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spk01: Greetings. Welcome to the Transact Technologies second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note that this conference is being recorded. I will now turn the conference over to Ryan Gardella, Senior Vice President of Investor Relations. Thank you, sir. You may begin.
spk05: Thank you, John. Good afternoon and welcome to Transact Technology's second quarter 2022 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 Bart Sheldman and President and CFO Steve DiMartino. Today's call will include a discussion of the company's key operating strategies, progress on these initiatives, and details on our second quarter financial results. We'll then open the call to participants for questions. As a reminder, this conference call contains forward-looking 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's filings, including its reports on Form 10-K and 10-Q. Transact undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call. Today's call and webcast will include non-GAAP financial measures and the meaning of SEC regulation changes. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. And with that, I'd like to turn the call over to Bart.
spk07: Thank you, Ryan, and thank you to everyone joining us on the call today. I am incredibly pleased with our execution in the quarter and could not be prouder of how the Transact team worked to navigate these difficult conditions. All the challenging work certainly paid off. Thank you, Transact team. You accomplished almost the impossible, and I'm so proud of all that you have done. Last quarter, I spoke at length about the challenges that we were facing in the supply chain, and we all know we were hardly alone in dealing with these problems. I assembled a team comprised of engineering operations and purchasing, tasked with finding more parts, redesigning product where parts weren't available, but other similar parts were, and then building and delivering the printers to meet customer demand. The team did an incredible job, as you can tell from the top line, but we have only just begun. Our production started to ramp up in May, expanded in June, and now in full motion in July and August. We delivered many thousands of printers in Q2 and were able to satisfy demand in key markets where our competition could not. namely casino and POS automation. And I'm pleased to tell our shareholders in the second half of the year, we are on track to deliver near record numbers of printers to our customers, barring any unforeseen parts issues. We are actively winning share in these markets. We are doing everything in our power to ramp production even more as the demand in the POS and casino markets continue. In addition, as I discussed last quarter, we raised prices and began to implement our cost reduction plan and expect to see these results of these savings in the current quarter Q3. The early results have been encouraging, and we believe this was the right move to streamline the organization. The core of our savings was the result of suspending a new product development project during the time when we were all asking, are we in a recession? While we intend to move forward with that project sometime in the future, we believe now is the right time to move quickly on our cost control plan and drive towards adjusted EBITDA profitability. This plan, combined with the large sales level we expect to achieve in the second half of 2022, should result in Transact moving towards adjusted EBITDA breakeven as we move through the year. Steve will clearly go over this in more detail in the financial section. Now let's turn to the markets. In the casino and gaming market, despite some fantastic work and a near record number of printers produced, we continue to see demand outstrip supply. While our backlog continues to grow, we are still hand-to-mouth on inventory. As soon as we build, we are shipping to a customer. However, we still manage to produce a large number of printers in the second quarter, and we plan to produce even more in the third and fourth quarters. approaching near record levels of production and sales in our casino market, again, barring any additional unseen supply issue. Even with the additional production, we expect to sell out all of our printers, as we've been able to take advantage of weakness and major supply issues at a direct competitor to pick up additional market share. And as I had mentioned in our last call, our first price increase went into effect in March, and as such is now fully reflected in our second quarter results. However, while sourcing many of our parts have been accomplished, we still sourced some more parts for the remainder of 2022, again, some at higher costs. Therefore, to meet the demand, we will be instituting a second round of price increases in September, specifically on our casino and gaming products. I truly dislike these price increases, and our customers know we have rarely raised our prices. But the cost of parts to meet the elevated level of production requires another round of price increases. We expect the second increase to be fully in effect starting in September, with our fourth quarter results reflecting the new pricing structure. We are also thrilled that the team we put together was so successful and able to resolve the parts issues with our casino printers. The results in Q3 and Q4 should reflect their hard work. In point of sale automation, we continue to be dealing with similar dynamics, with every printer we make being shipped out as soon as they are ready. Our team has been able to ramp production effectively, and we will be achieving near record numbers of printer shift in revenue in the second half of 2022. With our products being able to fill gaps that competitors have been unable to fill, and thus picking up market share. Our special project with McDonald's continues, and we expect the back half of the year to see a significant pickup in the number of point-of-sale printers sold, as we can effectively ramp production and deliver additional units. Now let's talk about the FST market. We saw solid results in FST, underpinned by a return to a more normalized label sales cadence which pushed our recurring revenue back over $2 million to $2.2 million. We also saw very robust demand for new hardware, which combined to result in total FST sales of $3.4 million, a huge jump up sequentially and a solid increase year over year. In the second quarter, we added 814 new paid terminals for a total of 10,941 currently in the market. While this number was slightly below our expectations for the quarter, we were optimistic about the back half of the year, as our sales team, now led by our new sales executive, who has deep experience with selling enterprise software products, is fully built out, and I could not be happier with the progress they are making. While we did reduce expenses in various parts of Transact this year, as I previously stated, On the other hand, we added more salespeople to our FST team. Our overall cost structure will be lower, and I am pleased to say we now have a full complement of salespeople across all the different verticals in the FST markets we serve. Our pipeline is as robust as ever, and we are seeing great traction with several new brands testing our BOHA products. Some of the most recognizable brands in the world are currently being counted among our pipeline, which, as a reminder, is fully vetted and does not include anyone kicking the tires. We still have more selling to do, but our pipeline has really grown since doing the NRA supermarket and C-store trade shows. Many of these potential customers are nationwide chains with units in the hundreds or if not thousands. However, timing can be uncertain. as well as initial order sizes and rollout strategy. With this in mind, it's probably best to take down the guidance of how many new BOHA terminals and workstations we will add this year. Though our sales pipeline is more robust than at the start of the year, and there is a chance that we can make our original guidance, due to the difficult first quarter of 2022, it is best that we speak about a lower number. Therefore, we have decided to take the number of new placements to 4,500 to 5,500 for 2022. However, we are maintaining our ARPU guidance for the year at $8 to $10 million. I also briefly wanted to mention that in July, we put out a press release announcing our first ever BOHA enterprise license sale. This software win is a five-year, 300-terminal and software license deal and represents a crucial step in the lifecycle of BOHA and represents the type of deal we will be actively pursuing in the future as we continue our evolution into a SaaS-based software solution provider. We sold the software enterprise license with the customer agreeing to buy the license for 300 locations, all up front. This gives us the confidence in our SAS potential revenue going forward. Lastly, I wanted to discuss our ARPU, our average revenue per unit for the quarter, which came in at $861 versus $638 sequentially. The rebound in label sales helped bring ARPU to a more normalized rate. And as a reminder, our target continues to be an ARPU of between $1,000 and $1,200. For the remainder of the year, we would expect ARPU to hover near its current levels. But please remember, we are selling BOHA terminals to replace our old AccuDate 9700s that is sold without any recurring revenue. These units are included in our ARPU calculation. In closing, I want to recap what I believe are the most important takeaways from the quarter. One, we are seeing tremendous success in navigating the exceedingly difficult supply chain issues. With the second quarter of 2022, while the second quarter of 2022 was good, we expect to deliver many more printers in the remaining two quarters of 2022, and we still expect to sell about every single unit we can produce. Two, our FSD sales team is now fully built out, and we are seeing a lot of momentum build in our pipeline. Our cost reduction plan is seeing excellent early results and was fully implemented in the third quarter. And in the fourth quarter, we will see the full effect. In addition, the price increase is flowing through and helped to offset the increase in supply chain costs we have experienced. Four, altogether, we now expect to be moving towards adjusted EBITDA breakeven by the end of 2022. I want to thank the entire team at Transact for their tireless effort. This was quite an effort. You never gave up. The results have been outstanding, and I want to thank you. And I want to thank our shareholders for the support and for your time here today. Now I will pass the call over to Steve for a more detailed review of the numbers. Steve?
spk00: Thanks, Bart, and thanks, everyone, for joining us. Before I start, I want to mention that all of our results for the prior periods that we will be discussing today are on an as-adjusted basis, taking into account the retrospective application of the change in accounting method we made on April 1st. I'll talk more about the accounting method change a bit later. Now let's turn to our second quarter 22 results in more detail. Total net sales for the second quarter were $12.6 million, up 35% from $9.3 million in the second quarter of 21. Sales from our food service technology market, or FST, were up 12% to 3.4 million compared to the second quarter of 21. FST hardware sales increased by 24% to 1.3 million from 1 million a year ago. We added 814 paid terminals during the quarter and finished with a total of 10,941 in the market. Our recurring FST sales, which include software and service subscriptions as well as consumable label sales, were $2.2 million, which was up 5% from $2.1 million in the prior year period and up 39% sequentially. This improvement was due to a more normalized cadence of label sales, as well as additional software deployments in the quarter. Our ARPU for the second quarter of 22 was $861, up from $638 in the first quarter of 22. The recovery of ARPU was due directly to the return of higher FST recurring revenue, which, as I just mentioned, had experienced a more normalized run rate during the quarter. Our casino and gaming sales were $6.5 million, up 88% from the second quarter of 21. We're seeing a very strong resurgence of international demand as those gambling floors continue to come back online, with total sales up over 150% for the quarter. Domestic sales also saw robust demand, with revenue up over 60% there as well. As Bart mentioned, we're continuing to see demand outstrip supply, Although we saw our manufacturing throughput improve greatly this quarter, which allowed us to deliver more printers than in the first quarter. Additionally, in the 2022 second quarter, we experienced a full effect from our first price increase, which generated a higher total revenue number and allowed us to absorb the cost increases we've incurred. Our engineering and operations teams did a phenomenal job of finding alternative parts sourcing, and in some cases, designing around parts entirely. As we experience some improvement in supply chain conditions, we're expecting to make a higher number of printer deliveries in the back half of the year. As a reminder, we experienced a second wave of product cost increases, and our second price increase will not go into effect until early September. So we expect somewhat lower gross margins in the third quarter and improvement in the fourth quarter when the second price increase takes full effect. POS automation sales were down 7% from the prior year period to $1.2 million. While we could have shipped many more printers based on the backlog of orders for both the special project from McDonald's and their regular business, unfortunately, supply chain issues limited our sales in the quarter. We expect production and therefore sales in this market to increase significantly in the second half of the year. Moving now to Transact Services Group, or TSG sales. Overall, TSG sales were up 6% to $1.5 million. This increase was largely due to an increase in domestic spare parts and accessories to legacy lottery and POS customers. Moving down the income statement, our second quarter gross margin was 43%, as compared to 36.8% in the prior year period. Gross margin was positively impacted by higher sales, especially in the casino and gaming market, as well as the implementation of our first across-the-board price hike, which went into effect at the end of the first quarter of 2022. Our operating expenses for the second quarter increased $2.3 million, or 38%, to $8.4 million when compared to the second quarter of 2021. Breaking this down, our engineering and R&D expenses increased 20% to $2.2 million, largely due to investment spending on R&D for BOHA, including the hiring of additional software developers for continued BOHA development projects, as well as higher costs related to designing in alternative electronic components for existing hardware. Our selling and marketing expenses increased 86% to $3.3 million, mostly due to additional investment spending related to BOHA, including marketing studies, enhanced marketing programs, and additional support staff around our BOHA offering. Additionally, we saw higher trade show and travel expenses as these returned to pre-COVID levels. Lastly, our G&A expenses increased 17% to $2.9 million. This increase was due to increased salaries across the board in response to wage inflation higher professional fees, and depreciation and other expenses related to the implementation of the company's new ERP system in April 22. These increases were partially offset by a reduction in incentive compensation expense. We incurred an operating loss of $3 million, or 23.4% of net sales in the second quarter of 22, which compares to an operating loss of $2.6 million, or 28.4% of net sales in the second quarter of 22. Sorry, 21. On the bottom line, we recorded a net loss of $2.4 million, or $0.24 per diluted share in the second quarter of 2022, compared to a net loss of $2 million, or $0.23 in the year-ago period. Adjusted EBITDA for the second quarter of 2022 was negative $2.5 million, which compares to negative $2.1 million in the year-ago period. Another thing I'd like to mention is that we successfully amended our credit facility with Sienda Lending Group in July. The amendment extended the term of our existing $10 million credit facility, which is subject to a borrowing base, for an additional two years through March of 25. It also requires us to maintain a minimum outstanding borrowing of $2.25 million during the term. As Bart mentioned, we completed the implementation of our cost-cutting measures during the third quarter and expect to see the beginning effect of these expense reductions in the third quarter and a full effect in the fourth quarter results. We expect this cost reduction plan, combined with higher sales, to result in lower cash burn, as we expect to move towards adjusted EBITDA break-even as we approach 23. As a result of this, combined with our now-extended Ciena credit facility, we expect to have enough liquidity for at least the next 12 months. And finally, I wanted to discuss the reason for the delay with our earnings call and the filing of our Form 10-Q. As mentioned in our press release and on previous earnings calls, On April 1st, 22, we implemented our new ERP system, which was necessary as we moved towards a business model with a greater focus on software sales. One change we made as we adopted the new ERP system was to change the accounting method we used to measure the value of inventory from standard cost to average cost. We made this change because the average cost method reflects a better measurement estimate of inventory cost as we now procure fully built finished printers rather than manufacture them. Average cost also aligns better with our go-forward business model and simplifies our business. Unfortunately, as we closed this quarter, we were delayed by the work required to retroactively apply the accounting change for all periods for which financial information is presented in our 10-Q. We are now through this process and expect to file our 10-Q within the permitted five-day extension period. And with that, I'd like to return the call back to Bart for any closing remarks.
spk07: Thanks, Steve, as always. Well done. Very thorough. It was just a great, I just got to tell you, it was just a great quarter and so proud of everybody, of what we were able to complete, going live on a new ERP system, the team getting all the parts, getting back into full production, and now really ramped up. Operator, with that, I will take some questions, please.
spk01: Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of George Sutton with Craig Hallam. Please proceed with your question.
spk03: Thank you, Bart. Nice job. So I wondered if you could just walk through the delta, the 2000 placement delta from what you expected prior and what you're suggesting now. And could we break them down into what those might have come relative to sales changes you made or 7-Eleven, Cadence, or Supply Chain? If you could just kind of break those down, I think that'd be helpful.
spk07: Yeah, George, thank you. No supply chain issues with our FST business. That's why we really don't address anything around supply chain issues with FST because we've got the inventory. So we've had no supply chain issues with FST. You know, the first quarter was just an anomaly, George, and it was so low that making up... what we thought we were able to do through the year is going to be a little difficult. What I can say, George, is the pipeline is about as big as I've ever seen at TransApp right now. Our goal, you know, as we came through the pandemic, George, we really only had a couple of markets open to us. We had the convenience store, truck stop, and food service management company opportunities in front of us. So we really focused our sales team there, but we didn't have as many as we have now. As we started getting through 2021 and into 2022, we realized that the restaurant market would open up. So we went and hired our new head of sales who comes in with enterprise experience and spent the last six months just hiring people. And we've got a full complement of salespeople across all the different segments or all the different verticals that we serve, quick serve, fine dining, casual, convenience store. We've added another person. So, you know, it's just going to take them a little time to ramp up. We also have a couple of projects where we did believe they would roll out all the terminals. These are new projects this year. And in some cases, we've got one in particular where we thought it was going to be 600. They will buy 600, but they're only going to roll out 100 this year. And that just has to do with rollout schedules, George. All I care about right now is what we call net new names, is closing new accounts. We have another deal that we worked on where, again, it was like 500 units. They wanted to start with 50. We said, fine, let's just get the order and get it going. So it's just a matter of ramping it up. I just had a review today with our sales manager in regards to the opportunities. It wouldn't surprise me if we get back to that number this year, but I think it's just prudent that we lower the number just because of the difficult first quarter that we had and just some of the rollouts are not, while they've agreed to do it all, they're only doing some this year.
spk03: Gotcha. Now, relative to the supply chain, there was a suggestion of perhaps reengineering products. Can you just give us some perspective of, as you brought these different teams together to try to move more quickly, just give us some examples of what you feel was accomplished there?
spk07: Oh, yeah. Well, first, I'd like to thank our chip supplier who worked hand-in-hand with us. So... If you look at one of our products, I won't tell you where it goes, but we started with one design. They were able to get us like processors, but not the same processor, and were able to get us enough to get us through most of this year. We had to redesign the product for that chip. which means we change the firmware. If you look at how the printer works, we connect to another system. That is pretty much done. It's what's below that that we have to do. We got a new chip. We have to program it to turn on the motors, turn on the sensors, move the paper, print on the paper. Every time you have a different chip, that machine code language changes completely. So with this one product, we completed that redesign, knowing we were only going to have enough chips for this year. And of course, our chip manufacturer told us if we go to a certain line family of chips, that that's the one that they can produce a lot of. And by the end of the year, we will have redesigned it a second time for the next generation chip. So this was a war room. This was operations, engineering, purchasing, working hand in hand. We had a motor driver, which we ran out of and went into the marketplace, found it. We had a capacitor. Actually, we couldn't find it, had to go to a different capacitor, which changed the way we look at black mark sensors. It's the way we look at the sensor that turns on and off and looks at the black mark, which tells us either when to print or when to stop the print. So we had to open up the band of focal length that we could use the sensor to see the black mark. So while we had to get another capacitor, we had to take another capacitor out. This was ongoing, ongoing. The good news is our chip manufacturer has asked us, and we've agreed on doing it right now, to go to their latest design. And we are in the process of Every piece of hardware at Transact will go to that family of chips. Everything, gaming, casino, food service, we've got a new product coming there, and the existing product, and POS will all go on the same family. And what we're designing is kind of an overall firmware base. That will run the chip, and then depending on the type of printer or type of hardware, we'll just add an extra piece of code to make it work for that specific product. And that should all be completed by the end of the year. That chip that we've gone to is in vast supply. We've already placed orders for the chips. And one thing that you'll notice on our balance sheet is our inventory is up. That's all the piece parts, all the chips and all the electronics that we bought that we could get. That's why we feel very comfortable about the ramp-up in production and how it's going to continue. We're going to ship a boatload of printers in the third quarter and fourth quarter, and we've got those products already at our contract manufacturer.
spk03: That's great detail and very helpful. So, lastly... You talked about May, June, July, and in terms of everything getting stronger with July, the strongest of the three. Can you just give us a sense of that dynamic?
spk07: Sure. Probably in one aspect, we'll shift three times the amount of printers in the third quarter than we did in the second quarter. And most of the printers for that product went out in June. We shipped no product in April, very little in May as we ramped up production. Once we got through all the redesigns, it took us months to do the redesigns, and we ramped up as we called it in May and then went into production in June. In one aspect, we'll triple production in the third quarter for that one product.
spk04: That's super. Thank you. You got it, George. Thank you.
spk01: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue, and you may press star 2 if you would like to remove your question from the queue. Our next question comes from the line of Jeff Martin with Roth Capital Partners. Please proceed with your question.
spk02: Great. Thank you. Hi, Bart. I wanted to get an update on 7-11. I know they placed a larger-than-usual order for Q2. Did all that ship as expected, and how does your visibility for the balance of the year with 7-Eleven look at this point?
spk07: Visibility is good, Jeff. Some of it did go, I think, in the third quarter. Label sales continue to come in. Actually, they're going to be one of our first customers to re-up their three-year ends in the fall. And we should be re-upping with them. So, you know, I know a lot of people ask us about, what do they call that, the whatever rate, you know, customers that come on and come off the system, 7-Eleven being our largest, and we should expect to sign another three-year agreement with them. So they're fine. They're fine. We are trying to figure out the Safeway deal, Speedway deal, not Safeway, Speedway deal. and see if they're going to be rolling out the fresh food program at Speedway. I can say I do talk to our sales manager on that account, and we are hearing that the fresh food program has been a real winner for them, and it wouldn't surprise him if they expand the program.
spk02: Okay, that's great to hear. I wondered if you could give us a little bit of insight into the average size deals within the pipeline. You'd mentioned a couple of times that it's as big or bigger than it's been to date. Are you seeing larger potential deals on average? Are you seeing some mega deals in that pipeline? Just some relative perspective would be real helpful.
spk07: Yeah. Today just happens to be my – every other week I – review in detail the projects. We've got everybody on Salesforce now, so we had it before, but now everybody is using it. I mean, truthfully, Jeff, the deals go from $1,000 to $20,000 and everything in between.
spk02: Okay. And what about pipeline progression? Maybe you could speak to that. I know the sales cycle is fairly long and you've added a lot of sales resources recently. recently at the Restaurant Trade Show, and that generated a lot of leads. But how are we looking in terms of pipeline progression? Is there anything near term that could really cause 2023 to be kind of a breakout year on the BOA terminal installation? Maybe just give us some perspective so we could think about how to model out next year. Yeah.
spk07: I think that's what Steve wants to know from me. So we've got some good-size opportunities. Some are in the 600, 2,500, 4,000 range, you know, progressing through the trials and all that. So... You know, I think 2023 has a great chance of being a lot bigger than any year we've ever done. The opportunity list that I looked at for the third and fourth quarter this year are way bigger than numbers that I gave you. But I'm uncomfortable because we're still going through the trials and the conversations. I want to be conservative in my approach. I want to give the sales team an opportunity to do their work and close those orders. I got to be honest with you, Jeff, I've never been this excited because we've got a whole team of people on our staff now that come from Oracle and other big companies that are very impressive. and very impressive in their approach to sales. And, in fact, we had a conference call today and an opportunity, and they asked me to write a letter on their behalf to somebody I know at the restaurant company, and they took me through their logic and all that. I was just totally impressed with how they're navigating through the customer. You know, we needed to get to this point, Jeff. You know, it's very easy to forget what 2020 and 2021 were like, when all our customers in the restaurant market were closed and not interested in talking to us. But they're open again. We've got a full staff of people again. They're going after that restaurant market. We've even had people in the food service management. We've added some people or one person into our convenience store because that's been so busy for us. You know, the opportunities are there. How much has it grown? I could use the word tremendously. We have this many people on the road versus what we had before. As you know, we had over 200 leads at NRA, all turning into opportunities. You know, we went to the supermarket show and ran into somebody, a couple of customers that are much larger than the food service management companies we have today. So that alone would grow that business tremendously. And then there was a special convenience store show we went to where we picked up a bunch of leads. So. You know, we've got to do our work now, Jeff. We've got to hunker down, get the work done. We've got the product. We've got the technology. We've got the sales team. We've got the backup team that does a lot of the technical work in getting them onboarded. You know, when I look at some of the opportunities that we're closing and how long it takes even after we close to get them on, you know, we put online 800 terminals, but we sold more in the quarter. But it just takes time to get them online. So, you know, we've just got to go through the sales process.
spk02: Great. And the last question is, you know, you tick down the BOHA terminals number for the year. You maintain the recurring revenue, annual recurring revenue component. What bridges the delta there? Is it higher than anticipated label sales relative to your last, you know, forecast there? Or is there something else that's...
spk07: No, great question, Jeff. It's exactly right that some of the new accounts are at a higher volume of labels and software. So you look at the enterprise deal, that was all software. That's predictable, right? We know exactly what we're going to be billing every month. We do have one customer that's at a higher rate of labels than some of the others. So, you know, we look, we kind of, we now using Salesforce can put in exactly how many cases of labels will they use and try to, from there, calculate what that recurring revenue is going to be. Look at the cadence. We now have a report that goes back to the beginning of 2021. So we can now look at cadence of purchasing by year. our larger customers, and ask if it drops off Y and find out what's going on. But we've also added a lot more customers. So those customers are coming into the, you know, every time we add a customer, that's going to add more recurring revenue. So we feel comfortable at the 8 to 10.
spk02: Very good. Thanks so much.
spk04: You got it.
spk01: And our next question comes from the line of Eric Wolfing from Grand Slam. Please proceed with your question.
spk06: Hey, Bart. How are you doing?
spk07: Good, Eric. How are you?
spk06: Very well. Congratulations on getting everything moving in the right direction.
spk07: Thank you.
spk06: So my question really relates to all the increase that we're seeing in labor costs, especially in the restaurant industry, and everybody seems to be shorthanded. Is that creating a greater sense of urgency at these restaurant companies for more technology and for Bohai in particular?
spk07: Yeah, I think you've got a couple of dynamics. There's no doubt that the labor shortage has driven them to look at ways to streamline their business. And clearly, whether it's the front of the house, the middle of the house, or the back of the house, that's where they're looking. So that, yes. I also think that during the slowdown or the restaurants not being able to be open or 25% or 50% open, They were really focused on the front of the house, and I've said it over and over again. It's not like they abandoned our idea of how to streamline the back of the house, but if they didn't have online ordering and maybe needed a ghost kitchen, needed ways for people to order online, pick up, deliver it, If they didn't have that, they had to get there, right? We could put all the equipment and all the technology in the back of the house, but if you got no revenue, what are you going to, you know, how are you going to pay your bills? And we're through most of that. I mean, you're seeing that in some of the earnings lately, right? Olo, you know, didn't have such good earnings, right? I mean, you know, a lot of the work in the front of the house has been done. You know, it was a rush to get the technology done. Now, of course, they're looking at our technology because now the people are back in. We're through all the shutdowns and all that, and now they're having to run the restaurant, and they've got food shortage issues. They've got wage inflation. They've got cost inflation, food inflation. If we can save them 3% or 4% on waste, that's huge. So clearly, clearly, Eric, the pendulum has finally swung. It was going to take time. I kept saying it on our calls. It's just going to take time for restaurants to get away from the focus of the front of the house, which they had to do. And now they're going to the back of the house. So it's all of it. It's all of it, Eric.
spk04: Great. Thank you very much. You got it.
spk01: Thank you. At this time, we have reached the end of the question and answer session, and I will now turn the call back over to Bart for any closing remarks.
spk07: Look, it's a modern miracle we got accomplished in the second quarter, but I just could not say it over and over again. I could not be more pleased with the team here at Transact. They did the work. They hunkered down and got us to this point. I really appreciate the support we've received from the shareholders during this time. I don't think any of us created a pandemic, nor did any of us want a pandemic. We launched our BOHA technology in 2019 to a great response and then got shut down by a pandemic in 2020 and 2021 and through the beginning of 2022. But here we are. We're growing again. We've got our production up. We've been able to get through this massive supply chain problem. And we've got a full sales team out there representing you, representing us in that market to grow BOHA. So I look forward to our next call. I really appreciate all the support that the shareholders have given us through what was a really difficult time. And now I kind of look forward to, you know, better times for the company and better times for you as shareholders. Thanks for your time, and thanks for your support.
spk01: Thank you, everyone. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great rest of the day.
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