Q1 2024 TransAct Technologies Inc Earnings Call

Speaker Change: [music].

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the TransAct Technologies first quarter of 2024 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the poll presentation. If anyone should require operator assistance during the conference, Please press start zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Ryan Gardella of Investor Relations. You may begin.

Good day, ladies and gentlemen, and won't come to the transact technologies as co chair of 'twenty 'twenty four earnings call.

At this time, all English learning mode.

A question and observation will follow the total presentation.

Speaker Change: If anyone should require operator assistance during the country piece.

Speaker Change: Please press star zero on your telephone keypad.

Speaker Change: Please note this countries is being recorded.

Speaker Change: I'll now turn the conference attitude, Ron could you that I've been visiting many Stratton you may begin.

Ryan Gardella: Welcome to TransAct Technology's first quarter 2024 earnings call. Today we'll be discussing the results announced in our press release issued before the market opened. Joining us from the company are CEO John Dillon, President, and CFO Steve DeMartino. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives, and details on our first quarter financial results. We'll then open the call to participants for questions.

Ron: Welcome to transact technologies first quarter 2024 earnings call today, we'll be discussing the results announced in press release issued before market open joining us from the company is CEO, John <unk>, President and CFO, Steve Demartino. Today's call will include a discussion of the company's key operating strategies progress on those initiatives and details on our.

Ron: First quarter financial results.

Ron: All participants for questions as a reminder, this conference call contains statements.

Unknown Executive: As a reminder, this conference call contains statements about future events and expectations which are forward-looking in nature. The 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 and the company, please refer to the company's SEC filings, including its reports on Forms 10-10 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.

Ron: And expectations are forward looking in nature.

Ron: Call, maybe deemed as forward looking at actual results may differ materially.

Ron: Risks inherent to the business. Please refer to the company's SEC filings, including its reports on forms 10-K 10-Q.

Ron: <unk> undertakes no obligation to revise or update any forward statements to reflect events or circumstances.

Unknown Executive: Today's call and webcast may include non-GAAP financial measures within the meaning of SEC regulations. One required reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company website.

Ron: Today's call and webcast may include non-GAAP financial measures within the meaning of FCC regulation G.

Ron: The required reconciliation of all non-GAAP financial measures most directly comparable financial measures calculated presented in accordance with GAAP can be found todays press release as well as the company.

Speaker Change: And with that I'd like to turn it off.

Paul: Paul the job.

John M. Dillon: Thank you, Ryan. And good morning, everyone, or evening, as the case may be.

Paul: Thank you Ryan and good morning, everyone or evening as the case may be and thank you for joining us today.

John M. Dillon: And thank you for joining us today. At a high level, the quarter came in mostly as expected. Total sales were $10.7 million, which is down, as expected, by 52% year over year, mostly due to the dynamics that we discussed at the last call relative to casino and gaming. FST, that's food service technology, recurring revenue increased to 2.4 million versus a year ago. FST was a bit lighter than expected because two of the larger expected transactions slipped into Q2 and have been or will be closed shortly. In addition, we are seeing strong demand for our FST technology from our large QSR client worldwide. USA, North America, Europe, and even the Middle East and Africa are placing orders.

Paul: At a high level the quarter came in mostly as expected total sales were $10 7 million, which was down as expected at 52% year over year, mostly due to the dynamics that we discussed at the last call.

Paul: 50 casino and gaming.

Paul: S T that foodservice technology, our recurring revenue increased to $2 4 million.

Paul: Versus the year ago period.

Paul: S T was a bit lighter than expected because two of the larger expected transactions slipped into Q2 that have been or will be closed shortly.

Paul: Further we are seeing strong demand for our athletes T technology from our large <unk> clients worldwide.

Paul: USA North America, Europe, and even in Middle East and Africa are placing orders.

John M. Dillon: On a less positive note, one of our large clients, a convenience store client, is moving to a smartphone application deployment model, single smartphone, and it will replace a considerable amount of our label sales revenue from the ARPU calculation. And while we enjoy the revenue from label sales, it's not an important revenue stream for us. Nonetheless, it will impact our numbers going forward. Before we go any deeper into the financials, I wanted to take a step back and talk a little bit about TransAct as a business and discuss where we stand today as well as what we have in store for the future. It's been just barely over a year since I took over as chief executive officer.

Paul: On a less positive note one of our large.

Paul: Clients can vineyard store client is moving to a smartphone application deployment model single smartphone and it will replace a considerable amount of our label sales revenue from the Arpus calculations.

Paul: And while we enjoy the revenue from label sales, it's not an important revenue stream for us Nonetheless, it will impact our numbers going forward.

John M. Dillon: And since then, I believe we've made considerable progress operationally by refocusing and retraining a new sales team, cutting expenses and spending, rolling out and winning important approvals for our new Baja T2 product, and introducing a couple of new metrics for investors to help us track our progress. While I'm encouraged by what the team has accomplished so far, I want to spend some time talking today about the future for TransAct rather than the past.

Speaker Change: Before we go any deeper into the financials I wanted to take a step back and talk a little bit about transact.

Paul: Business and discuss where we stand today as well as what we have in store for the future.

Paul: It's been just barely over a year since I took over as chief Executive and since then I believe we've made considerable progress operationally by refocusing and retraining, our new sales team cutting expenses and spending.

Paul: Going out and winning important approvals for our new Bot T. Two product and introducing a couple of new metrics for investors to help us track our progress.

Paul: While encouraged by what the team has accomplished so far I want to spend some time talking.

Paul: Today about the future for transact rather than the past.

John M. Dillon: I think we have a great organization at TransAct. It has core strengths, fundamental goodness, and I believe there's still considerable room for us to explore untapped potential and better define ourselves as an agile industry-agnostic transaction validation platform that delivers tailored business solutions to our clients. And while more products like casino and gaming printers and our BOHA platform might appear as serving two very separate markets with disparate goals, the reality is that both are industry-based solutions that leverage both hardware and software to validate transactions in the moment at the point of occurrence.

Paul: I think we have a great organization that transact without of course drinks fundamental goodness and I believe there's still.

Paul: Considerable room for us to explore untapped potential and better define ourselves as an agile industry agnostic transaction validation platform that delivers tailored business solutions to our clients.

Paul: And while more products like casino and gaming printers in a bowl hot.

Paul: Platform might appear as serving two very separate markets with disparate goals. The reality is in both our industry based solutions that leverage both hardware and software to validate transactions in the moment at the point of occurrence for.

John M. Dillon: And for a number of reasons, casino and gaming and restaurants back of the house are at two different stages in their transaction validation life cycle. I mean, we recognize that for casinos, there will always be a need for transaction validation, even if many players eventually switch from paper to electronic forms of validation. We're also well positioned to do that.

Paul: For a number of reasons casino and gaming and restaurants back of the house are at different stages in their transaction validation lifecycle.

Paul: We recognize that but casinos there'll always be a need for transaction validation, even if many players eventually switch from paper to electronic form of validation.

Paul: We're also well positioned to do that.

Paul: I mean this is a question I get frequently and while we believe there will always be a place for paper receipts in gaming environments transact is moving with the market introducing cutting edge technology.

John M. Dillon: And while we believe there will always be a place for paper receipts in gaming environments, TransAct is moving with the market, introducing cutting-edge technology to clients and providing custom solutions such that Transaction Validation Capabilities are possible. For example, sports betting is now the fastest growing gaming segment at many casinos, which is why we introduced a purpose-built printer called the Epic 880. And soon, this will be replaced by the TR80, which is the next generation for this exact application.

Paul: Clients and providing custom solutions such that.

Paul: Many transaction validation capabilities are possible for example, sports betting is now the fastest growing gaming segment at many casinos, which is why we introduced a purpose built printer called the epic 880.

Paul: And soon this will be replaced by the T. R. A D which is the next generation for this exact application and working with our OEM clients to design and optimize printer for kiosks.

John M. Dillon: And working with our OAM clients to design an optimized printer for Kiosk. Competitor solutions typically involve hastily redesigned existing products, putting them into a position where they're either difficult to service, prone to error, hard to operate, or both. And on the BOHA side, an example we've talked about in the past few months has been our entry into assisted living communities, where our technology is used to monitor temperatures in refrigerators and freezers for controlled medicinals in their storage areas. Medication storage has not traditionally been a service we advertise, but that doesn't mean we aren't more than equipped to take it on.

Paul: Competitor solutions typically involve hastily redesign existing products.

Paul: Put it in a position where it's even difficult to service prone to error hard to operate a boat.

Paul: And on the Bolthouse side. An example, we've talked about in the past few months has been our entry into assisted living communities.

Paul: Where our technology is used to monitor temperatures in refrigerators and freezers for controlled medicinal and their storage areas and medication storage has not traditionally been.

Paul: We advertise but that doesn't mean, we aren't more than equipped to take it on we worked diligently with this client to ensure we could provide a custom solution utilizing the bolt platform to meet their unique particular requirements.

John M. Dillon: We worked diligently with this client to ensure we could provide a custom solution utilizing the BOHA platform to meet their unique particular requirements. I mean, FSP is simply one market that can be unified with our BOHA platform. And we believe we have the ability to enter other markets with the same solution as well. So these small steps towards entering new verticals and applying our technology to strengthen new ways and existing verticals are symbolic of all the opportunities there are for our services to grow and expand.

Paul: I mean F. S. T is simply one market that can be one with our bowl platform and we believe we have the ability to enter other markets with the same solution as well.

Paul: So these small steps towards entering new verticals in applying our technology strengths in new ways in existing verticals are symbolic of all the opportunity there is for our services to grow and expand.

John M. Dillon: We believe there are opportunities like these across a range of spaces, from places we've already been, like lottery and banking, to totally new white space opportunities that may not even know yet how they can benefit from our technology. As an example, and those of you who have been with us for a long time will remember, we used to have a substantial market segment back in the 2000s until about 2017 was our banking business. Specifically, if you recall, our bankjet inkjet printers were used at bank teller stations all over the United States.

Paul: We believe there are opportunities like these across a range of spaces from places we've already previously been like lottery in banking the totally new white space opportunities that may not even know yet they can benefit from our technology as.

Paul: As an example, and those who you have been with US for a long time remember we used to have such substantial market segment back in that two thousands up until about 2017 was their banking business, specifically, if you recall, our baked yet jet printers, we used at bank teller stations all over the United States. It was a great market for us.

John M. Dillon: It was a great market for us, but obviously, banking has changed. But the point is that we have been in many other vertical markets, and we do a good job of it. With updated products and a revised go-to-market strategy, we believe there's a lot of possibilities here for TransAct. After all, TransAct is a company with a legacy of design wins in multiple verticals, spanning multiple decades. And that ability has not disappeared. We still have those roots. It's part of our DNA.

Paul: But obviously banking has changed.

Paul: The point is is that we have been in many other vertical markets and we do a good job of it.

Paul: With updated products and our revised go to market strategy, we believe theres a lot of possibilities here for us.

Paul: After all transact with a company with a legacy of design wins in multiple vertical spanning multiple decades and that ability has not disappeared. We add those routes. It's part of our DNA and I think we have the opportunity to find more and new ways to win in different markets at the meeting transaction validation and verification platform.

John M. Dillon: And I think we have the opportunity to find more and new ways to win in different markets as a leading transaction validation and verification platform. We've already identified a few opportunities to explore. Don't worry; we're staying very focused on the markets we're serving today. But the opportunities are exciting in these adjacent markets. For our technology, in the long term, we believe that we can apply ourselves to a wider array of industries.

Paul: We've already identified a few opportunities to explore don't worry we're staying very focused on the markets. We're serving today, but the opportunity is exciting in these adjacent markets for our technology in the long term, we believe that we can.

Paul: Apply ourselves to a wider array of industries.

John M. Dillon: Having said that, let me move on to some key points from the quarter, and then I'll pass it back to Steve for a more detailed review of the financials. On the FST side, or Food Service Technology, we saw revenues of $3.3 million, down about 5% year-over-year, with recurring revenues of $2.4 million, which was up about 3% year-over-year. We delivered 901 BOHA terminals, resulting in 856 new installations, and we ended the quarter with 15,370 online terminals in service. As the initial cohort, our Boa terminal install base begins to hit contract renewals. We do experience a minimum amount of churn in the quarter.

Paul: So having said that let me move on to some key points from the quarter and then I'll pass it back to Steve for a more detailed review of the financials on the FSP side, our foodservice technology. He saw revenues of $3 3 million.

Steven A. DeMartino: Down about 5% year over year with recurring revenues of $2 4 million, which was up about 3% year over year. We delivered 901 bought terminals, resulting in 856 net new installations and we ended the quarter with 15370 online terminals in service.

Steven A. DeMartino: As the initial cohort.

Steven A. DeMartino: Boy I terminal installed base begins to hit contract renewals, we do experience a minimum amount of churn in the quarter. We don't report that yet because it's too early to get you know significant metrics, that's something that I expect to report in the future, but that's the difference between the terminals, we sell and then the net new installation. So sometimes we lose a few terminals if somebody goes out of business.

John M. Dillon: We don't report that yet because it's too early to get, you know, significant metrics, but it's something that I expect to report in the future. But that's the difference between the terminals we sell and then the net new installation. So sometimes we'll lose a few terminals if somebody goes out of business or whatever, and that's an important metric that, eventually, as we get better statistics, we'll probably begin to report. Our T2 product continues to be well-received by customers and prospects as well, and I believe this new product will be crucial to our growth going forward.

Steven A. DeMartino: Or whatever and that's an important metric that eventually as we get better statistics will probably begin to report our.

Steven A. DeMartino: Our T. Two product continues to be well received by customers and prospects as well and I believe this new product will be crucial to our growth going forward. However, as I've mentioned in the past, we expect progress to be lumpy quarter to quarter, where small business and these are big purchases typically when a business or a company that's going to become a client has to change or processing.

John M. Dillon: However, as I mentioned in the past, we expect progress to be lumpy quarter to quarter. We're a small business, and these are big purchases typically when a business or a company that's going to become a client has to change a process in the back of the house. So we expect it to be lumpy.

Steven A. DeMartino: The back of the house. So we expect it to be lumpy, we expect rollouts to be somewhat inconsistent, but we have a lot of optimism for the future here.

John M. Dillon: We expect rollouts to be somewhat inconsistent, but we have a lot of optimism for the future here. The new FST pipeline growth metric, which measures the quarter-over-quarter difference in our four-quarter looking forward pipeline, grew about 4% quarter-over-quarter. So it's going in the right direction. We scrub it carefully.

Steven A. DeMartino: The new FSB pipeline growth metric, which measures the quarter over quarter difference in our four quarter.

Steven A. DeMartino: Looking forward pipeline that grew about 4% quarter over quarter. So it's going in the right direction, we scrub it carefully and we're paying a lot of close attention to what's in the pipeline and as I pointed out earlier, we've added eight new customers.

John M. Dillon: We're paying a lot of close attention to what's in the pipeline, and as I pointed out earlier, we've added eight new customers in the last quarter with the potential to purchase as many as 10,000 terminals or more over the next 12 to 24 months. And that's adding to the 12 new customers that we added in the prior quarter. Next, I want to provide an update on the status of 7-Eleven. Occasionally, some of you ask me about it.

Steven A. DeMartino: Last quarter with the potential to purchase as many as 10000 terminals or more over the next 12 to 24 months.

Steven A. DeMartino: And that's adding to the 12, new customers that we added in the prior quarter.

John M. Dillon: In April, 7-Eleven Corporation informed us that they would be moving to a new system and moving off the Bohai Terminal. In the first generation, we'd obviously hope that we would sell them the terminal. This loss was due to a cost-cutting project where virtually all of their in-store applications are going to be run on a single cell. These applications include point of sale; they're replacing their point of sale system, their inventory system, waste management, ordering, and all the other back of the house front of the house applications that they operate in a single store.

Steven A. DeMartino: Next I want to provide an update on the status of 711 occasionally some of you asked me about it.

John M. Dillon: They're all going to be moved to this in-house system by the end of the second quarter of 2024. While this is a disappointing development, we wanted to note that BOHA was not specifically targeted. It had nothing to do with the decision to make at the executive level at headquarters, and we're not taking it personally, as it were. And it's not due to any problems with our product or services but rather a result of a long effort to create and institute their own technology. We really didn't have much of an opinion on this.

Steven A. DeMartino: In April 711 Corporation informed us that they would be moving to a net new system and moving off the Beaumont terminal.

Steven A. DeMartino: They are in the first generation, we had obviously I hope that we would sell them. The terminal to this loss was due to our cost cutting project, where virtually all of their in store applications are going to be run on a single cell phone.

Steven A. DeMartino: These applications include point.

Steven A. DeMartino: Point of sale.

Steven A. DeMartino: And your point of sale system their inventory system waste management ordering and all the other back of the house in front of the house applications that they operate in a single store.

Steven A. DeMartino: They're all going to be moved to this in our system by the end of the second quarter in 2024.

Speaker Change: While this is a disappointing development we wanted to note that both hot was not specifically targeted it had nothing to do with the decision to make at the executive level at headquarters and we're not taking it personally as it were and it's not due to any problems with our product or services, but rather was the result of a long effort to create an institute their own technology.

Steven A. DeMartino: We really didn't have much perspective on this we were somewhat unaware of this until the termination.

John M. Dillon: We were somewhat unaware of this until the termination. Their 7-Eleven's parent company, 7 and I Holdings, generates tens of billions of dollars in revenue and staffs hundreds of engineers, and even then, it allegedly took years to build and roll out this very specific one-off product that is customized specifically for a single-store 7-Eleven business. This development will impact approximately 5,400 terminals in our install base and will reduce recurring revenue at an annualized rate of approximately $3.6 million, largely from labeled sales, and this has been reflected in the updated guidance range that we're going to provide.

Steven A. DeMartino: They're seven elevens parent company, seven and I holdings generated tens of billions of dollars in revenue and staffs hundreds of engineers and even then allegedly took years to build and rollout. That's very specific one off product that is customized specifically for a single store 711 business.

Steven A. DeMartino: This development will impact approximately 5400 terminals and our install base and will reduce recurring revenue at an annualized rate of approximately $3 6 million largely label sales and this has been reflected in the updated guidance range that we're going to provide.

John M. Dillon: I also wanted to briefly mention our international QSR win that I have referenced in prior calls. The rollout has been an incredible success so far, and we have started receiving an increasing number of orders for locations around the world. We couldn't be more thrilled with the positive reception and believe this is an opportunity that could provide over 1,000 rollout terminal sales quarter over quarter over quarter. We believe the worldwide footprint we have already will expand even wider.

Steven A. DeMartino: I also wanted to briefly mention our international keyless our win that I have referenced in prior calls the rollout has been an incredible success. So far and we have started receiving an increasing number of orders for locations around the world.

Steven A. DeMartino: We couldnt be more thrilled with the positive reception and believe this is an opportunity that could provide over 1000 volt terminal sales quarter over quarter over quarter. We believe the worldwide footprint, we have already will expand even wider.

John M. Dillon: And then finally, moving on, I want to mention that we have a large sushi client that is converting from our original terminal to the new Baja Terminal 2, T2. We expect this will generate hundreds of additional sales of the T2 terminals over the next 12 to 18 months, most of them will probably occur in 2024. Moving on to casino and gaming, we reported revenue of 5.7 million for the quarter, which was down 64% from the prior year.

Steven A. DeMartino: And then finally moving on I want to mention that we have a large sushi clients that is converting from our original terminal to the new <unk> terminal two T to we expect this will generate hundreds of additional sales of the T. Two terminals over the next 12 to 18 months.

Steven A. DeMartino: Most of them will probably occur in 2024.

Steven A. DeMartino: Moving onto casino and gaming, we reported revenue of $5 7 million for the quarter that was down 64% from the prior year and we've been discussing the changing dynamics in this largely duopoly.

John M. Dillon: And we've been discussing the changing dynamics in this largely duopoly market for the past several quarters and wanted to update everyone on how we see it progressing. First, on the competitive side, we believe our main competitor has reentered the market, and we're seeing some of the pricing pressure we expected. As this occurs, we're taking appropriate steps needed to make sure that we retain as much of the captured market share as possible.

Steven A. DeMartino: Market for the past several quarters and wanted to update everyone on how we see it progressing.

Steven A. DeMartino: First on the competitive side, we believe our main competitor has reentered the market and we're seeing some of the pricing pressure. We expected as this occurs we're taking appropriate steps needed to make sure that we retain as much of the captured market share as possible.

John M. Dillon: Second, on the inventory side, we continue to hear from most of our OAM customers that they are still in an oversupply position, and we expect this to continue for at least the next quarter. This dynamic continues to be the larger reason for the sequential slowdown in sales. Previously, we expected the first quarter to be the peak of this oversupply, and now we believe that this will continue through at least the second quarter, with order pickup beginning in the third quarter and then going forward from there.

Steven A. DeMartino: Second on the inventory side, we continue to hear from most of our OEM customers that they are in an oversupply position still and we expect this to continue for at least the next quarter and this dynamic continues to be the largest reason for the sequential slowdown in sales previously we expected the first quarter to be the peak of this oversupply.

Steven A. DeMartino: But now we believe that this will continue through at least the second quarter with order pick up beginning in the third quarter and then going forward from there.

John M. Dillon: And finally, I wanted to provide an update on our financial outlook for 2024. Due to the changing dynamics around both FST and consumer gaming, we decided it was most prudent to adjust our financial guidance to ensure that investors have an accurate idea of where we believe our performance will be for the remainder of the year. We are currently estimating that our four-year revenues will be between $45 and $50 million, and adjusted EBITDA will be between a negative $2.5 million and negative $3.5 million.

Steven A. DeMartino: And finally I wanted to provide an update to our financial outlook for 2024 due to the changing dynamics around both the F. S T and casino and gaming we decided it's most prudent to adjust their financial guidance to ensure that investors have an accurate idea of where we believe our performance will be.

Steven A. DeMartino: For the remainder of the year.

John M. Dillon: We now are currently estimating that our full year revenues full year revenues will be between 45 and $50 million and adjusted EBITDA will be between a negative $2 5 million and negative $3 5 million.

John M. Dillon: I'm relentlessly optimistic about the future of TransAct and believe that we have the right products and the right people to win in our existing markets, as well as some new ones in the future. While I acknowledge a continuing need to execute, especially in the near term. It is also important, as ever, but I have complete confidence in the strength of the organization to perform. So those are my comments this morning. And now, I'd like to pass it over to Steve DeMartino for a more detailed review of the financials.

Steven A. DeMartino: I'm relentlessly optimistic about the future of transact and believe that we have the right products the right people to win in existing markets as well as some new ones in the future well like knowledge.

Steven A. DeMartino: A continuing need to execute especially in the near term. It is also important and as ever but I have complete confidence in the strength of the organization to perform.

Steven A. DeMartino: So those are my comments this morning, and now I'd like to pass it over to Steve Demartino for a more detailed review of the financials.

Steven A. DeMartino: Keith.

Steven A. DeMartino: And thanks everyone for joining us this morning. Let's turn to our first quarter 24 financial results and more. Total net sales for the first quarter were 10.7 million, which was down 52% compared to 22.3 million a year ago. Sales from our food service technology market, or FST, for the first quarter were $3.3 million, which was down 30% sequentially and also down 5% compared to $3.5 million in the prior year. Our recurring FST sales, which include software and service subscriptions, as well as consumable label sales, for the first quarter were $2.4 million, which was down 25% sequentially but up 3% compared to $2.3 million in the prior year.

Steven A. DeMartino: Thank you John.

Steven A. DeMartino: And thanks, everyone for joining us this morning.

Steven A. DeMartino: Let's turn to our first quarter 'twenty for financial results in more detail.

Steven A. DeMartino: Total net sales for the first quarter were $10 7 million, which was down 52% compared to $22 3 million in the year ago period.

Steven A. DeMartino: Sales from our foodservice technology market or F. S. T for the first quarter were $3 3 million, which was down 30% sequentially and also down 5% compared to $3 5 million in the prior year period.

Steven A. DeMartino: Our recurring FSD sales, which include software and service subscriptions as well as consumable label sales for the first quarter were $2 4 million, which was down 25% sequentially, but up 3% compared to $2 3 million in the prior year period.

Steven A. DeMartino: Our ARPU for the first quarter of 24 was $663, which was down 13% compared to $764 in the first quarter of 23. As a reminder, we're currently selling a number of BOHA terminals with no recurring revenue attached to them, to start. While this presents an opportunity to sell recurring elements in the future, for now, they represent a drag on our. In the first quarter, a large number of our terminals fell into this category, and we expect this to continue in the near future.

Steven A. DeMartino: Our RFP for the first quarter of 'twenty, four with $663 that was down 13% compared to $7 64 in the first quarter of 'twenty three.

Steven A. DeMartino: As a reminder, we're currently selling a number of bolthouse terminals with no recurring revenue attached to them to start.

Steven A. DeMartino: While this presents an opportunity to sell recurring elements in the future for now they represent a drag to our number.

Steven A. DeMartino: In the first quarter, a large number of our terminals fell into this category and we expect this to continue in the near future.

Steven A. DeMartino: We're working on ways to lift this number going forward, but we expect our ARPU to be in the $500 to $1,000 range for at least the rest of 24. Our casino and gaming sales were 5.7 million, which was down 64% from the first quarter of 23, primarily due to OEMs working down high levels of printer inventory that they stockpiled during the supply crisis earlier in 23 that is now E3. As John mentioned, we expect the dynamics we experienced during the first quarter to continue through at least the second quarter of this year and begin to improve in the back half of this year.

Steven A. DeMartino: We're working on ways to lift this number going forward, but we expect our RPM to be in the $510000 range for at least the rest of 'twenty four.

Steven A. DeMartino: Our casino and gaming sales were $5 7 million, which was down 64% from the first quarter of 'twenty three primarily due to Oems working down high levels of printing inventory that they stockpiled during the supply crisis, rather than 23 that is now east.

Steven A. DeMartino: As John mentioned, we expect the dynamics, we experienced during the first quarter to continue through at least the second quarter of 'twenty four and begin to improve in the back half of this year.

Steven A. DeMartino: POS automation sales for the first quarter decreased 64% from the prior year to $651,000. This decline was largely the result of difficult comps, as we experienced unusually high sales in 23 due to a competitor's inability to supply product. In addition, similar to the casino market, during Q1, our customers were finishing up working down unusually high levels of printing inventory they'd built up during the supply crisis in 23. We believe the competitors in the market are now fully back online, and we are taking the appropriate steps to maintain market share and ensure our products are in line with the new dynamics of the market. Moving to TransAct Services Group, or TSG.

Steven A. DeMartino: P O S automation sales for the first quarter decreased 64% from the prior year to 651000.

Steven A. DeMartino: This decline was largely the result of difficult comps as we experienced unusually high sales and 23 due to a competitor's inability to supply product.

Steven A. DeMartino: In addition, similar to the casino market during Q1, our customers were finishing up working down unusually high levels of printing inventory they've built up during the supply crisis in 'twenty three.

Steven A. DeMartino: We believe the competitors in the market are not fully back online and we're taking the appropriate steps to maintain market share and ensure our products are in line with the new dynamics of the marketplace.

Steven A. DeMartino: For the first quarter, TSG sales were down 14% year-over-year to $1 million. This decrease was largely due to unusually high sales of the legacy lottery spare parts in the prior year, which we don't expect to repeat at the same levels in 24. Moving down the income statement, our first quarter gross margin was a solid 52.6%, which was up sequentially from 48%, but down from 55% in the prior year. The sequential increase comes as a result of an improved sales mix and favorable overhead cost absorption, somewhat offset by lower overall sales. Going forward, we expect our gross margin for the remainder of the year to be in the mid to high 40%.

Steven A. DeMartino: Moving to transact services group our T S G.

Steven A. DeMartino: The first quarter test <unk> sales were down 14% year over year to $1 million.

Steven A. DeMartino: This decrease was largely due to unusually high sales of legacy lottery spare parts of the prior year, which we don't expect to repeat at the same levels in 'twenty four.

Steven A. DeMartino: Moving down the income statement, our first quarter gross margin was a solid 52, 6%, which was up sequentially from 48%, but down from 55% in the prior year period.

Steven A. DeMartino: The sequential increase comes as a result of an improved sales mix and favorable overhead cost absorption somewhat offset by lower lower overall sales volume.

Steven A. DeMartino: Going forward, we expect our gross margin for the remainder of the year to be in the mid to high 40% range.

Steven A. DeMartino: Our total operating expenses for the first quarter decreased by 18% from their prior year first quarter to $6.9 million and were flat sequentially. The year-over-year decline came as a result of previously disclosed savings achieved from the cost-cutting efforts we began to put in place late in the third quarter last year. We estimated that these actions would produce operating expense savings of about $3 million on an annualized basis, and we experienced the full effect of these reductions during the first quarter.

Steven A. DeMartino: Our operating our total operating expenses for the first quarter decreased by 18% from the prior year first quarter to $6 $9 million and were flat sequentially.

Steven A. DeMartino: The year over year decline came as a result of our previously disclosed savings achieved from the cost cutting efforts, we began to put in place late in the third quarter last year.

Steven A. DeMartino: We estimate that these actions will produce operating expense savings of about $3 million on an annualized basis and we experienced the full effect of these reductions are starting the first quarter.

Steven A. DeMartino: Breaking down our operating expenses a bit, our engineering and R&D expenses for the first quarter were down 13% year over year to $2 million. Our selling and marketing expenses decreased 24% year over year to $2.1 million, and our G&A expenses decreased 60% year over year to $2.9 million.

Steven A. DeMartino: Breaking down our operating expenses a bit our engineering and R&D expenses for the first quarter were down 13% year over year to $2 million, our selling and marketing expenses decreased 24% year over year to $2 1 million and our G&A expenses decreased 16% year over year to $2 9 million.

Steven A. DeMartino: For the first quarter, our operating loss was $1.3 million, or a negative 12.2% of net sales. This compares to operating income of $3.8 million, or 17.1% of net sales in the prior year. On the bottom line, we recorded a net loss of $1 million, or a $0.10 loss per diluted share, for the first quarter, and this compares to net income of $3.1 million, or $0.31 per diluted share, a year ago.

Steven A. DeMartino: For the first quarter, our operating loss was $1 $3 million or a negative 12, 2% of net sales and this compares to operating income of $3 8 million or 17, 1% of net sales in the prior year period.

Steven A. DeMartino: On the bottom line, we recorded a net loss of $1 million or <unk>.

Steven A. DeMartino: <unk> loss per diluted share for the first quarter and this compares to net income of $3 1 million or 31 cents per diluted share in the year ago period.

Steven A. DeMartino: Our adjusted EBITDA for the quarter was negative $701,000, and this compares to positive $4.5 million for the first quarter of last year. Taking a quick look at our balance sheet, it continues to remain solid. We ended the quarter with $10.6 million in cash, with only the minimum required $2.25 million of outstanding borrowings under our credit facility with CMLS. And finally, before I open the call to Q&A, I wanted to address the expected impact our new guidance range is anticipated to have on our projected cash flow for 2020.

Steven A. DeMartino: Our adjusted EBITDA for the quarter was negative 701000, and this compares to positive $4 5 million for the first quarter of last year.

Steven A. DeMartino: Taking a quick look at our balance sheet. It continues to remain solid.

Steven A. DeMartino: We ended the quarter with $10 6 million in cash with only the minimum required $2 million to $5 million of outstanding borrowings under our credit facility with C&I lending.

Steven A. DeMartino: And finally before I open the call up for Q&A I wanted to address the expected impact our new guidance range is anticipated to have on our projected cash flow for 'twenty four.

Steven A. DeMartino: Even with a projected adjusted EBITDA loss of negative $2.5 to $3.5 million for 2024, we expect the business to be only slightly cash flow negative for the full year. We expect to sell down our inventories as we move through the year, which now sit at $19.2 million, and believe this, combined with liquidation of receivables resulting from lower sales levels, will likely be enough to fund a good portion of our projected EBITDA loss.

Steven A. DeMartino: Even with our projected adjusted EBITDA loss of negative two five to $3 5 million for 'twenty four.

Steven A. DeMartino: We expect the business to be only slightly cash flow negative for the full year.

Steven A. DeMartino: We expect to sell down our inventories as we move through the year, which now sit at $19 2 million and believe this combined with liquidation of receivables, resulting from lower sales levels will likely be enough to fund a good portion of our projected EBITDA loss.

Steven A. DeMartino: So given these factors, we believe we will easily have enough cash to fund our business for at least the next 12 months. And with that, I'd like to turn the call over to the operator for questions. Operator?

Steven A. DeMartino: So given these factors we believe we will easily have enough cash to fund our business for at least the next 12 months.

Speaker Change: And with that I'd like to turn the call over to the operator for questions operator.

Operator: Thank you, Sir ladies unchanged, meaning it will not be conducting a question and answer session.

Unknown Executive: Thank you, sir. Well, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone ball indicator will indicate that your line is in the question queue. You may press star 2 to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Unknown Executive: If you would ask concentration please press star one on these kind of thing keypad.

Unknown Executive: Inflation tentpole indicate it along eases in the question queue.

Unknown Executive: You may now choose.

Unknown Executive: Choose to leave the question Ken.

Unknown Executive: But parts of speech, making use of PK equipment, it may be necessary to pick up your handset before pressing the star tiers.

Unknown Executive: Our first question comes from Jeff Martin of Ross MKM. Please go ahead. Thanks. Good morning, guys. John wanted to dig in a little bit on the eight new logos. You know, what kind of terminal volume does that have?

Unknown Executive: Okay. This question comes from Jeff Martin of Roth.

Unknown Executive: And please go ahead.

Unknown Executive: Thanks. Good morning, guys.

Jeffrey Michael Martin: Thanks, Good morning, guys.

Unknown Executive: John wanted to dig in a little bit on the eight new logos you know what what kind of terminal volume does that represent potentially in the two FSC transactions that slipped into Q2.

Unknown Executive: John, I wanted to dig in a little bit on the eight new logos. You know, what kind of terminal volume does that potentially represent? And the two FST transactions that slipped into Q2, have those shipped as of today? And what kind of volume are we looking at in those two as well?

Unknown Executive: Those ships are as of today in and what kind of volume are we looking at and then those two as well.

Unknown Executive: Yeah.

Unknown Executive: Okay.

Unknown Executive: John.

John M. Dillon: Jeff, thanks for the question. You'd think we'd have figured out how to not be on mute during these virtual calls, so apologies for that.

Unknown Executive: Jeff Thanks for the question.

Speaker Change: We think we can figure out how to not be on mute. During these virtual calls so apologies for that.

John M. Dillon: The eight transactions that are net new clients represent the potential for north of a thousand units over time. As I mentioned in the prior call, we focus the team on selling to clients that have the potential to place a considerable amount of additional orders. We use a land and expand strategy. The product is, if you will, the best salesperson we have on the team. It performs well.

Jeff: The eight transactions that are net new clients represent the potential for north of a thousand units over time.

John M. Dillon: As I mentioned in a prior call we've focused the team on selling to clients that have the potential to place a considerable amount of additional orders.

John M. Dillon: We use a land and expand strategy.

John M. Dillon: The product is if you will the best salesperson, we have on team performed well. So once it's installed it pick the forms and most clients want to make sure that it's going to provide the ROI and and the.

John M. Dillon: So once it's installed, it performs, and most clients want to make sure that it's going to provide the ROI and the other capabilities that were the reason for their purchase in the first place. So we start small with most clients, and we expand. So that's kind of where we're at with that. And we closed net new clients, about 12 of them in 20 in Q1 of this year. So looking at those clients for expansion is something that we spend a lot of time on, relative to the two that slipped.

John M. Dillon: The other capabilities that were the reason for their purchase in the first place. So we start small with most clients and we expand so that's kind of where we're at with that and we close to the net new.

John M. Dillon: Clients about 12 of them in 'twenty in Q.

John M. Dillon: Q1 of this year so looking at those client for expansion is something that we spend a lot of timeline.

John M. Dillon: One of them was a large QSR that was going to place orders. But at the last minute, they decided to do a security audit to make sure that everything in their shops was buttoned up. And they postponed placing orders until they got that done, and that delayed things for about two months. And all that business is back on track. We're shipping product. And the other one was a whole debt on an opportunity that was in place. I don't think we have that order yet, but we expect to get it literally in the next couple of weeks.

John M. Dillon: Relative to the two that slipped.

John M. Dillon: One of them was a large queue of Saar that was going to place orders and at the last minute. They decided to do a security audit to make sure that everything in the and in their shops were buttoned up and they postponed placing orders until they got that done and that delayed things for about two months and.

John M. Dillon: All of that business is back on track we're shipping product.

John M. Dillon: And the other one was a.

John M. Dillon: Ah Ah Ah hold that on a on an opportunity that was in place.

John M. Dillon: Don't think we have that order yet, but we expect it to get it literally in the next couple of weeks.

John M. Dillon: Right. And then with respect to the change at 7-Eleven, That's a Q2 event, correct? So we had full results still in Q1, and then two we wanted to get a sense of what the other convenience stores are doing in terms of utilizing the Baja Terminal thing. Relative to 7-Eleven,

Speaker Change: Great and then with respect to the changed at 711.

John M. Dillon: That's a Q2 event correct. So we had you know a full results still in Q1, and then two wanted to get a sense of what the other convenience stores are doing in terms of the.

John M. Dillon: Yes.

John M. Dillon: Terminal thanks.

John M. Dillon: Relative to 711.

John M. Dillon: You know, I've seen the movie before; a big company decides they want to build it in house. They're basically jettisoning all of their vendors, and they're going to roll out a homegrown system that's taken them years to build. I don't know how much they spent on it, but it's probably a lot.

John M. Dillon: I've seen the movie before a big company decides they want to build it in house and they're basically jet are jettisoning all of their vendors and they're going to rollout a homegrown system, that's taken them years to build.

John M. Dillon: I don't know how much they spent on it but it's probably a lot.

John M. Dillon: We didn't see this as a, you know, if you will, a customer loss because our product was inferior, or it's not a replacement scenario. This is a custom in-house built project that they decided was strategically in their interest. And I think the primary reason was to just cut costs; labor rates and food rates are going through the roof. And you know, 7-Eleven is operated typically by a single employee. And so this is going to be the individual is going to have a cell phone in their hand, a little itty bitty printer.

John M. Dillon: We didn't see we don't see this as a.

John M. Dillon: If you will a customer loss because our product is inferior or it's not a replacement scenario. This is accustomed in house built project that they decided that with strategically and their interest and I think the primary reason was just cut cost and labor rates and food rates are going through the roof.

John M. Dillon: 711 is operated typically by a single employee and so this is going to be the individual's gonna have a cell phone in their hand, a little antibody printer and that supposedly is going to handle everything in the store.

John M. Dillon: And that supposedly is going to handle everything in the store. I don't know how well it's going to work, but they're beginning to roll it out now.

John M. Dillon: Don't know how well, it's going to work and they are beginning to roll. It out now the only disappointment I have is we didn't have a greater perspective on when this was going to happen.

John M. Dillon: The only disappointment I have is we didn't have a greater perspective on when this was going to happen. I mean, until Q1 of this year, they were still placing orders. And we really weren't; we were somewhat surprised by the sort of turn of events.

John M. Dillon: In Q1 of this year, they were still placing orders and we really weren't we were somewhat surprised by the sort of turn of events.

John M. Dillon: But they were a first-generation customer; they were running our older products. And while we're delighted to have clients like that, the simplicity of a 7-Eleven store is sort of below the threshold where our technology really makes a big difference. So, you know, I'm happy to take this as for any convenience store operation. But frankly, we're targeting more complex, complicated systems where our technology has a much greater competitive advantage.

John M. Dillon: But they were our first generation customer they were running our older products.

John M. Dillon: And while we're delighted to have clients like that.

John M. Dillon: The simplicity of a 711 stores.

John M. Dillon: Is sort of below the threshold, where our technology really makes a big difference. So you know I'm happy to take business for many convenient store operation, but frankly, we're targeting more complex complex systems, where our technology has a much greater competitive advantage.

Speaker Change: Thank you.

John M. Dillon: Okay.

Unknown Executive: Ladies and gentlemen, just a further reminder, if you'd like to ask a question, you're welcome to press star and then 1 to place yourself in the question queue. Our next question comes from Jeff Bernstein of Silverberg Bernstein Capital. Please go ahead.

John M. Dillon: Ladies unchanged interest just reminding you could have also Christian you won't with Bristow and didn't want to place yourself in the question queue.

Jeff Bernstein: Our next question comes from Chip brands Gene, Oh, silica pet parents capital keeps coming in.

Unknown Executive: Yeah, hi, guys. You guys were just talking a little bit faster. I was wondering if you could just go back and give the terminal numbers again. And if you could just talk about the model name of the new casino and gaming terminal that you're coming out with.

Jeff Bernstein: Yeah, Hi, guys.

Jeff Bernstein: You guys were just talking a little bit faster I was wondering if you could just go back and give a terminal numbers again and if you could just talk about the.

Unknown Executive: Model name off the new casino.

Unknown Executive: Casino and gaming terminal that you're coming out with.

John M. Dillon: I'll answer the first one. I'll let Steve go back and pull up the number. We have had a product on the market called the 880, and we're replacing that with a new model that's called the TR-80. We've announced it. We have shipped some.

Jeff Bernstein: Yeah, I'll answer the first one and I'll, let Steve go back and pull up the number the we have had a product in the market called the 880, and we're replacing that with a new model that's called the T. R. A D. We've.

John M. Dillon: We've announced that we have shipped some we expect that to kind of go into full production here in the next few months and it's up <unk>.

John M. Dillon: We expect that to kind of go into full production here in the next few months, and it's, essentially, a kiosk printer for sports betting. We do that sort of technology really well. It has a form factor, it's sort of a rack-mounted unit; you slot it right into a kiosk. And in a lot of places, sports betting is you go into a device, it's got a screen, you fiddle around with the screen, you place your bets, and you have to get a ticket.

John M. Dillon: Lee, it's a kiosk printer for sports betting.

John M. Dillon: We do that sort of technology really well it has a form factor, it's sort of a rack mounted unit you slot right into a kiosk and then a lot of places sports betting as you go into a device. That's got a screen you fiddle around with the screen you place your bets and you've gotta get a ticket and we do that really well.

John M. Dillon: And we do that really well, specifically built for this purpose. It's very much like what I was talking about, where we go in and work with the client, and ask them, what do you really need it to do? But it's the second generation of basically sports betting.

John M. Dillon: Specifically built for this purpose, it's very much like what I was talking about where we go in and work with the client, but what do you really need it to do.

John M. Dillon: But it's a second generation of the <unk> basically got sports betting kiosk printer.

John M. Dillon: Gotcha. Is there an Epic Central-type software opportunity here in sports batting, or does that not really apply?

John M. Dillon: Gotcha.

John M. Dillon: Is there any.

John M. Dillon: Is there an epic central type software opportunity here in sports betting or does that not not really apply.

John M. Dillon: I would say it's too soon to know. In sports betting, it's not so much like we need to know the personality of the person to be betting because they're deciding on a cricket match or a football game and the like. So, not clear. However, I do believe that client intimacy is something that most of these devices are going to need. We're going to a more and more telematic, centric system. Telematic being the way we're communicating, you know, Wi-Fi, Bluetooth, near field communication.

John M. Dillon: I would say it's too soon to know in sports betting it's not so much like we need to know the personality of the person that's better because they're deciding on a cricket match or a football game.

John M. Dillon: And the like so not clear I do believe that our client intimacy is something that most of these devices are going to need.

John M. Dillon: We're going to have more and more telematic centric system telematic, beating we're communicating.

John M. Dillon: And the devices that we install in various machines have the ability or will have the ability to communicate digitally with clients, maybe through their cell phone or their smartwatches. And so the more you can know about your client, you know, depending on who the ultimate vendor is, the better you can serve them. And so we think that things like Epic Central will be a key part of the future. But we're working with clients, with our customers, who are mostly OEMs, or original equipment manufacturers, in our products, to see if, in fact, we can help them engineer some of their stuff into their technology. But it's still early days.

John M. Dillon: Wifi Bluetooth near field communication and the devices that we install in various machines have the ability or will have the ability to communicate digitally with clients maybe through their cell phone or they're smart watches.

John M. Dillon: And so.

John M. Dillon: The more you can know about your client.

John M. Dillon: Depending on who the ultimate vendor is the better you can service them.

John M. Dillon: So we think that things like epic central will be a key part of the future, but we're working with clients and with our customers who are mostly OEM. This OEM and our products to see if in fact, we can help them engineer some of this stuff into their technology, but it's early days still.

Speaker Change: Great. Thanks.

Steven A. DeMartino: Jeff, did you want the terminal numbers? Yeah, please. Yes, we ended the quarter with 15,370. We added 901 new terminals sold during the quarter.

Speaker Change: Jeff did you want the terminal numbers.

Jeff: Yes. Please.

Jeff: Yes, so we ended the quarter with 15370.

Jeff: And we added 901.

Jeff: New terminals sold during the quarter.

Unknown Executive: Great time. Welcome.

Jeff: Great. Thanks.

Steven A. DeMartino: Welcome.

Unknown Executive: Yeah.

Unknown Executive: Okay.

Unknown Executive: Our next question comes from Rick Curran of Accretiv's Capital Partners. Please go ahead. Good morning, John. I wondered if you could provide an update on the strategic alternatives.

Speaker Change: Our next question comes from retiring all the Christmas Capital Partners. Please go ahead.

Rick Curran: Hi, Good morning, John I wondered if you could provide an update on the strategic alternatives.

John M. Dillon: Well, we've announced that we have an advisory service that's helping us. We are in the process.

Rick Curran: Well, we've announced that we have an advisory service, that's helping US we are in process.

John M. Dillon: It's going as it were; we don't have anything to report at this point, but we're looking at strategy, challenges, and opportunities. And we're going to continue to do that. And as and if we come up with things that make a difference, we'll be sure to basically post those things for our investors. But trust us that we're working diligently.

Rick Curran: It's going as it where we don't have anything to report at this point, but we're looking at strategy.

John M. Dillon: Challenges and opportunities and we're going to continue to do that and as and if we come up with things that make a difference will be sure to basically post that stuff for our investors, but trust us that we are working it diligently.

Speaker Change: Okay, and just to clarify.

John M. Dillon: This encompasses M&A strategies.

Speaker Change: That's true.

John M. Dillon: Okay.

Speaker Change: Great. Thank you.

John M. Dillon: Okay.

John M. Dillon: Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand over to John Dillon for his closing remarks.

Speaker Change: Ladies and gentlemen, we have reached the end of the question and answer session.

John M. Dillon: Now I'll hand over to Jonathan Okay, two remarks.

John M. Dillon: Thank you, and I want to thank you all for joining and listening, and I want to thank everyone for their support and feedback. As always.

John M. Dillon: Thank you.

Unknown Executive: If you want to speak about anything TransAct-related, please reach out to me or Ryan in our IR department to get a call set up. Happy to take the calls, happy to spend the time. Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.

John M. Dillon: I want to thank you all for joining and listening and I want to thank everyone for their support and feedback as always.

Unknown Executive: If you want to speak about anything about transact related.

Unknown Executive: Please reach out to me or Ryan in our IR Department to get a call set up happy to take the calls happy to spend the time.

Unknown Executive: Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.

Unknown Executive: Thank you, Sir ladies and gentlemen that concludes today's James. Thank you for attending and you may now disconnect your lines.

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