USA Technologies (USAT 10.50, -4.80, -31.37%) traded sharply lower today after
announcing it will delay its 10-K filing. USAT was required to file its 10-K
for fiscal 2018 (ended June 30) by September 13 but that will be delayed as the
company has initiated an internal investigation relating to certain of the
company's contractual arrangements.
This stock has been a big mover over the past year, going from under $6 a year to close yesterday at $15.30. USAT is a supplier of vending machine payment processing technology for cashless and mobile transactions in the self-service retail market. Its technology is primarily used in the unattended Point of Sale market with a focus on the small ticket, beverage, and food vending industry. USAT is also expanding to other unattended market segments, such as amusement, commercial laundry, kiosk, and others.
Its POS technology allows payments to be made using debit cards, credit cards, and electronic wallets based on near-field communication (NFC) technology (Apple Pay and Android Pay). Most of its revenue comes from license and transaction fees. The majority of its ePort Connect customers pay a monthly fee plus a blended transaction rate on the transaction dollar volume processed by the company. Connections to the ePort Connect service, therefore, are the most significant driver of USAT's revenue.
USAT announced some recent customer wins that were impressive. In August, USAT announced that Pepsi Bottling Ventures (PBV), the largest privately-held bottler for Pepsi-Cola products in North America, signed a multi-year agreement for USAT's ePort Connect Service. The agreement includes deployment of the ePort cashless payment system on 13,000 machines. PBV operates 20 bottling and distribution facilities, serving over 8 mln consumers on the East Coast.
A couple of weeks later, USAT announced that Admiral Pepsi, one of the largest privately-held bottlers for Pepsi-Cola products in North America, signed a multi-year agreement for USAT's ePort Connect Service. The agreement includes deployment of the ePort cashless payment system on nearly 6,000 machines in addition to the Seed Pro logistics software.
USAT also announced a new 3-year strategic agreement with Ingenico in April 2018. The two companies are partnering to pursue the unattended retail marketplace with a bundled offering that pairs Ingenico's hardware, software, security, and services with USAT's ePort Connect platform specifically designed for the unattended retail market.
In terms of today's news, there is not a lot of detail provided. Basically, the company, with the assistance of independent legal and forensic accounting advisors, is in the process of conducting an internal investigation of current and prior period matters relating to certain of the company's contractual arrangements, including the accounting treatment, financial reporting, and internal controls related to such arrangements. The Audit Committee is working closely with its advisors to complete its investigation in as timely a manner as possible.
Clearly investors are disappointed by this news. The stock has had a nice run over the past year, fueled by strong earnings results and several customer wins/partnerships. Also, USAT has been seen as a play on the move to cashless systems. Its technology has been designed to simplify the transition to cashless for traditionally cash-only based businesses. It's difficult to predict what will result from the internal investigation. However, it does put a bit of a cloud over the stock until this situation gets sorted out.
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