TransAct Technologies Incorporated (TACT) Q2 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. And welcome to the TransAct Technologies Second Quarter 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, today’s conference maybe recorded. I would now like to turn the conference over to Mr. James Leahy of JCIR. Sir, the floor is yours.

Thank you, Eli. Good afternoon, and welcome to TransAct Technologies 2016 second 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 these initiatives and details on the 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 maybe 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 would like to turn the call over to Bart Shuldman. Bart?

Thank you, Jim, and welcome to everybody joining us on this afternoon’s conference call and webcast. This afternoon we reported 2016 second quarter revenue of $14.4 million, operating income of $900,000, and EBITDA of $1.4 million. Steve will review the financials in more detail in a few minutes, but first I want to provide some high level comments about the quarter and about our business. Let me start by highlighting two changes we made in way we report revenue for our businesses as noted in this afternoon’s press release. Additionally, we reported revenue for our food safety PoS and banking business as a single line item. Beginning with this afternoon’s release, we are now disclosing revenue for our food safety terminals sales separately. As we have discussed in prior calls, we see tremendous opportunities for this business and believed that transaction is uniquely positioned to provide a comprehensive portfolio of solutions that can address restaurant kitchens and back in the house operations of all sizes and with varying degrees of complexity. We also know that many of you are acutely focused on tracking our progress in this business. So going forward, we’ll disclose separately the quarterly revenue related directly to sales of our AccuDate 9700 and AccuDate Pro and new AccuDate XL. The second change is how we describe our point-of-sale, or PoS, product line. You will note in today’s press release this product line is now called PoS automation. This change is not just rebranding the category, instead it reflects the emerging opportunity we see in this market as customer facing kiosks gaining interaction in the food service industry, particularly as food service operators seeks to matters the cost and adopt the changes of consumer purchasing behavior driven by increased comfort with automated transactions. Our PoS automation solutions include a number of products under our Ithaca brand that address this growing opportunity including kiosk printers. Now let’s turn to review of our opportunities by product line. Our AccuDate food safety terminal business generated strong growth in the quarter with revenue up 70% year-over-year to $1.7 million. This business is clearly benefiting from an industry environment that is evolving and moving in our direction. In particular, restaurant and food service operators are increasingly seeking out solutions that allow them to streamline back of the house processes in the name of efficiency, more closely monitor and improve their food handling procedures and ultimately deliver a quality safe product. We were ahead of the curve in identifying this market opportunity several years ago and have invested prudently to develop solutions that have made TransAct a clear industry leader. Last quarter, we laid out in detail our current market opportunity and it’s safe to say that TransAct is executing against and expanding on this opportunity, driving growth in our AccuDate terminal sales including both the AccuDate 9700 and AccuDate Pro to a wide variety of customers. Equally as important was the mid May debut of our newest AccuDate food safety terminal, the AccuDate XL, launched in partnership with CrunchTime, the industry’s leading provider of back of the house software solution for restaurant and food service operators the AccuDate XL is expanding the paradigm for our solution set. We showed the product for the first time at the National Restaurant Associations’ annual tradeshow in Chicago to a very strong reception. For the first time, restaurant and food safety operators have a single in-kitchen platform that can fully integrate back of the house operation with CrunchTime’s restaurant management platform using their new kitchen sink app. In addition by leveraging the Android OS operating system, the AccuDate XL gives TransAct a solution that we believe dramatically expands the addressable market for our terminals and we also serve to create an eco-system of software-based solutions that can be customized like never before all added on to our AccuDate XL terminal. The three solutions that make up our AccuDate product portfolio are for evaluate enhancing options for a restaurant of food service operator, no matter the scale or scope of their operations. We can address the needs of quick serve, casual dining or fine dining restaurants as well as any of the convenience type locations where food is served. That’s a substantial market opportunity and only TransAct has the unique combination of software terminal and print capabilities to address the entire industry. As we discussed in the first quarter call, our market opportunity includes licenses to hunt and potential full rollouts with over 40 distinct restaurant brands and concepts representing an addressable market of over 80,000 terminals. In the second quarter, we successfully added additional restaurant brands to this customer win list, further expanding our addressable market or potential terminals. It’s important to note that this is a multi-year execution opportunity. So while we think it is helpful to provide some color so that you can be sure we are continuing to gain traction with our solutions, we’re only planning to provide detailed metrics on the number of brands and concepts we’ve won on a periodic basis, suffice it to say these metrics continue to improve. Moving on to the casino and gaming industry, we remain focused on growing our share of the global gaming device printer marketplace by leveraging the industry leading capabilities and unbeatable reliability of our Epic 950 printer. Domestic demand is sluggish. And while the international environment was still somewhat challenged over the first half of 2016, there are signs thus far in the third quarter that the international printer demand is stabilizing and even beginning to grow. I do note that the domestic casino market is going through a major change with casinos focus on better utilization of their slot floors and adding revenue through non-gaming venues such as adding hotels, restaurants and nightclubs. However, we look to our Epicentral enterprise system to be our growth vehicle in the worldwide casino market. TransAct continues to be the only company to offer a comprehensive software system that could target market directly to a slot player, while they’re playing at the slot machine. Coupons and promotions will become a norm. And at the same time Epicentral is driving additional printer sales as casinos need our Epic 950 printer to utilize the system. While we did not see any installations go live during the second quarter, we made substantial progress on two previously disclosed installations that we continue to expect will go live later this year. As I finished my talk regarding the casino market, I can tell you I’m very much looking forward to the world’s largest casinos trade show, G2E that will be held at the end of September in Las Vegas. We will have a lot to say at that time. Now lottery sales were the largely normalized levels in the second quarter of 2016 and we expect the second half of the year will closely resemble the first half of the year. Our sales team continues to demonstrate the benefits of our new Epic 3000 lottery printer and we expect to grow our exposure to this marketplace going forward. Within PoS automation, TransAct remains a prime beneficiary of McDonald’s ongoing menu on process innovation, which has expanded to include new customized menu items and increased use of kiosk systems in their customer order flows. We again saw a strong demand for Ithaca 9000 grill printer during the second quarter and as I mentioned earlier we are now working with McDonald’s and other operators to explore the use of our industry leading thermal printing solutions in customer facing kiosk applications. The ongoing challenges in the oil and gas market remain a drag on our Printrex line of printers. Continued global weakness and the energy prices has had a dramatically negative impact a new demand for these types of oil and gas exploration activity that drives our business. While we continue to manage Printrex for profitability in the near term, we like every company that provides technology to this market look forward to the eventual rebound in oil prices, whenever it happens. Overall our financial performance over the first half of 2016 was actually in line with our expectations. Momentum for our AccuDate products continues to grow and as we continue to execute against this in our other key Epicenter of growth opportunities, we expect to expand gross margins, improve profitability and generate consistent cash flow. This will allow TransAct to continue our policy of returning excess capital to shareholders through our regular quarterly dividend and share repurchases. But now, before I turn the call over to Steve for the financial details. I would like to say something about TransAct, about the Company, the people, our customers and our shareholders. See in August 22, in just a few weeks TransAct will celebrate being a public company for 20 years. I know this was not easy and I know how hard we have all worked and I know what we have accomplished. But I want to say a few words to thank so many for their support for their friendship, for being part of the TransAct team and for helping us achieve the 20 year anniversary. First, I thank the guy sitting across the table from me, Steve. He has been the true partner, the true leader that ensures the directions we take do not get us off the rails of the rules and regulations we face. And while I spend much of my time with our sales and engineering teams, he manages the day-to-day operations of TransAct. Thank you, Steve. With that come my thanks the Steve’s finance team, HR team and into Andy Hoffman and his operations team and Don Brooks and David Block and their engineering teams. Thanks everyone. Look at all what we have accomplished. I also want to make note of two people who retired from TransAct, Dick Cote who was our first CFO and also someone who took the time to guide and teach me in the early years. He was also someone I could talk to about life and family, as I was a young CEO wanting to succeed and going through life’s challenges. And of course my Mike Kumpf our first leader of engineering. Mike was the best, he wanted to win but more importantly he wanted the customer to want our products. He spent countless hours working with our customers so TransAct could develop their solution not ours. A big thanks to sales group, Tracy, Mark Bauer, Dave Ritchie Chris Buckley, they’ve been with us for so long. Thank you. And thank you to all the members of the sales and marketing team led by a great guy Andrew Newmark. He make us proud every day and you believe in TransAct love. Going after the customers second order not just their first. Well there are many customers to thank, I want to make note of three. First is GTECH the largest lottery company in the world. Since1994, we’ve been providing them printer solutions, but they are pleased with us as we work right now I’m providing spare parts for printers in the field that are over 10 years old. Those darn printers continue to work despite the large amount of transactions they do every day. Nexis, McDonald’s our major customer in the PoS market. They trusted us with their domestic PoS printer needs and we have maintained that relationship for over 10 years. And then they asked us to join them in developing the solution for their food safety needs. They gave TransAct a new market prospect to look at and that was without a doubt the largest market opportunity TransAct has ever entered. And finally, I want to thank the Wynn Casino Company. Back in 2005, they opened the first casino with our Epic 950 printer. We actually started production of that printer just to make their grand opening we weren’t even in production yet. They were our first customer for the Epic 950 and once the casino market found out that Wynn Casino chose our printer over the competitors. It gave notice to the worldwide casino market that TransAct had a printer everyone should gets you know. Thank you, friends at Wynn. I also thank my board of directors for their trust in me to lead this wonderful company. Especially I want to thank Thomas Schwarz, who taken the time to guide and give me the honest feedback. I know who I'm. I can be aggressive and I just want to win. [Audio Gap] Street analysts I met. Cameron and Barry thanks for the introductions and the chance to meet many. Kerry Anderson and Todd Eilers thank you for your interest and courage at TransAct. I want to thank our many shareholders over the past 20 years. Many of you, I’ve met along the way and words cannot thank you enough for your investment in TransAct to all our shareholders I thank you. It has been an honor and a pleasure to be the leader at TransAct for the first 20 years. It’s a humbling experience that I want to take very seriously. I think all that have come to the hard doors. I thank our customers and our vendors and I thank all the wonderful TransAct employees that we have and that have worked at TransAct. Lastly Byron Roth can you believe 20 years, a big shout out to you and Jeff Martin. You have known us for so long and I truly enjoy the famous Spring ROTH Capital conference. Maybe on the CEO, who has attended the most times. Thank you guys. And thank you Frank Fantini for TransAct inclusion into your world. Okay one more thank you and that’s to my wife Sue. Who’s been there through it all. You sat at my desk in Bloomfield Connecticut on weekends back in 1994. The four children while Marc Global, Marc Lapointe and others and me built the first GTECH printers. You read the New York Times in your books while I worked on the manufacturing floor building printers for all those long weekends. That was the very beginning at TransAct, you were there through it all and you have been the biggest cheerleader for TransAct. Thanks Sue. Well, I guess it’s time for the numbers. Go ahead.

Thanks Bart, thanks for the kind words. Our 2016 second quarter net sales were $14.8 million compared to $17.2 million in a year ago quarter. As Bart mentioned, we made good progress during the quarter in executing against our long term growth opportunities. Namely sales of our AccuDate terminals as well as the advancement of several Epicentral placements that will contribute to revenue later this year. While gross margin in the quarter was negatively impacted by lower Epicentral revenue and strong sales of our lower margins Ithaca 9000 printers to McDonald’s. We continue to move forward with the pair of Epicentral installations that should go live later this year and help provide a nice lift to gross margin in the second half. Looking at our sales by market for the second quarter, food safety sales were up 70% or $700,000 or $1.7 million over last year second quarter. Sales of our food safety terminals were also up on a sequential basis, quarterly sequential basis as we continued to execute against our current market opportunities. As Bart highlighted we see significant growth potential for this business and we’re still early in the sales cycle of what will be a multiyear roll out of our AccuDate terminals. PoS automation and baking sales were up 33% or $800,000 to $3.2 million in the second of quarter 2016, as we continue to benefit from McDonald’s ongoing and accelerated rollout of our Ithaca 9000 grill and receipt printer in support of their ongoing menu expansion and enhancement initiatives. We expect the sales strength in McDonald’s to continue to at least through remainder of 2016. Casino and gaming sales were down 29% or $2.1 million year-over-year to $5.2 million in the second quarter 2016. As we’ve seen in recent quarters, choppy domestic and international demand for gaming devices continues to impact our casino and gaming business. As a result of the continued weak market demand, domestic sales are a industry-leading Epic 950 casino printer declined 13% in the quarter. International sales which were better source of know for [ph] weakness for some time now, were weak again during the second quarter. Despite this weakness, our key European distributor has shown signs of returning to more normalized purchase levels so far in the third quarter which is a trend we expect to continue for the balance of 2016. On the software side, sales of our industry-leading Epicentral software system were somewhat disappointing in the quarter, as we were not able to recognize revenue from many new installations in the quarter, compared to one domestic installation in the second quarter last year. As Bart mentioned, however, we did make progress on two new installations which we expect will go live in the second half of 2016. Lottery sales were down 27% to $2.2 million from $2.9 million in the second quarter of last year as the year-ago period saw higher IDT sales volume that did not repeat at the same level in the 2016 second quarter. As we look at the second half of 2016, we expect lottery sales to be largely in line with our first half sales. Printrex products sales were $176,000 compared to approximately $220,000 in a year-ago quarter, as severely depressed oil and gas prices continue to have a negative impact on oil and gas drilling activity in our customers’ capital spending. We believe Printrex sales will remain under pressure in 2016 and as a result we will continue to prudently manage and align our cost for this business with the current revenue level Finally, TSG sales were down 29% year-over-year to $2.4 million. The TSG business in the quarter was negatively impacted by lower lottery spare parts sales to IGT and declining sales the low margin HP inkjet cartridges. In addition we experienced lower sales of Printrex, color printer consumables related to the ongoing weakness in the oil and gas industry. Gross margins for the second quarter declined to 40.4% from 41.6% in the second quarter of 2015. The decline was driven primarily by an unfavorable sales mix, including absence of Epicentral software sales compared to the prior year, and increase sales of lower margin Ithaca 9000 PoS produced for McDonald’s, which together more than offset healthy AccuDate food safety terminal sales that carried attractive margins. While we expect sales of Ithaca 9000 to remain strong for the remainder of 2016, we believe additional Epicentral software sales and increased AccuDate food safety terminal sales will allow our gross margin to move higher over the balance of 2016. And as we’ve said for several quarters now, we believe gross margins can climb overtime to the mid-to-high 40% range and even touch 50% sales of our new products become a larger portion of our overall business. Looking at operating expenses, total operating expenses for second quarter 2016 were relatively consistent at $4.9 million, down about 1% from $5 million a year ago. Engineering, design and product development expenses for the second quarter were up $229,000 or 27% year-over-year. As with the first quarter, we continued our engineering investment to support our Epicentral and AccuDate product with a particular and growing focus on the software that enables both of these product lines. Selling and marketing expenses for the second quarter were down $241,000 or 11% to $1.9 million as we benefitted from the results of our efforts to reduce expenses across the business, as well as lower sales commissions and lower sales volume, compared to the second quarter last year. G&A expenses for the second quarter $1.9 million down 3% from the year-ago period, largely on lower incentive compensation expense. Operating income for the second of quarter 2016 was $1.1 million or 7.4% of sales, compared to operating income of $2.2 million or 12.8% of sales in the year-ago period. Both GAAP and adjusted diluted EPS for the 2016 second quarter were $0.10, compared to GAAP and adjusted diluted of $0.18 in the year-ago period. Adjusted EBITDA for the second quarter of 2016 was $1.6 million, compared to $2.7 million in the second quarter of 2015. Turning to the balance sheet, we ended the quarter with $2.6 million in cash and no debt outstanding. We returned a total of approximately $2.4 million of capital to shareholders during the 2016 second quarter through a combination of our quarterly cash dividend of $0.08 per share and the repurchase of approximately $1.8 million of shares at an average price of $7.85 per share. Year-to-date to through the second quarter of 2016, we repurchased total of 288,000 shares for $2.3 million, which means we’ve now bought back near 4% of our total shares outstanding since the start of the program this year. The repurchases we made during the 2016 were pursuant to our $5 million authorization we announced in late February this year, under which we have about $2.7 million remaining as of the end of June. As Bart mentioned at the top of the call, our enthusiasm for 2016 remains unchanged as we head into the second half of year. We expect gross expansion over the balance of the year, particularly as we benefit from increased AccuDate food safety terminal sales and Epicentral software installation and sales of these products, grow to represent a greater percentage of our overall sales. With the large opportunities we see ahead of us in the food safety market, combined with the expected gross margin expansion, we should be well-positioned to financially benefit as we realize these opportunities. Then with that I would like to give the call back to Bart for some closing remarks. Bart?

Okay. Steve, thank you. Before opening up the call to your questions, I want to again highlight the building excitement we have for our long term growth. We are seeing significant attention for AccuDate food safety portfolio with the recent debut of the AccuDate XL and our partnership with CrunchTime, taking the solution to a whole new level. In particular, our ability to create a more software centric ecosystem for this product offering is resulting in a myriad of new possibilities. At the same time casino operators are increasingly of the view that real time promotions and bonusing is the way of the future. And we believe that Epicentral is well-positioned to help our customers put their viewpoint into practice. The TransAct today is a dramatically different company than the TransAct at even two three years ago or what I talked about way back in 1994 and we believe that this transformation will continue only – not only benefiting our customers but also helping to generate the value that our shareholders demand. As we open the call to questions I want to extend my thanks to the hard working team at TransAct for their efforts, which have allowed our company to expand it to new high growth markets. And of course thanks to our shareholders for their continued support, as we further transform [ph] and grow our business. And for those attending the Global Gaming Exhibition in Las Vegas at the end of September, I look forward to seeing you and presenting some exciting things in our tradeshow booth. Operator, we’ll now open for questions.

Yes sir. [Operator Instructions] And it looks like our first question will come from the line of Kara Anderson with B. Riley & Company. Please go ahead. Your line is now open.

Hi, good afternoon. I’m wondering if you can talk…

Hello, welcome.

Hi, there. If you can talk at all about sort of the Epicentral pipeline for next year, if you can provide any color there?

I can’t really tell you what we’re doing with our customers and all that. But I thought it was quite interesting. I was in Las Vegas a couple of weeks ago and there was a casino marketing show going on. And somebody who I’ve known for many years was on a panel, who is pretty high up in one of the companies – one of the slot companies out there, system companies. And he made a comment that couponing – paper couponing and promotions will become a norm in the casino industry. And for a company that has been trying to promote this for so many years and I’m sure our shareholders that have been with us for a while will say they’ve heard it before but it’s the first time I really heard an endorsement or somebody actually talking about the fact that he believed and that couponing was going to be become the norm. That somebody getting that piece of paper was important. So I think the future looks bright. It’s a lengthy sells process. Because of all the systems that have to be set up in the servers and the wiring the casino doesn’t have all of our printers it might take a year or two for the casino to change out by our printer to replace our competitor’s printer. But we really sense a movement in the casino industry where promotions coupons and promotions are going to become very important to the casinos. And Kara, we are the only one that has a true enterprise system whereby you can sit at computer and run multiple, multiple promotions at the same time on the floor of the casino without an issue. You can – you have a coupon generator, you have a schedule of program. You’ve got all of the software in front of you, tied now to the player tracking system and every slot company has given us access into their player tracking system. And you can sit there and just run promotion after promotion and like I said you can run multiple promotions at the same time. So we’re starting to feel – very bullish about the opportunity, it’s taken a long time. But what ticket-in, ticket-out started in 1980’s and finally took hold in 2004. So it’s an industry that moves very slowly but we are starting to hear the right things from the industry and to be honest we will have a lot more to say about it at the Global Gaming show.

Okay. On the new AccuDate XL is there any recurring revenue opportunities associated with that?

Great question. Great question, Kara. There is actually recurring revenue that will occur with the Pro and the XL. So it’s part of our sales model. There will be recurring revenue for every Pro and XL that we sell going forward there will be a portion of the sell price that will be recurring revenue. And it’s going to range between 10% and 20% of the price of the terminal will be recurring revenue.

Okay. Great and then…

And maybe I should help explain that a little Kara.

Sure.

What is happening with both the Pro. Let’s start with the Pro. The terminal is not being used only for food rotational labeling. We have customers asking us to literally help to automate the back of the house for them. There’s so – when you’re working in an Android or Linux environment. There is so much more that you can add to the terminal and Pro is running Linux and XL is running Android. And it allows us to do much more with the terminal whereby we can actually help the restaurant company eliminate some devices that they have. Because you can program it on our terminal and by us getting much more involved with the restaurant company in their operation, in the types of technology that we’re adding to the terminal, we’re going to have to provide ongoing support for those restaurants for the life of the terminal. So it’s kind of like when we buy, we run Oracle here and we pay Oracle a yearly maintenance fee. And that allowed us if we have a problem with the system we can call them up and they can help us with it. We’re going to be doing the same thing with our customers because they need that from us. Not because we want to do it. We have one customer where we are literally eliminating cards, let’s call them cards and a card system that they use. And so whenever they add a new menu item, we’re going to have to get involved with them to add it to the software and to add it to their payload. So we’ll be involved with them from the time they roll it out all the way through the time that it’s being used. There’s also people that have asked actually asked us to host their menus with the Pro and we’ll be hosting menus and then giving updates to those restaurants through an FTP or secure FTP site. That’s also where we’re going to have these maintenance fees these ongoing relationships with a customer where they’ll pay us for that access to our technical people. On the XL, of course now we’re into Android. So we’re into operating systems, we’re into apps the first app is the KitchenSync App, we believe there will be other apps that will be added. So there we will also have an ongoing maintenance fee. So that we can support those customers once they want to add another app to the terminal. So what’s happen Kara is, we went from designing this one specific terminal – specific use terminal called the 9700 rotational labeling. I don’t want to look at a book anymore. Press the screen outcomes a label, now I’m under control. The Pro and the XL is taking it to a whole another level. This is a very, very large opportunity for us. Not only for the sale of the terminal, but the ongoing support for these customers. And we’re becoming somewhat their partner, because there is so much more you can do with the terminal.

With the Pro, you generating any maintenance fees today.

No. Because we really haven’t sold any yet, all of our Pro applications, all the restaurants that will working with the Pro and we have many – we have not launched yet.

Okay. As per gross margin expectations, I heard on the call you said that – you expected it to get a lift from Epicentral in the back half of the year. I think previous expectations were to end the year in the mid-40% range. Correct me if I’m wrong and whether or not that expectations still hold.

Well, in the first half, Kara because of the drag caused by all the 9,000 printers we shipped from McDonald’s. They probably is not going to reach the mid-40% this year.

But the margin will improve in the back half, because the newer products sales are going to be a larger portion the sales as we move through year. So the margin should improve as we go through the rest of 2016.

What is surprising Kara, is the amount of printers, McDonald’s is buying from us. So in our modeling we had that dropping off well AccuDate grows and Epicentral grows and that’s at much higher margin. We don’t – we now don’t expect McDonald’s to drop off. So it’s just all it’s a lot of business and look we’re happy to take it. They’ve been wonderful to us but it is at lower margins in the company average. So everything outside of that AccuDate, Epicentral, gaming printers even Printrex are higher than the corporate average. So we’ve got this big business that’s flowing through that lower that we didn’t expect. But it’s been wonderful. We are shipping a lot of printers to McDonald’s.

Okay. Fair enough. And then last one for me. Also I guess with McDonald’s, since you brought it up and the customer taking order options or solutions that you are – I guess in discussions with them, would that be to insert a printer within someone else’s terminal or are you going to get into I guess the kiosk terminal business as well.

No, no. So McDonald’s – look the restaurant industry has been hit pretty hard with the new medical plans that they have to offer Obamacare and then the minimum wage increases. So the restaurants are looking at ways to reduce labor costs and kiosk is a great solution and kiosk have been around for years. But the cost versus benefit wasn’t there. Now that the restaurant is seeing a lot of headwinds in their costs because of Obamacare, because of the minimum wage, now kiosk’s are becoming a benefit, they actually can justify it. So we are seeing – in fact, we are shipping printers right now to McDonald’s that go in kiosk and not just in this country. The other thing also is the Baleno’s also like to order off their iPhone or their iPad or go into the restaurant and order off a screen, and that is driving more kiosk. So we’ve got a bit of – push going on from our customers. We make for better works kiosk printers because we make gaming printers, our gaming printers are kiosk printers. When we put a roll printer into a gaming machine, the gaming machine is a kiosk. So what we had to do is we had to make some adjustments with those printers, we want to – it’s not just going to print out kind of a ticket, it’s going to print out more information. So we made some pretty cool adjustments to the printers. And now we’re going to launch that into the into the POS business because kiosk are becoming a major conversation that the restaurants.

Okay. Thank you for the clarification.

One more point. Okay, it’s kiosk printers.

Got it. That’s it for me.

Okay. Thanks, Kara.

Thank you, Kara.

Thank you. [Operator Instructions] We do have an additional question. It will come from the line of Phil Bernard with Eilers & Krejcik Gaming. Please go ahead. Your line is now open.

Hi, guys. Good afternoon. First congratulations on the 20 years in the public eye. And on behalf of Todd, we appreciate the kind words.

Thank you, Phil.

Yes.

Yes. I’ve known Todd for many years.

You are a good man, good man, absolutely. I will continue. One more question on food safety since we’re on that topic. So with the expanded portfolio of AccDate printers, I’m wondering if you guys are adopting or evolving with your focus within the restaurant industry. You mentioned you guys now have exposure to pretty much all of it, QSR, casual, fine dining, convenience. Is there any potential area of opportunity that you see as the largest and where you’re focusing most of your energy?

Wow. Phil, we’re talking to just about every restaurant company out there. However the Pro – if you look at restaurants with simple menus, you pretty much going to see the 9700. But even our 9700 customers and we have a few that have come to us that want to migrate over to the Pro, in fact, we’ve had 9700 out of three years and they’re talking about changing them out and buying our Pro instead. So if you’ll – it’s hard to say just one segment, but if you look at fast-casual and casual, that’s where you’re going to see the Pro and XL take off. And that’s where you’re going to see multiple terminals per restaurant. If you look at the XL, what we’re doing with CrunchTime, CrunchTime has a fantastic program called Net-Chef and it does all of this stuff for the restaurant. It manages their inventory. It tells them what – when they should – what they should prep for when they need to order inventory. But it’s all done with paper, it’s all done in a General Manager’s office. We take all of that information and we now can transfer it out to every prep station. So instead of a General Manager walking in and turning his computer on and handing out the orders to the prep chefs and all that, and hopefully getting the orders back, signed off that they’re completed. And then the General Manager entered it all into the computer, our terminal does it all. So the prep chef walks in the morning, turns the terminal on, all the orders come down including videos of everything they have to make. Then when they complete the prep order, they close it out on the screen and we feedback through what’s called the KitchenSync app back to Net-Chef that we completed the order. And then we’ll do real-time inventory, real-time inventory control. So when you look at a casual restaurant, where you will have many more prep chefs and much more to prep for the day. You could see two, three, four terminals per restaurant. So our attention has been across the restaurant spectrum – Duane Toro, we kind of look at the ones that want to close quickest and spend a lot more time trying to get their application done because there’s so much we’re doing for these restaurant companies not just rotational labeling. But it’s really across the spectrum, and by the way it’s not just restaurants, it’s convenience stores. I mean that today a lot of people are talking about that – people are buying their food at convenience stores and even supermarkets because you can buy prepared food there. And with food costs going up or they cheaper or not. So we’re working across the spectrum in restaurants, but we don’t stop just at restaurants anymore.

Got it. So hopefully one of these chains you’re able to get by and they validate and then you can start to canvas the rest of the spectrum. Great, and then transferring over to casino gaming, on our end we’ve seen maybe a moderate uptick in replacement sales, just wondering what you’re seeing on your side going forward in the custody domestic I should say clarify the domestic casino industry.

Look, I hope you’re right, Phil. What caught my eye was our casino company that announced the other day that said they had a floor of 2,100 slot machines that did $200 million. They took it down to 800 slot machines and they’re doing $200 million. So it took 20% to 15% of the floor out and they’re doing $10 million more dollars in EBITDA. So I think the casino industry is it just coming to grips with the better utilization of the floors. I see a lot of action in regards to hotels and nightclubs and restaurants and all that. I hope you’re right. We don’t see it and what we see is that Epicentral’s going to drive incremental printer sales because they have to use our printer or for new opening – is opening and they want to use Epicentral then they specify our Epic 950 because it’s only way that they can use Epicentral. But I hope you’re right. I hope the uptick is happening. I mean – we saw our ITTs results the other day I wouldn’t call it Stellar, we’ll see, I don’t see it.

Got it, got it. Well, that’s it for me, guys. Thanks.

Okay.

Thank you Phil. And gentlemen at this time I’m currently showing no additional questioners in the phone queue. I would now like to turn the program back over to Bart Shuldman for any additional or closing remarks.

Okay. Thank you, everybody for joining us on this call this afternoon. Of course we look forward to reporting back to you on further progress in our business when we report our third quarter earnings call in November. And again I would like to remind you that if you want to go to Las Vegas and see the industry’s biggest and best tradeshow, well say hello at our G2E booth in Las Vegas at the end of September. I’ll be available to meet, we will also have a fair amount to say at the show also. So either please reach out to me or reach out to JCIR, Rich and Jim and Joe and set up some time. I thank you for your attention today and thank you for joining us on this call.

Thank you, presenters, and thank you ladies and gentlemen for joining us today. This concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.