Cantaloupe, Inc. Q2 FY2025 earnings call

• Strong growth in micro markets and seed software with existing and new customers, e.g., Premier Foodservice replacing competitive micro markets and signing up for seed software.
• New customer wins like EBS for vending and Entertainment Solutions Group for cashless payment solutions.
• Launch and deployment of Cantaloupe Smart Store 600 and 700, revolutionizing self-service retail.
• Launched micro-lending services via Cantaloupe Capital and Cantaloupe Advantage program for digital advertising at point of sale.
• Fiscal year 2025 second-half priorities include expanding international operations in Europe and Latin America and refining go-to-market strategy.

During the second quarter, total revenue increased 13% year over year to $73.7 million. Transaction revenue grew 17% year-over-year to $44.4 million, and subscription revenue grew 14% year-over-year to $20.7 million. Total adjusted gross margin was 41.7%, with subscription adjusted gross margin at 89.7% and transaction gross margin at 25.6%. Adjusted EBITDA for Q2 was $10.7 million, a 26% increase compared to the prior year. Equipment revenue was $8.6 million, a decrease of 7% compared to Q2 FY2024.

• Reaffirmed total revenues to be between $308 million and $322 million, representing growth of 15% to 20%.
• Expect transaction and subscription revenue to be in the range of 15% to 20%.
• US GAAP net income expected to be 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.

• Actual results could differ materially from forward-looking statements due to factors including business, financial market, and economic conditions. Detailed discussion of risks is in SEC filings and press release.

Q: Can you just talk about the average revenue per unit and how that's evolved?

A: Overall growth related to transaction processing, average ticket size has gone up, and shift to higher value locations and new software like Pick Easy and receipt analytics.

Q: Any update on your international strategy?

A: Tracking well, passed the deployment tweak stage, expanding footprint in Latin America and EMEA, with micro markets showing growth, mix largely same under 5%.

Q: Are you originating loans for Cantaloupe Capital and holding the paper?

A: Don't hold paper or underwrite, partner handles, acts as gateway for customers to get approved easily.

Q: Lay out key growth drivers in product lines?

A: Growth in recurring revenue, mix shift to higher value locations, new location types for smart stores like universities, hospitals, etc., and smart retail/smart vending contributing to higher ticket sizes.

Q: On the margins and EBITDA growth, is it sustainable?

A: Feel at sustainable level, continue to see increases in transaction gross margin, benefits from cost reduction measures and higher average ticket prices.

Q: Subscription growth rate, should we think about improvement from here?

A: Saw acceleration, still in line with 15%+ guide provided, tied to MicroMarkets and smart stores.

Q: Clarification on Cantaloupe advertising program economic benefit?

A: Charge on per impression basis, marketplace model and custom campaigns, share revenue with customers and have custom pricing for bespoke ads.

Q: Given the guidance range, how to think about EBITDA for remainder of year?

A: Tracking to midpoint of guidance, expecting to stay on track towards midpoint as margins improve