USA Technologies, Inc.
Nov 9, 2016

USA Technologies Announces First 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 first quarter ended September 30, 2016.

First Quarter Financial Highlights:

First Quarter Financial Highlights, Connections & Transaction Data:

       

As of and for the three
months ended
September 30,

         

(Connections and $'s in thousands, transactions in millions, eps is not rounded)

  2016     2015       Change     % Change
Revenues:                            
License and transaction fees       $ 16,365       $ 12,925         $ 3,440       27 %
Equipment Sales         5,223         3,675           1,548       42 %
Total revenues       $ 21,588       $ 16,600         $ 4,988       30 %
                             
License and transaction fee margin         31.3 %       32.6 %         -1.3 %     -4 %
                             
Equipment sales gross margin         20.0 %       22.5 %         -2.5 %     -11 %
                             
Overall Gross Margin         28.6 %       30.4 %         -1.8 %     -6 %
                             
Operating income/(loss)       $ (950 )     $ 112         $ (1,062 )     -948 %
                             
Net income/(loss)       $ (2,464 )     $ 360         $ (2,824 )     -784 %
                             
Net income (loss) per common shares - basic       $ (0.07 )     $ -         $ (0.07 )     -700 %
                             
Net income (loss) per common shares - diluted       $ (0.07 )     $ (0.01 )       $ (0.06 )     600 %
                             
Net New Connections         19         16           3       19 %
                             
Total Connections (at period end)         448         349           99       28 %
                             
Total Number of Transactions (millions)         95         69           26       38 %
                             
Transaction Volume (millions)       $ 183       $ 127         $ 56       44 %
                             
Adjusted EBITDA       $ 663       $ 1,751         $ (1,088 )     -62 %
                             
Non-GAAP net income (loss)       $ (955 )     $ 61         $ (1,016 )     -1666 %
                                           

"USA Technologies continued its strong connection and revenue growth and is executing in the market to drive cashless and mobile payments to self-service retail locations," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "As we move further into our fiscal year, we expect to see both continued top line growth and expanding profitability as we drive wider adoption of our ePort Connect service to vending, kiosks, and other unattended retail locations. Our customers continue to see compelling economics which underpins their decisions to upgrade 100% of their locations to our technology. Further, as the market advances we expect our ePort Interactive Service, which enables a more robust consumer experience and yields improved performance at the location, to expand market share."

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 8:30 a.m. Eastern Time today, November 9, 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 # 8492228.

A live webcast of the conference call will be available at http://usat.client.shareholder.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 November 9, 2016 until 11:30 a.m. Eastern Time on November 12, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 8492228. 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 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. 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; 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 Ended September 30, 2016 and 2015

B. Five Quarter Select Key Performance Indicators

C. Comparative Balance Sheets as of September 30, 2016 and June 30, 2016

D. Five Quarter Statements of Operations and Adjusted EBITDA

E. Five Quarter 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 Ended September 30, 2016 and 2015

                                         
        For the three months ended September 30,              
($ in thousands, except shares and per share data)       2016    

% of
Sales

    2015    

% of
Sales

      Change     % Change
                                         
Revenues:                                        
License and transaction fees       $ 16,365       75.8 %     $ 12,925       77.9 %       $ 3,440       27 %
Equipment sales         5,223       24.2 %       3,675       22.1 %         1,548       42 %
Total revenues         21,588       100.0 %       16,600       100.0 %         4,988       30 %
                                         
Costs of sales/revenues:                                        
Cost of services         11,243       68.7 %       8,705       67.4 %         2,538       29 %
Cost of equipment         4,178       80.0 %       2,848       77.5 %         1,330       47 %
Total costs of sales/revenues         15,421       71.4 %       11,553       69.6 %         3,868       33 %
                                         
Gross profit         6,167       28.6 %       5,047       30.4 %         1,120       22 %
                                         
Operating expenses:                                        
Selling, general and administrative         6,909       32.0 %       4,796       28.9 %         2,113       44 %
Depreciation and amortization         208       1.0 %       139       0.8 %         69       50 %
Total operating expenses         7,117       33.0 %       4,935       29.7 %         2,182       44 %
                                         
Operating income (loss)         (950 )     -4.4 %       112       0.7 %         (1,062 )     -948 %
                                         
Other income (expense):                                        
Interest income         73       0.3 %       51       0.3 %         22       43 %
Interest expense         (212 )     -1.0 %       (119 )     -0.7 %         (93 )     78 %
Change in fair value of warrant liabilities         (1,490 )     -6.9 %       343       2.1 %         (1,833 )     -534 %
Total other income (expense), net         (1,629 )     -7.5 %       275       1.7 %         (1,904 )     -692 %
                                         
Income (loss) before provision for income taxes         (2,579 )     -11.9 %       387       2.3 %         (2,966 )     -766 %
Benefit (provision) for income taxes         115       0.5 %       (27 )     -0.2 %         142       -526 %
                                         
Net income (loss)         (2,464 )     -11.4 %       360       2.2 %         (2,824 )     -784 %
Cumulative preferred dividends         (334 )     -1.5 %       (334 )     -2.0 %         -       0 %
Net income (loss) applicable to common shares       $ (2,798 )     -13.0 %     $ 26       0.2 %       $ (2,824 )     -10862 %
                                         
Net earnings (loss) per common share - basic       $ (0.07 )           $ -               $ (0.07 )     -700 %
Net earnings (loss) per common share - diluted       $ (0.07 )           $ (0.01 )             $ (0.06 )     600 %
                                         
Basic weighted average number of common shares outstanding         38,488,005               35,848,395                 2,639,610       7 %
Diluted weighted average number of common shares outstanding         38,488,005               36,487,879                 2,000,126       5 %
                     

(B) Five Quarter Select Key Performance Indicators

                     
        As of and for the three months ended
        September 30,     June 30,     March 31,     December 31,     September 30,
        2016     2016     2016     2015     2015
Connections:                                
Gross New Connections         22,000         33,000         34,000         23,000         20,000  
% from Existing Customer Base         86 %       83 %       91 %       89 %       86 %
Net New Connections         19,000         28,000         32,000         20,000         16,000  
Total Connections         448,000         429,000         401,000         369,000         349,000  
                                 
Customers:                                
New Customers Added         350         300         125         350         675  
Total Customers         11,400         11,050         10,750         10,625         10,275  
                                 
Volumes:                                
Total Number of Transactions (millions)         95         89         82         76         69  
Transaction Volume (millions)       $ 183       $ 169       $ 151       $ 138       $ 126  
                                 
Financing Structure of Connections:                                
JumpStart         7.7 %       6.5 %       7.4 %       10.1 %       13.8 %
QuickStart & All Others *         92.3 %       93.5 %       92.6 %       89.9 %       86.2 %
Total         100.0 %       100.0 %       100.0 %       100.0 %       100.0 %
                                 
*Includes credit sales with standard trade receivable terms                  
 

© Comparative Balance Sheets September 30, 2016 to June 30, 2016

                             
($ in thousands)       September 30,     June 30,              
        2016     2016       Change     % Change
Assets                            
Current assets:                            
Cash       $ 18,198       $ 19,272         $ (1,074 )     -6 %
Accounts receivable, less allowance         5,840         4,899           941       19 %
Finance receivables         3,349         3,588           (239 )     -7 %
Inventory, net         4,264         2,031           2,233       110 %
Prepaid expenses and other current assets         1,439         987           452       46 %
Deferred income taxes         2,271         2,271           -       0 %
Total current assets         35,361         33,048           2,313       7 %
                             
Finance receivables, less current portion         3,962         3,718           244       7 %
Other assets         163         348           (185 )     -53 %
Property and equipment, net         9,570         9,765           (195 )     -2 %
Deferred income taxes         25,568         25,453           115       0 %
Intangibles, net         754         798           (44 )     -6 %
Goodwill         11,703         11,703           -       0 %
Total assets       $ 87,081       $ 84,833         $ 2,248       3 %
                             
Liabilities and shareholders' equity                            
Current liabilities:                            
Accounts payable       $ 8,693       $ 12,354         $ (3,661 )     -30 %
Accrued expenses         3,912         3,458           454       13 %
Line of credit, net         7,258         7,119           139       2 %
Current obligations under long-term debt         834         629           205       33 %
Income taxes payable         8         18           (10 )     -56 %
Warrant liabilities         -         3,739           (3,739 )     100 %
Deferred gain from sale-leaseback transactions         685         860           (175 )     -20 %
Total current liabilities         21,390         28,177           (6,787 )     -24 %
Long-term liabilities                            
Long-term debt, less current portion         1,517         1,576           (59 )     -4 %
Accrued expenses, less current portion         11         15           (4 )     -27 %
Deferred gain from sale-leaseback transactions, less current portion     -         40           (40 )     -100 %
Total long-term liabilities         1,528         1,631           (103 )     -6 %
Total liabilities         22,918         29,808           (6,890 )     -23 %
                             
Shareholders' equity:                            
Preferred stock, no par value         3,138         3,138           -       0 %
Common stock, no par value         244,996         233,394           11,602       5 %
Accumulated deficit         (183,971 )       (181,507 )         (2,464 )     1 %
Total shareholders' equity         64,163         55,025           9,138       17 %
Total liabilities and shareholders' equity       $ 87,081       $ 84,833         $ 2,248       3 %
                             
Net working capital       $ 13,971       $ 4,871         $ 9,100       187 %
                                           

(D) Five Quarter Statement of Operations and Adjusted EBITDA

                                           
($ in thousands)     For the three months ended
      September 30,    

 

    June 30,    

 

    March 31,    

 

    December 31,    

 

    September 30,    

 

      2016    

% of Sales

    2016    

% of Sales

    2016    

% of Sales

    2015    

% of Sales

    2015    

% of Sales

Revenues:                                                            
License and transaction fees     $ 16,365       75.8 %     $ 15,263       69.6 %     $ 14,727       72.3 %     $ 13,674       73.9 %     $ 12,925       77.9 %
Equipment Sales       5,223       24.2 %       6,681       30.4 %       5,634       27.7 %       4,829       26.1 %       3,675       22.1 %
Total revenue       21,588       100.0 %       21,944       100.0 %       20,361       100.0 %       18,503       100.0 %       16,600       100.0 %
                                                             
Costs of sales/revenues:                                                            
License and transaction fees       11,243       68.7 %       10,614       69.5 %       9,703       65.9 %       9,067       66.3 %       8,705       67.4 %
Equipment sales       4,178       80.0 %       5,547       83.0 %       4,986       88.5 %       3,953       81.9 %       2,848       77.5 %
Total costs of sales/revenues       15,421       71.4 %       16,161       73.6 %       14,689       72.1 %       13,020       70.4 %       11,553       69.6 %
                                                             
Gross Profit:                                                            
License and transaction fees       5,122       31.3 %       4,649       30.5 %       5,024       34.1 %       4,607       33.7 %       4,220       32.6 %
Equipment sales       1,045       20.0 %       1,134       17.0 %       648       11.5 %       876       18.1 %       827       22.5 %
Total gross profit       6,167       28.6 %       5,783       26.4 %       5,672       27.9 %       5,483       29.6 %       5,047       30.4 %
                                                             
Operating expenses:                                                            
Selling, general and administrative       6,909       32.0 %       6,721       30.6 %       6,094       29.9 %       4,762       25.7 %       4,796       28.9 %
Depreciation       208       1.0 %       208       0.9 %       173       0.8 %       127       0.7 %       139       0.8 %
Impairment of intangible asset       -       0.0 %       432       2.0 %       -       0.0 %       -       0.0 %       -       0.0 %
Total operating expenses       7,117       33.0 %       7,361       33.5 %       6,267       30.8 %       4,889       26.4 %       4,935       29.7 %
                                                             
Operating income (loss)       (950 )     -4.4 %       (1,578 )     -7.2 %       (595 )     -2.9 %       594       3.2 %       112       0.7 %
                                                             
Other income (expense):                                                            
Interest income       73       0.3 %       182       0.8 %       67       0.3 %       20       0.1 %       51       0.3 %
Other income       -       0.0 %       -       0.0 %       -       0.0 %       -       0.0 %       -       0.0 %
Interest expense       (212 )     -1.0 %       (197 )     -0.9 %       (180 )     -0.9 %       (104 )     -0.6 %       (119 )     -0.7 %
Change in fair value of warrant liabilities       (1,490 )     -6.9 %       18       0.1 %       (4,805 )     -23.6 %       (1,230 )     -6.6 %       343       2.1 %
Total other income (expense), net       (1,629 )     -7.5 %       3       0.0 %       (4,918 )     -24.2 %       (1,314 )     -7.1 %       275       1.7 %
                                                             
Loss before provision for income taxes       (2,579 )     -11.9 %       (1,575 )     -7.2 %       (5,513 )     -27.1 %       (720 )     -3.9 %       387       2.3 %
Benefit (provision) for income taxes       115       0.5 %       703       3.2 %       93       0.5 %       (154 )     -0.8 %       (27 )     -0.2 %
                                                             
Net income (loss)       (2,464 )     -11.4 %       (872 )     -4.0 %       (5,420 )     -26.6 %       (874 )     -4.7 %       360       2.2 %
                                                             
Less interest income       (73 )     -0.3 %       (182 )     -0.8 %       (67 )     -0.3 %       (20 )     -0.1 %       (51 )     -0.3 %
Plus interest expenses       212       1.0 %       197       0.9 %       180       0.9 %       104       0.6 %       119       0.7 %
Plus income tax expense       (115 )     -0.5 %       (703 )     -3.2 %       (93 )     -0.5 %       154       0.8 %       27       0.2 %
Plus depreciation expense       1,257       5.8 %       1,272       5.8 %       1,190       5.8 %       1,323       7.2 %       1,350       8.1 %
Plus amortization expense       44       0.2 %       44       0.2 %       44       0.2 %       -       0.0 %       -       0.0 %
Plus (less) change in fair value of warrant liabilities       1,490       6.9 %       (18 )     -0.1 %       4,805       23.6 %       1,230       6.6 %       (343 )     -2.1 %
Plus stock-based compensation       211       1.0 %       198       0.9 %       142       0.7 %       237       1.3 %       272       1.6 %
Plus intangible asset impairment       -       0.0 %       432       2.0 %       -       0.0 %       -       0.0 %       -       0.0 %
Plus VendScreen non-recurring charges       101       0.5 %       258       1.2 %       461       2.3 %       106       0.6 %       -       0.0 %
Plus litigation related professional fees       -       0.0 %       -       0.0 %       105       0.5 %       -       0.0 %       -       0.0 %
Adjusted EBITDA     $ 663       3.1 %     $ 626       2.9 %     $ 1,347       6.6 %     $ 2,260       12.2 %     $ 1,734       10.4 %
                                                             
See discussion of Non-GAAP financial measures later in this document                                    
                                                   

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

                                                   
        Three months ended
($ in thousands)       September 30,     % of     June 30,     % of     March 31,     % of     December 31,     % of     September 30,     % of
        2016     SG&A     2016     SG&A     2016     SG&A     2015     SG&A     2015     SG&A
                                                               
Salaries and benefit costs       $ 3,129       45.3 %     $ 3,050       45.4 %     $ 2,760       45.4 %     $ 2,786       58.6 %     $ 2,685       56.0 %
Marketing related expenses         329       4.8 %       635       9.4 %       362       5.9 %       335       7.0 %       333       6.9 %
Professional services         2,520       36.5 %       1,533       22.8 %       1,152       18.9 %       839       17.6 %       782       16.3 %
Bad debt expense         97       1.4 %       470       7.0 %       505       8.3 %       239       5.0 %       236       4.9 %
Premises, equipment and insurance costs         499       7.2 %       555       8.3 %       460       7.5 %       347       7.3 %       399       8.3 %
Research and development expenses         124       1.8 %       123       1.8 %       131       2.1 %       37       0.8 %       191       4.0 %
VendScreen non-recurring charges         101       1.5 %       258       3.8 %       461       7.6 %       106       2.2 %       17       0.4 %
Litigation related professional fees         33       0.5 %       51       0.8 %       105       1.7 %       -       0.0 %       -       0.0 %
Other expenses         77       1.1 %       46       0.7 %       158       2.6 %       73       1.5 %       153       3.2 %
Total SG&A expenses       $ 6,909       100 %     $ 6,721       100 %     $ 6,094       100 %     $ 4,762       100 %     $ 4,796       100 %
                                                               
Total Revenue       $ 21,588             $ 21,944             $ 20,361             $ 18,503             $ 16,600        
SG&A expenses as a percentage of revenue         32.0 %             30.6 %             29.9 %             25.7 %             28.9 %      
                               

(F) Five Quarter Condensed Balance Sheets

                               
($ in thousands)     September 30,     June 30,     March 31,     December 31,     September 30,
      2016     2016     2016     2015     2015
                               
Assets                              
Current assets:                              
Cash     $ 18,198     $ 19,272     $ 14,901       $ 14,809     $ 11,592
Accounts receivable, less allowance       5,840       4,899       8,345         6,976       6,448
Finance receivables       3,349       3,588       1,677         1,503       946
Inventory, net       4,264       2,031       2,341         2,849       3,718
Other current assets       3,710       3,258       2,336         2,160       1,883
Total current assets       35,361       33,048       29,600         28,297       24,587
                               
Finance receivables, less current portion       3,962       3,718       3,042         2,435       3,525
Other assets       163       348       337         326       342
Property and equipment, net       9,570       9,765       10,584         10,856       11,890
Deferred income taxes       25,568       25,453       25,701         25,607       25,761
Goodwill and intangibles       12,457       12,501       12,976         8,095       8,095
Total assets     $ 87,081     $ 84,833     $ 82,240       $ 75,616     $ 74,200
                               
Liabilities and shareholders' equity                              
Current liabilities:                              
Accounts payable and accrued expenses     $ 12,605     $ 15,812     $ 15,368       $ 9,992     $ 11,615
Line of credit, net       7,258       7,119       6,980         7,000       4,000
Warrant Liabilities       -       3,739       5,964         -       -
Other current liabilities       1,527       1,507       1,485         1,384       1,497
Total current liabilities       21,390       28,177       29,797         18,376       17,112
Long-term liabilities                              
Total long-term liabilities       1,528       1,631       2,016         3,945       3,116
Total liabilities       22,918       29,808       31,813         22,321       20,228
                               
Shareholders' equity:                              
Total shareholders' equity       64,163       55,025       50,427         53,295       53,972
Total liabilities and shareholders' equity     $ 87,081     $ 84,833     $ 82,240       $ 75,616     $ 74,200
                               
Total current assets     $ 35,361     $ 33,048     $ 29,600       $ 28,297     $ 24,587
Total current liabilities       21,390       28,177       29,797         18,376       17,112
Net working capital     $ 13,971     $ 4,871     $ (197 )     $ 9,921     $ 7,475
                                 

(G) Five Quarter Statements of Cash Flows

                                 
        Three months ended

($ in thousands)

      September 30,     June 30,     March 31,     December 31,     September 30,
        2016     2016     2016     2015     2015
OPERATING ACTIVITIES:                                
Net (loss) income       $ (2,464 )     $ (872 )     $ (5,420 )     $ (874 )     $ 360  

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

        211         198         142         237         272  
Gain on disposal of property and equipment         -         (110 )       (15 )       (41 )       (1 )
Non-cash interest and amortization of debt discount         105         13         -         -         -  
Bad debt expense         97         470         506         238         236  
Depreciation         1,257         1,272         1,190         1,323         1,350  
Amortization of intangible assets         44         43         44         -         -  
Impairment of intangible asset         -         432         -         -         -  
Change in fair value of warrant liabilities         1,490         (18 )       4,805         1,230         (343 )
Deferred income taxes, net         (115 )       (748 )       (93 )       154         27  
Recognition of deferred gain from sale-leaseback transactions         (215 )       (215 )       (215 )       (215 )       (215 )
Changes in operating assets and liabilities:                                
Accounts receivable         (1,038 )       2,977         (1,872 )       (767 )       38  
Finance receivables         (5 )       (2,587 )       (154 )       533         (583 )
Inventory         (2,223 )       (82 )       250         649         219  
Prepaid expenses and other assets         (224 )       (397 )       (160 )       (254 )       48  
Accounts payable         (3,661 )       329         4,154         (1,623 )       (1,044 )
Accrued expenses         486         115         1,166         (13 )       (2 )
Income taxes payable         (10 )       453         -         (70 )       -  
Net change in operating assets and liabilities         (6,675 )       808         3,384         (1,545 )       (1,324 )
Net cash provided (used) by operating activities         (6,265 )       1,273         4,328         507         362  
                                 
INVESTING ACTIVITIES:                                
Purchase and additions of intangible assets, property and equipment         (168 )       (207 )       (164 )       (118 )       (49 )
Purchase of property for rental program         (642 )       -         -         -         -  
Proceeds from sale of property and equipment         -         265         19         101         4  
Cash paid for assets acquired from VendScreen         -         -         (5,625 )       -         -  
Net cash provided by (used in) investing activities         (810 )       58         (5,770 )       (17 )       (45 )
                                 
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         -         29  
Proceeds (payments) from line of credit         -         138         33         3,000         -  
Repayment of long-term debt         (161 )       (162 )       (151 )       (233 )       (128 )
Net cash provided by (used in) financing activities         6,001         3,040         1,534         2,727         (99 )
                                 
Net increase (decrease) in cash         (1,074 )       4,371         92         3,217         218  
Cash at beginning of period         19,272         14,901         14,809         11,592         11,374  
Cash at end of period       $ 18,198       $ 19,272       $ 14,901       $ 14,809       $ 11,592  
                                 
Supplemental disclosures of cash flow information:                                
Interest paid in cash       $ 87       $ 147       $ 191       $ 107       $ 106  
Depreciation expense allocated to cost of services       $ 1,072       $ 1,139       $ 1,051       $ 1,186       $ 1,199  
Reclass of rental program property to inventory, net       $ (11 )     $ 415       $ 347       $ 777       $ (279 )
Prepaid items financed with debt       $ 54       $ -       $ -       $ -       $ 103  
Warrant issuance for debt discount       $ -       $ -       $ 52       $ -       $ -  
Debt financing cost financed with debt       $ -       $ -       $ 79       $ -       $ -  
Equipment and software acquired under capital lease       $ 254       $ -       $ 409       $ -       $ 35  
Disposal of property and equipment       $ -       $ 555       $ 189       $ 238       $ 99  
                     

(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)       September 30,     June 30,     March 31,     December 31,     September 30,
        2016     2016     2015     2015     2015
                                 
Net income (loss)       $ (2,464 )     $ (872 )     $ (5,420 )     $ (874 )     $ 360  
Non-GAAP adjustments:                                
Non-cash portion of income tax provision         (115 )       (792 )       (38 )       224         27  
Change in fair value of warrant adjustment         1,490         (18 )       4,805         1,230         (343 )
VendScreen non-recurring charges         101         258         461         106         -  
Litigation related professional fees         33         51         105         -         -  
Non-GAAP net income (loss)       $ (955 )     $ (1,373 )     $ (87 )     $ 686       $ 44  
                                 
Net income (loss)       $ (2,464 )     $ (872 )     $ (5,420 )     $ (874 )     $ 360  
Cumulative preferred dividends         (334 )       -         (334 )       -         (334 )
Net income (loss) applicable to common shares       $ (2,798 )     $ (872 )     $ (5,754 )     $ (874 )     $ 26  
                                 
Non-GAAP net income (loss)       $ (955 )     $ (1,373 )     $ (87 )     $ 686       $ 44  
Cumulative preferred dividends         (334 )       -         (334 )       -         (334 )
Non-GAAP net income (loss) applicable to common shares       $ (1,289 )     $ (1,373 )     $ (421 )     $ 686       $ (290 )
                                 
Net earnings (loss) per common share - basic       $ (0.07 )     $ (0.02 )     $ (0.16 )     $ (0.02 )     $ -  
                                                     
Non-GAAP net earnings (loss) per common share - basic       $ (0.03 )     $ (0.04 )     $ (0.01 )     $ 0.02       $ (0.01 )
Basic weighted average number of common shares outstanding         38,488,005         37,325,681         36,161,626         35,909,933         35,848,395  
                                 
Net earnings (loss) per common share - diluted       $ (0.07 )     $ (0.02 )     $ (0.16 )     $ (0.02 )     $ (0.01 )
Non-GAAP net earnings (loss) per common share - diluted       $ (0.03 )     $ (0.04 )     $ (0.01 )     $ 0.02       $ (0.01 )
Diluted weighted average number of common shares outstanding         38,488,005         37,325,681         36,161,626         35,909,933         36,487,879  
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 EBITDA 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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