Good afternoon, ladies and gentlemen, and welcome to the TransAct Technologies' First Quarter 2019 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] I will now like to turn the call over to your host Mr. Jim Leahy of JCIR.

Thank you, Natasha and good afternoon and welcome to TransAct Technologies 2019 first 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 first quarter financial results. We'll 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 the 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 everyone joining on this afternoon's conference call and webcast. For the 2019 first quarter, TransAct had net sales of $11.6 million; operating income of $800,000; and adjusted EBITDA of $1.3 million, delivering a quarterly gross profit margin of 52.7%, diluted EPS for the first quarter was $0.10 per share. Of course Steve will review these financial results in more detail in a few moments. It should not be a surprise that the first quarter of 2019 was a very important period for TransAct as we launched our BOHA! back-of-house ecosystem and recognized initial contributions from this new platform in our financial results. I spent quite a bit of time discussing the specifics of the BOHA! ecosystem on our 2018 fourth quarter call shortly after its launch. So, I will focus my comments today on our ongoing progress, go-forward strategy, potential results, and outlook. Since the official launch in March, our BOHA! sales team has been working diligently with our current opportunities and engaging with potential new customers to educate them about the many ways our unique new solution can benefit both their back-of-the-house operations, and their overall profitability. Restaurants and food service providers face an environment where labor is hard to find and labor costs are rising quickly. In a recent article, I read one restaurant company has experienced 120% staff turnover and rising labor costs, while they grew their topline, rising cost drove a decline in earnings. Add to this rising food cost and we have a market ripe for the BOHA! platform. In April, we announced that we had commitments from 10 distinct customers to deploy approximately 240 BOHA! terminals in their operations. These commitments carry revenues from hardware, software, label sales and even service. A portion of the sales related to…

Thanks, Bart and Good afternoon, everyone. First quarter 2019 net sales were $11.6 million down 6% from $12.2 million in the first quarter last year. Looking at our first quarter sales by market restaurant solutions sales declined 11% year-over-year to $900,000. The decline was driven by lower sales of the AccuDate 9700 terminal to McDonald's in our forward distributor partially offset by higher sales of our new BOHA! Terminal. Both terminal sales were down, it's important to note that we recognized our first sales of other BOHA! hardware products such as handhelds and temperature probes as well as BOHA! software subscriptions during the quarter. As we moved forward restaurant solutions sales growth will reflect the rollout of new BOHA! Terminals and other BOHA! software as well as software subscription revenue, while TSG results will benefit from sales of TransAct labels and BOHA! service contract revenue. Casino and gaming sales were down 8% year-over-year to $5.5 million in the quarter. Domestic casino and gaming sales were down 18% from the prior year as the year-ago period included a large one-time shipment of gaming printers to IGT for use in the Swedish lottery installation. We also had one EPICENTRAL installation in the prior year period and done in the 2019 first quarter. Looking more broadly at the industry while we saw improved domestic printer sales in March, we experienced industry-wide weakness in both January and February that the March uptick just couldn't overcome. Sales in the international markets were up 18% over the prior year as increased sales to a large Asian customer in the quarter were somewhat offset by lower European sales. POS automation and banking sales were down 26% to $1.3 million in the 2019 first quarter. The decrease was driven by an expected continued slowdown in the pace of…

Thanks, Steve. Nice job. We are very excited by the long-term prospects for TransAct as 2019 progresses and we make headway in aggressively pursuing the BOHA! market opportunity. Our sales and marketing team is actively working to convert customer interest into trials, active trials into orders and contracts and orders and contracts into full-scale deployment of BOHA! hardware and software. As I said earlier, BOHA! is far and away the most exciting and lucrative opportunity in TransAct's history and we are confident that our execution against this market opportunity will allow us to deliver strong financial performance and drive significant shareholder value. Before I open the call to questions, I want to highlight our proxy statement which was filed in mid-April. You may have noticed the two highly qualified candidates were nominated for election the TransAct's Board of Directors. Haydee Olinger has already served on the Board for nearly a year and her experience in McDonald's is an ideal fit for our go-forward operations and she has just been a wonderful contributor at the Board. Manny Hilario, current President and CEO of The ONE Group Hospitality brings with him extensive restaurant and foodservice operational experience, which the Board believes will be critical as we further develop our BOHA! opportunity. The Board believes both Haydee and Manny, if elected, will be great assets to our company for long-term growth. As the shareholders elect these two new wonderful board members, I want to thank Graham Tanaka, who is retiring from the TransAct Board for his 20-plus years of service. His insight into technology, his discussions, very deep discussions about digital deflation and the importance of patents and his push for TransAct to provide more and more technology to our customers was so important from me and the direction we continue to set for the company. Graham, on behalf of all of us at TransAct, we thank you. And finally, as I do every quarter, I'll end my comments by thanking our shareholders for your support and your trust and I also thank the TransAct team for their great work. It is your passion, it is your dedication and hard work that truly makes TransAct what it is. Operator, we're ready for questions.

[Operator Instructions] Your first question comes from Mitchell Sacks of Grand Slam Asset Management.

Hey, guys. Congratulations on the quarter earnings. You mentioned early on the call about the large customers you're working with and kind of the revenue opportunities those present. Can you repeat those numbers, because I kind of didn't quite grasp at all?

Yeah. So, what I did. Mitch, I think it's important for us to try -- when we say that BOHA! is the largest opportunity for TransAct, I thought it important to try to put some numbers on that. Why do we believe that, right? We're at a period right now where we starting to hit the inflection point and we expect to begin to close some of these orders. We run a sales force -- sales program -- sales management program and we log every opportunity into that program and we define it as we go through the phase gates of -- the phases of beginning with the customer to closing an order. And what we did is we decided to add up all those opportunities that we're working on. And it does take into account the hardware, the software and we try to -- the sales force tries to estimate how many apps they'll buy at the beginning. Now granted each one of these customers are also potential customers for more apps. But we try to put into the equation the sales force puts down how many apps they think they're going at the beginning and then we when put in the labels that we think we're going to sell based on the usage that they've given us and also whether we're going to sell the maintenance contract or not. That number is approaching $100 million, right now.

Okay. Wow. And then you talked about -- I guess you have nine apps in the BOHA! you're going to be putting a 10th. Can you guys talk a little bit about the interim process between TransAct and their customers in terms of how these apps are being created and the ideas for the apps?

Yeah. Yeah. So, great question, Mitch. Thank you. When we got into this, remember we started with McDonald's in kind a -- for better words an easy process of just labeling food as they used it and put it back and need it to label it for food safety. But as we got involved with more and more customers that's when we started to uncover the fact that -- we started to hear the issue of labor and rising food cost and if I'm going to put this technology in I wanted to do more and I in the cloud. So we started asking questions how much more would you like to do what would you like to do? Where do you -- where are your pain points? Where are your issues that you would like to see automation? A great example is things like temperature taking, I was talking to our sales manager today and one customer that we're working very closely with told us today that it would normally take him four hours a day to measure the temperature of the food as they cook it and with our solution its down to an one hour. So, the restaurant companies told us what their pain points were and then we went and worked on the apps around that. So, we identified eight, nine different issues that we believe that we could solve using automation and digital and apps and all that. So, it was really an interim process. And then at a certain point, we had certain customers that really wanted to move forward with us as we explored this opportunity of this -- they didn't know it was going to be called BOHA! at the time, but this platform of apps. And those -- there were some…

Okay. And then final question. Just with respect to inventory. I noticed you guys are have been building inventory a bit over the last few quarters. Is that geared towards the BOHA! units in looking to have it available in advance? Or can you just kind of walk me through that a little bit?

Yes. Yes Mitch. No doubt. No doubt. So we're working with some pretty good-sized companies. And one thing that we have to remember in the printer world, our cost on our books are a lot lower than the cost of our terminals. So when you look at sticking so many terminals versus so many printers, of course our inventory cost is going to go up just because it's a different cost structure. But the important thing for us Mitch was to able to have terminals that once we got the go-ahead that we could rollout terminals, right? We didn't want to have to say to our manufactures "hey ship a man and tell our customers to wait." So we did load up on inventory, we did and though that inventory will rollout as -- our plan is to -- Steve can talk about it is that inventory will rollout and as we close these orders and roll up the terminals.

We're also stocking up on the other hardware items that we're beating to offer Mitch. Like the handhelds and tablets and temperature probes and those other items.

And we have sensors, we have a gateway. Those are all things that we need in stock as we close. And there are certain aspects of certain part -- there are certain parts in there are common themes in a lot of the restaurant companies that we're working with that they want. There is certain things that are -- it's -- the payback is so easy and quick that a lot of the companies are looking at the same technology with the same app that they want to rollout with. So we're stocking up some of that hardware to make sure that if those rollouts do happen, we have enough inventory for everybody.

Great. Thanks very much.

[Operator Instructions]

Is it fair to say, there is no more questions?

At this time, I will like to turn the call back to your speaker, Mr. Shuldman for further comments.

All right. I thank everybody for joining us on the call this afternoon. We look forward to reporting back to you on further progress in our business when we report our second quarter results in early August. Also, if you plan to be in Chicago next week for the NRA Show, please stop by our booth, we'd be happy to provide a demonstration of our entire BOHA! software and hardware platform and as in the proxy, I also invite you to our annual shareholders meeting at the end of May. With that, I thank everybody for -- to being on the call and we'll talk to you in a couple of months. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.