Cantaloupe, Inc.

Hello, and thank you for standing by. Welcome to Cantaloupe fourth quarter fiscal year 2024 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the conference over to Magna Mirra. You may begin.

Thank you, operator. Good afternoon, everyone. Welcome to the KAMPLO fourth quarter earnings conference call. With me on the call today is 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 findings 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 cash flow 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 as well as the most comparable 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.cancelloop.com. And with that, I would like to turn the call over to Ravi.

Thank you, Meghna. Good afternoon, everyone, and thank you for joining us today for our fourth quarter and fiscal year 2024 call. I'll start with a high-level view of our Q4 performance and cover financial and operational accomplishments from FY24. I'll also touch on FY25 strategic priorities before turning it over to Scott for a deeper dive into the numbers and our FY25 guidance. Q4 financial highlights. It's been a strong year for Cantaloupe, capped off by a solid fourth quarter. Our total revenue increased 13% compared to FY23 Q4, to $72.7 million, driven by a 16% increase in transaction revenue and a 14% increase in subscription revenue compared to FY23 Q4. Adjusted EBITDA for Q4 was $7.5 million, a 19% decrease compared to Q4 FY23. Note that Q4 FY23 included a $1.5 million benefit through one-time items which Scott will elaborate in his section. FY24 financial accomplishments. From a financial perspective, FY24 revenue came in slightly below our guidance at $268.6 million. Adjusted EBITDA came in strong at $34 million, an increase of 91% from the prior year. During FY24, we succeeded in our strategy to expand operating leverage by driving recurring revenue growth while also optimizing cost of sales and controlling operational expenses. We have continued to make progress on expanding our gross margins. Total non-gap adjusted gross margin for FY24 was 38% compared to 33% in FY23. More significantly, we've extended our revenue per connection by 11% from $174 in FY23 to $194 in FY24, which reflects the impact of new products and features we've rolled out that allow our customers to sell higher ticket items through our points of sale. We are proud of the progress and accomplishments in 2024 and excited about the fiscal year 25 outlook of 15 to 20% top line growth and approximately 40% adjusted EBITDA growth at the midpoint of our guidance. As a reminder, this is on the heels of 80% adjusted EBITDA growth in FY23 and 90% growth in FY24. Scott will discuss this guidance in more detail shortly. Now on to our FY24 operational highlights. Our investments in improving internal controls have paid off, and as a result, we've remediated all the material weaknesses we reported last year. We've been successful in accelerating our growth in micromarkets and the penetration of seed software with existing as well as new customers. On the domestic side, in Q4, we saw continued success with competitor replacements and customers electing to go all in with Cantaloupe on payment devices and seed software services. Some examples are we continue to see customers upgrading vending machines in the field to cashless payments more and more as operators seek to be 100% cashless and are looking for a single provider. For example, Pepsi Mid-America, Continental Services, and Peppy Foods in combination added close to 4,000 catalog devices in Q4. Akers Vending went all in with Cantaloupe, securing devices, the complete seed prosuit, markets, and delivery platforms, along with upgrading micro-market kiosks onto Cantaloupe Go. We continue to expand our reseller and distributor channels, specifically noting our newest reseller, Vending Concepts, who secured over 1,100 Cantaloupe devices in their very first reseller order. With our focus on our micro market and smart cooler growth, we've been able to extend these services and solutions into other verticals as well, consistent with our vertical expansion strategy. In Q4, we saw penetration into the residential space where we focused initially on the west coast and secured 17 new locations in one quarter. We continue to see nice momentum here as we build the pipeline going into FY25. We are also experiencing further penetration of the Cantaloupe One platform, our first to market platform as a service offering that enables self-service operators to eliminate upfront capital expenditures. This offering has enabled us to penetrate the SMB segment better, and we are now seeing demand for Cantaloupe One with enterprise customers in Latin America. We are also gaining traction with our international expansion efforts. Decorum Vending, a vending operator in the UK, completed their initial rollout in Q4 across their vending machines, servicing the high traffic, transportation, and travel sector. Declan Sewell, Managing Director with Decorum Vending, noted, partnering with Cantaloupe not only streamlined our operations, but also significantly enhanced our bottom line. This is a testament to how Cantaloupe enables operators to manage their business more efficiently. We've accelerated our micromarket solution in the UK region with recent commitments from more vend, new vending, to place additional market locations. We were also pleased to be recognized as the best micromarket service at the annual Associated Vending Services Conference in Croatia in June, which is voted on by customers in the industry. And in Latin America, after our completion, of internationalizing SEED for Mexico, we've onboarded several new small business customers in Q4, leveraging the SEED Entrepreneur Edition. Moving on to our new sports and entertainment vertical. In Q4, we've signed a new deal with the Detroit City FC at Keyworth Stadium to be the exclusive point of sale platform for all soccer games and live events at the stadium. The Detroit City FC are the first professional United States soccer team, USL team, to leverage the Czech POS platform. We've also finalized rollout plans for the Sioux City Explorers Baseball Club and the Campanelli Stadium to implement our full POS solution. In terms of products and enhancements, we continue to see adoption and customer satisfaction with our add-ons released in FY24, specifically with products like Seed Pick Easy, our mobile warehouse picking solution, where we signed on multiple new customers in Q4, and Seed Analytics, an add-on service for our Seed Pro customers with advanced dashboards and reporting inside of Seed. For example, Pepsi NACARD, Highline, not only committed to upgrading 43 micromarket kiosks onto Cantaloupe Go, We're also signed on for seed pick-easy, seed analytics, and remote price change, expanding onto our full product line. We are proud of the progress we've made in FY24, and we'll continue to build on this success and momentum in FY25. Now turning to FY25 strategic priorities. We've made steady gains internationally, specifically in Europe and Latin America, as I just discussed. We are expanding operations support in these markets to allow more rapid scaling and will continue to refine our go-to-market strategy with both direct and indirect channels to expand our customer base organically as well as through strategic acquisitions. Our international strategy will now be enhanced with the acquisition of SB Software, which we announced earlier this week. SB Software is a recognized leader in the UK and Ireland with approximately 30,000 subscriptions and its trusted enterprise-level solutions. The acquisition of SB Software positions Cantaloupe as a leading provider of vending management solutions in the UK and broader Europe, significantly expanding our market reach and service capabilities. SB Software's VendManager and CoffeeManager software complement Cantaloupe's existing product offerings providing an even more comprehensive suite of solutions tailored to the unique needs of the European markets. We are thrilled to welcome the ASP software team to the Canalog family. Beyond international expansion, our strategy to expand into new verticals has also had good initial success. As I mentioned previously, we are gaining traction with residential apartment complexes, car dealerships, amusement, and gaming vendors as well. Our acquisition of CHEC earlier this year allowed us to enter an important new vertical, the sports, entertainment, and festival sectors with a comprehensive suite of self-service solutions. We just launched our new stadium suite solution where we've seen early success working with one of our Miami partners to dial into the needs around suite management in stadiums and ensure that we are providing a solution that can both be sold independently and in conjunction with our full POS and Check platform solutions. We also just completed a record-breaking turnout at a three-day food and music festival in Seattle, where Check served as the official POS solution, processing over $6 million in transactions across 400 points of sale, which amounted to 315 transactions per minute. We plan to leverage partnerships to expand more rapidly. A great example of this is our newest partnership with AIR, Automation in Retail, a company that provides complete automated retail solutions for hospitals, malls, airports, and more, leveraging Cantaloupe as a one-stop shop for cashless payments, point-of-sale technology, cabinetry, and single invoicing solutions for their clients. We placed our first set of locations in Q4 within the UK market and have continued growth plans across Europe and the United States with AIR. Another example of continued partnership is with MasterCard, who are participating in our Cantaloupe Advantage program, a digital advertising program across our digital POS screens, where we will work together to promote their Priceless Planet campaign using our digital advertising services. We recently released our 2024 Micropayments Trends Report, where we analyzed data across 600,000 food and beverage vending machines and amusement and gaming machines, along with 13,000 micromarket kiosks. The report showcases a continued push by consumers to pay cashless, noting that at food and beverage machines, 69% of all machine sales are now cashless. More importantly, the average cashless transaction at an amusement machine is nearly seven times that of a cash transaction. We continue to see micro-markets excel in driving average spend, 37% greater than traditional vending machines. Cantaloupe continues to benefit from these secular trends and the demand for self-service solutions, which will fuel our growth in FY25 and beyond. In addition to consumer preferences shifting towards self-service, as well as the efficiency of operational efficiencies from cashless payments, we are now seeing a new trend of customers in retail preferring our solutions to tackle the problem of retail theft, which opens exciting new possibilities and expands our addressable market. Finally, as always, Thanks to the entire Cantaloupe team for their hard work to drive these results. I'm looking forward to continuing the momentum into FY25. And with that, Scott will now review our Q4 results in more detail, as well as our outlook for FY25. Scott?