What happened
USA Technologies, Inc. (CTLP -2.41%) stock lost 55.7% in September, according to data provided by S&P Global Market Intelligence. Shares plummeted following the cashless-payment company's decision to conduct an internal probe into matters involving contracts, accounting, and financial reports.
USA Technologies stock sank 33% on Sept. 11 after the company published a press release outlining moves to perform an audit and delay its full-year report. Shares continued to lose ground as the month went on.
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So what
The audit meant that USA Technologies had to delay the filing its annual Form 10-K with the SEC beyond the Sept. 13 deadline, with the company initially filing for a 15-day extension. The key details from the company's Sept. 11 press release are excerpted below:
The Audit Committee of the Company's Board of Directors, with the assistance of independent legal and forensic accounting advisors, is in the process of conducting an internal investigation of current and prior period matters relating to certain of the Company's contractual arrangements, including the accounting treatment, financial reporting and internal controls related to such arrangements. The Audit Committee is working closely with its advisors to complete its investigation in as timely a manner as possible. The Company will not be in a position to file its Form 10-K until the Audit Committee completes its investigation and the Company and its independent auditor assess the results of that investigation.
The specifics of the investigation are unclear, raising a cloud of uncertainty that will surround the company until the matter is resolved. USA Technologies stock plummeted following the news, reversing much of the gains it had made over the last year. Shares had climbed roughly 80% prior to the decision to conduct the internal audit and delay the annual filing, but the market's assessment of the risk posed by the uncertainty surrounding the underlying issues prompted much of those gains to be erased.
Now what
USA Technologies provided an update on its 10-K filing on Oct. 1, revealing that the investigation was ongoing and that it had not been able to file its 10-K report within the extension period. The press release also outlined the company's agreement with lender JPMorgan Chase to extend the period for delivering financial results. USA Technologies stock has continued to lose ground in October, with shares down roughly 6% in the month as of this writing.
Prior to initiating its internal review, the company had guided for sales between $138 million and $142 million, representing roughly 34.5% year-over-year growth at the midpoint. Management targeted for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to come in between $14.5 million and $15 million, with the midpoint of that target representing a roughly 108% increase over adjusted EBITDA in 2017. Depending on how the audit turns out, it's possible that sales and earnings for the year and other periods could see substantial downward revisions, and that the company could face regulatory penalties and legal action.
