Cashless adoption: a rapid emerging market

For every industry, there’s a leader – even if that industry is the “unattended point of sales sector. Out in front of this particular market (think vending machines, service kiosks and laundromats) we find USA Technologies, Inc. (USAT-NASDAQ, $1.92). It provides “technology-enabled solutions that facilitate electronic payment transactions and value-added services” for POS markets. And we’re not talking small change here; these terminals generate about $119 billion in transactions.

Cashless is king these days and the company’s trademark technology provides electronic-payment capabilities for a wide range of everyday “small ticket” services. In addition, the firm delivers telemetry and machine-to-machine services, which give customers the ability to monitor, control, and report on the results of distributed assets containing its electronic payment solutions. As well, the company provides energy-management products that reduce energy use in vending machines and coolers.

The bulk of the company’s revenue comes from licence and transaction fees for its cutting-edge cashless acceptance service. Revenue for fiscal year 2012 climbed to US$29 million; there was also a loss of $0.18 a share versus $0.26 in the previous year. The first nine months of the current fiscal year saw revenue increase 24 per cent to $26.3 million. The net loss was greatly reduced too, down to a nickel a share compared with $0.10 for the same period last year.

The company’s sales reach into the coin-operated amusement/gaming market – one estimated to be worth US$5 billion – has gotten a little longer. The same holds true for the company’s “non-traditional vending” customers such as Ice House America. “Cashless adoption is a rapid emerging market,” says this advisory, suggesting investors “use all weakness down into the $2 area to add/buy with a first objective of $4-$5. Ultimate target is $6.50-$7 a share.

 The KonLin Letter
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