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Afternoon. Welcome to the TransAct Technologies first quarter twenty twenty five 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. Today's call will include a discussion of the company's key operating strategies the progress of these initiatives and details of our first quarter financial results. Will then open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations, 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 Form 10 ks and 10 Q, TransAct undertakes no obligation to revise or update any looking statements to reflect events or circumstances that occur after the call. Today's call and webcast will include non GAAP financial measures under the meaning SEC Regulation G. When required, reconciliation of all non GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP be found in today's press release as well as in the company website.
12m 31s
Thanks, Ryan, and good afternoon, everyone, and thanks for joining us today. I'm pleased to report that TransAct started off 2025 with a strong quarter delivering record BOHA! Terminal sales We had two thousand hundred and fifty units which surpasses last quarter's results which I believe were sixteen thirty nine units, This performance in our food service technology or FST business is 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 So let me start by reviewing of the FST highlights for the quarter. First, total FST revenue increased to $14,900,000 up an impressive 49% year over year driven largely by hardware sales, recurring FST revenue remained stable and we're happy to report positive net income and adjusted EBITDA for the quarter. Demonstrating that our operational and cost discipline is delivering positive results. Clearly, we're encouraged by this momentum and our team is excited about what the potential the future. The key driver for this quarter was the conversion of three Tier one customers from our first generation BOHA!
13m 57s
Terminal to the BOHA! Terminal two These upgrades include rollouts with a major QSR, and convenience store chains and highlight the confidence our customers have in the platform. The Terminal two is streamlining operations, driving efficiency, and that sales story is resonating. The feedback we're getting is positive, it's fuels our optimism for continued growth. Our sales teams refined lead tracking and nurturing process processes, which I spent significant time and effort overhauling our paying off with what I consider well scrubbed 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. We also as previously reported continued targeting the about 40,000 unit Accudate 9,700 in install base. This was a prior terminal, probably the baby terminal in the early days. Then we had the terminal one, then we had the terminal two. So that's a significant long term opportunity and we're targeting that I believe Our success in convenience store market demonstrates a solid footing that we're finding with this Terminal two We secured a major BOHA! Terminal two upgrade order with a leading national convenience store chain that operates over 700 locations What started out as a simple pilot has expanded into a full rollout.
15m 23s
The chain is replacing legacy workstations to enhance food safety, labeling and operational tasks The rollout showcases our growing track 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 further opportunities as we move forward. 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. Being a little glib here, simple wins, easy expansion. The product is probably the best 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 We're very proud to demonstrate the power of the the terminal and its applicability across a 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 in hospital and care facility kitchens. This new use case in a large sub vertical demonstrates the flexibility to technology 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.
16m 58s
This foothold opens new growth avenues and proves that BOHA! Is a versatile platform built for innovation and we think we can serve a number of different industries. We're excited to explore that. And we believe the terminal can drive a lot of value. Shifting over to casino and gaming, we're seeing the rebound that we forecasted last quarter with notable strength in our domestic markets. We recorded casino and gaming revenue of $6,700,000 up 18% year over year and 41% sequentially The growth was driven by improving market demand as we highlighted on our last call, And we're pleased that all of our major U. S. OEM partners have returned to what we call buying positions after resolving the prior inventory oversupply. 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 that supplier moving forward. Our new Epic TR 80, it's a thermal roll printer, has now fully entered the market and is available for purchase. It handles printing and sports betting kiosks, video lottery terminals, and other non casino gaming applications. And during Q and 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 it's more like a lottery system for things like a Lions Club or a Rotary Club.
18m 30s
Or a Veterans Home. Anyway, the TR-eighty is gaining momentum and we expect sales to climb steadily through 2025. Complementing the existing casino and gaming portfolio. Additionally, our partnership with Casino Track continues to drive Epicentral sales through their slot suite offering, which generates subscription based revenue that enhances player engagement and supports our recurring revenue income stream We are mindful of the macroeconomic uncertainties yet we see no systemic challenges in the midterm for our casino and gaming business and the industry's somewhat slow and tricky jerky, but nonetheless headed up to the right, the recovery gives us confidence for the year ahead. Next, let me provide you with an update on the Next, strategic review process. As you likely seen in our press release, the board of directors and management determined that it would be most appropriate to suspend the process for now due to increasing levels of uncertainty in the macroeconomic environment, at this time. And then given the increased momentum in both the FST and casino business, 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 were prudent yet retaining a commitment to disciplined spending.
20m 5s
If and when conditions seem more favorable, and or opportunities arise, the board and management jump right back into resuming the process As always, the board is committed to maximizing stockholder value and is constantly evaluating best strategy to achieve that goal. Before I turn the call over to Steve, I wanted to provide a brief update on our financial outlook for '25 We're maintaining a full year revenue guidance of 47,000,000 to 52,000,000 with adjusted EBITDA now expected to range from breakeven to negative 1,500,000.0 that moves the bottom of end of the range up by $05,000,000 based on a solid first quarter. The ranges we assume we see continue to be based on recovery in casino and gaming. Throughout the year without any unexpected disruption, neither supply or demand. While we believe this will be the case, we felt it was important to highlight this with some additional color. 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 year. So I'm pretty comfortable with that. And in summary, we're pleased with a strong first quarter We achieved record BOHA!
21m 30s
Terminal sales. We delivered positive net income and EBITDA and drove robust growth in F and casino and gaming sales appear to be back The BOHA! Platform is demonstrating its value to customers in convenience stores, healthcare and beyond. We're seeing the rebound we anticipated last quarter in casino and gaming including a win with a new OEM customer that helped us generate strong results for products like the TR-eighty We're focused on execution, improving processes, and fiscal discipline as I believe you'd hope we would be And net net, I'm pleased with the results for the quarter and confident in our team's ability [indiscernible] 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.
22m 22s
Let's take a look at our first quarter results in a little more detail.
22m 27s
Our total net sales for the first quarter were 13,100,000.0 which was up 28% sequentially and also up 22% compared to $10,700,000 in the prior year period. Sales from our food service technology market, or FST, for the first quarter were $4,900,000 that was up 14% sequentially and also up 49% compared to 3,300,000.0 in the prior year period. Our recurring FST sales, include software and service subscriptions well as consumable label sales, for the first quarter were $2,700,000 That was down 3% sequentially, but up 10% compared to 2,400,000.0 in last year's first quarter. Our ARPU for the first quarter of twenty five was $761 and that was down 13% sequentially, but up 15% year over year. 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. While this presents an opportunity to sell recurring elements in the future, for now they continue to represent a drag on our ARPU number. In the quarter, a large number of our terminals fell into this category again, we expect this to continue into the near future. Our casino and gaming sales were 6,700,000.0 that was up 41% sequentially and up 18% year over year, reflecting the market rebound John discussed.
23m 53s
As well as sales from a new OEM win combined with normalized buying levels from all major OEMs. Our POS automation sales for the first quarter declined 5% from the prior year to 618,000 This slight decline was due to continued strong competitive environment as other market participants have fully restored their supply chains. We will continue to adjust pricing if necessary to remain active in this market. Moving to TransAct Services Group, or TSG, for the first quarter, TSG sales were down 22% year over year to 808,000 This decrease was largely due to strong demand for legacy spare parts in the prior year [indiscernible] that didn't repeat. We expect TSG sales to remain at this quarterly run rate going forward, consistent with normalized demand. 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. This is largely a result of a higher mix of FST hardware sales which carry lower margins than our casino and gaming products. Going forward, we expect our gross margin to remain in the mid to high 40% range for the remainder of '25. Before leaving the gross margin discussion, I wanted to briefly touch on our tariff exposure its impact on our product costs.
25m 22s
As it currently stands, we have added a small tariff surcharge on applicable imported items mainly our casino and gaming printers so far, to maintain our margin. I want to emphasize that while this is a highly fluid situation, currently our BOHA! Terminals are exempt from any tariffs. We'll continue to monitor the situation and we'll update you as needed. Turning to our operating expenses, our total OpEx for the first quarter decreased by 8% from the prior year first quarter to 6,400,000.0 The year over year decline reflects the continued impact from several rounds of cost reduction initiatives that we took in '23 and '24, totaled about $5,000,000 in annualized savings. We began to fully realize these savings during the second half of twenty four, and expect to continue to realize them during 'twenty five, though somewhat offset by typical annual cost of living and other inflationary increases. Our engineering and R and D expenses for the first quarter were down 17% year over year to 1,600,000.0 Our selling and marketing expenses remained flat at 2,100,000.0 and our G and A expenses declined by 8% to $2,700,000 On the operating income line, we just missed reaching breakeven for the first quarter recording a slight operating loss of $15,000 or a negative one tenth of 1% of net sales.
26m 49s
This compares to an operating loss of $1,300,000 or negative 12.2% of net sales in the prior year period. 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 $1,000,000 or a 10¢ loss per diluted share in the year ago period. Our adjusted EBITDA for the quarter also crossed over to the positive [indiscernible] [indiscernible] Reaching $544,000 and that was up from negative $701,000 in the prior year period. And lastly, turning to our balance sheet, it continues to remain solid, Our cash and cash equivalents held steady at 14,200,000.0 which was relatively consistent with our year end cash balance of $14,400,000 And our debt balance remained unchanged from year end, at only the $3,000,000 of required minimum borrowings under our $10,000,000 credit facility.
27m 50s
So overall, our liquidity position continues to be strong.
27m 55s
And with that, I'd like to turn the call over to the operator for questions. Operator?
28m 2s
Thank you, At this time, we will be conducting a question and answer session. Before pressing the star keys. Again, if you would like to ask a question, please press star then one.
28m 33s
Now. The first question that we have comes from Geoff Martin of ROTHMKM. Please go ahead.
28m 42s
Thanks. Good afternoon, John and Steve. Hope you're both doing well. John, can we start on the FST pipeline? You mentioned that it's stable. How is conversion progressing? And what what end markets are you seeing the most traction in currently? Hello?
29m 13s
John? I had you all on mute so you wouldn't hear the man with the leaf blower in the background who's blowing the leaves off my deck. Sorry about that. I'm just kidding, but it's somewhat true. So good question, Jeff. The FSP machinery is working pretty well. We had a recast the whole thing, rebuild a lot of it and what we're seeing now originally I think when we went into the market we thought that restaurants your typical fine dining and restaurants like that would be a big consumer of the technology. But their challenges are pretty simple compared to large food service management companies, and the grab and go market. And both grab and go which is a sophisticated area where you make a food product and you have to label it with the nutritional items. 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 and you have to go out to a database to look up [indiscernible] calorie content, the glycerides, the cholesterol, the fat content, sugars, etcetera, sodium. And that has to all be on the label in addition to when it was made and when it needs to be consumed.
30m 30s
So we're doing really well there. And in particular, if you do grab and go sushi, which is made fresh every day, that's kind of a scary thing for a consumer and you really wanna make sure that the food safety technology supports that and we're doing really well in that space with several large national sushi providers and they provide, 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 printed by the TransAct BOHA! Terminal. So that's one area that's doing well. And then the second one is food service management. Which we have clients like Sodex and Aramark as an example, I believe Compass Group is also a customer of ours and they automate large organization facilities. It can be a rest home, it can be a sports stadium, it can be a hospital, it can be a college campus, it can be a large manufacturing facility. And they basically set up food service for maybe five, six, seven, eight ten, 20,000 employees in some cases, and they have multiple stations with multiple items and they need a sophisticated food service technology supplier and we're doing really well in market as well.
31m 51s
So I'd say those are the two highlights that we find very exciting right now. And then I will mention 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 senior living home where we provided the sensor devices that were on all those small refrigerators that held the controlled medicinals, You don't want the temperature in one of those reefers to go bad. Because the chemicals in those medicinals sometimes go bad and you don't wanna damage grandma by giving her a damaged medicine and at the same time those medicines are sometimes very expensive. So we're winning business like that and we're finding that food service in the [indiscernible] hospital space, in the medical space is something that's actually a pretty good opportunity for us. And we have developing partnership with several suppliers into those spaces, 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. That sort of orthogonal opportunity as well.
33m 4s
Great. And then could you touch on pipeline conversion for for FST?
33m 9s
It's pretty good. I I 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 1,800 units. Over time. So like the land and 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 costs, lifetime customer value, LCV, What we are focused on, we have a very growing degree of sophistication in our pipeline management from who we target as client potential customers, how we figure out the personas in each one of those clients, and then we put them at the top, we market to them, we look at the conversion rate all the way down from when it's just the suspect who might need our technology to becoming an opportunity we go through the MQL, the marketing qualified lead handed 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.
34m 17s
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. We dive in, and we figure out what it is. Is it pricing? Is it technology? Is it we didn't say the right things or we didn't engage with the right people in the organization. And it's kind of, I know this is 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. 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.
35m 11s
Okay. And then with respect to the QSR rollout, where are we, if you want to use a baseball analogy, what inning are we in terms of fulfilling as many of those 40,000 legacy units as possible?
35m 25s
I'd say we just finished maybe we're still at bat in the second inning. Maybe maybe maybe at bat in the third inning. 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. 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 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 up uptake is very positive. And very successful.
36m 14s
And then last one for me, as we look at the revenue guidance range maintained at 7,000,000 to $52,000,000 anything we should consider in terms of how that comes in on a quarter by quarter basis over the balance of the year?
36m 29s
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 the business still is lumpy. [indiscernible] [indiscernible] convenience store operation that has 700 units that upgraded with enormous number of upgraded terminals from the basically the prior terminal to the BOHA-two, and those orders happen, but they're lumpy We take revenue when we ship. So sometimes they want it all at once, sometimes they don't. 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, we look at it year over year, I think we can say that we expect that we can continue to improve.
37m 24s
Thank you.
37m 26s
Thanks, Jeff.
37m 30s
Thank you.
37m 31s
Ladies and gentlemen, just a reminder, if you would like to ask a question today, please press star and then one. We'll pause a moment. For any further questions. Just a final reminder, if you would like to ask a question to press star and then one At this stage, seems to be no further questions on the conference. I will now hand back hand the call back to John Dillon for closing remarks. Please go ahead, sir.
38m 19s
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 our next quarter two earnings call.
38m 35s
And again, you very much and 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. Thank you, Saul.
38m 50s
Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Key Insights
TransAct Technologies reported a strong Q1 2025, achieving record BOHA! Terminal sales (2,150 units) and a 49% year-over-year increase in Food Service Technology (FST) revenue to $4.9M, driven mainly by hardware sales.
The company delivered positive net income ($19,000) and adjusted EBITDA ($544,000), with total net sales up 22% year-over-year to $13.1M; gross margin was 48.7%, down from 52.6% due to a higher mix of lower-margin FST hardware.
Casino and gaming revenue rebounded to $6.7M (up 18% YoY and 41% sequentially), supported by normalized OEM buying and a new OEM win; the new Epic TR-80 printer is gaining traction and expected to drive further growth.
The FST pipeline remains stable with strong conversion, highlighted by six new client wins this quarter (potential for 1,800 units) and expanding opportunities in convenience stores, healthcare, and food service management sectors.
Full-year 2025 revenue guidance is maintained at $47M–$52M, with adjusted EBITDA expected between breakeven and negative $1.5M (improved from prior guidance); the company has a solid balance sheet with $14.2M in cash and $3M in debt, and expects continued year-over-year improvement despite some quarterly lumpiness.
