USA Technologies Announces Third Quarter Fiscal Year 2017 Results

Achieved $100 Million Revenue Run-Rate, and 500,000 Connection Goals

MALVERN, Pa.--()--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 third quarter ended March 31, 2017.

“USA Technologies has marked another record revenue quarter, while also achieving our 3 year revenue and connection goals. We continue to drive our payment and consumer engagement solutions into the rapidly evolving unattended retail market as we help our operator customers improve each location’s performance”

Third Quarter Financial Highlights:

  • Total quarterly record revenue of $26.5 million, a year-over-year increase of 30% marking the 30th consecutive quarter of growth
  • 504,000 connections to ePort service, representing a year-over-year increase of 26%
  • Added 500 customers to achieve record 12,400 total customers compared to 10,750 as of a year ago, a year-over-year increase of 15%
  • Quarterly record license and transaction fee revenue of $17.5 million, a year-over-year increase of 19%
  • Operating income of $419,000
  • Ended the quarter with $17.8 million in cash
  • Quarterly GAAP net income of $136,000
  • Quarterly Non-GAAP net income of $345,000
  • Quarterly Adjusted EBITDA of $1.9 million

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

 
   

As of and for the three months

   

ended March 31,

(Connections and $'s in thousands, transactions in millions, eps is not rounded) 2017     2016 Change     % Change
Revenues:
License and transaction fees $ 17,459 $ 14,727 $ 2,732 18.6%
Equipment sales   9,001   5,634   3,367 59.8%
Total revenues $ 26,460 $ 20,361 $ 6,099 30.0%
 
License and transaction fee margin 32.0% 34.1% (2.1%)
 
Equipment sales gross margin 11.6% 11.5% 0.1%
 
Overall Gross Margin 25.0% 27.9% (2.9%)
 
Operating income/(loss) $ 419 $ (595) $ 1,014 170.4%
 
Net income/(loss) $ 136 $ (5,420) $ 5,556 102.5%
 
Net loss per common shares - basic and diluted $ (0.00) $ (0.16) $ 0.16 100.0%
 
Net cash provided by (used in) operating activities $ 848 $ 4,328 $ (3,480) (80.4%)
 
Net New Connections 35,000 32,000 3,000 9.4%
 
Total Connections (at period end) 504,000 401,000 103,000 25.7%
 
Total Number of Transactions (millions) 104.9 82.0 22.9 27.9%
 
Transaction Volume (millions) $ 202.5 $ 151.0 $ 51.5 34.1%
 
Adjusted EBITDA $ 1,862 $ 1,347 $ 515 38.2%
 
Non-GAAP net income $ 345 $ (87) $ 432 496.6%
 
 

As of and for the nine months

ended March 31,

(Connections and $'s in thousands, transactions in millions, eps is not rounded) 2017 2016 Change % Change
Revenues:
License and transaction fees $ 50,463 $ 41,326 $ 9,137 22.1%
Equipment sales   19,341   14,138   5,203 36.8%
Total revenues $ 69,804 $ 55,464 $ 14,340 25.9%
 
License and transaction fee margin 31.6% 33.5% (1.9%)
 
Equipment sales gross margin 16.4% 16.6% (0.2%)
 
Overall Gross Margin 27.4% 29.2% (1.8%)
 
Operating (loss)/income $ (297) $ 111 $ (408) (367.6%)
 
Net loss $ (2,095) $ (5,934) $ 3,839 64.7%
 
Net loss per common shares - basic and diluted $ (0.07) $ (0.18) $ 0.11 61.1%
 
Net cash provided by (used in) operating activities $ (4,295) $ 5,197 $ (9,492) (182.7%)
 
Net New Connections 75,000 68,000 7,000 10.3%
 
Total Connections (at period end) 504,000 401,000 103,000 25.7%
 
Total Number of Transactions (millions) 300.2 227.2 73.0 32.1%
 
Transaction Volume (millions) $ 577.3 $ 415.7 $ 161.6 38.9%
 
Adjusted EBITDA $ 4,297 $ 5,358 $ (1,061) (19.8%)
 
Non-GAAP net (loss) income $ (369) $ 660 $ (1,029) (155.9%)
 

“USA Technologies has marked another record revenue quarter, while also achieving our 3 year revenue and connection goals. We continue to drive our payment and consumer engagement solutions into the rapidly evolving unattended retail market as we help our operator customers improve each location’s performance,” said Stephen P. Herbert, USA Technologies’ chairman and chief executive officer. “We are leveraging our flexible platform with third party offerings and our own ePort Interactive service to deepen the relationship with customers and provide even more value from each connection, while simultaneously expanding our distribution network.”

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, May 9, 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 # 8462087.

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 May 9, 2017 until 11:30 a.m. Eastern Time on May 12, 2017 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 8462087. 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® Connect, ePort® Interactive, QuickConnect, an API Web service for developers, and MORE., a customizable loyalty program. USA Technologies has 77 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; the ability of the Company to sell to third party lenders all or a portion of our finance receivables; the ability of a sufficient number of our customers to utilize third party financing companies under our QuickStart program in order to improve our net cash used by operating activities; 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:

A. Statements of Operations for the 3 Months and 9 Months Ended March 31, 2017 and 2016

B. Five Quarter Select Key Performance Indicators

C. Comparative Balance Sheets as of March 31, 2017 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 Income/(Loss) Per Common Share – Basic and Diluted to Non-GAAP Net Income/(Loss) Per Common Share – Basic and Diluted

(A) Statement of Operations for the 3 Months and 9 Months Ended March 31, 2017 and 2016

 
    For the three months ended March 31,        
($ in thousands, except shares and per share data) 2017     % of Sales     2016     % of Sales Change % Change
 
Revenues:
License and transaction fees $ 17,459 66.0% $ 14,727 72.3% $ 2,732 18.6%
Equipment sales   9,001 34.0%   5,634 27.7%   3,367 59.8%
Total revenues 26,460 100.0% 20,361 100.0% 6,099 30.0%
 
Costs of sales/revenues:
Cost of services 11,876 68.0% 9,703 65.9% 2,173 22.4%
Cost of equipment   7,959 88.4%   4,986 88.5%   2,973 59.6%
Total costs of sales/revenues   19,835 75.0%   14,689 72.1%   5,146 35.0%
 
Gross profit 6,625 25.0% 5,672 27.9% 953 16.8%
 
Operating expenses:
Selling, general and administrative 5,947 22.5% 6,094 29.9% (147) (2.4%)
Depreciation and amortization   259 1.0%   173 0.8%   86 49.7%
Total operating expenses 6,206 23.5% 6,267 30.8% (61) (1.0%)
 
Operating income (loss) 419 1.6% (595) (2.9%) 1,014 (170.4%)
 
Other income (expense):
Interest income 114 0.4% 67 0.3% 47 70.1%
Interest expense (188) (0.7%) (180) (0.9%) (8) (4.4%)
Change in fair value of warrant liabilities   0.0%   (4,805) (23.6%)   4,805 100.0%
Total other expense, net (74) (0.3%) (4,918) (24.2%) 4,844 (98.5%)
 
Income (loss) before income taxes 345 1.3% (5,513) (27.1%) 5,858 106.3%
(Provision) benefit for income taxes   (209) (0.8%)   93 0.5%   (302) 323.8%
 
Net income (loss) 136 0.5% (5,420) (26.6%) 5,556 102.5%
Cumulative preferred dividends   (334) (1.3%)   (334) (1.6%)   0.0%
Net loss applicable to common shares $ (198) (0.7%) $ (5,754) (28.3%) $ 5,556 96.6%
 
Net loss per common share - basic and diluted $ (0.00) $ (0.16) $ 0.16 100.0%
 
Basic and diluted weighted average number of common shares outstanding 40,327,697 36,161,626 4,166,071 11.5%
 
 
For the nine months ended March 31,
($ in thousands, except shares and per share data) 2017 % of Sales 2016 % of Sales Change % Change
 
Revenues:
License and transaction fees $ 50,463 72.3% $ 41,326 74.5% $ 9,137 22.1%
Equipment sales   19,341 27.7%   14,138 25.5%   5,203 36.8%
Total revenues 69,804 100.0% 55,464 100.0% 14,340 25.9%
 
Costs of sales/revenues:
Cost of services $ 34,508 68.4% $ 27,475 66.5% 7,033 25.6%
Cost of equipment   16,170 83.6%   11,787 83.4%   4,383 37.2%
Total costs of sales/revenues   50,678 72.6%   39,262 70.8%   11,416 29.1%
 
Gross profit 19,126 27.4% 16,202 29.2% 2,924 18.0%
 
Operating expenses:
Selling, general and administrative 18,649 26.7% 15,652 28.2% 2,997 19.1%
Depreciation and amortization   774 1.1%   439 0.8%   335 76.3%
Total operating expenses 19,423 27.8% 16,091 29.0% 3,332 20.7%
 
Operating (loss) income (297) (0.4%) 111 0.2% (408) (367.6%)
 
Other income (expense):
Interest income 387 0.6% 138 0.2% 249 180.4%
Interest expense (601) (0.9%) (403) (0.7%) (198) (49.1%)
Change in fair value of warrant liabilities   (1,490) (2.1%)   (5,692) (10.3%)   4,202 73.8%
Total other expense, net (1,704) (2.4%) (5,957) (10.7%) 4,253 71.4%
 
(Loss) before income taxes (2,001) (2.9%) (5,846) (10.5%) 3,845 65.8%
Provision for income taxes   (94) (0.1%)   (88) (0.2%)   (6) (6.8%)
 
Net loss (2,095) (3.0%) (5,934) (10.7%) 3,839 64.7%
Cumulative preferred dividends   (668) (1.0%)   (668) (1.2%)   0.0%
Net loss applicable to common shares   (2,763) (4.0%)   (6,602) (11.9%) $ 3,839 58.2%
 
Net loss per common share - basic and diluted   (0.07)   (0.18) $ 0.11 62.1%
 
Basic and diluted weighted average number of common shares outstanding 39,703,690 35,972,633 3,731,057 10.4%
 

(B) Five Quarter Select Key Performance Indicators

   
As of and for the three months ended
March 31,     December 31,     September 30,     June 30,     March 31,
2017 2016 2016 2016 2016
Connections:
Gross New Connections 40,000 25,000 22,000 33,000 34,000
% from Existing Customer Base 88% 80% 86% 83% 91%
Net New Connections 35,000 21,000 19,000 28,000 32,000
Total Connections 504,000 469,000 448,000 429,000 401,000
 
Customers:
New Customers Added 500 500 350 300 125
Total Customers 12,400 11,900 11,400 11,050 10,750
 
Volumes:
Total Number of Transactions (millions) 104.9 100.1 95.1 89.3 82.1
Transaction Volume (millions) $ 202.5 $ 191.5 $ 183.4 $ 169.0 $ 151.0
 
Financing Structure of Connections:
JumpStart 8.6% 6.8% 7.7% 6.5% 7.4%
QuickStart & All Others *   91.4%   93.2%   92.3%   93.5%   92.6%
Total   100.0%   100.0%   100.0%   100.0%   100.0%
 
*Includes credit sales with standard trade receivable terms
 

(C) Comparative Balance Sheets March 31, 2017 and June 30, 2016

 
    March 31,     June 30,        
($ in thousands) 2017 2016 Change % Change
Assets
Current assets:
Cash and Cash Equivalents $ 17,780 $ 19,272 $ (1,492) (7.7%)
Accounts receivable, less allowance for doubtful accounts of $2,851 and $2,814, respectively 6,734 4,899 1,835 37.5%
Finance receivables, less allowance for credit losses of $25 and $0, respectively 2,057 3,588 (1,531) (42.7%)
Inventory, net 4,147 2,031 2,116 104.2%
Prepaid expenses and other current assets 1,628 987 641 64.9%
Deferred income taxes   2,271   2,271  
Total current assets 34,617 33,048 1,569 4.7%
 
Finance receivables, less current portion 7,548 3,718 3,830 103.0%
Other assets 137 348 (211) (60.6%)
Property and equipment, net 9,173 9,765 (592) (6.1%)
Deferred income taxes 25,359 25,453 (94) (0.4%)
Intangibles, net 666 798 (132) (16.5%)
Goodwill   11,492   11,703   (211) (1.8%)
Total assets $ 88,992 $ 84,833 $ 4,159 4.9%
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 11,529 $ 12,354 $ (825) (6.7%)
Accrued expenses 3,111 3,458 (347) (10.0%)
Line of credit, net 7,021 7,119 (98) (1.4%)
Current obligations under long-term debt 786 629 157 25.0%
Income taxes payable 18 (18) (100.0%)
Warrant liabilities 3,739 (3,739) (100.0%)
Deferred gain from sale-leaseback transactions   255   860   (605) (70.3%)
Total current liabilities 22,702 28,177 (5,475) (19.4%)
 
Long-term liabilities
Long-term debt, less current portion 1,239 1,576 (337) (21.4%)
Accrued expenses, less current portion 52 15 37 246.7%
Deferred gain from sale-leaseback transactions, less current portion     40   (40) (100.0%)
Total long-term liabilities   1,291   1,631   (340) (20.8%)
Total liabilities   23,993   29,808   (5,815) (19.5%)
 
Shareholders' equity:
Preferred stock, no par value 3,138 3,138 0.0%
Common stock, no par value 245,463 233,394 12,069 5.2%
Accumulated deficit   (183,602)   (181,507)   (2,095) (1.2%)
Total shareholders' equity   64,999   55,025   9,974 18.1%
Total liabilities and shareholders' equity $ 88,992 $ 84,833 $ 4,159 4.9%
 
Net working capital $ 11,915 $ 4,871 $ 7,044 144.6%
 

(D) Five Quarter Statement of Operations and Adjusted EBITDA

       
For the three months ended
($ in thousands) March 31,         December 31,         September 30,         June 30,         March 31
(unaudited) 2017 % of Sales 2016 % of Sales 2016 % of Sales 2016 % of Sales 2016 % of Sales
Revenues:
License and transaction fees $ 17,459 66.0% $ 16,639 76.5% $ 16,365 75.8% $ 15,263 69.6% $ 14,727 72.3%
Equipment sales   9,001 34.0%   5,117 23.5%   5,223 24.2%   6,681 30.4%   5,634 27.7%
Total revenue 26,460 100.0% 21,756 100.0% 21,588 100.0% 21,944 100.0% 20,361 100.0%
 
Costs of sales/revenues:
License and transaction fees 11,876 68.0% 11,389 68.4% 11,243 68.7% 10,614 69.5% 9,703 65.9%
Equipment sales   7,959 88.4%   4,033 78.8%   4,178 80.0%   5,547 83.0%   4,986 88.5%
Total costs of sales/revenues 19,835 75.0% 15,422 70.9% 15,421 71.4% 16,161 73.6% 14,689 72.1%
 
Gross Profit:
License and transaction fees 5,583 32.0% 5,250 31.6% 5,122 31.3% 4,649 30.5% 5,024 34.1%
Equipment sales   1,042 11.6%   1,084 21.2%   1,045 20.0%   1,134 17.0%   648 11.5%
Total gross profit 6,625 25.0% 6,334 29.1% 6,167 28.6% 5,783 26.4% 5,672 27.9%
 
Operating expenses:
Selling, general and administrative 5,947 22.5% 5,793 26.6% 6,909 32.0% 6,721 30.6% 6,094 29.9%
Depreciation 259 1.0% 307 1.4% 208 1.0% 208 0.9% 173 0.8%
Impairment of intangible asset   0.0%   0.0%   0.0%   432 2.0%   0.0%
Total operating expenses 6,206 23.5% 6,100 28.0% 7,117 33.0% 7,361 33.5% 6,267 30.8%
                   
Operating income (loss)   419 1.6%   234 1.1%   (950) -4.4%   (1,578) -7.2%   (595) -2.9%
 
Other income (expense):
Interest income 114 0.4% 200 0.9% 73 0.3% 182 0.8% 67 0.3%
Other income 0.0% 0.0% 0.0% 0.0% 0.0%
Interest expense (188) -0.7% (201) -0.9% (212) -1.0% (197) -0.9% (180) -0.9%
Change in fair value of warrant liabilities   0.0%   0.0%   (1,490) -6.9%   18 0.1%   (4,805) -23.6%
Total other (expense) income , net (74) -0.3% (1) 0.0% (1,629) -7.5% 3 0.0% (4,918) -24.2%
 
Income (loss) before provision for income taxes 345 1.3% 233 1.1% (2,579) -11.9% (1,575) -7.2% (5,513) -27.1%
(Provision) benefit for income taxes (209) -0.8% 0.0% 115 0.5% 703 3.2% 93 0.5%
                   
Net income (loss)   136 0.5%   233 1.1%   (2,464) -11.4%   (872) -4.0%   (5,420) -26.6%
 
Less interest income (114) -0.4% (200) -0.9% (73) -0.3% (182) -0.8% (67) -0.3%
Plus interest expenses 188 0.7% 201 0.9% 212 1.0% 197 0.9% 180 0.9%
Plus income tax expense 209 0.8% 0.0% (115) -0.5% (703) -3.2% (93) -0.5%
Plus depreciation expense 1,165 4.4% 1,220 5.6% 1,257 5.8% 1,272 5.8% 1,190 5.8%
Plus amortization expense 45 0.2% 43 0.2% 44 0.2% 44 0.2% 44 0.2%
Plus (less) change in fair value of warrant liabilities 0.0% 0.0% 1,490 6.9% (18) -0.1% 4,805 23.6%
Plus stock-based compensation 233 0.9% 233 1.1% 211 1.0% 198 0.9% 142 0.7%
Plus intangible asset impairment 0.0% 0.0% 0.0% 432 2.0% 0.0%
Plus VendScreen non-recurring charges 0.0% 8 0.0% 101 0.5% 258 1.2% 461 2.3%
Plus litigation related professional fees   0.0%   0.0%   33 0.2%     0.0%   105 0.5%
Adjusted EBITDA $ 1,862 7.0% $ 1,738 8.0% $ 696 3.2% $ 626 2.9% $ 1,347 6.6%
 

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

 
    Three months ended
March 31,     % of     December 31,     % of     September 30,     % of     June 30,     % of     March 31,     % of
($ in thousands) 2017 SG&A 2016 SG&A 2016 SG&A 2016 SG&A 2016 SG&A
Salaries and benefit costs $ 3,060 51.5% $ 2,849 49.2% $ 3,129 45.3% $ 3,050 45.4% $ 2,760 45.4%
Marketing related expenses 569 9.6% 578 10.0% 329 4.8% 635 9.4% 362 5.9%
Professional services 1,472 24.8% 1,213 20.9% 2,520 36.5% 1,533 22.8% 1,152 18.9%
Bad debt expense 127 2.0% 352 6.1% 97 1.3% 470 7.0% 505 8.3%
Premises, equipment and insurance costs 482 8.1% 498 8.6% 499 7.2% 555 8.3% 460 7.5%
Research and development expenses 95 1.6% 173 3.0% 124 1.8% 123 1.8% 131 2.1%
VendScreen non-recurring charges 0.0% 8 0.1% 101 1.5% 258 3.8% 461 7.6%
Litigation related professional fees 0.0% 0.0% 33 0.5% 51 0.8% 105 1.7%
Other expenses   142   2.4%   122 2.1%   77 1.1%   46 0.7%   158 2.6%
Total SG&A expenses $ 5,947   100% $ 5,793 100% $ 6,909 100% $ 6,721 100% $ 6,094 100%
Total Revenue $ 26,460 $ 21,756 $ 21,588 $ 21,944 $ 20,361
SG&A expenses as a percentage of revenue 22.5% 26.6% 32.0% 30.6% 29.9%
 
 
    Nine months ended
March 31,     % of     March 31,     % of
($ in thousands)     2017 SG&A 2016 SG&A
 
Salaries and benefit costs $ 9,038 48.5% $ 8,231 52.6%
Marketing related expenses 1,476 7.9% 1,030 6.6%
Professional services 5,205 27.9% 2,773 17.7%
Bad debt expense 576 3.1% 980 6.3%
Premises, equipment and insurance costs 1,479 7.9% 1,206 7.7%
Research and development expenses 392 2.1% 359 2.3%
VendScreen non-recurring charges 109 0.6% 584 3.7%
Litigation related professional fees 33 0.2% 105 0.7%
Other expenses   341 1.8%   384 2.4%
Total SG&A expenses $ 18,649 100.0% $ 15,652 100.0%
 
Total Revenue $ 69,804 $ 55,464
SG&A expenses as a percentage of revenue 26.7% 28.2%
 

(F) Five Quarter Condensed Balance Sheets

 
($ in thousands)     March 31,     December 31,     September 30     June 30,     March 31,
(unaudited) 2017 2016 2016 2016 2016
 
Assets

 

Current assets:
Cash and Cash Equivalents $ 17,780 $ 18,034 $ 18,198 $ 19,272 $ 14,901
Accounts receivable, less allowance for doubtful accounts of $2,851 and $2,814, respectively 6,734 6,796 5,840 4,899 8,345
Finance receivables, less allowance for credit losses 2,057 1,442 3,349 3,588 1,677
Inventory, net 4,147 4,786 4,264 2,031 2,341
Other current assets 1,628 1,764 1,439 987 1,060
Deferred Income Taxes   2,271   2,271   2,271   2,271   1,276
Total current assets 34,617 35,093 35,361 33,048 29,600
 
Finance receivables, less current portion 7,548 3,956

3,962

3,718 3,042
Other assets 137 145 163 348 337
Property and equipment, net 9,173 9,433 9,570 9,765 10,584
Deferred income taxes 25,359 25,568 25,568 25,453 25,701
Intangibles, Net 666 711 754 798

1,273

Goodwill   11,492   11,492   11,703   11,703   11,703
Total assets $ 88,992 $ 86,398 $ 87,081 $ 84,833 $ 82,240
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 14,640 $ 12,002 $ 12,605 $ 15,812 $ 15,368
Line of credit, net 7,021 7,078 7,258 7,119 6,980
Warrant Liabilities - - - 3,739 5,964
Other current liabilities   1,041   1,242   1,527   1,507   1,485
Total current liabilities 22,702 20,322 21,390 28,177 29,797
Long-term liabilities          
Total long-term liabilities   1,291   1,446   1,528   1,631   2,016
Total liabilities   23,993   21,768   22,918   29,808   31,813
 
Shareholders' equity:          
Total shareholders' equity   64,999   64,630   64,163   55,025   50,427
Total liabilities and shareholders' equity $ 88,992 $ 86,398 $ 87,081 $ 84,833 $ 82,240
 
Total current assets $ 34,617 $ 35,093 $ 35,361 $ 33,048 $ 29,600
Total current liabilities   22,702   20,322   21,390   28,177   29,797
Net working capital $ 11,915 $ 14,771 $ 13,971 $ 4,871 $ (197)
 

(G) Five Quarter Statements of Cash Flows

   
Three months ended
March 31,     December 31,     September 30,     June 30,     March 31,
($ in thousands) 2017 2016 2016 2016 2016
OPERATING ACTIVITIES:
Net (loss) income $ 136 $ 233 $ (2,464) $ (872) $ (5,420)
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 233 233 211 198 142
Gain on disposal of property and equipment (28) (31) (110) (15)
Amortization of deferred financing fees 72 (79) 105 13
Bad debt expense 127 352 97 470 506
Depreciation 1,165 1,220 1,257 1,272 1,190
Amortization of intangible assets 45 43 44 43 44
Impairment of intangible asset 432
Change in fair value of warrant liabilities 1,490 (18) 4,805
Deferred income taxes, net 209 (115) (748) (93)
Recognition of deferred gain from sale-leaseback transactions (216) (215) (215) (215) (215)
Changes in operating assets and liabilities:
Accounts receivable (41) (1,309) (1,038) 2,977 (1,660)
Finance receivables (4,232) 2,125 (5) (2,587) (366)
Inventory 647 (467) (2,223) (82) 250
Prepaid expenses and other assets 136 (318) (224) (397) (160)
Accounts payable 2,441 397 (3,661) 329 4,154
Accrued expenses 160 (1,061) 486 115 1,166
Income taxes payable   (6)   (1)   (10)   453  
Net change in operating assets and liabilities   (895)   (634)   (6,675)   808   3,384
Net cash provided (used) by operating activities 848 1,122 (6,265) 1,273 4,328
 
INVESTING ACTIVITIES:
Purchase and additions of property and equipment (183) (441) (168) (207) (164)
Purchase of property for rental program (691) (693) (642)
Proceeds from sale of property and equipment 44 61 265 19
Cash paid for assets acquired from VendScreen           (5,625)
Net cash provided by (used in) investing activities (830) (1,073) (810) 58 (5,770)
 
FINANCING ACTIVITIES:
Cash used for the retirement of common stock (31) (173)
Payment of deferred financing costs (90)
Proceed from exercise of common stock warrants 6,193 3,237 1,652
Proceed (payments) from line of credit, net 138 33
Repayment of long-term debt   (182)   (213)   (161)   (162)   (151)
Net cash (used in) provided by financing activities   (272)   (213)   6,001   3,040   1,534
 
Net (decrease) increase in cash (254) (164) (1,074) 4,371 92
Cash at beginning of period   18,034   18,198   19,272   14,901   14,809
Cash at end of period $ 17,780 $ 18,034 $ 18,198 $ 19,272 $ 14,901
 
Supplemental disclosures of cash flow information:
Interest paid in cash $ 59 $ 382 $ 87 $ 147 $ 191
Income taxes paid by cash $ $ $ $ 501 $
Depreciation expense allocated to cost of services $ 950 $ 967 $ 1,072 $ 1,139 $ 1,051
Reclass of rental program property to inventory, net $ 8 $ (55) $ (11) $ 415 $ 347
Prepaid items financed with debt $ $ $ 54 $ $
Equipment and property acquired under capital lease $ 54 $ 18 $ 254 $ $ 409
Disposal of property and equipment $ 87 $ 570 $ $ 555 $ 189
Fair value of common stock warrants at issuance recorded as a debt discount $ $ $ $ $ 52
Debt financing cost financed with debt $ $ $ $ $ 79
 

Additional supplements not added

(H) Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Income/(Loss) Per Common Share – Basic and Diluted to Non-GAAP Net Income/(Loss) Per Common Share – Basic and Diluted

 
    Three months ended
($ in thousands) March 31,     December 31,     September 30,     June 30,     March 31,
(unaudited) 2017     2016     2016     2016     2016
 
Net income (loss) $ 136 $ 233 $ (2,464 ) $ (872 ) $ (5,420 )
Non-GAAP adjustments:
Non-cash portion of income tax provision 209 - (115 ) (792 ) (38 )
Change in fair value of warrant adjustment - - 1,490 (18 ) 4,805
VendScreen non-recurring charges - 8 101 258 461
Litigation related professional fees   -     -   33     51     105  
Non-GAAP net income (loss) $ 345   $ 241 $ (955 ) $ (1,373 ) $ (87 )
 
Net income (loss) $ 136 $ 233 $ (2,464 ) $ (872 ) $ (5,420 )
Cumulative preferred dividends   (334 )   -   (334 )   -     (334 )
Net (loss) income applicable to common shares $ (198 ) $ 233 $ (2,798 ) $ (872 ) $ (5,754 )
 
Non-GAAP net income (loss) $ 345 $ 241 $ (955 ) $ (1,373 ) $ (87 )
Cumulative preferred dividends   (334 )   -   (334 )   -     (334 )
Non-GAAP net income (loss) applicable to common shares $ 11   $ 241 $ (1,289 ) $ (1,373 ) $ (421 )
 
Net earnings (loss) per common share - basic and diluted $ (0.00 ) $ 0.01 $ (0.07 ) $ (0.02 ) $ (0.16 )
Non-GAAP net earnings (loss) per common share - basic and diluted $ 0.00   $ 0.01 $ (0.03 ) $ (0.04 ) $ (0.01 )
Basic weighted average number of common shares outstanding   40,327,697     40,308,934   38,488,005     37,325,681     36,161,626  
Diluted weighted average number of common shares outstanding 40,327,697 40,730,712 38,488,005 37,325,681 36,161,626
 
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 special litigation committee investigation described in our Form 10-K for the 2016 fiscal year. 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, 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

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