USAT
$4.58
USA Technologies
$.03
.66%
Earnings Details
2nd Quarter December 2019
Tuesday, February 18, 2020 7:30:00 PM
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Summary

USA Technologies (USAT) Recent Earnings

USA Technologies (USAT) reported a 2nd Quarter December 2019 loss of $0.09 per share on revenue of $44.1 million. The consensus estimate was a loss of $0.02 per share on revenue of $40.9 million.

USA Technologies Inc is a provider of technology-enabled solutions that facilitate electronic payment transactions and value-added services within the unattended Point of Sale market.

Results
Reported Earnings
($0.09)
Earnings Whisper
-
Consensus Estimate
($0.02)
Reported Revenue
$44.1 Mil
Revenue Estimate
$40.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

USA Technologies Reports Second Quarter Fiscal Year 2020 Results

Revenue Growth of 27.7% Year-Over-Year

Total Connections Rose 16% Year-Over-Year

Fiscal 2020 Revenue Expectations Increased to $175 Million to $185 Million

MALVERN, Pa.--(BUSINESS WIRE)--USA Technologies, Inc. (OTC:USAT) (“USAT” or the “Company”), a cashless payments and software services company that provides end-to-end technology solutions for the self-service retail market, today reported results for the second quarter fiscal year 2020 ended December 31, 2019.

“We are pleased with our fiscal second quarter results, which were marked by an acceleration in revenue growth and improvement in gross margins,” said Don Layden, USA Technologies’ Interim Chief Executive Officer. “We are in the final stages of negotiating a new transaction processing agreement, which we expect to result in first year savings of approximately $3.5 million and total cost savings over the next five years of approximately $22 million. In addition, we have completed a series of cost actions that will reduce our operating expenses by approximately $8.0 million on an annualized basis and we continue to rationalize our expenses to further optimize our cost structure.”

Second Quarter Fiscal 2020 Financial Highlights:

  • Revenue of $44.1 million, increased 27.7% year-over-year
    • License and transaction fee revenue of $35.8 million, increased 20.3% year-over-year
    • Equipment revenue of $8.3 million, increased 74.6% year-over-year
  • Net new connections of 40,000 bring total connections to 1,255,000
  • Gross margin of 29.0% increased from 27.4% in the prior year period
    • License and transaction gross margin of 36.8% increased from 34.5% in the prior year period
    • Equipment gross margin of (5.0)% increased from (17.6)% in the prior year period
  • Operating loss of $(7.8) million compared to operating loss of $(10.0) million in the prior year period
  • Net loss of $(8.4) million, or $(0.13) per basic share compared to net loss of $(10.4) million, or $(0.17) per basic share in the prior year period
  • Non-GAAP net loss of $(4.0) million, or $(0.06) per share compared to non-GAAP net loss of $(1.6) million, or $(0.03) per share in the prior year period
  • EBITDA of $(5.9) million compared to $(8.0) million in the prior year period
  • Adjusted EBITDA of $(2.3) million compared to $0.0 million in the prior year period
  • Ended the quarter with $37.5 million in cash and cash equivalents

“We are pleased to deliver another quarter of strong revenue growth, over 80% of which remains from recurring license and transaction fees,” said Glen Goold, USA Technologies’ Interim Chief Financial Officer. “We are raising our revenue guidance based on our strong financial performance this fiscal year. We are focused on execution and believe our scalable financial model, improved financial position, and enhanced compliance controls positions the Company well.”

Fiscal Year 2020 Outlook:

For full fiscal year 2020, the Company now expects revenue to between $175 million to $185 million, up from prior expectations of $165 million to $175 million, and continues to expect to add 170,000 to 190,000 net new connections to its service. We will not be able to meet our previous guidance of $10 million of annualized Adjusted EBITDA previously given. This guidance was set assuming we would take out all non-recurring expenses as part of our Adjusted EBITDA calculation. We will provide more details during the upcoming conference call of what our normalized performance would look like after eliminating all non-recurring expenses from the Company.

Webcast and Conference Call

USA Technologies will host a conference call and webcast the event beginning at 8:30 a.m. Eastern Time tomorrow, February 19, 2020.

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 # 3093309.

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 # 7577265.

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 February 19, 2020 until 11:30 a.m. Eastern Time on February 26, 2020 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 7577265. 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 cashless payments and software services company that provides end-to-end technology solutions for the self-service retail market. With more than one million connections worldwide, USAT is transforming the unattended retail community by offering one solution for payments processing, logistics, and back-office management solutions. The company’s enterprise-wide platform is designed to increase consumer engagement and sales revenue through digital payments, digital advertising and customer loyalty programs, while providing retailers with control and visibility over their operations and their inventory. As a result, customers ranging from vending machine companies, to operators of micro-markets, car charging stations, laundromats, kiosks, amusements and more, can run their businesses more proactively, predictably, and competitively.

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 (Generally Accepted Accounting Principles). Reconciliations between non-GAAP financial measures and the most comparable GAAP financial measures are set forth below in Financial Schedule D.

The following non-GAAP financial measures are discussed herein: adjusted EBITDA, non-GAAP net income (loss), and non-GAAP net income (loss) per share. The presentation of these additional financial measures 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 USAT or net cash provided by (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 USAT'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. 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 below in Financial Schedule D 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 non-cash portions of the Company’s income tax provision, amortization expense related to our acquisition-related intangibles, non-recurring fees and charges that were incurred in connection with the acquisition and integration of businesses, non-recurring fees and charges that were incurred in connection with the Audit Committee investigation and financial statement restatement activities, class-action litigation and shareholder derivative demand expenses, and stock-based compensation expense. 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. 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 these non-GAAP financial measures serve 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 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 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 businesses, non-recurring fees and charges that were incurred in connection with the Audit Committee investigation and financial statement restatement activities, class action litigation and shareholder derivative demand expenses, and stock-based compensation expense. 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 acquisition of business acquisitions 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 and the shareholder derivative demands as well as the non-recurring costs and expenses related to the Audit Committee investigation and financial statement restatement activities because we believe that they represent charges that are not related to our operations. 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.

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; the ability to finalize the negotiation of the new processing agreement referred to above, or if finalized to achieve the anticipated cost savings referred to above; 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, route scheduling, inventory management, and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days' notice; the risk associated with the currently pending litigation or possible regulatory action arising from the internal investigation and its findings, from the failure to timely file its periodic reports with the Securities and Exchange Commission, from the restatement of the affected financial statements, from allegations related to the registration statement for the follow-on public offering, or from potential litigation or other claims arising from the shareholder demands for derivative actions; whether the application by USAT to relist its securities on The Nasdaq Stock Market LLC (“Nasdaq”) will be granted by Nasdaq or granted in a timely manner; or whether USAT's existing or anticipated customers purchase, rent or utilize ePort or Seed 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.

(A) Balance Sheet
(B) Statements of Operations
(C) Statements of Cash Flows
(D) Reconciliation of GAAP to Non-GAAP Financial Measures

F-USAT

USA Technologies, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

($ in thousands)

 

December 31,
2019

 

June 30,
2019

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

37,505

 

 

$

27,464

 

Accounts receivable, less allowance of $6,261 and $4,866, respectively

 

18,904

 

 

21,906

 

Finance receivables, net

 

8,232

 

 

6,727

 

Inventory, net

 

11,324

 

 

11,273

 

Prepaid expenses and other current assets

 

1,789

 

 

1,558

 

Total current assets

 

77,754

 

 

68,928

 

 

 

 

 

 

Non-current assets:

 

 

 

 

Finance receivables due after one year, net

 

12,127

 

 

12,642

 

Other assets

 

2,050

 

 

2,099

 

Property and equipment, net

 

8,961

 

 

9,590

 

Operating lease right-of-use assets

 

6,281

 

 

 

Intangibles, net

 

24,602

 

 

26,171

 

Goodwill

 

63,945

 

 

63,945

 

Total non-current assets

 

117,966

 

 

114,447

 

 

 

 

 

 

Total assets

 

$

195,720

 

 

$

183,375

 

 

 

 

 

 

Liabilities, convertible preferred stock and shareholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

33,142

 

 

$

27,584

 

Accrued expenses

 

24,496

 

 

23,351

 

Capital lease obligations and current obligations under long-term debt

 

587

 

 

12,497

 

Income taxes payable

 

258

 

 

254

 

Deferred revenue

 

1,629

 

 

1,681

 

Total current liabilities

 

60,112

 

 

65,367

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Deferred income taxes

 

81

 

 

71

 

Capital lease obligations and long-term debt, less current portion

 

12,224

 

 

276

 

Operating lease liabilities, non-current

 

5,299

 

 

 

Accrued expenses, less current portion

 

1,520

 

 

100

 

Total long-term liabilities

 

19,124

 

 

447

 

 

 

 

 

 

Total liabilities

 

$

79,236

 

 

$

65,814

 

Commitments and contingencies (Note 13)

 

 

 

 

Convertible preferred stock:

 

 

 

 

Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and
outstanding, with liquidation preferences of $20,444 and $20,111 at December 31, 2019 and
June 30, 2019, respectively

 

3,138

 

 

3,138

 

Shareholders’ equity:

 

 

 

 

Preferred stock, no par value, 1,800,000 shares authorized, no shares issued

 

 

 

 

Common stock, no par value, 640,000,000 shares authorized, 64,171,422 and 60,008,481 shares
issued and outstanding at December 31, 2019 and June 30, 2019, respectively

 

395,662

 

 

376,853

 

Accumulated deficit

 

(282,316

)

 

(262,430

)

Total shareholders’ equity

 

113,346

 

 

114,423

 

Total liabilities, convertible preferred stock and shareholders’ equity

 

$

195,720

 

 

$

183,375

 

USA Technologies, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three months ended
December 31,

 

Six months ended

December 31,

($ in thousands, except per share data)

 

2019

 

2018

 

2019

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

License and transaction fees

 

$

35,754

 

 

$

29,733

 

 

$

70,363

 

 

$

58,404

 

 

Equipment sales

 

8,297

 

 

4,753

 

 

17,047

 

 

9,850

 

 

Total revenue

 

44,051

 

 

34,486

 

 

87,410

 

 

68,254

 

 

 

 

 

 

 

 

 

 

 

 

Costs of sales:

 

 

 

 

 

 

 

 

 

Cost of services

 

22,579

 

 

19,462

 

 

44,668

 

 

37,834

 

 

Cost of equipment

 

8,710

 

 

5,589

 

 

18,564

 

 

9,927

 

 

Total costs of sales

 

31,289

 

 

25,051

 

 

63,232

 

 

47,761

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

12,762

 

 

9,435

 

 

24,178

 

 

20,493

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

18,700

 

 

10,931

 

 

36,807

 

 

20,381

 

 

Investigation and restatement expenses

 

738

 

 

7,188

 

 

4,303

 

 

11,714

 

 

Integration and acquisition costs

 

 

 

181

 

 

 

 

1,103

 

 

Depreciation and amortization

 

1,080

 

 

1,143

 

 

2,102

 

 

2,276

 

 

Total operating expenses

 

20,518

 

 

19,443

 

 

43,212

 

 

35,474

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(7,756

)

 

(10,008

)

 

(19,034

)

 

(14,981

)

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

283

 

 

408

 

 

577

 

 

897

 

 

Interest expense

 

(833

)

 

(819

)

 

(1,298

)

 

(1,605

)

 

Total other income (expense), net

 

(550

)

 

(411

)

 

(721

)

 

(708

)

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(8,306

)

 

(10,419

)

 

(19,755

)

 

(15,689

)

 

Provision for income taxes

 

(72

)

 

(19

)

 

(131

)

 

(37

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(8,378

)

 

(10,438

)

 

(19,886

)

 

(15,726

)

 

Preferred dividends

 

 

 

 

 

(334

)

 

(334

)

 

Net loss applicable to common shares

 

$

(8,378

)

 

$

(10,438

)

 

$

(20,220

)

 

$

(16,060

)

 

Net loss per common share

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

$

(0.17

)

 

$

(0.33

)

 

$

(0.27

)

 

Diluted

 

$

(0.13

)

 

$

(0.17

)

 

$

(0.33

)

 

$

(0.27

)

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

63,664,256

 

 

60,059,936

 

 

61,891,197

 

 

60,056,924

 

 

Diluted

 

63,664,256

 

 

60,059,936

 

 

61,891,197

 

 

60,056,924

 

 

USA Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Six months ended
December 31,

($ in thousands)

 

2019

 

2018

OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(19,886

)

 

$

(15,726

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

Non-cash stock based compensation

 

2,032

 

 

972

 

Loss (gain) on disposal of property and equipment

 

41

 

 

(29

)

Non-cash interest and amortization of debt discount

 

732

 

 

45

 

Bad debt expense

 

862

 

 

1,308

 

Provision for inventory reserve

 

(514

)

 

1,211

 

Depreciation and amortization

 

3,493

 

 

3,972

 

Non-cash lease expense

 

1,021

 

 

 

Deferred income taxes

 

10

 

 

9

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

2,133

 

 

4,332

 

Finance receivables, net

 

(990

)

 

(109

)

Inventory, net

 

465

 

 

284

 

Prepaid expenses and other assets

 

(411

)

 

(1,588

)

Accounts payable and accrued expenses

 

1,999

 

 

(11,095

)

Operating lease liabilities

 

(776

)

 

 

Deferred revenue

 

(52

)

 

(201

)

Income taxes payable

 

4

 

 

25

 

Net cash used in operating activities

 

(9,837

)

 

(16,590

)

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchase of property and equipment, including rentals

 

(1,361

)

 

(2,324

)

Proceeds from sale of property and equipment, including rentals

 

31

 

 

82

 

Net cash used in investing activities

 

(1,330

)

 

(2,242

)

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from long-term debt and equity issuance by Antara

 

34,950

 

 

 

Repayment of revolving credit facility

 

(10,000

)

 

 

Repayment of capital lease obligations and long-term debt

 

(2,109

)

 

(1,928

)

Payment of debt and equity issuance costs

 

(1,633

)

 

(53

)

Proceeds from exercise of common stock options

 

 

 

42

 

Net cash provided by (used in) financing activities

 

21,208

 

 

(1,939

)

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

10,041

 

 

(20,771

)

Cash and cash equivalents at beginning of year

 

27,464

 

 

83,964

 

Cash and cash equivalents at end of period

 

$

37,505

 

 

$

63,193

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Debt and equity issuance costs incurred but not yet paid related to Antara issuance

 

$

(3,170

)

 

$

 

Interest paid in cash

 

$

565

 

 

$

1,503

 

Income taxes paid in cash

 

$

33

 

 

$

12

 

Reconciliation of Net Loss to Adjusted EBITDA

 

 

 

Three months ended December 31,

($ in thousands)

 

2019

 

2018

Net loss

 

$

(8,378

)

 

$

(10,438

)

Less: interest income

 

(283

)

 

(408

)

Plus: interest expense

 

833

 

 

819

 

Plus: income tax provision

 

72

 

 

19

 

Plus: depreciation expense

 

1,053

 

 

1,204

 

Plus: amortization expense

 

784

 

 

793

 

EBITDA

 

(5,919

)

 

(8,011

)

Plus: stock-based compensation

 

1,742

 

 

557

 

Plus: litigation related professional expenses

 

1,115

 

 

97

 

Plus: investigation and restatement expenses

 

738

 

 

7,188

 

Plus: integration and acquisition costs

 

 

 

181

 

Adjustments to EBITDA

 

3,595

 

 

8,023

 

Adjusted EBITDA

 

$

(2,324

)

 

$

12

 

Reconciliation of Net Loss to Non-GAAP Net Income (Loss)

 

 

 

Three months ended December 31,

($ in thousands)

 

2019

 

2018

Net loss

 

$

(8,378

)

 

$

(10,438

)

Non-GAAP adjustments:

 

 

 

 

Non-cash portion of income tax provision

 

5

 

 

5

 

Amortization expense

 

784

 

 

793

 

Stock-based compensation

 

1,742

 

 

557

 

Litigation related professional fees

 

1,115

 

 

97

 

Investigation and restatement expenses

 

738

 

 

7,188

 

Integration and acquisition costs

 

 

 

181

 

Non-GAAP net (loss) income

 

$

(3,994

)

 

$

(1,617

)

Reconciliation of Net Loss to Adjusted EBITDA

 

 

Six months ended December 31,

($ in thousands)

 

2019

 

2018

Net loss

 

$

(19,886

)

 

$

(15,726

)

Less: interest income

 

(577

)

 

(897

)

Plus: interest expense

 

1,298

 

 

1,605

 

Plus: income tax provision

 

131

 

 

37

 

Plus: depreciation expense

 

1,924

 

 

2,387

 

Plus: amortization expense

 

1,569

 

 

1,585

 

EBITDA

 

(15,541

)

 

(11,009

)

Plus: stock-based compensation

 

2,032

 

 

972

 

Plus: litigation related professional expenses

 

1,229

 

 

103

 

Plus: investigation and restatement expenses

 

4,303

 

 

11,714

 

Plus: integration and acquisition costs

 

 

 

1,103

 

Adjustments to EBITDA

 

7,564

 

 

13,892

 

Adjusted EBITDA

 

$

(7,977

)

 

$

2,883

 

Reconciliation of Net Loss to Non-GAAP Net Income (Loss)

 

 

 

Six months ended December 31,

($ in thousands)

 

2019

 

2018

Net loss

 

$

(19,886

)

 

$

(15,726

)

Non-GAAP adjustments:

 

 

 

 

Non-cash portion of income tax provision

 

10

 

 

9

 

Amortization expense

 

1,569

 

 

1,585

 

Stock-based compensation

 

2,032

 

 

972

 

Litigation related professional fees

 

1,229

 

 

103

 

Investigation and restatement expenses

 

4,303

 

 

11,714

 

Integration and acquisition costs

 

 

 

1,103

 

Non-GAAP net (loss) income

 

$

(10,743

)

 

$

(240

)

 

Investors:
Monica Gould
The Blueshirt Group
Tel: +1 212-871-3927
monica@blueshirtgroup.com

Lindsay Savarese
The Blueshirt Group
Tel: +1 212-331-8417
lindsay@blueshirtgroup.com

Media:
Joele Frank, Wilkinson Brimmer Katcher
Tim Lynch / Meaghan Repko
212-355-4449

Source: USA Technologies, Inc.