TransAct Technologies Incorporated (TACT) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 annual Meeting of Stockholders of TransAct Technologies. We do not expect any technical difficulties today. However, in the event if we lose audio or webcast connection, and we are unable to provide any updates, please wait 10 minutes for resolution. If the difficulties are not resolved, please refer to the Investor Relations page on the company's website at www.transact-tech.com for updates. If you are experiencing your own technical difficulties during the meeting, please use the help button on your screen.

Good morning. Welcome to TransAct Technologies 25th Annual Meeting of Stockholders, 25. My name is Bart Shuldman, and I'm Chairman and CEO of TransAct. I will act as Chairman of today's meeting. The meeting today will be in 2 parts. First will be the formal business meeting, during which we will elect 2 directors, ratify the selection of Marcum LLP as our independent registered public accounting firm for 2021, conduct an advisory nonbinding vote on executive compensation, conduct an advisory nonbinding vote on whether to recommend that the Board initiated action to declassify the Board and conduct any other business which might legally come before the meeting. Part 2 of the meeting will be an informal session, during which I will answer questions you may have about the company. As described in the proxy statement for the annual meeting previously distributed, you are entitled to participate in and vote at this meeting if you were a stockholder of record as of the close of business on March 29, 2021, which is the record date for this meeting, or hold a legal proxy for the meeting provided by your bank, broker or nominee. If you are a stockholder of record or a beneficial holder holding a legal proxy, you may vote and ask questions at this meeting only if logged into this webcast with a control number on your proxy card or voting instruction form. You may vote by clicking the voting button on your web console. Stockholders may submit questions at any time during this meeting through the Q&A section on your web console that appears on the virtual meeting screen. Stockholder questions are welcome, but we do not intend to address questions that are relevant to the business of the meeting relate to personal matters not shared by stockholders generally or use profanity or any other inappropriate or offensive language. Before we get started, I'd like to point out that any forward-looking statements we make are subject to a number of risks and uncertainties that cause actual results to differ materially. Those risks are spelled out in detail in our SEC filings, and I refer you to them. In attendance today is Michael Broader, a partner from the firm of Marcum LLP, our independent registered public accounting firm, who is attending this meeting. Also present with us today is Steve DeMartino, TransAct's President and Chief Financial Officer, who will act as Secretary Inspector of Elections for this meeting. Because our Board members serve staggered terms, only 2 directors are standing this year for election to the Board. I now call the formal portion of the meeting to order. I have appointed Mr. DeMartino, as Inspector of Elections of this meeting. He has taken an oath to faithfully administer his duties. I ask that he report to us the number of shares present at this meeting or represented by proxy.

There are 7,408,709 shares of common stock of TransAct Technologies Inc. present at this meeting or represented by proxy, representing more than 50% of the issued and outstanding shares of common stock entitled to vote at this meeting. Each share of common stock is entitled to one vote.

Thank you, Steve. I declare that a quorum is present and the meeting is duly constituted. I have an affidavit executed by Broadridge with respect to the distribution and mailing on April 12, 2021 of TransAct's proxy statement, form of proxy and voting instructions to all shareholders of record on March 29, 2021, the record date for determining holders entitled to vote at this meeting. I direct that this affidavit and the attached papers be filed with the records of this meeting. I also direct that all executed proxy cards and the oath of the Inspector of Elections and report be filed with the records of this meeting. The complete list of the holders of the common stock at the close of business on March 29, 2021, the record date is open for inspection by any stockholder during the meeting on the virtual meeting screen they used to access the meeting. You may not download a copy of the list. All stockholders entitled to vote have the ability to do so online during the meeting until I close the polls. To cast your vote by electronic ballot, please click the voting button on your web console. If you have already voted by proxy, there is no need to vote by electronic ballot at this time, unless you wish to revoke your proxy or change your vote. The individuals named as your proxies or any of them will vote your shares as you instructed them to do in the proxy that you submitted by Internet, phone or mail. The first proposal is the election of directors. The nominees to the Board of Directors as set forth in the proxy statement are John Dillon and Randall Friedman, who are nominated to serve on the Board of Directors for a term of 3 years until the Annual Meeting of Stockholders to be held in the year 2024 or until their successes have duly been elected and qualified. Mr. Friedman and Mr. Dillon, nominations are now before the meeting. Are there any questions regarding the election of directors? Seeing none, we will move on the second proposal. The second proposal is to ratify the selection of Marcum LLP as the company's independent registered public accounting firm for 2021. Are there any questions regarding this proposal? Seeing none, we will move on to the third proposal. The third proposal is to approve on an advisory basis the compensation of our named executive offices -- officers, I'm sorry. Are there any questions regarding this proposal? Seeing none, we will move on to the fourth proposal. The fourth proposal is to approve on an advisory basis whether to recommend that the Board initiated action to declassify the Board. Are there any questions regarding this proposal? Seeing none, we will now conclude the voting. The polls are about to close. So if you've not yet voted, please do so. [Voting]

Since everyone has had the opportunity to vote, I now declare the polls closed as of 10:08 a.m. today, May 25, 2021. I now ask the Inspector of Elections to tabulate the preliminary results of the voting on the matters before the meeting based on proxies received prior to the meeting. The Inspector of Elections has delivered the preliminary voting results. Based on the preliminary information, I can report that Mr. Dillion and Mr. Friedman have been elected as directors of the company for a 3-year term. The selection of Marcum LLP as independent registered public accounting firm for 2021 has been ratified. The advisory vote to approve the compensation of the company's named executive officers has passed. And the advisory vote to recommend that the Board initiated action to declassify the Board has been approved. I direct that the final report of the Inspector of Elections with respect to the votes taken, including the votes cast during the meeting be placed on file with the records of this meeting. If there is no other new business, then I declare the formal portion -- business portion of this meeting be adjourned so that we may address any questions from stockholders.

Now I open the meeting to any questions you might have. [Operator Instructions]

Bart, we have a couple of questions. The first one is, are the emergence of ghost kitchens an area of interest for BOHA!?

Oh, most definitely. What we like to talk about with BOHA! is anywhere food is manufactured or produced is where BOHA! can be installed. So those kitchens are a wonderful opportunity for us as they continue to grow and present us with opportunities, no doubt.

Okay. And then we also have a second question asking about the value of our new business pipeline, which we recently reported in the range of $140 million. The question is, what does that value represent, hardware versus recurring revenue?

Yes. So what we do is we add 3 years of recurring revenue, and that's an estimate based on how many terminals we believe the customer will purchase? How much software they'll buy, and we add the 3 years of that revenue? How many labels we believe they'll buy, and we add 3 years of revenue? And whether or not they're going to buy a service contract for the 3 years? We then add in the hardware revenue to that number, and that's how we come up with $140 million.

Good. And then a follow-up question on that is of the $140 million pipeline, can we categorize that by type of end users such as how much of that is related to convenience store, restaurant versus food prep companies?

So we don't break it out by specific vertical, but it involves the backlog -- not backlog, the opportunities list that we have includes convenience stores and restaurants and foodservice providers. It's across the gamut.

I don't see any other questions at this point.

Well, this has been interesting to do this, looking at a screen. And hopefully, the whole -- we start opening things up again. But I really thank you for attending today and look forward to talking to everybody after our second quarter results come out. We hold our second quarter earnings call. So thank you very much for attending today.