Cantaloupe Inc (CTLP) 2014 Q2 法說會逐字稿

Good day and welcome to the USA Technologies second-quarter fiscal year 2014 earnings conference call. Today's conference call is being recorded.

At this time I would like to turn the call over to Veronica Rosa, Vice President of Investor Relations. Please go ahead.

Thank you and good morning. Before beginning today's call, I would like to remind our listeners that all statements other than statements of historical fact included in this call are forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, included but not limited to business, financial, market, and economic conditions. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and the Form 10-Q report for the quarter ended September 30, 2013.

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 our ongoing operations. 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 items and a reconciliation of these non-GAAP financial measures to GAAP financial measures can be found in our press release issued this morning and on the Investor Relations section of our website, www.USATech.com.

On our call this morning are Stephen Herbert, Chairman and Chief Executive Officer, and Dave DeMedio, Chief Financial Officer. We will begin this morning's call with a review of second-quarter results, relative to our strategic priorities, followed by a more detailed analysis of second-quarter results by Dave. Steve will return for some brief closing remarks before opening the call to questions.

At this point I am going to turn the call over to Steve. Please go ahead, Steve.

Thank you, Ronnie, and good morning, everyone. Our results for the second quarter reflect improving financial performance, combined with our consistent, aggressive approach to driving cashless adoption in the $120 billion self-serve retail market. The strength of our ePort Connect service model and the strategies we have put in place to broaden and diversify our growth prospects are shaping into consistent and improved profitability, solid revenue growth, and strong connections and customers that we believe bode well for the future.

Financial highlights for the second quarter included total revenues of $10.6 million, an increase of 19% from the prior year, with license and transaction fees of $8.7 million, up 17% from second quarter of last year. Adjusted EBITDA was $1.9 million in the second quarter, about 18% of revenues.

In addition, GAAP and non-GAAP net income reached the second-highest level the Company has generated to date. GAAP and non-GAAP net income was $409,000 and $447,000, respectively, with non-GAAP net earnings per share coming in at $0.01 per share.

We also achieved 17,000 new gross connections to our service in the second quarter. That is one of the strongest quarters we have ever delivered.

As we mentioned on our last call, we expect deactivations in the 12/31 quarter from the customer who has had recent activity in this regard. Taking this activity into account, our net new connections for the second quarter totaled 7,000. With those 7,000 net connections for the quarter, our total service base grew to 224,000, up from 186,000 December 31 a year ago, an increase of 20% from December 31.

Over the last three years, we have grown our ePort Connect service base by a CAGR of 27%. At this time last year, we were marking profitability for the first time as a Company, having reached scale in our model at 186,000 connections to our ePort Connect service.

As expected, the Company has delivered consistently in this regard, with this being our fifth successive quarter of profitability. Additionally, we have continued to drive growth, primarily via new connections to our service, not only in vending but in many other adjacent, self-serve retail markets as well.

In the second quarter, we continued to further operationalize our four core growth platforms. Those areas are: continued penetration of our existing customer base; strengthening our presence in other self-serve retail markets, such as commercial laundry, kiosk, amusement, and taxi and transportation; and attracting developers and manufacturers in the self-serve retail market through our QuickConnect service, to further leverage our ePort Connect service infrastructure.

Running through all of these is our focus on value-added offerings such as MORE, our prepaid and loyalty program, and our Isis Mobile Wallet Fifth Purchase Free program underway, offerings that add differentiation for USAT and greater value per connection for our customers.

With an estimated 13 million to 15 million machines making up the $120 billion self-serve retail market that we currently address, we continue to believe that there is enormous opportunity for growth. Think about the many self-serve machines you encounter today; one increasingly sees cashless payment as an option.

With a 99% customer retention rate, we are strengthening our leadership position and longer-term growth potential with every new customer and new connection that we add to our service. In addition, we estimate our existing customers manage a population of over 2 million self-serve retail locations that have yet to transition to cashless payment, which we believe represents not only our best opportunity for growth, but a huge advantage for USAT.

In the second quarter, 475 new customers were added to the service, for 6,075 customers on the service in total, up 48% from the same period last year. The majority of these customers are still in vending, where we believe USAT has a clear and distinct advantage.

As a result, it's important that we continue to drive adoption in the overall market as well as within our existing customer base, and we are achieving that. In fact, the majority of new connections in our second quarter, about 90%, came from existing customers.

Many of you asked me about where we are in the adoption cycle, and I believe we are entering a very promising period. In vending, where we started and therefore have our greatest concentration of customers, the second quarter was particularly strong. In fact, gross connections for vending customers was 55% greater than the average new connections from vending customers for the last five quarters.

I find that very encouraging. We believe this acceleration is due in very large part to the benefits we drive for our customers.

We have a military customer, for example, that during the quarter completed a study of cashless performance in approximately 300 locations. This particular customer saw an average ROI of well over 100%, and they now aim to triple their cashless business with us over the near-term.

And there are customers like USConnect, a consortium of roughly 25 independent vending companies, who entered a five-year commitment for 50,000 ePorts in the second quarter, our largest commitment ever as part of their stated objective to be 85% cashless in the next five years. It's customers like these and others that we believe will continue to drive the market at a faster and faster clip towards greater levels of cashless adoption and penetration over the coming years.

In the area of adjacent self-serve retail markets, we developed new products and formed relationships in fiscal 2013 to leverage our service offering in commercial laundry, amusement, arcade, kiosk, and taxi and transportation. In the second quarter, over 10% of our new connections came from these areas, with much work going on behind the scenes to built a pipeline for longer-term growth.

For example, in amusement arcade approximately 6% of our connections came from this area in the second quarter. This is a $4.7 billion industry which is at the early stages of adoption, with USAT customers like AMI Entertainment and Innovative FOTO leading the way.

To reach the many amusement and arcade business owners that need to transition from cash and coin, we continue to work with Betson Enterprises, a national distributor to the amusement arcade and vending operators across the industry. During the second quarter, we expanded our agreement with Betson to include distributing to their vending customers.

In the $5-billion-plus commercial laundry space, we have a partnership with Setomatic Systems whereby USAT serves as the exclusive provider of cashless payments for Setomatic's cashless acceptance solutions. Our comprehensive service model allows us to continue to push value to commercial laundry operators as members of the ePort Connect service network. As a result, since inception we have secured nearly 7,000 new connections from this relationship and expect further growth in the future.

Just a few months ago, by capitalizing on our integration capabilities, we extended our industry reach to the $11 billion taxi and transportation industry with a product called ePort GO. EPort GO's mobile-based platform can handle all aspects of an operator's business from dispatching, trip management, record-keeping, navigation, and credit/debit fare payment, all for less than $20 a month.

We added several new customers in the second quarter. And following our joint presence with Verizon at the TLPA Conference earlier in the quarter, we have now partnered with and mobilized the Verizon Wireless business-to-business team to target customers in the taxi and transportation space.

The aim of our third growth platform is to leverage our service infrastructure by making ePort Connect the platform of choice among developers and manufacturers of self-serve retail applications. Through our Web service, QuickConnect, we are able to provide a turnkey cashless payment solution for these developers and manufacturers that scales with their needs.

In Q1, largely as a result of our ePort GO product, we integrated our ePort Connect service with a taxi operator for 2,800 connections. This quarter, we had a number of smaller QuickConnect customers with unique applications, from Sweet Amanda's Candy Kiosk, to kiosks by Winston industries, to SnapSurge mobile charging kiosks, as well as a DVD rental company.

Also in the second quarter, we used QuickConnect to broaden our end-to-end service offering with our largest customer set, vending. Our vending operators are deploying cashless in other areas of their business such as dining, micro markets, and delivery. And USAT is positioned to deliver cashless payment to our customers seamlessly.

During the second quarter, USAT became the preferred cashless payment provider for Revive Self Checkout, a micro-market offering. And we have already had customers move their micro-market cashless services over to USAT.

Micro-markets essentially provide similar offerings to a convenience store in a small footprint, typically found in workplaces, accessed by an employee ID. Consumers utilize a self-checkout style kiosk to complete their purchases. Micro-markets' popularity has grown with vending operators in the past two years, and as such we are working with a number of other suppliers and vending operators in this regard.

Our recent service integrations in laundry, taxi, and micro-markets are great examples of the open approach we have taken to our service platform. We began some time ago with third-party hardware from Crane, MEI, Coinco, and others; and we are now expanding that to micro-market providers as well as other technology providers that need a strong service partner in self-serve retail. Our ability to successfully and swiftly accommodate these requests adds to our differentiation with customers and speaks, I believe, to USAT's strength as a service provider in self-serve retail.

Another recent event benefiting customers is our relationship with Isis. Timed in concert with the nationwide Isis Mobile Wallet launch, in the second quarter we enabled over 70,000 of our locations using ePort point-of-sale devices and the ePort Connect service with Isis SmartTap technology, and the number of locations is expected to expand.

This technology enables consumers to make purchases using a mobile phone as well as the ability to participate in loyalty and rewards programs offered via the Isis Mobile Wallet, such as the Isis/USAT Fifth Purchase Free promotion. The Fifth Purchase Free allows our customers to participate, many for the first time, in the movement toward mobile payment as well as consumer loyalty programs.

Results thus far are encouraging. Consumers are taking advantage of the ability to make purchases and to participate in the loyalty programs via their mobile phones.

Most importantly for our customers who operate these locations, it means an enhanced consumer experience and a new revenue opportunity. It's a classic example of adding value to each of the connections we have with our customers.

In summary, we are delivering solid growth, executing in our core markets, and laying the foundation for even more opportunity as the self-serve retail market continues to embrace cashless payment technology and services. With that, I am going to turn the call over to our CFO, Dave DeMedio, for some additional details relative to the second-quarter financials and how the business looks to be trending for the remainder of fiscal 2014. Dave?

Thank you, Steve. Second-quarter results reflect our plans for steady growth and operating margin expansion. Revenues of $10.6 million grew 19% from the second quarter of last fiscal year.

Non-GAAP net income was approximately $447,000 for the second quarter, our second-highest level of profitability to date. And non-GAAP net earnings per diluted share for the second quarter was $0.01 per share.

Our first achievement of non-GAAP earnings was second quarter of last fiscal year, when we achieved scale at 186,000 connections. Due largely to the nature of a recurring revenue business model, we have sustained non-GAAP earnings over the last five consecutive quarters.

Since first achieving non-GAAP earnings in Q2 a year ago, we have been and will continue to be aggressive in our approach to sales and marketing while also managing through the customer transition, all with a goal of delivering operating margin expansion over the course of fiscal 2014 to achieve one of our goals of fiscal year 2014, which is a 100% increase in non-GAAP net income, or an increase from $914,000 for fiscal year 2013 to $1.8 million for fiscal 2014. As a reminder, an Excel file with these non-GAAP reconciliations is also posted on the IR webpage, www.USATech.com under Financial Information.

GAAP net income for the second quarter, which includes the fair value of warrant adjustment, was approximately $409,000, compared to net income of $154,000 for the comparable quarter in fiscal year 2013.

Financial highlights for the second quarter include equipment sales, making up 18% of our revenues this quarter, grew by 28% primarily due to strong direct sales of ePorts in the quarter and nonrecurring revenue we recorded as a result of our marketing agreement with Isis, increases that were partially offset by a decline in our EnergyMiser products. EnergyMiser, although very profitable, is becoming less of our overall business, at roughly $1.3 million in annual sales.

82% of our total revenues were driven by license and transaction fees, which are generated by monthly fees and transaction processing fees that stem from connections to our ePort Connect service. License and transaction fees grew by 17% for the second quarter, generally affected by the deactivations.

Gross connections for the quarter totaled 17,000, with about 90% coming from vending customers in the quarter. The remaining 10% came primarily from commercial laundry and amusement market segments.

The mix of JumpStart to total gross connections of 17,000 was about 60%, as more connections came from our ePort hardware versus other connection types such as QuickConnect. We also handled $69.1 million in small-ticket transactions in the second quarter, a 35% increase over the prior year.

Regarding the deactivations, and as we stated last quarter, the most conservative approach to any risk assessment here would be to look at the revenue that is at risk on the remaining connections we have with this customer. At this point, the revenue at risk has declined to $175,000 per quarter, or approximately 1.5% of quarterly revenue, based on the $10.6 million of revenue we achieved this quarter. As such, this event is essentially behind us.

Gross profit of $3.8 million for the second quarter increased 6% from $3.6 million for Q2 of fiscal year 2013. Gross margins came in at 36.2%, down from 40.5% for the same period last year due to the lower margins on license and transaction fees in the quarter, which represent over 80% of our gross profit dollars.

Gross profit margins on license and transaction fees came in at 36.6%, down from 41.1% in Q2 of last year, but up from 36.4% in Q1 of our fiscal 2014. While our target in this area continues to be a 40% gross profit margin, our leadership in the market has and continues to be focused on presenting different value propositions to the market as it evolves, in order to drive adoption. We will also continue to leverage that leadership with our partners to reduce costs on both services and devices.

Both GAAP and non-GAAP operating expenses were $3.3 million in the second quarter, up from $3 million in Q2 of fiscal year 2013, primarily due to increased headcount. Operating margins, both GAAP and non-GAAP, were 4.8% in the second quarter.

Our long-term focus is about realizing the operating leverage we believe exists in our model. Our R&D, network operations, customer service, and other areas are well developed. And while we continue to add sales and marketing resources to drive growth at a faster rate, we are doing so economically, through partnerships and additional telemarketing activity, as an example.

Moving to cash and liquidity, our cash and cash equivalents stood at approximately $6.7 million as of December 31, up from $5 million as of Q2 of fiscal year 2013, and up from $5.8 million at the end of last quarter. At the end of the second quarter, cash and cash equivalents reflect $1.7 million received as a result of exercise of the $1.13 warrants, with 1,972,085 warrants exercised during the second quarter and 58,527 warrants unexercised and canceled upon expiration as of December 31, 2013. Another $549,000 is reported in the accounts receivable line on the balance sheet as of December 31 for $2.2 million in total cash received from the exercise of warrants during the second quarter.

Free cash flow, defined as cash from operations less capital expenditures, as reported in the statement of cash flows, was negative $735,000 for the second quarter and negative $1.9 million for the six months ended December 31. One of the targets for our fiscal 2014 is to achieve positive and sustainable free cash flow in our fourth fiscal quarter.

Three key drivers will contribute to our anticipated achievement of this target. One, continued improvement in adjusted EBITDA, which increase this quarter to $1.9 million from $1.5 million last quarter, and $3.3 million from $2.5 million for our six months.

Two, cost reductions relative to our ePort cashless acceptance device. Our new ePort G9 has added features, but we have taken the cost down approximately 20%, so that will begin to help us in Q3 and more so in Q4.

Third, progress in achieving more software-based connections, whether through commercial laundry, taxi, or additional QuickConnect customers.

Obviously the balance we must continue to manage as it relates to free cash flow is the demand for JumpStart within vending and adjacent self-serve retail markets and the goal of increasing our customer and connection base, as we believe the acquisition of customers and connections across our targeted markets is a critical component of our growth plans. For the remainder of the year we continue to remain comfortable with cash on hand, continued improvement in free cash flow, and our credit line with Avidbank.

To recap our guidance for fiscal 2014, in terms of revenue growth we are tracking towards the lower range of our targets for license and transaction fee growth in the 25% to 30% range, total revenue growth in the 20% to 25% range, and adjusted EBITDA growth in the 40% to 50% range. As we've stated previously, these revenue expectations are based on roughly 50,000 net connections, with 31,000 gross connections and 10,000 net connections achieved year to date.

Achievement of our revenue and connection goals and improvements in operating margins over the remainder of the fiscal year should translate to 100% improvement in non-GAAP net income to roughly $1.8 million from approximately $900,000 for fiscal 2013. In addition, we anticipate to begin generating sustainable free cash flow in the fourth quarter of the fiscal year.

With that, I would now like to turn the call back over to Steve.

Thank you, David, and thank you all for your attention this morning. We are very encouraged by our results for the second quarter. We had a great quarter of gross connections; we saw strong results in customer penetration, particularly in vending; we are attracting more and more customers to our cashless solutions; and we are executing well on our growth platforms.

All these efforts we believe put USAT on a strong course for value creation. We are building a strong base of recurring revenue. Our cash profile is getting stronger with every quarter, and we are driving consistent profitability and taking steps to leverage our operating model.

Better still, market forces continue to strengthen the case for cashless. Consumers continue to move towards credit, debit, and mobile or other forms of cashless payments. Customers are beginning to realize the multiple benefits of a cashless payment platform.

Customers are also benefiting from improved and more affordable technology and services. In an emerging markets such as ours, we are very much in a game of strategy, timing, and balance. Look for USAT to continue to assert ourselves in the market with innovative programs to drive adoption in self-serve retail. There is enormous opportunity, and we believe USAT is well poised to benefit as the market continues to transition to cashless payments.

Now, operator, we would be happy to take questions. So if you would please go ahead and provide instructions for our Q&A session, thank you very much.

(Operator Instructions) Mike Latimore, Northland Capital.

Yes, great. Thanks a lot. Congratulations on the add in EBITDA in the quarter there. In terms of the -- just you mentioned maybe tracking to the lower end of original guidance. Is that related mainly to the additional deactivations? Or is it related to the broader industry trends?

Mike, it generally has to do with the deactivations we have sustained in the quarter, particularly this quarter, versus anything macro-level in terms of industry trends.

Then how about from a seasonality standpoint? June has historically been strong. But I guess how should we think about seasonality, given the different verticals you are targeting here?

Mike, it's Steve Herbert. Thanks for the kind words. I think what you can expect to see in the back half of the year is what we have seen in previous years. As we head into essentially the warmer months, our business tends to pick up.

That also has a fair amount to do with many of our customers getting new capital budgets for the calendar year. So it is really a mix of things.

I guess just lastly, revenue (multiple speakers) gross adds were really strong. How is revenue per connection trending on these new gross adds? Is it changing much from historic patterns?

No. Obviously the longer a device is out in the field, Mike, they tend to do more cashless transactions. That will help improve the revenue per connection. But generally when a new device goes out they are trending very similar to previous connections.

Now, new connections in new vertical markets, they do have a slightly different revenue per device type of economics. Taxi and laundry have different than those in vending.

And if we start to become -- or if our connection growth in those verticals starts to become substantial, that could impact the revenue per device that one might see, looking at our financials. We will update in our call, future call, what those might look like.

Okay, thanks a lot.

(Operator Instructions) Jim Gentrup, Discovery Investment Research.

Good morning. Just a follow-up comment or question quickly on the taxi and laundry discussion you just had. Does that mean that the revenue per connection would go up from those, or down?

Generally, just as an example for laundry, typically in laundry we have a lower monthly fee per connection in laundry because we are delivering different services in the laundry market. For example, with our current customer we're not delivering our communication our wireless to them; so we have a lower monthly fee. Therefore, that would tend to drive the revenue per connection down, when you look at it compared against vending.

Now in taxi, a lot of it is going to depend upon how much transactions, cashless transactions, flow through taxi. They tend to be higher average tickets. And as cashless transactions grow in taxi they could add even more revenue per connection than when compared to a vending connection.

Now, as it remains now, they are relatively low in terms of our overall mix of connections, so they are not really impacting any trend you might see in the financials today.

Okay. Then just in taxi, do you have anything in the pipeline that would be like Q1?

We actually have a number. We are very active in that channel right now.

A couple of things going on. There are things that we are targeting as a Company in general; but we have also partnered with Verizon, the Verizon business-to-business group, and they have many contacts in that particular industry.

So we are leveraging not only their brand but their distribution system. So we think that is going to be a promising vertical for us going forward. I hope that answers your question.

Yes, yes, I appreciate the color. The 17,000 new connections is a great number. Can you let us know how much that impacted, or did it impact, Q2? Or were you looking for this to more -- because of the delay, typical; it's typical delay, isn't there usually?

Thanks for the kind words, by the way. We do think it was a strong performance for the quarter.

We generally have a delay in terms of our connections coming on to our service and generating monthly fees. So you can see that beginning; you will see that beginning to affect the revenues as we go out into Q3 and Q4.

And it's due to a number of things. We give customers grace periods; but in addition to that, they do take time to get things out, which is why we try to help them out in that regard. But the short answer is that typically with connections, the revenue impact is downstream.

Okay. I have more questions, so I will get back in --

Forgive me. Other than activation fees and things that come to us upfront.

Sure, sure. I will get back in queue, then. Thank you.

(Operator Instructions) Jim Gentrup.

Yes, just was wondering about the comment you had about the gross margin target of 40%, but I think you are hedging yourself a little bit there. Or that's the way it sounded; I thought maybe you might want to just dive into that a little bit more.

Is it due to just trying to -- you said increased competitiveness. Should we look for this 36.2% to be more of a normal, or do you still think second half will tick back up?

Well, that's a great question, and thanks for asking it. The fact is that we are going to continue to target as a Company a margin of at or near 40%, in that regard.

As I mentioned in my closing statement, we as a Company are always, particularly in an emerging market, we are always going to be innovative as it relates to the model that we bring to our customers. We are going to be aggressive in marketing, particularly as the market opens up more rapidly and competition emerges.

So you will see us -- and it really is a balancing act. We will be balancing the need to drive the target margins that we have out there, with the very strong desire in this emerging market, with a lot of opportunities, to really gobble up as many connections and customers as we can.

And those activities will take many forms. It is not just about price. It is about marketing; it is about a lot of other things. So I hope that helps.

Yes, yes, sure. I appreciate it. I think you said the number from JumpStart in the quarter was 60%. Was that correct?

Jim, that's correct.

How do you think that will trend the second half of the year? Do you have a lot in the software base in the pipeline? Or do you think that number will be steady the rest of the year?

It's a good question. In the previous two quarters, that was trending down. It was, I think, 37% last quarter and in the 40%s the fourth quarter of last fiscal year as a result of getting connections from other connection types like QuickConnect.

We targeted at the beginning of the year, JumpStart to be in the 55% to 60% range. I would think that Q3 and Q4 will probably still tend towards that range of 55% to 60%.

Okay, all right. Then also, there has been seemingly more momentum going into this NFC-enabled -- this NFC area. I know that -- you might want to just remind us what, how many of your ePort GO's out with -- I think they are all NFC-enabled. But I just wondered if your total, if you are able to -- if that trend starts picking up, how will that impact you, I guess basically, with NFC movement?

I want to be -- I want to make sure that we are 100% clear on the question. You are asking, if NFC continues to proliferate, how are we positioned? Is that the question?

Yes. I am just curious if that really -- you're still going to get the transaction. Does it change anything in your model? Does it help you on the revenue side grow more?

Or is it just the fact that you've got to have -- make sure that you have an NFC-enabled? And if so, is most of your installed base -- is it already NFC-enabled? You might just want to talk about that a little bit.

Well, we do. I will answer the first question first. Whether it's NFC -- or we should just take a little step back. Whether it is NFC or what is called BLE, which is the beacon-type thing, or magstripe, which is the predominant way a consumer is identified right now, we see those things as ways to identify a consumer. That is what is going on there.

Now, things like NFC and BLE and some of the other things that are going on are very good for us and very good for the customer, for our customer. As an example, because of the installed base that we had with NFC, we were able to work with Isis; and we have mobilized 70,000 locations, which is probably one of the largest footprints for mobile payment and loyalty in the country right now.

We are able to go out and bring additional value to our customers. People can pay with our phones. They can participate in a loyalty program, which is something that essentially has never been done in the self-serve market.

So those other forms of consumer ID give us the ability to deliver more value not only to our customers, but to extract more value in terms of the dollars that we can generate for our company out a connection.

In terms of our installed base, Dave, where are we on NFC, ballpark?

It is over 100,000 now.

Over 100,000. So some people ask the question -- and I am just going to go ahead and answer it in advance. Some people ask the question about NFC: Well, what if we move away from NFC and we go to something else, is that a risk?

Well, no, it is not a risk. Because if a customer is on the service and they are paying -- let's say they are on the service and they're a JumpStart customer and they are paying X dollars per month. Well, if they want to move to BLE or something like that, that is really a selling opportunity for us to take them to a new type of technology.

It happens all the time. So, at the end of the day, we don't see that at all as a risk for the Company. So hopefully that answers your question and then some.

Yes. The last part about the upgrading, would that be true of your 100,000 or so that are not NFC-enabled? Would that be an upgrade potential if, when this trend starts to really kicking in? Would you say you have an upgrade potential there to go back to the people who are not NFC-enabled, or not?

We certainly do. Every location. And that is going to be true for the entire point-of-sale industry.

If one of the -- right now, NFC is out there and it is sort of the predominant technology of its type. But there are other things that are coming along that may help facilitate essentially mobile payment and all of the benefits that come with it.

The payment is the least of it. It is things like contextual-based offers and electronic couponing, loyalty, and such. So it's -- we see that whole movement as a very significant opportunity, not only for our Company but for our customers.

I think I just want to go back to whether it is BLE, NFC, magstripe, biometric, our Company is really agnostic when it comes to how the consumer gets identified. That is all we are talking about here.

But there are some -- I was trying to make the point, we love these new emerging technologies, such as NFC and BLE, because they offer much more value in terms of making things happen for the consumer.

All right. Thanks, guys.

Mike Latimore, Northland Capital.

Yes, hi. I just wanted a clarification. Did you say there was $69.1 million worth of transactions in the quarter?

Yes, Mike, $69.1 million. There is actually 40.2 million transactions as well.

Okay, got it. How about just on the Isis initiative, you said the results are encouraging. Is there any data points to provide on how frequently that type of payment is used, or the loyalty program?

We have to follow Isis's lead in that regard, Mike. We really -- we are not at liberty to make public any of the metrics in that regard.

Got it. Then just in the vending industry, does it feel like the vending or cashless adoption rate there is growing at a similar pace to what it has been? Or do you feel like it is slowing, or accelerating any? Just kind of a general industry trend there.

I generally feel like it is picking up. I think there were certain things that I mentioned during the piece that I get -- that I think are good indicators. The fact that we had a strong quarter; a lot of that business came from the vending channel. There are other things that are happening as well.

So I generally think that adoption is moving in the right direction.

You know there is this potential for calorie information to be required on vending machines. How do you think about that in terms of -- does that distract your customers from key initiatives like cashless, or is it a nonevent? Or how do you think about that generally?

I think about it as a giant opportunity. I will go back to one of the fundamental growth tenets of the Company: we want to add value per connection. Well, if you think about it, we actually as a Company have the most to gain if have the legislation is passed and, in a digital fashion, nutritional information has to be put on the front of a vending machine.

Why do I say that? Well, we have the largest installed base by a country mile. And the fact is that our customers are going to come to us and say: how are we going to move this content? How are we going to manage this content? We need a network to manage it, and we need a connection.

And it's simply something else for us to run over our rails.

Great, got it. Thanks.

Thank you. I'm not showing any further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.