Cantaloupe, Inc.

Thank you for standing by and welcome to the Cantaloupe 4th Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Marissa Newman, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to the Cantaloupe Fourth Quarter Earnings Conference Call. With me on today's call are 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 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 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 reflects 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 or loss. 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 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'd like to turn the call over to Ravi.

Thanks, Marisa. Good afternoon, everyone, and thanks for joining us today. for our fourth quarter and fiscal year 2023 earnings call. It has been an incredible year for Cantaloupe, capped off by a strong fourth quarter. For the fourth quarter, our revenue increased 11% year over year to $64.2 million. Importantly, transaction revenue grew 18% and subscription revenue grew 17% year over year for Q4. Adjusted EBITDA for Q4 was $9.2 million, a fourfold increase over last year's corresponding number. For the full fiscal year, our revenue increased 19% to $243.6 million, a new record for the company. Transaction revenue grew 20% and subscription revenue grew 16% year over year. We also improved gross margin to 33.3% compared to 31.3% in fiscal year 2022. Importantly, we improved gross margins sequentially through each quarter of the financial year. After two years of negative equipment margins, we delivered a positive equipment margin of 1.7% in fiscal year 23. This improvement was a result of more responsible competition in the marketplace for telemetry and payment devices following the 4G upgrade cycle where discounts were needed to incentivize and support our customers through it. It is also driven by diversification of our equipment product portfolio, which now includes higher margin smart coolers and micromarket kiosks. We also improved our margins for the combination of subscription and transaction revenue from 38.8% in fiscal year 22 to 40.2% in fiscal year 23. Our initiatives to accelerate subscription revenue growth and control expenses accelerated operating leverage, which we highlighted as a priority at our investor day last December. Consequently, adjusted EBITDA for the fiscal year was $17.8 million, an 80% increase from last year. Finally, we ended the fiscal year with over 28,000 active customers, a 19% increase over fiscal year 22. In addition to these financial accomplishments, I'm also pleased with operational accomplishments from this fiscal year that create a great platform for long-term growth and profitability. First, we successfully expanded our footprint in the fast growing micro market space with the acquisition of Three Square Market. Second, we continued to scale Candelab One, our platform as a service offering, which has enabled us to penetrate the SMB segment better. Third, we completed the move over to AWS Cloud Services, which has enabled scale business process optimization and global expansion of the Cantaloupe platform. Lastly, but importantly, we hosted our inaugural investor day where we were able to showcase our leadership team as well as provide a longer-term outlook with three-year financial targets. We remain committed to increased transparency and visibility into key drivers of the business for our investors. For 2024, We will focus on expanding operating leverage as we shared at our investor day last year. We will accomplish this through a three-pronged strategy, driving subscription revenue, optimizing COGS, and controlling operational expenses. I want to spend a few minutes elaborating this. We'll drive subscription revenue by focusing on three areas. First, accelerating growth in micro markets. The total addressable market for this space is over $1.7 billion. We are already the market leader on the software side and are now positioned to grow as a comprehensive solution, including kiosks, payments, and software. Since our acquisition of 3Square Market, we've been acquiring new customers because of the appeal of our comprehensive suite of solutions. This includes take a break canteen of Northern California, and vacation land vendors who have gone all in on our seed software, cashless solutions, and micro-market solutions. This showcases the appeal of a complete platform for our customers. On the go-to-market front, we continue to expand into indirect channels more. In Q4, we expanded our partnership with the AVS company as one of our master resellers in vending and amusement. They now offer Cantaloupe card readers, micro market kiosks, and cooler cafe payment terminals, along with smart locks added to their cool blue cooler line. The second driver of subscription revenue is further penetration of our Cantaloupe One platform for SMBs. As an example of this during Q4, SAMS An existing customer used Cantaloupe One to deploy Seed in addition to expanding their rollout of cashless ePort devices. They were also able to sign up for a remote price change add-on. Another customer, like Sam's, was Peninsula Bottling, who were under-deployed on cashless. Our team was able to bundle the rest of their fleet onto cashless along with Seed Pro software. The third driver of subscription revenue is extending our revenue per connection. We will do this by continuing to launch meaningful revenue driving add-on modules that our customers can purchase on top of their current service stack. We'll also leverage our customer success management teams to execute against this strategy. Two examples of exciting new add-ons that we debuted at the NAMA conference in May are the Cantaloupe Go product line and the Seed Pick Easy solution. The Cantaloupe Go self-service product line was developed so that consumers can buy it and go. It includes self-checkout kiosks, smart store concepts, and the Cantaloupe Go management platform. The Seed Pick Easy solution is a cloud-based technology solution designed to deliver time and operational cost savings to operators by optimizing warehouse picking. Unlike other competitive offerings, this plug-and-play solution integrates directly with an operator's vending management software, allowing warehouse workers to quickly generate digital pick lists. Operators can deploy seed pick-easy without disrupting current processes and scale the solution rapidly as their warehouse capacity grows. In addition to extending revenue per connection with existing customers, these add-on products and solutions enable us to further penetrate the enterprise segment. To highlight a few other customer wins with add-on products, in Q4, we signed an agreement with CSC ServiceWorks, one of the largest providers in the country of air vac machines, to roll out remote price change across their entire fleet. We also signed a deal with Blue Rhino, leveraging outdoor vending solutions equipment to roll out cantaloupe card readers with vertical-specific add-ons across all their outdoor propane tank refill stations in the United States. This is a great example of success with our strategy to penetrate adjacent verticals. Finally, in Q4, Pepsi MidAmerica, one of the largest Pepsi bottlers, committed to replacing their current VMS provider with Cantaloupe and have agreed to go all in on Seed to support their vending, micro market, and office coffee business, utilizing Seed software along with available add-ons for these specific businesses. Through fiscal year 23, we've seen tremendous success in the bottler space and are excited about the opportunity with them in fiscal year 2024. In addition to driving subscription revenue, the second area of focus for fiscal year 24 will be optimizing the cost of goods sold. We will do this by negotiating better terms and optimizing transaction routing for payments. We'll also continue to manage the cost of our equipment while navigating a complex supply chain environment. The final area of focus to drive operating leverage is related to controlling operational expenses. Fiscal year 24 will benefit from FY23 initiatives, including our migrations to the AWS for cloud infrastructure, maturing the rollout of our Salesforce CRM, NetSuite ERP, and other IT infrastructure improvements. To wrap up, I'm incredibly proud of what our team has accomplished in fiscal year 23, I'm even more excited about being well-positioned to address the opportunities in front of us for fiscal year 24. With that, Scott will now review our Q4 results in more detail, as well as outline our outlook for fiscal year 24. Scott?