITDA, as defined in the Amendment, equals or exceeds 70% of the target EBITDA specified in the Amendment for a given earn-out year. Pursuant to the Amendment, the definition of EBITDA was revised to include EBITDA from the Commissioning, Qualification and Validation business ("CQV") and incremental EBITDA from the SteriQual, Inc. business. The maximum earn-out payment will ~~also~~ be ~~made~~received if NEXA’s consolidated EBITDA equals or exceeds 150% of the target EBITDA specified in the Amendment. The earn-out payments, if any, will be paid in shares of common stock, ~~unless certain criteria~~calculated using the volume-weighted average closing price of the common stock for 30 consecutive trading days ending on the trading day that is ~~met for~~two days prior to the date the earn-out payment is to be paid (“VWAP”). If the VWAP is less than $45.07 per share, then the Company may pay the earn-out payment in cash ~~payment.~~ in lieu of shares of common stock.

As of ~~August 31, 2021~~March 25, 2023, the estimated fair value for the ~~contingent~~total earn-out ~~payments,~~obligations under the Purchase Agreement, classified as Level 3 in the fair value hierarchy, was ~~$0.2 million and included~~zero. As of September 23, 2023, the estimated fair value for the total earn-out obligations under the Amendment, classified as Level 3 in the ~~purchase price allocation below.~~fair value hierarchy, was approximately $2.8 million. This amount was calculated using a Geometric Brownian motion distribution that was then used in a Monte Carlo simulation model. Assumptions used in the Monte Carlo simulation model included: 1) ~~weighted-average cost~~discount rate of ~~capital of 6.60%~~9.00%, 2) risk-free interest rate of ~~0.58%~~5.00%, 3) asset volatility of ~~20.00%~~25.00%, and 4) forecasted revenue and EBITDA. This contingent consideration is remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be included in the ~~Company's Consolidated Statements of Income. During the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2023,~~ ~~the Company reduced the contingent consideration down to zero. As a result of remeasurement, the change was included in the~~ Company’s Consolidated Statements of Income. Due to the uncertainty with utilizing these significant unobservable inputs for this Level 3 fair value measurement, materially higher or lower fair value measurements may be recognized at subsequent remeasurement periods. The Company recognized a non-cash expense of $2.8 million, which was recorded in general and administrative expenses in its Consolidated Statement of Income for the quarter ended September 23, 2023. As of December 23, 2023, the estimated fair value of the total earn-out obligations under the Amendment was approximately $2.9 million. The change in accrual is due to the actual results of the 2023 calendar Earn-Out Year and the accretion of the 2024 and 2025 Earn-Out Years. As a result, the Company recognized a non-cash expense of $0.1 million, which was recorded in general and administrative expenses in its Consolidated Statement of Income for the quarter ended December 23, 2023. There were no ~~remeasurement adjustments during~~material changes in assumptions that would impact the ~~third~~ ~~quarter~~valuation as of ~~fiscal year~~ December 23, 2023. ~~$0.1 million of the purchase price has been put into escrow for indemnification claims, if any.~~

~~The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level~~ 3 ~~inputs, of NEXA’s assets and liabilities acquired on~~ ~~August 31, 2021 (~~~~in thousands):~~

~~During the~~ ~~first~~~~nine~~ ~~months of fiscal year~~ ~~2023~~~~, NEXA contributed revenue of $9.8 million and operating income of $0.2 million, which includes the negative impact of amortization of the acquired intangible assets.~~

~~Upstate Metrology~~~~: Effective~~ ~~April 29, 2021,~~ Transcat acquired substantially all of the assets of Upstate Metrology Inc. (“Upstate Metrology”), a New York based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that can leverage the Company’s already existing operating infrastructure.

All the goodwill related to the Upstate Metrology acquisition has been allocated to the Service segment. Amortization of goodwill related to the Upstate Metrology acquisition is deductible for tax purposes. The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do ~~not~~ ~~qualify for separate recognition.~~

The total purchase price for the assets of Upstate Metrology was approximately $0.9 million. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 ~~inputs, of Upstate Metrology’s assets and liabilities acquired on~~ ~~April 29, 2021 (~~~~in thousands):~~

~~Since this operation was integrated immediately into our existing operation, Upstate Metrology’s separate operating income in undeterminable.~~

The results of acquired businesses are included in Transcat’s consolidated operating results as of the dates the businesses were acquired. The following unaudited pro forma information presents the Company’s results of operations as if the acquisitions of Axiom, SteriQual, TIC-MS, Elite, Complete Calibrations, e2b ~~Alliance, Tangent, NEXA~~ and ~~Upstate Metrology~~Alliance had occurred at the beginning of fiscal year ~~2022.~~2023. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.

	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
	*Third Quarter Ended*				*Nine Months Ended*				*Third Quarter Ended*				*Nine Months Ended*
(in thousands except per share information)	*December 24, 2022*		*December 25, 2021*		*December 24, 2022*		*December 25, 2021*		*December 23, 2023*		*December 24, 2022*		*December 23, 2023*		*December 24, 2022*

Total Revenue	$	57,402	$	52,760	$	170,648	$	158,848	$	65,166	$	62,868	$	192,613	$	186,276
Net Income	$	1,601	$	1,648	$	7,245	$	9,749	$	3,348	$	1,383	$	6,548	$	5,801
Basic Earnings Per Share	$	0.21	$	0.22	$	0.96	$	1.30	$	0.39	$	0.18	$	0.81	$	0.77
Diluted Earnings Per Share	$	0.21	$	0.22	$	0.95	$	1.28	$	0.38	$	0.18	$	0.80	$	0.76

Certain of the Company’s acquisition agreements include provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value at the date of ~~acquisition. There is uncertainty of the fair value measurement from the use of significant unobservable inputs if those inputs reasonably could have been different~~acquisition and at ~~the reporting date. Changes in those significant unobservable inputs to a different amount might result in a significantly higher or lower fair value.~~subsequent remeasurement periods, as applicable. As of December ~~24, 2022~~23, 2023, ~~$0.5~~$1.0 million contingent consideration and $2.7 million of other holdback amounts unpaid are reflected in current liabilities on the Consolidated Balance Sheets and $2.4 million of contingent consideration and $1.6 million of other holdback amounts unpaid are reflected in other liabilities on the Consolidated Balance Sheets. During the first nine months of fiscal year ~~2023~~2024, $0.8 million of holdback amounts were paid. During the first ~~and~~nine months of fiscal year ~~2022~~2023, no contingent consideration or other holdback amounts were paid.

During the first nine months of fiscal year 2024 and fiscal year 2023,, acquisition costs of $0.7 million and $0.1 million, respectively, were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income. ~~During~~

On September 21, 2023, the ~~first~~~~nine~~ ~~months~~Company entered into an underwriting agreement with Oppenheimer & Co. Inc., as representative of ~~fiscal year~~several underwriters, for the sale of common stock in an underwritten public offering at a public offering price of $95.00 per share (the “Offering”). The Offering closed on ~~2022,~~September 25, 2023 ~~acquisition~~and the Company sold an aggregate of 847,371 shares in the Offering, which included 110,526 shares issued upon the exercise by the underwriters of their over-allotment option, for total gross proceeds of $80.5 million. Net proceeds received after direct costs in the Offering were ~~$0.9~~$75.2 million. A portion of the net proceeds from this Offering were used to pay off the Revolving Credit Facility in full.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, estimates, beliefs, assumptions and predictions of future events and are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “potential,” “outlook,” “seek,” “strategy,” “target,” “could,” “may,” “will,” “would,” and other similar words. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or those expressed in such forward-looking statements. You should evaluate forward-looking statements in light of important risk factors and uncertainties that may affect our operating and financial results and our ability to achieve our financial objectives. These factors include, but are not limited to, general economic conditions applicable to our business, inflationary impacts, the impact of ~~the COVID-19 pandemic, inflationary impacts,~~widespread public health crises, the highly competitive nature of the industries in which we compete and in the nature of our two business segments, the concentration of Service segment customers in the life science and other ~~regulated~~FDA-regulated and industrial manufacturing industries, ~~tariffs and trade relations,~~the significant competition we face in our Distribution segment, any impairment of our goodwill or intangible assets, tariffs and trade relations, our ability to successfully complete and integrate business acquisitions, cybersecurity risks, the risk of significant disruptions in our information technology systems, our ability to recruit, train and retain quality employees, skilled technicians and senior management, fluctuations in our operating results, our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers, the prices we are able to charge for our services in our Service segment, competition in the rental market, ~~the volatility of our stock price,~~ our ability to adapt our technology, reliance on our enterprise resource planning system, technology updates, ~~risks related to our acquisition strategy and the integration of the businesses we acquire, volatility in our customers’ industries, changes in vendor rebate programs,~~ supply chain delays or disruptions, the risks related to current and future indebtedness, foreign currency rate fluctuations, risks related to our intellectual property, geopolitical events, adverse weather events or other catastrophes or natural disasters, the volatility of our stock price, the relatively low trading volume of our common stock, ~~foreign currency rate fluctuations, adverse weather events or other catastrophes or natural disasters,~~ changes in tax rates, ~~and~~ changes in accounting standards, legal requirements and listing ~~standards.~~standards, and legal and regulatory risks related to our international operations. These risk factors and uncertainties are more fully described by us under the heading “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March ~~26, 2022.~~25, 2023. You should not place undue reliance on our forward-looking statements, which speak only as of the date they are made. Except as required by law, we undertake no obligation to update, correct or publicly announce any revisions to any of the forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

There have been no material changes to our critical accounting policies and estimates from the information provided in our Annual Report on Form 10-K for the fiscal year ended March ~~26, 2022.~~25, 2023.

On September 25, 2023, we closed an underwritten public offering of our common stock for aggregate gross proceeds of $80.5 million (the “Offering”). In the Offering, we sold an aggregate of 847,371 shares at $95.00 per share. We received net proceeds of $75.2 million in the Offering, a portion of which was used during the third quarter of fiscal year 2024 to repay in full our revolving credit facility. See “Liquidity and Capital Resources” below for more information.

During our third quarter of fiscal year ~~2023,~~2024, we had consolidated revenue of ~~$57.4~~$65.2 million. This represented an increase of ~~$6.5~~$7.8 million or ~~12.8%~~13.5% versus the third quarter of fiscal year ~~2022.~~2023. This increase was primarily due to ~~the~~ recently completed acquisitions, strong demand in our Service segment’s highly-regulated end markets and ~~improved market conditions~~increased rental sales, which includes incremental revenue from an acquisition completed in fiscal year 2024. See Note 5 – “Business Acquisitions” to our ~~Distribution segment, especially rentals.~~unaudited consolidated financial statements in this report for more information about the impact of our acquisitions.

Our third quarter of fiscal year ~~2023~~2024 gross profit was ~~$16.4~~$20.9 million. This was an increase of ~~$2.8~~$4.5 million or ~~20.3%~~27.7% versus the third quarter of fiscal year ~~2022.~~2023. In addition, consolidated gross margin was ~~28.6%~~32.1%, an increase of ~~180~~350 basis points versus the third quarter of fiscal year ~~2022.~~2023. This increase was largely the result of operating leverage on our fixed costs, increased technician productivity and accretive gross margins from our rental business.

Total operating expenses were ~~$13.2~~$16.6 million in the third quarter of fiscal year ~~2023,~~2024, an increase of ~~$2.0~~$3.4 million or ~~17.4%~~25.7% when compared to the prior year third quarter. Included in operating expenses during the third quarter of fiscal year ~~2023~~2024 were incremental operating expenses ~~related to~~from the acquisitions of ~~Alliance, e2b and Complete Calibrations,~~Axiom, SteriQual, TIC-MS, investments in technology and higher incentive-based employee costs due to higher sales. As a percentage of total revenue, operating expenses were 25.5% in the third quarter of fiscal year 2024, up 240 basis points from 23.1% in the third quarter of fiscal year ~~2023, up 90 basis points~~2023. Operating income was $4.3 million, an increase of $1.1 million, or 35.8% and operating margin increased from ~~22.2%~~5.5% to 6.6% in the third quarter of fiscal year ~~2022. Operating~~2024.

Net income was ~~$3.2~~$3.3 million ~~an increase of $0.8 million, or 34.0% and operating margin increased from 4.6% to 5.5%~~ in the third quarter of fiscal year ~~2023.~~

~~Net income was~~2024 versus $1.6 million ~~for each of~~in the third quarter of fiscal year ~~2023 and fiscal year 2022.~~2023. The ~~difference between~~increase was primarily due to higher operating income and ~~flat net~~lower interest expense associated with the repayment of our revolving credit facility, partially offset by higher provision for income ~~compared to the prior period is due to higher interest expense.~~taxes.

The following table presents, for the third quarter and for the first nine months of fiscal year ~~2023~~2024 and fiscal year ~~2022,~~2023, the components of our Consolidated Statements of Income:

	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
	Third Quarter Ended						Nine Months Ended						Third Quarter Ended						Nine Months Ended
	December 24,			December 25,			December 24,			December 25,			December 23,			December 24,			December 23,			December 24,
	2022			2021			2022			2021			2023			2022			2023			2022
As a Percentage of Total Revenue:
Service Revenue		62.7	%		59.4	%		62.4	%		58.6	%		63.7	%		62.7	%		65.1	%		62.4	%
Distribution Sales		37.3	%		40.6	%		37.6	%		41.4	%		36.3	%		37.3	%		34.9	%		37.6	%
Total Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Gross Profit Percentage:
Service Gross Profit		30.0	%		29.7	%		31.5	%		31.4	%		32.5	%		30.0	%		33.0	%		31.5	%
Distribution Gross Profit		26.2	%		22.5	%		25.4	%		23.2	%		31.5	%		26.2	%		29.2	%		25.4	%
Total Gross Profit		28.6	%		26.8	%		29.2	%		28.0	%		32.1	%		28.6	%		31.7	%		29.2	%

Selling, Marketing and Warehouse Expenses		11.5	%		10.0	%		10.9	%		10.1	%		11.5	%		11.5	%		11.1	%		10.9	%
General and Administrative Expenses		11.6	%		12.2	%		12.1	%		11.4	%		14.0	%		11.6	%		15.0	%		12.2	%
Total Operating Expenses		23.1	%		22.2	%		23.0	%		21.5	%		25.5	%		23.1	%		26.1	%		23.0	%

Operating Income		5.5	%		4.6	%		6.2	%		6.5	%		6.6	%		5.5	%		5.6	%		6.2	%

Interest and Other Expense, net		1.8	%		0.2	%		1.0	%		0.4	%		0.0	%		1.8	%		0.9	%		1.0	%

Income Before Income Taxes		3.7	%		4.4	%		5.2	%		6.1	%		6.6	%		3.7	%		4.7	%		5.1	%
Provision for Income Taxes		0.9	%		1.2	%		1.0	%		0.5	%		1.5	%		0.9	%		1.1	%		1.0	%

Net Income		2.8	%		3.2	%		4.2	%		5.6	%		5.1	%		2.8	%		3.6	%		4.2	%

Third Quarter Ended December ~~24, 2022~~23, 2023 COMPARED TO Third Quarter Ended December ~~25, 2021~~24, 2022 (dollars in thousands):

	Third Quarter Ended				Change					Third Quarter Ended				Change
	December 24,		December 25,							December 23,		December 24,
	2022		2021		$		%			2023		2022		$		%
Revenue:
Service	$	35,977	$	30,237	$	5,740		19.0	%	$	41,509	$	35,977	$	5,532		15.4	%
Distribution		21,425		20,665		760		3.7	%		23,657		21,425		2,232		10.4	%
Total	$	57,402	$	50,902	$	6,500		12.8	%	$	65,166	$	57,402	$	7,764		13.5	%

Total revenue was ~~$57.4~~$65.2 million, an increase of ~~$6.5~~$7.8 million, or ~~12.8%~~13.5%, in our fiscal year ~~2023~~2024 third quarter compared to the prior fiscal year third quarter.

Service revenue, which accounted for ~~62.7%~~63.7% and ~~59.4%~~62.7% of our total revenue in the third quarter of fiscal years ~~2023~~2024 and ~~2022,~~2023, respectively, increased ~~19.0%~~$5.5 million or 15.4% from the third quarter of fiscal year ~~2022~~2023 to the third quarter of fiscal year ~~2023.~~2024. This year-over-year increase included ~~$2.1~~$2.2 million in revenue from the acquisitions of TIC-MS, SteriQual and Axiom, and also included organic revenue growth of ~~12.0%~~9.1% driven by ~~improvement in end market conditions~~strong end-market demand and continued market share gains.

Our fiscal years ~~2023~~2024 and ~~2022~~2023 Service revenue growth, in relation to prior fiscal year quarter comparisons, was as follows:

The growth in Service segment revenue during the third quarter of fiscal year ~~2023~~2024 versus the third quarter of fiscal year ~~2022~~2023 reflected both organic growth and ~~acquisitions.~~increased revenue from the acquisitions of TIC-MS, SteriQual and Axiom.

Within any fiscal year, while we add new customers, we also have customers from the prior fiscal 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 trailing twelve-month information provides a better indication of the progress of this segment.

The following table presents the trailing twelve-month Service segment revenue for the first, second and third quarter of fiscal year ~~2023~~2024 and each quarter in fiscal year ~~2022~~2023 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:

	FY 2023									FY 2022												FY 2024									FY 2023
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Trailing Twelve-Month:
Service Revenue	$	139,787		$	134,047		$	128,324		$	122,005		$	116,315		$	110,854		$	105,864		$	162,556		$	157,024		$	150,860		$	144,883		$	139,787		$	134,047		$	128,324
Service Revenue Growth		20.2	%		20.9	%		21.2	%		20.5	%		19.5	%		17.2	%		13.1	%		16.3	%		17.1	%		17.6	%		18.8	%		20.2	%		20.9	%		21.2	%

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 the first, second and third quarter of fiscal year ~~2023~~2024 and for each quarter during fiscal year ~~2022:~~2023:

	FY 2023									FY 2022												FY 2024									FY 2023
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Percent of Service Revenue:
In-House		86.2	%		86.2	%		85.4	%		85.4	%		84.1	%		83.2	%		83.1	%		86.2	%		85.8	%		87.3	%		86.9	%		86.2	%		86.2	%		85.4	%
Outsourced		12.6	%		12.6	%		13.2	%		13.1	%		14.4	%		15.3	%		15.4	%		12.6	%		13.0	%		11.6	%		11.9	%		12.6	%		12.6	%		13.2	%
Freight Billed to Customers		1.2	%		1.2	%		1.4	%		1.5	%		1.5	%		1.5	%		1.5	%		1.2	%		1.2	%		1.1	%		1.2	%		1.2	%		1.2	%		1.4	%
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Our Distribution sales accounted for 36.3% of our total revenue in the third quarter of fiscal year 2024 and 37.3% of our total revenue in the third quarter of fiscal year ~~2023 and 40.6% of our total revenue in the third quarter of fiscal year 2022.~~2023. During the third quarter of fiscal year ~~2023,~~2024, Distribution segment sales ~~showed~~were $23.7 million which was an increase of ~~3.7%~~10.4% or ~~$0.8~~$2.2 million ~~to $21.4 million.~~. This increase was ~~primarily~~ due to ~~strong~~$2.9 million of incremental revenue from the acquisition of Axiom offset by slower demand for ~~rental orders.~~our non-rental products.

~~Our fiscal years 2023 and 2022 Distribution sales growth, in relation to prior fiscal year quarter comparisons, was as follows:~~

The ~~change~~following table presents the quarterly historical trend of Distribution sales in fiscal years 2024 and 2023 compared to the prior year fiscal quarter:

The Distribution segment sales increase for the third quarter of fiscal year 2024 versus the third quarter of fiscal year 2023 ~~versus~~was due to sales from the ~~third quarter~~acquisition of ~~fiscal year 2022 for the Distribution segment reflected organic growth.~~Axiom.

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~~Product 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 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 at the end of the third quarter of fiscal year 2023 were $9.5 million, an increase of $0.6 million versus the end of the third quarter of fiscal year 2022 and an increase of $1.8 million since March 26, 2022. The year-over-year increase in pending product shipments and backorders was a result of the disruption to the supply of products as well as increased orders.

The following table presents our total pending product shipments and the percentage of total pending product shipments that were backorders at the end of the first, second and third quarter of fiscal year ~~2023~~2024 and each quarter of fiscal year ~~2022:~~2023:

	FY 2023									FY 2022												FY 2024									FY 2023
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Total Pending Product Shipments	$	9,543		$	9,116		$	9,034		$	7,747		$	8,943		$	7,707		$	8,272		$	4,652		$	6,332		$	7,109		$	8,101		$	9,543		$	9,116		$	9,034
% of Pending Product
Shipments that were Backorders		78.4	%		80.8	%		78.1	%		83.2	%		80.5	%		77.2	%		77.5	%		82.0	%		87.4	%		85.0	%		84.8	%		78.4	%		80.8	%		78.1	%

Our total pending product shipments at the end of the third quarter of fiscal year 2024 were $4.7 million, a decrease of $4.9 million versus the end of the third quarter of fiscal year 2023 and a decrease of $3.5 million since March 25, 2023. The decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.

	Third Quarter Ended				Change					Third Quarter Ended				Change
	December 24,		December 25,							December 23,		December 24,
	2022		2021		$		%			2023		2022		$		%
Gross Profit:
Service	$	10,793	$	8,983	$	1,810		20.1	%	$	13,494	$	10,793	$	2,701		25.0	%
Distribution		5,607		4,653		954		20.5	%		7,442		5,607		1,835		32.7	%
Total	$	16,400	$	13,636	$	2,764		20.3	%	$	20,936	$	16,400	$	4,536		27.7	%

Total gross profit for the third quarter of fiscal year ~~2023~~2024 was ~~$16.4~~$20.9 million, an increase of ~~$2.8~~$4.5 million or ~~20.3%~~27.7% versus the third quarter of fiscal year ~~2022.~~2023. Total gross margin was 32.1% in the third quarter of fiscal year 2024, up from 28.6% in the third quarter of fiscal year 2023, ~~up from 26.8% in the third quarter of fiscal year 2022,~~ a ~~180~~350 basis point increase.

Service gross profit in the third quarter of fiscal year ~~2023~~2024 increased ~~$1.8~~$2.7 million, or ~~20.1%~~25.0%, from the third quarter of fiscal year ~~2022.~~2023. Service gross margin was ~~30.0%~~32.5% in the third quarter of fiscal year ~~2023,~~2024, a 30250 basis point increase versus the third quarter of fiscal year ~~2022.~~2023. This increase in gross margin was the result of ~~improved productivity offset by~~ increased ~~start-up costs from new client-based lab implementations.~~revenue, which allows us to leverage our fixed-costs, and continued increases in technician productivity.

The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:

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. In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, and the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers.

The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution sales:

Distribution segment gross margin was 31.5% in the third quarter of fiscal year 2024 versus 26.2% in the third quarter of fiscal year 2023, ~~versus 22.5% in the third quarter of fiscal year 2022,~~ a ~~370~~530 basis point increase. The increase in segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom and a favorable mix of higher margin products ~~sold and rented.~~sold.

	Third Quarter Ended				Change					Third Quarter Ended				Change
	December 24,		December 25,							December 23,		December 24,
	2022		2021		$		%			2023		2022		$		%
Operating Expenses:
Selling, Marketing and Warehouse	$	6,595	$	5,051	$	1,544		30.6	%	$	7,519	$	6,595	$	924		14.0	%
General and Administrative		6,642		6,224		418		6.7	%		9,123		6,642		2,481		37.4	%
Total	$	13,237	$	11,275	$	1,962		17.4	%	$	16,642	$	13,237	$	3,405		25.7	%

Total operating expenses were ~~$13.2~~$16.6 million in the third quarter of fiscal year ~~2023~~2024 versus ~~$11.3~~$13.2 million during the third quarter of fiscal year ~~2022.~~2023. 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 incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.

As a percentage of total revenue, operating expenses were 25.5% in the third quarter of fiscal year 2024 and 23.1% in the third quarter of fiscal year 2023, ~~and 22.2% in the third quarter of fiscal year 2022,~~ an increase of 90240 basis points.

Our effective tax rate for the third quarter of fiscal years 2024 and 2023 was 21.6% and ~~2022 was~~ 24.6% ~~and 26.8%~~, respectively. The ~~decrease~~increase in the tax provision is due to higher operating income and lower interest expense associated with the repayment of our revolving credit facility. The decrease in effective tax rate is due to the mix of net income by country. Our quarterly 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 benefits related to share-based compensation activity in ~~each of~~ the third quarter of fiscal years ~~2023~~2024 and ~~2022~~2023 was less than $0.1 million.

Net income for the third quarter of fiscal year ~~2023 was flat compared to~~2024 increased from the third quarter of fiscal year ~~2022. This is~~2023 primarily due to higher operating income and lower interest expense associated with the repayment of our revolving credit facility, partially offset by ~~increased interest expense.~~a higher provision for income taxes.

Total Adjusted EBITDA, a non-GAAP measure, for the third quarter of fiscal year 2024 was $9.1 million, an increase of $2.5 million or 38.5% versus the third quarter of fiscal year 2023. See “Non-GAAP Financial Measures” below for a description of the non-GAAP measures we use and a reconciliation to the most directly comparable GAAP measures. As a percentage of revenue, Adjusted EBITDA increased to 14.0% for the third quarter of fiscal year 2024 from 11.5% for the third quarter of fiscal year 2023. The increase in Adjusted EBITDA during the third quarter of fiscal year 2024 was primarily driven by increases in operating income, depreciation and amortization expense and non-cash stock compensation.

nine months ended December 23, 2023 COMPARED TO nine months ended December 24, 2022(dollars in thousands):

Service revenue, which accounted for 65.1% and 62.4% of our total revenue in the first nine months of fiscal years 2024 and 2023, respectively, increased $17.7 million, or 16.8%, from the first nine months of fiscal year 2023 to the first nine months of fiscal year 2024. This year-over-year increase included $7.1 million of incremental revenue from the acquisitions of TIC-MS, SteriQual and Axiom, and also included organic revenue growth of 10.0% driven by strong end-market demand and continued market share gains.

Distribution revenue, which accounted for 34.9% and 37.6% of our total revenue in the first nine months of fiscal years 2024 and 2023, respectively, increased $2.4 million, or 3.8%, from the first nine months of fiscal year 2023 to the first nine months of fiscal year 2024. This year-over-year increase is primarily due to $4.2 million of incremental revenue from the acquisition of Axiom offset by slower demand for our non-rental products.

Total gross profit for the first nine months of fiscal year 2024 was $59.8 million, an increase of $10.6 million or 21.5% versus the first nine months of fiscal year 2023. Total gross margin was 31.7% in the first nine months of fiscal year 2024, up from 29.2% in the first nine months of fiscal year 2023, a 250 basis point increase. This increase in gross margin was primarily due to increased revenue in our Service segment, which allows us to leverage our fixed costs, continued technician productivity improvements, and a favorable sales mix driven by increases in rental sales in the Distribution segment.

Total operating expenses were $49.2 million in the first nine months of fiscal year 2024 versus $38.8 million during the first nine months of fiscal year 2023, an increase of $10.4 million or 26.7%. The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes the non-cash charge related to the NEXA earn-out, incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.

As a percentage of total revenue, operating expenses were 26.1% in the first nine months of fiscal year 2024 and 23.0% in the first nine months of fiscal year 2023, an increase of 310 basis points.

Our effective tax rate for the first nine months of fiscal years 2024 and 2023 was 23.5% and 18.8%, respectively. The increase in the effective rate and tax provision is due to the discrete tax treatment of the non-cash charge related to the NEXA earn-out. 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 benefits related to share-based compensation activity in the first nine months of fiscal years 2024 and 2023 was $0.7 million and $0.5 million, respectively.

Net income for the first nine months of fiscal year 2024 was $6.8 million, a decrease of $0.3 million versus the first nine months of fiscal year 2023. The year over year decrease in net income was primarily due to flat operating income and a higher provision for income taxes.

Total Adjusted EBITDA, a non-GAAP measure, for the first nine months of fiscal year 2024 was $26.9 million, an increase of $5.5 million or 25.7% versus the first nine months of fiscal year 2023. See “Non-GAAP Financial Measures” below for a description of the non-GAAP measures we use and a reconciliation to the most directly comparable GAAP measures. As a percentage of revenue, Adjusted EBITDA increased to 14.3% for the first nine months of fiscal year 2024 from 12.7% for the first nine months of fiscal year 2023. The increase in Adjusted EBITDA during the first nine months of fiscal year 2024 was primarily driven by the NEXA earn-out adjustment and increases in depreciation and amortization expense and non-cash stock compensation.

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, non-cash loss on sale of building, and restructuring expense), 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.

	Third Quarter Ended						Third Quarter Ended						Nine Months Ended
	December 24,			December 25,
(dollars in thousands)							December 23,			December 24,			December 23,			December 24,
	2022			2021			2023			2022			2023			2022
Net Income	$	1,601		$	1,629		$	3,348		$	1,601		$	6,757		$	7,030
+ Interest Expense		726			194
+ Other (Income) / Expense		313			(58	)
+ Interest (Income) Expense								(266	)		726			1,438			1,636
+ Other Expense								289			313			304			96
+ Tax Provision		523			596			923			523			2,078			1,631
Operating Income	$	3,163		$	2,361			4,294			3,163			10,577			10,393
+ Depreciation & Amortization		2,824			2,368			3,783			2,824			9,842			8,243
+ Transaction Expense		96			55			78			96			591			126
+ Other Income / (Expense)		(313	)		58
+ Acquisition Earn-Out Adjustment								87			-			2,887			-
+ Other (Expense)								(289	)		(313	)		(304	)		(96	)
+ Noncash Stock Compensation		815			624			1,167			815			3,338			2,757
Adjusted EBITDA	$	6,585		$	5,466		$	9,120		$	6,585		$	26,931		$	21,423

Total Adjusted EBITDA for the third quarter of fiscal year 2023 was $6.6 million, an increase of $1.1 million or 20.5% versus the third quarter of fiscal year 2022. As a percentage of revenue, Adjusted EBITDA increased to 11.5% for the third quarter of fiscal year 2023 from 10.7% for the third quarter of fiscal year 2022. The increase in Adjusted EBITDA during the third quarter of fiscal year 2023 was primarily driven by the increase in depreciation and amortization expense and interest expense.

In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring ~~expense, on a~~expense; divided by the average diluted ~~per share basis)~~shares outstanding during the period), which is a non-GAAP measure. Our management believes Adjusted Diluted Earnings Per Share is an important measure of our operating performance because it provides 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 Diluted Earnings Per Share 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 Diluted Earnings Per Share and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted Diluted Earnings Per Share, 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.

~~nine months ended December 24, 2022 COMPARED TO nine months ended December 25, 2021~~:

Service revenue, which accounted for 62.4% of our total revenue during the first nine months of fiscal year 2023 and 58.6% of our total revenue during the first nine months of fiscal year 2022, increased $17.8 million, or 20.4%, from the first nine months of fiscal year 2022 compared to the first nine months of fiscal year 2023. This year-over-year increase reflected increased demand from the life sciences and other highly-regulated end markets and included $9.0 million of incremental revenue from acquisitions.

Our Distribution sales accounted for 37.6% and 41.4% of our total revenue in the first nine months of fiscal years 2023 and 2022, respectively. For the first nine months of fiscal year 2023, Distribution sales increased $1.6 million, or 2.7%, compared to the first nine months of fiscal year 2022. This increase in revenue was due to increased orders in the first nine months of fiscal year 2023 and strong demand for rental orders.

Total gross profit for the first nine months of fiscal year 2023 was $49.2 million, an increase of $7.4 million or 17.8% versus the first nine months of fiscal year 2022. Total gross margin was 29.2%, a 120 basis points increase compared to 28.0% in the first nine months of fiscal year 2022. This increase in gross margin was primarily due to operating leverage on our fixed cost base in the Service segment and a favorable mix of products sold and rented in the Distribution segment.

Total operating expenses for the first nine months of fiscal year 2023 were $38.8 million, an increase of $6.7 million or 20.8% versus the first nine months of fiscal year 2022. The year-over-year increase in selling, marketing and warehouse was due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs from new employees and continued investments in technology. As a percentage of total revenue, operating expenses during the first nine months of fiscal year 2023 were 23.0%, compared to 21.6% in the first nine months of fiscal year 2022, an increase of 140 basis points.

Our effective tax rates for the first nine months of fiscal years 2023 and 2022 were 18.8% and 7.9%, respectively. The increase in our tax rate is due to the decreased discrete tax benefits from share-based compensation activity. 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 benefits related to share-based compensation activity in the first nine months of fiscal years 2023 and 2022 were $0.5 million and $1.7 million, respectively.

Net income for the first nine months of fiscal year 2023 was $7.0 million, a decrease of $1.3 million or 15.6% versus the first nine months of fiscal year 2022. The year over year decrease in net income was due higher operating income offset by higher operating expenses, higher interest expense and a higher provision for income taxes.

During the first nine months of fiscal year 2023, Adjusted EBITDA was $21.4 million, an increase of $2.8 million or 14.8% versus the first nine months of fiscal year 2022. As a percentage of revenue, Adjusted EBITDA was 12.7% for the first nine months of fiscal year 2023 compared to 12.5% for the first nine months of fiscal year 2022. The increase in Adjusted EBITDA during the first nine months of fiscal year 2023 was primarily driven by the increase in interest expense, tax provision, depreciation and amortization expense and noncash stock compensation expense.

In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense, on a diluted per share basis), which is a non-GAAP measure. Our management believes Adjusted Diluted Earnings Per Share is an important measure of our operating performance because it provides 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.

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.

~~On July 7, 2021, we entered into the~~Under our Second Amended and Restated Credit Facility Agreement (the ~~“2021 Credit~~“Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the Company’s Amended and Restated Credit Facility Agreement dated as of October 30, 2017, as amended by Amended and Restated Credit Facility Agreement Amendment 1 dated December 10, 2018 and Amended and Restated Credit Facility Agreement Amendment 2 (“Amendment Two”) dated May 18, 2020 (as amended, the “Prior Credit Agreement”).

~~The 2021 Credit Agreement increased the~~we have access to a revolving credit commitment (the “Revolving Credit Commitment”) ~~from $40.0~~of $80.0 million ~~to $80.0 million,~~through June 2026, with a letter of credit subfacility ~~increased from $2.0~~of $10.0 million. Our 2018 term loan, with an original principal amount of $15.0 million (the “2018 Term Loan”), is also provided for under the Credit Agreement.

The Credit Agreement allows us to ~~$10.0~~use up to $50.0 million ~~and extended the term of~~under the Revolving Credit Commitment ~~to June 2026.~~for acquisitions in any single fiscal year. The ~~2021~~ Credit Agreement ~~amended the definition~~restricts our ability to complete acquisitions of Applicable Margin (formerly Applicable Rate under the Prior Credit Agreement), which is based upon our then current leverage ratio and is used to determine interest charges on outstanding and unused borrowings under the revolving credit facility; the amendments reduced the Applicable Margins payable at the two highest leverage ratio levels. The 2021 Credit Agreement also amended the definition of Permitted Acquisitions, that is, acquisitions which are permitted under, and may be financed with proceeds of, the revolving credit facility, including increasing the aggregate purchase price for acquisitions consummated in any fiscal year from $1.0 million to $65.0 million during fiscal year 2022 and $50.0 million during any subsequent fiscal year, and adding an aggregate purchase price of $40.0 million for acquisitions consummated at any time during the term of the 2021 Credit Agreement related to businesses with a principal place of business located in the United Kingdom or the European ~~Union.~~Union to an aggregate purchase price of $40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the Revolving Credit Commitment. Under the Credit Agreement, we may make restricted payments up to $25.0 million in the aggregate over the term of the Credit Agreement and $10.0 million in any single fiscal year to repurchase shares and pay dividends.

In addition, the 2021 Credit Agreement provides that, assuming no event of default, restricted payments up to $25.0 million (increased from $10.0 million in the Prior Credit Agreement) in the aggregate and $10.0 million (increased from $3.0 million in the Prior Credit Agreement) in any single fiscal year may be used by us to repurchase our shares and pay dividends. The 2021 Credit Agreement modified the leverage ratio and fixed charge coverage ratio covenants with which we are required to comply. The 2021 Credit Agreement also reduced the London Interbank Offered Rate (“LIBOR”) floor from 1.0% to 0.25% and included a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR. The 2021 Credit Agreement also reduced the fixedEffective July 1, 2023, interest ~~rate on our term loan in the amount of $15.0 million (the “2018 Term Loan”) was reduced from 4.15% to 3.90%.~~

The 2021 Credit Agreement superseded in its entirety, the Prior Credit Agreement. Amendment Two to the Prior Credit Agreement had previously extended the term of the revolving credit facility to October 20, 2022 and increased the revolving credit commitment to $40.0 million.

~~Amendment Two had modified the definition of the applicable rate used to determine interest charges~~ on outstanding ~~and unused~~ borrowings under the revolving credit facility accrue, at our election, at either the variable Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and ~~it amended the definition of permitted acquisitions to amend borrowings available under~~unused fees are determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the revolving credit facility for ~~acquisitions. In addition, Amendment Two had amended~~ the ~~definition~~first nine months of ~~restricted payments to exclude amounts up to $2.5 million during each~~ fiscal year ~~used~~2024 ranged from 6.4% to ~~pay~~7.1%. Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan.

The Credit Agreement has certain ~~employee tax obligations associated~~covenants with ~~share-based payment and stock option activity, and modified certain restrictions to~~which we must comply, including a fixed charge ratio covenant, which prohibits our ~~ability to repurchase our shares and pay dividends. Amendment Two also had modified the leverage ratio and~~ fixed charge coverage ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits our leverage ratio from exceeding 3.00 to 1.00. We were in compliance with all loan covenants ~~with which we were required to comply~~ and ~~limited capital expenditures to $5.5 million for~~requirements during the first nine months of fiscal year ~~2021. Amendment Two also had established a LIBOR floor of 1.0% and included a mechanism for adoption of a different benchmark rate~~2024. Our leverage ratio, as defined in the ~~event LIBOR~~Credit Agreement, was ~~discontinued.~~0.12 at December 23, 2023, compared with 1.60 at March 25, 2023.

As of December ~~24, 2022,~~23, 2023, $80.0 million was available for borrowing under the revolving credit ~~facility,~~facility. As of ~~which $42.2~~December, 23, 2023, there were no amounts outstanding under the revolving credit facility. After the closing of the Offering, we used approximately $50.0 million ~~was~~of the net proceeds to repay in full the amounts outstanding ~~and included in long-term debt on~~under the ~~Consolidated Balance Sheets.~~revolving credit facility. During the first nine months of fiscal year ~~2023~~2024 and ~~2022,~~2023, we used ~~$8.3~~$12.9 million and ~~$20.9~~$4.0 million, respectively, drawn from the revolving credit facility for business acquisitions.

As of December ~~24, 2022, $7.0~~23, 2023, $4.7 million was outstanding on the 2018 Term Loan, of which ~~$2.2~~$2.3 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt. The 2018 Term Loan requires total repayments (principal plus interest) of $0.2 million per month through December 2025.

Pursuant to the Prior Credit Agreement, we were required to comply with a fixed charge ratio covenant and a leverage ratio covenant, which were modified by the 2021 Credit Agreement. The allowable leverage ratio under the Prior Credit Agreement for the first quarter of fiscal year 2022 was a maximum multiple of 4.0 of total debt outstanding compared to EBITDA and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. The Prior Credit Agreement also had provided that the trailing twelve-month pro forma EBITDA of an acquired business was included in the allowable leverage calculation. After the first quarter of fiscal year 2022, pursuant to the 2021 Credit Agreement, the allowable leverage ratio is a maximum multiple of 3.0. We were in compliance with all loan covenants and requirements during the third quarter of fiscal year 2023. Our leverage ratio, as defined in the 2021 Credit Agreement, was 1.66 at December 24, 2022, compared with 1.74 at March 26, 2022

Interest on the revolving credit facility continues to accrue, at our election, at either the variable one-month LIBOR or a fixed rate for a designated period at the LIBOR corresponding to such period (subject to a 1% floor during the first quarter of fiscal year 2022 and a 0.25% floor for subsequent periods), in each case, plus a margin. Interest on outstanding borrowings under the 2018 Term Loan accrued at a fixed rate of 4.15% during the first quarter of fiscal year 2022 and accrue at a fixed rate of 3.90% during the second quarter of fiscal year 2022 and over the term of the loan for subsequent periods. Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio.

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

	Nine Months Ended						Nine Months Ended
	December 24,			December 25,			December 23,			December 24,
	2022			2021			2023			2022
Cash Provided by (Used in):
Operating Activities	$	13,975		$	12,378		$	26,889		$	13,975
Investing Activities	$	(15,445	)	$	(26,759	)	$	(22,031	)	$	(15,445	)
Financing Activities	$	782		$	16,900		$	29,076		$	782

Operating Activities: Net cash provided by operations was ~~$14.0~~$26.9 million during the first nine months of fiscal year ~~2023~~2024 compared to ~~$12.4~~$14.0 million of net cash provided by operating activities during the first nine months of fiscal year ~~2022.~~2023. The year-over-year increase in cash provided by operations was primarily the result of changes in net working capital (defined as current assets less current liabilities). The significant working capital fluctuations were as follows:

	December 24,		December 25,		December 23,		December 24,
	2022		2021		2023		2022
Net Sales, for the last two fiscal months	$	40,088	$	34,743	$	45,501	$	40,088
Accounts Receivable, net	$	37,702	$	34,702	$	43,307	$	37,702
Days Sales Outstanding		59		63		57		59

Accounts payable decreased $0.3 million during the first nine months of fiscal year 2023 inclusive of $0.1 million of accounts payable acquired during the period. Accounts payable increased $0.7 million during the first nine months of fiscal year 2022. Accounts payable decreased $4.5 million during the first nine months of fiscal year 2024. Accounts payable decreased $0.3 million during the first nine months of fiscal year 2023. The variances are largely due to the timing of inventory and capital expenditures and other payments in the respective periods.

During the first nine months of fiscal year 2024, accrued compensation and other current liabilities increased by $5.5 million, inclusive of $4.0 million from assumed liabilities, contingent consideration and purchase price holdbacks from acquisition transactions. During the first nine months of fiscal year 2023, accrued compensation and other current liabilities decreased by $2.4 million. The change from the first nine months of fiscal year 2023 accrued compensation and other current liabilities decreased by $2.4 million. During the first nine months of fiscal year 2022, accrued compensation and other current liabilities decreased by $1.1 million. The change from the first nine months of fiscal year 2022 was largely due to the inclusion of the acquisition related transactions, partially offset by the annual payment of incentive based compensation accruals.

Investing Activities: During the first nine months of fiscal ~~year~~years 2024 and 2023, we invested $9.1 million and $7.1 million, respectively, in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.

During the first nine months of fiscal ~~year 2022,~~years 2024 and 2023, we ~~invested $5.9~~used $12.9 million ~~in capital expenditures that was used primarily~~and $8.3 million, respectively, for ~~customer-driven expansion of Service segment capabilities and our rental business.~~business acquisitions.

During the first nine months of fiscal year ~~2023,~~2024, we ~~used $8.3~~paid $0.8 million ~~for~~of other holdback amounts relating to business acquisitions. During the first nine months of fiscal year ~~2022, we used $20.9 million for business acquisitions.~~

~~During each of the first nine months of fiscal year~~ 2023, ~~and fiscal year 2022,~~ no contingent consideration or other holdback amounts were paid related to business acquisitions.

Financing Activities: During the first nine months of fiscal year 2024, $75.7 million in cash was generated from the issuance of common stock, net of direct costs of the Offering. In addition, we used $42.7 million to repay our revolving line of credit, $1.7 million for scheduled repayments of our term loan and $2.2 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 2024, which are shown as a repurchase of shares of our common stock.

During the first nine months of fiscal year 2023, $2.3 million was borrowed from our revolving line of credit and $0.5 million in cash was generated from the issuance of common stock. In addition, we used $1.6 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 2023,~~the quarter, which are shown as a repurchase of shares of our common stock.

We are ~~pleased with the growth across all~~proud of our ~~business channels including double-digit~~dedicated team, which has consistently delivered exceptional results through various economic cycles as can be seen over the past decade and a half of profitable growth. During this fiscal year, we expect organic Service revenue growth in the high-single digit to low double-digit range and gross margin expansion. Automation of our ~~third quarter~~calibration processes and overall process improvement will be key enablers to future margin expansion in the Service segment. We believe the Service segment has substantial runway ahead for growth, both organically and through acquisition. Our robust and diverse acquisition pipeline enables strategic, accretive acquisitions that drive synergistic growth opportunities and will be a key component of ~~fiscal 2023.~~our future strategy. We ~~expect~~believe our unique value proposition ~~will continue to drive~~drives a sustainable competitive advantage in the highly regulated markets that we serve, particularly the Life Science, ~~and~~ Aerospace, and Defense ~~markets.~~

markets, along with a growing Rentals business. We ~~are confident~~have a long history of generating sustainable value for our ~~work around differentiation, including Nexa's service tracks~~shareholders and ~~consulting platform, will foster continued organic revenue growth. Driven by recurring revenue streams and regulation, we expect~~providing a dynamic, rewarding workplace for our ~~Service segment to outperform through various economic cycles.~~

Our acquisition pipeline is very active. Acquisitions, which have generated compelling returns throughout fiscal year 2023, will continue to be an important component of Service growth. In addition, in both the fourth quarter of fiscal year 2023 and fiscal year 2024, we expect organic Service revenue growth to remain in the high-single digit range. We also expect gross margin improvement to continue in those periods as a by-product of both growth and successful execution of various ongoing productivity enhancement programs.team.

We expect our income tax rate to range between ~~21%~~24% and ~~23%~~26% for full fiscal year ~~2023.~~2024. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards.

Our exposure to changes in interest rates results from our borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately ~~$0.4~~$0.5 million assuming our average borrowing levels during the first nine months of fiscal year 2024 remained ~~constant.~~constant under the revolving credit facility. As of December ~~24, 2022,~~23, 2023, $80.0 million was available for borrowing under ~~our~~the revolving credit ~~facility,~~facility. As of ~~which $42.2 million was~~December 23, 2023, there were no amounts outstanding ~~and included in long-term debt on~~under the ~~Consolidated Balance Sheets.~~revolving credit facility. As described above under “Liquidity and Capital Resources,” we also have a $15.0 million (original principal) term loan. The 2018 Term Loan is considered a fixed interest rate loan. As of December ~~24, 2022, $7.0~~23, 2023, $4.7 million was outstanding onunder the 2018 Term Loan and was included in long-term debt and current portion of long-term debt on the Consolidated Balance Sheets. The 2018 Term Loan requires total (principal and interest) repayments of $0.2 million per month.

AtEffective July 1, 2023, at our option, we may borrow from our revolving credit facility at the variable one-month ~~LIBOR~~Daily Simple SOFR or at a fixed rate for a designated period at the ~~LIBOR~~SOFR corresponding to such period (subject to a ~~1% floor during the first quarter of fiscal year 2022 and a~~ 0.25% ~~floor for subsequent periods)~~floor), in each case, plus a margin. Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate during the first nine months of fiscal year ~~2023~~2024 for our revolving credit facility ranged from ~~1.6%~~6.4% to ~~6.0%~~7.1%. Interest on outstanding borrowings of the 2018 Term Loan accrued at a fixed rate of ~~4.15% over the term of the loan during the first quarter of fiscal year 2022 and~~ 3.90% over the term of the ~~loan for subsequent periods. Our revolving credit facility includes a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR.~~loan. On December ~~24, 2022,~~23, 2023, we had no hedging arrangements in place for our revolving credit facility to limit our exposure to ~~upward~~ movements in interest rates.

Approximately 90% of our total revenues for each of the first nine months of fiscal year ~~2023~~2024 and ~~2022~~2023 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars and Euros. A 10% change in the value of the Canadian dollar to the U.S. dollar and the Euro to the U.S. dollar would impact our revenue by approximately 1%. We monitor the relationship between the U.S. dollar and the Canadian ~~currencies~~dollar and the U.S. dollar and the Euro on a monthly basis and adjust sales prices for products and services sold in Canadian dollars or Euros as we believe to be appropriate.

We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange rates. We do not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of $0.1 million and a gain of $0.3 ~~million and less than $0.1~~ million during the first nine months of ~~each of~~ the fiscal years ~~2023~~2024 and ~~2022,~~2023, respectively, was recognized as a component of Interest and Other Expense, net in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On December ~~24, 2022,~~23, 2023, we had a foreign exchange contract, which matured in January ~~2023,~~2024, outstanding in the notional amount of ~~$3.0~~$2.0 million. The foreign exchange contract was renewed in January ~~2023~~2024 and continues to be in place. We do not use hedging arrangements for speculative purposes.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. Our principal executive officer and our principal financial officer evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this quarterly report (our third quarter of fiscal year ~~2023)~~2024) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Page(s)
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Statements of Income for the Third Quarter and Nine Months Ended December ~~24, 2022~~23, 2023 and December ~~25, 2021~~24, 2022	1

	Statements of Comprehensive Income for the Third Quarter and Nine Months Ended December ~~24, 2022~~23, 2023 and December ~~25, 2021~~24, 2022	2

	Balance Sheets as of December ~~24, 2022~~23, 2023 and March ~~26, 2022~~25, 2023	3

	Statements of Cash Flows for the Nine Months Ended December ~~24, 2022~~23, 2023 and December ~~25, 2021~~24, 2022	4

	Statements of Changes in ~~Shareholders’~~Shareholders' Equity for the Third Quarter and Nine Months Ended December ~~24, 2022~~23, 2023 and December ~~25, 2021~~24, 2022	5

	Notes to Consolidated Financial Statements	6

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	1921

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3133

Item 4.	Controls and Procedures	3233

PART II.	OTHER INFORMATION

Item 6.	Exhibits	3335

SIGNATURES		3437

	(Unaudited)		(Audited)
	*December 23,*		*March 25,*
	*2023*		*2023*
Current Liabilities:
Accrued Payroll and Employee Benefits	$	4,056	$	3,243
Accrued Incentives		3,095		2,507
Current Portion of Lease Liabilities		2,878		2,333
Accrued Acquisition Holdbacks		2,749		252
Accrued Contingent Consideration		1,029		-
Other Current Liabilities		1,876		1,866
Accrued Compensation and Other Current Liabilities	$	15,683	$	10,201

Non-Current Liabilities:
Postretirement Benefit Obligation	$	1,238	$	1,266
Accrued Acquisition Holdbacks		1,647		-
Accrued Contingent Consideration		2,402		-
Other Non-Current Liabilities		240		168
Other Liabilities	$	5,527	$	1,434

Goodwill		$	26,707
Intangible Assets – Customer Base & Contracts			7,900
			34,607
Plus:	Cash		37
	Accounts Receivable		962
	Inventory		1,796
	Other Current Assets		84
	Property and Equipment		4,965
Less:	Current Liabilities		(631	)
	Deferred Tax Liability		(3,256	)
Total Purchase Price		$	38,564

Goodwill		$	2,163
Intangible Assets – Customer Base & Contracts			1,062
Intangible Assets – Covenant Not to Compete			392
Intangible Assets – Sales Backlog			95
			3,712
Plus:	Accounts Receivable		666
Less:	Current Liabilities		(211	)
	Deferred Tax Liability		(383	)
Total Purchase Price		$	3,784

Goodwill		$	7,253
Intangible Assets – Customer Base & Contracts			2,303
Intangible Assets – Covenant Not to Compete			132
			9,688
Plus:	Accounts Receivable		499
	Property and Equipment		356
Less:	Current Liabilities		(128	)
	Deferred Tax Liability		(636	)
Total Purchase Price		$	9,779

Goodwill		$	1,123
Plus:	Cash		10
	Inventory		44
Total Purchase Price		$	1,177

Goodwill		$	1,367
Intangible Assets – Customer Base & Contracts			746
Intangible Assets – Covenant Not to Compete			396
			2,509
Plus:	Accounts Receivable		361
	Other Current Assets		24
	Property and Equipment		326
Less:	Current Liabilities		(121	)
Total Purchase Price		$	3,099

Goodwill		$	1,590
Intangible Assets – Customer Base & Contracts			746
Intangible Assets – Covenant Not to Compete			396
			2,732
Plus:	Accounts Receivable		361
	Other Current Assets		24
	Property and Equipment		103
Less:	Current Liabilities		(121	)
Total Purchase Price		$	3,099

Goodwill		$	1,783
Intangible Assets – Customer Base & Contracts			2,320
Intangible Assets – Covenant Not to Compete			114
			4,217
Plus:	Accounts Receivable		343
	Property and Equipment		170
Less:	Current Liabilities		(27	)
Total Purchase Price		$	4,703

Goodwill		$	5,385
Intangible Assets – Customer Base & Contracts			4,150
Intangible Assets – Covenant Not to Compete			220
			9,755
Plus:	Cash		26
	Accounts Receivable		187
	Other Current Assets		16
	Property and Equipment		203
Less:	Current Liabilities		(68	)
	Deferred Tax Liability		(1,195	)
Total Purchase Price		$	8,924

Goodwill		$	15,679
Intangible Assets – Customer Base & Contracts			5,600
Intangible Assets – Backlog			490
Intangible Assets – Covenant Not to Compete			600
			22,369
Plus:	Cash		3,732
	Accounts Receivable		2,434
	Non-Current Assets		38
Less:	Current Liabilities		(572	)
	Deferred Tax Liability		(1,769	)
Total Purchase Price		$	26,232

Goodwill		$	483
Plus:	Current Assets		189
	Non-Current Assets		270
Less:	Current Liabilities		(11	)
Total Purchase Price		$	931

	FY 2023									FY 2022
	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Distribution Sales Growth		3.7	%		1.6	%		2.7	%		7.2	%		7.2	%		22.2	%		27.0	%

	FY 2024									FY 2023
	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Distribution Sales Growth (Decline)		10.4	%		0.9	%		(0.2	)%		5.1	%		3.7	%		1.6	%		2.7	%

	FY 2023									FY 2022
	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Service Gross Margin		30.0	%		32.6	%		32.0	%		33.1	%		29.7	%		32.9	%		31.8	%

	FY 2023									FY 2022
	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Distribution Gross Margin		26.2	%		24.9	%		25.0	%		24.5	%		22.5	%		23.5	%		23.6	%

Exhibit No.	Description

(31)	Rule 13a-14(a)/15d-14(a) Certifications

	31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)	Section 1350 Certifications

	32.1**	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(101)	Interactive Data File

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

(104)		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	TRANSCAT, INC.


Date: ~~February 1, 2023~~January 31, 2024	/s/ Lee D. Rudow
	Lee D. Rudow
	President and Chief Executive Officer (Principal Executive Officer)


Date: ~~February 1, 2023~~January 31, 2024	/s/ Thomas L. Barbato
	Thomas L. Barbato
	Senior Vice President of Finance and Chief Financial Officer (Principal Financial Officer)