Executive Summary / Key Takeaways

• TransAct Technologies is demonstrating renewed momentum, particularly in its Food Service Technology (FST) segment, driven by record BOHA! Terminal sales and successful upgrades to the advanced BOHA! Terminal 2.
• The company's strategic focus on high-growth markets and a "land and expand" model, coupled with differentiated technology like the BOHA! platform and EPICENTRAL, is beginning to yield tangible results and secure new customer wins in key verticals like convenience stores and healthcare.
• Significant cost reduction initiatives implemented in 2023 and 2024 are contributing to improved profitability, evidenced by positive Adjusted EBITDA in Q1 2025, positioning the company for better bottom-line performance despite fluctuating revenue.
• While the Casino and Gaming segment is showing signs of recovery from prior inventory oversupply issues, and new products like the Epic TR80 are launching, competitive pressures and macroeconomic uncertainties, including potential tariffs, remain factors to monitor.
• Maintained full-year 2025 revenue guidance of $47M-$52M and raised the bottom end of Adjusted EBITDA guidance to breakeven to negative $1.5M, signaling management's confidence in operational execution and cost control amidst market dynamics.

Setting the Scene: A Niche Innovator Adapts to Market Shifts

TransAct Technologies Incorporated operates at the intersection of software-driven technology and specialized printing solutions, serving distinct high-growth markets: Food Service Technology (FST), Point of Sale (POS) Automation, and Casino and Gaming. The company's business model involves developing and selling proprietary hardware (printers, terminals) and software, complemented by recurring revenue streams from services, supplies, and subscriptions through its TransAct Services Group (TSG).

TACT's strategic evolution has increasingly focused on the FST market with its BOHA! platform, aiming to automate back-of-house operations. This builds on a history rooted in reliable transaction printing for retail and gaming. The company positions itself as a provider of purpose-built, durable solutions designed from the ground up to meet specific market requirements, differentiating itself from broader technology providers.

The competitive landscape varies significantly across TACT's segments. In Casino and Gaming, the market is often described as a duopoly, where TACT competes head-to-head with a main rival. In POS Automation, competition is more fragmented, with larger players like NCR Corporation (NCR) and HP Inc. (HPQ) offering broader solutions, alongside specialized thermal printer providers like Zebra Technologies Corporation (ZBRA). TACT's challenge here is maintaining market share against competitors who have restored supply chains and are engaging in price competition. In the FST market, TACT competes with a mix of hardware providers and software solution companies, aiming to carve out a leadership position with its integrated BOHA! ecosystem.

TACT's strategy hinges on leveraging its technological expertise to create differentiated products, focusing on operational efficiency and reliability for its customers. This is coupled with a "land and expand" sales model, particularly in FST, where securing initial deployments in large organizations opens opportunities for broader rollouts and increased recurring revenue. Recent market dynamics, including supply chain disruptions, customer inventory adjustments, and the return of competitors, have necessitated a focus on cost discipline and refining go-to-market strategies to navigate these pressures effectively.

The Technological Edge: BOHA! and EPICENTRAL Drive Value

At the core of TransAct's offering are its proprietary technologies, most notably the BOHA! platform for food service and the EPICENTRAL system for casino promotions. These technologies are designed to provide specific, quantifiable benefits to customers, forming a key part of TACT's competitive moat.

The BOHA! platform integrates specialized hardware, such as the BOHA! Terminal 2.0, with cloud-based software applications for tasks like nutritional labeling, date coding, temperature monitoring, and checklists. The BOHA! Terminal 2.0, a key focus of recent sales momentum, combines a touchscreen interface with integrated thermal printers and is managed via the TransAct Enterprise Management System, enabling over-the-air updates. While specific, universally applicable quantifiable benefits like "X% faster processing" or "Y% lower degradation" are not detailed across all use cases, the company highlights that the system streamlines operations, drives efficiency, and enhances food safety and compliance. For instance, in the healthcare food service vertical, it supports nutritional labeling and compliance, a critical function. In grab-and-go sushi, it ensures accurate, timely labeling for food safety. The strategic intent behind BOHA! R&D is to create a versatile platform adaptable to different food service environments, generating recurring revenue through software subscriptions and label sales. The "so what" for investors is that this integrated, software-driven approach creates stickiness with customers and provides a platform for ongoing recurring revenue, moving beyond one-time hardware sales.

The EPICENTRAL print system in the Casino and Gaming segment is a software solution that allows casinos to create and print promotional coupons and marketing messages in real-time at the slot machine. This system pairs with TACT's thermal ticket printers like the Epic Edge and Epic 950. The partnership with CasinoTrac, integrating EPICENTRAL into their SlotSUITE offering, has demonstrated tangible benefits in pilot deployments, including substantial increases in carded play, rated coin in, overall coin in, and win per unit (WPU). While specific percentage increases are not available, the qualitative description of "substantial increases" and the focus on extending time on device and player spend highlight the system's value proposition. The strategic intent is to provide casinos with tools to enhance player engagement and profitability, generating subscription-based revenue for TACT. For investors, this represents a software-centric, recurring revenue opportunity within a core market, leveraging TACT's installed base of printers.

Beyond these platforms, TACT continues R&D on new hardware, such as the Epic TR80 thermal roll printer, which has fully entered the market targeting sports betting kiosks and other non-casino gaming applications. This expands TACT's addressable market within the broader gaming industry.

Performance and Financial Health: Navigating Transition

TransAct's recent financial performance reflects a business in transition, navigating market shifts and benefiting from internal restructuring. Q1 2025 results showed a significant improvement compared to the prior year, signaling building momentum.

Total net sales for the first quarter of 2025 reached $13.053 million, a substantial 22.1% increase from $10.687 million in Q1 2024. This growth was primarily driven by a 28% increase in hardware unit sales volume and a 5% increase in the average selling price of hardware.

Breaking down performance by market segment reveals the key drivers:

• Food Service Technology (FST): Revenue surged by 48.7% year-over-year to $4.908 million in Q1 2025. This was fueled by a remarkable 152.2% increase in hardware sales ($2.252 million vs. $893 thousand), largely due to record BOHA! Terminal sales (2,350 units) and successful upgrades to the BOHA! Terminal 2 by Tier 1 customers, including a major convenience store chain and a large international QSR. Recurring FST revenue also saw a healthy 10.3% increase to $2.656 million, despite the impact of a significant customer loss in Q2 2024. Management expects FST revenue to be higher in 2025 than in 2024.
• Casino and Gaming: This segment showed signs of recovery, with revenue increasing by 18.0% year-over-year to $6.719 million. Domestic sales were particularly strong, up 48.9% to $4.822 million, as most major US OEM partners returned to normalized buying levels after working through excess inventory. A new OEM customer in charitable gaming also contributed. International sales, however, decreased by 22.8% to $1.897 million, primarily due to a large European OEM still managing overstock, expected to normalize in the second half of 2025. Management anticipates domestic casino and gaming sales to be significantly higher in 2025.
• POS Automation: Revenue declined modestly by 5.1% to $618 thousand in Q1 2025, attributed to increased competitive pressure and a return to normalized sales levels after a period where competitors faced supply constraints. Average selling prices also saw a reduction. Management expects POS automation sales to be lower in 2025 due to continued competitive pressure.
• TransAct Services Group (TSG): Revenue decreased by 22.3% to $808 thousand, mainly due to lower sales of legacy replacement parts and consumables. TSG sales are expected to be somewhat lower in 2025 as the company plans to cease selling remaining legacy consumable products by year-end.

Gross profit increased by 13.1% to $6.359 million in Q1 2025. However, the gross margin percentage declined by 390 basis points to 48.7%. This margin contraction was primarily due to a higher mix of lower-margin BOHA! hardware sales compared to higher-margin casino products, along with increased overhead costs, inflation, and pricing adjustments in POS automation. Management expects gross margins to remain in the mid-to-high 40% range for the rest of 2025.

Operating expenses decreased by 8.0% to $6.374 million, reflecting the impact of cost reduction initiatives implemented in late 2023 and Q2 2024. These initiatives, targeting headcount, marketing, engineering, and G&A, are expected to yield approximately $5 million in annualized savings in 2025. This cost discipline, combined with revenue growth, significantly reduced the operating loss from $1.301 million in Q1 2024 to just $15 thousand in Q1 2025.

The improvement flowed down to the bottom line, with the company reporting net income of $19 thousand in Q1 2025, a stark contrast to the $1.036 million net loss in the prior-year period. Adjusted EBITDA turned positive, reaching $544 thousand compared to a negative $701 thousand in Q1 2024.

Financially, TransAct maintains a solid balance sheet. As of March 31, 2025, cash and cash equivalents stood at $14.178 million. The company has access to a $10 million revolving credit facility with Siena Lending, with $3.0 million outstanding at an interest rate of 9.25% and $3.3 million of net borrowing capacity available. The facility matures in March 2027, and the company remains in compliance with its financial covenants. Net cash used in operating activities improved significantly in Q1 2025 ($161 thousand used) compared to Q1 2024 ($1.49 million used), influenced by changes in working capital like increased receivables due to higher sales and decreased inventories as the company worked down stock. Capital expenditures remain minimal. The company believes its cash position, expected operating cash flows, and credit facility availability provide sufficient liquidity for at least the next twelve months.

A notable non-cash item impacting recent results was a $7.3 million valuation allowance recorded against US federal net deferred tax assets in Q4 2024, based on accounting rules related to cumulative pre-tax losses. This resulted in an unusually high effective tax rate in Q1 2025 due to near-breakeven pre-tax income and taxes only in the UK and minimum US state taxes. The company expects to record no income tax expense or benefit in 2025 due to this allowance.

Competitive Positioning: Niche Strength vs. Scale

TransAct operates in markets with formidable competitors, ranging from large, diversified technology companies to more specialized players. Its competitive positioning is defined by its focus on niche applications and the performance of its specialized hardware and software.

In the POS Automation market, TACT's Ithaca 9000 printer competes with offerings from companies like NCR and HPQ. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, TACT's POS sales declined in Q1 2025 due to competitive pressure as rivals restored supply chains. TACT's gross margins (mid-to-high 40s) are generally higher than HPQ's (20-25%) and NCR's (35-40%), suggesting better profitability in its specific POS niche, but its smaller scale means higher unit costs compared to mass producers like HPQ. TACT's strategy involves adjusting pricing to remain competitive, acknowledging the challenge posed by rivals' scale and cost advantages.

In Casino and Gaming, the market is often characterized as a duopoly. TACT competes with a main rival, and while that competitor faced supply issues in 2023, they have since returned. TACT's Epic printers and EPICENTRAL system are key products here. Management believes TACT does a "pretty good job head-to-head," particularly in new construction projects. The preference of casino floor technicians to work with a single vendor creates "moats" around existing installations for both TACT and its competitor. TACT's gross margins in this segment are typically higher than its FST segment, contributing significantly to overall profitability when sales are strong. The EPICENTRAL system, with its demonstrated ability to improve player metrics, offers a software-driven differentiator that adds value beyond hardware.

The FST market sees TACT competing with various providers of back-of-house automation solutions. TACT's BOHA! platform, particularly the Terminal 2.0, is positioned as a comprehensive, integrated hardware and software solution. The company's success in securing upgrades and new wins with large chains and entering new verticals like healthcare food service demonstrates its ability to compete effectively. The "land and expand" strategy is crucial here, leveraging the product's performance and reliability to drive further adoption within customer organizations. While direct quantitative comparisons of technology benefits (e.g., processing speed, durability) against all FST competitors are not available, TACT's emphasis on the BOHA! Terminal 2's ability to streamline operations and its positive customer feedback suggest a strong value proposition in this emerging market.

Overall, TACT's competitive strategy relies on developing specialized, high-performance technology for targeted niches. This allows for potentially higher margins in these areas compared to broader market players, as seen in its gross margin profile relative to HPQ and NCR. However, its smaller scale relative to diversified competitors like ZBRA, NCR, and HPQ can lead to higher unit costs and limits its ability to compete solely on price across all segments. The return of competitors with restored supply chains, particularly in POS and Casino, increases competitive pressure, requiring TACT to leverage its technological advantages and customer relationships to maintain market share.

Outlook and Risks: Momentum Meets Uncertainty

TransAct's outlook for 2025 reflects cautious optimism, balancing the positive momentum seen in Q1 with ongoing market uncertainties.

For the full year 2025, the company is maintaining its revenue guidance range of $47 million to $52 million. This range anticipates continued growth in the FST segment, building on the strong Q1 performance and expected further adoption of the BOHA! Terminal 2. It also assumes a continued recovery in the Casino and Gaming market, with domestic sales expected to be significantly higher and international sales normalizing in the second half of the year as the remaining OEM works through inventory. However, the guidance explicitly assumes this recovery proceeds without unexpected disruptions in supply or demand. POS automation sales are expected to be lower due to competitive pressures, and TSG sales are also projected to decline slightly.

Crucially, the company has raised the bottom end of its Adjusted EBITDA guidance for 2025 to a range of breakeven to negative $1.5 million. This improvement is a direct result of the significant cost reduction initiatives implemented in 2023 and 2024, which are expected to provide approximately $5 million in annualized savings in 2025. This demonstrates management's focus on operational efficiency and cost control, aiming to improve profitability even within the projected revenue range.

However, the outlook is not without risks. Key challenges highlighted by the company include:

• Macroeconomic Uncertainty: The potential impact of inflation, rising interest rates, and a possible recession on customer demand across all segments remains uncertain.
• Tariffs: The imposition of tariffs on goods imported from Thailand, where TACT's primary manufacturer is located, poses a risk of increased costs. While BOHA! terminals are currently exempt, tariffs on other products could impact margins if costs cannot be fully passed on to customers through price increases. The company has limited ability to mitigate this through alternative sourcing in the short term.
• Dependence on Single Manufacturer: Reliance on one contract manufacturer in Thailand exposes TACT to risks of disruption from geopolitical events, natural disasters, or issues at the manufacturer's facility, which could impact production and supply.
• Competitive Pressure: Increased competition, particularly in POS automation and Casino and Gaming, could lead to pricing pressure and impact market share and margins.
• Customer Inventory Levels: While domestic casino customers have largely normalized inventory, some international customers are still working through excess stock, which could delay orders. Potential advance orders due to tariff concerns could also shift demand unpredictably.

The suspension of the strategic review process in Q1 2025, while driven by macroeconomic uncertainty and perceived business momentum, signals a near-term focus on executing the current plan rather than pursuing transformative alternatives. This means the company's performance in the coming quarters will be primarily dependent on its ability to execute on its FST growth strategy, manage the recovery in Casino and Gaming, and maintain cost discipline, all while navigating the external risks.

Conclusion

TransAct Technologies is entering a phase characterized by building momentum, particularly within its strategically important Food Service Technology segment. Record BOHA! Terminal sales and successful upgrades to the BOHA! Terminal 2 underscore the traction of its differentiated technology and refined go-to-market approach. Coupled with a recovery in the core Casino and Gaming market and the benefits of aggressive cost reduction initiatives, the company is demonstrating improved financial performance, moving towards profitability as evidenced by positive Adjusted EBITDA in Q1 2025.

While competitive pressures persist and macroeconomic uncertainties, including potential tariff impacts and supply chain risks related to its single manufacturer, remain factors to monitor, TACT's focus on leveraging its niche technological advantages and maintaining operational discipline positions it to pursue its growth objectives. The maintained revenue guidance and improved Adjusted EBITDA outlook for 2025 reflect management's confidence in their ability to execute against their strategic plan. For investors, the story of TACT is one of a specialized technology provider working to capitalize on growth opportunities in targeted markets while prudently managing costs and navigating external headwinds, with the BOHA! platform and its recurring revenue potential standing out as a key driver for future value creation.