TransAct Technologies Inc (TACT) 2010 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the TransAct Technologies first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions. As a reminder, today's conference is being recorded. And now I would like to turn the conference over to Mr. William Schmitt of ICR. Please go ahead, sir.

Thank you, Melanie. Good afternoon and welcome to TransAct's first quarter 2010 results conference call. Joining us today from the Company are Mr. Bart Shuldman, Chairman, President and CEO, and Mr. Steve DeMartino, EVP and Chief Financial Officer. The format of the call will be a brief business review by Bart, followed by Steve providing details on the financials. We will then have time 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 risk factors inherent to the business and the Company, please refer to the companies SEC filings, including the Company's most recent report on Form 10-K for the year ended December 31, 2009. The Company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that happen after the call.

At this time I would like to turn the call over to Mr. Bart Shuldman. Please go ahead.

Thank you, Bill. Good afternoon, everyone, and thank you for joining us on today's call. We are very pleased by what transpired at TransAct for the first quarter of 2010. And if this quarter is any indication of how the rest of 2010 will go, it promises to be a good year for our Company, even as the economy slowly rebounds.

For the first quarter of 2010, revenue increased by 16% to $14.2 million. Our results in the first quarter of 2010 were led by growth of our casino and gaming sales in both the domestic and international markets.

But what we are truly pleased with is that we experienced solid revenue growth in both our international and domestic casino printer sales. I would like to focus on just the casino market for a moment, as I am sure our investors want to know how sales into our casino market have come back to grow our Company's revenues once again.

In fact, you should know the first quarter of 2010 has become the second-largest quarter in the Company's history for casino printer sales. After a very difficult 2009 in the worldwide casino market, mainly brought about by the global recession, we are now beginning to see a rebound in our worldwide casino printer revenue.

Part of this was due to our decision to enter the international casino market, as we've talked about many times. And that decision has paid off for TransAct. In the first quarter of 2010, our international casino printers saw an increase in sales of 89% from the first quarter of 2009.

But the most notable change in the first quarter of 2010 was from our domestic casino market, which saw revenues increase by 40% from Q1 2009. This solid growth in the first quarter of 2010 was accomplished, even though it is our understanding that shipments of slot machines into the domestic casino market this past quarter was actually flat. We believe we are gaining market share in what continues to be a slow recovery in the domestic casino market.

We believe the domestic casino environment is beginning to improve, and therefore we feel we could see some growth in slot machine shipments into the domestic market beginning in the second half of 2010. If it does begin to recover and grow, clearly we will be in prime position to capitalize on new orders, given our improved market position in the domestic casino market. I am truly pleased with the work our sales team did in both the international and domestic casino market this past quarter.

Now let's go through some highlights of the first quarter. For the first quarter 2010, we generated net income of $629,000, or $0.07 per diluted share, compared to net income of $121,000, or $0.01 per diluted share, in the prior year period. Our gross margin in the quarter increased 270 basis points, from 33.8% in the prior year quarter to 36.5% as the Company enjoyed the benefit of our transition to Chinese manufacturing for a full quarter, as well as a favorable sales mix. I will let Steve explain the financials in greater detail later in the call.

Now let's dive further into the results by market, starting with our casino and gaming market, where total sales were up 43% from the prior year quarter. International casino and gaming sales were up 48% from the prior year period and now account for over 60% of total TransAct casino and gaming revenue, another excellent quarter of performance from a rapidly expanding international market.

The growth was led by orders for the Epic 950 slot machine printer from Europe, Canada, and the Asia-Pacific rim, and we look forward to seeing the impact of our new distribution agreement in Latin America, which we just signed a few weeks ago.

On the domestic side, revenue in both our casino and gaming markets grew 36% from the prior year. However, as I just said a few moments ago, looking at just our domestic casino sales, revenue grew by 40%, as we believe we are gaining market share in what appears to be a flat slot machine sales market compared with the first quarter of 2009.

We also believe we are starting to see a better casino environment in the domestic market. This improved environment from a horrible 2009 is leading up to become positive about growth finally coming back to slot machine sales as casinos begin to replace their older slot machines on a more rapid basis than what we experienced this past quarter and all of 2009.

We do not want to get ahead of ourselves, but assuming that the rebound starts, we are in an excellent position with our casino printers to provide slot manufacturers with their new printing solutions due to our market share growth, as well as server port technology for those casinos that will be embracing server-based gaming. Our growth this past quarter, compared to what occurred in the domestic market, gives us much to be excited about going forward.

I am pleased with these results, as they do not reflect the opportunities we see for growth in both the international and domestic casino markets, as we have not felt the full impact of slot machine placement in places like Illinois, Canada, and Italy.

Moving on to our banking and point-of-sale markets, where sales were down 4% for the quarter to $2.4 million. However, we did experience solid growth in sales from our printers for McDonald's for both their grill initiative and also for the coffee and beverage printer initiative. Yes, both printers experienced growth in revenue from Q1 2009 to Q1 2010.

Focusing just on McDonald's for a moment, for the rest of 2010, we believe the grill solution will be the main revenue driver in our point-of-sale market as McDonald's begins a companywide program to have their stores upgrade to a new POS system. Let me explain.

The new POS system includes the grill initiative. The new POS system is both a software and hardware upgrade and change. Our Model 8000 thermal printer will be used with the new POS system in the grill area, as we will also be the receipt printer at the counter with their point-of-sale cash registers, and we'll also be the printer at the drive-through window as well.

In the US, McDonald's is requesting their Company-owned stores and franchisees to upgrade to the new POS software and hardware. From our perspective, the upgrade to this new system will drive the need for a minimum of five new printers per store, as I just explained. Some stores will actually require more, depending on how many drive-through windows they have, how many cash registers they use, and how many extra printers each store will want to have on their premises.

In analyzing the opportunity and potential revenue for TransAct, we must remember some stores already began to buy our Model 8000 printer. However, we have determined at least 7,000 stores will need all new printers, and others will need some new printers also.

So you can see this decision by McDonald's to change over to the new POS system, which includes the grill initiative, could have a meaningful impact on revenues as we enter the second half of 2010.

In terms of our banking sales, revenue was down 28% as we comped against the beginning of last year's large BANKjet 1500 order to our largest banking customer. On a positive note, in the first quarter of 2010, we did see our first volume of orders for our new BANKjet 2500 printer, which we believe will become a big sales producer for us.

Turning to our lottery market, lottery printer revenue rose 50% to $1.7 million from $1.1 million in the prior year quarter, primarily due to the timing of orders. As we mention on every call, lottery sales can vary significantly from quarter to quarter due to these timing things.

Looking at the rest of 2010, with our new GTECH agreement that we reached at the end of last year, we are expecting revenues in the back half of 2010 to be higher than the first half.

Now let's move on to TSG, our TransAct Services Group business, which our revenue declined 15% in the first quarter of 2010 compared with the first quarter of 2009. The decline was mainly due to a difficult comparison in our consumable sales as a result of unusually high inkjet cartridge sales to one customer in the first quarter of 2009.

To help understand that, as we shipped the many BANKjet 1500s last year to our largest banking customer, they also requested that we ship, and we sold, an additional six cartridges per printer to load up their bank branches with supplies. While we shipped lots of printers last year, we also shipped lots of extra cartridges at the same time. We expect this front-loading that they did to affect comparisons through the first half of 2010 and potential growth to begin again in the latter part of the second half of the year in cartridge sales.

In addition, we did experience lower sales of spare parts in Q1 2010 versus Q1 2009, strictly due to timing of orders from our larger customers, who buy lots of spare parts.

So to sum up, much of the strategic plan we put in place has started to come to fruition in the first quarter of 2010. Our gross margin improved significantly over the prior year quarter. Our move to China was a challenge but is turning into a big success for TransAct. And I can tell you we are not done with our work to continue to drive our manufacturing costs lower.

On the sales side, I'm extremely pleased with our results in the domestic casino market, with the prospects of growth returning to this market and our market share gains will only serve to continue to improve our financial results going forward.

I am pleased about the possibilities for the rest of 2010 and beyond. It does look promising. But, as always, we will stay focused on our strategy and execution.

Now, I know there will be questions once we end our talk regarding what we see for the rest of the year. While we do not give forward guidance, we do expect a stronger second half of 2010 than the first half. As we move into the second half of 2010, the Italian VLT market begins to ramp up, which will be a nice benefit to us. The grill and new POS system initiative at McDonald's should continue to roll along, and although the domestic casino and gaming market may take a year to get back to a normal replacement cycle, we are seeing new gaming jurisdictions open, and we believe our leading technology will allow us to continue to grow our market share.

On top of all that, the balance sheet remains pristine, with $10.7 million in cash and no debt. While we're always looking at opportunities to grow the Company through tuck-in acquisitions and are entering new markets, we remain prudent in our approach, given that the overall economic environment is still not yet back to a normal state. Until we find an opportunity that will provide long-term shareholder value, we are content to organically grow the Company and consistently improve our balance sheet.

At this point I turn the call to Steve, who will share the details of our financial results with you. Once finished, we will both be glad to answer any questions you have. Steve?

Thanks, Bart. Let's go over the first quarter financials. Our earnings per share for the first quarter of 2010 were $0.07 on a revenue of $14.2 million compared to EPS of $0.01 on $12.2 million of revenue in the first quarter '09.

Now let's discuss the details of the first quarter financial results. Our net sales for the first quarter of 2010 were $14.2 million, an increase of 16% from $12.2 million in the first quarter of '09.

As Bart has already nicely explained the ups and downs of our sales in each of our markets, I thought I would change it up a bit from our past calls and share some revenue statistics with you. During the first quarter of 2010, we shipped approximately 42,000 printers, which is a 35% increase in unit volume compared to the 31,000 units we shipped in the first quarter of '09. This increase in unit volume was led by the casino and gaming market, where our unit volume increased by 48% to a record quarterly high, which we think is quite impressive, given that the domestic casino market has not fully rebounded yet.

The average selling price of our printers declined by 3% to $264 per printer in the first quarter of 2010 compared to $273 per printer in the first quarter of '09. The slight decline in ASP was due largely to sales mix, as we sold more banking and legacy impact printers, which earned higher average selling prices than our other printers in the '09 period compared to the 2010 period.

Turning to gross margin, our gross margin in the first quarter of 2010 rose to 36.5% from 33.8% in the first quarter '09, an increase of 270 basis points. The reason for our gross margin improvement was twofold. First, we experienced a more favorable product mix, as we sold more higher-margin printers and fewer lower-margin consumable products in the quarter compared to last year. And second, we began to realize the positive effects from the transition of our printer production to China, which we completed in late '09.

Going forward, we expect to experience continued improvement in our gross margin as we move through 2010 and realize the full benefit from the completed move of our production to China.

Operating expenses for the first quarter of 2010 were $4.2 million, up 7% from $3.9 million in the first quarter of '09. Our operating expenses increased due largely to higher selling and marketing expenses, primarily from the addition of sales staff as well as higher sales commissions and travel expenses resulting from higher sales volume during the first quarter of 2010 compared to the first quarter of '09. We expect our operating expenses to be at or slightly above the Q1 run rate of $4.2 million throughout 2010.

Our operating income in the first quarter of 2010 rose to approximately $1 million, or 6.9% of net sales, from operating income of $200,000, or 1.5% of net sales, in the prior year quarter, as we leveraged the higher sales volume and gross margin for the quarter down to our operating income.

We recorded income taxes at an effective tax rate of 36.5% in the first quarter of 2010 compared to 34.2% in the first quarter of '09. Our effective tax rate for the first quarter of 2010 was unusually high because it does not include any benefit from the federal research and development tax credit, which is normally included in our rate, as this credit expired at the end of '09. As a result, we'll continue at this tax rate during 2010 until the tax credit is reinstated. If and when the credit is reinstated, we will record a favorable year-to-date catch-up adjustment in the period in which it is reinstated. If the R&D credit is not reinstated, we expect our effective tax rate for 2010 to be consistent with the first quarter of between 36% and 37%.

And on the bottom line, diluted EPS for the first quarter of 2010 was $0.07 compared to $0.01 in the prior year quarter.

Just a quick note. In the past, as a rule of thumb, we've told investors that for every $1 million of incremental revenue we gain, we typically drop between $0.02 and $0.03 per share to our bottom line. As you can see, for the first quarter of 2010, we actually came in at the high end of this range--$0.03 per $1 million of incremental revenue, as our sales were $2 million higher, and we delivered $0.06 more in earnings.

Now let's take a look at our balance sheet at the end of the quarter. Cash I'll talk about in detail a bit later.

Receivables were $8.2 million as of March 31, 2010, down from $9 million at the end of the fourth quarter of '09. Overall, the quality of our receivables remains excellent, though we continue to maintain our days sales outstanding in the 45- to 50-day range. Our net inventory balance rose to $8.5 million at the end of the first quarter of 2010, up $2.6 million, or 43%, from the end of the fourth quarter '09.

As you may recall, our inventory balance at the end of '09 was unusually low as we completed our production move to China and substantially depleted our stock of domestic piece part inventory. During the first quarter of 2010, we began to stock up on our supply of lower-cost, fully built, Chinese source printer inventory given our increased sales volume. Looking forward, we expect our inventory balance to continue to increase in the second quarter in anticipation of increased order flow and sales volume for the remainder of 2010.

Our accounts payable balance also rose by about $1.2 million, or 23%, to $6.2 million during the first quarter of 2010. This increase was directly due to our higher inventory purchases during the quarter. And in terms of debt, we continued to have no debt outstanding under our $20 million revolving credit facility with TD Bank.

Now looking at our cash flow, we had yet another quarter of solid, positive free cash flow, as our cash balance increased by $700,000 to $10.7 million at the end of the first quarter of 2010 from $10 million at the end of the fourth quarter '09. For the first quarter of 2010, we generated approximately $800,000 of cash from operations, largely due to the lower accounts receivable and higher accounts payable balances, partially offset by higher inventories for the reasons I explained earlier.

Our capital expenditures were approximately $200,000 for the first quarter of 2010 compared to about $100,000 for the first quarter of '09. The first quarter this year was a relatively low capital spending quarter for us. Based on our pipeline of planned development projects, we expect our capital spending to ramp up during the remainder of 2010 to our more typical full-year level of between $1.5 million and $2.0 million.

Depreciation and amortization totaled approximately $400,000 for both the first quarter of 2010 and 2009. Non-cash comp expense totaled approximately $200,000 for both the first quarter of 2010 and 2009. And lastly, looking at some of our financial metrics, our working capital increased to $21.5 million as of March 31, 2010, from $20.5 million at the end of '09. The increase in working capital was due largely to the increase in our inventories and cash balance, partially offset by the increase in accounts payable compared to the previous period.

Our current ratio was a solid 3.5 as of March 31, 2010, which was down just a bit from 3.7 at the end of '09. And our EBITDA for the first quarter of 2010 was approximately $1.6 million, which was double our EBITDA of $800,000 for the first quarter of '09.

In closing, the first quarter was a great start to the year, with rising sales volume and an improved gross margin aided by the completion of our Chinese manufacturing transition. For the remainder of the year, we expect to continue increasing our sales and expanding our gross margin compared to the prior year period, based on our current backlog of orders and forecast of order flow. Furthermore, we remain in prime financial position, with $10.7 million in cash and nearly $22 million in working capital on the balance sheet. We thank the entire TransAct team for a great first quarter of 2010 and look forward to continuing this excellent pace throughout the rest of the year.

And with that, I'll pass it back to Bart.

Thanks, Steve. Operator, we're open for questions.

Thank you. (OPERATOR INSTRUCTIONS.) And our first question is from Todd Eilers from Roth Capital.

Good afternoon, everyone. Can you hear me?

Yes, hey, Todd.

Hi, guys, excellent quarter. Just a few questions. I wanted to start off on gross margin, obviously a big uptick there for you guys. You mentioned benefiting from your China outsourcing as well as a favorable mix of products. Can you give us a sense for how much of those two, which was the greater contributor to the expansion there? And then with respect to mix, for the remainder of the year, should we expect a similar mix of products, or will that change as we move throughout the year?

Todd, it's Bart, and I'll let Steve come in if I make any mistakes here. But we are expecting the margin to pretty much hold. Depending on the volume, the margin could actually expand. As you know, the more revenue we put through, then the more that drops to the gross profit line. But we are expecting this margin to stay in these mid to high 30s.

When we look at the results for Q1, clearly, the move to China was a big help. As you know, we got rid of a lot of, lot of domestic parts that we had in the third and fourth quarter last year. And while we mixed and matched the parts to make the printers, we were able then to start with basically a full year this year with our Chinese manufacturing. And it really had a big effect.

Some of the sales mix, clearly shipping more casino printers helps us. But that also is product that we're now making over in China, so it all blends together, as this move to China was a big increase for us. Steven?

Todd, as the sales volume grows, we should be seeing some gross margin expansion.

Okay, that's helpful. I wanted to also talk about some new market activities. Obviously, Italy and Illinois are two big ones for you guys coming up. Can you maybe give us an update on your expectation for timing? Let's start off with Italy. Would you expect to ship any units at all in the second quarter? And then can you also talk about your relationships in that market and what you think your market share could be? Obviously, you have the exclusive with Spielo, but maybe to the extent that you can talk about some of your other relationships in that market, that would help as well.

Yes, so we shipped some printers in the first quarter to Italy. We will ship some printers in the second quarter, but most of them will go in the second half. So we saw some first, some second. Like I said, most will go in the second half.

Based on everything that we've won to date, and we actually just won one just the other day, we're expecting our market share to stay at 60%, if not above 70%, of the market. So we're still holding to what we said, I think, on our last call, where we are expecting our market share to be quite high in that market. And nothing has changed. In fact, like I said, we just won another account just the other day. So we're not expecting our market share to be below 60%, and it could go to 70% or more.

Okay. And with respect to the total market, roughly 50,000 units, would you anticipate the majority of those units to get shipped by the end of 2010, or how much of that should we see maybe in the first half of 2011? Just trying to get a sense for maybe the magnitude at this point in time, what your best guess is.

Yes. Best guess is that--what we've been told is most of them will ship this year, but it's really going to come down to the timing of the implementation of the system, Italy approving everything and, as you know, everything going as planned. But based on everything that we see in orders, I would say that a good 80% to 90% of our shipments will happen in the second half of this year. But it is down to what happens in Italy. In fact, this order that we just got told about yesterday or the day before will all ship in the September to October timeframe.

So it makes us believe it's all going to happen in the second half of the year. But again, it does come down to making sure that Italy, that nothing gets in the way of that. But again, our projections are that at least 80% to 90% of those sales happen in the second half.

Okay, perfect. And then just one last question, just moving to domestic markets. Obviously, Illinois will be a nice, new VLT market. Can you--at this point in time, I know they still need to award the system provider and all of that. But at this point in time, what's your best guess in terms of when you might start to ship some printers for product in that market? Do you anticipate any fourth quarter shipments or second half shipments for Illinois?

Todd, even though we have said we're going to have a bigger second half, we are not forecasting any Illinois orders for the second half. We are calling that a 2011 story. So we are not using any Illinois printers in our forecast for this year. Everything is, all that we're talking about in the second half of the year in our business continuing to grow does not take into account any printers into the Illinois market this year.

Okay, great. Thanks, guys. Appreciate it.

You're welcome.

Next we'll go to Debbie Slater from Slater Financial.

Good afternoon, gentlemen.

Hi, Debbie. How are you doing?

Very well, thank you, and I hope you're all doing as well. It seems like it from your report today. I have two questions. Can you quantify for us the scope of the size of the Latin American market now with this new relationship with Hanco? And do we have any orders in the pipeline now, or is this just in the implementation stages?

Actually, that's a great question, Debbie, and I appreciate you understanding the Latin American market. We just completed a pretty big trade show in Latin America, and the reports back are very positive. In fact, our sales team wanted to take the forecast up in the second half of the year based on the activity out there.

We have not quantified it, but we are talking about 15,000 to 20,000 printers going into that market, minimum. We already have some orders on the books. In fact, just the other day we heard that we won a casino, I think, in Peru, so we just won some business there.

It is a new market for us. It's exciting, and the reports back are quite positive. But we have not quantified exactly. It's a fragmented market, many different small countries out there. Maybe on the next call we can do a job of trying to quantify the unit volume that we think. But it's going to be in the 15,000 to 20,000 range.

Nice. My second question is simply what are the casino owners, what are you hearing in the domestic market?

I do spend a fair amount of time talking to the owners or to the operators of the casinos, and I read the reports. I read how they're doing. And our take on it is that results are improving, clearly, in certain areas. I wouldn't say Atlantic City's doing well, but Vegas is holding and doing better, and the locals market is starting to do better. And some of the casino owners that I've talked to are looking at increasing their budgets in the second half of the year. So we are optimistic, but patiently optimistic, that that comes through.

What we have heard from every casino operator is that they know that the new games drive incremental revenue to them. And every operator or every VP of slots that I talk to look at me and go, "Bart, if I only had the budget, I'd put more of these games on the floor," because they're driving incremental volume for them, incremental sales revenue for the casino.

So we're optimistic about the second half. I think that if you look at our results, Debbie, clearly we're pleased with 40% growth in the domestic market in a flat market. And even if the market was to stay flat or up 5% or 10% or 5% this year, you can see that our position in the market has improved, and therefore, our results should continue to improve all year.

It's a coiled spring. Eventually this market will turn back. We're still in a 20- to 25-year, probably, replacement cycle, maybe in the size 30-year. And this market will come back. And the good news is our position in the market is now much stronger than what it was just last year. Our market share is up.

So this year could be a story of good, solid market share gain, and the next year, or as we enter the second half of this year towards the end, and into next year, it will not only be the growth of the market coming back, but we're in a much stronger position in the marketplace.

Very good to hear. Thank you so much.

Yes, thanks, Debbie.

Next we'll go to [Terry Frank] of [T.F. Tracy and Company].

Hey, Bart.

Terry, how are you?

I'm doing well. I'm doing very well. I'd say an impressive quarter. I'm pleased with the promising discussion. And I've been a long-term investor. I've been around a long time, as you know, and I've watched some good quarters come and some poor quarters go, and it seems to me that except for a couple of runs, I think maybe in 2006 and 2008, and the stock had a run to 13 or 14 and, of course, the bear market in March '09, it had one big drop.

Otherwise, the stock is, in terms of the price of the stock, it's basically flat-lined for 5.5 years, which creates a reasonably stagnant price performance. And it seems to me we've got to figure out something. First of all, number one, it doesn't seem to me that the performance merits the potential compensation increase of either cash or warrants or stock, number one. Number two, I don't know why, or I would say could you or would you consider, with the cash flow, which is good, and the cash position, which is terrific, why not consider a $0.05 or $0.06 dividend for the stock? It obviously would probably affect the shareholder value, number one. And number two, it would increase the number of investors and companies who could consider looking and investing in the stock.

Terry, you bring up a good question about our cash position, how to use our cash position. And it's clearly something that, one, we have been working and building our cash position for the last year or two and really improving the balance sheet, which I think we've done, and done a very good job of.

I agree.

And the Company's sitting with almost $11 million in cash instead. But the question that you're asking, which is a very good one, is can we use it to enhance shareholder value? And clearly, it's a discussion at the Board level, so I can't get into the discussions at the Board level. But it's a good question, and it's one that we will continue to discuss at the Board level.

The big thing that we weigh, Terry, is using that powder to grow the Company long-term, which is can we buy a company, buy into a new market, buy some technology that will drive long-term shareholder value? First is, if we use it for a dividend or a stock buyback, what is the best way to use that cash? It is definitely a Board discussion, it is one that we'll continue to have. And when we decide what to do, we'll clearly share it with the shareholders.

But I do believe that the cash should be used to grow shareholder value. It's just which way do we do it? And if there's a way to buy technology or buy a bolt-on or a new market for us which looks promising and has the potential to continue to grow shareholder value, that's one way that we'll use it.

So we will continue to have that discussion, and then we'll continue to share what the decisions are at the Board level with the shareholders.

Thanks.

Yes, thanks, Terry.

(OPERATOR INSTRUCTIONS.) Next we'll go to Peter Caplan.

Hey, Bart, how are you?

Good, Peter.

Bart, almost two years ago, you guys announced the default status at IGT, which I believe expires next month. Can you comment on what the status of that is going to be? Is any decision made yet? Will that be extended?

The IGT relationship that we have doesn't end until the fall, so there's really nothing new to report other than you can see what's happening to our market share and what's driving that market share. So at this point, there's nothing to report other than a very good relationship with IGT.

Okay, thank you.

And it appears there are no further questions at this time. I'd like to turn the call back over to our speakers for any additional or closing remarks.

Yes, thank you, operator. Clearly, we're pleased with the first quarter results. Let me remind everybody that our annual shareholders meeting is 10 o'clock May 27 here in Hamden. If shareholders would like to attend, a good chance to see the new technology that we have. You can see our server port technology and some of the things that we're doing and get to meet the Board. It's here at 10 o'clock in Hamden, Connecticut. If not, I look forward to talking to everybody on our second quarter conference call in the summer. I thank everybody for joining us.

Ladies and gentlemen, that does conclude today's call. Thank you all for your participation.