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TransAct Technologies Incorporated (TACT)

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TransAct Technologies Incorporated (NASDAQ:TACT)

Q1 2018 Earnings Conference Call

May 3, 2018, 4:30 PM ET

Executives

Jim Leahy - IR, JCIR

Bart Shuldman - Chairman and Chief Executive Officer

Steven DeMartino - resident, Chief Financial Officer, Treasurer and Secretary

Analysts

Kara Anderson - B. Riley FBR

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the TransAct Technologies First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call may be recorded.

I would now like to turn the conference over to Mr. Jim Leahy of JCIR. Sir, you may begin.

Jim Leahy

Thank you, Shannon. Good afternoon and welcome to TransAct Technologies’ 2018 First 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 first 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 measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the Company's website.

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

Bart Shuldman

Thank you, Jim, and welcome to everyone joining us in this afternoon's conference call and webcast. Today, we announced our 2008 first quarter results which included net sales of $12.2 million, operating income of $900,000 and adjusted EBITDA of $1.2 million. Our results also included gross margin of 47.9%, which reflects the benefit of our ongoing sales mix shift.

Steve will review the results in more detail in a few moments, but I’d like to begin by providing some high level comments about our business. During the first quarter, we made significant strides in our Restaurant Solutions business with growing terminal shipments including shipments of our flagship AccuDate XL, initial sales of our proprietary labels for AccuDate terminals and ongoing product development work which led to this week’s announcement of the debut of a new terminal.

In addition, we made good progress in establishing our casino and gaming direct sales team in Europe. All this work and an ongoing shift and mix towards high-value, technology-driven solutions enable TransAct to deliver strong gross margin growth of 440 basis points in the first quarter and set us up what we believe will be a good 2018.

You know roughly six weeks ago, when we announced our full year results for 2017, I highlighted several opportunities with large national multi-brand restaurant companies and large-scale food service operators that our sales and technical teams were working to close.

I am happy to report today that shortly after our March call; we did indeed secure one of those customers and began shipping AccuDate X terminals to that customer in support of what we expect to be a full scale multi-quarter rollout.

Importantly, this customer has also agreed to purchase our support and maintenance contract offerings which represents the start of a very attractive recurring revenue opportunity. Building on these first quarter shipments of the AccuDate XL, we recently began shipping the AccuDate XL to a second large national customer.

We expect these shipments to ramp up over the coming quarters and this customer is adding to our service and maintenance support while adding the purchase of our labels which will drive additional recurring revenue label and consumable sales.

TransAct has been at the forefront of establishing an entirely new market that addresses the back of the house in restaurant and food service operations that will now include Internet of Things, devices commonly known as IOT devices and software for production and operational needs and our sales team is working with many potential customers in the market at integrating our solutions into their highly complex enterprises and back to the house operations.

While the nature of this sales cycle leads to near-term peaks and valleys in quarterly shipments, based on our ongoing conversations, we remain very confident that we are well positioned to capitalize on what is a sizable opportunity for our technology-driven AccuDate solutions.

To that end, we are looking forward to the National Restaurant Association Show later this month in Chicago as we debut an all-new AccuDate terminal, the AccuDate XL2e. This restaurant management solution is a natural evolution from the AccuDate XL as it introduces for the first time a true enterprise-class offering for large multi-site restaurant and food service operators.

The AccuDate XL2e leverages our latest software feature. The TransAct Enterprise Management System, which we refer to as TAMS to provide a fully controlled operating environment for the terminal which will ensure increased data security in the large enterprise while also providing security updates as they become available.

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