TransAct Technologies rporated(TACT) - 2023 Q4 - Annual Results

Executive Summary Preliminary Q4 and Full Year 2023 Overview TransAct Technologies reported preliminary financial results for Q4 and full year 2023, showing a significant decline in Q4 net sales but strong growth in full year net sales and Food Service Technology (FST) recurring revenue Q4 2023 (Millions) | Metric | Q4 2023 (Millions) | Q4 2022 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $13.3 | $18.0 | -26% | | FST Sales | $4.7 | $3.1 | +54% | | Casino and Gaming Sales | $4.2 | $11.0 | -62% | FY 2023 (Millions) | Metric | FY 2023 (Millions) | FY 2022 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $72.6 | $58.1 | +25% | CEO Commentary and Business Update CEO John Dillon highlighted 2023 as a year of positive change, resulting in a stronger and more efficient organization. The company is focused on its FST segment, with positive reception for the new BOHA! Terminal 2 and plans to build momentum in 2024 - The organization emerged from a year of transition stronger, more efficient, and operationally more effective[2] - The FST segment has the right team in place, selling to enterprise-level organizations with the new BOHA! Terminal 2, which has seen solid customer reception[2] - In Q4, TransAct added twelve new logos to its BOHA! platform and sold 1,235 terminals, anticipating momentum build-up throughout 2024[2] Financial Performance Highlights Fourth Quarter 2023 Financial Highlights TransAct experienced a decline in net sales and a swing to operating and net loss in Q4 2023 compared to Q4 2022, despite strong growth in FST recurring revenue and an improvement in gross margin Q4 2023 Financial Performance (Preliminary and Unaudited) | Metric | Q4 2023 (in thousands) | Q4 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $13,265 | $17,958 | -26.1% | | FST Recurring Revenue | $3,200 | $2,400 | +33.3% | | Gross Profit | $6,371 | $8,219 | -22.5% | | Gross Margin | 48.0% | 45.8% | +2.2 pp | | Operating (Loss) Income | $(522) | $494 | N/A (swing to loss) | | Net (Loss) Income | $(62) | $260 | N/A (swing to loss) | | Diluted EPS | $(0.01) | $0.03 | N/A (swing to loss) | | EBITDA | $338 | $993 | -65.9% | | Adjusted EBITDA | $587 | $1,280 | -54.1% | Full Year 2023 Financial Highlights For the full year 2023, TransAct achieved significant growth in net sales and a return to profitability, with substantial improvements in gross margin, operating income, and net income compared to 2022 FY 2023 Financial Performance (Preliminary and Unaudited) | Metric | FY 2023 (in thousands) | FY 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $72,631 | $58,139 | +25.0% | | FST Recurring Revenue | $11,100 | $8,700 | +27.6% | | Gross Profit | $38,400 | $24,412 | +57.3% | | Gross Margin | 52.9% | 42.0% | +10.9 pp | | Operating Income (Loss) | $5,706 | $(7,677) | N/A (swing to income) | | Net Income (Loss) | $4,748 | $(5,936) | N/A (swing to income) | | Diluted EPS | $0.47 | $(0.60) | N/A (swing to income) | | Adjusted Net Income (Loss) | $5,906 | $(5,936) | N/A (swing to income) | | Adjusted Diluted EPS | $0.59 | $(0.60) | N/A (swing to income) | | EBITDA | $7,647 | $(6,361) | N/A (swing to income) | | Adjusted EBITDA | $9,968 | $(5,206) | N/A (swing to income) | Sales Performance by Market Segment The company's sales performance varied significantly across market segments in Q4 and full year 2023, with strong growth in Food Service Technology and TransAct Services Group, while POS automation and Casino and Gaming experienced declines in Q4 Sales by Market Segment (Preliminary and Unaudited) | Segment | Q4 2023 (in thousands) | Q4 2022 (in thousands) | Q4 Change (%) | FY 2023 (in thousands) | FY 2022 (in thousands) | FY Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Food service technology | $4,714 | $3,054 | +54.4% | $16,308 | $12,364 | +31.9% | | POS automation | $1,577 | $2,959 | -46.7% | $6,922 | $10,659 | -35.1% | | Casino and gaming | $4,190 | $10,999 | -61.9% | $41,192 | $30,029 | +37.2% | | TransAct Services Group | $2,784 | $946 | +194.3% | $8,209 | $5,087 | +61.4% | | Total net sales | $13,265 | $17,958 | -26.1% | $72,631 | $58,139 | +25.0% | Condensed Consolidated Balance Sheets As of December 31, 2023, TransAct's balance sheet shows an increase in total assets and shareholders' equity compared to the prior year, driven by higher cash and inventories, while total liabilities decreased Condensed Consolidated Balance Sheets (Preliminary and Unaudited) | | December 31, 2023 (In thousands) | December 31, 2022 (In thousands) | | :--- | :--- | :--- | | Assets: | | | | Cash and cash equivalents | $12,321 | $7,946 | | Accounts receivable, net | $9,824 | $13,927 | | Employee retention credit receivable | $- | $1,500 | | Inventories | $17,759 | $12,028 | | Other current assets | $1,095 | $724 | | Total current assets | $40,999 | $36,125 | | Fixed assets, net | $2,421 | $2,781 | | Right-of-use assets, net | $1,602 | $2,488 | | Goodwill | $2,621 | $2,621 | | Deferred tax assets | $6,304 | $7,327 | | Intangible assets, net | $88 | $242 | | Other assets | $163 | $248 | | Total assets | $54,198 | $51,832 | | Liabilities and Shareholders' Equity: | | | | Revolving loan payable | $2,250 | $2,250 | | Accounts payable | $4,431 | $7,395 | | Accrued liabilities | $4,947 | $4,077 | | Lease liabilities | $929 | $875 | | Deferred revenue | $1,079 | $1,329 | | Total current liabilities | $13,636 | $15,926 | | Deferred revenue, net of current portion | $209 | $143 | | Lease liabilities, net of current portion | $720 | $1,683 | | Other liabilities | $219 | $218 | | Total liabilities | $14,784 | $17,970 | | Common stock | $140 | $139 | | Additional paid-in capital | $57,055 | $56,282 | | Retained earnings | $14,378 | $9,630 | | Accumulated other comprehensive loss, net of tax | $(49) | $(79) | | Treasury stock, at cost | $(32,110) | $(32,110) | | Total shareholders' equity | $39,414 | $33,862 | | Total liabilities and shareholders' equity | $54,198 | $51,832 | Strategic Initiatives and Outlook Recent Strategic Development TransAct Technologies has engaged a strategic advisor to help determine the optimal long-term strategy for its business - The Company engaged a strategic advisor to assist in determining the best long-term strategy for its business[6] 2024 Financial Outlook TransAct provided preliminary financial guidance for the full year 2024, projecting a decrease in total net sales and an approximately breakeven adjusted EBITDA - Full year 2024 total net sales are expected to be between $53 million and $58 million[11] - Full year 2024 total adjusted EBITDA is expected to be approximately breakeven[11] Non-GAAP Financial Measures Rationale and Definitions TransAct provides non-GAAP financial measures like EBITDA, Adjusted EBITDA, and Adjusted net income (loss) to offer investors a clearer view of its core operations, excluding non-recurring or non-cash items, for better comparability and evaluation of operating performance - Non-GAAP financial measures (EBITDA, Adjusted EBITDA, Adjusted net income/loss) are provided to help investors and others assess the ongoing nature of TransAct's core operations[12] - EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation, and amortization[13] - Adjusted EBITDA further adjusts EBITDA for share-based compensation, a $1.5 million severance charge related to the former CEO's resignation, and other items not reflecting ordinary earnings[14] GAAP to Non-GAAP Reconciliations The company provides detailed reconciliations from GAAP net income (loss) to non-GAAP measures such as Adjusted Operating Income, Adjusted Net Income, EBITDA, and Adjusted EBITDA for both quarterly and full-year periods, highlighting specific adjustments like the CEO severance charge Q4 2023 GAAP to Non-GAAP Earnings Reconciliation (Preliminary and Unaudited) | Metric | Reported (thousands) | Adjustments (thousands) | Adjusted Non-GAAP (thousands) | | :--- | :--- | :--- | :--- | | Operating expenses | $6,893 | $- | $6,893 | | % of net sales | 52.0% | | 52.0% | | Operating loss | $(522) | $- | $(522) | | % of net sales | (3.9)% | | (3.9)% | | Interest and other income | $426 | $- | $426 | | Loss before income taxes | $(96) | $- | $(96) | | Income tax benefit | $34 | $- | $34 | | Net loss | $(62) | $- | $(62) | | Diluted EPS | $(0.01) | $- | $(0.01) | FY 2023 GAAP to Non-GAAP Earnings Reconciliation (Preliminary and Unaudited) | Metric | Reported (thousands) | Adjustments (thousands) | Adjusted Non-GAAP (thousands) | | :--- | :--- | :--- | :--- | | Operating expenses | $32,694 | $(1,461) | $31,233 | | % of net sales | 45.0% | | 43.0% | | Operating income | $5,706 | $1,461 | $7,167 | | % of net sales | 7.9% | | 9.9% | | Interest and other income | $197 | $- | $197 | | Income before income taxes | $5,903 | $1,461 | $7,364 | | Income tax (expense) | $(1,155) | $(303) | $(1,458) | | Net income | $4,748 | $1,158 | $5,906 | | Diluted EPS | $0.47 | $0.12 | $0.59 | Adjustment includes a severance charge of $1,461 incurred in April 2023 related to the resignation of the Company's former Chief Executive Officer. Net Income (Loss) to EBITDA and Adjusted EBITDA Reconciliation (Preliminary and Unaudited) | Metric | Q4 2023 (thousands) | Q4 2022 (thousands) | FY 2023 (thousands) | FY 2022 (thousands) | | :--- | :--- | :--- | :--- | | Net (loss) income | $(62) | $260 | $4,748 | $(5,936) | | Interest expense, net | $48 | $63 | $255 | $208 | | Income tax (benefit) expense | $(34) | $322 | $1,155 | $(1,965) | | Depreciation and amortization | $386 | $348 | $1,489 | $1,332 | | EBITDA | $338 | $993 | $7,647 | $(6,361) | | Share-based compensation expense | $249 | $287 | $860 | $1,155 | | Severance charge related to resignation of the Company's former Chief Executive Officer | $- | $- | $1,461 | $- | | Adjusted EBITDA | $587 | $1,280 | $9,968 | $(5,206) | Company Information and Disclosures About TransAct Technologies TransAct Technologies is a global leader in software-driven technology and printing solutions for high-growth markets, offering products under various brands and providing comprehensive services and supplies - TransAct Technologies Incorporated is a global leader in developing and selling software-driven technology and printing solutions for high-growth markets[17] - The company's solutions cater to food service, casino and gaming, and POS automation markets, sold under brands like BOHA!™, AccuDate™, EPICENTRAL®, Epic, and Ithaca®[17][18] - TransAct has sold over 3.9 million hardware devices worldwide and provides world-class service, spare parts, and supplies through its TransAct Services Group[17] Cautionary Statements and Forward-Looking Information The report includes important disclaimers regarding the preliminary nature of the financial results, which are subject to change, and highlights various risks and uncertainties that could cause actual future results to differ materially from forward-looking statements - The preliminary financial information is inherently uncertain and subject to change as the company finalizes its results and audit for the period ended December 31, 2023[19] - Forward-looking statements are subject to certain risks, uncertainties, and assumptions, including economic conditions, supply chain disruptions, inflation, and the ability to develop new products, which could cause actual results to differ materially[21] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to revise them, except as required by law[21]