Release Details

 

MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ:USAT), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its second quarter ended December 31, 2016.

Second Quarter Financial Highlights:

• Total quarterly revenue of $21.8 million, a year-over-year increase of 18%
• 469,000 connections to ePort service, representing a year-over-year increase of 27%
• Added 500 customers to achieve record 11,900 total customers compared to 10,625 as of a year ago, a year-over-year increase of 12%
• Quarterly record license and transaction fee revenue of $16.6 million, a year-over-year increase of 22%
• Ended the quarter with $18.0 million in cash
• Quarterly GAAP net income of $233,000 resulting in earnings of $0.01 per share
• Quarterly Non-GAAP net income of $241,000
• Quarterly Adjusted EBITDA of $1.7 million

Second Quarter and YTD Financial Highlights, Connections & Transaction Data:
		As of and for the three months ended
		December 31,
(Connections and $'s in thousands, transactions in millions, eps is not rounded)		2016				2015				$ Change				% Change
Revenues:
License and transaction fees		$	16,639			$	13,674			$	2,965			22	%
Equipment Sales			5,117				4,829				288			6	%
Total revenues		$	21,756			$	18,503			$	3,253			18	%
License and transaction fee margin			31.6	%			33.7	%			-2.1	%		-6	%
Equipment sales gross margin			21.2	%			18.1	%			3.1	%		17	%
Overall Gross Margin			29.1	%			29.6	%			-0.5	%		-2	%
Operating income		$	234			$	594			$	(360	)		-61	%
Net income/(loss)		$	233			$	(874	)		$	1,107			127	%
Net earnings (loss) per common shares - basic		$	0.01			$	(0.02	)		$	0.03			150	%
Net earnings (loss) per common shares - diluted		$	0.01			$	(0.02	)		$	0.03			150	%
Net cash provided by operating activities		$	1,122			$	507			$	615			121	%
Net New Connections			21				20				1			5	%
Total Connections (at period end)			469				369				100			27	%
Total Number of Transactions (millions)			100				76				24			32	%
Transaction Volume (millions)		$	192			$	138			$	54			39	%
Adjusted EBITDA		$	1,738			$	2,260			$	(522	)		-23	%
Non-GAAP net income		$	241			$	686			$	(445	)		-65	%
		As of and for the six months ended
		December 31,
(Connections and $'s in thousands, transactions in millions, eps is not rounded)		2016				2015				$ Change				% Change
Revenues:
License and transaction fees		$	33,004			$	26,599			$	6,405			24	%
Equipment Sales			10,340				8,504				1,836			22	%
Total revenues		$	43,344			$	35,103			$	8,241			23	%
License and transaction fee margin			31.4	%			33.2	%			-1.8	%		-5	%
Equipment sales gross margin			20.6	%			20.0	%			0.6	%		3	%
Overall Gross Margin			28.8	%			30.0	%			-1.2	%		-4	%
Operating income/(loss)		$	(716	)		$	706			$	(1,422	)		-201	%
Net loss		$	(2,231	)		$	(514	)		$	(1,717	)		334	%
Net loss per common shares - basic		$	(0.07	)		$	(0.02	)		$	(0.05	)		250	%
Net loss per common shares - diluted		$	(0.07	)		$	(0.02	)		$	(0.05	)		250	%
Net cash provided by (used in) operating activities		$	(5,143	)		$	869			$	(6,012	)		-692	%
Net New Connections			40				36				4			11	%
Total Connections (at period end)			469				369				100			27	%
Total Number of Transactions (millions)			195				145				50			35	%
Transaction Volume (millions)		$	375			$	264			$	111			42	%
Adjusted EBITDA		$	2,435			$	4,011			$	(1,576	)		-39	%
Non-GAAP net income (loss)		$	(714	)		$	747			$	(1,461	)		-196	%

"With a focus on driving growth through penetration into our existing customer base and by acquiring new customers, we are seeing more adoption of our ePort connect devices and subsequent traction in cashless payment options," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "USA Technologies is at the forefront of the industry with our payment solutions, and with our customer loyalty programs and interactive point-of-sale devices we are adding increasing value to each connection sold. Our ePort Interactive platform creates new possibilities at the point of sale and we believe increases cashless payment acceptance."

Fiscal 2017 Outlook

For full fiscal year 2017, management expects to add between 115,000 and 125,000 net new connections for the year, bringing total connections to our service to a range of 544,000 to 554,000 and expects total revenue to be between $95 million and $100 million. 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 5:00 p.m. Eastern Time today, February 8, 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 # 59727592.

A live webcast of the conference call will be available at http://usat.client.shareholder.events.com/.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 8:00 p.m. Eastern Time on February 8, 2017 until 8:00 p.m. Eastern Time on February 11, 2017 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 59727592. 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 Mobile™ for customers on the go, ePort® Interactive, and QuickConnect, an API Web service for developers. USA Technologies has 77 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.

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, or increased revenues at a customer location; 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 improve cash flows from operations; whether USAT's remediation efforts in connection with the control deficiencies that resulted in a material weakness in USAT's internal controls over financial reporting as of June 30, 2016 would be effective or successful; whether USAT experiences additional material weaknesses in its internal controls over financial reporting in future periods, 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.	Statements of Operations for the 3 Months and 6 Months Ended December 31, 2016 and 2015
B.	Five Quarter Select Key Performance Indicators
C.	Comparative Balance Sheets as of December 31, 2016 and 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

(A) Statement of Operations for the 3 Months and 6 Months Ended December 31, 2016 and 2015
			For the three months ended December 31,
($ in thousands, except shares and per share data)			2016				% of Sales			2015				% of Sales			Change				% Change
Revenues:
License and transaction fees			$	16,639			76.5	%		$	13,674			73.9	%		$	2,965			21.7	%
Equipment sales				5,117			23.5	%			4,829			26.1	%			288			6.0	%
Total revenues				21,756			100.0	%			18,503			100.0	%			3,253			17.6	%
Costs of sales/revenues:
Cost of services				11,389			68.4	%			9,067			66.3	%			2,322			25.6	%
Cost of equipment				4,033			78.8	%			3,953			81.9	%			80			2.0	%
Total costs of sales/revenues				15,422			70.9	%			13,020			70.4	%			2,402			18.4	%
Gross profit				6,334			29.1	%			5,483			29.6	%			851			15.5	%
Operating expenses:
Selling, general and administrative				5,793			26.6	%			4,762			25.7	%			1,031			21.7	%
Depreciation and amortization				307			1.4	%			127			0.7	%			180			141.7	%
Total operating expenses				6,100			28.0	%			4,889			26.4	%			1,211			24.8	%
Operating income (loss)				234			1.1	%			594			3.2	%			(360	)		-60.6	%
Other income (expense):
Interest income				200			0.9	%			20			0.1	%			180			900.0	%
Interest expense				(201	)		-0.9	%			(104	)		-0.6	%			(97	)		93.3	%
Change in fair value of warrant liabilities				—			0.0	%			(1,230	)		-6.6	%			1,230			-100.0	%
Total other income (expense), net				(1	)		0.0	%			(1,314	)		-7.1	%			1,313			-99.9	%
Income (loss) before income taxes				233			1.1	%			(720	)		-3.9	%			953			132.4	%
Benefit (provision) for income taxes				—			0.0	%			(154	)		-0.8	%			154			-100.0	%
Net income (loss)				233			1.1	%			(874	)		-4.7	%			1,107			126.7	%
Cumulative preferred dividends				—			0.0	%			—			0.0	%			—			0.0	%
Net income (loss) applicable to common shares			$	233			1.1	%		$	(874	)		-4.7	%		$	1,107			127.7	%
Net earnings (loss) per common share - basic			$	0.01						$	(0.02	)					$	0.03			150	%
Net earnings (loss) per common share - diluted			$	0.01						$	(0.02	)					$	0.03			150	%
Basic weighted average number of common shares outstanding				40,308,934							35,909,933							4,399,001			12.3	%
Diluted weighted average number of common shares outstanding				40,730,712							35,909,933							4,820,779			13.4	%
			For the six months ended December 31,
($ in thousands, except shares and per share data)			2016				% of Sales			2015				% of Sales			Change				% Change
Revenues:
License and transaction fees			$	33,004			76.1	%		$	26,599			75.8	%		$	6,405			24.1	%
Equipment sales				10,340			23.9	%			8,504			24.2	%			1,836			21.6	%
Total revenues				43,344			100.0	%			35,103			100.0	%			8,241			23.5	%
Costs of sales/revenues:
Cost of services				22,632			68.6	%			17,772			66.8	%			4,860			27.3	%
Cost of equipment				8,211			79.4	%			6,801			80.0	%			1,410			20.7	%
Total costs of sales/revenues				30,843			71.2	%			24,573			70.0	%			6,270			25.5	%
Gross profit				12,501			28.8	%			10,530			30.0	%			1,971			18.7	%
Operating expenses:
Selling, general and administrative				12,702			29.3	%			9,558			27.2	%			3,144			32.9	%
Depreciation and amortization				515			1.2	%			266			0.8	%			249			93.6	%
Total operating expenses				13,217			30.5	%			9,824			28.0	%			3,393			34.5	%
Operating income (loss)				(716	)		-1.7	%			706			2.0	%			(1,422	)		-201.4	%
Other income (expense):
Interest income				273			0.6	%			71			0.2	%			202			284.5	%
Interest expense				(413	)		-1.0	%			(223	)		-0.6	%			(190	)		85.2	%
Change in fair value of warrant liabilities				(1,490	)		-3.4	%			(887	)		-2.5	%			(603	)		68.0	%
Total other income (expense), net				(1,630	)		-3.8	%			(1,039	)		-3.0	%			(591	)		56.9	%
Income (loss) before provision for income taxes				(2,346	)		-5.4	%			(333	)		-0.9	%			(2,013	)		604.5	%
Benefit (provision) for income taxes				115			0.3	%			(181	)		-0.5	%			296			-163.5	%
Net income (loss)				(2,231	)		-5.1	%			(514	)		-1.5	%			(1,717	)		334.0	%
Cumulative preferred dividends				(334	)		-0.8	%			(334	)		-1.0	%			—			0.0	%
Net income (loss) applicable to common shares			$	(2,565	)		-5.9	%		$	(848	)		-2.4	%		$	(1,717	)		202.5	%
Net earnings (loss) per common share - basic			$	(0.07	)					$	(0.02	)					$	(0.05	)		250.0	%
Net earnings (loss) per common share - diluted			$	(0.07	)					$	(0.02	)					$	(0.05	)		250.0	%
Basic weighted average number of common shares outstanding				39,398,469							35,879,164							3,519,305			9.8	%
Diluted weighted average number of common shares outstanding				39,398,469							35,879,164							3,519,305			9.8	%

(B) Five Quarter Select Key Performance Indicators
		As of and for the three months ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
Connections:
Gross New Connections			25,000				22,000				33,000				34,000				23,000
% from Existing Customer Base			80	%			86	%			83	%			91	%			89	%
Net New Connections			21,000				19,000				28,000				32,000				20,000
Total Connections			469,000				448,000				429,000				401,000				369,000
Customers:
New Customers Added			500				350				300				125				350
Total Customers			11,900				11,400				11,050				10,750				10,625
Volumes:
Total Number of Transactions (millions)			100				95				89				82				76
Transaction Volume (millions)		$	192			$	183			$	169			$	151			$	138
Financing Structure of Connections:
JumpStart			6.8	%			7.7	%			6.5	%			7.4	%			10.1	%
QuickStart & All Others *			93.2	%			92.3	%			93.5	%			92.6	%			89.9	%
Total			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
*Includes credit sales with standard trade receivable terms

© Comparative Balance Sheets December 31, 2016 and June 30, 2016
		December 31,				June 30,
($ in thousands)		2016				2016				Change				% Change
Assets
Current assets:
Cash		$	18,034			$	19,272			$	(1,238	)		-6	%
Accounts receivable, less allowance			6,796				4,899				1,897			39	%
Finance receivables, less allowance for credit losses of $29 and $0, respectively			1,442				3,588				(2,146	)		-60	%
Inventory, net			4,786				2,031				2,755			136	%
Prepaid expenses and other current assets			1,764				987				777			79	%
Deferred income taxes			2,271				2,271				—			0	%
Total current assets			35,093				33,048				2,045			6	%
Finance receivables, less current portion			3,956				3,718				238			6	%
Other assets			145				348				(203	)		-58	%
Property and equipment, net			9,433				9,765				(332	)		-3	%
Deferred income taxes			25,568				25,453				115			0	%
Intangibles, net			711				798				(87	)		-11	%
Goodwill			11,492				11,703				(211	)		-2	%
Total assets		$	86,398			$	84,833			$	1,565			2	%
Liabilities and shareholders' equity
Current liabilities:
Accounts payable		$	9,090			$	12,354			$	(3,264	)		-26	%
Accrued expenses			2,912				3,458				(546	)		-16	%
Line of credit, net			7,078				7,119				(41	)		-1	%
Current obligations under long-term debt			766				629				137			22	%
Income taxes payable			6				18				(12	)		-67	%
Warrant liabilities			—				3,739				(3,739	)		100	%
Deferred gain from sale-leaseback transactions			470				860				(390	)		-45	%
Total current liabilities			20,322				28,177				(7,855	)		-28	%
Long-term liabilities
Long-term debt, less current portion			1,394				1,576				(182	)		-12	%
Accrued expenses, less current portion			52				15				37			247	%
Deferred gain from sale-leaseback transactions, less current portion			—				40				(40	)		100	%
Total long-term liabilities			1,446				1,631				(185	)		-11	%
Total liabilities			21,768				29,808				(8,040	)		-27	%
Shareholders' equity:
Preferred stock, no par value			3,138				3,138				—			0	%
Common stock, no par value			245,230				233,394				11,836			5	%
Accumulated deficit			(183,738	)			(181,507	)			(2,231	)		1	%
Total shareholders' equity			64,630				55,025				9,605			17	%
Total liabilities and shareholders' equity		$	86,398			$	84,833			$	1,565			2	%
Net working capital		$	14,771			$	4,871			$	9,900			203	%

(D) Five Quarter Statement of Operations and Adjusted EBITDA
		For the three months ended
($ in thousands)		December 31,					September 30,					June 30,					March 31,					December 31,
(unaudited)		2016			% of Sales		2016			% of Sales		2016			% of Sales		2016			% of Sales		2015			% of Sales
Revenues:
License and transaction fees		$	16,639		76.5%		$	16,365		75.8%		$	15,263		69.6%		$	14,727		72.3%		$	13,674		73.9%
Equipment Sales			5,117		23.5%			5,223		24.2%			6,681		30.4%			5,634		27.7%			4,829		26.1%
Total revenue			21,756		100.0%			21,588		100.0%			21,944		100.0%			20,361		100.0%			18,503		100.0%
Costs of sales/revenues:
License and transaction fees			11,389		68.4%			11,243		68.7%			10,614		69.5%			9,703		65.9%			9,067		66.3%
Equipment sales			4,033		78.8%			4,178		80.0%			5,547		83.0%			4,986		88.5%			3,953		81.9%
Total costs of sales/revenues			15,422		70.9%			15,421		71.4%			16,161		73.6%			14,689		72.1%			13,020		70.4%
Gross Profit:
License and transaction fees			5,250		31.6%			5,122		31.3%			4,649		30.5%			5,024		34.1%			4,607		33.7%
Equipment sales			1,084		21.2%			1,045		20.0%			1,134		17.0%			648		11.5%			876		18.1%
Total gross profit			6,334		29.1%			6,167		28.6%			5,783		26.4%			5,672		27.9%			5,483		29.6%
Operating expenses:
Selling, general and administrative			5,793		26.6%			6,909		32.0%			6,721		30.6%			6,094		29.9%			4,762		25.7%
Depreciation			307		1.4%			208		1.0%			208		0.9%			173		0.8%			127		0.7%
Impairment of intangible asset			—		0.0%			—		0.0%			432		2.0%			—		0.0%			—		0.0%
Total operating expenses			6,100		28.0%			7,117		33.0%			7,361		33.5%			6,267		30.8%			4,889		26.4%
Operating income (loss)			234		1.1%			(950)		-4.4%			(1,578)		-7.2%			(595)		-2.9%			594		3.2%
Other income (expense):
Interest income			200		0.9%			73		0.3%			182		0.8%			67		0.3%			20		0.1%
Other income			—		0.0%			—		0.0%			—		0.0%			—		0.0%			—		0.0%
Interest expense			(201)		-0.9%			(212)		-1.0%			(197)		-0.9%			(180)		-0.9%			(104)		-0.6%
Change in fair value of warrant liabilities			—		0.0%			(1,490)		-6.9%			18		0.1%			(4,805)		-23.6%			(1,230)		-6.6%
Total other income (expense), net			(1)		0.0%			(1,629)		-7.5%			3		0.0%			(4,918)		-24.2%			(1,314)		-7.1%
Loss before provision for income taxes			233		1.1%			(2,579)		-11.9%			(1,575)		-7.2%			(5,513)		-27.1%			(720)		-3.9%
Benefit (provision) for income taxes			—		0.0%			115		0.5%			703		3.2%			93		0.5%			(154)		-0.8%
Net income (loss)			233		1.1%			(2,464)		-11.4%			(872)		-4.0%			(5,420)		-26.6%			(874)		-4.7%
Less interest income			(200)		-0.9%			(73)		-0.3%			(182)		-0.8%			(67)		-0.3%			(20)		-0.1%
Plus interest expenses			201		0.9%			212		1.0%			197		0.9%			180		0.9%			104		0.6%
Plus income tax expense			—		0.0%			(115)		-0.5%			(703)		-3.2%			(93)		-0.5%			154		0.8%
Plus depreciation expense			1,220		5.6%			1,257		5.8%			1,272		5.8%			1,190		5.8%			1,323		7.2%
Plus amortization expense			43		0.2%			44		0.2%			44		0.2%			44		0.2%			—		0.0%
Plus (less) change in fair value of warrant liabilities			—		0.0%			1,490		6.9%			(18)		-0.1%			4,805		23.6%			1,230		6.6%
Plus stock-based compensation			233		1.1%			211		1.0%			198		0.9%			142		0.7%			237		1.3%
Plus intangible asset impairment			—		0.0%			—		0.0%			432		2.0%			—		0.0%			—		0.0%
Plus VendScreen non-recurring charges			8		0.0%			101		0.5%			258		1.2%			461		2.3%			106		0.6%
Plus litigation related professional fees			—		0.0%			33		0.2%					0.0%			105		0.5%			—		0.0%
Adjusted EBITDA		$	1,738		8.0%		$	696		3.2%		$	626		2.9%		$	1,347		6.6%		$	2,260		12.2%
See discussion of Non-GAAP financial measures later in this document

(E) Five Quarter and YTD Selling, General, & Administrative Expenses
			Three months ended
			December 31,				% of			September 30,				% of			June 30,				% of			March 31,				% of			December 31,				% of
($ in thousands)			2016				SG&A			2016				SG&A			2016				SG&A			2016				SG&A			2015				SG&A
Salaries and benefit costs			$	2,849			49.2	%		$	3,129			45.3	%		$	3,050			45.4	%		$	2,760			45.4	%		$	2,786			58.6	%
Marketing related expenses				578			10.0	%			329			4.8	%			635			9.4	%			362			5.9	%			335			7.0	%
Professional services				1,213			20.9	%			2,520			36.5	%			1,533			22.8	%			1,152			18.9	%			839			17.6	%
Bad debt expense				352			6.1	%			97			1.4	%			470			7.0	%			505			8.3	%			239			5.0	%
Premises, equipment and insurance costs				498			8.6	%			499			7.2	%			555			8.3	%			460			7.5	%			347			7.3	%
Research and development expenses				173			3.0	%			124			1.8	%			123			1.8	%			131			2.1	%			37			0.8	%
VendScreen non-recurring charges				8			0.1	%			101			1.5	%			258			3.8	%			461			7.6	%			106			2.2	%
Litigation related professional fees				—			0.0	%			33			0.5	%			51			0.8	%			105			1.7	%			—			0.0	%
Other expenses				122			2.1	%			77			1.1	%			46			0.7	%			158			2.6	%			73			1.5	%
Total SG&A expenses			$	5,793			100	%		$	6,909			100	%		$	6,721			100	%		$	6,094			100	%		$	4,762			100	%
Total Revenue			$	21,756						$	21,588						$	21,944						$	20,361						$	18,503
SG&A expenses as a percentage of revenue				26.6	%						32.0	%						30.6	%						29.9	%						25.7	%
										Six months ended
										December 31,				% of			December 31,				% of
($ in thousands)										2016				SG&A			2015				SG&A
Salaries and benefit costs										$	5,978			47.1	%		$	5,471			57.2	%
Marketing related expenses											907			7.1	%			668			7.0	%
Professional services											3,733			29.4	%			1,621			17.0	%
Bad debt expense											449			3.5	%			475			5.0	%
Premises, equipment and insurance costs											997			7.8	%			746			7.8	%
Research and development expenses											297			2.3	%			228			2.4	%
VendScreen non-recurring charges											109			0.9	%			123			1.3	%
Class action professional fees											33			0.3	%			—			0.0	%
Other expenses											199			1.6	%			226			2.4	%
Total SG&A expenses										$	12,702			100.0	%		$	9,558			100.0	%
Total Revenue										$	43,344						$	35,103
SG&A expenses as a percentage of revenue											29.3	%						27.2	%

(F) Five Quarter Condensed Balance Sheets
($ in thousands)			December 31,			September 30			June 30,			March 31,				December 31,
(unaudited)			2016			2016			2016			2016				2015
Assets
Current assets:
Cash			$	18,034		$	18,198		$	19,272		$	14,901			$	14,809
Accounts receivable, less allowance				6,796			5,840			4,899			8,345				6,976
Finance receivables, less allowance for credit losses				1,442			3,349			3,588			1,677				1,503
Inventory, net				4,786			4,264			2,031			2,341				2,849
Other current assets				1,764			1,439			987			1,060				902
Deferred Income Taxes				2,271			2,271			2,271			1,276				1,258
Total current assets				35,093			35,361			33,048			29,600				28,297
Finance receivables, less current portion				3,956			3,962			3,718			3,042				2,435
Other assets				145			163			348			337				326
Property and equipment, net				9,433			9,570			9,765			10,584				10,856
Deferred income taxes				25,568			25,568			25,453			25,701				25,607
Intangibles, Net				711			754			798			1,273				432
Goodwill				11,492			11,703			11,703			11,703				7,663
Total assets			$	86,398		$	87,081		$	84,833		$	82,240			$	75,616
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses			$	12,002		$	12,605		$	15,812		$	15,368			$	9,992
Line of credit, net				7,078			7,258			7,119			6,980				7,000
Warrant Liabilities				-			-			3,739			5,964				-
Other current liabilities				1,242			1,527			1,507			1,485				1,384
Total current liabilities				20,322			21,390			28,177			29,797				18,376
Long-term liabilities
Total long-term liabilities				1,446			1,528			1,631			2,016				3,945
Total liabilities				21,768			22,918			29,808			31,813				22,321
Shareholders' equity:
Total shareholders' equity				64,630			64,163			55,025			50,427				53,295
Total liabilities and shareholders' equity			$	86,398		$	87,081		$	84,833		$	82,240			$	75,616
Total current assets			$	35,093		$	35,361		$	33,048		$	29,600			$	28,297
Total current liabilities				20,322			21,390			28,177			29,797				18,376
Net working capital			$	14,771		$	13,971		$	4,871		$	(197	)		$	9,921

(G) Five Quarter Statements of Cash Flows
		Three months ended
		December 31,				September 30,				June 30,				March 31,				December 31,
($ in thousands)		2016				2016				2016				2016				2015
OPERATING ACTIVITIES:
Net (loss) income		$	233			$	(2,464	)		$	(872	)		$	(5,420	)		$	(874	)
Adjustments to reconcile net (loss) income 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			233				211				198				142				237
Gain on disposal of property and equipment			(31	)			—				(110	)			(15	)			(41	)
Non-cash interest and amortization of debt discount			(79	)			33				13				—				—
Bad debt expense			352				97				470				506				238
Depreciation			1,220				1,257				1,272				1,190				1,323
Amortization of intangible assets			43				44				43				44				—
Impairment of intangible asset							—				432				—				—
Change in fair value of warrant liabilities			—				1,490				(18	)			4,805				1,230
Deferred income taxes, net			—				(115	)			(748	)			(93	)			154
Recognition of deferred gain from sale-leaseback transactions			(215	)			(215	)			(215	)			(215	)			(215	)
Changes in operating assets and liabilities:
Accounts receivable			(1,309	)			(1,038	)			2,977				(1,872	)			(448	)
Finance receivables			2,125				(5	)			(2,587	)			(154	)			214
Inventory			(467	)			(2,223	)			(82	)			250				649
Prepaid expenses and other assets			(318	)			(224	)			(397	)			(160	)			(254	)
Accounts payable			397				(3,661	)			329				4,154				(1,623	)
Accrued expenses			(1,061	)			486				115				1,166				(13	)
Income taxes payable			(1	)			(10	)			453				—				(70	)
Net change in operating assets and liabilities			(634	)			(6,675	)			808				3,384				(1,545	)
Net cash provided (used) by operating activities			1,122				(6,337	)			1,273				4,328				507
INVESTING ACTIVITIES:
Purchase and additions of property and equipment			(441	)			(168	)			(207	)			(164	)			(118	)
Purchase of property for rental program			(693	)			(642	)			—				—				—
Proceeds from sale of property and equipment			61				—				265				19				101
Cash paid for assets acquired from VendScreen			—				—				—				(5,625	)			—
Net cash provided by (used in) investing activities			(1,073	)			(810	)			58				(5,770	)			(17	)
FINANCING ACTIVITIES:
Cash used for the retirement of common stock			—				(31	)			(173	)			—				(40	)
Proceeds from exercise of common stock warrants			—				6,193				3,237				1,652				—
Proceeds (payments) from line of credit, net			—				72				138				33				3,000
Repayment of long-term debt			(213	)			(161	)			(162	)			(151	)			(233	)
Net cash provided by (used in) financing activities			(213	)			6,073				3,040				1,534				2,727
Net increase (decrease) in cash			(164	)			(1,074	)			4,371				92				3,217
Cash at beginning of period			18,198				19,272				14,901				14,809				11,592
Cash at end of period		$	18,034			$	18,198			$	19,272			$	14,901			$	14,809
Supplemental disclosures of cash flow information:
Interest paid in cash		$	382			$	87			$	147			$	191			$	107
Income taxes paid by cash		$	—			$	—			$	501			$	—			$	—
Depreciation expense allocated to cost of services		$	967			$	1,083			$	1,139			$	1,051			$	1,186
Reclass of rental program property to inventory, net		$	(55	)		$	(11	)		$	415			$	347			$	777
Prepaid items financed with debt		$	—			$	54			$	—			$	—			$	—
Warrant issuance for debt discount		$	—			$	—			$	—			$	52			$	—
Debt financing cost financed with debt		$	—			$	—			$	—			$	79			$	—
Equipment and property acquired under capital lease		$	18			$	254			$	—			$	409			$	—
Disposal of property and equipment		$	570			$	—			$	555			$	189			$	238
Disposal of property and equipment under sale-leaseback transactions		$	—			$	—			$	(52	)		$	52			$	—

(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
			Three months ended
($ in thousands)			December 31,			September 30,				June 30,				March 31,				December 31,
(unaudited)			2016				2016			2016				2016				2015
Net income (loss)			$	233		$	(2,464	)		$	(872	)		$	(5,420	)		$	(874	)
Non-GAAP adjustments:
Non-cash portion of income tax provision				-			(115	)			(792	)			(38	)			224
Change in fair value of warrant adjustment				-			1,490				(18	)			4,805				1,230
VendScreen non-recurring charges				8			101				258				461				106
Litigation related professional fees				-			33				51				105				-
Non-GAAP net income (loss)			$	241		$	(955	)		$	(1,373	)		$	(87	)		$	686
Net income (loss)			$	233		$	(2,464	)		$	(872	)		$	(5,420	)		$	(874	)
Cumulative preferred dividends				-			(334	)			-				(334	)			-
Net income (loss) applicable to common shares			$	233		$	(2,798	)		$	(872	)		$	(5,754	)		$	(874	)
Non-GAAP net income (loss)			$	241		$	(955	)		$	(1,373	)		$	(87	)		$	686
Cumulative preferred dividends				-			(334	)			-				(334	)			-
Non-GAAP net income (loss) applicable to common shares			$	241		$	(1,289	)		$	(1,373	)		$	(421	)		$	686
Net earnings (loss) per common share - basic			$	0.01		$	(0.07	)		$	(0.02	)		$	(0.16	)		$	(0.02	)
Non-GAAP net earnings (loss) per common share - basic			$	0.01		$	(0.03	)		$	(0.04	)		$	(0.01	)		$	0.02
Net earnings (loss) per common share - diluted			$	0.01		$	(0.07	)		$	(0.02	)		$	(0.16	)		$	(0.02	)
Non-GAAP net earnings (loss) per common share - diluted			$	0.01		$	(0.03	)		$	(0.04	)		$	(0.01	)		$	0.02
Basic weighted average number of common shares outstanding				40,308,934			38,488,005				37,325,681				36,161,626				35,909,933
Diluted weighted average number of common shares outstanding				40,730,712			38,488,005				37,325,681				36,161,626				35,909,933
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 (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 (Generally Accepted Accounting Principles), 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 SLC investigation. 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) 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 (Generally Accepted Accounting Principles). 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 (United States' Generally Accepted Accounting Principles) 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 income (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 third quarter of the prior fiscal year, impairment charges related to our EnergyMiser asset trademarks, and change in fair value of warrant liabilities and stock-based compensation expense. We have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash gain or charge that is not related to 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 (Generally Accepted Accounting Principles). 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 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 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 EBTIDA as a metric in its executive officer and management incentive compensation plans.

F-USAT

View source version on businesswire.com: http://www.businesswire.com/news/home/20170208006183/en/

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

 

Source: USA Technologies, Inc.

 

 

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