USA Technologies, Inc.
Aug 22, 2017

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Results

Added Record 64,000 Connections in Q4:17, up 129% Year-Over-Year

MALVERN, Penn.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ:USAT) ("USAT"), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its fourth quarter and fiscal year ended June 30, 2017.

Fourth Quarter Financial Highlights:

Fiscal Year Financial Highlights:

Fourth Quarter and Fiscal Year Financial Highlights, Connections & Transaction Data:

    As of and for the three months ended  
June 30,  

($'s in thousands, transactions in millions)

2017   2016 Change % Change
Revenues:
License and transaction fees $ 18,679 $ 15,263 $ 3,416 22.4%
Equipment sales   15,610   6,681   8,929 133.6%
Total revenues $ 34,289 $ 21,944 $ 12,345 56.3%
 
License and transaction fee margin 32.8% 30.5% 2.3%
 
Equipment sales gross margin 8.9% 17.0% -8.1%
 
Overall Gross Margin 21.9% 26.4% (4.5%)
 
Operating income/(loss) $ 432 $ (1,578) $ 2,010 127.4%
 
Net income/(loss) $ 243 $ (872) $ 1,115 127.9%
 
Net loss per common shares - basic and diluted $ 0.01 $ (0.02) $ 0.03 150.0%
 
Net cash provided by (used in) operating activities $ (2,476) $ 1,273 $ (3,749) (294.5%)
 
Net New Connections 64,000 28,000 36,000 128.6%
 
Total Connections (at period end) 568,000 429,000 139,000 32.4%
 
Total Number of Transactions (millions) 114.8 89.3 25.5 28.6%
 
Transaction Volume (millions) $ 225.6 $ 169.0 $ 56.6 33.5%
 
Adjusted EBITDA $ 2,781 $ 626 $ 2,155 344.2%
 
Non-GAAP net income (loss) $ 203 $ (1,373) $ 1,576 114.8%
 
Basic weighted average number of common shares outstanding 40,331,993 37,325,681 3,006,312 8.1%
 
Diluted weighted average number of common shares outstanding 40,772,482 37,325,681 3,446,801 9.2%
 
Non-GAAP net earnings (loss) per common share - basic and diluted 0.01 (0.04) 0.04 (113.7%)
 
 
As of and for the year ended
June 30,

($'s in thousands, transactions in millions)

2017 2016 Change % Change
Revenues:
License and transaction fees $ 69,142 $ 56,589 $ 12,553 22.2%
Equipment sales   34,951   20,819   14,132 67.9%
Total revenues $ 104,093 $ 77,408 $ 26,685 34.5%
 
License and transaction fee margin 31.9% 32.7% (0.7%)
 
Equipment sales gross margin 13.0% 16.7% (3.7%)
 
Overall Gross Margin 25.6% 28.4% (2.8%)
 
Operating (loss)/income $ 135 $ (1,467) $ 1,602 (109.2%)
 
Net loss $ (1,852) $ (6,806) $ 4,954 72.8%
 
Net loss per common shares - basic and diluted $ (0.06) $ (0.21) $ 0.15 71.4%
 
Net cash provided by (used in) operating activities $ (6,771) $ 6,468 $ (13,239) (204.7%)
 
Net New Connections 139,000 96,000 43,000 44.8%
 
Total Connections (at period end) 568,000 429,000 139,000 32.4%
 
Total Number of Transactions (millions) 414.9 315.8 99.1 31.4%
 
Transaction Volume (millions) $ 803.0 $ 584.4 $ 218.6 37.4%
 
Adjusted EBITDA $ 7,077 $

5,983

$ 7,790 (1092.6%)
 
Non-GAAP net income (loss) $ (166) $ (713) $ 547 (76.7%)
 
Cumulative preferred dividends (668) (668) 0.0%
 
Net (loss) income applicable to common shares (834) (1,381) 547 (39.6%)
 
Basic weighted average number of common shares outstanding

39,860,335

36,309,047

3,551,288

9.8%

 
Diluted weighted average number of common shares outstanding

39,860,335

36,309,047

3,551,288

9.8%

 
Non-GAAP net earnings (loss) per common share - basic and diluted (0.02) (0.04) 0.02

(45.0%)

 

"Our fiscal fourth quarter performance capped a strong year for USA Technologies. We achieved record revenue, and added the highest number of connections to our ePort service in the company's history. We are executing well in an accelerating market and have exceeded our long-term goals of attaining $100 million in annual revenue and 500,000 connections this fiscal year," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "Moreover, we strengthened our balance sheet by completing a follow-on offering at the end of July, raising $43.1 million in gross proceeds, to extend our leadership in the unattended retail payments industry with the flexibility to continue our organic growth and pursue potential inorganic growth opportunities that are accretive and strategically complementary. We are excited about the opportunity ahead of us and believe that we can continue to deliver returns for shareholders through increased growth and profitability."

Fiscal Year 2018 Outlook

For the full fiscal year 2018, USA Technologies expects to add between 170,000 and 175,000 net new connections for the year, bringing total connections to a range of 738,000 to 743,000. The company expects total revenue to be between $122 million and $127 million and adjusted EBITDA to grow 35% to 50% to a range of $9.6 million to $10.6 million.

We have not reconciled our adjusted EBITDA outlook to GAAP net income (loss) due to the uncertainty and potential variability of the provision for (benefit from) income taxes, which is a reconciling item between adjusted EBITDA and GAAP net income (loss). Because this item cannot be reasonably predicted and could have a significant impact on the calculation of GAAP net income (loss), we have not provided guidance for GAAP net income (loss) or a reconciliation of our adjusted EBITDA outlook to GAAP net income (loss). Accordingly, a GAAP net income (loss) outlook and a reconciliation of adjusted EBITDA outlook to GAAP net income (loss) is not available without unreasonable effort. For information regarding the reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see "Non-GAAP Financial Measures" and the reconciliation tables included in this press release under "Financial Schedules".

Webcast and Conference Call

USA Technologies will host a conference call and webcast the event beginning at 8:30 a.m. Eastern Time today, August 22, 2017.

To participate in the conference call, please dial (866) 393-1608 approximately 10 minutes prior to the call. International callers should dial (224) 357-2194. Please reference conference ID # 67222406.

A live webcast of the conference call will be available at http://usat.client.shareholder.com/events.cfm. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software. A telephone replay of the conference call will be available from 11:30 a.m. Eastern Time on August 22, 2017 until 11:30 a.m. Eastern Time on August 25, 2017 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 67222406. An archived replay of the conference call will also be available in the investor relations section of the company's website.

About USA Technologies

USA Technologies, Inc. is a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market. The company also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort® Connect, ePort® Interactive, QuickConnect, an API Web service for developers, and MORE., a customizable loyalty program. USA Technologies has 73 United States and foreign patents in force; and has agreements with Verizon, Visa, Chase Paymentech and customers such as Compass, AMI Entertainment and others. For more information, please visit the website at www.usatech.com.

Discussion of Non-GAAP Financial Measures:

This press release contains certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP (Generally Accepted Accounting Principles). Reconciliations between non-GAAP and GAAP measures are set forth above in Financial Schedules (D) and (H).

The following non-GAAP financial measures are discussed herein: adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net earnings (loss) per common share - basic and diluted. The presentation of these additional financial measures is not intended to be considered in isolation from, or superior to, or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of USAT or net cash provided/used by operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with USAT's net income or net loss as determined in accordance with GAAP. These non-GAAP financial measures are not required by or defined under GAAP and may be materially different from the non-GAAP financial measures used by other companies. USAT has provided above in Financial Schedules (D) and (H) the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

As used herein, non-GAAP net income (loss) represents GAAP net income (loss) excluding costs or benefits relating to any adjustment for fair value of warrant liabilities and non-cash portions of the Company's income tax benefit (provision), non-recurring fees and charges that were incurred in connection with the acquisition and integration of the VendScreen business, and professional fees incurred in connection with the class action litigation and the special litigation committee investigation. Non-GAAP net earnings (loss) per common share is calculated by dividing non-GAAP net income (loss) by the number of weighted average shares outstanding. Management believes that non-GAAP net income (loss) is an important measure of USAT's business. Non-GAAP net income (loss) is a non-GAAP financial measure which is not required by or defined under GAAP. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company's net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company's profitability or net earnings. Management believes that non-GAAP net income (loss) and non-GAAP net earnings (loss) per share are important measures of the Company's business. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that this non-GAAP financial measure serves as a useful metric for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net income (loss) as a metric in its executive officer and management incentive compensation plans.

As used herein, Adjusted EBITDA represents net loss before interest income, interest expense, income taxes, depreciation, amortization, non-recurring fees and charges that were incurred in connection with the acquisition and integration of the VendScreen business, professional fees incurred in connection with the class action litigation incurred during the fiscal year, impairment charges related to our EnergyMiser asset trademarks, change in fair value of warrant liabilities, and stock-based compensation expense. We have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash gain or charge that is not related to the Company's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of the Company. We have excluded the non-recurring costs and expenses incurred in connection with the VendScreen transaction in order to allow more accurate comparison of the financial results to historical operations. We have excluded the professional fees incurred in connection with the class action litigation as well as the trademark impairment charges because we believe that they represent a charge that is not related to the Company's operations. Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP. We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision making. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company's net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company's profitability or net earnings. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, the Company utilizes Adjusted EBITDA as a metric in its executive officer and management incentive compensation plans.

Forward-looking Statements:

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation the business strategy and the plans and objectives of USAT's management for future operations, are forward-looking statements. When used in this release, words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions, as they relate to USAT or its management, identify forward looking statements. Such forward-looking statements are based on the beliefs of USAT's management, as well as assumptions made by and information currently available to USAT's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, the ability of management to accurately predict or forecast future financial results, including earnings or taxable income of USAT; the incurrence by USAT of any unanticipated or unusual non-operational expenses which would require us to divert our cash resources from achieving our business plan; the ability of USAT to retain key customers from whom a significant portion of its revenues is derived; the ability of USAT to compete with its competitors to obtain market share; whether USAT's customers continue to utilize USAT's transaction processing and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days' notice; the ability of USAT to raise funds in the future through the sales of securities or debt financings in order to sustain its operations if an unexpected or unusual non-operational event would occur; the ability of USAT to use available data to predict future market conditions, consumer behavior and any level of cashless usage; the ability to prevent a security breach of our systems or services or third party services or systems utilized by us; whether any patents issued to USAT will provide USAT with any competitive advantages or adequate protection for its products, or would be challenged, invalidated or circumvented by others; the ability of USAT to operate without infringing or violating the intellectual property rights of others; the ability of the Company to sell to third party lenders all or a portion of our finance receivables; the ability of a sufficient number of our customers to utilize third party financing companies under our QuickStart program which would improve our net cash used by operating activities; whether USAT experiences material weaknesses in its internal controls over financial reporting in future periods, which would result in USAT not being able to accurately or timely report its financial condition or results of operations; and whether USAT's existing or anticipated customers purchase, rent or utilize ePort devices or our other products or services in the future at levels currently anticipated by USAT. Readers are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this release speaks only as of the date of this release. Unless required by law, USAT does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

F-USAT

Financial Schedules:

A. Statements of Operations for the 3 Months and Fiscal Years Ended June 30, 2017 and June 30, 2016

B. Five Quarter Select Key Performance Indicators

C. Comparative Balance Sheets at June 30, 2017 and at June 30, 2016

D. Five Quarter Statements of Operations and Adjusted EBITDA

E. Five Quarter and YTD Selling, General, & Administrative Expenses

F. Five Quarter Condensed Balance Sheets

G. Five Quarter Statements of Cash Flows

H. Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Earnings/(Loss) Per Common Share - Basic and Diluted to Non-GAAP Net Earnings/(Loss) Per Common Share - Basic and Diluted

I. Annual Reconciliation of Net Loss to Non-GAAP Net Loss and Net Loss Per Common Share - Basic and Diluted to Non-GAAP Net Loss Per Common Share - Basic and Diluted

(A) Statement of Operations for the 3 Months and Fiscal Years Ended June 30, 2017 and June 30, 2016

  For the three months ended June 30,    
($ in thousands, except shares and per share data) 2017   % of Sales   2016   % of Sales Change % Change
 
Revenues:
License and transaction fees $ 18,679 54.5% $ 15,263 69.6% $ 3,416 22.4%
Equipment sales   15,610 45.5%   6,681 30.4%   8,929 133.6%
Total revenues 34,289 100.0% 21,944 100.0% 12,345 56.3%
 
Costs of sales/revenues:
Cost of services 12,545 67.2% 10,613 69.5% 1,932 18.2%
Cost of equipment   14,224 91.1%   5,548 83.0%   8,676 156.4%
Total costs of sales/revenues   26,769 158.3%   16,161 152.6%   10,608 65.6%
 
Gross profit 7,520 21.9% 5,783 26.4% 1,737 30.0%
 
Operating expenses:
Selling, general and administrative 6,844 20.0% 6,721 30.6% 123 1.8%
Depreciation and amortization 244 0.7% 208 0.9% 36 17.3%
Impairment of intangible asset   0.0%   432 2.0%   (432) (100.0%)
Total operating expenses 7,088 20.7% 7,361 33.5% (273) (3.7%)
 
Operating income (loss) 432 1.3% (1,578) (7.2%) 2,010 (127.4%)
 
Other income (expense):
Interest income 95 0.3% 182 0.8% (87) (47.8%)
Interest expense (291) (0.8%) (197) (0.9%) (94) (47.7%)
Change in fair value of warrant liabilities   0.0%   18 0.1%   (18) 100.0%
Total other expense, net (196) (0.6%) 3 0.0% (199) (6633.3%)
 
Loss before (provision) benefit for income taxes 236 0.7% (1,575) (7.2%) 1,811 115.0%
Benefit (provision) for income taxes   7 0.0%   703 3.2%   (696) 99.0%
 
Net income (loss) 243 0.7% (872) (4.0%) 1,115 127.9%
Cumulative preferred dividends   0.0%   0.0%   0.0%
Net income (loss) applicable to common shares $ 243 0.7% $ (872) (4.0%) $ 1,115 127.9%
 
Net income (loss) per common share - basic $ 0.01 $ (0.02) $ 0.03 150.0%
Net income (loss) per common share - diluted $ 0.01 $ (0.02) $ 0.03 150.0%
 
Basic weighted average number of common shares outstanding 40,331,993 37,325,681 3,006,312 8.1%
Diluted weighted average number of common shares outstanding 40,772,482 37,325,681 3,446,801 9.2%
 
For the year ended June 30,
($ in thousands, except shares and per share data) 2017 % of Sales 2016 % of Sales Change % Change
 
Revenues:
License and transaction fees $ 69,142 66.4% $ 56,589 73.1% $ 12,553 22.2%
Equipment sales   34,951 33.6%   20,819 26.9%   14,132 67.9%
Total revenues 104,093 100.0% 77,408 100.0% 26,685 34.5%
 
Costs of sales/revenues:
Cost of services $ 47,053 68.1% $ 38,089 67.3% 8,964 23.5%
Cost of equipment   30,394 87.0%   17,334 83.3%   13,060 75.3%
Total costs of sales/revenues   77,447 74.4%   55,423 71.6%   22,024 39.7%
 
Gross profit 26,646 25.6% 21,985 28.4% 4,661 21.2%
 
Operating expenses:
Selling, general and administrative 25,493 24.5% 22,373 28.9% 3,120 13.9%
Depreciation and amortization 1,018 1.0% 647 0.8% 371 57.3%
Impairment of intangible asset   0.0%   432 0.6%   (432) (100.0%)
Total operating expenses 26,511 25.5% 23,452 30.3% 3,059 13.0%
 
Operating (loss) income 135 0.1% (1,467) (1.9%) 1,602 (109.2%)
 
Other income (expense):
Interest income 482 0.5% 320 0.4% 162 50.6%
Interest expense (892) (0.9%) (600) (0.8%) (292) (48.7%)
Change in fair value of warrant liabilities   (1,490) (1.4%)   (5,674) (7.3%)   4,184 73.7%
Total other expense, net (1,900) (1.8%) (5,954) (7.7%) 4,054 68.1%
 
Loss before (provision) benefit for income taxes (1,765) (1.7%) (7,421) (9.6%) 5,656 76.2%
(Provision) benefit for income taxes   (87) (0.1%)   615 0.8%   (702) 114.1%
 
Net loss (1,852) (1.8%) (6,806) (8.8%) 4,954 72.8%
Cumulative preferred dividends   (668) (0.6%)   (668) (0.9%)   0.0%
Net loss applicable to common shares   (2,520) (2.4%)   (7,474) (9.7%) $ 4,954 66.3%
 
Net loss per common share - basic and diluted   (0.06)   (0.21) $ 0.15 71.4%
 
Weighted average number of common shares outstanding - basic and diluted 39,860,335 36,309,047 3,551,288 9.8%
 

(B) Five Quarter Select Key Performance Indicators

  As of and for the three months ended
June 30,   March 31,   December 31,   September 30,   June 30,
2017 2017 2016 2016 2016
Connections:
Gross New Connections 70,000 40,000 25,000 22,000 33,000
% from Existing Customer Base 93% 88% 80% 86% 83%
Net New Connections 64,000 35,000 21,000 19,000 28,000
Total Connections 568,000 504,000 469,000 448,000 429,000
 
Customers:
New Customers Added 300 500 500 350 300
Total Customers 12,700 12,400 11,900 11,400 11,050
 
Volumes:
Total Number of Transactions (millions) 114.8 104.9 100.1 95.1 89.3
Transaction Volume (millions) $ 225.6 $ 202.5 $ 191.5 $ 183.4 $ 169.0
 
Financing Structure of Connections:
JumpStart 6.7% 8.6% 6.8% 7.7% 6.5%
QuickStart & All Others *   93.3%   91.4%   93.2%   92.3%   93.5%
Total   100.0%   100.0%   100.0%   100.0%   0.0%
 

(C) Comparative Balance Sheets at June 30, 2017 and June 30, 2016

  June 30,   June 30,    
($ in thousands) 2017 2016 Change % Change
Assets
Current assets:
Cash and Cash Equivalents $ 12,745 $ 19,272 $ (6,527) (33.9%)
Accounts receivable, less allowance for doubtful accounts of $3,149 and $2,814, respectively 7,193 4,899 2,294 46.8%
Finance receivables, less allowance for doubtful accounts of $19 and $0, respectively 11,010 3,588 7,422 206.9%
Inventory 4,586 2,031 2,555 125.8%
Prepaid expenses and other current assets   968   987   (19) (0)
Total current assets 36,502 30,777 5,725 18.6%
 
Finance receivables, less current portion 8,607 3,718 4,889 131.5%
Other assets 687 348 339 97.4%
Property and equipment, net 12,111 9,765 2,346 24.0%
Deferred income taxes 27,670 27,724 (54) (0.2%)
Intangibles, net 622 798 (176) (22.1%)
Goodwill   11,492   11,703   (211) (1.8%)
Total assets $ 97,691 $ 84,833 $ 12,858 15.2%
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 16,054 $ 12,354 $ 3,700 29.9%
Accrued expenses 4,130 3,458 672 19.4%
Line of credit, net 7,036 7,119 (83) (1.2%)
Capital lease obligations and current obligations under long term debt 3,230 629 2,601 413.5%
Income taxes payable 10 18 (8) (44.4%)
Warrant liabilities 3,739 (3,739) (100.0%)
Deferred gain from sale-leaseback transactions   239   860   (621) (72.2%)
Total current liabilities 30,699 28,177 2,522 9.0%
 
Long-term liabilities
Capital lease obligations and long term debt, less current portion 1,061 1,576 (515) (32.7%)
Accrued expenses, less current portion 53 15 38 253.3%
Deferred gain from sale-leaseback transactions, less current portion   100   40   60 150.0%
Total long-term liabilities   1,214   1,631   (417) (25.6%)
Total liabilities   31,913   29,808   2,105 7.1%
 
Shareholders' equity:
Preferred stock, no par value 0.0%
Series A convertible preferred stock 3,138 3,138 3,138 100.0%
Common stock, no par value 245,999 233,394 12,605 5.4%
Accumulated deficit   (183,359)   (181,507)   (1,852) (1.0%)
Total shareholders' equity   65,778   55,025   13,891 25.2%
Total liabilities and shareholders' equity $ 97,691 $ 84,833 $ 15,996 18.9%
 
Net working capital $ 5,803 $ 2,600 $ 3,203 123.2%
 

(D) Five Quarter Statements of Operations and Adjusted EBITDA

  For the three months ended
($ in thousands) June 30,     March 31,     December 31,     September 30,     June 30,  
(unaudited) 2017 % of Sales 2017 % of Sales 2016 % of Sales 2016 % of Sales 2016 % of Sales
Revenues:
License and transaction fees $ 18,679 54.5% $ 17,459 76.5% $ 16,639 75.8% $ 16,365 69.6% $ 15,263 72.3%
Equipment Sales   15,610 45.5%   9,001 23.5%   5,117 24.2%   5,223 30.4%   6,681 27.7%
Total revenue 34,289 100.0% 26,460 100.0% 21,756 100.0% 21,588 100.0% 21,944 100.0%
 
Costs of sales/revenues:
License and transaction fees 12,545 67.2% 11,876 68.4% 11,389 68.7% 11,243 69.5% 10,614 65.9%
Equipment sales   14,224 91.1%   7,959 78.8%   4,033 80.0%   4,178 83.0%   5,547 88.5%
Total costs of sales/revenues 26,769 78.1% 19,835 70.9% 15,422 71.4% 15,421 73.6% 16,161 72.1%
 
Gross Profit:
License and transaction fees 6,134 32.8% 5,583 31.6% 5,250 31.3% 5,122 30.5% 4,649 34.1%
Equipment sales   1,386 8.9%   1,042 21.2%   1,084 20.0%   1,045 17.0%   1,134 11.5%
Total gross profit 7,520 21.9% 6,625 29.1% 6,334 28.6% 6,167 26.4% 5,783 27.9%
 
Operating expenses:
Selling, general and administrative 6,844 20.0% 5,947 26.6% 5,793 32.0% 6,909 30.6% 6,721 29.9%
Depreciation 244 0.7% 259 1.4% 307 1.0% 208 0.9% 208 0.8%
Impairment of intangible asset   0.0%   0.0%   0.0%

 

  2.0%   432 0.0%
Total operating expenses 7,088 20.7% 6,206 28.0% 6,100 33.0% 7,117 33.5% 7,361 30.8%
                   
Operating income (loss)   432 1.3%   419 1.1%   234 -4.4%   (950) -7.2%   (1,578) -2.9%
 
Other income (expense):
Interest income 95 0.3% 114 0.9% 200 0.3% 73 0.8% 182 0.3%
Interest expense (291) -0.8% (188) -0.9% (201) -1.0% (212) -0.9% (197) -0.9%
Change in fair value of warrant liabilities   0.0%   0.0%   -6.9%   (1,490) 0.1%   18 -23.6%
Total other (expense) income , net (196) -0.6% (74) 0.0% (1) -7.5% (1,629) 0.0% 3 -24.2%
 
Income (loss) before provision for income taxes 236 0.7% 345 1.1% 233 -11.9% (2,579) -7.2% (1,575) -27.1%
(Provision) benefit for income taxes 7 0.0% (209) 0.0% 0.5% 115 3.2% 703 0.5%
                   
Net income (loss)   243 0.7%   136 1.1%   233 -11.4%   (2,464) -4.0%   (872) -26.6%
 
Less interest income (95) -0.3% (114) -0.9% (200) -0.3% (73) -0.8% (182) -0.3%
Plus interest expenses 291 0.8% 188 0.9% 201 1.0% 212 0.9% 197 0.9%
Plus income tax expense (7) 0.0% 209 0.0% -0.5% (115) -3.2% (703) -0.5%
Plus depreciation expense 1,768 5.2% 1,165 5.6% 1,220 5.8% 1,257 5.8% 1,272 5.8%
Plus amortization expense 43 0.1% 45 0.2% 43 0.2% 44 0.2% 44 0.2%
Plus (less) change in fair value of warrant liabilities 0.0% 0.0% 6.9% 1,490 -0.1% (18) 23.6%
Plus stock-based compensation 538 1.6% 233 1.1% 233 1.0% 211 0.9% 198 0.7%
Plus intangible asset impairment 0.0% 0.0% 0.0% 2.0% 432 0.0%
Plus VendScreen non-recurring charges 0.0% 0.0% 8 0.5% 101 1.2% 258 2.3%
Plus litigation related professional fees   0.0%   0.0%   0.2%   33 0.0%   0.5%
Adjusted EBITDA $ 2,781 8.1% $ 1,862 8.0% $ 1,738 3.2% $ 696 2.9% $ 626 6.6%
 

(E) Five Quarter and YTD Selling, General, & Administrative Expenses

  Three months ended
June 30,   % of   March 31,   % of   December 31,   % of   September 30,   % of   June 30,   % of
($ in thousands) 2017   SG&A 2017 SG&A 2016 SG&A 2016 SG&A 2016 SG&A
Salaries and benefit costs $ 3,027 44.2% $ 3,060 49.2% $ 2,849 49.2% $ 3,129 45.3% $ 3,050 45.4%
Marketing related expenses 731 10.7% 569 10.0% 578 10.0% 329 4.8% 635 9.4%
Professional services 2,092 30.6% 1,472 20.9% 1,213 20.9% 2,520 36.5% 1,533 22.8%
Bad debt expense 187 2.7% 127 6.1% 352 6.1% 97 1.4% 470 7.0%
Premises, equipment and insurance costs 630 9.2% 482 8.6% 498 8.6% 499 7.2% 555 8.3%
Research and development expenses 53 0.8% 95 3.0% 173 3.0% 124 1.8% 123 1.8%
VendScreen non-recurring charges 0.0% 0.1% 8 0.1% 101 1.5% 258 3.8%
Litigation related professional fees 0.0% 0.0% 0.0% 33 0.5% 51 0.8%
Other expenses   123   1.8%   142 2.1%   122 2.1%   77 1.1%   46 0.7%
Total SG&A expenses $ 6,843   100% $ 5,947 100% $ 5,793 100% $ 6,909 100% $ 6,721 100%
 
Total Revenue $ 34,289 $ 26,460 $ 21,756 $ 21,588 $ 21,944
SG&A expenses as a percentage of revenue 20.0% 22.5% 26.6% 32.0% 30.6%
 
  For the year ended
June 30,   % of   June 30,   % of
($ in thousands) 2017 SG&A 2016 SG&A
 
Salaries and benefit costs $ 12,065 47.3% $ 11,282 50.4%
Marketing related expenses 2,207 8.7% 1,665 7.4%
Professional services 7,297 28.6% 4,410 19.7%
Bad debt expense 764 3.0% 1,450 6.5%
Premises, equipment and insurance costs 2,109 8.3% 1,761 7.9%
Research and development expenses 445 1.7% 482 2.2%
VendScreen non-recurring charges 109 0.4% 842 3.8%
Litigation related professional fees 33 0.1% 156 0.7%
Other expenses   464 1.8%   325 1.5%
Total SG&A expenses $ 25,493 100.0% $ 22,373 100.0%
 
Total Revenue $ 104,093 $ 77,408
SG&A expenses as a percentage of revenue 24.5% 28.9%
 

(F) Five Quarter Condensed Balance Sheets

($ in thousands)   June 30,   March 31,   December 31,   September 30   June 30,
(unaudited) 2017 2017 2016 2016 2016
 
Assets
Current assets:
Cash and Cash Equivalents $ 12,745 $ 17,780 $ 18,034 $ 18,198 $ 19,272
Accounts receivable, less allowance for doubtful accounts 7,193 6,734 6,796 5,840 4,899
Finance receivables, less allowance for credit losses 11,010 2,057 1,442 3,349 3,588
Inventory, net 4,586 4,147 4,786 4,264 2,031
Other current assets   968   1,628   1,764   1,439   987
Total current assets 36,502 32,346 32,822 33,090 30,777
 
Finance receivables, less current portion 8,607 7,548 3,956 3,962 3,718
Other assets 687 137 145 163 348
Property and equipment, net 12,111 9,173 9,433 9,570 9,765
Deferred income taxes 27,670 27,630 27,839 27,839 27,724
Intangibles, Net 622 666 711 754 798
Goodwill   11,492   11,492   11,492   11,703   11,703
Total assets $ 97,691 $ 88,992 $ 86,398 $ 87,081 $ 84,833
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 20,184 $ 14,640 $ 12,002 $ 12,605 $ 15,812
Line of credit, net 7,036 7,021 7,078 7,258 7,119
Warrant Liabilities - - - - 3,739
Other current liabilities   3,479   1,041   1,242   1,527   1,507
Total current liabilities 30,699 22,702 20,322 21,390 28,177
Long-term liabilities          
Total long-term liabilities   1,214   1,291   1,446   1,528   1,631
Total liabilities   31,913   23,993   21,768   22,918   29,808
 
Shareholders' equity:          
Total shareholders' equity   65,778   64,999   64,630   64,163   55,025
Total liabilities and shareholders' equity $ 97,691 $ 88,992 $ 86,398 $ 87,081 $ 84,833
 
Total current assets $ 36,502 $ 32,346 $ 32,822 $ 33,090 $ 30,777
Total current liabilities   30,699   22,702   20,322   21,390   28,177
Net working capital $ 5,803 $ 9,644 $ 12,500 $ 11,700 $ 2,600
 

(G) Five Quarter Statements of Cash Flows

  Three months ended
June 30,   March 31,   December 31,   September 30,   June 30,
($ in thousands) 2017 2017 2016 2016 2016
OPERATING ACTIVITIES:
Net (loss) income $ 243 $ 136 $ 233 $ (2,464) $ (872)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Non-cash stock-based compensation 536 233 233 211 198
Gain on disposal of property and equipment (118) (28) (31) (110)
Non-cash interest and amortization of debt discount 15 72 (79) 105 13
Bad debt expense 187 127 352 97 470
Depreciation and amortization 1,817 1,210 1,263 1,301 1,315
Impairment of intangible asset 432
Change in fair value of warrant liabilities 1,490 (18)
Deferred income taxes, net (40) 209 (115) (748)
Recognition of deferred gain from sale-leaseback transactions 86 (216) (215) (215) (215)
Changes in operating assets and liabilities:
Accounts receivable (600) (41) (1,309) (1,038) 2,977
Finance receivables (10,006) (4,232) 2,125 (5) (2,587)
Inventory (357) 647 (467) (2,223) (82)
Prepaid expenses and other assets 102 136 (318) (224) (397)
Accounts payable and accrued expenses 5,649 2,601 (664) (3,175) 444
Income taxes payable   10   (6)   (1)   (10)   453
Net change in operating assets and liabilities   (5,202)   (895)   (634)   (6,675)   808
Net cash provided (used) by operating activities (2,476) 848 1,122 (6,265) 1,273
 
INVESTING ACTIVITIES:
Purchase and additions of property and equipment, including rentals (1,223) (874) (1,134) (810) (207)
Proceeds from sale of property and equipment 243 44 61 265
Cash paid for assets acquired from VendScreen          
Net cash provided by (used in) investing activities (980) (830) (1,073) (810) 58
 
FINANCING ACTIVITIES:
Cash used for the retirement of common stock (31) (173)
Proceeds from exercise of common stock warrants 6,193 138
Deferred financing costs (90) 3,237
Proceeds (payments) from line of credit, net (106)
Repayment of long-term debt   (1,473)   (182)   (213)   (161)   (162)
Net cash (used in) provided by financing activities   (1,579)   (272)   (213)   6,001   3,040
 
Net (decrease) increase in cash (5,035) (254) (164) (1,074) 4,371
Cash at beginning of period   17,780   18,034   18,198   19,272   14,901
Cash at end of period $ 12,745 $ 17,780 $ 18,034 $ 18,198 $ 19,272
 
Supplemental disclosures of cash flow information:
Interest paid in cash $ 207 $ 59 $ 382 $ 87 $ 147
Income taxes paid in cash (refund), net $ (305) $ $ $ $ 501
Reclass of rental program property to inventory, net $ 82 $ 8 $ (55) $ (11) $ 415
Prepaid items financed with debt $ $ $ $ 54 $
Equipment and property acquired under capital lease $ 3,573 $ 54 $ 18 $ 254 $
 

(H) Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Income/(Loss) Per Common Share - Basic and Diluted to Non-GAAP Net Income/(Loss) Per Common Share - Basic and Diluted

  Three months ended
($ in thousands) June 30,   March 31,   December 31,   September 30,   June 30,
(unaudited) 2017 2017 2016 2016 2016
 
Net income (loss) $ 243 $ 136 $ 233 $ (2,464 ) $ (872 )
Non-GAAP adjustments:
Non-cash portion of income tax provision (40 ) 209 - (115 ) (792 )
Change in fair value of warrant adjustment - - - 1,490 (18 )
VendScreen non-recurring charges - - 8 101 258
Litigation related professional fees   -     -     -   33     51  
Non-GAAP net income (loss) $ 203   $ 345   $ 241 $ (955 ) $ (1,373 )
 
Net income (loss) $ 243 $ 136 $ 233 $ (2,464 ) $ (872 )
Cumulative preferred dividends   -     (334 )   -   (334 )   -  
Net (loss) income applicable to common shares $ 243   $ (198 ) $ 233 $ (2,798 ) $ (872 )
 
Non-GAAP net income (loss) $ 203 $ 345 $ 241 $ (955 ) $ (1,373 )
Cumulative preferred dividends   -     (334 )   -   (334 )   -  
Non-GAAP net income (loss) applicable to common shares $ 203   $ 11   $ 241 $ (1,289 ) $ (1,373 )
 
Net earnings (loss) per common share - basic and diluted $ 0.01   $ (0.00 ) $ 0.01 $ (0.07 ) $ (0.02 )
Non-GAAP net earnings (loss) per common share - basic and diluted $ 0.01   $ (0.00 ) $ 0.01 $ (0.03 ) $ (0.04 )
Basic weighted average number of common shares outstanding   40,331,993     40,327,697     40,308,934   38,488,005     37,325,681  
Diluted weighted average number of common shares outstanding 40,772,482 40,327,697 40,730,712 38,488,005 37,325,681

 

(I) Annual Reconciliation of Net Loss to Non-GAAP Net Loss and Net Loss Per Common Share - Basic and Diluted to Non-GAAP Net Loss Per Common Share - Basic and Diluted

  Year ended
($ in thousands) June 30,   June 30,
(unaudited) 2017 2016
 
Net Loss $ (1,852 ) $ (6,806 )
Non-GAAP adjustments:
Non-cash portion of income tax provision 54 (579 )
Change in fair value of warrant adjustment 1,490 5,674
VendScreen non-recurring charges 109 842
Litigation related professional fees   33     156  
Non-GAAP net income (loss) $ (166 ) $ (713 )
 
Net income (loss) $ (1,852 ) $ (6,806 )
Cumulative preferred dividends   (668 )   (668 )
Net (loss) income applicable to common shares $ (2,520 ) $ (7,474 )
 
Non-GAAP net income (loss) $ (166 ) $ (713 )
Cumulative preferred dividends   (668 )   (668 )
Non-GAAP net income (loss) applicable to common shares $ (834 ) $ (1,381 )
 
Net earnings (loss) per common share - basic and diluted $ (0.06 ) $

(0.21

)
Non-GAAP net earnings (loss) per common share - basic and diluted $ (0.02 ) $ (0.04 )
Basic weighted average number of common shares outstanding  

39,860,335

   

36,309,047

 
Diluted weighted average number of common shares outstanding

39,860,335

36,309,047

 

USA Technologies, Inc.
Investors:
The Blueshirt Group
Monica Gould, +1 212-871-3927
monica@blueshirtgroup.com
or
Lindsay Savarese, +1 212-331-8417
lindsay@blueshirtgroup.com

Source: USA Technologies, Inc.

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