TransAct Technologies rporated(TACT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents TransAct Technologies Inc.'s unaudited condensed consolidated financial statements and detailed explanatory notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $17,746 | $14,394 | | Accounts receivable, net | $7,805 | $6,507 | | Inventories | $12,968 | $16,161 | | Total current assets | $39,688 | $38,362 | | Total assets | $44,549 | $44,034 | | Revolving loan payable | $3,000 | $3,000 | | Total current liabilities | $12,885 | $12,884 | | Total liabilities | $13,264 | $13,401 | | Total shareholders' equity | $31,285 | $30,633 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (In thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $13,798 | $11,599 | $26,851 | $22,286 | | Gross profit | $6,652 | $6,110 | $13,011 | $11,734 | | Operating loss | $(258) | $(438) | $(273) | $(1,739) | | Loss before income taxes | $(103) | $(405) | $(33) | $(1,718) | | Net loss | $(143) | $(319) | $(124) | $(1,355) | | Basic net loss per common share | $(0.01) | $(0.03) | $(0.01) | $(0.14) | | Diluted net loss per common share | $(0.01) | $(0.03) | $(0.01) | $(0.14) | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(143) | $(319) | $(124) | $(1,355) | | Foreign currency translation adjustment, net of tax | $37 | $(3) | $53 | $(4) | | Comprehensive loss | $(106) | $(322) | $(71) | $(1,359) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (In thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $3,434 | $(854) | | Net cash used in investing activities | $(29) | $(243) | | Net cash used in financing activities | $(50) | $(71) | | Increase (decrease) in cash and cash equivalents | $3,352 | $(1,187) | | Cash and cash equivalents, end of period | $17,746 | $11,134 | Condensed Consolidated Statements of Changes in Shareholders' Equity Condensed Consolidated Statements of Changes in Shareholders' Equity (In thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Equity beginning balance | $30,633 | $39,414 | | Share-based compensation expense | $773 | $544 | | Net loss | $(124) | $(1,355) | | Foreign currency translation adjustment, net of tax | $53 | $(4) | | Equity ending balance | $31,285 | $38,528 | Notes to Condensed Consolidated Financial Statements Note 1. Basis of presentation The unaudited interim financial statements follow U.S. GAAP, with management affirming sufficient liquidity for 12 months despite market slowdowns - The financial statements are unaudited and prepared under U.S. GAAP for interim reporting, not including all full-year disclosures[16] - Management believes the company has sufficient liquidity to fund operations, capital spending, and working capital for at least 12 months, combining net cash from operations, cash and cash equivalents, and revolving credit facility availability[18] - A temporary slowdown in demand in the casino and gaming market, observed in late 2023 and throughout 2024 due to customer excess inventory, impacted results[18] Note 2. Significant accounting policies Significant accounting policies are unchanged, and new accounting pronouncements are not expected to materially impact financial statements, though additional disclosures will result - No changes to significant accounting policies since the 2024 Form 10-K[21] - ASU 2023-09 (Income Taxes) requires consistent categories and greater disaggregation in tax rate reconciliations and income taxes paid disclosures, effective for fiscal years beginning after December 15, 2024. The company does not expect a material impact[22] - ASU 2024-03 (Expense Disaggregation Disclosures) requires footnote disclosures on disaggregated information about specific income statement expense categories, effective for fiscal years beginning after December 15, 2026. Adoption is expected to result in additional disclosure but no impact on financial position, results of operations, or cash flows[23] Note 3. Revenue Revenue disaggregation shows growth in Food Service Technology and Casino and Gaming, with contract liabilities increasing and remaining performance obligations at $6.4 million Net Sales by Market Type and Geography (In thousands) | Market Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Food service technology | $4,761 | $4,178 | $9,669 | $7,478 | | POS automation | $590 | $1,151 | $1,208 | $1,802 | | Casino and gaming | $7,629 | $5,359 | $14,348 | $11,055 | | TransAct Services Group | $818 | $911 | $1,626 | $1,951 | | Total net sales | $13,798 | $11,599 | $26,851 | $22,286 | | United States | $11,482 | $8,819 | $22,228 | $16,584 | | International | $2,316 | $2,780 | $4,623 | $5,702 | Total Net Contract Liabilities (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Unbilled receivables, current | $59 | $106 | | Unbilled receivables, net of current portion | $10 | $32 | | Customer pre-payments | $(339) | $(164) | | Deferred revenue, current | $(1,162) | $(1,107) | | Deferred revenue, net of current portion | $(333) | $(246) | | Total net contract liabilities| $(1,765) | $(1,379) | - As of June 30, 2025, remaining performance obligations totaled $6.4 million, with $6.1 million expected to be recognized within the next 12 months[30] Note 4. Inventories Inventory primarily comprises raw materials and finished goods, totaling $12.97 million as of June 30, 2025 Components of Inventories (In thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Raw materials and purchased component parts | $6,353 | $8,413 | | Finished goods | $6,615 | $7,748 | | Total inventories | $12,968 | $16,161 | Note 5. Borrowings The Siena Credit Facility provides a $10.0 million revolving credit line, with $3.0 million outstanding and $1.6 million available, and the company is in compliance - The Siena Credit Facility provides a revolving credit line of up to $10.0 million, secured by company assets[32] - As of June 30, 2025, outstanding borrowings were $3.0 million at an interest rate of 9.25%, with $1.6 million of net borrowing capacity available[35] - The company has remained in compliance with its excess availability covenant ($750 thousand minimum) through June 30, 2025[33] Note 6. Segment reporting TransAct operates as a single segment, focusing on software-driven technology and printing solutions, with performance assessed using consolidated financial measures - TransAct operates as a single operating and reportable segment: design, development, and marketing of software-driven technology and printing solutions[36] - Key performance measures used by management include sales, gross margin percentage, net income, EBITDA, and adjusted EBITDA[38] EBITDA and Adjusted EBITDA Reconciliation (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(143) | $(319) | $(124) | $(1,355) | | Interest income, net | $(40) | $(26) | $(62) | $(74) | | Income tax expense (benefit)| $40 | $(86) | $91 | $(363) | | Depreciation and amortization | $171 | $241 | $344 | $636 | | EBITDA | $28 | $(190) | $249 | $(1,156) | | Share-based compensation | $450 | $279 | $773 | $544 | | Adjusted EBITDA | $478 | $89 | $1,022 | $(612) | Note 7. Earnings per share Basic and diluted net loss per share improved to $(0.01) for both periods, with anti-dilutive stock awards excluded due to net losses Net Loss Per Common Share (In thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(143) | $(319) | $(124) | $(1,355) | | Basic EPS | $(0.01) | $(0.03) | $(0.01) | $(0.14) | | Diluted EPS | $(0.01) | $(0.03) | $(0.01) | $(0.14) | | Basic shares outstanding | 10,085 | 9,997 | 10,064 | 9,985 | | Diluted shares outstanding | 10,085 | 9,997 | 10,064 | 9,985 | - 1.8 million and 1.7 million anti-dilutive stock awards were excluded from EPS computation for the three and six months ended June 30, 2025, respectively, due to net losses[45] Note 8. Leases Operating lease expense was $518 thousand for H1 2025, with lease liabilities decreasing to $703 thousand and a weighted average term of 0.8 years - Operating lease expense for the six months ended June 30, 2025, was $518 thousand, reported across cost of sales and operating expenses[47] Operating Lease Information (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Weighted average remaining lease term (in years) | 0.8 | 1.2 | | Weighted average discount rate | 8.2% | 7.7% | | Total lease liabilities | $703 | $1,186 | Operating Cash Outflows from Leases (In thousands) | Period | Operating Cash Outflows | | :-------------------- | :---------------------- | | Six Months Ended June 30, 2025 | $526 | | Six Months Ended June 30, 2024 | $510 | Note 9. Income taxes Income tax expense was $40 thousand for Q2 and $91 thousand for H1 2025, with high effective rates due to near-breakeven losses and a full valuation allowance Income Tax Expense (Benefit) and Effective Tax Rate | Period | Income Tax Expense (Benefit) | Effective Tax Rate | | :-------------------------------- | :--------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $40 thousand | 38.8% | | Three Months Ended June 30, 2024 | $86 thousand (benefit) | (21.2%) | | Six Months Ended June 30, 2025 | $91 thousand | 275.8% | | Six Months Ended June 30, 2024 | $363 thousand (benefit) | (21.1%) | - The unusually high effective tax rates are due to near-breakeven pre-tax losses and tax expense only from UK earnings and minimum required U.S. state taxes[51] - A full valuation allowance of $8.3 million was maintained against net deferred income tax assets as of June 30, 2025, first recognized in Q4 2024[52][53] Note 10. Subsequent events Subsequent events include new tax laws, a 19% U.S. tariff on Thai goods, and the acquisition of the BOHA! software source code for $2.55 million plus transition fees - The U.S. President signed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, introducing federal tax law changes, which the company does not anticipate will have a material impact due to its current tax positions[55][56] - A U.S. tariff of 19% on goods imported from Thailand was announced on July 30, 2025, effective August 7, 2025, which is expected to impact certain goods assembled by the company's manufacturer in Thailand[57] - On August 6, 2025, the company acquired a perpetual, royalty-free license to the BOHA! software source code for $2.55 million, plus approximately $1.0 million in professional services fees for transition, with hosting expected to go live in early 2027[58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, covering key drivers, market trends, the BOHA! software acquisition, tariff impacts, and detailed revenue and expense analysis Forward-Looking Statements This section cautions on forward-looking statements, detailing risks like economic conditions, supply chain disruptions, inflation, and market competition - Forward-looking statements are subject to risks and uncertainties, including adverse economic conditions, supply chain disruptions, inflation, and geopolitical conflicts[60][62] - Other significant factors include difficulties in manufacturing, price increases, decreased availability of components, ability to develop new products, and risks associated with the BOHA! software acquisition and foreign operations[62] Overview TransAct leads in software-driven technology and printing solutions for food service, POS automation, and casino/gaming, operating as a single segment with global product sales - TransAct is a global leader in software-driven technology and printing solutions for food service technology, POS automation, and casino and gaming markets[63] - The company's BOHA! products automate back-of-house operations in food service, while thermal printers generate labels, coupons, and transaction records[63] - TransAct operates in a single reportable segment, with its chief operating decision-makers using a consolidated approach to assess performance and allocate resources[63] Recent Developments TransAct acquired a perpetual, royalty-free license to the BOHA! software source code for $2.55 million plus $1.0 million in transition fees, enabling independent hosting by early 2027 - On August 6, 2025, TransAct acquired a perpetual and royalty-free license to the BOHA! software source code from Avery Dennison[65] - Total consideration for the acquisition was $2.55 million, plus approximately $1.0 million in professional services fees for transition services[65] - TransAct will host the code in its own environment, expected to go live in early 2027, allowing for independent use, modification, and distribution[65] Current Business and Economic Trends Casino and gaming sales are normalizing in 2025, but new 19% U.S. tariffs on Thai goods, effective August 7, 2025, will impact results, with price increases planned for mitigation - The casino and gaming market is expected to return to more normalized sales levels in 2025, as significant domestic customers have sold through excess inventory[66] - A U.S. tariff of 19% on goods imported from Thailand will be effective August 7, 2025, impacting products assembled by the company's manufacturer[68][69] - The company plans to mitigate tariff impacts by raising prices to customers, but cannot assure all costs will be passed on[69] Balance Sheet, Cash Flow and Liquidity Cost reduction initiatives are expected to yield $2 million in 2025 savings, with inventory reduction benefiting cash flow; management deems resources sufficient for 12 months despite uncertainties - A cost reduction initiative in Q2 2024 is expected to yield approximately $2 million in annualized savings in 2025[72] - Inventory levels were reduced by approximately $3.2 million in the first half of 2025, benefiting cash flow and liquidity[72] - Management believes current cost-cutting efforts and liquidity measures will be sufficient, but acknowledges the uncertain ultimate impact of global economic conditions[73] Critical Accounting Estimates Critical accounting estimates, including revenue recognition, accounts receivable, and deferred tax assets, remain materially unchanged since the 2024 Form 10-K - Critical accounting estimates include revenue recognition, accounts receivable, inventory obsolescence, goodwill and intangible assets, valuation of deferred tax assets and liabilities, and share-based compensation[74] - There have been no material changes in critical accounting estimates from the information presented in the 2024 Form 10-K[74] Results of Operations: Three months ended June 30, 2025 compared to three months ended June 30, 2024 Net sales increased 19% to $13.8 million, driven by FST and Casino/Gaming; gross margin declined to 48%, but operating loss narrowed, and net loss decreased to $(143) thousand Net Sales Net Sales by Market (Three Months Ended June 30, In thousands) | Market | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :---------------------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Food service technology | $4,761 | 34.5% | $4,178 | 36.0% | $583 | 14.0% | | POS automation | $590 | 4.3% | $1,151 | 9.9% | $(561) | (48.7%) | | Casino and gaming | $7,629 | 55.3% | $5,359 | 46.2% | $2,270 | 42.4% | | TransAct Services Group | $818 | 5.9% | $911 | 7.9% | $(93) | (10.2%) | | Total net sales | $13,798 | 100.0% | $11,599 | 100.0% | $2,199 | 19.0% | | International | $2,316 | 16.8% | $2,780 | 24.0% | $(464) | (16.7%) | - Printer, terminal, and other hardware unit sales volume increased 21% to approximately 26,300 units, driven by 40% growth in casino and gaming and 41% in FST hardware[76] - The average selling price of hardware increased 5% due to increased costs from U.S. tariffs passed on to customers[76] Food service technology ("FST") FST Sales by Type (Three Months Ended June 30, In thousands) | FST Sales Type | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :------------------------------ | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Hardware | $1,802 | 37.8% | $1,402 | 33.6% | $400 | 28.5% | | Software, labels and other recurring revenue | $2,959 | 62.2% | $2,776 | 66.4% | $183 | 6.6% | | Total FST sales | $4,761 | 100.0% | $4,178 | 100.0% | $583 | 14.0% | - Domestic hardware sales increased 28.5%, driven by Workstation sales to a new sushi customer and BOHA! Terminal 2 sales to existing customers[79] - Despite the loss of a significant customer (approx. $300k in Q2 2024 sales), FST software, labels, and other recurring revenue increased 6.6%, primarily due to label sales to the new sushi customer[79][80] POS automation POS Automation Sales (Three Months Ended June 30, In thousands) | POS Automation Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :--------------------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $585 | 99.2% | $1,151 | 100.0% | $(566) | (49.2%) | | International | $5 | 0.8% | $0 | 0.0% | $5 | - | | Total POS automation sales | $590 | 100.0% | $1,151 | 100.0% | $(561) | (48.7%)| - The 49% decline in POS automation sales was largely due to competitive pressure and a reduction in average selling prices[83] Casino and gaming Casino and Gaming Sales (Three Months Ended June 30, In thousands) | Casino and Gaming Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :------------------------ | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $5,959 | 78.1% | $3,178 | 59.3% | $2,781 | 87.5% | | International | $1,670 | 21.9% | $2,181 | 40.7% | $(511) | (23.4%) | | Total casino and gaming sales | $7,629 | 100.0% | $5,359 | 100.0% | $2,270 | 42.4% | - Domestic sales increased 88% as major customers normalized ordering after working through excess inventory accumulated during the supply chain crisis[85] - Sales also benefited from a new OEM customer for charitable gaming establishments[85] - International sales decreased 23% due to a significant European OEM still working down overstocked inventory[86] TransAct Services Group ("TSG") TSG Sales (Three Months Ended June 30, In thousands) | TSG Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :---------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $584 | 71.4% | $711 | 78.0% | $(127) | (17.9%) | | International | $234 | 28.6% | $200 | 22.0% | $34 | 17.0% | | Total TSG sales | $818 | 100.0% | $911 | 100.0% | $(93) | (10.2%)| - Domestic revenue decreased due to lower sales of legacy replacement parts for lottery printers and legacy consumables[87] - The company expects TSG sales to be lower in 2025, with plans to cease selling all remaining legacy consumable products by the end of 2025[88] Gross Profit Gross Profit (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :--------- | :--- | :--- | :------- | :-------------- | :-------------- | | Gross profit | $6,652 | $6,110 | 8.9% | 48.2% | 52.7% | - Gross margin declined 450 basis points to 48% due to higher sales of lower-margin BOHA! hardware products, increased overhead costs, inflation, and competitive pricing in POS automation[89] - Gross margin for 2025 is expected to remain in the mid-to high-40s range[90] Operating Expenses - Engineering, Design and Product Development Engineering, Design and Product Development Expenses (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :---------------------------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | Engineering, design and product development | $1,725 | $1,799 | (4.1%) | 12.5% | 15.5% | - Expenses decreased 4% due to cost reduction initiatives from Q2 2024, including reduced contracted software development, partially offset by higher incentive compensation[90] Operating Expenses - Selling and Marketing Selling and Marketing Expenses (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :-------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | Selling and marketing | $2,103 | $2,197 | (4.3%) | 15.2% | 18.9% | - Expenses decreased 4% due to cost reduction initiatives (reduced headcount, trade show, marketing), partially offset by higher go-to-market strategy costs and incentive compensation[91] Operating Expenses - General and Administrative General and Administrative Expenses (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :-------------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | General and administrative | $3,082 | $2,552 | 20.8% | 22.3% | 22.0% | - Expenses increased 21% primarily due to higher incentive and stock-based compensation, partially offset by cost reduction initiatives[92] Operating Loss Operating Loss (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :------------- | :--- | :--- | :------- | :-------------- | :-------------- | | Operating loss | $(258) | $(438) | 41.1% | (1.9%) | (3.8%) | - Operating loss decreased by $180 thousand, driven by a 19% increase in sales and a $542 thousand increase in gross profit, despite a 6% increase in operating expenses[93] Interest, net - Net interest income increased to $40 thousand from $26 thousand, primarily due to higher levels of invested cash[94] - Minimum outstanding borrowings under the credit facility were $3 million in Q2 2025, up from $2.25 million in Q2 2024[94] Other, net - Other net income increased significantly to $115 thousand from $7 thousand, primarily due to foreign exchange gains[95] Income Taxes - Income tax expense was $40 thousand (38.8% effective rate) in Q2 2025, compared to a benefit of $86 thousand (-21.2% effective rate) in Q2 2024[96] - The high effective tax rate is due to near-breakeven pre-tax losses and a full valuation allowance against U.S. deferred taxes, meaning no U.S. federal tax benefits were recorded for losses[96] Net Loss - Net loss decreased to $(143) thousand, or $(0.01) per diluted share, from $(319) thousand, or $(0.03) per diluted share, in the prior year[97] Results of Operations: Six Months Ended June 30, 2025 compared to six months ended June 30, 2024 Net sales increased 21% to $26.9 million, driven by FST and Casino/Gaming; gross margin declined to 49%, but operating loss significantly narrowed by 84%, and net loss decreased to $(124) thousand Net Sales Net Sales by Market (Six Months Ended June 30, In thousands) | Market | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :---------------------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | FST | $9,669 | 36.0% | $7,478 | 33.5% | $2,191 | 29.3% | | POS automation | $1,208 | 4.5% | $1,802 | 8.1% | $(594) | (33.0%) | | Casino and gaming | $14,348 | 53.4% | $11,055 | 49.6% | $3,293 | 29.8% | | TSG | $1,626 | 6.1% | $1,951 | 8.8% | $(325) | (16.7%) | | Total net sales | $26,851 | 100.0% | $22,286 | 100.0% | $4,565 | 20.5% | | International | $4,623 | 17.2% | $5,702 | 25.6% | $(1,079) | (18.9%) | - Printer, terminal, and other hardware sales unit volume increased 24% to approximately 51,000 units, driven by 32% growth in casino and gaming and 82% in FST[99] - The average selling price of hardware increased 5% due to increased costs from U.S. tariffs passed on to customers[99] Food service technology FST Sales by Type (Six Months Ended June 30, In thousands) | FST Sales Type | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :------------------------------ | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Hardware | $4,054 | 41.9% | $2,295 | 30.7% | $1,759 | 76.6% | | Software, labels and other recurring revenue | $5,615 | 58.1% | $5,183 | 69.3% | $432 | 8.3% | | Total FST sales | $9,669 | 100.0% | $7,478 | 100.0% | $2,191 | 29.3% | - Hardware sales increased 77%, driven by Workstation sales to a new sushi customer and BOHA! Terminal 2 sales to existing customers[100] - Despite the loss of a significant customer (approx. $600k in H1 2024 sales), FST labels and other recurring revenue increased 8.3%, primarily due to label sales to the new sushi customer[100][101] POS automation POS Automation Sales (Six Months Ended June 30, In thousands) | POS Automation Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :--------------------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $1,203 | 99.6% | $1,802 | 100.0% | $(599) | (33.2%) | | International | $5 | 0.4% | $0 | 0.0% | $5 | - | | Total POS automation sales | $1,208 | 100.0% | $1,802 | 100.0% | $(594) | (33.0%)| - Sales decreased 33% due to competitive pressure and a reduction in average selling prices[102] Casino and gaming Casino and Gaming Sales (Six Months Ended June 30, In thousands) | Casino and Gaming Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :------------------------ | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $10,781 | 75.1% | $6,416 | 58.0% | $4,365 | 68.0% | | International | $3,567 | 24.9% | $4,639 | 42.0% | $(1,072) | (23.1%) | | Total casino and gaming sales | $14,348 | 100.0% | $11,055 | 100.0% | $3,293 | 29.8% | - Domestic sales increased 68% as major customers normalized ordering after working through excess inventory[103] - Sales also benefited from a new OEM customer for charitable gaming establishments[103] - International sales decreased 23% due to a significant European OEM still working down overstocked inventory, expected to resume ordering late H2 2025[104] TSG TSG Sales (Six Months Ended June 30, In thousands) | TSG Sales | 2025 Sales | 2025 % of Total | 2024 Sales | 2024 % of Total | $ Change | % Change | | :---------- | :----------- | :-------------- | :----------- | :-------------- | :------- | :------- | | Domestic | $1,268 | 78.0% | $1,564 | 80.2% | $(296) | (18.9%) | | International | $358 | 22.0% | $387 | 19.8% | $(29) | (7.5%) | | Total TSG sales | $1,626 | 100.0% | $1,951 | 100.0% | $(325) | (16.7%)| - Domestic revenue decreased due to lower sales of legacy replacement parts for lottery printers and legacy consumables[105] - The company expects TSG sales to be lower in 2025, with plans to cease selling all remaining legacy consumable products by the end of 2025[106] Gross Profit Gross Profit (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :--------- | :---- | :---- | :------- | :-------------- | :-------------- | | Gross profit | $13,011 | $11,734 | 10.9% | 48.5% | 52.7% | - Gross margin declined 420 basis points to 49% due to higher sales of lower-margin BOHA! hardware products, increased overhead costs, inflation, and competitive pricing in POS automation[107] - Gross margin for 2025 is expected to remain in the mid-to high-40s range[108] Operating Expenses - Engineering, Design and Product Development Engineering, Design and Product Development Expenses (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :---------------------------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | Engineering, design and product development | $3,360 | $3,765 | (10.8%) | 12.5% | 16.9% | - Expenses decreased 11% due to cost reduction initiatives from Q2 2024, including reduced contracted software development, partially offset by higher incentive compensation[108] Operating Expenses - Selling and Marketing Selling and Marketing Expenses (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :-------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | Selling and marketing | $4,188 | $4,280 | (2.1%) | 15.6% | 19.2% | - Expenses decreased 2% due to cost reduction initiatives (reduced headcount, trade show, marketing), partially offset by higher go-to-market strategy costs and incentive compensation[109] Operating Expenses - General and Administrative General and Administrative Expenses (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :-------------------------- | :--- | :--- | :------- | :-------------- | :-------------- | | General and administrative | $5,736 | $5,428 | 5.7% | 21.4% | 24.4% | - Expenses increased 6% primarily due to higher incentive and stock-based compensation, partially offset by cost reduction initiatives[110] Operating Loss Operating Loss (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | % Change | 2025 % of Sales | 2024 % of Sales | | :------------- | :---- | :---- | :------- | :-------------- | :-------------- | | Operating loss | $(273) | $(1,739) | 84.3% | (1.0%) | (7.8%) | - Operating loss decreased by $1.5 million, or 84%, driven by a 21% increase in sales and a $1.3 million increase in gross profit, alongside a 1% decrease in operating expenses[111] Interest, net - Net interest income decreased to $62 thousand from $74 thousand, despite higher invested cash, due to increased interest expense on higher minimum required borrowings ($3 million in H1 2025 vs $2.25 million in H1 2024)[112] Other, net - Other net income shifted to $178 thousand from an expense of $(53) thousand, primarily due to foreign exchange gains[113] Income Taxes - Income tax expense was $91 thousand (275.8% effective rate) in H1 2025, compared to a benefit of $363 thousand (-21.1% effective rate) in H1 2024[114] - The high effective tax rate is due to near-breakeven pre-tax losses and a full valuation allowance against U.S. deferred taxes, meaning no U.S. federal tax benefits were recorded for losses[114] Net Loss - Net loss decreased to $(124) thousand, or $(0.01) per diluted share, from $(1.4 million), or $(0.14) per diluted share, in the prior year[115] Liquidity and Capital Resources Cash and cash equivalents increased by $3.4 million to $17.7 million, driven by operations and inventory reduction; management believes liquidity is sufficient for 12 months despite uncertainties Cash Flow - Cash and cash equivalents increased by $3.4 million (23%) to $17.7 million as of June 30, 2025[116] - Cash provided by operating activities was $3.4 million in H1 2025, a significant improvement from $0.9 million used in H1 2024[117] - Operating cash flow benefited from a $3.4 million decrease in inventories, partially offset by a $1.2 million increase in accounts receivable[119] Resource Sufficiency - Management believes that cash and cash equivalents, expected cash flows from operating activities, and available borrowings under the credit facility will provide sufficient resources for the next twelve months[121] - The company continues to monitor cash generation, usage, and preservation, including working capital management, given uncertainties related to tariffs and general economic conditions[120] Credit Facility - The Siena Credit Facility provides a revolving credit line of up to $10.0 million, with $3.0 million outstanding at an interest rate of 9.25% as of June 30, 2025[122][125] - The company had $1.6 million of net borrowing capacity available under the facility and remained in compliance with its excess availability covenant through June 30, 2025[123][125] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, TransAct Technologies Inc. is exempt from detailed market risk disclosures - TransAct is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[126] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025[127] - It was concluded that disclosure controls and procedures were effective at the reasonable assurance level[127] Changes in Internal Control Over Financial Reporting - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[128] PART II - Other Information Item 1. Legal Proceedings No material pending or contemplated legal proceedings are known as of June 30, 2025 - As of June 30, 2025, the company is unaware of any material pending legal proceedings or any material legal proceedings contemplated by government authorities[129] Item 1A. Risk Factors Updated risk factors include challenges with the BOHA! software source code acquisition, dependence on a single manufacturer in Thailand, and increased costs from new U.S. tariffs - New risks include potential difficulties in realizing expected benefits from the BOHA! source code acquisition, including challenges in timely delivery, transition services, and potential defects in the code[131][133][134] - The company remains dependent on a single manufacturer in Thailand for substantially all printer and terminal manufacturing and assembly[139][140] - A 19% U.S. tariff on goods imported from Thailand, effective August 7, 2025, poses risks of increased costs, pricing pressures, and supply chain disruptions[141][142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported - No unregistered sales of equity securities or use of proceeds to report[145] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities to report[145] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[145] Item 5. Other Information No other material information to report, including no Rule 10b5-1 trading arrangements adopted or terminated by directors or officers - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[146] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate documents and key agreements - Exhibits include the Certificate of Incorporation, Amended and Restated By-Laws, Source Code Purchase and Perpetual License Agreement, and certifications by the CEO and CFO[147] SIGNATURES The report is duly signed by Steven A. DeMartino (President, CFO) and William J. DeFrances (VP, Chief Accounting Officer) - The report is signed by Steven A. DeMartino (President, CFO, Treasurer, and Secretary) and William J. DeFrances (VP and Chief Accounting Officer) on August 11, 2025[152]