TransAct Technologies Incorporated (NASDAQ:TACT) Q1 2026 Earnings Call Transcript

TransAct Technologies Incorporated (NASDAQ:TACT) Q1 2026 Earnings Call Transcript May 12, 2026

TransAct Technologies Incorporated beats earnings expectations. Reported EPS is $0.07, expectations were $-0.04.

Operator: Greetings. And welcome to the Transact Technologies First Quarter 26 Conference Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Ryan Gardella, Investor Relations. Thank you. You may begin.

Ryan Gardella: Thanks, Jessie. Good afternoon. Welcome to the TransAct Technologies First Quarter 26 Earnings Call. Today, we will be discussing the results announced in the press release issued after market close. Joining us from the company is CEO, John Dillon and President and CFO, Steven A. DeMartino. Today’s call will include discussion of the company’s key operating strategies, the progress on these initiatives, and details on our first quarter financial results. We will then open the line 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 deemed forward looking, and actual results may differ materially.

For a full list of risks inherent to the business of the company, please refer to the company’s SEC filings, including its reports on Form 10-K and 10-Q. TRANZACT 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 will include non GAAP financial measures within the meaning of SEC Regulation G. 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 website. And with that, I will turn the call over to John.

John Dillon: Thanks, Ryan. And good afternoon, everyone. Thanks for joining us. it is a nice afternoon here, and I am pleased to report today that Transact delivered a solid first quarter 26 Total net sales, $14.4 million, up 10% year over year. Generating an adjusted EBITDA of $1.4 million. Which is a strong start for the year. As we discussed, our focus remains on driving revenue growth in our food service technology or FST vertical, with software as our primary growth engine going forward. Supported by targeted and disciplined investments across the business to accelerate sales. In the first quarter, we sold 1.37 thousand BOHA! terminals driven mostly by upgrade orders from our 40 thousand-plus unit install base from prior sales of older products.

We also continue to see strong interest from existing customer base to move from either the AccuDate, which is our older system, or the T1, which is also an older system, to our newer Terminal 2, T2. We see a long runway of growth there, so that is a good sign. We ended the first quarter with 1 with 19 with 20 thousand online terminals, which is an increase of a little over 1 thousand. Actually, specifically, 1.06 thousand new online terminals over Q1 2025. Most importantly, our recurring FST revenue continues to grow. Our software revenue was up 23%, year over year, which gives us confidence in our strategic direction. And we are very focused on generating this revenue, which is high margin, certainly higher margin than hardware. More sustainable and predictable, and it is a focus we did not really have in the past because we did not own the software and we own it now.

Q&A Session

So we can start selling the software in a way we could not do before. So with nearly 20 thousand online terminals now in the field, this is the time to begin monetizing these deployments more effectively. In the past, we did not really do this. And in fact, software was often bundled for free. To make a hardware sale. Now our focus is to ensure that our customers are paying for and receiving the fair market value of our leading software offering. And given the importance of this growing revenue stream, we will begin sharing more and more of our ARR details, recurring revenue details each quarter to help you track that progress. ARR includes, for your reference, software, but it also includes contracted support service, which is a high margin service for us because of products are highly reliable and the labels.

So from an information standpoint for first quarter, ARR revenue was $3.3 million. And we firmly believe that the future for TRANZACT will come from recurring software revenue rather than 1-time hardware sales. Longer term, we are aiming to get our installed base up to a $100 to $200 per machine per month in recurring software revenue which can really unlock a lot of significant value. Given the size of our installed base and the fact that it is growing. Next, let me say a few words about the update on our port. Of our software to the new platform. As you know, we acquired the software, about a year ago last April, and we are making good progress here. We have pulled forward our go-live date from what was originally suggested to be 2027 and now it looks to be late Q2 2026.

So that is really good news and good progress. And I would like to say that our cloud partner, our public cloud partner, has done a really terrific job helping us with this transition. And as I stated before, ownership of the source code and launching our own hosting platform is really crucial for our recurring revenue model going forward. It provides us with an increased level of operational freedom, and enables us to accelerate software innovations like exploring, for example, an application store model for our own terminals where we could add additional applications, which either are grown in house or maybe sourced from outside through partners. So this model is appealing, and as we get into full production here, I think that is an interesting growth engine that we probably can explore successfully.

I also want to speak briefly about AI. Also known as artificial intelligence. And I know it is a hot topic in any software investment thesis right now, So I would like to say a few words about it. Most of you probably know that AI was developed in the 1.95 thousands. We are talking a long time ago, almost 75 years ago. And now it is really coming into its own because we have more data We have cloud compute capacity, which bursts and allows you to put a lot of machines to work all at once. And we have compute power in the form of GPUs and other optimization so the compute power is greater. So work that could not be done in a meaningful fashion or certainly could not eclipse human capability now is doing some stunning things which are really important.

And I believe AI will serve and continue to serve as an accelerant in our case for our business. It allows our developers to focus more time crafting existing new applications, for our platform and reduce as many of the mundane tasks that previously consumed enormous amount of time from our good engineers. As well, our integrated solutions approach insulates Transact from most of the potential downside from AI that might affect valuations for companies with simple applications and really a somewhat, again, simplistic pure-SaaS model. that is not Transact. If you keep in mind that we offer SaaS applications, of course, that are software as a service, these are integrated applications or rather solutions running on a purpose built platform with hardware, software, communications like Bluetooth, LTE, Wi-Fi, APIs, application program interfaces that talk to other systems, IoT, which includes sensors like the Temp-Sense in the kitchens, things like that.

And, of course, a mainstay for us are our printing capabilities. in the different types of foodservice environments. So all in all, having an integrated solution is something that is not easily disintermediated, and we see AI as a plus for us. Getting that right on the threshold of a lot of advance and a lot of progress, as we roll out software into the marketplace that we are already in. So for us, AI is a great accelerator. We think it is going to serve us well. And I just thought it was worth saying a few words about that. And separately, in another calls, I would be happy to talk a little bit more about AI. In terms of our GTM, the go to market, we are pleased with our strategy. It includes an emphasis on competing on competitive pricing strategic partnerships, targeted outreach, and high potential submarket verticals such as QSR.

that is quick service restaurants. Convenience stores, grab and go sushi, which has done really well for us. and corporate foodservice management from foodservice management companies. And at the same time, we expect to maintain a disciplined cost management regimen, target positive adjusted EBITDA, preserve the strength of the balance sheet, things I am sure you guys care about. Turning to our FST highlights specifically, in the first quarter. Total FST net sales came in at $4.7 million. Driven by strong recurring revenue growth and more offset by lower hardware sales. Recurring FST revenue reached $3.3 million. The ARPU, the average revenue per unit, was $709 per unit. Labels were $2.6 million. In the quarter, up 26% from the prior year. Driven by stronger volumes from long standing customers, including Love’s, TravelCenters of America, Hissho Sushi, and our 2025 win at Yummy Sushi.

These customers spend a lot of money with us. We have designed software. We help them with their labeling systems and frankly, it is 1 of the things that creates a greater degree of customer intimacy. And, frankly, it also makes the customer relationship with us stickier. It means that attrition rates are low, retention is high, and that is a good thing. Labels remain a margin accretive component of our P&L. And they help build the stickiness that I already mentioned. And as a solutions vendor, our labeling expertise and related services add a lot of differential value for our clients. Near term, our labels business also holds potential for labels only deals, where we might win customers based on the value, the quality, expertise, and pricing advantage that we can offer and that is another door into customers.

it is a distinctive competence that we can use to ultimately get in and sell additional products to clients that might start with us for just labeling and then move into some of the other applications our BOHA! Suite offers. So in the first quarter, we landed 22 new-logo accounts, from direct sales and from our market partners, And with the potential of about 1.41 thousand. about 1.4 thousand potential future units. We tend to use a land-and-expand strategy because our product performs well in situ, and it is great for us to get a small order from a potentially large client and then we treat that as an account management opportunity to get follow on business and expansion revenue. We also remain confident in our new pipeline logo pipeline for the remainder of 2026, so we feel like we are in pretty good shape.

And I also wanted to mention that when our customers win, we also win. We had a number of key customers this last quarter adding new stores to their portfolio in the quarter, and that presents an opportunity for us to sell into these new locations. So when we get revenue growth from these expansions, it comes without a huge sales investment like it takes when we wanna win a net new account. So expansion business is always easier to win. it is really important aspect of our land and expand model. And as our customers expand, we can expand with them. I also wanted to provide a brief update You know from prior press releases and maybe conversations that we hired a new chief marketing officer or CMO last quarter. Her name is Dana Loof. She joined us, I think, in early January.

And I am incredibly happy with the structure and progress she’s brought to our marketing function since joining us. I have had conversations with many of you about how our brand is somewhat I guess, I would say lackluster or kinda languishes out there. Our website has not been particularly hard hitting with calls to action and really compelling reasons why you should buy our technology, why you should buy it now. She’s changing all that, and I am delighted. The progress from her so far has been excellent. Her focus has been competitive positioning, messaging, and building out our lead gen engine. And we have already seen improvements in our press cadence and digital presence. She’s also been hard at work to update our website which some of you have commented on to me personally as well.

Any event, we are delighted with the improvement she’s already made and even more excited about the momentum she’s building we think she can generate a lot of opportunity for us. Stay tuned. I think you will see transact delivering a much improved market presence and brand presence as we go forward into the future. So I think of I think of that as actually really good news. A key individual, a key executive, is really making a difference. Shifting over to casino and gaming, We recorded net sales of $8.3 million for the quarter, up 24% from $6.7 million in the prior year period. Both domestic and international demand was strong with results in each segment up over 20%. And our EPYC TR80, which is a relatively new product, is also gaining some unique, meaningful traction.

Internationally in what we call role fed gaming applications. These would be things for, like, kiosk betting and things like that where it is a roll printer. That prints out the tickets from these machines. And although our casino and gaming business is highly cyclical we have found there is always a significant free cash flow component generated from it. And we do not expect that to change much in 2026. I do point out that it is somewhat lumpy, but it always bounces back, and it is consistent. I have got some recent casino statistics, and slot machine statistics. The CAGR there is respectable. It continues to grow and more casinos are opening. And at this point, as you know, it is a relatively high margin business, and we are in a duopoly market.

And we continue to service a significant portion of that overall market. And today, we believe that our ship share now approaches parity with the other large vendors serving the same market. So that is really important. We have made great progress. We have got a great sales team there. They know the industry cold, and we are very well equipped to continue to maintain our presence in this space. Going forward. Turning to our financial outlook for 2026, I am reaffirming our 2026, net sales outlook. We basically suggested $55 million to $57 million for the top line. And as you would expect, I am raising our adjusted EBITDA outlook to a range between $1 million to $1.75 million. Based on first-quarter guidance and performance. We are off to a good start, $14.4 million in net sales, $1.4 million of adjusted EBITDA, 1.37 thousand BOHA! terminals, grew our online terminal base to nearly 20 thousand which is a good opportunity for us going forward.

Software revenue rose 23%. Bolstering our confidence in that part of the market. it is high margin recurring revenue model, which you would expect us to try to drive. And we are making progress on monetizing the install base, look forward to giving you more updates on ARR progress each quarter and I am hoping to be able to add more specific metrics so that you can dive in and get a better understanding of the business. Feel good about the strategy. Direction, and where we fit in the marketplace, the evolution of our business in the coming year. So that is kind of where we are at. Before handing the call over to Steven, I know you have probably seen that we made a report last week about this transition for our chief financial officer, I just wanted to thank Steven for 30 years of tireless– I promise you it was– tireless effort, support, for Transact.

he is been a stalwart. he is been here from the original IPO way back in 2096, which is just an incredible feat of dedication, support, loyalty, and a job well done. Steven, you are an asset to the team. You going to be missed. But your retirement certainly well earned and deserved. So we wish you all the best and I know you are gonna be around. You are gonna be helping us at least through the end of the year in various forms and fashion. and support. But congratulations on this well earned retirement. And with that, maybe this is your last call. I would like to turn the call over to Steven DeMartino.

Steven A. DeMartino: Thanks for the kind words, John. And thanks, everyone, for joining us today. Let’s turn to our first quarter 2026 results in a little more detail. Total net sales for the first quarter were $14.4 million and that was up 10% compared to $13.1 million in the prior year period Sales from our FST market for the first quarter were $4.7 million That was down 4% compared to $4.9 million in 2025. And nearly flat, declining just 2% sequentially from $4.8 million in the fourth quarter of 2025. And as John said, we sold 1.37 thousand BOHA! terminals in the quarter, an increase from the 1.23 thousand terminals sold in the first quarter of 2026. Recurring FST sales. Our recurring FST sales, which includes software and service subscriptions as well as consumable label sales for the first quarter, were $3.3 million That was up 26% compared to $2.7 million in the prior year period.

Our ARPU for 2026 was $709 That was down 7% compared to $761 in the 2025. And down 6% sequentially from $756 in the fourth quarter 2025. Our ARPU reflects our continued focus on the growing recurring revenue base. And we are making progress transitioning our large hardware only customer towards a recurring model, and we expect this effort to begin to contribute positively to our ARPU in the coming quarters. Our casino and gaming sales were $8.3 million That was up 24%. from $6.7 million in 2025 and up 55% sequentially from $5.4 million in the fourth quarter 2025. Domestic sales were up 20% year over year, on strength from several large domestic OEMs, while international printer sales grew 35% with solid contributions from both Europe and our Asia Australia regions.

Our EP to build momentum internationally. In role fed gaming applications. While we expect fluctuations quarter to quarter in our sales, overall, we expect casino and gaming sales to continue to contribute positively to our cash flow. Throughout 2026. POS automation sales of our 9 thousand printer for the first quarter of 2026 were $620 thousand essentially flat compared to $618 thousand in the prior year period. Overall, Ithaca 9 thousand sales remain in a normalized range and we expect results to remain similar going forward. Moving to Transact Services Group or TSG sales. For the first quarter, TSG sales were $764 thousand That was down 5% from $808 thousand in the prior year period. The decline was driven by lower spares and accessories revenue as legacy installed base continues to naturally wind down.

Legacy consumables, which consist solely of our remaining thermal POS paper roll inventory, at this point, are nearly fully sold off. So we expect little to no revenue from these products going forward. Overall, we expect TSG sales to continue to slowly decline over time. Moving down the income statement, our first quarter gross margin rose to 50.3%, That compares to 48.7% in the prior year period, up sequentially from 47.6% in the fourth quarter 2025 and that was largely on the strength of casino and gaming sales in the first quarter, strong casino and gaming sales in the first quarter. We continue to expect our gross margin to be in the high 40% range for the full year 2026. Our total operating expenses for the first quarter were $6.5 million and that was up 2% compared to $6.4 million in the prior year period.

The modest increase was driven by higher selling and marketing expenses and G&A expenses, partially offset by a meaningful reduction in engineering expenses as we began to capitalize R&D costs related to the BOHA! software in-house effort. Breaking down our OpEx a little bit, our engineering and R&D expenses for the first quarter were $1.4 million that was down 16%. Compared to $1.6 million. In the prior year period. Our selling and marketing expenses for the first quarter were $2.2 million That was up 5% compared to $2.1 million in the prior year period. The increase reflects new hires initiated during the first quarter, as well as higher travel expenses and sales commissions tied to our stronger sales results. Lastly, our G&A expenses for the first quarter were $2.9 million That was up 10% compared to $2.7 million in the prior year period.

The increase was largely driven by higher share based compensation, and recruiting fees for new hires made during the first quarter. For the first quarter 26, our operating income was $800 thousand or 5.3% of net sales, and this compares to near breakeven operating loss of $15 thousand or 0.1% of net sales in the prior year period. On the bottom line, we record net income of $800 thousand or $0.07 per diluted share for the first quarter of 2026, and this compares to net income of $19 thousand or breakeven results per diluted share in the year ago period. We recorded income tax expense of $23 thousand at an effective tax rate of 2.9%, as we continue to take a full valuation allowance on our US and Macau pretax earnings and record tax only on income from our UK subsidiary.

Our adjusted EBITDA for the quarter was a positive $1.4 million and this compares to negative $499 thousand in the fourth quarter 2025, and $544 thousand in the first quarter of 2025. This was a strong start to the year, and keeps us well on track to deliver positive adjusted EBITDA for the full year 2026. Lastly, turning to our balance sheet, it remains solid. We ended the first quarter with $18.8 million in cash, and that compares to $20.4 million at year end 2025. And in terms of debt, we had $3 million of outstanding borrowings under our credit facility with Siena Lending. Finally, thank you all for your interest and trust over the years. As my 30 year career at TransAct comes to a close, I want to extend my heartfelt thanks to our shareholders, for your steadfast support of both TransAct and me.

I look forward to staying in touch. And with that, I would like to turn the call over to the operator for questions. Operator?

Operator: Thank you. Ladies and gentlemen, we will now be conducting our question and answer session. Before pressing the star keys. 1 moment, please, while we poll for questions. Thank you. It appears we have no questions at this time.

John Dillon: I would like to turn the floor back over to John Dillon for closing comments. Mr. Dillon, you may proceed with your closing remarks. Thank you very much for joining us today. If there are no questions, I would be happy to chat with any of you offline or downstream. You can reach us through Ryan Gardella from ICR. And, again, thank you, and best regards And with that, Steven and I will sign off

Operator: Thank you. Ladies and gentlemen, we thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day.