USA Technologies Reports Results for the First Quarter of Fiscal 2013
Total Revenues Up 25%; Recurring Revenues Up 27%
Gross Profit Up 53%
174,000 Connections to ePort Connect Service, Up 35% (year over year)
3,725 Customers, Up 64% (year over year)
-
25% increase in total revenues to
$8.4 million ; -
53% increase in gross profit to
$3.1 million ; -
27% increase in license and transaction fee revenues ("recurring
revenues") to
$6.9 million , representing 82% of total revenues for the quarter; -
174,000 total connections to its ePort Connect® service, a 35%
increase from 129,000 connections as of
September 30, 2011 , with 10,000 net new connections added in the first quarter of Fiscal 2013; - 3,725 total customers, a 64% increase from 2,275, with 450 new customers in the first quarter;
-
Adjusted EBITDA of
$730,707 , up from($760,088) ; -
GAAP net income of
$39,140 , up from($78,954) ; and non-GAAP net loss of($95,993) from($1,815,563) in the same quarter a year ago.
"Our first quarter results reflect steady progress toward our Fiscal
2013 goals set out in our year-end conference call in September,
particularly our goal for achieving non-GAAP net income in our second
fiscal quarter ending
"Net new connections for the first quarter were generally in line with our expectations, particularly in vending, although kiosk—related connections played a smaller role than anticipated this quarter," continued Herbert. "At the same time, while steady progress continued in expanding our ePort Connect network and recurring revenue base, the first quarter was also marked by a number of important advancements with respect to growing the value of every USAT connection longer-term, particularly with respect to our mobile and diversification strategies," said Herbert.
Strategic highlights during the first quarter included:
-
A special marketing agreement with Isis—a
mobile payment and commerce system joint venture between AT&T,
T-Mobile and Verizon—that promotes cashless adoption in tandem with
Isis mobile wallet acceptance in Isis' two launch markets of
Austin, Texas , andSalt Lake City Utah ; - Innovative mobile-based loyalty and couponing services demonstrated in the Verizon booth at CTIA MobileCON, including contextual applications (which provide a customized rewards experience based on where the consumer is and what they have purchased in the past), machine coupon redemption, and the ability to push information, advertisements, machine location and product availability to consumers via NFC smart phones;
-
Accelerated work with customers and partners with respect to the
introduction of ePort
Mobile™-- USAT's mobile acceptance product-- during the quarter,
with additional customer demonstrations scheduled for mid-November at
a NAMA trade event in
New Orleans ; and, - Introduction of QuickConnect™--an API Web service that streamlines the process by which developers or OEMs can point their devices to ePort Connect—to further expand USAT's pipeline in the kiosk market.
First Quarter Results
Revenues for the first 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 of
GAAP net income for the first quarter of Fiscal 2013 was
After preferred dividends, net loss per common share was
Outlook
"Strategies that have delivered double-digit increases in our ePort Connect service and customer base for the prior corresponding quarter are building a reliable and high margin revenue stream that is generating cash and taking us ever closer towards profitability," continued Herbert. "We are diligently working towards non-GAAP net income in our second fiscal quarter, and outside of any unusual or unanticipated non-operational expenses, expect to achieve that goal (see Discussion of Non-GAAP Financial Measures).
"In addition, we remain on track to meet other Fiscal 2013 targets
established for the year," said Herbert. "We continue to work toward
60,000 new connections for the year, and for 224,000 in total
connections to our ePort Connect service by the end of our
"Perhaps more importantly, we believe these Fiscal 2013 targets highlight the sustainable improvements in the business we were seeking in our turnaround plan articulated to shareholders less than a year ago," said Herbert. "They also highlight how every new connection to our ePort Connect cashless and M2M telemetry service can further enhance shareholder value through the continued cash generation characteristic of a service business. With cashless adoption in the unattended retail market at the early stages of adoption, we remain very optimistic about the future," concluded Herbert.
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 positive adjusted EBITDA, 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 it 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.
|
Consolidated Statement of Operations |
||||||||||||
|
Three months ended September 30, |
||||||||||||
| 2012 | 2011 | |||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Revenues: | ||||||||||||
| License and transaction fees | $ | 6,906,356 | $ | 5,419,663 | ||||||||
| Equipment sales | 1,483,921 | 1,286,085 | ||||||||||
| Total revenues | 8,390,277 | 6,705,748 | ||||||||||
| Cost of services | 4,192,360 | 3,761,577 | ||||||||||
| Cost of equipment | 1,053,636 | 895,135 | ||||||||||
| Gross profit | 3,144,281 | 2,049,036 | ||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 3,215,125 | 3,468,070 | ||||||||||
| Depreciation and amortization | 343,388 | 403,232 | ||||||||||
| Total operating expenses | 3,558,513 | 3,871,302 | ||||||||||
| Operating loss | (414,232) | (1,822,266) | ||||||||||
| Other income (expense): | ||||||||||||
| Interest income | 20,166 | 17,867 | ||||||||||
| Interest expense | (23,006) | (11,164) | ||||||||||
| Change in fair value of warrant liabilities | 463,133 | 1,736,609 | ||||||||||
| Total other income (expense), net | 460,293 | 1,743,312 | ||||||||||
| Income (loss) before provision for income taxes | 46,061 | (78,954) | ||||||||||
| Provision for income taxes | (6,921) | - | ||||||||||
| Net income (loss) | 39,140 | (78,954) | ||||||||||
| Cumulative preferred dividends | (332,226) | (332,226) | ||||||||||
| Loss applicable to common shares | $ | (293,086) | $ | (411,180) | ||||||||
| Loss per common share (basic and diluted) | $ | (0.01) | $ | (0.01) | ||||||||
| Weighted average number of common shares outstanding (basic and diluted) | 32,518,230 | 32,288,638 | ||||||||||
|
Consolidated Balance Sheets |
|||||||||||||||
|
September 30, 2012 |
June 30, 2012 |
||||||||||||||
| (unaudited) | |||||||||||||||
| Assets | |||||||||||||||
| Current assets: | |||||||||||||||
| Cash and cash equivalents | $ | 6,203,703 | $ | 6,426,645 | |||||||||||
|
Accounts receivable, less allowance for uncollectible accounts of
|
|||||||||||||||
|
|
2,366,750 | 2,441,941 | |||||||||||||
| Finance receivables | 139,039 | 206,649 | |||||||||||||
| Inventory | 1,185,917 | 2,511,748 | |||||||||||||
| Prepaid expenses and other current assets | 603,893 | 555,823 | |||||||||||||
| Total current assets | 10,499,302 | 12,142,806 | |||||||||||||
| Finance receivables, less current portion | $ | 372,977 | $ | 336,198 | |||||||||||
| Property and equipment, net | 13,037,458 | 11,800,108 | |||||||||||||
| Intangibles, net | 1,010,853 | 1,196,453 | |||||||||||||
| Goodwill | 7,663,208 | 7,663,208 | |||||||||||||
| Other assets | 81,247 | 80,884 | |||||||||||||
| Total assets | $ | 32,665,045 | $ | 33,219,657 | |||||||||||
| Liabilities and shareholders' equity | |||||||||||||||
| Current liabilities: | |||||||||||||||
| Accounts payable | $ | 6,020,991 | $ | 6,136,443 | |||||||||||
| Accrued expenses | 1,933,093 | 3,342,456 | |||||||||||||
| Line of credit | 1,337,779 | - | |||||||||||||
| Current obligations under long-term debt | 483,934 | 466,056 | |||||||||||||
| Total current liabilities | 9,775,797 | 9,944,955 | |||||||||||||
| Long-term liabilities: | |||||||||||||||
| Long-term debt, less current portion | 210,642 | 262,274 | |||||||||||||
| Accrued expenses, less current portion | 384,158 | 426,241 | |||||||||||||
| Deferred tax liabilities | 19,520 | 12,599 | |||||||||||||
| Warrant liabilities, non-current | 455,433 | 918,566 | |||||||||||||
| Total long-term liabilities | 1,069,753 | 1,619,680 | |||||||||||||
| Total liabilities | 10,845,550 | 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- 32,741,732 and 32,510,069, respectively | 220,638,660 | 220,513,327 | |||||||||||||
| Accumulated deficit | (201,957,221) | (201,996,361) | |||||||||||||
| Total shareholders' equity | 21,819,495 | 21,655,022 | |||||||||||||
| Total liabilities and shareholders' equity | $ | 32,665,045 | $ | 33,219,657 | |||||||||||
|
Consolidated Statements of Cash Flows |
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|
Three months ended September 30, |
|||||||||||
| 2012 | 2011 | ||||||||||
| OPERATING ACTIVITIES: | (unaudited) | (unaudited) | |||||||||
| Net income (loss) | $ | 39,140 | $ | (78,954) | |||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||
| Charges incurred in connection with the vesting and issuance | |||||||||||
| of common stock for employee and director compensation | 125,333 | 240,453 | |||||||||
| Charges reduced for change in fair value of warrants | (463,133) | (1,736,609) | |||||||||
|
Depreciation, |
|||||||||||
| of which is allocated to cost of services | 834,006 | 563,125 | |||||||||
| Amortization | 185,600 | 258,600 | |||||||||
| Bad debt recoveries, net | (6,129) | (22,056) | |||||||||
| Provision for deferred tax liability | 6,921 | - | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 81,320 | 187,501 | |||||||||
| Finance receivables | 30,831 | (43,791) | |||||||||
| Inventory | 1,331,390 | 160,798 | |||||||||
| Prepaid expenses and other assets | 79,629 | 48,339 | |||||||||
| Accounts payable | (115,452) | (656,552) | |||||||||
| Accrued expenses | (1,451,446) | 582,357 | |||||||||
| Net cash provided by (used in) operating activities | 678,010 | (496,789) | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment | (1,525) | (60,348) | |||||||||
| Purchase of property for rental program, net | (2,075,390) | (1,234,608) | |||||||||
|
|
|||||||||||
| Net cash used in investing activities | (2,076,915) | (1,294,956) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from the issuance of common stock | $ | - | $ | 10,010 | |||||||
| Proceeds from line of credit | 1,337,779 | - | |||||||||
| Repayment of long-term debt | (161,816) | (109,839) | |||||||||
| Net cash provided by (used in) financing activities | 1,175,963 | (99,829) | |||||||||
| Net decrease in cash and cash equivalents | (222,942) | (1,891,574) | |||||||||
| Cash and cash equivalents at beginning of year | 6,426,645 | 12,991,511 | |||||||||
| Cash and cash equivalents at end of period | $ | 6,203,703 | $ | 11,099,937 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | 26,150 | $ | 11,708 | |||||||
| Equipment and software acquired under capital lease | $ | - | $ | 495,955 | |||||||
| Prepaid insurance financed with debt | $ | 128,062 | $ | 90,372 | |||||||
| Disposal of property and equipment | $ | - | $ | 20,407 | |||||||
| Reclass of rental program property to inventory | $ | 5,559 | $ | - | |||||||
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 net loss per common share is calculated by dividing non-GAAP net loss applicable to common shares by the number of weighted average shares outstanding (basic and diluted).
Management believes that non-GAAP net income (loss) and non-GAAP net 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 divided by revenues.
|
Non GAAP Reconciliation |
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| Three Months Ended | |||||||||||||
|
|
|
||||||||||||
| Net income (loss) | $ | 39,140 | $ | (78,954 | ) | ||||||||
| Non-GAAP adjustments: | |||||||||||||
| Operating expenses | |||||||||||||
| Selling, general and administrative | |||||||||||||
| Proxy related costs | 328,000 | ||||||||||||
| Fair value of warrant adjustment | (463,133 | ) | (1,736,609 | ) | |||||||||
| Non-GAAP net loss | $ | (95,993 | ) | $ | (1,815,563 | ) | |||||||
| Net income (loss) | $ | 39,140 | $ | (78,954 | ) | ||||||||
| Non-GAAP net loss | $ | (95,993 | ) | $ | (1,815,563 | ) | |||||||
| Cumulative preferred dividends | (332,226 | ) | (332,226 | ) | |||||||||
| Loss applicable to common shares | $ | (293,086 | ) | $ | (411,180 | ) | |||||||
| Non-GAAP loss applicable to common shares | $ | (428,219 | ) | $ | (2,147,789 | ) | |||||||
|
Weighted average number of common shares |
32,518,230 | 32,288,638 | |||||||||||
| Loss per common share | $ | (0.01 | ) | $ | (0.01 | ) | |||||||
| Non-GAAP loss per common share | $ | (0.01 | ) | $ | (0.07 | ) | |||||||
|
Non GAAP Reconciliation Reconciliation of Operating Margin to Non-GAAP Operating Margin |
|||||||||||||
| Three Months Ended | |||||||||||||
|
|
|
||||||||||||
| Operating Loss | $ | (414,232 | ) | $ | (1,822,266 | ) | |||||||
| Non-GAAP adjustments: | |||||||||||||
| Operating expenses | |||||||||||||
| Selling, general and administrative | |||||||||||||
| Proxy related costs | 328,000 | ||||||||||||
| Operating Loss, Non-GAAP | $ | (86,232 | ) | $ | (1,822,266 | ) | |||||||
| Revenues | $ | 8,390,277 | $ | 6,705,748 | |||||||||
| Operating Margin | -4.9 | % | -27.2 | % | |||||||||
| Operating Margin, Non-GAAP | -1.0 | % | -27.2 | % | |||||||||
|
Reconciliation of GAAP Net Earnings to Adjusted Earnings |
|||||||||||||
| Three months ended | |||||||||||||
|
|
|
||||||||||||
| Net income (loss) | $ | 39,140 | $ | (78,954 | ) | ||||||||
| Less interest income | (20,166 | ) | (17,867 | ) | |||||||||
| Plus interest expenses | 23,006 | 11,164 | |||||||||||
| Plus income tax expense | 6,921 | - | |||||||||||
| Plus depreciation expense | 834,006 | 563,125 | |||||||||||
| Plus amortization expense | 185,600 | 258,600 | |||||||||||
| Less change in fair value of warrant liabilities | (463,133 | ) | (1,736,609 | ) | |||||||||
| Plus stock-based compensation | 125,333 | 240,453 | |||||||||||
| Plus intangible asset impairment | - | - | |||||||||||
| Adjusted EBITDA | $ | 730,707 | $ | (760,088 | ) | ||||||||
F-USAT
VP Corp. Comm. &
Investor Relations
vrosa@usatech.com
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