Transact Technologies Inc 2026 Q2 Earnings Call

Thanks, Sam. Good afternoon and welcome to the TransAct Technologies second quarter 2026 earnings call. Today, we will be discussing the results announced in our press release issued after market close. Joining us from the company is CEO John Dillon and CFO Troy Ingianni. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives, and details on our second quarter financial results. We will then 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 deemed as 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 and 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 will include non-GAAP financial measures from the meaning of the SEC Regulation G. When required, 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. With that, I would like to turn the call over to John.

Thanks, Ryan, and good afternoon, everyone, and thank you for joining us today. Before I begin, let me introduce you to Troy Ingianni. I am delighted to have him here. He is joining us as our new CFO and on the call for the first time. Let me just say, he has been great to work with. He is really exceptional at his job, and I couldn't be happier to have him on our team. I think as shareholders, you will be pleased as well with him. He is a great addition, and I am really delighted to have him here. So thank you for joining us, Troy.

Thank you, John. Now let me begin my- I appreciate that.

You're very welcome, Troy. Yes. I'm pleased to report that TransAct delivered solid second quarter results that continue to demonstrate progress against the long-term strategy that we've discussed. Total net sales were $13.9 million. As Troy will detail in a moment, this figure includes the impact of an approximate $1 million reduction to sales related to estimated customer refunds. These were driven by a U.S. Supreme Court ruling on certain import tariffs. Excluding this tariff impact, net sales would have been approximately $14.9 million, up 8% year-over-year. Adjusted EBITDA was $514,000 during the second quarter, also impacted by $400,000 of the tariff adjustments. For the first half of 2026, we generated $1.9 million of adjusted EBITDA, resulting in us raising our full year guidance to a range of between $1.5 million and $2 million.

Let me begin with a more detailed breakdown of the results, and I will start with food service technology. We refer to that as FST, food service technology. If I say that, you will know what I mean. Total revenue was $5.2 million, up 9% year-over-year and up 10% sequentially. Our focus remains squarely on driving revenue growth in our food service technology space, that is the market, with software as our primary growth engine. Our second quarter results are consistent with the strategic direction we have shared with investors to date. That is building a high margin, more predictable recurring revenue stream that leverages a growing base of online BOHA! units. In the second quarter, we sold 1,900 BOHA! units, which means we now have sold 3,270 units through the first 6 months of 2026.

Demand continued to be driven by upgrade orders from many of our large install base of older AccuDate and Terminal One systems. Customers are seeing the value of moving to the new terminal, and we are continued to view this conversion cycle as a multi-year runway of opportunity. We continue to execute on our land and expand strategy and believe the revised go-to-market or GTM motions and revitalized sales and marketing teams that we have are just beginning to pay dividends in the form of increased FST sales. We ended the second quarter with nearly 22,000 online units, up about 33% year-over-year, continuing the steady growth of our install base. That growing online base is the foundation of the software opportunity we are now actively monetizing. Most importantly, our recurring FST revenue continues to grow.

During the last quarter, the recurring FST sales reached $3.4 million in the second quarter, up 13% year-over-year. With that, software revenue was up 25% sequentially and 47% year-over-year, driven primarily by price increases that we began implementing earlier this year as part of an intensified focus where we ensure that we capture fair market value for the software offerings we have. As I have said before, in the past, the company frequently bundled the software for free simply to close a hardware sale or to get the label business. This practice now is behind us. We control the source code for the software and the platform. We are deliberately seeking to shift the business model towards a higher margin, sustainable, and predictable recurring software revenue model.

This should make pretty good sense, but later I am happy to discuss this in detail for any of those who want to follow up. Our long-term aim remains to drive the FST install base toward $100 to $200 per machine per month in recurring software and related revenue. That level of monetization applied to the growing base of terminals has the potential to unlock significant value for TransAct Technologies. Labels also saw a strong quarter, contributing positively to our gross margin and enhancing retention within our customer base. We will continue to lean into the label sales business as a key piece of our long-term FST strategy, as growth within the terminal base generally helps grow both the label and the software businesses. The label business creates a stickier, long-standing relationship with the client and creates a greater degree of intimacy there, so it is very important.

On the technology side, as you have heard, we recently launched our next generation enterprise-grade BOHA! SaaS, that is Software as a Service platform, with the completion of our migration from our legacy hosted infrastructure to Microsoft Azure. This was a strategic move. It significantly enhances the platform's scalability, security, resiliency, and performance, allowing us to bring innovation and requested enhancements to market faster, deliver seamless integrations with other systems such as point-of-sale systems, and provide enterprise-grade uptime disaster recovery across large multi-location deployments. Combined with the control of the software, the new platform also gives us greater operational freedom and positions us to accelerate our software roadmap, including implementing AI-related workloads and additional applications over time. Internally, because people ask, AI is also helping us with the development teams.

They can move faster and quicker, and it is more a function of having experts looking at code that is written by AI rather than having a typing pool that types things and we have to fix it anyway. We remain focused on the practical application for AI, but we feel confident that it will leverage our integrated hardware and software solutions approach in the future. Turning to casino and gaming, revenue in the second quarter was $7.3 million, down approximately 4% from the prior year. After adjusting for the tariff-related impact of the refunds, the casino and gaming revenue would have been approximately $8.3 million, approximately up 9% year-over-year. We saw solid contributions from key OEM customers, both domestically and internationally, and a relatively new Epic TR80 roll-fed printer continued to gain traction internationally in the gaming applications for betting kiosks and similar systems like that.

Finally, moving on to our financial outlook. We reaffirm our full year 2026 net sales outlook of $57 million to $55 million. As noted earlier, we are increasing our adjusted EBITDA outlook to a range of $1.5 million to $2.0 million. We delivered solid second quarter results, continued to demonstrate real progress against our strategic priorities, sold 1,900 online BOHA! units, increased our recurring revenue opportunity. We posted software revenue growth of 47%, and we successfully launched the next generation BOHA! platform on Azure. Recurring revenue continues to build. Our install base is expanding, and we remain firmly on track to deliver against our financial and strategic goals for the year. At the center of the strategy is to build out a high-margin, software-led, recurring revenue business on a growing install base.

We are executing that transition with disciplined capital allocation and frankly, the strength provided by a solid balance sheet. Those are most of my remarks. Before I turn it over to Troy, I wanted to provide some additional news related to casino and gaming. The board of directors recently initiated a formal strategic review related to the casino and gaming business. Management has engaged BofA Securities as its financial advisor, given their expertise within the casino and gaming market and their long-term standing relationship with TransAct. We believe that exploring potential options within casino and gaming, given the current strength of that market, is in the best interest of stockholders as they look to maximize value.