Q2 2024 TransAct Technologies Inc Earnings Call
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Operator: Greetings, and welcome to the TransAct Technology second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief 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. This conference is being recorded. It is now my pleasure to introduce your host, Ryan Gardella, Investor Relations. Thank you, sir. You may begin.
Speaker Change: Greetings and welcome to the TransAct Technology second quarter 2024 earnings call. At this time all participants are in a listen-only mode.
Speaker Change: A brief 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.
Speaker Change: This conference is being recorded. It is now my pleasure to introduce your host, Ryan Gardella, Investor Relations. Thank you, sir. You may begin.
Ryan Gardella: Thank you. Good afternoon. Welcome to TransAct Technologies' second quarter 2024 earnings call. Today we'll be discussing the results announced in our press release issued after market close. Joining us from the company are CEO John Dillon and President and CFO Steve DeMartino.
Ryan Gardella: Thank you. Good afternoon. Welcome to the TransAct Technologies second quarter 2024 earnings call. Today we'll be discussing the results announced in our press release issued after market close. Joining us from the company is CEO John Dillon and President and CFO Steve DeMartino.
Ryan Gardella: Today's call will include a discussion of the company's key operating strategies, the progress on these initiatives, and details on our second quarter financial performance. We will then open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations which are forward-looking in nature. Statements on the 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-K and 10-Q.
Speaker Change: Today's call will include a discussion of the company's key operating strategies, the progress on these initiatives, and details on our second quarter financial results.
Speaker Change: We will then open the call to participants for questions.
Speaker Change: As a reminder, this conference call contains statements about future events and expectations which are forward-looking in nature.
Speaker Change: 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.
Ryan Gardella: 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 within the meaning of the SEC Regulation. When 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's website. And with that, I'd like to turn the call over to John.
Speaker Change: including its reports on Forms 10-K and 10-Q. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occurred after the call.
Speaker Change: Today's call and webcast will include non-GAAP financial measures and the meaning of SEC Regulation G.
Speaker Change: When required, reconciliation of all non-GAAP financial measures and 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's website. And with that, I'd like to turn the call over to John .
John Dillon: Thank you, Ryan. Good afternoon, everyone.
Speaker Change: i
John: Thank you, Ryan. Good afternoon, everyone, and thank you for joining us today.
John Dillon: And thank you for joining us today. Please announce positive results for the quarter. Total sales of $11.6 million, FST, Food Service Technology, Recurring Revenue, up sequentially by a little over 15% despite the loss of a large customer early in the quarter and continued signs of stabilization in our casino and gaming market. So let's go through some of the highlights for FST. Again, that's food service technology. It had a strong quarter, and it's showing early signs of building momentum.
Speaker Change: Police announced positive results for the quarter. Total sales of 11.6 million, FST food service technology recurring revenue up sequentially a little over 15% despite the loss of a large customer early in the quarter.
Speaker Change: and Continued Signs of Stabilization in our Casino and Gaming Market.
Speaker Change: So let's go through some of the highlights for FST. Again, that's Food Service Technology. It had a strong quarter, and it's showing early signs of building momentum.
John Dillon: We generated total FSD revenue of 4.2 million, up 7% year over year and 27% sequentially, that would be last quarter to this quarter. Our FST recurring revenue is 2.8 million, up 12% year over year and 15% sequentially, mostly on the strength of several of our large chains.
Speaker Change: We generated total FSD revenue of $4.2 million, up 7% year-over-year, and 27% sequentially. That would be last quarter to this quarter.
John Dillon: And despite the loss, again, of the large customer in April that we discussed in our last call. Our FST hardware revenue was flat year over year despite the lost customer but generally grew sequentially up 57% from Q1 this year, and in the quarter, we sold almost 1500 units, 1500 terminals. We believe we're starting to see some really successful results from the reorganization and refocusing of our FST sales group and our go-to-market GGM.
Speaker Change: Our FST recurring revenue is $2.8 million, up 12% year-over-year and 15% sequentially, mostly on strength from several of our large chains and despite the loss, again, of the large customer in April that we discussed in our last call.
Speaker Change: Our FST hardware revenue was flat year-over-year despite the lost customer, but generally grew sequentially up 57% from Q1 this year, and in the quarter we sold almost 1,500 units, 1,500 terminals.
Speaker Change: We believe we're starting to see some really success from the reorganization and refocusing of our FST sales group and our Go-To-Market GTM.
John Dillon: These were key initiatives where we placed a heavy focus last year and continue to fine-tune the process as we go forward. We've got the right pieces in the right places working on selling the right accounts, and this quarter's results reflect the beginning stages of what I consider a growing success. We're executing well with the continued focus on the blocking and tackling needed to build our business. And yet, I'd like to reiterate that results may continue to be lumpy until we are at some degree of scale.
Speaker Change: These were key initiatives where we placed a heavy focus last year and continue to fine-tune the process as we go forward. We've got the right pieces in the right places working on selling the right accounts and this quarter's results reflect
Speaker Change: the beginning stages of what I consider growing success.
Speaker Change: We're executing well with the continued focus on the blocking and tackling needed to build our business and yet I'd like to reiterate that results may continue to be lumpy until we are at some degree of scale. Clearly.
John Dillon: Yet, however, we are positive about the progress we've made so far. The rollout of the Terminal 2, the BOHA back of the house automation platform, to our international QSR customer that we've talked about on prior calls continues to be a solid success. As many of you have already seen, in June, we announced that we had sold Terminal 2s to 200 Italian locations, marking the fifth new international market that we've gained.
Speaker Change: yet, however, we are positive about the progress we've made so far.
Speaker Change: the rollout of the Terminal 2, the BOHA back-of-the-house automation platform.
Speaker Change: To our international QSR customer that we've talked about reference on prior calls continues to be a solid success
Speaker Change: As many of you have already seen, in June we announced that we had sold Terminal 2's to 200 Italian locations, marking the fifth new international market that we've garnered.
John Dillon: Additionally, we have approvals pending but expected for several other international markets representing over 3,500 additional locations, and we have confidence that we'll begin selling it at the locations before the end of the year, 2024. These are completely new markets for us that have never before, Transcription by CastingWords, and franchisees are recognizing the unique benefits and cost savings associated with the TransAct BOHA platform, more or less for the first time. So we're very excited about that progress.
Speaker Change: Additionally, we have approvals pending but expected for several other international markets representing over 3,500 additional locations.
Speaker Change: and we have confidence that we'll begin selling into these.
Speaker Change: locations before the end of the year 2024.
Speaker Change: These are completely new markets for us that have never...
Speaker Change: in customers before necessarily and never before had bow hop, products and use, meaning that many franchises.
Speaker Change: Franchisees are recognizing the unique benefits and cost savings associated with the TransAct BoHA platform, more or less for the first time, so we're very excited about that progress.
John Dillon: We also announced a new win domestically with Jet Food Stores, a convenience store chain in Georgia, which will deploy the Terminal 2 for gate code and grab and go labeling across 42 locations. One of the major benefits of the BOHA platform is the ability to stay in compliance with FDA labeling requirements for Fresh Food Offerings.
Speaker Change: We also announced a new win domestically with Jet Fruit Stores, a seat store chain in Georgia, which will deploy the Terminal 2 for date code and grab-and-go labeling across 42 locations.
Speaker Change: One of the major benefits of the BOHA platform is the ability to stay in compliance with FDA labeling requirements.
John Dillon: This is the primary focus for this particular client. We've already begun rolling out the terminals, and expect to be finished with this rollout by the end of September. We continue to receive very positive feedback on the Terminal 2 from both customers and prospects. As we see existing BOHA customers, our users converting from prior generations, the earlier generation of the Accudate and the original BOHA terminals, they're moving to the new BOHA Terminal 2.
Speaker Change: for Fresh Food Offerings. This is a primary focus for this particular client. We've already begun rolling out the terminals and expect to be finished with this rollout by the end of September .
Speaker Change: We continue to receive very positive feedback on the Terminal 2 from both customers and prospects.
John Dillon: So we're very happy about that, and that's great progress. And we believe the momentum will continue to build. So it's all good there.
Speaker Change: As we see, existing BOHA customers are users converting from prior generations, the earlier generation of the Accudate and the original BOHA terminals, they're moving to the new BOHA Terminal 2. So we're very happy about that. And that's great progress.
Speaker Change: I believe the momentum will continue to build so it's all good there.
John Dillon: We also posted a good showing on the new logo line, adding 13 new BOHA customers in the quarter representing a potential deployment, approximately 2800 units total in the future. Additionally, our new pipeline remains strong, with the quarter over quarter difference in our rolling four quarter pipeline holding steady with a slight dip of a little bit less than 10%, mostly at the end of the pipe. In other words, four quarters out.
Speaker Change: We also posted good showing on the new logo line.
Speaker Change: Adding 13 new ball-hot customers in the quarter representing a potential deployment approximately 2800 units total in the future.
Speaker Change: Additionally, our new pipeline remains strong with the quarter of a quarter difference in our rolling four-quarter pipeline holding steady. With a slight dip of a little bit less than 10%, mostly at the end of the pipe, in other words, four quarters out, and as we eat.
John Dillon: And as we continue to refresh the pipeline with new engagements and new discussions, that four quarters out will begin to grow. And we have plenty of pipeline; we have plenty of revenue and potential in the pipeline to cover the near term, few quarters out that we can easily see. Moving on to the casino and gaming market, we reported revenue of $5.3 million, down a lot from 56.2% from the prior year, but we've been discussing the dynamics around this market for the past several quarters, and primarily in the context of competition and inventory supply. So, let me comment first on the competitive side.
Speaker Change: continue to refresh the pipeline with new engagements and new discussions that for four quarters out will begin to grow and we have plenty of pipe we have plenty of revenue and potential in the pipe to cover the near-term few quarters out that we can easily see
Speaker Change: Moving on to the casino and gaming market, we reported revenue of $5.3 million, down a lot from $5.3 million.
Speaker Change: 56.2% from the prior year, but we've been discussing the dynamics around this market for the past several quarters, and primarily in the context of competition and inventory supply.
John Dillon: As we mentioned last quarter, we've seen a re-entry into the marketplace from our main competitor. We continue to take the steps necessary to retain newly won market share and are confident that we have fortified our positions well enough to continue to hold on to these market share gains. We are also confident in our strategy and ability to adjust as needed and believe that we are approaching the new status quo. So that's generally pretty good news.
Speaker Change: So let me comment first on the competitive side. We've mentioned last quarter we've seen a re-entry into the marketplace from our main competitor.
Speaker Change: We continue to take the steps necessary to retain newly won market share and are confident that we have fortified our positions well enough to continue to hold on to these market share gains.
Speaker Change: We are also confident in our strategy and ability to adjust as needed.
Speaker Change: and believe that we are approaching the new status quo.
John Dillon: And second, on the inventory side, we've pinpointed two particular slot OEMs, one domestic and one international, who are still working through their oversupply situation. These two manufacturers purchased very large quantities of printers from us during the supply chain crisis and are still sitting on some units. The other slot OEMs we work with have, by now, more or less returned to normal supply levels. So as we move through the year, we believe this dynamic will continue to trend towards normalization. It hasn't happened yet, but we're on the way there.
Speaker Change: So that's generally pretty good news. And second, on the inventory side, we've pinpointed two particular slot OEMs, one domestic and one international.
Speaker Change: who are still working through their oversupply situations.
Speaker Change: These two manufacturers purchased a very large quantities of printers from us during the supply chain crisis and are still sitting on some units. The other slot OEMs we work with have, by now, more or less, returned to normal supply amounts.
Speaker Change: So as we move through the year we believe this dynamic will continue to trend towards normalization. It hasn't happened yet but we're on the way there.
John Dillon: So we're also seeing positive signs around our epicentral promotion and bonusing system, such as the two resort win in Macau we announced in June. This was a blue chip, globally renowned casino owner and operator who signed up for a 200 game deployment on their floor. This will allow the floor managers to push promotional offers in real time while the guest is playing, and this allows the casino to extend time on the device and player spend on average. So this has a really big ROI for the casino and the casino floor. The system pairs seamlessly with our products, our Epic Edge and our Epic 950 Tito. Tito is ticket in, ticket out.
Speaker Change: We're also seeing positive signs around our epicentral promotion and bonusing system.
Speaker Change: such as the two resort win in Macau we announced in June. This was a blue chip, globally renowned casino owner and operator who signed up for a 200 game deployment on their floor.
Speaker Change: This will allow the floor managers to push promotional offers in real time while the guest is playing.
Speaker Change: and this allows the casino to extend time on device and player spend on average.
Speaker Change: So this has a really big ROI for the casino and the casino floor. The system pairs seamlessly with our products, our Epic Edge and our Epic 950 Tito. Tito is ticket in, ticket out.
John Dillon: These printers increase profits and improve guest satisfaction when they're paired with Epic Central, so that's really good news and good progress. Next, I wanted to discuss our strategic review process, which I didn't do a good job of on the last earnings call, but I'm trying to get better, so trust me on this. What we last provided was an update in June, and as we mentioned in our earlier release, we have engaged with a number of different outside parties since then and are in various stages of discussions on alternatives.
Speaker Change: These printers increase profits and improve get satisfaction when they're paired with the epic central. So that's really good news and good progress.
Speaker Change: Next I wanted to discuss
Speaker Change: Our strategic review process.
Speaker Change: which I didn't do a good job of on the last earnings call, but I'm trying to get better, so trust me on this.
Speaker Change: What we last provided was an update in June .
Speaker Change: And as we mentioned in our earlier release, we have engaged with a number of different outside parties since then and are in various stages of discussions on alternatives.
John Dillon: We're going to continue working assiduously on this process until we have determined what an optimal outcome looks like for the company, and perhaps more importantly, for its stakeholders. Trust us; we're doing everything you'd want us to do.
Speaker Change: We're going to continue working assiduously on this process until we have determined what an optimal outcome looks like for the company, and perhaps more importantly, for its stakeholders.
John Dillon: Finally, before passing the call over to Steve for some closing remarks about the financials, I want to discuss our 2024 financial outlook. While we are still maintaining our current total net sales estimate of between $45 and $50 million for the year, we are raising our adjusted EBITDA guidance to between a negative $1 million and a negative $2 million, which is an improvement over the range we provided before, which was a negative $2.5 million to a negative $3.5 million previously.
Speaker Change: Trust us, we're doing everything you want us to do. We'll update everyone via the appropriate channels as soon as we have something that we can talk about, as soon as we have something more to talk about.
Speaker Change: Finally, before passing the call over to Steve for some closing remarks about the financials, I want to discuss our 2024 financial outlook.
Steve: While we are still maintaining our current total net sales estimate of between 45 and 50 million for the year, we are raising our adjusted EBITDA guidance to between a negative 1 million and a negative 2 million.
Steve: which is an improvement over the range we provided before, which was the negative two and a half million and a negative three and a half million previously. This is due to our success in controlling costs, allowing more revenue to flow to the bottom line, then we previously anticipated.
John Dillon: This is due to our success in controlling costs, allowing more revenue to flow to the bottom line than we previously anticipated. So, clearly, we feel we're making good progress on the FST side and seeing the first signs from earlier initiatives. We're pleased with the sequential increase in the number of terminals solved, as well as our sequential increase in recurring revenue. Combined with the continued normalization of our casino and gaming business, we're also optimistic about the remainder of the year. So, with that, I'd like to pass the call over to Steve for a more detailed review of the financials. Steve?
Speaker Change: So clearly we feel we're making good progress on the FST side and seeing the first signs from earlier initiatives. We're pleased with the sequential increase in number of terminals solved as well as
Speaker Change: Our sequential increase in recurring revenue. Combined with the continued normalization of our casino and gaming business, we're also optimistic about the remainder of the year.
Speaker Change: So, with that, I'd like to pass the call over to Steve for a more detailed review of the financials. Steve?
Steven DeMartino: and thanks everyone for joining us today. Let's turn to our second quarter financial results in more detail. Our total net sales for the second quarter were $11.6 million, which was up 9% sequentially but down 42% compared to $19.9 million in the prior year. Sales from our Food Service Technology Market, or FST, for the second quarter were $4.2 million, which was up 27% sequentially and up 7% compared to $3.9 million in the prior year.
Steve: Thank you, John . And thanks, everyone, for joining us today.
Steve: So let's turn to our second quarter financial results in more detail.
Steve: Our total net sales for the second quarter were 11.6 million, which was up 9% sequentially, but down 42% compared to 19.9 million in the prior year period.
Speaker Change: Sales from our Food Service Technology Market, or FST, for the second quarter were $4.2 million, which was up 27% sequentially and up 7% compared to $3.9 million in the prior year period.
Steven DeMartino: Our recurring FSD sales, which include software and service subscriptions, as well as consumable label sales, for the second quarter were $2.8 million, which was up 15% sequentially and also up 12% compared to $2.5 million in the prior year.
Speaker Change: Our recurring FSD sales, which include software and service subscriptions, as well as consumable label sales, for the second quarter were $2.8 million, which was up 15% sequentially, and also up 12% compared to $2.5 million in the prior year period.
Steven DeMartino: Our ARPU for the second quarter of 24 was $722, which was up 9% sequentially, but down 8% compared to $782 in the second quarter of 23. As a reminder, we're currently selling a number of our BOHA terminals with no recurring revenue attached to them to start. While this presents an opportunity to solve recurring elements in the future, for now, they represent a drag on our RPC.
Speaker Change: Our ARPU for the second quarter of 24 was $722, which was up 9% sequentially, but down 8% compared to $782 in the second quarter of 23.
John Dillon: Good afternoon, everyone, and thank you for joining us today. Police announced positive results for the quarter. Total sales, 11.6 million, FST, food service technology, recurring revenue, up sequentially, a little over 15%, despite the loss of a large customer early in the quarter. And continued signs of stabilization in our casino and gaming market. So let's go through some of the highlights for FST. Again, that food service technology. It had a strong quarter and it's showing early signs of building momentum.
Speaker Change: As a reminder, we're currently selling a number of our BOHA terminals with no recurring revenue attached to them to start.
Speaker Change: While this presents an opportunity to solve recurring elements in the future, for now they represent a drag to our ARPU number.
Steven DeMartino: In the first half of 24, a large number of the terminals we sold fell into this category, and we expect this to continue in the near future. We're working on ways to lift this number going forward, but we expect our ARPU to range between $500 and $1,000 for at least the rest of 24. Our casino and gaming sales were $5.4 million, down 56% from the second quarter of 2023, primarily due to two large OEM customers working down high levels of printer inventory that they stockpiled during the supply crisis in 2023 that's now E3. As John mentioned, we expect these dynamics to begin to normalize as we move through the rest of 2014.
Speaker Change: In the first half of 24, a large number of the terminals we sold fell into this category. We expect this to continue in the near future.
Speaker Change: We're working on ways to lift this number going forward, but we expect our output to range between $500 and $1,000 for at least the rest of $24.
Speaker Change: Our casino and gaming sales were $5.4 million, down 56% from the second quarter of 23, primarily due to two large OEM customers working down high levels of print inventory that they stockpiled during the supply crisis in 23 that's now eased.
John Dillon: We generated total FST revenue of 4.2 million up, 7% year over year, and 27% sequentially, that would be last quarter to this quarter. Our FST recurring revenue was 2.8 million up, 12% year over year, and 15% sequentially. Mostly on strength from several of our large chains and despite the loss, again, of the large customer Naples that we discussed in our last call. Our FST hardware revenue was flat year over year, despite the loss customer, but generally grew sequentially up 57% from Q1 this year, and in the quarter we sold almost 1500 units, 1500 terminals.
Speaker Change: As John mentioned, we expect these dynamics to begin to normalize as we move through the rest of 24.
Steven DeMartino: POS automation sales for the second quarter decreased 40% from the prior year to 1.2 million. 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. Our competitors in this market are now fully back online, and we're returning to a more normalized competitive environment. As a result, we're taking steps, including adjusting our pricing, to ensure our products are in line with the new dynamics of this market. Moving on to Transact Services Group or TSG sales.
John: POS automation sales for the second quarter decreased 40% from the prior year to 1.2 million.
John: This decline was largely the result of difficult comps, as we experienced unusually high sales in 2023 due to a competitor's inability to supply product.
Speaker Change: Our competitors in this market are now fully back online and we're returning to a more normalized competitive environment.
John: As a result, we're taking steps, including adjusting our pricing, to ensure our products are in line with the new dynamics of this marketplace.
John Dillon: We believe we're starting to see some really success from the reorganization and refocusing of our FST sales group and our go-to-market GGM. These were key initiatives where we placed a heavy focus last year and continue to fine tune the process as we go forward. We've got the right pieces in the right places working on selling the right accounts, and this quarter's results reflect the beginning stages of what I consider growing success.
Steven DeMartino: For the second quarter, TSG sales were down 53% year over year to $911,000. This decrease was largely due to unusually high sales of legacy lottery spare parts in the prior year, which we don't expect to repeat at the same level during fiscal 24. We also experienced declining sales of our legacy consumable products, which consists of paper rolls and inked ribbons used in our legacy POS products. Though we continue to take orders for these products from legacy customers, they represent less than 5% of our total TSG sales and are no longer a strategic focus for us.
John: Moving on to Transex Services Group or TSG sales.
John: For the second quarter, TSG sales were down 53% year-over-year to $911,000.
John: This decrease was largely due to unusually high sales of legacy lottery spare parts in the prior year, which we don't expect to repeat at the same level during 24.
John: We also experienced declining sales of our legacy consumer products, which consists of paper rolls and ink to ribbons used in our legacy POS printers.
John Dillon: We're actually getting well with the continued focus on the blocking and tackling needed to build our business, and yet I'd like to reiterate that results may continue to be lumpy until we are at some degree of scale. Clearly, yet, however, we are positive about the progress we've made so far. The rollout of the terminal two, the Baha back of the house automation platform, to our international QSR customer that we've talked about in reference on prior call continues to be a solid success.
John: Though we continue to take orders for these products from legacy customers, they represent less than 5% of our total TSG sales and are no longer a strategic focus for us.
Steven DeMartino: Moving down the income statement, our second quarter gross margin was 52.7%, up slightly sequentially from 52.6%, but down from 54.5% in the prior year period. This comes as a result of lower overall sales volume, including significantly lower sales of our profitable casino and gaming credit, as well as competitive price adjustments in the POS automation market, somewhat offset by favorable overhead costs. Going forward, we expect our gross margin for the remainder of the year to be in the mid to high 40s.
John: Moving down the income statement, our second quarter gross margin was 52.7%, up slightly sequentially from 52.6%, but down from 54.5% in the prior year period.
John: This comes as a result of lower overall sales volume, including significantly lower sales of our
John Dillon: As many of you have already seen in June, we announced that we had sold terminal twos to 200 Italian locations marking the fifth new international market that we've garnered. And additionally, we took rules pending but expected for several other international markets, representing over 3,500 additional locations. And we have confidence that we'll begin selling into these locations before the end of the year 2024. These are completely new markets for us that have never in customers before necessarily and never before had Baha products in use, meaning that many franchises franchisees are recognizing unique benefits and costumes associated with the transect Baha platform more or less for the first time.
John: As well as competitive price adjustments in the PLS automation market.
John: Somewhat offset by favorable overhead cost absorption.
John: Going forward, we expect our gross margin for the remainder of the year to be in the mid to high 40% range.
Steven DeMartino: Our total operating expenses for the second quarter decreased by 32% from the prior year's second quarter to $6.5 million, which was also down 5% sequentially. Excluding a $1.5 million sentence charge incurred related to the resignation of a former executive in the prior period, operating expenses declined by 20% year-over-year. The year-over-year decline came in large part as a result of previously discussed savings that we achieved from the cost-cutting effort we began to put in place late in the third quarter last year.
John: Our total operating expenses for the second quarter decreased by 32% from the prior year's second quarter to $6.5 million, which was also down 5% sequentially.
John Dillon: So we're very excited about that progress. We also announced a new win domestically with Jetfood stores, a seats store chain in Georgia, which will deploy the terminal two for gate code and grab and go labeling across 42 locations. One of the major benefits of the bohop platform is the ability to stay in compliance with FDA labeling requirements for food, fresh food offerings. This is a primary focus for this particular client, and we've already begun rolling out the terminals and expect to be finished with this rollout by the end of September.
Steven DeMartino: We estimated that these actions would produce operating expense savings of approximately $3 million on an annualized basis, and we experienced the full effect of these reductions during both the first and second quarters of this year. In June, we began another cost reduction initiative, a second one focused largely on further reducing our headcount and other external third-party resources. We believe this new initiative will generate an additional $2 million of annualized cost savings that we anticipate realizing the full effect of beginning in the third quarter of 2014, thus breaking down our operating expenses a bit.
Steven DeMartino: Our engineering and R&D expenses for the second quarter were down 28% year over year to 1.8 million. Our selling and marketing expenses decreased 18% year-over-year to $2.2 million. And our G&A expenses decreased 43% year-over-year to $2.6 million. For the second quarter, our operating loss was $438,000, or a negative 3.8% of net sales, compared to operating income of $1.2 million, or 6.1% of net sales in the prior year. On the bottom line, we recorded a net loss of $319,000, or a $0.03 loss per distributed share for the second quarter, which compares to net income of $765,000, or $0.08 per share a year ago.
John: Breaking down our operating expenses a bit our engineering and R&D expenses for the second quarter were down 28% year over year to 1.8 million, our selling and marketing expenses decreased 18% year over year to $2 2 million.
John Dillon: We'll continue to receive very positive feedback on the terminal two from both customers and prospects. As we see existing bohop customers are users converting from prior generations, the earlier generation and the acudate, and the original bohop terminals, they're moving to the new bohop terminal two, so we're very happy about that. And that's great progress, and believe the momentum will continue to build, so it's all good there. We also posted good showing on the new logo line, adding 13 new bohop customers in the quarter, representing a potential deployment, approximately 2800 units total in the future.
John: And our G&A expenses decreased 43% year over year to $2 6 million.
John: For the second quarter, our operating loss was $438000 or a negative three 8% of net sales compared to operating income of $1 2 million or six 1% of net sales in the prior year period.
John: On the bottom line, we recorded a net loss of $319000 or three cent loss per diluted share for the second quarter.
John: Which compares to net income of $765000 or eight cents per share in the year ago period.
John Dillon: Additionally, our new pipeline remains strong with the quarter over quarter difference in our rolling four quarter pipeline, holding steady, with a slight dip of a little bit less than 10%. Mostly at the end of the pipe, in other words, four quarters out, and as we continue to refresh the pipeline with new engagements and new discussions that four quarters out will begin to grow. And we have plenty of pipe, we have plenty of revenue and potential in the pipe to cover the near term few quarters out that we can easily see.
Steven DeMartino: Looking at our adjusted EBITDA, I'm happy to say that it broke back through breakeven for the second quarter, reaching positive $89,000, which was up nicely on a sequential basis from negative $701,000 in the first quarter of 2014, but down from $3.2 million in the second quarter of last year. Taking a quick look at our balance sheet, it continues to remain solid. We ended the quarter with over $11 million in cash and only the minimum required $2.25 million of outstanding borrowings under our credit facility with Sienna Lenders.
John: Looking at our adjusted EBITDA I'm happy to say that it broke back through the break even through breakeven for the second quarter, reaching positive $89000, which was up nicely on a sequential basis from negative 701000 in the first quarter 'twenty four but down from $3 2 million from the second quarter of last year.
John: Taking a quick look at our balance sheet. It continues to remain solid we ended the quarter with over $11 billion in cash and only the minimum required 2.25 million of outstanding borrowings under our credit facility with C&I lending.
John Dillon: Moving on to the casino and gay new market, we reported revenue of 5.3 million down a lot from 56.2% from the prior year, but we've been discussing the dynamics around this market for the past several quarters. And primarily in the context of competition and inventory supply. So let me comment first on the competitors side, we've mentioned last quarter, we've seen a reentry into the marketplace from our main competitor. We continue to take the steps necessary to retain newly one market share and are confident that we have fortified our positions well enough to continue to hold on to these market share gains.
Steven DeMartino: And finally, before we open the call up to questions, I wanted to mention that our new upward revised Adjusted EBITDA range of between negative $1 million and $2 million for 20-4 means that the business should be very close to cash break-even for the full year. We continue to expect to sell down our inventories for the remainder of the year, which we successfully reduced by $1.5 million during the second quarter and now sit at $17.6 million, and believe that this, combined with continued strong collections of our receivables, will likely be enough to fund most, if not all, of our projected EBITDA loss for the year.
John: And finally before we open the call up to questions I wanted to mention that our new upward revised adjusted EBITDA range of between negative $1 million and $2 million for 24 means that the business should be very close to cash breakeven for the full year.
John: We continue to expect to sell down our inventories for the remainder of the year, which we successfully reduced by $1 5 million during the second quarter and now sits at $17 6 million.
John: And believe that this combined with continued strong collections of receivables will likely be enough to fund most if not all of our projected EBITDA loss for the year.
John Dillon: We are also confident in our strategy and ability to adjust as needed and believe that we are approaching the new status quo. So that's generally pretty good news. And second, on the inventory side, we've pinpointed two particular slot OEMs, one domestic and one international who are still working through their oversupply situations. These two manufacturers purchased very large quantities of printers from us during the supply chain crisis and are still sitting on some units.
Steven 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.
John: 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: Thank you. 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 will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from George Sutton with Craig Howell. Please proceed with your question.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
George Sutton: Thank you, John. You mentioned strength from several large chains in the FST segment. I wondered if you could give us a little bit more specificity there. And can you just remind us that the C-Store customer was completely out of the numbers going into Q2 relative to Q1. I'm just trying to because there was a big lift and I'm trying to understand the dynamics.
John Dillon: Well, one of the larger customers is the large QSR, where we are doing a very good job and engaging with them. So you can factor that in.
Speaker Change: A confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
John Dillon: The other slot OEMs we work with have by now more or less returned to normal supply amounts. So as we move through the year, we believe this dynamic would continue to trend towards normalization. It hasn't happened yet, but we're on the way there. So we're also seeing positive signs around our epicentral promotion of focusing system, such as the two resort women Macau, we announced in June. This was a blue chip globally renowned casino owner and operator who signed up for a 200 game deployment on their floor.
John: One moment, please while we poll for questions.
John: Our first question comes from George Sutton with Craig Hallum. Please proceed with your question.
George Sutton: Thank you John you mentioned strength from several large chains in the F. S. T segment I wondered if you could give us a little bit more specificity, there and can you just remind us.
George Sutton: The C store customer was completely out of the numbers going into Q2 relative to Q1, I'm just trying to because there was a big lift and I'm trying to understand the dynamic.
John Dillon: This will allow the floor managers to push promotional offers in real time while the guest is playing. And this allows the casino to extend time on device and player spend on average. So this has a really big ROI for the casino and the casino floor. So that's really good news and good progress.
Speaker Change: Well one of the larger customers is a large queue of Saar.
John: Where we are doing a very good job in engaging with them. So you can factor that in and there was another a couple of other larger clients that are.
John Dillon: There was another, a couple of other larger clients that won't let us use their names, but they have been buying. The C-Store is a net new win, which is nice. They weren't a customer before. It's not huge, but, you know, every one of those kind of deals, you know, works. And as I've said before.
John: Let us use their names, but they have been buying the C store is a net new win which is nice and they weren't a customer before.
John: It's not huge but you know every one of those kind of deals you know works and as I've said before.
John Dillon: Next I wanted to discuss our strategic review process, which I didn't do a good job of on the last earnings call, but I'm trying to get better. So trust me on this, what we last provided was an update in June. And as we mentioned in our earlier release, we have engaged with a number of different outside parties. Since then, and are in various stages of discussions on alternatives. We're going to continue working acidulously on this process until we have determined what an optimal outcome looks like for the company and perhaps more importantly for its stakeholders. Trust us we're doing everything you want us to do will update everyone via the appropriate channels as soon as we have something that we can talk about soon as we have something more to talk about.
John Dillon: The lion's share of our focus is selling into markets or clients where they have the potential to, you know, buy a minimum of 50 to, say, 100 units. So most of our focus is there. We do have some onesie twosies, not really that small, but you know, some smaller clients that just insist on having this great technology.
John: The lion's share of our focus is selling into markets or our clients, where they have the potential to you.
John: You know by a minimum of 50 to say 100 units. So most of our focus is there we do have some onesie twosies not really that small, but you know some smaller clients that just insist on having this great technology.
John: But most of that.
John Dillon: But most of the business that's going to move the needle is from large clients that have the potential to buy and then buy more. Our sales model is the land and expand model. And the reason for that is most clients want to see how well the machines work. And we like to joke internally that, you know, the machines that we sell are the best salespeople we have in the company, not because our salespeople are a bunch of bums, but because the products just work so dang well, they're very reliable.
John: Business, it's going to move the needle are from large clients that have the potential to buy and then buy more our sales model is up.
John: Land and expand model and the reason for that is most clients want to see how the welding machines work and we'd like to joke internally that you know the machines that we sell are the best salespeople, we have in the company not because our salespeople are a bunch of bumps, but because the product just works so damn well, they're very reliable so once they get it.
John Dillon: Finally, before passing the call over to Steve for some closing remarks about the financials, I want to discuss our 2024 financial outlook. While we are still maintaining our current totalment sales estimate between 45 and 50 million per year, we are raising our adjusted EBITDA guidance to between a negative one million and a negative two million, which is an improvement over the range we provided before, which was a negative two and a half million and a negative three and a half million previously.
John Dillon: So once they get in, and the clients begin achieving the ROI that they hope to get, and then it's confirmed, then they buy more. So we won't necessarily go for huge orders up front because those large orders elongate the sales cycle and invite more competition. So generally, we get a smaller order initially, and then you're going to see a considerable amount of follow-on business being what you'd call expansion. So that's part of what we were able to do to achieve the numbers we did this quarter.
John: In and the clients to begin achieving the ROI that they hope to get and then finally, it's confirmed then they buy more so won't necessarily go for huge orders upfront because those are those large orders elongate the sales cycle.
John: Invite more competition. So generally we get a smaller order initially and then you're going to see a considerable amount of follow on business being what you'd call expansion. So that's part of what we were able to do to achieve the numbers. We did this quarter.
John Dillon: This is due to our success in controlling costs, allowing more revenue to flow to the bottom line than we previously anticipated. So clearly, we feel we're making good progress on the FST side and seeing the first signs from our earlier initiatives. We're pleased with the sequential increase in number of terminals sold as well as our sequential increase in the current revenue. Combined with the continued normalization of our casino and gaming business, we're also optimistic about the remainder of the year.
John: Yeah.
George Sutton: Great, thank you. And then, relative to the, you pointed out that you had two customers that had high inventory levels, and you identified them. And I believe you said you met with others who had more normal inventory. I wasn't really sure what the point was. Are you suggesting you're working with these customers to try to help them offload the inventory, or are they just, they're focused on, they're not buyers?
Speaker Change: Great. Thank you and then relative to the you'd pointed out that you had two customers that had high inventory levels and you've identified them.
Speaker Change: And I believe you said you met with others, who have more normal inventory I wasn't really sure. The point are you, suggesting you're working with these customers to try to help them offload the inventory or they're just.
Speaker Change: They're they're.
Speaker Change: They're focused on they're not buyers right now just because they were working down their inventory I just want make sure I understood. The point well I think the answer. The question is yes. Both are we know who they are we know why they bought more inventory than they needed. They were all concerned about supply chain shortages, and if you're making slot machines.
Steve Demartino: So with that, I'd like to pass the call over to Steve for a more detailed review of the financials. Steve? Thank you, John. And thanks everyone for joining us today. So let's turn to our second quarter financial results in more detail. Our totalment sales for the second quarter were 11.6 million, which was up 9% sequentially, but down 42% compared to 19.9 million in the prior year period. Sales from our food service technology market or FST for the second quarter were $4.2 million, which was up 27% sequentially, and up 7% compared to 3.9 million in the prior year period.
John Dillon: Well, I think the answer to the question is yes, both. We know who they are. We know why they bought more inventory than they needed. They were all concerned about supply chain shortages. And if you're making slot machines, these things sell for $25,000 to $50,000.
John Dillon: And you can't sell them because you don't have the systems that TransAct provides. And the other competitors, you know, are basically on their heels and are missing in action. They needed our systems, and they were just really worried. So, it's worked out pretty well, other than, you know, sort of the shark fin increase in revenue that we had early last year, and we're still working back to normal. But we know who they are.
John: And these things sell for 25 to 50, K and you can't sell them because you don't have the systems that transact provides.
Speaker Change: And the other competitors.
Speaker Change: You know it was basically on their heels and is missing in action and they needed our systems and they were just really worried so.
Speaker Change: It's worked out pretty well other than you know sort of the shark fin increase in revenue that we had early last year and we're still working back to normalcy, but we know who they are they're trying to help them work through that we have plenty of casinos that say they want to transact technology and not not the technology from the.
Steve Demartino: Our recurring FST sales, which includes software and service subscriptions as well as consumable label sales for the second quarter were 2.8 million, which was up 15% sequentially, and also up 12% compared to 2.5 million in the prior year. Our art proof for the second quarter of 24 was $722, which was up 9% sequentially but down 1% compared to $782 in the second quarter of 23.
John Dillon: We're trying to help them work through that. We have plenty of casinos that say they want TransAct technology and not the technology from the other guys. So I guess the answer to your question is, yes, they've got to work through the volume of inventory that they have on the shelf, but we're helping them every day to try to make that happen. And we know who they are, and we have good relationships with them. But when it first happened, we didn't really know where all the inventory was.
Speaker Change: Other guys. So I guess the answer to your question is yes, they've got to work through the bulk of the volume of inventory that they have on the shelf, but we're helping them every day to try to make that happen and we know who they are and we have good relationships with them, but when it first happened we didn't really know where all the inventory was and we have so now we have a really good handle on it that was the.
Steve Demartino: As a reminder, we're currently selling a number of our ball-hot 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 to our art proof number. In the first half of 24, a large number of the terminals we sold fell into this category and we expect this to continue in the near future. We're working on ways to lift this number going forward, but we expect our art proof to range between $500 and $1,000 for at least the rest of 24.
Speaker Change: The point of the.
Speaker Change: That we may have tried to make on the call today.
John Dillon: George, maybe to clarify a little more. So basically, all the OEMs have worked through all their inventory issues, and they're basically back to a normal buying pattern other than those.
George Sutton: George maybe to clarify it a little more as well so basically all the Oems haven't worked through all through their inventory issues and they're basically back to a normal buying pattern other than those two.
John Dillon: Yeah, that was the point we're trying to make is that that's an early precursor to normalcy, and there are just two left. And once those guys are back to normal, you know, I think you're gonna see the numbers as you would have expected pre-pandemic, pre-pandemic, with the growth, and the increase in market share that we've predicted, that's about 15%.
Speaker Change: Yes that was the that was the point we're trying to make is that said that's at an early a.
Speaker Change: Precursor to normalcy and Theres, just two left and what those guys are back to normal you know I think you're going to see the numbers as you would've expected prepaying pre pandemic with the growth the increase in market share that we've predicted that's about 15%.
Steve Demartino: Our casino and gaming sales were $5.4 million, down 56% from the second quarter of 23. Primarily due to two large OEM customers working down high levels of print inventory that they stockpiled during the supply crisis in 23, that's now eased. As John mentioned, we expect these dynamics to begin to normalize as we move through the rest of 24. POS automation sales for the second quarter decreased 40% from the prior year to 1.2 million.
Speaker Change: Yeah.
George Sutton: Gotcha. Okay. And relative to the strategic review, I know you can't go into any detail. I will just note that I did look up what assiduously means, and it sounds like
Speaker Change: Gotcha, Okay and relative to the strategic review I know you can't go into any detail I will just note that I did look up what the Cid you asleep means and it sounds like you're working with great care and perseverance. So I wish you luck with the completion of that.
Steve Demartino: 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. Our competitors in this market are now fully back online and we are returning to a more normalized competitive environment. As a result, we're taking steps including adjusting our pricing to ensure our products are in line with the new dynamics of this marketplace. Moving on to Transact Services Group or TSG sales, for the second quarter, TSG sales were down 53% year-over-year to $911,000.
John Dillon: Thank you. My mom was an English teacher, so it's always my pleasure to introduce a new word to the vocabulary of the masses. That's my new one for today.
Speaker Change: My mom was an English teacher, so its always my pleasure to introduce a new word in the vocabulary of the.
George Sutton: Thank you. All right. Yeah.
Speaker Change: The masses.
Speaker Change: That's that's my new one for the day. Thank you alright, Yeah, no. We're hard at work on that and you all know that we can't talk about anything, but we're doing what you'd want us to do well.
John Dillon: No, we're hard at work on that. And you all know that we can't talk about anything, but we're doing what you want us to do. We're working hard on it. We're looking at lots of different alternatives and things that might make sense. And we just aren't where we've got any news to report. And as soon as we do, we'll report it. And you can just trust that we're doing what you'd want us to do. Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: We're working hard at it we're looking at lots of different alternatives and things that might make sense and we just start where we've got any news to report and soon as we do we'll report it and you can just trust that we're doing what you'd want us to do.
Speaker Change: Perfect. Thank you.
Steve Demartino: This decreased with largely due to unusually high sales of legacy lottery spare parts in the prior year, which we don't expect to repeat at the same level during 24. We also experienced declining sales of our legacy consumable products which consist of paper rolls and inked ribbons used in our legacy POS printers. Though we continue to take orders for these products from legacy customers, they represent less than 5% of our total TSG sales and are no longer a strategic focus for us.
Operator: As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from Jeff Martin with Roth Capital Partners. Please proceed with your question.
Speaker Change: As a reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from Jeff Martin with Roth Capital Partners. Please proceed with your question. Thanks, Good afternoon, John and Steve Hope you're doing well was I was wondering if you could go into in and break down the.
Jeffrey Martin: Thanks. Good afternoon, John and Steve. I hope you're doing well.
Jeffrey Martin: I was wondering if you could go into and break down the unit placements a little bit more in the quarter. You know, almost 1,500 units. Can we get an updated installed base number for the terminals? You know, I know there's some puts and takes. We've got, you know, the McDonald's going in, the 7-Eleven coming out, and then it sounds like some... Original BOHA terminals were replaced with the T2 or the second version. So help us kind of understand what's going on underneath that 1500 number and then the total installed base, please. Thanks.
Speaker Change: The unit placements are a little bit more in the quarter and almost 1500 units.
Speaker Change: Is it could we get an updated installed.
Steve Demartino: Moving down the income statement, our second quarter gross margin was 52.7%, up slightly sequentially from 52.6%, but down from 54.5% in the prior year period. This comes as a result of lower overall sales volume, including significantly lower sales of our profit book as you know in gaming printers, as well as competitive price adjustments in the PLS automation market somewhat offset by favorable overhead cost absorption. Going forward, we expect our gross margin for the remainder of the year to be in the mid to high 40% range.
Speaker Change: Installed base number for the terminals you know I know.
Speaker Change: There's some puts and takes here we've got you know that.
Speaker Change: Mcdonald's going into 711 coming out and then it sounds like some.
Speaker Change: Original boathouse terminals were replaced with the T. Two or is it. The second version so help us kind of understand what's going on underneath that.
Speaker Change: 50, <unk> hundred number and then it can be a.
Speaker Change: The total installed base place things yes.
Unknown Executive: Yes, Steve, you want to take that? Yeah, the total installed base at the end of the quarter chat was.
Speaker Change: Steve do you want to take that.
Steven DeMartino: The total installed base at the end of the quarter was 16,411.
Steve: Yeah, Yeah. The total installed base at the end of the quarter, Jeff was 16411.
Speaker Change: Units.
Steve Demartino: Our total operating expenses for the second quarter decreased by 32% from the prior year second quarter to 6.5 million, which was also down 5%, sequentially. Excluding a $1.5 million seven charge incurred related to the resignation of a former executive in the prior period, operating expenses declined by 20% year. The year over year decline came in large part as a result of our previously discussed savings that we achieved from the cost-cutting effort we began to put in place late in the third quarter last year.
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: And then again.
Speaker Change: Yeah that's helpful.
Jeffrey Martin: So, did 7-Eleven roll off in early April? Just trying to get a sense if there was any recurring revenue contribution going forward.
Speaker Change: So so the 711 roll off in early April just trying to get a sense. If there was any recurring revenue.
Speaker Change: Contribution.
Speaker Change: Sure.
Steven DeMartino: are still in that number that I gave to you, Jeff. So they will trail off as we go through the year. So I would suspect that by the end of the year, all of the 711 units will be out of the installed base number.
Speaker Change: Seven of them are.
Speaker Change: Well in that number that I gave to you Jeff So they will they will trail off as we go through the year. So I would suspect by the end of the year.
Speaker Change: All of the 711 units will be out of the installed base number.
Jeffrey Martin: Okay, you broke up a little bit in the early part of that answer. It rolls out slowly over time, is that what you're saying? It rolls, it rolls off? You know, so
Jeff Martin: Okay, you broke up a little bit in the early part of that answer.
Steve Demartino: We estimated that these actions would produce operating spend savings of approximately $3 million on the annualized basis and would experience the full effect of these reductions during both the first and second quarters of the share. In June, we began another cost-reducing initiative, a second one focused largely on further reducing our headcount and other external third-party resources. We believe this new initiative will generate an additional $2 million of annualized cost savings that we anticipate realizing the full effect of beginning in the third quarter of 24.
Jeff Martin: It rolls out slowly over time is that what you're saying you're rolling it rolls off.
Steven DeMartino: You know, so they're going to turn them off over time, so it'll trail off as we go through the rest of the year.
Speaker Change: No.
Speaker Change: They're going to turn them off over time, So it'll trail off as we go through the Gulf through the rest of the year.
Speaker Change: Yeah.
Jeffrey Martin: Okay. Did much of it trail off during the second quarter?
Speaker Change: Okay.
Speaker Change: Did did much of a trail off during the second quarter.
Speaker Change: Yeah.
Steven DeMartino: Almost all of them were still online at the end of the day.
Speaker Change: Almost all of them were still on line at the end of June.
Speaker Change: Okay.
Speaker Change: That's helpful.
Jeffrey Martin: And then, John, how should we think about terminal installations as we progress throughout the back half? Installations or sales success? Or can you give me a little more perspective on the question? Yeah, I mean, it would be great to have your perspective on both installations and...
Speaker Change: And then John how should we think about you know a terminal installations as we progressed throughout the back half of the year.
Steve Demartino: Breaking down our operating expenses a bit, our engineering and our AD expenses for the second quarter were down 28% year over year to 1.8 million, our selling and marketing expenses decreased 18% year over year to 2.2 million, and our GNA expenses decreased 43% year over year to 2.6 million. For the second quarter our operating loss was $438,000 or a negative 3.8% of net sales compared to operating income of 1.2 million or 6.1% of net sales in the prior year period.
John: [laughter] installations or sales success or.
John: Can you give me a little more.
John: It's still a question it'd be great to have your perspective on both installations and bookings, but installations was when I was originally calling it going forward yeah, well when we get a booking we get money. We're still in one of these modes, where when we sell a terminal.
John Dillon: Yeah, well, when we get a booking, we get money. We're still in one of these modes where when we sell a terminal, the customer pays for it. And then we get the recurring revenue. So, you know, right now, the sale of the terminal itself contributes the lion's share of the revenue because we get that all up front. But, over time, I think maybe there'll be scenarios where we have the whole system being recurring revenue, which is an interesting and intriguing opportunity for us. But right now, to get specific to your question.
John: Customer pays for it.
John: And then we get the recurring revenue.
John: So.
John: You know right now the.
Steve Demartino: On the bottom line we recorded a net loss of $319,000 or a 3 cent loss per year for the second quarter, which compares to net income of $765,000 or 8 cents per year in the year ago period. Looking at our adjusted deba da, I'm happy to say that it broke back through the break even for the second quarter reaching positive $89,000, which was up nicely on a sequential basis from negative $701,000 in the first quarter of 24, but down from 3.2 million from the second quarter of last year.
John: The sale of the terminal itself contributes the lion's share.
John: Of the <unk>.
John: The revenue because we get that all upfront you know over time, I think maybe there'll be scenarios, where we have the whole system being recurring revenue, which is an interesting and intriguing opportunity for us but right now.
John: To get specific to your question.
John Dillon: It depends on the rollout plan. Most of the, clients that we have that have a large base of business, they're not going to have a simultaneously roll out in every one of their stores. They usually start out with a handful, and then it just sort of crescendos and you get a sort of steady stream until eventually maybe you approach some sort of ceiling where you've got most of the units installed and then that's of course an opportunity for us to sell software and other services that contribute to the ARPU and then there's replacement units because the units wear out they have to buy more one more units and the like so normally a normal install, For us, from time of order, you know, depends so much on the customer, but it can happen in a matter of, you know, a month, but it can also take, you know, a few months if they're trying to roll out to multiple stars, and they have usually the clients have a plan for the rollout. So, I mean, from a selfish standpoint, I want the rollouts to be, you know, pretty smooth from a resource standpoint so we can staff them appropriately.
Speaker Change: It depends on the rollout plan.
Speaker Change: Most of that.
Speaker Change: Clients that we have that have a large base of business, they're not gonna have a simultaneously rollout and every one of their stores. They usually start out with a handful.
Steve Demartino: Taking a quick look at our balance sheet it continues to remain solid. We ended the quarter with over $11 million in cash, and only the minimum required $2.25 million about standing borrowings under our credit facility with CNA lending.
Speaker Change: And then it just sort of Crescendo is then you get a stellar sort of steady stream until eventually maybe you present, some sort of ceiling, where you got most of the units installed and then that is of course, an opportunity for us to sell software and other services that contribute to the AARP U and then there's replacement units because the units.
Steve Demartino: And finally, before we open the call up to questions, I wanted to mention that our new upward revised adjusted deba da range of between negative $1 million and $2 million for $24, means that the business should be very close to cash break even for the full year. We continue to expect to sell down our inventory for the remainder of the year, which we successfully reduced by 1.5 million during the second quarter and now sit at 17.6 million, and believe that this, combined with continued strong collections of our receivables, will likely be enough to fund most if not all of our projected EBITDA loss for the year. 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: They have to buy more one more units and alike. So normally normal install.
Speaker Change: For us from time of order you know depend so much on the customer, but it can happen in a matter of you know.
Speaker Change: A month, but it can also take you know a few months if they're trying to roll out to multiple stars and they have usually the clients have a plan for the rollout.
Speaker Change: So I mean from a selfish standpoint, I want the rollouts to be you know pretty smooth from a resource standpoint, so we can staff them appropriately.
Jeffrey Martin: From a revenue standpoint, we usually get the lion's share of the revenue up front, and then we'll capture the balance of the ARPU stuff over the next few years. Many of the contracts, or most of them, are three years. We don't yet report much as it relates to net retention, but that's something that I think we're going to add to the earnings calls in the future where you're looking at adds and deletions.
Operator: And with that, I'd like to turn the call over to the operator for questions. Thank you.
Speaker Change: From a revenue standpoint, we usually get the lion's share of the revenue upfront and then we'll capture the balance of the Arpus step over the next few years many of the contracts or most of them are three years.
Operator: We will now be conducting a question and answer session. If you 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 question to you.
Operator: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands at before pressing the star keys.
Speaker Change: We don't yet report much as it relates to net retention, but that's something that I think we're going to add to the earnings calls in the future where you're looking at.
Jeffrey Martin: In other words, what's the expansion amount? What's the net attrition? What's the net expansion? And what's the delta between the two? But we don't have enough history yet to be able to make those numbers meaningful enough to report them. But to your question, how quickly somebody implements, and how long the customer lasts are all things that should go into the calculus for what the value of the installed base is. And 16,000 units means there's an awful lot of opportunity, so we're pretty excited about that. Great, thank you.
Speaker Change: Adds and deletes in other words, what's the expansion amount, what's the net attrition, what's the net expansion and whats the delta between the two but we don't have we don't have enough history, yet to be able to make those numbers meaningful enough to report them, but to your question how quickly somebody implements how long the customer lasts are all things that.
George Sutton: One moment please, while we pull for questions, our first question comes from George Sutton with Craig Howell. Please proceed with your question. Thank you. John, you mentioned a strength from several large chains in the FST segment. I wondered if you could give us a little bit more specificity there. And can you just remind us the C-store customer was completely out of the numbers going into Q2 relative to Q1. I'm just trying to because there was a big lift and I'm trying to understand the dynamic.
Speaker Change: Should go into the calculus for you know what the value of the installed bases and 16000 units means there's an awful lot of opportunity. So we're pretty excited about that.
Speaker Change: Yeah.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Operator: Our next question comes from Rick Fearon with Accrued Capital Partners. Please proceed with your question. Nick, are you there? Sorry, Rick, are you there?
Speaker Change: Our next question comes from Rick Sharon.
Speaker Change: Capital Partners. Please proceed with your question.
George Sutton: Well, one of the larger customers is the large QSR, where we are doing a very good job in engaging with them. So you can factor that in. There was another couple of other larger clients that won't let us use their names, but they have been buying. The C-store is a net new wind, which is nice. They weren't a customer before. It's not huge, but you know, every one of those kind of deals, you know, works.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Nick are you there.
Speaker Change: Sorry, Rick are you there.
Speaker Change: Sorry about that yeah.
Richard Fearon: Sorry about that. Yeah, yeah, yeah, Rick. Salute.
Speaker Change: Yeah, Yeah, Yeah, Rick or Luke.
Richard Fearon: So, yes, nice, nice job stabilizing things this quarter, John. I wanted to ask a question about the T2 BOHA terminals that are going to the big QSR, and you mentioned the 200 unit sale in Italy, and then on the heels of that, you talked about 3,500 additional units, which sounded like international sales as well. Did I hear correctly that that is anticipated by year-end 2024? So, within the next six months?
Speaker Change: So yeah nice nice job in stabilizing things this quarter Johnny.
Speaker Change: Wanted to ask a question about the T. Two Boe huh.
Speaker Change: Terminals that are going to the big U S are you mentioned that the 200.
Speaker Change: That sale in Italy, and then on the heels of that you talked about 3500 additional units, which sounded like international sales as well did I hear correctly that that use anticipated by year end 'twenty 'twenty four so within the next six months.
George Sutton: And as I've said before, the lion's share of our focus is selling into markets or clients, where they have the potential to, you know, buy a minimum of 50 to say 100 units. So most of our focus is there. We do have some onesie twosies, not really that small, but you know, some smaller clients that just insist on having this great technology. But most of the business that's going to move the needle are from large clients that have the potential to buy and then buy more.
John Dillon: I think the potential to sell into those new markets once we get the green light will mean that we will move terminals in 2024. It's pretty hard to project at this stage exactly how many that's going to be. But the answer to your specific question is, yes, we're going to be selling into those markets this year.
Speaker Change: I think the potential to sell into those new markets. Once we get the green light. It will mean that we will move terminals in 2024, it's pretty hard to project at this stage exactly how many that is gonna be but the answer to your specific question is yes, we're going to be selling into those markets. This year.
Richard Fearon: Okay, that's great news. And then once those are in, is there a recurring revenue component to those? Are there some labels that get printed from that, or is that just kind of an up-front sale?
Speaker Change: Okay. That's great news and then once those are in is there a recurring revenue component to those is there some labels that get printed from that or.
George Sutton: Our sales model is a land and expand model. And the reason for that is most clients want to see how well the machines work and we like to joke internally that, you know, the machines that we sell are the best salespeople we have in the company, not because our salespeople are a bunch of buttons, but because the products just work so dang well, they're very reliable. So once they get in and the clients begin achieving the ROI that they hope to get and then finally it's confirmed, then they buy more.
Speaker Change: Is that just kind of the upfront sale.
John Dillon: Currently, at this point, there's not a lot of ARPU or almost none on these units, but there's the opportunity to sell into those units, so it's potential energy, not kinetic energy yet, to get kind of physics on you. We're pretty excited about having those units out there, and as we enhance product offerings from a software standpoint and other services, we think the opportunity is there. It's sort of like getting a camel's nose into the tent.
Speaker Change: Currently at this point, there's not a lot of eight.
Speaker Change: AARP you are almost none on these units, but there's the opportunity to sell into those units. So.
Speaker Change: It's it's it's it's potential energy not kinetic energy yet to get kind of is Exxon U.
Speaker Change: We're pretty excited about having those units out there and as we embellished product offerings from a software standpoint, and other services, we think the opportunities there, it's sort of like getting the camel's nose under the tent once the camel's nose is in there you can work on getting the rest of the Campbell in and that's an opportunity for us to sell additional software and services, but right.
George Sutton: So we won't necessarily go for huge orders up front because those are those large orders elongate the sales cycle and invite more competition. So generally, we get a smaller order initially and then you're going to see a considerable amount of follow in business being what you'd call expansion. So that's part of what we were able to do to achieve the numbers we did this quarter.
John Dillon: Once the camel's nose is in there, you can work on getting the rest of the camel in, and that's an opportunity for us to sell additional software and services. But right now, most of the QSRs have a pretty specific use case. It doesn't include a lot of additional or any additional revenue from an ARPU standpoint, so it's all hardware.
Speaker Change: Now.
Speaker Change: Most of that U S or they have a pretty specific.
Speaker Change: Use case. It doesn't include a lot of additional or any additional revenue from our arpus standpoint, So it's all hardware.
John Dillon: Great. Thank you. And then relative to the, you had pointed out that you had two customers that had high inventory levels and you have identified them. And I believe you've said you met with others who have more normal inventory. I wasn't really sure the point. Are you suggesting you're working with these customers to try to help them offload the inventory or they're just, they're, they're focused on, they're not buyers right now just because they're working down the inventory.
Richard Fearon: I know that a number of these sales come from sort of a larger trade show type thing that McDonald's or the QSR does on behalf of the company. But is the sales force, you know, in touch with those franchisees regularly? Absolutely.
Speaker Change: As our sales force do they have the international reach I know that a number of these sales come from sort of a larger tradeshow type thing that a mcdonald's or the kyocera does on on behalf of the company, but it.
Speaker Change: Is the sales force.
Speaker Change: In touch with those franchisees regularly.
John Dillon: Absolutely. We just were at the annual event in Barcelona. We were swamped with foreign countries coming by the unit. We support things like Portuguese, Japanese, Polish, a lot of different language types with these systems, and it really solves a problem for many of these clients, and as the food service industry sort of matures and starts focusing on delivering, you know, information around food service and food safety, many of these clients are very excited about the product.
Speaker Change: Absolutely. We just we're at the annual event in Barcelona, we were swamped with foreign countries coming by the unit, we have we support things like Portuguese Japanese Polish a lot of different language types.
John Dillon: I just want to make sure I understood the point. Well, I think the answer to the question is yes, both. We know who they are. We know why they bought more inventory than they needed. They were all concerned about supply chain shortages. And if you're making slot machines and these things sell for 25 to 50 K. And you can't sell them because you don't have the systems that transact provides. And the other competitors out, you know, is basically on their heels and is missing an action.
Speaker Change: These systems and it really solves the problem for many of these clients and as the foodservice industry sort of matures and starts to focusing on delivering.
Speaker Change: You know that the information around you know foodservice and food safety.
John Dillon: They needed our systems and they were just really worried. So. It's worked out pretty well, other than sort of the shark fin increase in revenue that we had early last year, and we're still working back to a normal seat. But we know who they are trying to help them work through that. We have plenty of casinos that say they want to transact technology and not the technology from the other guys. So I guess the answer to your question is yes, they've got to work through the volume of inventory that they have on the shelf, but we're helping them every day to try to make that happen.
Speaker Change: Many of these clients are very excited about the product. So we had a great event there when I went personally.
John Dillon: So we had a great event there, and I went personally. Our booth was inundated with people, and one of the interesting things about this particular event is that it is only for the vendors and the franchisees. It's not for wannabes, and you could actually sell your product at the event. So it, which is very atypical for events like this, and we actually were taking orders at the booth. So to answer your question, the answer is yes.
Speaker Change: Our booth was inundated with people and one of the interesting things about this particular event.
Speaker Change: It is only for the vendors and the franchisees, it's not for want of Beast and you could actually sell product at the event. So it which is very atypical for events like this and we actually were taking orders in the booth. So to answer your question is.
John Dillon: We know who they are and we have good relationships with them. But when it first happened, we didn't really know where all the inventory was and we have so now we have a really good hand on it. That was the point of that we may try to make in the call today. George, maybe a little more so basically all the OEMs have worked through all through their inventory issues and they're basically back to a normal buying pattern, other than those two.
Speaker Change: The answer is yes, we know these people they know what.
John Dillon: We know these people, and they know us. We've got a pretty strong presence in most of these international markets. And the focus that we did with the FST sales team was, I only want you selling to companies that can buy a lot of systems, but in terms of what the potential is, you can look globally and not just in the United States. And so what's happening is they're focusing a lot on clients that have not just a strong North American presence but a presence in international markets. And this QSR is an excellent good example of exactly that.
Speaker Change: We've got a pretty strong presence in most of these international markets and the focus that we did with the.
John Dillon: Yeah, that was the point we're trying to make is that that an early precursor to normal seat and there's just two left and once those guys are back to normal, I think you're going to see the numbers as you would have expected pre-pandemic with the growth, the increase in market share that we've predicted that's about 15%. Gotcha. Okay.
Speaker Change: S. T sales team was I only want you're selling to companies that can buy a lot of systems.
Speaker Change: But in terms of what the potential is you can look globally and not just in the United States and so what's happening is they are focusing a lot on the clients that have not just a strong north American presence, but have a presence in international markets and this <unk> an exact a good example of exactly that.
Steven DeMartino: Rick Deda, on the... In the international markets, we also sometimes go through a network of resellers or distributors that are authorized by that QSR. So that gives us a reach beyond just our direct sales people. So we'll have contact with them, our direct salesperson, and that distributor or reseller, so they reach out to the franchises on our behalf. So that gives us more reach and flexibility than just our outside team.
Speaker Change: Breaking that down or any of that.
Speaker Change: And on the Internet.
Speaker Change: The international markets, we also sometimes go through.
George Sutton: And relative to the strategic view, I know you can't go into any detail. I will just note that I did look up what aciduously means and it sounds like you're working with great care and perseverance. So I wish you luck with the completion of that. Thank you.
Speaker Change: Network of resellers.
Speaker Change: Resellers or distributors that are authorized by the <unk>. So that gives us a reach beyond just our direct sales people. So they don't those will have contact with them are direct salesperson with that distributor reseller. So they reach out to their franchises on our behalf. So that gives us more reach and stretch and just all around.
John Dillon: My mom was an English teacher, so it's always my pleasure to introduce a new word to the vocabulary of the math. That's my new one for the day. Thank you. All right. Yeah, no, we're hard at work on that and you all know that we can't talk about anything, but we're doing what you want us to do. We're working hard at it. We're looking at lots of different alternatives and things that might make sense. And we just aren't where we've got any news to report. And soon as we do, we'll report it and you can just trust that we're doing what you'd want us to do.
George Sutton: Perfect. Thank you.
Speaker Change: <unk> yeah, good good point, Steve absolutely.
Steven DeMartino: Yeah, good, good point, Steve. Absolutely.
Richard Fearon: So the 200 units sale in Italy, was that the beginning of this brand new market, and so that's kind of the tip of the iceberg, and going through 2024, do you expect to start breaking into the additional 3,500 that you've targeted?
Speaker Change: That's impressive so that the 200 unit sale in Italy was that the beginning of this brand new market and so that's kind of the tip of the iceberg.
Speaker Change: Going through 'twenty 'twenty four do you expect to start breaking into the additional 3500 that you've targeted.
Speaker Change: That's right.
John Dillon: I mean, what I mentioned on the call was this was a region where we had no presence before. And so we're very excited about, you know, bringing the BOHA terminal into the country, and we're excited about the ongoing potential. And of course, whenever you land a client like that, you get other clients to say, well, what are they doing over here? What are they doing over there? And we can say, well, why don't you talk to the folks in Italy?
Speaker Change: That's what I meant what I mentioned on the call was this let's say a region, where we had no presence before and so we're very excited about.
Operator: As a reminder, you would like to ask a question, press r1 on your telephone keypad.
Speaker Change: Bringing the bolthouse terminal into the country and we're excited about the ongoing potential of of course whenever you land a client like that.
Jeffrey Martin: Our next question comes from Jeff Martin with Roth Capital Partners. Please proceed with your question. Thanks. Good afternoon, Jonathan. Hope you're doing well.
Speaker Change: You know you get you get other clients to say well what are they doing over here what are they doing over there and we can say well why don't you talk to the folks in Italy, and they'll say this stuff is really awesome and we we think if I were you I would buy some of it and so you know kind of its sort of like kind of cracking through you know what might've been a brick wall.
Steve Demartino: I was wondering if you could go into and break down the unit placements a little bit more in the quarter. Almost 1,500 units. Can we get an updated installed base number for the terminals? I know there's some puts and takes. We've got the journals going in, the 7-11 coming out, and then it sounds like some original boha terminals will replace with the T2 or the second version. So help us kind of understand what's going on underneath that 1,500 number and then the total installed base place.
John Dillon: And they'll say, "This stuff is really awesome, and we think, if I were you, I would buy some of it." And so, you know, kind of cracking through what might have been a brick wall, and what you get on the other side, it's pretty easy sailing.
Speaker Change: Once you get on the other side, it's pretty easy sailing.
Richard Fearon: And domestically, with that QSR, are you seeing similar types of opportunities in that kind of dynamic where you are sort of a trusted partner and put in touch with other potential buyers that are the real deal when you go to trade shows and things like that? Or is this really just an international phenomenon?
Speaker Change: Right and domestically with ex U S are you seeing similar types of opportunities and are in that kind of dynamic where you are sort of like a trusted partner and put in touch with other potential buyers that are real the real deal. When you go to trade shows and things like that or is that is this really just an international phenomenon.
John Dillon: No, this is the same in the US. I mean, we know the large franchise owners and operators, and we talk to them. In fact, it's kind of a push and a pull strategy. It's where we have to get the green light from headquarters that says we like this technology, and we are going to approve it for use in our operations. And then And then that gives us, if they do that, that gives us a license to go, if you will. It's a license to hunt, kind of.
Speaker Change: No. This is the same in the U S. I mean, we we know the large.
Steve Demartino: Thanks. Yes, Steve, do you want to take that? Yes. The total installed base at the end of the quarter, Jeff, was 16,411 units. Okay. And then, that's helpful. So, did 711 roll off in early April? Just trying to get a sense if there was any recurring revenue contribution. Seven are still in that number that I gave to Jeff, so they will trail off as we go through the year. So I would suspect by the end of the year, all of the 711 units will be out of the solid base number.
Speaker Change: Our franchise owners operators and we talk to them in fact, it's kind of a push and a pull strategy, where we have to get the green light from the headquarters. It says we like this technology, we are going to approve it for the use in our operations and then.
Speaker Change: And then that gives us that they do that that gives us the license to go if you will it's a license to hunt.
John Dillon: I mean, that sounds kind of funny, like you're hunting, but it allows us to engage with potential customers. But what we do at the same time is we also talk to the franchisees and say, here's a way to do a better job of what you're already doing. It's going to save money, it saves food wastage, it improves customer satisfaction, and it complies with health regulations. You probably need to be doing this.
Speaker Change: I mean that sounds kind of funny like youre hunting, but it allows us to engage with the potential customers, but what we do at the same time is we also talk to the franchisees and say here's a way to do a better job of what you'd already doing it's going to save money it saves food wastage.
Steve Demartino: Okay, you broke up a little bit in that answer. It rolls out slowly over time. Is that what you're saying? It rolls off. You know, so they're going to turn them off over time, so it'll trail off as we go through the rest of the year.
Speaker Change: It improves customer satisfaction and complies with health regulations.
Speaker Change: You probably need to be doing this.
John Dillon: And, you know, we can help them understand the ROI of the technology and the like. And they basically call up the headquarters and say, we want one of these things. And so that's kind of the push and the pull of it, if you understand what I mean. And so we do both.
Speaker Change: We can help them understand the ROI of the technology and the like.
Speaker Change: And they basically call it the headquarters and say we want one of these things.
Steve Demartino: Okay, did much of a trail off during the 7 quarter? Almost all of them were still online at the end of June. Okay, that's helpful.
Speaker Change: So that's kind of a push and the pull of it yes.
Speaker Change: If you see what I mean, and so we do both.
Richard Fearon: Yeah, that makes good sense. And John, hats off to you for going out there to Barcelona and being part of that. It sounds like each one of those conversations was a meaningful conversation. So, in particular, as strategic alternatives are considered, it seems that sort of one-on-one touch, the major customers have to be a key component of it so that, you know, everyone's, so there's, there's no, people aren't disconcerted by what's going on completely agree.
Speaker Change: Yes that makes good sense and John hats off to you for.
John Dillon: And then, John, how should we think about, you know, terminal installations as we progress throughout the back half of the year? Installations or sales success, or can you give me a little more perspective on the question? Yeah, I mean, it would be great to have your perspective on both installations and bookings, but installations was what I was originally going for. Yeah, well, when we get a booking, we get money. We're still in one of these modes where when we sell a terminal, the customer pays for it.
Speaker Change: Out there to Barcelona, and in being part of that it sounds like each one of those conversations but its a meaningful conversation.
Speaker Change: Are you a particular strategic alternatives are considered it seems that sort of one on one touch the major customers has to be a key component of it so that you.
Speaker Change: You know everyone's so theres no people aren't just concerned about what's going on.
Speaker Change: Completely agree.
Richard Fearon: Well, congratulations on a nice quarter. Thanks for the hard work. All right, thanks.
Speaker Change: Well congratulations on a nice quarter, thanks for the hard work.
John Dillon: All right, thank you.
Speaker Change: Alright, thank you.
John Dillon: And then we get the recurring revenue. So, you know, right now the sale of the terminal itself contributes to the lion share of the revenue, because we get that all up front. You know, over time, I think maybe there'll be scenarios where we have the whole system being recurring revenue, which is an interesting and intriguing opportunity for us. But right now, to get specific to your question, it depends on the rollout plan.
Speaker Change: Yeah.
Operator: There are no further questions at this time. I would now like to turn the floor back over to John Dillon for closing comments.
Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Jon Cohen for closing comments.
John Dillon: Well, listen, thanks a lot, everyone. We felt like it was a good quarter. We're making progress. I think the things that we're doing, a lot of it is blocking and tackling and staying focused and measuring things and seeing where there are constraints and then removing them.
Jon Cohen: Well listen thanks, a lot everyone. We felt like it was a good quarter, we're making progress I think the things that we're doing a lot of it's blocking and tackling and staying focused and measuring things and seeing where theres constraints and then removing them. The back office Steve's team is doing a great job and we look forward to that.
John Dillon: The back office, Steve's team, is doing a great job, and we look forward to the next call. We've got a couple conferences coming up in the fall. We've got NACS, the National Convenience Store Conference, and we've got G2E in Las Vegas.
Steve: Next call we've got a couple of conferences coming up in the fall. We've got next up in Nashville convenience store conference and we've got G. TUI in Las Vegas. So if we don't see you. There we will see you on the next earnings call and as always Steve and I. If you work if if you'd put if we plan. It we're happy to spend some time on the phone and talk to you a little bit in person about.
John Dillon: I mean, most of the clients that we have that have a large base of business, they're not going to have a simultaneously rollout in every one of their stores. They usually start out with a handful. And then it just sort of crescendos and you get a sort of steady stream until eventually maybe you've prosome sort of ceiling where you've got most of the units installed. And then that's of course an opportunity for us to sell software and other services that contribute to the ARPU.
John Dillon: So if we don't see you there, we'll see you on the next earnings call. And, as always, Steve and I, if you work, if you plan it, we're happy to spend some time on the phone and talk to you a little bit in person about what's working and what's not and what we can share with you. We're happy to do that. So with that, we'll sign off and wish everybody well on this Thursday afternoon. Thank you.
Speaker Change: What's working and what's not and what we can share with you we happen to do that so with that we'll sign off and I wish everybody well on this Thursday afternoon.
Jon Cohen: <unk>.
Jon Cohen: Yeah.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
John Dillon: And then there's replacement units because the units wear out and they have to buy more units and alike. So normally, I normally install for us from time of order, you know, depends so much on the customer, but it can happen in a matter of, you know, a month, but it can also take, you know, a few months if they're trying to roll out the multiple stars and they have a usually the clients have a plan for the rollout.
Operator: [music]
Speaker Change: [music].
John Dillon: So, I mean, from a selfish standpoint, I want the rollouts to be, you know, pretty smooth from a resource standpoint so we can staff them appropriately. From a revenue standpoint, we usually get the lion's share of the revenue up front and then we'll capture the balance of the ARPU stuff over the next few years, many of the contracts are most of them are three years.
John Dillon: We don't yet report much as it relates to net retention, but that's something that I think we're going to add to the earnings calls in the future where you're looking at ads and deletes. In other words, what's the expansion amount, what's the net attrition, what's the net expansion, and what's the delta between the two, but we don't have, we don't have enough history yet to be able to make those numbers meaningful enough to report them.
John Dillon: But to your question, how quickly somebody implements, how long the customer lasts are all things that should go into the calculus for, you know, what the value of the install basis and 16,000 units means there's not a lot of opportunity, so we're pretty excited about that.
John Dillon: Great, thank you.
Rick Fearon: Our next question comes from Rick Fearon, with a crude textual partners. Please proceed with your question. Nick, are you there? Rick, are you there? Yes, nice job in stabilizing things this quarter, Johnny. I wanted to ask a question about the T2 boha terminals that are going to the big QSR, and you mentioned the 200 unit sale in Italy, and then on the heels of that, you talked about 3500 additional units, which sounded like international sales as well.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: [music].
Rick Fearon: Did I hear correctly that that is anticipated by year end 2024, so within the next six months? I think the potential to sell into those new markets, once we get the green light, will mean that we will move terminals in 2024. It's pretty hard to project at this stage exactly how many that's going to be, but the answer to your specific question is yes, we're going to be selling into those markets in this year.
Rick Fearon: Okay, that's great, and then what's our end? Is there a recurring revenue component to those? Is there some labels that get printed from that, or is that just kind of upfront sale? Currently, at this point, there's not a lot of ARPU or almost none on these units, but there's the opportunity to sell into those units, so it's potential energy, not kinetic energy yet to get kind of physics on you. We're pretty excited about having those units out there, and as we embellish product offerings from a software standpoint and other services, we think the opportunity is there.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: [music].
Rick Fearon: It's sort of like getting the camel's nose into the tent. Once the camel's nose is in there, you can work on getting the rest of the camel in, and that's an opportunity for us to sell additional software and services. But right now, most of that QSR, they have a pretty specific use case. It doesn't include a lot of additional or any additional revenue from a ARPU standpoint, so it's all hard work.
Speaker Change: Mhm.
Speaker Change: [music].
Rick Fearon: Is our sales force, do they have the international reach? I know that a number of these sales come from the sort of larger trade show type thing that McDonald or the QSR does on behalf of the company, but is the sales force in touch with those franchisees regularly? Absolutely. We just were at the annual event in Barcelona. We were swamped with foreign countries coming by the unit. We support things like Portuguese, Japanese, Polish, a lot of different language types for these systems, and it really solves a problem for many of these clients, and as the food service industry sort of matures and starts focusing on delivering the information around food service and food safety, many of these clients are very excited about the product.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Mhm.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Rick Fearon: So we had a great event there when I went personally. Our booth was inundated with people, and one of the interesting things about this particular event is it is only for the vendors and the franchisees. It's not for wannabes, and you could actually sell product at the event, which is very atypical for events like this, and we actually were taking orders in the booth. So to answer your question is the answer is yes, we know these people, they know us, we've got a pretty strong presence in most international markets, and the focus that we did with the FST sales team was, I only want you selling to companies that can buy a lot of systems but in terms of what the potential is, you can look globally and not just in the United States and so what's happening is they're focusing a lot on the clients that have not just a strong North American presence but have a presence in international markets and this QSR is an exact good example of exactly that.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.
Rick Fearon: In the international markets, we also sometimes go through a network of resellers or distributors that are authorized by that QSR so that gives us a reach beyond just our direct sales people. So those will have contact with them are direct sales person with that distributor reseller so they reach out to the franchises on our behalf so that gives us more reach and stretch than just our outside team. Yeah, good point Steve, absolutely.
Speaker Change: Okay.
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Rick Fearon: That's impressive so that the 200 unit sale in Italy was that the beginning of this brand new market and so that's kind of the tip of the iceberg and going through 2024 expect to start breaking into the additional 3500 that you've targeted. That's right, I mean that's what I meant what I mentioned on the call was this was a region where we had no presence before. And so we're very excited about you know bringing the Bohot terminal into the country and we're excited about the ongoing potential of course whenever you land a client like that, you know you get you get other clients to say well what are they doing over here what are they doing over there and we can say well once you talk the folks in Italy and they'll say this stuff is really awesome and we think if I were you I would buy some of it.
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Rick Fearon: And so you know kind of it's sort of like kind of cracking through you know what might have been a brick wall and what you get on the other side it's pretty easy sailing. Right and domestically with that to us are you seeing similar types of opportunities and that kind of dynamic where you are sort of a trusted partner and put in touch with other potential buyers that you know are real the real deal when you go to trade shows and things like that or is that is this really just an international phenomenon.
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Rick Fearon: No this is the same in the US I mean we we know the large franchise owners operators and we talk to them in fact it's kind of a push in a poll strategy it's where we have to get the green light from the headquarters it says we like this technology we are going to approve it for the use in our operations and then. And then that gives us that they do that that gives us a license to go if you will to license to hunt kind of I mean that sounds kind of funny like you're hunting but allows us to engage with the potential customers but what we do at the same time is we also talk to the franchise and say here's a way to do a better job of what you're already doing it's going to say money to save food wastage.
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Rick Fearon: In improved customer satisfaction complies with health regulations you probably need to be doing this and you know we can help them understand the ROI of the technology and the like and they basically call it the headquarters and say we want one of these things and so that's kind of the push in the poll of it if you see what I mean and so we do both. Yeah, that makes a good sense.
Rick Fearon: And John Hapoff to you were out there to Barcelona and being part of that. It sounds like each one of those conversations was a meaningful conversation. So particular, yes, statistical alternatives are considered. It seems that sort of one-on-one, the major customers has to be a key component of it so that, you know, everyone's, so there's no people aren't disconcerted by what's going on. Completely agreed. Well, congratulations on a nice quarter. Thanks for the hard work. All right. Thank you.
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Operator: There are no further questions at this time.
John Dillon: I would now like to send the floor back over to John Dillon for closing comments. Well, listen, thanks a lot, everyone. We felt like it was a good quarter. We're making progress. I think that things that we're doing. A lot of us blocking and tackling and staying focused and measuring things and seeing where there's constraints and then we're moving them. The back office Steve's team is doing a great job. And we look forward to the next call.
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John Dillon: We've got a couple of conferences coming up in the fall. We've got NACS, National Community Store Conference, and we've got G2E and Las Vegas. So if we don't see you there, we'll see you on the next earnings call. And as always, Steve and I, if you plan it, we're happy to spend some time on the phone and talk to you a little bit in person about what's working and what's not and what we can share with you. We happen to do that.
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Operator: So with that, we'll sign off and wish everybody well on this Thursday afternoon. Thank you.
Operator: This includes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. [inaudible] John Dillon, John Dillon, John Dillon[inaudible] John Dillon, John John Dillon, John Dillon, John Dillon, John[inaudible][inaudible] John Dillon, John[inaudible] John Dillon, John Dillon, John Dillon, John[inaudible] John Dillon, John Dillon, John[inaudible] John Dillon, John Dillon, John[inaudible] John Dillon, John Dillon, John Dillon, John Dillon, John[inaudible]
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