TransAct Results Dip

WALLINGFORD, Connecticut –- (PRESS RELEASE) -- TransAct Technologies Incorporated (Nasdaq: TACT), a leading producer of transaction-based printers for customers worldwide, today announced financial results for the three months ended June 30, 2005.

Revenues for the second quarter of 2005 were $12.3 million, compared to $14.7 million in the same period a year ago. The Company earned net income for the second quarter of 2005 of $0.3 million compared to net income of $1.5 million in the same period of 2004. Earnings per share for the three months ended June 30, 2005 were $0.03 per diluted share compared to $0.14 per diluted share in the same period a year ago.

Revenues for the six months ended June 30, 2005 were $24.4 million, compared to $29.8 million in the same period a year ago. The Company earned net income for the first half of 2005 of $0.4 million compared to net income of $2.8 million in the comparable year-ago period. Earnings per share for the first half of 2005 were $0.04 per diluted share compared to $0.25 per diluted share in the same period a year ago.

Gaming and Lottery

Gaming and Lottery revenue for the second quarter of 2005 was $6.0 million compared to $7.6 million in the same period of 2004. Despite the continued weakness in the domestic gaming market, overall gaming revenue, excluding lottery, was down only 8% versus the second quarter of 2004 and up 53% over the first quarter of 2005. These results were due to TransAct's increasing worldwide gaming market share from the growing acceptance of the newly launched Epic 950(TM) casino printer and growth of over 300% in international gaming sales compared to the same quarter of last year. Lottery revenue, excluding gaming sales, was down approximately $1.0 million compared to the same quarter of last year due to the timing of orders from our lottery customer, GTECH. Lottery revenues are expected to increase in the latter part of the second half of 2005.

POS and Banking

POS and Banking revenue was $3.2 million in the second quarter of 2005 compared to $4.6 million in the second quarter of 2004. POS revenue, excluding banking, increased 12% compared to the second quarter of 2004, largely due to increasing sales of the new line of thermal printers and increasing sales in the international markets. This was the second quarter in a row of increasing year-over-year revenue growth in the POS market. Banking revenue, excluding POS, declined significantly compared to the same quarter of 2004, as the business is project oriented and the Company benefited from shipments of banking printers to two large financial institutions in 2004 that did not recur in 2005. However, TransAct announced in late June of this year that a top-tier financial services company selected the Company's BANKjet(R) 1500 printers for use at up to 6,000 of their bank teller stations. The Company shipped a small number of these units in the second quarter of 2005 with the remainder of units expected to ship in the third quarter of 2005.

TransAct Services Group

Revenue from the TransAct Services Group, which includes spare parts, consumables and services, was $3.2 million in the second quarter of 2005, a 27% increase from $2.5 million in the year-ago period and a 21% increase over the first quarter of 2005. This growth reflects the Company's growing installed base of printers and continued increased focus on the after-market business.

Operations and Finance

Steven A. DeMartino, Executive Vice President and Chief Financial Officer of TransAct Technologies, commented, "Our management team continued its focus on controlling our costs while also implementing our strategic initiative to drive future revenue growth. Gross margin improved to 34.5% from 30.6% in the first quarter of 2005 due to favorable product mix, as well as continued product cost improvements. Operating expenses were in line with our expectations as the strategic investments we made to our sales, marketing and engineering functions are substantially complete."

Mr. DeMartino continued, "As part of our stock repurchase program authorized by our Board of Directors in March, 2005, during the second quarter we repurchased 122,000 shares of our common stock for $984,000 at an average price per share of $8.07."

Looking Forward

Mr. Shuldman said, "The first half of the year was impacted by the significant decline in the domestic gaming market and project-oriented banking business. Even with this decline, we continued to focus on our growth initiatives, which included the introduction of four new products for the POS market, the expansion of international sales across all of our business units and expanding sales in our TransAct Services Group. While we are not expecting a recovery in the domestic gaming market at least through the third quarter, we are projecting revenue in the second half of 2005 to be higher than it was in the first half of the year. And once the domestic gaming market recovers, we have positioned TransAct for additional market share growth."

Mr. Shuldman concluded, "In the third quarter of 2005, we anticipate revenues will be between $14.5 million and $15.5 million, and we expect net income for the third quarter of 2005 will be in the range of $0.06 to $0.08 per diluted share."