Slide 1: Shareholder Advocates for Value Enhancement: USA Technologies, Inc.
Shareholder advocates for value Enhancement USA technologies, Inc. (NASDAQ:USAT) WWW.SAVEUSAT.COM RISKMETRICS pRESENTATION dECEMBER 2, 2009
Slide 2: Agenda
Agenda SAVE’s Proposal Why Change is Needed Poor Stock Performance Poor Financial Performance Management Paid for Poor Performance No Alignment with Shareholders Poor Governance • SAVE’s Plan Governance Reform Improve Operations Members and Candidates • Conclusion: Vote for SAVE’s Nominees
Slide 3: SAVE's Proposal
SAVE’s Proposal We propose three shareholder-nominated independent directors to the Board of USA Technologies (USAT). We nominate Peter Michel, Alan Gotcher and Bradley Tirpak; two experienced CEOs with relevant business expertise. an experienced portfolio manager with relevant investing experience.
Slide 4: SAVE's Proposal Background
· SAVE’s Proposal Background Week of October 12: We approached CEO requesting seats on the Board. We understood that the CEO was open to our nominees. October 15-20: We contacted potential candidates over the weekend. October 20: The Company announced they were: Accelerating the annual meeting 4 mon
Slide 5: Why We Initiated This Proposal
Why We Initiated This Proposal The Board needs independent shareholder representation. Management recent changes made bad corporate governance worse. Management is not aligned with common shareholders. We believe there is significant value in the company’s business, talented employee base, and intel
Slide 6: Why Change is Needed
Why Change is Needed Poor Stock Performance Poor Financial Performance Management Paid for Poor Performance No Alignment with Shareholders Poor Governance
Slide 7: Poor Stock Performance (absolute)
Poor Stock Performance (absolute) Since Sept. 30. 2003 USAT common stock is down 95%. • Note: IPO price was $. 50 on 3/6/1995. USAT had 1:10 reverse split on 6/7/1999 and a 1:100 reverse spit on 2/17/2006.
Slide 8: Poor Stock Performance (relative)
Poor Stock Performance (relative) Since Sept. 30. 2003 USAT common stock is down 95%. During the same period the NASDAQ is up.
Slide 9: Poor Financial Performance: Highlights
Poor Financial Performance: Highlights USAT has failed to achieve a profit in any quarter for the past 10 years. USAT is burning cash at an alarming rate. In the Sept. 30, 2009 quarter, cash burn increased 60% over the previous year to $2.8mm. USAT has continuously failed to execute on partnerships
Slide 10: Poor Financial Performance: No Profits for Years
Poor Financial Performance No Profits for 10 Years USAT Results (Smillions) Fiscal Year FY 2009 FY 2008 FY2007 FY2006 FY2005 FY2004 FY2003 FY2002 FY2001 FY2000 Revenues 12.02 16.10 9.16 6.41 4.68 5.63 2.85 1.68 1.45 2.05 Operating 1 -13.92 -17.15 -15.11 -11.78 -12.39 -17.15 -13.54 -15.32 -8.17 -6.82
Slide 11: Management's New Unrealistic Projections
Management’s New Unrealistic Projections After SAVE filed its proxy, Management made public a financial plan. Management did not guide net additions for the current Dec. 2009 quarter, yet they optimistically predict Dec. 2010 to be 280% better I than the most recent quarter. Management’s plan is not
Slide 12: Compensation: Paid for Poor Performance
Compensation: Paid for Poor Performance • CEO and President were paid 14% of revenues in FY2009.* — We looked at 6 small cap transaction processors and found the top two executives earned on average 1.6% of revenues. We view USAT like a late stage venture capital backed company. According to a recen
Slide 13: Compensation of CEO & President
Compensation: Paid for Poor Performance USAT: Compensation of CEO & President ($000) FY2009 FY2008 FY2007 FY2006 FY2005 FY2004 Totals Revenues Net Loss 12,020 — 13,732 16,104 — 16,418 9,158 — 17,783 6,415 — 14,847 4,678 — 15,499 5,633 — 21,426 54,008 — 99,705 Jensen Compensation Herbert Compensation
Slide 14: Leadership Not Aligned with Shareholders
Leadership Not Aligned with Shareholders • The Board of Directors and management team own very little common stock. The entire Board of Directors directly owns less than 1.0% of the company’s total common shares outstanding. Members of SAVE own twice the amount of stock that is directly owned by all
Slide 15: Leadership Not Aligned with Shareholders
Leadership Not Aligned with Shareholders Directors and Management’s ownership has decreased each year. We seek to replace directors with very little “skin in the game” with independent directors aligned with shareholders’ interests.
Slide 16: Leadership Not Aligned with Shareholders (USAT vs. USATP)
Leadership Not Aligned with Shareholders (USAT vs. USATP) source: Bigunarts.com The CEO directly owns $2.4mm of USATP and only $106k of USAT.* Minimizing dilution does appear to be a priority to the CEO. I As of 9/30/2009 CEO directly owns 80,000 shares of preferred and directly owns 65,802 shares o
Slide 17: Leadership Not Aligned with Shareholders (Dilution Every Year)
Leadership Not Aligned with Shareholders (Dilution Every Year) Common shareholders have suffered dilution each and every year. 18 Source: Bloomberg. FY2010 share count as of 9/30/2009. Does not include 7.1mm warrants issued in 8/2009.
Slide 18: Current Directors' Interlocking Relationships
Current Directors’ Interlocking Relationships • William Van Alen (16 years) Former President of The Noah Fund (NOAHX). Mutual fund with appx. $1 Omm in assets. For 5 years through October 2004, NOAHX lost 10.4% a year. NOAHX trailed S&P500 by 4.1 % per year for the 8 years of the funds existence. US
Slide 19: Corporate Governance Was Bad
Corporate Governance Was Bad The CEO is also Chairman of the Board of Directors. There is no Independent Lead Director. The President sits on the Board of Directors. Conflicted Directors: Corporate Counsel, Doug Lurio, is on the Board of Directors. The company paid his small law firm Lurio & Associa
Slide 20: Corporate Governance Got Worse
Corporate Governance Got Worse • After SAVE approached management: USAT staggered the board into three terms. USAT eliminated the ability for shareholders to call a special meeting. USAT accelerated the traditional meeting date from April timeframe to December. USAT gave shareholders only 10 days to
Slide 21: SAVE's Plan
SAVE’s Plan Governance Reform Improve Operations Candidates Members
Slide 22: SAVE's Plan: Governance Reform
SAVE’s Plan: Governance Reform We intend to advocate for: Implementing best-in-class corporate governance. Separating the role of Chairman and CEO. Nominating an Independent Chairman. Eliminating the staggered Board. Nominating non-management directors free from conflicts. Giving shareholders a reas
Slide 23: Plan: Improve Operations
Plan: Improve Operations We intend to advocate for: Examine and scrutinize cost structure. Recommend actions to reduce cash burn; management has stated to SAVE that cash burn is an impediment to large contract wins with Coke and Pepsi. Recommend ways to monetize existing failed partnerships with Mer
Slide 24: SAVE's Plan: Improve Operations
SAVE’s Plan: Improve Operations We intend to: Examine the size of the sales force and the sales channel. Examine the telecommunications costs. — We may recommend ways to reduce telecom costs. • Examine the transaction processing fees being charged by Visa, MasterCard and third party processing compa
Slide 25: SAVE's Plan: Candidates (Peter Michel)
SAVE’s Plan: Candidates • Peter Michel (Candidate) Built a career on turning companies around. Led 4 companies as CEO, chaired 5 non-profit boards, served on 4 corporate boards and served as a policy level executive in the Federal government. CEO of iSECUREtrac Corporation, a leader in electronic mo
Slide 26: SAVE's Plan: Candidates (Alan Gotcher)
SAVE’s Plan: Candidates · Alan Gotcher (Candidate) – An expert in development and commercialization of new technologies. – Served 14 years at Avery Dennison (AVY) where he was Chief Technology Officer and Senior VP of Manufacturing and oversaw 88 facilities in 35 countries. Founded two business unit
Slide 27: SAVE's Plan: Members
SAVE’s Plan: Members · Bradley Tirpak (Member of SAVE and also a Candidate) – 12 years of professional investing experience with Credit Suisse First Boston, Caxton Associates, and Sigma Capital Management and Chilton Investment Company. – Investments made in payment processing industry include Visa,
Slide 28: SAVE's Plan: We are Not Seeking Control
SAVE’s Plan: We are Not Seeking Control Company Slate · Steven D. Barnhart Class I * · Jack E. Price Class I * · William L. Van Alen Class II * · Joel Brooks Class II * · Steve Katz Class II · George R. Jensen, Jr., Class III · Stephen P. Herbert Class III · Douglas M. Lurio Class III SAVE Slate · S
Slide 29: SAVE's Plan: Compare the Nominees
SAVE’s Plan: Compare the Nominees Company Slate · William Van Alen – Board member since 1993. – Former President of NOAHX, a 10mm mutual fund that trailed the S&P index 4.1% a year. (Interlock with Jensen) · Steve Brooks – CFO of Senesco Technologies. (Interlock with Katz) · Steve Katz – Former Pres
Slide 30: Conclusion: Vote for SAVE's Nominees
Conclusion: Vote for SAVE’s Nominees · Why Change is Needed – Poor Stock Performance – Poor Financial Performance – Management Paid for Poor Performance – No Alignment with Shareholders – Poor Governance · SAVE’s Plan – SAVE’s proposal offers shareholder representation on the board. – SAVE’s proposa
Slide 31: Conclusion: Vote for SAVE's Nominees
Conclusion: Vote for SAVE’s Nominees It took shareholder interest to get a 50% independent board. It took a nomination to get an independent nomination committee. It took a proxy fight to get a financial plan. It will take an independent board to enhance shareholder value.
Slide 32: Disclaimers
Disclaimers · DISCLAIMER REGARDING THIS PRESENTATION · This presentation is for general information purposes only. It does not have regard to the specific investment objective, financial situation, suitability or the particular need of any specific person who reads this presentation, and should not