Cantaloupe, Inc. (CTLP) has reported a strong start to the first quarter of the fiscal year 2025, with a notable 13% increase in year-over-year revenue, reaching $70.8 million.
The company's earnings call underscored significant growth in both transaction and subscription revenue, alongside a rise in adjusted gross margin and EBITDA.
Cantaloupe's strategic focus remains on scaling its international operations and enhancing efficiency, with the company maintaining its revenue guidance for the full year.
Key Takeaways
- Cantaloupe's revenue increased by 13% year-over-year to $70.8 million.
- Transaction (JO:TCPJ) revenue grew by 18%, and subscription revenue by 12%.
- Adjusted gross margin improved to 40.7%, and adjusted EBITDA rose by 14% to $9 million.
- The company's strategic priorities include scaling international operations and improving efficiencies.
- Cantaloupe reaffirmed its full-year revenue guidance of $308 million to $322 million, with a net income forecast of $22 million to $32 million.
- Over 32,000 active customers and 1.23 million active devices were reported as of September 30, 2024.
Company Outlook
- Cantaloupe is optimistic about maintaining improved take rates and average ticket sizes.
- Margins are expected to see slight increases due to larger ticket sizes benefiting from fixed transaction processing fees.
- The company is cautious but confident in its expansion in Latin America and international markets.
- Long-term international revenue growth is expected, although short-term scaling may be moderated.
Bearish Highlights
- Management advised investors to consider the broader context of business growth rather than focusing solely on active device growth.
- New verticals such as residential complexes, fitness centers, and car dealerships are still in the early stages of contributing to revenue.
Bullish Highlights
- The introduction of new products like Seed Analytics and Cantaloupe One has driven a 12% increase in ARPU.
- A trend towards higher-ticket items is expected to continue driving ARPU growth.
- The company successfully integrated SB Software (ETR:SOWGn)'s Vendmanager, expanding its micro markets and customer base.
Misses
- There were no significant misses reported in the earnings call.
Q&A highlights
- No further questions were asked during the earnings call, indicating potential investor satisfaction with the provided information.
In summary, Cantaloupe's first-quarter earnings call painted a picture of a company on the rise, with a strong emphasis on strategic growth and international expansion.
The company's focus on higher-ticket items and new verticals, despite being in the early stages, suggests a forward-looking approach to revenue generation.
With a solid financial foundation and a clear vision for the future, Cantaloupe continues to be a company to watch in the evolving digital transaction space.
InvestingPro Insights
Cantaloupe, Inc. (CTLP) continues to demonstrate strong financial performance, aligning with the positive outlook presented in its recent earnings call. According to InvestingPro data, the company's revenue growth remains robust, with a 13.01% increase in the most recent quarter, closely matching the 13% year-over-year revenue growth reported in the earnings call.
The company's profitability is also noteworthy, with InvestingPro Tips indicating that Cantaloupe has been profitable over the last twelve months and is expected to maintain profitability this year. This aligns with the company's improved adjusted gross margin and EBITDA growth mentioned in the earnings report.
Investors should note that Cantaloupe's stock has shown a strong return over the last three months, with InvestingPro data revealing a 31.8% price total return. This performance may reflect the market's positive reception of the company's strategic initiatives and financial results.
However, potential investors should be aware that Cantaloupe is currently trading at a high P/E ratio of 52.16, which is relatively high compared to its near-term earnings growth. This valuation metric suggests that the market has high expectations for the company's future performance.
For those interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Cantaloupe, providing a deeper understanding of the company's financial health and market position.
Full transcript - Cantaloupe Inc (CTLP) Q1 2025:
Operator: Hello, and thank you for standing by. Welcome to the Cantaloupe First Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to [Indiscernible]. You may begin.
Unidentified Company Representative: Thank you. Good afternoon, everyone. Welcome to the Cantaloupe first quarter earnings conference call. With me on the call today is Ravi Venkatesan, Chief Executive Officer; and Scott Stewart, Chief Financial Officer. Before we begin today's call, we would like to remind you that all statements included in this call, other than statements of historical fact, are forward-looking in nature. Actual results could differ materially from those contemplated by the forward-looking statements because of certain factors, including but not limited to, business, financial markets and economic conditions. A detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements is included in our filings with the SEC and in the press release issued earlier today. Listeners are cautioned to not place undue reliance on any such forward-looking statements, which reflect management's views only as of the date they are made. Cantaloupe undertakes no obligation to update any forward-looking statements, whether because of new information, future events or otherwise. This call will also include a discussion of certain non-GAAP financial measures that we believe are useful for, among other things, evaluating Cantaloupe's operating results. These non-GAAP financial measures are supplemental to and not substitute for GAAP financial measures, such as net income alone. Details of these non-GAAP financial measures, a presentation of the most directly comparable GAAP financial measures and a reconciliation between those non-GAAP financial measures, as well as the most comparable GAAP financial measures can be found in our press release issued this afternoon, which has been posted on the Investor Relations section of our website at www.cantaloupe.com. And with that, I would like to turn the call over to Ravi.
Ravi Venkatesan: Thank you. Good afternoon, everyone, and thank you for joining us today for our FY 2025 Q1 call. I'll first start with a high level of our Q1 performance, and then I'll talk about our fiscal year 2025 strategic priorities before turning it over to Scott to dive deeper into the numbers and our outlook. Q1 financial highlights. During the first quarter, our total revenue increased 13% year-over-year to $70.8 million, driven by 18% year-over-year transaction revenue growth and 12% year-over-year subscription revenue growth. Total (EPA:TTEF) adjusted gross margin for the quarter was 40.7% compared to 38.8% in the same quarter last year. Adjusted EBITDA for Q1 was $9 million, a 14% increase compared to prior year. Now on to our Q1 business highlights. Revenue growth was driven by a continued acceleration in growth in micro markets and more customers making the choice to go all in with Cantaloupe. Pepi Foods expanded their footprint with us, replacing competitor kiosks with Cantaloupe Micro Markets. We also won new customers who are going all in on Seed services, including Unicorn Vending, part of our growing blind enterprise program operator community. In addition, attach rates for our analytics and remote price change add-ons are growing among customers that subscribe to the Seed software platform. We successfully completed the integration of SB Software's Vendmanager with Cantaloupe's payment devices to realize our cross-sell strategy following the SB Software acquisition. New SB software wins include JW Vending, a Cantaloupe Micro Market customer, and now all in with our combined offerings, leveraging Vendmanager as their VMS solution. Other wins include Vending Sense and JJ Fox Vending. We continue to grow in the U.K./EMEA region, adding multiple new customers for cashless payment and micro market services. In addition, a notable win in Q1 was Carbon Neutral Vending, replacing over 450 competitor devices with our Cantaloupe card readers. In the LAC region, we are seeing continued momentum in both the enterprise and small business segments and are in the process of scaling our deployments across the region. Micro markets and smart stores are becoming the go-to solution for residential complexes as they seek to bring convenience and differentiation to their resident offerings, including The Dorsey in Denver, “Adding a micro market to our property allows us to offer an amenity on site to our residents that bring convenience right at their doorstep. The nearest grocery store is an 8-minute walk from our property, so offering food and beverage as well as at-home products is essential for residents and has proven to be a great tool for us in our renewal strategy in retaining residents with this amazing perk,” said Rafael Ramirez, Lifestyle Director of The Dorsey. Moving on to our sports and entertainment vertical with Cantaloupe's Cheq platform. Two recent notable wins include the La Crosse Center in Wisconsin, a premier entertainment, concert and events destination, and the Detroit Opera (NASDAQ:OPRA) House in Michigan. We continue to launch innovations across our product lines. In Q1, we launched Suites, a premium suite management system designed to streamline and enhance the hospitality suite experience at stadiums and venues. In September, we announced a significant update to our industry-leading Seed vending management software platform. According to James Brown, Senior Director with Canteen Technology, this new look and feel of Seed is fantastic. It is much easier to use on mobile devices, which translates to increased efficiency for our field teams. Kudos to Cantaloupe for this upgrade. Lastly, one of our latest innovations to come to market and prove to be an early disruptor is Cantaloupe Smart Stores, expanding self-service commerce to completely new locations. We've seen early success with customers like Yakima Healthy Vending, who serves breakout rooms, schools, hospitals and gyms. With smart stores, theft is virtually nonexistent. It's a game changer for the industry. The setup was incredibly straightforward, and we were up and running faster than anticipated. Younger customers are drawn to the tech-savvy nature of our Smart Stores. “It's not just about snacks, it's about the experience,” said co-founder Stacy Davick. They are expanding their footprint and have already ordered additional smart stores. Now turning to our fiscal year 2025 strategic priorities. As covered in our last call, in FY 2025, we are focused on scaling our international footprint and continued improvement in operational efficiencies across the organization. I'm pleased to start the fiscal year strong with this quarter, and I'm excited for the future of Cantaloupe as we execute on our vision to be the global technology leader that powers self-service commerce. I want to thank the entire Cantaloupe team for their continued focus on execution, which led to a solid quarter. With that, Scott will now review our Q1 results in more detail as well as our outlook for FY 2025. Scott?
Scott Stewart: Thanks, Ravi. As mentioned we had a strong start to the year. Q1 revenue is up 13% to $70.8 million compared to Q1, 2024. Our combined transaction subscription revenue grew 15.7% to $63.8 million during the quarter. This includes $20.2 million of subscription revenue, a year-over-year increase of 12% and $43.6 million of transaction revenue, an increase of 18% compared to Q1, 2024. The overall increase in transaction revenue was driven by growth in active devices and higher average ticket sizes. Subscription revenue growth was largely driven by the increase in active devices and strength in our micro markets. As of September 30, 2024, we had over 32,000 active customers and 1.23 million active devices, an increase of 9% and 3.2% respectively, compared to the prior year. The average revenue per unit or ARPU for Q1 2025 was $198, up 11% from the prior year period. As a reminder, this is defined as our total subscription transaction fees for the trailing twelve months divided by the average total active devices for the same period. Our equipment revenue was $7 million, a decrease of 6.7% compared to Q1 FY 2024. Total adjusted gross margin for the quarter was 40.7% compared to 38.8% in the same quarter last year. Subscription transaction revenue adjusted gross margin was 44% compared to 42.5% in the prior year. This increase was driven by continued growth in the gross take rate for transaction processing and an increase in our average ticket size. Adjusted gross margin on equipment revenue for Q1 FY 2025 declined slightly to 11.4% from 12.2% in the prior year. Total operating expenses in Q1 FY 2025 increased to $24.7 million compared to $21.6 million in Q1 FY 2024, driven by our continued expansion into international markets and non-recurring expenses related to our change in auditor and transaction costs for the SP software acquisition. Net income applicable to common shares for the first quarter was $3.3 million or $0.04 diluted earnings per share compared to net income of $1.7 million or $0.02 diluted earnings per share in the prior year period. Adjusted EBITDA was $9 million for the first quarter compared to $7.8 million in the prior year period, an increase of 14%. We ended the first quarter with cash and cash equivalents of $33 million, down from our ending FY 2024 balance of $59 million. The decrease in cash is largely due to the cash paid to the SB Soft acquisition and cash used in operating activities. The cash used in operating activities is largely driven by the timing of payments made to our customers for transaction processing. This will normalize next quarter, and we anticipate cash from operating activities to grow throughout the rest of the year, in line with the guidance we provided. Now turning to our fiscal year 2025 guidance. Based on what we see today, we are reiterating our guidance for the fiscal year. Total revenue to be between $308 million and $322 million, representing growth of 15% to 20%. Transaction and subscription revenue growth to also be in the range of 15% to 20%. We expect total U.S. GAAP net income to be between $22 million and $32 million, adjusted EBITDA to be between $44 million and $52 million. Total operating cash flow is expected to be between $24 million and $32 million. With that, we'd now like to turn the call back over to the operator for our Q&A session. Operator?
Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Josh Nichols from B. Riley. Please go ahead. Your line is open.
Josh Nichols: Yes, thanks for taking my question and good to see the company off to a strong start for the first quarter. The gross margin profile for the subscription and transaction fee business came in better than what we had expected. Good to see the higher take rates and the average ticket size going up. I'm just curious, going forward, do you think that the level that you achieved in the first quarter is likely to sustain or increase a little bit, or thinking about the profile for the next three quarters.
Scott Stewart: Hey Josh, sure. Thanks for the question. Yes, we do anticipate that trend to continue. We did do a great job in increasing our overall take rate. You've seen that increase over the past four quarters. I do expect that to kind of cap out probably this quarter and maybe next quarter. But the overall margin on the transaction processing we feel will continue to improve throughout the year, largely due to the fact of our average ticket size, because a portion of the processing fees are fixed. As that ticket size gets bigger, it will help improve our margins. So we do see it increasing slightly as we go throughout the year.
Josh Nichols: I appreciate the context there. And looking at the international markets, I know you touched on that before. In Latin America, you had talked about how you had secured one key tier 1 customer. I'm just curious if there's any updates on how deployment in the early stages is going with that customer. And also, you kind of mentioned about potentially securing some other large awards there. Is that still the expectation overall?
Ravi Venkatesan: Yes, Josh, thanks for that question as well. No, we continue to be bullish about both the Europe and the Latin America expansion initiatives and are continuing to work to scale those. Specifically in Latin America, you are correct. We have been deploying with a large customer. And we actually have taken a very cautious and thoughtful approach to measure results and generate some metrics in terms of improved same-store sales, operational efficiencies, etcetera, from those deployments. Almost throttling it a little bit as we scale those deployments so that we are building on rock and not on sand in those new markets.
Josh Nichols: Thanks. And then last question for me. Looking at the guidance, a relatively wide range for EBITDA and net income guidance. I would assume that kind of narrows a little bit as we move through the year. But if you could kind of just go over some of the puts and takes, how you're thinking about what would get you to the low end versus the high end of that range and how things are looking as we stand today.
Scott Stewart: Sure. So overall, revenue growth is a big driver of that, and the increased margins is also a driver of that as well. When you're speaking specifically to net income, tax expense is also going to be a portion of that as well. So as we've improved our profitability over the past year or two, now we have to start thinking about taxes and including that in our forecast, which is a good problem to have. So tax will also be the other big component of it. And then when you look at OpEx, we'll be holding that fairly steady. What you see for the first quarter, we expect that to slightly stay steady or even slightly decrease a little bit as we go through the next three quarters. So those will probably be the big drivers.
Josh Nichols: Appreciate. Thanks, guys.
Scott Stewart: Thank you.
Operator: Thank you. We will take our next question. The next question comes from the line of Marc Feldman from William Blair. Please go ahead. Your line is open.
Marc Feldman: Hey guys, thanks for taking the question. Appreciate the ARPU disclosure over the past few quarters, but wanted to see if you could provide any updated thoughts on where that could go. Back at your Investor Day in 2022, you talked about a $337 opportunity with the ARPU, and that could go over to $400, but you've added a lot of products since then. So just updated thoughts around that.
Scott Stewart: Sure, Marc. What we provided during our Investor Day 2 years ago was if every -- if someone was to buy every service that we offered for one device, what would that ARPU look like? And that was at the $375. We've continued to add on new products. And so this quarter, we've seen a 12% growth in the ARPU. We expect that to continue throughout, that growth rate to continue throughout the rest of this year. Some of the drivers of that is the average ticket price getting higher. That's also pushing up the overall ARPU. And then as we start selling more of the Seed Analytics and as Cantaloupe One becomes a larger portion of our revenue, that's also going to help drive that ARPU up.
Marc Feldman: Great. No, that's very helpful. And then if I could just ask on the international part of the business here. So about a year ago, the target was to exit fiscal 2024 at 5% of revenues coming from international, and obviously there's been some delays there. And I know Ravi just talked about a little bit about throttling in the Latin America region. But is there any updated thoughts around where international revenues could get for the year?
Ravi Venkatesan: Yes, we're still tracking to the long-term trajectory that we outlined. While in the short -- the throttling that I mentioned is more a short-term kind of -- sort of the pace on the scaling. But in terms of long-term contribution to revenue, percentage of revenue, etcetera, we are still on a fairly strong footing. In fact, the first quarter was exciting in terms of new customer adds and new connection adds, etcetera.
Marc Feldman: Great. Thanks for taking the questions.
Operator: Thank you. We will take our next question. Your next question comes from the line of Gary Prestopino from Barrington. Please go ahead. Your line is open.
Gary Prestopino: Scott, Ravi how are you?
Ravi Venkatesan: Very good. How are you?
Gary Prestopino: Just fine. It's been a great earnings season. Just a couple of questions here. In the smart store space, what are the applications that you're winning in that space in terms of -- I guess I'm just trying to ask, how are these products, where would they be utilized, I guess? I'm trying to get a handle on that.
Ravi Venkatesan: Yes. So I've got one word for you, shrink. It's also known more in layman's terms as retail theft. So what's happened is because of retail theft going out of control, we've seen a tremendous demand for solutions that can prevent it, right, while simultaneously taking friction out of the buying experience. So we've seen these smart stores go into fitness centers, go into corporate breakrooms, go into universities, go into hospitals, but in a variety of locations where because of the nature of how it's locked, by default, there's no stealing possible. And it actually requires the tap of a credit card before it unlocks. And then there is AI and smart technology that detects exactly what products are taken by a consumer and they are charged for it. So we've deployed it in multiple locations where if they had a shrink rate or a theft rate of, gosh, sometimes even double digits, and it goes down to almost nothing after it's deployed. So that's the major use case right now.
Gary Prestopino: And you are producing that equipment as well as doing the connectivity and processing the transactions?
Ravi Venkatesan: Yes, it's an end-to-end solution that we sell. Now we obviously work with partners for different components and things like that like we do for the rest of our solutions.
Gary Prestopino: Okay. And then just at this point, as you look across the company, I mean, you are driving -- trying to drive higher ticket prices and all that. If you take your number of transactions divided by your transaction volume, it looks like it's like about $2.80. But as we go forward, I guess the question that we get is, right now, the mix is still really skewed towards the lower dollar transactions. As you go forward, where do you think that number goes as you start adding the micro markets and some of these smart applications?
Ravi Venkatesan: Yes. I think it's going to continue to grow up and -- go up and to the right. And there are a couple of reasons for it. One, if you take the food and beverage sector, which has been, I would say, a very large portion, disproportionately large portion of our business, we are going from potato chips to Cobb salads. That's how our Chairman likes to phrase it. And needless to say, Cobb salads are more expensive. And so whether it's micro markets or smart stores, you're seeing a trend towards healthier food and fresh food and more custom and more gourmet food that comes out of commissaries instead of regular kind of manufacturing, right? So that's one vector. The other vector is we're selling a lot of non-food and beverage items, whether it's gear like water bottles, cosmetics, pharmaceuticals, and electronics. There's all kinds of things that are now being sold through our smart stores or even vending machines that are atypical from a historical perspective. And all of those are more expensive items, and they are driving kind of higher ticket prices. And then of course just micro markets, by nature of how they are deployed, also drive higher ticket prices. Scott, anything I forgot there in terms of what's driving that?
Scott Stewart: No, Ravi. I think you covered it. Overall, Gary, when you look over the past year, you've seen that we've been growing that average ticket price at about 10% year-over-year, and we do expect that to continue through the rest of the year.
Gary Prestopino: Can you maybe give us some idea like of the total number of transactions, like just in this quarter, what percentage of them would be going to more of these higher ticket items? Just so we can get an idea of where the company is and then maybe make some assumptions of where it can go.
Scott Stewart: That's not anything that we disclosed before. And -- yes.
Ravi Venkatesan: I think we'd like to give some thought to how to draw that line, because it's not just apples and oranges. It's apples, oranges and bananas and things now. So we have to create a logical line between here is what used to be and here are all the new things, because it's not as simple. There are more than two categories there. So -- but I think it's good feedback. We'll do some thinking around it and come back with some data points to share.
Gary Prestopino: Yes. Yes, appreciate it because that's really another key thing here with driving the transaction and revenue and the fees is getting a higher ticket price item being bought across the enterprise, right?
Ravi Venkatesan: For sure.
Scott Stewart: And Gary, I think that's something that's going to constantly change as we go over the next 2, 3, even 4 years. I think that product mix is going to continue shifting and hopefully continue with the higher priced items.
Gary Prestopino: Okay, thanks guys. Thank you. [Operator Instructions] And we’ll take our next question. And the question comes from the line of Mike Latimore from Northland Capital. Please go ahead. Your line is open.
Unidentified Analyst: Hi, this is Aditya [ph] on behalf of Mike Latimore. Could you give some color on the new verticals such as the residential apartments? And what kind of bookings, the percentage of bookings can we expect from new verticals?
Ravi Venkatesan: So I'll take a pass at it, and then Scott maybe can add some more color. It's very early to talk about percentages of revenue. What I can tell you is that the residential segment, which was nonexistent a couple of years ago, has really started to become relevant. So we are seeing micro markets especially, and now also smart stores get deployed in the lobby areas of high-end residential complexes, and that's a whole new vertical for us. We're also seeing them get deployed in fitness centers and car dealerships, which are, again, newer verticals for micro markets and smart stores. So I would say exciting green shoots, but not at a level where we can start talking about how much they're contributing to revenue as a percentage, et cetera. But Scott, go ahead and add any other color there.
Scott Stewart: No, Ravi, that's exactly right. I mean we -- the use case scenario for the smart stores I think is limitless, and it's still very early stages and very new for us as well. So I think it will be a little while before we can provide any metrics around that.
Unidentified Analyst: Got it. And could you give some color on the growth that we can expect on the active devices? Should we continue to expect a low-to-mid-single digit growth?
Scott Stewart: Yes, that's right. Throughout the rest of this year, that's what we're anticipating in the single -- in the low-to-mid-range single digits.
Ravi Venkatesan: Yes. And honestly, while we've continued that metric, I think we have advised our investors to sort of not lay as much emphasis on that metric as a one-dimensional predictor of the growth of this business. Because remember when it was just telemeters or card readers on vending machines, it was very easy to measure everything based on connections. Now the micro market active device does 10 times the business of, let's say, a more legacy use case, and the smart stores are maybe even twice that. So they're all -- again, it's not homogenous in terms of how our active devices are. So while we continue to report it so that we can provide continuity, we have been deemphasizing it internally as well as with investors, and we'll continue to do so.
Unidentified Analyst: Fine, thank you.
Operator: Thank you. This concludes the question-and-answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.
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