Q4 2021 Cantaloupe Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and walk us through the Cantaloupe, Inc. Fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
I'd now like to hand, the conference over to your first speaker today at least in the eye.
Be able would gate vice president of corporate Communications and Investor Relations of handle a inc. Please go ahead.
Thank you and good afternoon, everyone and welcome to the kind of a fourth quarter and fiscal year 2021 earnings conference call with me on the call. This afternoon are Sean Feeney, Chief Executive Officer, Wayne Jackson, Chief Financial Officer announced augur well cheaper.
Chief revenue Officer, and Rob do you think that Tucson, Chief Technology Officer before.
Before we begin today's call I would like to remind you that all statements included in this call other than statements of historical fact are forward looking in nature actual results could differ materially from those contemplated by the forward looking statements as a result 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 with our filings with the SEC and in the press release issued earlier today.
Listeners are cautioned not to place undue reliance on any such forward looking statements, which reflects managements view only as of the date they are made.
[noise] Cantaloupe undertakes no obligation to update any forward looking statements, whether as a result 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 canceled its operating results. These non-GAAP financial measures are supplemental to and not a substitute for GAAP financial measures such as net income or loss details of these non-GAAP financial measures a presentation.
The most directly comparable GAAP financial measures and a reconciliation between these 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 Cantaloupe Dot com and with that I would now like to turn the call over to our Chief Executive Officer.
Sure Sean Feeney Sean.
Yeah.
Okay.
Okay.
Okay.
Okay.
Sean.
Yes.
The calls here.
Thank you Alicia and thank you everyone for joining us on our fourth quarter call.
We are pleased with the quarter's results, which capped off a transformational year for the company.
During the quarter, we reported revenue of 49 million, which increased 14, 6% sequentially and 52% over Q4 2020.
Increased dollar volumes throughout the quarter and we exited the year above pre COVID-19 transaction dollar volume highs.
Strong Q4 equipment revenue growth driven by an acceleration of customers purchasing <unk> devices as we get closer to the three G sunset.
In addition to cross selling products and upgrading devices due to the sunset.
We signed two enterprise customers to our seed platform elite refreshment services, and then buffet Lufkin Coke and deployed our seed cashless plus software to many SMB customers during the quarter, including vendors.
We also made significant progress on cost, reducing our operating expenses by 29% during the quarter compared to Q4 2020.
Our solid financial performance. In addition to the strong balance sheet as empowered us to invest in our people our technology and support our customers as they work to meet changing consumer needs.
During the quarter.
We created a strategic partnership with <unk> technologies to introduce our next generation interactive device, which will be key in delivering consumer engagement capabilities for our customers.
We launched a partnership with bass holdings to accept crypto currency payments and developed a program where the consumer can earn loyalty points to use at our customer locations.
We also announced the development of the E sport engage platforms premium and next generation touch screen devices.
As we look ahead to the next fiscal year, we remain dedicated to our mission to help the world buyer to go our growth initiatives are focused on sales service and technology.
On the sales and customer service side, we are investing in growing our adjacent markets to further expand our large addressable market opportunity I expect to gain more traction on this initiative during fiscal year 'twenty 'twenty two.
We continue to invest in our sales and marketing team further enabling us to sign new customers and increased customer engagement with cross sell opportunities.
We are increasing the automation itself service capabilities of our customer portal, which will improve customer service and provide for more operating leverage our recent.
Acquisition of Yoga payments and award winning micro market payments company in combination with our seed markets products will position us to expand in this fast growing segment of the unattended retail industry.
We also continue to make progress on business development and partnerships and our international expansion efforts.
Regarding our tech initiatives for FY 2022, we are continuing to invest in best in class solutions and service to drive future growth and operating leverage.
First as I briefly touched on before we announced the acquisition of yoke payments at Noma two weeks ago.
Having worked with Joe for the last four years. This acquisition was a natural progression of our relationship as the technology is best in class and already integrated with seed markets, our leading seed markets offering enables our customers to optimize their micro market business by integrating integrating route scheduling warehouse pre picking.
And reporting.
Point of sale platform.
Further extends our micro market offering to include self checkout, while seamlessly integrating with cantaloupes inventory management and payment processing platforms. We believe our combined micro market offering is financially attractive for operators of any location and any size and we will continue to.
In this segment.
We also believe that Europe will help us continue to grow our unattended solution outside of vending and micro markets.
At Napa, we held our first cantaloupe innovation summit, where we unveiled certain new products in two strategic pillars engage your consumer and optimize your business.
All focused on enabling our customers to increase revenue through new modes of payment and consumer engagement as well as new business tools to run an efficient operation.
These new innovations include.
A campus card solution, which will enable students to leverage their campus card via their mobile wallets to pay for goods and services directly at any E. G 10 reader.
Crypto currency acceptance capabilities powered by our partnership with back consumers will be able to pay with crypto currency through our more mobile platform when paying at any <unk> device.
Touchwood spending to allow consumers to scan and machines unique QR code.
New and browse nutritional facts on products than select.
One or multiple items and pay all from their smartphone or buying the machines cantaloupe point of sale device.
We also introduced our new E sport engage series, which is our nexgen <unk> touch screen device that accepts the MV chip and most other payment types. It offers a full edge to edge color touch screen to drive consumer engagement and as a platform for future innovation.
These devices will start shipping this month.
Our more mobile engagement platform is getting a full refresh this will enable multiple functionalities, we have market tested including loyalty rewards such with spending and new payment methods like crypto.
The more platform is an atlas experience, eliminating the friction of consumer enrollment or app download requirements, and ultimately increasing consumer engagement and same store sales for our customers.
Over the last few months, we have beta tested numerous new business tools and optimization features with select customers all of which will drive greater efficiencies in their day to day operations. These include focusing on increasing the number of machines compatible with our remote price change capability.
By the end of calendar year 2021, we will rollout new versions of our seed warehouse App.
Mobile based application that enables greater ease in control over warehouse inventory and transfer processes.
Finally seed mobile will be upgraded with a modernized look and user interface with new Android and Apple friendly versions coming in the spring of 'twenty 'twenty two.
All of these efforts and sales customer service and technology are aided by the industry tailwind of digital payments and Touchless technology in a study conducted in partnership with site research. We found that 90% of people surveyed stated that they shop that unattended retail as much.
Or more during the pandemic.
The study also found that younger consumers were the most likely to increase usage of unattended retail during that period, but we saw an increased usage in all age demographics.
The tight labor market has seen in many U S industries should continue to drive merchants to look for alternative solutions to keep their businesses open and growing we view micro markets is the bane of fishery of this dynamic as businesses adapt to this challenge.
As we look ahead, it's clear that consumers find value in unattended retail and its growing acceptance combined with our software and payments platform opens the door to better customer engagement and increase revenue opportunities for our operators.
Before turning it over to Wayne to go through our financials.
I'd like to thank our team for a great year and all of their hard work.
Our customers are very supportive of the changes we are making and excited by the innovation they are seeing from cantaloupe.
I look forward to leading this growing company in fiscal year 2022 and beyond.
Wayne I'll turn it over to you to go over the financials in greater detail.
Thanks, Sean and good afternoon, everyone.
From a financial perspective, we had a very good quarter.
We reported record revenues for the fourth quarter of FY 2021, a $49 million.
A 52% increase year over year, and a 14, 6% increase sequentially.
License and transaction revenue totaled $40.0 million for the fourth quarter, a 37, 3% increase year over you year and a sequential increase of 10, 2%.
Equipment sales for the fourth quarter were $18.0 million or 124, 5% year over year increase and a 33, 6% increase sequentially as we gain momentum on converting our customers to <unk> as well as continued growth of our customer current customer count.
Active devices defined as devices that have communicated are transacted with the company in the last 12 months totaled $2.0 million as of June 32021.
An increase of one 4% year over year.
Active customers defined as customers.
These one active device totaled $8019.0 as of June 32021.
Compared to $2017.0 as of June 32020, and.
An increase of 15% year over year, and 6% over the third quarter of FY 'twenty one.
As we exited FY 'twenty, one processing dollar volumes were above pre pandemic levels as businesses schools and other organizations across the country continue to open.
While the number of transactions does not exceed pre COVID-19 levels before year end. We are currently seeing the number of transactions above pre COVID-19 levels.
Total gross margin for the quarter was 32% compared with total margin of 34% for the prior year fourth quarter and 29, 7% in the third quarter of FY 2021.
Transaction revenues were significantly higher in the current quarter than prior year, resulting in LNG margins of 39, 3% in the fourth quarter of this year compared to 42, 3% in Q4 of last year.
While gross margin was down for the quarter.
Gross profit increased 27, 7% in the current quarter over the prior year.
Equipment margin for Q4, FY 'twenty, one improved by 11 eight points to negative $2 three from negative 14, 1% in the prior year.
Operating expenses in the fourth quarter totaled $17.0 million compared.
Compared to $26.0 million in Q4 FY 'twenty.
A 29% decrease over the prior year driven by lower SG&A expenses during the current quarter as well as no charges in the current quarter related to investigations proxy solicitations and restatement expenses, which totaled $14.0 million in Q4 of last year.
SG&A expenses for the quarter totaled $17.0 million compared.
Compared to $20.0 million for Q3.
$19.0 million for the prior year quarter.
Operating loss in the quarter was 467.
Compared to a loss of $14.0 million in the fourth quarter of the prior year.
Net income applicable to common shareholders for the fourth quarter was $9.0 million or.
<unk> <unk> per share compared to a loss of $15.0 million or <unk> 18 per share in the prior year period.
Adjusted EBITDA was $5 million in the fourth quarter compared to $4.0 million in third quarter, and a negative $3.0 million in the prior year period.
This year over year increase was driven by favorable operating performance for the quarter.
As well as a onetime benefit of $11.0 million, resulting from a reduction in accrued sales tax due to a state tax law change in the fourth quarter.
Relating to our balance sheet and liquidity, we ended fiscal year 2020, with cash and cash equivalents of $88 million.
Turning to FY 'twenty, two we are introducing our guidance for the year.
As mentioned previously we exited FY 'twenty, one with positive momentum in our core business and will introduce new products and solutions that will help drive growth in FY 'twenty two and beyond.
Therefore for FY 'twenty two we expect.
Revenue to be between $200 million and $210 million net loss applicable to common shares is expected to be between $7 million and $5 million.
Adjusted EBITDA to range between $13.0 million and $15.0 million we.
We expect to generate $8 million to $10 million in cash flow from operations, and lastly capital expenditures will range from $12 million to $14 million.
I will now turn the call over to Sean for closing remarks.
Thanks Wei to wrap up we are very pleased with our strong Q4 results and I'm incredibly excited about the future of <unk>.
Including the momentum going into FY 2022, where we are expecting top line revenue growth of between 20% and 26%. We are firmly on a path to growth and continued industry leadership defining how retailers can leverage technology to modernize and scale their business with that I'd like to turn it over to the operator.
<unk> for questions.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchstone telephone.
Ask a question. Please press Star then one.
The question comes from Mike Latimore of Northland Capital. Your line is open.
Yeah awesome quarter outlook there.
So.
<unk> is clearly picking it back up but I guess are there any.
Verticals or regions, where they are really not back to normal yet and you could still see some improvement in certain categories and then maybe what percent of revenue would those be.
Yes, Mike Thanks for the question.
We saw each other at Nama and you've got to talk to a lot of operators and I've been on the road kind of every week and operators are very optimistic what theyre seeing and coming back.
Delta variant is having an impact though is people are delayed getting back into the offices and thats kind of the one area. We've seen children pretty much back in school College is back in session, but offices, where we thought they should probably be coming back in September it seemed to be pushing back and thats. The one area that has the kind of dragging into recover.
But.
I would say our operators are optimistic and we are that that will happen in this fiscal year.
And Thats.
Something we're hoping for sooner rather than later.
Okay.
Great and then I believe during kind of the.
Parts of calendar 'twenty, how do your customers sort of.
Deactivated machines I guess are you seeing more of them kind of relate machines now and I don't know what percent of the base.
It could be related to let's say.
Mike What I would say is we are seeing people kind of relating to the ones that aren't coming back yet are the ones in offices.
And the other interesting phenomenon is we're beginning to see M&A activity pick up.
In this segment.
That should be.
Good for us as a number of the larger operators are our customers and will convert people.
<unk> over to seed we believe is.
Move forward.
Got it and then just lastly on transaction volumes did you have a number for that for the quarter.
I do transaction volume and Youll see the full year in the K that were filed tomorrow. So transaction the number of transactions for the quarter was $242 million.
The dollar volume for the quarter was $515 million.
While that is strong okay.
Very good.
Great. Thanks, a lot.
Thanks, Mike.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone and we do ask that you limit yourself to two questions and then places about back in the queue for any follow up.
Our next question comes from George Sutton of Craig Hallum. Your line is open.
Yeah.
Thank you first question. That's your innovation summit, you're kind of focused on three new areas of opportunity campus card crypto and mobile engagement platform I wondered if you could just give us a real quick summary of how the timing of expected impact.
Also potential impact from each of those opportunities in your view.
Yeah, George I'll ask Ravi to kind of give you an idea of when we'll see those and.
Yes.
To answer your questions.
Yes, George So this is Ravi thanks, Jason the campus card launch is this fall and we should see impact from that in <unk>.
In our third quarter fiscal and on the crypto and the other loyalty and engagement features they're also launching this fall and winter and those would have a longer turn off when we start seeing impacts towards the third and fourth quarter of our fiscal year.
And George we've built kind of when we think those will come on in the guidance that we've given you.
Sure.
Got you and just one other bigger picture question as we think through the ROI that you are offering to potential customers as I think through some of the dynamics you are offering them labor savings youre offering them.
Better revenues via better merchandising and price flexibility and then also lower support costs can you walk through what's really winning the day right now from your perspective in terms of deal opportunities.
Yes, I think when you look at new opportunities George what you're seeing is.
Operators telling us.
And our reference customers selling prospects and they couldnt have navigated COVID-19 without our seed platform.
And as.
Labor continues to be incredibly tight to the level that they are actually CEO and president of operators driving routes because of the two impacts one very tight labor to COVID-19 and what they are telling us is the ability to adjust routes up and down and inventory levels and the rate.
The right scheduling of routes seed is ultimately critical so I would say the reason that youll see US winning is one it's a proven technology that works in any number of operators that we've got a large number of reference customers. We've got very clear ROI on reducing cost using the seed platform and some of the customer.
<unk> things that we're bringing raising revenue on the when a sale device and Thats why we win we address both ends cost efficiency savings and increase revenue on the point of sale device.
Great. Thanks, guys nice job.
Right.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone.
Our next question comes from Chris Kennedy with William Blair. Your line is okay.
Vince can you give any more financial details whether it be the purchase price annual revenue or margin profile of yoke.
Chris Thanks, we're very excited about the.
The acquisition of yoke.
Ruben solution and that we've been partnering with them.
We're excited about getting the expertise, it's a very very small company.
We paid a small cash amount upfront.
Youll see in the K tomorrow, but $3 million and there is a $1 million payment at the one year anniversary point as a retention tool and then they have the ability to earn additional if they hit some aggressive sales targets in the next three years.
Okay. Thank you and then I'm sorry, I didn't answer the second part of your question, it's a pretty small company. They have between 750 installs they will contribute some but it's an area that we're going to invest quite a bit in.
In this fast growing segment so.
We're investing.
That's not generating what I would call a lot of operating leverage with them.
Okay, great. Thank you and then Sean in the in your opening remarks, you did talk about the international.
Our strategy can you give us an update more details on that.
Yes, Chris I wish I had some more definitive things, but we are making good progress, especially in Latin America with some partnerships.
And we've made good progress in Japan, as we've talked about it's just that both of those are.
A little bit slower going than I thought in the part of it is the pandemic, especially with Asia being able to get there and get face to face, but if you have done business in Japan. It is a slow moving type of thing, but we are making progress and I hope here in the first half of this fiscal year to be able to give you some specifics around that.
I am happy with the progress I wish we were further along but we are we are doing well there.
Okay. Thank you.
Thank you. Our next question comes from Gary <unk> Barrington Research Your line is open.
Hey, I know you can't talk about Europe too much but.
Could you give us some idea of how big this point of sale market is on the micro markets nationwide.
So.
Gary if you look at it.
Coming from them and it is a fast growing segment.
But if you look at it today says there is $4.0 million vending machines out there. They believe in the numbers vary from two and a half up as high as four.
Theres only.
$44043.0 micro markets out there.
So every operator I talked to you is looking at putting micro markets in their operation somewhere and as we've talked before many of them when they put those in place they redeploy.
The.
The vending machines elsewhere, but I think most of the growth things that I've seen is they expect micro markets and the number of those to grow somewhere between 45%.
Over the next year and really accelerate in calendar 2022, when most operators feel that there'll be pretty far out of.
Out of Covid so.
Should be very good growth in this segment.
And we're excited about having a full solution there with our very successful seed markets product now with the guidance for yoga.
Does.
This is a crowded field in terms of product offerings on the point of sale or and then you get a competitive advantage by having a full integrated product.
Yeah.
So there are some pretty large players 363 hundred 65 markets in Avanti.
And there are a number of other kind of as you would expect with a high growth area.
People coming along we think.
The position that we have with operators already the seed markets integration.
This is in a very good spot to get some pretty good growth here in that segment.
Okay. Thank you.
Okay.
Thank you I'm showing no further questions at this time I will turn the call back over to Sean pointed.
For any closing remarks.
Great. Thanks, operator, and thank all of you for your interest in listening to the call and your support of the company as I said, we had a great quarter and we are positioned for a great fiscal year 2022, with good topline growth and.
Increased.
Adjusted EBITDA. So we look forward to talking to many of you over the next couple of weeks in answering your questions in greater detail. Thank.
Thank you operator that will end the call.
Thank you. Thank you ladies and gentlemen does that conclude today's conference. Thank you all participating have a great day you may all disconnect.
Okay.
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