Source: USA Technologies, Inc. | Released May 13, 2014
Recurring Revenues Up 19%;
Recognizes Deferred Tax Asset of $26.7 million;
Net Connections to ePort Connect Service Up 100%;
Customer Base Up 47%;
Total Connections to ePort Connect Service, Up 24% (year over year) to 244,000
MALVERN, Pa.--(BUSINESS WIRE) -- USA Technologies, Inc. (NASDAQ: USAT) ("USAT"), a leader of wireless, cashless payment and M2M telemetry solutions for small-ticket, self-serve retailing industries, today reported results for the third fiscal quarter ended March 31, 2014.
Highlights for the third quarter included:
» GAAP net income of $26.9 million which included $26.7 million related to the partial recognition of a deferred tax asset. Non-GAAP net income was $321,526;
» Net earnings per common share of $0.75, which included $0.75 per share related to the partial recognition of a deferred tax asset. Non-GAAP net loss per common share was $0.00;
» Total revenues of $10.4 million; up 16% from the prior year;
» License and transaction fee revenue of $9.0 million, an increase of 19% over the prior year and representing 86% of total revenues; and
» Adjusted EBITDA of $1.8 million, up 9% from the prior year.
In addition, USAT achieved a record number of new connections to its cashless payment and M2M telemetry service, ePort Connect®, approximately 22,000, in the third quarter. Net new connections for the third quarter totaled approximately 20,000, a 100% increase from 10,000 net new connections for the third quarter of the prior year. Total connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, were 244,000 as of March 31, 2014, a 24% increase from March 31, 2013.
USAT also continued to demonstrate rapid growth in the number of customers using its ePort Connect service across various segments of the self-serve retail market including vending, commercial laundry, amusement/arcade, taxi and transportation, kiosk and mobile applications. During the third quarter, USAT added 575 new customers to its ePort Connect service, for 6,650 total customers as of March 31, 2014. For the three years ended March 31, 2014, the ePort Connect customer base has grown by a compound annual growth rate of 58%.
"Our results for the third quarter reflect assertive strategies directed toward growing market share, cashless adoption and long-term customer relationships for USAT in this emerging market," said Stephen P. Herbert, USAT's chairman and chief executive officer. "Connections were strong and we have a very encouraging pipeline of connections going into our fourth fiscal quarter. We are also looking forward to the additional license and transaction fee revenues associated with a number of new connections achieved through March that had not fully materialized as of quarter end -- all factors that we believe bode well for future revenue growth and cash generation.
"We were particularly excited to be able to recognize a deferred tax asset related to our net loss carryovers in the third quarter. This is another important milestone for USAT that we believe speaks to, among other things, the growing strength of our recurring revenue model and the strategies we have put in place to attract new customers and connections to our service," continued Herbert.
"During the third quarter, we continued to leverage our strong foothold in vending by working with those customers to drive cashless payment into a greater percentage of their installed base of machines," said Herbert. "Within this same market segment, we also took important steps to extend our value proposition to the other POS touchpoints within a full-service food and beverage operation that can benefit from our ePort Connect service. Beyond vending, third quarter successes also included execution in strategies designed to leverage ePort Connect in adjacent markets, such as commercial laundry and taxi and transportation."
Third quarter strategic highlights included:
» Introduction of Integrated Payment Services, an evolution of ePort Connect that is designed to support multiple aspects of a full-service food and beverage operation --vending, micromarkets, dining services, distribution/drop off services and loyalty -- under the ePort Connect umbrella;
» A new, exclusive agreement with The Pepi Companies, that represented USAT's first customer under the new Integrated Payment Services model. The agreement substantially expands The Pepi Companies' relationship with USAT by leveraging USAT products, services and add-on integration capabilities across other segments of its business;
» Continued expansion of third party technologies supported on ePort Connect that further add to the benefits and convenience of doing business with USAT. Examples include AirVend's android-based interactive touchscreen point-of-sale device, and micromarket support for Revive Self Checkout and Breakroom Provisions;
» Strong execution in taxi and transportation with 2,000 connections achieved in the quarter as well as additional orders for future connections. USAT offers simplified service-only integration to ePort Connect, as well as ePort GO™, USAT's one-stop offering for the taxi and transportation market; and
» Ongoing enhancements to ePort Connect in the area of consumer engagement that continue to differentiate USAT among its peers. Examples include integration of USAT's MORE. loyalty and prepaid program across micromarket and other supported technologies as well as the introduction of the MORE. consumer app with eBeacon™ mobile payment powered by Bluetooth low energy "BLE" technology.
Third Quarter Results
Revenues of $10.4 million in the third quarter of fiscal 2014 grew by 16% from the same period a year ago. Revenue from license and transaction fees, driven by net connections to USAT's ePort Connect service through monthly service fees, rental program fees and transaction processing fees, represented 86% of revenues in the third quarter and grew by 19% compared to the same quarter in the prior year.
Gross profit of $4.0 million increased by 9% for the third quarter, from $3.7 million for the same period in the prior year. Gross profit margin was 38.3%, down from 41.0% for the same period in the prior year, due primarily to lower gross margins associated with license and transaction fees in the quarter, which resulted from deactivations over the last year as well as certain marketing programs, and the timing of those programs, that are designed to further accelerate cashless adoption.
Operating expenses of $3.6 million in the third quarter grew from $3.3 million for the same period in fiscal 2013, largely due to additional investments in sales and marketing during fiscal 2014. Operating income was $365,535 and $350,219 for the third quarter of fiscal 2014 and fiscal 2013, respectively.
GAAP net income for the third quarter was $26.9 million compared to a GAAP net loss of ($1.0) million for the third quarter of the prior year. In the third quarter, USAT recognized a deferred tax asset of $26.7 million due to reduction of the valuation allowance established for operating loss carryovers. Under GAAP, such deferred tax assets are recognized when management has determined that it is more likely than not that the operating loss carryovers would be utilized in future periods.
Non-GAAP net income, which excludes the deferred tax benefit as well as the impact of the fair value of warrant adjustment, was $321,526 for the third quarter compared to $293,011 for the third quarter in the prior year (see non-GAAP Reconciliation table).
After preferred dividends, net earnings per common share was $0.75 for the third quarter of fiscal 2014 compared to a net loss per common share of ($0.04) for the third quarter of fiscal 2013. On a non-GAAP basis, net loss per common share was $0.00 for the both the third quarter of fiscal 2014 and fiscal 2013.
Cash and cash equivalents stood at approximately $6.6 million as of March 31, 2014, up from $3.9 million as of March 31, 2013.
Click here to see USA Technologies Inc.'s full press release and consolidated statements of operations (unaudited)
"Our strategies are delivering important results in this emerging market—more customers, more connections to our service and continued market differentiation," said Herbert. "We are encouraged by the higher average rate of new connections achieved for the first nine months of fiscal 2014 compared to last year and, for the fourth quarter, anticipate continued progress in driving revenue growth and operating margin expansion."
Webcast and Conference Call
USA Technologies will conduct a conference call and webcast at 10:00 a.m. Eastern Time on May 13, 2014. USA Technologies invites all interested parties to listen to the live webcast of the conference call, accessible on the Investor Relations section of USA Technologies' website. The webcast will be archived on the website within two hours of the live call. It will remain available for approximately 90 days. Interested parties unable to access the webcast may also participate by calling (866) 393-1608 or, if an international caller, (224) 357-2194. A replay of the call, available until midnight on May 16, 2014, can be accessed by calling (855) 859-2056; Conference ID#29061568, (toll free).
ABOUT: USA Technologies is a leader of wireless, cashless payment and M2M telemetry solutions for small-ticket, self-serve retailing industries. ePort Connect® is the company's flagship service platform, a PCI-compliant, end-to-end suite of cashless payment and telemetry services specially tailored to fit the needs of small ticket, self-service retailing industries. USA Technologies also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort Mobile™-for customers on the go, and QuickConnect, an API Web service for developers. USA Technologies has been granted 87 patents and has agreements with Verizon, Visa, Elavon and customers such as Compass, Crane, AMI Entertainment and others. Visit the website at www.usatech.com.
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