USA Tech Admits To Releasing Premature Revenues

USA Technologies issued an open letter on Monday (January 14) to shareholders, admitting that the company “had prematurely or inappropriately recognized revenue” in 2017 and 2018.

The self-service retail market payment technology service provider’s CEO, Stephen P. Herbert, wrote that the “Audit Committee, with the assistance of independent legal and forensic accounting advisors, conducted a thorough internal investigation relating to certain of the Company’s contractual arrangements.”

He added that the committee and its advisors have proposed adjustments be made, which would result in an aggregate reduction not expected to exceed $5.5 million.

“In most cases, revenues that had been recognized prematurely were, or are expected to be, recognized in subsequent quarters, including quarters subsequent to the quarters impacted by the investigative findings. The internal investigation further found that certain items that had been recorded as expenses, such as the payment of marketing or servicing fees, were more appropriately treated as contra-revenue items in earlier fiscal quarters,” the letter stated.

In addition, the company has also filed a Form 8-K (the “Form 8-K”) with the Securities and Exchange Commission.

As a result of the audit, the company’s board has decided to implement changes, including a reorganization of USAT’s senior management team; the hiring of a chief operating officer; boosting internal compliance through the creation of a compliance committee of the board of directors and the hiring of a chief compliance officer; a splitting of the roles of chairman and CEO, with Stephen P. Herbert continuing as CEO and a member of the board of directors, and Albin (Al) Moschner appointed non-executive chairman; and authorization for the nominating and corporate governance committee to start a search for two additional independent directors to join the board.

“Throughout this entire process, we have never lost sight of delivering world class service to our nearly 16,000 customers and approximately one million connections to our service. We continue to focus on reaching new customers and expanding our footprint within our existing customer base, while driving towards our goal of revenue and margin expansion across the business in order to deliver sustained, long-term shareholder value,” wrote Herbert.