Release Details

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

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

Fourth Quarter Financial Highlights:

• 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%
• 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,
($'s in thousands, transactions in millions)			2017			2016			Change			% Change
Revenues:
License and transaction fees			$	18,679		$	15,263		$	3,416		22.4%
Equipment sales				15,610			6,681			8,929		133.6%
Total revenues			$	34,289		$	21,944		$	12,345		56.3%
License and transaction fee margin				32.8%			30.5%			2.3%
Equipment sales gross margin				8.9%			17.0%			-8.1%
Overall Gross Margin				21.9%			26.4%			(4.5%)
Operating income/(loss)			$	432		$	(1,578)		$	2,010		127.4%
Net income/(loss)			$	243		$	(872)		$	1,115		127.9%
Net loss per common shares - basic and diluted			$	0.01		$	(0.02)		$	0.03		150.0%
Net cash provided by (used in) operating activities			$	(2,476)		$	1,273		$	(3,749)		(294.5%)
Net New Connections				64,000			28,000			36,000		128.6%
Total Connections (at period end)				568,000			429,000			139,000		32.4%
Total Number of Transactions (millions)				114.8			89.3			25.5		28.6%
Transaction Volume (millions)			$	225.6		$	169.0		$	56.6		33.5%
Adjusted EBITDA			$	2,781		$	626		$	2,155		344.2%
Non-GAAP net income (loss)			$	203		$	(1,373)		$	1,576		114.8%
Basic weighted average number of common shares outstanding				40,331,993			37,325,681			3,006,312		8.1%
Diluted weighted average number of common shares outstanding				40,772,482			37,325,681			3,446,801		9.2%
Non-GAAP net earnings (loss) per common share - basic and diluted				0.01			(0.04)			0.04		(113.7%)
			As of and for the year ended
			June 30,
($'s in thousands, transactions in millions)			2017			2016			Change			% Change
Revenues:
License and transaction fees			$	69,142		$	56,589		$	12,553		22.2%
Equipment sales				34,951			20,819			14,132		67.9%
Total revenues			$	104,093		$	77,408		$	26,685		34.5%
License and transaction fee margin				31.9%			32.7%			(0.7%)
Equipment sales gross margin				13.0%			16.7%			(3.7%)
Overall Gross Margin				25.6%			28.4%			(2.8%)
Operating (loss)/income			$	135		$	(1,467)		$	1,602		(109.2%)
Net loss			$	(1,852)		$	(6,806)		$	4,954		72.8%
Net loss per common shares - basic and diluted			$	(0.06)		$	(0.21)		$	0.15		71.4%
Net cash provided by (used in) operating activities			$	(6,771)		$	6,468		$	(13,239)		(204.7%)
Net New Connections				139,000			96,000			43,000		44.8%
Total Connections (at period end)				568,000			429,000			139,000		32.4%
Total Number of Transactions (millions)				414.9			315.8			99.1		31.4%
Transaction Volume (millions)			$	803.0		$	584.4		$	218.6		37.4%
Adjusted EBITDA			$	7,077		$	5,983		$	7,790		(1092.6%)
Non-GAAP net income (loss)			$	(166)		$	(713)		$	547		(76.7%)
Cumulative preferred dividends				(668)			(668)			—		0.0%
Net (loss) income applicable to common shares				(834)			(1,381)			547		(39.6%)
Basic weighted average number of common shares outstanding				39,860,335			36,309,047			3,551,288		9.8%
Diluted weighted average number of common shares outstanding				39,860,335			36,309,047			3,551,288		9.8%
Non-GAAP net earnings (loss) per common share - basic and diluted				(0.02)			(0.04)			0.02		(45.0%)

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

Fiscal Year 2018 Outlook

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

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

Webcast and Conference Call

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

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

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

About USA Technologies

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

Discussion of Non-GAAP Financial Measures:

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

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

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

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

Forward-looking Statements:

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

F-USAT

Financial Schedules:

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

B. Five Quarter Select Key Performance Indicators

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

D. Five Quarter Statements of Operations and Adjusted EBITDA

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

F. Five Quarter Condensed Balance Sheets

G. Five Quarter Statements of Cash Flows

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

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

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

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

(B) Five Quarter Select Key Performance Indicators

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

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

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

(D) Five Quarter Statements of Operations and Adjusted EBITDA

		For the three months ended
($ in thousands)		June 30,					March 31,					December 31,					September 30,					June 30,
(unaudited)		2017			% of Sales		2017			% of Sales		2016			% of Sales		2016			% of Sales		2016			% of Sales
Revenues:
License and transaction fees		$	18,679		54.5%		$	17,459		76.5%		$	16,639		75.8%		$	16,365		69.6%		$	15,263		72.3%
Equipment Sales			15,610		45.5%			9,001		23.5%			5,117		24.2%			5,223		30.4%			6,681		27.7%
Total revenue			34,289		100.0%			26,460		100.0%			21,756		100.0%			21,588		100.0%			21,944		100.0%
Costs of sales/revenues:
License and transaction fees			12,545		67.2%			11,876		68.4%			11,389		68.7%			11,243		69.5%			10,614		65.9%
Equipment sales			14,224		91.1%			7,959		78.8%			4,033		80.0%			4,178		83.0%			5,547		88.5%
Total costs of sales/revenues			26,769		78.1%			19,835		70.9%			15,422		71.4%			15,421		73.6%			16,161		72.1%
Gross Profit:
License and transaction fees			6,134		32.8%			5,583		31.6%			5,250		31.3%			5,122		30.5%			4,649		34.1%
Equipment sales			1,386		8.9%			1,042		21.2%			1,084		20.0%			1,045		17.0%			1,134		11.5%
Total gross profit			7,520		21.9%			6,625		29.1%			6,334		28.6%			6,167		26.4%			5,783		27.9%
Operating expenses:
Selling, general and administrative			6,844		20.0%			5,947		26.6%			5,793		32.0%			6,909		30.6%			6,721		29.9%
Depreciation			244		0.7%			259		1.4%			307		1.0%			208		0.9%			208		0.8%
Impairment of intangible asset			—		0.0%			—		0.0%			—		0.0%			—		2.0%			432		0.0%
Total operating expenses			7,088		20.7%			6,206		28.0%			6,100		33.0%			7,117		33.5%			7,361		30.8%
Operating income (loss)			432		1.3%			419		1.1%			234		-4.4%			(950)		-7.2%			(1,578)		-2.9%
Other income (expense):
Interest income			95		0.3%			114		0.9%			200		0.3%			73		0.8%			182		0.3%
Interest expense			(291)		-0.8%			(188)		-0.9%			(201)		-1.0%			(212)		-0.9%			(197)		-0.9%
Change in fair value of warrant liabilities			—		0.0%			—		0.0%			—		-6.9%			(1,490)		0.1%			18		-23.6%
Total other (expense) income , net			(196)		-0.6%			(74)		0.0%			(1)		-7.5%			(1,629)		0.0%			3		-24.2%
Income (loss) before provision for income taxes			236		0.7%			345		1.1%			233		-11.9%			(2,579)		-7.2%			(1,575)		-27.1%
(Provision) benefit for income taxes			7		0.0%			(209)		0.0%			—		0.5%			115		3.2%			703		0.5%
Net income (loss)			243		0.7%			136		1.1%			233		-11.4%			(2,464)		-4.0%			(872)		-26.6%
Less interest income			(95)		-0.3%			(114)		-0.9%			(200)		-0.3%			(73)		-0.8%			(182)		-0.3%
Plus interest expenses			291		0.8%			188		0.9%			201		1.0%			212		0.9%			197		0.9%
Plus income tax expense			(7)		0.0%			209		0.0%			—		-0.5%			(115)		-3.2%			(703)		-0.5%
Plus depreciation expense			1,768		5.2%			1,165		5.6%			1,220		5.8%			1,257		5.8%			1,272		5.8%
Plus amortization expense			43		0.1%			45		0.2%			43		0.2%			44		0.2%			44		0.2%
Plus (less) change in fair value of warrant liabilities			—		0.0%			—		0.0%			—		6.9%			1,490		-0.1%			(18)		23.6%
Plus stock-based compensation			538		1.6%			233		1.1%			233		1.0%			211		0.9%			198		0.7%
Plus intangible asset impairment			—		0.0%			—		0.0%			—		0.0%			—		2.0%			432		0.0%
Plus VendScreen non-recurring charges			—		0.0%			—		0.0%			8		0.5%			101		1.2%			258		2.3%
Plus litigation related professional fees			—		0.0%			—		0.0%			—		0.2%			33		0.0%			—		0.5%
Adjusted EBITDA		$	2,781		8.1%		$	1,862		8.0%		$	1,738		3.2%		$	696		2.9%		$	626		6.6%

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

		Three months ended
		June 30,			% of		March 31,			% of		December 31,			% of		September 30,			% of		June 30,			% of
($ in thousands)		2017			SG&A		2017			SG&A		2016			SG&A		2016			SG&A		2016			SG&A
Salaries and benefit costs		$	3,027		44.2%		$	3,060		49.2%		$	2,849		49.2%		$	3,129		45.3%		$	3,050		45.4%
Marketing related expenses			731		10.7%			569		10.0%			578		10.0%			329		4.8%			635		9.4%
Professional services			2,092		30.6%			1,472		20.9%			1,213		20.9%			2,520		36.5%			1,533		22.8%
Bad debt expense			187		2.7%			127		6.1%			352		6.1%			97		1.4%			470		7.0%
Premises, equipment and insurance costs			630		9.2%			482		8.6%			498		8.6%			499		7.2%			555		8.3%
Research and development expenses			53		0.8%			95		3.0%			173		3.0%			124		1.8%			123		1.8%
VendScreen non-recurring charges			—		0.0%			—		0.1%			8		0.1%			101		1.5%			258		3.8%
Litigation related professional fees			—		0.0%			—		0.0%			—		0.0%			33		0.5%			51		0.8%
Other expenses			123		1.8%			142		2.1%			122		2.1%			77		1.1%			46		0.7%
Total SG&A expenses		$	6,843		100%		$	5,947		100%		$	5,793		100%		$	6,909		100%		$	6,721		100%
Total Revenue		$	34,289				$	26,460				$	21,756				$	21,588				$	21,944
SG&A expenses as a percentage of revenue			20.0%					22.5%					26.6%					32.0%					30.6%

		For the year ended
		June 30,			% of		June 30,			% of
($ in thousands)		2017			SG&A		2016			SG&A
Salaries and benefit costs		$	12,065		47.3%		$	11,282		50.4%
Marketing related expenses			2,207		8.7%			1,665		7.4%
Professional services			7,297		28.6%			4,410		19.7%
Bad debt expense			764		3.0%			1,450		6.5%
Premises, equipment and insurance costs			2,109		8.3%			1,761		7.9%
Research and development expenses			445		1.7%			482		2.2%
VendScreen non-recurring charges			109		0.4%			842		3.8%
Litigation related professional fees			33		0.1%			156		0.7%
Other expenses			464		1.8%			325		1.5%
Total SG&A expenses		$	25,493		100.0%		$	22,373		100.0%
Total Revenue		$	104,093				$	77,408
SG&A expenses as a percentage of revenue			24.5%					28.9%

(F) Five Quarter Condensed Balance Sheets

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

(G) Five Quarter Statements of Cash Flows

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

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

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

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

		Year ended
($ in thousands)		June 30,				June 30,
(unaudited)		2017				2016
Net Loss		$	(1,852	)		$	(6,806	)
Non-GAAP adjustments:
Non-cash portion of income tax provision			54				(579	)
Change in fair value of warrant adjustment			1,490				5,674
VendScreen non-recurring charges			109				842
Litigation related professional fees			33				156
Non-GAAP net income (loss)		$	(166	)		$	(713	)
Net income (loss)		$	(1,852	)		$	(6,806	)
Cumulative preferred dividends			(668	)			(668	)
Net (loss) income applicable to common shares		$	(2,520	)		$	(7,474	)
Non-GAAP net income (loss)		$	(166	)		$	(713	)
Cumulative preferred dividends			(668	)			(668	)
Non-GAAP net income (loss) applicable to common shares		$	(834	)		$	(1,381	)
Net earnings (loss) per common share - basic and diluted		$	(0.06	)		$	(0.21	)
Non-GAAP net earnings (loss) per common share - basic and diluted		$	(0.02	)		$	(0.04	)
Basic weighted average number of common shares outstanding			39,860,335				36,309,047
Diluted weighted average number of common shares outstanding			39,860,335				36,309,047

View source version on businesswire.com: http://www.businesswire.com/news/home/20170822005597/en/

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

Source: USA Technologies, Inc.

News Provided by Acquire Media