MALVERN, Pa.--(BUSINESS WIRE)--USA Technologies, Inc. (NASDAQ: 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 2012 (ended September 30, 2011).
Fiscal Quarter Highlights
Compared to the quarter a year ago (ended September 30, 2010), USA Technologies:
- Increased the number of customers on its ePort Connect Service 85%;
- Increased the number and dollar value of small-ticket transactions handled by the network 79% and 75%, respectively;
- Increased recurring revenue from license and transaction fees 62%;
- Increased total revenue 51%;
- Increased the number of connected devices 47% and
- Reduced Adjusted EBITDA loss by over $600,000.
“In the first quarter of the new fiscal year, we sustained the momentum in the growth of our key performance indicators, which illustrates the market’s reception to our products and services and the consumers use of our cashless acceptance option,” said Stephen P. Herbert, Interim Chairman and CEO of USA Technologies, Inc. “By continuing to add connections and customers, we are experiencing growth in the dollar volume of transactions handled by our network, and the increased connections and transaction dollar volume is resulting in a base of recurring revenue and improving gross profit dollars. Over the long-term, we believe we can build a valuable franchise on the strength of our network and its ability to support the growing demand for wireless, cashless payments.”
Total revenue for the quarter increased 51% to $6.7 million, compared to $4.4 million in the first quarter of the prior year, while revenue from recurring license and transaction fees increased 62% to $5.4 million compared to $3.3 million for the quarter a year ago. Gross profit dollars for the quarter was $2 million, up 51% from $1.4 million a year ago while the gross margin on recurring revenues expanded 340 basis points to 30.6% from 27.2% in the same year ago quarter. The $555,000 year-over-year increase in selling, general and administrative expenses in the quarter included approximately $232,000 of increased non-cash stock-based compensation as well as approximately $160,000 of expenses related to sales taxes that are not expected to recur in future quarters and $89,000 of expenses related to the investigation surrounding Mr. Jensen’s separation from the Company.
For the quarter, the Company recorded an operating loss of $1.8 million, representing an improvement of $77,000 from the operating loss in the comparable year ago quarter. Net loss applicable to common shareholders for the quarter was $411,180 or ($0.01) per diluted share, compared to $2.2 million, or ($0.09) per diluted share a year ago. Results for the first quarter of fiscal 2012 include a $1.7 million gain on change in fair value of warrant liability. The Adjusted EBITDA loss for the quarter was reduced to $760,000 in the quarter from approximately $1.4 million in the first quarter of last year.
In the quarter, the Company handled 25 million transactions representing $42 million in small ticket transactions, compared to approximately 14 million transactions representing $24 million during the first fiscal quarter of the preceding year. Connections to and customers on the Company’s ePort Connect Service at September 30, 2011 increased to approximately 129,000 and 2,225, respectively, compared to approximately 88,000 and 1,200, respectively, at the same point a year ago, with approximately 300 new customers added during the three months ended September 30, 2011.
Over the past several months the Company has achieved a number of important milestones, including the signing of a joint marketing addendum with Verizon Wireless. In addition, the Company has expanded its JumpStart program to include stand-alone wireless telemetry. In recognition of the percentage revenue growth achieved during the years 2006 through 2010, the Company was again named to Deloitte's Fast 500 List of Fastest Growing Technology Companies in North America. The Company has also been recognized by Nilson as 5th in the United States and 19th Worldwide for point-of-sale terminal shipments in 2010.
Mr. Herbert concluded, “The ease and convenience of cashless payments is penetrating self-serve, small-ticket markets, such as the vending industry. We increasingly see consumers choosing to use plastic for their unattended, small-ticket purchases, and, in so doing, spending more on average than consumers who choose to use cash. We are helping owners in the vending, kiosk and similar industries improve the consumer buying experience by offering the industry’s only one-stop shop, turnkey wireless, cashless solution through our ePort Connect Service. We are focused on delivering superior products and services to the markets we serve, which we believe will help create value for our shareholders.”
Non-GAAP Financial Measures: Adjusted EBITDA
This press release includes the following financial measure defined as a non-GAAP financial measure by the Securities and Exchange Commission: Adjusted EBITDA. This supplemental financial measure is not required by GAAP, nor is the presentation of this financial information intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with USA Technologies Inc.'s (USAT) earnings results as determined in accordance with GAAP. However, for the reasons described below, we used this non-GAAP measure to evaluate the performance of USAT's business. See "Reconciliation of GAAP Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization Expense (Adjusted EBITDA)" table included in this press release for further information regarding these non-GAAP financial measures.
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. 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 the Company’s operations. We have excluded the non-cash expenses, stock-based compensation, as it does not reflect the cash-based operations of the Company. 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 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. 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.
Reconciliation of GAAP Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
| Three months ended | |||||||||
| September 30, | |||||||||
| 2011 | 2010 | ||||||||
| Net loss |
$ |
(78,954 |
) | $ | (1,886,614 | ) | |||
| Less interest income | (17,867 | ) | (25,310 | ) | |||||
| Plus interest expense | 11,164 | 12,652 | |||||||
| Plus income tax expense | - | - | |||||||
| Plus depreciation expense | 563,125 | 266,306 | |||||||
| Plus amortization expense | 258,600 | 258,600 | |||||||
| Less change in fair value of warrant liabilities | (1,736,609 | ) | - | ||||||
| Plus stock-based compensation | 240,453 | 8,103 | |||||||
| Adjusted EBITDA loss |
$ |
(760,088 |
) | $ | (1,366,263 | ) | |||
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, anticipated connections to our network, business strategy and the plans and objectives of the Company'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 the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company'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, business, financial market and economic conditions, including but not limited to, the ability of the Company to retain key customers from whom a significant portion of its revenues is derived; whether the Company’s customers continue to operate or commence operating ePorts shipped to such customers under the Jumpstart program or otherwise at levels currently anticipated by the Company; the ability of the Company to compete with its competitors to obtain market share; the ability of the Company to obtain widespread commercial acceptance of it products; whether the recent significant increase in the interchange fees to be charged by Visa and MasterCard for small ticket debit card transactions would adversely affect our business, including our revenues, gross profits, and anticipated future connections to our network; whether or not accepting any debit cards with interchange fees that are higher than the rates provided under the Visa Agreement would adversely affect our business, including our revenues, gross profits, and anticipated future connections to our network; and whether the Company's existing or anticipated customers purchase ePort devices in the future at levels currently anticipated by the Company. 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, the Company 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. |
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| Three months ended | ||||||||
| September 30, | ||||||||
| 2011 | 2010 | |||||||
| Revenues: | ||||||||
| License and transaction fees | $ | 5,419,663 | $ | 3,344,472 | ||||
| Equipment sales | 1,286,085 | 1,096,193 | ||||||
| Total revenues | 6,705,748 | 4,440,665 | ||||||
| Cost of services | 3,761,577 | 2,436,200 | ||||||
| Cost of equipment | 895,135 | 648,898 | ||||||
| Gross profit | 2,049,036 | 1,355,567 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 3,468,070 | 2,913,298 | ||||||
| Depreciation and amortization | 403,232 | 341,541 | ||||||
| Total operating expenses | 3,871,302 | 3,254,839 | ||||||
| Operating loss | (1,822,266 | ) | (1,899,272 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 17,867 | 25,310 | ||||||
| Interest expense | (11,164 | ) | (12,652 | ) | ||||
| Change in fair value | 1,736,609 | - | ||||||
| Total other income, net | 1,743,312 | 12,658 | ||||||
| Net loss | (78,954 | ) | (1,886,614 | ) | ||||
| Cumulative preferred dividends | (332,226 | ) | (333,351 | ) | ||||
| Loss applicable to common shares | $ | (411,180 | ) | $ | (2,219,965 | ) | ||
| Loss per common share (basic and diluted) | $ | (0.01 | ) | $ | (0.09 | ) | ||
| Weighted average number of common shares | ||||||||
| outstanding (basic and diluted) | 32,288,638 | 25,842,604 | ||||||
|
USA Technologies, Inc. |
||||||||
| September 30, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 11,099,937 | $ | 12,991,511 | ||||
| Accounts receivable, less allowance for uncollectible accounts of | ||||||||
| $53,000 and $113,000, respectively | 1,469,274 | 1,634,719 | ||||||
| Finance receivables | 377,232 | 285,786 | ||||||
| Inventory | 2,509,534 | 2,670,332 | ||||||
| Prepaid expenses and other current assets | 906,641 | 846,033 | ||||||
| Total current assets | 16,362,618 | 18,428,381 | ||||||
| Finance receivables, less current portion | $ | 147,946 | $ | 195,601 | ||||
| Property and equipment, net | 8,623,561 | 7,395,775 | ||||||
| Intangibles, net | 1,935,753 | 2,194,353 | ||||||
| Goodwill | 7,663,208 | 7,663,208 | ||||||
| Other assets | 108,112 | 126,687 | ||||||
| Total assets | $ | 34,841,198 | $ | 36,004,005 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 4,981,809 | $ | 5,638,361 | ||||
| Accrued expenses | 1,615,431 | 1,088,090 | ||||||
| Current obligations under long-term debt | 330,669 | 155,428 | ||||||
| Total current liabilities | 6,927,909 | 6,881,879 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, less current portion | 398,880 | 97,633 | ||||||
| Accrued expenses, less current portion | 221,725 | 166,709 | ||||||
| Warrant liabilities, non-current | 995,644 | 2,732,253 | ||||||
| Total long-term liabilities | 1,616,249 | 2,996,595 | ||||||
| Total liabilities | 8,544,158 | 9,878,474 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, no par value: | ||||||||
| Authorized shares- 1,800,000 Series A convertible preferred- | ||||||||
| Issued and outstanding shares- 442,968 (liquidation preference | ||||||||
| of $15,029,326 and $14,697,100, respectively) | 3,138,056 | 3,138,056 | ||||||
| Common stock, no par value: Authorized shares- 640,000,000 Issued | ||||||||
| and outstanding shares- 32,378,356 and 32,281,140, respectively | 220,023,061 | 219,772,598 | ||||||
| Accumulated deficit | (196,864,077 | ) | (196,785,123 | ) | ||||
| Total shareholders’ equity | 26,297,040 | 26,125,531 | ||||||
| Total liabilities and shareholders’ equity | $ | 34,841,198 | $ | 36,004,005 | ||||
|
USA Technologies, Inc. |
||||||||
| Three months ended | ||||||||
| September 30, | ||||||||
| 2011 | 2010 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (78,954 | ) | $ | (1,886,614 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Charges incurred in connection with the issuance and vesting | ||||||||
| of common stock for employee and director compensation | 240,453 | 8,103 | ||||||
| Charges incurred in connection with the Long-term Equity Incentive Program | - | 61,303 | ||||||
| Change in fair value of warrants | (1,736,609 | ) | - | |||||
| Loss on disposal of property and equipment | - | 10,380 | ||||||
| Depreciation, $418,493 and $183,365, respectively, of which is allocated to cost of services | 563,125 | 266,306 | ||||||
| Amortization | 258,600 | 258,600 | ||||||
| Bad debt expense (recovery) | (22,056 | ) | 8,316 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 187,501 | 143,576 | ||||||
| Finance receivables | (43,791 | ) | 111,824 | |||||
| Inventory | (1,073,810 | ) | (961,778 | ) | ||||
| Prepaid expenses and other assets | 48,339 | 132,920 | ||||||
| Accounts payable | (656,552 | ) | (19,818 | ) | ||||
| Accrued expenses | 582,357 | (67,895 | ) | |||||
| Net cash used in operating activities | (1,731,397 | ) | (1,934,777 | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment, net | (60,348 | ) | (89,999 | ) | ||||
| Net cash used in investing activities | (60,348 | ) | (89,999 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Net proceeds from the issuance of common stock | 10,010 | 8,085 | ||||||
| Repayment of long-term debt | (109,839 | ) | (120,252 | ) | ||||
| Net cash used in financing activities | (99,829 | ) | (112,167 | ) | ||||
| Net decrease in cash and cash equivalents | (1,891,574 | ) | (2,136,943 | ) | ||||
| Cash and cash equivalents at beginning of period | 12,991,511 | 7,604,324 | ||||||
| Cash and cash equivalents at end of period | $ | 11,099,937 | $ | 5,467,381 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 11,708 | $ | 13,472 | ||||
| Equipment and software acquired under capital lease | $ | 495,955 | $ | - | ||||
| Prepaid insurance financed with long-term debt | $ | 90,372 | $ | 94,311 | ||||
| Reclass of inventory to fixed assets for rental units | $ | 1,234,608 | $ | 493,587 | ||||
| Disposal of property & equipment | $ | 20,407 | $ | 140,931 | ||||