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Edited Transcript of USAT.OQ earnings conference call or presentation 4-Feb-21 9:30pm GMT

·28 min read

Q2 2021 USA Technologies Inc Earnings Call Malvern Feb 5, 2021 (Thomson StreetEvents) -- Edited Transcript of USA Technologies Inc earnings conference call or presentation Thursday, February 4, 2021 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alicia V. Nieva-Woodgate USA Technologies, Inc. - VP of Corporate Communications * Anant Agrawal USA Technologies, Inc. - Chief Revenue Officer * R. Wayne Jackson USA Technologies, Inc. - CFO * Sean E. Feeney USA Technologies, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Cristopher David Kennedy William Blair & Company L.L.C., Research Division - Associate * Gary Frank Prestopino Barrington Research Associates, Inc., Research Division - MD * George Frederick Sutton Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst * Michael James Latimore Northland Capital Markets, Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the USA Technologies Fiscal Year Second Quarter 2021 Earnings Conference Call. (Operator Instructions) I would now like to hand your conference over to your first speaker today, Alicia Nieva-Woodgate, Vice President of Corporate Communications and Investor Relations for USA Technologies. Please go ahead. -------------------------------------------------------------------------------- Alicia V. Nieva-Woodgate, USA Technologies, Inc. - VP of Corporate Communications [2] -------------------------------------------------------------------------------- Thank you, and good afternoon, everyone. Welcome to the USA Technologies Second Quarter Fiscal 2021 Earnings Conference Call. With me on the call this afternoon are Sean Feeney, Chief Executive Officer; Wayne Jackson, Chief Financial Officer; and Anant Agrawal, Chief Revenue Officer. Before we begin today's call, I would like to remind you that all statements included in this call other than statements of historical facts are forward-looking in nature. 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 and in the press release issued earlier today. 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, among other things, evaluating USA Technologies' operating results. These non-GAAP financial measures are supplemental to and not a substitute for GAAP financial measures, such as net income or loss. Details of these non-GAAP financial measures, a presentation of the most directly comparable GAAP financial measures and the reconciliation between these non-GAAP financial measures as well as the most comparable GAAP financial measures, can be found in our press release issued this afternoon, which has been posted on the Investor Relations section of our website at www.usatech.com. And with that, I would now like to turn the call over to our Chief Executive Officer, Sean Feeney. Sean? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Alicia, and thank you, everyone, for joining us today. I hope everyone is safe and well. During the second quarter, we [continued] to make an enormous amount of progress on the things within the company's control even as the COVID-19 pandemic continues to have an adverse impact on most of our customers' operations, which is reflected in our second quarter results that Wayne will walk you through shortly. During the quarter, we continued to build out the team with talented new hires, and we successfully preserved and grew our customer base despite the difficult macro environment. In addition, we further reduced the company's spend on external professional services and re-allocated some of those savings towards investments in products and services to better serve customers as well as to systems that the company needs to scale in the years to come. This is the first time in a long time that the company has invested in product innovation and platform infrastructure to drive future growth. Although we made a tremendous amount of progress on the things within our control, the variables beyond our control, namely COVID-19, continue to create a challenging operating environment. As it relates to transaction volumes, we saw a steady recovery from July to October of 2020. However, in November, we saw a repurchase trend as COVID cases spiked. The second COVID wave led to additional lockdowns and further delayed openings of office buildings and schools and caused some operators to temporarily deactivate additional devices. I am optimistic that volumes will rebound relatively quickly once schools and businesses reopen. For equipment sales, we are seeing positive momentum in our efforts to upgrade customers to the 4G ePort device. Some operators, still cautious of their liquidity during the pandemic, are committing to upgrades but are waiting to take delivery on hardware until later this calendar year. This upgrade effort is a key initiative as cellular networks sunset 2G and 3G technology over the next 2 years. As a result of COVID's persistence, and our updated assumptions around timing of a successful vaccine rollout, we have pushed out our expectations on when the virus will have less of an impact on our market and business. Therefore, we have revised our fiscal year 2021 revenue guidance to be between $163 million and $171 million, down from a range of $170 million to $180 million. We have revised our net loss applicable to common shares to be between $21 million and $17 million, down from $14.1 million and $11.1 million. We have revised our adjusted EBITDA range to positive $1 million to $4 million from the prior guidance of $2 million to $5 million. So while the economy's recovery from COVID is several months behind the pace that we had anticipated, my confidence in our growth, once we return to normal, is higher today than when I started back in May. With the growing consensus amongst the business community that the economic impact of COVID will materially diminish by this summer and into the fall, I am prepared, based on the progress we are making, to tell you that we believe we can drive revenue growth in the mid-teens in fiscal year 2022. Of course, as the circumstances around COVID continue to become clearer, we will update our outlook in future quarters. Turning back to the second quarter, we remain focused on the initiatives that position the company to capitalize on an economic rebound and optimize our long-term growth opportunity. As a reminder, the strategic initiatives we laid out for this fiscal year are position the company to drive sustainable organic growth, right-size the company's cost structure, and invest in people and culture in order to achieve excellence. Keeping these in mind, let me give you some highlights for the quarter. First, as part of our ongoing investment in talent, we recently appointed Ravi Venkatesan as Chief Technology Officer, a newly created position for the company. He joined us from BAKKT, a subsidiary of ICE, where he was the Head of Innovation and was previously the CTO at Bridge2 Solutions, an innovative loyalty platform. He is responsible for our technology, products and innovation strategy. I'm thrilled to have someone of Ravi's caliber and expertise. We have been successfully educating our customer base on the critical importance of setting a conversion timetable before the inevitable 2G/3G sunset of devices. As a result, as I previously mentioned, we are starting to see the steady migration and transition to 4G. In December, we added a new feature to Seed Mobile that has been very well received by our customers. This new feature enables real-time feedback from our drivers in the field. This will be an integral feature for some of the future product launches. And while we are on the topic of new products, we were recently awarded an exciting new patent, with Anant Agrawal and Mandeep Arora, co-founders of Cantaloupe, authored a few years ago, titled, “Method and System of Personal Vending.” This technology is focused on creating an unmatched shopping experience at an unattended retail location by reimagining the customer journey through the consumers' mobile device. We are thrilled to receive this recognition of our culture of innovation. I will now turn the call over to Anant, our Chief Revenue Officer, to give you more color on the quarter's business performance. Anant? -------------------------------------------------------------------------------- Anant Agrawal, USA Technologies, Inc. - Chief Revenue Officer [4] -------------------------------------------------------------------------------- Thanks, Sean. I want to touch on 4 focus areas today. First, our platform as a service. We continue to make progress with existing and potential new customers who are seeing the value of being on a single platform for both cashless and logistics software. Jackson Brothers of the South is a great example of this. As you've recently highlighted in a case study on our website, they decided to make the change from their legacy VMS solution in 2019 to the Seed platform, bringing their ePort cashless devices and software solution onto a single platform. Since then, they have expanded their use of our platform to help manage growing their micro markets and office coffee lines of business. And now, with our recent announcement on upcoming cellular sunsets, Jackson Brothers has decided to upgrade all their devices with us to 4G LTE and EMV simultaneously. As a result, Jackson Brothers now has one central place to view, manage and adapt to its client needs across their whole business with a single solution provider. Second, penetrating the broader unattended retail market outside of traditional vending. As an example, we recently expanded our business by deploying ePort cashless on 100% of the machines at a major commercial water dispensing company that has thousands of machines across the country and is growing at a rapid pace. Third, the move to cashless. Following the study we published in September 2020, we continue to see the shift to cashless payments accelerate. In the study sample set from January 2020 to July 2020, we saw cashless grow to nearly 62% of total sales, while the use of cash continued to decline. When we look at our own data, while transactions are down, we've seen cashless accelerate from 61% in September 2020 to 65% of total transaction volume at the end of December 2020. Our customers are seeing similar trends, where cashless continues to accelerate across their business. The Jackson Brothers case study exemplifies how operators are seeing the benefits of enabling all forms of payment, particularly cashless. And fourth, growth in international markets. Since Fernando joined us a few months ago, we have engaged with several potential in-country partners and early anchored customers in Latin America. We're encouraged by the activity and the potential that international unattended retail markets represent as an opportunity for the business. With that, I'd like to turn it over to Wayne to review our second quarter results in full detail. Wayne? -------------------------------------------------------------------------------- R. Wayne Jackson, USA Technologies, Inc. - CFO [5] -------------------------------------------------------------------------------- Thanks, Anant. Good afternoon, everyone. Revenue for the second quarter of FY '21 totaled $38.3 million, a decrease of 13% over the prior year second quarter and an increase of 3.8% from Q1. License and transaction revenue totaled $33.2 million for the second quarter, a decrease of 7% from the prior year, which was not impacted by the COVID virus. License and transaction revenue increased slightly over Q1 as the transaction momentum gained in the second half of Q1 and the first half of Q2 was lost as COVID cases began to increase in mid-November. Equipment sales for the current quarter of $5.1 million decreased 39% compared to the prior year quarter of $8.3 million. The decrease was primarily due to lower hardware shipments during the second quarter of FY '21 compared to the same period last year, which included a large contract with a new customer. Sequentially, equipment sales increased 35% as we continued our focus on new customer growth and 4G conversions. Total gross profit margin for the quarter was 32.1% compared with total margin of 29% for the prior year second quarter and 38.6% in the first quarter of FY '21. License and transaction margin improved to 38% in the second quarter of this fiscal year, up from 36.8% in Q2 of last year as transaction revenue had higher margins than in the prior year. L&T margins declined from 41.6% in Q1 due to a lower percentage of license revenue with total L&T revenue in Q2. Equipment margin was a negative 5.8% for the quarter compared to negative 5% in the prior year as we provided incentives for 4G upgrades. Equipment margins for Q2 declined from a positive 12.4% in Q1 as the prior quarter included a one-time out-of-period adjustment. Operating expenses in the second quarter totaled $14.9 million, a 28% decrease over the prior year. SG&A expenses in the second quarter of FY '21 totaled $13.8 million, which decreased 14% from $16.2 million in Q2 of the prior year. The change was driven by lower professional services costs and lower severance expense in the current quarter compared to the prior year. Sequentially, SG&A decreased 18%, primarily due to lower professional service fees and network outage costs incurred in Q1 compared to the current quarter. The operating loss for the second quarter was $2.6 million compared to a loss of $7.8 million in the second quarter prior year. In addition to SG&A savings, the other primary driver of the improvement in the second quarter of FY '20 is a $3.3 million reduction in investigation, proxy solicitation, and restatement expenses. Net loss applicable to common shareholders for the second quarter was $2.9 million, or a loss of $0.04 per basic share compared to $8.4 million, or a loss of $0.13 per basic share in the prior year period. I will now turn the call back over to Sean for closing remarks. Sean? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Thanks, Wayne. Before we open it up for questions, there are 3 more important Q2 updates to highlight. First, in November, we were relisted on the NASDAQ Global Select market. This represents an important milestone in our journey to build a better, stronger company for our customers, employees and stakeholders. The achievement reflects the operational and financial progress we have accomplished in the past 6 months, the fundamental strength of our core business and our ability to capitalize on the opportunities that lie ahead. In November, we also announced that we will transition our corporate identity to exclusively operate under the name Cantaloupe, Inc. with a new ticker symbol. This is another major milestone for us, as the Cantaloupe name has great brand equity in the industry, strong customer loyalty, and communicates our vision as the leading hardware and software platform for a contactless economy. The adoption of the new brand later in 2021 puts our company in a great position to better compete in the growing global market and delivers on our mission to help the world buy it and go. Third, as I'm sure you saw in the earnings release, we have updated our device and customer count disclosures, which we believe are both better representations of our business. This is the result of my team digging into the historical data and creating systems to monitor key operating metrics, which I will use to track our business drivers and measure progress against our targets. First, active devices, which includes devices that have connected with us in the last 12 months, was 1.15 million during the quarter. Second, active customers, which now includes customers with at least one active connection in the last 12 months was 18,000 during the quarter. To wrap up, we continue to increase active devices and active customers throughout the pandemic. And while growth has been slower than anticipated, we are not sitting idle. We are squarely focused on positioning the business to capitalize on the rebound. Over the past 6 months, we've introduced new products, brought on Ravi and the increased investments we are making in our tech road map and product development. We are very excited about our future offerings, which we will roll out in the next 12 months. We continue to make investments in our go-to-market team and strategy that we believe will pay dividends in both growing our current customer base domestically and internationally as well as fortifying our existing customer base as they migrate their devices to 4G technology. And while our near-term 2021 guidance has been impacted by the pandemic, I'm optimistic that we are taking the necessary actions within our control to best position ourselves to capitalize on the exciting market opportunity in front of us. We believe we have the right team in place, with tailwinds that we expect will drive our business for years to come, such as the shift to unattended retail and the increased demand for cashless products as well as making the right investment, position us for success. With that, let me hand it over to the operator. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We will now take our first question from the line of George Sutton. -------------------------------------------------------------------------------- George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [2] -------------------------------------------------------------------------------- Sean, you had mentioned that you are continuing to grow in spite of the COVID scenario. As you know, industry numbers are hard to come by. I'm curious if you think you are gaining share in this environment, if you could just give us some perspective there. -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- George, I think that what we are seeing is we're seeing some conversions from other providers. We're probably seeing more kind of some of our current operators expanding their cashless devices as well as some new operators that are coming in. There is a lot of, in probably the lower end of the market, those guys come in and out of business, and there's been a number of sales of those businesses. So some takeaway, some new customers, and then some expansion of existing customers is what we've seen. -------------------------------------------------------------------------------- George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [4] -------------------------------------------------------------------------------- My other question to you, we've been thirsting for new KPIs, so we appreciate those. There is about a 200,000 delta between active devices and total connections. And I'm curious if you could give us a sense of is that an opportunity set that exists once COVID becomes sort of normalized? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- No. I don't think the way to look at it is as an opportunity, George. I think active devices is just a better way to look at what we have. Essentially, the connections number was basically all the active devices that are devices that were sold at one time. They may have been lost. They may not have been connected. It just is a tighter representation of what's active in the field. So there may be some there, but I wouldn't look at it as, boy, there's 200,000 there we just need to turn on. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Your next question comes from the line of Gary Prestopino from Barrington Research. -------------------------------------------------------------------------------- Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [7] -------------------------------------------------------------------------------- Could we get a read on, or talk about the cashless and logistics software on a single platform? As I recall, when legacy Cantaloupe was purchased, there was very little penetration across the legacy customer base of USAT. So could you give us some idea of where that penetration stands right now and what you are doing to try and really aggressively get an uptake from customers that are not taking the logistics software? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [8] -------------------------------------------------------------------------------- Sure. I think what we've talked about is the penetration of Seed probably being somewhere in the neighborhood of 50% of our existing customers, and probably tilted more towards the large end of that. And we're beginning to put in place some sales or some incentives for our salespeople. And really, what we're trying to drive is kind of all in. So we are focused on ePort devices that don't have Seed and trying to expand that. And we've talked about our motto of being all in. I think one of the things that Anant's talked about is, for a couple of years post-acquisition, the company used the Seed software and probably deeply discounted it. And we're living with some of those deals in order to get connections. So what we are doing is we're working with some potential partners that we think can increase the penetration in the entire market. We're also working on trying to make it easier to install at the lower end of the market. And we're really kind of got our entire team incented around pushing kind of all in, not just selling connections but selling our total solution. -------------------------------------------------------------------------------- Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [9] -------------------------------------------------------------------------------- And then, in terms of the active devices that you signed up, which is, I think, phenomenal considering half the country is closed; I mean, are you basically seeing more of a concentration with the new devices with bigger entities? And I guess the other question would be is that, given what's going on in the industry, are you seeing a lot of consolidation or a lot of the smaller operators just basically selling out to the bigger players in the market? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- As always, you've artfully wrapped several questions into your one, but let me take a crack at it. So I do think that you've seen a good amount of what I would call movement in the market, and we see that when we get contacted to transfer devices. So I would say what we saw in probably this quarter was probably a little bit of an acceleration of some of the M&A opportunities. I think what we also saw, as we've talked about the deactivations, is we saw some operators, more on the smaller end, just get to the point where they couldn't hang in anymore without another PPP loan. And so we saw increased deactivations where they just had to take the devices out and movement there. On the new devices, it's really kind of spread across. Of course, a larger operator can move the needle a little bit more. But I would say it's been fairly consistent across the customer base of where we picked up active devices. And there are some areas where people are doing quite well, around manufacturing and those sorts of facilities. And we have a number of operators who are supporting some retail players who are expanding greatly. You can kind of guess who they are. Those operators are doing well and adding additional devices because those retail outlets are building out additional warehouses and delivery centers. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Your next question comes from the line of Mike Latimore from Northland Capital Markets. -------------------------------------------------------------------------------- Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [12] -------------------------------------------------------------------------------- On the move to the new payment processor, can you give an update there? I think that you said it was on track, but maybe an update there and when you see that maybe influencing the license and transaction gross margin? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [13] -------------------------------------------------------------------------------- Yes. I think you're talking about our move to Fiserv. And we are in the process, continues to move forward. I think we're finishing up one last certification. We're testing data, and we will begin migrating customers within this current quarter. So it's going well. We're probably 30 or 60 days behind where I would have liked to have been when I got here. But any time I've been involved with this, you always run into a few issues at the very end, but we're working very closely. We're getting great support from Fiserv, and they are doing a great job helping us move that. So I think, when you begin to see some of the savings that have been outlined in past quarters by prior management, really, that full impact will be in '22 because we're going to be careful in moving people over, and it will take us most of the second half to kind of get everybody over. And so think about it in '22, not really having much impact this fiscal year. -------------------------------------------------------------------------------- Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [14] -------------------------------------------------------------------------------- And then, in terms of just the upgrade to 4G devices, can you give some sense of what percent of the hardware volume you're seeing relates to that? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Yes. What we've seen, and as I highlighted in my comments, that we're seeing people very interested. I think we've seen some of our competitors trying to scare people that they've got to go right now. And we've been educating that you have time. But also, I think we thought that people would be going a little bit quicker. With the ongoing COVID, people are being very careful with their liquidity, so they're holding off, or they're committing and then taking orders later in the year. I think if you look at the numbers of our customers, it's sub-10% that have moved so far. -------------------------------------------------------------------------------- Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [16] -------------------------------------------------------------------------------- And just I guess last question would be on transaction volumes. I think December has some of the holidays in it. I guess, what about January? Any improvement in January? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- We saw January was pretty similar to what we saw in December. And we plan, when we do our forecasting, for that seasonality. So we've seen, as I said on the call, or on the prepared remarks, November, December and January have kind of been flat. And we've done some (inaudible) with operators and we've talked to them, and they've seen similar things. But again, as I said, I'm very optimistic. We've seen kind of 2 things. One is, I think we've increased the number of devices. Secondly, while you look at 61% to 65% cashless, that's a pretty dramatic swing in a short period of time. So we believe that, when things come back, we have more devices, and we're seeing a greater percentage of cash flow. So I'm optimistic it will come back pretty well. I think it will take time to get a lot of the devices and things that are in offices to come back, but it's coming. And there's more and more vaccines, and you look at the results that we're seeing in Israel, where a great deal of the population have had 2 of the vaccines. I'm optimistic that it's coming. It's just several months later than I thought it would be back when we put together the guidance and things for this year. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Your next question comes from the line of Cris Kennedy of William Blair. -------------------------------------------------------------------------------- Cristopher David Kennedy, William Blair & Company L.L.C., Research Division - Associate [19] -------------------------------------------------------------------------------- Appreciate the details in the press release. Sean, you mentioned the goal of getting to mid-teens growth in fiscal 2022. Can you talk about the margin profile of the business next year? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [20] -------------------------------------------------------------------------------- Well, I think that we expect to see the margin profile probably improve a little bit. We're working hard to take costs out of the business. We're working hard on, as I've talked before, on the margins on our hardware. The piece that I don't know, Brice (sic) [Cris], is we will get as aggressive as we have to maintain our share of the 3G/2G upgrades. We've got competitors, and pricing may get to where that has a short-term negative impact on margins. And so I do expect that it'll be improved, but I'll give you that caveat that we may need to do that. And look, as we've talked before the value of the cashless endpoint, and we expect that these 4G devices will be out there for anywhere from 5 to 10 years. If we have to go a little bit short-term hit to margin, I'm willing to do that. And I'm very confident in our sales organization, that we will do very well in this opportunity that we have. -------------------------------------------------------------------------------- Cristopher David Kennedy, William Blair & Company L.L.C., Research Division - Associate [21] -------------------------------------------------------------------------------- And then, you mentioned the international opportunity. Can you talk about the structural differences outside the U.S. and how that would impact your margins? -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [22] -------------------------------------------------------------------------------- Well, what I would say is let us give you a little more detail when we get a little bit closer to kind of being there. What we've seen so far, and one of the reasons we changed the name of the company to Cantaloupe was to be able to go internationally a little bit better. We've been very excited by the gentleman that we've hired down in the LatAm. He's got a lot of activity going. We've got some great partnership discussions going. The thing that's nice is he knows everybody, and we've been pleasantly -- and I wouldn't say surprised, but it confirms that we thought people knew who we were, and we're able to get meetings, and we're working on several partnerships. I would say what we're seeing is that, in LatAm, we believe there very well may be a software and a cashless device capability. What we've also talked about is you've got to have a local partner to work with that. I've had several conversations with the CEO at Fiserv about how they may be able to help us. We're talking to any other partners in certain regions that would be the best place to operate there. So it's early days. We're happy with the activity. Revenue kind of contribution would be in the back half of FY '22 and into '23 because it will take us a little time. We've got a little bit more ambitious goals than that; but I would say for you guys to plan, that's probably where I would look. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Your next question from the line of Gary Prestopino from Barrington Research. -------------------------------------------------------------------------------- Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [24] -------------------------------------------------------------------------------- Yes. Just in terms of the cost structure of the business now, Sean, and Wayne, have you got it to where you want it to be? I mean, your SG&A expenses look like they were $13.8 million this quarter. Obviously, not a lot of T&E in there. So as the business ramps up, you would expect to go up. But is that kind of the state of play where you want to be? -------------------------------------------------------------------------------- R. Wayne Jackson, USA Technologies, Inc. - CFO [25] -------------------------------------------------------------------------------- Thanks for the question. This is Wayne. So the SG&A for this quarter, we looked at SG&A on sort of a cash basis, which basically is SG&A minus stock-based comp and depreciation, amortization. So for us, this quarter is a little over $12 million, $12.2 million. I think, as we ramp up some of the costs that Sean talked about in Q3 and Q4 on investments, I think in terms of 12 5% to 13%. And then, going forward, we don't see any major changes of that unless it's to drive revenue or to drive some development in products that we want to get to the market pretty quick. That would be the framework that we're working. -------------------------------------------------------------------------------- Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [26] -------------------------------------------------------------------------------- I'm sorry, Wayne, that number is without stock comp? And what else was the other thing? -------------------------------------------------------------------------------- R. Wayne Jackson, USA Technologies, Inc. - CFO [27] -------------------------------------------------------------------------------- Depreciation and amortization. And those numbers you can find in the adjusted EBITDA calculation. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Thank you. There are no further questions. You may continue. -------------------------------------------------------------------------------- Sean E. Feeney, USA Technologies, Inc. - President, CEO & Director [29] -------------------------------------------------------------------------------- Great. Well, we appreciate your interest in the company. As I said, I'm excited about the things that we're doing, and I've got the team built now. And now it's about executing, and we all need the pandemic to get that thing on a run. and I go to bed every night praying for more vaccines and more needles in arms. So we look forward to kind of the one-on-one meetings and things with you guys from here, but I appreciate the interest. Thank you. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect. Thank you.