Earnings call transcript Q2 2023

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Operator

Good afternoon, ladies and gentlemen, and welcome to the TransAct Technologies Q2 2023 Earnings Conference Call. [Operator Instructions]. This call is being recorded on Wednesday, August 9, 2023, and I would now like to turn the conference over to Ryan Gardella, Investor Relations. Please go ahead.

Ryan Gardella

Thanks, Chris. to Second welcome Call. XXXX and afternoon, TransAct Quarter Technologies Earnings Good we'll announced close. after results discussing our Today, the issued in be press release market

us initiatives discussion of and company's John financial key DeMartino. is results. progress the on the call and on our strategies, those quarter Today's a CFO, Steven details Joining Dillon include will operating from and company President CEO, second

open the call questions. then for will We participants to

in differ expectations, nature. call conference contains about which this may are and deemed actual forward-looking on reminder, forward-looking a As be Statements future statements call materially. this and events as results may

For obligation a the the and company's risks revise forward-looking any to XX-Q. on reflect to to the including filings, the and its reports or or after update full business occur list to circumstances of that SEC Forms call. statements refer no company, events undertakes please XX-K inherent TransAct

in all SEC the meaning Today's When required, call within accordance with well call in measures financial as to measures and of the release company to presented the on financial financial calculated webcast like be can include John. the G. I'd press And Regulation directly as today's website. non-GAAP comparable non-GAAP measures of will over found turn reconciliation with most to GAAP that, and

John Dillon

afternoon, into the I've in more at an up of my for all, CEO was and as I now only Thank joining roll I And today. up month thanks to you some the work chance Good and job a you, least opportunity Last Ryan. a for about everyone, XXX days, of present bit little time, them dig I to had TransAct. into a had earnest. counted to and sleeves

and progress some So we've to you with I'm happy share I'm today. the going with that of made

in first decline it at the quarter hard on approximately the we've and from came a came in tried sequential the expected year XX% At to expected. on the beyond. million. call. 'XX last sales of $XX.X half was into results And and was XX% importantly, as discussed back but all in the as Net approximately the success we setting of level, for Year-over-year, the and work a stage high more increase

about well talked TransAct to take allow some parts found of of I I action business to here going some quarter, at fundamental of and the to goodness advantage as Last the that were as require us the the where the process was some added ahead new done to market. we've of none there in opportunities And up parts done. can always where internal the that say before. business we're I the that needed revamping be

moved have few progress the fully ready around. added business. We've some I the we've to much-needed We personnel and like momentum a feel let that made a few. some I for we're We've add go.

really focusing teams, predominantly I sales a that first overhaul. attention equation, that our we that also pretty the go-to-market execution. the other turn GTM The phase now reality right our and in that strategies right to say I'm significant And is places the required parts on is the and of complete. processes have largely really of feel can people to we confident now the happy

now takes any a pretty in in habits be long change shifting moving While direction. game, that can behaviors right and business confident time I'm the we're and all

results our from me the X go of markets. some over Let

about primarily FST XXXX led label product This or FST market, XX% million, was by was our our on First, food up and sales. higher AccuDate shipments of year-over-year. revenue increased $X.X service technology

XX, of the in bringing net BOHA! XXX XXXX. market quarter, the of to new of up the total the Terminals added June We the online terminals also as our number quarter, in XX,XXX end

that's numbers and pretty XX,XXX And key I improve the focuses honestly, ago. prior know on year one that's we in can me. the So for a these from of up period that's

the FST rebuilt new units selling as possible is Our the many priority, in is on refocused which as of these team sales marketplace. is and #X

some personnel the freshly We motions is terminal excellent strategy. take BOHA! the also the customers. clients of I an where and And have on and revamping beginning there out progress both we've new pitching continue time, iterative will momentum We've new while implemented launched sales mentioned existing Terminal we're X. already our process GTM existing changes of this some made from day this that to every needed, promises some seeing been of and the preorders and

after execution. I in its this As digging found improvement of for in a bit, I mentioned, room and GTM frankly a lot

While are optimal, fixable. why It's We these news that's do where just and it it people took not science. rocket many. easily a the around a they bit to good far is things that few moving creating were little and focus one of from relatively all have

to given going is manifest sales good However, the to long time it take the results. still cycle, for work the

very out we're as X. are customers turned BOHA! who clients have with product And those playing discussed so frankly, Terminal faster, happy happy and I capable a as brighter, bigger, with Further, and reception the than positive from just the The gotten quarter, original. the we trialed more well lot it far. last better we've

as who extent, are there's large upgrade and product BOHA! our our XXXX to existing some earlier older to that Terminal believe original customer opportunity We well. looking within a AccuDate installed the from base

headquarters I've reminder, but the a green engage a case said long, to dividends. franchises. with their with the sales most franchisees, when it's light pays is cycle the it BOHA! is and grants typically already the of that, us And this complex, As established

the approvals to year upsell individual authorized results the year -- approvals our on it, really introduce begin go at well end yes, will some those say, and back accounts. of to some on -- them the and and XXXX basically that And towards XXXX. an we're and hope out optimistic we're this gives the to to opportunity approved of unit key franchisees so of we've to for way And it, that And getting the once yield and the into we've that is then us they uptake. okay, it's key

but $XX.X Next, the on total we down in the up make and the revenue our predicted we X are for all-time first, year-over-year as we There last the We -- predicted first did of not high call, market first deliveries major gaming we from main last decline: million, of reentering sequential XX% a on our did and that, competitor side. had see sequentially but casino product of their the and reasons the they saw gaming saw signs quarter, lot, XX% some. in the quarter. casino some

that which slot OEMs having additions books result a a the first we printers rate orders order fact X we the our large chain out XXXX. had supply to the in of is and of printers Second, manufacturers X eased, chain backlog some And months believe supply OEMs combined seeing case tensions problems as continued, position had built half we to as just longer with of placing over certainly inventory are ordered are the slowing, previously. in no

We're believe that benefit short-term the on were ability our at spike during resting we -- the influx and you in right we profitability And was to demand us market the certainly capitalize place So with time the year. beyond not right benefit laurels, recovery. at this the earlier will of this this sales as say. created on pent-up

much in become and going We gaming A the those will of an have gain out for buyers customers increased retain customers printers. as market to our our our new as are certainly new portion staff effort of actively casino to sales and possible. share long-term

The forward. the XX% make are quarter net of believe year order pricing to However, marketplace stage, to run that a at level pre-COVID bit going to positioned would reflected we on the And XX% sure We demand well this these would fourth be here that this prize our run we about products new XXXX. than our estimate historical reduce market we as expect that also average. as higher in market a in in and the little permanent in competitive we should possible. baseline the sales result in fully much of is a expect increase we rate rate into stay to to And this share. sales as new capture on go-forward be

to casino retain printer of XXX, some will us some we our believe Further, EPIC help hope which gaming from customers. we new newest to benefit these see the call and

to et cetera, of expect launch, year. end the looking happen at and will unit this it gaming nice the launch -- to We of at some point, That boost of the towards but expect casino and some to end really publicly the nice be a customers. we a it's

of I progress. outlook how our the wanted for XXXX are and some to Finally, the business seeing on discuss color we rest provide

we're about of while that The much gaming discussed, both that reality we competitors taking of EBITDA. continue expect as reductions our retain are, as and to we're spoke fact, and trajectory action and I return last business well downward of seeing as about quarter, As talking sales to the we did price our strong will adjusted as net in profitability on possible. impact the is casino that

guidance believe $X pleased pieces again, with the be to take million full perspective our of and to of is time. have company the but ranges we all EBITDA $XX.X for place our year There's range million a now sales such, is the most in right but account the raised a to approach company I does have current quarter done the mentioned in from results adjusted into the These the take TransAct, a still direction are the decided impact of net believe prudent work As $X.X I and whole. for guidance today. maintain as our million the across points our at personnel I'm to moving here to million to guidance XXXX. $XX.X

newly service for for reinforced in the now on the take team preorders and Our technology particularly on encouraging capitalize cycles, early on Terminal our feedback best sales sales we're rebuilt sales are front position FST, is but in to of teams us. and BOHA! getting And very opportunities gaming time, the X. food FST casino

and with competitive began the predicted, the printer gaming quarter, environment OEMs longer decelerate no sales normalize casino as our While stockpiling. to in began in to

to hard relationships are share as these nurture new that retain work possible. to customer much of as at We

detailed that's the call Steve? for a it. now like And the I'd pretty numbers. much So review to to over more of turn Steve

Steven DeMartino

Thanks, everyone, us this joining John. Thanks, afternoon. for

to our detail. turn second Let's more 'XX in results quarter

and product AccuDate subscription software BOHA! up as $XX.X to labels were were to technology for compared or As quarter million, sales $XX.X the year a which for second our was the food well period. our compared in John market of higher revenue. total $X.X increase second sequentially reported was shipments XX% which quarter Sales also the from XX% year million, up prior million mentioned, high million FST, XXXX The $X.X record to in the XX% largely ago. was we service as up due net

mentioned, John added the XX,XXX of As the in gave us quarter, in market terminals which we quarter. the XXX at end second the

initiatives to we're sequential and our implement to by time flow encouraged bottom line increase the our results. our in sales, will While take then sales through FST

So for we believe to a be may lumpy number this while. continue

sales Our label subscriptions $X.X quarter recurring compared FST as well up and for period. $X.X software which consumable includes the the as was year XX% second which prior to million service sales, in million, were

Our ARPU X% quarter. for $XXX down second the up to was $XXX by of but compared which second sequentially the X% $XXX, quarter first quarter in the was last year, of compared to in 'XX

a reminder, recurring some to start. with them selling attached BOHA! to no Terminals As currently we're revenue

on future, our While drag presents represent in elements ARPU. recurring the they sell an to for this a opportunity now,

million, XX% $XX.X from Our down quarter from was were casino $XX.X high and record second gaming the at first 'XX, up sales the sequentially but of which quarter million. XX%

As working is OEMs well combination due as John of to printer gradual supply our reentry market inventory the down stockpiled this now competitor a major eased. during the high the crisis of that's levels as into of mentioned, they

product when this compared which Despite to to limited availability. issues see $X.X prior $X.X POS for -- our were increased our last second This continue year the to that quarter chain in XXX% sales year year-over-year. these due million. to by strength was sales as XXXX XX% higher time automation sales the million sales, factors, domestic the supply were Ithaca we of from result up restricted

prices We to more normalized sales this return competitors competitive. expect levels begin market ramping as in production we lower to remain to and

Moving TransAct TSG, Services Group or to sales.

second largely spare quarter, increase parts printer had up second service million. and $X.X of was sales the strong legacy parts printers. predict spare quarter, higher to sales legacy lottery Though to our vary can For This for TSG XX% can sporadic, year-over-year quarter-to-quarter. significantly of sales we a from to difficult due be and were lottery

Moving down the income statement.

of in gaming XX.X%, and the instituted the result to margin as cost This high comes the down of a was overall from of quarter quarter, rounds year casino volume, margin the XX% X year increased effect printer and in sales mix of up during prior a and slightly XX% gross record Our we second higher from prior price period. shipping in higher time. for 'XX improved production increases at of sales account but

we certain and mentioned, to John casino products, modest see gross of across margin as expect However, our some due reductions gaming. expected price in deleveraging particularly to

As forward result, looking the gross return historical of expect a 'XX, half to to to pre-COVID a to second our closer margin average. level we our

the quarter million. $X.X increased second Our to total operating XX% expenses for

$X.X as a million. R&D decreased increased well a this was higher about X%. expenses outside fees. expenses software Breaking talk our increased resources the our increase compensation quarter charge, to severance operating testing incentive Excluding quality in additional for second I'll largely which due The and bit, engineering as to a down XX% bit, and

Our a largely second XX% trade expenses that to to selling reduced of the first repeat half BOHA! did we in in quarter basis, 'XX. $X.X and show studies for 'XX year-over-year conducted the decreased not marketing million expenses and due on market

quarter. XX% expenses in related to the of our of charge due for a onetime to was G&A increased largely CEO former our increase severance million million resignation The Lastly, $X.X $X.X the April. to second

year loss in been an G&A of approximately flat million the relatively would quarter this prior period. have million the $X X% up generated to Excluding year-over-year. operating $X compared expenses in We million, charge, second only $X.X income operating 'XX of at

were by COVID-related year with lower chain the last associated volume negatively issues. results Our impacted sales supply

line, share loss in bottom of net $X.XX period. diluted loss we year per the of or $X.XX per recorded the On compared a to million income $XXX,XXX net ago share or diluted $X.X

current the have discussed, the I charge for Excluding been would our $X.X million EPS $X.XX just severance quarter.

EBITDA an million adjusted to adjusted to quarter $X.X second for EBITDA of loss improved the the Our million year. $X.X in compared last quarter

the generate $XX.X for of million. like total Lending. $X.X our and now we debt finished expect $X.XX open million Siena cash call the million And sheet, with to that, outstanding quarter between credit mentioned, operator, And 'XX, we'd balance John on and to facility in As with $X up lastly, I the questions. of with on for adjusted we EBITDA million think

Operator

Instructions]. [Operator

question first Jeff from Your comes Martin, MKM. Roth

Jeffrey Martin

ultimately, bit what's the produce more wanted I quickly changed to behavior doing a then that Hope how in improved dig you're in well. John, to little changes sales with on go-to-market, results? starts and

John Dillon

out Yes. that to to a do well. interested got the stuff to ultimately work and port that lot There's then possibility of of can that's got where you close to you find kind as you've relative marketing it you try automation go that use And got frankly, you a somebody -- and some you've to being your way in product treat the all customer of to deal.

marketing to So advocacy. really from I and my awareness between to in sales. opinion, from call A, And disconnect a had just that A we

but big, it. really arms is opportunity around we our market The didn't have

still take a say, there's the cold related GTM leads to can't over so and doing to number bunch and basically scan opportunities funnel leads ultimately to team. implemented them them a of a of track And turning of to call trade ready yet sales marketing would and making you're getting from and management, people we've bunch out to nurture lot you there, of calls the salesperson qualified sort awareness go and customers to sales-qualified potential metrics everything badges. have shows I what conversation And all get a of then well, a

it better? the we that what's where looks how And that we do worse? and a this how stuff something And it's just manages of. do do What's then well do as well. and it much more are at place it and out putting every so getting figures yield at getting Is we that not not improve working as should didn't works the and we work step be of is that, of in sort process is

couple the companies gradually those A track deliver implementing I of I'm that think investors and that some other for are, things that services. metrics you of

reporting going companies, we're around of the are ones things and the that also we and do all the yield an yields things. some of and yield the initiatives finding marketing net attrition undertaken creating some to us on And that the team to results you're are easy of or of see most customer expensive, the a and that in best modern expansion, don't and I'm much results familiar we've very awareness better. the pretty the -- costs get retention conversion I you are even SaaS lot those better results most other with and that find acquisition of we're in think

And the Officer. And underway, company, place for lot a all lot a share in casino untapped gaming good steady market where of picked no lot focus but we're market that's she's a we've opportunity. it's extra area the the more that the the amount a We've that. continued one knows And the manage, a great or around. manager but with of that's way. kind She's got in a made things it's sort great take market we on that got last and are but we she I've quite a share year. Chief retention account more as a a And on Revenue focused focuses business, of of changes. And kind been So well. is up where of kind of We've product keen and the different, into expecting some a and eddy space, but penetration of the of we and prisoners, has fair bedside there. been great of of a sales the things kind what businesses to of a big -- She's some she's team business X produce. less process one in people moved the got us about are a there's -- putting personnel while,

we're So eye well. not as ball that our off taking

Jeffrey Martin

if could. one Great. And then I more,

FST groups of large the like markets decision-making. the where and restaurant their in you market touch touching to an environment? FST major at then in terms store in stand, to maybe In still of input we are affecting still grocery terms costs where like the are related inflation for on further Or looking and this markets, could environment are they deploy terms of And labor on convenience time? technology receptiveness this in end

John Dillon

the get That's you of opportunity on mean, restaurants, is back bit. payback of some ones it I market mention I kind we're think large of that Most just good. of us. if before, print They Well, them the mentioned candidates of toast looks their engaged. on house chains buying in the still very down are been is now. back, restaurant read a a more from the quick-serve immediate good they job, one the slowed the revamping into space really thing. it's see are They've will kind We little the coming good again I opinion. stores. right Prices were of And us. heels large some of its because front a for are done while up. focused my I and

XX of the or do the XX having get couple we where dining or have now some pretty the as an from got XX effort where to green because got chains calorie XX there and a ones to these individual much We're actually XX do light and decide, get same maybe of headquarters, stores. terms or groups is to the restaurant handful to fine the the sorts a with your in sell investment use a some franchises, conversations on large If trying of the they've we're I somebody it opportunities stores. on yes, or who's of maybe larger other this. good opportunity focused the stores is if operators We're franchisees want larger but predominantly those of of large

but see in going business I would a think I say real I organizations. floodgates you're uptick I you're call franchise think open, going steady throughout wouldn't to -- it to see those

you waste, we I a grocery or Grab help and use you you example is these people mistakes. Right making of labor, with compliance, by sales an a now, still mean, and compliance, systems food we now. everything head make eating really And Go or by Sushi we help everybody you reducing not train easier to lot make difference. we sure service and to help help store, places as errors the of frankly, and by don't adds from turnover eliminating right food they managers lot have that count ability to and a makes the these food

the the and ROI the on excellent. actually economics And product pretty is

where implemented. and that teams needs the of and sense. kind who marketing just go-to-market the different And So places a where low-hanging every where companies at targeting done we've top haven't we number We're think we're we that we're of we've who if where of x extensive the doesn't, that's where we market where makes now buckets. focusing pretty -- We've right the place we greatest review in the of there's at one and looking been more opportunity, the know been, fruit. the us sales of and kind part both strategy

Operator

[Operator Instructions].

Your Craig-Hallum. Sutton, next comes George from question

George Sutton

on follow-up a you just something John, mentioned. just

I've for talked or anything excellent being really discussed ROI. You the seen BOHA! the not published ROI relative to about Terminals.

that? So how actually you do communicate

John Dillon

you've day, at those have product to leveling. feeds that's it operation. is apply dpi talks technically. isn't why Verbally, printing. it engineers. talks got But in brochure encountered of We're important. your about problem from really and you the can things area of some managers a is look we're a We the screen, bright But marketing and business of because want unfortunately, very TransAct got buy talks an the XXX They those it great all and candidly, of nice things at that reliable adds. business got it. how about standpoint We It a that And up value the stuff. from it are a one I proud buy end to that you great about speeds

our terminals to And to And value on of it's things. the save here's even matter go-to-market these if frankly, that's the themselves I'm proof concept how don't easily much of and of for I few whether in be buy a pointy a a team, really to of business ROI way. see from sales pay -- spear working the as the dimension that to something it's months, of we end you're think that you prospecting, add the And that one part if market going we will, move you or going forward.

George Sutton

Great.

You X, opportunistic? the mentioned a in after us looking BOHA! And specifically just to market out well. would that how of terminals Can if number as your as of got you've that the ability with AccuDate, give are sense there you there. those there an you many go relevant out a existing BOHA! the I'm of view X, some at

John Dillon

numbers? hit to the one, you . want you because do Steve, got that

Steven DeMartino

gen, I and we're replacing those first Yes, there. George, XXXX, out the probably there's think of about talking mainly our thousands of tens

John Dillon

unit. you difference any The XXXX is those it's back the And to Works And Terminal good a opinion stand-alone ultimately, my online, workhorse, BOHA! great, run not the could wanted can little platform the not software reliable, X you frankly, the run. but in it's between connected. very be a house. of is

ability XXXX. on to the the other the BOHA! X the or one in different older geographies the and it's be and Terminal menus it able big or multiple difference organizations having thing. that that this menu fact have to so sort for different of just connected have a And to were and as upload stores, large between There's of stats interconnectivity that

say, we're So upgrades. gang is of love for got hand, on at working excited hard think printers There's are these been The make there We've going this reliable. in darn I break. XX ultimately, pretty connected to another that. out out have years. it gain a things you we're so fully And downside do of today some XXst to about but waiting we to workhorse That the XXXX, be work the doing the in just no competitive obsolescence customer me of get the a being and in I planned hand, upgrade the it lot it's all able important the that really one. you to want printers advantage. think, organizations could that going We being the and century to get products one like on we're other there things. use no with are for can But follow to for technology to do broke,

George Sutton

are you. relative an When were you start on plans fairly a to and printer chain what Can question you you et supply side. normalized then production just Got to lines, shipping, And final cetera. added the built us capacity your -- able significant for capacity update from give production perspective?

John Dillon

manufacturing, and elastic. pretty We've got pretty CM, they good production all contract are capacity. It's

shape. going fourth a different good that a to in in country. probably regard, add pretty line We're So we're in

there's made not location. XXX% left where We -- still we're is be our may manufacturing of haven't but think -- of but the in Asia, to It I in do almost all, to bit not We've some we decided Americas. stuff I is decision we there. XXX% that haven't little a opportunity as economic might find that almost yet, flexibility. best. an moved China, to but another pick an going in manufacturing like But the

part mean, engineering pandemic team recovery ship, well I operations did from And that really and manufacturing where the the as team. it fix we the could didn't we you during be a one areas good most saw, marvelously and We've of and companies and ain't their being couldn't when it. broke don't product, got It's call, to share, through as in enormous able gaming market kudos XX% easily that team in front. printing for least going give mentioned the in to the business. come on I XX% were retain And think I casino I through increase we're to way that. and And to able work at the have

Operator

There are this proceed. time. at questions Please no further

John Dillon

up pretty together put let quarter. wrap think me solid Bottom here. line, we So a I this

the watching company put be in lot new We're And winner, Terminal shape. marketing, and on is I we're sales looks spend piece, X that optimizing a on the think the on mentioned the and expenses to we've of and to terminal, the doing good the the go-to-market FST that manufacturing the market. work taking to I BOHA! right spend track. a we're retooled right

issues, be thing you'll to And like. I I'm in everything going are say But XXX and and tactics think strategy other thing. either us initiatives where done be to we ultimate what ahead I'm quarter and that going early want our days discuss this, trade-offs forward. courses the the and I'd really the action. this of and we only other here, plans we or believe and and the earnings of here. do things best formulating an probably out the after opportunities strategy, we're The figuring not opportunity announcement like the understanding thoughts are Probably future, is in need very stakeholders give QX formulating to in later see doing the our the that we

that's communicate So vet give that yet I transparently everybody will progress. sort little stay a us in future the more and to work have. and to And that's be hope the determined something stakeholders and of all would I to to tuned time

Operator

and this concludes gentlemen, lines. participating and Ladies for your please you We ask for conference thank today. your you call that you. Thank disconnect

TransAct Technologies (TACT) 9 Aug 232023 Q2 Earnings call transcript