Q4 2024 TransAct Technologies Inc Earnings Call
Operator: Greetings and welcome to the TransAct Technologies fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the transact technologies fourth quarter 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation should anyone require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A brief question and answer session will follow the formal presentation.
Operator: Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
As a reminder, this conference is being recorded it.
Ryan Gardella: It is now my pleasure to introduce your host, Ryan Gardella, Investor Relations. Thank you. You may begin. Thank you.
It is now my pleasure to introduce your host Ryan Gardella Investor Relations. Thank you you may begin.
John Dillon: Good afternoon and welcome to the TransAct Technologies fourth quarter and full year 2024 earnings call. Today we'll be discussing the results announced in our press release issued after market close.
Thank you Todd. Thank you good afternoon, and welcome to the transact technologies fourth quarter and full year 2024 earnings call.
They will be discussing the results announced in our press release issued after market close.
John Dillon: Joining us from the company is CEO John Dillon and President and CFO Steve DeMartino. Today's call will include discussion of the company's key operating strategies, the progress on these initiatives, and details on our fourth quarter and full year funding.
Speaker Change: As for the company is CEO, John <unk>, President and CFO, Steve Demartino.
Speaker Change: Today's call will include a discussion of the company's key operating strategies progress on these initiatives and details on our fourth quarter and full year financial results. We'll then open the call participants for questions.
John Dillon: who then opened the call to participate in this request. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking in nature. Statements on this call may be deemed as forward-looking, and actual results may differ materially. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings, including its reports on 10-K and 10-Q forms. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call.
Speaker Change: During this conference call contains statements about future events and expectations, which are forward looking in nature statements on this call may be deemed as forward looking at actual results may differ materially.
Speaker Change: 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 Form 10-Q for us.
Transact undertakes undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that obstacle.
John Dillon: Today's call and webcast will include non-GAAP financial measures and the meeting of SEC Regulation G. When required, reconciliations of all non-GAAP financial measures and most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company website.
Speaker Change: Call them with gas will include non-GAAP financial measures of the meaning of the SEC regulation G. When required reconciliations of all non-GAAP financial measures most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company website and with that I'd like to turn the call over to John.
John Dillon: And with that, I'd like to turn the call over to John. Thank you, Ryan. And good afternoon, everyone, and thank you for joining us. So, I'm pleased to announce what I consider a relatively strong year at the end, particularly for FST. Total revenue for the fourth quarter was $10.2 million, highlighted by the sale of 1,639 BOHA terminals. It's the highest quarterly number we've recorded since 2020, and in fact, I did some math, and over the last eight quarters, beginning in Q1, two years ago, 2023, we've seen a $40.8 million increase. plus 42% combined annual growth rate.
John: Thank you Ryan.
John: And good afternoon, everyone and thank you for joining us.
So I'm pleased to announce a what I consider a relatively strong year.
John: At the end, particularly for F. S. T. A total revenue for the fourth quarter was $10 2 million highly.
Highlighted by the sale of 1639, Baja terminals, it's the highest quarterly number we have recorded since 2020.
John: And in fact, I did some math and over the last eight quarters beginning in Q1.
Two years ago of 2023, we've seen a 40.
John: Plus 42% combined annual growth rate.
John Dillon: in our quarterly BOHA terminal placements that's compounded. And this demonstrates, in my opinion, the improvements we've made in our go-to-market, the GTM strategies, and our internal sales motions. They are, in fact, working well to improve the business. We are also pleased that the momentum is here, and we believe that terminal placements will continue to trend upward throughout 2025.
John: In our quarterly Bohai terminal placements.
John: Compounded.
And this demonstrates in my opinion the improvements we've made in our go to market. The G T N strategies and our internal sales motions.
They are in fact, working well to improve the business. We were also pleased that the momentum. He is here and we believe that terminal placements will continue to trend upward throughout 2025.
John Dillon: So let's review some of the other fourth quarter and full year results. For the fourth quarter, we generated total FST revenue, that's Food Service Technology, $4.3 million. It's approximately flat sequentially and down about 8% to 9% year over year. And recurring FST revenue of $2.7 million, down almost 15% sequentially and 5% year over year. For the full year, we recorded FST revenue of $16.1 million, and FST recurring revenue for the year was $10.8 million, down about 1%. and 2.9 percent, respectively, from the prior year. As a reminder, we stopped receiving recurring revenue and additional hardware sales, as previously discussed, from a large client in the third quarter of 2024, meaning that much of our third and all of our fourth quarter recurring revenue results include only a de minimis contribution from that client, but our year-over-year comparisons do, so that's wiped down a little bit.
John: So let's review some of the other fourth quarter and full year results.
John: For the fourth quarter, we generated total SSD revenue, that's foodservice technology, a $4 3 million to approximately flat sequentially and down about 8% to 9% year over year and recurring SSD revenue of two point.
John: 7 million down almost 15% sequentially and 5% year over year.
John: For the full year, we recorded F. S. T revenue was $16 1 million and F. S T recurring revenue for.
John: For the year was $10 8 million down about 1%.
And two 9% respectively from the prior year.
John: As a reminder, we stopped receiving recurring revenue and additional hardware sales as previously discussed from a large client in the third quarter of 'twenty 'twenty four.
John: Meaning that much of our third in all of our fourth quarter at recurring revenue results include only a de minimis contribution from that client, but our year over year comparisons do so that's why it's down a little bit.
John Dillon: However, we believe that our improving results ultimately will offset the loss from that one client, unexpected as it was. I'm not happy about it, but, you know, it is what it is. It happens occasionally to any company. So we're working our way past that, and the numbers, I think, show that. The growing success in the FST market should direct direct results, as I pointed out, of the reorganization refocusing the FST sales team and marketing teams during the past 18 months. We acknowledge and understand that there's still work to be done. This is a recurring and improving process, you know, constant improvement.
John: We believe that our improving results ultimately will offset the loss from that one client unexpected as it was.
I'm not happy about it but you know it is what it is it happens occasionally to any company. So we're working our way past that and the numbers I think show that.
The growing success in Memphis tea markets of that direct result, as I pointed out the reorganization refocusing the sales team and marketing teams during the past 18 months.
John: We acknowledge and understand that there's still work to be done this isn't it a recurring and an improving process.
John: Constant improvement, but I'm pleased with the progress so far and the growing momentum in the FSP side of our business, it's still going to be lumpy.
John Dillon: But I'm pleased with the progress so far and the growing momentum in the FSP side of our business. It's still going to be lumpy, but we expect overall the trends will be upward and to the right, which is where you want them to be. We're also seeing good conversion stream, a good conversion stream coming from the existing customers who are using either our AccuDate terminal or earlier terminals that we provided in the past to the new BOHA Terminal 2. And this is including from our large QSR customer who refuses to let us use their name.
John: But we expect overall the trends will be upward and to the right, which is where you want them to be.
John: We're also seeing good conversion stream a good conversion stream coming from the existing customers, who are using either our academic terminal or earlier terminals that we provided in the past to the new ball at terminal two and this is including from our large <unk> customer.
Speaker Change: Who refuses to let us use their name.
John Dillon: However, they're continuing to roll out the Terminal 2 as planned. In addition to our large QSR and a large sushi customer, this is Hisho, we have a major convenience store chain customer that has begun to upgrade about 1,400 of their old workstations to the new BOHA Terminal. As a reminder, we discontinued our prior generation, AccuDate 9700, at the end of 23. which also makes the AccuDate install base of about 40,000 units a potential target for upgrades to the Terminal 2. And we're gradually targeting that and finding a successful opportunity. For the quarter, we landed six new accounts, not lots, but it's good.
Speaker Change: However, they're continuing to rollout the terminal to its plan. In addition to our large <unk> and a large sushi customer. This is he show.
Speaker Change: We have a major convenience store chain customer that it's begun to upgrade about 1400 of their old workstations to the new Bolthouse terminal.
As a reminder, we discontinued our prior debt generation Ackee date 9700 at the end of 'twenty three.
Speaker Change: Which also makes the action date installed base of about 440000 units a potential target for upgrades to the terminal two and we're gradually targeting that and finding a successful opportunity there.
Speaker Change: For the quarter, we landed six new accounts not lot, but it's good and however, I'll point out that the six accounts represent future potential opportunity for about 6000 units over time, we tend to use a bit of a land and expand strategy, it's easier to get the first bite of the Apple as it were.
John Dillon: However, I'll point out that these six accounts represent future potential opportunity for about 6,000 units over time. We tend to use a bit of a land and expand strategy. It's easier to get the first bite of the apple, as it were. And then the goal is to get the rest of the camel's nose, not just the nose, but the rest of the camel into the tent. And that's usually what happens with us. So land and expand the strategy and the six new accounts are an excellent opportunity for us in the future.
Speaker Change: And then the goal is to get the rest of the camel's nose, not just the nose, but the rest of the Campbell into the tent and that's usually what happens with us so land and expand the strategy and the six new accounts are an excellent opportunity for us in the future.
John Dillon: Additionally. The new pipeline remains solid, new business pipeline, with quarter-over-quarter difference in the rolling four-quarter pipeline numbers remaining consistent and constant. So the pipeline's holding up good. I'll point out that when I took over, the pipeline discipline was pretty weak. The discipline around vetting the pipeline and making sure you know what's in it and what's going to close and what's not going to close has improved significantly since we began the GTM overhaul last year.
Speaker Change: Additionally.
Speaker Change: The new pipeline remained solid new business pipeline.
Speaker Change: With a quarter over quarter difference in the rolling four quarter pipeline numbers remaining consistent and constant so the pipelines holding up good I'll point out that when I took over the pipeline discipline was pretty weak.
Discipline around vetting, the pipeline and making sure you know what's in it and what's going to close and what's not going to close has improved significantly since we began the G. T M overhaul last year.
John Dillon: Moving on to casino and gaming, we recorded revenue in the fourth quarter of $4.8 million up. 13.5% to 14% year-over-year, and approximately 5% sequentially. We're pleased to see the continued normalization of this market, as we predicted. There is evidence of improvement in the demand side of the market, with our first quarter this year trending a bit stronger than the fourth quarter last year so far. And on the inventory side, we believe we now have all of our major domestic OEM partners back in buying positions after working with them, and in some cases, to reconfigure existing inventory they had so they could sell it in other markets.
Speaker Change: Moving on to casino and gaming, we recorded revenue in the fourth quarter of $4 8 million up.
Speaker Change: A 13.5% to 14% year over year and approximately 5% sequentially. We're pleased to see the continued normalization in this market as we predicted our.
Speaker Change: There is evidence of improvement in the demand side of the market with our first quarter of this year trending a bit stronger than the fourth quarter last year so far.
Speaker Change: And on the inventory side, we believe we now have all of our major domestic OEM partners back in buying positions after working with them and in some cases to reconfigure existing inventory. They had so they could sell it in other markets. So that's worked out well.
John Dillon: So that's worked out well.
John Dillon: I'd also like to highlight two pieces of news that we think will be important for 25, and that's... First, we have completed the rollout of our Epic TR-80 Thermal Roll Printer. This printer is used in sports betting kiosks, some video lottery terminals, and other non-casino games. and it's going to be something that's going to complement some of the other systems that we already sell in casino and gaming, so we're happy about that. We expect it to fuel additional sales more or less throughout the year. And second, we are again encouraged by the increased sales traction we're seeing with Epic Central due to our new relationship with Casino Track.
Speaker Change: I'd also like to highlight two pieces of news that we think will be important for 25 and that's.
Speaker Change: First we have completed the rollout of our epic T. R 80, thermo roll printer.
This printer is used in sports betting kiosks, some video lottery terminals and other non casino games.
Speaker Change: And it's going to be something that's going to complement some of the other systems that we already sell in casino and gaming. So we're happy about that.
Speaker Change: We expect it to fuel additional sales more or less throughout the year and second we are again encouraged by the increased sales traction we're seeing with epic central.
Speaker Change: Due to our new relationship with Casino track Casino tracks sells epic's central as part of their slot suite product offering on a subscription basis. So we've received if you will recurring revenue per month per unit.
John Dillon: Casino Track sells Epic Central as part of their slot suite product offering on a subscription basis. So we receive, if you will, recurring revenue per month, per unit, basically per slot going forward. And it basically helps encourage players to expand their play, play longer, improves the average daily play. So this is exciting. They've got a really nice solution with slot suite and we're a component of that, which helps us as well. We believe that 2025 will be a positive year, over a year of casino and gaming sales. It's incumbent upon me to add that that business, we call it C&G, but casino and gaming, it's still recovering from the pandemic and the exuberant post-pandemic rebound, and now it's in a bit of a hangover.
Speaker Change: Basically for slot.
Speaker Change: Going forward and it basically helps encourage players to expand their play play longer it improves the average daily play. So this is exciting they've got a really nice solution with slot suite and we're a component of that which helps us as well.
We believe that 2025, we'll see a positive year over a year casino and gaming sales. However.
Speaker Change: It's incumbent upon me to add that that business, we call. It C N G, but casino and gaming is still recovering from the pandemic.
Speaker Change: And the exuberant post pandemic rebound and now it's in a bit of a hangover mean, everybody came back to the casinos in every one of them like crazy when the pandemic was over and now the casinos are sitting there figuring out what what steady state going to look like however, all in all we see no systemic problems in the midterm for our C N G.
John Dillon: I mean, everybody came back to the casinos and everyone went crazy when the pandemic was over, and now the casinos are sitting there figuring out, well, what's SteadyState going to look like? However, all in all, we see no systemic problems in the midterm for our C&G business, but our clients are still dealing with some amount of day-to-day market uncertainties. But again, we feel that the industry is back and it's going to be in good shape. I know some of the casino stocks are down a little bit and some of them have posted down results, but we don't see any slowdown in the long term or the midterm relative to those industries.
Business, but our clients are still dealing with some amount of day to day market uncertainties, but.
Speaker Change: Again, we feel that the industry is back and it's going to be in good shape I know some of the casino stocks are down a little bit and some of them have posted down results, but we don't see any slowdown on the in the long term or the midterm relative to those industries.
John Dillon: Next, I want to provide you with an update on our strategic review process. We began that only just a year ago. We started it, we announced we were going to do it in Q4 of 23. We began in earnest in 24. The process is active, and it's ongoing. Our management team and our board of directors are focused on the process, believe me, and collectively we're determined to consider any and all options that increase and or deliver shareholder value.
Next I want to provide you with an update on our strategic review process.
Speaker Change: We began that only just a year ago. We started it we announced we were going to do it in Q4 of 'twenty three we began in earnest in 'twenty four.
Speaker Change: The process is active and it's ongoing.
Our management team and our board of directors are focused on the process believe me and collectively we are determined to consider any and all options that increase and deliver shareholder value.
John Dillon: We don't have further updates right now, but the process when the company determines that a disclosure is appropriate or required, you will hear about it immediately from us. Many of our shareholders have said, well, it seems like it's taking a long time. Believe me, the process is way more complex than you might suspect from the outside, but we're working very hard at it. You can trust me on that. We're not turning away any opportunities that might come our way. We're looking at everything, and I believe that the process is doing the things that most investors would want us to do.
Speaker Change: We don't have further updates right now, but the process when the company determines that disclosure is appropriate or required you're you will hear about it immediately from us.
Speaker Change: Many of our shareholders who've said well it seems like it's taking a long time believe me the process is way more complex than you might suspect from the outside.
Speaker Change: But we're working very hard at it you can trust me on that.
Not turning away any opportunities that might come our way, we're looking at everything and I believe that the process is doing the things that most investors would want us to do.
John Dillon: Finally, before I turn the call over to Steve...
Steve: Finally, before I turn the call over to Steve.
John Dillon: Let me provide our 2025 financial outlook. For total revenue, we're expecting a range of between $47 million and $52 million in top-line revenue. And for adjusted EBITDA, we're expecting a range of zero, which is breakeven, to about a negative $2 million in EBITDA. These ranges assume we see continued recovery in casino and gaming throughout the year, with no disruptions in either supply chain or demand. While we believe this will be the case, we felt it was important to provide that additional color commentary. Overall, we are pleased with our momentum on AFSC side of the business, including the 40-plus percent compound annual growth rate in terminal units placed in the last two years.
Steve: Let me provide our 2025 financial outlook for total revenue, we're expecting a range of between 47 million or $52 million in topline revenue.
Speaker Change: And for adjusted EBITDA, we're expecting a range of zero, which is breakeven to.
About a negative $2 million in EBITDA. These.
These ranges assume we see continued recovery in casino and gaming throughout the year with no disruptions in either supply chain or demand. While we believe this will be the case, we felt it was important to provide that additional color commentary.
Speaker Change: Overall, we are pleased with our momentum on the assets side of the business, including the 40 plus percent.
Speaker Change: Compound annual growth rate in terminal units placed.
John Dillon: We got a strong balance sheet. We got enough working capital to weather a potential downturn in the economy, which we don't expect. However, we're prepared if needed, and our casino and gaming business is recovering.
Speaker Change: In the last two years, we got a strong balance sheet, we've got enough working capital to weather a potential downturn in the economy, which we don't expect however, we're prepared if needed and I can see you know a gaming business is recovering.
John Dillon: While we continue to press forward to grow our success in FST, we also simultaneously will vigorously pursue our strategic review focused on maximizing the returning value to shareholders.
Speaker Change: And while we're continuing to press forward to grow our success in FSC. We also simultaneously we will vigorously pursue our strategic review focused on maximizing and returning value to shareholders.
Steven DeMartino: And with that, I'd like to turn the call over to Steve for a more detailed review of the financials. Thank you, John, and thanks, everyone, for joining us tonight. Let's take a look at our fourth quarter and full year 24 results in a little more detail. Total net sales for the fourth quarter were $10.2 million, which was down 23% compared to $13.3 million in the fourth quarter of 2023. For the full year 2024, our net sales were $43.4 million, which was down 40% compared to $72.6 million in 2023, and within our revised outlook range for the year provided on our third quarter earnings.
And with that I'd like to turn the call over to Steve for a more detailed review of the financials Steve.
Steve: Thank you John.
Speaker Change: And thanks, everyone for joining us Tonight.
Speaker Change: Let's take a look at our fourth quarter and full year 'twenty four resulted in a little more detail.
Speaker Change: Total net sales for the fourth quarter were $10 2 million, which was down 23% compared to $13 3 million in the fourth quarter of 'twenty three for.
Speaker Change: For the full year 'twenty for our net sales were $43 4 million, which was down 40% compared to $72 6 million and 23.
And within our revised outlook range for the year provided on our third quarter earnings call.
Steven DeMartino: Sales from our Food Service Technology Marketer, FST, for the fourth quarter were $4.3 million, which was about flat sequentially and down 9% compared to $4.7 million in the prior year period. For the full year, FST sales were $16.1 million. That's down 1% compared to $16.3 million in 2023. As John said, we sold 1,639 terminals in the fourth quarter and 5,371 terminals for the full year. And we ended the year with 13,961, so just shy of 14,000, net new terminals installed Our recurring FSD sales, which include software and service subscriptions, as well as consumable label sales for the fourth quarter were $2.7 million.
Speaker Change: Sales from our foodservice technology market Rep S. T for the fourth quarter were $4 3 million, which was about flat sequentially and down 9% compared to $4 7 million in the prior year period for.
Speaker Change: For the full year F. S. T sales were $16 1 million, that's down 1% compared to $16 3 million and 23.
Speaker Change: As John said, we sold 1639 terminals in the fourth quarter and 5371 terminals for the full year and we ended the year with 13961. So just shy of 14000 net new terminals installed in the market.
Speaker Change: Our recurring F. S T cells, which include software and service subscriptions as well as consumable label sales for the fourth quarter were $2 $7 million that was down 15% compared to $33 2 million in the prior year period.
Steven DeMartino: That was down 15% compared to $3.2 million in the prior year. For the full year 24, recurring FSD sales were $10.8 million. That was down 3% compared to $11.1 million for the full year 24. Our ARPU for the fourth quarter of 24 was $875. That was down 6% compared to $926 in the fourth quarter of 23, but it was up 25% sequentially from $700 in the third quarter of 24. Our casino and gaming sales were $4.8 million. That was up 14% from the fourth quarter of 2023, primarily due to a recovery in the demand for our printers at the major slot oasis.
Speaker Change: For the full year 'twenty for recurring FSC sales were $10 8 million that was down 3% compared to 11.1 million for the full year 'twenty three.
Speaker Change: Our our pool for the fourth quarter 24 was $875 that was down 6% compared to 926 in the fourth quarter of 'twenty three but it was up 25% sequentially from $700 in the third quarter of 24.
Our casino and gaming sales were $4 8 million that was up 14% from the fourth quarter of 23, primarily due to a recovery in the demand for our printers at the major slot Oems.
Steven DeMartino: For the full year, casino gaming sales were at $20.3 million. That was down 51% year-over-year. As John mentioned, we've seen the expected return of our major domestic OEM partners to buying positions after helping them reconfigure and liquidate their existing investment. POS Automation sales for the fourth quarter decreased 74% from the prior year to 411,000. For the full year, POS automation sales were $3.4 million, and that was down 51% from the full year, 23%. The decline was largely a result of difficult comps, as we experienced unusually high sales in 2023 due to our competitors' inability to supply products.
Speaker Change: For the full year casino and gaming sales were $20 3 million that was down 51% year over year.
Speaker Change: As John mentioned, we've seen the expected return of our major domestic OEM partners to buying positions after helping them reconfigure and liquidate their existing inventory.
Speaker Change: P O S automation sales for the fourth quarter decreased 74% from the prior year to 411000.
For the full year P. O S automation sales were $3 4 million and that was down 51% from the full year 'twenty three.
Speaker Change: The decline was largely a result of difficult comps as we experienced unusually high sales in 'twenty three to our competitors due to our competitor's inability to supply product.
Steven DeMartino: In addition, we believe the competitors in this market are now fully back online, and we're experiencing a more competitive environment. As a result, we're taking steps, including adjusting our pricing, to respond to the new dynamics in this market. Moving to the TransAct Services Group, or TSG as we call it, sales for the fourth quarter were $759,000, which was down 73% from $2.8 million in the prior year. This was primarily due to unusually high sales from final buys of legacy lottery spirit parts in the prior year that didn't repeat in 24. For the full year 24, TSG sales were $3.6 million, and that was down 56% from the full year.
In addition, we believe the competitors in this market are now fully back online and we're experiencing a more competitive environment.
Speaker Change: As a result, we're taking steps, including adjusting our pricing to respond to the new dynamics in this market.
Speaker Change: Moving to the transact services group or T. S. G. As we call. It our sales for the fourth quarter were $759000, which was down 73% from $2 8 million in the prior year period.
This was primarily due to unusually high sales from final buys of legacy lottery spare parts in the prior year that didn't repeat in 'twenty four.
Speaker Change: For the full year 'twenty four test sales were $3 6 million and that was down 56% from the full year 'twenty three.
Steven DeMartino: Moving down the income statement, our fourth quarter gross margin was 44.2%. That was down from 48% in the prior year. full year gross margin was 49.5% as compared to 52.9% in the full year. This comes as a result of lower overall sales volume and competitive price adjustments, as well as significantly lower casino and gaming sales, somewhat offset by favorable overhead costs. Going forward, we expect our gross margin to be in the mid to high 40% range in 2025. Our total operating expenses for the fourth quarter decreased by $1.3 million, or 19%, to $5.6 million compared to the fourth quarter of 2020.
Moving down the income statement, our fourth quarter gross margin was 44, 2% that was down from 48% in the prior year period.
Full year gross margin was 49, 5% as compared to 52, 9% in the full year of 'twenty three.
This comes as a result of lower overall sales volume and competitive price adjustments as well as significantly lower casino and gaming sales somewhat offset by favorable overhead cost absorption.
Speaker Change: Going forward, we expect our gross margin to be in the mid to high 40% range in 'twenty five.
Our total operating expenses for the fourth quarter decreased by $1 3 million or 19% to $5 6 million compared to the fourth quarter of 'twenty three.
Steven DeMartino: And for the full year 24, operating expenses declined by 7.6 million or 23% to 25.1 million compared to the full year. The year-over-year declines came in large part as a result of savings achieved from two separate and successful rounds of cost reduction. totaling $5 million on an annualized basis. In late third quarter of 23, we initiated our first round of broad-based cost-cutting efforts. We estimated that this initiative would produce operating expense savings of about $3 million on an annualized basis, and we experienced the full effect of these reductions throughout 24, including the fourth quarter. We then instituted a second cost reduction initiative in June of 24 that focused largely on further reducing headcount and other external third-party resources.
Speaker Change: And for the full year 'twenty for operating expenses declined by $7 6 million or 23% to $25 1 million compared to the full year of 'twenty three.
Speaker Change: The year over year declines came in large part as a result of savings achieved from two separate and successful around the cost reduction initiatives totaling $5 million on an annualized basis.
Speaker Change: In late third quarter of 'twenty, three we initiated our first round of broad based cost cutting efforts efforts.
Speaker Change: We estimated that this initiative would produce operating expense savings of about $3 million on an annualized basis.
We experienced the full effect of these reductions throughout 24, including the fourth quarter.
Speaker Change: We then instituted a second cost reduction initiatives in June 24 that focus largely on further reducing head count and other external third party resources, we estimate that the second initiative would generate an additional $2 million of annualized cost savings over and above the $3 million of savings from the first round.
Steven DeMartino: We estimate that this second initiative would generate an additional $2 million of annualized cost savings, over and above the $3 million of savings from the first. We also experienced a full effect from the second round of cost reductions during the fourth quarter. Now, breaking down our operating expenses just a bit, our engineering and R&D expenses for the fourth quarter were down 27 percent to 1.6 million Euros. For the full year 24, these expenses decreased by 30% to $7 million compared to 24. Our selling and marketing expenses decreased 3% to $2 million for the fourth quarter on a year-over-year basis.
Speaker Change: We also experienced the full effect from the second round of cost reductions during the fourth quarter of 'twenty four.
Now breaking down our operating expenses, just a bit our engineering and R&D expenses for the fourth quarter were down 27% to $1 6 million year over year for the full year 'twenty for these expenses decreased by 30% to $70 million compared to 23.
Speaker Change: Our selling and marketing expenses decreased 3% to $2 million for the fourth quarter on a year over year basis for the full year 'twenty for our selling and marketing expenses were $8 2 million and that was down 18% year over year.
Steven DeMartino: For the full year 24, our selling and marketing expenses were $8.2 million, and that was down 18% year-over-year. The decrease was largely due to right-sizing changes related to our FST market made during the latter half of 2023, including reductions in headcount, trade show, and overall market share. As expected and noted last quarter, we saw a slight sequential increase in our marketing spend due to the timing of our two largest trade shows, G2E, which is for the casino and gaming market, and NAX, which is for our FST market, which both occur in the fourth quarter. This is consistent with prior years, even as we have reduced our marketing spend on all of our...
The decrease was largely due to right sizing changes related to our F. S. T market made during the latter half of 'twenty, three including reductions in head count trade show and overall marketing spend.
Speaker Change: As expected and noted last quarter, we saw a slight sequential increase in our marketing spend due to the timing of our two largest trade shows G. TUI, which is for the casino and gaming market and next which is for F. S T market, which both occur in the fourth quarter. This.
Speaker Change: This is consistent with prior years, even as we have reduced our marketing spend on all of our trade shows.
Steven DeMartino: Lastly, our G&A expenses decreased 26% to $2 million for the fourth quarter, largely due to lower bonus expense, share-based compensation, and lower bad debt. For the full year 24, our G&A expenses were $9.9 million, and that was down 25% from the full year 24. Note that our 23 G&A expenses included a $1.5 million severance charge related to the resignation of our former CEO. For the fourth quarter 24, our operating loss was 1.1 million, which was 10.3% of net sales, and that compared to an operating loss of 522,000, or 3.9% of net sales in the prior year.
Speaker Change: Lastly, our G&A expenses decreased 26% to $2 million for the fourth quarter, largely due to lower bonus expense share based compensation and lower bad debt expense.
Speaker Change: For the full year 'twenty for our G&A expenses were $9 9 million and that was down 25% from the full year 'twenty three.
Speaker Change: Note that our 23 G&A expenses included a $1 $5 million severance charge related to the resignation of our former CEO.
Speaker Change: For the fourth quarter 24 of our operating loss was $1 1 million, which was 10, 3% of net sales and that compared to an operating loss of 522000 or three 9% of net sales in the prior year period.
Steven DeMartino: For the full year 24, our operating loss was $3.6 million, and that compared to operating income of $5.7 million in 2020. On the income tax expense line, we incurred a $7.3 million non-cash charge in the fourth quarter of 2024 to record a full valuation allowance on our deferred tax assets. This charge was made in accordance with the applicable accounting guidance, which generally requires a company to provide a full valuation allowance when the company reports a cumulative pre-tax loss over its previous three fiscal years, which for us was 2022 through 2024, and a pre-tax loss in its most recent fiscal year, 2024.
Speaker Change: For the full year 'twenty four operating loss was $3 6 million and that compared to operating income of $5 7 million and 23.
On the income tax expense line, we incurred a $7.3 million noncash charge in the fourth quarter of 24 to record a full valuation allowance on our deferred tax assets.
This charge was made in accordance with the applicable accounting guidance, which generally requires a company to provide a full valuation allowance when the company reports a cumulative pre tax loss over its previous three fiscal years, which for US was 2022 through 2024.
Speaker Change: And our pretax loss in its most recent fiscal year 'twenty 'twenty four for us.
Steven DeMartino: Note that the accounting rules place significant weight on past profitability, that is the three-year look-back period, as a predictor of future profitability, and less weight on the company's future projections of profitability, since they're not certain. Therefore, this charge does not necessarily indicate that we don't expect profitability in the future. Though we have written down the value of our deferred tax assets to zero for accounting purposes on our balance sheet, we believe these assets still have monetary value to the company. A substantial portion of our deferred tax assets consist of net operating loss carry forwards and R&D credit carry forwards, both of which have indefinite lives under current tax law.
Note that the accounting rules placed significant weight on past profitability that is the three year look back period, as a predictor of future profitability and less weight on the company's future projections of profitability since theyre not certain.
Speaker Change: Therefore, therefore discharge does not necessarily indicate that we don't expect profitability in the future.
Speaker Change: Though we have written down the value of our deferred tax assets to zero for accounting purposes on our balance sheet. We believe these assets still have monetary value to the company a.
Speaker Change: A substantial portion of our deferred tax assets consist of net operating loss carry forwards and R&D credit carryforwards, both of which have indefinite lives under current tax laws.
Steven DeMartino: At such time when the company returns to profitability, we will be able to utilize these fully reserved assets to offset any such future pre-tax income and essentially pay no cash income taxes until they're fully utilized. Looking forward to 2025, we expect to continue to provide a full tax valuation allowance until we're able to demonstrate a consistent pattern of profitability. As a result, we expect to record no income tax expense or income tax benefit during 2025, which means our pre-tax income or loss will also be our net income. On the bottom line, we recorded a net loss of $8 million, or $0.79 per diluted share for the fourth quarter, compared to a net loss of $62,000, or $0.01 per share in the year ago.
Speaker Change: At such time, when the company returns to profitability, we will be able to utilize these fully reserved assets to offset any such future pretax income and essentially paid no cash income taxes until they're fully utilized.
Speaker Change: Looking forward to 'twenty five we expect to continue to provide a full tax valuation allowance until we're able to demonstrate a consistent pattern of profitability. As a result, we expect to record no income tax expense or income tax benefit during 2025, which means our pre tax income or loss will also.
Speaker Change: B, our net income or loss.
Speaker Change: On the bottom line, we recorded a net loss of $8 million or 79 cents per diluted share for the fourth quarter compared to a net loss of 62000 or one cents per share in the year ago period.
Steven DeMartino: For the full year, we had a net loss of $9.9 million, or $0.99 per diluted share, compared to net income of $4.7 million, or $0.47 per diluted share in 2020. Just as a reminder, our fourth quarter and full year 24 numbers include the $7.3 million non-cash charged income tax. Our adjusted EBITDA for the quarter was negative $705,000 and that compared to positive $587,000 for the fourth quarter of 2020. And for the full year, our adjusted EBITDA was negative $1.5 million, and that compared to positive $10 million in 2016. Our full-year 24 Adjusted EBITDA result places us at the midpoint of our 24 Outlook range that we provided on our last webinar.
Speaker Change: For the full year, we had a net loss of $9 9 million or <unk> 99 per diluted share compared to net income of $4 7 million or 47 cents per diluted share in 'twenty three.
Speaker Change: Just as a reminder, our fourth quarter and full year 'twenty four numbers include the $7 $3 million noncash charge to income taxes.
Our adjusted EBITDA for the quarter was negative 705000 and that compared to positive 587000 for the fourth quarter of 'twenty three.
Speaker Change: For the full year, our adjusted EBITDA was negative $1 5 million and that compared to positive $10 million in 'twenty three.
Speaker Change: Our full year 'twenty for adjusted EBITDA result places us at the midpoint of our 24 outlook range that we provided on our last earnings call.
Steven DeMartino: And lastly, turning to our balance sheet, it still remains solid. We finished the year with $14.4 million in cash, which was up from $2.1 million at the end of 2023. And in terms of debt, we successfully renewed our credit facility with Siena Lending during the fourth quarter, extending the term for two plus years through March of 27. As part of that extension, our minimum required borrowing amount increased from $2.25 million to $3 million, which is where our outstanding borrowing stood at the end of 2004.
Speaker Change: And lastly, turning to our balance sheet, it's still remains solid.
Speaker Change: We finished the year with $14 4 million in cash, which was up from $2 1 million at the end of 'twenty three.
Speaker Change: And in terms of debt, we successfully renewed our credit facility with Siena lending during the fourth quarter extending the term for two plus years through March of 'twenty seven.
Speaker Change: As part of that extension, our minimum required borrowing amount increased from 2.25 million to $3 million, which were outstanding borrowings stood at the end of 'twenty four.
Steven DeMartino: We believe our cash on hand and the available borrowings under our newly extended credit facility will provide enough liquidity to fund our business for at least the next 12 And that completes my presentation.
Speaker Change: We believe our cash on hand, and the available borrowings under our newly extended credit facility will provide enough liquidity to fund our business for at least the next 12 months.
Speaker Change: And that completes my presentation, so with that I'd like to turn the call over to the operator for questions operator.
Operator: So with that, I'd like to turn the call over to the operator for questions. Operator? Thank you.
Thank you.
Operator: 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 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 key. One moment, please, while we poll for questions.
Speaker Change: 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 your line is in the question queue. You May press star two if she would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please poll for questions.
Jeffrey Martin: The first question is from Jeff Martin from Ross Capital Partners. Please go ahead. Thanks. Good afternoon. I wanted to get a sense, John, of in terms of the FST terminal installations in the quarter and maybe for the year, how much of that was concentrated with the large QSR customer and how much of it was? replacements and how much was from new logos. I don't know if you can get that granular, but if you could, I think it'd be helpful. Sorry, a little bit of mute. We're still dealing with the mute button.
The first question is from Jeff Martin from Roth Capital Partners. Please go ahead.
Jeff Martin: Hey, good afternoon wanted to get a sense John off of in terms of the F. S. T terminal installations in the quarter and maybe for the year how.
Jeff Martin: How much of that was concentrated with a large kyocera, our customer and how much of it was.
Jeff Martin: Replacements and how much was from new logos I don't know if you can get that granular, but if you could I think it would be helpful.
Jeff Martin: Okay.
Jeff Martin: Sorry, a little bit I mean, we're still dealing with the mute button.
Steve Kim: As Steve Kim I can't give you the breakdown on the net new new clients off hand, but Steve can give you the breakdown in aggregate at relative to the large <unk> and the rest of the terminals.
John Dillon: I can't give you the breakdown on the new clients offhand, but Steve can give you the breakdown in aggregate relative to the large QSR and the rest of the terminal. Yeah, the large QSR was a decent chunk of the number, Jeff. It wasn't more than half, but it was a good chunk.
Steve Kim: Yes, the largest U S. Saar was a decent chunk of the number Jeff.
Steve Kim: More than half, but it was a good a good chunk.
John Dillon: Okay, and in terms of your outlook for and up to the right year in 2025, is that is the anticipation that you'll have the same relative contribution. from the QSR or other other clients coming into the fold here. other clients. But obviously, the large QSR is big, it's an enormous entity as it were, and we're going to continue to sell into that for the foreseeable future. But I'm more encouraged by the net new business. And it's net new business and it's expansion into an existing customers and it's replacement of some of our older terminals that is the most exciting for us.
Okay.
Steve Kim: And in terms of your outlook for an up to the right ear and.
Steve Kim: 2025.
Is that.
Is the anticipation that you'll have the same relative.
Steve Kim: You know contribution.
I'm, the CSR or are there other other clients coming into the fold here.
Steve Kim: Other clients, but obviously the large <unk> is big it's an enormous and density as it were and we're going to continue to sell into that for the foreseeable future.
Steve Kim: But I'm more encouraged by the net new business and it's.
Steve Kim: It's net new business and its expansion into new and existing customers and it's a replacement of some of our older terminals that is the most exciting for us.
Steven DeMartino: Jeff, just to be clear, we do we do expect the business with a large QSR to expand in 25 versus 24. We're going into multiple jurisdictions with them. We get more and more approved as we go here. As you know, it's a license to hunt, so we have to go and get them, you know, one by one. But we do expect to close more in 25 and 24 as we expand our presence with the QSR.
Steve Kim: Jeff just to be clear, we do it we do expect the business with the large <unk> to expand and twenty-five overseas twenty-four we're going into multiple jurisdictions with them and we get more and more approved as we go here as you know it's a it's a license to hunt we have to go and get them one by one, but we do expect to close more than 25%.
Steve Kim: Four as we expand our presence with the <unk>.
John Dillon: Actually, Jeff, let me add to what Steve just said. We are winning new business in geographies where we didn't have business before, overseas and other venues where, you know, we just didn't have a presence and we're winning that presence now. And that's really great. We almost treat it like a new account from an excitement standpoint, because this might be a country or a region that we just didn't have a presence and now we're getting it now. Got it.
Steve Kim: Actually Jeff let me add to what Steve just said.
Steve Kim: We are winning new business in geographies, where we didn't have business before overseas in other venues where.
Steve Kim: You know, we just didn't have a presence and we're winning that presence now and that's really great is we almost treated like a new account from an excitement standpoint.
Steve Kim: Because this might be a country or a region that we just didn't have a presence and now we have we're getting it now.
Got it.
Jeffrey Martin: Could we switch over to casino and gaming? Just want to confirm that I understood you correctly expect a growth year for the segment over 2024 during 2025. And then if you could also, you know, give an update on the international side of that market.
Steve Kim: Could we switch over to casino and gaming just wanted to confirm that I understood. You correctly, you expect a growth year for this segment over 'twenty 'twenty four during 2025 and then if you could also.
You know can you give an update on the international side of that market.
Steven DeMartino: Steve, you wanna speak to that? You're closer to that than I am. Yeah, all the domestic OEMs, Jeff, are back to buying. So that's a good sign. There was one that was a laggard from last year. They're now back as well. So everybody's back to buying. So that's good news on the domestic side. On the international side, there's still a couple of OEMs that are still working through inventory. But the others are all back to buying. So I think it's good news on both fronts. We expect even both of those OEMs that are currently still working inventory, I think they're going to come back to buying too, but probably in the latter half of 25.
Steve you want to speak to that closer to that than I am.
Steve Kim: Yeah.
Steve Kim: All the all the domestic Oems, Jeff are back to buying so that's a that's a good sign there was one that was a laggard from last year they're.
Steve Kim: They're now back as well so everybody's back to buying so that's good news on the domestic side.
Steve Kim: On the international side Theres still a couple of Oems that are still working through inventory, but the others are all back to buying so I think its good news on both fronts. We expect both even though even both of those Oems that are currently still working inventory I think theyre going to come back to buying tube up probably in the latter half of 'twenty five.
Steven DeMartino: So we do expect to have a stronger year in 25 overall, both domestic and international.
Steve Kim: So we do expect to have a stronger year and twenty-five overall, both domestic and internationally.
Jeffrey Martin: Great.
Jeffrey Martin: I'll pass it on. Thanks.
Steve Kim: Great I'll pass it on thanks.
Steve Kim: Okay.
Operator: As a reminder, to ask a question, please press star 1.
As a reminder to ask a question. Please press star one.
George Sutton: The next question is from George Sutton from Craig Hallam. Please go ahead. Thank you. Steve, if I took out the revenues from your C-Store customer that exited from the numbers in 24, how much in revenues would that have been? just try to think of comparisons year over year. Yeah, we previously disclosed, George, I believe that it was about 3 to 4 million annualized in a year. So about half of that was in the 24. They finished up about halfway through the year. So about half of that is what fell off. Gotcha. Okay.
Speaker Change: The next question is from George Sutton from Craig Hallum. Please go ahead.
George Sutton: Thank you, Steve if I took out the revenues from your C store customers that exited.
From the numbers in 'twenty four how how much in revenues.
Would that have been.
I'm just trying to think of comparisons year over year ex yeah. We yeah. We previously disclosed George I believe that it was about $3 million to $4 million annualized in a year. So it's about half of that was in in 'twenty four and they they finished up about halfway through the year. So about about half of that is what fell off.
George Sutton: Gotcha Okay.
John Dillon: John, you mentioned the process is way more complex than we may think. I understand you're selling two, you're effectively selling two different businesses. What else would be complex about this that we might not be thinking about? Well, two businesses is part of it, because somebody who would partner with us or would be a strategic event of strategic interest to us, they look at each business relative to the markets they might serve. So that's a complexity. And then internally, I mean, we're not a large company. So we operate the two businesses very much as if it's one that just has two verticals.
John you mentioned the processes.
George Sutton: Way more complex than we May think.
George Sutton: I understand youre selling to you you're effectively selling two different businesses.
George Sutton: What else would be complex about this that we might not be thinking about.
George Sutton: Well two businesses as part of it because somebody who what would partner with US there would be a strategic event of strategic interest to us.
George Sutton: They look at each business relative to the markets. They might serve so that's a complexity and then internally I mean, we're not a large company. So we operate the two businesses very much as if it's one that just has two verticals and so the ability to take.
John Dillon: And so the ability to take a close look at the economics relative to each is complicated. You can't just hit a button and get a spreadsheet that says, here's the P&L, here's the people that work here and there. And so in terms of a conversation we might have with someone relative to resources we might apply to a strategic opportunity is complicated, it takes more time, and so that's a degree of complexity that, you know, occurs. And then the two businesses are very different. We've got the Canon, you know this. We have the casino and gaming business, which is steady state, it grows, it's in a relatively small TAM, total available market, but we're in a duopoly, it's profitable, and then we have a more rapidly growing opportunity over in FST, where the TAM is well over a billion dollars.
George Sutton: Take a close look at the economics relative to each is complicated.
George Sutton: Can't just hit a button and get a spreadsheet that says here's the P&L is the people that work here and there and so in terms of our conversation we might have with someone relative to.
George Sutton: Resources, we might apply to a strategic opportunity is complicated it takes more time.
George Sutton: And so that's the degree of complexity that occurs.
George Sutton: Occurs and then the two businesses are very different we've got we can and you know this.
We have the casino and gaming business, which is steady state. It grows it's in a relatively small tam total available market.
George Sutton: But we're in a duopoly it's profitable and then we have a more rapidly growing.
Opportunity over in F. S T, where the Tam is well over $1 billion, it's an underserved market at this point and we're still early days and the opportunity is great, but that's not the part of the business that's contributing to the bottom line from a positive and constructive stance.
John Dillon: It's an underserved market at this point, and we're still early days. And the opportunity is great, but that's not the part of the business that's contributing to the bottom line from a positive and constructive standpoint. So, you know, it makes for complexity if you're talking to somebody about how do we want to work together with you. And so, I mean, all those things basically come into play. And I'm not trying to make an excuse. I'm just saying it's more complex than probably most people from the outside might presume.
George Sutton: So you know it makes.
George Sutton: For our complexity, if you're talking to somebody about how do we want to work together with you and so I mean, all of those things basically come into play and I'm not trying to make an excuse so I'm just saying, it's more complex than probably most people from the outside might presume.
George Sutton: One other question on the EPIC TR80.
Speaker Change: One other question on the epic tier 80, but can you just talk about what the size of that market opportunity is that would be an expanding new part of the market for you.
Steven DeMartino: Can you just talk about what the size of that market opportunity is? That would be an expanding new part of the market for you?
Steven DeMartino: If, Steve, you want to tackle that one, you're closer to the TR-80. Then that's the replacement for the 880. Yeah, that that's, that's our role fed printer. So that's really attacking the sports betting market, George, which is, is large and growing, especially in Europe. It's got a large market potential for it.
Steve you want to tackle that one you're closer to the TRA then that's the replacement for the AAD.
Speaker Change: Yeah, that's a that's our roll fed printer, so that's really attacking the sports betting market George.
Speaker Change: Which is is large and growing especially in Europe.
Speaker Change: It's got a it's got a large market potential for it we were in the market with a previous project called their 880.
Steven DeMartino: We were in the market with a previous product called our 880, but we've been out of the market for a couple of years, so now it's a matter of just reestablishing our relationships and getting our product back out there. We've had good interest so far since we have got it back out in earnest really in the last quarter of last year. It's probably the first quarter where we're really going back at the market hard, and we're starting to get good interest for it again. I think it's got a lot of potential.
Speaker Change: But we have we've been out of the market for a couple of years. So now it's a matter of just reestablishing our relationships and getting our product back out there we've.
Speaker Change: We've had good interest so far since we have got it back out in earnest really in the last quarter of last year. It was probably the first quarter, where we're really going back at the market hard and we're starting to get good interest for it again I think that's why I think it's got a lot of potential.
Okay. Thanks, guys. That's it for me.
Operator: Okay, thanks guys, that's it for me. There are no further questions at this time.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to John Dillon for closing comments.
John Dillon: I would like to turn the floor back over to John Dillon for closing comments. Yes. Well, thanks, everybody, for joining. Appreciate your time and attention. I'm always willing to take a call personally. And I want to point out that we didn't do this call today, Thursday, because we're in a hurry. It's because I'm going to be at the Roth Conference on Monday. And for any of you that are going to be there, I'm happy to take a one-on-one meeting or an after-hours chit-chat if that's appropriate. So anyway, thanks very much for being here. And I look forward to seeing you at the conference.
Speaker Change: Yes.
Well, thanks, everybody for joining.
Speaker Change: I appreciate your time and attention I'm always willing to take a call personally.
Speaker Change: And I want to point out that we didn't do this call today Thursday, because we're in a hurry, it's because I'm going to be at the Roth conference on Monday and for any of you that are going to be there I'm happy to take a one on one meeting or an after hours chit chat if that's appropriate so anyway. Thanks very much for being here and I look forward to seeing you at the conference.
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.
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