USA Technologies, Inc.
USA TECHNOLOGIES INC (Form: 8-K, Received: 08/24/2017 06:03:14)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934


Date of report (Date of earliest event reported): August 22, 2017

USA TECHNOLOGIES, INC .
(Exact name of registrant as specified in its charter)

Pennsylvania
001-33365
23‑2679963
     
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)

100 Deerfield Lane, Suite 300
Malvern, Pennsylvania 19355
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: 610-989-0340

n/a
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 


Item 2.02.
Results of Operations and Financial Condition

On August 22, 2017, USA Technologies, Inc. (the “Company”), issued a press release reporting financial results for the fourth quarter and year ended June 30, 2017, a copy of which is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Item 9.01.
Financial Statements and Exhibits

Exhibit 99.1
Press Release of the Company dated August 22, 2017

SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: August 23, 2017
USA TECHNOLOGIES, INC.
     
 
By:
/s/ Stephen P. Herbert
   
Stephen P. Herbert,
   
Chairman and Chief Executive Officer
 
2

Index to Exhibits

Exhibit No.
Description of Exhibit
   
Press Release of the Company dated August 22, 2017
 
 
3


Exhibit 99.1
 
 
USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Results
 
Added Record 64,000 Connections in Q4:17, up 129% Year-Over-Year
 
MALVERN, Pa. August 22, 2017 – 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:
 
Achieved record quarterly revenue of $34.3 million, a year-over-year increase of 56% marking the 31 st consecutive quarter of growth
 
Record net connections of 64,000, a year-over-year increase of 129%
 
Quarterly record license and transaction fee revenue of $18.7 million, a year-over-year increase of 22%
 
Operating income of $432,000, compared to an operating loss of $1.6 million in the prior year period
 
Ended the quarter with $12.7 million in cash, which excludes $11.0 million of short-term finance receivables
 
Quarterly GAAP net income of $0.2 million, or $0.01 per share, compared to a net loss of $(872,000), or $(0.02) per share for the prior year period
 
Quarterly Non-GAAP net income of $0.2 million, or $0.01 per share, compared to Non-GAAP net loss of $(1.4) million, or $(0.04) per share for the prior year period
 
Quarterly Adjusted EBITDA of $2.8 million, a year-over-year increase of 344%
 
Fiscal Year Financial Highlights:
 
Record total revenue of $104.1 million, a year-over-year increase of 35%
 
Record 568,000 net connections to ePort service as of June 30, 2017, representing a year-over-year increase of 32%
 
Record net connections of 139,000, a year-over-year increase of 45%
 
1

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
Achieved a record 12,700 total customers, a year-over-year increase of 15%
 
Net loss was $(1.9) million, or $(0.06) per share, compared to a net loss of $(6.8) million, or $(0.21) per share for the fiscal year of 2016. The net loss for the fiscal year reflected a $1.5 million non-cash charge for the change in the fair value of warrant liabilities
 
Non-GAAP net loss was $(0.2) million, or $(0.02) per share, compared to non-GAAP net loss of $(0.7) million, of $(0.04) per share for the prior year period
 
Adjusted EBITDA of $7.1 million, a year-over-year increase of 18%
 
Fourth Quarter and Fiscal Year Financial Highlights, Connections & Transaction Data:
 
   
As of and for the three months ended
             
   
June 30,
             
(Connections and $'s in thousands, transactions in millions, eps is not rounded)
 
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
)
   
0.05
     
(125.0
%)
 
2

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results

   
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
   
$
1,094
     
18.3
%
                                 
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.”
 
3

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
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.
 
4

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
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.
 
5

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
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.
 
6

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
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.
 
7

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
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
 
8

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
(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
%
 
9

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
 
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
%
 
10

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
(B)
Five Quarter Select Key Performance Indicators

   
As of and for the three months ended
 
   
June 30,
2017
   
March 31,
2017
   
December 31,
2016
   
September 30,
2016
   
June 30,
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
%

*Includes credit sales with standard trade receivable terms
 
11

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
(C)
Comparative Balance Sheets at June 30, 2017 and June 30, 2016

($ in thousands)
 
June 30,
2017
   
June 30,
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
%
 
12

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
(D)
Five Quarter Statements of Operations and Adjusted EBITDA

   
For the three months ended
 
($ in thousands)
(unaudited)
 
June 30,
2017
   
% of Sales
   
March 31,
2017
   
% of Sales
   
December 31,
2016
   
% of Sales
   
September 30,
2016
   
% of Sales
   
June 30,
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
%
 
13

USA Technologies Announces Fourth Quarter and Fiscal Year 2017 Financial Results
 
(E)
Five Quarter and YTD Selling, General, & Administrative Expenses

   
Three months ended
 
($ in thousands)
 
June 30,
2017
   
% of
SG&A
   
March 31,
2017
   
% of
SG&A
   
December 31,
2016
   
% of
SG&A
   
September 30,
2016
   
% of
SG&A
   
June 30,
2016
   
% of
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