Transcat, Inc. reported fiscal third-quarter EPS of $0.26, falling short of the Zacks Consensus Estimate of $0.30 and down 42% from $0.45 a year earlier. Net income declined to $4.2 million versus $7.1 million in the prior-year period. The earnings miss reflected margin pressure from elevated labor and freight costs, which expanded operating expenses by 250 basis points to 19.8% of revenue.

Total third-quarter revenue rose 2.3% year over year to $102.6 million, driven by a return to high single-digit organic growth in the services segment. Service revenues increased 7.8% on an organic basis following two consecutive quarters of flat performance, contributing $54.3 million, while product sales were flat at $48.3 million as order timing shifted into the fourth quarter.

Calibration and field service lines saw a combined revenue gain of 9.5%, with demand for onsite instrument qualification and maintenance rising as industrial customers resumed capital projects. Booking trends improved sequentially, with backlog up 5% to $22.8 million, supported by new multi-year service agreements in the pharmaceutical and semiconductor end markets.

Transcat ended the quarter with $32.4 million in cash and $18.7 million drawn on its revolving credit facility. Free cash flow was $6.5 million, up from $4.1 million a year ago, enabling the company to invest $3.2 million in strategic acquisitions of calibration software assets and to increase its quarterly dividend by 5% to $0.21 per share.