Cantaloupe Inc. (CTLP) 2024 Q4 Earnings Call Summary

Optimistic Highlights

• Revenue Growth

Total revenue increased 13% in Q4 to $72.7 million, driven by a 16% increase in transaction revenue and a 14% increase in subscription revenue.

• FY 2024 Financial Accomplishments

FY 2024 revenue was $268.6 million, with adjusted EBITDA at $34 million, a 91% increase from the prior year.

• Gross Margin Expansion

Total non-GAAP adjusted gross margin for FY 2024 was 38%, up from 33% in FY 2023.

• International Expansion

Successful penetration into the UK and Latin America markets, with new deals and product rollouts.

• Strategic Acquisitions

Acquisition of SB Software to enhance market reach and service capabilities in the UK and broader Europe.

Pessimistic Highlights

• Adjusted EBITDA Decrease

Q4 adjusted EBITDA was $7.5 million, a 19% decrease compared to Q4 FY 2023.

• Revenue Slightly Below Guidance

FY 2024 revenue came in slightly below guidance at $268.6 million.

• Equipment Revenue Margins

Adjusted gross margin on equipment revenue for Q4 2024 declined to 7% from 21% in the prior year.

• June Consumer Spending Weakness

Noted weaker consumer spending in June, which impacted transaction revenue.

• Implementation Delays

Previous issues with implementation timelines, although now resolved, had impacted operations.

Company Outlook

• FY 2025 Guidance

Total revenue expected to be between $308 million and $322 million, representing growth of 15% to 20%.

• Adjusted EBITDA Growth

Expected adjusted EBITDA growth of approximately 40% at the midpoint of guidance.

• Strategic Focus

Continued focus on international expansion, new verticals, and leveraging partnerships for growth.

• Product and Market Expansion

Plans to expand micro markets, smart coolers, and smart stores, with a focus on reducing retail theft.

• Financial Stability

Strong balance sheet to support new product lines, verticals, and acquisitions.

Q & A Highlights

• Q: Can you give a little bit more color on the sub and transaction revenue guidance of 15% to 20% relative to your prior initial, I think preliminary outlook of at least 18%? (Cristopher Kennedy, from William Blair)

A: Our guidance is 15% to 20%. Initially, when we revised our guidance back in the third quarter of last year, we said 18% plus. We're right in the mid-range of what we said in the previous quarter. (Scott Stewart)

• Q: Can you give us any additional color on the mix, the subscription growth versus transaction growth as we look into next year? (Cristopher Kennedy, from William Blair)

A: We're expecting subscription revenue to be in the 15% range and transaction revenue to be in the 18% plus range. (Scott Stewart)

• Q: Can you talk about the strategy and opportunity to add payments with the acquisition of SB Software and the timeline on that? (Cristopher Kennedy, from William Blair)

A: It's primarily a software business with a nice expanded reach in the European market. It allows us to cross-sell our cashless payment acceptance devices and other software add-ons. (Ravi Venkatesan)

• Q: Expectations for the September quarter and the traction you're seeing? (Josh Nichols, from B. Riley)

A: We saw transaction revenue come in lighter in June, but July and August have been more typical. We have not seen any weakness continue into fiscal year 2025. (Ravi Venkatesan)

• Q: Is the SB Software acquisition more of a technology acquisition, and is it a material revenue contributor this fiscal year? (Josh Nichols, from B. Riley)

A: It's more a technology acquisition and opens up cross-sell opportunities. Financially, it is not material, less than 1% of our revenues and EBITDA. (Ravi Venkatesan, Scott Stewart)

• Q: Can you provide more detail on the breakdown of what's driving the expected growth in subscription and transaction fee revenue? (Josh Nichols, from B. Riley)

A: Growth in international markets, Cantaloupe One, and micro markets are key drivers. (Scott Stewart, Ravi Venkatesan)

• Q: Is there anything in SB Software that needs to change for it to enter the European continental market? (Gary Prestopino, from Barrington Research)

A: They have a limited presence in continental Europe and have localized the software. As part of Cantaloupe, we can now expand into continental Europe. (Ravi Venkatesan)

• Q: Have the issues with implementation timelines been resolved? (Gary Prestopino, from Barrington Research)

A: Yes, implementation timelines have returned to normal trends. (Ravi Venkatesan)

• Q: What impacted the gross margin in Q4? (Gary Prestopino, from Barrington Research)

A: Margins were in line with the past three quarters. The decrease was due to one-time benefits in the prior year. (Scott Stewart)

• Q: Should we assume gross margin is relatively stable going forward? (Mike Latimore, from Northland Capital Markets)

A: Transaction margins may still expand slightly, subscription margins will stay within 88% to 90%, and equipment margins aim for 10% to 15%. (Scott Stewart)

• Q: Can you quantify the current implementation timeframe? (Mike Latimore, from Northland Capital Markets)

A: Implementation is back to a six-week timeframe, down from up to four months. (Ravi Venkatesan)

• Q: What are the growth opportunities in Latin America? (Mike Latimore, from Northland Capital Markets)

A: We have prospects of winning at least one more big customer in Latin America. (Ravi Venkatesan)

• Q: Are you where you want to be in international markets, and do you still see significant opportunities? (George Sutton, from Craig Hallum)

A: More bullish about opportunities in Europe and Latin America, with new products like smart stores gaining traction. (Ravi Venkatesan)

• Q: Where do you see revenue per connection going in 2025 and beyond? (George Sutton, from Craig Hallum)

A: We expect it to continue increasing with new add-on modules and higher average transaction prices. (Scott Stewart)