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Note 3 - Stock-based Compensation | 6 Months Ended
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Sep. 27, 2025
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | NOTE 3 – STOCK-BASED COMPENSATION 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 September 27, 2025, 0.5 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 six months of fiscal year 2026 and fiscal year 2025 were less than $0.1 million and $1.1 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 a restricted stock unit grant is the quoted market price for a share of the Company’s common stock on the date of grant. These restricted stock units are generally either time vested or vest following the third fiscal year end from the date of grant subject to cumulative Adjusted EBITDA (a non-GAAP measure) targets over the eligible period. There was a special award granted in September 2025 that will vest following the second fiscal year end from the date of grant subject to cumulative Adjusted EBITDA (a non-GAAP measure) 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 estimated level of achievement for performance-based restricted stock units granted in fiscal year 2025 and fiscal year 2026, are estimated to be 100% and 150% of the targets, respectively. The following table summarizes the non-vested restricted stock units outstanding as of September 27, 2025 (in thousands, except per unit data):
|  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |
|  | Number |  |  | Grant Date |
|  | Of |  |  | Fair |
|  | RSUs |  |  | Value |
Outstanding as of March 29, 2025 |  |  | 74,071 |  |  | $ | 101.63 |
Granted |  |  | 111,245 |  |  | $ | 83.03 |
Vested |  |  | 7,336 |  |  | $ | 114.85 |
Forfeited |  |  | 150 |  |  | $ | 101.95 |
Outstanding as of September 27, 2025 |  |  | 177,830 |  |  | $ | 89.46 |
Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was $2.5 million and $0.9 million in the first six months of fiscal year 2026 and fiscal year 2025, respectively. As of September 27, 2025, unearned compensation, to be recognized over the grants’ respective service periods, totaled $12.0 million based on estimated achievement levels as of September 27, 2025. If the maximum performance levels were achieved, the unearned compensation could be a maximum of $12.6 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 over a period of three to five years either in annual tranches or cliff vesting and expire either five years or ten years from the date of grant. The Company calculates the fair value of the stock options granted using the Black-Scholes model. The following weighted-average assumptions were used to value options granted during the first six months of fiscal year 2026 and fiscal year 2025:
|  | Second Quarter Ended |  |  | Six Months Ended |
|  | September 27, |  |  | September 28, |  |  | September 27, |  |  | September 28, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Risk-Free Interest Rate |  |  | 3.93 | % |  |  | 4.09 | % |  |  | 3.89 | % |  |  | 4.35 | %
Volatility Factor |  |  | 46.71 | % |  |  | 40.70 | % |  |  | 46.78 | % |  |  | 40.98 | %
Expected Term (in Years) |  |  | 4.00 |  |  |  | 4.00 |  |  |  | 4.00 |  |  |  | 4.00 |
Annual Dividend Rate |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
The Company calculates 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. The Company assumes no expected dividends. During the first six months of fiscal year 2026, the Company granted options for 4,100 shares of common stock in the aggregate to Company employees that vest over three years. During the first six months of fiscal year 2025, the Company granted options for 10,000 shares of common stock in the aggregate to Company employees that vest over three years. The expense related to all stock option awards was $0.4 million in the first six months of fiscal year 2026 and $0.7 million in the first six months of fiscal year 2025. The following table summarizes the Company’s options as of and for the first six months ended September 27, 2025 (in thousands, except price per option data and years):
|  |  |  |  |  | Weighted |  |  | Weighted |  |  |  |  |
|  |  |  |  |  | Average |  |  | Average |  |  |  |  |
|  | Number |  |  | Exercise |  |  | Remaining |  |  | Aggregate |
|  | Of |  |  | Price Per |  |  | Contractual |  |  | Intrinsic |
|  | Options |  |  | Option |  |  | Term (in years) |  |  | Value |
Outstanding as of March 29, 2025 |  |  | 174 |  |  | $ | 72.14 |  |  |  |  |  |  |  |  |
Granted |  |  | 4 |  |  | $ | 82.59 |  |  |  |  |  |  |  |  |
Exercised |  |  | 1 |  |  | $ | 64.39 |  |  |  |  |  |  |  |  |
Forfeited |  |  | - |  |  | $ | - |  |  |  |  |  |  |  |  |
Outstanding as of September 27, 2025 |  |  | 179 |  |  | $ | 72.42 |  |  |  | 5 |  |  | $ | 1,684 |
Exercisable as of September 27, 2025 |  |  | 106 |  |  | $ | 62.70 |  |  |  | 4 |  |  | $ | 1,497 |
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 second quarter of fiscal year 2026 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 September 27, 2025. 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 September 27, 2025 was $1.2 million, which is expected to be recognized over a period of three years. The aggregate intrinsic value of stock options exercised during the first six months of fiscal year 2026 was less than $0.1 million. The aggregate intrinsic value of stock options exercised during the first six months of fiscal year 2025 was $2.4 million. Cash received from the exercise of options in the first six months of fiscal years 2026 and 2025 was less than $0.1 million and $0.6 million, respectively.

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