Q4 2019 Earnings Call
Greetings welcome to transact technologies.
Fourth quarter full year 2019 conference call.
At this time, all participants are in listen only mode.
Question answer session will follow the formal presentation.
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At this time.
The conference over to Mark Griffin and Investor Relations. Please go ahead.
[music].
Thank you good afternoon, and welcome to transact technologies fourth quarter and year end 2019 earnings call today ill be discussing the results announced in our press release issued after market close.
Joining us today from the company of Chairman and CEO, our children and.
<unk> CFO, Steve Demartino.
Today's call will include a discussion of the company's key operating strategy progress on these initiatives and details on the fourth quarter financial results well open the call participants for questions.
As a reminder, this conference call contains statements about our future events and expectations, which are forward looking in nature.
It's on this call may be deemed as forward looking and actual results may differ material.
For a list of <unk> risks inherent to the business ended the company. Please refer to the company's FCC filings, including its reports on form 10-K, and 10-Q transact undertakes no obligations to revise or update these forward looking statements.
To reflect events or circumstances that Carl after the call.
Todays call and webcast will include non-GAAP financial measures within the meaning of FCC regulation G. when required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with gas can be found in today's press release.
As well as on the company's website with that let me turn it over to part.
Thank you Mark and thank you to everyone for joining us on today's call.
Before I begin I'd like to mention to our shareholders that we have engaged in new firm I see.
As both our Investor and public relations firm for 2020.
I think rich land and Jim Leahy, Eddie A.J.C. IR for the work on behalf of transact. The last few years Retune, Jim. Thank you.
We've now moved to ice Youre and we look forward working with them as they will be coordinating both the IR and PR efforts together for transact.
We look forward to working with.
Michael Bowen, Mark Refunded, Ryan Gardella on the IR site and lives de Trapattoni and Kate Octavio cats with our public relations.
As a quick note we've made a lot of progress in growing our visibility in the foodservice market as I see our ready arranged press interviews with national restaurant, a convenience store magazines.
Regarding our bulk <unk> foodservice technology and they were extremely helpful. You getting me recognized as one of the most influential restaurants Ceos in the U.S.
Now onto the business.
We're pleased with our execution throughout the year and ended 2019 whats wrong momentum in our foodservice.
Technology market.
As Steve will discuss in detail later during this call our preliminary fourth quarter total net revenue declined 5% year over year to 11.2 million. We recorded an operating loss of 1.1 million and adjusted EBITDA loss of 140000.
We delivered.
Quarterly gross profit margin of 41.2%.
And diluted he P.S. loss for the fourth quarter of 11 cents per share Steve will have more to speak about.
In May of 2019, we launched bought our new foodservice technology Echo system.
Sorry.
Sorry, I'm going to try and lower this okay.
In May of 2019, we launched <unk>, a new food service technology Echo system and we're excited by the momentum both is receiving in the market.
The blow up the both platform drove 58% year over year revenue growth in our foodservice technology.
Well, what we kind of call the F S T market.
More importantly, foodservice technology recurring revenue grew sequentially and more than tripled from Q4 2018.
As a reminder, recurring sales include software and service subscriptions as well as consumable label cells and it.
It's 675000 in Q4 or an annual recurring run rate of 2.7 million.
During the fourth quarter, we installed a record number of hardware terminals and completed many trials, which set the stage for the large number of deals we announced in the first few months of this year.
As of December.
31st we had 2750 paid terminals in the market, which drove the 21% year over year increase in FSD hardware revenue.
In December we announced an expansion deal with one of our first bought customers, adding 220 additional terminals to their existing.
Work, which increased the annual recurring revenue what these stores.
As of yearend, our boss solutions are active in 20 different restaurant and food service companies.
Most importantly was the progress we made and executing the trial phase with a host of customers that led to five announced wins in January.
February of this year.
In total we are expecting to install over 450 hardware terminals with an average recurring revenue per unit greater than $1100.
Now, let's review some of the more recent notable wins.
A regional office of a national convenience store chain with 72 locations.
Our boss solution will allow this customer to manage its new fresh food offering. We believe that has a fresh food program has expanded to new regions. We label, we'll be able to expand the boss solution to what additional 2000 stores.
And National contract Foodservice management company, we use the boss solution it up to.
Hello locations with 50, starting at 2020 this customer we use the boss solution at a variety locations for grab and go labeling date cold cold labeling and to digitize knows the standard operating procedures using the Bahar media library.
This customer is also evaluating two additional bonus.
<unk> applications, both my sense and bought temp to manage their equipment temperature monitoring and to improve the food safety temperature taking compliance.
A regional convenience store chain, we'll use the bought Ecas echo system to support their fresh food program at 100 locations.
Especially with the food contractor, which operate independent kiosk throughout the regional grocery store chain expects to deploy the bonus system into most of the 130 of their locations by the ended the year.
And a regional convenience store chain, we use the Boa echo system to support their fresh food program at 100 <unk>.
Locations this year and the remaining 130 locations in 2021.
Finally, we secured the first expansion agreement at the corporate level to begin selling additional boss solutions to more than a thousand Canadian fast food franchise locations.
The additional hardware naps form the basis.
Of our digital temperature, taking and monitoring solution, which includes the bulk attempt that both us and SAP and both hard time, the app plus the required hardware, which includes both how gateway in both sensors with over 90 franchisees already using the ball, how labeling SaaS based app and Thames alongside.
The bolt Hot terminal, we're excited about the opportunity to cross sell additional apps to these and other franchise locations.
Now moving onto our market, leading casino and gaming printer business revenue the quarter was flat at five point Threemillion and ended the year at 21.5 million down nicely 19 per.
<unk> year over year.
As a reminder, in 2018, we benefited from two significant one time shipments of replacement printers to a large domestic casino, operator, and a customer in Europe, which created a tough comparison in 2019.
That said, we're pleased with the continued strength of the.
You know business, particularly on the international side.
We continue to invest in this important segment of our business and that ice London in February this year, we launched epic central 4.0 into the European market.
The global gaming a casino market remain steady component of our overall business and.
Provides necessary support to ramp are both <unk> foodservice technology business.
With that Steve will review, our <unk>, our preliminary fourth quarter full year 2019 results after which I'll make some summary remarks before opening the call to questions and answers Steve.
Thanks Mark.
Good afternoon.
One.
We're pleased with the progress trying to transact has made it our most recent quarter.
Just a quick note in light of are ongoing internal controls remediation that we discussed with you last quarter, where again presenting our fourth quarter results and preliminary form as pwc completes their yearend audit procedures.
We expect to report our final operating.
For the fourth quarter 19, when we file our 2018 form 10-K.
Overall, our fourth quarter 19 that sales were 11.2 million down 5% from 11.8 million in the fourth quarter last year.
Looking at a fourth quarter sales by market, our foodservice technology market or S. T formerly referred to as.
Restaurant solutions was up 58% to 1.8 million from 1.2 million in the fourth quarter of last year.
As a reminder, beginning last quarter. We now include Baja service and Bowl how label sales NFS T.
Previously we included those sales and TSG.
SST hardware sales were up 21%.
The 1.1 billion from 938000 in the fourth quarter 18, and we ended the quarter with 2750 paid terminals.
Our recurring sales, including software and service subscriptions as well as consumable label sales reached 686000 in Q4, which is more than tripled. The 212000, we reported in the year ago.
Period.
The large increase in our recurring revenue demonstrates the bahar initiatives have begun to gain traction and are driving incremental sales with customers who already use our terminals.
Casino and gaming sales were 5.3 million, which was flat from the fourth quarter of 18.
Breaking this down a little further our domestic revenues.
As were down 4% from the prior year.
Our U.S. casino ticket printer sales increased 5%, which was more than offset by a decline in epicentral software sales as we didn't have any new installations in the fourth quarter 19.
Our international Casino gaming revenues were up 8% due largely to international gaming printer sales.
Do at least in part to a large order in Spain based on strong demand from sports betting applications as well as higher demand from an Asian Oems.
POS automation and become sales were down 4% to 1.3 million in the fourth quarter 19.
We continue to experience slowing sales have yet to get 9000 Pos printers.
Mcdonald's, including the ongoing impact of a decision by one of the Mcdonald's large Pos system vendors to repair versus replaced their printers.
As we've noted before while this decision reduces new printer sales. It has driven an increase in service revenue, which shows up at our TSG sales unit.
We had no baking sales.
In the fourth quarter 19, as we exit this market at the end of 18.
Contracts product sales were flat at 243000 compared to the prior year fourth quarter.
While we're no longer focused on this market. We expect continued to receive orders during 2020 as we continue to service our legacy customers.
And finally, TSG sales were down 12% year over year to 2.1 billion an increase in service the spare parts for Mcdonald's large Pos vendor was not enough to offset a decline in sales of legacy consumables, such as HP inkjet cartridges and Pos paper roles.
Moving down the income statement, our fourth quarter gross.
Margin was 41.2% compared to 50.1% in the prior year.
Our gross margin was negatively impacted in the fourth quarter 19 by a 400000 dollar write off of tooling due to a product design change as well as approximately $200000 of incremental expense from additional Chinese tariffs.
Absent. These two items, our gross margin would have been about 46.6% in the quarter.
Getting a little color on the tooling write off we had started to the development of a new product over a year ago for foodservice technology.
In response to market feedback our product team conceived the different product that even more applications and.
Benefits to the market.
As a result, we decided to abandon the original design and go into different direction.
So we can't disclose the details yet we're really excited about the new design and we expect to launch this new ball hot product in the next month or two.
In terms of the Chinese tariff, we do expect to continue to be impacted by the tariff.
2020, as one of our two main contract manufacturers is located in China.
However, we've already begun the process of transitioning production from this C M to our other C.M., who is located outside of China. So the impact should diminish as we move to the latter part of 2020 to 21.
Total.
Operating expenses for the fourth quarter, 19 were 5.7 million, which was up 17% year over year.
Selling and marketing expenses were up 390000, or 22% as we continued to build out and increased our spend an outside and inside sales technical sales and marketing staff to support the growth of our SSD market.
Gene expenses were up 452000, or 23% on higher legal accounting and other professional service fees as well as increased recruiting expenses for new hires and severance incurred during the quarter.
Engineering design and product development expenses were flat on a year over year basis.
We incurred an.
Getting lost for the fourth quarter 19, a 1.1 billion or 9.5% of that sales, which compares to operating income of 1.1 billion or 9.1% of net sales in a year ago core.
On the bottom line, we recorded a net loss of $800000 or 11 cents per diluted share in the fourth quarter 19 compared to net.
Income of 962000, or 12 cents per diluted share in a year ago period.
Our adjusted EBITDA for the fourth quarter 19 was a loss of 140000, which compares to 1.3 million in the fourth quarter of last year.
And finally, turning to the balance sheet. We ended 19 was 4.2 million in cash.
Yes, and no debt.
We also returned about 700000 of capital to shareholders in the fourth quarter through our previous through our previous quarterly cash dividend of nine cents per ship.
Subsequent to the quarter, we ended our quarterly dividend to accelerate the company's investments into sales and marketing and continued product development of both.
Before my closing remarks, I want to provide a brief update on the remediation plan for the internal controls issues, we spoke about last quarter.
We believe we developed a solid remediation plan to address the internal controls issues. We're in the process of implementing it.
We're making good progress so far and our team is working diligently to complete the remediation as quickly.
He has been Kevin.
During 2020, given the significant growth opportunity, we see in the F. S. T market, we plan to accelerated investment spending to support the rollout of the rollout of Boa.
Existing sales and trial activity should generate increased in a recurring revenue in the coming quarters as we have added staff and.
Continued to add more staff to exploit this opportunity.
This will ensure we have the right team and infrastructure in place to support our customers as they introduced ball onto their day to day operations.
The growth in recurring sales, which includes software and service subscriptions as well as consumable label sales was very strong.
Fourth quarter and highlights the benefits of our ongoing investments.
We believe this affirms that our business model transformation to SaaS based software subscriptions and related label sales is beginning to take hold.
And our expanding installed base of hardware will be a driver of these recurring revenue offerings going forward.
We believe that.
Remains on track to benefit from both in the long term growth potential of this exciting market opportunity.
And at this point I'd like to get the call back the burden for some closing remarks, thank Steve is always great job.
As we look towards 2020, we remain confident that bohnhoff is on pace to become our largest ever revenue.
The rating opportunity at transact.
Our focus is on driving the successful Boa as we had determined to leverage our position in this emerging market to grow our business and create significant long term value for our shareholders. While at the same time, focusing on our casino and gaming business with a world class leading.
Printers, and Epicentral software system.
Now normally I'd be looking forward to meeting somebody you at the Roth Capital Conference next week.
Unfortunately, we are going through a strange time right now with the.
Corona virus and therefore, the Roth capital conference was postponed as.
I've been told about an hour ago, but also that they'd be trying to do something called a virtual one on one meeting I have no details on how that's going to work so I can't share that with yet, but unfortunately, we won't have the chance to me and then talk about the company and the years and the years ahead.
So at this time I.
Well open up the call to questions and answers. Thank you.
Thank you well now be conducting the question answer session. If you like to ask a question. Please press star one on your telephone keypad.
And a confirmation total indicate your line is in the question Q.
Let me first start to if you like to move your question from the Q.
Participants using.
Weaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
One moment, please where we poll for questions.
Thank you.
First question comes from the line of Kara Anderson with B. Riley FBR. Please proceed with your question.
Hey, Bob Hi, Steve.
Hello.
[noise] I'm kind of my last point Bart just wondering if you can discuss implications that krona virus, maybe having our could have on your business I know you contract manufacturer in China and you are quite exposure in the casino gaming industry.
Strianese just curious if you have some thoughts there you can provide thanks.
Sure sure I got it I got a couple of thoughts.
First of all Unfortunately, we've had the cancellation or the Roth Capital Conference and we've also had the cancellation doesn't Mcdonald's worldwide.
One was a selling.
For me to potential and existing shareholders and one was a potential for the company to.
Well to the Mcdonald's franchisees as Steve spoke about we are launching a new product shortly and it would have been given us a great opportunity to showcase that product at the Mcdonald's worldwide.
We're staying very close to the industries that were in I can say that I am very worried about what the American Gaming Association is doing a we have a trade show in Macau, China out of all places.
And while it was postponed for may they they're telling us that they're.
Going to try and hold it in July and I think thats very dangerous for our employees I would ask my friends in the casino industry to join me and ask the AG, a and read exhibition to postpone or further and maybe even combine it with that Macau gaming show in November. So we don't have to put our employees in harm's way just today the.
Often are of Connecticut announced a state of emergency here. So we're dealing with reality of what's going on.
As for our supply chain clearly it was affected but the wonderful news is if you look at our balance sheet, our inventory is up and up a lot as we prepare.
Cared for our shipments of go hard terminals into our into the market for our customers.
And we'll be able to meet that demand as we see it today and we have enough gaming and casino printers to meet the current demand that we see and we actually.
I have actually seen it.
Opportunity to sell some more casino printers as our competitors struggle to meet the demand as their supply chain is in worse shape and they don't have inventory.
However, we have to remember cower that our businesses our consumer facing.
Casinos and restaurants are is the mark.
<unk> that we serve.
And we faced the consumer and it's too early to call.
On a we're off to a two a good start this year. Just so you know our business was off to a nice start Europe was looking better and our casino market and clearly we closed five deals for RFS tea business in January.
In February but.
But unfortunately with the world has changed and it's not a hoax, it's real New York newer show was just shut down as the city.
So we just don't know Mark is a very big month for us and for our casino customers, especially our slot.
Manufacturers and we will see how it develops over the course of this month the next month.
You know we have to wait and see we are having meetings here in Connecticut on the expense side of the business.
To monitor to our expenses as a this develops further.
But on the I'm I'm.
One positive side I, just like to give you. An example of how we see boho, helping Starbucks announced that they will every eight minutes clean the store.
And if you think about that if you use both heart check list and Bohac timer, you can set the checklist of what needs to be cleaned and the time.
Just say every eight minutes clean whatever you need to clean so we will start to market bohle as they helped to restaurants in food service providers as they look at how theyre going to manage their restaurants in regards to making sure it's clean and virus free. So we think that both high is a great.
Solution to help our foodservice customers deal with the virus and the potential of it's spreading.
So care, it's too early to call.
You know, it's very fluid I don't think anybody is.
It is going to deny that this thing is not moving very quickly regardless of what's going on in the marketplace.
Place like I said, we're off to a pretty good start this year, but and you know if that's all the rear view mirror. We are looking forward, we're talking to our customers and we'll see how the next couple of months rollout.
Thank you for that that's very helpful. Just one follow up on the supply chain.
Our contract manufacturers up and running at this point.
There there the Chinese manufacturers coming back in Chinese new year, and it's been a slower start than it typically in a typical year care, obviously because of the buyers, but they are coming back online.
So it's been slow, but they are coming yeah, we've really.
Just have one product left in China.
Oh, it's a terminal you know I think we can say that the terminal that we manufacture their its life is short in regards to when we look out both <unk> over the next many years. So it made no sense to move it because it's very.
So we are selling it though.
So we need it and we do have inventory and that's hence why you saw the charge in the fourth quarter for $200000 for tariffs sorry, trying to didn't pay for those tariffs transact paid for those tariffs, but the rest of everything Steve if I'm not mistaken.
You can has been moved to a title it still sourced at least yeah.
So we should be when we we met as a team last week and went over our forecast and what what you know at that time actually before I mean, this week has really been a real change to the market.
And we don't see any impact to shipping product to our customers. This year based on our large amount of inventory that we have we even like I said, we even picked up an extra order because one of our one of our competitors could not ship and we had it in stocks we were able to.
Bill that order.
Got it and then.
No I think you called it out as a million 0.1 on in hardware sales for FSP and the corridor is any part of that reflecting older version like that accudate.
Yes, we continue to sell the Iraqi date, 9700, remember Mcdonald's franchisees.
Use that terminal for their food safety labeling so and we have a couple of other customers that continue to use it I'm just for food safety labeling.
But mcdonalds is our is our biggest customer.
That uses it.
Hence why we got a little disappointing, but not little I'd say, we're very disappointed that we weren't able to attend the worldwide to show them something new.
Right.
And then on the customer that you've talked about in the past what the potential 10000.
And I'm wondering if there's any update there on the progress with that.
No no you had almost kind of steady as she goes clearly you know we're trying to stay in touch with them over the Corona virus issue you know it's going to it.
They.
They've got their schedule on the their construction schedule will follow their construction schedule and the shipments. If it were really you know it'll ramp up this year, because they've got a pretty big construction schedule.
We do believe it's gonna be somewhere around 2000.
Terminals this year, probably a little more in the back half than the first half of the or I would say almost definitely a little more in the back half than the first half.
But.
From what we can see what they've shown us in regards to their construction schedule and the different things because it's not just one.
Kinda venue that they're doing one item that they're doing they're doing multiple different.
Items that the rating to different stores.
Each one of those stores needs a Boe a solution so.
Other than you know them shutting down or deciding to wait to get through the Corona virus we.
Ill very positive that 2000 terminals will leave this year.
And then one last question for me, just housekeeping and I'm, sorry, if I missed it did you call out the current recurring revenue run rate.
Yeah, Yeah actually I said it was more than 675 and Steve gave the exact.
Number of 680 686000 was the quarters, but if you annualize that is around 2.7 million annualized and just see you know those numbers have been pulled out and T.S.G. So anybody looking at TSG realize that those numbers are no longer inside a TSG, we're going to put that into the foodservice the FSP market.
But we're running a little over.
If you look at what we presented today Cara 2700, 50 terminals in the marketplace that are paying we do up more because the trials and all that recurring revenue above 2.7 million. So we're averaging you know almost $10000.
Terminal and recurring revenue once they're out there.
Recurring revenue annual recurring revenue per year.
So we're very pleased with those numbers.
Got it thank you.
Thank you.
Our next questions from the line of Mitchell sacks, with Grand Slam asset management.
Please proceed with your question.
Sure just a follow up in terms of what you were just talking about with respect to understanding the recurring revenue. So just to make sure enhanced correctly. The 2750 pay terminals or I would use a thousand dollars a year in recurring revenue.
Yeah, Yeah, just a little under it and that's that's right and remember.
Since we haven't shipped as many of our one of our customers is or we're already kind of forecasting at 1700, but we haven't shipped many of those terminals into the market yet so, but yes, it's running a little under a thousand dollars per terminal.
And then when you were talking earlier in the presentation.
You were lifting some of the some of the companies that you had headwinds with and I thought I heard you say in one of the company's was a 2000 unit.
Order.
Is that correct. So can you just give me the parameters because I was looking through my list of wins I Didnt see anybody with that.
Hi, So I must have missed it no no no miss what.
We said was this is a and I'll I'll I'll I'll get it out so it may be.
What I said wasn't.
So it's a regional office, so we want to regional office of a national convenience store chain. This regional offices 72 locations.
Our goal how to.
That will allow this customer to manage as we have seen mitch across the country convenience stores are rushing into fresh food and they have to be F.D.A. compliant with their labeling and kind of running to us for a solution now that's just a regional part of a national convenience store.
We believe as fresh food is rolled out to more regions would sit within this national convenience store chain that would provide an additional 2000 locations for our boho solution. Okay that makes so this is just a regional chain.
It started with us.
But as you know we have heard some fantastic numbers about the convenience store market.
Revenue increase I mean, there's an article out there that talks about 30%.
Increase in revenue, we have one convenient store that actually told us that they've seen.
Revenue go up.
Almost 60% because of their fresh food offering a smaller regional from but you know you are seeing convenience stores rush the fresh food and you know if you think about it Mitch we don't know what the world's going to be like the next quarter or two let's be honest right.
Do we all have to live at home for a couple of weeks as you know states in cities and towns tried to deal with the Corona virus, but at some point you Gotta go get food.
Right I mean, you now do you go to your supermarket, which might not have food or do you go to your local convenience store and get some.
Yes, food so it might it could turn into be a windfall for convenience stores. We don't know, but you know there is the likelihood that that could happen. There is always winners and losers and things like this.
Kind of wish we sold face mask right now because we'd be sold out but there are winners and losers in this type in this type of environment and just maybe.
Convenience stores, our winter as people go in and get different things that they need for the house instead of going local supermarket big store lots of people. They go to the local convenience store. So we'll see.
Super Thank you very much.
Yes, Thanks, sorry, I won't see you next week.
Thank you.
Our next quarter as a reminder, press star one to ask a question at this time.
Our next question is coming from the line of Jeff Bernstein with Cowen Prime Advisors. Please proceed with your question Hi, guys. Just a quick question on the restaurant solutions.
Breakout 1.8 million in this quarter.
A 1.2 or 1.15 for last year, but is this apples and oranges because this year has the recurring stuff that would have previously.
Ben in the TSG piece and can you give me the apples to apples number.
No we reclassified both pair Jeff so they're both their.
Just apples Oh, Okay. This yeah this quarter there 608.
Got last.
Oh gosh last year at <unk> I remember now is that was filling it and it had been like 800, K or something so so youve reclassified both gotcha. Okay. So that's great. So that's a 58% growth year to year, which is great and then just the sequential.
So you were down slightly what was the story sequentially.
What was that also it should be the September would need to be restated, yeah, well, if you're looking at yet because we have it yeah no September we reclassified.
So it should be apples to apples yet.
So so what's the September number for restaurants solutions.
I don't think I have that suggests reclassified okay. I mean, it looks like just even before reclassification that that's down sequentially, a little bit and I was just curious as to what what drove that just.
The terminal might be Oh.
What was our terminal sales and because our recurring revenue was up sequentially gotcha, Okay, Oh, Yes, Oh, Yeah, Oh, yes, I think sequentially.
The terminals might be down a little.
It does okay. It was just Mcdonald Donald's terminals, Jeff Yeah, no the bought terminals were.
We're up at Mcdonald's was down and that and look we're going to face that because we rolled out a lot of terminals to mcdonalds.
But the Bohac terminals will clearly up in the recurring revenue was up I forget what it wasn't the.
In the September quarter, but yes. It was definitely us so that was sold at Mcdonalds is split between the.
Pos automation and ER and the food safety, there's still but because you still have the food safety terminal that you sell to them. Some of some Mcdonald's revenue is in is in the restaurant solutions.
And the the only thing that's an Pos the printer that we sell to Mcdonalds that's used in the in the front.
One that you guys just.
Yeah.
Gotcha, Okay, obviously coffee got you understood great great.
So now that mcdonalds or we have year to year and and sequential growth in restaurant solutions. That's that's terrific and that if you look at critical high itself, Jeff Vobis growing there's no doubt boa recurring revenue is growing and both of our.
This is growing.
It's just our our legacy the 9700 I Gotcha, and then just real quick on the Canadian opportunity, where youve already kind of gone back in and seen a more content demand in into a customer you had already.
So I think you talked about it and over 2000, a unit chain or something what what was the exact description.
No Canada is about 1000 units.
And the total recurring revenue used to be like 375 and now.
Now up to like 850 based on the new software sales okay.
A thousand units what you have one so far.
No no. So so with it in typical QSR fashion, it's a license to sell to their franchisee, yes, gotcha I franchisees have already bought the both hot terminal.
Lincoln Thames.
Based on our work.
Excuse me with corporate we were able and really corporate right requesting from us.
Our time or intend taking in temp sensing apps. They just approved it they proved it right before their worldwide whether Canadian.
Franchisee conference. So they had all the franchisees and where we were able to present to them. The new solution, which is what we call are both food safety bundle, which includes all the software so as we sign up more franchisees outside of the first 90 will be trying.
To sell them the full bundle.
Yes labels and service and to the 90, we've already sold were now cross selling that the new apps.
I think the good news about the whole thing was here here, we were starting a lot with labeling as everybody has said and everybody asks you yes.
He is the easiest thing to start with and all that but there is not a customer that were not working with that isn't looking attempt taking or 10 sensing or checklist or timers. You know these are the apps that they take a little longer there's a whole process. If you have to go through labeling is a lot easier but I.
I think the really good news is here. They were you know wanting it driving it through their their testing and in a very short time, they approved it and did it and in time enough for us to present it to all their franchise owners last week at their national franchise meeting Gotcha, and just a follow up on that a little bit <unk> because I.
No you guys have been in some some trials with some you know the bigger guys and obviously those things take time and there's some this organizational hurdles and and enter you know and just a you know cultural stuff that.
When you go to change People's behavior.
Sure of how their employees are going to work in the store is that sort of part of the hurdle here that that theres essentially policies on how people are supposed to do stuff in and before you can given this new tool that's going to change their work flow. They just have to kind of write a policy around it.
Yeah, I mean, what we're doing this we're.
At least shortening their policies right because yes, if you look tent picking you've got a whole book that you've got to go through and then you've got feeds you got to fill out.
So really the work the really heavy lifting if you think about temptation to you you have to get into the operation and you have to get into the corporate headquarters and you got to.
Every food that gets temptation <unk>, how do they tend to get when did they temptation, where do they tend to take it.
That takes months to go through every item because it's in a huge book in the back of the restaurant. Yeah. You know there's procedures for the first is the day when they first fire up the grow they lay out a bunch of stuff then they tend to take it.
It's the grilled hot enough. So that's the heavy lifting you know the labeling was so easy because everybody labels and this is just such an easy thing to do but there is you know there is a lot of work to getting their procedures into the cloud and now on our system. So that's what takes a little longer.
You know.
The thing that.
It's got our attention look we launched it in May we started working with new customers in June and you know in January February this year, we closed.
Five new customers, we had one QSR that we're working with from the beginning that expanded the.
Relationship clearly the convenience store market is is running very fast yeah and that you know we're going after the low hanging fruit. So convenient stores. These kiosks in supermarkets is another area, where fresh food labeling is critical and.
Troll than demanded by the FDA. So were numerous conversations on some other cost another customers that supply types of food and kiosk type operations in Russia in supermarkets.
And you know and restaurant companies will take will take longer because not only do we we've.
To get into their operation, we got to get all that into the cloud we got to get it tested in their lab and tested in a couple of stores then tested in a couple more stores and then right an agreement around it. So I believe that sales process is still about 18 months for those types of restaurants gotcha, so but.
<unk>.
The positive part of that right is no pun intended this is gonna be very sticky once you get in there and your though guy that they wrote a all the procedures around and they started throwing away book its kind of hard for somebody else to come in and say Oh, you know you should allow your franchisees to buy this.
Two nobody wants to go back in and kind of redo all that work.
There's no doubt and this is a very sticky business. You know we are in and that's why Jeff We're focused on operations because as you know once you're in the operations and there are doing their procedures with your technology and your cloud.
And you've done all the work right. It's not just you know handing them enap in saying make it work we're in there using our app and for better words customizing, putting their way of taking temperature and what their temperature taking has got to be what their temperature is and all that we're in there doing that customization for them.
Yes, we are then part of their operation and.
The cost you know is not that dramatic to them because of the savings.
We've had one CEO tell us that he thinks is food quality is up using our technology the temperatures right there there.
Turning their food quicker in the walking.
You know, they're not using old food that was in the walking so they're turning they're using that food quicker. So yes, it's gonna be it's very sticky and we expect that are the.
Turn rate know how many how many times, we really do the contract to be pretty high considering we're so involved inside the restaurant you've got it.
All right that's great that's great well good luck.
Thank you.
Thank you we've reached the end of a question answer session I'll turn the call back.
You are shown for closing remarks.
Well, we thank everybody for joining us on todays call you know.
We've had the question about the Corona virus and clearly it's on <unk> on our minds, we do send our thoughts to all of our shareholders and your families and your loved ones in regard.
The staying safe and healthy.
You know we've been through this before we've been through Sars, we've been through the great recession. It is a large bump in the road, but you know we are going to stay very very focused on this very large sales opportunity for us as Jeff said, it's it's very sticky.
It's it's it's it's recurring revenue.
We're starting to feed you more data and what it looks like right now we're a little under a thousand dollars determine them recurring annual recurring revenue per year that looks very good to us and remember a lot of that is still would just went out so as as our customers.
Please go to two three and four apps, we believe that number is going to grow we thank you for your thoughts we thank you for your support of the company hopefully whether it's the next conference call will conference call. After that we want us to talk about Corona virus anymore, we do send our best wishes to everybody's family.
And your loved ones in regards to staying healthy and we'll talk to you guys. Thank you.
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