USAT Chief Stephen Herbert Steps Down Amid Proxy Threat, Board Names Layden Interim CEO

Posted On: 10/18/2019

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By Emily Jed

MALVERN, PA -- USA Technologies Inc. announced that chief executive Stephen Herbert has stepped down as its largest investor has threatened to take over its board. USAT’s board of directors named Donald W. Layden Jr., a board member, interim CEO, effectively immediately.

Herbert, a 23-year veteran of Malvern, PA-based USAT, has held the company’s top spot for the past eight years. USAT said its board will enlist an executive-search team to find a permanent replacement.

The news comes following an Oct. 14 announcement by USAT’s largest shareholder, New York City-based Hudson Executive Capital LP, that it would nominate a slate of prospective board members at USAT’s next annual stockholder meeting.  Hudson Executive Capital managing director Douglas L. Braunstein blamed USAT for “value-destructive conduct” and declared that the cashless payment giant needs new leadership.

USAT responded by issuing a statement that “under the banner of ‘Constructive Engagement,’ Mr. Braunstein describes Hudson on its website as a firm seeking ‘to preserve and drive shareholder value in a cooperative manner, formally forgoing the right to conduct hostile proxy fights and public media tactics.’ This appears to be nothing but a sound-bite used by Mr. Braunstein to attract investors and ‘CEO partners,’ and disguise the true nature of his tactics.” Click here to read USAT’s complete statement.

This latest round of controversy for USAT comes on the heels of its announcement last week that it had filed long-overdue financial reports and is now in compliance with its periodic reporting requirements. The new filings and restatements are the result of an internal investigation USAT announced in September 2018. Read more

“With our financial disclosures now up to date, and with a strong foundation in place from which we can grow our business, Steve determined that the time was right for a change in management,” said USAT board chairman Albin Moschner in the release announcing Herbert’s resignation that

“Since joining the USA Technologies board in April, I have been impressed with the company-wide efforts to stay focused on the customer and to deliver growth in the customer base and connection count,” Layden said in the release. “We have also made great progress in strengthening the company’s oversight, control and governance functions to be in line with best practices, and I look forward to building on our strong business fundamentals to capitalize on industry trends and drive value for our shareholders and customers.”

Layden has spent the past 25 years managing, investing in and advising financial technology and payments businesses both domestically and globally. Since 2011, he has served as a Venture Partner of Baird Capital Partners, where he focuses on investments in technology and technology-enabled businesses with an emphasis on financial technology and business process outsourcing. He also serves as an of counsel partner of Quarles & Brady LLP, where he practices corporate law.

In his own statement, Herbert said: “With our efforts to regain our financial compliance complete, and with a recently bolstered balance sheet, I leave USA Technologies in a strong competitive position.”

USAT also reaffirmed its expectations for full fiscal year 2020 of revenue between $165 million to $175 million, adjusted EBITDA of between $10 million and $11 million, and the addition of 170,000 to 190,000 net new connections to its service