Good day ladies and gentlemen, and welcome to the TransAct Technologies' Third Quarter 2015 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 conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Jim Leahy. Sir, you may begin.

Thank you, Kelly. Good afternoon, and welcome to TransAct Technologies' 2015 Third 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, progress against those initiatives, and details on the third 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 welcome to everyone to joining us on this afternoon's conference call and webcast. This afternoon we reported third quarter revenue of 14.2 million, adjusted EBITDA of $2 million, and diluted EPS of $0.13. Steve will review the financials in more detail, but let me start by noting that the company's results over the first nine months of 2015 were driven by strong performance across our food safety market and our domestic [ph] casino, gaming, and lottery market. To-date in 2015, total net sales are up over 17%, driving a 142% increase in adjusted EBITDA and a 313% increase in adjusted net income, compared with the same period in 2014. Since the beginning of 2015, TransAct has been focused on sales execution and prudent management of expenses. I am pleased to say that our teams are delivering on both of these goals, and I believe that our financial results year-to-date are a clear validation of our strategies. In particular, our engineering team has provided our sales professionals with an attractive portfolio of high margin products tailored to address a number of large growth opportunities, and our sales efforts have allowed us to gain traction, grow market share, and demonstrate to our customers how much value our new solutions can bring to their business. Furthermore, by being prudent in the way we invest in growth and operate the business day-to-day, we've been able to leverage our top line success to deliver increased profitability and cash flow, while we focus away from our old commodity printer products. Before I hand the call to Steve, I want to briefly review the success we are having in the markets we serve, and our outlook for continued progress going forward. First, the momentum for our line of AccuDate food safety terminals is…

Thanks, Bart. Good afternoon, everyone. 2015 third quarter net sales were 14.2 million, up 6% compared to 13.4 million in the year ago quarter. As Bart pointed out earlier, Q3 benefited from the growing momentum in our food safety terminal business, strong domestic casino sales, and continued strength in our global lottery business. Looking at our sales by market for the third quarter, casino and gaming sales were down approximately $700,000 or 13% year-over-year to 4.4 million. Despite the overall decline, our results reflect strong domestic sales driven by continued share gains for Epic line of casino and gaming printers. The domestic strength we experienced was offset by weakness across our international markets, driven by a slowdown in Europe and Macau. Lottery sales were up 22% to 1.8 million from 1.5 million in the third quarter last year as we returned to more normalized quarterly sales. Though sales in Q3 declined sequentially from Q2 due unusually high shipments in the first half of 2015, our lottery business remains extremely healthy. And going forward, we believe we will benefit from our new contract with GTECH that will now allow us to be able to offer our leading lottery printer solution to a broader range of customers beyond just GTECH. Food safety, POS, and banking sales were 3.4 million in the third quarter 2015, grew by 800,000 or 29% year-over-year, and we are roughly flat compared to the second quarter of 2015. Results for the 2015 third quarter reflect a 91% increase in sales of our food safety terminals compared to the prior year, and also included the first volume shipments of our new AccuDate Pro. In addition, sales of our point-of-sale and banking printers increased by 14%, reflecting further sales of our Epic 9000 printer into McDonald's locations. Looking ahead, we…

Thanks, Steve. Before opening up the call to your questions, I want to emphasize that the transformation of TransAct is beginning to bear fruit, as evidenced by the strong financial results delivered in the third quarter of 2015. While we have lots of work ahead of us to continue the transformation of TransAct, and drive towards our goal of turning the company into a hi-tech solution provider for the markets we serve. We are truly excited by what the future holds for TransAct. With that, let's open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Phil Bernard with Eilers Research. Your line is open.

Hi. Thanks for taking my question guys. First off, congratulations on a solid quarter, well done.

[Indiscernible].

Yes, absolutely. I'll start with a few questions regarding the casino industry. First one, congratulations on the progress with Epicentral. Did you guys have -- generate any sales within the quarter, and would you be able to provide any comments here on maybe percentage within domestic casino gaming or potentially maybe even a whole number?

Yes, there were no installations in the third quarter with Epicentral.

Okay.

So, there were no sales. It was strictly -- I mean, if you look at our number, the domestic casino market was driven by the 70% increase in printer sales.

Okay, beautiful. Now, with regards to your relationship with Aristocrat, how does that differ with the way the product integrates with, let's say, a Bally system?

Well, if you look at how we do everybody but Aristocrat, we get a gateway from the other service providers, the other system providers, and then between us and the casino, we work with them on how they want to distinguish their players, how they want to separate them, and then drive promotions based on player habit, time on device, what kind of player they are, what's their ADT, Average Daily Theoretical, and all that. What Aristocrat allowed us to do, and for those that were at the show could see it, we now actually have the ability to really work inside of the slot machine. So, for instance, what they showed is almost -- the video slot machine almost opened up. It had a window, and it allowed us to communicate directly to the player different offerings. We actually showed the capability of doing sports betting. So if they know that the player likes to bet, and is a sports bettor, they can actually offer that right at the slot machine, they can choose to bet. If a player wants to just bet on a football game, they show that capability also. So, with the integration of our system on to the Aristocrat system, not only do we have full access to their system, but we have full access to all the slot machines on the floor, where we can even do more, and it's more, not only promotion and couponing and all that, but now we're getting into entertaining, and keeping the player at the slot machine and really integrating our solution with their solution with the slot machine, and it's everybody's slot machine on the floor. And if you got to see it, it was really exciting to see how the whole -- their system and our system work together, and then literally on the screen provided this interactive experience, which by the way the millennials kind of like, right, they like that interactive experience. We showed that on their slot machine. So it's really beneficial. I mean, it's an endorsement by Aristocrat of our system and our capabilities. But more important, it's the interaction and the combination of the two systems to drive more play, more entertainment, more communication. If somebody is at a certain level, and they might get a coupon or something, we actually can talk to the player and say, hey, do you want to play some more and get to the next level? So there's just so much more we can do by communicating some of that on the screen.

Okay, interesting. Yes. Okay, that's quite a bit more involved than the relationship with the other systems. And one last bit of commentary within the casino segment, could you provide additional commentary on what happed with the international printer sales?

Look, I don't think it's a mystery that Macau is going through some issues. So we saw the effect of that. We've won just about all the openings, but some of the -- I don't think we had an opening in the third quarter. We'll have some more openings coming up that we'll provide our printers for. I don't think it's a mystery that Macau is not in a great way right now. And Europe was a little slow, and I don't think that should surprise anybody. It's just the reality of what's going on over there. I think the good news is, like in Macau we've won just about all the openings now. I think there's one more that hasn't made a decision. The other thing that's pretty interesting is there is a level for Epicentral over there. And even casinos that don't have our printer. So the opportunity to continue our market share growth, which is pretty high in Macau, is pretty exciting. And by the way, there's a fair amount of interest in Europe for Epicentral. So we feel -- What's happening is, Epicentral, in itself, is driving casinos to buy our printer. Whether it's asking for our printer when they buy new machines, and there is one customer internationally, I want to tell you who it is, but who personally called me at home one night, to say, I just want to let you know I just bought 200 machines with your printer, because eventually I'm putting in Epicentral. So Epicentral is pulling our printer in many different ways. Either if they're getting ready to install Epicentral, and they're one of our backlog customers, if they don't have our printer, they're putting our printer in. If they have our printer -- if they want our system, and they're ordering new machines, they're buying it clearly with our printer. I mean, we're up 70% domestically in the third quarter. I don't think there is a slot manufacturer that's going to talk anywhere near those kinds of numbers. But that's what Epicentral is doing. Because we are the only truly integrated hi-tech promotion and coupon, and now entertaining system, on the floor of that casino. And with Aristocrat, we even showed how to get the millennials' attention by going back and forth, and communicating with them. So we're seeing the benefit what Epicentral do to pull our printer sales.

Got it, got it. So most of your business, it sounds like, was in Macau, there's some potential moderate opportunities to expand there, but primarily you're looking for expansion out of Europe, but that will take some time before that kicks in?

Look, I think from our perspective, Epicentral is doing a great job at pulling printer sales, and Epicentral has got some real opportunities in the international markets, and we're not going to discuss who is in our backlog, but it's not all domestic. So Epicentral is garnering the attention all over the world, and it's helping to drive printer sales. The fact that Macau is going through a difficult time, they'll come out of it. I mean, things will settle down, and the casinos will figure out how to get into the new world of not having the high end player, and being more of a mass market. And by the way, a mass market eventually should be good for us. Because that means more people are on the floor of the casino, which means more people will be looking at the slot machine, versus the junket player that's in a backroom just playing baccarat. It's just the ebb and flow of what's going on overseas, no concerns here.

Got it, got it. Yes, anyone that listened to the Wynn [ph] call can hear the frustration from Macau. But, yes, we all hope that that turns around.

Yes, look, you feel for the guy. He's building a casino, and doesn't know many table games he's going to get, how many [indiscernible].

Right, right. It's -- I understand the frustration. Moving past casino gaming, on the food safety, you guys are releasing the AccuDate Pro. Is there any development with that? Are you testing that anywhere right now?

No, we got orders.

You got orders?

Yes, we shipped -- we actually shipped our first, I won't say how many, but we've won our first account with the AccuDate Pro, and that's shipped in the third quarter, so some of our -- the increase in sales that we got in the third quarter was the AccuDate Pro. I've got to say that with the launch of the AccuDate Pro, what's impressive to me is the conversations now that we're having with customers about how to even do more and how this device will become their assistant, not just their food safety terminal. This is now going to provide more features and functions and services to not only restaurants, but food service providers in different venues. And we're really excited about the conversations that are going on. And the opportunity to really provide hi-tech solutions, and really almost own the back of the restaurant and the back of the food service operators. So we did ship our first Pro. We've -- I've got to tell you that the amount of customers that we're talking to right now -- we used to talk about 70,000 or getting close to a 100,000. It's now getting close to 200,000 locations. It's just going to take time to go through the integration. It's going to get time where people want more technology, is getting them that technology, but the sales funnel has doubled over the last couple of months, and a lot of that because of the Pro.

Now how does that compare, I guess, in terms of ASP and margins with the current AccuDate's 9700?

Look, the AccuDate Pro and the new terminals are higher priced -- higher ASP than the 9700. And the margins are higher. And you heard Steve, who's probably more conservative out of both of us, and I know I'm very pleased and proud of what we've been able to do. Steve's looking at it saying, Bart, if you continue down this path, as we look out, and we're talking a quarter or two, but as we look out further, and, say, more Epicentrals, and more casino printer sales, and more AccuDate sales. We're starting to look at gross margins that can approach 50%. And this is a company that was in the high 20s-low 30s not too long ago. So the margins are there, the technology is there, but I think just as exciting it is, my team has come up -- our team has come up with ways to drive recurring revenue from all this. And that is even just as exciting, because that of course has a good position for us to grow that recurring revenue business in services. So we're excited about what our team is bringing to us. We hired a new executive to run sales and marketing, and he's just knocking the cover off the ball with the opportunities, and the ideas that they have to really own this space in the back of the restaurant, in the back of the food service providers.

Great. That actually brings me to my next question, and then I will stop bothering you. On the sales and marketing front, it sounds like most of the operating expenses are going to be fairly consistent. R&D has come down a bit. With the new sales executive, and you mentioned that you had already increased some of the folks on your sales force. Do you intend on further increasing and juicing the sales force from here?

Not on the sales side, maybe one or two engineers, not on the sales side. The amount of opportunities that we've been handed for both Epicentral and food safety, we might add one or two more engineers just to keep up, but not on the sales side.

Okay, great. That's it for me. Thank you.

Thanks, Phil.

Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Mitchell Sacks with Grand Slam Asset Management. Your line is open.

Hi guys, really nice quarter.

Thank you.

Hi, Mitch.

My question is on the backlog on Epicentral, and just how to think about that or -- going forward? And when does that backlog start to turn into revenue?

Well, I -- the way I think about is, I'd be very happy we got a backlog. We will install it when the customer has done their work, and we've done our work. And so you'll see it roll out over the next couple of quarters. That's how we look at it. There's a lot of things that we're doing for these customers, and they're all over the world. So, I -- it's the first time that since we've announced Epicentral few years ago, that we can actually say we've got a backlog.

Okay. And then on the AccuDate Pro, it's nice to hear that you guys have sales. When does that become a more meaningful part of the food safety sales? Is that a 2016 or is that more of a '17 kind of switch?

I would say, Mitch, you're going to see it ramp up in 2016. There's no doubt.

Great. Thank you guys very much. I appreciate it.

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I would like to turn the call back over to Mr. Shuldman for closing remarks.

Yes. Let me just talk about -- I actually thought somebody would ask the question, there is a situation in the Northwest of the country going on with a wonderful restaurant company. I let you know that there is an outbreak of a food issue. And that's what we help to prevent. We got into this business that was the first thing we looked at is how do we keep restaurant companies from losing their brand, from breaking their brand? And clearly there is an issue when the Northwest, it's in the papers, people saying it could take months if not years for that company to recover from it. That's what we help to prevent with our 9700, and some of the features of our Pro. We have actually expanded that for inventory control and menus and videos and all the rest being online, but that's -- if you look at that situation, that's the conversations that we are having with restaurants. Do you want to do it manually? Do you want to do it -- were you hoping somebody does it right? Would you want to do what you contract that they did it right, that there is no mistakes? And that's the conversations that we are having with our restaurant companies. That was the conversation with the 9700 with people like McDonald's when we got into it. Clearly, the 9800 then there is more conversations, and then the next models that will come out, we didn't have further conversations, but that's what we are doing in the restaurant industry is we are helping them to protect their brand, and it's not that we are -- it's not like we look at the situation and say, well, that should help us, but that's exactly what we are trying to do is protect these companies from having the issues. And then of course for those that about the casino industry and how it's getting a bit healthier, especially domestically and then internationally people want to try and get healthier, really Epicentral helping them out in how it just pulls printer sales. So with that, I really thank everybody for being on the call. I really appreciate the shareholders supporting us. We've got a lot more work to do, but you can see that we've got some excitement here and that we are focused on taking the advantage and driving those sales. So, I really thank everybody. I really appreciate your support.

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