Greetings, and welcome to the Transcat Inc. Second Quarter Fiscal Year 2017 Financial Results Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Deborah Pawlowski, Investor Relations for Transcat. Thank you. You may begin.

Thank you, Melissa, and good morning, everyone. We certainly appreciate your time today and your interest in Transcat. I have here with me today our President and CEO, Lee Rudow and our Chief Financial Officer, Mike Tschiderer. After our formal remarks, we are going to open up the call for questions. If you don’t have the news release that crossed the Wire after markets closed yesterday, that can be found on our website which is www.transcat.com. The slides that accompany today’s discussion are also found there. So, if you would, please refer to slide two. As you are aware we may make forward-looking statements, during the formal presentation and Q&A portion of this teleconference. Those 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 with documents filed by the company with Securities and Exchange Commission. You can find those on our website where we regularly post information about the company, as well as on the SEC’s website at sec.gov. Please review our forward-looking statements in conjunction with these precautionary factors. I would like to point out as well during today’s call; we will discuss some 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 have provided reconciliations of our non-GAAP information to comparable GAAP measures in the tables accompanying the earnings release and in the slides. So, with that, let me turn the call over to Lee to begin the discussion.

Okay. Thank you, Deb. Good morning, everyone. Thank you for joining us on the call. Overall, we're pleased with our second quarter results and our progress year-to-date. We continue to drive towards the goal of $175 million to $200 million in revenue and we continue to stay focused on driving increased margins overtime and at that volume. Let me give some of the highlights for the quarter, then I’ll turn things over to Mike for a more in-depth review of the financials, before I get back to provide some outlook for the rest of year. As I stated a moment ago, second quarter execution produced strong financial results for both segments. We achieved record revenue of $34.5 million, up 17%. Higher revenue and gross profit resulted in operating income growth of 15%, EBITDA margin expanded a 150 basis points and as a percentage, EBITDA increased 38% for the quarter, 46% for the year. Second quarter service revenue showed steady progress with 19% growth, a blend of organic and acquired growth. Life science growth in the quarter was particularly strong as it stayed true to our growth strategy and leverage our value proposition in the highly regulated FDA space. We did experience a decline in service revenue in Canada directly related to softness in the Canadian aerospace market. The softness was partially offset by growth in Canadian life sciences, driven by a recent acquisition of Dispersion Laboratories in Montreal. In the U.S., organic growth was impacted a bit by capacity restraints in a couple of our key labs. Generally speaking, we see capacity as more of a timing issue, more short-term in nature, and we ended the quarter with a strong pipeline of organic activity. The quarter represented our 30th consecutive quarter of year-over-year service growth as we continue to take…

Thanks, Lee, and good morning, everyone. Please note that when considering our year-over-year comparisons that the second quarter of our fiscal year 2017 that ends at March 25th, 2017 and the six month year-to-date results include the acquisitions of Anmar Meteorology in September of 2015, Spectrum Technology in January of 2016, Dispersion based on Montreal that was January of 2016 and Excalibur Engineering, which was acquired at the beginning of this fiscal year on April 1st. I will be referring to some of the slides that we posted on our website throughout this discussion. Starting on slide four. Our record quarter was driven by a significant growth in revenue in both segments. Service segment revenue was up 19% to a second quarter record of $16.9 million, which includes the acquisition related growth. On a trailing 12-month basis, which we believe is more indicative of a long-term progress of the service segment, revenue was up nearly 20%. As Lee mentioned, we are encouraged by the results of the distribution segment this quarter. Sales increased 15% over the prior year second quarter, more supported by incremental sales from Excalibur, the expansion of the high emerging rental businesses both Transcat’s and Excalibur’s and strong orders from the alternative energy markets. On slide five, consolidated operating income increased 15% to $1.6 million, while operating margins were flat. We expect operating margins in both segments to increase as we continue to integrate our recent acquisitions and get the expected sales and cost synergies. Service segment gross and operating margins negatively affected by softness in our Canadian markets and lower than desired U.S. organic revenue, as Lee described. The operating margin in service also reflects an increased allocation of general and administrative costs of approximately $130,000 and higher selling costs in the quarter. We allocate our…

All right, thank you, Mike. Let me wrap up where we are after completing our first two quarters in fiscal 2017, you know I'll start with service. We continue to expect double-digit revenue growth and we remain optimistic about what we see in the business or integrating our recent acquisitions and are pleased with the early performance of those deals, we’ll continue to work on sales and cost synergies to drive higher margins. We feel good about our organic and service pipeline as well, as the acquisition pipeline and the opportunities I had. Our targeted life science market continues to present opportunities for growth, as we take market share from the competition, and we continue to leverage our expanding lab network and addressable markets, as we make our mark as a leader in our industry. Pertaining to distribution, like I stated before, we like our performance in the second quarter driven by a blend of organic initiatives on our traditional distribution business and are pivot to higher-margin rental and used equipments. It's nice to see a higher level of orders and increased level of activity from the market, we hope it continues, I'll conclude with our expectations for solid third quarter and fourth quarter results. On a comparative basis in Q3, we’ll contend with a prior-year reversal, in other words, last year's reversal, a performance-based compensation expense as related, or was related to the impact of the softness in the oil and gas market. That said, we expect solid consolidated operating earnings growth in Q4 and for the full year. So, with that, I’ll turn things over to the operator. We can open the line for questions.

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Chris Reynolds with Neuberger Berman. Please proceed with your question.

Good morning.

Morning, Chris.

I have a quick question here about your acquisition activity. It’s been very successful and it’s obviously enhancing your growth. Do you anticipate continuing to make acquisitions over the next year or so, or do you think the acquisition activity, it would slow down a little bit as you integrate what you’ve announced so far? Then I have a second question.

Hey, Chris. So, this is Lee, and I absolutely do see the acquisition activity continuing on an ongoing basis. The pipeline that we have today that we’re working is pretty robust as we say, as strong as ever. I think there is opportunities out there, and we are and while we’re integrating the high-level of activity that we encountered and engage with last year. I don't see that as any kind of long-term, you know, event that will prevent us from acquiring companies. The important thing is that they fit, that they’re strategic as we've done in the past, I think it's really important that we get it right. Our track record has been positive and you know, we’re going to stay on that path and continue with that strategy.

Okay.

I'll just add one thing related to that, we are disciplined buyers. We were very strategic and what we look for, where we look for and what we’ll pay, but those criteria do resonate with the activity that we've seen out there. So, we still think it’s a good market for acquisitions.

Okay. And my second question relates to the international markets, you’ve made acquisitions in Canada, and you have business in Puerto Rico. But are there other opportunities outside of those international markets for growth and do your customers on the distribution side perhaps place orders for equipment that may be utilized overseas?

I’ll address the distribution part of the question first. We do have, there are identifiable sales that we make domestically that end up in global markets, that’s pretty, it’s a pretty small part of what we do. It’s been pretty consistent through the years, so I don't see it as all that material. As far as positioning our self globally or expansion into global markets on the service end of the business, Chris. You know, we’ve all - we remained focused on domestic markets for two reasons. One, it’s low-hanging fruit for us, I mean as long as we are experiencing solid organic growth and there is opportunities to acquire within North America, we’re going to continue to make that our primary focus. Now, I will say that in-time, it’s not beyond the realm that we will expand in the global markets, and the way we would do that at a very high level is on the coattails of a customer, or an opportunity that drives you there and takes you there, where you have sponsorship from day one. And that tends to be how it works and you know that may very well happen at some point, but it's not part of our current strategic plan and something that we will address that opportunity presents itself.

Okay. Terrific, thank you.

Welcome.

Thank you. Our next question comes from the line of Dave Rhodes [ph] with Stifel. Please proceed with your question.

Good morning.

Good morning Dave.

Hi, Dave.

Congrats on a nice quarter.

Thank you.

I'd like to follow-up a little bit his first question and tie it into where you guys see the rental business going and the used equipment business, I know that when this transformation started some 14, 15 years ago, when you guys identify the opportunities to grow - attempt to grow aggressively through acquisition particularly on the service side, it took a good 7 or 8 years There were major hiccups in the economy back in '7, '8, '9 to allow you to get the right metric it seems to make these acquisitions, people were more interested in selling after that economic pickup occurred. It seems now that now the perspective is I just wanted to throw out, are you guys starting to get is the word out, are you guys getting contact now rather than have to be as aggressive as you were back in the day or are more opportunities just kind of coming your way by nature of talk in the industry and things like this?

So, that’s an interesting question and I would say that over the last, I would say 24 to 36 months, we have seen more people reach out to us in terms of companies that potential interested in selling to Transcat that we have in the past. So, you are right at the beginning we are very proactive and what momentum we were able to create was sort of self-generated. I think - I don’t want to say its 50-50 still probably 60% or 70% more outreach on our part, but we are seeing increase level of people that reach out to us and that’s through networking and every press release they see that we are active in the acquisition market. So, it has become a little easier in that respect. I would also say that there are opportunities, so last year and particular with the softness in oil and gas and industrial output being low in the U.S. strong dollar and all the derivative effects of that, that it was a great time to acquire companies for all the obvious reasons. And we took advantage of that, and I think that’s a good strategy and I would do it again. I think the market has not changed all that much, so we’re still seeing enough sluggishness in output and the strength of the dollar continues to be strong and so, I think their opportunity this year like they were last year and I haven’t seen any change and I would anticipate that we would be the type of company that would take advantage of that, that opportunity. So, the last thing I would say relative to your question is we have entered into the used and rental markets, we like the margin profiles of those markets. We are seeing growth in those markets particularly rentals, we just entered the used equipment in April so it's really soon too soon to make general statement, but I would say that there are probably and we see acquisition opportunities on those fronts as well at the traditional service business that we’ve acquired into and so we will take a look at this opportunity as they present themselves relative to rentals and used.

Dave I'll just add one or the 10 to at least said in the first part about the acquisitions, I do think we have got some positive synergies now because we’ve done deals and the deals have worked out for the buyers, we’re known as a good buyer and some of the ones that we’ve seen come across our desk now are from some of those other buyers in the companies that we bought previously. It’s kind of a small community, so in addition to the outreach, we've had brokers call us who brought us deals in the past, now there is other ones that are out there. So, it’s kind of building on itself.

Thanks. I know it's again in the used equipment and the rental business, I know it’s embryonic in certain areas for you right now there, but I’m just interested in more color, if you will to learn more, it seems as though by adding that to the company it almost creative three-legged stool with the service, with product and now with the used and rental business opportunities, which potentially gives you a more solid foundation to move forward? What is, do you know the mix if there was a mix on the ElectroRent company that was acquired by Platinum Equity recently. Were they pure rental, were they used equipment, were they mix of such or do you know what their makeup was?

I know the specific breakdown Dave. I do know that they're primarily a rental company. And when you're in the rental business almost by default you're going to be in the used equipment business as well, they hand in hand. But I would say that to the best of my knowledge and for I've read in the past and it used to look at comps their primary drivers of the rental business. But the two are very closely associated and linked at necessity.

Okay. Thank you.

You're welcome.

Thank you. [Operator Instructions]. Our next question comes from the line of Steven Stern with Stern Investment Advisors. Please proceed with your question.

Thank you and good morning. Congratulations on another good quarter. My question is looking the interest expense line for the last two quarters. It’s expected that interest will go up as you expand the rental as you finance acquisitions. And as explained in the past operating cash flows paydown those bank lines that finance those two activities. However, are we at the stage now where perhaps some longer-term debt on the balance sheet could give us some stability by reducing the need on the bank lines which right now are very inexpensive because of variable low rate. But it would allow us to lock in low financing for 10, 15-20 years into the future a base in long-term capital or long-term debt. Has that been looked at?

Yes, Steven hey this is Mike. And we have looked at that and we had some I think very productive discussions with our bankers as well as other bankers about the potential opportunities. I think the important thing right now as you said it's very cheap money right now. I think we have a very good facility, where it's a very low rate it's a LIBOR plus so it is variable. But the way it structured we have some really good grid protection. We have though talked to them about fixed rates as well as do we want to do some kind of a swap agreement. And we've just concluded at least in the short term that we don't need to do that unless we start to really hear something more immanent from the FED about what rates are going to do. But we do keep it in the front of our mind as we look at our balance sheet structure for sure.

Thank you.

Thank you, Steve.

Thank you. There are no further questions at this time. I'd like to turn the floor back to Mr. Rudow for any final remarks.

Okay thank you. So, I want to thank everybody for joining us. We always appreciate your continued interest and support. For those of you who are going to be or who are in the greater New York area, we're going to be at the Sidoti Emerging Growth Conference on November 1st. So, if you as to meeting up with us, let us know and we'll certainly carve out some time. We're also going to be at the IDS Conference in Dallas on November 16th and again, we'd welcome the opportunity to meet with anybody that has the interest in meeting with us. As always, we appreciate of everybody being on the call today. Thanks for joining us and take care. Have a nice day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.