USA Technologies Reports Financial Results for Third Quarter of Fiscal 2013
USA Technologies Reports Financial Results for Third Quarter of Fiscal 2013
Total Revenues Up 19%; Recurring Revenues Up 26%
Gross Profit Up 32%
Connections to ePort Connect Service, Up 32% (year over year) to 196,000
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 third quarter of fiscal 2013 ended March 31, 2013. Third quarter highlights, compared to the corresponding quarter of the prior fiscal year, included:
- 19% increase in total revenues to $9 million, including 26% increase in license and transaction fee revenues ("recurring revenues") to $7.6 million, which represented 84% of total revenues for the quarter;
- 32% increase in gross profit to $3.7 million, up from $2.8 million;
- Adjusted EBITDA of $1.7 million, up from $0.3 million;
- GAAP net loss of ($1.0) million (includes $1.3 million Other Expense for fair value of warrants), from a GAAP net loss of ($0.5) million (includes $.1 million Other Income for fair value of warrants); and,
- Non-GAAP net income of $293,011, up from a non-GAAP net loss of ($633,692) in the same quarter a year ago.
Total connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, were 196,000 as of March 31, 2013, a 32% increase from the prior fiscal year, fueled in the third quarter by 10,000 net new connections to the service. Total connections as of March 31, 2012 were 148,000, fueled by 12,000 net new connections in that quarter. New ePort Connect customers added in the quarter totaled 425, for 4,525 total customers, contributing to a 59% increase in USAT's customer base from 2,850 customers since the same period in fiscal 2012.
During April, USAT entered into an exclusive agreement with a new customer in a vertical market in which it is already participating—commercial laundry. The customer has its own cashless payment hardware platform for the laundry industry which would now utilize USAT's network for credit/debit card processing. USAT anticipates that the initial connections to its ePort Connect service under the agreement would be several thousand. The customer and USAT will also use good faith efforts to achieve certain annual targets in terms of connections during the three year term of the agreement.
Stephen P. Herbert, Chairman and CEO of USA Technologies, stated, "Our results for the quarter reflect a number of dynamics in this emerging market. In spite of our momentum, connections were not what we expected this quarter, as several of the agreements we have been working on since early in the fiscal year have taken longer to materialize than we anticipated. We remain encouraged, however, by the work underway to get our new laundry customer's connections on our service, as well as our accomplishments in the quarter in many areas of the business that we believe are essential to driving increased adoption in the marketplace.
"During the third quarter, we expanded our sales reach in the $5 billion, coin-operated amusement and gaming market with a new distribution agreement with Betson Enterprises, with Ameri-Source for small-medium size vending companies, and we expanded into non-traditional vending with companies like Ice House America, a network of over 2,400 independently owned ice house locations," continued Herbert. "While these don't translate to connections overnight, we believe they nevertheless extend our opportunity for growth longer-term as cashless payment adoption accelerates.
"Much of our work during the third quarter also related to the formation of agreements and development to facilitate introduction of our new value-add services that we anticipate will extend USAT's differentiation in the marketplace, as well as our next generation ePort G9 and G10, designed to deliver greater value and improved functionality to our customers while reducing the capital required by USAT for our JumpStart program. For example, we believe our mobile payment and loyalty promotion with Isis is the largest offering of its kind ever introduced to the U.S. vending market. Isis' interest in loyalty is spot on with our own initiatives in this area that include an expanded services suite formed around loyalty that is tailored to the individual business operator.
"In summary, there are numerous developments that we believe will continue to attract consumers to cashless forms of payment, including mobile payment, loyalty, couponing and other consumer engagement applications," said Herbert. "We have accumulated a base of 4,525 ePort Connect customers that we will continue to work closely with in this very transformative time in the unattended, small-ticket market. Through products and service enhancements, our goal is to improve customer ROI on all levels, which should continue to help boost the rate of cashless adoption, and USAT's continued leadership in this emerging market," concluded Herbert.
Third Quarter Results
Revenues for the third quarter of fiscal 2013 were $9.0 million, an increase of 19% from the same period a year ago. Revenue growth was fueled by a 26% growth in license and transaction fees, offset by a $125,000 decline in equipment sales compared to the third quarter of fiscal 2012. The decline in equipment sales stemmed from a decrease in sales from USAT's EnergyMiser product line, offset in part by increased sales of ePort cashless payment and telemetry devices in the quarter.
Revenue from license and transaction fees, which is driven by connections to USAT's ePort Connect service through monthly service fees, JumpStart fees and transaction processing fees, grew to $7.6 million for the third quarter, a 26% increase from the third quarter of fiscal 2012. The ePort Connect service base reached 196,000 connections as of March 31, 2013, representing a 32% increase from March 31, 2012.
Gross profit was $3.7 million in the third quarter, a 32% improvement from $2.8 million for the same period in the prior year. Gross profit margin improved to 41% in the second quarter, from 37% for the prior year. Gross profit margin is largely impacted by revenues from license and transaction fees, which were 84% of total revenues for the quarter ended March 31, 2013.
Operating margin was 3.9% compared to (8.5%) for the same period in the prior year, due to stronger revenues, improvements in gross margins and lower operating expenses.
For the third quarter, a $1.3 million charge for fair value of warrant liability adjustment for the 4.2 million of warrants expiring in September 2016 contributed to a GAAP net loss of ($1.0) million. The fair value of warrant liability adjustment is based, in part, on increases in USAT's stock price and other market factors that occurred during the quarter. Conversely, for the same period in the prior year, GAAP net loss was ($0.5) million, which included a $95,074 positive warrant liability adjustment. Non-GAAP net income, which excludes fair value of warrant liability adjustments for both years, was $293,011, compared to a non-GAAP net loss of ($633,692) for the third quarter of fiscal 2012. (see non-GAAP Reconciliation table.)
After preferred dividends, net loss per common share was ($.04) for the third quarter of Fiscal 2013 compared to ($.03) for the same period in Fiscal 2012. On a non-GAAP basis, net loss per common share was $.0 for the third quarter of Fiscal 2013 compared to ($.03) for the same period in Fiscal 2012.
Webcast and Conference Call
USA Technologies will conduct a conference call and webcast at 10:00 a.m. Eastern Time on May 10, 2013. USA Technologies invites all interested parties to listen to the live webcast of the conference call, accessible on the Investor Relations section of USA Technologies' website. The webcast will be archived on the website within two hours of the live call. It will remain available for approximately 90 days. Interested parties unable to access the webcast may also participate by calling (866) 393-1608 or, if an international caller, (224) 357-2194. A replay of the call, available until midnight on May 13, 2013, can be accessed by calling (855) 859-2056; Conference ID#33897356, (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 cash flow from operations, 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 USAT of any unanticipated or unusual non-operational expenses which would require us to divert our cash resources from achieving our business plan, including the commercial production and introduction of our next generation G-9 and G-10 devices; 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, including appropriate diversification resulting from products and programs other than our Jumpstart Program; 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 its 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 USAT can timely manufacture and introduce to the marketplace its next generation G-9 and G-10 devices; the ability of USAT to obtain widespread commercial acceptance of its next generation G-9 and G-10 devices or its loyalty and prepaid programs; 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.
Three months ended
Nine months ended
|License and transaction fees||$||7,562,589||$||5,985,052||$||21,872,187||$||16,988,179|
|Cost of services||4,525,244||3,749,862||13,080,816||11,494,690|
|Cost of equipment||774,221||981,969||2,748,785||2,836,995|
|Selling, general and administrative||3,003,231||3,040,562||8,918,030||10,039,712|
|Depreciation and amortization||327,889||391,859||1,004,134||1,139,500|
|Total operating expenses||3,331,120||3,432,421||9,922,164||11,179,212|
|Operating income (loss)||350,219||(637,201)||503,638||(4,396,500)|
|Other income (expense):|
|Change in fair value of warrant liabilities||(1,308,954)||95,074||(1,249,456)||1,983,442|
|Total other income (expense), net||(1,359,251)||98,583||(1,305,948)||1,957,869|
|Loss before provision for income taxes||(1,009,032)||(538,618)||(802,310)||(2,438,631)|
|Provision for income taxes||(6,911)||-||(20,734)||-|
|Cumulative preferred dividends||(332,226)||(332,226)||(664,452)||(664,452)|
|Net loss applicable to common shares||$||(1,348,169)||$||(870,844)||$||(1,487,496)||$||(3,103,083)|
|Net loss per common share (basic and diluted)||$||(0.04)||$||(0.03)||$||(0.05)||$||(0.10)|
Weighted average number of common shares outstanding
|USA Technologies, Inc.|
Consolidated Balance Sheets
|Cash and cash equivalents||$||3,948,537||$||6,426,645|
Accounts receivable, less allowance for uncollectible accounts of $9,000 and
|Prepaid expenses and other current assets||656,306||555,823|
|Total current assets||8,927,878||12,142,806|
|Finance receivables, less current portion||381,946||336,198|
|Property and equipment, net||15,528,584||11,800,108|
|Liabilities and shareholders' equity|
|Line of credit||2,000,000||-|
|Current obligations under long-term debt||314,756||466,056|
|Total current liabilities||9,248,686||9,944,955|
|Long-term debt, less current portion||159,775||262,274|
|Accrued expenses, less current portion||374,856||426,241|
|Deferred tax liabilities||33,333||12,599|
|Warrant liabilities, non-current||2,168,022||918,566|
|Total long-term liabilities||2,735,986||1,619,680|
|Commitments and contingencies|
|Preferred stock, no par value:|
Authorized shares- 1,800,000 Series A convertible preferred- Authorized shares- 900,000
Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding
|Total shareholders' equity||21,244,698||21,655,022|
|Total liabilities and shareholders' equity||$||33,229,370||$||33,219,657|
|USA Technologies, Inc.|
Consolidated Statements of Cash Flows
|Three months ended|
|Nine months ended|
Adjustments to reconcile net loss to net cash
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