Q2 2022 TransAct Technologies Inc Earnings Call
[music].
Greetings and welcome to the transact technologies second quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
And please note that this conference is being recorded.
I'll now turn the conference over to Ryan Gardella Senior Vice President of Investor Relations. Thank you Sir you may begin.
Thank you John good.
Afternoon, and welcome to transact Technologies' second quarter 2022 earnings call and I will.
We will be discussing the results announced in our press release issued after market close joining us from the company is CEO , Bart Sheldon and President and CFO , Steve Demartino. Today's call will include a discussion of the company's key operating strategies progress on these initiatives and details on our second quarter financial results. We'll then open the call to participants for questions. As a reminder, this conference call contains forward.
Statements about future events and expectations, which are forward looking statements.
Statements on this call may be deemed as forward looking and actual results may differ materially for a full list of risks inherent to the business of the company, we spoke to the company's SEC filings, including its reports on Form 10-K, and 10-Q transact undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after the call.
Today's call and webcast will include non-GAAP financial measures led to a meeting of SEC regulation G. When required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website and with that I'd like to turn the call over to Bart.
Thank you Ryan and thank you to everyone joining us on the call today.
I'm incredibly pleased with our execution in the quarter and could not be prouder of how the transact team worked to navigate these difficult conditions.
All the challenging work certainly paid off thank you transact team you accomplished almost impossible and I'm. So proud of all that you have done.
Last quarter I spoke at length about the challenges that we were facing in the supply chain and we all know we were hardly alone in dealing with these problems.
I assembled the team comprised of engineering operations and purchasing tasked with finding more parts redesigning product where parts were aren't available, but other similar parts work.
And then building and delivering the printers to meet customer demand.
The team did an incredible job as you can tell from the topline, but we've only just begun.
Our production started to ramp up in May expanded in June and now in full motion in July and August we.
We delivered many thousands of printers in Q2, and we're able to satisfy demand in key markets, where our competition could not namely casino in P. O S automation.
And I'm pleased to tell our shareholders in the second half of the year.
We are on track to deliver near record numbers of printers to our customers' borrowing any unforeseen part tissues. We.
We are actively winning share in these markets. We are doing everything in our palette to ramp production, even more as the demand in the in the P. O S. Defino markets continue.
In addition, as I discussed last quarter, we raised prices and began to implement our cost reduction plan and expect to see is see these results of these savings in the current quarter Q3.
The early results have been encouraging and we believe this was the right move to streamline the organization.
The core of our savings was the result of suspending or new product development projects. During the time when we were all asking are we in a recession.
While we intend to move forward with that project sometime in the future. We believe now is the right time to move quickly on our cost control plan and drive towards adjusted EBITDA profitability.
This plan combined with the large sales level, we expect to achieve in the second half of 'twenty 'twenty. Two should result in transact moving towards adjusted EBITDA breakeven as we move through the year Steve.
Steve will clearly go over this in more detail in the financial section.
Now, let's turn to the markets.
In the casino and gaming market. Despite some fantastic work in a near record number of printers produced we continued to see demand outstripped supply.
Well our backlog continues to grow we're still hand to mouth on inventory as soon as we build we are shipping to our customer.
However, we still managed to produce a large number of printers in the second quarter and we plan to produce even more in the third and fourth quarters.
Protein near record levels of production and sales in our casino market again, barring any additional unseen supply issue.
Even with the additional production, we expect to sell out all of our printers as we've been able to take advantage of weakness in major supply issues at a direct competitor to pick up additional market share.
And as I had mentioned in our last call. Our first price increase went into effect in March and as such is now fully reflected in our second quarter results.
However, while certain sourcing many of our plants had been accomplished we still source some more parts for the remainder remainder of 2022 against some at higher costs.
Therefore to meet the demand we will.
Therefore to meet these demands we will be instituting a second round of price increases in September .
Specifically on our casino and gaming products.
Truly just like these price increases and our customers know we have rally raised our prices.
But the cost of parts to meet the elevated level of production requires another round of price increases.
We expect the second increase to be fully in effect starting in September with our fourth quarter results, reflecting the new pricing structure.
We're also thrilled that the team we put together was so successful and able to resolve the parts issues with our casino printers. The results in Q3, and Q4 should reflect their hard work.
And point of sale of automation, we continue to be dealing with similar dynamics with every printed we make being shipped out as soon as they are ready our team has been able to ramp production effectively and we will be achieving near record numbers of premier shift in revenue in the second half of 2022.
With our products being able to fill gaps that competitors have been unable to fill and thus picking up market share.
Our special project with Mcdonald's continues and we expect the back half of the year to see a significant pickup in the number of point of sale printers sold as we can effectively ramp production and deliver additional units.
Now, let's talk about the F S D market.
We saw solid results in F. S T underpinned by a return to a more normalized label sales cadence, which pushed our recurring revenue back over $2 million to 2.2 million.
We also saw a very robust demand for new hardware, which combined to result in total F. S. T cells, a $3.4 million a huge jump up sequentially and a solid increase year over year.
In the second quarter, we added 814, new paid terminals for a total of 10941 currently in the market.
While this number was slightly below our expectations for the quarter. We are optimistic about the back half of the year as our sales team now led by a new sales executive who has deep experience with selling enterprise software products is fully built out and I could not be happier with their progress they are making.
While we did reduce expenses in various parts of transact. This year as I previously stated on the other hand, we added more salespeople to our F. S T team.
Our overall cost structure will be lower and I am pleased to say, we now have a full complement of salespeople across all the different verticals in the F. S. T markets we serve.
Our pipeline is as robust as ever and we are seeing great traction with several new brands testing are both hot products.
Some of the most recognizable brands in the World are currently being counted among our pipeline, which as a reminder is fully vetted and does not include anyone kicking the tires.
We still have more selling to do but our pipeline has really grown since doing the NRA supermarket and C store tradeshows.
Many of these potential customers a nationwide chains with units in the hundreds if not or if not thousands.
Whoever timing can be uncertain as well as initial order sizes and rollout strategy.
With this in mind, it's probably best to take down the guidance of how many new bolthouse terminals and workstation, we will add this year.
Though our sales pipeline is more robust than at the start of the year and there is a chance that we can make up make our original guidance due to the difficult first quarter of 2022. It is best that we speak about a lower number.
Therefore, we have decided to take the number of new placements to 4500 to 5500.
For 2022.
However, we are maintaining our <unk> guidance for the year at $8 million to $10 million.
I also briefly wanted to mention that in July we put out a press release announcing our first ever Bohai enterprise license sale.
This software win is a five year 300 terminal.
And software license deal and represents a crucial step in the lifecycle of boho and represents the type of deal we will be actively pursuing in the future as we continue our evolution into a SaaS based software solution provider.
We sold the software enterprise license with a customer green to buy the license for 300 locations.
All upfront.
This gives us this gives us the confidence in our SaaS potential revenue going forward.
Lastly, I wanted to discuss our ARPA or average revenue per unit for the quarter, which came in at $861 versus 638 sequentially.
The rebound in label sales helped bring our pud to a more normalized rate and as a reminder, our target continues to be an ARP who are between 1000 $1200.
For the remainder of the year, we would expect our pud to hover near its current levels.
But please remember we are selling bolthouse terminals to replace our old Ackee date 97, hundreds that are sold without any recurring revenue. These units are included in our RPI calculation.
In closing I want to recap what I believe are the most important takeaways from the quarter.
One we are seeing tremendous success in navigating the exceedingly difficult supply chain issues.
With the second quarter of 2022 while the second quarter 'twenty 'twenty. Two was good we expect to deliver many more printers and the remaining two quarters of 2022.
And we still expect to sell about every single unit we can produce.
Two our FSD sales team is now fully built out and we're seeing a lot of momentum build in our pipeline.
Three our cost reduction plan has seen excellent early results and was fully implemented in the third quarter and in the fourth quarter, we will see the full effect.
In addition, the price increases flowing through and helped to offset the increase in supply chain costs, we have experienced.
Four altogether, we now expect to be moving towards adjusted EBITDA breakeven by the end of 2022.
I want to thank the entire team at transact for their tireless effort. This was quite an effort.
You never gave up.
The results have been outstanding.
And I want to thank you and I want to thank our shareholders for their support and for your time here today.
Now I will pass the call over to Steve for more detailed review of the numbers Steve.
Thanks, Mark and thanks, everyone for joining us.
Before I start I want to mention that all of our results for the prior periods that we will be discussing today are on an as adjusted basis, taking into account the retrospective application of the change in accounting method, we made on April 1st.
I'll talk more about the accounting method change a bit later.
Now, let's turn to our second quarter 'twenty two results in more detail.
Total net sales for the second quarter were $12 6 million up 35% from $9 3 million in the second quarter of 'twenty one.
Sales from our foodservice technology market or F. S. T were up 12% to $3 4 million compared to the second quarter of 'twenty one.
FSD hardware sales increased by 24% to $1 3 million from 1 million a year ago.
We added 814 paid terminals during the quarter and finish with a total of 10941 in the market.
Our recurring F. S T cells, which include software and service subscriptions as well as consumable label sales were $2 2 million, which was up 5% from $2 1 million in the prior year period and up 39% sequentially.
This improvement was due to a more normalized cadence of label sales as well as additional software deployments in the quarter.
Our RFP for the second quarter 'twenty, two is $861 up from 638 in the first quarter 'twenty two there.
The recovery in <unk> was due directly to the return of higher F. S. T recurring revenue, which as I just mentioned had experienced a more normalized run rate during the quarter.
Our casino and gaming sales were $6 5 million up 88% from the second quarter of 'twenty one.
We're seeing a very strong resurgence of international demand as those gambling floors continue to come back online with total sales up over 150% for the quarter.
Domestic sales also saw robust demand with revenue up over 60% there as well.
As Bart mentioned, we're continuing to see demand outstrip supply.
Although we saw our manufacturing throughput improved greatly this quarter, which allowed us to deliver more printers than in the first quarter.
Additionally, in the 2022 second quarter, we experienced a full effects from our first price increase which generated a higher total revenue number and allowed us to absorb the cost increases we've incurred.
Our engineering and operations teams did a phenomenal job of finding alternative parts sourcing and in some cases designing around parts entirely.
As we experienced some improvement in supply chain conditions, we're expecting to make a higher number of printed deliveries in the back half of the year.
As a reminder, we experienced the second wave of product cost increases and our second price increase will not go into effect until early September . So we expect somewhat lower gross margins in the third quarter an improvement in the fourth quarter when the second price increase takes full effect.
P O S automation sales were down 7% from the prior year period to $1 2 million.
While we could have shipped many more printers based on the backlog of orders for both a special project in Mcdonalds and their regular business. Unfortunately supply chain issues limited our sales in the quarter.
We expect production and therefore sales in this market to increase significantly in the second half of the second half of the year.
Yeah.
Moving now to transact services group our T. S. G sales overall T. S. T cells were up 6% to $1 5 million.
This increase was largely due to an increase in domestic spare parts and accessories to legacy lottery and tos customers.
Moving down the income statement, our second quarter gross margin was 43% as compared to 36, 8% in the prior year period.
Gross margin was positively impacted by higher sales, especially in the casino and gaming market as well as the implementation of our first across the board price hike, which went into effect at the end of the first quarter 'twenty two.
Our operating expenses for the second quarter increased $2 $3 million or 38% to $8 4 million when compared to the second quarter of 'twenty one.
Breaking this down our engineering and R&D expenses increased 20% to $2 2 million largely due to investments spending on R&D for Baja including the hiring of additional software developers for continued bahar development projects as well as higher costs related to design again alternatives electric electronic components for existing hardware.
Our selling and marketing expenses increased 86% to $3 3 million, mostly due to additional investment spending related to Baja including marketing studies enhanced marketing programs and additional support staff around our Baja offering.
Additionally, we saw higher trade show and travel expenses as these returned to pre COVID-19 levels.
Lastly, our G&A expenses increased 17% to $2 9 million.
This increase was due to increased salaries across the board in response to wage inflation higher professional fees and depreciation and other expenses related to the implementation of the Companys New ERP system in April 22.
These increases were partially offset by a reduction in incentive compensation expense.
We incurred an operating loss of $3 million or 23, 4% of net sales in the second quarter 'twenty, two which compares to an operating loss of $2 6 million or 28, 4% net sales in the second quarter 'twenty two.
Sorry, 'twenty one.
On the bottom line, we recorded a net loss of $2 4 million or 24 cents per diluted share in the second quarter of 'twenty, two compared to a net loss of $2 million or 23 cents in the year ago period.
Adjusted EBITDA for the second quarter of 'twenty, two was negative $2 5 million, which compares to negative $2 1 million in a year ago period.
Another thing I'd like to mention is that we successfully amended our credit facility with C&I lending group in July .
The amendment extended the term of our existing $10 million credit facility, which is subject to a borrowing base for an additional two years through March of 'twenty five.
It also requires us to maintain a minimum outstanding borrowings of 2.25 million during the term.
As Bart mentioned, we completed the implementation of our cost cutting measures during the third quarter and expect to see the beginning affected these expense reductions in the third quarter and full effect in the fourth quarter results.
We expect this cost reduction plan combined with higher sales to result in lower cash burn as we expect to move towards adjusted EBITDA breakeven as we approached twenty-three.
As a result of this combined with our novel extended C&I credit facility, we expect to have enough liquidity for at least the next 12 months.
And finally I wanted to discuss the reason for the delay with our earnings call and the filing of our Form 10-Q.
As mentioned in our press release and on previous earnings calls on April 1st 22, we implemented our new ERP system, which was necessary as we move towards a business model with a greater focus on software sales.
One change we made as we adopted the new ERP system was to change the accounting method, we use to measure the value of inventory from standard cost to average cost.
We made this change because the average cost method reflects a better measure measurement estimate of inventory cost as we know procure fully built finished printers, while it rather than manufacturer.
Average cost also aligns better with our go forward business model and simplifies our business.
Unfortunately, as we close this quarter, we were delayed by the work required to retroactively apply the accounting change for all periods for which financial information as presented in our 10-Q.
We are now through this process and expect to file file our 10-Q within the permitted five day extension.
And with that I'd like to turn the call back to Bart for any closing remarks. Thanks, Steve has always well done very thorough.
It was just a great I just got a tie it was just a great quarter and so proud of everybody of what we were able to complete that.
We live on a new ERP system the team getting all the parts getting back into full production and now really ramped up.
Operator with that I will we'll take some questions. Please.
Thank you Sir at this time, we'll be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that Youre line is in the queue. You May press star two if you would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, while we poll for questions.
Our first question comes from the line of George Sutton with Craig Hallum. Please proceed with your question.
Thank you Bart nice job. So I wondered if you could just walk through the delta or the 2000.
Placement Delta from what you expected prior and what Youre, suggesting now and could we break them down into <unk>.
What those might have come relative to sales changes, you've made or 711 cadence or supply chain. If you could just kind of break those down I think that'd be helpful.
Yeah, George Thank you.
No supply chain issues with our FSP business. That's why we really don't do we don't address it anything around supply chain issues would have S. T. Because we've got the inventory. So we've had no supply chain issues would F. S. T. You know the first quarter was just an anomaly George and it was so low.
Making up.
What we thought we were able to do through the year is can be a little difficult.
What I can say George is the pipeline is.
As big as I've ever seen at transact right now our goal.
As we came through the pandemic George we really only had a couple of markets open to US we had the convenience store truck stop and food.
Food service management company opportunities in front of us. So we really focused our sales team there, but we didn't have as many as we have now as we started getting through 2021 and into 2022 we realized that the restaurant market would open up so we went and hired our new head of sales who can.
And with enterprise experience and spent the last six months just hiring people and we've got a full complement of salespeople across all the different segments or all the different verticals that we serve quick serve fine dining cash will convenience store we've added another person.
So it's just going to take them a little time to ramp up. We also have a couple of projects, where we did believe they would rollout all the terminals. These are new projects. This year and in some cases, we got one in particular, where we thought it was going to be 600, they will buy 600, but they're only going to rollout 100, this year and that just has.
To do with rollout schedules George all I care about right now is what we call net new names is closing new accounts.
We have another deal that we worked on where again it was like 500 units. They wanted to start with 50, we said fine, let's just get the order and get it going so it's just a matter of ramping it up the I do just had a review today with our sales manager in regards to the opportunities.
It wouldn't surprise me, if we get back to that number this year, but I think it's just prudent that we lowered the number just because of the difficult first quarter that we had and just some of the rollouts are not well they've agreed to do at all they're only doing some this year.
Got you know relative to the supply chain. There was a suggestion of perhaps reengineering products can you just give us some perspective of as you brought these different teams together to try to move more quickly you can just give us. Some examples of what you feel was accomplished there.
Oh, Yeah, Oh, well first I'd like to thank our chip supplier.
Who work hand in hand with us so.
If you look at one of our products I won't tell you where it goes but we will have we started with one design they were able to get us like processors, they're not the same processor and we're able to get us.
Enough to get us through most of this year, we had a redesigned the product for that ship, which means we changed the firm where if you look at how the printer works we connect to another system that is pretty much done. It's what's below that that we have to do we got a new chip we have to program it to turn.
On the motors turnover sensors moved that paper print on that paper every time, you have a different ship that <unk>.
Machine code language changes so with this one product we completed that redesign knowing we only going to have enough chips that this year and of course, our chip manufacturer told US we go to a certain line family of chips that that's the one that they can produce a lot of and by the end of the year.
Here, we will have redesigned it a second time for the next generation chip.
So this was a war room. This was operations engineering purchasing working hand in hand.
We had a motor driver, which we ran out of and went into the marketplace founded.
We had a we had a capacitor actually we couldnt find it had to go to a different capacitor, which changed the way we look at black Mark sensors at least the way we look at the sensor that turns on and often looks at the black Mark which tells US either went to print to when to stop the print.
So we had to open up the band of focal lengths that we could use the sensor to see the black Mark So while we had to get another capacity we had to take another capacitor out. This was ongoing ongoing the good news is our.
Our chip manufacturer has asked us and we've agreed and doing it right now to go to their latest design and we are in the process.
Every piece of hardware at transact will go to that family of chips everything gaming Casino food service, we've got a new product come in there and the existing product.
N P O S will all go on the same family and what we're designing is kind of a kind of an overall firm where base.
That will run the chip and then depending on the type of printer or types of hardware.
We will just add an extra piece of code to make it work for that specific product.
And that should all be completed by the end of the year.
That <expletive> that chip that we've gone to is in red or it isn't and vast supply we've already placed orders for the chips and one thing that you'll notice on our balance sheet is our inventory is up that's all the piece parts all the chips and all the electronics that we bought that we could get.
That's why we feel very comfortable about the ramp up in production and how it is going to continue we're going to ship a boatload of printers in the third quarter and fourth quarter and we've got those products already at our contract manufacturer.
That's great detail on and very helpful. So lastly, you talked about May June July in terms of everything getting stronger with July the strongest of the three can you just give us a sense of of that dynamic.
Sure probably in one in one aspect will ship three times the amount of printers in the third quarter than we did in the second quarter.
And most of the printers for that product went out in June we shipped no product in April very little in May as we ramped up production. Once we got through all the Redesigns. It took us months to do the Redesigns and we've ramped up as we called it in May and then went into production in June .
In one in one aspect will triple production in the third quarter for that one product.
That's super Thank you.
You Gotta George Thank you.
As a reminder.
Minder, if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue and you May press star two if he would like to remove your question from the queue.
Our next question comes from the line of Jeff Martin with Roth Capital Partners. Please proceed with your question.
Great. Thank you Hi, Bart wanted to get an update on 711, and I know that they had placed a larger than usual order for Q2.
Did all of that ship as expected and how does your visibility for the balance of year with 711 and look at this point.
Visibility is good Jeff you know.
Some of it did go I think in the third quarter label sales continue to come in.
Actually theyre going to be one of our first customers to re up.
They're there.
There are three year ends in in the fall.
And we should be re upping with them. So you know I know a lot of people ask us about whether they call that the.
Whatever rate you know customers that come on and come off the system 711, being our largest and we should expect to.
<unk> signed another three year agreement with them. So theyre fine Theyre fine. We we are trying to figure out the Safeway deal, let's speedway deal not Safeway Speedway deal.
And see if they're going to be rolling out.
You know the fresh food program.
At Speedway, you know I I can say.
<unk> talked to our sales manager on that account and we are hearing that the fresh food program has been a real winner for them and it wouldn't surprise him if they expand the program.
Okay, that's great to hear.
I'm wondering if you could give us a little bit of insight into the average size deals within the pipeline you had mentioned.
Couple of times that it says as big or bigger than it's been to date are.
Are you seeing.
Larger potential deals on average are you seeing some mega deals in that pipeline, there's some relative perspective, but that would be real helpful.
Yeah. So we went with.
Today, just happens to be my every other week I I review in detail.
The projects, we've got everybody on sales force now so we had it before but now everybody is using it.
I mean truthfully, Jeff the deals go from one to 20000.
And everything in between.
Okay, and what about you know pipeline progression, maybe you can speak to that I know it sounds like a fairly long and now you've added a lot of sales resources recently.
Recently at the restaurant trade show and that generated a lot of leads but how are we looking in terms of pipeline progression you know how many are or is there anything.
Near term that could you know.
Really.
<unk> 'twenty 'twenty three to be kind of a breakout here on the Bora terminal installation, maybe you just give us some perspective, so that could so we could think about how to model out next year.
Yeah.
[laughter] I think that's what Steve wants to know for me.
So.
Well.
We've got we've got some some good size opportunities some are in the 600.
2500 4000 range.
You know progressing through the trials and all that so.
You know I think 2023 has a great chance of being a lot bigger.
Deneb than any any year, we've ever done.
The opportunity list that I looked at for the third and fourth quarter of this year are way bigger than numbers that I gave you.
But I'm uncomfortable because we're still going through the trials and the conversations I want to be conservative in my approach I want to give the sales team an opportunity to do their work.
And close those orders.
I got to be honest with you Jeff I've never been this excited because we've got a we've got a whole team of people on our staff now they come from Oracle and other big companies that are very impressive and very impressive in their approach to sales and in fact, we were we had a conference.
Today, and an opportunity and they asked me to write a letter in their behalf to somebody I know what at the restaurant company and they took me through their logic and all that I was just totally impressed with how they're navigating through the customer.
You know it's.
We needed to get to this point Jeff.
It's very easy to forget what 'twenty, 2020, one where like when all of our customers in the restaurant market will close the non interested in talking to us.
But there are open again, we've got a full staff of people again.
Theyre going after that restaurant market, we've even add people in the foodservice management, we've added some people or one person into a convenience store because that's been so busy for us.
The opportunities are there.
How big how much has that grown I could use the word tremendously when you have this many people on the road.
Versus what we had before as you know we had over 200 leads at NRA all turning into.
Into opportunities, we went to the supermarket show and ran into somebody a couple of customers that are much larger than the foodservice management companies. We have today, so that alone would grow that business tremendously and then there was a special convenience store show, we went to what we picked up a bunch of leads so.
You know, it's it's we got to do our work now Jeff We've got a we got a hunker down get the work done we've got the product we've got the technology.
Got the sales team, we got the backup team that does a lot of the technical work and getting them on boarded.
When I look at some of the opportunities that we're closing and how long it takes even after we close to get them on yes, we shipped we put online 800 terminals, but we sold more in the quarter.
But it just takes time to get them online. So you know we just got to go through the sales process.
Great and then last question is yes.
It ticked down the Baja terminals number for the year you maintain the recurring revenue and annual recurring revenue component.
What bridges the delta there or is it higher than anticipated label sales relative to last a forecast there or is there something else that's it.
No. That's great question, Jeff that's exactly right that some of the new accounts are.
Our.
A higher volume of labels and software. So you look at the one the enterprise deal.
That was all software that's predictable right. That's that we know exactly what we're gonna be building every month.
We do have one customer that's.
At a higher rate of labels than some of the others.
So.
We look we kind of we know using sales force can put in exactly how many cases of labels will they use and try to from their calculate what what that recurring revenue is going to be look at the cadence. We now report that goes back to the beginning of 2021. So we can now look.
Cadence of purchasing by our larger customers and ask if it drops off why and find out what's going on.
But we've also added a lot more customers. So those customers are coming into the you know every time, we add a customer that's going to add more recurring revenue. So we feel comfortable at the eight to 10.
Very good thanks, so much.
You got it.
And our next question comes from the line of Eric <unk> from Grand Slam. Please proceed with your question.
Hey, Bob how are you doing.
Good Erik how are you.
Very well congratulations on getting everything moving in the right direction.
Thank you. So my question really relates to.
All the the increase that we're seeing in labor cost.
Especially in the restaurant industry and everybody seems to be short handed.
Is that creating a greater sense of urgency at these restaurant companies for more technology and for both of them in particular.
Yes, I think you've got a couple of dynamics there there's no doubt that the labor shortage has driven them to look at ways to streamline their business and clearly you know whether it's the front of the house the middle of the ounce of the back of the house, that's where they're looking.
So that yes.
I also think that during the slowdown or euro.
The restaurants.
Not being able to be open or 25 or 50% open. They were really focused on the front of the house and I've said it over and over again, it's not like they abandoned our idea of how to streamline the back of the house, but if they didn't have online ordering.
And Matt maybe needed a ghost kitchen.
Needed ways for people to order online pickup delivery, if they didn't have that they had to get that right.
We could put all the equipment and all the technology in the back of the house, but if you've got no revenue what are you going to how are you going to pay your bills.
We're through most of that I mean, youre seeing that in some of the earnings lately right. Although you know didn't have such good earnings right. I mean, you know a lot of the work in the front of the house has been done.
It was a rush to get the technology now of course, the looking at our technology because now that people are back in we're through we're through all this shutdowns and all of that and now theyre, having to run the restaurant and they've got.
They've got food shortage issues they got.
Our wage inflation, they got cost inflation food inflation, if we if we can save them three or 4% on waste that's huge.
So clearly clearly Eric.
The pendulum has finally swung it was going to take time I kept saying it on our calls is just going to take time for restaurants to get away from the focus of the front of the house, which they had to do.
And now Theyre going to the back of the house. So it's it's all of it it's all of it Eric.
Great. Thank you very much.
You got it.
Thank you at this time, we have reached the end of the question and answer session and I will now turn the call back over to Bart for any closing remarks.
Okay.
Look it's a minor miracle, we got accomplished in the second quarter, but I just cannot say it over and over again I could not be more pleased with the team here at transact. They they did the work they they hunker down.
And got us to this point.
I really appreciate the support we've received from the shareholders. During this time.
I don't think any of US created a pandemic nor did any of us want a pandemic week, we launched our <unk> technology in 2019 to a great response, and then got shut down by a pandemic in 'twenty 2020 'twenty, one and through the beginning of 2022, but here we are.
We're growing again.
<unk> got our production up we've been able to get through this.
This massive supply chain problem.
And we've got a full sales team out there representing you representing us in that market to grow bolthouse. So I look forward to our next call I really appreciate all the support that the shareholders have given us through what was a really difficult time and now I kind of look forward to better times for.
The company and better times for you as shareholders.
For your time and thanks for your support.
Thank you everyone. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great rest of that.
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