USA Technologies Reports Results for the First Quarter of Fiscal 2013
USA Technologies Reports Results for the First Quarter of Fiscal 2013
Total Revenues Up 25%; Recurring Revenues Up 27%
Gross Profit Up 53%
174,000 Connections to ePort Connect Service, Up 35% (year over year)
3,725 Customers, Up 64% (year over year)
Business Wire
MALVERN, Pa. -- November 08, 2012
USA Technologies, Inc. (NASDAQ: USAT), (“USAT”), a leader of wireless,
cashless payment and M2M telemetry solutions for self-serve, small-ticket
retail industries, today reported results for the first quarter of Fiscal 2013
ended September 30, 2012. First quarter highlights, compared to the
corresponding quarter of the prior fiscal year, included:
* 25% increase in total revenues to $8.4 million;
* 53% increase in gross profit to $3.1 million;
* 27% increase in license and transaction fee revenues (“recurring
revenues”) to $6.9 million, representing 82% of total revenues for the
quarter;
* 174,000 total connections to its ePort Connect® service, a 35% increase
from 129,000 connections as of September 30, 2011, with 10,000 net new
connections added in the first quarter of Fiscal 2013;
* 3,725 total customers, a 64% increase from 2,275, with 450 new customers
in the first quarter;
* Adjusted EBITDA of $730,707, up from ($760,088);
* GAAP net income of $39,140, up from ($78,954); and non-GAAP net loss of
($95,993) from ($1,815,563) in the same quarter a year ago.
“Our first quarter results reflect steady progress toward our Fiscal 2013
goals set out in our year-end conference call in September, particularly our
goal for achieving non-GAAP net income in our second fiscal quarter ending
December 31, 2012,” said Stephen P. Herbert, Chairman and CEO of USA
Technologies. “In addition, we were extremely pleased to see Adjusted EBITDA
of $730,707. After excluding $328,000 in remaining expenses related to Fiscal
2012’s proxy contest, our Adjusted EBTIDA would have crossed the $1 million
mark—a tremendous milestone for USAT and we believe a strong indicator of the
value inherent in our ePort Connect service model as we continue to grow our
base of recurring revenues.
“Net new connections for the first quarter were generally in line with our
expectations, particularly in vending, although kiosk–related connections
played a smaller role than anticipated this quarter,” continued Herbert. “At
the same time, while steady progress continued in expanding our ePort Connect
network and recurring revenue base, the first quarter was also marked by a
number of important advancements with respect to growing the value of every
USAT connection longer-term, particularly with respect to our mobile and
diversification strategies,” said Herbert.
Strategic highlights during the first quarter included:
* A special marketing agreement with Isis—a mobile payment and commerce
system joint venture between AT&T, T-Mobile and Verizon—that promotes
cashless adoption in tandem with Isis mobile wallet acceptance in Isis’
two launch markets of Austin, Texas, and Salt Lake City Utah;
* Innovative mobile-based loyalty and couponing services demonstrated in the
Verizon booth at CTIA MobileCON, including contextual applications (which
provide a customized rewards experience based on where the consumer is and
what they have purchased in the past), machine coupon redemption, and the
ability to push information, advertisements, machine location and product
availability to consumers via NFC smart phones;
* Accelerated work with customers and partners with respect to the
introduction of ePort Mobile™-- USAT’s mobile acceptance product-- during
the quarter, with additional customer demonstrations scheduled for
mid-November at a NAMA trade event in New Orleans; and,
* Introduction of QuickConnect™--an API Web service that streamlines the
process by which developers or OEMs can point their devices to ePort
Connect—to further expand USAT’s pipeline in the kiosk market.
First Quarter Results
Revenues for the first quarter of Fiscal 2013 were $8.4 million, an increase
of 25% from the same period a year ago. Revenue growth was fueled by a 27%
growth in license and transaction fees and a 15% increase in equipment sales
compared to the first quarter of Fiscal 2012.
Revenue from license and transaction fees, which is driven primarily by
monthly ePort Connect service fees, JumpStart fees and transaction processing
fees, grew to $6.9 million for the first quarter. As of September 30, 2012,
USAT’s ePort Connect service base totaled 174,000 connections.
Gross profit was $3.1 million in the first quarter compared to $2.0 million
for the same period in the prior year, a 53% increase. Increased revenues and
actions taken by management over the course of Fiscal 2012 to strengthen major
supplier contracts and streamline network operations contributed to the
increase. Gross margin was 37.5% for the first quarter compared to 30.6% for
the same period a year ago, as stronger gross margins on revenues from license
and transaction fees, now 82% of total revenues, contributed to a larger share
of the overall mix.
Operating expenses of $3.6 million declined by $0.3 million in the first
quarter of Fiscal 2013 compared to the first quarter of Fiscal 2012. As a
result, operating margins improved to (4.9%) from (27.2%) a year ago and on a
non-GAAP basis, which excludes $328,000 in proxy expenses in the Fiscal 2013
first quarter, non-GAAP operating margins improved to (1.0%) compared to a
non-GAAP operating margin of (27.2%) for the same period a year ago—all while
supporting double-digit top line growth.
GAAP net income for the first quarter of Fiscal 2013 was $39,140. On a
non-GAAP basis, which also excludes fair value of warrant liability
adjustments for both years in order to track the operational progress of the
business, non-GAAP net loss narrowed to ($95,993) from a non-GAAP net loss of
($1.8) million for the first quarter of Fiscal 2012. Continued, strong revenue
growth and actions to enhance gross margins and lower operating expenses led
to this $1.9 million improvement (see non-GAAP Reconciliation table).
After preferred dividends, net loss per common share was ($.01) for the first
quarter of Fiscal 2013 compared to ($.01) for the same period in Fiscal 2012.
On a non-GAAP basis, net loss per common share was ($.01) for the first
quarter of Fiscal 2013 compared to ($.07) for the same period in Fiscal 2012.
Outlook
“Strategies that have delivered double-digit increases in our ePort Connect
service and customer base for the prior corresponding quarter are building a
reliable and high margin revenue stream that is generating cash and taking us
ever closer towards profitability,” continued Herbert. “We are diligently
working towards non-GAAP net income in our second fiscal quarter, and outside
of any unusual or unanticipated non-operational expenses, expect to achieve
that goal (see Discussion of Non-GAAP Financial Measures).
“In addition, we remain on track to meet other Fiscal 2013 targets established
for the year,” said Herbert. “We continue to work toward 60,000 new
connections for the year, and for 224,000 in total connections to our ePort
Connect service by the end of our June 30, 2013 fiscal year. We also remain
committed to achieving over 30% revenue growth for the year, as well as cash
generated from operations in the $4-$5 million range.
“Perhaps more importantly, we believe these Fiscal 2013 targets highlight the
sustainable improvements in the business we were seeking in our turnaround
plan articulated to shareholders less than a year ago,” said Herbert. “They
also highlight how every new connection to our ePort Connect cashless and M2M
telemetry service can further enhance shareholder value through the continued
cash generation characteristic of a service business. With cashless adoption
in the unattended retail market at the early stages of adoption, we remain
very optimistic about the future,” concluded Herbert.
Webcast and Conference Call
USA Technologies will conduct a conference call and webcast at 10:00 a.m.
Eastern Time on November 8, 2012. USA Technologies invites all interested
parties to listen to the live webcast of the conference call, accessible on
the Investor Relations section of USA Technologies’ website. The webcast will
be archived on the website within two hours of the live call. It will remain
available for approximately 90 days. Interested parties unable to access the
webcast may also participate by calling (866) 393-1608 or, if an international
caller, (224) 357-2194. A replay of the call, available until midnight on
November 10, 2012, can be accessed by calling (855) 859-2056; Conference ID#
58774466, (toll free).
Forward-looking Statements:
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: All statements other than statements of historical fact included in this
release, including without limitation the financial position, achieving
profitability or non-GAAP net income or positive adjusted EBITDA, anticipated
connections to our network, business strategy and the plans and objectives of
USAT’s management for future operations, are forward-looking statements. When
used in this release, words such as "anticipate", "believe", "estimate",
"expect", "intend", and similar expressions, as they relate to USAT or its
management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of USAT’s management, as well as
assumptions made by and information currently available to USAT’s management.
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors, including but not
limited to, the ability of USAT to generate sufficient sales to generate
operating profits, or conduct operations at a profit; the incurrence by us of
any unanticipated or unusual non-operational expenses, such as in connection
with a proxy contest, which would require us to divert our cash resources from
achieving our business plan; the ability of USAT to retain key customers from
whom a significant portion of its revenues is derived; whether USAT’s
customers would continue to add additional connections to our network in the
future at levels currently anticipated by USAT; the ability of USAT to compete
with its competitors to obtain market share; whether USAT’s customers continue
to utilize USAT’s transaction processing and related services, as our customer
agreements are generally cancelable by the customer on thirty to sixty days’
notice; the ability of USAT to obtain widespread commercial acceptance of it
products; the ability of USAT to raise funds in the future through the sales
of securities in order to sustain its operations if an unexpected or unusual
non-operational event would occur; whether the actions of our former CEO which
resulted in his separation from the Company or the Securities and Exchange
Commission’s investigation would have a material adverse effect on the future
financial results or condition of the Company; and whether USAT’s existing or
anticipated customers purchase, rent or utilize ePort devices in the future at
levels currently anticipated by USAT. Readers are cautioned not to place undue
reliance on these forward-looking statements. Any forward-looking statement
made by us in this release speaks only as of the date of this release. Unless
required by law, USAT does not undertake to release publicly any revisions to
these forward-looking statements to reflect future events or circumstances or
to reflect the occurrence of unanticipated events.
USA Technologies, Inc.
Consolidated Statement of Operations
Three months ended
September 30,
2012 2011
(unaudited) (unaudited)
Revenues:
License and transaction fees $ 6,906,356 $ 5,419,663
Equipment sales 1,483,921 1,286,085
Total revenues 8,390,277 6,705,748
Cost of services 4,192,360 3,761,577
Cost of equipment 1,053,636 895,135
Gross profit 3,144,281 2,049,036
Operating expenses:
Selling, general and administrative 3,215,125 3,468,070
Depreciation and amortization 343,388 403,232
Total operating expenses 3,558,513 3,871,302
Operating loss (414,232) (1,822,266)
Other income (expense):
Interest income 20,166 17,867
Interest expense (23,006) (11,164)
Change in fair value of warrant 463,133 1,736,609
liabilities
Total other income (expense), net 460,293 1,743,312
Income (loss) before provision for 46,061 (78,954)
income taxes
Provision for income taxes (6,921) -
Net income (loss) 39,140 (78,954)
Cumulative preferred dividends (332,226) (332,226)
Loss applicable to common shares $ (293,086) $ (411,180)
Loss per common share (basic and $ (0.01) $ (0.01)
diluted)
Weighted average number of common
shares outstanding (basic and 32,518,230 32,288,638
diluted)
USA Technologies, Inc.
Consolidated Balance Sheets
September 30, June 30,
2012 2012
(unaudited)
Assets
Current assets:
Cash and cash $ 6,203,703 $ 6,426,645
equivalents
Accounts receivable,
less allowance for
uncollectible accounts
of $19,000 and
$25,000, respectively 2,366,750 2,441,941
Finance receivables 139,039 206,649
Inventory 1,185,917 2,511,748
Prepaid expenses and 603,893 555,823
other current assets
Total current assets 10,499,302 12,142,806
Finance receivables, $ 372,977 $ 336,198
less current portion
Property and equipment, 13,037,458 11,800,108
net
Intangibles, net 1,010,853 1,196,453
Goodwill 7,663,208 7,663,208
Other assets 81,247 80,884
Total assets $ 32,665,045 $ 33,219,657
Liabilities and
shareholders’ equity
Current liabilities:
Accounts payable $ 6,020,991 $ 6,136,443
Accrued expenses 1,933,093 3,342,456
Line of credit 1,337,779 -
Current obligations 483,934 466,056
under long-term debt
Total current 9,775,797 9,944,955
liabilities
Long-term liabilities:
Long-term debt, less 210,642 262,274
current portion
Accrued expenses, less 384,158 426,241
current portion
Deferred tax liabilities 19,520 12,599
Warrant liabilities, 455,433 918,566
non-current
Total long-term 1,069,753 1,619,680
liabilities
Total liabilities 10,845,550 11,564,635
Commitments and
contingencies
Shareholders’ equity:
Preferred stock, no par
value:
Authorized shares-
1,800,000 Series A
convertible preferred-
Authorized shares-
900,000
Issued and outstanding
shares- 442,968
(liquidation preference
of $15,693,778 and
$15,361,552, 3,138,056 3,138,056
respectively)
Common stock, no par
value: Authorized
shares- 640,000,000
Issued and outstanding
shares- 32,741,732 and 220,638,660 220,513,327
32,510,069, respectively
Accumulated deficit (201,957,221) (201,996,361)
Total shareholders’ 21,819,495 21,655,022
equity
Total liabilities and $ 32,665,045 $ 33,219,657
shareholders’ equity
USA Technologies, Inc.
Consolidated Statements of Cash Flows
Three months ended
September 30,
2012 2011
OPERATING ACTIVITIES: (unaudited) (unaudited)
Net income (loss) $ 39,140 $ (78,954)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Charges incurred in connection with
the vesting and issuance
of common stock for employee and 125,333 240,453
director compensation
Charges reduced for change in fair (463,133) (1,736,609)
value of warrants
Depreciation, $676,218 and $418,493,
respectively,
of which is allocated to cost of 834,006 563,125
services
Amortization 185,600 258,600
Bad debt recoveries, net (6,129) (22,056)
Provision for deferred tax liability 6,921 -
Changes in operating assets and
liabilities:
Accounts receivable 81,320 187,501
Finance receivables 30,831 (43,791)
Inventory 1,331,390 160,798
Prepaid expenses and other assets 79,629 48,339
Accounts payable (115,452) (656,552)
Accrued expenses (1,451,446) 582,357
Net cash provided by (used in) 678,010 (496,789)
operating activities
INVESTING ACTIVITIES:
Purchase of property and equipment (1,525) (60,348)
Purchase of property for rental (2,075,390) (1,234,608)
program, net
Net cash used in investing (2,076,915) (1,294,956)
activities
FINANCING ACTIVITIES:
Proceeds from the issuance of common $ - $ 10,010
stock
Proceeds from line of credit 1,337,779 -
Repayment of long-term debt (161,816) (109,839)
Net cash provided by (used in) 1,175,963 (99,829)
financing activities
Net decrease in cash and cash (222,942) (1,891,574)
equivalents
Cash and cash equivalents at 6,426,645 12,991,511
beginning of year
Cash and cash equivalents at end of $ 6,203,703 $ 11,099,937
period
Supplemental disclosures of cash
flow information:
Cash paid for interest $ 26,150 $ 11,708
Equipment and software acquired $ - $ 495,955
under capital lease
Prepaid insurance financed with debt $ 128,062 $ 90,372
Disposal of property and equipment $ - $ 20,407
Reclass of rental program property $ 5,559 $ -
to inventory
USA Technologies, Inc.
Non-GAAP Schedules
Discussion of Non-GAAP Financial Measures
This press release includes the following measures defined as non-GAAP
financial measures by the Securities and Exchange Commission: adjusted EBITDA,
non-GAAP net income (loss) , non-GAAP operating margin, and non-GAAP net loss
per common share. The presentation of these additional financial measures are
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 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 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
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 relating to the proxy contest, the costs associated with the
separation of the former CEO, any adjustment for fair value of warrant
liabilities, and any charges for impairment of intangible assets. As used
herein, non-GAAP net loss per common share is calculated by dividing non-GAAP
net loss applicable to common shares by the number of weighted average shares
outstanding (basic and diluted).
Management believes that non-GAAP net income (loss) and non-GAAP net loss per
common share are important measures of USAT’s business. Management uses the
aforementioned non-GAAP measures to monitor and evaluate ongoing operating
results and trends and to gain an understanding of our comparative operating
performance. We believe that these non-GAAP financial measures serve as useful
metrics for our management and investors because they enable a better
understanding of the long-term performance of our core business and facilitate
comparisons of our operating results over multiple periods, and when taken
together with the corresponding GAAP financial measures and our
reconciliations, enhance investors’ overall understanding of our current and
future financial performance.
As used herein, Adjusted EBITDA represents net income (loss) before interest
income, interest expense, income taxes, depreciation, amortization, and change
in fair value of warrant liabilities and stock-based compensation expense and
impairment expense on intangible assets. We have excluded the non-operating
item, change in fair value of warrant liabilities, because it represents a
non-cash charge that is not related to USAT’s operations. We have excluded the
non-cash expenses, stock-based compensation and impairment expense, as they do
not reflect the cash-based operations of USAT. Adjusted EBITDA is presented
because we believe it is useful to investors as a measure of comparative
operating performance and liquidity, and because it is less susceptible to
variances in actual performance resulting from depreciation and amortization
and non-cash charges for changes in fair value of warrant liabilities and
stock-based compensation expense.
As used herein, operating margin represents operating income or loss divided
by revenues and non-GAAP operating margin represents operating income or loss
excluding any expenses related to the proxy contest divided by revenues.
Non GAAP Reconciliation
Reconciliation of Net Loss to Non-GAAP Net Loss and Loss Per Common Share to
Non-
GAAP Loss Per Common Share
Three Months Ended
9/30/2012 9/30/2011
Net income (loss) $ 39,140 $ (78,954 )
Non-GAAP adjustments:
Operating expenses
Selling, general and
administrative
Proxy related costs 328,000
Fair value of warrant adjustment (463,133 ) (1,736,609 )
Non-GAAP net loss $ (95,993 ) $ (1,815,563 )
Net income (loss) $ 39,140 $ (78,954 )
Non-GAAP net loss $ (95,993 ) $ (1,815,563 )
Cumulative preferred dividends (332,226 ) (332,226 )
Loss applicable to common shares $ (293,086 ) $ (411,180 )
Non-GAAP loss applicable to common $ (428,219 ) $ (2,147,789 )
shares
Weighted average number of common
shares 32,518,230 32,288,638
outstanding (basic and diluted)
Loss per common share $ (0.01 ) $ (0.01 )
Non-GAAP loss per common share $ (0.01 ) $ (0.07 )
Non GAAP Reconciliation
Reconciliation of Operating Margin to Non-GAAP Operating Margin
Three Months Ended
9/30/2012 9/30/2011
Operating Loss $ (414,232 ) $ (1,822,266 )
Non-GAAP adjustments:
Operating expenses
Selling, general and administrative
Proxy related costs 328,000
Operating Loss, Non-GAAP $ (86,232 ) $ (1,822,266 )
Revenues $ 8,390,277 $ 6,705,748
Operating Margin -4.9 % -27.2 %
Operating Margin, Non-GAAP -1.0 % -27.2 %
Reconciliation of GAAP Net Earnings to Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA)
Three months ended
9/30/2012 9/30/2011
Net income (loss) $ 39,140 $ (78,954 )
Less interest income (20,166 ) (17,867 )
Plus interest expenses 23,006 11,164
Plus income tax expense 6,921 -
Plus depreciation expense 834,006 563,125
Plus amortization expense 185,600 258,600
Less change in fair value of warrant (463,133 ) (1,736,609 )
liabilities
Plus stock-based compensation 125,333 240,453
Plus intangible asset impairment - -
Adjusted EBITDA $ 730,707 $ (760,088 )
F-USAT
Contact:
USA Technologies
Veronica Rosa, 484-359-2138
VP Corp. Comm. & Investor Relations
vrosa@usatech.com
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