USA Technologies, Inc.
Feb 8, 2017

USA Technologies Announces Second Quarter Fiscal Year 2017 Results

 

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:

 

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

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

 

Source: USA Technologies, Inc.

 

 

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