Press release

TransAct Technologies Reports 2019 First Quarter Results

Sponsored by Businesswire

TransAct Technologies Incorporated (Nasdaq: TACT) (“TransAct” or the
“Company”), a global leader in software-driven technology and printing
solutions for high-growth markets, today reported operating results for
the quarter ended March 31, 2019.

Summary of 2019 Q1 Results

(In millions, except per share and percentage data)


Three Months Ended
March 31,

2019   2018
Net sales $ 11.6 $ 12.2
Gross profit $ 6.1 $ 5.9
Gross margin 52.7 % 47.9 %
Operating income $ 0.8 $ 0.9
Net income $ 0.7 $ 0.7
Net income per diluted share $ 0.10 $ 0.09


EBITDA $ 1.1 $ 1.1
Adjusted EBITDA $ 1.3 $ 1.2
(1)   A reconciliation of each non-GAAP financial measure to the most
comparable Generally Accepted Accounting Principles (“GAAP”)
financial measure is included in this release. See “Non-GAAP
Financial Measures” below for a discussion of these metrics.

Bart Shuldman, Chairman and Chief Executive Officer of TransAct,
commented, “Our first quarter results include initial contributions from
our BOHA! back-of-house ecosystem following its launch in March. These
contributions include initial BOHA! Terminal and BOHA! Handheld sales,
as well as a nearly six-fold year-over-year increase in recurring
revenue from software, labels and maintenance and support sales related
to our restaurant solutions business. Our casino and gaming business
also remains a key driver of TransAct’s overall success, providing the
strong financial foundation and cash flow that supports the investments
we are making to develop BOHA! and grow sales. During the 2019 first
quarter, our growing mix of high-margin products, including recurring
label and software sales, drove a 480 basis point improvement in gross
margin, leading to a 10% increase in net income even as net sales
declined 6% from the prior-year period.

“Since launching BOHA!, our team has been very active in customer trials
and we are engaged in a range of opportunities with restaurant and
foodservice operators. These trials and ongoing discussions with
customers lead us to believe that BOHA! is already showing signs of
success, which reinforces our view that this back-of-house restaurant
solutions opportunity is the largest single-market opportunity ever
identified by TransAct. As previously announced, we have secured
commitments from ten distinct customers to deploy approximately 240
BOHA! Terminals, some of which were recognized in restaurant solutions
sales in the 2019 first quarter. Since announcing our initial sales
progress in mid-April, we have continued to experience growing interest
and traction for our BOHA! products and solutions. We expect the
upcoming National Restaurant Association Show in Chicago in mid-May will
be an excellent opportunity to interact with existing customers and also
work with potential new customers as we drive further awareness for our
comprehensive, single-vendor solution for restaurant and foodservice
operators’ back-of-house automation needs.

“As our BOHA! deployments grow, we expect to generate significant and
increasing annual recurring revenue in the form of software, maintenance
and support contracts, and proprietary labels, with maintenance and
support contract and label revenues recognized in our TransAct Services
Group business. We expect to bill customers for software subscriptions
upfront on a per-app basis and then recognize the subscription revenue
evenly over the subscription period. At the same time, as our BOHA!
hardware and software solutions become a critical part of our customers’
day-to-day workflows, we expect to recognize sales of our maintenance
and support contracts backed by TransAct’s legendary customer service
over the life of those contracts. Including our sales of TransAct
Labels, we are already demonstrating the potential of our restaurant
solutions recurring sales and are excited to report that the average
annual recurring revenue per unit (“RPU”) installed is more than 100% of
the original hardware revenue over the life of the unit under contract.

“We believe that BOHA! is the largest single revenue generating
opportunity in TransAct’s history and we are confident that the efforts
of our team will result in financial growth and the creation of
significant long-term shareholder value.”

Review of Balance Sheet and Capital Return Initiatives

At March 31, 2019, TransAct had approximately $1.9 million of cash and
cash equivalents and no debt. During the 2019 first quarter, the Company
paid a dividend to common shareholders of $0.09 per share, which
resulted in a return of capital of approximately $0.7 million for the
quarter. TransAct made no share repurchases during the 2019 first
quarter and has approximately $3.0 million remaining under its existing
$5.0 million share repurchase authorization.

Steve DeMartino, President and Chief Financial Officer of TransAct,
added, “TransAct has maintained its strong financial position as we
continue to invest in product development, sales and marketing, and
infrastructure to support the rollout of our BOHA! solution. While it
will still take some time for our pipeline to convert into sales, we are
confident that the early momentum for BOHA! along with the recurring
nature of its SaaS-based software and consumable sales will ultimately
transform our financial results and further enhance our already strong
gross margin. As we focus more intently on BOHA! and the restaurant
solutions marketplace, our casino and gaming business continues to
provide consistent cash flow that we can use to invest in our future and
drive growth in both businesses going forward. We believe that TransAct
is ideally positioned for long-term growth.”

Summary of 2019 First Quarter Operating Results

TransAct generated 2019 first quarter net sales of $11.6 million
compared with 2018 first quarter net sales of $12.2 million. Casino and
gaming net sales in the 2019 first quarter were $5.5 million compared to
$5.9 million in the prior-year period. Domestic casino and gaming sales
declined 18% as there were lower U.S. printer shipments in the 2019
first quarter and the prior-year period benefited from a non-recurring
sale of Epic 880 printers and an Epicentral installation. International
casino and gaming sales grew 18% in the 2019 first quarter compared to
the prior-year period, with printer shipments to a large customer in
Asia partially offset by lower European sales. Restaurant solutions net
sales were $0.9 million in the 2019 first quarter compared to $1.0
million in the 2018 first quarter, as higher BOHA! Terminal sales in the
2019 first quarter were offset by lower AccuDate 9700 sales to
McDonald’s in the period. The Company recorded an approximate six-fold
increase in BOHA! recurring revenue, which include software subscription
revenue (recorded in our restaurant solutions unit along with BOHA!
hardware sales) and maintenance and service contract revenue and label
sales (recorded in our TSG unit). POS automation and banking net sales
decreased $0.4 million year over year to $1.3 million in the 2019 first
quarter driven by lower sales of the Ithaca 9700 to McDonald’s and the
Company’s decision to exit the banking market. Lottery printer net sales
were relatively consistent at $0.7 million in the 2019 first quarter
compared to $0.6 million in the 2018 first quarter. Printrex net sales
were $342 thousand in the 2019 first quarter compared to $275 thousand
in the prior-year period, while TransAct Services Group generated net
sales of $2.8 million in the 2019 first quarter compared to $2.6 million
in the 2018 first quarter, inclusive of the BOHA! label sales and
service contract sales noted above.

The Company recorded gross margin of 52.7% in the 2019 first quarter
compared to gross margin of 47.9% in the 2018 first quarter. Gross
profit in the 2019 first quarter was $6.1 million compared to $5.9
million in the prior-year period, primarily as a result of an increase
in sales of higher-margin products within the overall sales mix as well
as lower manufacturing overhead expenses.

Total operating expenses in the 2019 first quarter increased 6% to $5.3
million compared to $5.0 million in the 2018 first quarter, primarily
reflecting increased sales and marketing expenses in support of BOHA!,
offset in part by lower engineering and G&A expenses.

TransAct generated operating income of $0.8 million, or 6.7% of net
sales, in the 2019 first quarter compared to $0.9 million, or 7.0% of
net sales, for the 2018 first quarter. Net income in the 2019 first
quarter was $0.7 million, or $0.10 per diluted share, compared to net
income of $0.7 million, or $0.09 per diluted share, in the prior-year

2019 First Quarter Conference Call and Webcast

TransAct is hosting a conference call and webcast today, May 7, 2019,
beginning at 4:30 p.m. ET to discuss 2019 first quarter results and
other matters. Both the call and the webcast are open to the general
public. The conference call number is 678-825-8259 and the conference ID
number is 5377388 (domestic or international). Please call five minutes
prior to the presentation to ensure that you are connected.

Interested parties may also access the conference call live on the
Internet at
(select “Investor Relations” followed by “Events & Presentations”).
Approximately two hours after the call has concluded, an archived
version of the webcast will be available for replay at the same location.

Non-GAAP Financial Measures

TransAct is providing certain non-GAAP financial measures because the
Company believes that these measures are helpful to investors and others
in assessing the ongoing nature of what the Company’s management views
as TransAct’s core operations. The Company believes that the non-GAAP
financial measures of EBITDA and adjusted EBITDA provide relevant and
useful information, which is widely used by analysts, investors and
competitors in the Company’s markets as well as by the Company’s
management in assessing the Company’s performance. The Company uses
these non-GAAP financial measures internally to focus management on the
results of the Company’s core business. The presentation of this
non-GAAP information is not considered superior to or a substitute for,
and should be read in conjunction with, the financial information
prepared in accordance with GAAP.

EBITDA is defined as net income before net interest expense, income
taxes, depreciation and amortization. A reconciliation of EBITDA to net
income, the most comparable GAAP financial measure, can be found
attached to this release.

Adjusted EBITDA is defined as net income before net interest expense,
income taxes, depreciation and amortization and is adjusted for
share-based compensation. The Company adjusts EBITDA for share-based
compensation because the Company considers share-based compensation to
be a non-cash expense similar to depreciation and amortization. A
reconciliation of adjusted EBITDA to net income, the most comparable
GAAP financial measure, can be found attached to this release.

EBITDA and adjusted EBITDA provide the Company with an understanding of
one aspect of earnings before the impact of investing and financing
charges and income taxes. EBITDA and adjusted EBITDA may be useful to an
investor in evaluating the Company’s operating performance because these
measures are: (i) widely used by investors to measure a company’s
operating performance without regard to non-recurring items excluded
from the calculation of such measure; (ii) used as financial
measurements by lenders and other parties to evaluate creditworthiness;
and (iii) used by the Company’s management for various purposes
including strategic planning and forecasting, assessing financial
performance and paying incentive compensation.

About TransAct Technologies Incorporated

TransAct Technologies Incorporated is a global leader in developing
software-driven technology and printing solutions for high-growth
markets including restaurant solutions, POS automation, casino and
gaming, lottery, and oil and gas. The Company’s solutions are designed
from the ground up based on customer requirements and are sold under the
BOHA!™, AccuDate™, EPICENTRAL®, Epic®, Ithaca®, and Printrex® brands.
TransAct has sold over 3.3 million printers and terminals around the
world and is committed to providing world-class software, service, spare
parts and accessories to support its installed product base. Through the
TransAct Services Group, the Company also provides customers with a
complete range of supplies and consumable items both online at
and through its direct sales team. TransAct is headquartered in Hamden,
CT. For more information, please visit
or call (203) 859-6800.

Forward-Looking Statements

Certain statements in this press release include forward-looking
statements. Forward-looking statements generally can be identified by
the use of forward-looking terminology, such as “may”, “will”, “expect”,
“intend”, “estimate”, “anticipate”, “believe”, or “continue”, or the
negative thereof, or other similar words. All forward-looking statements
involve risks and uncertainties, including, but not limited to, customer
acceptance and market share gains, both domestically and
internationally, in the face of substantial competition from competitors
that have broader lines of products and greater financial resources; our
competitors introducing new products into the marketplace; our ability
to successfully develop new products; our dependence on significant
customers; our dependence on significant vendors; our dependence on
contract manufacturers for the assembly of a large portion of our
products in Asia; our ability to protect intellectual property; our
ability to recruit and retain quality employees as the Company grows;
our dependence on third parties for sales outside the United States,
including Australia, New Zealand, Latin America and Asia; the economic
and political conditions in the United States, Australia, New Zealand,
Europe, Latin America and Asia; marketplace acceptance of new products;
risks associated with foreign operations; the availability of
third-party components at reasonable prices; price wars or other
significant pricing pressures affecting the Company’s products in the
United States or abroad; risks associated with potential future
acquisitions; our line of restaurant solutions products driving
increased adoption by customers; increased product costs or reduced
customer demand for our products due to changes in U.S. policy that may
result in trade wars or tariffs; our ability to successfully transition
our business towards the sale of software products on a SaaS
subscription basis; and other risk factors detailed from time to time in
TransAct’s reports filed with the Securities and Exchange Commission.
Actual results may differ materially from those discussed in, or implied
by, the forward-looking statements. The forward-looking statements speak
only as of the time of issuance of this press release, and the Company
assumes no duty to update them to reflect new, changing or unanticipated
events or circumstances.

– Financial tables follow –

(In thousands, except per share amounts)

Three months ended
March 31,

2019   2018
Net sales $ 11,550 $ 12,243
Cost of sales   5,464     6,381  
Gross profit   6,086     5,862  
Operating expenses:
Engineering, design and product development 1,165 1,221
Selling and marketing 1,854 1,573
General and administrative   2,290     2,212  
  5,309     5,006  
Operating income   777     856  
Interest and other income (expense):
Interest, net (6 ) (8 )
Other, net   90     10  
  84     2  
Income before income taxes 861 858
Income tax provision   115     178  
Net income $ 746   $ 680  
Net income per common share:
Basic $ 0.10 $ 0.09
Diluted $ 0.10 $ 0.09
Shares used in per share calculation:
Basic 7,461 7,533
Diluted 7,619 7,901




(In thousands)


Three months ended
March 31,

2019   2018
Restaurant solutions $ 928 $ 1,045
POS automation and banking 1,277 1,716
Casino and gaming 5,483 5,940
Lottery 697 635
Printrex 342 275
TransAct services group   2,823   2,632
Total net sales $ 11,550 $ 12,243
  March 31,   December 31,
(In thousands) 2019 2018
Current assets:
Cash and cash equivalents $ 1,944 $ 4,691
Accounts receivable, net 6,836 8,025
Inventories 14,387 12,835
Other current assets   1,778     1,486  
Total current assets   24,945     27,037  
Fixed assets, net 2,413 2,272
Right of use assets, net 3,479
Goodwill 2,621 2,621
Deferred tax assets 2,239 2,198
Intangible assets, net 746 797
Other assets   31     31  
  11,529     7,919  
Total assets $ 36,474   $ 34,956  
Liabilities and Shareholders’ Equity:
Current liabilities:
Accounts payable $ 2,267 $ 3,483
Accrued liabilities 2,911 2,765
Deferred revenue   402     384  
Total current liabilities   5,580     6,632  
Deferred revenue, net of current portion 240 265
Lease liabilities 2,808 250
Other liabilities   218     242  
  3,266     757  
Total liabilities   8,846     7,389  
Shareholders’ equity:
Common stock 115 115
Additional paid-in capital 32,103 32,129
Retained earnings 27,593 27,515
Accumulated other comprehensive loss, net of tax (73 ) (82 )
Treasury stock, at cost   (32,110 )   (32,110 )
Total shareholders’ equity   27,628     27,567  
Total liabilities and shareholders’ equity $ 36,474   $ 34,956  
  Three Months Ended
(In thousands) March 31,
2019   2018
Net income $ 746 $ 680
Interest expense, net 6 8
Income tax provision 115 178
Depreciation and amortization   252   221
EBITDA 1,119 1,087
Share-based compensation expense   173   161
Adjusted EBITDA $ 1,292 $ 1,248