Good day, ladies and gentlemen, and welcome to the TransAct Technologies Third Quarter 2016 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 is being recorded. I would like to introduce your host for today’s conference, Jim Leahy. You may begin.

Thank you, Leeann. Good afternoon, and welcome to TransAct Technologies 2016 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 these 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 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 Web site. At this time, I would like to turn the call over to Bart Shuldman. Bart?

Thank you, Jim, and welcome to everyone for joining us on this afternoon’s conference call and webcast. This afternoon, we reported 2016 third quarter revenue of 14.5 million, operating income of 1.2 million and EBITDA of 1.6 million. Steve will review the financials in more detail in a few minutes, but first I would like to provide some high level comments about the quarter and about our business prospects for the balance of the year. As I mentioned during my prepared remarks last quarter, TransAct celebrated its 20th anniversary as a public company when we rang the NASDAQ closing bell in late August. Over the course of more than 20-year history, TransAct has developed into an innovative provider of print technology and software-based solutions that use printers as an output to a variety of high-growth industries; including casino and gaming, food safety, point-of-sale automation, lottery, oil and gas exploration and mobile. In addition, we have continually adapted to the various changes seen in our markets during that time. Today, food safety is our most exciting long-term opportunity. Our food safety terminal business is centered on our line up of three AccuDate terminals; the AccuDate 97, the AccuDate PRO and the AccuDate XL. This fully featured suite of products provide TransAct with the ability to serve the entire range of food service operators, from the smallest quick service and convenience store operators to nationwide chains that operate hundreds of full service restaurants and/or thousands of individual quick serve and fast casual store locations. Our solutions address the variety of operational challenges that exist in the industry. The AccuDate 9700 targets those restaurants and other food service establishments that primarily want a solution for food rotational labeling. The AccuDate PRO is the center of the kitchen terminal solution with enhanced features such…

Thanks, Bart. Good afternoon, everyone. 2016 third quarter net sales were 14.5 million compared to 14.2 million in the year ago quarter. As Bart mentioned, we saw strong sales in our POS automation business and increasing interest in our AccuDate line of food safety terminals. During the quarter, we also completed a new installation of our Epicentral software-based promotion and bonusing print system and furthered our technology leadership position in the global casino gaming industry with new product introductions at the G2E show. Looking at our sales by market for the third quarter; food safety sales were $1 million, down 12% or $138,000 from last year's third quarter. While sales were down year-over-year and on a quarterly sequential basis, we continue to expand the total market opportunity for our food safety products while we work the current pipeline of opportunities. As we have said, we envision a multiyear rollout of our AccuDate terminals and believe the heightened focus on food safety in an operational cost efficiency across the food service industry will drive long-term growth. Thus, while TransAct is still moving through the early stages of defining and developing this new automated food safety market; near-term, year-over-year or sequential revenue comparisons will not be the optimal way to gauge our success in this business. POS automation and banking sales were up 27% or $600,000 to 2.9 million in the 2016 third quarter, as we again benefited from exceptionally strong sales of our Ithaca 9000 printer to McDonald's in support of their continued rollout of new menu and technology initiatives across the restaurant footprint worldwide. Given the traction for this product at McDonald's, we believe this current trend will continue through the remainder of 2016 and into 2017. Casino and gaming sales were up 28% year-over-year or 1.2 million to 5.6…

Thanks, Steve. Great analysis of our finances and what’s going on with sales and expenses in the business, so I thank you. As we close out 2016 and prepare for 2017, we believe TransAct has an exciting future ahead of us and we look forward to delivering of our promise of continued evolution in innovation. We really are creating this back-of-the house automation in food safety technology. And I really want to thank the hard working people at TransAct for their efforts, which have allowed the company to really expand into these high-growth, high-margin businesses. This has not been easy. There’s been a lot of work and a lot of technology and actually a lot of new people that we've added to be able to reach the level of complexity and solutions that our customers are asking of us. Their excitement in the product, especially on the engineering side, has just been amazing for me to watch and our sales people in bringing in these opportunities and working with these customers on how to pretty much automate their back-of-the house operations. It's quite exciting. Of course, I’d like to thank our shareholders for your continued support as we further transform and grow our business. This is not what I’d call the easiest times right now in this worldwide economy. Oil prices dropped pretty significantly today. We’ve got a pretty tough election out there. The macro environment is not all that great. And I really thank our shareholders for supporting us as we really transform TransAct into a total different business. I hope you remain as excited as we do. Operator, we’re ready to take on some questions.

[Operator Instructions]. Our first question comes from Kara Anderson with B. Riley & Company. Your line is open.

Hi. Good afternoon. Thanks for taking my question or questions. Let me start on food safety, and I know it’s not great to look at this on a quarterly basis as you said, but if you think about what you did in Q2 and what you did in Q3, can you talk about the strength in Q2 relative to Q3 whether it was due to a single of a bigger rollout or a broad based strength? And then if we saw somewhere the negative impact of that in Q3. Thanks.

Yes, a great question Kara and thank you. Thank you for joining us today. What’s happening with the business and I’m trying to create kind of what we see and what’s happening. As we entered the business with the 9700, which was truly a food rotational labeling system, multiple sized labels. You want to print what the expiration date is of lettuce or hamburgers or chicken. And as we have progressed this year, a lot of the projects have moved from the 9700 to the PRO and the XL. And the reason why – and that’s what we saw pretty much in Q2 and Q3, because Q2 still saw some pretty heavy 9700 business and in Q3 we started to see customers really move from the 9700 to the PRO. And that’s really happening because of the customer’s desire to see how much more this technology can do in regards to their operational needs in the back-of-the restaurant. And as they got to know the product and started asking questions, hey, by the way we do this; can we somehow use the terminal to do that? Our sales team said, yes, but you got to kind of move over to the PRO, because the 9700 was never designed to do that. And so what we’re seeing is this transfer of a lot of opportunities from 9700s to PROs and then actually eventually to XLs. We actually have certain customers, if you can believe this, bought the 9700; had told us they’re going to buy the PRO, use it for a year or two and then actually turn over to the XL once their integration of the software that they want to use is done. And the true automation of the back-of-the house occurs. But they’re willing to go from the…

So if I’m understanding correctly, it essentially lengthens the sales cycle a bit when they decide to make that switch?

No doubt.

Okay.

It’s providing a solution that locks us into the customer on many different levels. So, yes, it definitely has lengthened the sales cycle, no doubt.

Okay. And then shifting to Epicentral, I think previously you guys had commented that you expected two installations for the balance of this year. We saw one in the quarter. Are you still expecting one more in Q4?

We are. We have one customer that’s a bit challenging and we would like to see that order hit this quarter. I think the prospects are high but again, it’s a bit of a challenging customer for us and we’ll see what happens. I think the story of Epicentral is really what Bally asked us to do and now we’re seeing other casino software companies come to us in regards to using their bonusing engine, but their bonusing engine didn’t have any print capability, coupon capability and watching as some of the software companies utilize this new Epicentral SE. And that’s kind of exciting for us because they go out and sell the features of their bonusing system and then say, by the way we can turn them into printed coupons and we’ll bring in TransAct to do that.

In a way, would you think that the Epicentral SE would cannibalize potential sales for the full Epicentral suite or – I mean even if does that, is that okay given the market opportunity might be greater by integrating with these operators?

That’s another great question. It could. The pricing difference is not that big but it could. What we have done with customers, we have one in particular that we’re working with. They like what they can get from the SE. But the questions then becomes, hey, I’m limited by the amount of promotions I can do with the software I have. If I add in your Campaign Center, which is really the one thing that we take out of Epicentral SE, can I do more? And that’s where the conversation goes, of course you can. Because now we are so tied into the system and see the real-time transactions based on the information that they are now providing us, again the amount of promotions becomes almost endless. So then once they get hooked on the couponing and the rise in revenue that they’ll get from that, they’re realizing that there’s just so much – they’re limited by how many coupons they can do. And then we believe that they’ll come to us and say, hey, we want the Campaign Center. Sell us that, because we can do more. So we think it’s kind of an introduction and then we go in, and once they get hooked on the couponing – we’ve got one casino that went live a couple of months ago and they’re seeing really dramatic increase in revenue. They were going to run 1,000 coupons a day and now they’re running 3,000 a day because they’ve seen the revenue growth. We really want them to get hooked on coupons and then come to us and say, look, we want to do more so we need your Campaign Center.

That’s a casino that you had already utilized in Epicentral SE?

No. What we did is we’ve been meeting with the customer on the Epicentral SE. And they’ve come to us and said, look, we know we’re limited. How do we do more? And that’s when we said, well, you got to go to the full suite. And we believe that our first order could be SE but it could be the full suite of product, because they’re really wrestling with the limitation they have by just doing the SE.

Okay. And then also in the casino and gaming market, I know you commented that international is stronger and you benefit from two casino openings in Macau. How was your ship share fairing versus your competitors?

What we use, Kara, is – the only way for us to look at it is what the OEMs or what the slot manufacturers say in their earnings report and are they up or down, and then we can compare it to us. There’s no real statistic out there. If not holding share, growing share especially on the international side, because we won one casino that we’ve never had before, casino group, and this is our first casino within the casino group that we won. So we think we’re growing share. But that’s our opinion. There’s no industry information but we’re doing fine. And our Epic Edge was just a real homerun at the show for those that were there could experience the response of the market. There’s one guy in particular that is well known in the industry and came over to me – I think it was like Wednesday late afternoon and just came over and said, Bart, congratulations, you did it. You’ve really overtaken the competition that’s out there in technology, in support of the industry. I wouldn’t minimize the fact that our printer printing at 300 dpi really improves ticket acceptance in bill acceptors. And that’s been a real issue for casinos. They’re reading the bar code and in certain cases, it could be 90%, 92% read rate that could potentially go to 97%, 98% or 99%, and that’s a real homerun for the casinos. So just the fact that we would go in that direction and think about the casino and providing a solution, we just didn’t come out with – our competitor came out with a fix to their product. They didn’t come out with anything new. They’ve had quality reliability issues for years. We came out with a solution for the industry. We came out with a 300 dpi printer that will speed up the transaction and make the transaction more accurate. We came out with a flexible printer paper configuration that in some cases we have casinos that said, you know what, if we run a tournament, we want to use the Edge because in that location we’ll use the smaller paper, so we know who the tournament winners are. We got jurisdictions to have both VLTs and casinos and they’ve said to us, you know the VLTs will probably use the smaller ticket and the casinos will use the bigger ticket so we can know the difference between where the players have come from. And the response was just wonderful. So we really think that we’ve focused on the industry and solutions versus just focusing on fixing a printer that had reliability issues. So we’re very pleased where we are in what currently is kind of a choppy and difficult market.

All right. And then last question for me and then I’ll let somebody else take a shot. I think it’s been maybe a year since the exclusivity agreement with IGT has gone away. Have you made any progress on any business outside of IGT?

No. We’ve got a lot of irons in the fire. That’s going to be a long-term process because it’s not only the fact of the integration of the product but a lot of companies six months ago bid on contracts that will close a year from now. So if and when they integrate the product, those bids won’t – we won’t see the revenue for at least a year after that. So the bid packages are out a year ahead of time. So we’re not expecting – and we’ve said this the whole time, this is not something that’s going to be dramatic to the business. Food safety is going to be dramatic to the business. Epicentral will add significant margin and revenue to the business. The fact that we’ve been given the opportunity to sell our lottery technology around the world is a great opportunity, but it’s a long play. And it’s not only from the integration and installation, but then we got to get into the bid packages. And so it’s a long-term – if you want to talk about a long-term sales cycle, that’s a long sales cycle.

Okay, fair enough. Thank you.

You got it.

[Operator Instructions]. At this time, I’m showing no further questions. I would like to turn the call back over to Bart Shuldman for any closing remarks.

Thank you. Thank you everyone for joining us on the call this afternoon. To my friends in Chicago, good luck. To my friends in Cleveland, good luck. Tonight somebody will win the World Series after so many years of being left high and dry. I also look forward to select [ph] endings, so we can get back to focusing on other things. We do look forward to reporting back to you on further progress of our business when we report our fourth quarter results in early March. The fact that I won’t be talking to you for a couple of months, I do wish you and your family a happy and healthy and safe Thanksgiving. And also and probably the first time I’ll say it, a happy and healthy New Year. So we’ll talk again. Thanks for joining us today.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone, have a great day.