Q1 2025 TransAct Technologies Inc Earnings Call
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Speaker Change: Greetings and welcome to the TransAct Technologies Plus Quarter 2025 earnings call. At this time, the more participants are in listen only mode.
Speaker Change: A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star than zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your
Ryan Gardella, Investor Relations. Please go ahead, so.
Thank you.
Speaker Change: Good afternoon and welcome to the TransAct Technology's first quarter of 2025 earnings call. Today we'll be discussing the results announced in our press release issued after market close.
Speaker Change: Financial in the company is CEO John Dillon and president and CFL Steve DeMartino. They all include discussion of the company's key operating strategies to progress on these initiatives and details of our first quarter financial results. 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. Statements on this call may be deemed forward-looking and actual results by different materials.
Speaker Change: For a full list of risks inherent to the business and the company, we've referred to the company's FCC violence, including its reports in form 10K and 10K. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect the venture circumstances that occur at the call.
Speaker Change: Today's column will pass on good non-gal financial measures in the meeting of SEC Regulation [inaudible]
Speaker Change: One required reconciliation of all non-GAAP financial measures, the most directly comparable financial measures calculated and presented in accordance with GAP, can be found today's press release as well as in the company website. And with that, I'd like to turn the call over to John .
John Dillon: Thanks, Ryan, and a good afternoon everyone, and thanks for joining us today.
John Dillon: I'm pleased to report that TransAct started off 2025 with a strong quarter, delivering black or bow-hot terminal sales. We had 2350 units.
John Dillon: with surpasses last quarter's results, which I believe were 1639 units.
John Dillon: This performance in our food service technology or FSD business is a high bar for the year and why we believe it's likely to be our strongest quarter for 2025. We're pleased with the strength and execution of our revised go-to-market strategies and the dedication of our reorganized.
sales team.
John Dillon: So let me start by reviewing some of the FST highlights for the quarter. First,
John Dillon: Total FST revenue increased to 14.9 million, an impressive 49% year-over-year, driven largely by hardware sales, recurring FST revenue remains stable, and we're happy to report positive net income and adjusted EBITDA for the quarter.
John Dillon: Demonstrating that our operational and cost discipline is delivering positive results.
John Dillon: Clearly we're encouraged by this momentum and our team is excited about what the potential for the future. The key driver for this quarter was a conversion of three Tier 1 customers from our first generation Boehaw Terminal to the Boehaw Terminal 2.
John Dillon: These upgrades include rollouts with a major QSR and convenience store chains and highlight the confidence our customers have in the platform.
The Terminal 2 is streamlining operations, driving efficiency.
John Dillon: and that sales story is resonating. The feedback we're getting is positive that its views are optimism for continued growth.
John Dillon: Our sales teams refine lead tracking and nurturing processes, which I've spent significant time and effort overhauling our, paying off with what I consider well scrub pipeline. A lot of times pipelines are kind of a mess, but we're feeling like we're in pretty good shape. And it's holding steady quarter over quarter.
John Dillon: We also as previously reported, continue targeting the about 40,000 unit acudate, 9,700 install base. This was a prior terminal, you know, probably the Bay Determinal in the early days. Then we had the Terminal 1, then we had the Terminal 2.
John Dillon: So that's a significant long-term opportunity, and we're targeting that, I believe effectively.
John Dillon: Our success in convenience store market demonstrates a solid footing that we're finding with this terminal two. We secured a major Bohot terminal two upgrade order with a leading national convenience store chain that operates over 700 locations.
John Dillon: What started out as a simple pilot has expanded into a full rollout, the chain is replacing legacy workstations to enhance food safety, labeling, and operational tasks.
John Dillon: The rollout showcases our growing traction in the convenience store vertical which we believe is an important vertical and there's a lot of headroom there and opportunity in the future. We're seeing strong adoption in this sub vertical and expect this win to unlock through their opportunities as we move forward.
John Dillon: The success reinforces the commitment to what I call a land and expand strategy, where we secure initial deployments and then grow our footprint over time.
Speaker Change: being a little glib here. Simple wins, easy expansion. The product is probably the best.
John Dillon: Salesperson, we have on the staff, it works well, it's reliable, it delivers the value we promise and once we get that unit in the store and operational, the customers easily see the advantage and that's the way we expand the business.
Thank you for joining us.
Speaker Change: We're very proud to demonstrate the power of the terminal and its applicability across the large range of industries. In Q1, we got a contract with the National Healthcare Food Service provider to deploy boha terminals for nutritional labeling and compliance and hospital and care facility
Speaker Change: This new use case in a large subvertical demonstrates the flexibility of technology.
Speaker Change: How it adapts seamlessly to different demands for different industries, in this case healthcare, yet delivering the same reliability that the restaurant and food service customers, the typical food service customers that we target rely on.
Speaker Change: This foothold opens new growth avenues and proves the Bohot is a versatile platform built for innovation and we think we can serve a number of different industries. Which side it explore that and we believe the terminal can drive a lot of value.
Speaker Change: Shifting over to Casino and Gaming, we're seeing the rebound that we forecast the last quarter
Speaker Change: With notable strength in our domestic markets, we recorded Casino in Gaming Revenue with 6.7 million of 18% year-over-year and 41% sequentially.
Speaker Change: The growth was driven by improving market demand as we highlighted on a last call and we pleased that all of our major US OEM partners have returned to what we call buying positions.
Speaker Change: after resolving the prior inventory over supply. A new win with a major OEM also was a significant contributor to this quarter's success, and we're eager to deepen the partnership with that supplier moving forward.
Our New Epic!
Speaker Change: TR80, it's a thermal roll printer, has now fully entered the market and is available for purchase.
Speaker Change: It handles printing and sports betting kiosk video lottery terminals and other non casino gaming applications and during Q&A if somebody wants to know what those are I'd be happy to help describe that but it's not betting the same way. More like a lottery system for things like a Lions Club or a rotary club or a veterans home.
Speaker Change: Anyway, the TR-80 is getting momentum and we expect sales to climb steadily through 2025, complementing the existing casino and gaming portfolio.
The Recurring Revenue Income Stream
We are mindful of the macroeconomic uncertainty.
Speaker Change: Yet we see no systemic challenges in the midterm for our casino and gaming business and the industries somewhat slow and tricky jerky, but nonetheless headed up to the right, the recovery gives us confidence for the year ahead.
Speaker Change: Next, let me provide you with an update on the strategic review process. As you've likely seen in our press release, the Board of Directors and Management have determined that it would be most appropriate to defend the process for now.
Speaker Change: Due to increasing levels of uncertainty in the macroeconomic environment at this time, and then given the increased momentum in both the FST and concenial business.
Speaker Change: We think slowing down right now is the best strategy and yet the Transact and our board and management feel the intention to focus on incremental growth now executing on a corporate plan in order to expand the business and invest for prudent.
Speaker Change: Yet retaining a commitment to discipline spending. If and when conditions see more favorable and or opportunities arise, the board and management rule.
Speaker Change: Jump right back into resuming the process, as always the board is committed to maximizing stockholder value and is constantly evaluating that strategy to achieve that goal.
Speaker Change: Before I turn the call over to Steve, I wanted to provide a brief update on our financial outlook for 25.
Speaker Change: We're maintaining a full year revenue guidance of $47 to $52 million with adjusted EBITDA now expected to range from break even to negative $1.5 million. That moves the bottom of end of the range up by half a million dollars based on a solid first quarter.
Speaker Change: based on recovery in casino and gaming throughout the year without any unexpected disruption neither supplier demand. Why we believe this will be the case, we felt it was important to.
I like this with some additional color.
Speaker Change: We have a strong balance sheet, ample working capital to provide a buffer against economic and potential uncertain headwinds. We are pretty strong in the area of cost discipline, evident in Q1's positive EBITDA and positions us well for the years, so I'm pretty comfortable with that. And in summary,
Speaker Change: We're pleased with a strong first quarter. We achieve record ball high terminal sales. We delivered positive income in deep a thought and drove robust growth in FSG and casino and gaming sales appear to be back.
Speaker Change: The BoHop platform is demonstrating its value into customers and convenience stores, healthcare and beyond. We're seeing the rebound we anticipated last quarter in casino and gaming, including the win with a new OEM customer that helped us generate strong results for products like the TRA 80.
Speaker Change: We're focused on execution, improving processes, and fiscal discipline as I believe you hopefully would be.
Speaker Change: and NetNet, I'm pleased with the results for the quarter and confident our team's ability to execute during the remainder of the year. And with that, I'd like to hand the call over to Steve for a detailed review of the financials. Steve?
Thank you, John .
and thanks everyone for joining us today.
Speaker Change: Let's take a look at our first quarter result in a little more detail.
Speaker Change: Our total net sales for the first quarter were 13.1 million, which was up 28% sequentially and also up 22% compared to 10.7 million in the prior year period.
Speaker Change: Sales from our food service technology market or FST for the first quarter were 4.9 million and that was up 14% sequentially and also up 49% compared to 3.3 million in the prior year period.
Speaker Change: Our recurring FST sales, which includes software and service subscriptions as well as consumable label sales, for the first quarter we're 2.7 million. That was down 3% sequentially but up 10% compared to 2.4 million in last year's first quarter.
[inaudible]
Speaker Change: Our art proof for the first quarter of 25 was $761 and that was down 13% sequentially but up 15% year-over-year.
Speaker Change: As we've reminded on past calls, we continue to sell a number of our boha terminals to a large QSR with no recurring revenue attached to start.
Speaker Change: While this presents an opportunity to celebrate current elements in the future, for now they continue to represent a drag on our approved number.
Speaker Change: In the quarter, a large number of our terminals fell into this category again and we expect this to continue into the near future.
Speaker Change: Arcasino and gaming sales were 6.7 million, that was up 41% sequentially and up 18% year over year, reflecting the market rebound John discussed, as well as sales from a new OEM when combined with normalized buying levels from all major OEMs.
Speaker Change: Our POS automation sales for the first quarter declined 5% from the prior year to 618,000.
Speaker Change: This slight decline was due to continued strong competitive environment as other market participants have fully restored their supply chains.
Speaker Change: We will continue to adjust pricing if necessary to remain active in this market.
Speaker Change: Moving to TransAct Services Group or TST for the first quarter, TST sales were down 22% year-over-year to 808,000.
Speaker Change: This decrease was largely due to strong demand for legacy spare parts in the prior year quarter that didn't repeat.
Speaker Change: We expect TSG sales to remain approximately at this quarterly run rate going forward, consistent with normalized demand.
Speaker Change: Moving down the income statement, our first quarter gross margin was 48.7% and that was down from 52.6% in the prior year period.
Speaker Change: This is largely a result of a higher mix of FST hardware sales which carry lower margins than our casino gaming products.
Speaker Change: Going forward, we expect our gross margin to remain in the mid-to-high 40% range for the remainder of 25.
Speaker Change: Before leaving the gross margin discussion, I wanted to briefly touch on our tariff exposure and its impact on our product costs.
Speaker Change: As the currently stands, we have added a small tear of surcharge on applicable imported items, mainly Arcasino and Gaming printers so far, to maintain our margin.
Speaker Change: I want to emphasize that while this is a highly fluid situation, currently our boha terminals are exempt from any tariffs.
Speaker Change: We'll continue to monitor the situation and we'll update you as needed.
Speaker Change: Turning to our operating expenses are total optics for the first quarter, decreased by 8% from the prior year first quarter to 6.4 million.
Speaker Change: The year-of-year decline reflects the continued impact from several rounds of cost reduction initiatives that we took in 23 and 24 that told about $5 million in annualized savings.
Speaker Change: We began to fully realize these savings during the second half of 24 and expect to continue to realize them during 25, though somewhat offset by typical annual cost of living and other inflationary increases.
Speaker Change: Our engineering and R&D expenses for the first quarter were down 17% year over year to 1.6 million. Our selling and marketing expenses remained flat at 2.1 million, and our G&A expenses declined by 8% to 2.7 million.
Speaker Change: On the operating income line, we just miss reaching breakeven for the first quarter, recording a slight operating loss of $15,000 or a negative one-tenth of one percent of net sales.
Speaker Change: This compares to an operating loss of 1.3 million or a negative 12.2% of net sales in the prior year period.
Speaker Change: On the bottom line, I'm happy to report that we broke through Breakeven and recorded positive net income of $19,000, which represented EPS of zero, and that compared to a net loss of $1 million, or a 10 cent loss, particularly to chair in the year
Speaker Change: Our adjusted EBITDA for the quarter also crossed over to the positive territory level reaching $544,000 and that was up from a negative $701,000 in the prior year period.
Speaker Change: And lastly, turning to our balance sheet, it continues to remain solid. Our cash and cash equivalence held steady at 14.2 million.
Speaker Change: which was relatively consistent with our year-end cash balance of 14.4 million.
Speaker Change: And our debt balance remained unchanged from year end and only the three million dollars of required minimum borrowings under our ten million dollar credit facility.
So overall, our liquidity position continues to be strong.
Speaker Change: And with that, I'd like to turn the call over to the operator for questions. Operator?
Speaker Change: Thank you so, at this time, we will be conducting a question and on succession.
Speaker Change: If you would like to ask a question, please press star then one on your telephone keypad.
Speaker Change: The confirmation tone will indicate your line is in the question cue. You may press star and then tune if you would like to remove your question from the cue.
Speaker Change: For participants using speaker equipment, you may be necessary to pick up your handset before pressing the star keys. Again, if you would like to ask a question, please press star and then one, no.
Speaker Change: The first question that we have comes from Jeff Martin of Roth MKM. Please go ahead.
Jeff Martin: Thanks. Good afternoon, John Steve. Hope you're both doing well. John , can we start on the FST pipeline? You mentioned that it's stable. I was conversion progressing and what end markets are you seeing the most traction in currently?
Hello?
Jeff Martin: John , I had you all on mute so you wouldn't hear a man with a leaf blower in the background and he's blowing the leaves off my deck.
Sorry about that. I'm just kidding but it's-
somewhat true. So, good question, Jeff.
Jeff Martin: The FST machinery is working pretty well. We had to recast the whole thing, rebuild a lot of it.
Jeff Martin: and what we're seeing now, originally I think when we went into the market we thought that restaurants were typical fine dining and restaurants like that would be the big consumer of the technology but their challenges are pretty simple compared to
large food service management company and the grab-and-go market.
Jeff Martin: and both Gravengo which is a sophisticated area where you make a food product and you have to label it with the nutritional items.
Jeff Martin: And all of a sudden, that means the applications have to be more sophisticated. You have to have, you have to know what the ingredients are, you have to go out through a database to look up what the calorie content, the glycerides, the cholesterol, the fat content, shimmers, etc., sodium.
Jeff Martin: and that has to all be on the label in addition to when it was made and when it needed to be consumed, so we're doing really well there.
Jeff Martin: And in particular, if you do grab and go sushi, which is made fresh every day
Jeff Martin: That's kind of a scary thing for a consumer, and you really want to make sure that the food safety
Jeff Martin: Technology supports that, and we're doing really well, and that space was several large.
Jeff Martin: They don't run the stores. They basically provide the sushi product that sit there in those counters and those plastic containers that have a really nice label. Many of them are determined by the Transact Bo Hot Terminal.
Jeff Martin: So that's one area that's doing well. And then the second one is food service management.
Jeff Martin: which we have clients like Sadexo and Aremark as an example.
Jeff Martin: I believe Compass Group is also a customer of ours and they automate large
Jeff Martin: Organization Facilities. It can be a rest home, it can be a sports stadium, it can be a hospital.
It can be...
College Campus. It can be a large manufacturing facility.
Jeff Martin: and they basically set up food service for maybe five, six, seven, eight, and 20,000 employees in some cases. And they have multiple stations with multiple items, and they need a sophisticated...
Jeff Martin: Food Service Technology Supplier, and we're doing really well in that market as well. So I'd say those are the two highlights that we find very exciting right now. And then I will mention.
Jeff Martin: We're finding that there's an opportunity in the medical field. We had a win a couple of quarters ago where we provide temp and sense capabilities for a senior living home where we provided the sensor devices that were on all the small refrigerators that held the control medicinals.
Jeff Martin: We don't want the temperature in one of those reefers to go bad because the chemicals in those medicinal sometimes go bad and you don't want to
Jeff Martin: Damaged grandma by giving her a damaged medicine and on the same time those medicines are sometimes very expensive So we're winning business like that and we're finding that food service in that
in the...
Jeff Martin: Hospital Space and the medical space is something that's actually a pretty good opportunity for us and we have it developing partnership with several suppliers into those space that know the industry better than we do but basically can take our technology in because they've already got a relationship. So we're excited about that sort of.
or Fogginal Opportunity as well.
Thank you.
Jeff Martin: Great, and then did you touch on pipeline conversion for for at the States?
Jeff Martin: It's pretty good. I thought it was in our script, but we closed six new clients this quarter, this last quarter, brand new customers with the potential of about 1800 units.
Jeff Martin: over time. So like the Lantern Expand scenario is one that we like. Conversion is pretty good. We are still refining some of the metrics that we need to be familiar with, CAC Customer Acquisition Clause, Lifetime Customer Value, LCD.
Jeff Martin: What we are focused on, we have a very growing degree of sophistication and our pipeline management from.
Jeff Martin: Who we target as potential customers, how we figure out the personas in each one of those clients and then we put them into the top, we market to them and we look at the conversion rate all the way down from
Jeff Martin: When it's just a suspect who might need our technology to becoming an opportunity, we go through the MQL, the marketing qualified lead, hand it off to the sales team to make it a sales qualified lead if it does, and all the way down to the different steps in the sales cycle, and then we're looking at the close rate.
Jeff Martin: And what we do is we look at the yields at each one of the steps and where the yield somehow isn't consistent with the yield all the way through the funnel. We assume there's a constraint.
Jeff Martin: We dive in, and we figure out what it is. Is it pricing? Is it technology? Is it...
Jeff Martin: We didn't say the right things or we didn't engage with the right people in the organization.
Jeff Martin: and it's kind of, I know this is a broad answer, but we are working very aggressively on improving yield all the way through probably 15 different steps through. We don't even know who you are, but we want you as a customer too, we got a closed deal.
Jeff Martin: and that's a process that we're refining every quarter. And we're making progress on it. It's pretty complex, candidly, but let's just say we believe that the machinery there is working better and better, and we're getting a good handle on it.
Speaker Change: Okay. And then with respect to the QSR rollout, where are we, if you want to use the baseball ball? And I'll see what any going to be in in terms of.
Well, filling as many of those 40,000 legacy units as possible.
Speaker Change: I'd say we just finished maybe, maybe we're still at bat in the second inning.
Maybe, maybe, maybe you have that in the third inning.
Speaker Change: I don't know whether we're the home team or the visitors, but it's going really well. I mean, we don't treat that.
Client as a new customer per se.
Speaker Change: But there have been a couple of cases where we've won entirely new markets, where we never were before. Our permission, if you will, from the headquarters has historically only been...
Speaker Change: to sell our product in North America, but the permission we have now is global, so we can sell in every country in the world where that QSR is present, and that's a pretty big market opportunity, and so far we're finding the uptake is very positive and very successful.
Speaker Change: And then last one for me, as we look at the revenue guidance range maintained at 47 to 52 million Anything we should consider in terms of
Speaker Change: How that thumbs in on a quarter by quarter basis of the balance of the year.
Speaker Change: I don't think so. I think we try to provide some guidance that says we think that we can continue to improve the year-over-year performance. But, you know, the business still is lumpy.
Speaker Change: We mentioned we had a convenience store operation that has 700 units that upgraded
Speaker Change: with a normal number of upgraded terminals from the, basically the prior terminal to the
Speaker Change: and those orders happen, but they're lumpy. We take revenue when we ship, so sometimes they want all at once, sometimes they don't.
Speaker Change: So, I think you should assume that the business will still have a little bit of ups and downs in it, but I think what we're saying is quarter over quarter, when we look at it year over year, I think we can say that we expect that we can continue to improve.
Thank you.
Thank you.
Speaker Change: Just a final reminder, if you would like to ask a question, please press star and then one now.
[inaudible]
Speaker Change: At the stage, there seems to be no further questions on the conference. I will now hand the call back to John Dillon for closing remarks. Please go ahead, sir.
John Dillon: Thank you very much. And once again, everyone, thank you for joining us. Thanks for your support, and we look forward to talking to you if you're interested in conversations during the next quarter, but of course, again, in August , on the next quarter or two earnings call. And again, thank you very much.
John Dillon: If it's summer coming up, I hope you have a great summer vacation and we're looking forward to continuing to deliver on the promise. Thank you.
John Dillon: Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You we now disconnect your lines.