Hello there. Next up, we have John Dillon with TransAct.
Thank you. That was quite an introduction. Thank you very much. Good morning or afternoon, as the case may be. Depends on your time zone. I'm noticing the slide says confidential TransAct Technologies only. I promise you there will not be any confidential information in this presentation, as much as I know you would all like to get some. I've got just a handful of slides. There's aspects of the company which I'll dig into. It's a hard company to understand, and I hope that this will cause some questions. If I get a little bit of time at the end, I'll try to answer some of them. I have to find the button to push 'cause this is a Hewlett-Packard. I am fully tech-enabled.
Okay, we did an IPO in 1996, 30 years ago, and I think we have less revenue today than we did 30 years ago. That's a good start, don't you think? There's gotta be a good reason, and what are we doing now? Let me try to dive into the business a little bit. We are very strong in two verticals, but originally, we got our start in the printing business by making 1 of the first standalone point-of-sale printers. If you think back, for any of you who are old enough, which is probably most of you are not, cash registers used to have a printer in them. The cash register, you ring it up, it'd be this big dingy thing, and little things would pop up and stuff like that, and out would come a receipt.
Eventually, the point-of-sale printer became a peripheral. Our company designed one and built it, bunch of guys out of Ithaca, New York, and they called it the Ithaca 2800 or something like that. That was a point-of-sale printer, and we sold it all over the place. Point-of-sale printers now are kind of a commodity. Later than that, we actually made something called the BANKjet printer. Probably don't remember that, it used to be installed at every Chase Bank right by the cashier, the banker, the person and the teller, and they would take your checks. You run 'em through this little thing. It would print something on the back. That was a BANKjet printer. We're not in that business anymore. We used to make lottery printers. We'd make about 50,000 of them a year.
A lot of paper handling associated with that. You have to stack the cards and tickets up. We don't make that anymore. You're going like, "Okay, what the heck do you do?" We're strong in casino and gaming, C&G. It's a cash cow. It's something where originally, slot machines in places like Las Vegas or Macau or any place there's a gaming casino, you'd put coins in or bills in, and you hit a jackpot. Out came all the cash. Money, come ring it down. Ding-a-ling-a-ling, you know, you know, and somebody would come over and talk to you. Some, you know, a host would come over, and they decided to quit doing the coins. Think about it for a minute. You really want people walking around the casino with coins?
Big boxes are like, "Okay, take those, just take those dollars, silver dollars and quarters and stuff. Give you cash, paper cash." That was a bad idea. Quite a while ago, they said, "Let's get rid of those printers." Those printers I'm not Sorry, printers. The cash. They went cashless. You can still put money in, $20, $50, $100 bills, and they are read by what's called a bill validator, typically made by somebody like Crane Payment Innovations. That's a good example. If you go to a checkout, like at a CVS Pharmacy, you could put money into some of those things, and those are still bill validators.
When you stop gambling at a slot machine, out comes a little paper ticket, and the machine that prints that is called a TITO printer, ticket in, ticket out, and we make a lot of them. There's probably somewhere between 1 million and 2 million slot machines in the United States. I don't know how many are worldwide, but you could look it up. Maybe it's about 8 million. They're all over the place. The reality is casinos swap out about 8% of them every year. Every year, 8% of the slot machines on the floor, you get a new slot machine. It's something else. You know, maybe Star Wars comes out with a new movie, another Mission: Impossible, I hope not, but another one, and, you know, it could be Indiana Jones.
It could be whatever it is. They make slot machines different themes. If you've got 1 million of these things in the United States, and 8% of them change out every year, that's 8,000 machines, right? Think about worldwide. We make those machines, and we make them, and we have one competitor and then a really small ankle biter. For the big competitor, it's Japan Cash Machines, JCM Global, headquartered in Japan. They bought our main competitor about 10 years ago, a company called FutureLogic, for those of you who remember. They were bigger than us, but today I'd like to claim that we pretty much have share parity. We're probably shipping as many machines as they are, and there's one very small company that's held by a PE firm.
I think the individual who bought into them is in the San Francisco Bay Area, but it's probably 5% market share. These machines are highly have a good profit margin, and it is a cash cow, and we sell them every year. It's a regulated industry, very hard to get in. My guess is that TAM is I doubt if a TAM is bigger than $100 million annual revenue. Maybe it's $200 million, but that would be if you had absolutely every slot machine in the world. You'd have to own the whole market. We generate. In 2026, our guidance is we're gonna do, I think, well, I think we said, I think we said $55 million-$57 million, and we're gonna deliver between $1 million and $1.5 million adjusted EBITDA. That's the guidance.
I can't tell you anything else, but in any event, it's a very good business. It doesn't take a big sales force. There's only a handful of slot machine makers. They are OEMs. We sell to them. The other business is food service technology. We abbreviate it FST. It's not food safety technology, it's food service. The food industry. I had somebody say, "Well, how big is the market?" I said, "Well, pretty much as big as the number of humans on the planet that eat." Everybody eats food, and everybody cares about food. Is there enough? Is it good quality? Is it safe? This, that, and the other thing. The people that are getting killed are the people that run the food service industries, whether it's food service management, like people like Sodexo, Aramark, Compass Group, or if it's QSRs, quick service.
You can see, and I'm gonna rattle a few more off. These are all subverticals in food service. QSRs are people like McDonald's. You've got convenience stores like 7-Eleven. You've also got grocery stores. You've got fine dining. You've got fast casual. Everybody's got a challenge with food. What the problem with food is, it's getting more expensive. Supply chains are a challenge. You have labor. You have two problems with labor: wage rate inflation and turnover. People are coming and going, and everybody's worried about margins. Our technology pretty much, it's called BOHA!, back-of-house automation, and we use it for automating a lot of the activities that happen in the back of the house, very much like Toast does in the front of the house. Toast does payroll, and they do point of sale.
We do all the silly stuff in the back of the house most people don't see. Probably the largest growing market for us, and this, I'm just trying to help you understand it, is grab-and-go sushi. If you're a sushi chef in the back of the grocery store and you're making sushi all day long, typically, if you are doing grab-and-go food in the United States, if you have more than 10 stores, you have to put nutritional labeling on it. Well, guess what? Each batch of sushi is a little bit different. Imagine you got rice, you've got seaweed, you've got tuna, you've got avocado. How do you know what's in it?
You have to put the nutritional information on there, and our system talks to online, they're all online, an internationally approved database that has the nutritional information based on the recipe. When that thing goes out the door, it's got a nice long label, and they use the label to seal the package. In any event, I'm gonna come back a little bit and talk about the BOHA business. The BOHA business is a startup company. It was supposed to be a purpose-built piece of hardware, but that comes loaded with software. Touchscreen, iOS, Android compatible. It's got telematics in it. It can talk Bluetooth, Wi-Fi, LTE mobile, even near-field communication. It can do everything. It can do everything that this thing does and more. That has been a money loser.
We had the pandemic, both the gaming business and the food service business went in the tank. There was a huge supply chain issue right at the end of the pandemic. The casinos came back online just as the chips, the semiconductors that go into things like cars and go into things like our TITO printer, were unavailable. You couldn't get them. We had them, and our competitor, JCM, didn't have any. For a brief period of time, we had 100% market share. If you're building a $30,000 or $40,000 slot machine and you can't ship it because you don't have this stupid $300. I think it's $300. Just give or take it's $300.
You don't have one of these $300 printers, you can't ship it. They went crazy, and they bought everything we had. 100% market share, they bought more than they needed. We had one big vendor bought three years' worth of supply. Now, I've only been the CEO for three years, most of the problems now I own. That was a really interesting. It didn't dawn on the sales force that if these guys were buying more printers from us than they could use in a year, there was a problem going to emerge. We had a big year, went up to about $73 million in revenue, it came down to $43 million the next year. That was about the time I took the job, which didn't look real good.
It was also about the same time that I ran a strategic review. We hired a banker to go out and look and see what was going on, and I ran that process, and I point that out because during that process, I couldn't do anything. I couldn't hire anybody. I couldn't fire anybody. I couldn't start a project. Everything that we'd cut to keep the boat afloat had to stay the same. Basically, about a year ago in April, we canceled the review and now I'm back at it. What we've done, if I can get the next slide up here, I pushed this. Oh, that one. This is kind of what I've just been gone through.
There's a duopoly here, good margins, great EBITDA, 5%-8% annual growth, maybe $100 million, maybe $200 million. TAM in the food service business, probably $4 billion. Early days. In unit sales, we're sustaining about a 30%-35% CAGR, but we're coming from a hole. We kind of weren't doing very well there. In the last 10 quarters, that's the CAGR. The product has a software component. It's got a suite of software offerings that do labeling, sophisticated labeling, nutritional labeling. It started out with date code, like when do you use it by. When you open a package of lettuce, you have to put a sticker on it. It's the law. If you don't, you don't know when it's going to run out. You don't know, is this lettuce still good?
The last thing you want to be is Chipotle when they had a listeria problem or even think about McDonald's, who's one of our largest customers.
When they had that Listeria scare. It was onions. I thought it was gonna be potatoes or something, it was onions. This business is new for us, but we didn't have any software. We do have software now. We didn't use to own it, which was my first problem to overcome. I bought it, we're moving it's gonna be running on one of the large public clouds beginning in the next two to three months. We used to pay a 50% royalty on that software. We don't pay that anymore. Now, it's probably gonna end up with a gross margin about 75% 'cause we have hosting fees. That's that business. I can't share this with you, but I see a path to profitability.
Once we start selling the software, that's what I'm gonna report to the market, and I'm gonna tell you, is it growing? If it grew, how much it grew? If that's there, then we've got a real business. It's a SaaS company, more or less, lurking inside of a very old, EBITDA-oriented steady Eddie business. That's kinda what we're dealing with here, and that's why it's complicated. This is the gaming industry. You can look this stuff up for yourself. Fundamentally, it's continuing to grow. It's not gonna grow a lot, but it's mostly repeat business, refreshing the slots on the floor. You go look at this. It's very profitable. There's only 3 of us, and it funds the FST growth, the food service growth. Some customers, you know some of them. You probably know Caesars.
If it's a Wynn casino, it's ours. If they open a new casino, it's ours. Biggest casino in the Western U.S. is Yaamava', just east of here, San Bernardino. They have 7,500 slot machines on the floor. That's a lot. It's a big casino. We found one that had 10,000, so it's not the biggest one in the country. They use us for food service, and we're working on getting the gaming piece. That's a different story. We have cross-selling in there. More importantly, if you look at the FST market, this is kinda what it has in it. Now, we're a subset of these numbers.
We don't have a $28 billion TAM. I would argue that we probably have a $4 billion TAM. It's hardly pitched, hardly touched. The food service industry is only now going through digital transformation, something most Fortune 500 companies did a decade ago or more. They're, for any of you food service guys, they're technical laggards. They're great at hospitality, great at recipes, great brand development, stuff like that. How do you use technology in the back of the house? It's a mess back there. They gotta label the food stuff. They've gotta take temperatures of things. They got deep fat fryers to deal with. They've got lots of stuff they gotta do. It's really scary back there. Oh, by the way, there's a lot of metal back there. Wi-Fi doesn't work very well.
It's a complicated environment, but the market is big, and it's only starting now. This is a representative of what we sell. People go, "What do you sell?" This is the BOHA! Terminal, and those are all buttons that say, "Print me a label that's about," you know, "Print me some kind of label," a label for some lettuce, a label for some potatoes. These things can be on grab-and-go. They can be little round labels that go on fruit cups. It can go on a jar of yogurt. It can go on labels in the back of the house to do better food management, but it can also go in the front of the house to do brand development and compliance. Grab-and-go sushi, grab-and-go McDonald's is even doing some grab-and-go, and they're using some of the round labels.
I know it's going to sound lame, but there's a lot of science to labels. For starters, they can be lined or unlined, peel and stick, or they come out and they're already sticky, or they can be water-soluble. If you put them on glass containers that you use your food in, you put it through the dishwasher, the label comes off, doesn't contaminate the food. Then you got synthetic, where it never comes off, you know. We have label design software, stuff like that, and we sell a ton of labels. We buy them from people that are converters, take the big rolls and make the little stuff that goes in cash registers and stuff. We pre-print those with logos and things like that.
Next time you go to a Kroger and look for sushi, it's probably made by Hissho Sushi, which is our customer that is in 40 or 50 Kroger around the country. That's kind of what they do. These little blue things, those are sensors. We put them on freezers. We put them on chill cases. It talks to this thing and says, "Is this thing out of alignment?" I'll send alerts. It goes up to the cloud, comes back, keeps a record so the food service health inspectors can check it. We do analytics. We do checklists. We have video for, you know, training for employees. We have food preparation application and we also have a temperature sensing capability where you can test the temperature of a hamburger or a piece of chicken that's making wings.
It's all about food safety, and it's all online. This is the suite of applications that we sell right now. Believe it or not, timer is the hottest application we've got right now. You go, "What do you need a timer for? I got a cell phone. I got a timer in there." Well, we went to McDonald's and we said, "You wanna buy our timer?" They said, "No." We said, "Why?" 'Cause they said, "You can only time 8 things at once." We need a timer that can time 20 things. The point is, there's all this silly little simple stuff that's happening in the back of the house, and we typically can cut OpEx in the back of the house, I would say on average 8% on the low end, maybe 14% on the high end.
I gotta tell you, the people that operate restaurants, that operate grab-and-go, that operate grocery stores or restaurants, they care about that 14% 'cause they're all getting squeezed. This is kind of some of the ways that we save money, labor, food waste, hours saved, speed of improvements. Frankly, you're complying with the food service regulations, which if you get caught, it's gonna cost you a lot more in brand awareness, business that's gonna walk in the door. If you ever go shopping for a dinner place in Manhattan and you see that little food safety sticker on there, if it says A, my wife will go right in. If it says C, I can't even get her in the store. She won't even look.
All you have to do is find one mice or rat in the back and you're dead. With all the other food requirements, it's a pretty big deal. In any event, we've got some customers you've heard of. This is a sample. We've got a great book of business. All of these people have a product, but not all of them are paying for software because we didn't use to own it, so we didn't use to sell it. We're selling it now. We started a push in January, and my sales team is on fire trying to jack up the ARR, the recurring revenue. That's the future of this business. It does lose money, but when it breaks through, I don't think there's gonna be any stopping it. I think that's it.
The only other thing I say is we got 20,000 systems online, 20,000 locations mostly. Some locations have more than one of these systems. We have 40,000 of the older models that are not cloud enabled, so they're not online. Those are existing customers that haven't bought from us lately, but we're going out to them and saying, "Hey, it's time to renew or time to upgrade." With every one of those sales, we're gonna include a bunch of software. Our implementation of the SaaS model is new. We're kinda young at it. We've got a team now that knows how to do it. We didn't use to own the software. We bought it. We ported it over. In short, it's a turnaround, mostly complete, not done. We're trading below book value.
We've got about, I don't know, $17 million or $18 million in cash. Of that, $3 million is a drawdown from a $10 million line of credit that we have with somebody. We're doing a $3 million cash share repurchase for over the next 12 months 'cause we have more cash than we need. The FST break even is more or less in sight.
I need a little more visibility before I can share that with the market, soon as I think I can lock it down, you know, plus or minus a quarter, I'm gonna share that information. I intend to continue to share the ARR number each quarter, which I expect you're supposed to I was in the Navy, you know, there was an old saying is, "You get what you inspect." I'm inspecting the team. Every week I'm at the pipeline meeting, if they don't sell the software, they're gonna be horsewhipped. That's a figure of speech. Don't mind, don't report me. It's a figure of speech. They are selling the software. You know, their comp plans didn't use to have software in it. They do now.
We, you know, we're a hardware company. We couldn't get out of our own way. It's okay. It's understandable. Now this thing is back, and it is The original story was we got a startup company with huge potential inside a cash Funded inside a company that's got a cash cow. I don't need any more money to get there from here. Like I said, breakeven's in sight. I think that's my last slide. In the 4 minutes and 45 seconds I have left, I'll take a question from this man.
How much more of a head start? You say you're upgrading these, there's four, a credit of $4 million. There's a lot of printers you're upgrading. How many you get per upgrade?
How much money we get when we sell something?
Yeah.
The machine costs $1,200, the hardware. Assume it's got about a 50% gross margin, and we were 50% gross margin last quarter. Assume it's 50%, so that means it gives us $600. The competitors in the market that sell software as a service that does the same thing we do charge $200-$235 a month, for exactly the same stuff we sell and our stuff does, and it's all integrated, and it's secured. It's locked down. We don't have a conversation with the IT department to make sure the security validation's on and such. We're not a door-to-door vendor. We're an enterprise vendor, more or less. We don't really sell to anybody that doesn't want 50-100 machines.
The IT department always calls us in. If we just sold $100 a month for the same stuff our competitors sell for $200, that would be $1,200, right? Except it's got a 75% gross margin, that means contribution in one year is $900, 50% more than the $600 we get from the hardware, except the difference is it's likely that that license will last, let's say, simple math, five years. That means it gives us $4,500 in contribution, where the hardware gives us $600. The hardware's really good, it lasts 10 years. We're probably not gonna get a replacement unit for the hardware, and we have a combination. We have some bundles.
The minimum you can get into our product for now is about $45 a month, moving to $60. For existing customers who are already paying something, we're doing what Amazon does with the Prime and we're doing to customers what Netflix does. Every year it goes up about $3, $5. We're raising prices on existing customers, but we have a lot of green field in the install base. Eventually, it's my expectation at a minimum we'll get probably, say, $120 a month, which is $3 a day. You can't even buy a latte for $3 a day. Yes, sir.
John, what's your background? And what exits have you been involved in?
Well, I started out as a little sales rep at Oracle, back in the days when it was $100 million in revenue. I'm an engineer by training, a software engineer actually. I was a systems engineer after I got out of the Navy. I was a nuclear engineer on a submarine. I know something about engineering. I went software 'cause that's the future. Nuke power went like that. It's coming back. Anyway, I did Oracle for five years, five jobs, built five sales teams, and then went on and became the first CRO of a company called Arbor Software, which you never heard of, and it's my fault because we had a huge IPO. I tell everybody this, 'cause it was first day NASDAQ bump. We bumped Netscape, if you remember them.
God love them. We bumped Netscape from number six to number seven. It was a great IPO. We only had this pre- dot-com thing. We had $30 million in revenue, and we closed at $500 million. That was the days. We did that, then I bought Hyperion Solutions. We were a little bit smaller than them. It was an RTO kind of I became the CEO of Arbor Software and then bought Hyperion. Left after a fight with the board. That's a different discussion. You need a glass of wine for that one. We sold eventually sold to Oracle for $3.6 billion.
Marc Benioff, who worked for me at Oracle Corporation, he asked, he said he needed a CEO, I joined Salesforce, the first CEO, employee number six or seven. I don't remember, just some engineers. I was there for the first I got it from zero to $50 million. We didn't even have a product when I joined. I figured out the pricing. Not I'm not wonderful. I was just trying to make the sales model, the customer engagement, customer journey. I wanna make it simple. No big, long contract, no overpaid sales reps, no car allowances, none of that hooey. Just make it simple. No hardware to buy. No computer to be in the back office. CRM was in the early days. Everybody had sales force automation, but nobody had CRM. We said, "Screw it.
Let's make it $50 a month. I'd go to Sand Hill Road every quarter. It was the stupidest idea I ever had. Anyway, obviously it worked. I wish I had all of my stocks still 'cause I probably wouldn't be here. I'd probably be with Larry on his boat. Larry owned 4% of the company. I don't know if you guys knew that. He was funding us just like he funded NetSuite. Anyway, I did that, I did a couple other things, right now, I was on the board of this company. I was retired. The CEO left, and they said, "John, would you do it?" The reason they thought I would be good is I had a logistics company after Salesforce that was a Summit Partners investment, we sold it.
Lockheed almost bought it, Zebra of all companies bought it 'cause they wanted to do logistics tracking end to end, and we were doing IoT in the early days before it was called IoT. I ended up there for a year doing my indentured servitude. A headhunter said, "Hey, John, you know something about CRM, and you know something about printers." The TITO printer has a little thing that can improve intimacy with the guy playing the slot machine. That was my story. It's kind of an accident. Everybody's career is an accident. Anyway, I'm out of time. I'm happy to talk with anybody later, either here at the conference or you can all track me down. Thanks very much.