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TransAct Technologies Incorporated (TACT)

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TransAct Technologies Incorporated (TACT)

Q2 2018 Results Earnings Conference Call

August 02, 2018, 04:30 PM ET

Executives

Jim Leahy - IR, JCIR

Bart Shuldman - Executive Chairman & CEO

Steven DeMartino - CFO, Treasurer & Secretary

Analysts

Kara Anderson - B. Riley

Mitchell Sacks - Grand Slam Asset

Jeff Bernstein - Cowen

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the TransAct Technologies Second Quarter 2018 Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Jim Leahy of JCIR. You may begin.

Jim Leahy

Thank you, Michelle. Good afternoon, and welcome to TransAct Technologies 2018 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'll 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 to 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 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 everyone joining us on this afternoon's conference call and webcast. Just a few minutes ago, we announced our 2018 second quarter results, which included net sales of $14.8 million, operating income of $1.6 million and adjusted EBITDA of $2 million.

Our results also included gross margin of 47.4%, which reflects the benefit of our ongoing sales into high-growth technology driven markets.

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. Clearly, we're very happy with what occurred.

Progress continued in the second quarter, as we've worked to build out, evolve and execute on the opportunity around our restaurant solutions products offerings.

Net sales of our terminals were up 23% in the second quarter, driven by the shipment of our AccuDate XL terminals to our current restaurants and foodservice customers.

Many of these customers are also purchasing our AccuDate labels as well as our support and maintenance contracts, and as a result, total quarterly sales of our terminals and we bring offerings were approximately $1.4 million in the quarter.

Terminal and eventual software sales are -- will be reported as restaurant solutions net sales. Well, our aftermarket recurring sales labels and support and maintenance revenue related to the terminals will be reported as part of TSG net sales.

In the second quarter of 2018, we reached a key milestone, as shipments of our AccuDate XL terminal exceeded shipments of the original AccuDate 9700 terminal for the first time.

With customer attention now shifting towards our software driven offerings, given the benefits these solutions provide. With restaurant and foodservice operator spacing rising labor and food cost, this market is looking to increase the amount of automation in the back of the house. This intern is opening a much larger opportunity for terminal sales, coupled with sales of multiple software solutions. Presenting TransAct with a significant opportunity for SaaS-based software revenue. We believe this trend will only continue going forward and are excited that it will help us build our total recurring sales, including consumable and maintenance and support contracts, which dovetail with customer implementations of the AccuDate XL.

Over the past several quarters, we have been actively staffing up our team of hardware and software developers to better exploit this opportunity, as we listen to and work with our customers.

Our team is laser focused on the -- on an understanding what our customers need, to better run their businesses and we are quickly expanding our solution set to address these needs. Restaurant and foodservice companies have all shapes and sizes, rapidly evaluating investments into technologies that can transform almost every area of their operations, to not only improve food safety, but to also operate more efficiently, cut cost and ultimately improve their profitability.

We believe our AccuDate terminal solutions can be the restaurant hub for this focus and played in a good role in each of these avenues and we tend to remain at the forefront of innovation.

As we look to the future of this business, one thing is crystal clear, the opportunities remain significant and the range of functionality we can bring to our terminal is growing.

At the National Restaurant Association Show in May, we debuted the new AccuDate XL2e terminal and the TransAct Enterprise Management System to a highly favorable response.

We are the only company offering an Internet capable terminal with an integrated enterprise software management system that provides a security, terminal and software upgrade capabilities that the market demands. These advancements have established a foundation around which we will add innovative new hardware and software driven offerings that will ultimately establish TransAct as the one-stop shop for all our restaurant solutions customers back of the house operations and management needs. I think it's fair to say that TransAct's ability to quickly evolve ahead of this opportunity has positioned us not to just lead the way in innovation, but to establish the path forward for the industry.

Read the rest of this transcript on seekingalpha.com