USA Technologies Is ‘Re-energized And Digging in,’ New CEO Says

The new regime at unattended-payments provider USA Technologies Inc. is now in place after a proxy fight that deposed the old management team and board of directors, and it’s looking for growth from underexploited opportunities and cost-cutting.

“With the uncertainties of the proxy contest now behind us combined with a streamlined senior team, the company is re-energized and digging in,” new chief executive Sean Feeney said Wednesday afternoon on a conference call to review results for fiscal 2020’s third quarter ended March 31.

Feeney, a software executive for 30 years, took his post last month. A former Army officer, he most recently was CEO of DefenseStorm Inc., a provider of cloud-based cybersecurity management for financial institutions. Feeney came in with a new board of directors backed by Hudson Executive Capital, the hedge fund that is Malvern, Pa.-based USAT’s largest shareholder and pushed to replace the company’s leadership following accounting problems and what it called mismanagement. The new board is headed by Doug Bergeron, the former CEO of point-of-sale terminal maker Verifone Inc.

Feeney, who already has reorganized USAT into three units, said the company has focused too much on expanding its payment network while overlooking other opportunities, and been overly reliant on expensive outside lawyers and consultants—a problem he said would be quickly rectified. He also said USAT’s 2017 acquisition of rival Cantaloupe Systems Inc. was a “game changer strategically, but was never fully executed on. I plan to change that.” 

Cantaloupe’s Seed Cloud platform provides cloud- and mobile-based software for vending machine route scheduling, merchandising, inventory management, and other functions as well as cashless vending. Earlier this year, now former USAT CEO Don Layden said about half of the company’s 19,000 customers were using one or more Seed services. 

Feeney and his team have plenty of other matters to keep them busy. The U.S. Department of Justice during the third quarter issued a subpoena for records from prior financial reporting periods, including restatements. The company says it’s cooperating. It recently settled an investor class-action lawsuit for $2.6 million plus insurance proceeds. USAT, whose shares currently trade over the counter, also is trying to get relisted on the Nasdaq, which has delisted it.

And chief financial officer Michael Wasserfuhr said on the call that without refinancing or modification of terms, “it is highly likely” that USAT will be out of compliance with requirements of its term-loan agreement as of June 30. An existing investor has indicated it might provide financing if new agreements with lenders can’t be reached, Wasserfuhr said.

Wasserfuhr said USAT’s processing volumes are now 78% of what they were before the Covid-19 pandemic hit a few months ago. Average daily volumes fell 40% in mid-March but began to recover in April, he said.

USAT reported it added 34,000 net new connections to its payment network of vending machines and other unattended devices in the March quarter, bringing it to 1.29 million in all. The company reported revenue of $43.1 million, up 14.3% year-over-year, but a net loss of $9.6 million compared with a $4.6 million loss in fiscal 2019’s third quarter.