Greetings, welcome to TransAct Technologies' fourth quarter and full year 2023 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to Ryan Gardella, Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to TransAct Technologies' fourth quarter and full year 2023 earnings call. Today, we'll be discussing the results announced in our press release issued after market close. Joining us from the company is CEO, John Dillon; and President and CFO, Steve DeMartino. Today's call will include discussions of the company's key operating strategies, the progress of those initiatives, and details of the fourth quarter and full year 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 forward looking and actual results may differ materially. For a full list of risks inherent to the business of the company, please refer to the company's SEC filings, including its reports on Forms 10-K and 10-Q. TransAct undertakes no obligation to revise 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 the SEC Regulation [indiscernible]. When required, reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, can be found in today's press release as well as the company website. With that, I'll turn the call over to John.

Thank you, Ryan, and good afternoon, everyone. Thanks for joining us today. '23 has been a unique year for TransAct in many regards, and I'm happy to report that we closed it out with a fair amount of good news, and we believe that we are well set see increasing momentum in 2024. We reported $13.3 million for the fourth quarter and $72.6 million for the full year, reflecting results of changing dynamics in both of our main lines of business as we've been discussing in prior calls. On the FST side, food, service technology, we saw revenue of $4.7 million, that's up about 54% year-over-year and 11% sequentially, with the recurring component of that revenue of $3.2 million, up 33% year-over-year and 2% sequentially, both to a record high. As I discussed at length previously, FST was a major focus in our reorganization of TransAct Technologies, and we believe that we now have the right pieces in the right places, as we're now focusing on selling our efforts to the top thousand organizations in the US and their related operations abroad to sell BOHA!, the Back of the House Automation platform. Additionally, we launched our new BOHA! terminal [Technical Difficulty] and BOHA! Terminal 2, we call it [Technical Difficulty] in '23, and this is a high end enterprise grade solution, which will suitably be made for enterprise customers. And so, while we expect progress to be lumpy quarter to quarter as a small business would, we believe that we are seeing the first signs of momentum to build. And we sold 1,235 new BOHA! Terminals in the fourth quarter, bringing the annual total to 3,655 units sold during the year. We ended the year with a total of 14,514 online Terminals installed in the marketplace. We count that statistic…

Thank you, John, and thanks, everyone, for joining us today. I'd like to start by discussing our fourth quarter and full year '23 results in more detail. Total net sales for the fourth quarter were $13.3 million, which was down 26% compared to $8 million in the fourth quarter of 22. For the full year '23, total net sales were $72.6 million, which was up 25% compared to $58.1 million in '22, and within our financial outlook range we gave for the 2023 year. Sales from our Foodservice Technology market, or FST, for the fourth quarter were $4.7 million, which was up 11% sequentially and 54% compared to $3.1 million in the prior year period. For the full year, FST sales were $16.3 million, which was up 32% compared to $12.4 million in '22. These increases were largely due to higher terminal sales, including the launch and first sales of our new BOHA Terminal 2, as well as sales of centers and gateways to a new assisted living customer and higher recurring revenue. We sold 1,235 terminals in the fourth quarter '23 and ended the year with 14,514 net new terminals installed in the market. Our recurring FST sales, which include software and service subscriptions, as well as consumable label sales for the fourth quarter reached a record high $3.2 million, which was up 33% compared to $2.4 million in the prior year period. For the full year, recurring FST sales were $11.1 million, also a record high and up 28% compared to $8.7 million for the full year '22. Our ARPU for the fourth quarter of '23 was $926. That was up 15% compared to $806 in the fourth quarter of '22, but down slightly sequentially from $929 in the third quarter of '23. As a reminder, we're currently…

[Operator Instructions]. Our next question is from George Sutton with Craig-Hallum Capital Group. Please proceed.

Thank you. John, I wondered if you could walk through the decline quarter over quarter. Just give us a sense of the significance of the inventory issue in the quarter, relative to the competitive change in the quarter. And as you look forward to Q1, I think you're suggesting Q1 will be below Q4 in that segment. Is that correct?

Steve, you'll have to answer that.

Yeah, we're expecting that inventory overstock position that we experienced in Q4 is going to continue into the first half, but most of the effect we're going to see is going to be in the first quarter. So a lot of the OEMs really have just really slowed down, in some cases, turned off the orders for a quarter or so.

Yeah, it's interesting. We've been so supportive of our client base that they'd call us up and say, I need machines next week or tomorrow, and we can get them out to him. But when the supply shortage hit supply chain, they found they couldn't ship machines, whether they were getting the machines from us or they're getting from somebody else. And I wouldn't say they panic, but they overbought because if you making up $30,000 to $50,000 slot machine and you need a TITO printer, ticket-in, ticket-out printer, to basically handle the cards, and you don't have one whether you're getting it from us or from our main competitor, you can't ship that machine. So they went crazy, and the uncertainty in the supply chain caused them to place orders. And frankly, it was a happy problem we had. We were doing a little bit of arbitrage and triage trying to give people enough machines, so they could ship as the casino and gaming industry rebounded. But the net result is both we and our clients have increased inventory, and we're just going to have to work through that. And the good news is, all of our inventory is saleable, and frankly, I've been to Las Vegas lately and a lot of the casinos are back full tilt. We think that it's I just want a normal- - supply and demand disruption that will work its way out and stabilize probably towards the end of the year. And as we pointed out, we believe that we picked up about 15% to 20% in sustainable market share, given that our competitor was missing in action during this whole rigmarole with the supply chain. And we did not recede a little bit here and there, but not much yet. We expect them to be back. But the inroads we made, we believe we can keep most of them.

And just to be clear, Steve, did you say the revenues in casino this quarter were something you would anticipate as more normal going forward? Did I hear that correctly?

No, what I was saying was the revenue for the POS market, George, that would be the run rate for Q4, should be a similar run rate as we go into 2024.

Okay. I'm happy. I heard that incorrectly --.

Because you know, casino game is going to be lower in the beginning and it should ramp up as we go through the year once the customer, the OEMs work through their inventory issues, it should ramp again back to normal.

Yeah, and lastly, John, I wondered if you could just give us a sense of the 12 logos that you signed in the quarter and just the composition of them, what types of outlets are they and how significant if you fully roll out to them, would those be?

It's hard to predict just from a sales focus standpoint. We're not focusing on from an outbound standpoint on organizations that really can't place orders for 50 to 100 units minimum. There are some holdovers and we don't turn people away when they say, Hey, I really need these machines even if they're small. So we've got a mix in there. It's pretty much across the board. We mentioned that we had an interesting opportunity that we closed where we're monitoring refrigerators and storage for additionals in a retirement home setting, where you can imagine people are taking a lot of expensive medicines and a very small little reefer. Then, hallway goes out, you might lose thousands of dollars in medicines or you might risk providing a medicine that is damaged somehow because it is not too hot. So I'd say these things are some of that's residual from the organizational structure we had before. Some of the deals were in the pipeline, but I'd say it's a mix across the board, but I do think it represents some thousands of units over a period of time.

[Operator Instructions]. Our next question comes from Jeff Martin with Roth MKMV.

Could you give us an update and I know you've talked in the past you alluded to it brief very briefly this afternoon, but in terms of adding technologies, perhaps partnering with other technology providers or software companies on the BOHA! T2 terminal, are you seeing that become more prominent in the potential offering?

It's a keen focus of mine, but it's early days, so there really isn't any color commentary that would be meaningful at this point. And I'll point out that most -- first of all, in the foodservice technology space, this has not anything to be I know denigrating or pejorative, but they're technologically kind of laggards. They might be greater hospitality, great in a kitchen, great with cooking ingredients, and packaging, and all that, but they're kind of slow to adopt technology. And what's happened is -- as an industry we've realized that this is a place where we can make a lot of improvement. Minimum wages are going through the roof, labor's hard to get, and automation is possible, and we're hoping that this industry, which has a very, very large TAM, total addressable market. will grow. We are approaching it I think right way. We're delivering more what I would call fast. And by that, I don't mean software as a service solution as a service, no, we don't price it that way other than there are recurring components to the pricing model. But the idea here is that most of the other vendors are older software vendors and they've written a couple of apps that work. And then when you want to be a customer, they ship you a couple of tablets and a couple of printers in a box, maybe they're getting from Zebra and maybe they get it from Epson, and in some cases, they tried to put in a little plastic container. But you're stuck as a customer to figure this stuff out, find shelf space in the back of the house and the like, and we think that needs BOHA! Terminal that we have available now, the BOHA! Terminal 2 is a platform.…

Great, so John, your cellphone has been cutting in and out a bit throughout the call. I think we're done with that. It's things, but just as a has a fair warning.

Thank you.

My question relates to the types of end markets that you're I'm looking at when you talk about the pipeline being up -- 160% or so. Could you characterize the qualified near term 12-month pipeline in terms of maybe C-stores, QSRs, restaurant groups and the like?

Yeah, I don't have the specific numbers in front of me. We have a team dedicated to about four or five of the sub verticals. We have QSR, of course, we have casual and fine dining, we have grocery, we have grab-and-go, and we had food service management. I would say, from an opportunity standpoint, it's about even. Even though in some cases like a QSR could have 1,000 stores, 1,000 shops, whereas you do it in who's a foodservice management firm, I have a very different operation, not lots of units but big units. And so from a unit standpoint, it's pretty much spread evenly and the sales team is targeting each one of those. We've implemented some account-based marketing, which is sort of like looking at who you're trying to sell to and then who in that organization, do you need to know. And then how do we reach those people. And a little bit of color commentary [Technical Difficulty] I think Jeffrey have implemented and are continuing to enhance is essentially an average frac. A lot of companies if I talk to say that sounds great and they don't say no, and the math say anything at all, but really have not no, but not now. And is they may have five other projects underway; they might be building new distribution centers. We have one of our large, I guess, convenience store customers. Put a pause on buying our machines and our systems because they were reconfiguring their stores. Or and in the same case, they had a large acquisition they had to consume. But the point is, is that so we've got to nurture track where we actually stay in touch with these people, instead of letting them fall on the floor. And it's just good…

We have reached the end of our questions-and-answer session. I would like to turn the conference back over to John Dillon for closing comments.

Well, listen, I don't have a lot of extra things to say. We're excited about this quarter, even though the gaming and casino industry's been up and down. I'm disappointed that it's that way, but, you know, it's not broken. It's just that a disequilibrium. And all the system that disequilibrium usually regress to a mean or norm, and that's what we expect. We look forward to talking to some of you individually. And again, I will continue to focus on transparency and share as much as possible with you as I can. And godspeed and I appreciate your time and attention to this call, and we look forward to working with you through the quarter.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.