TransAct Technologies Reports Preliminary First Quarter 2024 Financial Results

Rhea-AI Summary

TransAct Technologies reported preliminary financial results for the first quarter of 2024, highlighting net sales of $10.7 million, a 52% decrease from the same period in 2023 due to market dynamics. The company also reported FST recurring revenue of $2.4 million, a 3% increase from 2023. However, gross profit decreased to $5.6 million with a gross margin of 52.6%. Operating income was a loss of $(1.3) million, and net loss was $(1.0) million. EBITDA and Adjusted EBITDA were negative as well. TransAct Technologies expects full-year 2024 total net sales between $45 million and $50 million and adjusted EBITDA between negative $2.5 million and negative $3.5 million.

Positive

• Increased FST recurring revenue of $2.4 million in Q1 2024.

Negative

• Decrease in net sales to $10.7 million in Q1 2024, down 52% from the same period in 2023.

• Operating income loss of $(1.3) million in Q1 2024.

• Net loss of $(1.0) million in Q1 2024.

• EBITDA and Adjusted EBITDA were negative in Q1 2024.

Insights

Financial Analyst

TransAct's preliminary financial results for Q1 2024 display a considerable downturn in net sales, plummeting by 52% year-over-year, which investors should view as a significant indicator of current business performance. This decline is attributed to a normalization in the Casino and Gaming sector, which might suggest the company is experiencing a post-pandemic market correction after an inflated demand period. However, the slight 3% increase in FST recurring revenue is a positive note, indicating a potential for stability in this revenue stream. The disclosed gross margin remains robust at 52.6%, despite being lower than the previous year's 55%. Operationally, the transition from a net income to a net loss this quarter is concerning. Investors should consider the company's forecast of continued negative adjusted EBITDA, which signals ongoing operational challenges. The projected net sales for the year, between $45 million and $50 million and an adjusted EBITDA estimate between negative $2.5 million and negative $3.5 million, should be compared against historical performance and industry benchmarks. It's vital for stakeholders to analyze these figures in light of the company's strategic plans to innovate and expand into new markets.

Market Research Analyst

From a market perspective, TransAct's report highlights a shift in the gaming industry's dynamics. The statement on market normalization suggests that the expansion in gaming experienced during the recent past may be waning, which could be indicative of a broader industry trend. The addition of eight new FST accounts shows business development progress but needs context regarding the potential revenue per unit to fully gauge impact. Furthermore, the assertion of exploring new markets could signal diversification, a strategic move that might mitigate risks associated with the volatility in the gaming sector. Stakeholders should monitor how TransAct adapts its product offerings and penetrates new verticals, as this will be important for future growth and market share. As the market for transaction validation continues to evolve with technology advancements, TransAct's agility in adapting to these changes will be a critical factor in its ability to maintain and grow its customer base.

Lands Eight New FST Accounts, Representing Potential Terminal Sales of Nearly 1,000 Units

Casino and Gaming Sales Begin Normalization

HAMDEN, Conn.--(BUSINESS WIRE)-- 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 preliminary results for the first quarter ended March 31, 2024.

“We have continued confidence in our core product offerings and our ability to win new customers in new deployment situations across a number of verticals, with eight new logos added to our BOHA! platform in the quarter,” said John Dillon, Chief Executive Officer of TransAct. “We are optimistic about the future of TransAct as an agile, transaction validation platform providing tailored solutions to our customers and believe there is significant opportunity in both the near and long-term to target new use cases with our existing products and to enter new markets further down the road.”

First Quarter 2024 Financial Highlights

• Net Sales: Net sales for the first quarter of 2024 were $10.7 million, down as expected due to the pull back in Casino and Gaming. The results were down 52% compared to $22.3 million for the first quarter of 2023 largely as a result of the expected market dynamics and normalizing demand for our Casino and Gaming printers.
• FST Recurring Revenue: FST recurring revenue for the first quarter of 2024 was $2.4 million, up 3% compared to $2.3 million for the first quarter of 2023.
• Gross Profit: Gross profit for the first quarter of 2024 was $5.6 million, resulting in gross margin of 52.6%, compared to gross profit of $12.3 million for the first quarter of 2023, which delivered a 55.0% gross margin.
• Operating (loss) income: Operating loss for the first quarter of 2024 was $(1.3) million, compared to operating income of $3.8 million for the first quarter of 2023.
• Net (loss) income: Net loss for the first quarter of 2024 was $(1.0) million, or $(0.10) per diluted share, based on 10.0 million weighted average common shares outstanding. Net income for the comparable 2023 period was $3.1 million, or $0.31 per diluted share, based on 10.0 million weighted average common shares outstanding.
• EBITDA: EBITDA was negative $966 thousand for the first quarter of 2024, compared to $4.2 million for the first quarter of 2023.
• Adjusted EBITDA: Adjusted EBITDA was negative $701 thousand for the first quarter of 2024, compared to $4.5 million for the first quarter of 2023.

2024 Financial Outlook

• Total Net Sales: The Company currently expects full year 2024 total net sales of between $45 million and $50 million.
• Total Adjusted EBITDA: The Company currently expects full year 2024 total adjusted EBITDA to be between negative $2.5 million and negative $3.5 million.

Our outlook for non-GAAP adjusted EBITDA is presented only on a non-GAAP basis because not all of the information necessary for a quantitative reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure is available without unreasonable effort, primarily due to uncertainties relating to the occurrence or amount of these adjustments that may arise in the future. If one or more of the currently unavailable items is applicable, some items could be material, individually or in the aggregate, to GAAP reported results.

2024 First Quarter Conference Call and Webcast

TransAct is hosting a conference call and webcast today, May 7, 2024, beginning at 8:30 a.m. ET to discuss the Company’s preliminary first quarter 2024 results and other matters. Both the call and the webcast are open to the general public. The conference call number is 877-704-4453 and the conference ID number is 13746173 (domestic or international). Please call ten minutes prior to the presentation to ensure that you are connected.

Interested parties may also access the conference call live on the Internet at www.transact-tech.com (select “Company” followed by “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. 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. The Company believes that these non-GAAP financial measures provide relevant and useful information to an investor 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 items that do not reflect the Company’s ongoing operations and are excluded from the calculation of such measures; (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 and assessing financial performance. 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 (loss) income before net interest expense, income taxes, depreciation, and amortization. A reconciliation of EBITDA to net (loss) income, the most comparable GAAP financial measure, can be found attached to this release.

Adjusted EBITDA is defined as net (loss) income before net interest (income) expense, income taxes, depreciation and amortization and is adjusted for (1) share-based compensation and (2) any other items, when they occur, that we believe do not reflect the ordinary earnings of the Company’s ongoing business. 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 (loss) income, the most comparable GAAP financial measure, can be found attached to this release.

About TransAct Technologies Incorporated

TransAct Technologies Incorporated is a global leader in developing and selling software-driven technology and printing solutions for high-growth markets including food service, casino and gaming, and POS automation. The Company’s solutions are designed from the ground up based on customer requirements and are sold under the BOHA!™, AccuDate™, EPICENTRAL®, Epic and Ithaca® brands. TransAct has sold over 3.9 million printers, terminals and other hardware devices around the world and is committed to providing world-class 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 http://www.transactsupplies.com and through its direct sales team. TransAct is headquartered in Hamden, CT. For more information, please visit http://www.transact-tech.com or call (203) 859-6800.

©2024 TRANSACT Technologies Incorporated. All rights reserved. TransAct®, BOHA!™, AccuDate™, Epic Edge®, EPICENTRAL® and Ithaca® are trademarks of TransAct Technologies Incorporated.

Cautionary Statement Regarding Preliminary Financial Information

The Company has prepared the preliminary financial information set forth below on a materially consistent basis with its historical financial information and in good faith based upon its internal reporting as of and for the three months ended March 31, 2024. This financial information is preliminary and is thus inherently uncertain and subject to change as the Company finalizes its financial results and related review for the three months ended March 31, 2024. During the course of the preparation of the Company’s consolidated financial statements and related notes as of and for the three months ended March 31, 2024, the Company may identify items that could cause its final reported results to be materially different from the preliminary financial information set forth above. As a result, there can be no assurance that the Company’s final results for this period will not differ from the preliminary financial information.

This preliminary financial information should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. In addition, this preliminary financial information is not necessarily indicative of the results to be achieved for any future period.

Forward-Looking Statements

Certain statements included in this press release may be forward-looking statements within the meaning of the U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent current views about possible future events and are often identified by the use of forward-looking terminology, such as "may", "will", "could", "expect", "intend", "estimate", "anticipate", "believe", "project”, "plan”, "predict”, "design" or "continue", or the negative thereof, or other similar words. Forward-looking statements are subject to certain risks, uncertainties and assumptions. In the event that one or more of such risks or uncertainties materialize, or one or more underlying assumptions prove incorrect, actual results may differ materially from those expressed or implied by the forward-looking statements. Important factors and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: the adverse effects of current economic conditions on our business, operations, financial condition, results of operations and capital resources, difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions, inflation and the Russia/Ukraine and Middle East conflicts, an inability of our customers to make payments on time or at all, diversion of management attention, a possible future reduction in the value of goodwill or other intangible assets, inadequate manufacturing capacity or a shortfall or excess of inventory as a result of difficulty in predicting manufacturing requirements due to volatile economic conditions, price increases or decreased availability of component parts or raw materials, exchange rate fluctuations, volatility of and decreases in trading prices of our common stock and the availability of needed financing on acceptable terms or at all; our ability to successfully develop new products that garner customer acceptance and generate sales, both domestically and internationally, in the face of substantial competition; our reliance on an unrelated third party to develop, maintain and host certain web-based food service application software and develop and maintain selected components of our downloadable software applications pursuant to a non-exclusive license agreement, and the risk that interruptions in our relationship with that third party could materially impair our ability to provide services to our food service technology customers on a timely basis or at all and could require substantial expenditures to find or develop alternative software products; our ability to successfully grow our business in the food service technology market; risks associated with the pursuit of strategic initiatives and business growth; general economic conditions; our dependence on contract manufacturers for the assembly of a large portion of our products in Asia; our dependence on significant suppliers; our ability to recruit and retain quality employees; our dependence on third parties for sales outside the United States; marketplace acceptance of new products; risks associated with foreign operations; the availability of third-party components at reasonable prices; price wars, supply chain disruptions or other significant pricing pressures affecting the Company’s products in the United States or abroad; 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 protect intellectual property; and other risk factors identified and discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and other reports filed with the Securities and Exchange Commission. We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this release. We undertake no obligation to publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors, except where we are expressly required to do so by applicable law.

- Financial tables follow-

TRANSACT TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Preliminary and Unaudited)
	Three months ended March 31,
	2024		2023
	(In thousands, except per share data)
Net sales	$10,687		$22,270
Cost of sales	5,063		10,015
Gross profit	5,624		12,255
Operating expenses:
Engineering, design and product development	1,966		2,269
Selling and marketing	2,083		2,757
General and administrative	2,876		3,416
	6,925		8,442
Operating (loss) income	(1,301)		3,813
Interest and other income (expense):
Interest, net	48		(66)
Other, net	(60)		21
	(12)		(45)
(Loss) income before income taxes	(1,313)		3,768
Income tax benefit (expense)	277		(629)
Net (loss) income	$(1,036)		$3,139
Net (loss) income per common share:
Basic	$(0.10)		$0.32
Diluted	$(0.10)		$0.31
Shares used in per share calculation:
Basic	9,972		9,930
Diluted	9,972		10,043

SUPPLEMENTAL INFORMATION – SALES BY MARKET:
(Preliminary and Unaudited)
	Three months ended March 31,
	2024		2023
	(In thousands)
Food service technology	$3,300		$3,458
POS automation	651		1,797
Casino and gaming	5,696		15,811
TransAct Services Group	1,040		1,204
Total net sales	$10,687		$22,270

TRANSACT TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Preliminary and Unaudited)
		March 31,		December 31,
		2024		2023
Assets:		(In thousands)
Current assets:
Cash and cash equivalents		$10,631		$12,321
Accounts receivable, net		7,780		9,824
Inventories		19,171		17,759
Prepaid income taxes		352		322
Other current assets		931		773
Total current assets		38,865		40,999
Fixed assets, net		2,187		2,421
Right-of-use assets		1,371		1,602
Goodwill		2,621		2,621
Deferred tax assets		6,691		6,304
Intangible assets, net		50		88
Other assets		133		163
		13,053		13,199
Total assets		$51,918		$54,198
Liabilities and Shareholders’ Equity:
Current liabilities:
Revolving loan payable		$2,250		$2,250
Accounts payable		$4,226		4,431
Accrued liabilities		4,126		4,947
Lease liabilities		941		929
Deferred revenue		925		1,079
Total current liabilities		12,468		13,636
Deferred revenue, net of current portion		196		209
Lease liabilities, net of current portion		468		720
Other liabilities		215		219
		879		1,148
Total liabilities		13,347		14,784
Shareholders’ equity:
Common stock		140		140
Additional paid-in capital		57,249		57,055
Retained earnings		13,342		14,378
Accumulated other comprehensive loss, net of tax		(50)		(49)
Treasury stock, at cost		(32,110)		(32,110)
Total shareholders’ equity		38,571		39,414
Total liabilities and shareholders’ equity		$51,918		$54,198

TRANSACT TECHNOLOGIES INCORPORATED
RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA
NON-GAAP FINANCIAL MEASURES
(Preliminary and Unaudited)
		Three Months Ended
		March 31,
		2024		2023
		(In thousands)
Net (loss) income		$(1,036)		$3,139
Interest (income) expense, net		(48)		66
Income tax (benefit) expense		(277)		629
Depreciation and amortization		395		352
EBITDA		(966)		4,186
Share-based compensation expense		265		278
Adjusted EBITDA		$(701)		$4,464

 

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Investor Contact:

Ryan Gardella

ICR, Inc.

Ryan.Gardella@icrinc.com

Source: TransAct Technologies Incorporated

FAQ

What were TransAct Technologies' net sales in Q1 2024?

TransAct Technologies reported net sales of $10.7 million in the first quarter of 2024, a 52% decrease from the same period in 2023.

How did FST recurring revenue perform in Q1 2024?

FST recurring revenue for the first quarter of 2024 was $2.4 million, up 3% compared to the first quarter of 2023.

What was the operating income in Q1 2024 for TransAct Technologies?

TransAct Technologies reported an operating loss of $(1.3) million in the first quarter of 2024.

What is TransAct Technologies' financial outlook for 2024?

TransAct Technologies expects total net sales between $45 million and $50 million and adjusted EBITDA between negative $2.5 million and negative $3.5 million for the full year 2024.