TransAct Technologies Incorporated (NASDAQ:TACT) Q3 2020 Earnings Conference Call November 5, 2020 4:30 PM ET
Marc Griffin – Investor Relations
Bart Shuldman – Chairman and Chief Executive Officer
Steve DeMartino – President and Chief Financial Officer
Conference Call Participants
Jeff Martin – Roth Capital Partners
Chris Howe – Barrington Research
Mitchell Sacks – Grand Slam Asset Management
Good day and welcome to the TransAct Technologies Third Quarter 2020 Conference Call. Today’s conference is being recorded.
And at this time, I would like to turn the conference over to Marc Griffin. Please go ahead.
Thank you. Good afternoon and welcome to TransAct Technologies third quarter 2020 earnings call. Today we’ll be discussing the results announced in our press release issued after the 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 our third 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 10-Q. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occurred 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.
And with that, let me turn it over to Bart.
Thank you, Marc, and thank you to everyone joining us on the call today. We are pleased with our execution in the third quarter and especially pleased with the strong momentum in our foodservice technology market. The global pandemic continues to create challenges for our customers in our key markets, including restaurants, food stores, and casinos. While activity has not returned to pre-COVID levels, we are nonetheless pleased with the sequential improvement we experienced in the quarter three for 2020, especially in our foodservice technology market.
Before we get into quarterly results, a few weeks ago and subsequent to the quarter end, we closed an underwritten public offering of 1.38 million shares, raising $9.8 million. We were humbled by the immense support we received from the investment community and we plan to use the additional capital to support the expansion of our BOHA! hardware and software solutions. We thank all our capital partners for their support and efforts to complete the capital raise, along with the full team on both sides that worked together to get this accomplished. We thank you.
Now on to the results. Our third quarter total net revenue came in at $7.3 million, well ahead of our expectations of $5.5 million to $6 million. Most importantly, the recurring revenue element of our foodservice technology business reported revenue of $1.6 million, an increase of 157% year-over-year and made up 22% of our total revenue. We recorded an operating loss of $1.5 million and adjusted EBITDA loss of $869,000, which was better than our internal projections for the third quarter.
We delivered quarterly gross profit margin of 45.9%, and EPS loss for the third quarter was $0.11 per share. Of course, Steve will go into details later in the call.
Total foodservice technology market revenue was $2.35 million, up 20% from the same period last year. But more importantly, FSP was up almost 100% from our second quarter in 2020. And while the industry restaurant is still recovering and dealing with different restrictions around the country, our BOHA! solutions have regained momentum in the market.
Hardware revenue came in at $771,000, a healthy increase from our second quarter, but well below the year-ago period. During the third quarter, we installed an additional 312 paid terminals and now have a total of 3,813 paid terminals running on our system today. Hardware terminals are the lifeblood of our recurring revenue stream. And as we increase the number of terminals in the market, our recurring revenue will grow exponentially. An accumulation of terminals in the market as of today has led to our third quarter recurring revenue of $1.6 million, I would say 157% increase year-over-year and well ahead of our expectations of greater than $1 million.
As a reminder, recurring revenue for our foodservice technology market includes software fees, service contract and label sale. On an annualized basis, our recurring revenue is now about $6 million and will continue to grow as we sell more BOHA! terminals and workstations in the marketplace.
As we continue to bring back house [ph] technology to the foodservice market, we are excited to continue our leadership by providing technology efficiencies to our customers through our partnership with ESHA Research. For nearly 40 years, ESHA has been recognized as the foodservice industry’s top choice for nutritional analysis, recipe development, and regulatory compliance. With this integration, BOHA! customers will now be able to create all of their customers recipes with ESHA’s Genesis R&D software, calculate the nutritional analysis and print FDA mandated nutritional labels all from the BOHA! terminal.
And one of the great benefits to the customers includes the ability for a chef to create a daily special and generate the much-needed nutritional label that day at the point of production. This provides our foodservice customers with creative capability to assemble new food items without any delay or hassle of getting the nutritional label ready.
As challenging as 2020 has been, we have continually focused on enhancing our technology and developing our next-generation terminal and software suite. As part of this technology development, we made the decision to accelerate the market adoption of BOHA! with a dedicated solution just for restaurant. BOHA! workspace and the accompanying restaurant operations platform or what we call an ROP was developed so we can package and sell a software solution using a single portal that would address the many aspects of food production.
As we were finalizing the solution and getting ready for launch, Apple contacted us regarding pairing our BOHA! software suite with their iPads as a package for restaurant. Our new BOHA! workspace uses a tablet instead of a fixed terminal, so the opportunity for Apple and TransAct was present.
As we started to speak and work with Apple, we became very excited about the partnership, and made the decision necessary and made the necessary adjustments to our BOHA! software applications to the iOS native and designed our new BOHA! workstation to pair with Apple’s iPad. I am very happy to report the relationship is in full motion and we just finished training our Apple partners and their ecosystem on our BOHA! restaurant operations platform in the new workstation. We now expect general availability and sales ramp-up of this exciting new product starting in January and we are in the process of building out additional sales and launching resources to support the new lead and accelerate our growth. We are off and running.
Now not to get too much [indiscernible], but our new software platform, BOHA! ROP, includes BOHA! hardware as well as the full suite of software applications which provides restaurant operators with a single digitized platform to manage and track food safety procedures and back of the house operational processes that have become even more critical amid today’s safety challenges.
The new BOHA! restaurant platform includes the BOHA! control center, a single web portal allowing restaurant operators to manage and update their BOHA! native iOS applications from a single location. BOHA! control center is the first single vendor solution to combine all applications for food safety labeling, grab-and-go labeling, employee wellness suite, timers, checklist, and task management as well as temp taking and temp sensing, all in one integrated platform. And all of these applications can be downloaded and installed directly from the Apple Business App store.
And one of the best features of the BOHA! ROP is the business intelligence that the enterprise restaurant company can extract from our system.
Moving on to our market-leading casino and gaming printer business. Revenue in the quarter was $2 million, down 60% year-over-year. The global casino and gaming markets remain challenged during the quarter, but we are seeing a mild recovery as casinos refocus their spending on the gaming floor. Our international casino markets remain more challenged than the U.S. as large gaming localities require more travel, which has been limited during the pandemic.
Europe experienced extensive shutdowns in the first half of 2020 and saw a moderate recovery in Q3 before some countries started to impose curfews and another lockdown measures. Those challenges aside, we continue to see opportunities in sports betting and other areas, and remain connected to our customers as they reinvent their businesses.
Casinos throughout Asia have begun to reopen, but continue to run well below capacity as curtailed travel and visa restriction have prevented more activity. That said, new opportunities are still arising and we are very excited about our partnership with a new Hoiana Suncity Resort in Vietnam. Hoiana Suncity offers cutting-edge entertainment and gaming facilities inside Hoiana, Vietnam’s first fully integrated resort and transactions providing 300 Epic 950 printers and seven Epic Edge TT printers to support their initial slot machines and table top gaming machines. We are pleased to see our industry-leading technology represented at another world-class resort.
As we highlighted last quarter, many casinos across the U.S. opened for gaming with limited capacity and most nongaming attractions remain closed. As casinos refocused on their gaming activity, we believe we will be beneficiary as we are seeing an increase in orders and accordingly, our domestic revenue improved 60% in Q2 and was only down 50% in Q3 from last year.
Central to our leadership in the casino industry is our Epicentral platform, which is integral to our Epic 950 and Epic Edge printers. Our Epicentral system can reward players and encourage them to come back again through real-time promotions and incentives. Additionally, as casinos try to socially distance their customers, our Epicentral system can turn each slot machine to a kiosk where players can receive their coupons and promotions. I’d like to say, it is important for TransAct to offer solutions to our casino customers to help them navigate the COVID-19 outbreak.
With that, Steve will review our third quarter 2020 results and our liquidity position, after which I’ll make some summary remark before opening the call to questions and answers. Steve?
Thanks, Bart, and good afternoon, everyone. We’re pleased with the progress TransAct has made in our most recent quarter. Before I get into the details of our third quarter results, I’d like to highlight the recent public offering we completed. On October 16, we completed an underwritten public offering of 1,380,000 shares, including the exercise in full of the overallotment option at $7.10 per share, a total gross proceeds of approximately $9.8 million.
As of the end of October, we had cash and cash equivalents of approximately $10.3 million. The capital raise will allow us to invest in additional staff and infrastructure to support the expanded rollout of our BOHA! solutions.
Now, turning to our third quarter results. Net sales were $7.3 million, down 38% from $11.7 million in the third quarter of last year, but up 38% sequentially compared to the second quarter. Our foodservice technology market for FST was up 20% to $2.3 million from $2 million in the third quarter last year. Our FST hardware sales declined 42% to $771,000, and we ended the quarter with 3,813 paid terminals in the market.
In the quarter, we experienced lower sales of both our BOHA! terminals and our 9700 terminals, which we believe were both impacted by reduced customer purchases due to COVID. Despite the lower hardware sales, our recurring FST sales, which includes software and service subscriptions as well as consumable label sales, came in at a record $1.6 million in Q3, which was up 157% from the $613,000 we reported in the year ago period.
During the third quarter, we benefited from both a growing installed base of terminals and increasing label usage as our customers began to slowly recover. In addition, we benefited from a large stocking order from our largest consumer store customer. The increase in our recurring revenue demonstrate the cumulative and ramping effect of having the increasing number of BOHA! hardware terminals in the market with each terminal currently generating over $1,600 in recurring revenue per year on average.
Casino and gaming sales were $2 million, a decline of 60% from the third quarter of 2019, but a 48% improvement sequentially from the second quarter as casinos began to reopen, albeit with much lower volume of activity than pre-COVID-19 times. Breaking this down further, our domestic revenues were down 46% from the prior year, and our international revenues were down 79%, all due to the worldwide pandemic.
POS Automation and banking sales was down 51% to $742,000 in the third quarter of 2020, significantly lower sales of our Ithaca 9,000 POS printer for McDonald’s, which is the impact of COVID-19 on their business. Looking at Printrex sales, revenues were down 64% to $107,000 compared to the prior year period. While we continue to deemphasize Printrex sales, we still expect to receive additional orders from our legacy oil and gas customers as the industry recovers from the impact of COVID-19.
And finally, TransAct Services Group or TSG, sales were down 24% year-over-year to $2.1 million as we continue to experience declines in sales of legacy spare parts and legacy consumable products, such as HP inkjet cartridges and POS paper rolls that we’re no longer focusing on.
Moving down the income statement. Our third quarter gross margin was 45.9% compared to 47.5% in the prior year period as our gross margin for the current period was negatively impacted by the overall sales decline from the pandemic. Total operating expenses for the third quarter of 2020 were $4.8 million, which was down $200,000 or 4% sequentially from the second quarter of 2020 and down $406,000 or 8% from the third quarter last year.
As we outlined earlier in the year, we took a number of steps to lower our expense structure from the first quarter run rate in response to the effect of COVID-19 pandemic on our business.
Selling and marketing expenses were down $689,000 or 35% year-over-year to $1.3 million. The sharp decline was primarily attributable to the elimination of a significant portion of all trade shows and other planned marketing programs, as well as the travel ban, reduced sales commissions, and employee furloughs and terminations in April, all due to the ongoing COVID-19 pandemic.
Looking forward, we plan to begin making significant investments in sales and marketing to support our recent partnership with Apple and the growth opportunity we see for our BOHA! solutions. Despite the pandemic, we continue to invest in our engineering, design, and product development, aiming for the launch of our new BOHA! restaurant operations platform and our new relationship with Apple. And accordingly, those expenses were up $397,000 or 38% year-over-year to $1.4 million.
Development expenses over the past year have been centered on our recently announced native iOS BOHA! restaurant operations platform and the all-new BOHA! workstation that will be paired with an iPad.
G&A expenses were down $114,000 or 5% year-over-year to $2.1 million as legal, accounting, and other professional fees declined during the quarter. We incurred an operating loss for the third quarter of 2020 of $1.5 million or 20% of net sales, which compares to operating income of $312,000 or 2.7% of net sales in the year ago period.
And on the bottom line, we recorded a net loss of $867,000 or $0.11 per diluted share in the third quarter 2020 compared to net income of $384,000 or $0.05 per diluted share in the year ago period. Adjusted EBITDA for the third quarter of 2020 was a negative $869,000, which compares to positive $673,000 in the third quarter of last year.
And finally, turning to the balance sheet. We ended the September quarter with just under $1 million in cash and $2.2 million of debt under the PPP loan. Like we’ve done for the past two quarters, where we traditionally have not given financial guidance, in the spirit of continued transparency given the pandemic, we want to provide investors with an understanding of where the business is trending in the fourth quarter. Absent an accelerating wave of COVID cases and shutdowns, we believe our customers’ businesses will gradually improve as the impact from COVID diminishes over time, but we’re estimating our fourth quarter sales to be around $7.50 to $8 million. And we expect to have between 5,000 and 6,000 paid terminals in the market by year-end.
In summary, we made prudent decisions during these unprecedented times including banking almost $9 million from the capital raise we completed in October. And we believe we are now on the other side and ready to grow again.
And at this point, I’d like to give the call back to Bart for some closing remarks. Bart?
Great job. Thanks, Steve. As you look towards the end of 2020 and into 2021, we’re optimistic about the momentum we are seeing in the restaurant industry and our convenience store too and remain confident that BOHA! is on pace to become our largest ever revenue-generating opportunity. Our focus is on driving the success for BOHA! as we are determined to leverage our position in this emerging market and leverage our relationship with Apple to grow our business and create significant long-term value for our shareholders.
Before turning the call over for questions, I would like to thank the TransAct shareholders, both new and existing, for your support. I also want to thank the employees of TransAct who have helped us to withstand the impact of the virus and the impact on our markets and our business. You’re a bunch of great people, and I cannot thank you enough.
At this time, I’ll turn the call over to questions. Operator?
[Operator Instructions]. And we will take our first question from Jeff Martin with Roth Capital Partners. Please go ahead.
Hi, Bart, and Steve, how are you doing?
Good. How are you?
Well, thank you. Bart, with the completion of the training of the Apple sales force on BOHA! restaurant operations platform. I was curious if you could share some anecdotes about their reactions to it. And what happens now?
Yes. So the one reaction that we’ve heard, which has been wonderful is that when you sell BOHA!, you sell BOHA! workstation ROP, it has to come with an iPad. So Apples loves that. So that has been one of the things that they continue to say is that it’s great because you can’t fill a system without our iPad, which is great. What happens next is exactly what we expected is sales force is trained and now they’ll go out and start to present our solution with their iPad. They’ve identified a certain amount of customers that go into it first, well over 100 customers. And they’re going to start talking to them about the iPad and about back of house automation and what BOHA! can do for them and to get engaged with those customers and then get us engaged.
So, we’re right where we thought we – I mean, look, we just did the capital raise not too long ago. So it’s not like anything was going to change. We’re right where we thought we’d be. We trained our sales force. They’re very excited. There’s a lot of conversations going on between the two companies. And hopefully we’ll have more to say about that as we go forward. But they’re out selling. And it’s wonderful. So – and that’s why we’re gearing up. They have over 100 salespeople that are going to be representing us in the marketplace. So we expect to be pretty busy soon.
That’s very encouraging. Second question, do you have any increased visibility in terms of the rollout scheduled for 7/11? And are we on track to go full deployment in three years’ time frame?
Yes. Jeff, I would think so. They’re back in buying mode again. And through one of our shareholders who seems to like to follow them, we can track what they’re saying in the marketplace, which has been great. And I really thank our shareholders for sharing some of that information. And, yes, I would think that – and then we got – I mean, we got to think about Speedway. I think they just announced that they’re going to divest some stores due to the Speedway, but I think it probably add another 3,000 to the 10,000, we believe, it’s going to be. So there is nothing that I know that they’re not going to complete that in about three years.
And then last question, in terms of the sales pipeline for BOHA! general, how has that come together, how has that changed over the course of the third quarter, does it have it all?
Yes. So we’ve been successful in the C-store market, Jeff, as you know. And that continues to present opportunities to us. Not every C-store is doing fresh food. Clearly, it appears that a lot of them want to get into it. So there that continues to develop nicely for us with opportunities. In the food service market, we’re seeing some activity in regards to other people doing kind of kiosk operations in supermarkets. And there, they’ve got to do the labeling. So we see some action there, which is kind of new, which is nice. Clearly, we – the goal is to rollout 1,200 terminals by the end of the year to foodservice provider, to supermarkets.
We’re also seeing on the food service side where companies that deal with office buildings and things like that, we’re starting to hear from them that they’re starting to think about, okay, when office buildings open up again, how are we going to sell food, right, low days of waiting online and saying, I’ll buy this, and I’ll buy that and make this sandwich or that sandwich is probably not going to happen again. So, I think we’ll see more grab-and-go type of offerings, which lines up with our labeling solution like we did for the C-store market. So, we do see some traction there and some of it’s pretty big. But we’ll see. I mean, this is – we’re probably the first inning of this, but it’s logical to say that a food service provider is now starting to think about being at the other end of this virus, saying, okay, come the summer when the vaccines are all there, what happens when we open up again and how are we going to run our business differently. So that makes a lot of sense to me.
And then I think the restaurant market with the ROP solution, that’s new. That’s got us – I don’t know if I told you, Jeff, but I had an opportunity for the staff to show me what the solution does at all levels, from the corporate level to the regional level to the – get to the local level. And because we’re kind of coming to conclusion on the development and all of that and granted, we had to add some development time because of iOS and all of that. But what impress me really, Jeff, was what we could do at the enterprise level, at the corporate headquarters, in regards to our business intelligence.
And I think that story hasn’t been told enough on our end. And one of the things in raising the money, it’s going to give us the capability to market more. We had to be very tight with our budgets, and we had to be pretty spot on to our marketing because as we watch the market kind of collapse on us, in April and May, we had to be very careful with our dollars. But now that we’ve raised the money, I think the opportunity for us to tell the story about the business intelligence. What a COO can see in the numerous stores that they have out there? And what information can flow to that COO or that Food Safety Director, I think that story needs to be told even better than what we’ve done.
So, I’m very excited about it. And in fact, I think we’re going to do something with you, Jeff, where we’re going to have an Investor Day where we’re going to try and show the investors how the solution works and some of the business and intelligence that we can provide. And I think getting that story out is now going to be important to us.
Now, we’ve got a couple more weeks of development to finish and we’ll be able to show the investors in the mid-November time frame. But I think that that story is one that hasn’t really been told in the market yet. And I can tell you that I’m very impressed with what we were able to accomplish.
Great. Thank you, Bart. And looking forward to seeing the technology interaction.
Yes. Thank you, Jeff.
Our next question will come from Chris Howe with Barrington Research. Please go ahead.
Good afternoon, Bart and Steve.
Following up on some of Jeff’s questions previously about the completion of the Apple, training of their sales staff. With what you know now, how would you qualify the length of the sales cycle as we consider this pandemic environment is still ongoing? And what that sales cycle could look like as we normalize?
Yes. Look, I think the sales cycle is still going to be what we’ve seen, Chris, which is anywhere from six months to 18 months. I think it’s been quicker on the C-store and foodservice provider side because there, the FDA requirement hangs over their head. And so there, it’s how do we get it out there as quick as we can. And, yes, there’s work that we have to do. We’ve got to get to understand all of the food items and get the nutritional label information in the case of what I talked about on the call with [indiscernible] there’s things that we can do to quicken that.
On the longer side, I think its restaurants. And there – that’s just because of the many food items, we’re not just dealing with food safety labeling or nutritional labeling. We’re dealing with timers and checklists and tabs list. We’re dealing with temp taking and temp sensing. So, the beauty of what we’re doing in the restaurant industry is we’re selling a package of software. And I think we’ve talked about this, Chris, where our recurring revenue for restaurants on a percentage basis will be higher on software, less on labels for restaurants and more on labels and less on software for C-stores and food service providers. So, I think that sales cycle is longer just because there’s more work. There’s more things to get involved with and to integrate into our system. So I would say that, that will be at the six to 18-month level easily.
And just led to some more thoughts. If we look at the comparison between label usage for a convenience store versus a preferred restaurant chain, how could we see the difference between the reoccurring revenue per terminal per year. As we look further out and compare a restaurant terminal versus C-store terminal on average?
Yes. So we don’t break out the individual sales and I don’t think we will. But I think what will happen is because we’re selling a software package, which will – which is a lot more than just selling BOHA! labeling. I think the recurring revenue is going to average somewhere around $1,300, $1,400 a terminal, but I think in the restaurant market, it can be more in softwares than labels. Restaurants that are just doing what we call food safety labels, where they’re just labeling food that goes back in the walk-in or sauces that they just made that needs to be labeled with a shelf life, those labels tend to be 1x1s and 2x2s and not very expensive.
What we’re doing in the C-store in the food service market is we’re wrapping a label around a container. And they’re with Colors, we’re doing it in the restaurant – I mean in the C-store and the foodservice providers colors. We use their labels, we use their brand. We work very closely with them to design those labels. So there those labels are much more expensive. But I think at the end of the day, based on the models that we’ve done, and it’s going to take a couple of years, right? Because we got – right now, we’re so heavily focused on food service providers and C-stores, that once the restaurants come in, we’ll get a better understanding of what that recurring revenue is going to look like. But based on our model, I still think it’s about – it’s going to be around the same area we’re at right now.
And, yes, I guess I’ll ask one more here. Label usage, it seems to be in the early innings from realizing the full potential that this could add to the reoccurring revenue stream. Is there a way to quantify it per terminal per year as kind of a wide range of what you see as potential on the high end as well as on the low end, what we can expect for label usage?
Well, we haven’t been able to do that yet because every customer is so different, Chris. And we’re in the early innings. So it’s a great question. We – what we do is in our onboarding process, we’re working with them on what we’re labeling, what labels they need from us. We estimate what the label usage is going to be. And in some cases, we’ve been surprised at the low side. In many more cases, we’ve been surprised on the high side because they’re selling more products and using more labels than we had estimated.
So again, like when we do a trial, so if we win C-store and we do a trial in 10 restaurants, we’re seeing what their volume is. But a year from then, it’s – okay. Well, in fact, we have one C-store customer right now that added a new food item. So that’s going to increase the amount of labels that they’re buying because it’s one more label and one more – they’re selling more fresh food because they’re selling it, right? So they’ve added another item to their fresh food, which means our label sales will go up.
So, I think we’re in the early innings. It’s too early to call and try to do that yet. And I think over the next couple of years, we’ll be able to. But at the same time, I think we’re going to probably come to some average. And with getting into the restaurant business with the workstation and ROP, we now don’t sell individual software programs. We’re selling a full suite at one time. So that will take away like with certain customers where we started with labeling and then we added timers and then we added temp taking, that all goes away because it’s all sold upfront. And we feel very good that that’s what we need to do. So, I think over the next couple of years, we’ll try to get to some average. And that’s what we’ll probably say.
Yes, if you’re looking at the extreme, I would say, like the – probably the lowest end we’ve seen has been something around like $400 recurring revenue. And the highest has been over $2,000. And then everything in between, you heard me say on the call, we’re averaging right now around $1,600. That might give you at least some sense of where it could range.
And look, it’s also going to be a little noisy because we have a lot of terminals going out at the end of the month. And at the end of the year, the question is, when do they buy all their labels? I mean, they’re going to need labels for every 1,200 of those machines. Now do they buy them all upfront? Do they – I mean, how quickly can we install all the terminals. So do we see some of those label sales in January versus December, we don’t really care, right? We’re putting another 1,200 terminals in the marketplace. We’ll be at a minimum of 5,000 terminals by the end of the year. So some label sales go into January because they weren’t able to roll out all the terminals in December. That doesn’t affect us on our success.
I mean we’re rolling out on 1,200 terminals to a customer that’s going to use a lot of labels. And those are perfect customer, right, that’s labeling a package, the label was pretty long. So those are perfect customer for us. We love them and we love having to do long labels. Long custom labels is a good thing to do. So again, over the years, we could see – I don’t think we’ll see anybody $400 anymore. Because with ROP, there’s a minimum of software they have to buy, and that’s clearly not going to be $400 a year. So – but no, I think we’ll get to an average in two or three years.
I appreciate that because it seems like as we go forward, there’s some intrinsic unrecognized value as you gain more data from these stores.
And the other thing, Chris, that has happened, like I said, is we have a C-store customer that we started with. We’ve been with them for a couple of years. And they just added a new item. And it just like it’s fantastic, hey, can you add more items because it’s more labels. It’s not taking away our other label out. They found another product that they can sell. So it’s wonderful to us. And we hope that the C-stores and foodservice providers continue down that path of offering more fresh food because that just means we’re going to sell more labels.
Thanks. I appreciate the color. And thanks for taking my questions. I’ll hop in the queue.
Thank you, Chris.
Our next question will come from Mitchell Sacks with Grand Slam Asset Management. Please go ahead.
Thanks. So, I think you already talked a little bit about engineering and selling and marketing going forward. In terms of the engineering side, I assume you’ve spent some significant money getting the iOS version of your product up and running. As you go forward, does that start to level off? Or can you kind of just give us a feel for how that works going forward?
Yes. Great question. I don’t think software ever ends. And what you get accomplished today becomes something new that you got to get done tomorrow. We’re not stopping with what we have, right? So we already have our product plan list that goes out at least 12 months. It’s not 18 months because we think there’s more we can do in the market. And there’s more enhancements. I don’t think it ever ends, right? It’s not like a mechanical device like our printers, okay, we did our 950 and then we waited to do our Epic Edge 10 years later. There’s always upgrades, there’s 13.1, there’s 13.2%, there’s 13.3%. There’s always stuff that you’re going to do enhancement, improvements, I’m sure we’ll run into a bugger too.
So, I don’t look at it that way. The question that I look at, what I look at, Mitch, is where can we get the revenue at a certain spend level. The recurring revenue, as Steve said, is exponentially growing, right? And the question is, how do we get more terminals out there? You look out two, three years and get, let’s say we finished 7/11, right, that’s got to add another bunch of thousands of terminals. Where does that revenue go? And the question is, what is the spend level against that to keep us as the forefront leader? I would imagine that people like Apple or Intel don’t finish something and say, okay, we’re done and let their engineers go.
So the question is, what do we need to do to continue to be the innovator in the marketplace. We are the innovator. We are the leader. And there’s a thing needs to sit on my desk before we close the office that said, if you’re the lead dog, the view never changes. And that drives me every day. So – and I’m sure Apple is going to bring us – they’ll bring us ideas and things. So we want to make sure we have the staff to be able to continue our leadership.
And then in terms of sales team, and I guess it’s an odd selling environment, right, because most in person sales are not happening across all industries. How do you think about sales force and driving sales in your end?
Yes. Mitch, I think that – if I – the conversations that I have with other CEOs is exactly that, Mitch, which is a – it’s a total different market. We would always watch technology at trade shows. We use trade shows to bring customers to us because of our technology. And so the question is, how do you manage through this, right? What is the way to get in? Now the one thing that is good, Mitch, there’s no doubt that our friends at Apple have a role at that like we’ve never seen. And their ability to call people up and maybe not get an in person meeting, but clearly what we’ve seen them able to do is get a video meeting is pretty spectacular.
So we’ll adjust our selling in regards to now, I call it, it’s more marketing than selling. But there’re demos, we’ve got to be able to do a demo. We’ve got to be able to do that efficiently using whether it’s Zoom or we happen to use Teams or Cisco Webex, how do you use the technology to be able to do what you used to be able to do in person. We’re learning along the way. I think – let me tell you, I think every company is going through this. But I think when you have a solution in a market like this, in certain markets, we take the C-store market where they – if they’re going to get into fresh food, they got to figure out a labeling solution.
So the demand is there. It’s finding us, right? It’s how do they find us or how do we find them? So in one way, the C-store market and the food service market has been good for us because the demand is there. People are entering the market. They need to print labels and they got to figure it out and they’re finding us. And the restaurant markets are a little different. And I think we’re very fortunate to have a relationship with Apple, where they’re opening up their road [ph] and it might not be an in-person call, but it’s sure going to be a great Zoom call.
Yes. And look, we’re – Mitch, look, we’re asking experts in the marketplace. We’ve got our ear to the ground on this one. I don’t think anybody truly figured it out yet. I think everybody’s got their ideas, and that’s – we’re listening. We’re listening to what other people do. I mean, clearly, we’re working with ICR, with their PR team. We’ve done more PR in the last three months than the company has probably ever done. Whether – and you know some of the stuff that we’ve done, webinars and things like that. Those are good events for us. And so we’ll continue down the path with that.
Great. Thanks for your time. Appreciate it.
And with no further questions, I’d like to turn the call back to Mr. Bart Shuldman for any closing remarks.
We’d like to thank everybody. Look, we’ve got some new investors, I’m sure, on the call, we’ve got our existing investors on the call. I really, really thank you for your support. Clearly, these are very different times. Mitch just talked about it. How do you sell in the non-travel environment? It’s a great question. But I really, really appreciate the support. We’ve got a lot ahead of us. We’re very excited about the future. We’ve now bifurcated the market into really two segments: the restaurant and everything else in our foodservice technology business. So we’re very excited about the future. And I guess the next call will be sometime after the first of the year. And I know it’s probably pretty early to do this, but I do wish you a happy Thanksgiving, merry Christmas, Happy Hanukkah, and Happy New Year. May 2021 be a lot different than 2020. We’ll talk to you again. Thank you.
And this concludes today’s conference. Thank you for your participation. And you may now disconnect.