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TransAct Technologies Incorporated (TACT)

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TransAct Technologies Incorporated (TACT)

Q2 2017 Earnings Conference Call

August 3, 2017 4:30 pm ET

Executives

Jim Leahy - IR, JCIR

Bart C. Shuldman - Chairman and CEO

Steven A. DeMartino - President, CFO, Treasurer and Secretary

Analysts

Kara Anderson - B. Riley & Co.

Todd Eilers - Eilers Research

Jeffrey Bernstein - Cowen

Mitchell Sacks - Grand Slam Asset Management

Presentation

Operator

Good day, ladies and gentlemen. Welcome to the TransAct Technologies Second Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's conference, Jim Leahy of JCIR. Sir, you may begin.

Jim Leahy

Thank you, Bernie. Good afternoon and welcome to TransAct Technologies 2017 Second Quarter Conference Call. Joining us today from the company are Chairman and CEO, Bart Shuldman, and President and CFO, Steve DeMartino. Today's call will include a discussion of the Company's key operating strategies, progress against these initiatives, and details on the second 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 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-K and 10-Q. TransAct undertakes no obligations 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 within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with the GAAP can be found in today's press release as well as on the Company's Web-site.

At this time, I would like to turn the call over to Bart Shuldman. Bart?

Bart C. Shuldman

Thank you, Jim, and welcome to everyone joining us on this afternoon's conference call and Webcast. Earlier this afternoon, we reported 2017 second quarter net sales of $13.6 million, operating income of $1.3 million, and EBITDA of $1.6 million. Steve will review the second quarter financials in more detail in a few moments, but I'd like to begin by providing some high-level comments about our results and our business.

For the past several years, one of the key things we have frequently touched on in our conversations with investors is the diversification of our product offerings towards purposely-built, high value software and technology-driven solutions. This diversification is critical to our long-term success and we again made progress on this effort during the second quarter.

The most important of these high-value offerings are our restaurant solution terminals, introduced first with the groundbreaking AccuDate 9700 in 2012 and furthered with the debut of our AccuDate PRO, and more recently the AccuDate XL. Since the debut of the 9700, we have worked consistently with our customers to evolve our solutions to meet the demands of their day to day back-of-the-house workflows and operations.

This new market, which TransAct has helped create, is starting to organize around software-driven solutions that are additive to the original food safety labeling function of the terminal, particularly with the introduction of the CrunchTime and Jolt software solutions. Both CrunchTime and Jolt allow restaurant and food service operators to automate their food safety labeling, but then leverage software to drive productivity and efficiency gains in the back of the house.

While this software was being developed, these two companies needed a terminal in order to offer labeling, while also serving as the back-of-the-house assistant to help with additional productivity tools they were developing. This led TransAct to design our AccuDate XL and to choose Android as our operating system as the foundation. By customizing our operating system around Android, we brought control to the terminal, which is very important to restaurant and foodservice providers. All in, these critical efforts drove significant interest for our AccuDate XL, especially once Jolt and CrunchTime began to market their solutions.

Furthermore, this interest led TransAct to make the decision to dramatically alter our go-to-market strategy for the AccuDate XL so that we can better position ourselves to take full advantage of this long-term large market opportunity. The sale of the AccuDate XL terminal is much more technical in nature than the AccuDate 9700 or PRO, and it's very important we lead the effort.

So first, we began the process of identifying and hiring accomplished industry sales professionals for an internal direct sales team focused on driving demand for this technology-driven solution. As they have come onboard and ramped up, our new team members are working in their regional territories to expose the powerful AccuDate XL and its software ecosystem to restaurant and foodservice operators of all sizes. They've done great work in a short period of time and our efforts to control the sales process internally is leading to what is a growing base of sales opportunities for the AccuDate XL.

Second, in May, we initiated a direct marketing campaign to design, to elevate market awareness for TransAct and the AccuDate XL. This program, which is still ongoing, was rolled out ahead of the all-important National Restaurant Association Show in Chicago and it was a major driver of traffic to our booth at the show and in the ongoing interest we've seen since the show. It also includes an active microsite where prospective customers can learn more about the product.

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