USA Technologies Reports GAAP and Non-GAAP Profitability for the Second Quarter of Fiscal 2013
Total Revenues Up 29%; Recurring Revenues Up 33%
Gross Profit Up 86%
186,000 Connections to ePort Connect Service, Up 37% (year over year)
4,100 Customers, Up 62% (year over year)
-
29% increase in total revenues to
$8.9 million and 33% increase in license and transaction fee revenues ("recurring revenues") to$7.4 million , representing 83% of total revenues for the quarter; -
86% increase in gross profit to
$3.6 million ; -
Adjusted EBITDA of
$1,752,721 , up from an Adjusted EBITDA loss of($938,400) ; -
GAAP net income of
$153,758 , up from a GAAP net loss of($1,821,061) ; and, -
Non-GAAP net income of
$557,393 , up from a non-GAAP net loss of($997,820) in the same quarter a year ago.
In addition, customers and connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, continued to demonstrate solid growth in the second quarter. Highlights, compared to the second quarter of the prior fiscal year, included:
- 12,000 net new connections, a 71% increase;
- 186,000 total connections, a 37% increase; and,
- 375 new customers, a 50% increase, for 4,100 total customers, a 62% increase.
"We are extremely pleased to achieve non-GAAP net income for the first
time in USAT's history," stated
"Our resolve to achieve non-GAAP profitability by the second quarter of fiscal 2013 included an equally determined commitment to continue to strengthen our prospects for growth," continued Herbert. "In a short period of time, we have accumulated a strong list of customers whose transition to cashless payment and telemetry is, we believe, just getting started. We are also encouraged by acceleration of adoption by a number of our existing customers. This is reflected in some of the customer activity in the second quarter, such as our work with The Pepi Companies— the first full-service food and beverage vending company believed to be 100 percent cashless—and All Stop Vending has also indicated its intent to go 100 percent cashless. It is also evident in the ten additional exclusive agreements for our ePort Connect service that we signed in the second quarter—a testament, we believe, to the confidence these customers have in our service and a greater level of customer interest in planning for more comprehensive cashless and M2M telemetry adoption longer-term.
"Concurrently, we have continued to pursue strategic partnerships and
value-added service offerings that further enhance our position in the
marketplace," added Herbert. "During the second quarter, our work with
key partners, such as Isis,
resulted in an extension of our marketing support agreement to
Second Quarter Results
Revenues for the second quarter of fiscal 2013 were
Revenue from license and transaction fees, which is driven primarily by
monthly ePort Connect service fees, JumpStart fees and transaction
processing fees, grew to
Gross profit was
Operating expenses compared to the comparable period a year ago declined
by
GAAP net income was
Diluted earnings (loss) per common share was
Outlook
"Our crossover into profitability marks a new beginning for USAT," said Herbert. "Perhaps more importantly, it comes at a time when, in our view, there are numerous developments that will continue to attract consumers to cashless forms of payment. Emerging trends such as mobile payments, including loyalty, couponing and other consumer engagement applications, for example, should continue to raise awareness that we believe will further drive adoption of cashless payment and telemetry capabilities in the small-ticket, unattended market.
"In this light, we continue to work toward our target of 60,000 new
connections for the year, for 224,000 in total connections to our ePort
Connect service by the end of our
"In addition, given the improved financial performance in the second quarter and the recurring nature of the majority of our revenues, we believe non-GAAP net income is sustainable; therefore, we also expect to achieve non-GAAP net income for the full fiscal year as well," concluded Herbert.
NASDAQ Stock Market Closing Bell
In celebration of its milestone profitability event, USAT will ring The
NASDAQ Stock Market Closing Bell today in
Webcast and Conference Call
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 financial position, achieving profitability or non-GAAP net income or cash flow from operations, anticipated connections to our network, 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 USAT to generate sufficient sales to generate operating profits, or conduct operations at a profit; the incurrence by us of any unanticipated or unusual non-operational expenses, such as in connection with a proxy contest, 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; whether USAT's customers would continue to add additional connections to our network in the future at levels currently anticipated by USAT; 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 obtain widespread commercial acceptance of its products; the ability of USAT to raise funds in the future through the sales of securities in order to sustain its operations if an unexpected or unusual non-operational event would occur; whether the actions of our former CEO which resulted in his separation from the Company or the Securities and Exchange Commission's investigation would have a material adverse effect on the future financial results or condition of the Company; and whether USAT's existing or anticipated customers purchase, rent or utilize ePort devices 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.
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| Consolidated Statements of Operations | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three months ended | Six months ended | ||||||||||||||
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|
December 31, | ||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||
| Revenues: | |||||||||||||||
| License and transaction fees | $ | 7,403,241 | $ | 5,583,464 | $ | 14,309,598 | $ | 11,003,127 | |||||||
| Equipment sales | 1,481,080 | 1,298,134 | 2,965,001 | 2,584,219 | |||||||||||
| Total revenues | 8,884,321 | 6,881,598 | 17,274,599 | 13,587,346 | |||||||||||
| Cost of services | 4,363,212 | 3,983,251 | 8,555,572 | 7,744,828 | |||||||||||
| Cost of equipment | 920,928 | 959,891 | 1,974,564 | 1,855,027 | |||||||||||
| Gross profit | 3,600,181 | 1,938,456 | 6,744,463 | 3,987,491 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative | 2,699,675 | 3,531,081 | 5,914,800 | 6,999,150 | |||||||||||
| Depreciation and amortization | 332,856 | 344,409 | 676,245 | 747,641 | |||||||||||
| Total operating expenses | 3,032,531 | 3,875,490 | 6,591,045 | 7,746,791 | |||||||||||
| Operating income (loss) | 567,650 | (1,937,034) | 153,418 | (3,759,300) | |||||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 21,661 | 13,286 | 41,827 | 31,154 | |||||||||||
| Interest expense | (25,016) | (49,072) | (48,023) | (60,236) | |||||||||||
| Change in fair value of warrant liabilities | (403,635) | 151,759 | 59,498 | 1,888,368 | |||||||||||
| Total other income (expense), net | (406,990) | 115,973 | 53,302 | 1,859,286 | |||||||||||
| Income (loss) before provision for income taxes | 160,660 | (1,821,061) | 206,720 | (1,900,014) | |||||||||||
| Provision for income taxes | (6,902) | - | (13,823) | - | |||||||||||
| Net income (loss) | 153,758 | (1,821,061) | 192,897 | (1,900,014) | |||||||||||
| Cumulative preferred dividends | - | - | (332,226) | (332,226) | |||||||||||
| Net income (loss) applicable to common shares | $ | 153,758 | $ | (1,821,061) | $ | (139,329) | $ | (2,232,240) | |||||||
| Net earnings (loss) per common share - basic | $ | - | $ | (0.06) | $ | - | $ | (0.07) | |||||||
| Weighted average number of common shares outstanding | 32,734,394 | 32,448,040 | 32,626,312 | 32,368,339 | |||||||||||
| Net earnings (loss) per common share - diluted | $ | - | $ | (0.06) | $ | - | $ | (0.07) | |||||||
| Diluted weighted average number of common shares outstanding | 33,468,336 | 32,448,040 | 32,626,312 | 32,368,339 | |||||||||||
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| Consolidated Balance Sheets | |||||||||
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June 30, | ||||||||
| 2012 | 2012 | ||||||||
| (Unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 5,046,346 | $ | 6,426,645 | |||||
|
Accounts receivable, less allowance for uncollectible accounts of
|
1,156,404 | 2,441,941 | |||||||
| Finance receivables | 110,363 | 206,649 | |||||||
| Inventory | 2,439,280 | 2,511,748 | |||||||
| Prepaid expenses and other current assets | 680,274 | 555,823 | |||||||
| Total current assets | 9,432,667 | 12,142,806 | |||||||
| Finance receivables, less current portion | $ | 407,782 | $ | 336,198 | |||||
| Property and equipment, net | 14,647,943 | 11,800,108 | |||||||
| Intangibles, net | 825,253 | 1,196,453 | |||||||
| Goodwill | 7,663,208 | 7,663,208 | |||||||
| Other assets | 92,606 | 80,884 | |||||||
| Total assets | $ | 33,069,459 | $ | 33,219,657 | |||||
| Liabilities and shareholders' equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 6,447,583 | $ | 6,136,443 | |||||
| Accrued expenses | 1,791,887 | 3,342,456 | |||||||
| Line of credit | 1,000,000 | - | |||||||
| Current obligations under long-term debt | 396,809 | 466,056 | |||||||
| Total current liabilities | 9,636,279 | 9,944,955 | |||||||
| Long-term liabilities: | |||||||||
| Long-term debt, less current portion | 158,862 | 262,274 | |||||||
| Accrued expenses, less current portion | 408,000 | 426,241 | |||||||
| Deferred tax liabilities | 26,422 | 12,599 | |||||||
| Warrant liabilities, non-current | 859,068 | 918,566 | |||||||
| Total long-term liabilities | 1,452,352 | 1,619,680 | |||||||
| Total liabilities | 11,088,631 | 11,564,635 | |||||||
| Commitments and contingencies | |||||||||
| Shareholders' equity: | |||||||||
| Preferred stock, no par value: | |||||||||
| Authorized shares- 1,800,000 Series A convertible preferred- Authorized shares- 900,000 | |||||||||
|
Issued and outstanding shares- 442,968 (liquidation preference of
|
3,138,056 | 3,138,056 | |||||||
|
Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding shares- 32,721,421 and 32,510,069, respectively |
220,646,236 | 220,513,327 | |||||||
| Accumulated deficit | (201,803,464 | ) | (201,996,361 | ) | |||||
| Total shareholders' equity | 21,980,828 | 21,655,022 | |||||||
| Total liabilities and shareholders' equity | $ | 33,069,459 | $ | 33,219,657 | |||||
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| Consolidated Statements of Cash Flows | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three months ended | Six months ended | ||||||||||||||||
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December 31, | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| OPERATING ACTIVITIES: | |||||||||||||||||
| Net income (loss) | $ | 153,758 | $ | (1,821,061 | ) | $ | 192,897 | $ | (1,900,014 | ) | |||||||
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Charges incurred in connection with the vesting and issuance of common stock for employee and director compensation |
94,891 | 187,044 | 220,224 | 427,497 | |||||||||||||
| Change in fair value of warrant liabilities | 403,635 | (151,759 | ) | (59,498 | ) | (1,888,368 | ) | ||||||||||
| Depreciation | 904,580 | 552,990 | 1,738,586 | 1,116,115 | |||||||||||||
| Gain on disposal of property and equipment | (3,600 | ) | (12,003 | ) | (3,600 | ) | (12,003 | ) | |||||||||
| Amortization | 185,600 | 258,600 | 371,200 | 517,200 | |||||||||||||
| Bad debt expense (recoveries), net | 15,187 | (19,512 | ) | 9,058 | (41,568 | ) | |||||||||||
| Provision for deferred tax liability | 6,902 | - | 13,823 | - | |||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | 1,195,158 | (154,980 | ) | 1,276,479 | 32,520 | ||||||||||||
| Finance receivables | (6,129 | ) | 9,679 | 24,702 | (34,112 | ) | |||||||||||
| Inventory | (1,249,295 | ) | (832,088 | ) | 82,095 | (671,290 | ) | ||||||||||
| Prepaid expenses and other assets | (87,740 | ) | (186,210 | ) | (8,111 | ) | (137,871 | ) | |||||||||
| Accounts payable | 426,592 | (665,491 | ) | 311,140 | (1,322,043 | ) | |||||||||||
| Accrued expenses | (117,364 | ) | 307,694 | (1,568,810 | ) | 890,051 | |||||||||||
| Net cash provided by (used in) operating activities | 1,922,175 | (2,527,097 | ) | 2,600,185 | (3,023,886 | ) | |||||||||||
| INVESTING ACTIVITIES: | |||||||||||||||||
| Purchase of property and equipment | (47,881 | ) | (313,597 | ) | (50,278 | ) | (373,945 | ) | |||||||||
| Purchase of property for rental program, net | (2,466,780 | ) | (821,386 | ) | (4,542,170 | ) | (2,055,994 | ) | |||||||||
| Net cash used in investing activities | (2,514,661 | ) | (1,134,983 | ) | (4,592,448 | ) | (2,429,939 | ) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||||||||
|
Net proceeds from the issuance (retirement) of common stock and exercise of common stock warrants |
(87,315 | ) | (12,041 | ) | (87,315 | ) | (2,031 | ) | |||||||||
| Proceeds from (repayments of) line of credit | (337,779 | ) | - | 1,000,000 | - | ||||||||||||
| Repayment of long-term debt | (138,905 | ) | (95,435 | ) | (300,721 | ) | (205,274 | ) | |||||||||
| Net cash provided by (used in) financing activities | (563,999 | ) | (107,476 | ) | 611,964 | (207,305 | ) | ||||||||||
| Net decrease in cash and cash equivalents | (1,156,485 | ) | (3,769,556 | ) | (1,380,299 | ) | (5,661,130 | ) | |||||||||
| Cash and cash equivalents at beginning of period | 6,202,831 | 11,099,937 | 6,426,645 | 12,991,511 | |||||||||||||
| Cash and cash equivalents at end of period | $ | 5,046,346 | $ | 7,330,381 | $ | 5,046,346 | $ | 7,330,381 | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||||||||
| Cash paid for interest | $ | 25,519 | $ | 5,092 | $ | 51,669 | $ | 16,800 | |||||||||
| Equipment and software acquired under capital lease | $ | - | $ | - | $ | - | $ | 495,955 | |||||||||
| Prepaid insurance financed with debt | $ | - | $ | - | $ | 128,062 | $ | 90,372 | |||||||||
| Disposal of property and equipment | $ | - | $ | 75,045 | $ | - | $ | 54,638 | |||||||||
| Reclass of rental program property to inventory | $ | 4,068 | $ | - | $ | 9,627 | $ | - | |||||||||
| Depreciation expense allocated to cost of sales | $ | 757,323 | $ | 467,181 | $ | 1,433,541 | $ | 885,674 | |||||||||
Non-GAAP Schedules
Discussion of Non-GAAP Financial Measures
This press release includes the following measures defined as non-GAAP
financial measures by the
As used herein, non-GAAP net income (loss) represents GAAP net income (loss) excluding costs relating to the proxy contest, the costs associated with the separation of the former CEO, any adjustment for fair value of warrant liabilities, and any charges for impairment of intangible assets. As used herein, non-GAAP diluted earnings (loss) per common share is calculated by dividing non-GAAP net income (loss) applicable to common shares by the diluted weighted average number of shares outstanding.
Management believes that non-GAAP net income (loss) and non-GAAP diluted earnings (loss) per common share 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.
As used herein, Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, and change in fair value of warrant liabilities and stock-based compensation expense and impairment expense on intangible assets. We have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash charge that is not related to USAT's operations. We have excluded the non-cash expenses, stock-based compensation and impairment expense, as they do not reflect the cash-based operations of USAT. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance and liquidity, and because it is less susceptible to variances in actual performance resulting from depreciation and amortization and non-cash charges for changes in fair value of warrant liabilities and stock-based compensation expense.
As used herein, operating margin represents operating income or loss divided by revenues and non-GAAP operating margin represents operating income or loss excluding any expenses related to the proxy contest, CEO separation or any adjustment for impairment of intangible assets divided by revenues.
| Non GAAP Reconciliation | |||||||
|
Reconciliation of Net Income (Loss) to Non-GAAP Net Income
(Loss) and Net Earnings |
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| Three Months Ended | |||||||
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||||||
| Net income (loss) | $ | 153,758 | $ | (1,821,061 | ) | ||
| Non-GAAP adjustments: | |||||||
| Operating expenses | |||||||
| Selling, general and administrative | |||||||
| CEO separation | 975,000 | ||||||
| Fair value of warrant adjustment | 403,635 | (151,759 | ) | ||||
| Non-GAAP net income (loss) | $ | 557,393 | $ | (997,820 | ) | ||
| Net income (loss) | $ | 153,758 | $ | (1,821,061 | ) | ||
| Non-GAAP net income (loss) | $ | 557,393 | $ | (997,820 | ) | ||
| Cumulative preferred dividends | - | - | |||||
| Net income (loss) applicable to common shares | $ | 153,758 | $ | (1,821,061 | ) | ||
| Non-GAAP net income (loss) applicable to common shares | $ | 557,393 | $ | (997,820 | ) | ||
| Diluted weighted average number of common shares outstanding | 33,468,336 | 32,448,040 | |||||
| Net earnings (loss) per common share - diluted | $ | 0.00 | $ | (0.06 | ) | ||
| Non-GAAP net earnings (loss) per common share - diluted | $ | 0.02 | $ | (0.03 | ) | ||
| Non GAAP Reconciliation | ||||||
| Reconciliation of Operating Margin to Non-GAAP Operating Margin | ||||||
| Three Months Ended | ||||||
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|||||
| Operating income (loss) | $ | 567,650 | $ | (1,937,034) | ||
| Non-GAAP adjustments: | ||||||
| Operating expenses | ||||||
|
Selling, general and administrative CEO separation |
975,000 | |||||
| Operating income (loss), Non-GAAP | $ | 567,650 | $ | (962,034) | ||
| Revenues | $ | 8,884,321 | $ | 6,881,598 | ||
| Operating Margin | 6.4% | -28.1% | ||||
| Operating Margin, Non-GAAP | 6.4% | -14.0% | ||||
|
Reconciliation of GAAP Net Earnings to Adjusted |
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| Three months ended | ||||||||
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| Net income (loss) | $ | 153,758 | $ | (1,821,061 | ) | |||
| Less interest income | (21,661 | ) | (13,286 | ) | ||||
| Plus interest expenses | 25,016 | 49,072 | ||||||
| Plus income tax expense | 6,902 | - | ||||||
| Plus depreciation expense | 904,580 | 552,990 | ||||||
| Plus amortization expense | 185,600 | 258,600 | ||||||
| Less change in fair value of warrant liabilities | 403,635 | (151,759 | ) | |||||
| Plus stock-based compensation | 94,891 | 187,044 | ||||||
| Plus intangible asset impairment | - | - | ||||||
| Adjusted EBITDA | $ | 1,752,721 | $ | (938,400 | ) | |||
F-USAT
VP Corp. Comm. & Investor Relations
vrosa@usatech.com
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