Announced Agreement to Acquire Cantaloupe
Systems
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 first quarter ended September 30,
2017.
First Quarter Financial Highlights:
- Revenue of $25.6 million, a
year-over-year increase of 19% marking the 32nd consecutive quarter
of growth
- Net connections of 26,000, a
year-over-year increase of 37%
- Achieved record license and transaction
fee revenue of $19.9 million, a year-over-year increase of
22%
- Operating loss of $(0.6) million,
compared to an operating loss of $(1.0) million in the prior year
period
- Adjusted operating income (operating
income as adjusted for integration and acquisition costs) of $0.2
million, compared to a loss of $(0.8) million for the prior year
period
- Ended the quarter with $51.9 million in
cash
- Net loss of $(0.2) million, or $(0.01)
per share, compared to a net loss of $(2.5) million, or $(0.07) per
share for the prior year period
- Adjusted EBITDA of $2.3 million, a
year-over-year increase of 244%
“The first quarter was a strong start to our fiscal year, marked
by continued momentum of cashless acceptance in our target market,”
said Stephen P. Herbert, USA Technologies’ chairman and Chief
Executive Officer. “During the quarter, we increased our
penetration with our existing customers and reached the highest
quarterly new customer additions in two years. We believe that our
value proposition and addressable market will be further enhanced
by our planned acquisition of Cantaloupe Systems, which we
announced yesterday, November 7, 2017. Cantaloupe will bring
complementary value added services that will enable USA
Technologies to offer a comprehensive end-to-end enterprise
platform to new customers and further penetrate our existing
customer base.”
“I am very pleased with our first quarter results,” said
Priyanka Singh, USA Technologies’ Chief Financial Officer.
“Consistent with our strategy, we grew revenue, while increasing
our L&T margins and managing expenses, which led to improved
profitability. We are excited about the opportunity to further
enhance our financial model with the acquisition of Cantaloupe,
which brings high margin recurring revenue and the potential for
both cost and revenue synergies.”
Fiscal Year 2018 Outlook
As a result of the announced agreement with Cantaloupe Systems,
USAT is updating its outlook for fiscal 2018. The company now
expects pro-forma combined revenue to be between $137 million to
$142 million and adjusted EBITDA to be between $12.5 million to
$13.5 million. Net of one-time transaction and integration expenses
and any purchase accounting adjustments, USAT expects the
transaction to be accretive in fiscal 2018.
USA Technologies has not reconciled the company’s adjusted
EBITDA outlook to GAAP net income (loss) due to the uncertainty and
potential variability of the provision for (benefit from) income
taxes, which is a reconciling item between adjusted EBITDA and GAAP
net income (loss). Because this item cannot be reasonably predicted
and could have a significant impact on the calculation of GAAP net
income (loss), USA Technologies has not provided guidance for GAAP
net income (loss) or a reconciliation of the company’s adjusted
EBITDA outlook to GAAP net income (loss). Accordingly, a GAAP net
income (loss) outlook and a reconciliation of adjusted EBITDA
outlook to GAAP net income (loss) is not available without
unreasonable effort. For information regarding the reconciliation
of historical non-GAAP financial measures to the nearest comparable
GAAP measures, see "Non-GAAP Financial Measures" and the
reconciliation tables included in this press release under
“Financial Schedules”.
Webcast and Conference Call
USA Technologies will host a conference call and webcast the
event beginning at 8:30 a.m. Eastern Time today, November 8,
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 # 4097308.
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
November 8, 2017 until 11:30 a.m. Eastern Time on November 11, 2017
and may be accessed by calling (855) 859-2056 (domestic dial-in) or
(404) 537-3406 (international dial-in) and reference conference ID
# 4097308. 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 76
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.
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 and GAAP measures are
set forth below in Financial Schedule E.
The following non-GAAP financial measures are discussed herein:
adjusted EBITDA, adjusted operating income, and non-GAAP net income
(loss). 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, 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 below in
Financial Schedule E 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, 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 the planned
acquisition of Cantaloupe Systems, Inc., and professional fees
incurred in connection with the class action litigation and the
special litigation committee investigation. 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. 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) is an important
measure of the Company's business. Management uses the
aforementioned non-GAAP measure 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 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 the VendScreen
business and the planned acquisition of Cantaloupe Systems, Inc.,
professional fees incurred in connection with the class action
litigation incurred during the fiscal year, 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 and the proposed acquisition of Cantaloupe
Systems, Inc. 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 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. We use these non-GAAP financial measures for financial
and operational decision-making purposes and as a means to evaluate
period-to-period comparisons. We believe that these non-GAAP
financial measures provide useful information about our operating
results, enhance the overall understanding of past financial
performance and future prospects and allow for greater transparency
with respect to metrics used by our management in its financial and
operational decision making. 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. 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.
As used herein, adjusted operating income represents operating
income before the non-recurring costs and expenses incurred in
connection with the VendScreen transaction and the proposed
acquisition of Cantaloupe Systems, Inc. We have excluded these
non-recurring costs and expenses in order to allow more accurate
comparison of the financial results to historical operations and we
believe such a comparison is useful to investors as a measure of
comparative operating performance.
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 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 which would
improve our net cash used by operating activities; whether USAT
experiences material weaknesses in its internal controls over
financial reporting in future periods, which would result in USAT
not being able to accurately or timely report its financial
condition or results of operations; the effect of the proposed
acquisition of Cantaloupe Systems, Inc. on USAT’s earnings or
adjusted EBITDA in fiscal year 2018; the possibility that all or a
portion of the expected benefits and efficiencies from the combined
offering of the services of USAT and Cantaloupe Systems, Inc.,
including increases in revenue, business efficiencies and
competitiveness, and decrease in operational costs, will not be
realized or would not be realized within the expected time period
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
Ended September 30, 2017 and September 30, 2016
B. Five Quarter Select Key Performance Indicators
C. Balance Sheets at September 30, 2017 and
at June 30, 2017
D. Statements of Cash Flows for the 3 Months
Ended September 30, 2017 and September 30, 2016
E. Reconciliation of GAAP to Non-GAAP Financial Measures for the
3 Months Ended September 30, 2017 and September 30,
2016
(A) Statements of Operations for
the 3 Months Ended September 30, 2017 and September
30, 2016
Three months ended September 30,
Percent ($ in thousands, except shares and per share
data) 2017 % of Sales 2016
% of Sales Change Change Revenues: License and
transaction fees $ 19,944 77.9 % $ 16,365 75.8 % $ 3,579 21.9 %
Equipment sales 5,673 22.1 % 5,223 24.2
% 450 8.6 % Total revenues 25,617 100.0 % 21,588
100.0 % 4,029 18.7 % Costs of sales/revenues: Cost of
services 13,326
66.8
% 11,243
68.7
% 2,083 18.5 % Cost of equipment 5,090
89.7
% 4,178
80.0
% 912 21.8 % Total costs of sales/revenues 18,416
71.9 % 15,421 71.4 % 2,995 19.4 % License and transaction
gross profit 6,618 33.2 % 5,122 31.3 % 1,496 29.2 % Equipment gross
profit 583 10.3 % 1,045 20.0 % (462 )
(44.2 %) Gross profit 7,201 28.1 % 6,167
28.6 % 1,034 16.8 % Operating expenses:
Selling, general and administrative 6,746 26.3 % 6,808 31.5 % (62 )
(0.9 %) Integration and acquisition costs 762 3.0 % 101 0.5 % 661
654.5 % Depreciation and amortization 245 1.0 %
208 1.0 % 37 17.8 % Total operating
expenses 7,753 30.3 % 7,117 33.0 %
636 8.9 % Operating loss (552 ) (2.2 %) (950 )
(4.4 %) 398 41.9 % Other income (expense): Interest income
80 0.3 % 73 0.3 % 7 9.6 % Interest expense (209 ) (0.8 %) (212 )
(1.0 %)
(3
)
(1.4 %) Change in fair value of warrant liabilities —
— (1,490 ) (6.9 %)
(1,490
)
(100.0 %) Total other expense, net (129 ) (0.5 %)
(1,629 ) (7.5 %)
(1,500
)
(92.1 %) Loss before income taxes (681 ) (2.7 %) (2,579 )
(11.9 %) 1,898 73.6 % Benefit for income taxes 468
1.8 % 115 0.5 % 353 307.0 % Net
loss (213 ) (0.8 %) (2,464 ) (11.4 %) 2,251 91.4 % Cumulative
preferred dividends (334 ) (1.3 %) (334 ) (1.5 %)
— — Net loss applicable to common shares $
(547 ) (2.1 %) $ (2,798 ) (13.0 %) $ 2,251 80.5 % Net loss
per common share - basic and diluted $ (0.01 ) $ (0.07 ) $ 0.06
84.2 % Weighted average number of common shares
outstanding - basic and diluted 47,573,364 38,488,005
9,085,359 23.6 %
(B) Five Quarter Select Key
Performance Indicators
As of and for the three months ended
September 30, June 30, March 31,
December 31, September 30, ($ in thousand)
2017 2017 2017 2016 2016
Connections:
New connections (gross)
28,000 70,000 40,000 25,000 22,000 % from existing customer base 82
% 93 % 88 % 80 % 86 %
New connections (net)
26,000 64,000 35,000 21,000 19,000 Total connections 594,000
568,000 504,000 469,000 448,000 Customers: New customers
added 550 300 500 500 350 Total customers 13,250 12,700 12,400
11,900 11,400 Volumes: Total number of transactions
(millions) 121.1 114.8 104.9 100.1 95.1 Transaction volume
(millions) $ 239.2 $ 225.6 $ 202.5 $ 191.5 $ 183.4 Financing
structure of connections: JumpStart 4.1 % 3.3 % 8.6 % 6.8 % 7.7 %
QuickStart & All Others * 95.9 % 96.7 %
91.4 % 93.2 % 92.3 % Total 100.0 %
100.0 % 100.0 % 100.0 % 100.0 %
*Includes credit sales with standard trade receivable terms
(C) Balance Sheets
at September 30, 2017 and at June 30, 2017
September 30, June 30, ($ in
thousands, except shares) 2017 2017 Assets
Current assets: Cash and cash equivalents $ 51,870 $ 12,745
Accounts receivable, less allowance of $3,445 and $3,149,
respectively 10,288 7,193 Finance receivables, less allowance of
$22 and $19, respectively 3,082 11,010 Inventory 8,240 4,586
Prepaid expenses and other current assets 1,122
968 Total current assets 74,602 36,502
Non-current assets: Finance receivables, less current portion 7,742
8,607 Other assets 750 687 Property and equipment, net 11,850
12,111 Deferred income taxes 28,205 27,670 Intangibles, net 578 622
Goodwill 11,492 11,492 Total
non-current assets 60,617 61,189 Total assets $ 135,219
$ 97,691 Liabilities and shareholders’ equity
Current liabilities: Accounts payable $ 14,211 $ 16,054 Accrued
expenses 3,795 4,130 Line of credit, net 7,051 7,036 Capital lease
obligations and current obligations under long-term debt 2,649
3,230 Income taxes payable 10 10 Deferred gain from sale-leaseback
transactions 197 239 Total current
liabilities 27,913 30,699 Long-term liabilities: Capital
lease obligations and long-term debt, less current portion 1,049
1,061 Accrued expenses, less current portion 62 53 Deferred gain
from sale-leaseback transactions, less current portion 99
100 Total long-term liabilities 1,210 1,214
Total liabilities $ 29,123 $ 31,913
Shareholders’ equity: Preferred stock, no par value,
1,800,000 shares authorized, no shares issued — — Series A
convertible preferred stock, 900,000 shares authorized, 445,063
issued and outstanding, with liquidation preferences of $19,109 and
$18,775 at September 30, 2017 and June 30, 2017, respectively 3,138
3,138 Common stock, no par value, 640,000,000 shares authorized,
50,194,731 and 40,331,645 shares issued and outstanding at
September 30, 2017 and June 30, 2017, respectively 286,463 245,999
Accumulated deficit (183,505 ) (183,359 ) Total
shareholders’ equity 106,096 65,778
Total liabilities and shareholders’ equity $ 135,219 $
97,691
(D) Statements of Cash Flows for
the 3 Months Ended September 30, 2017 and September
30, 2016
Three months ended September 30, ($ in
thousands) 2017 2016 OPERATING ACTIVITIES:
Net loss $ (213 ) $ (2,464 ) Adjustments to reconcile net loss to
net cash provided by (used in) operating activities: Non-cash stock
based compensation 576 211 Gain on disposal of property and
equipment (18 ) — Non-cash interest and amortization of debt
discount 15 105 Bad debt expense 118 97 Depreciation and
amortization 1,492 1,301 Change in fair value of warrant
liabilities — 1,490 Excess tax benefits 67 — Deferred income taxes,
net (535 ) (115 ) Recognition of deferred gain from sale-leaseback
transactions (43 ) (215 ) Changes in operating assets and
liabilities: Accounts receivable (3,192 ) (1,038 ) Finance
receivables 8,771 (5 ) Inventory (3,648 ) (2,223 ) Prepaid expenses
and other current assets (217 ) (224 ) Accounts payable and accrued
expenses (2,168 ) (3,175 ) Income taxes payable —
(10 ) Net cash provided by (used in) operating activities
1,005 (6,265 ) INVESTING ACTIVITIES: Purchase of property
and equipment, including rentals (992 ) (810 ) Proceeds from sale
of property and equipment, including rentals 45
— Net cash used in investing activities (947 ) (810 )
FINANCING ACTIVITIES: Cash used in retirement of common
stock — (31 ) Proceeds from exercise of common stock warrants —
6,193 Issuance of common stock in public offering, net 39,888 —
Repayment of capital lease obligations and long-term debt
(821 ) (161 ) Net cash provided by financing activities
39,067 6,001 Net increase (decrease) in cash and cash
equivalents 39,125 (1,074 ) Cash and cash equivalents at beginning
of period 12,745 19,272 Cash and cash
equivalents at end of period $ 51,870 $ 18,198
Supplemental disclosures of cash flow information: Interest paid in
cash $ 107 $ 87 Income taxes paid in cash (refund),
net $ — $ — Supplemental disclosures of noncash
financing and investing activities: Equipment and software acquired
under capital lease $ 227 $ 254
(E) Reconciliation of GAAP to
Non-GAAP Financial Measures for the 3 Months Ended September
30, 2017 and September 30, 2016
Reconciliation of Net Loss to
Adjusted EBITDA: Three months ended September 30,
2017 Percentage ($ in thousand) 2017
2016 Change Change Net loss $ (213 ) $ (2,464
) $ 2,251 91.4 % Less interest income (80 ) (73 ) (7 ) 9.6 % Plus
interest expense 209 212 (3 ) (1.4 %) Less income tax benefit (468
) (115 ) (353 ) 307.0 % Plus depreciation expense 1,448 1,257 191
15.2 % Plus amortization expense 44 44
— — EBITDA $ 940 $ (1,139 ) $ 2,079
182.5 % Plus loss on fair value of warrant
liabilities — 1,490 (1,490 ) (100.0 %) Plus stock-based
compensation 576 211 365 173.0 % Plus integration and acquisition
costs 762 101 661 654.5 %
Adjustments to EBITDA 1,338 1,802
(464 ) (25.7 %) Adjusted EBITDA $ 2,278 $ 663
$ 1,615 243.6 %
Reconciliation of Operating Loss
to Adjusted Operating Income/(Loss): Three months
ended September 30, 2017 Percentage ($ in
thousand) 2017 2016 Change Change
Operating loss $ (552 ) $ (950 ) $ 398 41.9 % Plus integration and
acquisition costs 762 101 661
654.5 % Adjusted operating income/(loss) $ 210 $ (849
) $ (1,059 ) 124.7 %
Reconciliation of Net Loss to
Non-GAAP Net Income/(Loss): Three months ended
September 30, Percentage ($ in thousands, except
shares and per share data) 2017 2016
Change Change Net loss $ (213 ) $ (2,464 ) $ 2,251
91.4 % Non-GAAP adjustments: Non-cash portion of income tax benefit
(468 ) (115 ) (353 ) 307.0 % Fair value of warrant adjustment —
1,490 (1,490 ) (100.0 %) Litigation related professional fees — 33
(33 ) (100.0 %) Integration and acquisition costs 762
101 661 654.5 % Non-GAAP net
income/(loss) 81 (955 ) 1,036
(108.5 %)
F-USAT
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version on businesswire.com: http://www.businesswire.com/news/home/20171108005513/en/
Investors:The Blueshirt GroupMonica Gould,
+1-212-871-3927monica@blueshirtgroup.comLindsay Savarese,
+1-212-331-8417lindsay@blueshirtgroup.com
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