Release Details

USA Technologies Announces Third Quarter Fiscal Year 2016 Results

May 12, 2016
PDF Version

MALVERN, Pa.--(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 third quarter ended March 31, 2016.

Third Quarter Financial Highlights:

  • Total quarterly revenue of $20.4 million, a year-over-year increase of 33%
  • 32,000 net connections for the quarter compared to 14,000 in the same quarter last year, a year-over-year increase of 129%
  • 401,000 connections to ePort service, including 6,000 new connections attributable to the VendScreen acquisition which closed on January 15, 2016, representing a year-over-year increase of 33%
  • Record 10,825 customers compared to 8,925 as of a year ago, a year-over-year increase of 21%
  • Quarterly record license and transaction fee revenue of $14.7 million, a year-over-year increase of 33%
  • $4.3 million of cash provided by operating activities representing the fifth straight quarter of positive operating cash flow
  • Quarterly GAAP net loss of $5.4 million, including the impact of a $4.8 million non-cash expense for the fair value warrant liability adjustment, $461,000 of non-recurring expenses relating to the acquisition and integration of the VendScreen business, and $105,000 of professional fees incurred in connection with the class action litigation which was dismissed by the court in April 2016
  • Quarterly Non-GAAP net loss of $87,000, or $(0.01) per share
  • Quarterly adjusted EBITDA of $1.3 million
           

Third Quarter Financial Highlights & Transaction Data:

 
Nine months ended, unless noted
March 31,    

(Connections, transactions and $'s in thousands, except per share data)

2016   2015 # Change % Change
 
 
Revenues:
License and transaction fees $ 41,326 $ 31,695 $ 9,631 30%
Equipment sales   14,138   8,736 5,402 62%
Total revenues $ 55,464 $ 40,431 $ 15,033 37%
 
License and transaction fees gross margin 33.5% 32.0% 1.5% 5%
 
Equipment sales gross margin 16.6% 21.6% (5.0%) -23%
 
Operating income (loss) $ 111 $ 115 $ (4) -3.5%
 
Adjusted EBITDA $ 5,358 $ 5,007 $ 351 7.0%
 
Net loss $ (5,934) $ (889) $ (5,045) 567.5%
 
Net earnings (loss) per common share - diluted $ (0.18) $ (0.04) $ (0.14) 312.8%
 
Net New Connections 68 36 32 89%
 
Total Connections (at period end) 401 302 99 33%
 
Total Number of Transactions 226,798 154,500 72,298 47%
 
Transaction Volume $ 415,423 $ 276,200

$

139,223

50%
 
 
 
Three months ended, unless noted
March 31,    

(Connections, transactions and $'s in thousands, except per share data)

2016 2015 # Change % Change
 
 
Revenues:
License and transaction fees $ 14,727 $ 11,059 $ 3,668 33%
Equipment sales   5,634   4,298 1,336 31%
Total revenues $ 20,361 $ 15,357 $ 5,004 33%
 
License and transaction fees gross margin 34.1% 35.3% (1.2%) -3%
 
Equipment sales gross margin 11.5% 28.9% (17.4%) -60%
 
Operating income (loss) $ (595) $ 730 $ (1,325) -181.5%
 
Adjusted EBITDA $ 1,347 $ 2,379 $ (1,032) -43.4%
 
Net loss $ (5,420) $ (567) $ (4,853) 855.9%
 
Net loss per common share - basic and diluted $ (0.16) $ (0.03) $ (0.13) 531.3%
 
Net New Connections 32 14 18 129%
 
Total Connections (at period end) 401 302 99 33%
 
Total Number of Transactions 82,000 54,800 27,200 50%
 
Transaction Volume $ 151,000 $ 97,700 $ 53,300 55%
 

"We are experiencing an inflection point in the unattended retail payments market with our cashless-payment solutions while achieving record revenue and integrating an acquisition," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "With the introduction of our ePort Interactive Service, our most progressive solution to date, our customers now can leverage a content delivery platform to directly engage with their customers. Additionally, the Premium Support Service continues to incentivize operators to move to cashless payments at 100% of their locations, which proliferates the acceptance of cashless payments in the self-service retail market. We view the broadening adoption of cashless payment solutions, coupled with our continued growth, as validation that USAT is positioned as the clear leader in the self-service retail market."

Fiscal 2016 Outlook

For full fiscal year 2016, management raised its expectations for connections and revenue, and it now expects to add between 93,000 and 95,000 net new connections for the year, bringing total connections to our service to a range of 426,000 to 428,000 and expects total revenue to be between $76 million and $78 million. Additionally, the company anticipates that QuickStart will remain a popular program for customers, and management expects it to drive positive cash provided by operating activities in fiscal year 2016. We also expect to have year-over-year increases of adjusted EBITDA and non-GAAP net income.

Webcast and Conference Call

Management will host a conference call and webcast the event beginning at 8:30 a.m. Eastern Time today, May 12, 2016.

To participate in the conference call, please dial (866) 393-1608 approximately 10 minutes prior to the call. International callers should dial (224) 357-2194. Please reference conference ID # 2454754.

A live webcast of the conference call will be available at http://investor.usatech.com/events.cfm. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

A telephone replay of the conference call will be available from 11:30 a.m. Eastern Time on May 12, 2016 until 11:59 p.m. Eastern Time on May 15, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 2454754. 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, and QuickConnect, an API Web service for developers. USA Technologies has 78 United States and foreign patents in force; and has agreements with Verizon, Visa, Chase Paymentech and customers such as Compass, AMI Entertainment and others. Visit the website at www.usatech.com.

Forward-looking Statements:

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation the business strategy and the plans and objectives of USAT's management for future operations, are forward-looking statements. When used in this release, words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions, as they relate to USAT or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of USAT's management, as well as assumptions made by and information currently available to USAT's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, the ability of management to accurately predict or forecast future financial results, including earnings or taxable income of USAT; the incurrence by USAT of any unanticipated or unusual non-operational expenses which would require us to divert our cash resources from achieving our business plan; the ability of USAT to retain key customers from whom a significant portion of its revenues is derived; the ability of USAT to compete with its competitors to obtain market share; whether USAT's customers continue to utilize USAT's transaction processing and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days' notice; the ability of USAT to raise funds in the future through the sales of securities or debt financings in order to sustain its operations if an unexpected or unusual non-operational event would occur; the ability of USAT to use available data to predict future market conditions, consumer behavior and any level of cashless usage; the ability to prevent a security breach of our systems or services or third party services or systems utilized by us; whether any patents issued to USAT will provide USAT with any competitive advantages or adequate protection for its products, or would be challenged, invalidated or circumvented by others; the ability of USAT to operate without infringing or violating the intellectual property rights of others; whether USAT would be able to sell sufficient ePort hardware to third party leasing companies as part of the QuickStart program in order to continue to increase cash flows from operations; whether USAT's ongoing remediation of a material weakness that USAT identified in its internal controls over financial reporting, and which was reflected in our annual report on Form 10-K for the fiscal year ended June 30, 2015, would be effective; whether USAT experiences additional material weaknesses in its internal controls over financial reporting in the future, and USAT is not able to accurately or timely report its financial condition or results of operations; and whether USAT's existing or anticipated customers purchase, rent or utilize ePort devices or our other products or services in the future at levels currently anticipated by USAT. Readers are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this release speaks only as of the date of this release. Unless required by law, USAT does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

       
Financial Schedules:
 

A.

Comparative Income Statement For 9 Months Ended March 31, 2016 and March 31, 2015

B.

Comparative Income Statement For 3 Months Ended March 31, 2016 and March 31, 2015

C.

Five Quarter Select Key Performance Indicators

D.

Comparative Condensed Balance Sheets March 31, 2016 to June 30, 2015

E.

Five Quarter Statement of Operations and Adjusted EBITDA

F.

Five Quarter Selling, General, & Administrative Expenses

G.

Five Quarter Condensed Balance Sheet and Other Data

H.

Five Quarter Condensed Statement of Cash Flows

I.

Consolidated Statement of Shareholders' Equity

J.

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

 

NEW ACCOUNTING CLASSIFICATION

Commencing with the September 30, 2015 financial statements, the Company changed the manner in which it presents certain uncollected customer accounts receivable and the related allowance in its consolidated balance sheets and the related statements of cash flows. These accounts receivable represent a large number of small balance amounts due from customers for processing and service fees which had not been billed to customers, and as to which, there had been no customer transaction proceeds from which the Company could collect the amounts due in accordance with its normal procedures. The previous accounting classification recorded these amounts as a reduction of its accounts payable in the consolidated balance sheets and the related statements of cash flows. The new accounting classification moves these amounts to accounts receivable and allowance for bad debt.

Accordingly, the respective balances for all prior periods presented in these financial statements were reclassified in order to be consistent and comparable to the accounting treatment of these items in our March 31, 2016 financial statements. The new accounting classification as well as the reclassification for prior periods had no effect on the consolidated statements of operations or the consolidated statements of shareholders' equity.

                       

(A) Comparative Income Statement For 9 Months Ended March 31, 2016 and March 31, 2015

 
($ in thousands, except share and per share data) For the nine months ended March 31,
(unaudited) 2016

% of
Sales

2015

% of
Sales

Change % Change
 
Revenues:
License and transaction fees $ 41,326 74.5% $ 31,695 78.4% $ 9,631 30.4%
Equipment sales   14,138 25.5%   8,736 21.6% 5,402 61.8%
Total revenues 55,464 100.0% 40,431 100.0% 15,033 37.2%
 
Costs of sales/revenues:
Cost of services 27,475 66.5% 21,566 68.0% $ 5,909 27.4%
Cost of equipment   11,787 83.4%   6,850 78.4% 4,937 72.1%
Total costs of sales/revenues   39,262 70.8%   28,416 70.3% 10,846 38.2%
 
Gross profit:
License and transaction fees 13,851 33.5% 10,129 32.0% 3,722 36.7%
Equipment sales   2,351 16.6%   1,886 21.6% 465 24.7%
Total gross profit   16,202 29.2%   12,015 29.7% 4,187 34.8%
 
Operating expenses:
Selling, general and administrative 15,652 28.2% 11,444 28.3% $ 4,208 36.8%
Depreciation   439 0.8%   456 1.1% (17) -3.7%
Total operating expenses   16,091 29.0%   11,900 29.4% 4,191 35.2%
Operating income 111 0.2% 115 0.3% (4) -3.5%
 
Other income (expense):
Interest income 138 0.2% 41 0.1% 97 236.6%
Interest expense (403) -0.7% (209) -0.5% (194) 92.8%
Change in fair value of warrant liabilities   (5,692) -10.3%   (656) -1.6% (5,036) 767.7%
Total other income (expense), net   (5,957) -10.7%   (824) -2.0% (5,133) 622.9%
 
Loss before provision for income taxes (5,846) -10.5% (709) -1.8% (5,137) 724.5%
Benefit (provision) for income taxes   (88)   (180) (92) 51.1%
 
Net loss (5,934) -10.7% (889) -2.2% (5,045) 567.5%
Cumulative preferred dividends   (668) -1.2%   (668) -1.7% - 0.0%
Net loss applicable to common shares $ (6,602) -11.9% $ (1,557) -3.9% $ (5,045) 324.0%
Net loss per common share - basic and diluted $ (0.18) $ (0.04) $ (0.14) 321.0%
Basic and diluted weighted average number of common shares outstanding 35,961,648 35,705,210 256,438 0.7%
 
Adjusted EBITDA $ 5,358 9.7% $ 5,007 12.4% $ 351 7.0%
 
Non-GAAP net loss applicable to common shares $ (25) 0.0% $ (747) -1.8% $ 722 0.0%
 
Total connections at period-end 401,000 302,000
Net new connections in period 68,000 36,000
 
           

(B) Comparative Income Statement For 3 Months Ended March 31, 2016 and March 31, 2015

 
($ in thousands, except share and per share data) For the three months ended March 31,
(unaudited) 2016    

% of Sales

    2015    

% of Sales

Change % Change
 
Revenues:
License and transaction fees $ 14,727 72.3% $ 11,059 72.0% $ 3,668 33.2%
Equipment sales   5,634 27.7%   4,298 28.0% 1,336 31.1%
Total revenues 20,361 100.0% 15,357 100.0% 5,004 32.6%
 
Costs of sales/revenues:
Cost of services 9,703 65.9% 7,157 64.7% $ 2,546 35.6%
Cost of equipment   4,986 88.5%   3,054 71.1% 1,932 63.3%
Total costs of sales/revenues   14,689 72.1%   10,211 66.5% 4,478 43.9%
 
Gross profit:
License and transaction fees 5,024 34.1% 3,902 35.3% 1,122 28.8%
Equipment sales   648 11.5%   1,244 28.9% (596) -47.9%
Total gross profit   5,672 27.9%   5,146 33.5% 526 10.2%
 
Operating expenses:
Selling, general and administrative 6,094 29.9% 4,281 27.9% $ 1,813 42.3%
Depreciation   173 0.8%   135 0.9% 38 28.1%
Total operating expenses   6,267 30.8%   4,416 28.8% 1,851 41.9%
Operating income (loss) (595) -2.9% 730 4.8% (1,325) -181.5%
 
Other income (expense):
Interest income 67 0.3% 27 0.2% 40 148.1%
Interest expense (180) -0.9% (85) -0.6% (95) 111.8%
Change in fair value of warrant liabilities   (4,805) -23.6%   (1,101) -7.2% (3,704) 336.4%
Total other income (expense), net   (4,918) -24.2%   (1,159) -7.5% (3,759) 324.3%
 
Loss before provision for income taxes (5,513) -27.1% (429) -2.8% (5,084) 1185.1%
Benefit (provision) for income taxes   93   (138) 231 -167.4%
 
Net loss (5,420) -26.6% (567) -3.7% (4,853) 855.9%
Cumulative preferred dividends   (334) -1.6%   (334) -2.2% - 0.0%
Net loss applicable to common shares $ (5,754) -28.3% $ (901) -5.9% $ (4,853) 538.6%
Net loss per common share - basic and diluted $ (0.16) $ (0.03) $ (0.13) 531.3%
Basic and diluted weighted average number of common shares outstanding 36,161,613 35,747,979 413,635 1.2%
 
Adjusted EBITDA $ 1,347 6.6% $ 2,379 15.5% $ (1,032) -43.4%
 
Non-GAAP net income (loss) applicable to common shares $ (421) -2.1% $ 321 2.1% $ (742) -231.2%
 
Total connections at period-end 401,000 302,000
Net new connections in period 32,000 14,000
 
               

(C) Five Quarter Select Key Performance Indicators:

 
Three months ended
(unaudited) March 31,     December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
Connections:
Gross New Connections 38,000 24,000 20,000 34,000 24,000
% from Existing Customer Base 91% 89% 86% 89% 82%
Net New Connections 32,000 20,000 16,000 31,000 14,000
Total Connections 401,000 369,000 349,000 333,000 302,000
 
Customers:
New Customers Added 200 350 675 675 475
Total Customers 10,825 10,625 10,275 9,600 8,925
 
Volumes:
Total Number of Transactions (millions) 82.0 76.0 68.8 62.2 54.8
Transaction Volume ($millions) $151.0 $138.0 $126.4 $112.8 $97.7
 
Financing Structure of Connections:
JumpStart 7.4% 10.1% 10.2% 6.0% 11.3%
QuickStart & All Others * 92.6%     89.9%     89.8%     94.0%     88.7%
Total 100.0%     100.0%     100.0%     100.0%     100.0%
 

*Includes credit sales with standard trade receivable terms

 
             

(D) Comparative Condensed Balance Sheets March 31, 2016 to June 30, 2015

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

2016

2015

$ Change

% Change

 
Assets
Current assets:
Cash $ 14,901 $ 11,374 $ 3,527 31%
Accounts receivable, less allowance * 8,345 5,971 2,374 40%
Finance receivables 1,677 941 736 78%
Inventory 2,341 4,216 (1,875) -44%
Deferred income taxes 1,276 1,258 18 1%
Prepaid expenses and other current assets   1,060   574   486 85%
Total current assets 29,600 24,334 5,266 22%
 
Finance receivables, less current portion 3,042 3,698 (656) -18%
Property and equipment, net 10,584 12,869 (2,285) -18%

Goodwill and intangibles

12,976 8,095 4,881 60%
Deferred income taxes 25,701 25,788 (87) 0%
Other assets   337   350   (13) -4%
Total assets $ 82,240 $ 75,134 $ 7,106 9%
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable * $ 12,029 $ 10,542 $ 1,487 14%
Accrued expenses 3,339 2,108 1,231 58%
Line of credit 6,980 4,000 2,980 75%
Current obligations under long-term debt 625 478 147 31%
Income taxes payable - 54 (54) -100%
Warrant liabilities 5,964 - 5,964 0%
Deferred gain from sale-leaseback transactions   860   860   - 0%
Total current liabilities 29,797 18,042 11,755 65%
Long-term liabilities
Long-term debt, less current portion 1,742 1,854 (112) -6%
Accrued expenses, less current portion 19 49 (30) -61%
Warrant liabilities, less current portion - 978 (978) -100%
Deferred gain from sale-leaseback transactions, less current portion   255   900   (645) -72%
Total long-term liabilities   2,016   3,781   (1,765) -47%
Total liabilities   31,813   21,823   9,990 46%
 
Shareholders' equity:
Preferred stock, no par value 3,138 3,138 - 0%
Common stock, no par value 227,924 224,874 3,050 1%
Accumulated deficit   (180,635)   (174,701)   (5,934) 3%
Total shareholders' equity   50,427   53,311   (2,884) -5%
Total liabilities and shareholders' equity $ 82,240 $ 75,134 $ 7,106 9%
 
Total current assets $ 29,600 $ 24,334 $ 5,266 22%
Total current liabilities   29,797   18,042   11,755 65%
Net working capital $ (197) $ 6,292 $ (6,489) -103%
 
 
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications $ - $ 1,299
                               

(E)   Five Quarter Statement of Operations and Adjusted EBITDA

 
For the three months ended
(unaudited) March 31,    

% of

    December 31,

% of

September 30,

% of

June 30,

% of

March 31,

% of

2016    

Sales

    2015    

Sales

    2015    

Sales

    2015    

Sales

    2015    

Sales

Revenues:
License and transaction fees $ 14,727 72.3% $ 13,674 73.9% $ 12,925 77.9% $ 11,938 67.7% $ 11,059 72.0%
Equipment Sales   5,634 27.7%   4,829 26.1%   3,675 22.1%   5,708 32.3%   4,298 28.0%
Total revenue 20,361 100.0% 18,503 100.0% 16,600 100.0% 17,646 100.0% 15,357 100.0%
 
Costs of sales/revenues:
License and transaction fees 9,703 65.9% 9,067 66.3% 8,705 67.4% 7,863 65.9% 7,157 64.7%
Equipment sales   4,986 88.5%   3,953 81.9%   2,848 77.5%   4,975 87.2%   3,054 71.1%
Total costs of sales/revenues 14,689 72.1% 13,020 70.4% 11,553 69.6% 12,838 72.8% 10,211 57.9%
 
Gross Profit:
License and transaction fees 5,024 34.1% 4,607 33.7% 4,220 32.6% 4,075 34.1% 3,902 35.3%
Equipment sales   648 11.5%   876 18.1%   827 22.5%   733 12.8%   1,244 28.9%
Total gross profit 5,672 27.9% 5,483 29.6% 5,047 30.4% 4,808 27.2% 5,146 33.5%
 
Operating expenses:
Selling, general and administrative 6,094 29.9% 4,762 25.7% 4,796 28.9% 5,009 28.4% 4,281 27.9%
Depreciation   173 0.8%   127 0.7%   139 0.8%   156 0.9%   135 0.9%
Total operating expenses 6,267 30.8% 4,889 26.4% 4,935 29.7% 5,165 29.3% 4,416 28.8%
         
Operating income (loss)   (595) -2.9%   594 3.2%   112 0.7%   (357) -2.0%   730 4.8%
 
Other income (expense):
Interest income 67 0.3% 20 0.1% 51 0.3% 42 0.2% 27 0.2%
Other income - 0.0% - 0.0% - 0.0% 52 0.3% - 0.0%
Interest expense (180) -0.9% (104) -0.6% (119) -0.7% (92) -0.5% (85) -0.6%
Change in fair value of warrant liabilities   (4,805) -23.6%   (1,230) -6.6%   343 2.1%   263 1.5%   (1,101) -7.2%
Total other income (expense), net (4,918) -24.2% (1,314) -7.1% 275 1.7% 265 1.5% (1,159) -7.5%
 
Income (loss) before provision for income taxes (5,513) -27.1% (720) -3.9% 387 2.3% (92) -0.5% (429) -2.8%
Benefit (provision) for income taxes 93 0.5% (154) -0.8% (27) -0.2% (109) -0.6% (138) -0.9%
         
Net income (loss)   (5,420) -26.6%   (874) -4.7%   360 2.2%   (201) -1.1%   (567) -3.7%
 
 
Less interest income (67) -0.3% (20) -0.1% (51) -0.3% (42) -0.2% (27) -0.2%
Plus interest expenses 180 0.9% 104 0.6% 119 0.7% 92 0.5% 85 0.6%
Plus income tax expense (93) -0.5% 154 0.8% 27 0.2% 109 0.6% 138 0.9%
Plus depreciation expense 1,190 5.8% 1,323 7.2% 1,350 8.1% 1,381 7.8% 1,433 9.3%
Plus amortization expense 44 0.2% - 0.0% - 0.0% - 0.0% - 0.0%
Plus (less) change in fair value of warrant liabilities 4,805 23.6% 1,230 6.6% (343) -2.1% (263) -1.5% 1,101 7.2%
Plus stock-based compensation 142 0.7% 237 1.3% 272 1.6% 175 1.0% 216 1.4%
Plus VendScreen non-recurring charges 461 2.3% 106 0.6% 17 0.1% - 0.0% - 0.0%
Plus class action professional fees   105 0.5%   - 0.0%   - 0.0%   - 0.0%   - 0.0%
Adjusted EBITDA $ 1,347 6.6% $ 2,260 12.2% $ 1,751 10.6% $ 1,251 7.1% $ 2,379 15.5%
 

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

 
                               

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

 

 

 

Three months ended

($ in thousands) March 31,     % of     December 31, % of September 30, % of June 30, % of March 31, % of
(unaudited) 2016 SG&A 2015 SG&A 2015 SG&A 2015 SG&A 2015 SG&A
 
Salaries and benefit costs $ 2,761 45.4% $ 2,786 58.6% $ 2,685 56.0% $ 2,295 45.8% $ 2,534 59.2%
Marketing related expenses 362 5.9% 335 7.0% 333 6.9% 580 11.6% 184 4.3%
Professional services 1,256 20.6% 839 17.6% 782 16.3% 844 16.8% 708 16.5%
Bad debt expense 505 8.3% 239 5.0% 236 4.9% 497 9.9% 303 7.1%
Premises, equipment and insurance costs 460 7.5% 347 7.3% 399 8.3% 475 9.5% 372 8.7%
Research and development expenses 131 2.1% 37 0.8% 191 4.0% 154 3.1% 96 2.2%
VendScreen non-recurring charges 461 7.6% 106 2.2% 17 0.4% - 0.0% - 0.0%
Other expenses   158     2.6%       73     1.5%       153     3.2%       164     3.3%       84     2.0%
Total SG&A expenses $ 6,094     100%     $ 4,762     100%     $ 4,796     100%     $ 5,009     100%     $ 4,281     100%
 
Total Revenue 20,361 18,503 16,600 17,646 15,357
SG&A expenses as a percentage of revenue 29.9% 25.7% 28.9% 28.4% 27.9%
 
                 

(G) Five Quarter Condensed Balance Sheet and Other Data

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

2016

2015

2015

2015

2015

 
Assets
Current assets:
Cash $ 14,901 $ 14,809 $ 11,592 $ 11,374 $ 8,475
Accounts receivable, less allowance * 8,345 6,976 6,448 5,971 5,245
Finance receivables 1,677 1,503 946 941 750
Inventory 2,341 2,849 3,718 4,216 4,241
Other current assets   2,336   2,160   1,883   1,832   1,322
Total current assets 29,600 28,297 24,587 24,334 20,033
 
Finance receivables, less current portion 3,042 2,435 3,525 3,698

3,505

Other assets 337 326 342 350 423
Property and equipment, net 10,584 10,856 11,890 12,869 13,574
Deferred income taxes 25,701 25,607 25,761 25,788 26,169
Goodwill and intangibles   12,976   8,095   8,095   8,095   8,095
Total assets $ 82,240 $ 75,616 $ 74,200 $ 75,134 $ 71,799
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses * $ 15,368 $ 9,992 $ 11,615 $ 12,650 $ 9,044
Line of credit 6,980 7,000 4,000 4,000 4,000
Warrant Liabilities 5,964 - - - -
Other current liabilities   1,485   1,384   1,497   1,392   1,294
Total current liabilities 29,797 18,376 17,112 18,042 14,338
Long-term liabilities          
Total long-term liabilities   2,016   3,945   3,116   3,781   4,134
Total liabilities   31,813   22,321   20,228   21,823   18,472
 
Shareholders' equity:          
Total shareholders' equity   50,427   53,295   53,972   53,311   53,327
Total liabilities and shareholders' equity $ 82,240 $ 75,616 $ 74,200 $ 75,134 $ 71,799
 
Total current assets $ 29,600 $ 28,297 $ 24,587 $ 24,334 $ 20,033
Total current liabilities   29,797   18,376   17,112   18,042   14,338
Net working capital $ (197) $ 9,921 $ 7,475 $ 6,292 $ 5,695
 
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications $ - $ - $ - $ 1,299 $ 1,842
 
 

(H) Five Quarter Condensed Statement of Cash Flows

 
Three months ended
March 31,     December 31,     September 30,     June 30,     March 31,
($ in thousands) 2016     2015     2015     2015     2015
(unaudited)
 
OPERATING ACTIVITIES:
Net income (loss) $ (5,420) $ (874) $ 360 $ (201) $ (567)

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

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

142 237 272 175 216
Gain on disposal of property and equipment (15) (41) (1) (4) (6)
Bad debt expense 506 238 236 497 302
Depreciation 1,190 1,323 1,350 1,381 1,433
Amortization of intangible assets 44 - - - -
Change in fair value of warrant liabilities 4,805 1,230 (343) (263) 1,101
Deferred income taxes, net (93) 154 27 31 121
Gain on sale of finance receivables - - - (52) -
Recognition of deferred gain from sale-leaseback transactions (215) (215) (215) (215) (216)
Changes in operating assets and liabilities:
Accounts receivable

 

*

(1,872) (767) (713) (1,223) (984)
Finance receivables (154) 533 168 (332) (2,248)
Inventory 250 649 219 (639) 651
Prepaid expenses and other assets (160) (254) 48 (97) 152
Accounts payable

 

*

4,154 (1,623) (1,044) 3,491 (141)
Accrued expenses 1,166 (13) (2) 93 234
Income taxes payable   -       (70)       -       37       17
Net change in operating assets and liabilities   3,384       (1,545)       (1,324)       1,330       (2,319)
 
Net cash provided by operating activities 4,328 507 362 2,680 65
 
INVESTING ACTIVITIES:
Purchase and additions of property and equipment (164) (33) (49) (6) (4)
Proceeds from sale of property and equipment 19 101 4 8 19
Cash paid for assets acquired from VendScreen   (5,625)       -       -       -       -
 
Net cash provided by (used in) investing activities (5,770) 68 (45) 2 15
 
FINANCING ACTIVITIES:
Cash used for the retirement of common stock - (40) - - -
Proceeds from exercise of common stock warrants 1,652 - 29 - -
Excess tax benefits from share-based compensation - - - 10 -
Proceeds (payments) from line of credit 33 3,000 - - -
Proceeds from long-term debt - - - 304 1,753
Repayment of long-term debt   (151)       (233)       (128)       (97)       (93)
 
Net cash provided by (used in) financing activities   1,534       2,727       (99)       217       1,660
 
Net increase in cash 92 3,217 218 2,899 1,741
 
Cash at beginning of period   14,809       11,592       11,374       8,475       6,734
 
Cash at end of period $ 14,901     $ 14,809     $ 11,592     $ 11,374     $ 8,475
 
Supplemental disclosures of cash flow information:
Interest paid in cash $ 191     $ 107     $ 106     $ 99     $ 67
Depreciation expense allocated to cost of services $ 1,051     $ 1,186     $ 1,199     $ 1,179     $ 1,271
Reclass of rental program property to inventory, net $ 347     $ 777     $ (279)     $ (718)     $ 1,374
Prepaid items financed with debt $ -     $ -     $ 103     $ -     $ -
Equipment and software acquired under capital lease $ 409     $ -     $ 35     $ -     $ -
Disposal of property and equipment $ 189     $ 238     $ 99     $ 447     $ 343
Fair value of common stock warrants at issuance $ 52     $ -     $ -     $ -     $ -
Proceeds from debt for debt financing costs $ 79     $ -     $ -     $ -     $ -
 
* Accounts Receivable

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

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

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

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

(I) Consolidated Statement of Shareholders' Equity

 
Series A
Convertible
Preferred Stock Common Stock Accumulated
($ in thousands, except shares) Shares Amount Shares Amount Deficit Total
 
Balance, June 30, 2015, as previously reported 442,968 $ 3,138 35,747,242 $ 224,874 $ (174,701) $ 53,311
Adjustments 2,095 - 16,421 - - -
Balance, June 30, 2015, as adjusted 445,063 $ 3,138 35,763,663 $ 224,874 $ (174,701) $ 53,311
 
Warrants issued in conjunction with Line of Credit Agreement - - - 52 - 52
Reclass of fair value of warranty liability upon exercise of warrants - 706 706
Exercise of warrants - - 645,100 1,681 - 1,681
Stock based compensation
2013 Stock Incentive Plan - - 169,913 377 - 377
2014 Stock Option Incentive Plan - - 12,785 274 - 274
Retirement of common stock - - (12,746) (40) - (40)
Net loss - - - - (5,934) (5,934)
 
Balance, March 31, 2016 445,063 $ 3,138 36,578,715 $ 227,924 $ (180,635) $ 50,427
 
           

(J) Reconciliation of Net Earnings/(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) March 31,     December 31,     September 30, June 30, March 31,
(unaudited) 2016     2015     2015     2015     2015
 
Net income (loss) $ (5,420) $ (874) $ 360 $ (201) $ (567)
Non-GAAP adjustments:
Non-cash portion of income tax provision (38) 224 27 72 121
Fair value of warrant adjustment 4,805 1,230 (343) (263) 1,101
Non-recurring charges 461 106 - - -
Class action professional fees   105       -       -       -       -
Non-GAAP net income (loss) $ (87)     $ 686     $ 44     $ (392)     $ 655
 
Net income (loss) $ (5,420) $ (874) $ 360 $ (201) $ (567)
Cumulative preferred dividends   (334)       -       (334)       -       (334)
Net income (loss) applicable to common shares $ (5,754)     $ (874)     $ 26     $ (201)     $ (901)
 
Non-GAAP net income (loss) $ (87) $ 686 $ 44 $ (392) $ 655
Cumulative preferred dividends   (334)       -       (334)       -       (334)
Non-GAAP net income (loss) applicable to common shares $ (421)     $ 686     $ (290)     $ (392)     $ 321
 
Net earnings (loss) per common share - basic $ (0.16)     $ (0.02)     $ 0.00     $ (0.01)     $ (0.03)
Non-GAAP net earnings (loss) per common share - basic $ (0.01) $ 0.02 $ (0.01) $ (0.01) $ 0.01
Basic weighted average number of common shares outstanding 36,161,613 35,898,773 35,826,731 35,761,251 35,747,979
 
Net earnings (loss) per common share - diluted $ (0.16)     $ (0.02)     $ 0.00     $ (0.01)     $ (0.03)
Non-GAAP net earnings (loss) per common share - diluted $ (0.01) $ 0.02 $ (0.01) $ (0.01) $ 0.01
Diluted weighted average number of common shares outstanding 36,161,613 35,898,773 36,466,215 35,761,251 35,747,979
 

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

 

Discussion of Non-GAAP Financial Measures:

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

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

As used herein, non-GAAP net income represents GAAP net income (loss) excluding costs or benefits relating to any adjustment for fair value of warrant liabilities, non-cash portions of the Company's income tax benefit (provision), non-recurring professional service fees recorded in SG&A during the quarter ended December 31, 2015 that were incurred in connection with the VendScreen transaction, non-recurring costs and expenses recorded in SG&A during the quarter ended March 2016 that were incurred in connection with the acquisition and integration of the VendScreen business, and professional fees incurred during the March 31, 2016 quarter in connection with the class action litigation. Non-GAAP net earnings (loss) per common share - diluted is calculated by dividing non-GAAP net income (loss) applicable to common shares by the number of diluted weighted average shares outstanding.

Management believes that non-GAAP net income (loss) and non-GAAP net earnings (loss) per common share - diluted are important measures of USAT's business. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that these non-GAAP financial measures serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net income as a metric in its management and executive officer incentive compensation plans.

Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, non-recurring professional service fees recorded in SG&A during the quarter ended December 31, 2015 that were incurred in connection with the VendScreen transaction, non-recurring costs and expenses recorded in SG&A during the quarter ended March 31, 2016 that were incurred in connection with the acquisition and integration of the VendScreen business, professional fees incurred during the March 31, 2016 quarter in connection with the class action litigation, change in fair value of warrant liabilities, and stock-based compensation expense. We have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash gain or (charge) that is not related to USAT's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of USAT. We have excluded the nonrecurring costs and expenses incurred in connection with the VendScreen transaction in order to allow more accurate comparisons of the financial results to historical operations. We have excluded the professional fees incurred in connection with the class action litigation because we believe they represent a charge that is not related to USAT's operations. 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 management and executive officer incentive compensation plans.

F-USAT

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

Source: USA Technologies, Inc.

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