- Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. And welcome to the Cantaloupe First Quarter 2023 Earnings Conference Call. Please be advised that today’s conference is being recorded. With us on the call this afternoon is Ravi Venkatesan, Chief Executive Officer; and Scott Stewart, Chief Financial Officer.

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

Ravi Venkatesan

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

and for our modules benefited as year’s with platform-as-a-service last We Remote revenue first record ONE, at additional a came offering, reporting a growth quarter. year-over-year, of demand Change. in with fiscal like as Subscription in revenue XX% start first subscription bundled software continued the Price well are from expectations. line strong over uptake our year Transaction pleased by revenue Cantaloupe quarter up million, revenue our of and year-over-year XX% XX% are of grew $XX.X

work of increase to near closely was as industry-wide necessary the end up full quarter, the with Active high-teens. earnings for December XX,XXX the the XXX% in up Equipment outlook up low-teens have fiscal the growth our the we customers year complete X% and before and customers we ramp our sequentially, upgrades the growth devices first the growth driven the upgrade may primarily as Active the navigate continue totaled throughout at XX% upgrade XG XX continue the release, and and year-over-year over in to of EMV the end seen our you business X% strategy. deadline. to As revenue strong, year, the cycle, exiting in subscription the expect cycle. final revenue X% resulting we of of year section of in small year-over-year, XXXX by year-over-year months success we medium grew sequentially, hardware to

acceleration the an next as number to expect when expansion capital and devices are into of move We we budgets active reelected year calendar the innovation. in

in positive to million Our due the onetime for of compared negative quarter was demand. Gross the prior were cloud adjusted migration EBITDA and to to margin higher $X.X fulfill related $X.X year. and procurement transition AWS million, environment to impacted adjusted to primarily our customer the costs EBITDA priced same components of quarter negatively

remainder of the fiscal over laser-focused years. However, growth accelerating this on the years Cantaloupe’s five three through growth next and We for positions year. well to profitability us remain the

offset to are and partner shortages impact areas labor for and inflation and who view of Cantaloupe looking these a aggressively hear core integrate can and technology micro expanding continue around chain They day-to-day presence help software and on vending add-ons, I supply smart food concerns which as pressures our position macro in and customers constraints software operations. verticals service traditional to We and offerings key from the to their actively beverage, extend our help. invest to and in markets. us consistently like

the this risk expenditures strong continued market For model beginning bundled enabling performance ONE, eliminate capital and end retailers April, life. to autonomous hardware upfront on subscription example, first-of-its-kind its of to reduce a in quarter. of brought is our Cantaloupe which new ONE Cantaloupe platform we hardware

two in RPC, particular offering nature would had implement could Data price or X,XXX experiencing Services money Historically, on seeing take it that, Price along at interest a we effort are the required offering. capital can Updating are increases take price customers. Change to in Remote Analyst customers given time, used of annual growing year. to from in Administrator We offering putting XX quarter. our Today, trucks our from consistency. proprietary Brian also customers months. field, ensure any our System fleet unquote. do four machines changes and XXX the a Potts, pass SMB our Using successful average customer of now our software substantial a CPG across the those a before XX-plus and to saves up without of machines bank Continental price and increases prices base, four RPC to companies machines quote, light found XX minutes, minutes system-wide more

Seed. know can manage keeping and has Kyle’s Manager, Buffalo Rock, service Pro’s They full-line and bottler seed need exactly are Seed massive locations. in from completed quote, Southeast Buffalo XX unquote. business. General how has from functionality they our and across tremendous entire comes scheduling drivers for this example a stated, a Murphy, efficiently X,XXX more different ePort switching great route, should, since levels of the be no-brainer device, words, much Another a No Rock and downtime dynamic are exactly and vending Kyle found our revenue implementation how branches. where We been devices the our our value their who and work cashless Pepsi more just also reliable at more readers are missed they machine. noticing commenting at no that our our over we customers the win to to Cantaloupe with sync in

Seed and and invoicing, We paperless targeting ordering mobile software our web Delivery, segment. also saw coffee in delivery that the solution a growth integrated significant dynamic enables office pantry

your us I a operational This which offerings million to as highlight AWS cloud coffee, milestone on like touch platform. started one the to manage the and platform. replicate Delivery. X,XXX. in to an locations national entire upon QX, doubled the will Seed to moving Compass already seamlessly In of becoming next This now Canada, X,XXX coffee have to committed completion major allow well. and infrastructure upgrade is the across our operation on pantry is enterprise-wide, vending to existing on office services advantages the network. markets to of They locations total the One micro ability migrations have from our all devices. and office is their customer, to markets with also wanted of migration foundation delivery Seed One We to to add an cloud-based

that to turning in me QX about to few call to wanted our over of position Scott Before spend some a review market Cantaloupe’s results and most the I opportunities things the more on ahead the us. the excite minutes of detail,

We partnership among tailwinds adoption First, study cashless in our had University industry. XXXX. Michigan driving We locations. a payments Unattended XXX,XXX of conducted in a vending sample XX% in increased digital payments called by October State payment XXXX to with January XX% Payments analyzing of trends saw the the secular Retail, transactions from

the have to phone the is steadily become the to adoption impressive using tap mobile card continue increase and Consumers in or comfortable more What’s at see payments. contactless more growth payments physical month-over-month. and just more cashless of We go.

vending We kiosk-based self-service, opportunities be continue offerings, sold flourish. in both for driving it’s Second, our as for or demographics core beginning well adjacent current the experiences. non-traditional self-checkout machines to whether as to innovative categories solutions in proliferation are preference the of TAM see for verticals consumer

and add-ons transformation like last flexible our software and labor technology, and who growth Seed goods our their scale customer offerings. macroeconomic any shortages not for RPC digital manage Today’s of in people. platform consequently costs scalable least, software trends rising our to our cost and fuel business. help Third, essential becoming And but are will like wants

us moats I QX most. will over turn to business and XXth some hard We for some have on the York have recruited the City, we a Scott? that, two Analyst and talent, last With years in over worked New December at culture whom where half to in top-tier meet opportunities our excellence our of will review will to reviewing that a and Day a detail. rebuild our upcoming be around chance him excite results of the to you of to Scott it

Scott Stewart

QX Ravi. year-over-year. increase million, XX% was $XX.X an of revenue Thanks, XXXX

[ph], Our volume transaction combined as additional driven ONE transaction subscription and sizes, like revenue well as was higher grew XX% by average $XX.X newer modules million, RPC. to from revenue which Cantaloupe software ticket subscription

XXXX. predominantly compared driven year. Our XXX% to to Total by gross last equipment XX.X% an increase equipment margins X.X% on compared down year, negative was the QX from XX.X% margin for XX.X%, gross quarter revenue, prior $XX.X revenue was in million, of

levels we has issue we to of navigate to demand, supply continues our higher team Our customer work than some inventory chain are been and maintaining to normal fulfill which constraints for an competitors. hard ensure

that ePort by higher QX, we in However, products shortage. chip are certain than being demand saw impacted an anticipated industry-wide for

Given the an equipment componentry in resulting to at to negative value decided of higher gross purchase very the approximately profit. we $X the lifetime satisfy necessary active demand, attractive market prices million device, a spot to on of impact our

and related the of to year-over-year. continue We closely margin normalize transaction of December and de-risked XG flat compliance deadline industry-mandated to we relatively As with thereafter. through would down is September work Subscription QX XXst. our XX, was and migration. equipment will a customers for gross to our device expense The AWS due to in have QX. margins EMV one-time vast portfolio XX.X%, expect was this we majority Sequentially,

driven the to For to XXXX related the be XXXX. first expand migration on year, debt margin operating filing. spend XX-K to compared professional our expense expenses market our remainder debt was and of the AWS projects, be in in Total gross quarter and combined The and to the $XX.X bad QX by approximately the position, transaction increase gross expect in million, $XX were delayed million fiscal services and transaction subscription primarily we to higher XX% margins of XX%. the on efforts revenue technology FY mid-teens to

recovery anticipated a Additionally, cash our than $X.XX million $XX.X year or prior $X.X higher million loss to $X including expenses and quarter per was of a the of higher Related the number to or and equipment the benefited share, expenses prior shares first $X.XX compared insurance million just in Net net We onetime a expense, negative of $X.X equivalent compared and during liquidity, loss operating the cash ended of mentioned. with in million applicable of approximately expenses in per sheet for first AWS-related to Adjusted was quarter, $X.X component-related million. from EBITDA common positive of $XXX,XXX. I the $X.X balance first quarter the million prior had the loss period. we also year period. a one-time the to quarter, first share

to turning Now XXXX guidance.

are reiterating year. our for We guidance the fiscal

million revenue. $XXX the growth between $XXX be demand guidance to revenue XX%. we to total high million, XX% for we Based calls representing of and strong at on our the to for guidance our total now reminder, expect business end experiencing, a As of be are

As XX%. be of XX% we subscription in on expand growth last mentioned $XXX expect call, we revenue expect high-teens representing million in the combination million, and growth transaction to our transaction and of $XXX between to be the earnings subscription the revenue revenue the to we further, be low-teens. to To growth

the reminder, cycle. category on we revenue in revenue we EMV throughout today. detail feedback, year investor added be on you expect our upgrade flat skewed the growth note conclude that we year-over-year, expect subscription to we issued a major Conversely, half will and but ramp to XG year. sequentially of earnings equipment first the the As release relatively fiscal by heavily revenue earlier further Based as in and transactions

higher to be GAAP to I to than expected turn the be total is which million to $XX just between total guidance million. I Our on, low the Operator? end for to expect Q&A. range between the full and over for operator million, will total adjusted between year. for anticipated the costs be for we income million the and $XX on cash touched call U.S. our Based now first flow $X adjusted at million, EBITDA $XX of our quarter, that, EBITDA With and $XX $X operating million be net

Operator

first [Operator Chris from Our Thank Instructions] you. Chris, your line question is Kennedy with William comes open. Blair.

Chris Kennedy

going appreciate and subscription acceleration afternoon at Is mentioned thank the Good a we that and for question about revenue high-teens what year little forward? on bit we additional talk guidance. Can the you kind expect you taking details exiting you of of and the clip. a should the

Ravi Venkatesan

Thanks for Chris. the question,

that much revenue. very the excited more really is margin heard of attractive on are gas the about the most for our investors, profile revenue, the important subscription We we stepping repeatedly given single which metric on especially have

So Cantaloupe been additional focus artificial and et offering is and our has RPC the add-on products power, intelligence, there merchandising, strategy a platform-as-a-service ONE on driven primarily like also by of This it. cetera. with

be what And In yes, revenue will at have terms to full we level from the the is of in as XX% throughout high-teens, the subscription year revenue year at started see in the to expect first mentioned expectations, next low-teens, the we accelerate that with accelerate have actually the continuing we earlier, quarter, and the consequently year. we but that fiscal entering exit there.

Chris Kennedy

Great. Appreciate a associated migration costs color. what And that then the modeling one, the small just to with AWS? was

Scott Stewart

Yeah.

overall $X.X see will two you that was cost different and So, areas. million Chris, the in

see cost $XXX,XXX sold less million to in You will about operating then of the $X bit see the a in than you little $XXX,XXX goods will and expenses.

Chris Kennedy

Thanks lot Great. guys. a

Operator

question. next our for standby Please

Ravi Venkatesan

Chris. Thanks,

Operator

open. line Gary Prestopino Barrington comes Research. your is Gary, question next Our from from

Gary Prestopino

all, couple at on Payments you getting any you Yoke space. you Hi. Good A Are everyone. first questions about talk there traction here, the anything afternoon, of could of saw all?

Ravi Venkatesan

question, the Yes. for Gary. Thanks

we exciting And that which So based our we in impact -- traction months. our Not subscription will coming address for the guidance on of the Yoke is a beneficially the part the particularly software some Yoke but our from they reminder, is kiosks micro positive the for are combined market Payments revenue revenue already on And Seed our the have Yoke not market space. in traction that the that whether markets revenue are subscription trajectory results, financial our on of micro addition, is but first just traction, quarter front, the the the leader micro Seed as opportunity powers market seeing, market kiosk, just or also competitor. the kiosk and not software for products, markets, offerings. another the together reflected

Gary Prestopino

in far past you that then this as are as And for you upgrade, you can equipment once normalize guidance we that contemplating, the margins Okay. your will said get see.

we we where in shouldn’t pretty downside. kind correct expect bad So had quarter any here on the disintermediation a surprise of like get a that the negative Is we assumption?

Scott Stewart

Gary. Yeah. That assumption, a correct is

you to when of the we at quarter. into landed and quarter, those looking look first then expect trickle we overall, So, into some quarter where second for the second costs

our some renegotiating suppliers. by of that mitigated have We with some our prices

out We quarter, that, are But a it the little we them absorb the quarter well. and after we in as a the to third we are for the we round equipment expecting from getting fourth of There process. significant costs in quarter will pretty revenue quarter, roll as second spillover be as XG second some be profit. and upgrade then will selling at a that

Gary Prestopino

And just Okay. then last…

Ravi Venkatesan

will… we Gary, And

Gary Prestopino

I am sorry. Go ahead, Ravi.

Sorry.

Ravi Venkatesan

as push capital our view customers. well and all for on our keeping long-term in is work No. those customers relationships a very as a help customers surprise. through But of products value downside the to on lot connections, latter, challenging with the with been bit kind them it equipment, the to make, is, we we on cetera. specific worked on best which and interest has more supply on a the either attractive decided and you upgrades Look, the the pass them chip had situation it, the we spending especially lifetime business, our of try strategic chain to just upgrades, our those going do et to mix, decision believe described with with and have to these shortages to longer specific color depends a this the their in is or we as of and profile I has little was and the the significant add fairly the our eye with way costs margin which

Gary Prestopino

off. basis will that revenues that. in I a offices say is idea business an generating the jump and pre-pandemic you Would at things to lastly just opening, same-store just or then above of am like now like looks trying basically economy I your terms And what levels? on guess get Okay. I of

Ravi Venkatesan

will let it is. is answer color add simple more The some Yeah. is. I It there. Scott

Scott Stewart

Yeah.

the more the still coming as above there’s pre-pandemic were. are as we for the especially processing, to come is The like to transaction back. us operating relates relates well to exciting we it So what businesses feel it part levels

another So if occupied. ever offices get or XX% XX% full we increase being we think to back

Gary Prestopino

you. Thank Great.

Operator

standby. you. Thank Please

Our Sutton next your Craig-Hallum. from line open. question comes George is George, from

George Sutton

Thank you.

where talked what’s scale move Looking Can have. to that move? you the growth enhanced AWS to you talk at give are your ability your any by just those and the AWS, about about to we that you will prior had you clear governors so this, were to

Ravi Venkatesan

Yeah. you that Josh, thank for question.

when have So software now to for it way. require platform within that within the it’s Europe, like Similar into are cloud the it software easier where macro other that example, there, to that you Latin to runs it run cetera. the for AWS replicate makes in our run their things and two the et that reasons, platform take AWS move geographies much to centers that Europe, and for compliance makes is, America, easier data replicate software that the replicate we regions easier it region. much

So cloud felt in earlier we infrastructure. our that’s big a was which governor a prior one,

George Sutton

be just you Is international wanted that quicker So encourage be just clear? clear, -- that to This to we will to primarily that’s you, and it’s an effort. benefit, main obviously, the grow internationally. enhance benefit,

Ravi Venkatesan

the benefit. That’s main

best us scale is on volumes a transactions and benefit as as manner, environment. seamless very we that more as second scalable The platform. on the a and it’s cloud grow, the Amazon the planet grow in more put built has connections infrastructure essentially lets

George Sutton

Understand.

new both So attractive retention is, curious when customers? existing something hear that are Price of aggressively we for for am I we it’s Remote competitors and customer have how Change opportunities don’t and continually do third-party how using work, you

Ravi Venkatesan

in validates ears third-party and it’s marketplace. question my research we are to that your what great seeing a the It’s music

you on as retention, in using being as as both, are new acquisition. customer it aggressive We well said, in

to In our Seed being aggressive is not also to fact, we too sale devices to it, amount the are driver, been to not for if a not and just Change. makes do value sale that see pretty for hold a several software, there and have Where going whom the we are trying are versus value-based the hold to migrate ePort we been we price-based main to but ability tremendous new this is customers Remote us, our -- of Price in because for price steady us there sense. has a

George Sutton

if together. a to Last could, things put couple Understand. I just of trying question,

had constraints. you have suggested had You that competitors some supply

You bringing after to relative growth opportunities a were very of growth? significance ONE component Cantaloupe just understand you then versus this aggressive this trying also going effort and relative in of hardware relationship some broader am customers. in as hardware part this fairly announced all the a to put the and to of I the together significant customer

Ravi Venkatesan

Yeah.

the to So it’s supply was are layer Cantaloupe which navigation whether sense, of all important key two the combination with in very the this cycle our devices, things, upgrade us, on we for active it’s let continue what or ONE because our -- metric a Cantaloupe layered do services minimum navigate us effort footprint. a of right, grow the churn, of and very chain, is that top

to an vector. devices software Does Seed also, continue work that independent our on answer can question? with does Although we your competitive grow that so

George Sutton

retention the that hearing? sense being able the I in that I to hardware aggressive keep have am side, new bringing different customers what so think that the in it’s are you customers, on is by is Cantaloupe is been -- So what channel, via ONE you saying

Ravi Venkatesan

had segment lot segment Part our and penetrated. receptivity well reflected at less business Cantaloupe months. and it’s have the the and very we enterprise starting more, is we was wonderful Cantaloupe XX%. being last the of amplifying specifically SMB it’s on also small traditionally that always off it where Correct. were customers Correct. pay Traditionally, months the focused in that, medium the strategy looked particularly And in up segment penetrated we with on significantly, and XX large ONE has a to worth which XX to ONE were

George Sutton

Perfect.

guys. Thanks, Okay.

Operator

turn to closing back you. Ravi would now like I for to it Thank remarks.

Ravi Venkatesan

Thank you, Operator.

to leadership on to Thank With wanted growth you to First of December Investor also an that, broader XXth the and team call our you. our thank engagement. about the all, to NASDAQ all for joining strategy term we learn wanted this at I at your Day also and company. you longer to of join out. meet outlook invitation extend can I the and us close

Operator

disconnect. Thank program you conference. for your and participation today’s This does conclude in now the may you

Cantaloupe (CTLP) 8 Nov 222023 Q1 Earnings call transcript