Cantaloupe, Inc.

Good day and thank you for standing by and welcome to the Cantaloupe Second Quarter 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dara Dirks, Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to the Cantaloupe Second Quarter Earnings Conference Call. With me 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. 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 actual results and events 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 cantaloupes operating results. These non-GAAP financial measures are supplemental to and that substitute for GAAP financial measures such as net income or loss. Details of these non-GAAP financial measures, a presentation of the most directly comparable GAAP financial measures, and the reconciliation between those non-GAAP financial measures as well as the most comparable GAAP financial measures can be found in our press release issue this afternoon, which has been posted on our investor relations section of our website at www.cancelope.com. And with that, I would like to turn the call over to Ravi.

Thank you, Dara. Good afternoon, and thank you for joining us today. I'm pleased to report solid financial and business results from the second quarter of our fiscal year 2023. This was my first quarter as CEO, and we made a lot of progress on strategic initiatives which are led by our vision to become the global market leader, providing technology that powers self-service commerce. We successfully closed on the acquisition of Three Square Market in December, positioning us to accelerate Cantaloupe's presence in the high-growth micro-market industry, while also immediately expanding Cantaloupe's international footprint for a full suite of self-service technology products. We held our first investor day at NASDAQ, which was well attended. During this session, investors and analysts were able to meet our executive team, listen to key customers, and hear our vision and strategy. We also shared a long-term financial outlook for the company and one-time KPIs that demonstrate the opportunity we see ahead of us. Our focus continues to be on accelerating the high-margin subscription revenue growth. We were successful in doing this by scaling the Cantaloupe program and selling subscriptions, including seed software, device management, and remote price change. As a reminder, our Cantaloupe One platform is the only bundled subscription offering in the market that enables self-service operators to eliminate upfront capital expenditures. We continue to see strong interest from our growing small and medium business customers, given the light capital nature of this offering. We also reported strong financial results for Q2. We reported a record in total revenue of $61.3 million, up 20% over last year's second quarter. We reported a record in transaction revenue, which grew by 21% year over year, and a record in subscription revenue, which grew by 15% year over year. While we anticipated an acceleration of subscription revenue in the second half of the fiscal year, we've been pleased with the strong subscription revenue growth trends in the first half as well. We continue to expect subscription growth to ramp throughout the year, resulting in growth in the high teens for the full year. Equipment revenue growth was strong as well, up 25% year over year, While the 4G and EMV upgrade cycle is largely behind us, there are some delayed installations due to labor shortages. We are pleased to have helped many of our clients through their upgrade cycle. Active customers totaled 26,335 at the end of the second quarter, up 24% year-over-year compared with the second quarter of last year. 1,300 new customers in the quarter, primarily among small and medium businesses, driven by the appeal of our Cantaloupe One offering. Active devices grew 3% year-over-year. And importantly, our adjusted EBITDA for the quarter was $3.9 million, a 61% increase year-on-year compared to the second quarter of the prior year. Now to move to a few additional business highlights from this quarter. While we are still early in the integration of Three Square Market, we are pleased with the progress thus far integrating business functions such as sales, marketing, HR, and finance. Our priority is to achieve the revenue synergy opportunity we saw with the acquisition, and we've already posted a number of early wins including automatic sales automatic vending sales who's located in Michigan we've reached an agreement to replace a portion of their competitor units with three square market and they've committed to growing their future market locations with cantaloupe Adam more president of automatic vending sales stated we chose three square market because of their feature rich platform which was comparable to our previous provider and and the attractive fee structure that allows us to see a higher profitability on our markets. Our transition installing the Three Square Market kiosk has been seamless for both my team and my customers, and we look forward to continuing to grow with Cantaloupe in the future. The reception among existing Cantaloupe customers has also been exceedingly positive about the combined company offerings. For example, Cantaloupe customer Madison Coffee and Vending is transitioning their micromarket business from a competitor to 3Square. Lastly, HGM Drick Service, a Sweden-based 3Square market customer, successfully installed multiple new markets and are continuing to scale their footprint with us. We also continue to see strong organic growth in other areas of our business. CC Vending is one of the largest independent refreshment services companies in the metro New York area and longtime seed customer, entered into a strategic long-term agreement with Cantaloupe to upgrade all of their non-EMV devices and also signed up for a remote price change for their vending fleet. Additionally, they added 24 more yoke kiosks to expand their micromarket services at one of the largest financial institutions in the city. Crickler Vending, a canteen franchisee in the New York State area and former Cantaloupe Cashless customer who had switched to a competitor in 2017, had signed an agreement to migrate half of their machines back to Cantaloupe Cashless devices and move fully onto the Seed platform. This includes all of our core Seed products like Seed Pro, Office, Markets, and Delivery. We continue to see strong demand for upsells As you might have seen from a recent release, we completed a significant project to onboard Buffalo Rock, a Pepsi bottler, who will now use Seed to manage 9,000 vending machines. We also expanded our agreement to support Sodexo's in-reach convenience business with both our hardware and software solutions. This includes the rollout of Seed across 18 branches. Pepsi Florence, also known as PD Foods, A large Pepsi bottler and canteen franchisee in the southeast, who is a fully deployed Cantaloupe customer, expanded their seed services by adding remote price change. And lastly, Coke Odom, a large Coca-Cola bottler, upgraded their non-EMV devices to ePort Engage, our latest interactive device. In November, we held Cantaloupe University, where we hosted 150 of our customers and partners in a two-day summit and discuss some of the latest innovations and upcoming products that we will release in calendar year 2023. We also conducted in-depth seed, e-port, and micro-market training. The event was very well received and validated that our pipeline of innovations continues to resonate with our customers and be highly relevant to their businesses. As we move into the second half of our fiscal year, we remain focused on the four initiatives that we outlined at our investor day. One, increase market share in core verticals that we operate in within North America. Two, international expansion leading with enterprise software. We are already positioned well for this with our acquisition of Three Square Market. Three, extend revenue per connection through our add-on services such as remote price change, AI-powered merchandising, and more. Four, continue expansion into adjacent verticals, such as EV charging, entertainment, gaming, and smart retail. We are focused on continuously strengthening the executive team, and to that end, I would like to officially welcome Anna Novoseletsky as our new Chief Legal and Compliance Officer, who will also serve as General Counsel and Corporate Secretary. Anna has already been an excellent addition to our leadership team, bringing even more focus towards international expansion and valuable legal experience of reviewing regulatory needs as we continue to expand and scale. With that, I'll turn it over to Scott for him to review our Q2 financial results in detail. Scott? Thanks, Ravi.