USAT - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the USA Technologies First Quarter Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this conference is being recorded. to host like Ms. today's now would introduce for your conference, I Gould, Technologies. USA Relations Monica for Investor Ma'am, begin. you may

Monica Gould

Thank you Call. and Herbert, Singh, USA the Technologies' Chief good this Chairman morning, everyone. Quarter call Officer; XXXX Welcome and Fiscal Financial Chief Earnings and is Officer. Conference morning With Executive on First me Steve to Priyanka the

that to facts, nature. call, to limited and to economic all undue to market, statements that and uncertainties earlier release a the results earlier financial GAAP Web statements we non-GAAP Steve made. Details today's not conditions. other that, of statements, to which as measures statements actual over morning will operating the materially results. this the reflect contemplated as Before filings items call forward-looking the such also USA any than and you a the our such from that begin update future are USA in but press other substitute to Listeners risks financial Technologies' these Technologies whether of result believe differ a I’d Relations financial, not measures call, release in any date be or undertakes Investor call statements from of by measures site, remind I on included net GAAP supplemental and are could things, found we for, to certain can are otherwise. of differ This detailed events www.usatech.com. among these view include could the are issued not A non-GAAP and place with of like historical no forward-looking in as factors, business, result is certain our only information, statements including, press Actual issued as would of this our reliance management's measures forward-looking turn they non-GAAP obligation of financial section like those or forward-looking These to, are and to this morning. evaluating discussion SEC on events, with included Herbert. and results of for useful a such reconciliation income Steve? forward-looking new cause discussion loss. the materially in of financial financial measures cautioned With a

Steve Herbert

us XXXX you, fiscal Thank and Thank to good quarter Monica, you joining our results. morning, year first everyone. for discuss

year reflects first in XXX service of We achieved on that of growth marked our the seeing and we Our performance years, new quarter start with XX,XXX. in quarter adoption are the unattended two highest new customer indicative is of have market. customers, retail this we new the cashless in ePort payments to bringing retail total continued count a number non-cash acceptance. customers in customer addition Connect market the fiscal the the toward the the of the expanded to believe strong point unattended the inflexion base customer We

in We new payments connections quarters. the controlled of XX% connection mobile believe XXX,XXX not total a bringing XX% new revenue drive if world. United to and XXX,XXX, NFC largest coming Importantly, NFC-based by accepts or growth count convert new are these will the footprint to over XX,XXX, approximately enabled. our entity connections the is will which in the Net to which States, this the quarter single customers our first year-over-year rose

X% to equipment as the to L&T year the ago both to from leverage to marking operating revenue while expenses quarter. on XX.X profitability. converting revenue rose basis We XXnd quarter the X.X of quarter this period in increased $XX.X successful revenue continuing revenue to percentage consecutive reduced improving rose and million in operating expenses, revenue By million. were an our growth. of first we absolute year-over-year year-over-year XX% First revenue XX% million

result, a our than period. tripled $X.X EBITDA ago more As to to adjusted million the year relative

at we transactions utilized for In Our processed increasing the by XXX service $XXX value. first million quarter, than an consumers more more in rate. million is being than

Importantly, we of achieved $X a the goal rate run first quarter our on for billion transaction processing. exiting annual

Now, to highlights. turn our recent I’d like to business of some

with a announce new pleased that We’re to we Visa. signed three-year agreement

in catalyst with now retail market. an was helped a of important Our cashless approximately Visa drive that decade and payments partnership the acceptance us spans unattended

corporate and locations, recently to derive transactions ePort and announced ePort transition Canteen Canteen, which of service that but us for will in is albeit offering. our automated engagement XXX units to with acquisition, network not upgrade success the the with Interactive merchandizing offering as value and existing more Kansas, Berkshire generate business VendScreen We of Interactive transaction company and our Cantaloupe loyalty program. kiosks Food consumer of GXX-S for locations two will transactions yesterday. that partnership on to we vending, we large of of our scale executing cashless the food our New into our which much similar market on believe Connecticut X,XXX addition their vending built ePort its larger from Connect Both and food locations our acquisition continued dining the on payments. the ePort our In both we’ve X,XXX Systems benefits, service. micro-market, XXX% over operators States a the VendScreen to largest franchise announced Interactive company only with Canteen devices, partnership and leading we York, demonstrate in service to its our Last ePort our the continues opportunity also a United the widening integrating enable to and of footprint and approximately announced service to in new services success GXX-S Our with offered Premier September, owned that and connectivity network ePort month, coffee leading We Foods, a office Service, momentum. provider in announced X,XXX than franchisees

further previously enhancing and transaction greater shareholders. with further to or technology and share, drive believe our We to and partner have for expand that recent and value-added our complementary achieves objectives for the to intended suite the services choice follow-on returns highly strategic noted offering, operator opportunities would verticals in will and geographies with extend strategically our allowing additional our both leader market or product growth acquisition this We complementary, we that pursue that as us customers. platform position accretive innovation of additional

integration-related With to offer office service great one-time fiscal accretive offer turnkey emerging to States, XXX,XXX optimizes optimize decrease run operator will value customers such and as new new their the markets transaction rent and to in them machine. market new XX%. to while South and increase to their than honored them services and expand operational expect manage the brings global delivery service that help later is well as built sales complementary as module and and footprint to markets. combination We opportunity schedules. expenses for our much platform of that improved as to portfolio and value which These XX% acquisition has Cantaloupe with to in value-added, work the There be Cantaloupe allow well cloud-based increased inventory, on Australia into to services also at team business space be machines their this this into the route United as value-added sales enables from product enable downtime with expenses and in revenue by better and enabling unequaled those Francisco week as more can have its customers that highly America, and able catapult costs, other proposition reduce to results after in unattended the approximately functions San as customers mobile base. their dynamic the to each efficiently. benefit headquartered to we X,XXX and are scheduling a decreasing accounting combined to USAT Cantaloupe customers retail The a that merchandizing Canada, customer back work enterprise thus XXXX. close adding customers warehouse, to we our more with an is help

welcome family. with the In year. start Cantaloupe to pleased I’m we the to had at thrilled We’re very team strong fiscal USA closing, exceptional Technologies the Systems to the

we We transaction. the the of I’ll results to of are excited well be detailed about able Priyanka and the solution Priyanka? offer as to a call more and as we will forward our to existing overview turn to have the With joining us. both new end-to-end to forces that, comprehensive with now look Cantaloupe financial We many Cantaloupe provide customers. ahead opportunities

Priyanka Singh

Thank you, Steve, good and everyone. morning,

XX,XXX the in which of performance marketplace. strong all up announce year, We share million Total XX% stellar reflecting highlights across last to our the revenue consistent grow XX.X first from indicators. another with pleased of key the are connections quarter growth We year-over-year. added in strategy the and to our was performance execution growth of quarter XX%

of which new line License XX% Our Equipment improved years. X% million compared with a our revenue. year. of approximately increase Existing growth. the scalability more top and to the quarter additions adjusted new the believe of year. in like ability two we first customers, customer the revenue breakdown reported accounted brief first with X.X last returns of provide for year growth the our EBITDA represented we quarter and were connections of grew through grew X.X our last XX% and a of margin XX,XXX than to validates the million fees XX% to of three-fourths business to our expansion drive in growth transaction million, XX XXX We new customers significant customer quarter, quarter. number ended XX% the addition in quarter highest up last an total of last of In the from in from sales I and would the customers, quarter. new

attention to our turning Now margins.

expanded margins pleased steady quarters. We increase in six XXX over our the L&T L&T sequential see margins last points are very XX.X%. gross to to basis a

last compared margin equipment was year. XX.X% XX% first Our the quarter in to

long-term, our equipment revenue from As the relationship for by in is strategy made the as leveraging we margin to use initial reporting stated sales enabler connection. the an have past, driving higher

of Turning decreased in a operating Due of slightly last leverage, we This expand for this first X.X to SG&A basis and XX.X% success revenue to million, XXX expense our management XX.X% points approximately scale as XQ year. from to in to expenses. SG&A of quarter our down broad decrease to increased disciplined last line. year. of million was first drive from percentage reflects the continuing the continue expenses X.X year while quarter

working million to sheet. in XX.X totaled the now compared balance quarter. Net last million capital the to Turning X.X

quarter of in Our million was our XX million approximately of the proceeds follow-on late XX.X balance net we end cash July. the increased at completed from which first and offering

million into entered approximately receive Cantaloupe definitive have As we recent entered a consideration. XX transaction Chase. on to cash credit with Cantaloupe agreement million. to in from transaction offering in facility a cash valued with acquire and we in and Steve million at as discussed, yesterday, finance through announced XX.X follow-on plan that USAT Systems We will hand XX we’ve a the our new JPMorgan stock into

We our an combined platform for reductions, would ability partnership business more the to position allow competitive expect their to value our efficient acquisition our enable logistic driving and USAT’s proposition leadership way. this growth run line close to excited and week. we drive to our a technology provide the in cashless would to cost solution Cantaloupe’s This leverage later expand end-to-end are customers. the customers Combining us to to customers in top and combined

financials. USAT, Let XX% of nature. revenue than annualized a their few provide over more more me basis on has is in in the Cantaloupe’s the an revenue recurring to overview XX% is last mid-XXs drawing Cantaloupe been than years. Similar of high-level now and

We EBITDA expect to accretive margins. Cantaloupe to our adjusted be

we Net a accounting and EBITDA revenue including to combined fiscal of million As Cantaloupe be million adjustments, to one-time we and of purchase between transaction XX.X expect fiscal XXX accretive million to this a expenses months, in approximately now eight transactions for any XX.X XXXX. XXX XXXX. be million between integration and transaction, result forma this pro on for adjusted expect basis, and

financial to continued fiscal in We USAT momentum will Cantaloupe We of performance only concludes are that customers. call suite turnkey to and back our you. new now believe offer first delighted of and with enabling positive our Steve. expect to a the will Thank services existing our our further I quarter enterprise to few efforts our customers XXXX. end-to-end This acquisition turn by platform update. a

Steve Herbert

questions. our quarter we’re excited us. wrap Operator? happy To and very that performance that, lie the take we’d up, your very about pleased first to ahead opportunities now with be With of

Operator

Instructions]. [Operator

from Sutton Craig-Hallum. line Our first from of question the comes George

Your now is line open.

George Sutton

synergies is any you. assuming. you us you sense, I what improvement. pleased this with to demand might built Thank And guys that estimates I’m a give synergies relative into from cost Priyanka, your the if particularly transaction then EBITDA could see wondered and you’re that

Priyanka Singh

George, for XXXX very not it’s significant.

that’s We we cost and revenue point. this significant at that built have some in, nothing out synergies want give but to

George Sutton

Steve, sales simple to us would sales very might be force be cross-sell a their you your able sell? example go force businesses bringing given relative these to through how to together how more and two and for

Steve Herbert

George, Sure, because the for we the A offers marketplace thanks a to is great typical question. thanks services described. Cantaloupe words and that which kind question sell the get we and to cross-sell

capability, offered past scheduling, et we in to our customers. the space XX,XXX Now These haven’t dynamic sales to there’s that cetera. services are

a and we set base we’re to able with installed have So go very that of with them. services complementary those we existing customers sell new for us forward, their as to

and So sell very to handful of customers going forward to margins. a and existing services new those base high

George Sutton

a Let your how When look to you addressable deal? the addressable market versus big the ask prior me market, in you way. different post deal is at

Steve Herbert

unattended The in retail. addressable terms largely market the is same of

somewhere changes the a in for international talking and now unattended potential XX been to XX into of million neighborhood thing that of outlets have we think the million we’ve locations States in I retail us, United markets. couple the about

the total So services the States. largely the market that same. more market TAM will have that increase sell simply regard. We to But that the in to is addressable in United

George Sutton

over Thank to you. Understand. others. it turn I’ll

Operator

from comes Napoli Bob William of question Our from line the Blair. next

Your line open. now is

Robert Napoli

Thank Cantaloupe? A the on is Priyanka the the quarter. I good congratulations of and you question, XXX guidance, deal on revenues, how and to Cantaloupe of guess, XXX that much

Priyanka Singh

annualized high fiscal is mid you in basis for 'XX so for to an XXXX. Cantaloupe teens Cantaloupe the can for somewhere on mid-XXs, assume

Robert Napoli

to a EBITDA more of the that. the much in increase, then what then the EBITDA versus see than increase the from thinking little thought business? of the which great outperformance increased see And we’re guidance you confidence the might, in to we Okay. and nice EBITDA is coming is How acquisition core

Priyanka Singh

really good you Thank Bob. a That’s that. question, for

EBITDA kind with I’d that extremely on all, like we’re reiterate just to the side, results first especially the thanks of quarter our First words. so pleased for

see and it’s is, think acquisition are second strategic, year thing complementary pleased we itself, very in in in first the business accretive it’s The as we extremely about our to model to that the itself.

signed at have point that things this our and feel of for and couple of will more by at the we transaction really couple overall next accounting there’s still into that of over a purchase and this combined in reporting and give the insight around the that we it given just guidance out haven’t out putting probably good Thirdly, needs weeks probably next as point quarter, next and the about evolve amounts guidance adjust company yesterday and point. we we months financial at closed the and work to be done months,

Robert Napoli

Okay.

increase the core the acquisition? due your versus business of own is what most So to just

Priyanka Singh

upside of as more that both. into There we’re we amount is the a well. combination rolling year first of the some saw the in quarter that acquisition. of the for It’s rest It’s

Robert Napoli

stock Okay. the tied the price close – And fixed that it or so deal, or the the the is just at of XX% is XX% stock. structure you the what at the I stock deal a understand when price Is to?

Steve Herbert

time. bWAPP It’s Bob, a it’s essentially Steve. [ph] period a over of

Robert Napoli

Okay.

Steve Herbert

a on bWAPP of not it’s over a It’s period time, so day closing. the exactly of

Robert Napoli

And expect time But were is probably a my I competing with you long force some them you and or that your How sales known how like? question, thoughts team, good does in look and them Maeve for have product? What to organizing? some as And their been are – sell how this strategy? company the go-to-market worked what around have you’ve How her last going you’ve cases. was would that? I sell? imagine against pretty does partners quite would

Steve Herbert

answer, what preamble on a just is like And say question. to great a the That’s yes. I’d

for always I we’ve of to work the and think they I’ve known a it and have some team. a people the over started ago admired quite have was personally Cantaloupe they known did be the them time. that We founders thrilled decade part the company, since our

have to together companies worked the addition years. that, In over our

We locations. thousands tens of tune have joint of of to customers the

together So this have different certain our And our selling delivery today. collaborated phone in sales another and delivering sets one cases services call perspective people as on already in an to and already customers. from operational a with services of we’re technical we’re then

lot so a a From this opposed prop cashless perspective, situation. stage. – I a in really from worked already together, and And software sale the enterprise just the hope very – a sale you wrap back ground sale. can how I So integration VendScreen is they I or the longwinded, flying. to having value helpful the it’s sales that of up We a good like platform bit an can office the into know little to have setting teams tell it’s and the idea hit but as just sale

So it’s might one think. advanced far more than

Robert Napoli

you. Thank appreciate it. I

Steve Herbert

Sure.

Operator

[Operator Instructions].

comes Mike question Latimore the line Capital. next Northland of from from Our

Your line is open. now

Mike Latimore

Congratulations Great. great. it on here; everything looks

Steve Herbert

Thanks, Mike.

Mike Latimore

Just Is you about how show connections the think XXX,XXX add we up Cantaloupe XXX,XXX model, should we I your layering meaning connection that in guess going for terms count, in machines. mentioned the to quarter? into to of

Steve Herbert

I’ll and gave a from I – remember some firm grasp on in perspective, – we were the together. mentioned there’s Mike, Well, broad but Priyanka the numbers, locations

various XX,XXX is services XXX,XXX at serving their actually neighborhood we’re that believe somewhere Cantaloupe if of or and it’s together. XX,XXX locations approximately math I rough the on the So in

double So you count that. can’t

Priyanka, is number. very to on that net add about it brush a would broad XXX,XXX right? connection our So approximately

Priyanka Singh

That sounds right. about

Mike Latimore

And sense. -- makes that then Okay,

Steve Herbert

right? you getting at, what were That’s

Mike Latimore

services the in XX% the recurring. And is revenue definitely. or professional non-recurring XX% Is hardware, of what’s that piece? Yes, other you then mentioned

Priyanka Singh

Mike, is the XX% is remaining than recurring, More hardware. and

do sales some they as So have well. hardware

Mike Latimore

Is revenue this got be would And I of international at I Okay, know, guess it. then international some have point? they what that, business. percent don’t

Priyanka Singh

be not will mid-single very It low somewhere to point. digits, in significant at the this

Mike Latimore

Okay, got it.

Priyanka Singh

that the But gets footprint. excited us it

year, this being act that. having footprint talked to and the of pleased this. the calendar so international on with close As us allows about, very by It we’re

Mike Latimore

Got synergies, current opportunity onto terms say, greenfield of of here off maybe customers say, VMS other, how of just versus Cantaloupe much opportunities? it. revenue migrating is, then And in the

Steve Herbert

But like are. our the well that’s displacing to with good some Crane. from Streamware hard we something say a Mike, be It’s may question. cases percentages what very in customers,

be likely most would combination. that see the disruption would that service So some this from

Mike Latimore

Okay, great. Thanks a lot.

Priyanka Singh

you. Thank

Operator

showing at the I’m turn time, to over And this questions. no to call for like back further any closing I’d Steve remarks.

Steve Herbert

team. thank imagine Well, right. for and for you about and all very us joining been as our for much the you combined think future We’ve hard thrilled company now just call can company today. what the working our holds thanks everyone Cantaloupe we’re I our All with and

very we after forward time look day. next again, our your much a terrific you thank to and So update for have hope quarter. next And you

Operator

participation and great a conference. Ladies conclude does the all This in for you you program have Everyone, day. gentlemen, and may today’s disconnect. your thank

Cantaloupe (CTLP) 8 Nov 172018 Q1 Earnings call transcript