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Why USA Technologies Inc. Stock Jumped Tuesday

Daniel Sparks, The Motley Fool

What happened

Shares of cashless payment company USA Technologies (NASDAQ: USAT) jumped as much as 14.9% Tuesday, following the company's fiscal third-quarter earnings release. The stock finished the trading day up nearly 13%.

One reason for the stock's gain is likely USA Technologies higher-than-expected non-GAAP earnings per share, which came in at $0.04 versus a consensus analyst estimate for $0.01, helped by the company's improved profit margin. 

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Image source: Getty Images.

So what

USA Technologies fiscal third-quarter revenue was $35.8 million, up 35% year over year. Unlike its non-GAAP earnings per share, this metric was below a consensus analyst estimate for revenue of $38 million. 

USA Technologies' revenue increase, which was its 34th consecutive quarter of year-over-year revenue growth, was helped by the company's recent acquisition of Cantaloupe. Adjusting for this acquisition, revenue increased 12% year over year. USA Technologies' license and transaction fee revenue was up 25% year over year.

Management seemed pleased with the results, with USA Technologies CEO Stephen Herbert noting that the results demonstrated "the successful integration of Cantaloupe, including additional cross-selling wins, improved operational efficiencies, as well as revenue and margin expansion across our business."

USA Technologies' gross margin increased from 25% in the year-ago quarter to 33.3% in the third quarter of fiscal 2018.

Now what

With USA Technologies' third-quarter license and transaction profit margin at the highest the company has seen in five years, the company's business model is more lucrative.

Management said it expects its total fiscal year 2018 EBITDA to be between $14.5 million and $15 million. In addition, the company expects full-year revenue to be between $138 million and $142 million.

Management also commented on USA Technologies' announcement in April of a three-year agreement with Ingenico Group. "We are thrilled to strengthen our relationship with Ingenico via this strategic alliance, which we believe will help expand our reach in North America, as well our global presence into agreed upon markets, ultimately positioning us to gain additional penetration and market share in the global unattended retail market," Herbert said.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.