Sequential Revenue Growth of 13%

$5.2 Million in Operating Cash Flow for the Quarter

MALVERN, Pa.–(BUSINESS WIRE)–$USAT #RPC–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 fiscal year 2021 first quarter.

“We delivered a quarter with solid sequential revenue growth, and in line with our expectations,” said Sean Feeney, chief executive officer, USA Technologies. “We continue to execute on the initiatives I outlined last quarter and remain focused on growth, operational execution and delivering for our customers. As the demand for contactless payment solutions grows, we are seeing demand in the market for an end-to-end solution that can help vending operators get through these challenging economic times. We are well positioned to capitalize on these trends and during the first quarter, we won significant deals against our competition, selling across all product lines, as customers leverage our Platform as a Service.”

Financial Highlights:

  • Revenue of $36.9 million, an increase of 13.0% versus fourth quarter 2020, and a decrease of 15.0% year over year

    • License and transaction fee revenue of $33.1 million, a decrease of 4.3% year-over-year and an increase of 18.9% versus fourth quarter 2020
    • Equipment revenue of $3.8 million, a decrease of 21.5% over fourth quarter 2020 and decrease of 56.9% year over year
  • Net new connections of approximately 15,000 bring total connections to approximately 1,335,000
  • Gross margin of 38.6% compared with 26.3% in the prior year period
  • Operating loss of $(3.6) million compared to operating loss of $(11.3) million in the prior year period
  • Net loss applicable to common shares of $(6.9) million, or $(0.11) per basic share compared to net loss applicable to common shares of $(11.8) million, or $(0.20) per basic share in the prior year period
  • Adjusted EBITDA of $(0.5) million compared to $(4.9) million in the prior year period
  • Ended the quarter with $34.7 million in cash and cash equivalents

“While our revenue decreased year over year, mostly due to the COVID-19 pandemic, we experienced solid sequential growth trends during the quarter. Our overall revenue was up over the fourth quarter of 2020, mostly driven by the increase in license fees. We are also pleased to have generated a $5.0 million increase in operating cash flow in the current quarter over the prior year quarter,” said Wayne Jackson, chief financial officer, USA Technologies.

Operational Highlights:

  • Announced the upgrade and expansion of the Company’s ePort product portfolio to now accept EMV contact and contactless payments
  • New Senior Hires include Chief Accounting Officer, Scott Stewart and the return of Denis Kouznetsov, now the Company’s Chief Architect
  • Worked to become a more customer-centric organization. Hired two new regional sales directors and built out customer service teams
  • Key customer wins including a large Operator in the Midwest, FreshBrew Vending, and Continental Vending, Inc.

Fiscal Year 2021 Outlook:

For full fiscal year 2021, the Company expects the following:

  • Revenue to be between $170 million and $180 million
  • Net loss applicable to common shares to be between $(14.1) million and $(11.1) million
  • Adjusted EBITDA to be between $2 million and $5 million

Webcast and Conference Call

USA Technologies will host a conference call and webcast at 4:30 p.m. Eastern Time today. 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 # 2696196. A live webcast of the conference call will be available at https://usatechnologiesinc.gcs-web.com/events-and-presentations. 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 7:30 p.m. Eastern Time on November 5, 2020 until 7:30 p.m. Eastern Time on November 8, 2020 and may be accessed by calling +1 (855) 859-2056 (domestic dial-in) or +1 (404) 537-3406 (international dial-in) and reference conference ID # 2696196.

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. USAT is transforming the unattended retail community by offering one integrated solution for payments processing, logistics, and back-office management. 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 inventory. As a result, customers ranging from vending machine companies, to operators of micro-markets, gas and car charging stations, laundromats, metered parking terminals, kiosks, amusements and more, can run their businesses more proactively, predictably, and competitively.

Discussion of Non-GAAP Financial Measures:

This press release contains discussion of adjusted EBITDA, a non-GAAP financial measure which is not required or defined under GAAP (Generally Accepted Accounting Principles). 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 financial measures and the most comparable GAAP financial measures are set forth below in Financial Schedule D.

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 our net income or net loss 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 our net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of our profitability or net earnings. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, we utilize Adjusted EBITDA as a metric in our executive officer and management incentive compensation plans.

We define Adjusted EBITDA as net loss before (i) interest income, (ii) interest expense, (iii) income taxes, (iv) depreciation, (v) amortization, (vi) stock-based compensation expense, and (vii) non-recurring fees and charges that were incurred in connection with the 2019 Investigation and financial statement restatement activities as well as proxy solicitation costs.

We have excluded stock-based compensation, as it does not reflect our cash-based operations. We have excluded the professional fees incurred in connection with the non-recurring costs and expenses related to the 2019 Investigation, financial statement restatement activities, and proxy solicitation costs because we believe that they represent charges that are not related to our operations.

Forward-looking Statements:

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 within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this release, words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, as they relate to USAT or its management, may identify forward-looking statements. Such forward-looking statements are based on the reasonable 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 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 uncertainties associated with COVID-19, including its possible effects on USAT’s operations and the demand for USAT’s products and services; 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; the ability of USAT to make available and successfully upgrade current customers to new standards and protocols; 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; or other risks discussed in USAT’s filings with the U.S. Securities and Exchange Commission. 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. If USAT updates one or more forward-looking statements, no inference should be drawn that USAT will make additional updates with respect to those or other forward-looking statements.

–F—USAT

USA Technologies, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

($ in thousands, except share data)

 

September 30,

2020

 

June 30,
2020

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

34,690

 

 

 

$

31,713

 

 

Accounts receivable, less allowance of $7,313 and $7,676, respectively

 

19,175

 

 

 

17,273

 

 

Finance receivables, net

 

7,356

 

 

 

7,468

 

 

Inventory, net

 

7,005

 

 

 

9,128

 

 

Prepaid expenses and other current assets

 

1,545

 

 

 

1,782

 

 

Total current assets

 

69,771

 

 

 

67,364

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

Finance receivables due after one year

 

10,385

 

 

 

11,213

 

 

Other assets

 

2,156

 

 

 

1,993

 

 

Property and equipment, net

 

7,526

 

 

 

7,872

 

 

Operating lease right-of-use assets

 

5,417

 

 

 

5,603

 

 

Intangibles, net

 

22,249

 

 

 

23,033

 

 

Goodwill

 

63,945

 

 

 

63,945

 

 

Total non-current assets

 

111,678

 

 

 

113,659

 

 

 

 

 

 

 

Total assets

 

$

181,449

 

 

 

$

181,023

 

 

 

 

 

 

 

Liabilities, convertible preferred stock and shareholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

31,791

 

 

 

$

27,058

 

 

Accrued expenses

 

28,880

 

 

 

30,265

 

 

Finance lease obligations and current obligations under long-term debt

 

3,871

 

 

 

3,328

 

 

Deferred revenue

 

1,639

 

 

 

1,698

 

 

Total current liabilities

 

66,181

 

 

 

62,349

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Deferred income taxes

 

143

 

 

 

137

 

 

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

 

14,066

 

 

 

12,435

 

 

Operating lease liabilities, non-current

 

4,469

 

 

 

4,749

 

 

Total long-term liabilities

 

18,678

 

 

 

17,321

 

 

 

 

 

 

 

Total liabilities

 

84,859

 

 

 

79,670

 

 

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 $21,113 and $20,779 at September 30, 2020 and June 30, 2020, 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, 65,252,965 and 65,196,882 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively

 

402,742

 

 

 

401,240

 

 

Accumulated deficit

 

(309,290

)

 

 

(303,025

)

 

Total shareholders’ equity

 

93,452

 

 

 

98,215

 

 

Total liabilities, convertible preferred stock and shareholders’ equity

 

$

181,449

 

 

 

$

181,023

 

 

 

USA Technologies, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three months ended

 

 

September 30,

($ in thousands, except per share data)

 

2020

 

 

2019

 

Revenue:

 

 

 

 

License and transaction fees

 

$

33,108

 

 

 

$

34,609

 

 

Equipment sales

 

3,769

 

 

 

8,750

 

 

Total revenue

 

36,877

 

 

 

43,359

 

 

 

 

 

 

 

Costs of sales:

 

 

 

 

Cost of services

 

19,336

 

 

 

22,089

 

 

Cost of equipment

 

3,301

 

 

 

9,854

 

 

Total costs of sales

 

22,637

 

 

 

31,943

 

 

 

 

 

 

 

Gross profit

 

14,240

 

 

 

11,416

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling, general and administrative

 

16,780

 

 

 

17,196

 

 

Investigation, proxy solicitation and restatement expenses

 

 

 

 

4,476

 

 

Depreciation and amortization

 

1,068

 

 

 

1,022

 

 

Total operating expenses

 

17,848

 

 

 

22,694

 

 

 

 

 

 

 

Operating loss

 

(3,608

)

 

 

(11,278

)

 

 

 

 

 

 

Other income (expense):

 

 

 

 

Interest income

 

350

 

 

 

294

 

 

Interest expense

 

(3,315

)

 

 

(465

)

 

Total other income (expense), net

 

(2,965

)

 

 

(171

)

 

 

 

 

 

 

Loss before income taxes

 

(6,573

)

 

 

(11,449

)

 

Provision for income taxes

 

(40

)

 

 

(59

)

 

 

 

 

 

 

Net loss

 

(6,613

)

 

 

(11,508

)

 

Preferred dividends

 

(334

)

 

 

(334

)

 

Net loss applicable to common shares

 

$

(6,947

)

 

 

$

(11,842

)

 

Net loss per common share

 

 

 

 

Basic

 

$

(0.11

)

 

 

$

(0.20

)

 

Diluted

 

$

(0.11

)

 

 

$

(0.20

)

 

Weighted average number of common shares outstanding

 

 

 

 

Basic

 

64,859,002

 

 

 

60,096,852

 

 

Diluted

 

64,859,002

 

 

 

60,096,852

 

 

 

USA Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three months ended

 

 

September 30,

($ in thousands)

 

2020

 

 

2019

 

OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(6,613

)

 

 

$

(11,508

)

 

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

 

 

 

 

Non-cash stock based compensation

 

1,509

 

 

 

290

 

 

Gain on disposal of property and equipment

 

(3

)

 

 

(15

)

 

Non-cash interest and amortization of debt discount

 

3,125

 

 

 

338

 

 

Bad debt expense

 

394

 

 

 

(110

)

 

Provision for inventory reserve

 

802

 

 

 

574

 

 

Depreciation and amortization included in operating expenses

 

1,068

 

 

 

1,022

 

 

Depreciation included in cost of sales for rentals

 

539

 

 

 

634

 

 

Non-cash lease expense

 

269

 

 

 

491

 

 

Deferred income taxes

 

5

 

 

 

5

 

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(1,540

)

 

 

3,286

 

 

Finance receivables

 

531

 

 

 

(454

)

 

Inventory

 

1,324

 

 

 

1,232

 

 

Prepaid expenses and other assets

 

100

 

 

 

(412

)

 

Accounts payable and accrued expenses

 

3,985

 

 

 

5,288

 

 

Operating lease liabilities

 

(259

)

 

 

(399

)

 

Deferred revenue

 

(58

)

 

 

(33

)

 

Net cash provided by operating activities

 

5,178

 

 

 

229

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchase of property and equipment

 

(483

)

 

 

(420

)

 

Proceeds from sale of property and equipment

 

8

 

 

 

30

 

 

Net cash used in investing activities

 

(475

)

 

 

(390

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from long-term debt issuance by JPMorgan Chase Bank, N.A., net of debt issuance costs

 

14,550

 

 

 

 

 

Repayment of finance lease obligations and long-term debt

 

(15,101

)

 

 

(1,763

)

 

Proceeds from exercise of common stock options

 

25

 

 

 

 

 

Payment of Antara prepayment penalty and commitment termination fee

 

(1,200

)

 

 

 

 

Net cash used in financing activities

 

(1,726

)

 

 

(1,763

)

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

2,977

 

 

 

(1,924

)

 

Cash and cash equivalents at beginning of year

 

31,713

 

 

 

27,464

 

 

Cash and cash equivalents at end of period

 

$

34,690

 

 

 

$

25,540

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Interest paid in cash

 

$

191

 

 

 

$

205

 

 

 

Reconciliation of Net Loss to Adjusted EBITDA

 

 

Three months ended September 30,

($ in thousands)

 

2020

 

 

2019

 

Net loss

 

$

(6,613

)

 

 

$

(11,508

)

 

Less: interest income

 

(350

)

 

 

(294

)

 

Plus: interest expense

 

3,315

 

 

 

465

 

 

Plus: income tax provision

 

40

 

 

 

59

 

 

Plus: depreciation expense included in cost of sales for rentals

 

539

 

 

 

634

 

 

Plus: depreciation and amortization expense in operating expenses

 

1,068

 

 

 

1,022

 

 

EBITDA

 

(2,001

)

 

 

(9,622

)

 

Plus: stock-based compensation

 

1,509

 

 

 

290

 

 

Plus: investigation, proxy solicitation and restatement expenses

 

 

 

 

4,476

 

 

Adjustments to EBITDA

 

1,509

 

 

 

4,766

 

 

Adjusted EBITDA

 

$

(492

)

 

 

$

(4,856

)

 

 

Contacts

Media and Investor Relations Contact:
Alicia V. Nieva-Woodgate

USA Technologies

+1 720.808.0086

anievawoodgate@usatech.com

Investor Relations:
ICR, Inc.

USATechIR@icrinc.com