TransAct Technologies Incorporated (TACT) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the TransAct Technologies Inc. Fourth Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this call may be recorded. I would now like to introduce your host for today's conference Jim Leahy of Investor Relations. You may begin.

Thank you, Sam. Good afternoon and welcome to TransAct Technologies 2014 fourth 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 fourth 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 Web site. At this time, I would like to turn the call over to Bart Shuldman. Bart?

Thank you, Jim, and let me say that Jim is from the firm of JCIR. And thank you Jim and welcome to everybody joining us on this afternoon's conference call and webcast. This afternoon we reported fourth quarter revenue of 12.3 million, adjusted EBITDA of $800,000 and a GAAP diluted loss per share of $0.08 and a positive 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 fourth quarter and full year results reflected the challenges that impacted the casino and gaming industry, including the well-documented declines in overall replacement units sales on a global basis. In fact if you look at the year-over-year comparisons, 65% of the 7 million decline in revenue from 2013 is attributable to both to our casino and gaming business. A lot of you may be aware that recent trends in gross gaming revenue have been more favorable than they have been in a number of years. While this is certainly some indication of the potential for a domestic casino recovery, it is only representative of a few months of performance and we're hopeful we will continue to see these types of positive results. In any case, we believe it was prudent to implement a plan late in 2014 to bring our costs in line with the outlook for the worldwide casino market and also the end of our significant product development efforts. In total through reductions and expenses, we have reduced total cost in our business by $1 million on an annualized basis. As Steve will report shortly, employee termination charges to affect this reduction in cost impacted our 2014 fourth quarter and full year results. It is important to note that these cost reductions did not impact our ability to maintain or even grow our worldwide market share for casino printers and our Epicentral enterprise software system or our ability to move forward with our sales objectives for our newest products. And building on that, I want to focus my comments now on the opportunities we have to capitalize on high growth opportunities we have for our products such as Epicentral and the Ithaca 9700 line of food safety terminals in 2015 and how we are managing TransAct with all the markets we serve. Let me start by saying that 2015 is unequivocally a year of sales execution focus for TransAct. The product development work we have completed over the last several years to transform TransAct through the creation of new high value products for new markets is behind us. As a result of our new product development, we are positioned with a more diversified range of products that expand the verticals we address. But as I said, the development and transformation of the products TransAct now offers is behind us and 2015 is a year of focus on sales execution. In fact we have started 2015 with a companywide theme called, it’s all about sales. The goals and objectives of all the employees inside TransAct are to ensure that they assist and help our sales efforts in any way possible. Along those lines, we believe it was prudent to strengthen our sales and marketing efforts and we are pleased with the appointment of Andrew Newmark as Executive Vice President of Global Sales & Marketing. That we are in better position today to leverage our powerful brands and product line up to accelerate our growth in several new markets. I want to briefly review the outlook we have for our products in the markets we serve today. In some cases we are managing these products and sales for true revenue growth. In other cases such as oil and gas, we are managing this product line for profit, to work to ensure we maintain the profitability we achieved in 2014 despite the difficult oil and gas exploration market. So first for our gaming and casino industry, as I noted earlier we expect to maintain a broader market share for electronic gaming machine printers this year. I will tell you that while it is still early in the year business activity in the international casino and gaming industry is more favorable to-date than it was at this time last year. And while we all pay careful attention to the domestic gross gaming revenue trends, as I mentioned earlier we believe it is prudent to remain conservative with our A estimates for growth in printer sales until we see how GGR trends move over longer period of time. Now our casino and gaming sales however should benefit from higher Epicentral activity in 2015 compared to 2014. I do expect that the increased Epicentral business and revenues in 2015 will reflect both domestic and international new installations this year. Second, lottery is one market that very early on in the year we have a lot of visibility into, as orders already in-hand point to a very strong Q1 and first half of the year for this business. Third, moving on our Printrex line for the oil and gas, seismic and exploration products, while our larger Printrex 980 color printers continue to be a success story for TransAct in particular the attractive recurring revenue business from consumables, we have established as the install base growth there is no doubt that the dramatic change in oil prices has impacted this industry and it will continue to do so. As such the opportunity for our Printrex 920 color truck printer and our other black and white oil and gas printers continues to be impacted by the overall state of the industry which has seen large scale layouts and dramatically lower drilling activity. However, we do expect to see growth in our very profitable Printrex color consumables as we grow the install base of Printrex 980 color printers. So we are managing our Printrex line of printers on a profitability measurement, where it is our goal to meet the same profit these printers and consumables drove in 2014 happen in 2015. Four, we have a relatively new product that we believe offers further growth opportunities for the Company. Briefly the introduction of our RESPONDER brand remains on-track and we expect to see some initial contributions from this product in the second half of this year. As we have reviewed previously this product addresses a significant opportunity in the machine-to-machine or M2M market and also the Internet of Things market since we announced RESPONDER MP2 mobile printing solution last year and the reaction has been highly positive. And finally I will now turn to our Ithaca line of food safety terminals and the ongoing rollout of these products which I purposely saved for last in this discussion. For 2015, we are encouraged by the outlook for sales of the Ithaca 9700. Our outlook reflects the new business we have recently won with a number of well known global restaurant and food service operators. These new customers are a clear evidence that we are now moving away from selling predominantly to McDonalds and are making headway with many other food service operators. The food safety terminal market is very similar in many aspects to our initial entry into the casino and gaming industry with our Epic line of Ticket-In/Ticket-Out printers. The manner in which these markets are more similar is that the funnel is big, but takes accretive time to turn. As we saw with our Epic printers the buildup was slow and consistent then after a while it began to achieve sales acceleration. We know we have developed an industry unique end-user facing solution that is being increasingly accepted by the marketplace. We know that the ease of use and the dramatic cost savings the Ithaca 9700 offers by reducing labor time and cost is a value proposition that is really very compelling. Just today I was forwarded a letter written by a restaurant operator, not a McDonald's operator, who wrote to the cooperate office about our product. This owner was writing to tell the cooperate office how our Ithaca 9700 terminal was not only saving to store money for food waste, but also saving about a half an hour a day of employee work to label the food. And with this value proposition being understood more and more by restaurant and food service operators, we know that this year will be exciting for the potential the Ithaca 9700 offers for our top-line growth in revenue. All of the datapoints we have at this time points for a year of consistent growth in sales of the Ithaca 9700. Just briefly one more item on the Ithaca line of food safety terminals, our goal for this market is to be here for a long time and to be recognized as the leader in delivering solutions that provide value to operators across a wide spectrum of food service and restaurant operations. While sales activity in 2015 will center around the Ithaca 9700. For a market segment mostly thought of as quick service, we're still making progress with enhancements to the line that will enable us to address different types of industry operators. As an example for those restaurants thought of as casual dining where menu changes are more frequent and staff training is more intensive. Our Ithaca 9800 offers compelling solutions and value. We expect to record initial revenue from the Ithaca 9800 later in 2015. And for those restaurant operators that can benefit from a food safety terminal with even more functions, one then can interact with a back office system they already have in place. TransAct will have that solution available for the market this year. In offering a comprehensive line of food safety solutions we believe TransAct will come to be seen as the dominant provider in this market, as we can easily outline competitors on this value proposition and product offerings. So as you can see we're expecting 2015 to be one of revenue and profit growth. We are managing our many product lines for either sales growth or consistent profitability building to a successful 2015. With that, I’ll turn the call over to Steve for a deeper review of the 2014 fourth quarter results, after which I’ll make some summary remarks before we open up the call to questions-and-answers. Steve?

Thanks, Bart. Good afternoon, everyone. 2014 fourth quarter net sales were 12.3 million compared to 12.5 million in the year ago quarter and on a full year basis total net sales were 53.1 million in 2014 compared to 60.1 million in 2013. As Bart pointed out earlier nearly $5 million of our 7 million year-over-year sales decline was attributable to lower sales in our casino and gaming market which was impacted throughout the year by lower unit sales trends. For the full year 2014 our gross margin was 40.9% compared to 41.7% in 2013. Although we did lose some gross margin leverage on 12% lower sales volume, the decline was only 80 basis points. The transition we made to our newer higher value products is now definitely showing up in our gross margin and we expect this trend to continue into 2015 as we ramp sales of these higher margin products, especially in food safety and to a lesser extent Epicentral. Looking at our sales by market for the fourth quarter, casino and gaming sales declined approximately $700,000 to 5 million. The year-over-year decline reflects lower North American market revenues which were partially offset by a modest increase in sales for the international markets. You may recall that 2013’s fourth quarter benefited from the significant slot machine replacement orders from a large casino group that didn’t repeat in 2014. Lottery sales of 1.6 million were consistent with the 2013 fourth quarter and lottery sales for the full year 2014 of 4.7 million was actually a bit higher than in '13 as GTECH took just slightly more than their minimum required quantities for 2014. As Bart noted earlier on the call, based on orders already in-hand we expect lottery sales to be strong this year, particularly in the first quarter and the first half of 2015. Food safety, POS and banking sales were 2.2 million in the fourth quarter 2014, consistent with the fourth quarter 2013. Sales for the 2014’s fourth quarter reflects 115% increase in sales of our Ithaca 9700 food safety terminal compared to the prior year, which is offset by lower sales of lower margin banking and point of sale printers. On a full year basis, food safety, banking and POS sales were 9.3 million compared to 11.3 million in 2013, mostly due to a large initial stocking order for food safety terminals we made to a distributor during 2013 that didn’t repeat in 2014. With sales for this distributor resuming in 2015 and a growing traction we are getting from some well-known restaurant brands for the Ithaca 9700. We expect to see positive sales trends for our food safety, banking and POS solutions during 2014. Total revenue of our Printrex branded printers was approximately $900,000, which is up slightly from last year’s fourth quarter and also up on a quarterly sequential basis. Full Printrex sales were a 3.9 million in 2014 compared to 4.3 million in 2013, as our 2014 sales were impacted by oil and gas customer’s lower capital spending resulting from steeply declining oil prices. Given the state of the oil and gas industry today we expect this trend will continue to impact our worldwide Printrex oil and gas printer sales during 2015. However despite this trend, we do expect sales of our Printrex 980 color office printer to continue to be strong in 2015, which should lead to continued growth of our recurring high margin Printrex color consumables business. Finally TSG sales were up 19% during the fourth quarter to 2.6 million, including a $400,000 increase in spare part sales and a more than doubling of sales of our Printrex color consumables, reflecting the higher install base of Printrex color printers. On a full year basis TSG sales were 12.4 million compared to 12.8 million in 2013. During 2014 we experienced a $700,000 decline in service revenue from expiring contracts and paper testing services that did not repeat in 2014 as well as an $800,000 decline in sales of non-Printrex consumables largely HP inkjet cartridges. As you may recall our install base of HP inkjet printers continues to decline as we continue to deemphasize this low margin legacy printer product. However on the positive side spare part sales were up $900,000 mostly to GTECH and sales of Printrex color printer consumables continued their growth trajectory increasing $300,000 year-over-year a trend that we expect to continue into 2015. Our gross margin of 39.9% in the fourth quarter was consistent with the 2013 fourth quarter. Operating expenses of 6.1 million for the fourth quarter were up 2.6 million year-over-year, however excluding lawsuit legal fees, employee termination charges and adjustment to the accrual for contingent consideration related to the Printrex acquisition in both periods, operating expenses were 4.5 million compared to 4.1 million in the 2014 fourth quarter up $400,000 or 8%. Engineering, design and product development expenses for the fourth quarter were down 150,000 or 15% year-over-year reflecting lower product development expenses, as well as staff reductions resulting from the cost reduction plans we initiated in the fourth quarter. Selling and marketing expenses for the fourth quarter were up $200,000 or 13% to 1.9 million primarily due to a shift in the timing of the G2E trade show this year. G2E, which is our largest trade show expense of the year, moved from the third quarter of 2013 to the four quarter in 2014. G&A expenses for the fourth quarter were up 1.2 million to $2 million in the fourth quarter. The increase was due to a couple of unusual items. First, G&A expenses for the fourth quarter of 2013 were unusually low because they included a $700,000 reversal of expense related to the Printrex contingent consideration accrual. We did not make any similar adjustment for this accrual in the fourth quarter 2014. Secondly, G&A expenses for the fourth quarter of 2014 included a $200,000 charge for severance related to employee terminations incurred as part of our cost reduction actions taken in Q4. In terms of our cost reduction plan, we are on-track and still expect to realize at least $1 million in annualized cost savings from these actions beginning in the first quarter of 2015. Excluding both unusual items the employee termination charge and the change in contingent consideration accrual G&A expenses were only up $300,000 due largely to higher incentive compensation expense compared to the prior year period. Legal and other expenses related to the lawsuit with Avery Dennison were 1.4 million in the fourth quarter 2014. We expect legal fees for this lawsuit to continue to ramp through the scheduled trial date of April 21, 2015. Although we cannot predict the outcome of the trial I will remind everyone that to-date we received a favorable ruling from the courts on three separate occasions as it relates to this lawsuit. GAAP diluted EPS for the fourth quarter of 2014 was a loss of $0.08 compared to diluted EPS of a positive $0.13 in the year ago period. Adding back the legal and other expenses related to the Avery Dennison and lawsuit, employee termination charges and the Printrex contingent consideration accrual adjustment, adjusted diluted EPS was a positive $0.05 for the 2014 fourth quarter compared to $0.08 in the year ago quarter. Adjusted EBITDA for the fourth quarter of 2014 was $800,000 compared to 1.3 million in the fourth quarter 2013 and on a full year basis adjusted EBITDA was 3.8 million in 2014 compared to 8.4 million in 2013. And now turning to the balance sheet, we ended the quarter with 3.1 million in cash and we continue to have no debt outstanding as of December 31, 2014. During the quarter we also returned approximately 2.5 million of capital to our shareholders through our quarterly cash dividend of $0.08 per share and a repurchase of approximately 326,000 shares of our common stock at an average price of $5.55 per share. For the full year 2014, we repurchased a total of approximately 435,000 shares of our common stock for $2.6 million at an average price of $6.06 per share. So through a combination of quarterly cash dividend and share repurchases we returned a total of approximately $5.2 million to shareholders during 2014. After getting effect to these share repurchases we made in 2014, we have approximately 4.9 million remaining under our current $7.5 million share repurchase authorization, which includes approximately 2.2 million remaining under our 10b5-1 trading plan. The training allows share repurchases to take place according to the provisions of the plan during our normal quarterly blackout periods. This 10b5-1 trading plan expires at the end of April 2015. As Bart mentioned we entered 2015 with a specific focus on sales execution for our product lines in particular those products that carry higher margins. We are expecting a better year in 2015 in fact we expect to start the year out strong, especially since we began the year with a healthy backlog and forecast for lobby printer sales from GTECH. In addition, we also expect to see our food safety terminal sales ramp-up as we move throughout 2015. In the casino and gaming market, we remain cautious with our growth expectations given the current market conditions, though the first part of the year we are starting off nicely especially in the international markets. We remain similarly cautious with the Printrex oil and gas market given the impact of declining oil prices and it's having on the capital spending of our customers. Still our lucrative color consumables business should continue to grow even in this challenging environment. And lastly, we're excited about the prospects for our new mobile printer the RESPONDER and expect to record initial revenues from this product later in the year. All-in-all, 2015 will be a better year. And at this point I'd like to give the call back to Bart for some closing remarks.

Thanks Steve, thanks for great analysis of the fourth quarter. Before opening up the call to your questions I want to emphasize our main goal and point of emphasis for 2015. The transformation in TransAct in my view is now complete. We had to do it, we did and it's now complete. We have developed new products that are compelling value to our potential customers in a growing number of markets, while at the same time providing TransAct with higher margin and the opportunity for more recurring revenue. In 2015, we are fully focused on executing on our sales initiatives. We're excited about our opportunities for the year ahead and look forward to a year of execution and improving year-over-year results. As I said the theme of the year, it's all about sales. With that, let’s open up the call to your question, operator?

Thank you. [Operator Instructions] Our first question comes from Phil Bernard of Eilers Research. Your line is now open.

First question is about the casino market I know you mentioned that you noticed GGR trends picking up and I realize that you guys want to be conservative but I was curious if you had seen a positive year-over-year trend in the final few months of this last year?

I would no, I would say that it was a kind of steady as you went as we talked about it in the first quarter of this year. We actually are somewhat surprised about the international sales picking up. But we haven’t seen the effect of the GGR increases in our domestic market yet.

And on the international markets which markets in particular are you folks focusing on?

Well I mean clearly we focus on a lot on Asia and there is a bunch of openings coming up so we are clearly focused on making sure that we win those openings. We made a change in our distribution in Europe as everybody knows we added Suzo-Happ and changed out our distribution partner in Europe and sales in Europe right now are pretty healthy.

Moving on to oil and gas you mentioned that there are some challenges in that area that related to the drop in gas prices. You also mentioned the color office printer is still performing fairly well. Do you expect that to offset any challenges from the decrease in capital spending that you're seeing from the drilling folks.

What we've done is we've done modeled the business separately and what we're looking at is we want that business to drive. Because we believe that revenue could be challenging this year just because of the lower truck printer sales, we've modeled the business on a profitability model and we want that business to drive the same profitability in 2015 as we achieved in 2014. Now that’s all based on our forecast and what we think will happen and it’s based on the success we are having with our officer printer the 980 because it drives so much consumable sales. And with our outlook for lottery which is clearly opening up much stronger. We are seeing some uptake in our European Casino business we are looking at our food safety business being much stronger this year than last year. We will be very happy if we can drive the profitability of our oil and gas business flat year-to-year because our other businesses will pick up. So we will see revenue growth from them and profitability growth them and keep oil and gas flat. So that’s how we are looking at it. I mean 980 drivers a fair amount of consumable business it is high margin. We had a very good 2014 in regard to the consumable business and the more printers that we get out there the more profit that it drives. We have also looked at our pricing of our other products and have taken some necessary action so that even though the volume will come down we could increase prices where we could and continue to drive that profitability over our black and white printers.

Which actually feeds me to the question so we are focusing on margins and talking about the operating structure you mentioned and it’s the $1 million in cost savings I was wondering whether any of that was realized in 2014? And does that also take into account the new executive sales men that you guys have brought in?

So the $1 million is net of the increase to adding Andrew Newmark. So the $1 million is net of that. So we knew by adding Andrew cost would go up but we took out enough cost to drive the $1 million of cost savings with the incremental cost of Andrew.

A very-very little of the savings we experienced in the fourth quarter because we did the action right towards the end of the quarter.

Thank you. Our next question comes from Mitchell Sacks of Grand Slam Asset Management. Your line is now open.

First question has to do with the food safety players. You were talking a bit about some wins that you had. Can you give us anymore color in terms of the opportunity for the stuff that you have currently won or maybe some color on maybe the number of organizations that you have been able to get positively responding?

From who they are, they are very large well-known restaurant chains. As for giving out names and all that Mitch I would rather not because our competitors are clearly listening to the call and we would rather not give them a heads up on where we are winning the business, but they are well-known large establishments. We closed at least business with 10 new restaurants, at least. And that doesn’t mean that as we win a restaurant chain or the restaurant chain accepts our technology then we go out most of the time and win the franchisees. In a couple of cases we have actually won the whole restaurant chain, so that the roll it out over a year, year and a half, but we have got enough to say that we probably have 10 restaurant chains or companies buying our terminal today.

And then on Epicentral you made a comment about this year looking better from a activity standpoint. Could you give any more color on that in terms of whether it’s bid activity or what it is that your getting the confidence on that?

Yes we are actually -- the bid activity is up there is no doubt Mitch and that could be a reflection of operators feeling a bit more better about their business. It is an interesting industry when sales go down by cut marketing. I remember that United Commercial where United Airlines with the guy said okay business is down and I will get out and sale more and go out and talk to your customers more in the case the casino industry they cut back on their marketing. But what we are projecting is clearly more installations, more revenue and that’s based on where we are in the process of not only the bid but where we are in the conversations with the casinos in regards to their marketing departments their IT departments. We have confidence enough to say that clearly Epicentral sales in 2015 will be higher than 2014. And it’s a interesting thing Mitch it’s not only in the U.S. now it’s now become a worldwide product.

Thank you. [Operator Instructions] Our next question comes from David Gorman of Empire Asset Management. Your line is now open.

A couple of things, in early 2014 you announced your relationship with CrunchTime and Ecolab. Are they still progressing? And can you talk about that at all?

We don’t talk about where we are in the relationship, I could tell you though with Ecolab we are not using them as a distributor any longer and I'll leave at that. But as for what we're doing with CrunchTime we don’t discuss the initiatives between the two companies.

My next question is so you basically disclosed that you have had 10 large restaurant chains. Obviously McDonalds is probably one of the largest in the world I mean anything in comparable size to like a McDonalds.

David as we said we don’t talk about the names of the customers. And I think it's fair to let the shareholders know that we feel very good about what we're seeing for 2015. We feel very good about the success that we've had in our work to get the menus right, get the operations to expect the terminal and go out there and sell. And we'll wait for our results to show you how we're doing.

I understand that and I understand you guys are in litigation which has been an ongoing thing and obviously over a $1 million in expenses last quarter which you had obviously no control over. And I have been trying to get my hands around this for a long time while Avery Dennison would come after a Company like so small to get you guys. And obviously we must something there so that’s why I'm interested in trying to understand what's going on with the food safety and because most of you are the markets continue to deteriorate for many years and there is nothing and I mean this just sounds like your…

David I really appreciate the question. We won't talk about the lawsuit we've told our shareholders we believe we've done nothing wrong we live in a country where everybody is…

You know will come out and it clearly and it will I'm sure in the lawsuit will also come out with the 10 people what you're doing with I mean you can't hide that can you?

I'm not going speak to it David. Can we get another question, could we get somebody else to ask the question?

Our next question comes from Andrew Wiener of Samjo Capital. Your line is now opened.

Bart so I think in the past you've given some numbers there upon with respect to how many food safety terminals were in aggregate with the Company's that we're doing trial. So if you were to take that 10 plus organizations that you've either been selected as an authorized vendor or actually have one out right. What does that represent in as far as amount of terminals that you can sell them now?

I have to add them all up but it's clearly North of 30,000 to 40,000. Maybe probably may be much more probably more like 70,000 but I'd have to add them all up. And that’s the total population of stores that they would have worldwide.

And this is we're talking about the 10 where you have been selected or when you move from trial phase to some form of selection.

Yes. Like I said today I actually got one of my sales managers send me an e-mail that one of the franchisees wrote the cooperate office really just bragging about the technology. And so the acceptance buy those that are buying it has been really positive no doubt.

So again like that will actually lead to my question is with those 10 organization that we look at their contribution in 2014 was it sort of mostly trials or sort of 100 of units or will you actually sell into a number of these organizations in 2014 as well?

We sold to some of the organizations not anywhere near the potential over the next couple of years. But we sold some in fourth quarter, in the fourth quarter of 2014 as Steve said in his talk food safety sales were up and up nicely compared to the year before. So some of that reflects the restaurants that we've won but nowhere near the expectations if -- look our expectation is because it is when we look at these restaurants they're all worldwide some are n domestic. But a lot of them are worldwide and outside the U.S. that takes more work to get those to buy and the good news we've two customers right now buy in Europe. So we're pleased with some of the progress we're making but when you look at the domestic market the opportunity is there it is just going to roll out overtime because clearly they've accepted the technology.

And you referred to this letter you received I mean do you have data that would speak specifically to like a tangible ROI at to the savings franchisee or a store owner would get from both potentially on labor savings from a time perspective as well as spoilage or waste?

There are three measurements that we use. And we have a calculator that our sales people use with the restaurants it labels sales because you can go to a standard label instead of a so called colored label. There is labor savings and as this one franchisee wrote he is saving half an hour a day and he can put his people to work to other things and there is food waste. And we have a calculator that we use that our sales people use with the franchisees and also the corporate office.

Switching gears to Epicentral, can you give us a sense of what is either the revenue of Epicentral were in 2014 as a way of thinking about what ’15 could be or at least the number of slot machines enabled or turned on in 2014?

We don’t have that number in front of us Andrew can we get back to you on that?

Sure.

From installations this year, I could tell you we don’t share projections. So we are going to take a conservative look at the year. And we have our projections from sales and what they think they can close. In regards to where they are in the closing process, we feel very comfortable at saying our revenue for Epicentral will be up in 2015 versus 2014. We won’t give you the number of deals that we think we are going to close and that would relate to how many slot machines but from a business standpoint where we are in the sales process is which is what we look at to say okay will they really buy it where are they in the selection did they get buying from IT and marketing has the general managed signed off has the finance manager agreed to the pricing and all that we feel very comfortable that revenue will be up in 015 versus 014 based on where we are.

With respect to the 980 office printer and -- Printrex office printer how many units do we now have installed?

We don’t disclose it but against it is meaningful I mean in regards to the consumable revenue that we are getting from it. If you think about what Steve said we have deemphasized our inkjet product line the HP product line and we are emphasizing our consumables for our 980 which are higher average selling prices and much higher margin. But when we went into the market it is a good way to look at it. When we went into the market we believe that total market size was truly 100. We told everybody from the beginning. We think there is 100%. We clearly believe it’s much more based on how many we have sold.

And I think you said that Printrex consumables were up 300% Steve $300,000 I should say.

$300,000.

Year-over-year. And so I think you have talked about the consumables for machine being running at roughly about 15,000 is that correct?

It’s actually running higher than that now.

Okay, so…

I know what you can do which is good I mean look it’s wonderful that you are interested in it. I mean you got to remember it all depends on when it’s installed.

Sure, no absolutely I mean as we get the majority of the machines the 980s would have been sold in 2014?

A good chunk of it, yes.

Yes we sold a good chunk in 2013 as well though.

Yes it is between half and half between ’13 and ’14.

And then I guess my last question would be, you alluded to the fact that you have sort of gotten through this period of accelerated product development. If you will and is the reduction then in product development cost built into that $1 million net savings or is there an incremental savings that will come from a reduction in product development cost?

So it’s built into the $1 million Andrew. It’s basically people and services that we use to help develop the products. And looking at how many products we have rolled out over the last couple of years and the amount of engineers for instance that we had. And looking forward we are making incremental changes. We've got the 9700 out clearly the 9800 is out but we're making some changes to that because we think that there is a very large market for it in regards to looking at casual restaurants and looking at other venues outside of restaurants that have contacted us about our terminal that can do more. And then the or so called CrunchTime unit which hooks up to a software system we don’t need that many engineers as we make these incremental adjustments or changes. So a lot of the cost was in engineering.

Thank you. And at this time I'm not showing any further questions. I would like to turn the call back to management for any closing comments.

Okay, first I'd like to remind everybody that TransAct will be at the ROTH Capital Conference. I think my presentation is Monday at 5 PM West Coast time. So those that may get out to the ROTH Capital Conference I'll be out there and we can easily do one-on-ones Monday or Tuesday. I’d like to thank everybody for joining us on the cal this afternoon. We clearly thank our shareholders for your support and we also like to thank our team members at TransAct they've been very focused on the product development side of our transformation process. And now they’re very focused on the sales and we look forward to reporting back to you on further progress of our business when we report the first quarter results in May of 2015. So thanks for joining us tonight.

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