USA Technologies Announces Fourth Quarter and Fiscal Year 2013 Results

USA Technologies Announces Fourth Quarter and Fiscal Year 2013 Results

Fiscal 2013 Service Revenues Up 29%; Total Revenues Up 24% (year over year)

Connections to ePort Connect Service Up 30% (year over year)


Substantial Improvements in Profitability and Cash Generation

MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NAS: USAT) ("USAT"), a leader of wireless, cashless payment and M2M telemetry solutions for small-ticket, self-serve retailing industries, today reported results for the fourth quarter and full fiscal year ended June 30, 2013.

Fiscal 2013 financial highlights, compared to the prior year, included:

  • 29% increase in license and transaction fee revenues to $30.0 million, representing 84% of total revenues for the 2013 fiscal year;
  • 24% increase in total revenues to $35.9 million;
  • Adjusted EBITDA of $5.8 million up from an Adjusted EBITDA loss of ($2.8) million;
  • GAAP net income of $0.9 million from a GAAP net loss of ($5.2) million; and,
  • Non-GAAP net income of $0.9 million, up from a non-GAAP net loss of ($3.8) million (fiscal 2013 excludes $0.3 million of Other income for change in fair value of warrants and $0.3 million in proxy expenses and fiscal 2012 excludes $1.8 million Other income for change in fair value of warrants and $3.2 million in proxy and separation expenses).

Total connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, grew by 30% during fiscal 2013, with 18,000 net connections achieved in the fourth quarter. In addition, USAT's customer base expanded to 5,050 customers as of June 30, 2013, a 53% increase from the prior fiscal year, with 525 new customers in the fourth quarter.

After accrual for preferred dividends, net earnings per common share, diluted, for fiscal 2013 was $0.01 compared to a net loss per common share of ($0.18) for Fiscal 2012. On a non-GAAP basis, net income per common share, diluted, was $0.01 for fiscal 2013, improving from a net loss per common share of ($0.14) for fiscal 2012.

Cash generated from operations was $6.0 million for fiscal 2013 compared to $0.08 million for fiscal 2012, an increase due primarily to substantial improvements in operating performance over the course of fiscal 2013 when compared to 2012. Cash and cash equivalents stood at approximately $6.0 million as of June 30, 2013.

Stephen P. Herbert, USA Technologies' chairman and chief executive officer, commented, "During fiscal 2013, we achieved tremendous improvements in profitability, while making great strides in developing new services and marketing partnerships that extend USAT's capabilities across multiple channels of the small-ticket, unattended market. We continued to lead cashless payment adoption in the sizable vending market with the industry's largest menu of cashless payment services, including our MORE loyalty program and the upcoming Isis Mobile Wallet "fifth vend free" promotion—relatively new value-added services that we believe are only beginning to shape how a cashless payment platform can be optimized in our market segment.

"In addition, we took important steps toward leveraging USAT's ePort Connect service platform in several other, equally opportunistic markets such as laundry, transportation and amusement in fiscal 2013. For example, during the fourth quarter, we kicked off our new relationship with Setomatic Systems, a leading provider of cashless payment acceptance devices in the commercial and multi-unit housing laundry markets, with the transfer of over 5,000 of their existing cashless connections to our ePort Connect service. We also coupled the appeal of our ePort Connect service with a unique solution for the taxi and for-hire vehicle industry, called ePortGO™, and we continue to experience a growing demand for our integration capabilities as self-service applications become more ubiquitous," said Herbert.

Fourth Quarter Results

Fourth quarter financial highlights, compared to the prior year, included:

  • 23% increase in total revenues to $9.7 million;
  • 28% increase in license and transaction fee revenues to $8.2 million, representing 84% of total revenues for the quarter;
  • Adjusted EBITDA of $1.6 million, up from an Adjusted EBITDA loss of ($1.4) million;
  • GAAP net income of $1.7 million from a GAAP net loss of ($2.8) million; and,
  • Non-GAAP net income of $0.2 million, up from a non-GAAP net loss of ($0.4) million (fiscal 2013 excludes $1.5 million of Other income for the change in fair value of warrants and fiscal 2012 excludes $0.2 million of Other expense for the change in fair value of warrants and $2.2 million in proxy expenses).

Revenues for the fourth quarter of fiscal 2013 were $9.7 million, an increase of 23% from the same period a year ago. Revenue growth was attributable to a 28% increase in license and transaction fees to $8.2 million. Revenue from license and transaction fees, which grew to represent 84% of revenues for the fourth quarter of fiscal 2013 compared to 81% for the fourth quarter of the prior year, is driven by connections to USAT's ePort Connect service through monthly service fees, JumpStart fees and transaction processing fees.

Equipment sales of $1.5 million were essentially flat compared to the fourth quarter of fiscal 2012 as growth in direct sales of ePort cashless payment devices was offset by a decline in sales of Miser-branded energy products.

Gross profit was $3.7 million in the fourth quarter, a 15% improvement from $3.2 million for the same period in the prior year.

Operating margin (both GAAP and non-GAAP) expanded to approximately 2% from (33%) and (5%) on a GAAP and non-GAAP basis, respectively, for the same period in the prior year, due largely to stronger revenues and resulting gross profit dollar contribution.

GAAP net income was $1.7 million for the fourth quarter of fiscal 2013, which included a $1.5 million other income adjustment for the change in fair value of warrant liability related to the 3.9 million of warrants expiring in September 2016. The fair value of warrant liability adjustment is based, in part, on changes in USAT's stock price and other market factors that occur during the quarter. As a result, this non-cash adjustment can fluctuate substantially from quarter to quarter. For the same period in the prior year, GAAP net loss was ($2.8) million, which included a $0.2 million charge for warrant liability adjustment.

Non-GAAP net income removes the impact of the fair value of warrant adjustment, in addition to other non-operational adjustments noted for the quarter (see Non-GAAP Reconciliation tables). For the fourth quarter, non-GAAP net income was $0.2 million compared to a non-GAAP net loss of ($0.4) million for the fourth quarter of fiscal 2012.

GAAP and non-GAAP net income (loss) applicable to common shares were the same as GAAP and non-GAAP net income (loss). GAAP net earnings per common share, diluted, for the fourth quarter was $0.05 compared to a GAAP net loss per common share of ($0.09) for the prior year. Non-GAAP net earnings per common share, diluted, for the fourth quarter of fiscal 2013 was $0.00, up from a non-GAAP net loss per common share of ($0.01) for the fourth quarter of the prior year.

Outlook

"To date, growth in customers and connections to our ePort Connect service have delivered substantial improvements in our performance and our strengthened service model is delivering visible returns in terms of cash generation," said Herbert. "In fiscal 2014, our priorities include delivering 25%-30% license and transaction fee revenue growth, 20-25% total revenue growth and over 50% growth in non-GAAP profitability, even as we absorb deactivations to our service from a customer in the first quarter of the fiscal year.

"New customers, a stronger presence in complementary market segments, expanded services and promising work underway that makes our ePort Connect service easily accessible to kiosk and other developers, gives us confidence that fiscal 2014 should be another exciting year of financial progress and value creation for USAT in the quickly evolving, small-ticket market for cashless payment," concluded Herbert.

For more information on fiscal 2013 results and fiscal 2014 expectations, including the impact of the deactivations noted above on its fiscal 2014 results, please access the webcast and conference call in addition to USAT's Form 10K, which will be filed on Monday, September 30.

Webcast and Conference Call

USA Technologies will conduct a conference call and webcast at 10:00 a.m. Eastern Time on September 27, 2013. 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 September 30, 2013, can be accessed by calling (855) 859-2056; Conference ID#41109554, (toll free).

About USA Technologies:

USA Technologies is a leader of wireless, cashless payment and M2M telemetry solutions for small-ticket, self-serve retailing industries. ePort Connect® is the company's flagship service platform, a PCI-compliant, end-to-end suite of cashless payment and telemetry services specially tailored to fit the needs of small ticket, self-service retailing industries. USA Technologies also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G8, ePort Mobile™ for customers on the go, and QuickConnect™, an API Web service for developers. USA Technologies has been granted 86 patents and has agreements with Verizon, Visa, Elavon, Isis and customers such as Compass, Crane, AMI Entertainment and others. 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 incurrence by us 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 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; the ability of USAT to use available data to predict future market conditions, consumer behavior and any level of cashless usage; the ability of USAT to efficiently and securely integrate cashless payment with new machine technologies; 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.

 
USA Technologies, Inc.
Consolidated Statements of Operations
 
 
  Three months ended   For the year ended
June 30, June 30,
2013   2012 2013   2012
 
Revenues:
License and transaction fees $ 8,172,243 $ 6,382,575 $ 30,044,429 $ 23,370,754
Equipment sales   1,512,599     1,520,271     5,895,815     5,646,489  
Total revenues 9,684,842 7,902,846 35,940,244 29,017,243
 
Cost of services 5,139,129 3,818,276 18,219,945 15,312,966
Cost of equipment   874,901     906,231     3,623,686     3,743,226  
Gross profit 3,670,812 3,178,339 14,096,613 9,961,051
 
Operating expenses:
Selling, general and administrative 3,150,535 5,420,955 12,068,566 15,460,668
Depreciation and amortization   309,989     361,275     1,314,122     1,500,775  
Total operating expenses   3,460,524     5,782,230     13,382,688     16,961,443  
Operating income (loss) 210,288 (2,603,891 ) 713,925 (7,000,392 )
 
Other income (expense):
Interest income 4,212 26,877 57,121 72,059
Interest expense (47,804 ) (13,237 ) (157,205 ) (83,993 )
Change in fair value of warrant liabilities   1,517,384     (169,755 )   267,928     1,813,687  
Total other income (expense), net   1,473,792     (156,115 )   167,844     1,801,753  
 
Income (loss) before provision for income taxes 1,684,080 (2,760,006 ) 881,769 (5,198,639 )
Provision for income taxes   (6,912 )   (12,599 )   (27,646 )   (12,599 )
Net income (loss) 1,677,168 (2,772,605 ) 854,123 (5,211,238 )
Cumulative preferred dividends   -     -     (664,452 )   (664,452 )
Net income (loss) applicable to common shares $ 1,677,168   $ (2,772,605 ) $ 189,671   $ (5,875,690 )
Net earnings (loss) per common share - basic $ 0.05   $ (0.09 ) $ 0.01   $ (0.18 )
 
Weighted average number of common shares outstanding 33,080,641 32,496,327 32,787,673 32,423,987
 
Net earnings (loss) applicable to common shares - diluted $ 0.05   $ (0.09 ) $ 0.01   $ (0.18 )
Diluted weighted average number of common shares outstanding 34,115,444 32,496,327 33,613,346 32,423,987
 
 
USA Technologies, Inc.
Consolidated Balance Sheets
 
  June 30,   June 30,
2013 2012
 
Assets
Current assets:
Cash and cash equivalents $ 5,981,000 $ 6,426,645

Accounts receivable, less allowance for uncollectible accounts of $18,000 and
   $25,000, respectively

2,620,684 2,441,941
Finance receivables 116,444 206,649
Inventory 1,823,615 2,511,748
Prepaid expenses and other current assets   184,336     555,823  
Total current assets 10,726,079 12,142,806
 

Finance receivables, less current portion

408,674 336,198
Property and equipment, net 17,240,065 11,800,108
Intangibles, net 454,053 1,196,453
Goodwill 7,663,208 7,663,208
Other assets   84,117     80,884  
Total assets $ 36,576,196   $ 33,219,657  
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 7,301,247 $ 6,136,443
Accrued expenses 1,468,184 3,342,456
Line of credit 3,000,000 -
Current obligations under long-term debt   247,152     466,056  
Total current liabilities 12,016,583 9,944,955
 
Long-term liabilities:
Long-term debt, less current portion 122,754 262,274
Accrued expenses, less current portion 366,785 426,241
Deferred tax liabilities 40,245 12,599
Warrant liabilities, non-current   650,638     918,566  
Total long-term liabilities   1,180,422     1,619,680  
Total liabilities   13,197,005     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 $16,026,004 and $15,361,552, respectively)

3,138,056 3,138,056

Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding
   shares- 33,284,232 and 32,510,069, respectively

221,383,373 220,513,327
Accumulated deficit   (201,142,238 )   (201,996,361 )
Total shareholders' equity   23,379,191     21,655,022  
Total liabilities and shareholders' equity $ 36,576,196   $ 33,219,657  
 
 
USA Technologies, Inc.
Consolidated Statements of Cash Flows
 
 
  Three months ended   For the year ended
June 30, June 30,
  2013       2012     2013       2012  
OPERATING ACTIVITIES:
Net income (loss) $ 1,677,168 $ (2,772,605 ) $ 854,123 $ (5,211,238 )

Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:

 

Charges incurred in connection with the vesting and issuance
   of common stock for employee and director compensation


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