EX-99.1 2 ex99_1.htm EXHIBIT 99.1
Exhibit 99.1
 

USA Technologies Announces Third Quarter Fiscal Year 2017 Results
Achieved $100 Million Revenue Run-Rate, and 500,000 Connection Goals

MALVERN, Pa. – May 9, 2017 – USA Technologies, Inc. (NASDAQ:USAT) (“USAT”), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its third quarter ended March 31, 2017.

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,
2017
    
December 31,
2016
    
September 30,
2016
    
June 30,
2016
    
March 31,
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

($ in thousands)
  
March 31,
2017
    
June 30,
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)
(unaudited)
  
March 31,
2017
    
% of Sales
    
December 31,
2016
    
% of Sales
    
September 30,
2016
    
% of Sales
    
June 30,
2016
    
% of Sales
    
March 31
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
%
 
See discussion of Non-GAAP financial measures later in this document
 
(E)
Five Quarter and YTD Selling, General, & Administrative Expenses

   
Three months ended
  
($ in thousands)
  
March 31,
2017
    
% of
SG&A
    
December 31,
2016
    
% of
SG&A
    
September 30,
2016
    
% of
SG&A
    
June 30,
2016
    
% of
SG&A
    
March 31,
2016
    
% of
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
  
($ in thousands)
  
March 31,
2017
    
% of
SG&A
    
March 31,
2016
    
% of
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)
(unaudited)
  
March 31,
2017
    
December 31,
2016
    
September 30
2016
    
June 30,
2016
    
March 31,
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
  
($ in thousands)
  
March 31,
2017
    
December 31,
2016
    
September 30,
2016
    
June 30,
2016
    
March 31,
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)
(unaudited)
  
March 31,
2017
    
December 31,
2016
    
September 30,
2016
    
June 30,
2016
    
March 31,
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.

Investor Contact:
Mike Bishop
The Blueshirt Group
Tel: +1 415-217-4968
mike@blueshirtgroup.com
Source: USA Technologies, Inc.
F-USAT