Good day, ladies and gentlemen, and welcome to the TransAct Technologies First Quarter of 2024 Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to Ryan Gardella of Investor Relations. You may begin.

Good morning. Welcome to TransAct Technologies First Quarter 2024 Earnings Call. Today, we'll be discussing the results announced in our press release issued before market open. Joining us from the company is CEO, John Dillon, President and CFO, Steven DeMartino. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives, and details on our first-quarter financial results. With that, I open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking in nature. Statements on this call may be labeled forward-looking and actual results may differ materially. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings, including its reports on Forms 10-K and 10-Q. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call. Today's call and webcast may include non-GAAP financial measures on the meaning of SEC Regulation S-K. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. And with that, I'd like to turn the call over to John. John?

Thank you, Ryan, and good morning, everyone, or evening, as the case may be, and thank you for joining us today. At a high level, the quarter came in mostly as expected. Total sales were $10.7 million, which is down as expected, 52% year-over-year, mostly due to the dynamics that we discussed at the last call relative to casino and gaming. FST, that's Food Service Technology, recurring revenue increased to $2.4 million versus the year-ago period. FST was a bit lighter than expected because two of the larger expected transactions slipped into Q2 and have been or will be closed shortly. Further, we are seeing strong demand for our FST technology from our large QSR client worldwide. U.S.A., North America, Europe, and even in the Middle East and Africa are placing orders. On a less positive note, one of our large clients, a convenience store client, is moving to a smartphone application deployment model. A single smartphone will replace a considerable amount of our label sales revenue from the ARPU calculations. And while we enjoy the revenue from label sales, it is not a crucial revenue stream for us; nonetheless, it will impact our numbers going forward. Before we go any deeper into the financials, I wanted to take a step back and talk a little bit about TransAct as a business and discuss where we stand today as well as what we have in store for the future. It's been just barely over a year since I took over as CEO. And since then, I believe we've made considerable progress operationally by refocusing and retraining a new sales team, cutting expenses and spending, rolling out and winning important approvals for our new BOHA! T2 product and introducing a couple of new metrics for investors to help us track our progress. While I'm encouraged by what the team has accomplished so far, I want to spend some time talking today about the future for TransAct rather than the past. I think we have a great organization at TransAct. It has core strengths and fundamental goodness, and I believe there is still considerable room for us to explore untapped potential and better define ourselves as an agile, industry-agnostic transaction validation platform that delivers tailored business solutions to our clients. And while more products like casino and gaming printers and our BOHA! platform might appear to serve two very separate markets with disparate goals, the reality is that both are industry-based solutions that leverage both hardware and software to validate transactions in the moment at the point of occurrence. For a number of reasons, casino and gaming and restaurants back of the house are at different stages in their transaction validation life cycles. We recognize that. For casinos, there will always be a need for transaction validation even if many players eventually switch from paper to an electronic form of validation. We're also well-positioned to do that. This is a question I get frequently. And while we believe there will always be a place for paper receipts in gaming environments, TransAct is moving with the market, introducing cutting-edge technology to clients and providing custom solutions such that many transaction validation capabilities are possible. For example, sports betting is now the fastest-growing gaming segment at mini-casinos, which is why we introduced a purpose-built printer called the Epic 880. Soon, this will be replaced by the TR80, which is the next generation for this exact application, and we're working with our OEM clients to design and optimize printers for kiosks. Competitor solutions typically involve hastily redesigned existing products that put them in a position where it's either difficult to service, prone to error, difficult to operate, or both. On the BOHA! side, an example we've talked about in the past few months is our entry into assisted living communities where our technology is used to monitor temperatures in refrigerators and freezers for controlled medicinals in those storage areas. Medication storage has not traditionally been a service we advertise, but that doesn't mean we're not more than equipped to take it on. We work diligently with this client to ensure we provide a custom solution utilizing the BOHA! platform to meet their unique requirements. FST is simply one market that we can win with our BOHA! platform, and we believe we have the ability to enter other markets with the same solution as well. These small steps towards entering new verticals and applying our technology strengths in new ways within existing verticals are symbolic of all the opportunity there is for our services to grow and expand. We believe there are opportunities like these across a range of spaces from places we've already previously been, like lottery and banking, to completely new white space opportunities that may not even know yet they can benefit from our technology. As an example, those of you who have been with us for a long time may remember, we used to have a substantial market segment back in the 2000s until about 2017 in our banking business. Specifically, if you recall, our bank jet printers were used at bank teller stations all over the United States. It was a great market for us, but obviously, banking has changed. The point is that we've been in many other vertical markets, and we do a good job of it. With updated products and a revised go-to-market strategy, we believe there are many possibilities here for us. After all, TransAct is a company with a legacy of design wins in multiple verticals spanning multiple decades. That ability has not disappeared. We have those roots as part of our DNA, and I think we have the opportunity to find more and new ways to win in different markets as a leading transaction validation and verification platform. We've already identified a few opportunities to explore. Don't worry, we're staying very focused on the markets we're serving today, but the opportunity is exciting in these adjacent markets for our technology. In the long term, we believe we can apply ourselves to a wider array of industries. So having said that, let me move on to some key points from the quarter, and then I'll pass it back to Steve for a more detailed review of the financials. On the FST side, we saw revenues of $3.3 million, down about 5% year-over-year, with recurring revenues of $2.4 million, which was up about 3% year-over-year. We delivered 901 BOHA! terminals, resulting in 856 new installations, and we ended the quarter with 15,370 online terminals in service. As the initial cohort of our BOHA! terminal installed base begins to hit contract renewals, we do experience a minimum amount of churn in the quarter. We don't report that yet because it's too early to get significant metrics, but it's something I expect to report in the future. That's the difference between the terminals we sell and the net new installation. Sometimes, we'll lose a few terminals if someone goes out of business, which is an important metric that eventually, as we get better statistics, we'll probably begin to report. Our T2 product continues to be well received by customers and prospects. I believe this new product will be crucial to our growth going forward. As I've mentioned in the past, we expect progress to be lumpy quarter-to-quarter. We're a small business, and these are big purchases typically when a business or a company that is going to become a client has to change the process in the back of the house. We expect it to be inconsistent, but we have a lot of optimism for the future here. The new FST pipeline growth metric, which measures the quarter-over-quarter difference in our fourth quarter looking forward pipeline, grew about 4% quarter-over-quarter. So it's going in the right direction. We're paying a lot of close attention to what's in the pipeline. As I pointed out earlier, we've added eight new customers in the last quarter, with the potential to purchase as many as 10,000 terminals or more over the next 12 to 24 months, adding to the twelve new customers that we added in the prior quarter. Next, I want to provide an update on the status of 7-Eleven. Occasionally, some of you asked me about it. In April, 7-Eleven Corporation informed us that they would be moving to a net new system and moving off the BOHA! terminal. They are in the first generation; we had obviously hoped that we would sell them the Terminal 2. This loss was due to a cost-cutting project where virtually all of their in-store applications are going to be run on a single cell phone. These applications include point-of-sale, they're replacing their point-of-sales system, their inventory system, waste management, ordering, and all the other back-of-the-house and front-of-the-house applications that they operate in a single store, and they're all going to be moved to this in-house system by the end of the second quarter in 2024. While this is a disappointing development, we wanted to note that BOHA! was not specifically targeted. It had nothing to do with the decision made at the executive level at headquarters. We're not taking it personally; it's not due to any problems with our product or services, but rather as a result of a long effort to create and institute their own technology. We really didn't have much perspective on this; we were somewhat unaware of this until the termination. 7-Eleven's parent company, Seven & I Holdings, generates tens of billions of dollars in revenue and staffs hundreds of engineers, and even then, allegedly took years to build and roll out this very specific one-off product that is customized specifically for a single-store 7-Eleven business. This development will impact approximately 5,400 terminals in our installed base and will reduce recurring revenue at an annualized rate of approximately $3.6 million, largely in label sales, and this has been reflected in the updated guidance range that we're going to provide. I also wanted to briefly mention our international QSR win that I have referenced in prior calls. The rollout has been an incredible success so far, and we have started receiving an increasing number of orders for locations around the world. We couldn't be more thrilled with the positive reception and believe this is an opportunity that could provide over 1,000 BOHA! terminal sales quarter-over-quarter. We believe the worldwide footprint we have already will expand even wider. Finally, I want to mention that we have a large sushi client that is converting from our original terminal to the new BOHA! Terminal 2, T2. We expect this will generate hundreds of additional sales of the T2 terminals over the next 12 to 18 months, most of which will probably occur in 2024. Moving on to casino and gaming, we reported revenue of $5.7 million for the quarter. That was down 64% from the prior year, and we've been discussing the changing dynamics in this largely duopoly market for the past several quarters and wanted to update everyone on how we see it progressing. First, on the competitive side, we believe our main competitor has reentered the market, and we're seeing some of the pricing pressure we expected as this occurs. We're taking appropriate steps needed to make sure that we retain as much of the captured market share as possible. Second, on the inventory side, we continue to hear from most of our OEM customers that they are still in an oversupply position, and we expect this to continue for at least the next quarter. This dynamic continues to be the larger reason for the sequential slowdown in sales. Previously, we expected the first quarter to be the peak of this oversupply, and now we believe that this will continue through at least the second quarter with order pickup beginning in the third quarter and going forward from there. Finally, I wanted to provide an update on our financial outlook for 2024. Due to the changing dynamics surrounding both FST and casino and gaming, we decided it's most prudent to adjust our financial guidance to ensure that investors have an accurate idea of where we believe our performance will be for the remainder of the year. We are currently estimating that our full-year revenues will be between $45 million and $50 million and adjusted EBITDA will be between a negative $2.5 million and negative $3.5 million. I'm relentlessly optimistic about the future of TransAct and believe that we have the right products and the right people to win in our existing markets as well as some new ones in the future. While I acknowledge a continuing need to execute, especially in the near term, it is also important as ever, but I have complete confidence in the strength of the organization to perform. Those are my comments this morning. Now I'd like to pass it over to Steve DeMartino for a more detailed review of the financials. Steve?

Thank you, John, and thanks, everyone, for joining us this morning. Let's turn to our first line compared to $22.3 million in the year-ago period. Sales from our Food Service Technology market, or FST, for the first quarter were $3.3 million, which was down 30% sequentially and also down 5% compared to $3.5 million in the prior year period. Our recurring FST sales, which includes software and service subscriptions as well as consumable label sales for the first quarter were $2.4 million, which was down 25% sequentially but up 3% compared to $2.3 million in the prior year period. Our ARPU for the first quarter of 2024 was $663, which was down 13% compared to $764 in the first quarter of 2023. As a reminder, we're currently selling a number of BOHA! terminals with no recurring revenue attached to them initially. While this presents an opportunity to sell recurring elements in the future, for now they represent a drag on our ARPU number. In the first quarter, a large number of our terminals fell into this category, and we expect this to continue in the near future. We're working on ways to lift this number going forward, but we expect our ARPU to be in the $500 to $1,000 range for at least the rest of 2024. Our casino and gaming sales were $5.7 million, which was down 64% from the first quarter of 2023, primarily due to OEMs working down high levels of printer inventory that they stockpiled during the supply crisis earlier in 2023, which have now eased. As John mentioned, we expect the dynamics we experienced during the first quarter to continue through at least the second quarter of 2024 and begin to improve in the back half of this year. POS Automation sales for the first quarter decreased 64% from the prior year to $651,000. This decline was largely the result of difficult comparisons as we experienced unusually high sales in 2023 due to a competitor's inability to supply product. In addition, similar to the casino market, during Q1, our customers were finishing up working down unusually high levels of printed inventory they built up during the supply crisis in 2023. We believe the competitors in the market are now fully back online, and we are taking the appropriate steps to maintain market share and ensure our products are in line with the new dynamics of the marketplace. Moving to TransAct Services Group, or TSG, for the first quarter, TSG sales were down 14% year-over-year to $1 million. This decrease was largely due to unusually high sales of legacy lottery spare parts in the prior year, which we don't expect to repeat at the same levels in 2024. Moving down the income statement, our first quarter gross margin was a solid 52.6%, which was up sequentially from 48% but down from 55% in the prior year period. The sequential increase comes as a result of an improved sales mix and favorable overhead cost absorption, somewhat offset by lower overall sales volume. Going forward, we expect our gross margin for the remainder of the year to be in the mid-to-high 40% range. Our total operating expenses for the first quarter decreased by 18% from the prior year first quarter to $6.9 million and were flat sequentially. The year-over-year decline came as a result of our previously disclosed savings achieved from the cost-cutting efforts we began to put in place late in the third quarter last year. We estimate that these actions would produce operating expense savings of about $3 million on an annualized basis, and we experienced the full effect of these reductions during the first quarter. Breaking down our operating expenses a bit, our engineering and R&D expenses for the first quarter were down 13% year-over-year to $2 million. Our selling and marketing expenses decreased 24% year-over-year to $2.1 million, and our G&A expenses decreased 60% year-over-year to $2.9 million. For the first quarter, our operating loss was $1.3 million or a negative 12.2% of net sales, and this compares to operating income of $3.8 million or 17.1% of net sales in the prior year period. On the bottom line, we recorded a net loss of $1 million or a $0.10 loss per diluted share for the first quarter, which compares to net income of $3.1 million or $0.31 per diluted share in the year-ago period. Our adjusted EBITDA for the quarter was negative $701,000, which compares to positive $4.5 million for the first quarter of last year. Taking a quick look at our balance sheet, it continues to remain solid. We ended the quarter with $10.6 million in cash, with only the minimum required $2.25 million of outstanding borrowings under our credit facility with Siena Lending. Finally, before I open the call to Q&A, I wanted to address the expected impact of our new guidance range on our projected cash flow for 2024. Even with the projected adjusted EBITDA loss of negative $2.5 million to negative $3.5 million for 2024, we expect the business to be only slightly cash flow negative for the full year. We expect to sell down our inventories as we move through the year, which now sit at $19.2 million, and believe this, combined with liquidation of receivables resulting from lower sales levels, will likely be enough to fund a good portion of our projected EBITDA loss. Given these factors, we believe we will easily have enough cash to fund our business for at least the next 12 months. And with that, I'd like to turn the call over to the operator for questions.

Thank you, sir. Ladies and gentlemen, we will now be conducting the question-and-answer session. Our first question comes from Jeff Martin of ROTH MKM.

John, I wanted to dig in a little bit on the new logos. What kind of terminal volume does that represent potentially in the two FST transactions that slipped into Q2? Have those shipped as of today? And what kind of volume are we looking at in those two as well?

Jeff, thanks for the question. I think we've figured out how to not be on mute during these virtual calls, so apologies for that. The eight transactions that are net new clients represent the potential for over 1,000 units over time. As I mentioned in the prior call, we focused the team on selling to clients that have the potential to place a considerable amount of additional orders. We use a land-and-expand strategy. If you will, our product is the best salesperson we have; the team performs well. Once it's installed, it performs, and most clients want to ensure that it's going to provide the ROI and the other capabilities that were the reasons for their purchase in the first place. So we start small with most clients, and we expand. That's kind of where we're at with that. We closed a net new client count of about twelve in Q1 of this year, and looking at those clients for expansion is something we spend a lot of time on. Relative to the two that slipped, one was a large QSR that was going to place orders. At the last minute, they decided to do a security audit to ensure everything in their shops was buttoned up, and they postponed placing orders until they got that done. That delayed the sales by about two months, but all that business is back on track; we're shipping product. The other was an opportunity that was in place, but I don't think we have that order yet. We expect to get it literally in the next couple of weeks.

Great. And then, with respect to the change of 7-Eleven, that's a Q2 event, correct? So we had full results still in Q1. And then two, I wanted to get a sense of what the other convenience stores are doing in terms of utilizing the BOHA! terminal?

Relative to 7-Eleven, I've seen the movie before. Big companies sometimes decide they want to build the system in-house. They're essentially jettisoning all of their vendors and going to roll out a homegrown system that has taken them years to build. I don't know how much they spent on it, but it's probably a lot. We don't see this as a customer loss because our product was inferior or it's not a replacement scenario. This is a custom in-house built project they decided was strategically in their interest. The primary reason was to cut costs; labor rates and food costs are going through the roof, and 7-Eleven is typically run by a single employee. This means the individual will have a cell phone in their hand and a small printer, which supposedly is going to handle everything in the store. I don't know how well it's going to work; they're beginning to roll it out now. My only disappointment is we didn't have greater insight into this process. In Q1 of this year, they were still placing orders, and we were somewhat surprised by the turn of events. They were a first-generation customer running our older products. While we're excited to have had clients like that, the simplicity of a 7-Eleven store is below the threshold where our technology really makes a big difference. I'm happy to take this on for any convenience store operation, but we're targeting more complex systems where our technology has a much greater competitive advantage.

In the first quarter of this year, they were still placing orders, which took us by surprise. They were a first-generation customer using our older products. While we're pleased to have had clients like that, the simplicity of a 7-Eleven store is below the level where our technology truly shines. I'm willing to support any convenience store operation, but we are focusing on more complex systems where our technology offers a significant competitive edge.

If you could just talk about the model name of the new casino and gaming terminal that you're coming out with?

I'll answer the first one, and I'll let Steve go back and pull up the number. We have had a product in the market called the 880, and we're replacing that with a new model called the TR80. We've announced it, we have shipped some, and we expect it to enter full production here in the next few months. It's essentially a kiosk printer for sports betting. We excel in this technology; it has a favorable form factor. It's sort of a rack-mounted unit that slotted right into a kiosk. In many places where sports betting operates, as you enter a device, there’s a screen you interact with to place your bets, and then you receive a ticket. We do this exceptionally well. This product has been specifically built for this purpose. It's very much as I talked about, where we collaborate with the client to understand what they need it to do, but it's a second generation of our sports betting kiosk printer.

Got you. And is there an Epicentral type software opportunity here in sports betting? Or does that not really apply?

I would say it's too soon to know in sports betting. It's not so much about knowing the personality of the person who's betting because they're deciding on a cricket match or a football game. Not clear at this point. I do believe that client intimacy is something that is going to be needed in most devices. We're entering a more telematic-centric system—telematics meaning we're communicating via Wi-Fi, Bluetooth, and near-field communication. The devices we install in various machines will have the ability to communicate digitally with clients, possibly through their cell phone or smartwatches. The more you know about your client, depending on who the ultimate vendor is, the better you can service them. So, we think that things like Epicentral will be a key component of the future, but we’re working with clients who are primarily OEM and our products to discover if we can help engineer some of their technology into our systems. It’s still early days.

Jeff, did you want the terminal numbers?

Yes, please.

Yes. We ended the quarter with 15,370, and we added 901 new terminals sold during the quarter.

Our next question comes from Rick Fearon of Accretive Capital Partners.

John, I wondered if you could provide an update on the strategic alternatives.

Well, we've announced that we have an advisory service that's helping us. We are in process. It's going as it were. We don't have anything to report at this point, but we're looking at strategy challenges and opportunities, and we'll continue to do that. If we develop things that make a difference, we'll be sure to communicate that to our investors. Trust us that we are diligently working on it.

Okay. And just to clarify, does this encompass M&A strategies?

That's correct.

Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand over to John Dillon for closing remarks.

Thank you. I want to thank you all for joining and listening. I appreciate everyone's support and feedback. As always, if you want to discuss anything related to TransAct, please reach out to me or Ryan in our IR department to set up a call. I'm happy to take the call and spend the time.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.