USA Technologies, Inc. reported results for the first fiscal quarter ended Sept. 30, 2013 with a 21 percent increase in sales. First quarter financial highlights, compared to the corresponding quarter in the prior year, included a 23 percent increase in license and transaction fee revenues to $8.5 million, a 21 percent increase in total revenues to $10.1 million, an adjusted EBITDA of $1.5 million up from $0.7 million, GAAP net income of $293,654 from $39,140, and non-GAAP net income of $74,557, up from a non-GAAP net loss of $95,993.
License and transaction fee revenues, which represented 84 percent of total revenues in the quarter, were largely driven by connections to USAT's comprehensive and turnkey cashless payment and M2M telemetry service, ePort Connect®. Total connections to ePort Connect reached 217,000 as of Sept. 30, 2013, a 25 percent increase over total connections as of Sept. 30, 2012.
"Our first quarter results reflect solid progress toward our fiscal 2014 objectives that include 25 percent to 30 percent growth in service revenues and the doubling of non-GAAP net income for the fiscal year," said Stephen P. Herbert, USAT's chairman and chief executive officer, in a prepared statement.
"We added 14,000 new connections to our ePort Connect service in the quarter, which more than offset the 11,000 deactivations during the quarter that we had announced on last quarter's conference call. Our customer base grew by 50 percent from the first quarter a year ago, to 5,600 customers as of Sept. 30, 2013, which we believe further demonstrates a growing awareness for cashless among both large and small businesses. In addition, our efforts to strengthen our presence in other adjacent self-serve retail markets beyond vending, such as commercial laundry, amusement and transportation, also progressed well in the first quarter. And, we had a solid quarter of contribution from our web service, QuickConnect™, with a mobile-based payment application that contributed to approximately 2,800 new connections in the first quarter. Our QuickConnect product is attracting more developers and manufacturers looking for a streamlined cashless payment solution like ePort Connect,” he continued.
New products and services introduced in the quarter included expansion of the ePort Connect suite of services with launch of the MORE. loyalty program and toolkit. Through MORE., USAT customers can build loyalty, repeat business and a greater understanding of their consumers' purchasing preferences by offering rewards and discount offers for products purchased at their cashless-enabled locations. Other items included the completion of the Isis® SmartTap™ integration for USAT's ePort G8 that enables consumers nationwide to pay, present loyalty cards and redeem offers with a single tap — a technical pre-requisite to USAT's "Fifth Vend Free" promotion with Isis. Also, an introduction of an integrated, mobile payment solution, ePort GO™, designed for the $11 billion taxi and transportation industry, which is already adding new customers and new connections to USAT's ePort Connect service base.
First quarter results included equipment sales of $1.6 million increased by 9 percent due to growth in both direct sales of ePort cashless payment devices and sales of Miser-branded energy products.
Gross profit was $3.6 million in the first quarter, a 14 percent improvement from $3.1 million for the same period in the prior year. Gross profit margin was 35.4 percent, down from 37.5 percent for the same period in the prior year, due to lower gross profit margins from license and transaction fee revenues in the quarter.
Operating margin (both GAAP and non-GAAP) expanded to approximately 1.3 percent from 4.9 percent and 1 percent on a GAAP and non-GAAP basis, respectively, for the same period in the prior year, as additional investments in sales and marketing for fiscal 2014 were offset by stronger revenues and resulting gross profit dollar contribution.