Cantaloupe, Inc. Q4 FY2024 earnings call

• FY2024 financials: Revenue slightly below guidance but adjusted EBITDA strong. Gross margin improved and revenue per connection increased due to new products/features.
• Operational highlights: Remediated material weaknesses in internal controls, growth in micro markets, Seed Software penetration, expansion into new verticals (sports/entertainment), international expansion with SB Software acquisition, partnerships (e.g., Mastercard), and new product trends like smart stores addressing retail theft.

In Q4 FY2024, total revenue increased 13% compared to FY2023 Q4 to $72.7 million. Transaction revenue grew 16% and subscription revenue grew 14% compared to FY2023 Q4. Adjusted EBITDA for Q4 was $7.5 million, a 19% decrease from Q4 FY2023. For FY2024, revenue was $268.6 million (slightly below guidance), adjusted EBITDA was $34 million (up 91% from prior year). Gross margin for FY2024 was 38% vs 33% in FY2023. Revenue per connection extended 11% from $174 in FY2023 to $194 in FY2024.

• FY2025 guidance: Total revenue expected to be between $308 million and $322 million (15%-20% growth). Transaction subscription revenue expected in 15%-20% range. GAAP net income expected between $22 million and $32 million. Adjusted EBITDA expected between $44 million and $52 million. Operating cash flow expected between $24 million and $32 million.

• Factors like business, financial markets, and economic conditions could cause actual results to differ materially from forward-looking statements. Detailed discussion of risks in SEC filings and press release.

Q: Can you give a little bit more color on the sub and transaction revenue guidance of 15% to 20% relative to prior initial outlook?

A: Our guidance is 15% to 20%, right in the mid-range of previous quarter's statement.

Q: Any additional color on the mix of subscription growth versus transaction growth as we look into next year?

A: Expect subscription revenue in 15% range and transaction in 18 plus range.

Q: Can you talk about the strategy and opportunity with the acquisition of SB Software?

A: It's a software business with expanded reach in Europe, allows cross-selling of cashless payment devices and add-ons, with synergies with micro market solutions.

Q: Do you expect the trajectory seen in Q4 to continue into FY2025?

A: Weakness in June was due to temporary consumer spending issue, not a trend; July and August show normal trends continuing.

Q: Is the SB Software acquisition a material revenue contributor this coming fiscal year?

A: It's less than 1% of revenues and EBITDA, more of a technology and cross-sell opportunity.

Q: With SB Software acquisition, is there anything in their software that needs to be changed for continental European market?

A: They have limited presence in continental Europe but can be localized and expanded with Cantaloupe's strength in sales, marketing, etc.

Q: Has implementation timeframes alleviated?

A: Long-term trend is 6-week implementation, now back to that as exceptions still take longer but broad majority is better.

Q: Growth opportunities in Latin America?

A: Prospects of winning at least one more big operator and potentially two.

Q: On gross margin, should we assume stability going forward and more room for expansion?

A: Transaction side has room for expansion, subscription margin likely to stay in 88%-90% range, equipment side aiming for 10%-15% in 2025.

Q: On revenue per connection, where do you see it going?

A: Expected to continue increasing with new add-on modules and higher average transaction prices.