TransAct Technologies Incorporated

Greetings and welcome to the Transact Technologies third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Gardella, Investor Relations. Thank you. You may begin.

Thanks. Good afternoon. Welcome to the Trade and Act Technologies 3rd Quarter 2024 Earnings Call. Today we'll be discussing the results announced in a press release issued after market closed. Joining us from the company is CEO John Dillon and President and CFO Steve DiMartino. Today's call will include discussion of the company's key operating strategies, the progress on those initiatives, and details on our 3rd Quarter financial results. We will then open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking and dangerous. Statements on this call may be deemed as forward-looking and actual results may differ materially or full list of risks inherent to the business and the company. Please refer to the company's SEC filings, including reports in Forms 10-K and 10-Q. Grants Act undertakes no obligation to revise or update any forward-looking statements to reflect advanced circumstances that occur after the call. Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, reconciliation of all non-GAAP financial measures to most directly comparable financial figures calculated and presented in accordance with GAAP can be found on today's press release as well as on the company's website. And with that, I'll turn it over to John.

Thanks, Ryan, and good afternoon, everyone, and thank you all for joining us today. Total sales for the quarter were $10.9 million. we had excellent progress in the FST food service technology space was highlighted by 1,355 units sold. Uh, meaning that, uh, in the last two quarters, the last six months, given that last quarter we sold about 1,476 units last six months, we've sold 2,800 units and we're feeling pretty good about that. We're proud of the sales progress we've made with the team. And we expect this approximate level of quarterly terminal placements to continue as we head into 2025. So that's some pretty good news. But let's walk through some of the other FST highlights. First, the FST from a revenue line standpoint was $4.3 million, up 2% year over year and 3% sequentially. The FST recurring revenue was $2.9 million, down 8% year over year, but up 3% sequentially. on continued strength from several of our large chain customers. So we feel pretty good about that as well. FST hardware sales were up 30% year over year and up approximately 3% sequentially. And as I mentioned, in Q3, we sold 1,355 units in the quarter, which is up 90% from the prior period a year ago. As we discussed on the last call, we believe this momentum is just the start from the reorganization and refocusing of our FST sales group. We spent a lot of time on that since I started as a full-time CEO. I guess it was April last year. We're going to continue to fine-tune the process, but fundamentally, I believe that we've got the right directionality here. We've made excellent progress, and especially with our focus that's related to developing, tracking, and nurturing the lead process, which we didn't do very well in the past. We've got a really good process now, and it's beginning to work pretty well. I will reiterate, as I said before, that sales will continue to be lumpy. We're an enterprise B2B company, and when enterprises buy, they usually buy in lumps. We use a land and expand strategy somewhat where a client will start with our technology and then buy more, but sometimes it's very hard to predict those large additional acquisitions. And the final thing I'll just say on that is I think that we should assume that the current run rate of terminal placement is sustainable. I think that's pretty encouraging for us. And as well, the rollout of our terminal to our large QSR client continues to go as planned with a large number of the terminals this past quarter being placed with them. The feedback on the product continues to be overwhelmingly positive. And we even sold about 100 units to a sushi customer in the quarter, which is also a good sign. And we have a couple of large major convenience store customers set to upgrade their entire install base of some of our older units. For those of you who don't remember, we sunsetted the Accudate 9700 terminal at the end of the 2023, which means all those units that are out there installed are an install base that we can use for potential upgrades to the new BOHA terminal, too. We also had a strong quarter on the new logo line. We added 12 new BOHA clients in the quarter, representing an opportunity for about 2,400 units over time. The new business pipeline remains strong. Quarter over quarter difference in the four-quarter pipeline remains solid and consistent. It's holding steady even though we booked business for last quarter. We take it out. We have to add new opportunities into the pipe. And I'm feeling very good about the pipeline coverage compared to the target revenue goals that we set for the sales team. Moving on to casino and gaming, we reported revenue of $4.5 million. That's down 50% year over year. However, on a positive note, we're seeing continued normalization of this market, as we predicted on previous calls. On the inventory side, I'm happy to say that we're down to just one of our major OEMs who is stuck in an oversupply situation. We're actively working with this client to reconfigure some of their existing stock for other markets in order to help them accelerate the liquidation and begin buying product from us again. However, we still expect them not to be buyers until at least the start of the year. And anecdotally, I know some of you have heard this as well, but casino activity seems to be slowing a little bit. We were just at IGT. I'm sorry, G2E. IGT is a nice client, but G2E in Las Vegas. And we kind of got a sense that right now the gaming industry is a little slow. We think it's macroeconomic factors. We don't think there's anything serious there, but we may see this trend continue until 2025. And we also believe it's contributed to the slower pace of slot sales from some of our OEM customers. On a final note relative to gaming and casino, we're seeing some increased sales traction with our Epicentral product as a result of our relationship with CasinoTrack. CasinoTrack is selling Epicentral as part of their slot suite product offering on a subscription basis. We like subscription revenue, especially when it's software. In August, we shared some results from the six-month deployment of SlotSuite, which was developed in this partnership with CasinoTrack and Transact. And going across an install base of 2,500 games and compared against data from the previous 12 months, the customer where we were doing this pilot saw substantial increases in carded play, rated coin-in, overall coin-in, as well as rated and overall WPU, that's win per unit, We believe this could represent some significant white space for us in the casino market, and we're excited about that over the long term. Next, I wanted to provide you with a bit of an update on our strategic review process. And while I cannot provide any further details at this time, I wanted to assure investors that we're working hard on the process. We're driving quickly towards an optimal outcome for our company and its stakeholders. but we don't really have any news. We promise that we will update everyone via the appropriate channels as soon as we have something to report, something to talk about. Before I turn the call over to Steve for more detail, I wanted to provide a bit of feedback on our financial outlook Due to the unexpected length of demand lag in the casino and gaming, we feel it's most prudent for us to revise our revenue outlook to a range of between $43 and $45 million. Our adjusted EBITDA, however, range will remain the same as we've been very disciplined on the cost side of the business. So I wanted to make sure you heard that information from me. So in summary, we are pleased with the progress, particularly on the FST side of the business. Year-over-year terminal placement up 90%. We continue to see additional demand from several of our larger key FST customers. The product is a winning product, the Terminal 2. It's one of the best products we've come up with, and I'm really excited about the potential. We're getting strong positive feedback and growing sales opportunities. The process improvements have clearly started to show results, and on the casino and gaming side, while the lag in demand has been longer than anticipated, We're down to really only one OEM customer is not currently buying from us. And we expect this dynamic will resolve and normalize in the first half of 2025. So that's really much the news from my report. And with that, I'd like to pass the call over to Steve for more detailed review of the numbers. Steve?