USA Technologies’ Network Volume Grows 28% While Its NFC Base Expands

Unattended-payments provider USA Technologies Inc. (USAT) said its revenues increased 47% to $15.4 million in fiscal 2015’s third quarter ended March 31 versus $10.4 million year earlier as connections and transaction volume in its wireless network rapidly increased.

Malvern, Pa.-based USAT on Monday said its network handled 54.8 million transactions, up 28% from 42.8 million in fiscal 2014’s third quarter. The network, comprised mostly of vending machines but also laundries, kiosks, and amusement and gaming devices, had 302,000 connections at quarter’s end, up 24% from 244,000 a year earlier. The company added 475 customers in the quarter, bringing its total to 8,925 versus 6,650 a year ago.

USAT is one of the nation’s leading processors of merchant locations enabled for near-field communication (NFC) contactless transactions—the type of transaction generated by smart phones using the Apple Pay, Google Wallet and pending Samsung Pay mobile wallets. In response to an analyst’s question during a conference call Monday afternoon, chairman and chief executive Stephen P. Herbert said 100% of recent new network additions are NFC enabled.

“It’s a very rare customer that doesn’t understand the importance of mobile payment and that NFC capability,” Herbert said.

For the entire network with its 300,000-plus connections, the NFC-enabled base is 70% to 75%, Herbert estimated. “We still have a few mag-stripe-only [locations] out there,” he said.

Herbert and chief financial officer David DeMedio attributed much of the network’s growth to the company’s QuickStart program, which provides prospective customers with third-party leasing options for USAT’s ePort line of hardware. That gives a vending machine owner a third option to acquire USAT’s hardware, the others being actual purchase or rental through an older program called JumpStart.

Meanwhile, USAT announced in late April that JPMorgan Chase & Co.’s Chase Commerce Solutions unit, which includes merchant acquirer Chase Paymentech, would be its new payment card processor. Chase will replace U.S. Bancorp’s Elavon acquiring subsidiary once the agreement takes effect at the end of the fiscal fourth quarter.

Asked by an analyst if Chase was offering better pricing, DeMedio said “we do expect efficiencies in terms of our cost,” but that the main reason for the deal was the “strategic relationship” with Chase. USAT said in an April release that Chase’s scale could help it grow both domestically and internationally.

USAT posted a $0.9 million loss for the quarter mainly because the year-earlier period’s financials included a $26.9 million income-tax benefit. Operating income doubled to $0.73 million.