USA Technologies Announces Second Quarter Fiscal Year 2017 Results

 

MALVERN, Pa. – Feb. 8, 2017 – USA Technologies, Inc. (NASDAQ:USAT) (“USAT”), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its second quarter ended December 31, 2016.

Second Quarter Financial Highlights:

 

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Total quarterly revenue of $21.8 million, a year-over-year increase of 18%

 

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469,000 connections to ePort service, representing a year-over-year increase of 27%

 

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Added 500 customers to achieve record 11,900 total customers compared to 10,625 as of a year ago, a year-over-year increase of 12%

 

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Quarterly record license and transaction fee revenue of $16.6 million, a year-over-year increase of 22%

 

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Ended the quarter with $18.0 million in cash

 

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Quarterly GAAP net income of $233,000 resulting in earnings of $0.01 per share

 

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Quarterly Non-GAAP net income of $241,000

 

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Quarterly Adjusted EBITDA of $1.7 million

 

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Second Quarter and YTD Financial Highlights, Connections & Transaction Data:

 

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“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.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 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

 

 

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:

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Statements of Operations for the 3 Months and 6 Months Ended December 31, 2016 and 2015

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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

 

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($ in thousands)		December 31, 2016				June 30, 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	%

		For the three months ended
($ in thousands) (unaudited)		December 31, 2016				% of Sales				September 30, 2016				% of Sales				June 30, 2016				% of Sales				March 31, 2016				% of Sales				December 31, 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	%