USA Technologies Reports Results for the First Quarter of Fiscal 2013
USA Technologies Reports Results for the First Quarter of Fiscal 2013
Total Revenues Up 25%; Recurring Revenues Up 27%
Gross Profit Up 53%
174,000 Connections to ePort Connect Service, Up 35% (year over year)
3,725 Customers, Up 64% (year over year)
MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ: USAT), ("USAT"), a leader of wireless, cashless payment and M2M telemetry solutions for self-serve, small-ticket retail industries, today reported results for the first quarter of Fiscal 2013 ended September 30, 2012. First quarter highlights, compared to the corresponding quarter of the prior fiscal year, included:
- 25% increase in total revenues to $8.4 million;
- 53% increase in gross profit to $3.1 million;
- 27% increase in license and transaction fee revenues ("recurring revenues") to $6.9 million, representing 82% of total revenues for the quarter;
- 174,000 total connections to its ePort Connect® service, a 35% increase from 129,000 connections as of September 30, 2011, with 10,000 net new connections added in the first quarter of Fiscal 2013;
- 3,725 total customers, a 64% increase from 2,275, with 450 new customers in the first quarter;
- Adjusted EBITDA of $730,707, up from ($760,088);
- GAAP net income of $39,140, up from ($78,954); and non-GAAP net loss of ($95,993) from ($1,815,563) in the same quarter a year ago.
"Our first quarter results reflect steady progress toward our Fiscal 2013 goals set out in our year-end conference call in September, particularly our goal for achieving non-GAAP net income in our second fiscal quarter ending December 31, 2012," said Stephen P. Herbert, Chairman and CEO of USA Technologies. "In addition, we were extremely pleased to see Adjusted EBITDA of $730,707. After excluding $328,000 in remaining expenses related to Fiscal 2012's proxy contest, our Adjusted EBTIDA would have crossed the $1 million mark—a tremendous milestone for USAT and we believe a strong indicator of the value inherent in our ePort Connect service model as we continue to grow our base of recurring revenues.
"Net new connections for the first quarter were generally in line with our expectations, particularly in vending, although kiosk-related connections played a smaller role than anticipated this quarter," continued Herbert. "At the same time, while steady progress continued in expanding our ePort Connect network and recurring revenue base, the first quarter was also marked by a number of important advancements with respect to growing the value of every USAT connection longer-term, particularly with respect to our mobile and diversification strategies," said Herbert.
Strategic highlights during the first quarter included:
- A special marketing agreement with Isis—a mobile payment and commerce system joint venture between AT&T, T-Mobile and Verizon—that promotes cashless adoption in tandem with Isis mobile wallet acceptance in Isis' two launch markets of Austin, Texas, and Salt Lake City Utah;
- Innovative mobile-based loyalty and couponing services demonstrated in the Verizon booth at CTIA MobileCON, including contextual applications (which provide a customized rewards experience based on where the consumer is and what they have purchased in the past), machine coupon redemption, and the ability to push information, advertisements, machine location and product availability to consumers via NFC smart phones;
- Accelerated work with customers and partners with respect to the introduction of ePort Mobile™-- USAT's mobile acceptance product-- during the quarter, with additional customer demonstrations scheduled for mid-November at a NAMA trade event in New Orleans; and,
- Introduction of QuickConnect™--an API Web service that streamlines the process by which developers or OEMs can point their devices to ePort Connect—to further expand USAT's pipeline in the kiosk market.
First Quarter Results
Revenues for the first quarter of Fiscal 2013 were $8.4 million, an increase of 25% from the same period a year ago. Revenue growth was fueled by a 27% growth in license and transaction fees and a 15% increase in equipment sales compared to the first quarter of Fiscal 2012.
Revenue from license and transaction fees, which is driven primarily by monthly ePort Connect service fees, JumpStart fees and transaction processing fees, grew to $6.9 million for the first quarter. As of September 30, 2012, USAT's ePort Connect service base totaled 174,000 connections.
Gross profit was $3.1 million in the first quarter compared to $2.0 million for the same period in the prior year, a 53% increase. Increased revenues and actions taken by management over the course of Fiscal 2012 to strengthen major supplier contracts and streamline network operations contributed to the increase. Gross margin was 37.5% for the first quarter compared to 30.6% for the same period a year ago, as stronger gross margins on revenues from license and transaction fees, now 82% of total revenues, contributed to a larger share of the overall mix.
Operating expenses of $3.6 million declined by $0.3 million in the first quarter of Fiscal 2013 compared to the first quarter of Fiscal 2012. As a result, operating margins improved to (4.9%) from (27.2%) a year ago and on a non-GAAP basis, which excludes $328,000 in proxy expenses in the Fiscal 2013 first quarter, non-GAAP operating margins improved to (1.0%) compared to a non-GAAP operating margin of (27.2%) for the same period a year ago—all while supporting double-digit top line growth.
GAAP net income for the first quarter of Fiscal 2013 was $39,140. On a non-GAAP basis, which also excludes fair value of warrant liability adjustments for both years in order to track the operational progress of the business, non-GAAP net loss narrowed to ($95,993) from a non-GAAP net loss of ($1.8) million for the first quarter of Fiscal 2012. Continued, strong revenue growth and actions to enhance gross margins and lower operating expenses led to this $1.9 million improvement (see non-GAAP Reconciliation table).
After preferred dividends, net loss per common share was ($.01) for the first quarter of Fiscal 2013 compared to ($.01) for the same period in Fiscal 2012. On a non-GAAP basis, net loss per common share was ($.01) for the first quarter of Fiscal 2013 compared to ($.07) for the same period in Fiscal 2012.
"Strategies that have delivered double-digit increases in our ePort Connect service and customer base for the prior corresponding quarter are building a reliable and high margin revenue stream that is generating cash and taking us ever closer towards profitability," continued Herbert. "We are diligently working towards non-GAAP net income in our second fiscal quarter, and outside of any unusual or unanticipated non-operational expenses, expect to achieve that goal (see Discussion of Non-GAAP Financial Measures).
"In addition, we remain on track to meet other Fiscal 2013 targets established for the year," said Herbert. "We continue to work toward 60,000 new connections for the year, and for 224,000 in total connections to our ePort Connect service by the end of our June 30, 2013 fiscal year. We also remain committed to achieving over 30% revenue growth for the year, as well as cash generated from operations in the $4-$5 million range.
"Perhaps more importantly, we believe these Fiscal 2013 targets highlight the sustainable improvements in the business we were seeking in our turnaround plan articulated to shareholders less than a year ago," said Herbert. "They also highlight how every new connection to our ePort Connect cashless and M2M telemetry service can further enhance shareholder value through the continued cash generation characteristic of a service business. With cashless adoption in the unattended retail market at the early stages of adoption, we remain very optimistic about the future," concluded Herbert.
Webcast and Conference Call
USA Technologies will conduct a conference call and webcast at 10:00 a.m. Eastern Time on November 8, 2012. USA Technologies invites all interested parties to listen to the live webcast of the conference call, accessible on the Investor Relations section of USA Technologies' website. The webcast will be archived on the website within two hours of the live call. It will remain available for approximately 90 days. Interested parties unable to access the webcast may also participate by calling (866) 393-1608 or, if an international caller, (224) 357-2194. A replay of the call, available until midnight on November 10, 2012, can be accessed by calling (855) 859-2056; Conference ID# 58774466, (toll free).
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation the financial position, achieving profitability or non-GAAP net income or positive adjusted EBITDA, anticipated connections to our network, business strategy and the plans and objectives of USAT's management for future operations, are forward-looking statements. When used in this release, words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions, as they relate to USAT or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of USAT's management, as well as assumptions made by and information currently available to USAT's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, the ability of USAT to generate sufficient sales to generate operating profits, or conduct operations at a profit; the incurrence by us of any unanticipated or unusual non-operational expenses, such as in connection with a proxy contest, which would require us to divert our cash resources from achieving our business plan; the ability of USAT to retain key customers from whom a significant portion of its revenues is derived; whether USAT's customers would continue to add additional connections to our network in the future at levels currently anticipated by USAT; the ability of USAT to compete with its competitors to obtain market share; whether USAT's customers continue to utilize USAT's transaction processing and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days' notice; the ability of USAT to obtain widespread commercial acceptance of it products; the ability of USAT to raise funds in the future through the sales of securities in order to sustain its operations if an unexpected or unusual non-operational event would occur; whether the actions of our former CEO which resulted in his separation from the Company or the Securities and Exchange Commission's investigation would have a material adverse effect on the future financial results or condition of the Company; and whether USAT's existing or anticipated customers purchase, rent or utilize ePort devices in the future at levels currently anticipated by USAT. Readers are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this release speaks only as of the date of this release. Unless required by law, USAT does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
|USA Technologies, Inc.|
Consolidated Statement of Operations
|Three months ended|
|License and transaction fees||$||6,906,356||$||5,419,663|
|Cost of services||4,192,360||3,761,577|
|Cost of equipment||1,053,636||895,135|
|Selling, general and administrative||3,215,125||3,468,070|
|Depreciation and amortization||343,388||403,232|
|Total operating expenses||3,558,513||3,871,302|
|Other income (expense):|
|Change in fair value of warrant liabilities||463,133||1,736,609|
|Total other income (expense), net||460,293||1,743,312|
|Income (loss) before provision for income taxes||46,061||(78,954)|
|Provision for income taxes||(6,921)||-|
|Net income (loss)||39,140||(78,954)|
|Cumulative preferred dividends||(332,226)||(332,226)|
|Loss applicable to common shares||$||(293,086)||$||(411,180)|
|Loss per common share (basic and diluted)||$||(0.01)||$||(0.01)|
|Weighted average number of common shares outstanding (basic and diluted)||32,518,230||32,288,638|
|USA Technologies, Inc.|
Consolidated Balance Sheets
|Cash and cash equivalents||$||6,203,703||$||6,426,645|
|Accounts receivable, less allowance for uncollectible accounts of $19,000 and|
|Prepaid expenses and other current assets||603,893||555,823|
|Total current assets||10,499,302||12,142,806|
|Finance receivables, less current portion||$||372,977||$||336,198|
|Property and equipment, net||13,037,458||11,800,108|
|Liabilities and shareholders' equity|
|Line of credit||1,337,779||-|
|Current obligations under long-term debt||483,934||466,056|
|Total current liabilities||9,775,797||9,944,955|
|Long-term debt, less current portion||210,642||262,274|
|Accrued expenses, less current portion||384,158||426,241|
|Deferred tax liabilities||19,520||12,599|
|Warrant liabilities, non-current||455,433||918,566|
|Total long-term liabilities||1,069,753||1,619,680|
|Commitments and contingencies|
|Preferred stock, no par value:|
|Authorized shares- 1,800,000 Series A convertible preferred- Authorized shares- 900,000|
|Issued and outstanding shares- 442,968 (liquidation preference|
|of $15,693,778 and $15,361,552, respectively)||3,138,056||3,138,056|
|Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding|
|shares- 32,741,732 and 32,510,069, respectively||220,638,660||220,513,327|
|Total shareholders' equity||21,819,495||21,655,022|
|Total liabilities and shareholders' equity||$||32,665,045||$||33,219,657|
|USA Technologies, Inc.|
Consolidated Statements of Cash Flows
|Three months ended|
|Net income (loss)||$||39,140||$||(78,954)|
|Adjustments to reconcile net income (loss) to net cash used in operating activities:|
|Charges incurred in connection with the vesting and issuance|
|of common stock for employee and director compensation||125,333||240,453|
|Charges reduced for change in fair value of warrants||(463,133)||(1,736,609)|
|Depreciation, $676,218 and $418,493, respectively,|
|of which is allocated to cost of services||834,006||563,125|
|Bad debt recoveries, net||(6,129)||(22,056)|
|Provision for deferred tax liability||6,921||-|
|Changes in operating assets and liabilities:|