Transcat Inc (TRNS) 2025 Q2 法說會逐字稿

Greetings and welcome to TRANSCAT Inc second quarter, fiscal year 2025 financial results conference call at this time.

All participants are in a listen-only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr Tom Barbato, Chief Financial Officer.

Thank you, Mr Barbato.

You may begin.

Thank you operator and good morning everyone.

We appreciate your time and your interest in transcat with me.

Here on the call today is our President and CEO lee Rudow and our Chief Operating Officer, Mike West.

We'll begin the call with some prepared remarks and then we'll open up the call for questions.

Our earnings release crossed the wire after market closed yesterday.

Both the earnings release and the slides that will be referenced during our prepared remarks can be found on our website transcat dotcom in the investor relations section.

If you please, if you would please refer to slide 2.

As you're aware, we make forward-looking statements during the formal presentation and Q&A portion of this teleconference, these statements apply to future events which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today.

These factors are outlined in the news release as well as in the documents filed by the company with the SEC.

You can find those on our website where we regularly post information about the company as well as on the SECs website at sec.gov.

We undertake no obligation to publicly update or correct any of the forward-looking statements contained in this call, whether as a result of new information, future events or otherwise, except as required by law.

Please review our forward-looking statements in the in conjunction with these precautionary factors.

Additionally, during today's call, we will discuss certain non-GAAP measures which we believe will be useful in evaluating our performance.

You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

We've provided reconciliations of nongaap to compared GAAP measures in the tables accompanying this earnings release with that.

I'll turn the call over to Lee.

Thank you, Tom.

Good morning everyone.

Thank you for joining us on the call.

Today, transcat delivered strong performance from our core calibration services business.

Again in the second quarter of fiscal Year2025 consolidated revenue is up 8% to $67.8 million driven by consistent demand for our calibration services as well as solid performance in our traditional rental business, which includes both our TRANSCAT and axiom rental platforms.

Consolidated gross profit grew 5% was driven by growth in both our service and distribution segments.

In the second quarter, service recorded its 62nd straight quarter of year over year revenue growth.

As our calibration services continued to perform at a very high level.

Overall service revenue growth was 6% and 4% organic growth.

The 6% growth is below historical trends and was significantly impacted by a decline in our Nexa cost control and optimization services business.

That was beyond the magnitude of what we anticipated.

We've identified the root causes that need to be addressed, which primarily center around the immediate need for Nexa to be fully integrated into Transcat's dynamic and proven sales and marketing processes.

In addition, we are renaming the business Transcat Solutions to fully leverage Transcat's industry leading brand.

All of these actions are underway with Nexa.

We are making meaningful progress and we're committed to reverting back to growth in the near future.

On a positive note, when excluding Nexa in the second quarter, we generated organic service growth of 9% versus prior year.

We have a strong pipeline of new business opportunities entering the back half of the fiscal year.

The core service business continues to benefit from recurring revenue streams as well as our industry leading value proposition which continues to resonate throughout the highly regulated markets we serve including both life sciences and aerospace and defense.

Turning to distribution in the second quarter, gross gross profits grew 10% on double digit revenue growth.

However, Becknell revenue and profit was negatively impacted by two hurricanes in the Gulf of Mexico which pressured second quarter distribution margins.

Overall transcat's core business performed well in the second quarter of fiscal 2025.

And our exceptional team is working to overcome the near term nexa challenges which we believe are very fixable and include channel marketing and pipeline expansion which is already strengthening.

We are confident that business will return to growth in the first quarter of fiscal 2026.

Becknell continues to be a well run company and a strong niche market with significant opportunity for sustainable growth.

We fully expect Becknell to deliver sequential improvements in the 3rd and 4th quarters and distribution margins to return to levels consistent with the second half of fiscal 2024.

The balance sheet remains strong.

Our revolving credit facility was paid off last year and we are in an excellent capital position to support our strategic growth plan that includes a very active M&A initiative.

With that.

I'll turn things over to Tom for a more detailed look at the second quarter.

Financial results.

Thanks Lee.

I'll start on slide 4, the earnings deck posted on our website which provides detail regarding our revenue on a consolidated basis.

And by segment for the second quarter of fiscal 2025 2nd quarter, consolidated revenue of 67.8 million was up 8% versus prior year.

Looking at it by segment service revenue grew 6% with 4% of the growth coming organically and the other 2% from acquisition, as lee mentioned, service revenue grew 9% organically when excluding Nexa, turning to distribution revenue of 23.7 million grew 11% and we continue to see good performance from the higher margin.

Traditional rental businesses turning to slide 5, our consolidated gross profit for the second quarter of 21.2 million was up 5% from prior year.

Service gross profit increased 4% versus prior year.

We continue to leverage higher levels of technician productivity in our different differentiated value proposition.

But that could not offset the pressure we saw as a result of the lower than expected Nexa revenue distribution segment, gross profit of 6.6 million was up 10% but margins were lower than expected as a result of the two Gulf of Mexico hurricanes impacting bech now results in the quarter turning the slide.

Six Q2 net income of 3.3 million was up from half a million dollars in the prior year.

Q2 of last year included a $2.8 million non cash charge related to the amended Nexa or not agreement diluted earnings per share came in at 35¢ of 29% or 29¢.

Over the prior year, we report adjusted diluted earnings per share as well to normalize for the impact of upfront and ongoing acquisition related cost.

Q2 adjusted diluted earnings per share was 52¢, flipping, flipping the side seven where we show our adjusted EBITA and adjusted ebita margin.

We use adjusted EBITA which is non-GAAP to gauge the performance of our business because we believe it is the best measure of our operating performance and ability to generate cash.

As we continue to execute on our acquisition strategy.

This metrics becomes even more important to highlight as it does adjust for one time deal related transit transaction costs as well as the increased level of non cash expenses that will hit our income statement from acquisition purchase accounting with that in mind, second quarter, consolidated adjusted EBITA of 8.9 million was down 5% from the same quarter in the prior year as lower than expected nexa revenue negatively impacted services ebita and be no pressure distribution IDA as always a reconciliation of adjusted EBITA to operating income and net income can be found in the supplemental section of this presentation.

Moving to slide 8 operating cash flow was mostly consistent with last year.

Q2 capital expenditures were 2.2 million higher than prior year.

Continue to be centered around service segment capabilities, rental pool assets, technology and future growth projects.

The spend was in line with expectations slide, nine highlights our strong balance sheet.

At quarter end, we had total net cash of $20.8 million with a leverage ratio of 0.08 X.

We had 80 million available from our credit facility.

Lastly, we expect to file our form 10-Q on November 6th with that, I'll turn it back to you, lee.

Okay.

Thanks Tom.

Over the past 12 years, we've successfully and consistently delivered organic service revenue growth, sustainable gross margin expansion and delivered strong free cash flow.

We expect these metrics to improve in the back half of fiscal 2025 and return to more normal in the first half of fiscal 2026.

Given the temporary setback in the Nexus sales channel for the full 2025 fiscal year.

We expect organic service revenue growth in the mid single digits when normalized for the extra week.

In fiscal 2024.

Our M&A strategy has been very successful and will continue to be an important component of our overall growth plan.

As we look to continue to strengthen our core business and expand our adjustable markets through acquisitions.

We expect to expand our geographical footprint capabilities and expertise and of course, we're always interested in bolt on opportunities where we can leverage our current infrastructure to drive both cost synergies and growth opportunities.

We currently have a very robust acquisition pipeline with the potential to increase the trajectory of our business.

And as I mentioned earlier, we have a strong balance sheet which will continue to support the conversion of our M&A pipeline.

We will continue to leverage continuous process improvement and automation as key enablers to future margin expansion.

And we expect service gross margin expansion for the full 2025 fiscal year.

As we move through the back half of fiscal 2025 our dedicated and talented team will continue to focus on generating sustainable long term value for our shareholders.

With that operator.

Please open the line for questions.

Thank you.

We will now be conducting a question and answer session.

If you would like to ask a question, please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You may press star two.

If you would like to remove your questions from the queue for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.

One moment, please.

While we pull for questions.

The first question comes from the line of Scott Buck with Etsy Wainwright.

Please go ahead.

Hey, good morning guys.

Thanks for taking my questions.

Lee, can you give us a sense of when you start to recognize that the Nexa was, was kind of falling short of expectations?

Well, you know, listen, we, we have Scott, we have multiple sales channels, you know, throughout the organization, you know, probably 10 or so.

And, you know, at any given time in any given quarter, they're not all going to be, operating to full, you know, capacity, all cylinders if you will.

And so, you know, and, you know, there's always, you know, little pockets that you keep your eye on.

And I think, you know, we probably saw some of that in the first quarter, but nothing that would have led us to believe that we would have the drop off we had in Q2.

So that kind of came up a little unexpected.

Like I said in, in, in the earning script, we, we dove right into the root causes.

It's a really good business, but we dove right into the root causes and just saw that there was just some very fixable processes within, you know, their, their, the way they manage their pipeline.

And so we're all over it and we'll get them turned around pretty quickly, but that, you know, it's kind of subtle in the first quarter and just kind of hit us a little bit unexpected in a second.

That's how I would characterize it.

I appreciate that.

And it sounds like there's no, you know, additional read through on the rest of the business or, or any kind of macro economic read through based on the, the softness you saw in the second quarter there.

Right.

No, I don't think so.

I mean, the, the, like I said, the core calibration business organically grew 9%.

So we, we, we like not only the performance in the second quarter, we like the pipeline going into the back half of the year.

So that's steady.

Certainly the rental business, which is a big component these days of, of the distribution segment that's very strong.

And we, we expect, you know, back now to perform well.

So as we look in the back half of the year, now, I think the other areas of the company are, are are performing as we would expect, we just have this sort of isolated miss that, that we're going to fix.

No, that that's helpful.

And then on M&A besides the larger deal at the beginning of the year, it's been relatively slow.

Can you talk a little bit about pricing and, and what you're seeing there?

Clearly you guys are open to doing deals.

I'm just curious what the the other side of those transactions look like today.

Right?

So from an M&A pipeline perspective, I don't have any concern.

We have a as good of an M&A pipeline is robust.

We like to use that word.

I think it characterizes it well and accurately, we have a great pipeline, we're working, you know, strategic deals that we think are a good fit for the company and you know, it appears quiet.

Externally, I get that in, in internally.

It's not quiet at all and we'll continue to, to work that pipeline.

And I think you'll see, you know, this, you know, you look at what we've done in the past, you'll see that layout in the near future as time goes by.

And you know, we, we have the capacity to, to get, to get even more deals done if they're appropriate and they're a good fit that we've got done in the past because we built the infrastructure got to do that.

So, no, no, no, no concern on my end.

I I like the way the pipeline looks.

Great.

Appreciate that lee and then last one, Tom just curious, OpEx for the second half of the year is the first half a fair run rate or should we see some, you know, operating expense creep there as you support some of these growth initiatives?

Yeah, I would, I would expect, you know, some some increase, you know, sequentially, you know, in the Q3 and Q4.

Okay, perfect.

I.

Appreciate.

The time guys.

Thank you.

Thank you.

Thank you.

Next question comes from the line of Craig Palm with Craig Hallum capital Group.

Please go ahead.

Yeah, thanks.

Good, good morning.

Thanks for taking the questions.

I wanted to follow up a little bit on, on next.

You know, it wasn't too long ago that you were, you know, kind of characterizing that business as, you know, exceeding expectations.

I think it was even, I don't know, end of last year, earlier this year where you talked about, you know, that business more than doubled since being acquired.

So I, I guess I'm still a little bit confused on what went wrong in, in such a short amount of time.

Maybe you could just dig into that a little bit more if you can.

Yeah, I, I get the question.

Thanks, Craig.

Yeah, look, this business the first couple, couple of years since we acquired in the first couple of years was really flying high.

We're talking about high growth rates, really performing well.

And I think because of that, you know, we probably gave them more autonomy than we typically would for an acquisition.

You know, Greg, we, we, we integrate quick quickly.

We do a good job integrating, we get the synergies, we bring these companies together and that's what makes us different.

And I think we didn't run that playbook, to be H1st with Nexa, because we have a company that was doing so well.

The first couple of years, you know, we're not talking quarters, we're talking years.

So four quarters, I made the decision and it's kind of on me and the team made the decision to support me.

Let's let them keep doing what they're doing.

We collaborated, they helped us win calibration business, but we didn't get involved with the day to day operations, the processes, the procedures, the pipeline, the marketing, we just kind of let them do their thing.

And I think that was probably a mistake.

We probably went too long.

We got it now.

I mean, we get it and, you know, we have all of our top people working on, you know, expanding their pipeline, coordinating the marketing and making them a transcat company under the name Transcat Solutions.

We're very confident that will solve the problem.

So I guess, you know, sometimes success hides some, some flaws and that's probably a fair way to characterize it.

But again, high flyer for two plus years we, and you know, that's why it kind of cost a little bit off guard but, but we'll, we'll get it fixed up.

Yeah.

No, I appreciate that.

That's, that's helpful color.

I mean, if you're able to, can you provide the revenue decline specific to Nexa?

I don't know if you've got the year-to-date level as well and just remind us is it, is it mostly project based revenue?

I'm just kind of curious to know kind of what the visibility is like.

Yeah, we, we're not going to get into the specific numbers but it's a combination.

So they've got, they've got some project based business.

They've got some sort of ongoing business.

It depends on what channel within their, their company, but it's a mix that, that leans towards project based, which is, you know, probably some of the, you know, sort of core issues around, you know, what, what, what we got behind on, you know, without the recognition.

So, yeah, we, we, we know how to, we know how to combat that and fix it.

So, hopefully won't be an issue once we, once we get them kind of turned around.

Yeah, but, you know, just to be clear, it sounds like you're characterizing, this is more company specific than something market related, you know, competitively related, something of that, of that nature.

It, it sounds fixable.

I guess that's what I'm trying to get at.

I think so, I don't see a problem with the industry.

We have other areas of our company that serve the exact same industry almost in the exact same way.

If you remember, we, we acquired a company called S we've got validation business that operates in the same space with some of the same attributes and characteristics as the next of business and they're performing well.

So we don't see it.

I mean, that's not to say there aren't certain pockets of industry slowed down within life sciences that cycle in and out quarter to quarter, but, but nothing systemic.

So I think it's, that's why we, it's isolated and fixable.

One thing I want to just mention Greg and maybe just correct something.

Is when lee in his prepared remarks, talked about, you know, we're confident the business will return to growth.

I think you might have misspoken it.

We, we said, well, that business we believe will return to growth in the first half of fiscal 2026.

So we talk about it being fixable.

We talk about the time frame to fix it.

It's, it's kind of a near term, you know, fix in our mind.

Yeah.

Okay.

And then I guess my, my other last question just on, on Becknell, you talked about a little bit of, you know, issues related to the, the hurricanes.

Was there a revenue issue as well or was it mostly on, on the cost side?

And are you able to kind of quantify what that impact was?

I don't know if you can give a gross margin, you know, X no kind of like you gave the organic service, you know, ex Nexa, but any sort of clarification there would be, would be helpful as well.

Yeah.

Well, just to clarify Greg, right?

So the, the issue, you know, with the hurricanes caused the revenue issue, right?

So it's, it's both a revenue and profit issue and, and had we not seen those issues?

And I think, you know, the way we've got it in the press release is that we expect distribution margins, you know, in the second half of this year to be kind of more in line with what we saw in the second half of last year.

So certainly, you know, north of 30%.

Got it.

Okay.

All.

Right.

I will leave it there.

Thanks.

Thanks Greg.

Thank you.

Next question comes from the line of Ted Jackson with Northland Securities.

Please go ahead.

Hey, good morning.

Thanks for taking my questions.

Is that one says.

I'm going to beat the dead horse of Nexa or TRANSCAT services now.

So with the, the fall off in business there and the the things that you're doing to kind of, you know, repair it, you, you mentioned a couple of things and one of them was sales channels and now you have various sales channels and some were stronger and some were weaker and that you were going to basically go in, in, in terms of management of those channels, kind of make some repairs there.

And so on that front, I'm kind of curious when you get into maybe some discussion around what are the different kind of channels from which you go to market with that business and where were the issues?

And then with regards to pipeline management?

What, what's the difference between how TRANSCAT manages the pipeline, you know, in your processes?

Vis A vis Nexa, you know, what are the, what are the kind of the actual changes that you're making there to refill the pipeline?

And then I've got some things outside of Nexa to ask after that next.

Well, let me, let me start with your last question first when you think about pipeline development and you look at this way nexa perform sales, execute their sales and marketing plan.

You know, they had one sales person, for example, and they grew with that sales person, like I said, transcode is 80 sales people.

So if you count inside sales people and customer service people as well and business development people, strategic account managers, we've got a lot of touches into the marketplace, particularly in life sciences where you see the nexus services soon to be transcat Solutions.

You know, you know, operate and so it's the difference of had we gotten our sales engine behind this sooner.

It just would have helped, you know, would help in a, in a big way.

And so that's the most obvious and clear solution plus from a marketing perspective, from a brand perspective, I mean, TRANSCAT has such a strong, strong brand within the instrumentation world.

So whether you're talking distribution or calibration services, there's just no, we're second to none in terms of brand strength.

And so when you put brand strength behind the solutions business, which is Nexa, you're going to get a lot of benefit.

We have a core, we do work with almost every single pharmaceutical company, med device company in North America.

I mean, maybe not all of them, but most and so had we opened up those channels earlier and instead of collaborating really integrated, I think we wouldn't have this problem today.

So that's what we're doing now as far as one of your other questions.

Ted about channels, I think we have pet channels, we have rental channels, biomedical marine.

And like I said, generally most of them perform well, but in any given quarter you might see softness here or timing there.

I mean, you could have ships employed to the Middle East which could, you know, affect our marine business.

There's just different things that can happen, but that's normal, that's normal.

And you don't, you know, you don't dive into those numbers as long as you think you're going to hit your aggregated organic number, which we have just very, very consistently.

So, but there's a kind of type of channels that we're, that we were talking about.

You know, again, that, that's how I would characterize.

I hope, I hope I got all your questions if I didn't just shoot it back at me.

No, you know, you did and I do, I actually, I am going to ask a little bit more around Nexa before I move on.

You know, my perception with regards to kind of how you were managing Nexa and you know, granted, you know, it was, it was, you know, it was being very successful, was it you were, we're letting them kind of, you're building a business around them if you would and really kind of letting them operate and you can correct me if I'm wrong.

And, and so to me, you know, like to me this is why I think, you know, it seems like such a shift for us on the outside because we're not on the inside seeing everything that happens.

But Nexa, you know, with such a shift and you kind of bringing transcat processes and channels.

And because at the end of the day, I mean, it really is somewhat of a restructuring for Nexa Nexus at its core consulting business, which is really more of a person business.

Should there be some concern with regards to turnover within some of the talent base of Nexa, you know, if you go through and if you change, you know, your, your your go to market and your pipeline management and bring it to have it be more managed and structure transcat this year, you know, something like it's a, it's a culture change and that's where I'm going with it.

So just some discussion around that and then I'll drop next, I promise.

Okay, I I don't see that as a concern at all.

You know, when I look at what Nexa does well and still does well, it's, it's the capabilities they have and the delivery of their services, you mentioned consulting services and some of them fit well with that, with that, with that characterizing it that way, they've always had strong delivery of their services.

So I don't see and probably 90% of their staff to 95.

That's exactly what they do.

You know, they do the CM MS work, they do the reliability work, they do the interval and optimization adjustments that's not going to change.

I mean, what we're bringing is really incremental.

We're bringing sales and marketing leadership and a strong brand incrementally to the process that they have because where they, their problem is with sales and like in hindsight, it was, it was predictable, This was going to happen at some point.

So I think when we put the companies together, it really starts to become a one plus one equals three, they'll keep doing what they do.

Well, we'll interject, intercede and integrate where, where we have the expertise and I think both companies get better.

That's different than the collaboration we've done in the past.

That's integration and albeit late to the game by a quarter or two, but that's where we are today.

So that's why my confidence level high.

So we bring the incremental benefits and brand to, to, to their core delivery of their services, which has always been strong.

So I don't, I don't see a cultural change at all.

Okay.

The other ones won't be as like sort of loy going over to back now, the the hurricanes impacted the business and this is just because I'm ignorant with regards to kind of how the business might flow.

But you say you get into like construction equipment and things like that a lot of times after you have an event, in this case, two events that there's actually, you know, that it's more than just a business, you have a disruption in the business.

But then because there's, you know, additional kind of maintenance, additional things that need to be done to actually repair because of the hurricanes that you actually have some extra wind in your sales.

Would that be the case with Becknell or is it just to get it back to its, it'll just bounce back to kind of its normal, you know, state to where it would have been.

Do you understand what I'm asking where?

Yeah.

It'll, it'll be more normal state ted you know, the, the amount of incremental that could be generated is not meaningful.

Okay.

Okay.

The next question, your inventory dropped by, you know, I mean, I don't know, close to $3 million sequentially.

Is there something that drove that down?

How would we think about that as we go?

You know, beyond, you know, we go into the third quarter, fourth quarter and beyond.

No, it's just, you know, it's something that myself and Mike West have been hyper focused on the past couple quarters.

And as you know, you know, when you, you get focused on inventory, it, it takes a little time to build some momentum, but obviously, you know, that's, it's just looking to improve the cash conversion cycle, right?

So we've been hyper focused on that and it's not indicative of, you know, any changes in that distribution business.

No.

Well, but so, but would that be kind of the new norm then if I would, you know, you know, how much I care about cash?

So.

No, no, no.

Absolutely.

No, I'm sorry, I missed II, I missed making that point.

Right.

Is that, yes, we would expect that to be the new norm.

And, you know, on occasion is as, you know, we get opportunities to, to make strategic buys and additional discounts and, and we'll continue to do that where it makes good financial sense.

But, hopefully when we do that, it'll kind of work its way through in the current quarter or maybe the subsequent quarter.

But you think of it is more the norm.

And then on the gross margin side, particularly as it relates to the distribution business, you know, it, you know, your number there was, you know, at a level not seen since, I guess the first quarter of last year.

Is that all back now or is there anything else that went on in there that, you know, caused that to go?

Or it was just really just this, you know, this one time?

No.

It's primarily back now.

It's primarily back now and that's why we're, you know, comfortable, you know, saying that, you know, for the second half of the year, we should be back more to you know, levels we had in the second half of last year, which are, you know, north of 30%.

Okay.

And that's it for me.

I mean, is your 10-Q will be out later today?

No, on Wednesday, the November 6th.

00, okay.

So from tomorrow?

All right, thank you.

All right.

Thank you.

Thanks.

Bye bye.

Thank you.

Next question comes from the line of Martin Yang with Oppenheimer and co please go ahead.

Hi, good morning.

Thanks for taking the question.

Can you help us get a sense of how big is Nexa in your revenue contribution on an annual basis?

Yeah, it's when, when we look at services, I'm going to say and Tom correct me if I'm wrong, but it's somewhere between five and 10% probably, you know, right in the middle, closer to 10.

And that's what's so interesting, you know, it's such a small part of the business but you know, where you didn't get labor out and you didn't, you know, kind of anticipate that some of the changes in revenue Martin, it's just that you can see the effect it has on the business.

But again, we'll we got our arms around it now.

Yeah, I think that that range is accurate.

Yes.

Thanks.

One more question on organic growth for services in the past quarters as well as this just reported quarter.

When you track all the other acquired business are they are, all of them growing have grown organically.

So.

So the way we, I mean, we don't really talk about performance at the individual unit level.

So, but, you know, keep in mind that from a, from a service standpoint, you know, most of our, our growth is, is impacted or by organic, by organic growth, right?

Because we didn't, we haven't had a, we haven't acquired a services business since, you know, April of, of last year.

So, you know, we're the, the point we made is that when you back out, next, you know, organic growth was at 9% and, and, and the, the businesses are all, you know, contributing, contributing to that to that growth.

So.

Got it.

One last question for me.

So given what you have seen in Nexa, would you apply perhaps a bit more scrutiny to other acquired business in terms of sales marketing or other business processes?

So interesting.

I I get the question.

I mean, my knee jerk reaction is, of course, we always will and do but, but remember we integrate all the businesses we acquire.

When we run the transcat acquisition playbook, it's always our intention to integrate fast and integrate completely and we think we're really good at it.

And historically, our track record shows that next, it was an exception, you know, it was a different business, although related and very much in the ecosystem in which we perform our calibration services.

They were a high flyer, they were performing very, very well for an extended period of time and we kind of decided not to run the playbook Martin.

So I don't think this applies the, the other businesses.

Well, you know, some businesses have better quarters than others.

Generally speaking, we always review this at the board level and internally as well.

These businesses perform very well.

I mean, across the board and through the year.

So I think Nexa is more of an outlier and an exception and, and we, and we did learn from it.

There's no question about that and I wouldn't expect that to happen again.

So we'll, I think we'll get better in that respect for sure.

Alright, thanks lee.

Okay, no problem.

Thank you.

A reminder to all the participants that you may press star and want to ask a question as there are no further questions at this time.

Ladies and gentlemen, we have reached the end of question and answer session.

I would now like to turn the floor over to Lee Rudolph for closing comments.

Well, thank you all for joining us on today's call.

We we appreciate your continued interest in TRANSCAT.

We'll be attending the Craig Hallen 15th annual Alpha select Conference which is New York City on November 19th, Ty and I will be there.

Feel free to check, check in with us at the conference or really any other time.

Otherwise we'll talk to everybody after the third quarter results.

So again, thanks.

Thanks for participating.

Take care.

Thank you.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.