Stephen P. Herbert, Chairman and CEO of USA Technologies, commented: "Our Fiscal 2012 results reflect the commitment we made to shareholders in January of this year to sharply accelerate our path toward profitability. With every new connection and customer win we are building a reliable stream of recurring revenues and strengthening our pipeline for future growth. While approximately $3.2 million in expenses related to the proxy contest and CEO separation clearly impacted our results this fiscal year, they did not stop the fundamental progress we are making in growing revenues and expanding our footprint of connections and the value of those connections for our customers in the small ticket, unattended retail market."

Fiscal 2012 highlights, compared to the prior year, included:

• 27% increase in total revenues to $29.0 million;
• 42% increase in license and transaction fee revenues ("recurring revenues") to $23.4 million, representing 81% of total revenues for the 2012 year;
• 38% increase in connections to its ePort Connect® service, from 119,000 at the end of Fiscal 2011 to 164,000 as of June 30, 2012; as well as a 43% increase in the dollar value of transactions processed through its ePort Connect service during the fiscal year; and,
• 69% increase in new customers to USAT's ePort Connect service during the year, for 3,300 customers as of June 30, 2012.

In addition, Fiscal 2012 net loss, which includes a charge of $2.2 million in selling, general and administrative expenses related to the proxy contest that took place in the fourth quarter ended June 30, 2012 and approximately $975,000 related to the CEO separation, narrowed to ($5.2) million, compared to ($6.5) million for Fiscal 2011. On a non-GAAP basis, which excludes these items as well as warrant liability adjustments and the impairment charge for intangible assets in Fiscal 2011 in order to track the operational progress of the business, non-GAAP net loss narrowed to ($3.8) million compared to ($5.1) million for Fiscal 2011 (see Non-GAAP Reconciliation table).

After preferred dividends, net loss per common share was ($.18) for Fiscal 2012 compared to ($.26) for Fiscal 2011. On a non-GAAP basis, net loss per common share was ($.14) for Fiscal 2012 compared to ($.21) for Fiscal 2011.

Fourth Quarter Results
Revenues for the fourth quarter of Fiscal 2012 were $7.9 million, an increase of 15% from the same period a year ago. Revenue growth was fueled by a 27% growth in license and transaction fees; this growth was slightly offset by a decline in equipment sales of approximately $340,000 due to reduced sales of EnergyMiser®-branded products in the quarter.

Growing ePort Connect Service Base Drives Recurring Revenues

Revenue from license and transaction fees, which is fueled primarily by monthly ePort Connect service fees, JumpStart fees and transaction processing fees, grew to $6.4 million, or by 27% in Fiscal 2012 fourth quarter from $5.0 million for the same quarter a year ago. Highlights in this area for the fourth quarter of Fiscal 2012 included:

• 16,000 additional net connections to USAT's ePort Connect service in the quarter—an increase of approximately 129% from the same period a year ago;
• $47 million in small-ticket, credit/debit transactions dollars handled in the quarter, up 27% from the fourth quarter of the prior year;
• Approximately 450 new ePort Connect customers in the quarter, the strongest quarter of new customer wins for all of Fiscal 2012.

In addition, gross margin on these recurring revenues, which represented 81% of total revenue for the quarter, crossed the 40% mark in the quarter—to 40.2%—from 33.5% from the fourth quarter of the prior year.

Strengthening Operational Performance
While operating expenses in the fourth quarter of Fiscal 2012 were negatively impacted by proxy-related costs, strong growth in revenues - particularly high-margin recurring revenues - continues to position USAT for sustainable profitability. Net loss for the fourth quarter of Fiscal 2012, which includes $2.2 million of expenses related to the proxy contest, was ($2.8) million compared to ($1.9) million for the same period a year ago. However, excluding these proxy expenses and adjustment for fair value of warrants, non-GAAP net loss narrowed to approximately ($0.4) million in the fourth quarter of Fiscal 2012.

Herbert continued: "The steady growth in our integrated ePort Connect service platform and the investments we have been making to leverage that platform to offer new services, attract new customers and expand margins is working. In addition, our success in these areas is translating to improvement in Adjusted EBITDA, a measure we have used to gauge the progress of our operational performance and liquidity.

"Last quarter, we crossed over into positive Adjusted EBITDA on revenues of $7.5 million. For the fourth quarter, outside of the proxy contest charges taken in the quarter, this progress continued. Adjusted EBITDA loss this quarter of ($1.4) million would have been $814,000 excluding the proxy costs, a marked improvement from $336,000 last quarter and ($366,000) for the fourth quarter of Fiscal 2011. We believe this indicates that, outside of non-operational events like the recent proxy contest, the business is at scale and is beginning to generate cash that can be strategically deployed to win more business in what we view as a highly opportunistic market segment," said Herbert.

Cash and cash equivalents as of June 30, 2012 stood at $6.4 million. Net cash generated from operations in the fourth quarter of Fiscal 2012 was $2.9 million. The most significant use of cash in the fourth quarter was for the JumpStart program, which is now reported on the Statement of Cash Flows under Investing Activities.

Outlook
"The USAT Board of Directors and management team remain committed to achieving non-GAAP net income (see Discussion of Non-GAAP Financial Measures) in the second quarter of Fiscal 2013," commented Herbert. "At the same time, our customer focus is as strong as ever. We look forward to bringing new, innovative services to a broader reach of customers in Fiscal 2013, particularly as mobile technologies continue to drive consumer behavior in cashless payments.

"Our plans for Fiscal 2013 include a steadfast focus on optimizing the scalability and versatility of our ePort Connect service platform to expand our growth potential and generate cash. In Fiscal 2013, we are targeting double-digit revenue growth and connection growth of over 30%, as we strive to grow our ePort Connect service base to 225,000 connections by the end of Fiscal 2013," concluded Herbert.