USA Technologies, Inc. (NASDAQ: USAT) is a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market.
The stock has been very active during recent past and is continuously trading with strong & above average volumes. On August 22nd, 2017, USAT reported results for its fourth quarter and fiscal year ended June 30, 2017. The company achieved record quarterly revenue of $34.3 million, a year-over-year increase of 56% marking the 31st consecutive quarter of growth. It reported net income of $0.2 million, as against a net loss of $(872,000), or $(0.02) per share for the prior year period.
So far as future guidance is concerned, for full fiscal year 2018, USA Technologies expects to add between 170,000 and 175,000 net new connections for the year, bringing total connections to a range of 738,000 to 743,000. The company expects total revenue to be between $122 million and $127 million and adjusted EBITDA to grow 35% to 50% to a range of $9.6 million to $10.6 million.
The company’s performance capped an extremely strong year for USA Technologies. It achieved record revenue, and added the highest number of connections to its ePort service in the company’s history. As per management, USAT is executing well in an accelerating market and has exceeded its long-term goals of attaining $100 million in annual revenue and 500,000 connections this fiscal year.
Furthermore, on the financial flexibility and liquidity front – USA Technologies, further strengthened its balance sheet by completing a follow-on offering at the end of July, raising $43.1 million in gross proceeds, to extend its leadership in the unattended retail payments industry with the flexibility to continue organic growth and pursue potential inorganic growth opportunities that are accretive and strategically complementary.
USA Technologies is presently on a rapid growth trajectory & has been building a leadership position in the market for enabling vending machine payments. The rapid evolution of cellular technology along with Cloud computing and the Internet of Things (IoT) creates a healthy opportunity for accelerated growth of the company.
Moreover, USAT’ business risk profile derives significant strength & synergies from its large-scale operations and core-expertise at a time when the industry is offering its most significant opportunities since the invention of the vending machine itself.
The management reaffirmed the opportunities ahead of the company and they believe that USAT would continue to deliver returns for shareholders through increased growth and profitability.
The company is at a critical inflection point, and if the management strategies continue to play out, USAT will have significant upside and potential to provide double-digit annual returns for years to come. USAT has a chance to add another 40 percent in 52 weeks, based on average target price of $7.15, suggested by majority of the analysts.
About the Company: USA Technologies, Inc. is a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market.
Other Product profile:
The company also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort® Connect, ePort® Interactive, QuickConnect, an API Web service for developers, and MORE., a customizable loyalty program.
USA Technologies has 73 United States and foreign patents in force; and has agreements with Verizon, Visa, Chase Paymentech and customers such as Compass, AMI Entertainment and others.
About ePort: ePort Interactive is doing extremely well and as an example of USAT’ ability to deliver greater value to its customers and garner increased revenue from each connection, which is an important element in company’s strategy for growth. In an example of its continued expansion into the kiosk market, where USAT frequently use its Quick Connect APIs or said in another way, creates a connection without a traditional hardware sale.
Recent developments in details:
Details on new connection: The fourth quarter’s net new connection rate was 64,000 and is evidence of the inflection point USAT is seeing in the unattended retail market toward non-cash acceptance, this quarterly connection achievement compares to 67,000 net connections, added for the full year in fiscal 2015, just two years ago.
Partnership with JuiceBot: The Company also announced its partnership with JuiceBot, a California technology company offering automated kiosk that can serve raw and organic beverages in an unattended retail format. The company will be leveraging USAT’s Quick Connect API to securely process cashless transactions, track the acceptance of cash, credit or debit cards in mobile wallet payments and remotely monitor the operation of their unattended locations.
Strategic arrangement with Five Star Food Service: In the fourth quarter, USAT announced a five-year strategic agreement with Five Star Food Service for a deployment of nearly 9,000 interactive devices on its ePort Connect service.
Five Star is a progressive food service, vending and micromarkets company and USAT is now enabling the company to track the acceptance of cash, credit and debit cards and mobile wallet payments such as Apple Pay, Samsung Pay and Android Pay. In addition, Five Star will be able to leverage all of the capabilities provided by USAT’s ePort Connect platform including digital advertising, loyalty rewards programs and nutritional information.
Closing of Public Offering: On July 25th, USAT announced the closing of its underwritten public offering of 9,583,332 shares of its common stock at a public offering price of $4.50 per share. The gross proceeds to USAT from the offering, before deducting underwriting discounts and commissions and other offering expenses, was approximately $43.1 million.
Fourth quarter 2017 Financial Results:
Fourth quarter revenue was $34.3 million, of which $18.7 million was Licensing and Transaction and $15.6 million was equipment. The fourth quarter marked the 31st consecutive quarter of year-over-year revenue growth and the top line rose 56% from a year ago. For the year, total revenue grew to $104 million, a 35% increase from last year.
The company added 300 new customers, bringing its total customer count to 12,700. USAT is seeing these connections convert to revenue. First in equipment sales, then to the recurring licensing transaction line, both of which hit new highs.
From a profitability perspective, consistent with its prior commentary, USAT leveraged operating expenses in 2017, reducing them as a percent of total revenue to drive more dollars to the bottom line. Adjusted EBITDA increased both in the fourth quarter and for the full year. As a reminder, USAT’s dual goal is to drive both increasing profitability and top line growth in this dynamic and growing industry.
Key risk factors and potential stock drivers:
USAT is tolerant of low margins. The company’s ability to ramp-up profitability while sustaining its revenue growth would be one of the key stock driver over the near to medium term. The company must leverage its operating cost structure as revenue ramps.
The company is exposed to risk of the changing market dynamics. The company’s operational risk profile is significantly dependent on the increased adoption of cashless options at vending machines and conversions of potential connections as well.
USAT’s business strategy significantly depends on its ability to grow its ePort Business. If it is unsuccessful, revenues might be adversely affected.
On Friday, August 25rd, 2017, USAT shares closed at $5.85 on an above average volume of 591,300
shares exchanging hands. Market capitalization is $260.36 million. The current RSI is 63.93.
In the past 52 weeks, shares of USAT have traded as low as $3.55 and as high as $5.90.
At $5.35, shares of USAT are trading above its 50-day moving average (MA) at $5.25 and above its 200-day MA at $4.62
The present support and resistance levels for the stock are at $5.11 & $5.50 respectively.
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