Lauren Stevens - IR Steve Herbert – Chairman and CEO Dave DeMedio - CFO.

Jason Kreyer - Craig-Hallum Gary Prestopino - Barrington Research Mike Latimore - Northland Capital Kevin Dede - H.C. Wainwright Bill Sutherland - Emerging Growth Equity Barry Kitt - Pinnacle.

Good day ladies and gentlemen, and welcome to USA Technologies' Third Quarter Fiscal 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I'd now like to hand the conference over to Ms. Lauren Stevens, Investor Relations with USAT. Ma’am, you may begin..

Thank you and good afternoon, everyone. This is Lauren Stevens and welcome to the USA Technologies third quarter fiscal 2015 earnings conference call. With me on the call today are Steve Herbert, Chairman and Chief Executive Officer and Dave DeMedio, Chief Financial Officer of USA Technologies.

Before we begin today's call, I'd like to remind you all that statements, included in this call, other than statements of historical facts are forward-looking statements.

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including, but not limited to business, financial market and economic conditions.

A detailed discussion of the risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included with our filings with the SEC.

Listeners are cautioned not to place undue reliance on any such forward-looking statements, which reflect management's view only as of the date they are made. USA Technologies undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

This call will also include a discussion of certain non-GAAP financial measures that we believe are useful for understanding USA Technologies operations. These non-GAAP financial measures are supplemental to, and not a substitute for GAAP financial measures, such as net income or loss or net cash used in operating activities.

Details of these items and a reconciliation of these non-GAAP financial measures to GAAP financial measures can be found in our press release issued this afternoon and on the Investor Relations page of our Web site www.usatech.com. Now I’d like to turn the call over to Steve. Please go ahead..

Thank you, Lauren, and good afternoon everyone. Thank you for joining us to discuss our third quarter results. USA Technologies is making substantial progress on all fronts including strategic initiatives, financial performance and customer penetration. Our results for the third quarter reflect our continued and forward momentum.

First, I will provide a quick overview of the quarter and then give a strategic and operational update as we've had many recent developments that I'd like to share with you. Our revenue for the quarter was $15.4 million, growing 47% from a year ago, and 20% from last quarter.

A big jump in equipment sales drove overall growth and more importantly, our license and transaction revenue showed healthy, sustainable growth. We've described our QuickStart initiative in the past two earnings calls and as a reminder, it is our program to enable third-party financing of ePort hardware.

We strategically design and implemented QuickStart to improve our balance sheet by generating free cash flow. We are very enthusiastic about the further acceleration of customer demand for QuickStart in the quarter as it is responsible for growth of both hardware revenue and free cash flow.

However, the increase in the number of connections is also an important component of the overall growth story. We added gross connections of 24,000 and net connections of 14,000 for the third quarter of this fiscal year. Connection growth remains a significant metric for the future of USA Technologies.

Total connections now stand at a record 302,000, a level of growth rate that is evidenced we are on the path towards achieving our three-year goal of 500,000 connections. This represents a growth of 24% from the 244,000 connections we reported in Q3 of 2014. Despite the deactivation level, customer retention remains high.

6,600 of the deactivations in the quarter were driven by two sources. The previously discussed wind down with CCR, as well as determination of a customer relationship and a vertical other than vending with whom the company no longer desires to do business.

We added 475 new customers, for 8925 total customers on our ePort Connect service, a 34% increase year-over-year and more than we have ever had in the history of USA Technologies.

As further evidence of our momentum, we expanded our relationship with Southern Refreshment Services, the leading provider of self-serve, micro market, kiosk vending and office coffee services in the Atlanta region.

The increase includes 1000 additional vending locations, as well as an additional 100 plus micro markets, cafeterias, office coffee service locations and back office buildings for catering bulk orders and delivery services.

In the third quarter, our service handled more than 51 million transactions, 27% above a year ago for a total transaction volume of nearly $98 million. Additionally, we hit another significant milestone, averaging more than $1 million in transactions per day.

The QuickStart program had an appreciable impact in the quarter not only on revenue, but also benefited our cash position. Consistent with our expectations for the leasing program, we dramatically reduced cash usage on the rental programs and ramped up the QuickStart leasing program.

The net effect was an increase in cash of more than $1.7 million from last quarter primarily as a result of our sale to a third-party leasing company of our rights to future lease payments under certain QuickStart leases. We spent a long time in the quarter talking with customers about mobile payment, specifically the recently launched Apple Pay.

Deloitte expects the 2015 will be an inflection point for the usage of mobile phones for NFG enabled cashless payment. With this current shift and our leadership position in the self-serve market, our customers have been coming to us asking of their machines are ready.

And further, the smart customers are seeking to outfit all of their outlets with cashless payment capabilities. Of course, this activity was in large part, sparked by Apple Pay. And Apple now reports that Apple Pay comprises two out of every $3 spent on purchases using contactless payments across the three major U.S. card networks.

It has been a boost to the whole ecosystem and in an article dated November 5, 2014 by Ars Technica, an online publication, Google Wallet saw an increase of 50% in weekly transactions immediately following the launch of Apple Pay.

We believe the combination of Apple Pay, Google Wallet and other payment capabilities, together with self-serve retail and other cashless services is a perfect match. As such, we see unintended small purchases as the most likely to gain first adoption for mobile payments.

USAT and its customers are in a position to take full advantage of this momentum and excitement in the market and we anticipate this would propel us towards more connections and increasing shareholder value through revenue and earnings growth. In April, we announced a strategic relationship with Chase Commerce Solutions.

Chase will be taking over as our payments processor and both companies intend to engage in several joint marketing and sales activities in the future. The relationship with Chase allows us to broaden our reach for our ePort products and services.

We believe Chase will be a solid partner for our go-to-market strategies and will help further our growth and will ultimately broaden USA Technologies footprint. David will share some additional details on this important development.

Also, in April, we attended NAMA the largest trade event in the vending and refreshment services industry where we demonstrated Apple Pay and Google Wallet capabilities and conducted joint educational sessions for our customers with MasterCard.

MasterCard held demonstrations in our booth at both companies had representatives on hand to jointly present to customers and answer questions. We also featured key customers, including Five Star Services, M&M sales company, Pepi Services, Southern Refreshment Services and others.

The tradeshow was a great success, as we highlighted USAT's capabilities, showcased our relationship through key partners and met with key customers and prospects to do business planning and review current performance.

The data from our knowledge base is so compelling, especially in light of a positive mobile wallet trajectory referred to earlier, that several of these discussions lead to new and extended agreements being signed right there on the show floor.

Perhaps, equally as exciting was our presence beyond our booth, walking around the tradeshow floor we saw evidence of our large market share, leadership position and traction by seeing our products featured in a dozen or more other booths hosted by companies representing a multitude of consumer brands including Starbucks, Seaga and TCBY.

With such array of providers, vendors, customers, retailers and partners participating with us, the team left an NAMA with a renewed sense of USAT’s challenging leadership, and what we believe is the strong upside potential in this evolving market.

As we move through the fourth quarter of our fiscal year, we believe we are accelerating growth driven by the combination of the solid technology we've been investing in for more than a decade that actualization of strategic plans to generate sales and improved cash flow and the growing trend of cashless and mobile payments.

We are energized more than ever by the rapid change in the market towards adoption of our solutions. We believe we have a significant opportunity to capture market share and we are committed to accomplishing our long-term goals and maintaining or growing our market-leading position.

I'm now going to turn the call over to Dave for comments on our financial results for the third quarter.

Dave?.

Thank you, Steve. Gross connections added during the third quarter totaled 24,000 compared to 22,000 in Q3 of last year. Of the total gross connections, 82% came from existing customers and the balance from new customers added during the quarter. Net connections for the quarter totaled 14,000 compared to 20,000 in last year's third quarter.

We added 475 new customers, ending the quarter with a total of 8925 customers. This is a 34% increase in the customer count from Q3 of Fiscal 2014, which we believe is indicative of a broadening adoption and acceptance of cashless payments in the industries we serve.

For the third quarter, total revenue was $15.4 million, an increase of 47% compared to $10.4 million in the third quarter of Fiscal 2014 and 20% sequential improvement from the $12.8 million we recorded last quarter, which was driven by the increase in equipment sales under our QuickStart program.

License and transaction fees were $11.1 million compared to $9 million in the year ago quarter, a 23% increase. These fees that are comprised of recurring monthly service fees plus recurring transaction processing fees accounted for approximately 72% of total revenue.

Growth was driven by the year-over-year increase in total connections to our ePort Connect service. Equipment sales were $4.3 million compared to $1.4 million in last year's third quarter, a 198% increase. This increase is related to our QuickStart program, which is having a positive impact on equipment sales and cash that we expected.

The uptake in QuickStart continue to grow during the third quarter, as the program accounted for approximately 65% of our gross connections, up from the 45% of gross connections experienced from September to December, while JumpStart remained at just 15% of gross connections.

Gross profit was $5.1 million compared to $4 million in the year ago quarter. Total gross margin was 33.5% compared to 38.3% in the third quarter last year. Gross margin on license and transaction fees was 35.3%, compared to 35.7% last year and up sequentially from this year's second fiscal quarter's margin of 31.7%.

As we indicated last quarter, we expected license and transaction fee gross margins to improve as this fiscal year continued, predominantly as a result of starting to bill for the JumpStart units that were deployed last fiscal year under grace period marketing program.

Also the margin this quarter, when comparing to a quarter a year ago was affected by the sale-leaseback transaction we executed in June of 2014 where the rental payments are larger than the depreciation charge, resulting in a decrease of gross margins. As a reminder, the sale-leaseback is a three-year agreement.

The equipment margin was 28.9%, compared to 54.3% in the year ago quarter. Margin in the current quarter was positively impacted by a one-time recovery of $0.7 million and in the year ago quarter, was positively impacted by a one-time recovery of $0.2 million.

Excluding these one-time items, generally, the margin reductions reflect the shift in new connections coming from QuickStart and moving away from JumpStart, as well as, we did not charge higher margin activation fees on QuickStart connections added during the quarter.

Selling, general and administrative expenses were $4.3 million in the third quarter, compared to $3.5 million in the year ago quarter, a 23% increase.

The increase is the result of approximately $0.3 million increase in the reserve for doubtful accounts, approximately $3.3 million related to an increased compensation expense of which 50% is due to non-cash equity-related compensation.

And the remaining approximately $0.2 million predominantly relates to an increase in the use of outside and/or consulting services. For the third quarter, adjusted EBIDTA was $2.4 million compared to $1.8 million in the comparable period last year.

On a comparative basis, results this quarter were impacted by $0.4 million of cash rental expense from the sale-leaseback transaction which are not excluded from adjusted EBITDA.

GAAP operating income for the third quarter was approximately $0.7 million, reduced by $1.3 million of other expenses and the provision for income taxes which consisted of a $1.1 million non-cash charge related to the change in fair value of warrant liabilities and $0.1 million non-cash tax provision, our GAAP net loss was approximately $0.6 million.

After preferred dividends, GAAP net loss applicable to common shares was $0.03 per share. On a non-GAAP basis, net income was $0.5 million, compared to non-GAAP net income of $0.3 million in the same period last year. Cash at March 31, 2015 was $8.5 million, an increase of $1.8 million from the quarter ended December 31, 2014.

The rapid uptake of QuickStart and a significantly reduced levels of JumpStart for new connections has had an impact on our cash flow statement.

Under JumpStart, the use of cash for the rental program is categorized in investing activities and for the nine months ended March 31, 2015, we have only used $1.6 million of cash or $5.6 million less than we used in the nine months for the same last year under this program.

During the nine-month period, we sold approximately $4.9 million of equipment under QuickStart. Of which, we received approximately $2.7 million in cash from the third-party lessor we recently brought on.

Of which, $1.8 million is reflected under financing activities and the remaining $0.9 million, $0.3 million, was received prior to March 31, 2015 and improved cash flow from operations in the remaining $0.6 million of the $0.9 million was in accounts receivable and subsequently received to March 31, 2015.

As we previewed last quarter, the transactions and cash received through the third-party lessor was a significant contributing factor to the $1.8 million increase in the cash balance during the quarter. We had approximately $2.2 million of cash usage for QuickStart leases during the nine-month period that were not sold to the third-party lessor.

However, the company recently received a commitment from a different third-party leasing company to purchase a substantial number of these leases. In addition, USAT and this leasing company, are working together to establish an ongoing leasing program which, if successful, would make this our second lessor for our QuickStart program.

As Steve mentioned, in April, we entered into a strategic relationship with Chase Commerce Solutions whereby among other things USAT would become a third-party processor and where Chase who act as a provider of credit and debit card transaction processing services, including authorization, conveyance and settlement of transactions.

In addition to the strategic benefits Steve mentioned related to this relationship, we anticipate processing transactions within the next 60 days and begin to realize the financial benefits related to our transaction, license and transaction fee cost under this agreement at that time.

Given the revenue strength we saw in Q3, we now expect to see total revenue to be in excess of this $53 million for the full year, which was the high range of our previous guidance. License and transaction fee revenue is estimated to be in the lower range of $44 million to $47 million for an increase of 24% to 31%.

We also expect net new connections in the range of 66,000 to 76,000 for an increased 27% to 46%. We also expect fourth quarter adjusted EBITDA to increase sequentially over the third quarter and to deliver an approximately 20% yearly growth over Fiscal 2014, total adjusted EBIDTA. Now, I would like to turn the call back over to Steve..

Thank you very much, Dave. And thank you everyone for joining us this afternoon. In closing, we believe the team has delivered on the initiatives we laid out over previous quarters, including driving revenue growth, improving cash flow and growing the number of connections and recurring revenue.

We believe that we will remain well-positioned for increased traction and continued success to deliver enhanced shareholder value. We would now like to open up the call for questions.

Operator?.

Thank you. [Operator Instructions] Your first question comes from George Sutton from Craig-Hallum. Your line is open. Please go ahead..

Good afternoon, guys. It's Jason on for George..

Hi, Jason..

I wanted to just ask so you reiterated your connections growth for the year of 66,000 to 76,000 and that would suggest that you are off to a pretty good start here in Q4.

Just wondering, if you can give any details on why you are confident in that number and what you're seeing in the marketplace right now?.

Jason, its Steve Herbert. A couple of things. Typically, we have a very strong fourth quarter, as a company, from a connections stand point and we are encouraged by the pipeline that we see in the – with the company, right now. So there are a number of things. Those are two examples..

And then maybe we could revisit the long-term margin expectation, the margins in Q3, here were better than what we were looking for.

And just wondering what your thoughts would be following the termination of the grace period or once that gets worked out of the system and now, the benefits from the new Chase strategic agreement?.

Jason, for Q4, while the benefits related to the Chase agreement will impact fiscal year 2016 as we will probably start to process with Chase sometime in June. So we won't get much of an impact from that relationship until fiscal 2016.

But, in terms of Q4 license and transaction margin, we would expect them to be in line or along what we saw for Q3 as a lot of those units went out under the grace period almost all being billed now.

Then, when we circle back probably on our next call for guidance or outlook for next year, I think we may update the long-term at least fiscal 2016 outlook for margins on a go forward..

That's helpful. Last one for me.

Just wondering if you can give a couple additional details on the churn that we saw this quarter? You've called out the bulk of the churn and wondering if you could talk a little bit more about those customers and if you are seeing anything else in the pipeline or you think it should remain at the typical levels of trend that we’ve seen?.

Jason, it's pretty typical stuff, outside of the two that I believe I mentioned in my remarks. It's really up and down the street business with – we have close to 9000 customers on service so either constantly activating and deactivating things and moving them around. So those are things that we will probably see on a pretty regular basis.

So in kind of the short version of the answer is, outside of the two, there was really nothing out of the ordinary..

And Jason just a – I’m sorry just a follow-up as it relates to CCR, the remaining connections at the end of the quarter, March 31 quarter, were approximately 800. So largely those connections and the impact of the activation from those are largely behind us, now Jason..

That was my next question. So that takes care of it for me. Thanks a lot guys..

Thank you. Our next question comes from Gary Prestopino from Barrington Research. Your line is open. Please go ahead..

Hi. Good afternoon. Couple of questions here.

First of all, could you give us what the percentage of gross new connections were from ePort vending versus the newer adjacent markets?.

Hi, Gary, thanks for the question. Approximately 90% of our connections this quarter, gross connections this quarter, came from the vending market. And that left about 10%, which came from other verticals and those are equally spread between laundry and kiosk and amusement and gaming..

And then as far as the breakdown of new connections between the percentage with QuickStart and JumpStart in the quarter, could you give us those too?.

Sure. The percent of QuickStart of gross connections was 65% this quarter. And JumpStart was 15%, one-five..

Okay.

And then at this point, given that the NAMA show and Apple Pay and all that, are you seeing more and more of your net adds being NFC enabled? And could you maybe give us what that percentage breakdown of connections are that are NFC enabled at this point?.

Gary. Hi, it's Steve, it's a 100%. It's 100%. It's a very rare customer that doesn't understand the importance of mobile payment and the NFC capability..

So, the new ones are 100% and your total base -- I think it was somewhere around 70%, 75% at one time.

Is it now gravitated more towards 100%, Steve?.

We still have some number of mag stripe only out there. I'm going to wait for Dave to come up with a percentage. So large percentage of our base and off the top of my head, I'm going to say something like 70% of the 300, more than that, actually, I think I saw a number of 220, recently so let's call it somewhere between 70% and 75% of our base.

Dave, did I get that right?.

Yes. That's about right..

Okay. And then just a couple of quick other ones because I was writing so fast and trying to listen.

This new agreement with Chase, does that come with a better rate on charges for processing or was I misunderstanding that?.

Hi, Gary. We do expect efficiencies in terms of our cost and license and transaction fees. But the main reason we entered into that agreement was for the strategic relationship on the upside of that partnership with Chase. But any of the efficiencies we gain in terms of costs and margin improvement are going to be seen in fiscal year 2016 forward..

Okay.

And then you also reiterated, you said that you are looking for your EBITDA to be up 20% this year?.

For total year-over-year from 2015 compared to 2014, yes..

That's great. Then one last question.

When does the impact of the warrants come into your share flow?.

There's 3.9 million warrants, well, actually 4.2 million warrants that expire September of 2016. They are in the money. They haven't exercised strike price of $2.61. And they come into the share flow if and when exercised..

Okay.

So it's not a function of the price in the market, it's when they are exercised?.

Well, correct. Now, in terms of a fully diluted calculation, as long as they are in the money, they would come into the fully diluted calculation, if all the accounting metrics were met. And, they weren't anti-dilutive. They weren't included in this quarter's fully diluted number because inclusion would have caused those to be anti-dilutive.

In a sense, that would have reduced the loss..

Okay. I see what you are saying. Okay. All right. Thank you, then..

Sure..

Thank you. [Operator Instructions] Our next question comes from Mike Latimore from Northland Capital. Your line is open. Please go ahead..

Nice quarter guys.

On the QuickStart contribution, 65% of gross connections, is that kind of what you are targeting going forward or is that a little bit elevated?.

Mike, thanks for the kind words. And to answer your question, I think we said we were enthusiastic about the response in the marketplace. If it remains on this trajectory, we'll be very pleased.

I have to say, that our customers moving over from a rental to a hard five-year commitment to both our devices and service, has happened at a more rapid pace than I thought. So if it remained at 65% that would be great. Candidly, I don't think it's going to stop here, but we'll have to see. It's something new..

Yes. Sure. Okay, good. And then on just – on the equipment gross margin. Did you say there was a $0.7 million one-time benefit, I guess that's the first question.

Second, if we – if that's the case you back it out, is that kind of a good run rate per gross margin?.

Yes, Mike. You have that correct. It was a one-time benefit. And if you back that out, that is probably -- we would expect margins to be somewhere in the high teens to low 20 margin for equipment. And I think if you back that out, that's where you are going to land. So to answer your question, yes. It would be sort of a normal expected run..

Did you get more connections from your largest customer this quarter?.

We did. We did. We actually received significant orders from them in Q3..

Okay, great.

SG&A, is that kind of the quarter amount here, is that a good run rate going forward, SG&A?.

Mike, no. Of that 4.2, I would estimate 350,000 to 400,000 is sort of one-time for this quarter..

Okay..

So I would expect it to come down in Q4..

Got it.

And also just to clarify, did you say the transaction dollar amount was close to $98 million?.

Yes..

Okay, great. Very good. Thanks a lot..

Thank you..

Thank you. Our next question comes from Kevin Dede from H.C. Wainwright. Your line is open. Please go ahead..

Thanks. Good afternoon, gentlemen. Steve, just back on the Chase deal, I get the feeling there's two aspects, right? There is the transaction side and then there is a marketing side.

I was wondering if you could sort of peel back again this one layer and give us a little more detail on each aspect there, if you think I'm thinking about it the right way?.

Well, in a nutshell, I think you said it right. There are efficiencies to be gained on transaction processing side. As Dave said, those will become apparent in the beginning of fiscal year 2016 in our – I guess our starting July 1, approximately perhaps it had taken a little later than that.

So there is that on a macro level, there is that facet of relationship. And then, there's also -- there's a strong desire on the part of both companies to penetrate this space. As we all know, there is a lot of what something called Blue Ocean in this market space.

And they have a lot of arms and legs and it's one of the things and then a very broad reach, not only in the United States, but globally. So that's something that we were very attracted to in the discussions with Chase..

Do have maybe anything up your sleeve that you could offer as an example of how you think you might be able to leverage this arrangement with them? There is just something that might be able to make it a little more tangible? I mean as I'm hearing it here, it's just very high level and I'm just curious what it means in terms of boots in the street?.

The fact of the matter is that, let me preface this by saying one of the things that we don't want to do is to tip our hand to competition before we're ready to launch say a specific joint marketing effort with a partner, with really, with any partner. We don't want to tip our hand on that stuff. So we are not being cryptic to be difficult, of course.

We always want to be as transparent as we can. But, theoretically, to give you an example, as I mentioned, this is a market space that we both have a high degree of interest in and feel that it has great promise. And Chase does – to use your phrase, they do have a lot of boots on the ground.

So theoretically, you could see someone like Chase offering our service to say, a marketplace that, perhaps, has nothing to do with vending, but has a lot to gain from this type of peanut service. So I hope that helps..

Yes, it does. Thank you.

Not that you are directly connected with Apple Pay, but there is certainly a lot of other credit card companies that are and I'm wondering, number one, if this Chase arrangement exclusive, and number two, is there still an opportunity interest in your part perhaps make arrangements with American Express or Visa?.

Well, our relationship – we're certainly free. We have separate agreements with the card associations. We have a strategic agreement with MasterCard. We have a strategic agreement with Visa. So we are free to do those things. We can partner with people like Apple Pay. And so we certainly – we have maintained the freedom to do those things..

Okay. So given the traffic on the show floor at NAMA and what appears to be a pretty bullish outlook, Q4, in terms of connections, is there a chance that you might come back to the street or investors, in general, and give us an indication on how that's trending? I mean, I'm thinking about it.

Otherwise, we are not going to see your full-year report until sometime late summer.

I'm just wondering and if there's a chance you might be able to relay some of that information prior to that?.

I don't know that we, at this point, have anything planned. So at this point, I would have to say the answer to that is no. We don't have anything planned. However, if it becomes clear that we need to do so, we should do so, then we will kind of circle the wagons with the IR team and figure it out..

Could you sort of talk about, I guess the correlation between connections and equipment sales? I mean it's kind of tough to try.

I'm just sort of wondering what to expect on the equipment side, given an up tick in what you expect on transaction – I'm sorry -- on connections in this current June quarter?.

Kevin, the correlation between connections and equipment sales largely has to do with the percent of those connections coming from QuickStart. So at this moment, the best information we have is the last seven months of QuickStart activity. It's been favorable, 65% of our gross connections this quarter, were QuickStart.

Right now, we see no indication that Q4 connections would not be similar to that..

Fair enough, Dave. Thanks. I guess it's fair to say, then, you are expecting a pretty bullish return on equipment sales and gave us a sort of range on margins. I know I asked you – I think last quarter – about continued refinements in the equipment you are developing.

Is there anything on the horizon that you can speak to?.

Not at the moment. One of our suppliers was coming out with both pieces of our design. So we are looking into that possibly purchasing both pieces of our equipment from a single source supplier. But, other than that, nothing at the moment.

A little longer out, DMV is something both contactless and contact DMV is something that we're looking into for our customers..

Right. Okay. Seeing more of that in the news, lately, too. So just back to NAMA again and relationships developed there.

What sort of lag time do think there is between sort of a new agreement and then, actually starting to see those connections work into your connection base?.

Mike, typically when we sign an agreement with someone, the connections start to flow pretty quickly. It's not like we have a backlog as a company or a customer wants to wait. It's rare that a customer wants to wait a long time after signing an order or an agreement. So I hope that helps..

Yes. It does. It does.

I mean would it be fair to say that the kick up you see in this current quarter primarily a result of that show or is it just general seasonality in the quarter? And then how much do you think of that sort of filters through to your first half fiscal year 2016 outlook? Honestly, I understand you're not going to offer guidance on that.

You are just now – I'm just kind of wondering on – there's so many things happening, right? There are so many – there's a confluence of so many drivers right now it's kind of hard to synthesize the impact of anyone and I'm just wondering how much you can help me get my arms around that?.

Well, in the – kind of in the forward-looking part of your question, I always, you are talking about a confluence of different things. We have things like mobile and other things. But I always characterize things like Apple Pay and Google Wallet and the emergence of mobile payment as a nice tailwind for us.

One would say that it was unexpected if they weren't watching the industry closely or one could say, if you are flying an airplane and you are a good pilot, it is in your flight plan. We expect a tailwind from that. And it's effecting this year and it will likely affect next year.

And we are optimistic about that and that, along with the convergence of some other factors. So it has affected, to answer your question, some of those things have affected this year and will affect the way this year wraps up. And certainly, we don't would expect those things to drop-off as we go into next year..

Okay, Steve. Fair enough. That's all I've got at the moment. But thanks very much..

Well, thank you..

Thank you. Our next question comes from Bill Sutherland from Emerging Growth Equity. Your line is open. Please go ahead..

Thanks very much. Good quarter guys. On pricing, I assume it's looking pretty good and wondering if given the demand for QuickStart, in particular, if you are considering starting to charge some activation fee again..

That's a possibility. Particularly – and by the way – thanks for the kind words about the quarter on behalf of the team. But that – it's a possibility that is something that could happen in the future.

Particularly, as customers – they are beginning to dial-up services when they activate that sort of go over and above the core services, the core ePort Connect service we've been offering in the past. I know we talked about things like more loyalty programs.

So as we continue to add value, when someone connects, I really do think it will give us the opportunity for some sort of activation fee in the QuickStart program. We have to see. Unfortunately, we don't – we don't act in a vacuum.

So part of it is market driven and part of it is driven by the breadth of the service that we offer and the ability to justify such a thing..

Did the leasing company accept all of the deals you brought them in this quarter?.

The leasing company, thanks to the question, the leasing company this quarter, we brought on in May with the initial purchase of $1.8 million and then we brought them on for the ongoing program around the first or second week of March.

From that time, to the March 31, they purchased $900,000 worth of leases, which was predominantly most of the activity in the last several weeks of the quarter..

Okay. .

We always anticipate it having several leasing companies in the arsenal, just like any other company that is successful out leasing equipment or hardware or cars, whatever it is. You typically have multiple sources..

Sure.

And you are going to have a second one by the end of the quarter you said?.

I think it's safe to say that we do have a second one..

Okay. Just noticing again, the proportion of the gross connections being heavy and vending in the quarter, I'm sure it moves around quarter-to-quarter. But just wondering if – a little color on what's happening in the adjacent markets maybe that's the best way to ask a question..

We still have a significant amount of activity in commercial laundry, in kiosks and amusement. It wasn't as high this quarter as it has been in previous quarters as a percentage of the overall business. But, I would still say that those are active. And we continue to push on them. Remember we go to those channels.

We go to those channels through intermediaries. So we are having to work through other boots on the ground, if you will, to get that done. So it never happens as quickly as we would like. But that is typically the case with the reseller type arrangements. We recently attended a major trade event with our commercial laundry partner Setomatic Systems.

And it's my understanding that the industry -- they were there highlighting with us. We were in their boots with them, we help staff it. And Apple Pay was just a huge hit in that market. So we will have to see if that translates into connections in subsequent quarters..

Okay. That's it for me. Thanks, everybody..

Thank you..

Thank you. Our next question comes from Barry Kitt from Pinnacle. Your line is open. Please go ahead..

Congratulations on the great quarter. I appreciate it. First, a question. When you first gave your forecast for year-end, June 17, if I recall correctly was 500,000 connections, $100 million of revenue, $15 million of free cash flow and $20 million adjusted EBITDA.

Do I recall that correctly?.

Yes..

So my question is, at the time you gave that forecast, was that based on U.S.

or domestic only or did that include any international opportunities?.

That is largely, that was largely Barry, domestic only. It also contemplated for the most part our business model with JumpStart.

With QuickStart and the impact on equipment sales that QuickStart has, you might be able to achieve at least the top line revenue number sooner than a half million connections or the run rate of $100 million sooner than half a million connections.

But, I think as we go into next year with guidance and outlook, that something we're going to have to take a look at, as to how that impacts that goal..

So can you talk a bit about the JPMorgan Chase agreement that you recently announced? How does that impact or what opportunities does it give you in the international marketplace?.

There has been interest from outside the U.S. in terms of our solution, particularly in vending. And Chase has a much broader footprint in terms of – I think they have the ability for 120 different currencies throughout the U.S., throughout the globe. So they definitely give us more breath in terms of going into various countries.

It will just depend on the opportunity as it comes to us. And the particular region that they come from as to whether or not we will be able to grow with that relationship. We obviously think that their breath allows us to do that more so than our previous relationship. I hope that answers your question..

Sorry. I'm juggling conference calls. If I missed a few minutes where you already discussed or disclosed this.

Can you flush out a bit how the JPMorgan Chase relationship is going to help you get new customers other than who you are happy getting before? I think you talked earlier before you signed this agreement you are looking for not just a new process or new processing agreement from somebody, but you are looking for somebody who can essentially be a partner and bringing new customers.

Is that what you got with JPMorgan Chase?.

We believe so. They have a lot of customers and as Steve mentioned, we are going through some of these other verticals through into mediators through indirect sales channels. They may have a customer relationship in another vertical market. It could utilize the service like USA Technologies.

And we might be able to benefit from that existing relationships that they have..

Okay. Thank you very much..

That's just one example..

I appreciate that. Thank you..

Thank you..

Thank you. At this point, we did not have any time for further questions. I will now turn the call over to management for closing remarks..

Thank you, everyone, for taking the time for our call today. We appreciate all of the great questions and all of your interest in our company and enthusiasm. So thank you, again, on behalf of the whole team. I hope you all have a nice evening..

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect..