Good day, ladies and gentlemen, and welcome to the TransAct Technologies First Quarter 2014 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Richard Land. Mr. Land, please begin.

Thank you, Michelle. Good afternoon, and welcome to TransAct Technologies 2014 First Quarter Conference Call. Joining us today from the company are Chairman and CEO, Bart Shuldman; and President and CFO, Steve DeMartino. Today's call will include a discussion of the company's key operating strategies and progress against these initiatives and details on the first 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 on Form 10-K and 10-Q. TransAct undertakes no obligations 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 measure calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website. At this time, I'd like to turn the call over to Bart Shuldman. Bart?

Thank you, Rich, and welcome to everyone joining us on this afternoon's conference call and webcast. This afternoon, we reported revenue of $13.6 million, adjusted EBITDA of $1.1 million and diluted and adjusted diluted EPS of $0.05 a share. Steve will review the financial results in detail in a few moments, but let me start the call by noting that the quarter, while continuing to reflect the headwinds discussed in our fourth quarter call, the first quarter financial results are modestly ahead of our expectations; we are well positioned to grow revenue, margin, EBITDA and diluted EPS going forward. Since the beginning of 2014, we have continued to make steady progress in the transition of our business from one that was focused primarily on the lower-margin point-of-sale printer market and also the casino gaming and lottery markets to one that is poised to capture growing share in expanded number of markets with large revenue opportunities for TransAct. Coupled with the large new market opportunities was our decision to enter these markets with value-added technology that should garner us higher-margin sales. In particular, with the introduction in March of our newest product, the Responder MP2 for the large machine-to-machine addressable market, I believe we have completed a multiyear path undertaken to transition TransAct into more markets with distinct high-value products. We now have finished the heavy lifting and created what I refer to as 4 legs of the TransAct table. For the casino gaming and lottery industry, we have our industry-leading products under the Epic brand, including the Epicentral system. For the food safety POS and banking markets, we have exciting innovative products under the Ithaca brand. For the oil and gas, seismic and well-logging market, we offer industry-leading printers under the Printrex brand. And as I mentioned, we are addressing…

Thanks, Bart. Good afternoon, everyone. 2014 first quarter net sales were $13.6 million compared to $15.1 million in the year-ago quarter. By sales unit, casino and gaming revenue was $6.5 million compared to $6.7 million in the year-ago quarter as the prior-year period benefited from a greater number of Epicentral installs featuring a larger number of units. As Bart mentioned, we continue to gain share in printer sales, as domestic casino printer sales were up 11% year-over-year. International casino and gaming sales also improved 6% year-over-year. Lottery printer sales of $800,000 were down about $0.5 million from the prior year period, reflecting GTECH's normal minimum contractual buy in the 2014 first quarter. Food safety POS and banking revenue was $1.8 million, which is down 10% year-over-year, reflecting a lower food safety terminal sales due to the timing of orders, partially offset by higher sales of POS printers to McDonald's, as McDonald's accelerates its rollout for several initiatives. Revenue from Printrex oil and gas and medical and mobile printers was approximately $1 million compared to $1.3 million in the prior year quarter, as sales for the current quarter were impacted by general weakness in the oil and gas industry. And finally, TSG sales were down 4% to $3.5 million in the quarter. The decrease is largely due to lower HP inkjet cartridge sales, reflecting a declining installed base as we continue to de-emphasize our focus on this low-margin legacy printer consumable. In addition, we experienced lower service revenue. These decreases were largely offset by higher sales of accessories and spare parts, primarily for GTECH's legacy lottery printers, as well as higher sales of Printrex color printer consumables. Our gross margin declined to 42% from 42.7% in the year-ago period. This modest decline reflects a less favorable sales mix due to lower…

Thanks, Steve. Before opening up the call to your questions, I want to emphasize that this is a very exciting time for TransAct. I think about where our business was just a short few years ago and how we were so reliant on lower-margin products and on a less diverse revenue base by industries. When I compare that to where we are today with 4 distinct branded product lines and high-growth market opportunities, I am very proud of the pace of our transition and enthusiastic about our outlook for long-term growth. We have invested in our business. And even in our historical gaming market, we're very favorably positioned to consistently grow market share in casino printer sales and execute on a great growth opportunity with Epicentral. Our entire organization has done a tremendous job of executing on a long-term product development strategy, which is focused on identifying large, untapped addressable markets, for which we can lever our technology expertise to create products that deliver revenue and margin growth. We continue to move forward with this focus and have already introduced 2 new products in 2014, with the third new product introduction planned for later this year. We now have the organizational infrastructure focus and financial flexibility to execute on very unique growth opportunities, as we bring new value-added solutions to the market, which will help our existing and new customers enhance their profitability and efficiency. With that, let's open the call to questions. Operator?

[Operator Instructions] And our first question comes from the line of Phil Bernard [ph] with Eilers Research.

First question is going to be a broad one. You mentioned a lot about growing market share within the domestic casino industry. We're coming off of a pretty weak first quarter, and I'm wondering what your thoughts are on that market going forward.

Well, there's no doubt that the domestic market is weak. We think it's going to continue. The -- you've got macro events, and then you've got micro events going on. You've got both expansion which is cannibalizing some sales, and you've also got the macro kind of economic situation. I think the good news, Phil, is look at what we've done. I don't think anybody's going to talk about their business like ours being up 11%. There's 2 of us in the marketplace, and our business was up 11% in the quarter. We are optimistic about the future because we are starting to see better results in Las Vegas, which is always good to see. But I think, Phil, we'd all agree that the domestic market will stay pretty weak all year.

I think that you guys are doing some really interesting things with your product mix. So I have one question about the Responder MP2. Can you give us a sense for what you think the market opportunity looks like? And then past that, when do you expect to start seeing some sales come through the pipeline?

Yes. So when you look at TransAct, TransAct -- we like to look at TransAct as building blocks. So 3 years ago, we started -- 3.5 years ago, we started on the McDonald's adventure with food safety and introduced the product in pretty much late 2012 and started seeing some sales 2013. Of course, we'll see sales '14 and '15, and same thing with the oil and gas. When we introduce a product like the Responder MP2, we're looking out 2 years. We need -- because when we look at our growth, we could see growth in our business, '14, '15, '16, but then we need to add another product to continue to expand our growth. And when we do that, we need to introduce that product in '14 if we want sales in '16. So we're really looking at 2015, but really 2016. The market is quite large. We did a study on: how many police vehicles there are, how many firetrucks there are, how many ambulances there are, just in the U.S., and that's approximately about 200,000. We then looked at insurance car opportunities and things like that. We then looked at the market because there's really no integrated printer solution. And what I mean by that is we have paper and printer, all in one small device, that can literally either fit in the car seat or be installed in the armrest or somewhere in the ceiling of the car or in the truck or something like that. So when we looked at the market, there was no printer out there that could be a total solution. There were print sticks out there where integrators had to take the print stick and then mount the paper roll holder and then put a case and cover around it,…

That's great. My final question, this is more about your structure. I've noticed that SG&A is -- has been on an increasing trend over the last year. And that maybe coincides with your current, I would say, plan of adding more business and more products to your product line. Do you expect to see that increasing trend of SG&A as a percentage of revenue growing, or how do you see that going moving forward?

So I would say that it's going to flatten off in the second quarter. What we did is we looked at each one of our markets where we have our sales team. And let's take food safety, for instance. Food safety, banking and POS, but mainly food safety. The opportunity is very large for us, and we put on Ecolab as our second distributor. And those that know Ecolab, it's an $11 billion company that has almost 2,500 salespeople in the marketplace and offers us a huge opportunity for expansion. We've added another sales manager to really run that group. That whole group was reporting to me as we entered the marketplace. And now we've put a sales executive in place because we really look at the -- there's so many opportunities. Like I said, I was just at the McDonald's show, and we have truly taken the market. The 9700 is the product that they want. Our competitor is really struggling and trying to even get attention to their product. So we've added a sales executive now to just truly focus on food safety and drive that, both domestic and international, by the way. We had an opportunity to hire the leading printer sales manager in the oil and gas industry, and he came to us because our customers were telling him, "Hey, TransAct's the new guys in town, and they've got the best line of products. And you really should go work for them." He was working for one of our competitors. So we really fitted out our sales team, and we're done. We'll see a little increase in Q2 because one of the -- because the oil and gas salesperson just really entered in Q2, and the sales executive in the food safety business entered in the…

[Operator Instructions] And I'm showing no further questioners at this time.

Well, I'd like to thank everybody for joining us on the call this afternoon. We want to thank our shareholders for their support, and we'd also like to thank all of our team members at TransAct. Great job. We'd also like to take a moment to invite all of our shareholders to attend our annual meeting next Thursday, May 15 at 10 a.m. at our corporate headquarters here in Hamden, Connecticut. For those that can't make it, we look forward to reporting back to you on further progress in our business when we report the second quarter results in August. Thanks for joining tonight.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.