TransAct Technologies rporated(TACT) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net revenue for Q1 2020 declined 11% year-over-year to $10.2 million, with an operating loss of $1.3 million and negative adjusted EBITDA of $1 million [28][59] - Gross profit margin for the quarter was 48%, down from 52.7% in the prior year [53] - Diluted EPS for Q1 was a net loss of $0.13 per share, compared to net income of $0.10 per share in the year-ago period [59] Business Line Data and Key Metrics Changes - Foodservice technology revenue increased 13% year-over-year to $1.4 million, with recurring FST sales at $616,000, nearly double the $310,000 reported in the previous year [48][49] - Casino and gaming sales were $4.9 million, a decline of 10% year-over-year, with domestic revenues down 25% due to COVID-19 impacts [50] - POS Automation and banking sales rose 22% to $1.6 million, driven by strong sales of the Ithaca 9000 POS printer [51] Market Data and Key Metrics Changes - The global casino and gaming market is facing significant challenges, with U.S. casinos closed and a slow recovery expected [12][13] - International casino and gaming revenues increased 15%, offsetting lower demand from Asian OEMs [50] - The foodservice industry is undergoing substantial changes, with many restaurants shifting to takeout and implementing new safety procedures [20][21] Company Strategy and Development Direction - The company is focusing on the BOHA! platform to support foodservice technology and is delaying a product launch to September to align with market conditions [25][26] - A marketing program called "Be Ready" is being initiated to assist customers in adapting to new operational procedures [22][83] - The company is exploring third-party financing options to facilitate customer purchases during the crisis [77] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the COVID-19 pandemic but remains optimistic about the company's resilience and long-term survival [61][64] - The company expects a slow recovery, projecting Q2 sales between $4.5 million and $5 million, with a gradual return to pre-pandemic sales levels by Q4 2021 [42][44] - Management emphasizes the importance of liquidity measures taken to navigate the current volatility [40][45] Other Important Information - The company implemented austerity measures to reduce operating expenses by an estimated $1.75 million, achieving $700,000 in Q1 savings [33][37] - The company received approximately $2.2 million from the Paycheck Protection Program to support payroll costs [39] - The effective tax rate for Q1 was unusually high at 31.9%, with expectations of a cash refund from net operating losses anticipated in 2020 [56][58] Q&A Session Summary Question: Can you talk about the convenience store market? - Management noted that convenience stores are adapting their product offerings and safety procedures, with ongoing business and unit shipments continuing [69][72] Question: Are you considering providing third-party financing for equipment purchases? - Management confirmed they are exploring options to assist customers with capital constraints and have been proactive in maintaining customer engagement [77][80] Question: What is the expectation for gross margin sustainability? - Management expects gross margin to decline due to reduced sales levels but anticipates recovery as sales improve [88] Question: Can you recap the operating expense savings? - Management detailed that $700,000 in savings were achieved in Q1, with an additional $1.1 million expected in Q2 [91][95] Question: What enhancements are included in the delayed BOHA! product upgrade? - Management refrained from disclosing specific enhancements but indicated it would be a significant new product launch [96][97]