Q3 2024 Cantaloupe Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Cantaloupe Third Quarter Fiscal Year 2024 Earnings Conference Call.

Good day and thank you for standing by welcome to the Cantaloupe third quarter fiscal year 2024 earnings Conference call. At this time, all participants are in a listen only mode.

Operator: 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 the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dara Dierks. Please go ahead.

Dara Dierks: After the speaker's presentation, there will be a question and answer session to ask a question Jobin. This session you will need to press star one on one on your telephone you will then have an automated message advising Johan is raised to withdraw your question. Please press star one and one.

Dara Dierks: Again, please be advised that today's conference is being recorded I would now like to hand, the conference says that your speaker today, David <unk>. Please go ahead.

Dara Dierks: Thank you, Operator. Good afternoon, everyone.

Dara Dierks: Thank you operator, good afternoon, everyone and welcome to the Cantaloupe third quarter earnings Conference call with me on the call today is Ravi thank it tastes and Chief Executive Officer, and Scott Stewart, Chief Financial Officer before we begin today's call. We would like to remind you that all statements include included in this call other than statements of historical.

Dara Dierks: Welcome to the Cantaloupe Third 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. However, 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.

Dara Dierks: 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 to differ materially from such forward looking.

Dara Dierks: A detailed discussion of the risks and uncertainties that could cause actual results to differ materially from such forward-looking statements is included in our filings with the FEC and in the press release issued earlier today. Listeners are cautioned not to 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.

Dara Dierks: 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.

Dara Dierks: 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 not a substitute for GAAP financial measures such as net income or loss details of these <unk>.

Dara Dierks: 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 a substitute for GAAP financial measures, such as net income or loss. Details of these non-GAAP financial measures and 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.cantaloupe.com. And with that, I would like to turn the call over to Ravi.

Dara Dierks: non-GAAP financial measures and the 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 Dot Cantaloupe Dot com.

Dara Dierks: Sure.

Dara Dierks: Excuse me and with that I would like to turn the call over to Ravi.

Ravi Venkatesan: Thanks, Dara. Good afternoon, everyone.

Ravi: Thanks, Darren good afternoon, everyone and thank you for joining us today for our third quarter fiscal year 2024 call.

Ravi Venkatesan: And thank you for joining us today for our third quarter fiscal year 2024 call. During this quarter, our total revenue increased 13% year-over-year to $57.9 million, driven by 20% year-over-year transaction revenue growth and 7% year-over-year subscription revenue growth. More notably, subscription revenue grew 6% sequentially from Q2 to Q3, signaling the re-acceleration of that revenue stream. Transaction growth remains strong, driven by improvements to our take rate, as well as continued growth in active devices and average transaction size. Our average revenue per unit increased from $167.52 in Q3'23 to $186 in Q3'24.

Ravi Venkatesan: During this quarter.

Ravi Venkatesan: Total revenue increased 13% year over year to 69, 67 $9 million driven by a 20% year over year transaction revenue growth and 7% year over year subscription revenue growth more notably subscription revenue grew 6%.

Ravi Venkatesan: Chile from Q2 to Q3 signaling the re acceleration of that revenue stream.

Ravi Venkatesan: <unk> growth remains strong driven by improvements to our take rate as well as continued growth in active devices and average transaction size.

Ravi Venkatesan: Our average revenue per unit increased from 160 $752 in Q3 23 to $186 in Q3 2004 there.

Ravi Venkatesan: We've been able to grow our pool by providing solutions that increase our customers' ability to sell higher-ticket items and increase transaction volumes per device, and the progress we are making to improve attach rates for our software services. We expect to continue this momentum with new products that we recently launched, like Seed PickEasy and Seed Analytics, many of which are independent of the sale of equipment. We continue to make progress on expanding our growth margin. Total growth margin for the quarter was 39.6%, compared to 37.9% in the same quarter last year.

Ravi Venkatesan: <unk> been able to grow our pool by providing solutions that increase our customers' ability to sell higher ticket items and increased transaction volumes per device and the progress we are making to improve attach rates for our software services we.

Ravi Venkatesan: To continue this momentum with new products that we recently launched like seed picky the.

Ravi Venkatesan: Analytics.

Ravi Venkatesan: Any of which are independent of the sale of equipment.

Ravi Venkatesan: We continue to make progress on expanding our gross margins.

Ravi Venkatesan: Total gross margin for the quarter was 37 39, 6% compared to 37, 9% in the same quarter last year.

Ravi Venkatesan: The increase in gross margin was driven by higher margins for both subscription and transaction revenue.

Ravi Venkatesan: The increase in growth margin was driven by higher margins for both subscription and transaction revenue. Adjusted EBITDA for Q3 was $10.2 million, reflecting continued success with our strategy of expanding operating leverage by driving recurring revenue growth while also optimizing cost of goods sold and controlling operational expenses. I wanted to comment on the trends we've seen in the last three quarters as it relates to the three levers we outlined to expand operating leverage. Number one, transaction revenue growth and margins have overperformed versus our expectations. Number two, subscription revenue growth has underperformed while margins have overperformed.

Ravi Venkatesan: Adjusted EBITDA for Q3 was $10 $2 million, reflecting continued success with our strategy of expanding operating leverage by driving recurring revenue growth. While also optimizing cost of goods sold and controlling operational expenses.

Ravi Venkatesan: And thirdly, operating expense control has been on target. We remain on track to deliver on the 70% Hager target for adjusted EBITDA from fiscal year 23 through fiscal year 26, which we outlined at our investor day in December 2022. With activation timelines stabilizing and international pipeline conversion beginning to pick up in earnest, we see subscription revenue re-accelerating in the near term, as evidenced by the sequential growth in this quarter. As we look to fiscal year 25, we now believe subscription revenue growth will be north of 15% versus the 20% we've discussed previously, and combined subscription and transaction revenue growth will be north of 18%. We will share more specific guidance for fiscal year 25 on our Q4 call

Ravi Venkatesan: I wanted to comment on the trends we've seen in the last three quarters.

Ravi Venkatesan: As it relates to the three levers we outlined to expand operating leverage.

Ravi Venkatesan: Number one transaction revenue growth and margin have over performed versus our expectations.

Ravi Venkatesan: Number two subscription revenue growth has underperformed.

Ravi Venkatesan: While margins have over performed.

Ravi Venkatesan: Thirdly operating expense control has been on target.

Ravi Venkatesan: We remain on track to deliver on the 70% CAGR target for adjusted EBITDA from fiscal year 'twenty three through fiscal year, 2006, which we outlined at our Investor Day in December 2022.

Ravi Venkatesan: With activation timeline stabilizing.

Ravi Venkatesan: International pipeline conversion beginning to pick up in earnest, we see subscription revenue re accelerating in the near term.

Ravi Venkatesan: Evidenced by the sequential growth in this quarter.

Ravi Venkatesan: As we look to fiscal year 2005, we now believe subscription revenue growth will be north of 15%.

Ravi Venkatesan: First is the 20% we have discussed previously.

Ravi Venkatesan: And combined subscription and transaction revenue growth will be north of 18%.

Ravi Venkatesan: We'll share more specific guidance for fiscal year 'twenty five on our Q4 call.

Ravi Venkatesan: While it's taken longer than anticipated, we are starting to see real traction in both India and Latin American expansion. We recently signed a strategic partnership with one of the largest operators in Mexico. This collaboration is currently deploying close to 4,000 devices under our Cantaloupe One program. This partnership marks a major milestone in our Latin America market expansion. In Europe, we have now sold over 1500 devices across 30 plus customers, with devices being deployed in the UK, Ireland, and Portugal.

Ravi Venkatesan: While it has taken longer than anticipated.

Ravi Venkatesan: Turning to see real traction in both EMEA and Latin American expansion, we recently signed a strategic partnership with one of the largest operators in Mexico. This collaboration is currently deploying close to 4000 devices under a cantaloupe one program.

Ravi Venkatesan: This partnership marks a major milestone in our Latin America market expansion in.

Ravi Venkatesan: In Europe, we have now sold over 500 devices across 30, plus customers the devices being deployed in the U K, Ireland and Portugal.

Ravi Venkatesan: We are entering Q4 with a robust pipeline in all these markets. Turning to the quarter, we had several exciting new wins, which will continue to drive subscription and transaction revenue. We are accelerating growth in micro markets and the penetration of seed software with both existing and new customers. Notably, our micro market business experienced strong year-over-year growth in Q3. Our customers continue to go all in with Cantaloupe and take advantage of our state-of-the-art micro market solution.

Ravi Venkatesan: We are entering Q4 with a robust pipeline in all of these markets.

Ravi Venkatesan: Turning to the quarter, we had several exciting new wins, which will continue to drive subscription and transaction revenue.

Ravi Venkatesan: We are accelerating growth in micro markets and the penetration of <unk> software with both existing and new customers.

Ravi Venkatesan: Notably our micro market business experienced strong year over year growth in Q3.

Ravi Venkatesan: Our customers continue to go all in with catalog and take advantage of our state of the art micro market solutions.

Ravi Venkatesan: Dependable Vending is an example of a customer who is in the process of converting competitor kiosks onto the Cantaloupe Go platform. This is an existing seed customer who saw the advantages of leveraging Cantaloupe as a single partner to support their growing micro-market business and drive increased savings to their bottom line.

Ravi Venkatesan: Dependable vending is an example of a customer who is in the process of converting competitive kiosk onto the catalog go platform.

Ravi Venkatesan: This is an existing seed customer who saw the advantages to leveraging catalog as a single partner to support their growing micro market business and drive increased savings to their bottom line.

Ravi Venkatesan: We're also seeing customers that leverage Cantaloupe today for seed or micromarkets, converting competitor card readers onto our platform and consolidating their needs with one reliable partner to service their entire business. To this end, Pepsi Mid-America, an existing seed customer, secured a large number of engaged combo devices, replacing competitor devices. We also onboarded many new customers in the quarter, including AYSV, who went all in with Cantaloupe, signing up for C-Pro, Office, Markets, Delivery, and PickEasy.

Ravi Venkatesan: We're also seeing customers that leverage can look today for seed or micro market converting competitor card readers onto our platform and consolidating their needs with one reliable partner to serve as their entire business.

Ravi Venkatesan: And Pepsi mid America, and existing seed customer secured a large number of engage combo devices, replacing competitor devices.

Ravi Venkatesan: We also on boarded many new customers in the quarter, including a Y S. We went all in with cantaloupe, signing up for seed Pro office markets delivery and pick easy.

Ravi Venkatesan: We also recently partnered with Monumental Markets, an innovative operator in Washington, D.C., Virginia, and Maryland, to implement our seed markets platform across 500 plus micromarket and pantry locations, streamlining operations and Enhancing the guest experience for consumers. Craig Kushner, the President of Monumental Markets, stated, "With seed markets, you literally hit a button, and it's done. What once required days of manual work is now accomplished effortless, allowing us to reallocate resources toward growth and service excellence." Having everything on one system allows us to move away from static scheduling to dynamic scheduling, which significantly enhances our service levels and drives productivity.

Ravi Venkatesan: We also recently partnered with monumental markets and innovative operator in Washington, D C, Virginia, and Maryland to implement our seed market platform across 500, plus micro market and pantry locations streamlining operations and enhancing the guest experience for consumers.

Ravi Venkatesan: Craig Kushner the precedent of monumental markets stated with seed markets you literally hit a button and it's done what once acquired base of manual work is now accomplished effortlessly, allowing us to reallocate resources towards growth and service excellence.

Ravi Venkatesan: Having everything on one system allows us to move away from static scheduling to dynamic scheduling, which significantly enhances our service levels and drive productivity.

Ravi Venkatesan: Another area of growth is through our channel diversification with both partners and resellers. We recently signed on a new reseller in Canada, AU Natural, who placed their first large order for engaged devices and will serve as a provider to the smaller and midsize operators in the Canadian market and be able to provide fast and cost-effective shipping directly within that country. We continue to see strong growth with our BEP or blind enterprise program partners, with significant micro market sales in Q3 across multiple state BEP programs.

Ravi Venkatesan: Another area of growth is through our channel diversification with both partners and resellers.

Ravi Venkatesan: We recently signed on a new reseller in Canada Au Naturel, who place their first large order for engage devices and will serve as a provider to the smaller and mid size operators in the Canada market and be able to provide fast and cost effective shipping directly within that country.

Ravi Venkatesan: We continue to see strong growth with our Bep are blind enterprise program partners with significant micro market sales in Q3 across multiple state bep programs.

Ravi Venkatesan: We also recently announced a strategic partnership with Innovative Display Works, or IDW, to become a preferred OEM to manufacture our revolutionary cooler cafe for IDW's customers across the country. This collaboration not only expands the availability of the Cantaloupe smart lock connect technology but also leverages IDW as a strategic channel partner for our cooler cafe solution. Our next area for focus is innovation with new products and enhancements. I just returned from a week in Dallas, where the NAMA show was taking place.

Ravi Venkatesan: We also recently announced a strategic partnership with innovative display works or ITW.

Ravi Venkatesan: A preferred OEM.

Ravi Venkatesan: A manufacturer a revolutionary cooler cafes for ITW as customers across the country.

Ravi Venkatesan: This collaboration not only expands the availability of the catalog smart lock connect technology, but also leverages ITW as a strategic channel partner for a cooler cafe solution.

Ravi Venkatesan: Our next area for focus is innovation with new products and enhancements.

Ravi Venkatesan: Just returned from a week in Dallas with dynamics show has been taking place there has been a lot of buzz around our booth, where we've been showcasing all our solution, including the new check point of sale platform and our latest micro market innovations.

Ravi Venkatesan: There has been a lot of buzz around our booth where we've been showcasing all our solutions, including the new check point of sale platform and our latest micro market innovations, like the new modern kiosk design and smart coolers leveraging both AI and age verification. Our quick, easy integration with seed software is also now available, and it's capturing customer interest with signups underway to empower our operators to digitize their warehouse operations. SEAD Intelligence is now commercially available as a new add-on, facilitating cross-systems reporting by integrating data from SEAD Pro to derive actionable insights.

Ravi Venkatesan: The new modern kiosk designed and smart coolers, leveraging both AI and age verification technology.

Ravi Venkatesan: Our pick easy integration with seed software is also now available and its capturing customer interest with sign ups underway to empower our operators to digitize their warehouse operations.

Ravi Venkatesan: Feed intelligence is now commercially available as a new add on.

Ravi Venkatesan: <unk> Cros systems reporting by integrating data from <unk> pro to derive actionable insights.

Ravi Venkatesan: The adoption of seed analytics is also ramping up as operators use this tool to leverage data to grow their business with improved decision making and enhanced productivity. Our acquisition of CHECK and the integration are also going very well. During the quarter, we signed two additional minor league baseball stadiums and are seeing a strong pipeline develop in this exciting sports and entertainment market. As we engage more with customers in these segments, we are receiving very positive feedback.

Ravi Venkatesan: The adoption of feed analytics is also ramping up as operators use this tool to leverage data to grow their business with improved decision, making and enhance productivity.

Ravi Venkatesan: Our acquisition of checks and the integration is also going very well during the quarter. We signed two additional minor league baseball stadiums and are seeing a strong pipeline developing this exciting sports and entertainment market as.

Ravi Venkatesan: As we engage more with customers in these segments, we are receiving very positive feedback.

Ravi Venkatesan: Nick Desrosiers, Managing Partner at Liberty Sports Group and F&B Operator at Mercy One Field, said, "We're constantly seeking out the best new technology for our venue. Our collaboration with Chex significantly upgrades our tech stack, and we are thrilled to work together in delivering amazing fan experiences for all to enjoy." Jason Wright, NFL's Washington Commander, team president, and an existing Czech customer said, "We saw significant improvement in key food and beverage metrics, including a reduction in wait times and an increase in average ticket size. The ordering process was seamless."

Ravi Venkatesan: Nick that throws years managing partner at Liberty Sports Group and F&B, operator, Mercy, one field that we are constantly seeking out the best new technology for our venue partners, our collaboration with check significantly upgrades, our tech stack and we are thrilled to work together and delivering.

Ravi Venkatesan: Raising fan experiences for all to enjoy.

Ravi Venkatesan: Jason right NFL to Washington commanders team President and existing check customer said, we saw significant improvement in key food and beverage metrics, including a reduction in wait times and an increase in average ticket size. The ordering process was seamless guests of all ages.

Ravi Venkatesan: Guests of all ages were able to order their favorite food with just a few taps. As I touched upon earlier, we are continuing to expand our footprint internationally, with thousands of connections across Latin America and Europe now. In addition to the large partnership in Mexico that I mentioned earlier, we recently held our first Cantaloupe Innovation Day in Mexico with AMS, our Mexican reseller partner, and Exene, a local distributor. We have now secured several agreements with vending operators such as ER Vending, Abril Vending, and Citibox Vending in that geography. In Europe, we continue to make progress in scaling from pilots to full implementation. Notable new customers include Venn Marquis, Premier Vending, and Carbon Neutral Vending. This momentum has continued into Q4.

Ravi Venkatesan: Build to order their favorite food with just a few taps.

Ravi Venkatesan: As I touched upon earlier.

Ravi Venkatesan: We're continuing to expand our footprint internationally with thousands of connections across Latin America and Europe now.

Ravi Venkatesan: In addition to the large partnership in Mexico that I mentioned earlier, we recently held our first Cantaloupe innovation day in Mexico with Ams, our Mexican reseller partner and <unk> seen a local distributor <unk>.

Ravi Venkatesan: We now have secured several agreements with vending operators, such as ER vending abra lending and citywalk spending in that geography.

Ravi Venkatesan: In Europe, we continue to make progress in scaling from pilot to full implementation.

Ravi Venkatesan: Notable new customers include when marquee premier vending and carbon neutral lending.

Ravi Venkatesan: This momentum has continued into Q4, we also continue to see customers, placing and purchasing and placing micro markets and smart fridges, including new wins with county, local vending the vending people, new vending jetblue lending and connect lending.

Ravi Venkatesan: We also continue to see customers placing and purchasing micro markets and smart fridges, including new wins with county local vending, the vending people, new vending, JW vending, and connect vending. We've previously discussed our efforts to expand into adjacent verticals and have recently accelerated our services and cashless acceptance for the amusement sector. We secured Mendota Valley Amusements as a premium reseller to their bar, restaurant, and family fun center partners across the United States.

Ravi Venkatesan: We've previously discussed our efforts to expand into adjacent verticals and have recently accelerated our services and cashless acceptance for the amusement sector.

Ravi Venkatesan: We secured Mendota valley amusements as a premium retailer.

Ravi Venkatesan: Our bar restaurant and family Fun Center partners across the United States.

Ravi Venkatesan: They came on board as a customer in Q3, securing devices for their own local Minneapolis-based regional location, and have now gone all in, buying a significant number of devices to take our solutions to all of their partners across the country. NEM, National Entertainment Network, also continues to expand its footprint with us, adding cashless payments to their fleet of amusement and gaming locations.

Ravi Venkatesan: They came on board as a customer in Q3, securing devices for their own local Minneapolis based regional location.

Ravi Venkatesan: And have now gone all in buying a significant number of devices to take our solutions to all of their partners across the country.

Ravi Venkatesan: Any in National Entertainment Network also continues to expand their footprint with us, adding cashless payments to their fleet of amusement and gaming locations.

Ravi Venkatesan: Beyond all these growth initiatives, we also remain focused on continued optimization of cost of goods sold. As mentioned earlier, we've made significant progress in expanding growth margins through the optimization of COGS, especially in transaction processing and equipment. Equipment margin improved sequentially from 2% last quarter to 7% in Q3. And transaction margin also improved sequentially from 21% to 23%. Lastly, discipline in managing operational expenses remains a priority.

Ravi Venkatesan: Beyond all of these growth initiatives.

Ravi Venkatesan: We also remain focused on continued optimization of cost of goods sold.

Ravi Venkatesan: As mentioned earlier, we made significant progress in expanding gross margins through the optimization of Cogs, especially.

Ravi Venkatesan: Especially in transaction processing and equipment equip.

Ravi Venkatesan: Equipment margin improved sequentially from 2% last quarter to 7% in Q3 and transaction margin also improved sequentially from 21% to 23%.

Ravi Venkatesan: Lastly, disciplined and managing operational expenses remains a priority.

Ravi Venkatesan: In the third quarter, while OPEX was approximately $6 million higher year-over-year due to a number of one-time items that Scott will discuss, without these items, OPEX as a percentage of revenue would have been flat to last year in spite of investments in our international economy. To wrap up, I wanted to highlight our 2024 Micropayment Trends Report, which analyzes payment transaction data from a sample of more than 600,000 cantaloupe card readers on vending machines.

Ravi Venkatesan: In the third quarter, while Opex was approximately $6 million higher year over year due to a number of onetime items that Scott will discuss without these items opex as a percentage of revenues would have been flat to last year in spite of investments in our international expansion.

Ravi Venkatesan: To wrap up I wanted to highlight our 2024 micro payment trends report, which analyzes payment transaction data from a sample of more than 600000 cantaloupe card readers on vending machine or.

Ravi Venkatesan: Our findings show a significant rise in cashless and touchless payments along with the growth of micromarkets in the convenience services industry, revealing a 36% increase in the number of installed micro market locations in 2020. These strong secular tailwinds validate the long-term opportunity of Cantaloupe and will continue to drive our business for years to come. As always, thanks to the entire Cantaloupe team for their hard work in Q3. And with that, Scott will now review our Q3 results in more detail, as well as our updated outlook for Fiscal Year 24. Scott.

Ravi Venkatesan: Our findings show significant ryzen cashless and touchless payments.

Scott: Along with the growth of micro markets in the convenient services industry.

Scott: Wheeling, a 36% increase in the number of installed micro market locations in 2023.

Scott: These strong secular tailwind validate the long term opportunity of catalog and we will continue to drive our business for years to come.

Scott: As always thanks.

Ravi Venkatesan: Thanks to the entire catalog team for their hard work in Q3 and with that Scott will now review, our Q3 results in more detail as well as our updated outlook for fiscal year 'twenty for Scott.

Scott Matthew Stewart: Thanks, Ravi. As Ravi mentioned, we delivered another strong quarter. Our 3Q24 revenue was $67.9 million, up 13% year over year. Our combined transaction subscription revenue grew 16% to $59.2 million during the quarter. This includes $19.2 million of subscription revenue, a year-over-year increase of 7.4%, and $40 million of transaction revenue, an increase of 20% year over year. The overall increase in transaction revenue was driven by an increase in our take rate. Growth in active devices and higher average ticket sizes.

Scott: Thanks, Ravi as Ravi mentioned, we delivered another strong quarter or <unk> 24 revenue was $67 9 million up 13% year over year our.

Scott Matthew Stewart: Our combined transaction and subscription revenue grew 16% to $59 $2 million during the quarter. This includes $19 $2 million of subscription revenue our year over year increase of seven 4%.

Scott Matthew Stewart: And $40 million of transaction revenue, an increase of 20% year over year.

Scott Matthew Stewart: Overall increase in transaction revenue was driven by an increase in our take rate.

Scott Matthew Stewart: Growth in active devices and higher average ticket sizes subscription.

Scott Matthew Stewart: Subscription revenue growth was largely driven by growth in our Cantaloupe One program and strength in our micromarket solution. As a result, average revenue per unit, or ARPU, for 3Q24 was $1.86, or $1.86, up 11% from the prior year period. As a reminder, this is defined as our total subscription and transaction fees for the trailing 12 months, divided by average total active devices for the same period. Our Equipment Revenue was $8.7 million, a decrease of 5% compared to Q3 FY23.

Scott Matthew Stewart: Subscription revenue growth was largely driven by growth in our catalog one program and strengthen our micro market solution.

Scott Matthew Stewart: As average revenue per unit or <unk> for <unk> 24.

Scott Matthew Stewart: $1 86 versus $186 up 11% from the prior year period.

Scott Matthew Stewart: As a reminder, this was defined as our total subscription and transaction fees for the trailing 12 months divided by average total active devices for the same period.

Scott Matthew Stewart: Our equipment revenue.

Scott Matthew Stewart: Was $8 7 million.

Scott Matthew Stewart: The decrease of 5% compared to Q3 FY2023.

Scott Matthew Stewart: This was primarily due to the prior year benefiting from the 3G upgrade cycle that is now behind us. While overall equipment revenue was down, we did see an increase in active device growth of 6% year over year. Filiberto's margin for the quarter was 39.6% compared to 37.9% in the same quarter last year, driven by higher margins in both the subscription and transaction revenue lots. Subscription and transaction revenue margin was 44.4%, versus 42.3% in the prior year. This increase is driven by an improved processing take rate and reduced processing costs.

Scott Matthew Stewart: Primarily due to prior year benefiting from the <unk> upgrade cycle does now behind us.

Scott Matthew Stewart: While overall equipment revenue was down we did see an increase in access device growth of 6% year over year.

Scott Matthew Stewart: Total gross margin for the quarter was 39, 6% compared to 37, 9% in the same quarter last year.

Scott Matthew Stewart: Driven by higher margins in both the subscription and transaction revenue loss.

Scott Matthew Stewart: Subscription and transaction revenue margin was 44, 4%.

Scott Matthew Stewart: <unk> 42, 3% in the prior year.

Scott Matthew Stewart: This increase was driven by an improved processing take rate and reduce processing costs.

Scott Matthew Stewart: Equipment revenue margin for Q3 FY24 declined to 7.2% from 13.4% in the prior year. The decrease was due to initial ramp-up costs from international expansion. These costs will normalize as our volumes scale. Total operating expenses in Q3 FY24 were $22.6 million compared to $16.2 million in Q3 FY23. This increase was due to expenses related to the check acquisition, including transaction costs, stock remediation, and last year's $1 billion net benefit from an insurance settlement.

Scott Matthew Stewart: Equipment revenue margin for Q3, FY 'twenty four declined to seven 2% from 13, 4% in the prior year.

Scott Matthew Stewart: The decrease was due to the initial ramp up costs from international expansion.

Scott Matthew Stewart: These costs will normalize as our volume scale.

Scott Matthew Stewart: Total operating expenses in Q3, FY 'twenty four were $22 6 million compared to $16 2 million in Q3, FY2023.

Scott Matthew Stewart: This increase was due to expenses related to the check acquisition, including transaction costs.

Scott Matthew Stewart: Sox remediation and last year's $1 million benefit from insurance settlements as Ravi mentioned without these items opex as a percentage of revenue would have been flat year over year.

Scott Matthew Stewart: As Ravi mentioned, without these items, OPEX's percentage of revenue would have been flat year over year. Net income applicable to common shares for the third quarter was $4.4 million, or $0.06 per share, compared to net income of $6.7 million, or $0.09 per share in the prior period. Adjusted EBITDA was $10.2 million in the third quarter compared to $10.1 million in the prior year period, an increase of 1%. We ended the third quarter with cash-in-cash equivalents of $50.2 million.

Scott Matthew Stewart: Net income applicable to common shares for the third quarter with $4 4 million or <unk> <unk> per share compared to net income of $6 7 million or <unk> <unk> per share in the prior period.

Scott Matthew Stewart: Adjusted EBITDA was $10 2 million in the third quarter compared to $10 1 million in the prior year period, an increase of 1%.

Scott Matthew Stewart: We ended the third quarter with cash and cash equivalents of $50 2 million.

Scott Matthew Stewart: Our capital allocation priorities continue to target profitable growth and are specifically focused on driving operational improvements to control outbacks, expanding our micro-market offerings, and investing in domestic and international go-to-market strategies and product development. Now turning to the FY24 Guide.

Scott Matthew Stewart: Our capital allocation priorities continue to target profitable growth and are specifically focused on driving operational improvements to control opex, expanding our micro market offerings and investing in domestic and international go to market strategy and product development.

Speaker Change: Now I'll turn it into FY 'twenty four guidance with one quarter remaining of our fiscal year to report, we're tightening and updating our guidance ranges.

Scott Matthew Stewart: With one quarter remaining in our fiscal year to report, we are tightening and updating our guidance range. We now expect total revenue to be between $270 million and $275 million. This is driven by a recalibrated map of our international expansion, and we now expect transaction subscription revenue to be between $232 million and $236 million. We expect total U.S. gap net income to be between $12 million and $15 million. Based on our progress with improving gross margins for both transaction and subscription revenue and our improved operating leverage overall, we are raising our adjusted EBITDA guidance to a range of $33 million to $36 million.

Scott Matthew Stewart: We now expect total revenue to be between $270 million and $275 million.

Scott Matthew Stewart: This was driven by our Recalibrated ramps of our international expansion.

Scott Matthew Stewart: We now expect transaction subscription revenue to be between $232 million and $236 million.

Scott Matthew Stewart: We expect total U S GAAP net income to be between $12 million and $15 million.

Scott Matthew Stewart: Based on our progress with improving gross margins for both transaction and subscription revenue and our improved operating leverage overall, we are raising our adjusted EBITDA guidance to a range of $33 million to $36 million.

Scott Matthew Stewart: Total operating cash flow is expected to be between $24 million and $28 million. In summary, we have improved profitability throughout the year and achieved meaningful revenue growth. While subscription revenue has grown slower than anticipated, transaction revenue is exceeding expectations and achieving higher profitability rates soon. With that, we'd like to turn the call back over to the operator for the Q&A session. Operator.

Scott Matthew Stewart: Total operating cash flow is expected to be between $24 million and $28 million.

Scott Matthew Stewart: In summary, we have improved profitability throughout the year and achieve meaningful revenue growth.

Scott Matthew Stewart: While subscription revenue has gone slower than anticipated production revenue is exceeding expectations and achieving higher profitability rates sooner.

Scott Matthew Stewart: With that we'd like to turn the call back over to the operator for the Q&A session operator.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will take our first question. Your first question comes from the line of Chris Kennedy on behalf of William Blair. Please go ahead; your line is open.

Operator: Thank you as a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and Glenn again.

Cristopher David Kennedy: We will take our first question.

Operator: First question comes from the line of Chris Kennedy from William Blair. Please go ahead. Your line is open.

Cristopher David Kennedy: Good afternoon. Thanks for taking the question. The guidance implies a nice snapback and acceleration in subscription and transaction revenue growth in the fourth quarter. Can you talk about the key drivers there?

Cristopher David Kennedy: Good afternoon, and thanks for taking the question the guidance implies a nice snapback in acceleration in the subscription and transaction revenue growth in the fourth quarter can you talk about the key drivers there.

Ravi Venkatesan: Good afternoon, Chris. Thanks for the question. Yeah, the key drivers are we've seen a stabilization in the activation timeline as a result of several initiatives, including adding more installers and providing more training to our customers so that they can be more efficient in accelerating those activations, so that's one step, and a ramp-up in international expansion where several projects have gone from pilot to now more full-scale implementations. In addition to that, we've also seen strong growth on the transaction side, with a mixed shift from lower ticket items to higher ticket items and micro markets becoming a bigger part of the equation.

Cristopher David Kennedy: Good afternoon, Chris Thanks for the question Yeah. The key drivers are we've seen a stabilization in the activation timelines.

Ravi Venkatesan: As a result of several initiatives, including adding more installers and providing more training to our customers. So that they can be more efficient in activating those activations. So thats, one step and ramp up in international expansion. There are several projects have gone from pilot to now more full scale.

Ravi Venkatesan: <unk>.

Ravi Venkatesan: In addition to that we've also seen strong growth in transaction side with a mix shift from lower ticket items to higher ticket items and micro markets, becoming a bigger part of the equation.

Ravi Venkatesan: Okay very helpful. And then you talked about subscription.

Ravi Venkatesan: very helpful. And then you talked about subscriptions and growth of over 15% in fiscal 2025. When you think about that, how does that align with your long-term fiscal 2026 goals of margin improvement? What have you?

Ravi Venkatesan: Revenue growth of over 15% in fiscal 2025, when you think about that how does that.

Ravi Venkatesan: Aligned with your long term fiscal 2026 goals.

Ravi Venkatesan: Margin improvement what have you.

Ravi Venkatesan: So when we outlined our strategy with kind of a three-year time horizon, we had articulated a target of 20% subscription. We acknowledge that that has performed lower than our original expectation, while the transaction revenue growth rate and margins have performed better than our original expectation. The purpose of both the subscription revenue growth and targeting it that way, as well as working on the cost of goods sold on the transaction revenue growth rate, was to get to a CAGR of 70% on EBITDA over a three-year period.

Ravi Venkatesan: So when we outlined our strategy with kind of a three year time horizon.

Ravi Venkatesan: Had articulated a target of 20% subscription.

Ravi Venkatesan: Growth rate year over year, and we acknowledge that that has performed lower than our original expectation.

Ravi Venkatesan: The transaction revenue growth rate and margins have performed better than our original expectations.

Ravi Venkatesan: The purpose of both the subscription revenue growth and targeting exactly as well as working on the cost of goods sold on the transaction revenue growth rate was to get to CAGR of 70% on the EBITDA over a three year period. The good news is that we're still on target for that.

Ravi Venkatesan: The good news is that we are still on target for that. Although one of the levers has performed better, and the other one has performed less than the others, this now reflects the recalibrated ramp on the subscription revenue growth rate. We are comfortable in articulating where it will land for fiscal year 25. We have to do a lot more work before articulating where it will land for fiscal year 20.

Ravi Venkatesan: Although one of the levers have performed better than the other one is performed less than we expected. So this now reflect the recalibrated ramp of the subscription revenue growth rate. We are comfortable in articulating their designed for fiscal year 'twenty five we have to do a lot more work before articulating where it will land in fiscal year 'twenty six.

Operator: Great. Thanks for taking the question.

Speaker Change: Great. Thanks for taking the questions.

Speaker Change: Thank you.

Operator: We will take our next question. Your next question comes from the line of Josh Nichols from Beaviley. Please go ahead. Your line is open.

Speaker Change: We will take our next question.

Operator: Your next question comes from the line of Josh Nichols from B. Riley. Please go ahead. Your line is open.

Josh Nichols: Yeah, thanks for taking my question. And just to dive in, the gross margins have really shown a lot of upside relative to expectations, which is a little bit surprising, just because, usually, subscription revenue, right, is the stuff that has by far the highest contribution margin. I'm just curious, like, if you think subscription growth is going to be accelerating from the current levels to, say, 15 plus percent, as you kind of talked about, wouldn't that imply that as long as you're able to hold transaction margins around these levels, you could see some further nice step-ups in the overall margin for subscription and transaction revenue? Is that a fair assessment for how you're thinking about the fourth quarter and next year?

Josh Nichols: Yes, Thanks for taking my question and just to dive in.

Josh Nichols: The gross margins have really shown a lot of upside relative to expectations.

Josh Nichols: Which is a little bit surprising just because usually the subscription revenue rate is the stuff that has by far the highest contribution margin.

Josh Nichols: I'm just curious like if you think subscription growth is going to be accelerating from the current levels to say 15 plus percent. So as you kind of talk about wouldnt that imply that as long as you're able to hold like transaction margins around these levels that you could see some further nice step ups in the overall margin for.

Josh Nichols: And transaction revenue is that like a fair assessment for how youre thinking about.

Josh Nichols: The fourth quarter and next year.

Ravi Venkatesan: I think it's a fair assessment. I'll give you my perspective, and I'd love to have Scott add to that as well.

Speaker Change: I think it's a fair assessment I'll give you my perspective, and I'd love to have Scott add onto that as well.

Scott Matthew Stewart: The real reason why it isn't, hey, here are three steps up, is because, remember, we are also now continuing to aggressively expand into two new geographies with Europe and Latin America. And, by the way, we'll have phase two of international expansion follow shortly thereafter. So as you get into newer markets, for a period of time as we ramp up transaction volumes, the margins are lower. And then once we get to economies of scale, then the margins start kicking in. Scott, anything to add to that? No, that's exactly right, Ravi.

Speaker Change: The real reason why.

Scott: Why it doesn't hit our three steps up is because remember we are also now continuing to aggressively expand into two new geographies.

Scott: Europe, and Latin America, and by the way it will have a phase two of international expansion followed shortly thereafter, so as you get into newer markets for a period of time as we ramp the transaction volumes. The margins are lower and then once we get to economies of scale then the margin start kicking in.

Scott Matthew Stewart: Scott anything to add to that.

Scott Matthew Stewart: No, that's exactly right, Ravi. As we look to expand that, I think within the next year, margins on equipment and transactions might be a little bit depressed from where they currently are right now, but not much, maybe half a percentage point or so on the transaction margin side. But we do expect that to rebound as we start building those economies and scales.

Scott: Right Ravi is we look to expand on I think within the first within the next year.

Scott Matthew Stewart: Margins on equipment and transaction might be a little bit depressed from where they currently are right now, but not much maybe half a percentage point or so on the transaction margin side, but we do expect that to rebound back as we start building those economy of scales.

Josh Nichols: And then just looking as a follow-up here, as it was kind of mentioned, there's a very nice step up in the growth trajectory across subscription, but also transaction fee, revenue, and hardware as well, too. For the fourth quarter, I'm just curious in terms of visibility since we're over a month into the quarter. Have a lot of these orders already been placed? You said you've been transitioning from pilots into full-scale implementation. I'm just curious about the confidence you have in achieving that big step up in visibility based on the pipeline that you talked about.

Scott Matthew Stewart: Thanks.

Scott Matthew Stewart: Just looking at.

Josh Nichols: Follow up here.

Josh Nichols: As it was kind of mentioned there is a very nice step up.

Josh Nichols: The growth trajectory across subscription but also.

Josh Nichols: Transaction fee revenue and hardware as well too candidly.

Josh Nichols: For the fourth quarter I'm, just curious in terms of the visibility.

Josh Nichols: We're over a month into the quarter have a lot of these orders have already been placed you said you've been transitioning from pilots into full scale implementation.

Josh Nichols: Curious the confidence you have in achieving that big step up in the visibility based on the pipeline that you talked about.

Ravi Venkatesan: A high level of confidence. I think the reason we were very excited to share some concrete numbers on international trade as part of this call was, you know, quite frankly, it's new. And for a lot of our investors, I think the international expansion was perceived as one of the areas of risk with respect to this company and our, you know, future growth. And so I'm glad to report that we have made thousands of connections in both Latin America and in Europe. So everybody knows that planes take off from the runway and, you know, rapidly climbing towards cruising out.

Josh Nichols: A high level of confidence I think the reason we were ready.

Ravi Venkatesan: I'm excited to share some concrete numbers on international as part of this call was quite frankly, it's new and for a lot of our investors I think the international expansion was perceived as one of the areas of risk with respect to this company and our future growth.

Ravi Venkatesan: So I am glad to report that we have across thousands of connections in both Latin America and in Europe.

Ravi Venkatesan: Everybody knows that the claims of the runway and rapidly climbing towards cruising altitude.

Josh Nichols: And then the last question for me, I'm just gonna ask because I know it's been a point that's kind of been talked about in more detail previously. You had talked about some installation bottlenecks, I know that you've hired some people and done a lot of work on that front. Have you brought the timelines for installation back down to that like four to six weeks type average? Or I'm just curious, with the ramp up domestically, but also abroad, what you're expecting?

Speaker Change: I appreciate that and then last question for me I'm, just going to ask because I know it's been a point that's kind of been talked about a more detailed previously.

Josh Nichols: You had you had talked about some installation bottlenecks I know that you've hired some people in and done a lot of work on that front have you brought the timelines for installation back down to that four to six week type average or I'm, just curious with the ramp up domestically, but also abroad, what you expected.

Ravi Venkatesan: So, no, we have not been able to bring them back down. But we have been able to stabilize and hold them at kind of the, I would say, 12-week range.

Speaker Change: No we have not been able to bring them back down we have been able to stabilize and hold them at kind of the.

Ravi Venkatesan: I would say 12 week range.

Ravi Venkatesan: And based on all the data that I've looked at and that, you know, we've analyzed, we think we will sustain it at this level. We don't think in the near future we'll be able to shrink it back down. And that's really just driven by, you know, continued severe labor shortages that exist. And while we can do a lot with technology, and we have done a lot with technology in accelerating those, at some point, you run into a point of diminishing returns. So we think we'll hold and sustain. But we are not optimistic about being able to shrink those timelines back down.

Ravi Venkatesan: Based on all the data that I've looked at it and that we've analyzed we think we will sustain it at this level. We don't think in the near future, we will be able to shrink it back down and Thats really just driven by <unk>.

Ravi Venkatesan: Continued severe labor shortages that exist and what we can do a lot of the technology and we have done a lot with technology and accelerating those.

Ravi Venkatesan: At some point.

Ravi Venkatesan: You run into point of diminishing returns. So we think will hold and sustain we're not optimistic about being able to shrink those time lines back down.

Josh Nichols: Understand. Got it. Thank you. I'll have that in the queue.

Speaker Change: Understood got it. Thank you I'll hop back in the queue.

Speaker Change: Thank you.

Operator: Thank you. We will take our next question, and your next question comes from the line of Gary Prestopino from Barrington Research. Please go ahead; your line is open.

Speaker Change: Thank you.

Speaker Change: We'll take our next question.

Gary Frank Prestopino: Your next question comes from the line of Gary <unk> from Barrington Research. Please go ahead. Your line is open.

Gary Frank Prestopino: Hi Scott. Hi Ravi.

Gary Frank Prestopino: Hi, Scott, Hi, Robyn Hey.

Gary Frank Prestopino: Questions here.

Gary Frank Prestopino: Hey, a couple of questions here. First of all, on the transaction side, it's Exceeding Expectations. Is that a lot of that driven by the micromarket business and that you get higher ticket prices there? Or have you been able, because you've increased your volumes, been able to negotiate better terms with some of the card networks?

Gary Frank Prestopino: First of all on the transaction side.

Gary Frank Prestopino: It's exceeding expectations is that a lot of that driven by the.

Gary Frank Prestopino: A micro market business and that you get higher ticket prices, there where have you been able to because you have increased your volumes been able to negotiate better terms.

Gary Frank Prestopino: With.

Gary Frank Prestopino: Some of the card networks.

Ravi Venkatesan: It's a combination, you know; the micro-markets becoming a bigger part of the equation have definitely helped. Even in cases like vending, the types of products that are sold through those channels have changed. I mean, now you have vending machines that are dispensing cupcakes and pizza and headphones and cosmetics instead of just, you know, snacks and beverages. So that's helped. Some of our other verticals, like amusement, et cetera, have also had higher ticket items.

Gary Frank Prestopino: It's a combination the micro markets, becoming a bigger part of the equation has definitely helped.

Ravi Venkatesan: Even in cases like Wendy the types of products that are sold through those channels have changed I mean now you have.

Ravi Venkatesan: Vending machines, there are dispensing cupcakes, and pizza and headphones and cosmetics and sort of just.

Ravi Venkatesan: Snacks and beverages.

Ravi Venkatesan: That's helped some of our other verticals like amusement et cetera have had also a higher ticket.

Ravi Venkatesan: So all that. So the product mix is shifting favorably. That's one ask. And yes, we've been able to do optimization on the transaction processing cost, which, you know, both in combination, so it's not just one side of the equation. You know, it's kind of both of those sides.

Ravi Venkatesan: Items, so all of that so that the product mix shift.

Ravi Venkatesan: Shifting favorably that's one aspect.

Ravi Venkatesan: And yes, we've been able to do optimization on the transaction processing cost, which more than combination. So its not one side of the equation.

Ravi Venkatesan: It's kind of both of those sites.

Scott Matthew Stewart: And I'll add to that a little bit too, Gary. So if you look across the past four quarters, our take rate has increased quarter over quarter. And that's intentional. We've done a lot of work with our sales folks, and they are entering into new contracts to make sure that we're keeping as high of a take rate as possible.

Speaker Change: I'll add to that a little bit too Gary. So if you look across the past four quarters, our take rate has increased quarter over quarter and that's intentional we've done a lot of work with us.

Scott Matthew Stewart: So it's in those or entered into new contracts to make sure that we're keeping.

Scott Matthew Stewart: Hi, the take rate as possible.

Gary Frank Prestopino: Okay, and then I jumped on the call a little bit late, and I know there was a lot of talk about international expansion and what's going on there in the US market, in terms of your seed software platform, or your total software platform, and even particular remote pricing. Um, can you just address how that shakes out in the quarter and that there's still a healthy appetite on the part of operators to want to have this software to maximize their own profitability. Yeah, and that's why I mentioned it, you know.

Speaker Change: Okay, and then I jumped on the call a little bit late I know there was a lot of talk about the international expansion.

Gary Frank Prestopino: What's going on there in the U S market in terms of your seed software platform, where your total software platform and even particular remote price change.

Gary Frank Prestopino: Can you just address how that shook out in the quarter and if there is still a healthy appetite on the part of.

Gary Frank Prestopino: Operators to want to have the software too.

Gary Frank Prestopino: Now maximize their own profitability.

Ravi Venkatesan: Yeah, and that's why I mentioned, part of the nice thing about our business and what I'm seeing as our future is that dependency on selling hardware widgets and installing them to grow revenue per unit continues to diminish as the attach rate on software add-ons has been healthy. So that's how we've been able to grow the RPU so aggressively is by, you know, all these add-on software products. So, yeah, feed penetration within R-based diets has continued to grow at a healthy rate.

Gary Frank Prestopino: And that's why I mentioned.

Ravi Venkatesan: Part of the nice thing about our business and what I'm seeing is our future.

Ravi Venkatesan: Is.

Ravi Venkatesan: Our our dependency on selling hardware digits and installing them to grow their revenue per unit.

Ravi Venkatesan: Continues to diminish as the attach rate on software add ons has been healthy. So that's how we've been able to grow the <unk> collectively is by all these add on software products.

Ravi Venkatesan: Yes feed penetration.

Ravi Venkatesan: Our base has continued to grow at a healthy rate.

Ravi Venkatesan: Remote price changes continue to grow at a healthy rate, and so have some of the newer products, which I mentioned, like seed analytics, intelligence, PEV, et cetera. So the exciting thing is, both on the transaction processing side, through changes in products and ticket sizes, as well as on the software side, we've now identified and executed on vectors of growth that are independent of selling new equipment.

Ravi Venkatesan: A more price changes continue to grow at a healthy rate and so have some of the newer products, which I mentioned black sea downlink data intelligent <unk> et cetera. So the exciting thing is.

Ravi Venkatesan: Both on the transaction processing side through mix shift in products and ticket sizes as well as on the software side. We've now identified and executed on vectors of growth that are independent of selling new equipment.

Speaker Change: Thank you.

Speaker Change: Thank you.

Operator: We will take our next question. Your next question comes from the line of George Sutton from Craig Helen Capital Group. Please go ahead; your line is open.

Speaker Change: We will take our next question.

Operator: Your next question comes from the line of George Sutton from Craig Hallum Capital Group. Please go ahead. Your line is open.

George Frederick Sutton: Hey, good afternoon. This is Adam on behalf of George. Going back to the recalibration of the international ramp, I was hoping you could share a few details about what you've done from a sales and marketing standpoint to coincide with that recalibration.

Operator: Hey, Good afternoon. This is Adam on for George.

George Frederick Sutton: Hi.

Adam: Going back to the Recalibration of the international ramp I was hoping you could share a few details about what you've done from a <unk>.

Adam: Sales and marketing standpoint to coincide with that Recalibration.

Ravi Venkatesan: So from a sales and marketing perspective, it's been more about, you know, what are the right target segments for us? kind of initially versus as we've established credibility, and we can go and start scaling further. And then where do we need to be more channel partner driven versus direct sales driven versus, you know, marketing and search engine optimization driven? So all that, you know, when you enter new markets, you learn a lot, and you learn a lot by yourself as well as from the experiences of others. Right?

Adam: So from a sales and marketing.

Ravi Venkatesan: Perspective, it's been more about.

Ravi Venkatesan: What are the right target segments for us.

Ravi Venkatesan: Initially versus as we've established credibility and we can go and start scaling toward.

Ravi Venkatesan: And then where do we need to be more channel partner driven versus direct sales driven versus marketing and search engine optimization and so all of that.

Ravi Venkatesan: You enter new markets, you learn a lot and you.

Ravi Venkatesan: You learn a lot by yourself as well as from the experiences of others right. So some of our competitors have been in those markets.

Ravi Venkatesan: So some of our competitors have been in those markets for a while, and we've learned both from their successes and their mistakes. But all that has gone into what we are calling a recalibration. And then some of it is just becoming more realistic and informed about our own expectations of the ramp. When we entered the early stages of our European expansion, for example, we thought the upgrade cycle from 3G to 4G connections in Europe would be very similar to the US, where it was basically single-cut off states from the major carriers.

Ravi Venkatesan: And then we've learned ports from their successes and their mistakes with all of that has gone into what we are calling it the recalibration and then some of it is just becoming more realistic and informed about our own expectations of the ramp.

Ravi Venkatesan: But as we've executed, we realized that Europe works very differently, where every country has a different cutoff date, and every carrier in every country has a different cutoff date. So the pressures on customers to upgrade equipment have not been the same as they have been in the US. So all that has gone into what we've called a recalibration.

Ravi Venkatesan: We entered the early stages of our Europe expansion. For example, we thought the upgrade cycle from <unk> to four <unk> connections in Europe will be very similar to U S where it was basically single cutoff dates from the major carriers.

Ravi Venkatesan: As we have executed we realized that Europe has work very differently every country has a different.

Ravi Venkatesan: Cutoff date every carrier in every country has a different cutoff date.

Ravi Venkatesan: The pressures on customers to upgrade equipment have not been the same as they've been in the U S. So all that has gone into what we acquired a recalibration.

Ravi Venkatesan: Great, thank you. And then, with respect to the Innovation Day in Mexico, could you just kind of share some of the things you learned from hosting that event? And, in addition, do you have any other Innovation Days scheduled in EMEA or LATAM? Yes, we have a whole pipeline of these types of...

Speaker Change: Great. Thank you and then with respect to the innovation day in Mexico could you just kind of share some of the things you learned from a hosting that event and in addition, do you have any other innovation days scheduled in EMEA or flatter.

Ravi Venkatesan: Yes, we have a whole pipeline of these types of events, and they are intended to drive more conversations and more intimate demonstrations of our innovation capabilities with prospects and customers. The Innovation Day in Mexico that I mentioned was with a couple of key partners, AMS, that's our reseller in the Mexican market, as well as Xeem, one of their distributors, and that enabled us to share innovations with a number of operators that they serve and that they provide equipment to then add on our solutions to both increase in-store sales and boost operational efficiencies for those customers.

Ravi Venkatesan: Yes, we have a whole pipeline of these types of events and they are intended to drive.

Ravi Venkatesan: More conversations and more intimate.

Ravi Venkatesan: Inventory turns of our innovation capabilities with prospects and customers.

Ravi Venkatesan: Innovation day in Mexico that I mentioned was with a couple of key partners.

Ravi Venkatesan: <unk>.

Ravi Venkatesan: Our reseller in the Mexican market as well as <unk> as one of their distributors and that enabled us to share innovations with a number of operators that dsos and that they provide equipment to to then add on our solutions to both increase same store sales and boost operational efficiencies for.

Ravi Venkatesan: Of those customers.

Speaker Change: Great. Thanks, guys.

Ravi Venkatesan: Yeah.

Speaker Change: Thank you.

Speaker Change: We will take our next question.

Operator: We will take our next question. Your next question comes from the line of Mike Latimore from Northland Capital Markets. Please go ahead; your line is open.

Ravi Venkatesan: Your next question comes from the line of Mike Latimore from Northland Capital markets. Please go ahead. Your line is open.

Mike Latimore: Hi, this is Vijay Dever on behalf of Mike Vladimir. I think I'll continue with the international expansion discussion. I think you disclosed how many devices there are in Mexico and EMEA. Could you tell us how many customers you have overall internationally?

Operator: Yeah, Hi, this is Vijay <unk> for Mike Latimore.

Ravi Venkatesan: I think I'll continue with <unk> international.

Mike Latimore: Expand some discretion.

Ravi Venkatesan: I think.

Ravi Venkatesan: Disclose how many new license there in Mexico and EMEA.

Ravi Venkatesan: How many customers we have overall.

Mike Latimore: <unk>.

Ravi Venkatesan: Yeah, I mentioned in the call that in Europe, we are now over 30 customers. We have, you know, a sizable number of customers in Latin America that we haven't yet disclosed that there are. The Latin American market is a little bit more concentrated in terms of a few large players. So, for competitive reasons, we are not yet sharing the number of customers, but suffice to say that it's a healthy number. It's smaller than the total number of customers in India, but in a similar kind of way.

Mike Latimore: Yes, I mentioned in the call that in in Europe, We are now over 30 customers.

Ravi Venkatesan: We have.

Ravi Venkatesan: A sizable number of customers in Latin America is that we haven't yet disclosed that there are Latin American market is a little bit more concentrated in terms of a few large players. So for competitive reasons, we are not yet sharing the number of customers, but suffice to say that it is.

Ravi Venkatesan: It's a healthy number is smaller than the total number of customers in EMEA, but in a similar kind of age.

Ravi Venkatesan: Okay.

Scott Matthew Stewart: And in terms of pricing and gross margin in international businesses, how do they compare with those in the U.S.?

Ravi Venkatesan: In terms of the pricing and gross margin.

Scott Matthew Stewart: On the international business.

Scott Matthew Stewart: Comparable.

Scott Matthew Stewart: In the U S.

Scott Matthew Stewart: On the margin side the pricing.

Scott Matthew Stewart: Yes, when you look at the transaction processing rates, it's generally lower in Europe because you don't have the interchange fees that go along with it. But the margins tend to be a little bit higher. So the cost is significantly less, and overall margins are slightly higher than what we see in the US. As we mentioned a little bit before, as we're breaking into the market and building up our volume, we're probably a little bit below the margins that we have in the US, but as that ramps up, it gets better.

Scott Matthew Stewart: Yes, so when you look at the transaction processing rates.

Scott Matthew Stewart: Generally lower over in Europe, because you don't have the interchange fees that go along with it but the margins tend to be a little bit higher. So the cost is significantly less overall margins are slightly higher than what we see in the U S.

Scott Matthew Stewart: As we mentioned a little bit before.

Scott Matthew Stewart: As we are breaking into the market and building up our volume, we're probably a little bit below margins that we have in the U S, but as that ramps indicate better.

Mike Latimore: Okay, great. And finally, in terms of the deployment timeframe, do you see the timeframe shrinking, or how is it as you're making this progress in terms of expansion? Do you see the deployment time shrinking, or just flat?

Speaker Change: Okay, great and finally.

Mike Latimore: In terms of.

Mike Latimore: The deployment timeframe do you see the bank term shrinking.

Mike Latimore: How is the government.

Mike Latimore: Im making this progress in terms of expansion do you see the deployment by shrinking.

Mike Latimore: Flat.

Ravi Venkatesan: As I mentioned earlier, we think we will sustain the deployment timeline kind of at the same level that they are. That doesn't mean we aren't putting an effort into innovations that can help shrink them further, but our confidence level is high in sustaining the current timelines.

Mike Latimore: Yes, as I mentioned earlier, we think we will.

Ravi Venkatesan: Dean the deployment timelines kind of at the same level that they are.

Ravi Venkatesan: That doesn't mean, we aren't putting effort.

Ravi Venkatesan: <unk> innovations that can help shrink them further, but our confidence level is high and sustaining the current timelines.

Mike Latimore: Got it. Thank you.

Speaker Change: Got it thank you.

Operator: Thank you. I would now like to turn the conference back to management for closing remarks.

Speaker Change: Thank you I would now like to turn the conference back to management for closing remarks.

Ravi Venkatesan: Thank you, operator. Thanks to all our investors and everybody listening in for your engagement. In summary, what I would like to share is this has been an exciting quarter to be able to come back and report concrete progress and numbers on both the Europe and Latin America front and share the progress we've made with growth margins across all of our revenue streams. While the subscription revenue growth has underperformed our original anticipation, it's been good to kind of put a floor on it and look ahead at fiscal year 25.

Speaker Change: Thank you operator, thank to all our investors and everybody listening in for your engagement I think in summary.

Ravi Venkatesan: I'd like to share is this has been an exciting quarter to be able to come back and report concrete progress in numbers on both the Europe and Latin America front and share the progress we've made with gross margins across all of our revenue streams, while the subscription revenue growth has underperformed.

Ravi Venkatesan: Our original anticipation.

Ravi Venkatesan: Ben.

Ravi Venkatesan: Good to kind of put a floor on it and look ahead at fiscal year 'twenty five.

Ravi Venkatesan: So, our investors know what's coming there, and it's also been nice for our management team to be able to express confidence in the longer-term CAGR for EBITDA growth that we had outlined at our investor day a year and a half ago. And as we are at the midpoint of that kind of three-year journey, to know that we are on track to achieve those goals. With that, I'll turn the call back over to you, operator.

Ravi Venkatesan: Our investors know what's coming there.

Ravi Venkatesan: And it's also been nice for our management team to be able to express confidence in the longer term CAGR for EBITDA growth that we had outlined at our Investor day, a year and a half back and as we are at the midpoint of that kind of a three year journey to know that we are on track to achieve those goals.

Ravi Venkatesan: With that I'll turn the call back over to you operator.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Thank you.

Speaker Change: Today's conference call. Thank you for participating you may now disconnect.

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