USA Technologies, Inc.
Nov 12, 2015

USA Technologies Announces First Quarter Fiscal Year 2016 Results

MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ:USAT) ("USAT"), a leader of wireless, cashless payment and M2M/IoT solutions for small-ticket, self-serve retailing industries, today reported results for the first quarter fiscal year ended September 30, 2015.

First Quarter Financial Highlights:

*(Defined as cash flow from operations less cash used for the purchase of equipment for the JumpStart rental program.)

First Quarter Financial Highlights & Transaction Data:

       
 
Three months ended, unless noted
September 30,    
(Connections and $'s in thousands, except per share data) 2015 2014 # Change % Change
 
 
Revenues:
License and transaction fees $ 12,925 $ 10,156 $ 2,769 27 %
Equipment sales   3,675     2,096   1,579 75 %
Total revenues $ 16,600   $ 12,252   $ 4,348 35 %
 
License and transaction fees gross margin 32.6 % 28.6 % 4.0 % 14.0 %
 
Equipment sales gross margin 22.5 % 11.0 % 11.5 % 104.5 %
 
Operating income (loss) $ 112 $ (666 ) $ 778 NC
 
Adjusted EBITDA $ 1,734 $ 946 $ 788 83 %
 
Net income (loss) $ 360 $ (61 ) $ 421 NC
 
Net earnings (loss) per common share - diluted $ (0.01 ) $ (0.01 ) NC NC
 
Net New Connections 16 10 6 60 %
 
Total Connections (at period end) 349 276 73 26 %
 
Total Number of Transactions 68,800 48,700 20,100 41 %
 
Transaction Volume $ 126,400 $ 89,200 $ 37,200 42 %
 

"The growing number of transactions and transaction volume, in addition to the growing number of USAT customers, indicate that we are capitalizing on the cashless payment trend and delivering on our strategic initiatives," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "Many of our largest customers are moving to connect 100% of their machines to USAT's ePort Connect technology incentivized by our Premium Support Service, the latest product offering which provides customers with a cross-functional service model to realize the impact of USAT's ePort Connect technology on their business, including increased awareness and accelerated adoption of cashless payments."

Fiscal 2016 Outlook

For full year fiscal 2016, management expects to add more than 75,000 net new connections , bringing total connections on the service to over 400,000 and expects total revenue to be between $69 million and $71 million. Additionally, we anticipate that QuickStart will remain a popular program for customers, and management expects it to drive positive free cash flows in fiscal year 2016. We also expect to have year-over-year increases of adjusted EBITDA and non-GAAP net income.

Webcast and Conference Call

Management will host a conference call and webcast the event beginning at 8:30 a.m. Eastern Time tomorrow, November 13, 2015.

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 # 70551888.

A live webcast of the conference call will be available at http://investor.usatech.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 November 13, 2015 until 11:59 p.m. Eastern Time on November 16, 2015 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 70551888. 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 is a leader of wireless, cashless payment and M2M/IoT telemetry solutions for small-ticket, self-serve retailing industries. ePort Connect® is the company's flagship service platform, a PCI-compliant, end-to-end suite of cashless payment and telemetry services specially tailored to fit the needs of small ticket, self-service retailing industries. USA Technologies also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort Mobile™ for customers on the go, and QuickConnect, an API Web service for developers.USA Technologies has been granted 87 patents; and has agreements with Verizon, Chase Paymentech, Visa, MasterCard, and customers such as Compass and others. Visit the website at www.usatech.com.

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 earnings or taxable income of USAT; the incurrence by us 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 the proprietary rights of others; whether USAT would be able to sell sufficient ePort hardware to third party leasing companies as part of the QuickStart program in order to continue to increase cash flows from 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.

Financial Schedules:

A. Comparative Income Statement For 3 Months Ended September 30, 2015 and September 30, 2014

B. Five Quarter Select Key Performance Indicators

C. Comparative Condensed Balance Sheets September 30, 2015 to June 30, 2015

D. Five Quarter Statement of Operations and Adjusted EBITDA

E. Five Quarter Selling, General, & Administrative Expenses

F. Five Quarter Condensed Balance Sheet

G. Five Quarter Condensed Statement of Cash Flows

H. Consolidated Statement of Shareholders' Equity

I. Reconciliation of Net Loss to Non-GAAP Net Income (Loss) and Net Earnings Loss Per Common Share - Diluted to Non-GAAP Net Earnings (Loss) Per Common Share - Diluted

NEW ACCOUNTING CLASSIFICATION

The Company is changing the manner in which it presents certain uncollected customer accounts receivable and the related allowance in its consolidated balance sheets and the related statements of cash flows. These accounts receivable represent a large number of small balance amounts due from customers for processing and service fees which had not been billed to customers, and as to which, there had been no customer transaction proceeds from which the Company could collect the amounts due in accordance with its normal procedures. The previous accounting classification recorded these amounts as a reduction of its accounts payable in the consolidated balance sheets and the related statements of cash flows. The new accounting classification is more appropriate now, as the uncollected customer accounts have been outstanding for longer time periods and are larger in the aggregate than when the accounting process was established many years ago.

Accordingly, the respective balances for all prior periods presented in these financial statements were reclassified in order to be consistent and comparable to the accounting treatment of these items in our September 30, 2015 financial statements. The new accounting classification as well as the reclassification for prior periods had no effect on the consolidated statements of operations or the consolidated statements of shareholders' equity.

 

(A) Comparative Income Statement For 3 Months Ended September 30, 2015 and September 30, 2014

           
($ in thousands, except share and per share data) For the three months ended September 30,
(unaudited) 2015

% of
Sales

2014

% of
Sales

Change % Change
 
Revenues:
License and transaction fees $ 12,925 77.9 % $ 10,156 82.9 % $ 2,769 27.3 %
Equipment sales   3,675   22.1 %   2,096   17.1 % 1,579 75.3 %
Total revenues 16,600 100.0 % 12,252 100.0 % 4,348 35.5 %
 
Costs of sales/revenues:
Cost of services 8,705 67.4 % 7,251 71.4 % 1,454 20.1 %
Cost of equipment   2,848   77.5 %   1,866   89.0 % 982 52.6 %
Total costs of sales/revenues   11,553   69.6 %   9,117   74.4 % 2,436 26.7 %
 
Gross profit:
License and transaction fees 4,220 32.6 % 2,905 28.6 % 1,315 45.3 %
Equipment sales   827   22.5 %   230   11.0 % 597 259.4 %
Total gross profit   5,047   30.4 %   3,135   25.6 % 1,912 61.0 %
 
Operating expenses:
Selling, general and administrative 4,796 28.9 % 3,632 29.6 % 1,164 32.0 %
Depreciation   139   0.8 %   169   1.4 % (30 ) -17.8 %
Total operating expenses   4,935   29.7 %   3,801   31.0 % 1,134 29.8 %
Operating income (loss) 112 0.7 % (666 ) -5.4 % 778 -116.8 %
 
Other income (expense):
Interest income 51 0.3 % 10 0.1 % 41 410.0 %
Interest expense (119 ) -0.7 % (75 ) -0.6 % (44 ) 58.7 %
Change in fair value of warrant liabilities   343   2.1 %   310   2.5 % 33 10.6 %
Total other income, net   275   1.7 %   245   2.0 % 30 12.2 %
 
Income (loss) before (benefit) provision for income taxes 387 2.3 % (421 ) -3.4 % 808 -191.9 %
Benefit (provision) for income taxes   (27 )   360   (387 ) -107.5 %
 
Net income (loss) 360 2.2 % (61 ) -0.5 % 421 -690.2 %
Cumulative preferred dividends   (332 ) -2.0 %   (332 ) -2.7 % - 0.0 %
Net income (loss) applicable to common shares $ 28   0.2 % $ (393 ) -3.2 % $ 421 -107.1 %
Net earnings (loss) per common share - basic $ -   $ (0.01 ) $ 0.01 -100.0 %
Basic weighted average number of common shares outstanding 35,788,199 35,586,455 201,744 0.6 %
Net loss per common share - diluted $ (0.01 ) $ (0.01 ) $ 0.00 -9.4 %
Diluted weighted average number of common shares outstanding 36,427,683 35,586,455 841,228 2.4 %
 
Adjusted EBITDA $ 1,734   10.4 % $ 946   7.7 % $ 788 83.3 %
 
Non-GAAP net income (loss) applicable to common shares $ (288 ) -6.8 % $ (1,072 ) -8.7 % $ 784 -73.1 %
 

 

(B) Five Quarter Select Key Performance Indicators:

         
Three months ended

 

(unaudited) September 30, June 30, March 31, December 31, September 30,

 

2015 2015 2015 2014 2014

 

Connections:
Gross New Connections 20,000 34,000 24,000 14,000 13,000

 

% from Existing Customer Base 86 % 89 % 82 % 82 % 84 %

 

Net New Connections 16,000 31,000 14,000 12,000 10,000

 

Total Connections 349,000 333,000 302,000 288,000 276,000

 

 
Customers:
New Customers Added 675 675 475 550 600

 

Total Customers 10,275 9,600 8,925 8,450 7,900

 

 
Volumes:
Total Number of Transactions (millions) 68.8 62.2 54.8 51.0 48.7

 

Transaction Volume ($millions) $ 126.4 $ 112.8 $ 97.7 $ 89.3 $ 89.2

 

 
Financing Structure of Connections:
JumpStart 10.2 % 6.0 % 11.3 % 14.4 % 22.7 %

 

QuickStart & All Others *   89.8 %     94.0 %     88.7 %     85.6 %     77.3 %

 

Total   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %

 

 

*Includes credit sales with standard trade receivable terms

 
 

(C) Comparative Condensed Balance Sheets September 30, 2015 to June 30, 2015

       
($ in thousands) September 30, June 30,
(unaudited)

2015

2015

$ Change

% Change

 
Assets
Current assets:
Cash $ 11,592 $ 11,374 $ 218 2 %
Accounts receivable, less allowance * 6,448 5,971 477 8 %
Finance receivables 946 941 5 1 %
Inventory 3,718 4,216 (498 ) -12 %
Deferred income taxes 1,258 1,258 - 0 %
Prepaid expenses and other current assets   625     574     51   9 %
Total current assets 24,587 24,334 253 1 %
 
Finance receivables, less current portion 3,525 3,698 (173 ) -5 %
Property and equipment, net 11,890 12,869 (979 ) -8 %

Goodwill and intangibles

8,095 8,095 - 0 %
Deferred income taxes 25,761 25,788 (27 ) 0 %
Other assets   342     350     (8 ) -2 %
Total assets $ 74,200   $ 75,134   $ (934 ) -1 %
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable * $ 9,498 $ 10,542 $ (1,044 ) -10 %
Accrued expenses 2,117 2,108 9 0 %
Line of credit 4,000 4,000 - 0 %
Current obligations under long-term debt 583 478 105 22 %
Income taxes payable 54 54 - 0 %
Deferred gain from sale-leaseback transactions   860     860     -   0 %
Total current liabilities 17,112 18,042 (930 ) -5 %
Long-term liabilities
Long-term debt, less current portion 1,758 1,854 (96 ) -5 %
Accrued expenses, less current portion 38 49 (11 ) -22 %
Warrent liabilities 635 978 (343 ) -35 %
Deferred gain from sale-leaseback transactions, less current portion   685     900     (215 ) -24 %
Total long-term liabilities   3,116     3,781     (665 ) -18 %
Total liabilities   20,228     21,823     (1,595 ) -7 %
 
Shareholders' equity:
Preferred stock, no par value 3,138 3,138 - 0 %
Common stock, no par value 225,175 224,874 301 0 %
Accumulated deficit   (174,341 )   (174,701 )   360   0 %
Total shareholders' equity   53,972     53,311     661   1 %
Total liabilities and shareholders' equity $ 74,200   $ 75,134   $ (934 ) -1 %
 
Total current assets $ 24,587 $ 24,334 $ 253 1 %
Total current liabilities   17,112     18,042     (930 ) -5 %
Net working capital $ 7,475 $ 6,292 $ 1,183 19 %
 
* Accounts receivable, net of allowance for uncollectible accounts and accounts payable have increased by the following amounts due to reclassifications $ -   $ 1,299  
 
                   

(D) Five Quarter Statement of Operations and Adjusted EBITDA

 
($'s in thousands) For the three months ending
(unaudited) September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2015  

% of Sales

  2015  

% of Sales

  2015  

% of Sales

  2014  

% of Sales

  2014  

% of Sales

Revenues:
License and transaction fees $ 12,925 77.9 % $ 11,938 67.7 % $ 11,060 72.0 % $ 10,480 81.7 % $ 10,156 82.9 %
Equipment Sales   3,675   22.1 %   5,708   32.3 %   4,298   28.0 %   2,341   18.3 %   2,096   17.1 %
Total revenue 16,600 100.0 % 17,646 100.0 % 15,358 100.0 % 12,822 100.0 % 12,252 100.0 %
 
Costs of sales/revenues:
License and transaction fees 8,705 67.4 % 7,863 65.9 % 7,157 64.7 % 7,158 68.3 % 7,251 71.4 %
Equipment sales   2,848   77.5 %   4,975   87.2 %   3,055   71.1 %   1,930   82.4 %   1,866   89.0 %
Total costs of sales/revenues 11,553 69.6 % 12,838 72.8 % 10,213 57.9 % 9,088 51.5 % 9,117 51.7 %
 
Gross Profit:
License and transaction fees 4,220 32.6 % 4,075 34.1 % 3,903 35.3 % 3,323 31.7 % 2,905 28.6 %
Equipment sales   827   22.5 %   733   12.8 %   1,243   28.9 %   412   17.6 %   230   11.0 %
Total gross profit 5,047 30.4 % 4,808 27.2 % 5,145 33.5 % 3,734 29.1 % 3,134 25.6 %
 
Operating expenses:
Selling, general and administrative 4,796 28.9 % 5,009 28.4 % 4,280 27.9 % 3,530 27.5 % 3,632 29.6 %
Depreciation   139   0.8 %   156   0.9 %   135   0.9 %   152   1.2 %   169   1.4 %
Total operating expenses 4,935 29.7 % 5,165 29.3 % 4,415 28.7 % 3,682 28.7 % 3,801 31.0 %
         
Operating income (loss)   112   0.7 %   (357 ) -2.0 %   731   4.8 %   51   0.4 %   (666 ) -5.4 %
 
Other income (expense):
Interest income 51 0.3 % 42 0.3 % 26 0.2 % 4 0.0 % 10 0.1 %
Other income - 0.0 % 52 0.3 % - 0.0 % - 0.0 % - 0.0 %
Interest expense (119 ) -0.7 % (92 ) -0.6 % (85 ) -0.5 % (49 ) -0.3 % (75 ) -0.5 %
Change in fair value of warrant liabilities   343   2.1 %   263   1.6 %   (1,101 ) -6.6 %   135   0.8 %   310   1.9 %
Total other income (expense), net 275 1.7 % 265 1.5 % (1,160 ) -7.6 % 90 0.7 % 245 2.0 %
 
Income (loss) before (benefit) provision for income taxes 387 2.3 % (92 ) -0.5 % (429 ) -2.8 % 141 1.1 % (421 ) -3.4 %
Benefit (provision) for income taxes (27 ) -0.2 % (109 ) -0.6 % (138 ) -0.9 % (402 ) -3.1 % 360 2.9 %
         
Net income (loss)   360   2.2 %   (201 ) -1.1 %   (567 ) -3.7 %   (261 ) -2.0 %   (61 ) -0.5 %
 
 
Less interest income (51 ) -0.3 % (42 ) -0.3 % (26 ) -0.2 % (4 ) 0.0 % (10 ) -0.1 %
Plus interest expenses 119 0.7 % 92 0.6 % 85 0.5 % 49 0.3 % 75 0.5 %
Plus income tax expense (benefit) 27 0.2 % 109 0.7 % 138 0.8 % 402 2.4 % (360 ) -2.2 %
Plus depreciation expense 1,350 8.1 % 1,381 8.3 % 1,433 8.6 % 1,444 8.7 % 1,473 8.9 %
Less change in fair value of warrant liabilities (343 ) -2.1 % (263 ) -1.6 % 1,101 6.6 % (135 ) -0.8 % (310 ) -1.9 %
Plus stock-based compensation   272   1.6 %   175   1.1 %   216   1.3 %   186   1.1 %   139   0.8 %
Adjusted EBITDA $ 1,734   10.4 % $ 1,251   7.1 % $ 2,380   15.5 % $ 1,681   13.1 % $ 946   7.7 %
 

See discussion of Non-GAAP financial measures later in this document

 

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

 
Three months ended
($ in thousands) September 30,   % of   June 30,   % of   March 30,   % of   December 31   % of   September 30,   % of
(unaudited) 2015 SG&A 2015 SG&A 2015 SG&A 2014 SG&A 2014 SG&A
 
Salaries and benefit costs $ 2,685 56.0 % $ 2,295 45.8 % $ 2,533 59.2 % $ 2,131 60.4 % $ 2,204 60.7 %
Marketing related expenses 333 6.9 % 580 11.6 % 184 4.3 % 215 6.1 % 247 6.8 %
Professional services 799 16.7 % 844 16.8 % 708 16.5 % 460 13.0 % 498 13.7 %
Bad debt expense 236 4.9 % 497 9.9 % 303 7.1 % 141 4.0 % 159 4.4 %
Premises, equipment and insurance costs 399 8.3 % 475 9.5 % 372 8.7 % 370 10.5 % 402 11.0 %
Research and development expenses 191 4.0 % 154 3.1 % 96 2.2 % 115 3.3 % 50 1.4 %
Other expenses   153     3.2 %     164     3.3 %     84     2.0 %     98     2.8 %     72     2.0 %
Total SG&A expenses $ 4,796     100 %   $ 5,009     100 %   $ 4,280     100 %   $ 3,530     100 %   $ 3,632     100 %
 
SG&A expenses as a percentage of revenue 28.9 % 28.4 % 27.9 % 27.5 % 29.6 %
 
 

(F) Five Quarter Condensed Balance Sheet and Other Data

         
($ in thousands) September 30, June 30, March 31, December 31, September 30,
(unaudited)

2015

2015

2015

2014

2014

 
Assets
Current assets:
Cash $ 11,592 $ 11,374 $ 8,475 $ 6,734 $ 10,916
Accounts receivable, less allowance * 6,448 5,971 5,245 4,591 3,798
Finance receivables 946 941 750 363 279
Inventory 3,718 4,216 4,241 3,448 2,629
Other current assets   1,883   1,832   1,322   1,495     1,285  
Total current assets 24,587 24,334 20,033 16,631 18,907
 
Finance receivables, less current portion 3,525 3,698 3,505 1,643 949
Prepaid expenses and other assets 342 350 423 411 383
Property and equipment, net 11,890 12,869 13,574 16,451 17,780
Deferred income taxes 25,761 25,788 26,169 26,290 26,714
Goodwill and intangibles   8,095   8,095   8,095   8,095     8,095  
Total assets $ 74,200 $ 75,134 $ 71,799 $ 69,521   $ 72,828  
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses * $ 11,615 $ 12,650 $ 9,044 $ 8,945 $ 10,764
Line of credit 4,000 4,000 4,000 4,000 5,000
Other current liabilities   1,497   1,392   1,294   1,064     1,068  
Total current liabilities 17,112 18,042 14,338 14,009 16,832
Long-term liabilities          
Total long-term liabilities   3,116   3,781   4,134   1,834     2,181  
Total liabilities   20,228   21,823   18,472   15,843     19,013  
 
Shareholders' equity:          
Total shareholders' equity   53,972   53,311   53,327   53,678     53,815  
Total liabilities and shareholders' equity $ 74,200 $ 75,134 $ 71,799 $ 69,521   $ 72,828  
 
Total current assets $ 24,587 $ 24,334 $ 20,033 $ 16,631 $ 18,907
Total current liabilities   17,112   18,042   14,338   14,009     16,832  
Net working capital $ 7,475 $ 6,292 $ 5,695 $ 2,622 $ 2,075
 

* Accounts receivable, net of allowance for uncollectible accounts and accounts payable have increased by the following amounts due to reclassifications

$ - $ 1,299 $ 1,842 $ 1,832   $ 1,353  
 
 
Net cash provided by (used in) operating activities $ 362 $ 2,680 $ 65 $ (3,039 ) $ (1,405 )
Purchase of property for rental program   -   -   -   -     (1,642 )
Free cash flow $ 362 $ 2,680 $ 65 $ (3,039 ) $ 237  
 
       

(G) Five Quarter Condensed Statement of Cash Flows

 
Three months ended
September 30,   June 30, March 31, December 31, September 30,
($ in thousands) 2015   2015   2015   2014   2014
(unaudited)
 
OPERATING ACTIVITIES:
Net income (loss) $ 360 $ (201 ) $ (567 ) $ (261 ) $ (61 )
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Charges incurred in connection with share-based compensation 272 175 216 186 139
Gain on disposal of property and equipment (1 ) (4 ) (6 ) (4 ) (3 )
Bad debt expense 236 497 303 141 159
Depreciation 1,350 1,381 1,433 1,444 1,473
Change in fair value of warrant liabilities (343 ) (263 ) 1,101 (135 ) (310 )
Deferred income taxes, net 27 31 121 423 (361 )
Gain on sale of finance receivables - (52 ) - - -
Recognition of deferred gain from sale-leaseback transactions (215 ) (215 ) (215 ) (215 ) (188 )
Changes in operating assets and liabilities:
Accounts receivable (713 ) (1,223 ) (984 ) (842 ) 5
Finance receivables 168 (332 ) (2,249 ) (778 ) (756 )
Inventory 219 (639 ) 651 (805 ) (1,138 )
Prepaid expenses and other current assets 48 (97 ) 151 (247 ) (111 )
Accounts payable (1,044 ) 3,491 (141 ) (1,859 ) (46 )
Accrued expenses (2 ) 93 234 (87 ) (186 )
Income taxes payable   -     37     17     -     (21 )
Net change in operating assets and liabilities   (1,324 )   1,330     (2,321 )   (4,618 )   (2,253 )
 
Net cash provided by (used in) operating activities 362 2,680 65 (3,039 ) (1,405 )
 
INVESTING ACTIVITIES:
Purchase of property and equipment (49 ) (6 ) (4 ) (19 ) (31 )
Purchase of property for rental program - - - - (1,642 )
Proceeds from sale of rental equipment under sale-leaseback transaction - - - - 4,994
Proceeds from sale of property and equipment   4     8     19     11     24  
 
Net cash provided by (used in) investing activities (45 ) 2 16 (8 ) 3,345
 
FINANCING ACTIVITIES:

Net proceeds from the issuance (retirement) of common stock and exercise of common stock warrants

29 - - (62 ) -
Excess tax benefits from share-based compensation - 10 - - -
Net Proceeds (retirement) of Debt   (128 )   207     1,660     (1,073 )   (96 )
 
Net cash provided by (used in) financing activities   (99 )   217     1,660     (1,135 )   (96 )
 
Net increase (decrease) in cash 218 2,899 1,741 (4,182 ) 1,844
 
Cash at beginning of period   11,374     8,475     6,734     10,916     9,072  
 
Cash at end of period $ 11,592   $ 11,374   $ 8,475   $ 6,734   $ 10,916  
 

Supplemental disclosures of cash flow information:

Depreciation expense allocated to cost of services $ 1,199 $ 1,252 $ 1,289 $ 1,283 $ 1,295
Reclass of rental program property to (from) inventory, net $ (279 ) $ (719 ) $ 1,374 $ 14 $ 4
 
           

(H) Consolidated Statement of Shareholders' Equity

 
Series A
Convertible
(unaudited) Preferred Stock Common Stock Accumulated
($ in thousands) Shares Amount Shares Amount Deficit Total
 
Balance, June 30, 2015 442,968 $ 3,138 35,747,242 $ 224,874 $ (174,701 ) $ 53,311
 
Exercise of warrants - - 11,000 29 - 29
Stock based compensation
2013 Stock Incentive Plan - - 25,976 157 - 157
2014 Stock Option Incentive Plan - - - 115 - 115
Net income -   - -   -   360     360
 
Balance, September 30, 2015 442,968 $ 3,138 35,784,218 $ 225,175 $ (174,341 ) $ 53,972
 

 

         

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

 
Three months ended
(unaudited) September 30, June 30, March 31, December 31, September 30,
($ in thousands) 2015   2015   2015   2014   2014
 
Net income (loss) $ 360 $ (201 ) $ (567 ) $ (261 ) $ (61 )
Non-GAAP adjustments:
Non-cash portion of income tax provision/benefit 27 72 121 402 (369 )
Fair value of warrant adjustment   (343 )   (263 )   1,101     (135 )   (310 )
Non-GAAP net income (loss) $ 44   $ (392 ) $ 655   $ 6   $ (740 )
 
Net income (loss) $ 360 $ (201 ) $ (567 ) $ (261 ) $ (61 )
Cumulative preferred dividends   (332 )   -     (332 )   -     (332 )
Net income (loss) applicable to common shares $ 28   $ (201 ) $ (899 ) $ (261 ) $ (393 )
 
Non-GAAP net income (loss) $ 44 $ (392 ) $ 655 $ 6 $ (740 )
Cumulative preferred dividends   (332 )   -     (332 )   -     (332 )
Non-GAAP net income (loss) applicable to common shares $ (288 ) $ (392 ) $ 323   $ 6   $ (1,072 )
 
Net earnings (loss) per common share - basic $ -   $ (0.01 ) $ (0.03 ) $ (0.01 ) $ (0.01 )
Non-GAAP net earnings (loss) per common share - basic $ (0.01 ) $ (0.01 ) $ 0.01 $ - $ (0.03 )
Basic weighted average number of common shares outstanding 35,788,199 35,716,603 35,687,650 35,657,519 35,586,455
 
Net earnings (loss) per common share - diluted $ (0.01 ) $ (0.01 ) $ (0.03 ) $ (0.01 ) $ (0.01 )
 
Non-GAAP net earnings (loss) per common share - diluted $ (0.01 ) $ (0.01 ) $ 0.01 $ - $ (0.03 )
Diluted weighted average number of common shares outstanding 36,427,683 35,716,603 35,687,650 35,657,519 35,586,455
 

See discussion of Non-GAAP financial measures later in this document

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. Reconciliations between non-GAAP and GAAP measures are set forth below.

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 are 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 (Generally Accepted Accounting Principles), including the net income or net loss of USAT 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 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 below the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

As used herein, non-GAAP net income 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-GAAP net earnings (loss) per common share - diluted is calculated by dividing non-GAAP net income (loss) applicable to common shares by the number of diluted weighted average shares outstanding.

Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, and 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 USAT's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of USAT. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance and liquidity, and because it is less susceptible to variances in actual performance resulting from depreciation and amortization and non-cash charges for changes in fair value of warrant liabilities and stock-based compensation expense.

Management believes that non-GAAP net income (loss) and non-GAAP net earnings (loss) per common share - diluted are important measures of USAT'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 these non-GAAP financial measures serve as useful metrics 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.

F-USAT

Investor Contact:
The Blueshirt Group
Mike Bishop, +1-415-217-4968
mike@blueshirtgroup.com

Source: USA Technologies, Inc.

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