Source: USA Technologies | Released May 10, 2013
MALVERN, PA -- May 10 -- USA Technologies Inc. (NASDAQ: USAT), ("USAT"), a leader of wireless, cashless payment and M2M telemetry solutions for self-serve, small-ticket retail industries, today reported results for the third quarter of fiscal 2013 ended March 31, 2013. Third quarter highlights, compared to the corresponding quarter of the prior fiscal year, included:
» 19% increase in total revenues to $9 million, including 26% increase in license and transaction fee revenues ("recurring revenues") to $7.6 million, which represented 84% of total revenues for the quarter;
» 32% increase in gross profit to $3.7 million, up from $2.8 million;
» Adjusted EBITDA of $1.7 million, up from $0.3 million;
» GAAP net loss of ($1.0) million (includes $1.3 million Other Expense for fair value of warrants), from a GAAP net loss of ($0.5) million (includes $.1 million Other Income for fair value of warrants); and,
» Non-GAAP net income of $293,011, up from a non-GAAP net loss of ($633,692) in the same quarter a year ago.
Total connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, were 196,000 as of March 31, 2013, a 32% increase from the prior fiscal year, fueled in the third quarter by 10,000 net new connections to the service. Total connections as of March 31, 2012 were 148,000, fueled by 12,000 net new connections in that quarter. New ePort Connect customers added in the quarter totaled 425, for 4,525 total customers, contributing to a 59% increase in USAT's customer base from 2,850 customers since the same period in fiscal 2012.
During April, USAT entered into an exclusive agreement with a new customer in a vertical market in which it is already participating -- commercial laundry. The customer has its own cashless payment hardware platform for the laundry industry which would now utilize USAT's network for credit/debit card processing. USAT anticipates that the initial connections to its ePort Connect service under the agreement would be several thousand. The customer and USAT will also use good faith efforts to achieve certain annual targets in terms of connections during the three year term of the agreement.
Stephen P. Herbert, Chairman and CEO of USA Technologies, stated, "Our results for the quarter reflect a number of dynamics in this emerging market. In spite of our momentum, connections were not what we expected this quarter, as several of the agreements we have been working on since early in the fiscal year have taken longer to materialize than we anticipated. We remain encouraged, however, by the work underway to get our new laundry customer's connections on our service, as well as our accomplishments in the quarter in many areas of the business that we believe are essential to driving increased adoption in the marketplace.
"During the third quarter, we expanded our sales reach in the $5 billion, coin-operated amusement and gaming market with a new distribution agreement with Betson Enterprises, with Ameri-Source for small-medium-size vending companies, and we expanded into non-traditional vending with companies like Ice House America, a network of over 2,400 independently owned ice house locations," continued Herbert. "While these don't translate to connections overnight, we believe they nevertheless extend our opportunity for growth longer-term as cashless payment adoption accelerates.
"Much of our work during the third quarter also related to the formation of agreements and development to facilitate introduction of our new value-add services that we anticipate will extend USAT's differentiation in the marketplace, as well as our next generation ePort G9 and G10, designed to deliver greater value and improved functionality to our customers while reducing the capital required by USAT for our JumpStart program. For example, we believe our mobile payment and loyalty promotion with Isis is the largest offering of its kind ever introduced to the U.S. vending market. Isis' interest in loyalty is spot on with our own initiatives in this area that include an expanded services suite formed around loyalty that is tailored to the individual business operator.
"In summary, there are numerous developments that we believe will continue to attract consumers to cashless forms of payment, including mobile payment, loyalty, couponing and other consumer engagement applications," said Herbert. "We have accumulated a base of 4,525 ePort Connect customers that we will continue to work closely with in this very transformative time in the unattended, small-ticket market. Through products and service enhancements, our goal is to improve customer ROI on all levels, which should continue to help boost the rate of cashless adoption, and USAT's continued leadership in this emerging market," concluded Herbert.
Third Quarter Results
Revenues for the third quarter of fiscal 2013 were $9.0 million, an increase of 19% from the same period a year ago. Revenue growth was fueled by a 26% growth in license and transaction fees, offset by a $125,000 decline in equipment sales compared to the third quarter of fiscal 2012. The decline in equipment sales stemmed from a decrease in sales from USAT's EnergyMiser product line, offset in part by increased sales of ePort cashless payment and telemetry devices in the quarter.
Revenue from license and transaction fees, which is driven by connections to USAT's ePort Connect service through monthly service fees, JumpStart fees and transaction processing fees, grew to $7.6 million for the third quarter, a 26% increase from the third quarter of fiscal 2012. The ePort Connect service base reached 196,000 connections as of March 31, 2013, representing a 32% increase from March 31, 2012.
Gross profit was $3.7 million in the third quarter, a 32% improvement from $2.8 million for the same period in the prior year. Gross profit margin improved to 41% in the second quarter, from 37% for the prior year. Gross profit margin is largely impacted by revenues from license and transaction fees, which were 84% of total revenues for the quarter ended March 31, 2013.
Operating margin was 3.9% compared to (8.5%) for the same period in the prior year, due to stronger revenues, improvements in gross margins and lower operating expenses.
For the third quarter, a $1.3 million charge for fair value of warrant liability adjustment for the 4.2 million of warrants expiring in September 2016 contributed to a GAAP net loss of ($1.0) million. The fair value of warrant liability adjustment is based, in part, on increases in USAT's stock price and other market factors that occurred during the quarter. Conversely, for the same period in the prior year, GAAP net loss was ($0.5) million, which included a $95,074 positive warrant liability adjustment. Non-GAAP net income, which excludes fair value of warrant liability adjustments for both years, was $293,011, compared to a non-GAAP net loss of ($633,692) for the third quarter of fiscal 2012. (see non-GAAP Reconciliation table.)
After preferred dividends, net loss per common share was ($.04) for the third quarter of Fiscal 2013 compared to ($.03) for the same period in Fiscal 2012. On a non-GAAP basis, net loss per common share was $.0 for the third quarter of Fiscal 2013 compared to ($.03) for the same period in Fiscal 2012.
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