CTLP - Earnings call transcript Q3 2022

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Operator

Welcome to the Cantaloupe Third Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. Please be advised that today’s conference is being recorded. With me on the call today is Sean Feeney, Chief Executive Officer; Ravi Venkatesan, Chief Operating Officer; and Scott Stewart, Chief Financial Officer.

forward today’s statements would other included of facts into you to than get historical all nature. that in are we call, like I remind statements Before in looking this call results because certain business, statements, financial, differ the limited economic and but of from contemplated factors those Actual by could conditions. forward-looking markets not including, to, materially filings from A with earlier included and events results could cause detailed actual is in and discussion of SEC today. statements differ the the such materially the risks with issued looking and our uncertainties that release forward to press place Listeners reliance as are cautioned to not which made. view are any take statements, forward only reflect they management’s undue looking such date the of on information, future or no events undertakes to forward-looking obligation statements new Cantaloupe otherwise. any update whether of because of things, operating evaluating are financial a will that measures call believe Cantaloupe’s other include also useful This among certain non-GAAP for discussion results. we These loss. non-GAAP financial supplemental as GAAP are such net and for substitute to not financial measures income or measures, financial has presentation as well at Details and GAAP these the www.cantaloupe.com. this our measures, financial these press GAAP found of non-GAAP website be Relations the the our on which reconciliation release and most measures of can comparable directly non-GAAP afternoon, financial as comparable financial of been in most posted between the measures measures Investor issued the section Feeney. And with Sean to that, Officer, I would Executive like to over turn the Chief call Sean?

Sean Feeney

afternoon operator. Good and thank you you, us Thank joining for today.

double revenue the XX% digit results of quarter. calendar solid our are reported fourth for XXXX, to third year growth. our revenue consecutive year-over-year, pleased by report to total We the start annual We marking quarter increasing a

platform, which has for in of February, January to initiatives Ravi Equipment into in with Transaction April grew shortly. encouragingly, offices quarter. March. continue recovered ONE the and more in were strength XX% transaction negatively we recent the like as drive launch impacted our grew discuss While grew quarter strongly Subscription of volumes the fees the resurgence in we quarter, detail business the begin the year-over-year, subscription Cantaloupe continued Omicron in reopen. revenue the this variant X% to and growth by X% will revenue

We in total XG and strongest We increase transactions, prepare XG dollar revenue EMV operators of equipment our a saw and in lift for fourth expect the quarter. achieve qX, more in as the volume to a quarter in upgrades. for customers a XX% active total, we a record in increase consecutive XX% typically

X.X, of our name show of the to Chicago, Just showcased We last a many the Our Seed away NAMA booth. hosted of we month we our I where operators HIVERY, takeaways. exciting following merchandising number prospects and products in new After speaking including App, attended came with at a number Warehouse offering customers with Yoke with few. and AI-enabled a our

more First, expansion operators. industry than innovation growth through top the and and for is technology mind is for poised ever, of

an markets Second, is branches very visibility also explosion stacks are operators, and many and also of active, customers large operator technology diversify are market to for the and their across seed post acquisitions. leveraging technology seed by to all operational grow leveraging their standardize M&A complete small offerings. led niche There's who

I'm all of revenue focused programs. meet additional needs. that report customers loyalty Thirdly, drive products engaging happy interactive have devices are through advertising, we and on operators to that And those increasingly to

and since generation innovation NAMA market. Cantaloupe, vending a traditional improvement conference. smart a next the coolers, and of XXXX our and that in on operator micro next feedback dramatic convenient of the concepts Lastly, micro both the experience Specific there have seen in is service they is services to a which customer August hybrid markets solutions like including vending generation of provide a lot

of technical operators industry engage the and proud the Cordaro, and provide industry support, with that as our on our greatly business. Catering to respected platform of are them. support listen focus headquartered that businesses well-positioned common the as and to increase customer Pete are efforts we technical their our company and you future. customer value of issues company, team. the and customer seed and and to Our same-store I'm well ways off Pennsylvania, has expertise incredibly increased well now, optimize our Cantaloupe class we experience and for vending in success, a owner has world believe continuous revolutionized our across the sales operators With to to CRH address consumers recognition refrain improve and A paying was in

base to points seed go Florida including I'd revenue. wins seed with a continuing expansion expansions We service our from coffee franchise example customer machines, with vending bottle a successfully Rock Georgia delivery back customer existing continue quarter. to win deploy XX significant ePort. opportunity XXX serving the XX,XXX traction along recurring Alabama, of after in to some the Plus to Buffalo Rock deployments customer a share examples new competitive seed all and represents conversion office like But this significant and represents a during a Buffalo Company, The Pepsi hardware. are large believe scale quarter. to delivery. micro-markets increased our operations, of using and full seed This made our for decision was a great XXXX markets is with piloting and in to

We months. working to implementation over several this next will be complete the

Seed our customer a our the Refreshment quarter During returned that the new Vending Time years left Office, Cantaloupe include Vendedge, cloud Jordan for Seed two in client for Other who software, Break competitor to Works, Markets and Seed ago Pro, suite wins quarter Distributing. of platform seed a full was and Delivery. Seed

and wins Sega, the include quarter expansion Florence, among Cash Additional Pepsi, Depot, in hardware others.

like to to our would to I to new functionality, we for to Operating call discuss Venkatesan, Finally, payment, as continue efficient exciting of some well new additional consumer the Chief a Officer exciting to tools turn Ravi?\ more through over that modes engagement increase product customers initiatives and new develop updates. as enable important On business running our operation. revenue note, Ravi

Ravi Venkatesan

Sean. Thanks,

We Sean these launched mentioned, was new last As announced recently for at And XXXX. it launches. this of to an August NAMA, show time I success to products we a this showcase had wanted us. to many actively and highlight great customer was from recent that sell the we few NAMA year, our returned which products energizing in a enthusiastic response.

workflow First, our et through has inventory enabling Seed stock the an Warehouse cetera the XX. been use March easy reconciliation, app. warehouse, feedback positive. extremely to like This happen streamlines app, mobile taking, to which released on Customer we app functions within rapidly

efficient. saving Coffee of solutions, to said, it Compared used time Brothers now with now we but information. For a we doing recently one warehouse are able Daily the dread our inventory all example, saving business we app, Tommy do Services to There Elliott having and South can from Tomra in inventory, making Jackson as to from and were a we system. fast hard twice said, the new Tyler driver more and information Vending keep our no-brainer. other and are getting time warehouse money was accurate the business

or to XG ePort subscription launched XG, to its hardware starting upfront risk the a Engage capital like EMV brings that March platform solves our due a the for Combo. our of future to We On computing It consumers our XX. unattended traction. Thanks customers fees, of the business. first ONE is as Cantaloupe their bundled transition simplified significant model to this proof March platform to to such and zero XX, kind eliminating cetera. is cloud end-of-life This upfront paradigm on gain model, subscription also et expenditures need and monthly launched market retail, we

features. a In acceptor. customers this addition machines offers It's we ideal an for have for benefits Yoke a provides customers customized unique We've ePort new consumer with XX,XXX this that plus product. all year. enables POS install program shipped as ePort platform cashless well and previously to devices simplified Yoke supports quarter. is Combo at have an bill us our our Plus A was device directly mobile next-generation expected already both to the loyalty Yoke card that capabilities, upgraded installation later and Engage newly as app cash announced This be calendar acceptance, limited point-of-sale our to platform, NAMA, The Engage, over engagement existing as over version to highlight as well space the during third available of as and well enhanced which as launched, reader. interface, promotion the

it Group solutions, Yoke One with stated of our for that market, have just Chris cost XX C is every Cationne customers effective. market from because we micro one can other

As part partnerships to existing to continue bring industry. of to also we leverage products new our our rapidly and exciting strategy, quick-to-market

vending it price the machines of pipeline change this customers partnership with Vendors Exchange compatibility first product into recently XX% extend the plus few to already seeing of we very seed sold a We've it. example, our U.S. the our extending for a and product, remote launched For announced in reach and are strong to

making as customers. NAMA story of a has within we've success we've subscription And our at retail partnership this year, has available record now This merchandising Seed long booth Another our few product already our to unattended been and and company it in traditional our first this was a retail. AI-powered HIVERY. signed success an item of hot are add-on very software brought with an in HIVERY launch product. track functionality

QR many capital technology, with their that, Scott? vending our true experience. to streamline over and subscription their their using the within the over code of product processes quarter touchless call exciting this as smartphone, new it now our products, payments, like their Scott as go we've vending well an operating an to sold continue be It the a was a detail. our Lastly, in This customers and partnered as consumers greater make with costs enable to all products we With help financials businesses. machine. Vendekin release I'd platform. touching scan reduce ever can scale without mobile of cashless as will simply add-on turn expenditures, app-enabled to select With to

Scott Stewart

Ravi. afternoon, everyone. Thanks, Good

be Compared year-over-year. of combined off totaled for devices last in end the for XX% our During of $XX.X increase XX% the we fees We've to Equipment was the through million increased and investment delivering while our gross fees of share, year-over-year income this, of device per year-over-year. we and XXXX is XX% transaction so XXXX. March, In debt expect XXXX, available and the to in we or reduce cash loss acquire and Total million, for pricing largely was share in trends believe grew to new quarter, to improved margin the revenue third to on from our for XX% margin which QX forward. to for $X.X the million improvement up million, XXXX. $XX fees compared and XX.X% relatively million, increase meaningfully million. equipment million to the a network balance year in flat million. We've Transaction increase Net transaction will XX% to accelerate improved revenue closing. of million XX,XXX loans an transaction new dollar which year. X% customers. our borrowed our applicable $XX.X to $X.X year. in XX and makes year-over-year gross product sales discontinuation Subscription from subscription from our revenue year third held driven to million XG Active force in XX% period. Equipment simultaneously $XX.X sales margins our revenue we the sheet $X.X continued to revenue cash loss year The fees quarter, was $X.XX QX an for customers gross XX.X%, year. third margin. the total QX term additional G&A. was as of Due and on EBITDA prior up The net year improving XXXX. and in shares third $XX.X the was $XX.X to XX%. expanded volumes increase of of many while can quarter. an in fees growth. third year-over-year, to quarter third of we of basis common to and that year for the XX% starting continued QX Subscription calendar driven amended going Operating during by XG to liquidity, customers, the year-over-year, XXXX, with expenses and credit points in subscription X.X increased prior margins of equivalents Adjusted quarter X% company to of ability prior to XXXX ended quarter period. quarter, the million negative the to third support facility $X.X improved million, closer to prior we a compared revenue quarter, record. in versus Active continue FY mid-teens $X.X totaled increased quarter transaction Relative compared the margin per strong grow in as continually fiscal X% by R&D The prior another customers our year-over-year to XX our March increase negative upgrades innovation, increase in due a quarters also or million. quarter has $XX facility, equipment $X.XX primarily was the line third one

past of our result the We confidence our it to of strong this company a financial in banks direct as the over due are year. performance proud agreement is

fiscal guidance for representing million previously and to in and to of year-over-year XXXX between to growth to our remain We issued continue be Turning our $XXX guidance. XX% revenue expect year confident $XXX million, XX%.

We increased transaction revenue transaction and dollar from customers. subscription and continue incremental to on based as as new revenue volume, well subscription expect grow and existing to

the million and based adjusted $X to to EBITDA net on true-up between and anticipated expense improvement expect to We applicable million. than million. related range be of $X and continue lower tax. between now This is $XX.X interest expense shares stock-based $X.X million to We our compensation sales loss expect common

operations expect $X and between to cash also breakeven negative We continue from million. to flow be

challenges to build that, possible. call need the over and now With to inventory chain Q&A. the for the our Given turn supply operator whenever the levels continued I'll Operator?

Operator

[Operator Mike Instructions] question Markets. comes of Your line from first Capital the from Lattimore Northland

open. now is line Your

Mike Lattimore

results Yes. there. Thanks. Great

and -- margin the the Just I said said on growing guess I you transaction it I I in gross you gross margin first touched the transaction on guess grew guess, transaction percent. sequentially the that's as subscription you the despite there. one percent? question. was think mid-teens a

drove should this forward? or be second, going margin bit level transaction gross sustainable -- the of what a then gross The little improve margin? And

Ravi Venkatesan

Scott, answer one. do want to you that

Scott Stewart

the Yes, for you Thank sure. much question. very

due is what is increasing. lot of overall, we're And that margin to are a transactions different So our seeing two on things.

we've that manage worked past the costs. The year first is over to our

which really we've entered so, which to additional the reducing our into is get new growing And some rebates, helping agreements margin. is some incentives costs, and

an transaction seeing is other increase The average thing that we're in the price.

guess, we the last we year, around $X.XX when transaction. began around, average year's I So per were was

Now per we're up to $X.XX transaction.

that's And so helping increase the margin well. as

Mike Lattimore

we like you it subscription? guess, then seem a things can RPC, How about And rank I like Scott. be talked any Thanks Seed? should number discuss the the of Is drivers them Is drivers would or there what subscription. that to biggest about of new order is drive here? they think biggest connections? subscription way it

Sean Feeney

very focused Mike, and that's It's we are Yes. question, a great that on. you something know

revenue, biggest and kind of So the subscription impact. kind customers to growing first has Rock of that key all, near-term signing are like large of Buffalo the

that. the reaction customers to part in the not Service, and high it a It with ONE the initial market the Platform market like to because platform, to sold into on quite and we very hundreds Secondly, we've very fits the them. proof buy market as excited future the end of But of depreciate they about Cantaloupe that. attractive of well to of we're market, the kind devices answered was the and asking SMB as of

So some that in will -- I think see improvement you'll that.

driving we equal happy third margins we're be would revenue it's have when equipment I get in the there will RPC then would And the subscriptions. bundled subscription, on subscription, of impact will for into think growth. equipment additional probably higher HIVERY that. on trade subscription negative a revenue, all yield very and it to where Now probably we but kind of to be priority see next The contribution especially

Mike Lattimore

of the of guess, one Great. million, revenue to quarter I The $XX range? last upper you or end range what that implied And just for sort about lower me. is fourth moves

Sean Feeney

the there. The And to range steady. people kind kind we've is and business of March end remaining continued hotels in see are and XG and come some around number come got offices travel, for we travel of that, pretty really QX. determines back into kind that. to back the growth that If business on a upgrades things. growth and We'll around transaction that on really we two saw of is then, see April, as upper it lower or key XG of sales kind of and hardware of Subscription begin what

Mike Lattimore

Yes. Got you. it. Thank

Sean Feeney

Mike. Thanks

Operator

from comes Sutton the question next of line Craig-Hallum. George from Our

open. now is line Your

George Sutton

offering you've curious in successful markets has I'm significance with Investors Cantaloupe think I'm And do more a service get following just reaction yarn initial you a the to I'm that Thank understand on the perspective with of against extremely ONE a doesn't that hardware offering, Apple Or release. market the the curious there. as just at been you. bit seem up the your little the context. and seen, appreciate trying to this?

Sean Feeney

Yes.

initial George, to the I hardware have look far. general. with after go see if great you've of and that announced, a traditional hit removing is, the think, of going yet. bundling forward kind -- want and just worry reaction announced. there price were and with. very reflecting products out all they about we just the I you service. days stock of kind kind as and on to has isn't a that been the company is it's it hardware know, out we positive like into so a think came our to those couple better, been of the And performance with that feel software market But done nail to as reaction I'm our bundling upgrade has coming -- keeps cable performing launch results a I model, the platform at head probably better in Peloton their they an the Apple

we'll small- I'm give quarter's very positively works said to business. some the probably smaller depreciation primarily, guys capital and full reaction. hardware end The of the of I But the where But buy have done get impressed you that. the results and at so worth challenge, I'm in sales So, and the more next the off sheet. kind right the we with has hearing customers, have far what it details a larger quarter of like in our And organization from for as balance very well. medium-sized

George Sutton

you'll So the on more least side, and it deal a thinking very position decision to you're a out, how a had work hardware to service deal is a maintain broadly, the way? gross margins you hardware competitor temporarily. your I gladly Am make hardware with take low the comes that's side, strategic of vendors. I right hardware still other -- on instead assume that about if at willing

Sean Feeney

competitor If working a we've it service. -- devices, of gladly for Apple, works program from our in other program rental going our the that is initial -- else's then and better term second some beyond better operators the and we've before two I have with of hardware is large yes, what But as we things platforms everyone many while software. rental revenue likelihood our on would make one mentioned, That's with kind will hardware, everybody products our cable I'm it to you the knows work of I the or And the understand strategies three a I the software it use -- is, prefer question, your -- as mentioned very bundles we seen for into software I Cantaloupe with kind much company. turned and margin our because George, and revenue of trade just part good around hardware. that as kind as can competitors.

George Sutton

said revenue, software you Just hardware revenue? confuses, the so revenue, anybody prefer software reading you this as mean you it you'd trade

Sean Feeney

I revenue, yes. prefer subscription

George Sutton

know question last quick hear there? a didn't it's just us Yes. you I international. this I update give on strategy. updates on any call. And new Can a

Sean Feeney

and working, having devices to Latin our in and a We're they're America got close good things still working very couple We've Mexico. there. certified Yes. of

that So we in fiscal next revenue optimistic July see I'm in will our X. course, which, starts year, of

we Europe, ever I'm in our towards hired did that NAMA a in we're with first and Europe, and operators, that. We of employee and there's we during have than happy. aggressively more opportunity very are international moving meetings a confident bunch Seed

international we of One hired as guy kind Dumbrell moving -- had Latin of Jeff Revenue in experience. in and was, well former of the we that Europe markets as Officer begun reasons Chief we're is teammates, those he our his a aggressively of one America. hired in He's lot as the

to don't I have announce, coming. more something disappointed but firm I'm it's So

George Sutton

the Cantaloupe hoping how Europe. he's employee very from Cantaloupe talk in number years now I'm eloquently can one employee the about

Sean Feeney

I'm well very excited optimistic. as and about that

George Sutton

Thanks guys.

Operator

next Blair. question from from of Instructions] Your the line Kennedy Cristopher [Operator William comes

Your line now is open.

Unidentified Analyst

see for know Chris. for I you guys. talking such just had other at Hi, I expansion updates. NAMA. stuff stations. charging to on And vehicle any taking This the is wanted to beyond as wanted thank vending. about Mark know more just I you on you touch mentioned my questions. if I Yoke

So any or appreciated? would be color there update

Sean Feeney

We platform, vending lot with of and around we're continue device on unattended beyond activity spaces account our a We've partnerships. key. moving couple got into adjacencies and Yoke exciting of working a to total good our growing is on focus

the of of of going is kind charging work partners to vehicle growth. in a course, with an continue couple we station. course, that, to of think have We be that, We, there. work We electronic explosive

others expanding we've we're there in and So the with and CSC partners space. the airbag Laundry our traditional as in in in ones as worked well with always

are small, years. continue coming So believe, make as cases, the In will rapidly you by see but customer in to the we there progress grow, those some can count.

good So got coming. stuff some

this think or either here So Mark, things I stand some quarter next. by in you'll the see

Unidentified Analyst

Cantaloupe then with And one just it. follow-up Got ONE.

offering any with upgrade you seeing are Cantaloupe ONE when upgrading of they So, XG? the customers are the on your cycle, SMB with approached to convert

Sean Feeney

or XG to driving either EMV That's Yes. XG of that, a Yes. upgrades. lot

Unidentified Analyst

appreciate that. you I Thank guys. it. Got

Sean Feeney

call, Mark. have you Good on the to

Operator

you continue. [Operator you. Speakers, no at are may time. There further this Instructions]. questions Thank

Sean Feeney

Great. and Thank we forward weeks. with is your everyone the know you with interest. over day next look for busy earnings, up following today Thanks, a I operator. to few

Operator

Thank you. for participating. call. This you today's Thank conference concludes all

You may disconnect. now

Cantaloupe (CTLP) 9 May 222022 Q3 Earnings call transcript