Source: USA Technologies Inc. | Released Feb. 6, 2014
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 second fiscal quarter ended December 31, 2013.
"During the second quarter, we continued to drive new connections and new customers to our ePort Connect® service across all vertical markets," said Stephen P. Herbert, USAT's chairman and chief executive officer. "By leveraging our existing customer base and industry diversification strategies, we gained 17,000 new connections to our ePort Connect service in the quarter, strong results that helped us offset 10,000 deactivations from a customer that we previously announced was transitioning away from our service. In addition, our customer base grew by 48% from the prior year, to 6,075 customers at the end of the quarter, reflecting what we believe to be a growing awareness for cashless in the self-serve retail market.
"We also generated our second highest level of GAAP and non-GAAP net income in the second quarter—solid progress as we work toward our fiscal 2014 objectives that include the doubling of non-GAAP net income for the fiscal year," said Herbert.
Highlights for the second quarter, compared to the corresponding quarter in the prior year, included:
» GAAP net income of $409,191 up from $153,758;
» Non-GAAP net income of $447,087, down from non-GAAP net income of $557,393;
» Earnings per diluted share, both GAAP and non-GAAP, of $.01 and $.01, respectively, compared to $.00 and $0.02, respectively, for the second quarter of fiscal 2013;
» Total revenues of $10.6 million, a 19% increase;
» License and transaction fee revenue of $8.7 million, a 17% increase; and
» Adjusted EBITDA of $1.9 million, an 8% increase.
Approximately 82% of total revenues stemmed from license and transaction fee revenues, which are largely driven by connections to USAT's comprehensive and turnkey cashless payment and M2M telemetry service, ePort Connect.
Total ePort Connect customers grew to 6,075 as of December 31, 2013, a 48% increase compared to total customers as of December 31, 2012.
Total connections to USAT's ePort Connect service grew to 224,000 as of December 31, 2013, up from 186,000 connections as of December 31, 2012, an increase of 20%.
"Last fiscal year, we worked to expand our sales and marketing presence in self-serve retail markets beyond vending, such as commercial laundry, amusement, kiosk and taxi and transportation," continued Herbert. "Similar to vending, many of these markets are in the early stages of cashless adoption and thus, in our view, hold enormous opportunity for growth going forward. During the second quarter, we continued to strengthen our presence in each of these markets through value-added services and innovative programs and products."
» Winning the largest commitment ever for our ePort® and ePort Connect service—50,000 potential connections—from USConnect, a consortium of independent vending and food service companies targeting adoption of cashless payment and telemetry for the majority of the self-serve locations owned or operated by their members by 2018;
» Expansion, via our QuickConnect Web service, of USAT's servicing capabilities to the micro-market vending community, beginning with the certification of micro-market supplier, Revive Self Checkout;
» Launch of the nationwide Isis mobile payment and "Fifth Purchase Free" loyalty program, with over 70,000 USAT customer locations enabled with Isis SmartTap® technology during the second quarter;
» Introduction of ePort GO™ to the taxi and transportation market in conjunction with Verizon Wireless' business to business team; and
» The addition of USAT's 87th patent to its collection of intellectual property. Through this patent and others, USAT has accumulated what USAT believes is a meaningful portfolio of intellectual property around, among other things, cashless payment, remote diagnostics and interactive transaction capabilities in a vending machine.
Second Quarter Results
Revenues of $10.6 million in the second quarter of fiscal 2014 grew by 19% from the same period a year ago, led by growth in equipment sales of 28% and growth in license and transaction fees of 17%.
Revenue from license and transaction fees, which represented 82% of revenues in the second quarter, is driven by net connections to USAT's ePort Connect service through monthly service fees, including any rental program fees and transaction processing fees.
Gross profit of $3.8 million increased by 6% in the second quarter, from $3.6 million for the same period in the prior year. Gross profit margin was 36.2%, down from 40.5% for the same period in the prior year, due primarily to deactivations in the quarter.
Operating expenses of $3.3 million in the second quarter grew slightly, from $3.0 million for the same period in fiscal 2013, largely due to additional investments in sales and marketing for fiscal 2014. Operating margin (both GAAP and non-GAAP) was 4.8% for the second quarter, compared to 6.4% for the same period a year ago.
GAAP and non-GAAP net income were both positive for the second quarter of fiscal 2014, with non-GAAP net income reaching the second highest level for USAT to date.
GAAP net income was $409,191 for the second quarter of fiscal 2014, compared to $153,758 for the same period in the prior year. Diluted net earnings per common share was $.01 for the second quarter of fiscal 2014 compared to $.00 for the same period in fiscal 2013.
Non-GAAP net income for the second quarter of fiscal 2014 was $447,087 compared to $557,393 for the same period in the prior year. Non-GAAP diluted net earnings per common share was $.01 for the second quarter of fiscal 2013 compared to $.02 for the same period in fiscal 2013. Non-GAAP net income and non-GAAP diluted net earnings per common share removes the impact of the fair value of warrant adjustment of $0.04 million and $0.4 million for second quarter fiscal 2014 and 2013, respectively.
Cash and cash equivalents stood at approximately $6.7 million as of December 31, 2013, up from approximately $5.0 million as of December 31, 2012.
"We remain encouraged by the 31,000 gross new connections achieved in the first half of fiscal 2014, the continued expansion of our customer base and feedback from our existing customers regarding the value of cashless payment as a vital tool to drive incremental revenue and operational benefits," continued Herbert. "At the same time, we are also mindful of growing competitive pressures and the need to remain agile and aggressive from a marketing perspective.
"For the remainder of fiscal 2014, we will be balancing these market dynamics, our long-term strategies and the customer environment as we work toward achieving our fiscal 2014 financial targets that include over 25% license and transaction fee revenue growth, over 20% total revenue growth and a 100% improvement in non-GAAP net income for fiscal 2014," said Herbert.
Webcast and Conference Call
USA Technologies will conduct a conference call and webcast at 10:00 a.m. Eastern Time on February 6, 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 February 9, 2014, can be accessed by calling (855) 859-2056; Conference ID#35407558, (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® G8, 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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