USA Technologies, Inc. Reports Lower Profit On 14 Percent Revenue Gain In Second Quarter

USA Technologies, Inc., a provider of wireless, cashless payment and M2M telemetry solutions for self-serve, small-ticket retail industries, reported results for the second quarter of fiscal 2012 ended Dec. 31, 2011.

Compared to the same quarter a year ago, USA Technologies:

Increased the number of customers on its ePort Connect Service 77 percent;

Increased the number and dollar value of small-ticket transactions handled by its network 50 percent and 54 percent, respectively;

Increased recurring revenue from license and transaction fees 49 percent;

Increased the number of connected devices 25 percent.

"The results for the second quarter of 2012 reflect the steady growth of our portfolio of customers in the vending, kiosk and other small-ticket, unattended industries as they continue to adopt cashless payment technology at their historically cash-only points of sale," said Stephen P. Herbert, chairman and chief executive officer of USA Technologies, Inc. in a prepared statement. "We are intently focused on our strategy to achieve profitability as soon as practicable by gaining wider acceptance of our technology and improving our operating efficiency."

With approximately 7,000 connections and 250 new customers added during the three months ended Dec. 31, 2011, connections to and customers on the company's ePort Connect Service at Dec. 31, 2011 increased to approximately 136,000 and 2,475, respectively, compared to approximately 109,000 and 1,400, respectively, at the same point a year ago. In the quarter, the company handled 24 million transactions representing $40 million in small ticket transactions, increases of 50 percent and 54 percent, respectively, compared to approximately 16 million transactions representing $26 million in volume during the second fiscal quarter of the preceding year.

The significant increase in connections, customers, and transaction volume drove revenue from recurring license and transaction fees up 49 percent to $5.6 million in the quarter compared to $3.8 million for the second quarter of fiscal 2011. The dollar gross profit on recurring revenues from license and transaction fees in the quarter was $1.6 million, up from $1.1 million in the same year ago quarter.

Herbert, commenting on the significant increase in recurring revenues, said, "We believe that the significant increase in recurring revenues illustrates that the rate of adoption and the penetration of cashless payments at the unattended, small-ticket point-of-sale is on the rise. The increase in transaction volume on our network is attributable to our expanded footprint, as additional devices are connected to our network, as well as increased usage of cashless payments. Driving increased volume on our network is one of the key elements of our strategy to achieve profitability as soon as practicable. The gross margin on recurring revenue this quarter rose slightly compared to the same year ago quarter, despite the dampening effect of a period of higher interchange rates during the quarter. Management addressed the higher debit interchange challenge with its successful negotiation of its October 2011 Visa Agreement."

Total revenue for the quarter increased 14 percent to $6.9 million, compared to $6.0 million in the second quarter of the prior year. Total dollar gross profits for the quarter were $1.9 million, compared to $2.5 million a year ago. Selling, general and administrative expenses in the quarter were $3.5 million up from $2.3 million in the like quarter a year ago. A majority of the increase in selling, general and administrative expenses ($886,000) was due to costs associated with the audit committee's investigation of postings concerning the company made on an internet message board and the severance arrangements with the company's former chief executive officer.