8-K: TransAct Technologies Reports Preliminary Q3 2024 Results: Terminal Sales Strong, Revenue Declines

TransAct Technologies announced preliminary third-quarter 2024 results, highlighting strong terminal sales but a decline in overall revenue compared to the previous year.

Summary

• TransAct Technologies reported preliminary financial results for the third quarter of 2024, showing a net sales of $10.9 million, which is a 6% decrease sequentially and a 37% decrease compared to the same quarter in 2023.
• The company sold over 1,350 terminals in the quarter, with over 2,800 sold in the last two quarters.
• They added 12 new FST customers, representing approximately 2,400 potential Terminal 2 sales opportunities.
• FST recurring revenue was $2.9 million, up 4% sequentially but down 8% year-over-year.
• Gross profit was $5.2 million with a gross margin of 48.1%, compared to $8.9 million and 51.9% in the third quarter of 2023.
• The operating loss for the quarter was $(837) thousand, compared to an operating loss of $(438) thousand in the second quarter of 2024 and an operating income of $1.2 million in the third quarter of 2023.
• Net loss was $(551) thousand, or $(0.06) per diluted share, compared to a net income of $906 thousand, or $0.09 per diluted share in the third quarter of 2023.
• EBITDA was negative $(533) thousand, and adjusted EBITDA was negative $(204) thousand for the quarter.
• The company has updated its full-year 2024 net sales outlook to between $43 million and $45 million and continues to expect adjusted EBITDA to be between negative $1 million and negative $2 million.
• TransAct is actively assessing strategic alternatives with the assistance of Roth Capital Partners, LLC.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to significant year-over-year revenue decline and a net loss, although there are some positive signs in the FST segment and terminal sales. The strategic review also adds uncertainty.

Positives

• The company experienced strong sales of BOHA! Terminals, selling over 1,350 in the third quarter and over 2,800 in the last two quarters.
• TransAct added 12 new FST customers, which could lead to future sales opportunities.
• FST recurring revenue saw a 4% sequential increase.
• The company is actively assessing strategic alternatives to maximize shareholder value.

Negatives

• Net sales decreased by 37% compared to the third quarter of 2023, falling to $10.9 million.
• The company reported a net loss of $(551) thousand for the third quarter of 2024.
• EBITDA and adjusted EBITDA were both negative for the quarter.
• Gross profit and gross margin decreased compared to the same period last year.
• The company's operating loss was $(837) thousand for the quarter, a worsening from the previous quarter.

Risks

• The company is experiencing a normalization of demand in the casino and gaming market after an industry inventory build during the pandemic.
• There are uncertainties related to the finalization of financial results, which could differ materially from the preliminary information.
• The company faces risks related to economic conditions, supply chain disruptions, and competition.
• The company's reliance on a third party for software development and maintenance poses a risk to their operations.
• The company is dependent on contract manufacturers in Asia, which could be impacted by various factors.
• The company is subject to risks associated with foreign operations, including exchange rate fluctuations.

Future Outlook

The company expects full-year 2024 net sales to be between $43 million and $45 million and adjusted EBITDA to be between negative $1 million and negative $2 million. They also anticipate improved go-to-market execution and conversion rates in 2025.

Management Comments

• We reported an excellent FST quarter, with another 1,355 BOHA! Terminal sales. We believe this momentum is just the beginning, with the effects of our re-organization and re-focusing of the sales team and go-to-market process starting to yield positive results, said John Dillon, Chief Executive Officer of TransAct.
• Our pipeline continues to hold strong under continued scrubbing, and as we further refine our process, we expect to further improve our go-to-market execution and generate improving conversion rates in 2025.

Industry Context

The results reflect a normalization in the casino and gaming market after a period of increased demand during the pandemic. The company is focusing on its food service technology (FST) segment, which shows some positive momentum, while facing challenges in its traditional markets.

Comparison to Industry Standards

• TransAct's revenue decline of 37% year-over-year is significant and suggests they are underperforming compared to industry peers who may have seen less dramatic declines.
• The negative EBITDA and adjusted EBITDA figures indicate a struggle with profitability, which is concerning compared to companies with positive EBITDA in the same sector.
• The company's focus on FST is a strategic move to diversify away from the volatile casino and gaming market, similar to other companies seeking growth in new sectors.
• Companies like PAR Technology and NCR Corporation, which also operate in the POS and food service technology space, may be used as benchmarks for comparison, though their scale and product offerings may differ.

Stakeholder Impact

• Shareholders will be concerned about the significant decrease in revenue and the net loss.
• Employees may be affected by the company's strategic review and potential restructuring.
• Customers in the food service technology sector may see continued investment and development in that area.
• Suppliers may be impacted by changes in demand and production volumes.
• Creditors will be monitoring the company's financial performance and strategic direction.

Next Steps

• The company will continue to assess strategic alternatives with the assistance of Roth Capital Partners, LLC.
• TransAct is hosting a conference call and webcast on November 7, 2024, to discuss the results.
• The company expects to further improve its go-to-market execution and generate improving conversion rates in 2025.

Key Dates

Keywords

TransAct Technologies, BOHA! Terminals, FST, Financial Results, Net Sales, EBITDA, Adjusted EBITDA, Recurring Revenue, Casino and Gaming, Food Service Technology