TransAct Technologies Inc (TACT) 2011 Q3 法說會逐字稿

Welcome to the TransAct Technologies third quarter 2011 earnings conference call. Today's conference is being recorded. At this time I would like to turn thing to Mr. Garrett Edson.

Good afternoon and welcome to TransAct's third quarter 2011 results conference call. Joining us today from the Company are Mr. Bart Shuldman, Chairman and CEO, and Mr. Steve DeMartino, President and CFO. 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 Company's SEC filings, including the Company's most recent report on Form 10K for the year ended December 31, 2010. 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, sir.

Thank you, Garrett. Good afternoon, everyone and thank you for joining us on today's call.

Let me start by saying the third quarter of 2011 was quite unusual. We had some positive results. We had some negative results. And the typical order flow was much different than we normally experience. Let me explain. Revenues in our quarter normally start off slow as our customers buy a lot of printers at the end of the previous quarter. Then the next month they ramp up and continue to ramp up through the end of the quarter. The third quarter of 2011 was much different. July started off normal. But then in August, sales did not ramp up as usual. If you will remember, this was the time frame of the Washington budget fiasco. And from what we experienced, our customers just stop buying for the month.

In September, it continued for the first 10 days, and then orders just exploded. September revenue was very large, but as our results show, not large enough to make the shortfall we had in August. There is no doubt we see the continued weak macroeconomic environment, but as I just said, we have some very positive results and some not. We actually had a fantastic quarter with sales into our domestic casino and gaming market. In the face of what seems to be regular quarterly weakness in the domestic casino environment, we increased our revenues 59% from the prior year period. Needless to say, we continue to believe we are gaining significant domestic market share.

I'm also pleased to report the third quarter included shipments of our Epic 950 printer to the most recent high-profile casino opening in the United States, namely Aqueduct in New York City. We won the entire Aqueduct Casino project, and we shipped the first set of printers for Phase 1. We congratulate the Genting organization on their successful opening. And it was a fantastic job done by our domestic sales team in winning the first casino in New York City. We now look forward to shipping the remainder of printers in the opening of Phase 2.

Continuing with the positive results, in late August, we completed the acquisition of Printrex, the worldwide leading manufacturer of high-performance specialty printers primarily sold into the oil and gas exploration and drilling market, for $4 million in cash. This is a brand new market for Transact and Printrex is already making a material contribution to TransAct's results contributing nearly $500,000 in revenue in just six weeks, and providing solid gross margin, which are higher than our normal corporate average.

As mentioned on our prior call, we expect the Printrex transaction to be slightly accretive in 2011, net of one-time acquisition costs and fully accretive in 2012. We are very excited about Printrex's potential to contribute to TransAct's long-term share holder value. With that said, our domestic casino and gaming revenue increase and new Printrex sales could not make up for some difficult results we experienced in our lottery and point-of-sale banking markets.

Our revenues for the third quarter were $14.1 million, down 14% from the $16.4 million in third quarter of 2010. Earnings per share for the third quarter of 2011 were $0.09, which also includes about $200,000 in acquisition costs versus the $0.11 in the prior-year period. Without the one-time acquisition costs I just mentioned, our earnings per share would have been $0.10.

Now let's dive further into our results. In our overall gaming and casino market, revenue was approximately $5.9 million for the third quarter of 2011, up 16% from the prior year. As mentioned, we experienced a 59% increase in domestic casino and gaming sales, in the face of a struggling domestic market. We want to, again, believe we gained shift share during the quarter. We are hopeful that further expansion opportunities in Ohio, Maryland, Massachusetts, and Illinois will come to fruition shortly, which would provide a major boost to the overall domestic market and ultimately for ourselves.

On the international side, casino and gaming printer sales were down 9% from the prior year quarter, primarily due to a large order in the Asia Pacific market from the third quarter of 2010 that did not repeat this quarter. Excluding that one order, the Asia-Pacific market was relatively flat, and we continue to have high hopes for that region to provide significant business for TransAct. Asia also has future growth opportunities with Vietnam, Korea, and Japan on the horizon. On the positive side, European sales were up 18% from the prior year.

While I am talking about our gaming and casino market, I would like to provide an update on our Epicentral print system. We are coming off an excellent G2E trade show in Las Vegas just a few weeks ago in October where we introduce several new capabilities and modules for the system, including campaign center, which gives casino operators the ability to fully automate the use of the Epicentral system across the casino floor, and Mobile Player, which gives the ability to offer coupon choices to their players through a smartphone or iPad application. We think the response to the system and new modules was excellent.

The number of casinos we are quoting in going through the sales cycle has doubled since G2E just a month ago, and while we continue to say this is a software product that has a long sales cycle, we remain as positive and excited about the opportunity for significant revenue growth from our Epicentral print system as we have ever been. In addition, on our last conference call we mentioned that a US casino became the first to contract for the Epicentral print system. We expect this system will become operational during the fourth quarter.

Once live, the Epicentral print system will be connected to approximately 1,000 slot machines at the casino and on top of that, they are already in the process of replacing 30% of the printers on the floor with our Epic 950 printer to ensure that each slot machine will have the full capabilities of the system. We look forward to many more installations of Epicentral print system in the near future.

Moving onto our banking and point-of-sale markets, sales for the quarter were $2.8 million, down 44% from the third quarter of 2010. The decline mainly came from our POS market as McDonald's upgrade the grill and beverage initiatives in the US started to slow down as we had mentioned they would begin to on our last call. Going forward, we expect to see sales from McDonald's more concentrated on the international front as they ramp up the POS upgrade for the grill and combined beverage initiatives overseas.

Our banking market also declined during the quarter, as there were no major projects in the third quarter to counteract a large order we received in the prior year period. Giving ongoing issues with the banks, we would not be surprised to see the banking market to continue to be negatively affected in the upcoming quarters, as this is a project-by-project business.

Our lottery market generated revenues of $1.6 million, down 33% from the prior year period. We mentioned last quarter the considerable growth in the first half of the year was going to abate to more normalized levels. We expect another decline in sale in our lottery market during the fourth quarter, strictly due to the timing of orders from GTech. Now let's move to TSG, our Transact Services Group business, which saw a revenue decline 14% in the third quarter of 2011 compared with the third quarter of 2010. The decrease was mainly driven by 23% lower sales of consumables, as well as lower service revenues. The slowdown in consumable sales indicate to us of the lower amount of transactions occurring at the banks, as a lot of our ink jet cartridges are sold into that market for our installed BANKjet printers and other devices.

So to sum it up, it was rather an interesting quarter, as we did see significant increases in a couple of key areas, such as our domestic casino and gaming revenue and our gross margin, which was up 400 basis points from the prior year period. We also saw the first contributions of Printrex and we are very excited about this business and its potential to significantly contribute to Transact in the future.

Finally, we have not stopped innovating and we look forward to bringing you news in the near future about 3 new printers that we will be launching in mid-2012. One addresses a brand new market for Transact and another is with our new Printrex acquisition. I end by thanking our shareholders who continue to support our work and efforts and I also thank all of our Transact employees who have worked tirelessly in what can be a challenging global economic environment.

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

Thanks, Bart.

Let's go over the third quarter financials. Our earnings per share for the third quarter 2011 was $0.09 on a revenue of $14.1 million compared to EPS of $0.11 on $16.4 million of revenue in the third quarter of last year. Excluding certain transaction and other expenses related to the Printrex acquisition, which I'll explain a little later, our EPS for the third quarter 2011 would have been $0.10.

Now let's discuss details of the third quarter financial results. As Bart explained, our net sales for the third quarter of 2011 were $14.1 million, a decline of 14% from $16.4 million in the third quarter 2010. During the third quarter of 2011, we shipped 40,000 printers, representing a 21% decrease in unit buying compared to the 51,000 units we shipped in the third quarter last year. This decrease in unit volume resulted primarily from a 45% decline in unit volume from banking and point-of-sale markets and a 29% unit decline in our lottery market. These decreases were somewhat offset by a 13% increase in unit volume from our casino gaming markets.

Despite the decline in unit volume, the average selling price increased by 9% to $266 per printer in the third quarter 2011 from $245 per printer in the third quarter last year. The increase in ASP was due largely to favorable sales mix, as we sold more casino printers in the third quarter of 2011, as well as sales of Printrex printers, which have significantly higher average selling prices than our other printers.

Now turning to gross margin. Our gross margin third quarter 2011 was 37.9%, compared to 33.9% in Q3 2010, an increase of 400 basis points. Gross margin increase was primarily due to more favorable sales mix, as we sold proportionately more casino and gaming printers and fewer POS and banking and lottery printers that sell at much lower margins. I'd also like to note that sales of Printrex products also contributed to our gross margin improvement in the quarter, as the gross margin on Printrex products runs above our corporate average of 38%. Looking forward we expect gross margin for the remainder of the year to remain at or slightly above the 38% level.

Operating expenses for the third quarter of 2011 were $4.2 million, an increase of 8% from $3.9 million in the third quarter of last year, mainly driven by the acquisition of Printrex. Specifically, our operating expenses for the third quarter of 2011 included approximately $200,000 of transaction and integration expenses, as well as the amortization of intangible assets related to the acquisition of Printrex. Excluding these expenses, operating expenses increased only 2% compare to the third quarter of last year.

Looking forward to the fourth quarter, we do expect our operating expenses to be higher than in the third quarter for a few reasons. First, as we do every year, we expect to incur higher selling and marketing expenses in Q4, due to the G2E trade show expenses we incur in October. Second, Printrex will be in our results for a full quarter for the fourth quarter compared to only six weeks in the third quarter, so Printrex's regular ongoing day-to-day expenses for its engineering, sales and admin staff expenses will be higher to reflect a full quarter's worth of expenses, which is about a $200,000 increase. Third, we expect to incur amortization expense of about $100,000 per quarter on intangible assets acquired from Printrex beginning in the fourth quarter, which will carry into 2012. And finally, also related to Printrex we expect to incur an additional $100,000 of integration expense in the fourth quarter, as we complete the transition and consolidation of Printrex's ERP and accounting system to our Oracle system.

Looking on to 2012, we do expect to achieve operating expense synergies from Printrex of around a half a million dollars. Our operating income in the third quarter 2011 decrease to $1.1 million or 8% of net sales from $1.6 million or 10% of net sales in the prior year quarter. The decrease in our operating income and operating margin were primarily due to lower gross profit resulting from a 14% decrease in net sales, combined with higher operating expenses, largely from the acquisition of Printrex.

We recorded income taxes at an effective rate of 24.8% in the third quarter of 2011 compare to 34.1% in the third quarter of last year. Our effective tax rate for the third quarter this year was unusually low because it was favorably impacted by the recognition of $53,000 of certain discrete tax benefits. We now expect our effective tax rate for the full year 2011 to be between 33% and 34%. On the bottom line, diluted EPS for the third quarter 2011 was $0.09, compared to $0.11 per diluted share in the prior year quarter. However, as I mentioned previously, excluding the $200,000 transaction integration and amortization expenses related to our acquisition of Printrex, our EPS would have been a penny higher at $0.10.

Now let's take a look at our balance sheet at the end of the quarter. Cash we'll talk in detail a bit later. Receivables were $10.3 million as of September 30, 2011, down 1% from $10.4 million at the end of the second quarter 2011. Our receivables balance at the end of the third quarter included approximately half a million dollars of acquired Printrex receivables. Excluding the Printrex receivables, our receivables declined by $600,000, due primarily to a 19% decline in sales from the second quarter. Our inventory balance increased to $14.7 million at the end of the third quarter, up $2 million or 16% from the previous quarter. This was due largely to lower-than-anticipated sales volume. In addition, approximately $800,000 of the increase related to inventory acquired from Printrex.

Our accounts payable increased by about $200,000 or 4% to $5.4 million third quarter of 2011. The increase was mainly due to additional inventory purchases and the timing of payments made during the quarter. In terms of debt, we continue to have no debt outstanding under a $20 million revolving credit facility with TD Bank.

And now looking at our cash flow. Our cash balance decreased by $3 million or 28% to $7.9 million at the end of the third quarter from $10.9 million at the end of the second quarter 2011. Of course, the most significant use of cash in the third quarter was the purchase of Printrex for $4 million. This was somewhat offset by $800,000 reduction in receivables during the quarter. Looking forward, we expect our cash position to build to between $9 million and $10 million by the end of this year, which is close to the cash level we finished 2010 with, even after using $4 million of our cash to acquire Printrex and returning $2.1 million back to our shareholders through the repurchase of our stock.

Our capital expenditures approximately $209,000 for the third quarter of 2011; this compares to $346,000 of CapEx for the third quarter of last year. Based on our pipeline of planned printer projects including Epicentral software development and Printrex's new product development, we expect our CapEx for 2011 to be about $1.3 million. Depreciation and amortization totalled $421,000 for the third quarter of 2011 and $385,000 for the third quarter 2010. Our Q3 2011 number included $56,000 of amortization of intangible assets acquired from Printrex. As I mentioned previously, we expect this amortization to be around $100,000 per quarter going forward.

Noncash compensation expense totalled approximately $146,000 for the third quarter of 2011 and $134,000 for the third quarter last year. Our current ratio was 4.2 as of September 30, 2011, down a little from the current ratio of 4.6 at the end of the second quarter because of the decline in our cash balance from the $4 million purchase of Printrex. Our EBITDA for the third quarter of 2011 was approximately $1.7 million compared to $2.1 million for the third quarter of last year. And finally, during the quarter we repurchased 25,172 shares of our common stock for approximately $200,000 under our stock repurchase program. This brings our total buyback for the year-to-date 2011 period to 2.1 million. As a reminder, we're authorized to repurchase up to $10 million under our current program through May 2013. We have up to $7.8 million remaining available to repurchase as of the end of third quarter.

And finally, in closing, we were pleased to see the first contribution to our results from our newly-acquired Printrex business during the third quarter. In addition, we are encouraged to see such a strong performance in the domestic casino and gaming market. However, we could not avoid the impact of a struggling economy on the results from our other markets, which we expect to continue for the remainder of 2011. But even in this uncertain economic environment, our financial position remains solid with $7.9 million cash and $27 million in working capital on our balance sheet.

With that, I'll pass it back to Bart.

Thank, Steve. Nice job. Operator, we'll open the call to questions.

(Operator Instructions) We'll go first to Todd Eilers of ROTH Capital Partners.

Good afternoon, guys. Handful of questions. Bart, obviously domestic gaming and casino sales were pretty strong in the quarter, up 59% year-over-year. Based on what the largest suppliers have reported, looks like the market was up about 30% year-over-year. So it looks like you're continuing to take market share there. Can you give us a sense for -- I know I asked this last quarter as well -- how much of the percent gain in revenue was driven by volume and how much was driven by pricing? And then I don't know if you can give the number, but it would be interesting to know how many casino and gaming printers were sold out of that 40,000 number, I believe you gave?

So, Todd, the whole gain of 59% was volume. There was no price, so it's all volume gain. And the way to look at it is two major reasons why we gained that much market share. And I'm glad to hear that you think the market grew 30% and we grew 59% because that will tell our shareholders that we had what looks like a very good third quarter in our domestic gaming and casino market. One of the main reasons we're gaining that type of market share is clearly those casinos that have embraced Epicentral print system and haven't signed up yet or we're in negotiations with, are getting ready, and they're buying our printer either in their new machines, or in certain cases, replacing printers on the floor of the casinos in anticipation of implementing Epicentral. So that is one, if not the biggest, key driver of our incremental market share above of what the market is growing. Clearly, there's a reliability of our product we believe is better in the marketplace than anybody else. And we think we have better functions and all that, but the number one driver, Todd, of that almost doubling of what the market grew in the third quarter is those casinos in anticipation of buying the printer, installing the printer, or asking their slot manufacturers to ship those slot machines in with our printer in anticipation of the implementation of Epicentral.

Okay. Great. And that follows with my next question on Epicentral. Based on your comments, it sound like demand and interest continues to build for this product. I guess I would say I probably would have thought we would see some additional announcements this quarter. Can you talk a little bit about why this is a longer sales cycle? The other question is, if some of these casino operators have informally already made the decision to go with this product and that has resulted in Epic 950 sales, what's the final hurdle to get these customers to sign a contract?

Okay. I'm going to break that up into three answers, Todd. Let me give you my first answer and give an exact situation that happened last week. I got a call from one of our sales managers. We had big presentation and a brand new -- not a brand new -- at a casino that was brand new in regards to wanting to look at Epicentral. Flew down, and we met with 5 of their marketing people. I ended up giving about 40 minutes of the presentation, and I will quote what one of their marketing people said, 40 or 45 minutes into the presentation. He said, Bart, would you do me a favor and stop? And I quote, you had me at 7.5 minutes. So that ought to give me an indication of what happens when we make a presentation on Epicentral. There are -- the reason that -- so in regards to not seeing any more announcements is we will not announce anything until a full contract is signed. And that benefits both us and the casino in regards to either tipping it off or not having contracts done or anything like that if we're still in negotiations.

But the sales cycle is a bit longer than we thought it would be. It makes sense now that we've been involved in so many of these deals that we're involved with. Because what you have is you have 3 groups that have to come together. First, normally the operation people inform marketing there's this system out there. We then meet with marketing, and normally marketing drives the decision on going ahead and implementing or buying Epicentral. But all 3 groups have to come together. So when they make the decision, the IT department is brought in, and they have to decide how their high-speed network works. Do they have enough switches on the floor? If they don't, how many switches do they need? And how they're going to implement that and get that done? At the same time, the operations department needs to decide, are they 100% Epic 950? Are they not? How many more printers they might need? How many printers would have to replace other manufacturers' printers on the floor?

Then operations does their thing. And everything takes weeks and everybody gets together. Operations puts their thing together. IT puts their thing together. Then marketing does their thing in saying how they're going to implement it. And then, of course, it goes to senior management for approval. So the sale cycle makes a lot of sense to me. We have to work with all the 3 groups. All 3 groups buy in. They all agree, but then they have got all this work to do. We're right now installing Epicentral into our casino that we announced, which we will eventually announce name of, and even that takes weeks because the new printers have to come in and get installed. They have to install them.

Then the wiring happens from the switches up to our server port device. Then all of the IP addresses need to be done. And then the marketing campaigns need to be written and then implemented. So it is a bit longer than we thought, but it all makes sense to us. Software sales tend to take longer than just buying another printer. Steve and I like to talk about when we bought our Oracle system here at TransAct, we spent two years analyzing the different systems and then one year to implement. We think the sales cycle for Epicentral is in that 12- to 18-month range. We also believe that with our work that we did at Foxwoods, where they were a very sophisticated IT department. They wanted to write all of their, we'll call it rules, on what they were going to do to look at their player and play. And how they were going to measure and then issue coupons.

As we got working with them, they realized that they couldn't do it all and wanted our help. And by us looking at that, we decided that we could actually offer an additional software, the campaign center that we now call it, and that would be necessary for most casinos out there. So as we started working with casinos in July and August, after going through the trial at Foxwoods, we also realized that the campaign center that we were developing was going to be very important to most the casinos we were working with. And, remember, we didn't really have that available until October of this year at the G2E. It all makes sense to us. It is a little longer, but it doesn't mean there are any issues in regards to selling it or closing these deals. Like I said, just last Friday, I had a marketing guy looked at me after a 45-minute presentation say, Bart, you had me at 7.5 minutes. And that's a quote that I wrote down.

All right. Very helpful, Bart. I appreciate the insight there. Also wanted to ask on sales in the quarter. Obviously, a little bit weaker than expected. It looks like most of that came on the international casino and gaming side as well as it looks like GTECH lottery sales were a bit weaker than expected. I was wondering if you could talk a little bit about how we should look at those 2 areas going forward, whether it's fourth quarter or even fiscal 2012, just how we should be looking at those areas in terms of modeling and expectations?

Yes. The lottery side is tough on us because we are a 100% supplier, sole-source supplier to GTECH, and we can't go into another market and try to open up more lottery sales for us. Really it's how many contracts GTECH wins and then when they are going to install their system and printers. It's month-by-month, project-by-project, jurisdiction-by-jurisdiction. And some months are high and some months are low. That's just the way the business is. It's always been like that with us. We do expect the fourth quarter would actually lower than the third quarter. It's just timing of orders. And then next year business will come up to a certain level and keep running at that level.

The international side looks very promising. We've got clearly a couple of countries in Europe -- I don't think I have to mention which ones -- that are looking at expanding gaming to help with their budget shortfalls. Those look very promising to us as opportunities. And Asia looks -- also continues to be very promising in regards to even the Philippines. Clearly, we're talking Korea, Japan. Vietnam has already got their first 2 projects on the books. We look at next year in a positive way. Todd, it's just -- the world -- I mean, look at what happened to stock market today, down 400 points, Italy and Greece and this guy's leaving and this guy doesn't want to leave and the world falls apart. It just gets a little difficult to really forecast because we don't know when all of this shenanigans and stupidity is going to end. There's nothing we can do.

The world has got issues. You give away free money. Eventually you got to collect that money and these countries are struggling with that. It's tough to call because we can't see that far because of the issues. But what we do see is the project that people is talking to us about. We tend to -- our industry tends to help during bad times because states -- I mean, Massachusetts is looking at it, Ohio, you've got Maryland. You've got all these states looking at putting in -- New York -- put in Aqueduct, all to help with budget issues. We look at it in a positive way, but I got to say, though, days like today with the market down 400 points and Europe falling apart, it's just tough to call.

Sure, sure. Understandable. Bart, moving on, outside of kind of gaming and lottery with the Printrex acquisition, obviously, first quarter where you started to show some results there with that business. I know it's just a few months. But any surprises, good or bad with that acquisition? And expectations for the fourth quarter? I don't know if there's any seasonality to that business or if they had signed any large contracts before you had acquired them that might make sales lumpy? But any sort of color or thoughts on that would be helpful.

I'm going to split the question in two. Steve is work on the integration. I think he's got good news there. But on the sales side, it's a very interesting business. The orders just come in. There are no contracts, per se, that we wait for like the banking industry or the lottery industry. The world needs oil and gas, and these printers work 24/7. And there's replacement sales and new sales and the orders just come in. From a sales side, we're really pleased with what we see right now. We also see some really interesting opportunities with some new technology to take this industry up a whole another level in regards to what the printer can do, which, if we're successful at it, should double the size of the business just from that. So from the sales and marketing side, I think we're all really pleased with what we have found now that we're in it and truly the opportunities and the way the sales are coming in. You maybe want to comment on the integration.

Yes. The opportunities that Bart just talked about, Todd. Printrex is running -- their run rate for revenue is about $400,000 to $500,000 a month. The integration is going great so far. For the first big project is to get them up live onto Oracle, to switch from their system. We're probably greater than half way through that. It's going fine with no issues.

(Multiple speakers) I want to follow up on the integration. I just want to make sure I heard your comments right. It looks like we should expect about -- was it $100,000 per quarter in amortization of intangibles, and then another $100,000 per quarter due to the migration over the Oracle system? Is that correct in terms of amortization?

The amortization is correct. Amortization will be $100,000 a quarter going forward for a few years. And then on integration, once we're up live on Oracle by the end of the quarter, that will be it. So that will be a one-timer. It will be another $100,000 coming in the fourth quarter for that. And then that should be it.

Yes, that's a one-time cost to integrate -- to take their building materials and put it on our building material system. So that's a one-time just in the fourth quarter.

Okay. All right, that's helpful. And then I think you mentioned expectations for a $0.5 million dollars in cost synergies on an annual basis? Is that correct?

Yes. Printrex's SG&A as it stands right now, their run rate is between $300,000 and $400,000 a quarter for that run rate. And we expect we are to get operating synergies of at least $0.5 million next year.

Okay.

You know, Todd, when you look at the business, they basically use mostly the same components we do. Just their wide format printer, they are about eight inches, 8.5 inches, and we're, of course, narrow at three inches. But they use the same motors. They use electronic boards. They use platens. They were buying at a much lower level. So we're integrating that into our system and then getting them into our purchasing. And we buy at $200,000 level versus what they were buying at. We expect significant cost savings on material and then on the operating side, too. We're projecting at least a $0.5 million in synergies next year.

Okay. Perfect. And then just one last question, if I might. Sorry, full of questions today. Let's see -- on the Mcdonald's business, I think you mentioned that domestic contracts are ramping down there, but that international should pick up a little bit. Looking for -- how should we look at that dynamic? Is that a wash? Should international be bigger or less than domestic was? Just trying to get a feel there for how to look at that dynamic.

Yes. So we're right now starting Canada, and then we're working in Europe right now. The thing that could be different, Todd, is that Mcdonald's US really pushed out this system really quick once we got going. And we saw a real big spike up and it ran for about a year, 1.5 year. I would think that based on the what we've talked to with the sales force that while this 14,000 stores in the US and 37,000 stores total worldwide, so a bigger population outside the US, because you have different geographic pockets that make that up, it won't be as high and fast. It will be as much, but probably over a longer period of time.

Okay, that's helpful. Is there any way to leverage the Mcdonald's contracts, whether it's the point-of-sale or the beverage initiative with other fast food companies or -- how does that look out there? Are there any opportunities on that horizon?

Yes. So -- exactly. So we are taking the product all over the POS market in many different areas. Clearly, the coffee market it is being shown a lot. Things like grab-and-go sandwiches or place that make sandwiches, deli counters. The technology is being shown in many different verticals within the point-of-sale marketplace.

Okay. All right. Thanks, guys.

Thanks, Todd.

You are welcome.

We have no other callers in the queue at this time. (Operator Instructions) We'll go next to Jason Nelson of Roumell Asset Management.

Hey, Bart, good evening.

Good evening.

Just quickly -- I wanted to see if there was any -- I know, initially, Asia was not going to be a focus market for you guys with Epicentral, given the major play there, mostly table gaming -- any opportunities you guys are seeing at pushing Epic into the Asian market?

Yes. I don't think we ever said we would not go to Asia with Epicenter. Clearly, the opportunity for Epicenter is worldwide. One comment we probably made maybe six or nine months ago is we would focus the first installation or two domestically, just so we could get our arms around how it would get installed, the challenges of getting it installed, the pluses and minuses, the successes and all that. Since we finished the trial, or the test at Foxwoods, we are out selling this system around the world. So it is being looked at literally every area in the world right now.

Okay. Any feedback? You guys have reps -- I know sometimes you travel to Macau and what not -- have you actually had some discussions with potential customers?

Yes. I talked to -- One, I talk to all of our sales guys once a week. We have a weekly meeting where we go over the list. One, it's exciting to go through the list. There's a lot of coordination between their people. We have people on the ground that go out and do site surveys and do all this work. There are a couple of us. Ben White, who heads up our Epicentral business, and he has a guy that works for him. Some of our sales people get on the phone and we do it once a week to see where we are with a lot of the processes that we go through. I won't discuss, in particular, which customers are looking at it, but I can make the comment that literally there are customers around the world involved in quotes and discussions -- ongoing discussions, right now.

Okay, great, great. Shifting to Printrex -- just curious. This is, obviously, a new offering for you guys. What technology are you looking to add to the printer itself, or you think you can potentially double the market for this device? I'm just curious.

I do appreciate the question, considering I led you into that question. It's in our best interest -- (laughter) Yes, I'm sorry. I try to let our investors know -- the big thing I have found with some of our investors is they think we stop. Se came up with Epicentral and we are going to stop. We literally have 3 new printers or 4 new printers coming out next year. I try to let you know that so that you know that this Company -- it's our philosophy. It's our strategy that we need to create demand. This is -- the domestic market is -- you're in 1%, 2% growth. It's not a fun market to be in. It's our goal to create demand for product. That either comes from new products, entering new markets -- like I said, we'll have in the middle of next year, which we think is a huge opportunity for us. It's going to create people to think about how to spend money on the device that we're going to have. It's the same thing in the oil and gas. We think we can add some functionality and some things to the printer that's going to make their job better. At this point, it's not in our best interest to give that away. We will launch it in the middle of next year. And then you'll get to see it, get to hear it, and get to play with it with everybody else. But it doesn't make sense for us to tipoff to our competitors what we're doing.

Understood, okay. Thanks.

Peter Kaplan, private investor.

Hey, Bart, how are you?

Good, Peter, how are you?

Good, thanks. At the last conference call back in August, you had indicated that you had hoped to announce 1 or 2 Epicentral deals by the end of this year. Are you still holding to that? Or have things changed a little bit?

We have so many in the cycle, Peter, that they are all being negotiated. They're all at different phases. So could it happen? Definitely. Would it bother me if it happened in January or February? It really wouldn't. We understand that the investors think when you launch a software product you should be able to sell it in 5 seconds. That's just not what happens. I remember when ticket-in and ticket-out was first happening. In fact, you were one of the investor that called and said, why isn't it happening? Why isn't it happening? I said, well, it just takes time. It takes time for an industry to embrace the technology. But once it did, everybody remembers, once ticket-in, ticket-out happened, we were off to the races. And it's the same thing with this technology.

We are driving coupon printing at the slot machine by tying our technology to the casino's database. We are working fantastically with all the software vendors out there. They're embracing the technology. They're working with us. We're working with them. We're working with the IT department, the marketing departments, the operation departments of all of these casinos. And when they're ready to sign or they are ready to turn it on -- it could be a lot of them have put in their budgets for next year, so it could be right after the beginning of the year. It could be when they say, okay, we've got all our network bridges in and we're good. So, yes, could 1 or 2 more close before the end of the year? No, doubt about it. That doesn't mean that the revenue starts right away. Remember, the revenue will start once the system turns on. But this all takes time. Again, we're as excited about the technology. We're learning a lot. We are learning a lot about the sales cycle and the process. But like I said, our number of casinos that we're dealing with has literally doubled. And again, just Friday, got a call -- I mean last week, got a call for a new casino that went on our list. And one flew down and met with them. Literally within 45 minutes, they said we need to do this. But, Peter, that cycle of that new customer who said you had me at 7.5 minutes will probably take a year just to get everything done within that casino. It's a very large casino group.

Thank you.

Sure.

At this time there appear to be no further questions.

I would like to thank our shareholders once again for all your support for Transact. We appreciate it. I also like to thank our employees for the hard work that they continue to give us, the dedication. Our next conference call will be some time at the end of February, beginning of March, as we have our year-end conference call with you. And I thank you for attending tonight. Thanks.

Once again, ladies and gentlemen, that concludes our conference. Thank you all for your participation.