2016 Fourth Quarter Revenue of $13.6 Million
and GAAP Diluted EPS of $0.18; Full Year Revenue of $57.2 Million
and GAAP Diluted EPS of $0.47
TransAct Technologies Incorporated (Nasdaq:TACT) (“TransAct” or
the “Company”), a global leader in software-driven technology and
printing solutions for high-growth markets, today reported
operating results for the fourth quarter and full year ended
December 31, 2016, as summarized below:
Summary of 2016 Q4 and Full Year
Results
(In millions, except per share and
percentage data)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2016 2015
2016 2015 Net sales
$ 13.6 $ 12.1 $ 57.2 $ 59.7 Gross profit $ 6.0 $ 5.0 $ 23.8 $ 25.0
Gross margin 44.2% 41.5% 41.6% 41.9% Operating income $ 1.9 $ 0.5 $
5.2 $ 4.5 Net income $ 1.4 $ 0.5 $ 3.6 $ 3.1 Net income per diluted
share $ 0.18 $ 0.07 $ 0.47 $ 0.39 Non-GAAP(1): Adjusted
operating income $ 1.9 $ 0.5 $ 5.2 $ 6.2 EBITDA $ 2.3 $ 0.8 $ 6.5 $
5.9 Adjusted EBITDA $ 2.4 $ 0.9 $ 7.1 $ 8.1 Adjusted net income $
1.4 $ 0.5 $ 3.6 $ 4.2 Adjusted net income per diluted share $ 0.18
$ 0.07 $ 0.47 $ 0.54 (1) A reconciliation of each non-GAAP
financial measure to the most comparable Generally Accepted
Accounting Principles (“GAAP”) financial measure can be found
attached to this release. See “Non-GAAP Financial Measures” below
for a discussion of these metrics.
Bart Shuldman, Chairman and Chief Executive Officer of TransAct,
commented, “Sales growth for our AccuDate terminals, our casino and
gaming business and our lottery business, combined with our ongoing
focus on controlling costs, drove operating results growth in the
fourth quarter including a 12% rise in net sales, a 155% increase
in net income and a 156% rise in Adjusted EBITDA compared to the
fourth quarter of 2015. Our AccuDate terminal solutions continue to
gain customer traction following the successful expansion of our
portfolio to include the AccuDate 9700, PRO and XL. The significant
evolution of these products over the last several years, which we
have achieved with the help of the many customers with whom we have
engaged, has led us to design and introduce the AccuDate XL, a
restaurant and food service management solution that goes far
beyond the original food safety functionality. With this
significant opportunity in front of us and the innovative
technology we are providing, we are now renaming this market
opportunity as ‘restaurant solutions’. Our casino and gaming market
also concluded the year strong and we continued our product
leadership in this market by introducing the new Epic Edge printer
and the new Epicentral SE. The 2016 fourth quarter results
benefited from shipments to our international distributor to
satisfy increased demand for roll-fed thermal printers in an
expanding market for sports wagering in Europe and Australia as
well as from the expansion of an existing domestic Epicentral
deployment. Finally, our lottery business was again strong in the
fourth quarter as we successfully addressed increased global
demand.
“Throughout 2016, we made significant progress in growing our
restaurant solutions business, with total sales up 23% year over
year. With ongoing investments in product engineering and software
development in our AccuDate XL, TransAct now offers a full suite of
solutions with feature sets that can address the expanding range of
industry opportunities. Importantly, the momentum of customer wins
for each of our AccuDate terminals clearly demonstrates that the
marketplace is embracing the value and capabilities of this
product.
“During 2017, TransAct intends to build on the strong foundation
for our restaurant solutions business. Importantly, last week we
announced a partnership with Jolt to bring their cloud-based
software platform to the AccuDate XL, dramatically expanding the
potential market for our flagship product. With our current
software partners, the AccuDate XL is becoming a technology hub
that brings critical new solutions to restaurant and food service
operators as they seek to manage their operations, menus,
inventory, prep production and food safety, and grab ‘n go labeling
in a more effective and productive manner. We now believe the total
available market for our terminals is far larger than it was when
we originally launched the AccuDate 9700, particularly as
restaurants and other food service venues demonstrate increased
interest in the full system solution utilizing the new AccuDate XL
and associated software. With such a large market opportunity, we
are committing more resources to, and investing in, our internal
infrastructure dedicated to this business to build a world-class
sales force and implement a highly targeted and proactive direct
marketing campaign. We believe that ultimately this investment will
allow us to introduce the technology to the market, leverage our
software partner relationships, increase AccuDate terminal trials
and transition those trials to rollouts and revenue. While these
efforts require elevated investment beginning early in 2017 to
build our infrastructure ahead of an expected revenue ramp later in
the year, we believe this is the right time and strategy to allow
us to penetrate and lead this important and growing market for
TransAct.
“TransAct continues to be a leader in the global casino and
gaming equipment market with solid market share for casino, gaming
and lottery printers as well as for innovation. Our Epic Edge has
features not offered by any other provider of casino printers, such
as thermal printing at 300dpi, that drives higher acceptance with
currency through bill acceptors, and the new Epicentral SE allows
casino system software companies to use parts of our industry
leading technology to drive promotions and bonuses already included
in their software. We expect to benefit from this leadership
position in the year ahead, particularly as we begin shipments of
our new Epic Edge casino ticket printer and continue to gain
traction with our Epicentral bonusing solution.”
Mr. Shuldman concluded, “TransAct is on the path to unlocking
new value in our business as our cash flow generating casino,
gaming and lottery businesses provide a foundation for us to invest
in what we see as a significant, high-growth opportunity in the
restaurant solutions marketplace. As such, we believe 2017 will be
a year of sales growth that will support our goal of enhancing
shareholder value.”
Review of Balance Sheet and Capital Return
Initiatives
As of December 31, 2016, TransAct had approximately $2.5 million
of cash and cash equivalents and no debt. During the 2016 fourth
quarter, the Company paid a dividend to shareholders of $0.08 per
share and repurchased approximately 50,000 shares of its common
stock for total consideration of approximately $0.3 million,
resulting in a total return of capital to shareholders in the 2016
fourth quarter of approximately $0.9 million. Through its regular
quarterly dividend and the repurchase of common stock, TransAct
returned a total of approximately $6.0 million to shareholders in
2016. As of December 31, 2016, the Company had approximately $1.4
million remaining under its $5.0 million share repurchase
authorization.
Steve DeMartino, President and Chief Financial Officer of
TransAct, added, “We remain very excited by the evolving and
significant growth opportunity for our restaurant solutions market
and continue to invest appropriately to drive sales and make an
aggressive push to introduce the technology and the solutions to
the market. We expect that the cash flow generated by our casino
and gaming and lottery businesses will help fund our planned
investments and support our restaurant solutions growth initiative.
Importantly, while we plan to invest at a higher level primarily in
the first half of 2017 to build out our internal sales and
marketing resources for the restaurant solutions business, we
expect the benefit from these investments will be evident in the
second half of the year as our new selling strategies take hold. As
such, TransAct is positioned to grow our top and bottom line
results in 2017 while continuing to return capital to our
shareholders.”
Summary of 2016 Fourth Quarter Operating Results
TransAct generated 2016 fourth quarter net sales of $13.6
million compared with net sales of $12.1 million in the 2015 fourth
quarter. Restaurant solutions net sales (formerly referred to as
“food safety” in prior disclosures) increased $0.4 million year
over year to $1.7 million in the 2016 fourth quarter, reflecting
higher terminal sales to McDonald’s and growing traction with large
new restaurant brands. POS automation and banking net sales
decreased $0.7 million to $2.1 million in the 2016 fourth quarter
compared to the 2015 fourth quarter. While Ithaca 9000 POS printer
sales for McDonald’s initiatives remained strong in the 2016 fourth
quarter, the year-ago period reflected record shipments. Casino and
gaming net sales in the 2016 fourth quarter were $4.8 million
compared to $4.5 million in the prior-year period, reflecting flat
domestic sales and higher printer shipments to international
markets. Lottery printer net sales in the 2016 fourth quarter were
$2.6 million compared with $0.7 million in the 2015 fourth quarter
due to the timing of shipments to IGT, the Company’s primary
lottery customer. Printrex net sales were $142,000 in the 2016
fourth quarter compared to $229,000 in the prior-year period while
the Company’s TransAct Services Group generated net sales of $2.3
million in the 2016 fourth quarter compared to net sales of $2.7
million in the prior year period primarily due to a decline in
sales of consumables and spare parts.
Gross margin of 44.2% in the 2016 fourth quarter compared to
gross margin of 41.5% in the prior year period, reflecting a
favorable mix of higher-margin restaurant solutions terminal sales
in the overall revenue base. Total operating expenses for the 2016
fourth quarter decreased $0.5 million from the 2015 fourth quarter
to $4.1 million, as both engineering expenses and selling and
marketing expenses were down year over year.
TransAct recorded operating income of $1.9 million, or 14.1% of
net sales, for the 2016 fourth quarter compared to $0.5 million, or
4.0% of net sales, in the 2015 fourth quarter. Net income in the
2016 fourth quarter was $1.4 million, or $0.18 per diluted share,
compared to net income of $0.5 million, or $0.07 per diluted share,
in the prior-year period.
2016 Fourth Quarter Conference Call and Webcast
TransAct is hosting a conference call and webcast today, March
8, 2017, beginning at 4:30 p.m. ET. Both the call and the
webcast are open to the general public. The conference call number
is 678-825-8259 and the conference ID number is 69874838 (domestic
or international). Please call five minutes prior to the
presentation to ensure that you are connected.
Interested parties may also access the conference call live on
the Internet at www.transact-tech.com (select “Investor Relations”
followed by “Events & Presentations”). Approximately two hours
after the call has concluded, an archived version of the webcast
will be available for replay at the same location.
Non-GAAP Financial Measures
TransAct is providing certain non-GAAP financial measures
because the Company believes that these amounts are helpful to
investors and others in assessing the ongoing nature of what the
management views as TransAct's core operations. The Company
believes that the non-GAAP financial measures of EBITDA, adjusted
EBITDA, adjusted operating income, adjusted net income and adjusted
net income per diluted share provide relevant and useful
information, which is widely used by analysts, investors and
competitors in the Company’s markets, as well as by the Company’s
management in assessing the Company’s performance. These non-GAAP
measures exclude the effect in the applicable periods presented of
certain items that are contained in the tables included with this
release. These non-recurring items, which include the impact of
legal fees incurred during the first half of 2015 related to the
now-settled lawsuit with Avery Dennison Corporation, have been
excluded from non-GAAP financial measures because management does
not believe that they are representative of underlying trends in
the Company's performance. Their exclusion provides investors and
others with additional information to more readily assess the
Company's operating results. The Company uses the non-GAAP
financial measures internally to focus management on the results of
the Company's core business. The presentation of this additional
non-GAAP information is not considered superior to or a substitute
for, and should be read in conjunction with, the financial
information prepared in accordance with GAAP.
EBITDA is defined as net income before net interest expense,
income taxes, depreciation and amortization. A reconciliation of
EBITDA to net income, the most comparable GAAP financial measure,
can be found attached to this release.
Adjusted EBITDA is defined as net income before net interest
expense, income taxes, depreciation, and amortization and is
adjusted for share-based compensation and the impact of legal fees
related to the lawsuit with Avery Dennison Corporation in 2015. The
Company adjusts EBITDA for share-based compensation as the Company
considers share-based compensation to be a non-cash expense similar
to depreciation and amortization, and believes that it provides
investors with an additional measure of the Company’s liquidity. A
reconciliation of adjusted EBITDA to net income, the most
comparable GAAP financial measure, can be found attached to this
release.
EBITDA and adjusted EBITDA provide the Company with an
understanding of one aspect of earnings before the impact of
investing and financing charges and income taxes. EBITDA and
adjusted EBITDA may be useful to an investor in evaluating the
Company’s operating performance and liquidity because this measure
is: (i) widely used by investors to measure a company’s operating
performance without regard to items excluded from the calculation
of such measure; (ii) a financial measurement that is used by
lenders and other parties to evaluate creditworthiness and
liquidity; and (iii) used by the Company’s management for various
purposes including strategic planning and forecasting, assessing
financial performance and liquidity, and paying incentive
compensation.
Adjusted operating income is defined as operating income
adjusted for special items that are not normal to our business or
recurring in nature (the impact of legal fees related to the
lawsuit with Avery Dennison Corporation incurred in 2015). The
Company adjusts for these legal fees because the Avery Dennison
lawsuit does not relate to the Company’s core business and because
it believes that eliminating the legal fees helps investors
understand, assess and develop expectations for the Company’s core
business. A reconciliation of adjusted operating income to
operating income, the most comparable GAAP financial measure, can
be found attached to this release.
Adjusted net income is defined as net income adjusted for the
tax-effected impact of special items that are not normal to our
business or recurring in nature (legal fees related to the lawsuit
with Avery Dennison Corporation incurred in 2015). A reconciliation
of adjusted net income to net income, the most comparable GAAP
financial measure, can be found attached to this release.
Adjusted net income per diluted share is defined as adjusted net
income divided by diluted shares outstanding. A reconciliation of
adjusted net income per diluted share to net income per diluted
share, the most comparable GAAP financial measure, can be found
attached to this release.
Adjusted operating income, adjusted net income and adjusted net
income per diluted share provide the Company with an understanding
of the results of the primary operations of the business by
excluding the effects of special items that are not normal to our
business or recurring in nature (legal fees related to the lawsuit
with Avery Dennison Corporation) that do not reflect the ordinary
earnings of the Company’s operations. The Company uses these
measures to evaluate period-over-period operating performance
because the Company believes this provides a more comparable
measure of its continuing business as it adjusts for special,
nonrecurring items that are not reflective of the normal results of
the business. These measures may be useful to an investor in
evaluating the underlying operating performance of the Company’s
business.
About TransAct Technologies Incorporated
TransAct Technologies Incorporated is a global leader in
developing software-driven technology and printing solutions for
high-growth markets including restaurant solutions, POS automation,
casino and gaming, lottery, mobile and oil and gas. The Company’s
solutions are designed from the ground up based on customer
requirements and are sold under the AccuDate™, EPICENTRAL®, Epic®,
Ithaca®, RESPONDER and Printrex® brands. TransAct has over 3.0
million printers and terminals installed around the world and is
committed to providing world-class service, spare parts and
accessories to support its installed product base. Through the
TransAct Services Group, the Company also provides customers with a
complete range of supplies and consumable items both online at
http://www.transactsupplies.com and through its direct sales team.
TransAct is headquartered in Hamden, CT. For more information,
please visit http://www.transact-tech.com or call (203)
859-6800.
Forward-Looking Statements
Certain statements in this press release include forward-looking
statements. Forward-looking statements generally can be identified
by the use of forward-looking terminology, such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe" or
"continue" or the negative thereof or other similar words. All
forward-looking statements involve risks and uncertainties,
including, but not limited to, customer acceptance and market share
gains, both domestically and internationally, in the face of
substantial competition from competitors that have broader lines of
products and greater financial resources; our competitors
introducing new products into the marketplace; our ability to
successfully develop new products; our dependence on significant
customers; our dependence on significant vendors; dependence on
contract manufacturers for the assembly of a large portion of our
products in Asia; our ability to protect intellectual property; our
ability to recruit and retain quality employees as the Company
grows; our dependence on third parties for sales outside the United
States, including Australia, New Zealand, Europe, Latin America and
Asia; the economic and political conditions in the United States,
Australia, New Zealand, Europe, Latin America and Asia; marketplace
acceptance of new products; risks associated with foreign
operations; the availability of third-party components at
reasonable prices; price wars or other significant pricing
pressures affecting the Company's products in the United States or
abroad; risks associated with potential future acquisitions;
the risk that our new line of food safety and oil and gas products
will not drive increased adoption by customers; and other risk
factors detailed in TransAct's Annual Report on Form 10-K and other
reports filed with the Securities and Exchange Commission. Actual
results may differ materially from those discussed in, or implied
by, the forward-looking statements. The forward-looking statements
speak only as of the date of this release and the Company assumes
no duty to update them to reflect new, changing or unanticipated
events or circumstances.
TRANSACT TECHNOLOGIES INCORPORATED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited) Three
Months Ended Twelve Months Ended (In thousands,
except per share amounts)
December 31, December 31,
2016 2015
2016 2015 Net sales
$
13,603 $ 12,116
$ 57,235 $ 59,676 Cost of
sales
7,587 7,082
33,436 34,698 Gross profit
6,016 5,034
23,799
24,978 Operating expenses: Engineering, design
and product development
967 1,105
4,425 3,599 Selling
and marketing
1,447 1,746
6,907 7,806 General and
administrative
1,678 1,702
7,267 7,367 Legal fees and
settlement expenses associated with lawsuit
-
-
-
1,738
4,092 4,553
18,599 20,510 Operating income
1,924 481
5,200
4,468 Interest and other income (expense):
Interest, net
(8 ) (5 )
(26 ) (28 )
Other, net
(17 ) 3
(4 ) 2
(25 )
(2 )
(30 ) (26 ) Income
before income taxes
1,899 479
5,170 4,442 Income tax
provision (benefit)
543 (53 )
1,553 1,350 Net income
$
1,356 $ 532
$ 3,617
3,092 Net income per common share: Basic
$ 0.18 $ 0.07
$ 0.48 $ 0.40 Diluted
$ 0.18 $ 0.07
$ 0.47 $ 0.39
Shares used in per share calculation: Basic
7,423 7,818
7,610 7,818 Diluted
7,454 7,931
7,655 7,854
SUPPLEMENTAL INFORMATION – SALES BY SALES UNIT:
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2016
2015
2016
2015
Restaurant solutions
$ 1,656 $ 1,230
$
5,162 $ 4,191 POS automation and banking
2,111
2,769
10,518 8,838 Casino and gaming
4,802 4,518
21,006 21,755 Lottery
2,602 701
9,913 9,468
Printrex
142 229
540 1,381 TransAct Services Group
2,290 2,669
10,096 14,043 Total net sales
$ 13,603 $ 12,116
$
57,235 $ 59,676
TRANSACT
TECHNOLOGIES INCORPORATED CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31,
December 31, (In thousands)
2016 2015
Assets: Current
assets: Cash and cash equivalents
$ 2,503 $ 4,473
Accounts receivable, net
10,585 7,174 Inventories
9,707 11,296 Other current assets
372
437 Total current assets
23,167
23,380 Fixed assets, net
2,241 2,507
Goodwill
2,621 2,621 Deferred tax assets
3,432 3,145
Intangible assets, net
545 888 Other assets
36
28
8,875 9,189
Total assets
$ 32,042 $ 32,569
Liabilities and Shareholders’ Equity: Current
liabilities: Accounts payable
$ 4,894 $ 2,642 Accrued
liabilities
2,394 2,838 Income taxes payable
19 245
Deferred revenue
117 604 Total
current liabilities
7,424 6,329
Deferred revenue, net of current portion
67 77
Deferred rent, net of current portion
178 189 Other
liabilities
264 246
509 512 Total liabilities
7,933 6,841 Shareholders’
equity: Common stock
112 112 Additional paid-in capital
29,701 28,921 Retained earnings
24,157 22,956
Accumulated other comprehensive loss, net of tax
(109
) (80 ) Treasury stock, at cost
(29,752
) (26,181 ) Total shareholders’ equity
24,109 25,728 Total liabilities and
shareholders’ equity
$ 32,042 $ 32,569
TRANSACT TECHNOLOGIES INCORPORATED
RECONCILIATION OF NON-GAAP EARNINGS
FINANCIAL MEASURES TO CORRESPONDING
GAAP FINANCIAL MEASURES
(Unaudited, thousands of dollars, except percentages and per
share amounts)
Three months ended
December 31, 2016
Adjusted
Reported
Adjustments(1)
Non-GAAP
Operating expenses $ 4,092 $
-
$ 4,092 % of net sales 30.1 % 30.1 % Operating income 1,924
- 1,924 % of net sales 14.1 % 14.1 % Income before income
taxes 1,899 - 1,899 Income tax provision 543 - 543 Net income 1,356
- 1,356 Net income per diluted share $ 0.18 $ - $ 0.18
(1) No adjustments.
Three months ended
December 31, 2015
Adjusted
Reported
Adjustments (2)
Non-GAAP
Operating expenses $ 4,553 $
-
$ 4,553 % of net sales 37.6 % 37.6 % Operating income 481 -
481 % of net sales 4.0 % 4.0 % Income before income taxes
479 - 479 Income tax provision (benefit) (53 ) - (53 ) Net income
532 - 532 Net income per diluted share $ 0.07 $ - $ 0.07
(2) No adjustments.
TRANSACT TECHNOLOGIES INCORPORATED RECONCILIATION
OF NON-GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
GAAP FINANCIAL MEASURES
(Unaudited, thousands of dollars, except percentages and per
share amounts)
Twelve Months Ended
December 31, 2016
Adjusted
Reported
Adjustments(3)
Non-GAAP
Operating expenses $ 18,599 $ - $ 18,599 % of net sales 32.5 % 32.5
% Operating income 5,200 - 5,200 % of net sales 9.1 % 9.1 %
Income before income taxes 5,170 - 5,170 Income tax
provision 1,553 - 1,553 Net income 3,617 - 3,617 Net income per
diluted share $ 0.47 $ - $ 0.47
(3) No adjustments.
Twelve Months Ended
December 31, 2015
Adjusted
Reported
Adjustments (4)
Non-GAAP
Operating expenses $ 20,510 $ (1,738 ) $ 18,772 % of net sales 34.4
% 31.5 % Operating income 4,468 1,738 6,206 % of net sales
7.5 % 10.4 % Income before income taxes 4,442 1,738 6,180
Income tax provision 1,350 608 1,958 Net income 3,092 1,130 4,222
Net income per diluted share $ 0.39 $ 0.15 $ 0.54
(4)
Adjustments include $1,763 of legal and other expenses
partially offset by a $25 reversal of accrued settlement expenses
related to the lawsuit with Avery Dennison Corporation. Such
adjustments were tax effected using an effective tax rate of 35%.
TRANSACT TECHNOLOGIES INCORPORATED RECONCILIATION
OF EBITDA AND ADJUSTED EBITDA
TO CORRESPONDING GAAP FINANCIAL
MEASURES
(Unaudited) Three Months Ended
Twelve Months Ended (In thousands)
December 31,
December 31,
2016
2015
2016
2015
Net income
$ 1,356 $ 532
$ 3,617 $
3,092 Interest expense, net
8 5
26 28 Income
tax provision (benefit)
543 (53 )
1,553 1,350
Depreciation and amortization
369 349
1,331 1,426 EBITDA
2,276 833
6,527 5,896 Share-based compensation
expense
138 111
611 488 Legal fees and settlement
expenses associated with lawsuit
-
-
-
1,738
Adjusted EBITDA
$ 2,414 $ 944
$ 7,138 $ 8,122
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170308005973/en/
Investors:TransAct Technologies IncorporatedSteve
DeMartino, 203-859-6810President and Chief Financial
OfficerorJCIRRichard Land, Jim Leahy, Joseph Jaffoni212-835-8500 or
tact@jcir.com
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