USA Technologies makes Q3 net loss

Source: USA Technologies

USA Technologies (NASDAQ: USAT) a leader in the networking of wireless cashless transactions, today reported results for the third quarter of fiscal 2011 (ended March 31, 2011).

"Quarterly transactions processed and transaction volume both reached record levels in the third quarter of fiscal 2011, performance metrics that clearly indicate consumers are increasingly gravitating to cashless as the payment option of choice at vending, kiosks and similar environments," said George Jensen, Chairman and CEO of USA Technologies, Inc. "Compared to a year ago, connections are up 53%, while customers are up 81%, as USA Technologies strengthens it leading industry position. With a rapidly growing base of customers and connections, we are establishing a solid foundation that we believe can be leveraged into even greater growth as cashless payment applications become increasingly ubiquitous."

Results for Third Fiscal Quarter

Total revenue for the quarter increased 50% to $5.5 million, compared to $3.7 million in the third quarter of the prior year, while revenue from recurring license and transaction fees increased 79% to $4.3 million compared to $2.4 million for the quarter a year ago. Gross profit for the quarter was $1.6 million, up 20% from $1.3 million a year ago. General and administrative expenses in the quarter were reduced by $340,000 compared to the third quarter of 2010.

For the quarter the company recorded an operating loss of $1.7 million, a $600,000 improvement from the operating loss in the comparable year ago quarter. Net loss for the quarter was $2.5 million, or ($0.11) per diluted share, little changed from the net loss of $2.3 million, or ($0.12) per share a year ago, despite absorbing $850,740 of non-cash charges for a change in the fair value of warrant liabilities in the current quarter.

During the third quarter the Company recorded significant growth across its operating performance metrics, including:

  • Increased the number of devices connected to its network to approximately 112,000, up 53%, compared to 73,000 as of March 31, 2011, driving a 79% increase in license and transaction processing revenue as compared to the prior corresponding quarter;
  • The number of cashless transactions processed during the quarter increased to 19.3 million and processing volume reached a quarterly record of $31.4 million, representing increases of 95% and 75%, respectively, compared to the comparable year ago quarter;
  • Customers on the Company's USALive® Network increased 81% compared to a year ago, with approximately 250 new customers added during the past three months, bringing the total number of such customers to approximately 1,700 as of March 31, 2011. By comparison, in the third quarter of last fiscal year the Company added 125 new customers to end the quarter with approximately 900 customers;
  • For the quarter the Company shipped all of the 3,000 new connections to its USALive® Network that were available from inventory, as an industry wide component recall with a key supplier limited the amount of new devices that could be produced in the quarter. As a result, the Company was unable to satisfy the full demand of the 250 new customers added during the quarter. The recall has been resolved and inventory is being rapidly replenished to support customer needs, as well as the expansion of the JumpStart program;
  • Closed the sale to institutional investors of an aggregate of 5,200,000 shares of its common stock and warrants to purchase up to 3,900,000 additional shares of its common stock, raising a total of $10.7 million, with net cash proceeds of approximately $9.9 million;
  • At the Annual NAMA Vending Expo in Chicago:

- Officially announced that a majority of the proceeds of the equity offering will be used to expand the Company's highly-successful JumpStart program, under which the Company generated over 32,000 new connections in calendar year 2010;
- In cooperation with ViVOtech, demonstrated NFC mobile payment technology for vending and wireless point of sale;

  • Announced a collaboration with Verizon Wireless that the companies believe will accelerate the adoption of small-ticket, wireless, cashless payment services and machine-to-machine applications via USA Technologies' ePort Connect Service. The USA Technologies solution will now include the Verizon Wireless network for connectivity that enables wireless point-of-sale payments at vending machines via credit and debit cards;
  • Announced the launch of USALive®1.6-an update to our current USALive® online reporting system, and designed to provide vending operators with real-time business metrics, transaction and sales reports, machine health monitoring, payment reconciliation and the ability to handle settlement of routes for accurate accounting of the business.

Mr. Jensen concluded, "At NAMA late last month, we officially announced the expansion of our incredibly successful JumpStart program. We expect the market to offer this attractive product a very warm reception. Together with our new Verizon Wireless partnership, USALive® 1.6 on line reporting system, and technological advances - such as our NFC trials with ViVOtech - we clearly offer the most robust, comprehensive end-to-end wireless, small-ticket cashless payments solutions available in the market. We will continue to invest in our technology, network, and market efforts to sustain, if not extend, our industry leadership."

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