USA Technologies, Inc. (USAT) ("USAT"), a leader of wireless, cashless payment and M2M telemetry solutions for small-ticket, self-serve retailing industries, today reported results for the fourth quarter and full fiscal year ended June 30, 2013.
Fiscal 2013 financial highlights, compared to the prior year, included:
- 29% increase in license and transaction fee revenues to $30.0 million, representing 84% of total revenues for the 2013 fiscal year;
- 24% increase in total revenues to $35.9 million;
- Adjusted EBITDA of $5.8 million up from an Adjusted EBITDA loss of ($2.8) million;
- GAAP net income of $0.9 million from a GAAP net loss of ($5.2) million; and,
- Non-GAAP net income of $0.9 million, up from a non-GAAP net loss of ($3.8) million (fiscal 2013 excludes $0.3 million of Other income for change in fair value of warrants and $0.3 million in proxy expenses and fiscal 2012 excludes $1.8 million Other income for change in fair value of warrants and $3.2 million in proxy and separation expenses).
Total connections to USAT's cashless payment and M2M telemetry service, ePort Connect®, grew by 30% during fiscal 2013, with 18,000 net connections achieved in the fourth quarter. In addition, USAT's customer base expanded to 5,050 customers as of June 30, 2013, a 53% increase from the prior fiscal year, with 525 new customers in the fourth quarter.
After accrual for preferred dividends, net earnings per common share, diluted, for fiscal 2013 was $0.01 compared to a net loss per common share of ($0.18) for Fiscal 2012. On a non-GAAP basis, net income per common share, diluted, was $0.01 for fiscal 2013, improving from a net loss per common share of ($0.14) for fiscal 2012.
Cash generated from operations was $6.0 million for fiscal 2013 compared to $0.08 million for fiscal 2012, an increase due primarily to substantial improvements in operating performance over the course of fiscal 2013 when compared to 2012. Cash and cash equivalents stood at approximately $6.0 million as of June 30, 2013.
Stephen P. Herbert, USA Technologies' chairman and chief executive officer, commented, "During fiscal 2013, we achieved tremendous improvements in profitability, while making great strides in developing new services and marketing partnerships that extend USAT's capabilities across multiple channels of the small-ticket, unattended market. We continued to lead cashless payment adoption in the sizable vending market with the industry's largest menu of cashless payment services, including our MORE loyalty program and the upcoming Isis Mobile Wallet "fifth vend free" promotion—relatively new value-added services that we believe are only beginning to shape how a cashless payment platform can be optimized in our market segment.
"In addition, we took important steps toward leveraging USAT's ePort Connect service platform in several other, equally opportunistic markets such as laundry, transportation and amusement in fiscal 2013. For example, during the fourth quarter, we kicked off our new relationship with Setomatic Systems, a leading provider of cashless payment acceptance devices in the commercial and multi-unit housing laundry markets, with the transfer of over 5,000 of their existing cashless connections to our ePort Connect service. We also coupled the appeal of our ePort Connect service with a unique solution for the taxi and for-hire vehicle industry, called ePortGO™, and we continue to experience a growing demand for our integration capabilities as self-service applications become more ubiquitous," said Herbert.
Fourth Quarter Results
Fourth quarter financial highlights, compared to the prior year, included:
- 23% increase in total revenues to $9.7 million;
- 28% increase in license and transaction fee revenues to $8.2 million, representing 84% of total revenues for the quarter;
- Adjusted EBITDA of $1.6 million, up from an Adjusted EBITDA loss of ($1.4) million;
- GAAP net income of $1.7 million from a GAAP net loss of ($2.8) million; and,
- Non-GAAP net income of $0.2 million, up from a non-GAAP net loss of ($0.4) million (fiscal 2013 excludes $1.5 million of Other income for the change in fair value of warrants and fiscal 2012 excludes $0.2 million of Other expense for the change in fair value of warrants and $2.2 million in proxy expenses).
Revenues for the fourth quarter of fiscal 2013 were $9.7 million, an increase of 23% from the same period a year ago. Revenue growth was attributable to a 28% increase in license and transaction fees to $8.2 million. Revenue from license and transaction fees, which grew to represent 84% of revenues for the fourth quarter of fiscal 2013 compared to 81% for the fourth quarter of the prior year, is driven by connections to USAT's ePort Connect service through monthly service fees, JumpStart fees and transaction processing fees.
Equipment sales of $1.5 million were essentially flat compared to the fourth quarter of fiscal 2012 as growth in direct sales of ePort cashless payment devices was offset by a decline in sales of Miser-branded energy products.
Gross profit was $3.7 million in the fourth quarter, a 15% improvement from $3.2 million for the same period in the prior year.
Operating margin (both GAAP and non-GAAP) expanded to approximately 2% from (33%) and (5%) on a GAAP and non-GAAP basis, respectively, for the same period in the prior year, due largely to stronger revenues and resulting gross profit dollar contribution.
GAAP net income was $1.7 million for the fourth quarter of fiscal 2013, which included a $1.5 million other income adjustment for the change in fair value of warrant liability related to the 3.9 million of warrants expiring in September 2016. The fair value of warrant liability adjustment is based, in part, on changes in USAT's stock price and other market factors that occur during the quarter. As a result, this non-cash adjustment can fluctuate substantially from quarter to quarter. For the same period in the prior year, GAAP net loss was ($2.8) million, which included a $0.2 million charge for warrant liability adjustment.
Non-GAAP net income removes the impact of the fair value of warrant adjustment, in addition to other non-operational adjustments noted for the quarter (see Non-GAAP Reconciliation tables). For the fourth quarter, non-GAAP net income was $0.2 million compared to a non-GAAP net loss of ($0.4) million for the fourth quarter of fiscal 2012.
GAAP and non-GAAP net income (loss) applicable to common shares were the same as GAAP and non-GAAP net income (loss). GAAP net earnings per common share, diluted, for the fourth quarter was $0.05 compared to a GAAP net loss per common share of ($0.09) for the prior year. Non-GAAP net earnings per common share, diluted, for the fourth quarter of fiscal 2013 was $0.00, up from a non-GAAP net loss per common share of ($0.01) for the fourth quarter of the prior year.
"To date, growth in customers and connections to our ePort Connect service have delivered substantial improvements in our performance and our strengthened service model is delivering visible returns in terms of cash generation," said Herbert. "In fiscal 2014, our priorities include delivering 25%-30% license and transaction fee revenue growth, 20-25% total revenue growth and over 50% growth in non-GAAP profitability, even as we absorb deactivations to our service from a customer in the first quarter of the fiscal year.
"New customers, a stronger presence in complementary market segments, expanded services and promising work underway that makes our ePort Connect service easily accessible to kiosk and other developers, gives us confidence that fiscal 2014 should be another exciting year of financial progress and value creation for USAT in the quickly evolving, small-ticket market for cashless payment," concluded Herbert.