Q4 2021 TransAct Technologies Inc Earnings Call
We're currently holding for the transact Technologies' fourth quarter 2021 earnings conference call. At this time, we're assembling our audience that will be underway in about one minute. We thank you for your patience in holding and ask that you. Please remain on the line.
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Good day and welcome to the transact technologies fourth quarter 2021 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Ryan Gardella, Vice President of Investor Relations. Please go ahead Sir.
Thank you good afternoon, and welcome to transact Technologies' fourth quarter and full year 2021 earnings call today, we'll be discussing the results announced in our press release issued after market close joining us from the company is chairman and CEO Bart children, President and CFO , Steve Demartino. Today's call will include a discussion of the company's key operating strategies progress on these initiatives details on our fourth quarter.
Full year financial results.
Open the call up to participants for questions. As a reminder, this conference call contains statements about future events and expectations, which are forward looking in nature statements.
Statements on this call may be deemed as forward looking at actual results may differ materially for a full list of risks inherent to the business of the company. Please refer to the company's SEC filings, including its reports on Form 10-K , 10-Q, transact undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after today's call and webcast will include non-GAAP financial measure.
What are the media by SEC regulation G. When required reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated presented in accordance with GAAP can be found in today's press release as well on the company's website and with that I will now turn the call over to Bart Barthes.
Thank you Ryan and thank you to everyone for joining us on the call today.
Our fourth quarter results demonstrated strong momentum in both the foodservice technology or F. S. T market, it's well, it's fantastic results rock casino and gaming market we.
Experience at almost 22% sequential increase in sales of our industry, leading casino and gaming products in the quarter and continue to see demand outstripping supply as against the National bounce back begins and domestic strength continues. We also saw another quarter with over $2 million in recurring revenue and I will.
Expanding on both these points shortly.
Our preliminary fourth quarter and full year 2021 total net revenue were 11, 1 billion and $39 4 million, respectively gains of 43% and 29% from the year over year comparisons our fourth quarter revenue also represents a sequential acceleration of 5% from.
Our third quarter revenue, which as we mentioned had been our highest revenue numbers since the fourth quarter of 2019.
Our total F. S. T revenues set another all time record in the fourth quarter up 25% year over year to $3 5 million.
Our F S T recurring revenue, which includes software subscription labels and service posted its third consecutive quarter of over $2 million coming in at $2 1 billion, which was a 124% year over year increase.
For the full year 2021 we generated $7 4 million in recurring FSD revenue, which was above our guidance expectation of at least $7 billion breaking.
Breaking this down our debt our boba software sales were impacted in the fourth quarter as we decided to accommodate an overseas customer and provide a credit due to their bolthouse terminals being an inactive from COVID-19 during the year.
This resulted in in our pool of $965 in the fourth quarter of $51 decline sequentially.
Moving onto our terminal installed base as we have previously stated hardware sales and the number of paid terminals in the market are the lifeblood of a recurring revenue stream as we increase the number of terminals in the market. Our recurring revenue will grow fueling a predictable stream of that S. T revenue.
In the fourth quarter, we added an additional 1069 terminals for a total of 9818 terminals at the end of 2021 .
Well, we are slightly disappointed in the final number it's worth noting that this number was affected by supply chain constraints with our customers.
The opportunities for both our terminals and workstations remained high and I am so happy to announce that a restaurant company with over 500 stores has just approved our bolthouse terminal, allowing franchisees to replace our older 9700 food safety terminals.
We expect to begin shipping some ballpark terminals during Q1 of this year and we'll work with their franchisees as they convert to our Bolthouse enterprise online system.
This is an exciting project for transact as the customers working with US on a special label design that will be used as a marketing tool for the grab and go items.
Once the label is designed completed and sponsored by the corporate office. We believe all 1500 stores could eventually need our boll our turbo.
Print out this special marketing label, along with the typical food safety labeling needs.
This opportunity is right in our wheelhouse.
We have two other large restaurant opportunities we are working on right now and we also continue to have opportunities centered around fresh food in the convenience store market.
They are the need for labeling labeling sorry remains high.
Build out their fresh food program.
We continue to build the opportunity funnel across the spectrum of our different F. S T markets.
While we do have additional large opportunities in the restaurant market that are progressing forward I must reiterate some comments on the labor pool food shortage situation that we have spoken about previously.
We are still hearing from many perspective customers that we have been working with that they simply do not have the personnel right now to work on new technology installations as they work to improve their supply chain situation and their labor shortage and wage issues. However, we remain positive that when this situation begins to improve.
And as the country continues to open up we are well positioned to capitalize even more on these opportunities as our technology is being evaluated and that's our boat a workstation in Beaumont terminal.
With the labor shortage as we just noted has been impacting the testing and deployment of new technology at large restaurant companies. We have seen some great progress within our SMB sales group.
Basically in the small market store market.
These opportunities are typically quicker to close and small chains have no choice, but to continue operations as fast as possible as they face the difficult macro economic headwinds.
As we announced last week the fourth in the fourth quarter, we sold 44 at workstations and terminals and <unk>.
<unk> six different small change and franchisees with the total opportunity for up to 900 more workstation and terminals for just these businesses alone.
There is there was no restaurant too small to benefit from a lot of technology and we continue to see success momentum in this SMB space.
And Additionally initiative, we started in our SMB sales group was the call on an answer calls from franchisees directly as they need technology to offset their labor and food shortage challenges.
While the corporate office has their own personnel issues to address we are proud to be assisting these franchisees and streamlining their processes.
This initiative has proved successful so far and not only are they buying our boll our technology, but they are helping to promote our technology into the corporate office.
At this part of the market grows we will continue to add to our inside sales team.
As I said I'm very encouraged by the many opportunities in a rapid and deep pipeline. Despite the labor shortage issues in the market and continue to be impressed with our relationship with Apple as we both work to win the restaurant market.
Together with our friends at Apple we are working on a clear message to the CIO office, highlighting both our technologies and how we can streamline their operations and demonstrate the cost benefit of the bolthouse technology over individual solutions.
We are also working on doing more customer and sales events together as the U S start to open up.
Hopefully, we will have more to say in the future.
Before I end, our discussion about the U S T market another bright spot for transact as in regards to our POS printers, we sell to the front of the house for restaurants, mainly mcdonalds.
I'm very pleased to report that we experienced growth in our P. O S market in 2021 but wanted to make a special note to our investors regarding this year.
We are embarking on a special project, where mcdonalds and coupled with our competitors issues with manufacturing printers for them, we expect to double the sales in our P. O S market in 2022.
Now, let's move on to our casino and gaming market.
Revenue in the quarter was $4 9 million up 84% year over year and revenue for the full year was $15 3 million up 39% from the full year 2020.
We're seeing very strong demand continue in the domestic market and we are pleased with the recent rebound at the international market, which was up 100% sequentially.
More markets around the world open up from Covid related closures, we expect to see demand continued to accelerate as we move through 2022.
Finally, I wanted to make a few broader comments about our business and the macro environment. We're in.
We are incredibly proud of our team at transact for navigating through a challenging environment, but certain effects of the worldwide supply constraints and ongoing COVID-19 pandemic started to impact our business.
In the third and fourth quarters of 2021, we benefited greatly from having a very good inventory level, but unfortunately as I have spoken about before regarding the word D. Commit as we ended 2021, we found ourselves dealing with decommitments the chips and print heads that were ordered and needed for the production of our hardware.
In 2022.
Not only are sales rising, but we experience higher sales in 2021 so we need to replenish our inventory.
Chip shortages cannot be avoided and delays in the production by our suppliers have impacted our ability to build back our inventory positions.
Going forward, our hardware sales will be hand to mouth in every market in 2022, while not ideal there are plenty of silver linings here.
First we believe we are well ahead of our competitors in terms of managing our supply chain, we have even seen instances where customers of our competitors are replacing their products would transact products as we are able to facilitate the delivery of hardware in a timely fashion.
I can tell you one of our competitors has not been able to deliver a printer to a certain customer for over six months.
Second the demand pipeline continues to be very strong.
Every unit that has produced either already has a buyer or a soon have a buyer.
We currently have orders going all the way to the end of 2022, which is not typical for us.
You need to know we are working very closely with our chip manufacturer, who has really responded to our needs.
They are helping us to align our company with their latest chip technology.
We are doing this so we utilize their mass production chips to ensure better availability as we end 2022.
I cannot thank our engineering staff enough.
To complete the necessary board affirmed firmware redesigned some hardware that will go through two different redesigned to meet all demand from 'twenty to 'twenty two and beyond.
Our investors should know the chip shortage issue was no joke and worldwide demand easily continues to outstrip supply.
I can point to a major car manufacturer, who recently announced cutting production by 500000 cars in 2022 do the chip shortage issue.
Finally in order to combat rising costs and inflation and having to ship our hardware by ear Air we are implementing our second across the board price hike in our hardware.
This price increase will allow us to absorb the vast majority of the increased cost pressure we are facing.
I am pleased to say, we are not seeing any pushback from customers on this new pricing level, they need our hardware and working hard with our suppliers in the market and flying in the products. They can continue to purchase from transact.
To close out I wanted to discuss our guidance for 2022, and our rationale behind it.
First we're expected to add another 6500 to 7500 paid terminals in service for the year.
Unfortunately, as we deal with the supply of chips and wafers to put in our products. We felt it prudent to guide to a level that we feel confident in our ability to produce rather than sell.
Should that sad situation a bit quicker than expected, we will revisit that number.
Kimberly we're guiding between 10, and a half million, an $11 billion and recurring S. T revenue for the full year 2022, as you know our FSD recurring revenue is largely a function of the number of paid terminals in service.
Despite all these headwinds and chip and processes supplies and hopefully the beginning of the end of the pandemic you can see we're excited about the future of our business as we transition our company into a software and service organization.
And with that I'd like to turn the call over to our President and Chief Financial Officer, Steve Demartino for a comprehensive rundown of our fourth quarter and full year numbers.
Thanks Bart.
And thanks, everyone for joining us today.
Let's turn to our fourth quarter and full year 'twenty one results in more detail.
Total net sales for the fourth quarter of 'twenty, one were $11 1 billion, which was up 43% year over year and net sales for the full year were $39 4 million, which was up 29% from 2020.
Sales from our foodservice technology market R. F. S. T were $3 5 million in the fourth quarter, 'twenty, one which was a 25% increase over the fourth quarter of 2020, and $12 6 million in the full year 'twenty, one which was up 63% from 2020.
That's S T hardware sales in the fourth quarter were down 24% from the prior year due to the timing of orders, but were up 33% for the full year versus 2020.
Our recurring FSD sales, which include software and service subscriptions as well as consumable label sales were $2 1 million in the fourth quarter and $7 4 million for the full year, which were up 124% and 95% respectively over the comparable prior year periods.
The increase was due to strength across all three components, but particularly from a strong label sales as restaurant C store activity resumed a more normalized pace in 'twenty, one and we've placed over 4000 additional terminals into service during 'twenty one.
As Bart mentioned, our recurring revenue is a function of how many paid terminals we have in service and as those numbers continue to climb so too will our label sales and other recurring revenue.
Our our pool for the fourth quarter of 'twenty, one was $965, which was down from $1016 in the third quarter 'twenty one.
As a reminder, we calculate <unk> by Annualizing the quarters recurring revenue and then dividing that number but the number of paid terminals in service at the end of the prior quarter.
Given that we're still in the early stages of building out our installed base of terminals are our pool will likely fluctuate quarter to quarter based on the size of individual orders and the timing of terminals shipped.
Our casino and gaming sales were $4 9 million in the fourth quarter 'twenty, one and $15 3 million for the full year, which are increases of 84% and 39% over the comparable COVID-19 impacted prior year's periods.
As Bart touched on we continue to see great improvement in the domestic market during the fourth quarter. We also finally began to see a pickup in our international casino markets, which were up 100% over the fourth quarter 2020 is 32% sequentially from the third quarter 'twenty one.
P O S automation sales, which consists mostly of sales of receipt and landless label printers to Mcdonalds were $1 2 million in the fourth quarter of 'twenty, one and $4 8 million for the full year that was up 23% and 28% over the comparable prior year periods respectively.
Demand for printers for use in Mcdonalds stores continue to increase throughout 'twenty, one compared to the Covid lows of 2020.
We expect this trend to continue into 2022.
<unk> sales were 200000 in the fourth quarter and 631000 for the full year.
As Bart mentioned, we made the decision to end of life, our print trucks products, which resulted in some large final sales to customers in the fourth quarter 'twenty one.
Going forward, we don't expect any future sales of <unk> products.
Moving out to transact services group or PSG sales.
PST sales totaled $1 3 million in the quarter and $6 million for the full year, which is up 3% and down 14%, respectively from a year ago periods.
As a reminder, PST sales include legacy Pos paper and service contracts on legacy banking printers is spare parts for lottery printers, which we are no longer focused on.
We expect ESG revenue to continue to decline over time.
We believe the slight bump in the fourth quarter may have been due to part shortages, causing customers to repair their existing printers due to limited availability of new printers for purchase.
Moving down the income statement gross margin in the fourth quarter was 39, 7% compared to 36% in the fourth quarter of 2020.
For the full year 'twenty, one was 38, 7% compared to 42, 3% in 2020.
Despite 29% higher sales year over year, our gross margin for 'twenty, one was lower mostly due to higher cost of our hardware as well as shipping costs.
Resulting from part shortages, which were significantly higher than in 2020.
Unfortunately, we expect these elevated shipping in part costs to continue for the foreseeable future.
As Bart mentioned during the first quarter 'twenty two we've instituted an across the board price increase on all of our hardware products.
We expect these price increases to at least cover our cost increases and protect our gross margin around the current level.
Our operating expenses for the fourth quarter of 'twenty, one increased $1 $8 billion or 37% to $6 9 million for the full year increased $3 7 million or 17% to $24 8 million.
This increase can mostly be attributed to higher selling and marketing expenses as we hire new sales and marketing staff expanded marketing programs to support to support both hot and incurred higher sales commissions and travel expenses as trade shows resumed and travel began to return to more normalized run rates throughout the year.
Also included in this increase were higher engineering expenses as we hired additional software developers and incurred higher expenses for Bolthouse software development projects Pizza, Our third party development firm from whom we licensed our software.
Breaking this down a bit further in the fourth quarter, our engineered expenses were up 32% to $1 9 billion, our selling and marketing expenses were up 102% to $2 5 million and our G&A expenses were up 4% to $2 4 million.
For the full year 'twenty, one our engineering expenses were up 31% to $7 5 million or selling and marketing expenses were up 25% to $7 7 million and our.
G&A expenses were up 4% to $9 6 million.
We incurred an operating loss of $2 5 million or 22% of net sales in the fourth quarter of 'twenty, one, which compares to an operating loss of $2 7 million or 34% of net sales in the fourth quarter of 2020.
For the full year 'twenty, one we incurred an operating loss of $9 5 million or 24% net sales, which compares to an operating loss of $8 2 million or 27% net sales in 2020.
As I mentioned last quarter, our full year results include the $2 2 million PPP loan from the SBA under the cares Act, which was formerly forgiven in the third quarter and shows up in our other income line item.
Additionally, in the fourth quarter to 21. Other income includes the recognition of a $1.5 million gain from the employee retention credit or ERC under the cares Act.
On the bottom line, we recorded a net loss of 735000 or seven cents per diluted share in the fourth quarter 'twenty, one which compares to a net loss of $1 9 million or <unk> 22 cents per diluted share in the fourth quarter of 2020.
Excluding the employee retention credit our adjusted EPS was a net loss of 19 <unk> per share for the fourth quarter of 'twenty, one which compared to a net loss of 22 cents in the fourth quarter 2020.
For the full year 'twenty, one we recorded a net loss of $4 1 million or <unk> 45 per cent per cents per diluted share compared to a net loss of $5 6 million or <unk> 72 cents per diluted share in 2020.
Excluding both the PPP loan forgiveness and employee retention credit our adjusted EPS for the full year 'twenty. One it was a net loss of 81 per share, which compares to a net loss of <unk> 72 per share in 2020.
Adjusted EBITDA for the fourth quarter 'twenty, one was a negative $2 1 million, which includes it includes removing the impacts from the $1 $5 billion of employee retention credit, which compares to negative $1 7 million in the year ago period.
For the full year 'twenty, one adjusted EBITDA was negative $7 6 million, which includes removing the impact from both the ERC and the forgiveness of the PPP loans, which compares to negative $5 9 million in 2020.
And lastly, we ended 2021 with $19 5 million in cash and no outstanding debt.
And at this point I'd like to turn the call over to Bart for any closing remarks.
Thank you, Steve as always what a great job.
Before I open this call to questions I'd like to send our company's thoughts and prayers to Ukrainian people.
Our shareholders might not know, but we have a programmer and Keith who has helped us with the design of our technology.
We found out he evacuated keep about a year about a week ago trying to get out of the country.
We hope and pray he is safe.
I also want to thank the employees of transact.
Who have had to endure and have worked through the most difficult times.
First getting us through the pandemic and now the parts shortages we face.
You are an amazing team never giving up and finding solutions to move our business forward.
I am truly thankful for your dedication.
Not enough words to say, how grateful I am.
And finally, I invite our shareholders to the Roth Capital Investor Conference next week.
Where I will be doing one on ones on Monday.
The calendar is getting quite full but I will make time for you before or after the one on ones on Monday to meet with you should you decide to attack just let me know.
Operator, it's now time for questions.
Thank you if you'd like to ask a question please signal by pressing star.
Star one on your telephone keypad than if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment I guess my star one to ask a question.
And we will go first to George Sutton of Craig Hallum.
Thank you Bart first you suggested that your guidance reflected some of the supply constraints and labor constraints, but correct me if I'm wrong, you didn't give guidance. So I just wanted to make sure we could quantify these two items supply and labor in turn.
Of how they're impacting what you would expect results to be.
Well you know it.
What we're saying is we at this point we're looking.
Looking to do 6500 to 7500 terminals or workstations based on the availability ability of chips.
So should that change, we'll be happy to come back and look at that and based on some of the opportunities one that we just.
Got the other day and the other two that we're working on and then.
Many that we're working on in the convenience store market should we should we find ourselves in a better chip situation will will advice.
Advice differently.
Okay I apologize so.
Then if we went to those numbers can we talk about how much impact do you think youre seeing from those two constraints.
I know, it's a hypothetical question yeah.
Sure Alex.
Yeah, George has been just an amazing time.
As we ended the year expecting the shipments of these chips.
Or these are purchase orders that we placed over a year ago. So.
Steve and his team look out 12 to 18 months and place orders for things like chips and all the specialty components over a year ahead of time and as we were expecting delivery, we started getting word from our.
We we actually buy through a distributor, but it's it's it's our major manufacturer that makes them that they were having problems. Some of it had to do with Covid, China shut down certain areas of the country, where these chips are actually made and therefore, they couldnt be made and then of course, there's a worldwide.
Supply shortage.
The.
Three.
Restaurant companies that we're working on ones for 1500, the others will add up to a probably another 8500, so that would be 10000 alone.
<unk> that we have existing customers that will keep ordering from us.
711 will continue the rotor.
And most of our customers continued to place more orders with us as they expand.
We're working very closely with each customer to try to get a hold on when exactly they wanted deliveries on all of that and then working very closely with our chip supplier to find out what we can get.
What I can tell you is between my I actually called.
The CEO the major major chip manufacturer myself.
And then I also got one of our largest customers to write a letter to get their attention to the need for those chips and I can't be more thankful to the CEO and his team.
Were looking at us as a important customer there is granted that there are a lot larger customers than us out there and actually starting to supply the chips that we need we're actually getting.
Getting into a George we're getting into a better position, but we just can't college yet.
But I am pleased with the work that.
My head of operations, Andy Hoffman did our purchasing department.
Our engineering team because our chip manufacturers said, if we move to a different chip that's the one they're mass producing now I think it's mainly driven by the car demand the car manufacturers demand and they were very helpful. In getting US design specification. So we could we write our firmware and redesign our boards and in some cases, we're designing printers.
Twice to get to the end of the year will finally implement these new chips.
So the demand is rising theres no doubt George.
You know I don't think I have to tell you about the headwinds faced in the restaurant companies.
I talked to one restaurant CEO just the other day, who said its not the labor shortage as much as every time he hired somebody literally within a month or two they get an offer for a dollar more and they jumped to a different restaurant I think today, the unemployment is $4 5 million jobs.
That more than the employed there.
The numbers today, where were amazing in regards to the amount of job openings there or.
So you know we're coming out of the pandemic were working with our restaurant companies closely to understand I guess.
I said, we've got three restaurant companies right now one Thats told US to go ahead, we're now putting there our product into their system and working with them on this nice label design.
This QR code stuff is pretty cool and the ability for them to communicate to their customers almost real time, when they get a grab and go items is what's driving the demand for the terminal the costs from the headquarters they can make a design change on the label instantaneous and get it down to all of their stores.
So you know, we're energetic where positive the upside is there.
Sad to say that you'll be could be limited by chips and timing of orders.
One other question, if I could supply and labor constraints aside.
When you look at how you are performing your go to market in terms of sales management and quota carriers and partners can you just give us a broad update of how successful you view that to be are you where you'd like to be in terms of touch.
Touch points.
In one area yet in one area, you know or our small medium business has been a real success for us I think and in fact, the reason why we got this one restaurant company as we started working with some of their stores directly because they were actually calling us for help.
And through that.
And the back channel that was going on we won this order. We won this business I wouldn't say it to order.
It's an agreement to go forward and get these terminals out in the marketplace. So they could do this marketing.
On the direct we direct sell right we have sales managers in the field. It has been difficult to find people and we could use some more.
So will also most of you know we don't have our head of sales for F. S. T. A.
And but that looks promising in regards to finding somebody but.
That's the one area George you know that we could use some more to more people.
The good news is our customer success team that we built is actually full of people and where necessary they fit they fill in for a sales presentation or.
A video presentation or answered some questions about our technology, but I would like a couple more salespeople, Georgia is no doubt.
Well, thank you very much I appreciate it.
Sure. Thanks George.
And we'll go next to Chris Howe of Barrington Research.
Thanks, Thanks for taking my questions Steve.
Hi, Chris.
Hey.
6500 to 7500 paid terminals.
There's a lot of supply chain constraints going on can you talk about how we should think of the mix of terminals.
This next year.
Because of the supply chain constraints would you think.
The mix of terminals favors the second half of the year as perhaps the chipsets become.
More readily available for you.
So like to answer it in two ways first of all you know we actually have two products that we sell them the bolthouse terminal, let Nicola workstation.
We.
Where we're seeing the.
In certain restaurants, the bolthouse terminal is the one that they're looking at because it's kind of a standalone. One it's all included but the beauty of the workstation with the help of the Apple.
Apple continues to sell their iPad into restaurants, all we have to add to the equation other than our software is the workstation itself. It's the unit that has the two printers and a stand for the iPad and that makes more of our sales offering are.
Product offering are quite inexpensive because they already bought the tablet.
So it's going to be interesting to see how the mix goes because apple is even getting more aggressive now and helping us in the marketplace.
As the market opens up and they actually get the okay to travel again I do think that the second half is going to be bigger than the first and that's because of the chip yeah, why theres no doubt.
So if you look at the order.
The project that we just won I think it's kind of probably take three or four months to finish up all the work that we're doing for them on the label design and getting it right for them and then teaching them how to use what we call. The command center, which actually can talk to all the terminals in the marketplace and that's gonna probably.
Take us another couple of months to do however, they are starting to buy the terminal we expect the orders to come in.
Next week or the week after as we enter in our information into their system, but I would say that the second half will be bigger than the first due to the chip issue.
Oh, that's excellent very helpful and.
Can you talk about terminal allocation Theres a lot of puts and takes here you have the 500 stores as it relates to the restaurant company you have your SMB initiatives that are generating success for the company here.
Also have large convenience store that continues to rollout it's terminals, how should we think about the different buckets.
S side, where to place terminals. This year you know what.
What we told our sales force is pretty simple Chris He places the order gets the product.
You know what that what is what it's doing is it's forcing our customers to kind of think ahead and say when do we want and when do we need them and to lock it up.
This just happened at Christmas time, we were expecting chip shipments you know what the <unk>.
First week of January when we were literally told that they weren't coming in and it's the same.
In part as you know we were given no heads up to this day.
Thankfully, we were able to get on the phone and with the necessary people to get that turned around.
But we are telling our customers first come first serve.
It's hard for me to reserve product for a customer when our pipeline of opportunities is growing so it has put a little pressure on our sales force to talk directly to the customers to say you know what make your commitment and I think that's good for us.
You saw our backlog or the casino industry.
I mean, they're in I mean, the orders are ready, they're trying to lock up as.
As quickly as possible.
So we could see that also in the restaurant market.
Okay. You led me right into my last question and then I'll give some others a chance.
The casino and gaming industry Youre seeing a quick sequential pick up on the international front.
It also sounds like Youre picking up some market share in this environment as you mentioned.
Some of the logistical issues that persist.
In the market space can you talk about what youre seeing there and perhaps.
Once we normalize out of this casino and gaming, what's better than it's ever been.
Yeah, So let's break it down into three markets, Chris we have the U S. We have Europe , then we have Asia Asia is still that Asia is still a problem.
China has a zero tolerance program, where should something breakout they shut everything down.
Macao is still very slow we do have some pockets of business the Philippines, we get some business out of them than those layoffs in Cambodia, I don't think everybody knows how many different countries with sell too, but the biggest market is Macau and that's still pretty soft Europe is what came back and it's been nice and we continue to see the orders.
Well our biggest customer there is trying to lock up production for their for their slot machines through the year and then maybe Steve can talk about that some more in regards to what's coming in and clearly the U S has picked up and there is no doubt that.
We have one market share.
Our either our competitor could not ship or we believe that they're going back to an older printers to be able to ship and customers are telling us they don't want to do that and coming to us now that put a little extra pressure on US you know the one thing that that happen as we ended Q4 was the all these orders.
Coming in and nobody forecasting. It ahead of time people started to get desperate based on the issue and the point of sale market. Our biggest competitor hasnt been able to ship to our customer in over six months I mean think about that Chris imagine if I told you I couldn't ship for six months.
But it was all a surprise to us and a lot of it came to light when they wanted to do this new project, where theyre going to buy a lot more printers from us for their stores and we realized the problem that they were in I can't thank them enough for working with us.
And helping us through the issue.
So yeah, we have we have picked up some market share I don't know when we'll see Asia come back I'm in constant contact with our sales manager out there as well as Tracy is our head of sales to get some b. We've got a project on the board that if they can open to help her get close to opening up we'd see.
A fair amount of printer shipping into Asia, because we've won the business, but right now we have no visibility to that.
Okay. Thanks for taking my questions.
Chris Thanks for your help thank you.
Yeah.
And we'll go next to Jeff Martin of Roth Capital Partners.
Hey, good evening.
Bart I wanted to get a sense of Oh God.
For all the detail.
Paul.
It sounds like Youre working through extremely difficult condition.
Connection and it sounds like Eric you're handling it well so congratulations there.
On the engineering side, it sounds like you're having to do a lot of.
Re reengineering on product is that both on the gaming and casino side as well as the F. S. T side and if so where are you in the phases of that and did you have any of that in Q4 or is that really starting to happen in Q1.
Yeah, So Jeff.
I got the call.
Steve or was it a day or two before Christmas when we got the right around Christmas.
Yeah.
So that's why we got the call Pat.
Probably the toughest Christmas iPad when you find out that.
Product Youre expecting was being pushed out months and.
And we had to go to work all the way through Christmas and New York to get that reversed.
Jeff every hardware product that transact is being redesigned right now Luckily and thankfully our chip manufacturer.
Sound some chips for us so we could keep going but told us.
If you look at our products versus what some of these chips do we don't need all the bells and whistles right, we need to move motors print on a piece of paper have a have a sensor tell us whether we're out of paper and all that.
But our chip manufacturers said those types of processes, while they're not into liking. It there's just not going to be a lot of production of it and you should go to our latest.
And then get got us in touch with their engineering team to help our engineering team understand the design criteria.
It's it's not a horrible project.
It's one that our engineering took on but with a lot of.
I mean, you know this is what they they are.
Hired to do right. They love this stuff, let us go to work in.
Design and some latest technology. Its just work right. It's it's it's a different ship it so it's a different.
Platform package that means the board's gotta be redesign and then the firm where it's got to be redesigned because each one has different iOS and how many iOS.
We literally have it down in detail, Jeff If you saw what we're doing we we literally have it laid out five months when products go to the next version and then go to the next version of <unk>.
As it stands right now we have weekly meetings, almost three or four times a week.
We are I'm pleased to say that we're right on schedule, if not ahead of schedule, where we need to be.
The real issue is can be just getting the chips I think on the engineering side, we will get that done the team is very excited.
They're working with the latest and greatest chip technology, even though.
Probably won't use out of it.
Even though they'd like to use it and tell me that they can get that get the printer to saying when we don't need at this thing.
But every hardware product that transact will be redesigned by the end of this year. So we can get on the new platform.
And we can be in the high production area.
Okay, Great and then I wanted to ask you about the two large restaurant.
Organizations within the pipeline that could be an additional 8500 terminals.
Yeah that would exceed your guidance of 65 under 7500 for the year and I would imagine that as we progressed throughout 2022, you're going to see other large restaurant organizations look to.
Move forward.
At a faster pace than they are currently.
Wondering if you could kind of help shape the perspective, maybe give some you know.
Some observations over the last three or four or five months in terms of any shift.
And mentality I know you talked about the issues of the labor shortages and the things that they're focusing on having to put the attention to whereas technology.
Implementations or evaluations are still on hold somewhat but just curious if you could if you could comment with respect to the 8500 and the two opportunity pipeline.
And then relative to any any shift in sentiment or or.
Engagement level from the larger restaurant organizations.
Yeah. So great question again, Jeff. Thank you so.
If I kind of break it up.
If a restaurant like this one that we just got the commitment for.
What do they saw the need for technology not only for the back of the house, but to help drive demand for their product their marketing messages and things like that.
They've got to get away from the old technology, that's out there that they can't do it with like our 9700 and some of the older terminals out there.
So they are driven to you know to use the latest technology.
And most of the applications that we're working on it's being driven by the need for labeling.
Some of the restaurants, where you talked to them about labor savings and you've got this inflation going on.
If they don't have a real need to go do what right now such as the one customer that we just won where they wanted to do this labeling on their grab and go items. They put everything on hold they're there you know we're getting emails we apologize we're still going to test it but we got to get through the labor issue, we got to get through our our our food shortly.
Issues, we got to get through the inflation issues and we understand that right.
Uh huh.
And through our own parts issues. So we understand that so where there is a real need for the technology, that's being driven forward and so when you combine that in a certain part of the restaurant market. That's doing that and then you look at the convenience store market, where each one is looking at fresh food initiatives and in the need of being.
Able to print the right nutritional information and grab them don't want information, that's what's driving our business forward right now.
If you looked at the standard restaurant business, where we can go in and do timers, and and and and and temperature checking and temperature sensing and all that.
If they don't have a real need right now to accomplish something other than Hey, you know what we can save labor. We can help you automate we can help you streamline the operation they look at us and go but I don't know.
I can't get labor in where every time I bring somebody and I got to pay a dollar or two more and we're just juggling that so where we see the need for the technology a real need right now that's where we're hunting, that's where we're going because they need our technology.
So you know while we have this to other opportunities in the restaurant market. We have many opportunities in the convenience store market too. So we've just got to manage through that we've got to manage through their expectations. We got to manage through their trials and evaluations and also you know not not scare them about this about the technology.
You know when the chip issue, but work with them closely to say you know if you want to roll this out at a certain time, let's make sure that we're in tune to that so that we can provide you the technology. While we're also supporting our existing customers. We heard from one of our customers that they might buy another 200 terminals. So we got to make sure that we're on top of all that.
I actually meet with the sales team every week Monday mornings, we go over it we go where the demand.
And making sure that we.
Effectively let Steve and his operations team, though what we're seeing.
Very helpful. Thanks, part of the potency in the next week.
Yeah, Yeah, Hey, light and color.
Fabulous, that's all right well I don't know about that it's about time.
Yeah.
And as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
We'll go to Chris Sakai of singular research.
Hi, good afternoon.
I had a couple of questions.
With recent inflation.
Have you guys increased your label pricing for both of our customers.
Oh, Yeah, Chris across the board, we are implementing our second price increase.
And one of the things that we're doing to help our customers.
Nobody likes.
D going up so what we're doing is we actually split on certain products.
We split the price increase into two parts one is to help us pay for the airfreight and that doesn't go to their PPV and one for the inflation that we're experiencing so we're actually helping our customers so that look.
One of our customers shared with us the inflation that they are facing it is just amazing to see the millions and millions of dollars that they're facing in regards to inflation were nothing compared to some of the other stuff that they are facing.
But we're right where we were pushing through our second price increase in problem, Steve what four months I think we did the last one September October .
Yep.
Yeah, So we're pushing through our second.
I've been I've been CEO of this company for quite a while and all we did was lower our prices or hold our prices, we never had to raise prices before this is.
No. It's it's it's not fun to have to do but I got to tell you when you talk to the customers and share with them.
We're very open we're very we're very transparent with them with what's going on they go we understand we're seeing it across the board we expected you to raise our prices.
Okay.
Great well thanks for that.
I was just wondering if can you.
Shed some light on the ARPA for both of our units in the fourth quarter.
And what do you think that'll be for 2022.
I you know I still believe that our average revenue per unit is going to be between $1200 every project that we work on.
It's right around there in the fourth quarter as I said, we we took a credit to help are.
Overseas customer, who haven't used the term a little year, they've been shut down and this customer is very important to us as they also buy our casino printer.
So the right thing for us to do was to help them out and in times like this you can build relationships when even you have to take a credit and give them back some money or give them credit you actually can help build on the relationship when you do something like that but there are two important customer for us.
For us to have said no. So it impacted our ARPA that's all it's okay.
Okay.
How many installations you guys believe you can achieve in 2010.
I think we said that.
6500 to 7500.
Right right Okay.
One thing I don't think our shareholders realize.
As we have almost 60000 terminals in the marketplace. Today now realize we were first into the restaurant market, where our food safety terminal well, let's call. It a bowl hot terminal.
We have 60000 terminals in the marketplace now are 9700 didn't come with recurring revenue and all that but there are out there right. They're working they're working every day at many restaurant companies.
This recent one that we that we won is we want it because they want to do more than just food safety labeling which drove them to our to our terminal we worked with them on solving that issue of being able to print out.
Our marketing label for them for grab and go but our shareholders should realize we have almost 60000 terminals in the marketplace today.
Okay, great. Thanks.
Operator.
Yes, we do.
Do have a question from a private investor Richard It sounds good.
Yes, Hi, Bart.
Hi, Bart just wanted to tell you how impressed I am how informative and transparent the call is I almost feel like.
I'm talking to.
Someone sitting next to me so.
Vance I'm, just a lowly shareholder for probably the past 10 years and I'm impressed with the detail on how the company.
Jukes and jobs to help its customers and you calling ceos to on behalf of <unk>.
Get chips and stuff like that and I'm also impressed with all the.
FCC filings I'm, saying about you know the board does.
By either buying more stock or granting stock option. So theres, obviously, oh face in the future, but what my question is is what is done being done for the shareholders.
The price of the stock is is my barometer as much as I'd like to be.
Be impressed by everything that's going on is.
I just feel that every call I listen to them.
It's sort of the same shareholders each telling the same story to the same people how do we broaden our Ohio PR company. Some company to help to help broaden tell this great story that you're telling today.
Yeah. Thank you. Thank you for the question when.
We did the two capital raises over the last year or so year and a half.
One one of our goals was to expand our shareholder base, which we believe we have.
It's been difficult.
In regards to you know we couldn't attend.
That's the conferences and things like that where I think we are.
Can tell a great story and meet face to face with the shareholder and explain what we're doing.
Thankfully, our rock will be our first I could not thank them enough for deciding to go live.
So the goal is to.
To drive this to the stock price up.
In all fairness, it's just been it's been headwind after headwind.
Launch restaurant technology in the middle of 2019, and wake up in March of 2020 with orders coming in to a massive pandemic that shut our business shut our customers down.
I like to say that had been in the casino market for probably 25 years and never sort of casino close before and we watched casinos around the world all closed per months.
But the big thing for US is to stay positive been focused which we are.
The tips.
Can you all came out of that came out of nowhere and Christmas weren't expecting it but you know you handed the cards you hand, it and we went to work and we worked all through the holidays to turn that around.
I think I think our strategy is spot on I think what we're doing for convenience stores is helping them out I think we got to close a couple more of the sales force knows that.
We're finally, starting to see restaurants open up their purse their pocketbook. This latest one is a good win for US I think we'll get a get a couple more and then we just got to focus on the business. We really do we got to focus on growing it and if you kind of go out a couple of years and start thinking about seven.
10000 terminals going out and hopefully more you start thinking about the recurring revenue when you get up to 30 40000 terminals out there you start talk about $30 million to $40 million recurring revenue. So we're very focused on that I'm very pleased to see the casino industry coming back.
Very profitable business for us.
And that also helps us.
And then clearly the surprise was our point of sale business you know as much as we're focused in the back of the house, we do have a front of the house business.
And you.
I do think it's going to it could it should double this year.
As long as we can continue to get the chips and so it's up to us to say to stay focused we do have an investor relations firm, probably the best on the street ICR could not be more happy with them.
Truthfully, they're just wonderful the best we've ever had they know that we've got to get the story out they they know that the challenges we've had the last two years and they've been very helpful.
Unfortunately, they at a conference in January that had to get canceled at the last minute I'm a crime set us back a lot you know in December January and February but.
You know I think ICR is just a wonderful firm and helping us out tremendously.
And it appears there are no further questions at this time I would now like to turn the call back over to Bart Sherman for any additional or closing remarks.
Thank you operator, and thank you shareholders for being on the call I do send my thoughts and prayers to the Ukraine like I said, we have an engineer out there and we just hope you're safe.
I also thank our shareholders for all your support and I. Thank our employees, who have just have gone through the ring over the last two years I do hope that some of you come out to rock, let's get together.
But let's shake hands again, let's see each other face to face again.
Let's talk about you know what we can do as a company, but let's just say a low to each other again, so hopefully you'll see a bunch of you out at Ross I. Thank you for listening on the call. We'll talk to you again. Thank you.
And this concludes today's call. Thank you for your participation you may now disconnect.
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