Cantaloupe, Inc. Q1 FY2025 earnings call

• Revenue growth was driven by acceleration in micro markets and more customers going all in with Cantaloupe, including Pepi Foods expanding their footprint and new customers like Unicorn Vending. - Attach rates for analytics and remote price change add-ons growing among Seed software platform subscribers. - Successfully integrated SB Software's Vendmanager with Cantaloupe's payment devices, with new SB software wins like JW Vending. - Continued growth in U.K./EMEA region with new customers for cashless payment and micro market services, and a notable win with Carbon Neutral Vending. - Momentum in LAC region's enterprise and small business segments, with micro markets and smart stores becoming popular in residential complexes like The Dorsey. - Launched Suites, a premium suite management system, and updated Seed vending management software platform. - Early success with Cantaloupe Smart Stores in locations like Yakima Healthy Vending.

During the first quarter, 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 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. As of September 30, 2024, there were 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 (ARPU) for Q1 2025 was $198, up 11% from the prior year period. Equipment revenue was $7 million, a decrease of 6.7% compared to Q1 FY 2024.

• Reiterating guidance for FY 2025: total revenue between $308 million and $322 million (15% to 20% growth), transaction and subscription revenue growth in the range of 15% to 20%, total U.S. GAAP net income between $22 million and $32 million, adjusted EBITDA between $44 million and $52 million, and total operating cash flow between $24 million and $32 million.

Q: Josh Nichols from B. Riley asked about the sustainability of the gross margin profile for subscription and transaction fee business.

A: Scott Stewart said they anticipate the trend to continue, with margin on transaction processing expected to improve throughout the year due to average ticket size increase.

Q: Josh Nichols asked about updates on international markets, specifically Latin America.

A: Ravi Venkatesan said they are bullish on Europe and Latin America expansion, with a cautious approach in Latin America to measure results from large customer deployments.

Q: Josh Nichols asked about guidance range for EBITDA and net income.

A: Scott Stewart said revenue growth and increased margins are drivers, and tax expense is also a component.

Q: Marc Feldman from William Blair asked about ARPU update.

A: Scott Stewart said ARPU growth is driven by average ticket price increase, Seed Analytics sales, and Cantaloupe One contributing more to revenue.

Q: Marc Feldman asked about international revenues.

A: Ravi Venkatesan said they are still on the long-term trajectory, with first quarter showing new customer and connection adds.

Q: Gary Prestopino from Barrington asked about smart store applications.

A: Ravi Venkatesan said smart stores are used in locations to prevent retail theft, like fitness centers, corporate breakrooms, universities, and hospitals.

Q: Gary Prestopino asked about active devices growth.

A: Scott Stewart said low-to-mid single digit growth expected, and Ravi Venkatesan mentioned deemphasizing active devices as a one-dimensional predictor.

Q: Aditya from Mike Latimore asked about new verticals like residential apartments.

A: Ravi Venkatesan said residential segment is new, with micro markets and smart stores deployed in high-end complexes, but early stages for revenue percentage.

Q: Aditya from Mike Latimore asked about active devices growth expectation.

A: Scott Stewart said low-to-mid single digit growth expected, and Ravi Venkatesan mentioned deemphasizing active devices as a predictor.