Good day, and welcome to the TransAct Technologies First Quarter 2020 Conference Call. Today's call is being recorded.At this time, I would like to turn the conference over to Mr. Marc Griffin, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, and welcome to TransAct Technologies first quarter 2020 earnings call. Today, we'll be discussing the results announced in our press release issued after market close. Joining us today from the company are Chairman and CEO, Bart Shuldman; and President and CFO, Steve DeMartino.Today's call will include a discussion of the company's key operating strategies, progress on these initiatives and details on the first quarter financial results. We will then open the call to participants for questions.As a reminder, this conference call contains statements about future events and expectations which are forward-looking in nature. Statements on this call may be deemed as forward-looking, and actual results may differ materially. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings, including its reports on Form 10-K and Form 10-Q. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call.Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website.With that, let me hand it over to Bart.

Thank you, Marc. And thank you to everyone joining us on the call today. As you know, we're all doing it from a remote location, so please bear with us as we try to talk and answer your questions without being able to see each other between Steve and myself on the call.Before we dive into our first quarter results, I'd like to spend some time on the current business environment. As you are well aware, the COVID-19 pandemic continues to create challenges for countries, towns, businesses and families around the world. As we navigate this uncertain environment, we will do our best to remain thoughtful and transparent and sharing as much as we can about what we are seeing in our business.Finally, our thoughts and prayers brought to those families that have been impacted, and our gratitude goes out to the dedicated medical staffs and frontline workers helping to fight the virus. We thank you.On our last earnings call in early March, we spoke about accelerating investments, mostly in additional people to support the rollout of BOHA! Since that time, the COVID-19 pandemic and the resulting stay-at-home orders have caused massive disruptions to our customers' businesses, and thus, our business, and that hiring quickly came to a halt.In addition, as trade shows were canceled, the product launch we had scheduled for our foodservice technology market for mid-May has been changed to mid-September for all the right reasons. I will have more to say shortly.So let me provide some insight into the different markets we serve, which should give you the context of where our business is trending in Q2 and beyond. The global casino and gaming market is challenged to say the least. Breaking the market into different geographical areas, casinos in the Asian market, mainly Macau, are starting…

Thanks, Bart. Good afternoon, everyone. Before I get into the details of our first quarter results, I'd like to highlight the steps we took to decrease our operating expenses and manage our liquidity during this COVID-19 crisis.As we announced on March 24, we took a number of austerity measures to reduce spending by an estimated $1.75 million. I'm proud of our ability to pivot quickly, which enabled us to lower our Q1 operating expenses by over $500,000 and manufacturing overhead expenses by approximately $200,000 or $700,000 in total from the levels we projected internally for Q1.As you may recall, we planned to significantly increase investment spending to accelerate growth of our BOHA! solution in 2020, including hiring new sales and marketing staff and greatly expanding on marketing efforts. As a result, we internally projected our operating expenses to increase substantially beginning in Q1.However, when COVID began to hit us hard in March, we quickly put the brakes on all the new planned spending. We then met as an executive team, combed through our departmental expenses and put a detailed plan in place to reduce spending in every area we could.The measures we took included furloughing over 10% of our workforce, instituting a 10% across-the-board salary reduction for all salaried non-commissioned employees, reducing sales commissions for all commissioned employees, reducing the cash retainer fees we pay to all non-employee directors by 10%, reducing our inventory purchases and the related tariffs on those purchases from China, and eliminating all discretionary spending such as trade shows, marketing and promotional activities, travel and entertainment expenses, training, et cetera, wherever we could.In addition to the $700,000 of savings we achieved in Q1, we believe these measures will result in further reduction of another $1.1 million in Q2 compared to our Q1 run rate, consisting of…

Thank you, Steven. I'd just like to tell the shareholders that when we started to experience the effect of the virus hitting our businesses, which, in all fairness, first hit us in Asia in Macau, Steve went to work. And let me tell you, he worked 12, 15, 18 hours a day to get our loan, the PPP, I mean, to get all of our SEC filings done. He took a very conservative approach to our business and said, I am going to get enough liquidity for at least 12 months, based on some very conservative projections that he was going to put together. And he drove the business to achieve that. And I just want to thank him for what he did because we're going to come out of this fine.The outlook for 2020 remains challenged, but we are confident in the strong countermeasures we implemented to ensure TransAct's long-term survival in these volatile times. The COVID-19 pandemic has caused us to pause our planned increases in investments, mostly in BOHA!, but that in no way diminishes the opportunity we see for our FST market.We are confident in the resilience of our business and employees and believe we will come out at the other end of these times even stronger and resilient. I want to thank the employees of TransAct for their hard work and their dedication to our company as we all get through this. I'd like to thank our Board. And most importantly, I'd like to thank our shareholders.At this point, I'd like to open the call to questions.

Thank you. [Operator Instructions] And we'll take our first question from Mitchell Sacks of Grand Slam.

Hey, guys. Interesting time. Can you guys talk - can you talk a little bit about the convenience store market, kind of what you're seeing there, and if you're - if that market is operating in a way where there's still business there? Or is it frozen up a bit like the restaurant and casino market?

So I think, Mitch, we've got two markets that are doing okay. One of them is the convenience store market and then one of them is our grocery store market. Let me talk about each one. On the convenience store market, I think that if we go back to the third week of March, when things like the NBA started to get canceled, we heard about some casinos shutting their doors and all that. I think most of our - all of our convenience store customers went into a mode of, okay, what is business going to be like during this crisis?And so what we saw was convenience store companies looking at their menu items, their product offerings, what product offerings they would do, what new labels they might need. And of course, we helped lay those out.At the same time, they were also looking at their policies and procedures of how to keep their employees safe and their customer safe and what they were going to do to make that happen. And I think we're through that process. I think when I talked to you a couple of weeks ago and some of the other investors, I said, I think it's going to be the end of April where we start getting through that heavy lifting of what these stores were going to look like and how they were going to operate.And in talking to some of our technology people that helped the convenience stores with their new labels and things like that, we've got some really good stories of how we're designing some new labels for different food items that convenience stores will offer their customers.So those - that market is good. Now look, they're not expanding. They're not rolling out as much technology as we would like…

And then in terms of customers that are buying equipment, are you considering or have you guys looked at providing some third-party financing to make it a little bit easier for them to do that?

Yes. So look, we have - we're fortunate to have members of the Board that are in the restaurant industry, also fortunate that we speak to some really good people. Look, ICR is now handling our IR and our PR, and they have - they gave us access to a lot of knowledgeable people in the marketplace.We don't want to talk about the things that we're looking at to help customers that might not be able to spend capital. But in some of the things that we're working on, the orders will be different than what we normally do.So clearly - and if you followed us on LinkedIn or anything like that, where we cut back on our true marketing spend or advertising, we were all over the social media pages with stuff that we're doing. We ran a free promotion, checklist and timers. We offered checklist and timers for free to customers that wanted to use them.If you think about it, if you're going to have a cleaning procedure for your restaurant in every eight minutes, you're going to clean a different thing, you can use our checklist and timer to do that. We offered those apps for free, and we actually have -- I think we're working with eight or nine customers that took us up on it. But it kept us in front of the customers talking to them about ideas, about BOHA! and how to use BOHA! I got to tell you, there's been a lot of articles written that if you think about as restaurants reopen, it's going to be, what, 25% or 50% of the tables are going to be allowed, things like that. So revenue will be down. So the amount of people working in the restaurants will be down.But if you think…

Okay. Thanks very much.

[Operator Instructions] And we'll take our next question from Tim Chatard of Meros Investments.

Can I just ask on gross margin, if you expect that the level from Q1 to sustain for the rest of the year?

We expect the gross margin is probably going to decline some only because of the sales level dropping as much as it's going to drop. A lot of our overhead is fixed. So you can't take it away. So that would just drop the gross margin. It's only because of the sales level though. Once the sales level comes back, then the margin will grow back up to where it was.

And I wondered if you can recap the operating expense color that you talked about. I think I got some of it, but I'm just trying to get directionally operating expense sequentially from 1Q.

Yes. Let me get that in front of me. One second. Yes. So in the first quarter, we achieved about $700,000 of our $1.75 million of savings. And then the remainder of the savings will come in Q2. So that will be Q2 off of the Q1 actual.So the other $1.1 million of savings will be the decline from Q1 to Q2. A portion of that will be in the operating expense line, and a portion of that will be in cost of sales - with those two in cost of sales.

Okay. In aggregate, $1 million? Across...

In aggregate, $1.1 million.

$1.1 million.

$1.1 million. Yes. Yes, $1.1 million. $700,000 in operating expense and $400,000 in cost of sales.

Got it. And then you also talked about the BOHA! product upgrade that you were talking about for May getting pushed into September. Have you talked about what product enhancements are included in that product upgrade?

Yeah. So no, we haven't. And we don't. It's not good for us to tell our competitors what we're doing. I wouldn't even call it enhancement. I think it's -- I'd rather call it a new product that we're going to bring out.And being the leader, we have a chance to get the early feedback on some things and to say, you know what, we think we got more that we can bring to the marketplace. So it's going to come in September, and we'll clearly let you know what it all is. It's a pretty good bundle of stuff.

Understood. Thanks.

Yeah. Thanks, Tim.

And gentlemen, it does appear we have no further questions at this time. I'll turn it back over to you for any additional or closing remarks.

Well, we really do thank you for joining us on today's call. We do wish you and your families and friends and your businesses health and safety. And we'll continue to keep you updated on our quarterly calls as to where we are. And again, we thank you for your support of TransAct. Thank you, and we'll talk to you soon.

Once again, that does conclude today's closing remarks. Thank you for your participation, and have a wonderful day.