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USA Technologies' CEO Discusses Q4 Results - Earnings Call Transcript

Stocks in this article: USAT

In fiscal 2012, we expanded our customer base by 69%, and it's now tripled what it was two years ago. Going forward, we anticipate these 3,300 customers will be an important part of our growth story as we cultivate existing relationships and help drive further penetration in those accounts. As a result of these customer wins in fiscal 2012, our installed base of connections to our ePort Connect service grew by 38% from 119,000 to 164,000 as of June 30, 2012.

Fiscal 2012 was clearly packed with a number of important milestones for the business and certainly a number of unexpected challenges and events. We managed through the unintended consequences of the Durbin amendment and unexpected CEO separation and found ourselves engaged in a costly and distracting proxy contest right when the business was coming to scale. As you can see from the financial results for the fourth quarter, the contest related litigation cost the company $2.2 million in the fourth quarter.

Despite these challenges and distractions, the business itself did exceptionally well over the course of fiscal 2012. In January, 2012, we set forth our goal letter to shareholders as part of our CEO leadership transit. Over the course of this year, we made tremendous progress on each and every objective set forth in that letter. Delivery of value to our customers with continued additions to our product and service portfolio, improved governance and transparency including a reconstituted, highly qualified and actively engaged board and most importantly remarkably improved business performance as we carved out and continued to execute against an accelerated path toward profitability.

Positive adjusted EBITDA, as many of you remember, was the first milestone we start to reach in that path toward profitability. Positive adjusted EBITDA provides us with important insights regarding the cash generation of the business. Quite simply, it tells us that the core operations of the business are no longer burning cash. As many of you know, we achieved that important marker in the three fiscal quarter ended 3/31/2012, with adjusted EBITDA of $336,000. More importantly, we achieved that on a stronger base of reliable recurring revenues and gross margins now representing 81% of our overall revenues backed by connection and customer wins that offer continued opportunity for growth.

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