USA Technologies Plans Stock Offering of Nearly $40 Million To Fund Growth Initiatives

Unattended payments services provider USA Technologies Inc. announced late Friday that it plans to sell $34.5 million in stock to finance growth initiatives, including possible acquisitions and international expansion.

Malvern, Pa.-based USAT filed a registration statement with the Securities and Exchange Commission giving details about the proposed sale, for which no date has yet been set. In addition to the $34.5 million, the publicly traded company is granting underwriters a 30-day option to buy up to another $5.2 million in USAT stock, meaning the offering ultimately could raise close to $40 million.

USAT, whose 12,400 customers include bottlers, food-service organizations, and small businesses that deploy vending machines and other payment-accepting devices, has been posting strong growth in recent quarters. The firm hopes the stock sale will provide further funding to keep that growth going.

“We intend to use the net proceeds received from the offering for general corporate purposes and working capital to support anticipated growth,” the filing says. “These purposes may include, among other things, future acquisitions of businesses, products and technologies, or establishing strategic alliances, that we believe will complement our current or future business.” The company said it currently has no commitments for any specific acquisitions or strategic alliances.

As of March 31, USAT had 504,000 connections to its ePort Connect network that provides wireless payment services to vending machines, kiosks, laundries, and other unattended merchant locations, up 26% from a year earlier. The company claims its network is the largest in the unattended small-ticket market.

The filing also says USAT intends to “capitalize on opportunities in international markets” as well as “capitalize on the emerging NFC and growing mobile-payments trends.”

“We are currently focused on the U.S. and Canadian markets for our ePort devices and related ePort Connect service, but may seek to establish a presence in electronic payment markets in Europe, Asia, and Latin America,” the document says.

More than 70% of USAT’s network connections are enabled for contactless payments through near-field communication technology, which means the company can offer merchants acceptance of mobile wallets such as Apple Pay and Android Pay, the filing says.

The stock offering comes with risk factors, including USAT’s history of losses. From its inception through June 30, 2016, USAT posted cumulative losses from operations of $181 million. The company did post a profit of $136,000 in its third quarter quarter of fiscal 2017 ended March 31 on revenues of $26.5 million versus a loss of $5.42 million a year earlier.

USAT also relies heavily on some key customers, the loss of which could hurt its financials. In 2016, for example, one customer accounted for 28% of equipment sales, and one customer generated 16% of licensing and transaction-processing revenues.

Yet another risk is potentially fluctuating operating results, although USAT says its business model focusing on services promotes financial stability. The company now gets 73% of its revenues from recurring license and transaction fees, and 27% from sales of electronic-payment devices and related hardware.

USAT hasn’t said how many shares it plans to offer in the pending sale. Chicago-based William Blair & Co. is managing the offering. Its stock closed at $5.25 per share on Friday.