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DATE
Thursday, Nov. 12, 2026
CALL PARTICIPANTS
- Investor Relations - Ryan Gardella
- Chief Executive Officer - John Dillon
- Chief Financial Officer - Troy Ingianni
TAKEAWAYS
- Net Sales -- $14.4 million, representing 10% growth year over year and a 4% sequential increase from the second quarter of 2026.
- Food Service Technology (FST) Revenue -- $6.4 million, increasing 33% year over year and 24% sequentially.
- FST Software Revenue -- $876,000, reflecting 61% growth year over year driven by price increases, contract renewals, and new account wins.
- FST Recurring Revenue -- $4.0 million, growing 24% year over year including software, label sales, and service subscriptions.
- Casino and Gaming Revenue -- $6.4 million, a decline of 11% year over year due to the cyclical timing of OEM orders and casino expansions.
- BOHA! Unit Sales -- 2,346 units, including 2,018 BOHA! Terminal 2 units and 328 workstation units sold during the quarter.
- Online BOHA! Terminals -- 22,600 units, increasing 26% year over year net of retirements.
- Gross Margin -- 46.4%, down from 49.8% in the prior year period primarily due to a shift in product mix toward lower-margin FST hardware.
- Adjusted EBITDA -- $289,000, compared to $669,000 in the third quarter of 2025.
- Year-to-Date Adjusted EBITDA -- $2.2 million, which management attributed to operational discipline and typical business seasonality.
- Net Loss -- $440,000, or $0.04 per diluted share, compared to net income of $15,000 in the prior year period.
- Operating Loss -- $415,000, representing a negative 2.9% operating margin.
- POS Automation Sales -- $733,000, growing 84% year over year and exceeding the company's normalized quarterly range of approximately $600,000.
- TransAct Services Group (TSG) Sales -- $900,000, up 14% year over year driven by higher spares revenue.
- Engineering and R&D Expenses -- $1.7 million, increasing 36% sequentially following the launch of the new BOHA! platform on Azure.
- Selling and Marketing Expenses -- $2.6 million, up 24% year over year due to trade show, consulting, and website marketing costs.
- Cash and Cash Equivalents -- $20.2 million, compared to $20.4 million at the end of 2025.
- Debt -- $3.0 million, representing the minimum drawdown on the company's revolving loan facility.
- 2026 Sales Guidance -- $55 million to $56 million, narrowed from the previous range of $55 million to $57 million.
- 2026 Adjusted EBITDA Guidance -- $1.5 million to $1.75 million, revised from the previous upper limit of $2 million.
- New FST Accounts -- four, providing entry into new food service venues during the third quarter.
- ARPU -- $740,000, increasing 10% sequentially but declining 7% year over year.
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RISKS
- Dillon warned that "we currently expect to see the softer demand environment continue for Casino and Gaming into the fourth quarter, also in line with last year," noting that seasonal variations impact the back half of the fiscal year.
- Ingianni noted that gross margins were negatively impacted by product mix, as "increased sales volume within the FST hardware business... generally carries lower gross margins relative to other product offerings."
SUMMARY
TransAct Technologies Incorporated (NASDAQ:TACT) reported third quarter revenue growth of 10% year over year, led by a 33% increase in the food service technology segment. Management highlighted a 61% surge in software revenue as the company transitions toward a recurring revenue model by monetizing its growing installed base of 22,600 online terminals. However, overall performance was affected by cyclical softening in the Casino and Gaming market and higher operating expenses related to the migration of the BOHA! platform to Microsoft Azure. The company revised its full-year guidance downward at the top end for both net sales and adjusted EBITDA to reflect expected continued weakness in gaming demand through the end of the fiscal year. Additionally, the Board of Directors is actively conducting a strategic review of the Casino and Gaming business and considering potential alternatives for the FST segment.
- Management engaged BofA Securities to assist in the strategic review process, which includes exploring a potential sale of the Casino and Gaming business or the FST business.
- CEO Dillon stated, "Our long-term aim... is to drive our FST installed base to about $100 to $200 per terminal for the software and the recurring support and related revenue that we achieve."
- The company transitioned its reporting metric from new logos to new FST accounts to provide a broader view of market expansion and sell-through opportunities.
- The new BOHA! platform migration to Microsoft Azure is intended to deliver faster enhancements, external system integrations, and improved disaster recovery capabilities.
- Management noted that software is now included in every sales conversation and sales compensation plan to support the transition to a higher-margin recurring revenue base.
- The company reported $120,000 in shareholder advisory costs during the quarter related to third-party legal and advisory fees in connection with shareholder activism.
- The Casino and Gaming segment continues to operate in a duopoly market characterized by high barriers to entry and a regulated environment.
INDUSTRY GLOSSARY
- BOHA!: A terminal and software suite combining hardware, an operating system, and thermal printing for food service automation.
- FST: Food service technology, a business segment focused on automated labeling and food safety solutions.
- HADR: High Availability and Disaster Recovery, technical protocols used to ensure system uptime and data recovery in cloud environments.
- TITO: Ticket in, ticket out, a technology used in slot machines to print and read barcoded vouchers for payouts.
- TSG: TransAct Services Group, the company's service and spare parts division.
Full Conference Call Transcript
Operator: Good day, and welcome to the TransAct Technologies Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ryan Gardella, Investor Relations. Please go ahead.
Ryan Gardella: Thank you. Good afternoon, and welcome to the TransAct Technologies Third Quarter 2026 Earnings Call. Today, we'll be discussing the results announced in our press release issued after the market close. Joining us from the company is CEO, John Dillon, and CFO, Troy Ingianni. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives and details on our 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 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 Forms 10-K and 10-Q. TransAct undertakes no obligation 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. 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 on the company website. And with that, I'll turn the call over to John.
John Dillon: Thanks, Ryan, and good afternoon, everyone. Thanks for joining us today. I'm pleased to report TransAct delivered a strong third quarter, led by broad-based growth within our food service technology, or FST, business. Total net sales for the company were $14.1 million (sic) [ $14.4 million ], up approximately 10% year-over-year and approximately 4% sequentially. Through 9 months, adjusted EBITDA was approximately $2.2 million, which we believe reflects our operational discipline, our normal seasonality and the typical cadence of the business. The results of the go-to-market and sales efforts on the FST side of the house are now becoming apparent. These results demonstrate momentum with solid year-over-year growth in hardware, software and labels.
Consistent with last year, we're seeing a seasonality -- a seasonally softer second half demand from Casino and Gaming, which I will walk through shortly. At the same time, and as we have said on many of these calls, our Casino and Gaming business is cyclical based on the forecasted timing of casino openings and expansions. FST revenue was $6.4 million, up 33% year-over-year and up 24% sequentially. All product lines within the FST business grew on a year-over-year basis. Most importantly, our FST software business continues to accelerate as we focus on building a recurring revenue base within our FST solutions business.
Software revenue grew 61% year-over-year and approximately 20% sequentially, driven by pricing actions, which we began implementing earlier this year that I discussed last quarter, unit sales growth to existing customers and winning new accounts during the quarter. As I said before, the days of bundling software for free just to close the hardware sale are behind us, we're delivering an integrated solution so that when we sell a terminal to a new or existing customer, we include software packages at an additional cost as all part of the contract. And across our existing book of business, we're working with customers to ensure that they're paying fair market value for the value of the software and the hosting services provide.
And our long-term aim, as I've stated before, is to drive our FST installed base to about $100 to $200 per terminal for the software and the recurring support and related revenue that we achieve. Applied to a growing base of business terminals, that level of monetization has the potential to unlock significant value for TransAct and its shareholders. FST recurring revenue, which includes software contract support services and labels was $4 million for the quarter, up 24% year-over-year. And in the third quarter, we sold 2,346 of the BOHA! units, bringing us approximately to 5,600 units sold on a year-to-date basis for 2026. That drove FST hardware revenue up to $2.4 million, up approximately 51% year-over-year.
Our older offline installed base of terminals continues to drive demand for upgrades. We ended the quarter with approximately 22,600 online terminals, up 26% year-over-year. So that growing base is the foundation of the software opportunity we're now actively monetizing, and we're encouraged by these early results. Labels also delivered another strong quarter, up about 15% year-over-year. Labels are margin accretive, and they deepen our relationships with customers. So as our terminal base grows, it supports both a growth in labels and software as well. And we do labels really well, and we plan to continue that focus on labeling. It's a key piece of differentiated long-term technology that we have, and it's a key part of our strategy.
On the technology side, our next-generation enterprise-grade BOHA! platform, which runs on Microsoft Azure, we launched it last quarter, as you know, and it's complete. It's up and running. It works. We're very pleased with the performance. And the new platform lets us bring requested enhancements to market faster, deliver integrations with other systems external to the BOHA! suite such as point of sale and provide enterprise-grade uptime and disaster recovery, HADR, across large multi-location deployments. So we believe we have the right platform, the right focus and the right team to continue driving the software transition forward. We also remain focused on the practical applications of AI. I know many investors care about AI.
Trust me, we're involved with it. It's a very helpful tool. It does a lot for us. We use it in how our engineers develop software, and we also use it in tools that we place into our customers' hands. We believe that our integrated hardware and software approach gives us a meaningful advantage in bringing these capabilities to market to solve real-world business problems. So we're pleased with what AI is doing for us, and we're going to continue to make investments there. As I mentioned last quarter, we are refining how we report new business to better reflect our growing footprint in the market. And there's a lot of different ways to report it.
But instead of reporting new logos, we -- which was not giving us a complete picture of the sell-in and the sell-through opportunity we have with partners and customers. So we're now going to provide the new number of FST accounts. And in the third quarter, we added 4 new FST accounts, which provide entrance into several new food service venues, and we're very pleased with that. When our customer accounts grow, we grow with them, and that expansion revenue requires far less sales investment, as you would understand, than winning a net new account from scratch. It's kind of part of the land and expand strategy that we've been using.
We're also seeing the benefits of the work we have done to strengthen our sales and marketing engine. Our lead generation is improving. Software is now part of every sales conversation and every sales compensation plan, and we believe those changes are beginning to show up in the results. Next, turning to Casino and Gaming. Revenue in the third quarter was $6.4 million, down approximately 11% year-over-year. As we've discussed on prior calls, the Casino and Gaming market is highly cyclical and can be a bit lumpy from quarter-to-quarter, and it's driven by OEM order timing, customer inventory levels and the pipeline for new casino openings and expansions and the timing of jurisdictional approvals for new rollouts.
All that stuff is hard to predict. So it kind of goes up and down, and that's kind of the nature of this OEM relationship we have with the TITO, ticket in, ticket out printers for the slot machines. Following strong demand in the first half of the year, we're seeing softer results in the second half, which is consistent with our trending in the back half of last year. We currently expect to see the softer demand environment continue for Casino and Gaming into the fourth quarter, also in line with last year. However, the fundamentals of this business are unchanged. It is a regulated market, high barriers to entry and a long-standing OEM customer base.
And we continue to operate in a duopoly market with recurring replacement cycle. Casino and Gaming remains a strong cash flow generator and a consistent contributor to earnings. Before moving on to the outlook for the remainder of the year, I want to touch on our strategic review process. As we announced last quarter, the Board of Directors initiated a formal strategic review related to the Casino and Gaming business. Management engaged BofA Securities as its financial adviser during the third quarter. We've been working closely alongside BofA as we continue to believe that exploring potential options is in the best interest of stockholders as we look to maximize value.
While the review is focused on Casino and Gaming business, the Board is also evaluating a broader range of strategic alternatives for the company, including alternatives involving the FST business. These alternatives may include a potential sale of the company's FST business, whether separately or as part of a broader transaction, if the Board determines that such an alternative may further enhance stockholder value. The company has not set a public timetable for the review, and there can be no assurance that the review will result in any transaction or strategic outcome.
We do not intend to disclose developments until our Board of Directors has approved a specific transaction or course of action or until otherwise we determine that disclosure is appropriate or required. Turning back to our outlook. We are revising our full year 2026 net sales outlook to $55 million to $56 million, bringing down the high end of our outlook from an earlier $55 million to $57 million. The primary driver behind this change is a softer fourth quarter for Casino and Gaming as prefaced by the softer third quarter we just experienced and more consistent with the Casino and Gaming results for the same period in the prior year.
As mentioned earlier, the casino business tends to demonstrate lumpiness based on a changing pipeline driven by forecasted casino openings and expansions. Given the softer top line, we're also refining the top end of adjusted EBITDA guidance. We're bringing down the top end of our adjusted EBITDA outlook for 2026 from $2 million to $1.75 million, thereby guiding to adjusted EBITDA for 2026 of $1.5 million to $1.75 million for the full year. We're pleased that we delivered a solid quarter. We sold 2,346 BOHA! units. We grew the quarterly software revenue by 61% year-over-year and delivered year-to-date adjusted EBITDA of approximately $2.2 million. We clearly laid out our strategy and focus in FST and continue to see positive results.
We're building a high-margin software-led recurring revenue business on a growing installed base, and we're working to execute that transition with disciplined capital allocation and the strength of a solid balance sheet. And with that, I'll turn the call over to Troy for a more detailed view of the financial results. Troy?
Troy Ingianni: Thanks, John, and thanks, everyone, for joining us today. Let's turn now to our third quarter 2026 results in more detail. Total net sales for the third quarter were $14.4 million, up 10% compared to $13.2 million in the prior year period. Net sales within FST were $6.4 million in the third quarter, up 33% compared to $4.8 million in the prior year period and up 24% sequentially from $5.2 million in the second quarter of 2026. We sold 2,018 BOHA! Terminal 2 units and 328 workstation units in the third quarter for a total of 2,346 BOHA! units, as John had mentioned.
Our FST recurring revenue, which includes software and service subscriptions as well as consumable label sales, was $4.0 million during the third quarter, up 24% compared to $3.3 million in the prior year period. As John also mentioned, software revenue was up approximately 61% year-over-year, driven primarily by price increases through contract renewals, additional units being sold to existing customers and the winning of new accounts. ARPU for the quarter was [ $740,000 ] up 10% sequentially since last quarter, but down 7% on a year-over-year basis. As we noted last quarter, ARPU has become less indicative of true software growth as our installed unit base expands.
While we continue to report ARPU this quarter, we plan to prospectively share metrics that better reflect our contractual software business going forward. Casino and Gaming sales were $6.4 million, down 11% compared to $7.1 million in the third quarter of 2025 and down 13% sequentially from $7.3 million in the second quarter of 2026. Casino and Gaming sales were negatively impacted in the quarter by natural variations in the cyclicality and the seasonality of the business. As John had mentioned, factors such as OEM order timing, customer inventory levels, projected new casino openings and expansions and the timing of jurisdictional approvals for new rollouts oftentimes impact our sales levels in any given quarter.
POS automation sales of our Ithaca 9000 printer for the third quarter were $733,000. This is up 84% compared to $399,000 in the prior year period. Ithaca 9000 sales were above our normalized range this quarter. Normalized range is approximately $600,000 per quarter, and we expect results going forward to be closer to that same range. That's kind of the sweet spot of around $600,000 per quarter. Moving to TransAct Services Group, or TSG, sales. For the third quarter, TSG sales were $900,000, up 14% from $792,000 in the prior year period. The increase was driven by higher spares revenue, which based on customer needs could be lumpy between periods. Moving down the income statement.
Our third quarter gross margin was 46.4% compared to 49.8% in the prior year period and down sequentially from 50.2% in the second quarter of '26. The reduction in gross margin was largely related to mix. It is driven by increased sales volume within the FST hardware business, which generally carries lower gross margins relative to other product offerings, combined with the decline in the sale of Casino and Gaming hardware, which generally carry higher gross margins relative to other offerings. We continue to expect our gross margin to be in the mid- to high 40% range for the full year of 2026.
Total operating expenses for the third quarter were $7.1 million, up 9% compared to $6.5 million in the prior year period. Further breaking down our OpEx, our engineering and R&D for the third quarter was $1.7 million, which was essentially flat compared to the prior year period. This was up 36% sequentially, however, due to the launch of the new BOHA! platform on Azure. Following the launch, certain consulting and technical support costs were required now that we control the source code, and John had mentioned this earlier. Total depreciation and amortization for the quarter was $277,000 compared to $163,000 in the prior year period and $138,000 in the second quarter of 2026.
Selling and marketing expenses for the third quarter were $2.6 million, up 24% compared to $2.1 million in the prior year period, but down from $2.7 million sequentially. The year-over-year increase reflects trade shows, consulting and website marketing costs, along with the hire of additional support staff. As we've said before, we look and we are continuing to invest in the BOHA! side of the house and really focusing on developing further our go-to-market strategy from a software standpoint. These increases were partially offset by lower incentive compensation. Lastly, our G&A expenses for the third quarter were $2.8 million, up 2% compared to the prior year period, essentially flat.
This was due to the slightly higher legal fees, partially driven by third-party legal and advisory costs related to shareholder activism during the quarter. During the quarter, we recorded an operating loss of $415,000 or negative 2.9% of sales compared to operating income of $14,000 or 0.1% of sales in the prior year period. On the bottom line, we recorded a net loss of $440,000 or $0.04 per diluted share for the third quarter of 2026 compared to net income of $15,000 or breakeven on a diluted basis in the prior year period. We recorded tax expense of $78,000 in the third quarter.
Our adjusted EBITDA for the quarter was $289,000 compared to $669,000 in the third quarter of 2025 and $514,000 in the second quarter of 2026. For the first 9 months of '26, our adjusted EBITDA totaled $2.2 million. Lastly, turning to our balance sheet. We ended the third quarter with cash and cash equivalents of $20.2 million compared to $19.4 million at the end of the second quarter of 2026 and $20.4 million at the end of 2025. In terms of our debt, we had $3.0 million outstanding borrowings on our revolving loan, unchanged from the end of the second quarter and since the end of 2025. That's the minimum that we draw down on the line.
Thank you for all your continued interest and the support. And with that, I'd like to turn the call back over to the operator for questions. Operator?
Operator: [Operator Instructions] The first question comes from Greg Burns with Sidoti & Company.
Gregory Burns: I just want to dig in a little bit more on the software attach rates. On the new BOHA! Terminal sales, is it now 100%? I know it can range in terms of the software packages that customers are taking. So maybe if you could give us a little bit of color on what you're seeing in terms of the level of software adoption on those new BOHA! Terminals that you're selling?
John Dillon: Well, we sell to new customers. We sell expansion units to existing customers, and we can sell software to installed units that are already installed within existing accounts. So to be frank, it's really all over the map. In some cases, we have contracts that provide some amount of revenue for software, and we renegotiate those. In some cases, the contracts provide some software for free for a period of time until that contract becomes due and then there's a renewal opportunity. If it were a net new customer, software is bundled in almost always.
If it's a customer that is expanding, opening new stores or something like that or they make an acquisition, then that's where we said there's a software conversation. And so in many cases, software goes with those terminals, but it may not be at the price that we expect over the long run. So candidly, it's still sort of up in the air, and we're not really in a position where we can say this is -- there's no model that exists that emerges from it. It's really a conversation with each client as we add them or each client that's already a client already. And it's kind of all over the map to be candid with you.
But it's good and it's growing, and we think -- we expect it will continue.
Gregory Burns: Okay. With the existing installed base, what are those conversations like? Are you getting any pushback? Are you finding you're able to upgrade them and get those software sales?
John Dillon: Well, again, that's kind of all over the map. It's like if you had a free trial and they call you up and say, "Well, guys, that 2-year free trial is over and now you have to pay. In some cases, the client says, well, that's a lot of units. We don't budget it. It's OpEx, and we're not prepared for it. So in many cases, it's us working with clients that in some cases, we've known for years and helping them adopt a software model that they never really experienced before from us. That said, almost all software today that's driven to organizations like this come as a Software-as-a-Service product and has a fee for it.
And then our personal lives, as you know, anybody who has a cell phone pays money for certain applications. So nobody is surprised, but they pushed back a little bit, and it's a negotiation, and we aim to get to harmony in a combination where they begin to pay for it. And I think of that as the camel's nose is in the tent because we have other software that we can offer, we can upsell, we can cross-sell, we can add new products. And that's really the future, a key future of the software for food service technology. But in each case, it's a conversation, and our sales team is doing a really good job.
They were a little nervous about picking up the phone and saying, hey, you know that stuff, you're using for free. Now you're going to have to pay for it. It doesn't go quite that coarse or that crass. But the reality is we're offering a great service. We've improved the quality of the service. We moved it from a colocation facility that didn't have HADR that's high availability and disaster recovery that we get from Microsoft's Cloud, their Azure product, their Azure Cloud. And so we're delivering a lot better service and we've got the software that's running and it's getting better and better kind of literally by the month.
So we make the argument that, hey, we're providing a service. It's really a small price to pay for the value you get. So value for service is tremendous. And most of the clients grudgingly say, you're right, and we're adding them kind of one at a time.
Gregory Burns: Okay. And then you added or you sold around 2,300 BOHA! Terminals. It looks like the connected terminals went up by only 800 -- around 800 sequentially. Was there an increase in churn? Could you just maybe give us a little bit more color on that dynamic?
John Dillon: Yes. Troy, do you want to speak to that because we are always looking at that and how we measure that.
Troy Ingianni: Greg, you're looking at the 2,346, the T2s and the workstations?
Gregory Burns: Right. That's what you sold in the quarter. And it looks like the -- what you report as the connected terminals only went up by 800. So it looks like there's maybe a little bit of increase in churn in the quarter.
Troy Ingianni: The T2 specifically.
Gregory Burns: Right.
Troy Ingianni: Yes, the T2s did go up by, I think that number of units, that's right. I think -- but the T2s were a heavier sell this quarter. Yes. You're looking versus the workstations, correct?
Gregory Burns: I might have my definitions not aligned with exactly what you're referring to. But I'm just looking at -- you reported a total number of Terminal sales of around 2,300. The online terminals only went up by 800. So it looks like there was some churn somewhere in the...
Troy Ingianni: Yes. So if you're looking sequentially, the T2s went from 1,600 to about 2,000, right? 1,618 to 2,018, so that's -- they're up 400. The workstations went up from 282 to 328 sequentially. Year-over-year, the T2s went from about 1,500 to 2,000. But what's happening is the off-line units are continuing to go offline and then they're updating with the T2s. And the same thing is happening with the T1s. The T1s are still online. But as they retire the T1s, we're replacing them with the T2s. And that's the ramp from the sequentially the 1,600 to the 2,000 on the T2s.
The offline units -- you refer to the offline units, we generally think of that as the older model legacy 9,700.
Operator: [Operator Instructions] Since there are no further questions, this concludes the question-and-answer session. I would like to turn the conference back over to John Dillon for any closing remarks. Please go ahead.
John Dillon: Well, all I'd like to say is thanks, everyone, for joining us. Happy to chat sometimes between quarters. If any of you want to have a conversation, happy to make time available. And with that, we'll sign off and say have a great rest of your day. Thank you very much.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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