USA Technologies, Inc.: Initiation of Research Coverage

Thursday, August 24, 2017

William Blair & Company initiated research coverage of USA Technologies, Inc. (USAT $5.20), which is focused on adding cashless payments and additional services to small-ticket, unattended retail (e.g., vending machines, kiosks, laundry facilities).

Analyst Robert Napoli estimated that USA Technologies would earn $0.04 per share in fiscal 2018 and $0.13 per share in fiscal 2019.

“We believe the growth opportunities remain vast; less than 30% of the 13 million to 15 million vending machines in the United States accept cashless payments,” Napoli said. “We believe cashless acceptance will trend toward 100% over time as electronic payments continue to take share and because of the several benefits of ‘connected’ machines (e.g., higher sales, improved data/information, operational efficiencies).”

He added, “We expect USA Technologies will post about 20% organic revenue growth of its high-value license and transaction fees in coming years as the number of connected devices continues to grow; we estimate USA Technologies is less than 30% penetrated within its existing customer base and has less than 5% share of the U.S. market. Connections tend to be very sticky and allow USA Technologies to process volume, earn license fees, and sell additional services. USA Technologies has increased the number of connections at a 30% annual rate since fiscal 2011, while revenue has grown at a 29% annual rate.”

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William Blair or an affiliate was a manager or co-manager of a public offering of equity securities of USA Technologies, Inc. within the prior 12 months.

William Blair or an affiliate beneficially owns or controls (either directly or through its managed accounts) 1% or more of the equity securities of USA Technologies, Inc. as of the end of the month ending not more than 40 days from the date herein.

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William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from USA Technologies, Inc. or an affiliate within the next three months.

William Blair or an affiliate received compensation for investment banking services or non-investment-banking services from USA Technologies, Inc. within the last 12 months. [Company name] is or was, within the last 12 months, an investment banking client of William Blair & Company and/or one or more of its affiliates.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in securities of USA Technologies, Inc.

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Current Ratings Distribution (as of 7/31/17)

Coverage Universe
Outperform (Buy): 59%
Market Perform (Hold): 34%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 11%
Market Perform (Hold): 3%
Underperform (Sell): 0%

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