USA Technologies, Inc.
Feb 12, 2016

USA Technologies Announces Second 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 its second quarter ended December 31, 2015.

Second Quarter Financial Highlights:

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

             

Second Quarter Financial Highlights & Transaction Data:

 

Three months ended,

December 31,    
(Connections, transactions and $'s in thousands, except per share data) 2015     2014 # Change % Change
 
 
Revenues:
License and transaction fees $ 13,674 $ 10,480 $ 3,194 30 %
Equipment sales   4,829     2,342   2,487 106 %
Total revenues $ 18,503   $ 12,822   $ 5,681 44 %
 
License and transaction fees gross margin 33.7 % 31.7 % 2.0 % 6.3 %
 
Equipment sales gross margin 18.1 % 17.6 % 0.6 % 3.2 %
 
Operating income $ 594 $ 51 $ 543 1064.7 %
 
Adjusted EBITDA $ 2,260 $ 1,681 $ 579 34.4 %
 
Net loss $ (874 ) $ (261 ) $ (613 ) 234.9 %
 
Net loss per common share - basic and diluted $ (0.02 ) $ (0.01 ) $ (0.01 ) 100.0 %
 
Net New Connections 20 12 8 67 %
 
Total Connections (at period end) 369 288 81 28 %
 
Total Number of Transactions 76,000 51,000 25,000 49 %
 
Transaction Volume $ 138,000 $ 89,300 $ 48,700 55 %
 

"The growing success at USA Technologies validates that the self-service retail market is moving toward the acceptance and adoption of cashless payments," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "This is an exciting time for us as we see major customers move toward migrating all of their machines to the ePort Connect service, as we simultaneously increase our customer base. With the acquisition of VendScreen we are driving additional value to each connection with the most advanced cloud based interactive content delivery system for the self-service market. We are enthusiastic about the traction we have made this quarter and our organic growth, coupled with the increasing operating leverage, underpin our confidence that USAT will continue to deliver strong results."

Fiscal 2016 Outlook

For full fiscal year 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 today, February 12, 2016.

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 # 42182812.

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 February 12, 2016 until 11:59 p.m. Eastern Time on February 15, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 42182812. 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 78 United States and foreign patents in force; 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 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; 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; whether USAT's ongoing remediation of a material weakness that USAT identified in its internal controls over financial reporting, and which was reflected in our annual report on Form 10-K for the fiscal year ended June 30, 2015, would be effective; whether USAT experiences additional material weaknesses in its internal controls over financial reporting in the future, and USAT is not 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.

Financial Schedules:

A. Comparative Income Statement For 6 Months Ended December 31, 2015 and December 31, 2014

B. Comparative Income Statement For 3 Months Ended December 31, 2015 and December 31, 2014

C. Five Quarter Select Key Performance Indicators

D. Comparative Condensed Balance Sheets December 31, 2015 to June 30, 2015

E. Five Quarter Statement of Operations and Adjusted EBITDA

F. Five Quarter Selling, General, & Administrative Expenses

G. Five Quarter Condensed Balance Sheet and Other Data

H. Five Quarter Condensed Statement of Cash Flows

I. Consolidated Statement of Shareholders' Equity

J. Reconciliation of Net 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

NEW ACCOUNTING CLASSIFICATION

Commencing with the September 30, 2015 financial statements, the Company changed 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 moves these amounts to accounts receivable and allowance for bad debt.

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 December 31, 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 6 Months Ended December 31, 2015 and December 31, 2014

 
($ in thousands, except share and per share data) For the six months ended December 31,
(unaudited) 2015    

% of
Sales

    2014    

% of
Sales

Change % Change
 
Revenues:
License and transaction fees $ 26,599 75.8 % $ 20,636 82.3 % $ 5,963 28.9 %
Equipment sales   8,504   24.2 %   4,438   17.7 % 4,066 91.6 %
Total revenues 35,103 100.0 % 25,074 100.0 % 10,029 40.0 %
 
Costs of sales/revenues:
Cost of services 17,772 66.8 % 14,409 69.8 % 3,363 23.3 %
Cost of equipment   6,801   80.0 %   3,796   85.5 % 3,005 79.2 %
Total costs of sales/revenues   24,573   70.0 %   18,205   72.6 % 6,368 35.0 %
 
Gross profit:
License and transaction fees 8,827 33.2 % 6,227 30.2 % 2,600 41.8 %
Equipment sales   1,703   20.0 %   642   14.5 % 1,061 165.3 %
Total gross profit   10,530   30.0 %   6,869   27.4 % 3,661 53.3 %
 
Operating expenses:
Selling, general and administrative 9,558 27.2 % 7,163 28.6 % 2,395 33.4 %
Depreciation   266   0.8 %   321   1.3 % (55 ) -17.1 %
Total operating expenses   9,824   28.0 %   7,484   29.8 % 2,340 31.3 %
Operating income (loss) 706 2.0 % (615 ) -2.5 % 1,321 -214.8 %
 
Other income (expense):
Interest income 71 0.2 % 14 0.1 % 57 407.1 %
Interest expense (223 ) -0.6 % (124 ) -0.5 % (99 ) 79.8 %
Change in fair value of warrant liabilities   (887 ) -2.5 %   445   1.8 % (1,332 ) -299.3 %
Total other income (expense), net   (1,039 ) -3.0 %   335   1.3 % (1,374 ) -410.1 %
 
(Loss) before provision for income taxes (333 ) -0.9 % (280 ) -1.1 % (53 ) 18.9 %
Provision for income taxes   (181 )   (42 ) (139 ) 331.0 %
 
Net loss (514 ) -1.5 % (322 ) -1.3 % (192 ) 59.6 %
Cumulative preferred dividends   (332 ) -0.9 %   (332 ) -1.3 % - 0.0 %
Net loss applicable to common shares $ (846 ) -2.4 % $ (654 ) -2.6 % $ (192 ) 29.4 %
Net loss per common share - basic and diluted $ (0.02 ) $ (0.02 ) $ - 0.0 %
Basic and diluted weighted average number of common shares outstanding 35,808,488 35,625,199 183,289 0.5 %
 
Adjusted EBITDA $ 4,011   11.4 % $ 2,627   20.5 % $ 1,384 52.7 %
 
Non-GAAP net income (loss) applicable to common shares $ 415   1.2 % $ (704 ) -5.5 % $ 1,119 158.9 %
 
             

(B) Comparative Income Statement For 3 Months Ended December 31, 2015 and December 31, 2014

 
($ in thousands, except share and per share data) For the three months ended December 31,
(unaudited) 2015    

% of
Sales

    2014    

% of
Sales

Change % Change
 
Revenues:
License and transaction fees $ 13,674 73.9 % $ 10,480 81.7 % $ 3,194 30.5 %
Equipment sales   4,829   26.1 %   2,342   18.3 % 2,487 106.2 %
Total revenues 18,503 100.0 % 12,822 100.0 % 5,681 44.3 %
 
Costs of sales/revenues:
Cost of services 9,067 66.3 % 7,158 68.3 % 1,909 26.7 %
Cost of equipment   3,953   81.9 %   1,930   82.4 % 2,023 104.8 %
Total costs of sales/revenues   13,020   70.4 %   9,088   70.9 % 3,932 43.3 %
 
Gross profit:
License and transaction fees 4,607 33.7 % 3,322 31.7 % 1,285 38.7 %
Equipment sales   876   18.1 %   412   17.6 % 464 112.6 %
Total gross profit   5,483   29.6 %   3,734   29.1 % 1,749 46.8 %
 
Operating expenses:
Selling, general and administrative 4,762 25.7 % 3,531 27.5 % 1,231 34.9 %
Depreciation   127   0.7 %   152   1.2 % (25 ) -16.4 %
Total operating expenses   4,889   26.4 %   3,683   28.7 % 1,206 32.7 %
Operating income 594 3.2 % 51 0.4 % 543 1064.7 %
 
Other income (expense):
Interest income 20 0.1 % 4 0.0 % 16 400.0 %
Interest expense (104 ) -0.6 % (49 ) -0.4 % (55 ) 112.2 %
Change in fair value of warrant liabilities   (1,230 ) -6.6 %   135   1.1 % (1,365 ) -1011.1 %
Total other income (expense), net   (1,314 ) -7.1 %   90   0.7 % (1,404 ) -1560.0 %
 
Income (loss) before provision for income taxes (720 ) -3.9 % 141 1.1 % (861 ) -610.6 %
Provision for income taxes   (154 )   (402 ) 248 -61.7 %
 
Net loss (874 ) -4.7 % (261 ) -2.0 % (613 ) 234.9 %
Cumulative preferred dividends   -   0.0 %   -   0.0 % - 0.0 %
Net loss applicable to common shares $ (874 ) -4.7 % $ (261 ) -2.0 % $ (613 ) 234.9 %
Net loss per common share - basic and diluted $ (0.02 ) $ (0.01 ) $ (0.01 ) 100.0 %
Basic and diluted weighted average number of common shares outstanding 35,828,776 35,657,519 171,257 0.5 %
 
Adjusted EBITDA $ 2,260   12.2 % $ 1,681   13.1 % $ 579 34.4 %
 
Non-GAAP net income (loss) applicable to common shares $ 686   3.7 % $ 6   0.0 % $ 680 11333.3 %
 
         

(C) Five Quarter Select Key Performance Indicators:

 
Three months ended
(unaudited) December 31,   September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
Connections:
Gross New Connections 24,000 20,000 34,000 24,000 14,000
% from Existing Customer Base 89 % 86 % 89 % 82 % 82 %
Net New Connections 20,000 16,000 31,000 14,000 12,000
Total Connections 369,000 349,000 333,000 302,000 288,000
 
Customers:
New Customers Added 350 675 675 475 550
Total Customers 10,625 10,275 9,600 8,925 8,450
 
Volumes:
Total Number of Transactions (millions) 76.0 68.8 62.2 54.8 51.0
Transaction Volume ($millions) $ 138.0 $ 126.4 $ 112.8 $ 97.7 $ 89.3
 

Financing Structure of Connections:

JumpStart 10.1 % 10.2 % 6.0 % 11.3 % 14.4 %
QuickStart & All Others *   89.9 %     89.8 %     94.0 %     88.7 %     85.6 %
Total   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
 

*Includes credit sales with standard trade receivable terms

 
                   

(D) Comparative Condensed Balance Sheets December 31, 2015 to June 30, 2015

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

2015

2015

$ Change

% Change

 
Assets
Current assets:
Cash $ 14,809 $ 11,374 $ 3,435 30 %
Accounts receivable, less allowance * 6,976 5,971 1,005 17 %
Finance receivables 1,503 941 562 60 %
Inventory 2,849 4,216 (1,367 ) -32 %
Deferred income taxes 1,258 1,258 - 0 %
Prepaid expenses and other current assets   902     574     328   57 %
Total current assets 28,297 24,334 3,963 16 %
 
Finance receivables, less current portion 2,435 3,698 (1,263 ) -34 %
Property and equipment, net 10,856 12,869 (2,013 ) -16 %
Goodwill and intangbiles 8,095 8,095 - 0 %
Deferred income taxes 25,607 25,788 (181 ) -1 %
Other assets   326     350     (24 ) -7 %
Total assets $ 75,616   $ 75,134   $ 482   1 %
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable * $ 7,876 $ 10,542 $ (2,666 ) -25 %
Accrued expenses 2,116 2,108 8 0 %
Line of credit 7,000 4,000 3,000 75 %
Current obligations under long-term debt 524 478 46 10 %
Income taxes payable - 54 (54 ) -100 %
Deferred gain from sale-leaseback transactions   860     860     -   0 %
Total current liabilities 18,376 18,042 334 2 %
Long-term liabilities
Long-term debt, less current portion 1,584 1,854 (270 ) -15 %
Accrued expenses, less current portion 26 49 (23 ) -47 %
Warrant liabilities 1,865 978 887 91 %
Deferred gain from sale-leaseback transactions, less current portion   470     900     (430 ) -48 %
Total long-term liabilities   3,945     3,781     164   4 %
Total liabilities   22,321     21,823     498   2 %
 
Shareholders' equity:
Preferred stock, no par value 3,138 3,138 - 0 %
Common stock, no par value 225,372 224,874 498 0 %
Accumulated deficit   (175,215 )   (174,701 )   (514 ) 0 %
Total shareholders' equity   53,295     53,311     (16 ) 0 %
Total liabilities and shareholders' equity $ 75,616   $ 75,134   $ 482   1 %
 
Total current assets $ 28,297 $ 24,334 $ 3,963 16 %
Total current liabilities   18,376     18,042     334   2 %
Net working capital $ 9,921 $ 6,292 $ 3,629 58 %
 
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications $ -   $ 1,299  
 
   

(E) Five Quarter Statement of Operations and Adjusted EBITDA

 
For the three months ended
(unaudited) December 31,  

 

  September 30,  

 

  June 30,  

 

  March 31,  

 

  December 31,  

 

2015  

% of Sales

  2015  

% of Sales

  2015  

% of Sales

  2015  

% of Sales

  2014  

% of Sales

Revenues:
License and transaction fees $ 13,674 73.9 % $ 12,925 77.9 % $ 11,938 67.7 % $ 11,060 72.0 % $ 10,480 81.7 %
Equipment Sales   4,829   26.1 %   3,675   22.1 %   5,708   32.3 %   4,298   28.0 %   2,342   18.3 %
Total revenue 18,503 100.0 % 16,600 100.0 % 17,646 100.0 % 15,358 100.0 % 12,822 100.0 %
 
Costs of sales/revenues:
License and transaction fees 9,067 66.3 % 8,705 67.4 % 7,863 65.9 % 7,157 64.7 % 7,158 68.3 %
Equipment sales   3,953   81.9 %   2,848   77.5 %   4,975   87.2 %   3,055   71.1 %   1,930   82.4 %
Total costs of sales/revenues 13,020 70.4 % 11,553 69.6 % 12,838 72.8 % 10,213 57.9 % 9,088 51.5 %
 
Gross Profit:
License and transaction fees 4,607 33.7 % 4,220 32.6 % 4,075 34.1 % 3,903 35.3 % 3,323 31.7 %
Equipment sales   876   18.1 %   827   22.5 %   733   12.8 %   1,243   28.9 %   412   17.6 %
Total gross profit 5,483 29.6 % 5,047 30.4 % 4,808 27.2 % 5,145 33.5 % 3,734 29.1 %
 
Operating expenses:
Selling, general and administrative 4,762 25.7 % 4,796 28.9 % 5,009 28.4 % 4,280 27.9 % 3,531 27.5 %
Depreciation   127   0.7 %   139   0.8 %   156   0.9 %   135   0.9 %   152   1.2 %
Total operating expenses 4,889 26.4 % 4,935 29.7 % 5,165 29.3 % 4,415 28.7 % 3,683 28.7 %
         
Operating income (loss)   594   3.2 %   112   0.7 %   (357 ) -2.0 %   730   4.8 %   51   0.4 %
 
Other income (expense):
Interest income 20 0.1 % 51 0.3 % 42 0.3 % 26 0.2 % 4 0.0 %
Other income - 0.0 % - 0.0 % 52 0.3 % - 0.0 % - 0.0 %
Interest expense (104 ) -0.6 % (119 ) -0.7 % (92 ) -0.6 % (85 ) -0.5 % (49 ) -0.3 %
Change in fair value of warrant liabilities   (1,230 ) -7.4 %   343   2.1 %   263   1.6 %   (1,101 ) -6.6 %   135   0.8 %
Total other income (expense), net (1,314 ) -7.1 % 275 1.7 % 265 1.5 % (1,160 ) -7.6 % 90 0.7 %
 
Income (loss) before provision for income taxes (720 ) -3.9 % 387 2.3 % (92 ) -0.5 % (429 ) -2.8 % 141 1.1 %
Provision for income taxes (154 ) -0.8 % (27 ) -0.2 % (109 ) -0.6 % (138 ) -0.9 % (402 ) -3.1 %
         
Net income (loss)   (874 ) -4.7 %   360   2.2 %   (201 ) -1.1 %   (567 ) -3.7 %   (261 ) -2.0 %
 
 
Less interest income (20 ) -0.1 % (51 ) -0.3 % (42 ) -0.3 % (26 ) -0.2 % (4 ) 0.0 %
Plus interest expenses 104 0.6 % 119 0.7 % 92 0.6 % 85 0.5 % 49 0.3 %
Plus income tax expense 154 0.9 % 27 0.2 % 109 0.7 % 138 0.8 % 402 2.4 %
Plus depreciation expense 1,323 8.0 % 1,350 8.1 % 1,381 8.3 % 1,433 8.6 % 1,444 8.7 %
Plus (less) change in fair value of warrant liabilities 1,230 7.4 % (343 ) -2.1 % (263 ) -1.6 % 1,101 6.6 % (135 ) -0.8 %
Plus stock-based compensation 237 1.4 % 272 1.6 % 175 1.1 % 216 1.3 % 186 1.1 %
Plus due diligence/ acquisition costs   106   0.6 %   17   0.1 %   -   0.0 %   -   0.0 %   -   0.0 %
Adjusted EBITDA $ 2,260   12.2 % $ 1,751   10.6 % $ 1,251   7.1 % $ 2,380   15.5 % $ 1,681   13.1 %
 

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

                                       

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

 

Three months ended

($ in thousands) December 31, % of September 30, % of June 30, % of March 30, % of December 31, % of
(unaudited) 2015 SG&A 2015 SG&A 2015 SG&A 2015 SG&A 2014 SG&A
 
Salaries and benefit costs $ 2,786 58.6 % $ 2,685 56.0 % $ 2,295 45.8 % $ 2,533 59.2 % $ 2,132 60.4 %
Marketing related expenses 335 7.0 % 333 6.9 % 580 11.6 % 184 4.3 % 215 6.1 %
Professional services 839 17.6 % 782 16.3 % 844 16.8 % 708 16.5 % 460 13.0 %
Bad debt expense 239 5.0 % 236 4.9 % 497 9.9 % 303 7.1 % 141 4.0 %
Premises, equipment and insurance costs 347 7.3 % 399 8.3 % 475 9.5 % 372 8.7 % 370 10.5 %
Research and development expenses 37 0.8 % 191 4.0 % 154 3.1 % 96 2.2 % 115 3.3 %
Due Diligence/ Acquisition Costs 106 2.2 % 17 0.4 % - 0.0 % - 0.0 % - 0.0 %
Other expenses   73   1.5 %     153   3.2 %     164   3.3 %     84   2.0 %     98   2.8 %
Total SG&A expenses $ 4,762   100 %   $ 4,796   100 %   $ 5,009   100 %   $ 4,280   100 %   $ 3,531   100 %
 
             

(G) Five Quarter Condensed Balance Sheet and Other Data

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

2015

2015

2015

2015

2014

 
Assets
Current assets:
Cash $ 14,809 $ 11,592 $ 11,374 $ 8,475 $ 6,734
Accounts receivable, less allowance * 6,976 6,448 5,971 5,245 4,591
Finance receivables 1,503 946 941 750 363
Inventory 2,849 3,718 4,216 4,241 3,448
Other current assets   2,160   1,883   1,832   1,322   1,495  
Total current assets 28,297 24,587 24,334 20,033 16,631
 
Finance receivables, less current portion 2,435 3,525 3,698 3,505 1,643
Other assets 326 342 350 423 411
Property and equipment, net 10,856 11,890 12,869 13,574 16,451
Deferred income taxes 25,607 25,761 25,788 26,169 26,290
Goodwill and intangibles   8,095   8,095   8,095   8,095   8,095  
Total assets $ 75,616 $ 74,200 $ 75,134 $ 71,799 $ 69,521  
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses * $ 9,992 $ 11,615 $ 12,650 $ 9,044 $ 8,945
Line of credit 7,000 4,000 4,000 4,000 4,000
Other current liabilities   1,384   1,497   1,392   1,294   1,064  
Total current liabilities 18,376 17,112 18,042 14,338 14,009
Long-term liabilities          
Total long-term liabilities   3,945   3,116   3,781   4,134   1,834  
Total liabilities   22,321   20,228   21,823   18,472   15,843  
 
Shareholders' equity:          
Total shareholders' equity   53,295   53,972   53,311   53,327   53,678  
Total liabilities and shareholders' equity $ 75,616 $ 74,200 $ 75,134 $ 71,799 $ 69,521  
 
Total current assets $ 28,297 $ 24,587 $ 24,334 $ 20,033 $ 16,631
Total current liabilities   18,376   17,112   18,042   14,338   14,009  
Net working capital $ 9,921 $ 7,475 $ 6,292 $ 5,695 $ 2,622
 
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications $ - $ - $ 1,299 $ 1,842 $ 1,832  
 
 

Free cash flow (from operations less cash for purchase of rental equipment)

$ 507 $ 362 $ 2,680 $ 65 $ (3,039 )
 
   

(H) Five Quarter Condensed Statement of Cash Flows

 
Three months ended
December 31,   September 30,   June 30,   March 31,   December 31,
($ in thousands) 2015   2015   2015   2015   2014
(unaudited)
 
OPERATING ACTIVITIES:
Net income (loss) $ (874 ) $ 360 $ (201 ) $ (567 ) $ (261 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Charges incurred in connection with the vesting and issuance of common stock for employee and director compensation

237 272 175 216 186
Gain on disposal of property and equipment (41 ) (1 ) (4 ) (6 ) (4 )
Bad debt expense 238 236 497 303 141
Depreciation 1,323 1,350 1,381 1,433 1,444
Change in fair value of warrant liabilities 1,230 (343 ) (263 ) 1,101 (135 )
Deferred income taxes, net 154 27 31 121 424
Gain on sale of finance receivables - - (52 ) - -
Recognition of deferred gain from sale-leaseback transactions (215 ) (215 ) (215 ) (215 ) (215 )
Changes in operating assets and liabilities:
Accounts receivable * (767 ) (713 ) (1,223 ) (984 ) (842 )
Finance receivables 533 168 (332 ) (2,249 ) (778 )
Inventory 649 219 (639 ) 651 (805 )
Prepaid expenses and other assets (254 ) 48 (97 ) 151 (248 )
Accounts payable * (1,623 ) (1,044 ) 3,491 (141 ) (1,859 )
Accrued expenses (13 ) (2 ) 93 234 (87 )
Income taxes payable   (70 )     -       37       17       -  
Net change in operating assets and liabilities   (1,545 )     (1,324 )     1,330       (2,321 )     (4,619 )
 
Net cash provided by (used in) operating activities 507 362 2,680 65 (3,039 )
 
INVESTING ACTIVITIES:
Purchase of property and equipment (33 ) (49 ) (6 ) (4 ) (19 )
Additions of internally developed software (85 ) - - - -
Proceeds from sale of property and equipment   101       4       8       19       11  
 
Net cash provided by (used in) investing activities (17 ) (45 ) 2 16 (8 )
 
FINANCING ACTIVITIES:

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

(40 ) 29 - - (62 )
Excess tax benefits from share-based compensation - - 10 - -
Proceeds (repayment) of line of credit, net 3,000 - - - (1,000 )
Proceeds from long-term debt - - 304 1,753 -
Repayment of long-term debt   (233 )     (128 )     (97 )     (93 )     (73 )
 
Net cash provided by (used in) financing activities   2,727       (99 )     217       1,660       (1,135 )
 
Net increase (decrease) in cash 3,217 218 2,899 1,741 (4,182 )
 
Cash at beginning of period   11,592       11,374       8,475       6,734       10,916  
 
Cash at end of period $ 14,809     $ 11,592     $ 11,374     $ 8,475     $ 6,734  
 
Supplemental disclosures of cash flow information:
Depreciation expense allocated to cost of services $ 1,186     $ 1,199     $ 1,252     $ 1,289     $ 1,283  
Reclass of rental program property to (from) inventory, net $ 777     $ (279 )   $ (719 )   $ 1,374     $ 14  
 
* Accounts Receivable

·Reclassification of cash provided by and included in accounts payable to accounts receivable

$ -     $ -     $ 543     $ (10 )   $ (479 )
 
* Accounts Payable

·Reclassification of cash provided by and included in accounts payable to accounts receivable

$ -     $ -     $ (543 )   $ 10     $ 479  
 
           

(I) Consolidated Statement of Shareholders' Equity

 
Series A
Convertible
Preferred Stock Common Stock Accumulated
($ in thousands, except shares) 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 - - 88,678 302 - 302
2014 Stock Option Incentive Plan - - - 207 - 207
Retirement of common stock - - (12,746 ) (40 ) - (40 )
Net loss -   - -     -     (514 )   (514 )
 
Balance, December 31, 2015 442,968 $ 3,138 35,834,174   $ 225,372   $ (175,215 ) $ 53,295  
 
           

(J) Reconciliation of Net 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

 
Three months ended
($ in thousands) December 31, September 30, June 30, March 31, December 31,
(unaudited) 2015   2015   2015   2015   2014
 
Net income (loss) $ (874 ) $ 360 $ (201 ) $ (567 ) $ (261 )
Non-GAAP adjustments:
Non-cash portion of income tax provision 224 27 72 121 402
Fair value of warrant adjustment 1,230 (343 ) (263 ) 1,101 (135 )
Due Diligence/ Acquisition Costs   106       -       -       -       -  
Non-GAAP net income (loss) $ 686     $ 44     $ (392 )   $ 655     $ 6  
 
Net income (loss) $ (874 ) $ 360 $ (201 ) $ (567 ) $ (261 )
Cumulative preferred dividends   -       (332 )     -       (332 )     -  
Net income (loss) applicable to common shares $ (874 )   $ 28     $ (201 )   $ (899 )   $ (261 )
 
Non-GAAP net income (loss) $ 686 $ 44 $ (392 ) $ 655 $ 6
Cumulative preferred dividends   -       (332 )     -       (332 )     -  
Non-GAAP net income (loss) applicable to common shares $ 686     $ (288 )   $ (392 )   $ 323     $ 6  
 
Net earnings (loss) per common share - basic $ (0.02 )   $ -     $ (0.01 )   $ (0.03 )   $ (0.01 )
Non-GAAP net earnings (loss) per common share - basic $ 0.02 $ (0.01 ) $ (0.01 ) $ 0.01 $ -
Basic weighted average number of common shares outstanding 35,828,776 35,788,199 35,716,603 35,687,650 35,657,519
 
Net earnings (loss) per common share - diluted $ (0.02 )   $ (0.01 )   $ (0.01 )   $ (0.03 )   $ (0.01 )
Non-GAAP net earnings (loss) per common share - diluted $ 0.02 $ (0.01 ) $ (0.01 ) $ 0.01 $ -
Diluted weighted average number of common shares outstanding 35,828,776 36,427,683 35,716,603 35,687,650 35,657,519
 

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 above in Financial Schedules (E) and (J).

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 (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 above in Financial Schedules (E) and (J) 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, non-cash portions of the Company's income tax benefit (provision), and nonrecurring professional service fees recorded in SG&A that were incurred in connection with the VendScreen transaction. 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.

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.

Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, nonrecurring professional service fees recorded in SG&A that were incurred in connection with the VendScreen transaction, 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. We have excluded the nonrecurring professional service fees incurred in connection with the VendScreen transaction in order to allow more accurate comparisons of the financial results to historical operations. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance and liquidity, and because it allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

F-USAT

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

Source: USA Technologies, Inc.

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