Q3 2025 Cantaloupe Inc Earnings Call
Yeah.
Operator: Good day and thank you for standing by.
Speaker Change: Good day, and thank you for standing by welcome to the catalyst third quarter fiscal year 2025 earnings Conference call.
Operator: Welcome to the Cantaloupe Third Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you'll need to press star one one on your telephone.
Speaker Change: Then here an automated message advising your hand is raised.
Speaker Change: Draw. Your question. Please press star one one again.
Meg Nomera: Please be advised that today's conference is being I would now like to hand the conference over to Meg Nomera, Investor Relations. Please go ahead. Thank you.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to Mcnamara Investor Relations. Please go ahead.
Ravi Venkatesan: Good afternoon, everyone. Welcome to the Cantaloupe Third Quarter Earnings Conference Call.
Speaker Change: Thank you good afternoon, everyone welcome to the capital third quarter earnings Conference call with me on the call today is Rob I think that takes on.
Ravi Venkatesan: With me on the call today is Ravi Venkatesan, Chief Executive Officer, and Scott Stewart, Chief Financial Officer.
Rob I: Chief Executive Officer, and Scott <unk>, 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 fact are forward looking in nature actual results could differ materially from those contemplated by the forward looking statements because they are.
Ravi Venkatesan: Before we begin today's call, we would like to remind you that all statements included in this call, other than statements of historical facts, are forward looking in nature. Actual results could differ materially from those contemplated by the forward including but not limited to business, financial markets, and economic conditions.
Rob I: Certain factors, including but not limited to business financial market and economic condition.
Ravi Venkatesan: A detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements is included in our filings with the SEC and in the press release issued earlier today. Listeners are cautioned to not place undue reliance on any such forward-looking statements, which reflect management's views only as of the date they are Cantaloupe undertakes no obligation to update any forward-looking statements, whether because of new information, future events, or otherwise.
Rob I: He did a discussion of the risks that are supposed to do.
Rob I: These that could cause the actual results to differ materially from such forward. Looking statements is included in our filings with the SEC and in the press release issued yesterday.
Rob I: Washington knocked me undue reliance on any such forward looking statements, which reflect management's views only as of the date Seattle neat gasoline takes no obligation to update them.
Rob I: Any forward looking statements, whether because of new information future events or otherwise.
Ravi Venkatesan: This call will also include a discussion of certain non-GAAP financial measures that we believe are useful for, among other things, evaluating Cantaloupe's operating results. These non-GAAP financial measures are supplemental to and not substitute for GAAP financial measures such as net income or loss.
Rob I: I would also include a discussion of certain non-GAAP financial measures that we believe are useful for among other things evaluating caseloads operating results. These non-GAAP financial measures are supplemental to and not substitute for GAAP financial measures such as net income or loss.
Ravi Venkatesan: Details of these non-GAAP measures, a presentation of the most directly comparable GAAP financial measures, and a reconciliation between those non-GAAP financial measures, as well as the most comparable GAAP financial measures can be found in our press release issued this afternoon, which has been posted on the Investor Relations section of our website at www.cantaloupe.com.
Rob I: Wesley, Issues this afternoon, which has been posted on the Investoration Section of our website at www.cantaloupe.com. And with that, I would like to turn the call over to Ravi.
Ravi Venkatesan: And with that, I would like to turn the call over to Ravi. Thank you, Meghna. Good afternoon, everyone, and thank you for joining us today for our third quarter fiscal year 2025 call. I'll first start with a high level view of our Q3 performance and outlook for fiscal year 2025, before turning it over to Scott to dive deeper into the numbers and our outlook.
Speaker Change: Thank you, Magna. Good afternoon, everyone, and thank you for joining us today for our third quarter of fiscal year 2025 call. I'll first start with a high-level view of our Q3 performance and outlook for fiscal year 2025 before turning it over to Scott to dive deeper into the numbers and our outlook.
Ravi Venkatesan: Q3 Financial Highlights. During the third quarter, our total revenue increased 11% year-over-year to $75.4 million, driven by a 10% year-over-year transaction revenue growth and 10% year-over-year subscription revenue growth. Our equipment revenue was $10.2 million, an increase of 18% compared to Q3 fiscal year 2015. revenue came in lower than anticipated due to one time weather events, impacting transaction revenue, and delays in equipment purchases due to economic uncertainty. While we had lower than anticipated equipment sales this quarter, we've seen a strong rebound in April, providing us confidence in our newly revised guidance for the year. Scott will cover this in more detail.
Q3 Financial Highlights
Speaker Change: During the third quarter, our total revenue increased 11% year-over-year to $75.4 million.
Speaker Change: Revenue came in lower than anticipated due to one time weather events impacting transaction revenue and delays in equipment purchases due to economic uncertainty.
Speaker Change: While we had lower than anticipated equipment sales this quarter, we've seen a strong rebound in April , providing us confidence in our newly revised guidance for the year. Scott will cover this in more detail.
Ravi Venkatesan: total adjusted growth margin continues to expand for the quarter at 41.6% compared to 39.6% in the same quarter last year. Adjusted EBITDA for Q3 was $13.9 million, a 37% increase compared to prior year, reflecting continued success with expanding margins and operating leverage. Q3 was one of our best quarters for cash generation, with total cash from operating activities achieving $22.4 million.
Speaker Change: Total adjusted gross margin continues to expand for the quarter at 41.6% compared to 39.6% in the same quarter
Speaker Change: Adjusted EBITDA for Q3 was $13.9 million, a 37% increase compared to prior year reflecting continued success with expanding margins and operating leverage.
Speaker Change: Q3 was one of our best quarters for cash generation, with total cash from operating activities achieving 22.4 million dollars.
Ravi Venkatesan: Now on to Q3 operational highlights. We continue to see strong growth in micromarkets and penetration of seed software with both existing and new customers. SMB customers continue to go all in with Cantaloupe, including cashless payments and seed software to manage vending micro markets and smart stores. New wins include NDDN distributions, Variety Vendors, Best Vending, and Ace Vending. Many of these customers have selected SEED software in addition to cashless payment acceptance. A notable win in the enterprise space is DC Vending, who is completing a full replacement of over 1,200 competitive devices and moving from a legacy software platform to Cantaloupe Seed for their vending, micromarket, and office coffee business.
Now on to Q3 operational highlights.
Speaker Change: We continue to see strong growth in micro markets and penetration of seed software with both existing and new customers.
Speaker Change: S&B customers continue to go all in with Cantaloupe, including cashless payments and seed software to manage vending micro markets and smart stores.
Speaker Change: New winds include NDDN distributions, variety vendors, best-wending and ace-wending. Many of these customers have selected seed software in addition to cashless payment acceptance.
Speaker Change: A notable win in the enterprise space is DC Vending, who is completing a full replacement of over 1200 competitive devices and moving from a legacy software platform to Cantaloupe
Ravi Venkatesan: and also deploying add-on modules such as analytics and remote price. We see continued momentum in our micromarket business, including Peppy Foods moving from a competitor's platform to Cantaloupe and booking a large replacement order for 120 micromarkets. And also see wins in the small business segment, including a rollout of micromarkets with amazing rates. Our success in expansion with channel partners and resellers continues with additional orders through the quarter from AVS and TPI for cashless payment devices to sell downstream into their customer base. The amusement vertical remains a strong focus for cashless expansion for us. We had the opportunity to showcase our Engage Pulse device at the AMOA show in Las Vegas in March.
Speaker Change: and also deploying add-on modules such as analytics and remote price change.
Speaker Change: We see continued momentum in our micro market business, including peppy foods moving from a competitor's platform to Cantaloupe and booking a large replacement order for 120 micro markets.
Speaker Change: and also see wins in the small business segment including a rollout of micro markets with amazing
Speaker Change: Our success in expansion with channel partners and resellers continues with additional orders through the quarter from AVS and TPI for cashless payment devices to sell downstream into their customer base.
Speaker Change: The Amusement Vertical Remains A Strong Focus For Cashless Expansion For Us.
Speaker Change: We had the opportunity to showcase our engage pulse device at the AMOA show in Las Vegas in March.
Ravi Venkatesan: We've sold several Engage Pulse units across multiple customers, including bar partners, hype amusement, and also developed a partnership with CandyMachines.com, where we will become one of their primary cashless payment providers for their customers. During Q3, we shipped over $2 million of smart stores, which drive incremental growth in new verticals and accelerate our foothold in the adjacent areas of residential, airport, and transportation sectors. We continue to gain traction in sports and entertainment venues at the mid-tier level, including two independent baseball league venues who are adopting Cantaloupe's full point of sale platform, along with leveraging our suit management for creating a cohesive fan game day experience.
Speaker Change: We saw several engaged policy units across multiple customers, including bar partners, hyper amusement, and also developed a partnership with candymachines.com where we will become one of their primary cashless payment providers for their customers.
Speaker Change: During Q3, we shipped over two million dollars of smart stores which drive incremental growth in new verticals and accelerate our foretold in the adjacent areas of residential, airport and transportation sectors.
Speaker Change: We continue to gain traction in sports and entertainment venues at the mid-tier level.
Speaker Change: including two independent baseball league venues, where adopting Cantaloupe's full point of sale platform, along with leveraging our suet management for creating a cohesive fan game day experience.
Ravi Venkatesan: Moving on to the product side, at the start of Q3, our Engage Pulse cashless device designed for the arcade and amusement industry became commercially available. It has been well received based on unique differentiated features, such as ladder pricing interface for encouraging higher placement, major price redemption reporting, and single tap multi-band functionality. We've already received positive response from customers, including Tim Zahn, Vice President of Operations at Lieberman Companies, who stated, we installed crane machines with the EngagePulse units at one of our trampoline park locations, and saw in the first two months, sales up 85% year over year.
Moving on to the product site.
Speaker Change: At the start of Q3 our Engage Pulse Cashless Device designed for the arcade and amusement industry became commercially available.
Speaker Change: It has been well-received based on unique, differentiated features such as ladder pricing interface for encouraging higher play spend, major price redemption reporting, and single-tap multi-event functionality.
Speaker Change: We installed crane machines with the Engage Pulse units at one of our trampoline park locations and saw in the first two months sales up 85% year over year. In more locations we are seeing up to 53% year over year sales increases.
Ravi Venkatesan: In mall locations, we are seeing up to 53% year-over-year sales increase.
Ravi Venkatesan: In late January, we held our largest Cantaloupe customer conference to date, Cantaloupe University in Miami, Florida, where we hosted over 250 customers of all sizes, strategic partners and technology providers. The agenda included a preview of our latest product innovations, along with interactive training and education sessions to help customers leverage Cantaloupe's entire platform to run a profitable and growing business.
Speaker Change: In late January , we held our largest Cantaloupe customer conference to date, Cantaloupe University in Miami, Florida, where we hosted over 250 customers of all sizes, strategic partners and technology providers.
Speaker Change: The agenda included a preview of our latest product innovations along with interactive training and education sessions to help customers leverage Cantaloupe's entire platform to run a profitable
Ravi Venkatesan: We debuted the Smart Aisle as a preview to what customers can expect to see at the upcoming NAMA show in May. We also showcased new seed features that continue to enhance experience with add-on services such as seed analytics and remote pricing.
Ravi Venkatesan: In February, in collaboration with Fundbox, we launched Cantaloupe Capital, a platform built to provide Cantaloupe customers flexible access to cash flow for equipment investments and business growth. Since launch, we've already signed 117 registered users through this platform, approving over 300,000 in capital We continue to look at this as an enabler to help our customers of all sizes get quick access to cash and support their business growth with Cantaloupe.
Speaker Change: In February , in collaboration with FundBox, we launched Cantaloupe Capital, a platform built to provide cantaloupe customers, flexible access to cash flow for equipment investments and business growth.
Speaker Change: Since launch, we've already signed a 117 registered users through this platform, approving over 300,000 in capital funds.
Speaker Change: We continue to look at this as an enabler to help our customers of all sizes get quick access to cash and support their business growth with Cantaloupe.
Ravi Venkatesan: Our strategic priorities remain intact. We will continue to focus on scaling our business in Europe and Latin America and continue to refine our go-to-market strategy across both direct and indirect channels to expand our customer base organically and through strategic acquisition. As always, I want to thank the entire Cantaloupe team for their continued focus on execution.
Speaker Change: We will continue to focus on scaling our business in Europe and Latin America and continue to refine our go-to-market strategy across both direct and indirect channels to expand our customer base organically and through strategic acquisitions.
Speaker Change: As always, I want to thank the entire cantaloupe team for their continued focus on execution. With that, Scott will now review our Q3 results in more detail as well as our outlook for fiscal year 25 Scott.
Scott Stewart: With that, Scott will now review our Q3 results in more detail, as well as our outlook for Fiscal Year 25. Scott. Thanks, Ravi. As Ravi mentioned, we delivered another strong Our Q3'25 revenue was $75.4 million, up 11% compared to Q3'26. Our combined transaction subscription revenue grew 10% to $65.2 million during the pandemic. This includes $21.2 million of subscription revenue, a year-over-year increase of 10%. and 44 million of transactions. an increase of 10% compared to Q3. Transaction revenue in the quarter was materially impacted by several adverse weather events and storms in January. which led to abnormally low traffic for many of our customer locations, including schools and offices that closed.
Scott: Thanks, Ravi. As Ravi mentioned, we delivered another strong quarter. Our T325 revenue was 75.4 million, up 11% compared to the Q324.
Scott: Our Combined Transactions Description Revenue, who 10% to 65.2 million during the quarter.
Scott: This includes 21.2 million of subscription revenue, a year-over-year increase of 10%, and 44 million of transaction revenue, an increase of 10% compared to Q324.
Scott: As actually revenue in the quarter was materially impacted by several adverse weather events in storm in January and February , which led to abnormally low traffic for many of our customer locations, including schools and offices that closed during these events.
Scott Stewart: Since March and April, we have seen traffic trends and transactions on. During the quarter, we also saw a pullback in large equipment purchase. due to economic uncertainty as Robby This appears to have rebounded in the fourth quarter as we have seen strong equipment sales. As of March 31, 2025, we have over 34,000 active customers and 1.26 million active employees. an increase of 11% and 4% respectively compared to the prior year. The average revenue per unit, or ARPU, for 3Q25 was $206, 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.
Scott: Since March and April , we have seen traffic trends and transactions buttons normalize.
Scott: During the quarter, we also saw a pullback in large equipment purchases due to economic uncertainty as Robby mentioned earlier. This appears to have rebounded in the fourth quarter as we have seen strong equipment sales in April .
Scott: As of March 31st, 2025, we have over 34,000 active customers and 1.26 million active devices in increase of 11% and 4% respectively compared to the prior year.
Scott: The average revenue per unit for RPU for $3.25 was $206, up 11% from the prior year period.
Scott: As a reminder, this is defined as our total subscription and transaction fees for the trail in 12 months divided by average total active devices for the same period.
Scott Stewart: Our equipment revenue was $10.2 million, an increase of 18% compared to Q3 FY24, driven by continued success in our SmartStore office. Total adjusted gross margin for the quarter was 41.6%, compared to 39.6% in the same quarter last year, driven by continued expansion of our transaction and subscription margin. Subscription adjusted gross margin was 90.7% versus 89.6% in the prior year, and transaction gross margin was 24.8% versus 22.8% in the prior year. These increases were driven by leveraging our scale to renegotiate vendor agreements and improving transaction routing strategies. Gross Marginal Equipment Revenue for Q3 FY25 increased to 12.3% from 7.2% in the prior year.
Scott: Our equipment revenue was 10.2 million in increase of 18% compared to Q3 FY24 driven by continued success in our smart store offering.
Scott: Total adjusted gross margin for the quarter was 41.6% and paid to 39.6% in the same quarter last year, driven by continued expansion of our transaction and subscription margin.
Scott: Subscription and adjusted gross margin was 90.7% versus 89.6% in the prior year, and transaction goes margin was 24.8% versus 22.8% in the prior year.
Scott: These increases were driven by leveraging our scale to renegotiate vendor agreements and improving transaction rally strategies.
Scott: Gross Marginal Equipment Revenue for Q3 FY25 increased to 12.3% from 7.2% in the prior year.
Scott Stewart: Total operating expenses in Q3 FY25 increased to $24.5 million compared to $22.6 million in Q3 FY24. driven by higher DNA and other expenses incurred by a newly acquired company SB Soft.
Scott: So operating expenses in Q3 FY25 increased to 24.5 million compared to 22.6 million in Q3 FY24, driven by Aditya D&A and other expenses incurred by a newly acquired company SB software.
Scott Stewart: Now turning to income taxes. During Q3 FY25, the company released $42.2 million of its valuation allowance associated with a federal and state deferred tax act. These deferred tax assets were created as a result of net operating loss carry forwards from historical business operations. The company's sustained profitability over the last three years, coupled with anticipated future earnings. provided enough evidence to support the fact that sufficient taxable income will be generated to use a net operating loss carry. making the valuation allowance on the deferred tax assets in the one The release of the $42.2M valuation allowance shows as an income tax benefit on the income Net income applicable to common shares for the third quarter was $48.9 million, or $0.65 per rooted earnings per share.
Scott: Now, starting to income taxes. During Q3 FY25, the company released 42.2 million of its valuation allowance associated with a federal and state deferred tax assets.
Scott: The company's sustained profitability of the last three years coupled with anticipated feature earnings.
Speaker Change: Providing enough evidence to support the fact that sufficient taxable income will be generated to use net operating loss carry boards. Making the dilation allowance on the deferred tax assets no longer necessary.
Scott: The release of the 42.2 million violation allowance shows as an income tax benefit on the income statement.
Scott Stewart: Without the previously mentioned tax benefit, net income attributable to common shares would have been $6.7 million. They pay a net income of $4.4 million or six cents diluted earnings per share in the prior Adjusted EBITDA was $13.9 million in the third quarter compared to $10.2 million in the prior year period, an increase of 37%. We ended the third quarter with cash-in-cash equivalents of $46.3 million. This represents $18.6 million of sequential growth for the quarter.
Scott: Without the previously mentioned tax benefit, that income attributable to common shares would have been $6.7 million, compared to that income of $4.4 million, or $6.2 million earnings per share in the prior year period.
Scott: Adjusted even though it was 13.9 million in the third quarter compared to 10.2 million in the prior year period and increased to 37%.
Scott Stewart: The growth was largely driven by $22.4 million of cash from operating activities offset by cash used in a Now turning to our fiscal year 2025 guidance. As Ravi mentioned earlier, we are revising our 2025 outlook as total revenues to be between $302 million and $300 representing growth for 13 to Transaction and Subscription Revenue Growth. We now expect that to be at the low end of our previously given range of 50%. We now expect total U.S. GAAP net income to be between $64 million and $74 million. with the increase being driven by the release of the large valuation Unknown Speaker, Unknown Speaker, We now expect the adjusted EBITDA to be between $46 million.
Scott: Total revenue is to be between 302 million and 308 million, representing growth of 13 to 15 percent.
Scott: For transaction and subscription revenue growth, we now expect that to be at the low end of our previously given range of 15 to 20%.
Scott: We now expect adjusted EBITDA to be between 46 million and 50 million.
Operator: Total operating cash flow is still expected to be between $24 million and $30 With that, we would now like to turn the call back over to the operator for the Q&A.
Scott: Total operating cash flow is still expected to be between 24 million at 32 million.
Scott: With that, we would now like to turn the call back over to the operator for the Q&A session. Operator?
Operator: Operator. As a reminder, if you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Scott: As a reminder, if you'd like to ask a question at this time, please press star 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Josh Nichols: Our first question comes from a line of Josh Nichols with B Riley. Yeah, thanks for taking my question and I'm glad you provided a little bit of color on the transaction revenue. To dig a little bit deeper into it, were you able to quantify at all about what that weather impact had specifically on like the transaction revenue kick order?
Speaker Change: Our first question comes from a line of Josh Nichols with B. Riley.
Josh Nichols: Yeah, thanks for taking my question and, and, and glad you provided a little bit of color on the transaction revenue to dig a little bit deeper into it. We able to quantify it all about what that weather impact had specifically on like the transaction revenue to the quarter.
Scott Stewart: Yes, thanks for the question, this is Scott. And yes, this is approximately $2 million. mostly in January and a little bit in February. Got it.
Josh Nichols: Thank you for the question, Mr. Scott. And yes, this is approximately 2 million.
Mostly in January and a little bit in February .
Josh Nichols: And then good to see the SmartStore sales. I think you said like 2 million during the quarter and looking at the guidance, you know, there should be a healthy step up in hardware sales in 4Q. What are the early indications you're seeing from the SmartStore product demand? And do you expect those to ramp up pretty quickly? Or what's the cadence look like on that front?
Josh Nichols: Got it and then good to see the smart store sales, I think he said like two million during the quarter.
Josh Nichols: and looking at the guidance, there should be a healthy step up in hardware sales in 4Q.
Josh Nichols: What are the early indications you're seeing from the smart store?
Josh Nichols: Product demand, and do you expect those to ramp up pretty quickly or what the cadence look like on that front? Yeah, Josh, yeah, you're absolutely right, we are.
Scott Stewart: Josh, yeah, you're absolutely right. We are already seeing quite a ramp up in the fourth quarter. And the SmartStore continues to be, I'd say, our hottest selling product.
already seeing quite a ramp up in the fourth quarter.
and the smart store continues to be...
Scott Stewart: I'm actually at the NAMA show today, which is the largest conference for our industry. And it's the SmartStore is basically the most sought after product that people want to learn about, order, and find out how they can get it and deploy it as soon as possible. And we are starting to see it translate into the numbers in fourth quarter equipment revenue already.
and they are the hottest selling product.
I'm actually at the Namah Show.
Today, which is the largest...
Ravi Venkatesan, Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker,
Josh Nichols: And then last question for me, then I'll hop back in the queue.
Unknown Executive: You touched on it really briefly, some progress you're seeing in Europe.
Speaker Change: And then last question for me, then I'll hop back in the queue. You touched on it really briefly, some progress you're seeing in Europe . Any updates in Latin America specifically, I know you've been working with like one or two customers over there specifically and any color on that.
Unknown Executive: Any updates in Latin America specifically? I know you've been working with like one or two customers over there specifically, and any color on that?
Unknown Executive: We do have some really exciting updates. It's just a little bit premature to share them, but the scaling is continuing to happen both with the large customers we have as well as in the SMB space. And, you know, look forward to some releases very soon from us on that. Appreciate it. Thanks.
Speaker Change: We do have some really exciting updates. It's just a little bit premature to share them, but the scaling is continuing to happen both with large customers we have as well as in the SMB space.
Speaker Change: and look forward to some releases very soon from us on that.
Unknown Attendee, Ravi Venkatesan, Unknown Executive
Chris Kennedy: Our next question comes from Chris Kennedy with William Blair. Good afternoon. Thanks for taking the question. Just wanted to follow up on your comments on the smart store. We saw your micro payment trends report. There's some really interesting data in that.
Appreciate it. Thanks
Our next question comes from Chris Kennedy with William Blair.
Chris Kennedy: Good afternoon. Thanks for taking the question. Just wanted to follow up on your comments on the smart store.
Speaker Change: We saw your micro-payment trends report. There's some really interesting data in that. Can you just talk broadly about kind of the revenue opportunity between traditional vending smart stores and the other verticals?
Scott Stewart: Can you just talk broadly about kind of the revenue opportunity between traditional vending, smart stores, and the other verticals? Yeah, Chris, thanks for the question. First of all, what we're seeing is an evolution in the form factors that support self service commerce. It, it used to be vending and the various forms in which vending machines came. And then came the micro markets, which essentially were kiosk based marketplaces with products kept out in the open. Vending, very secure, no chance of people stealing from it. However, an older experience, a less contemporary experience, and some limitations in terms of the types of products that can be sold from there.
Speaker Change: Yeah Chris, thanks for the question first of all. What we are seeing is an evolution in the form factors that support sales service commerce.
Speaker Change: It used to be vending and the various forms in which vending machines came and then came the micro markets which essentially were key off-based marketplaces, the products kept out in the open.
Speaker Change: Winning very secure, no chance of people stealing from it. However, an older experience, a less contemporary experience, and some limitations in terms of the types of products that can be sold from there. Micromarkets,
Scott Stewart: Micro markets were a great fit for corporate buildings and kind of non-public secure locations, where the audience was fairly known. And hence, the potential for theft was very controlled. But they couldn't scale beyond that space, you know, where there is low trust environments like transit locations, hospitals, hotels, etc, which are either semi public or public. Micro markets have struggled because of the theft issue in spite of cameras, and you know, all kinds of theft detection measures. The smart store has been such a runaway hit because it solves both of those problems. And it's, in that sense, the next evolution of self service commerce.
Speaker Change: were a great fit for corporate buildings and kind of non-public secure locations.
Speaker Change: Space, where there are low-trust environments like transit locations, hospitals, hotels, etc., either semi-public or public, micro markets have struggled because of the theft issue, in spite of cameras and all kinds of theft detection measures.
Speaker Change: The smart store has been such a runaway hit because it solves both of those problems and it in that sense the next evolution of self-service commerce.
Scott Stewart: It's trust, it can operate in low trust environments, because it's theft proof. And it can also provide a very contemporary, very modern feel and allow for food items like fresh salads and sandwiches, etc, to be sold. And then, by the way, there are other form factors coming, such as just walkout experiences that you've seen with Amazon, digital cart experiences that are AI powered, camera based, scan free, you know, no need to scan and check out products. So there are there are more evolutions coming.
Speaker Change: It can operate in low-trust environments because it's theft proof, and it can also provide a very contemporary, very modern feel and allow for food items like fresh salads and sandwiches, etc. to be sold.
Speaker Change: And then, by the way, there are other form factors coming, such as just walk out experiences that you've seen with Amazon, digital card experiences that are AI-powered camera-based, scam-free, you know, no need to scam and checkout products. So there are more evolutions coming.
Scott Stewart: The way I see it pan out is, I think vending will continue to grow kind of in the 5-6% range and micro markets will continue to grow kind of in the, you know, 30, maybe even 40% range. Smart stores and all the other cousins they have, like smart coolers and, you know, various other flavors, some are AI powered cameras, some are load bearing cells. I think they will grow 100-200% in the next two to three years and start, you know, start becoming a big portion of the market share. Long answer to your short question, but hopefully that helps.
The way I see it, pan-out is...
Speaker Change: I think Vending will continue to grow kind of in the 5-6% range and micro markets will continue to grow kind of in the 30, maybe even 40% range.
Speaker Change: in various other flavors, some are AI-powered cameras, some are low bearing cells. I think they will grow 100-200 percent in the next two to three years and start becoming a big portion of the market share. Long answer to your short question, but hopefully that helps.
Chris Kennedy: Yeah, no, that's fantastic. Really appreciate that.
Scott Stewart: And then just a follow up. When you think about the productivity or the monthly sales, how did those how does that vary between a vending, a micro market and a smart store? I think as we execute on this new and exciting phase, where people are realizing that, hey, if I deploy, when I deploy a micro market, I get 10 times the sales of a vending machine. And oh, by the way, when I deploy a smart store, I get twice even that. And the margins are better.
Speaker Change: Yeah, no, that's fantastic. Really appreciate that. And then just follow up. When you think about the productivity or the monthly sales, how did those, how does that vary between a vending a micro market and a smart store?
Speaker Change: I think as we execute on this new and exciting phase where people are realizing that, hey, if I deploy, when I deploy a micro market, I get 10 times the sales of the winning machine. And by the way, when I deploy a sports store, I get twice even that. And the margins are better. We think in the next
Scott Stewart: We think in the next, you know, at least the next 12 to 18 months, smart stores will be a considerable portion, maybe 25-30% of the new sales that we do.
Speaker Change: You know, at least the next 12 to 18 months, March stores will be a considerable portion, maybe 25, 30% of the new sales that we do.
Scott Stewart: Great. Thanks for taking the questions.
Great, thanks for taking the questions.
Gary Prestopino: Our next question comes from Gary Prestopino with Bering.
Our next question comes from Gary Prestopino with Marrington.
Gary Prestopino: Ravi Scott, how are you? Wonderful, Gary. How are you? Oh, just great. Hey, um, just a couple of questions in terms of the slippage in sales. I've had a number of calls today and a couple of companies have said that the storms in the southeast really impacted them and I would assume that that's where you're talking about where you had some issues with lower traffic to generate transactions. was there something else going on there?
Ravi Scott, how are you?
Wonderful guy, how are you? Oh, just great. Thanks
Speaker Change: Hey, just a couple of questions in terms of the slippage and sales.
Unknown Attendee, Ravi Venkatesan, Unknown Executive
Scott Stewart: No, that's Gary. And really it was storms that blew through on the 20th and 21st of January. Those are on a Monday and Tuesday, caused a lot of school closures and a lot of business closures. So that was the biggest impacting storm. And there was also another storm that blew through in February that lasted longer. It was from the 13th to the 17th of February. That also had a fairly significant impact. That's when places like New Orleans were getting snow, right? Right, and the tornadoes that also came with it, and the flooding that also came with it.
Or is there something else that's going on there?
No, that's not there, it's been really illogical.
Speaker Change: That's when like places like New Orleans were getting smell, right? Right, and the tornado had a game with it, and the flooding that also came with it. Okay.
Scott Stewart: Okay, so that's good.
Scott Stewart: And then I guess on the equipment side... I mean, you guys had said you were on allocation for smart stores, the smart store product. Was the slowdown that you saw in the quarter, I would assume it's towards the latter end of the quarter. Did that encompass the smart store product? Or was it, you know, something else that was out there, say micromarkets, things like that, that Yeah, no, smart stores, actually, it was the opposite. We, you know, we were more supply constrained and demand constrained. But on the micro markets, as well as the vending and other amusement, you know, all of the other spaces, we did see a period of time, where economic uncertainty was driving businesses to defer purchases, right, they were they were nervous about, you know, the tariff situation, they were nervous about trade, they were nervous about interest rates, potential recessionary conditions, we have seen that, you know, settle down, as as the, you know, broader markets have settled down and, and light at the end of the tunnel around bilateral kind of tariff deals.
Speaker Change: So that's, that's good. And then I guess on the equipment side.
Speaker Change: Something else that was out there saying, micro markets, things like that, that really good news.
Speaker Change: Yeah, no smart stores actually, it was the opposite. We were more supply-constrained and demand-constrained, but on the micro markets as well as the vending and other amusement, all of the other spaces, we did see a period of time.
where economic uncertainty was driving businesses.
Speaker Change: to Defer Purchases. They were nervous about the Paris situation. They were nervous about trade. They were nervous about interest rates, potential recessionary conditions.
We have seen that...
Scott Stewart: And, you know, maybe it's not going to be as bad as it once felt is starting to become the tone we are we are seeing those purchases happen now in the in the fourth quarter. So, so, you know, we are optimistic that it was a temporary kind of deferral. But that is what caused the weakness on the equipment side. Okay, so so the equipment kind of snapped back here in May, because I mean, look, the whole thing with tariffs and the liberation day didn't come until the first first couple of days of May. So post that time where people have had the ability to absorb some of what could possibly happened with tariffs and the stock market has started to do a little bit better.
Speaker Change: We are seeing those purchases happen now in the fourth quarter, so we are optimistic that it was a temporary kind of deferral but that is what caused the weakness on the equipment side.
Speaker Change: Okay, so the equipment kind of snapped back here in May, because I mean, look, the whole thing with tariffs, the liberation day, didn't come until the first couple of days in May. So post that time where people have had the ability to absorb some of what could
Possibly Happen with Parris,
Scott Stewart: You have seen an increase in equipment sales. We have. The other thing I'll mention is a lot of people think Liberation Day is when the problems of uncertainty started. That's actually not true. There was way more uncertainty, at least from our vantage point, before that because there was a rhetoric around something's going to happen and people didn't know what's going to happen. At least with Liberation Day, you know, people then knew, OK, this is what's happened and this is what we think will now happen. And so let's get on with it. Right. So so it actually had the opposite effect.
Speaker Change: and the stock market has started to do a little bit better. You have seen an increase in
and Equipment Sales.
Speaker Change: We have the other thing I'll mention is a lot of people think liberation days when the problems of uncertainty started that's actually not true there was way more uncertainty at least from our vantage point before that because
Speaker Change: There was a rhetoric around something is going to happen and people didn't know what's going to happen.
Scott Stewart: It kind of settled some of the decisions down because it provided a worst case analysis for a lot of people.
Scott Stewart: Okay, thank you.
Okay, thank you.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touch tone. Again, that is star 11 to ask a question.
Michael Latimore: Our next question comes from the line of Michael Latimore with Northland Capital.
Speaker Change: Our next question comes from a line of Michael Latimore with Northland Capital.
Aditya Dagaonkar: Hey, hi, this is Aditya on behalf of Michael Latimore. Could you give some color on what do you expect the international revenue to be as a percentage exiting this year? Sure. So as we exit our fourth quarter 2025 fiscal year, we're anticipating international revenue to be in the three to four. and then continue to climb from there through our FY20.
Speaker Change: Hi, this is Aditya on behalf of Michael Latimore. Could you give some color on what do you expect the international revenue to be as a percentage exiting this year?
Dara Dierks, Unknown Attendee, Ravi Venkatesan, Unknown Executive
Speaker Change: Sure, so as we exit our fourth quarter, 2025 this year, we're anticipating international revenue being about 3 to 4% and then it continues to climb from there through our FY26 year.
Scott Stewart: and some color on the free cash flow that we can expect. Sure. So as Ravi mentioned in his prepared remarks, we had a great quarter for cash flow, our free cash flow this quarter ended up being $18.6 million. As we look at the fourth quarter, we're anticipating it to be around that same range. So operating cash flow somewhere in the, let's say $16 to $22 million, and free cash flow being somewhere in the $15 to $18 You got it.
Speaker Change: and some color on the free cash flow that we can expect.
Speaker Change: Sure. So as Ravi mentioned, his prepared remarks, we had a great quarter for our free cash flow this quarter, and that being 18.6 million. As we look to fourth quarter, we're anticipating it to be around that same range. So operating cash flow somewhere in the, that's a 16 to 22 million and three cash flow being somewhere in the 15 to 18 million.
Operator: Thank you.
Got it. Thank you.
Ravi Venkatesan: That concludes today's question and answer session.
Ravi Venkatesan: I'd like to turn the call back to Ravi for closing remarks. Thank you, operator. Again, thank you all for your engagement. I just want to leave you with kind of the highlights from my perspective from Q3 were that we breached the $200 ARPU mark for the first time, which was part of our strategic goals. And I'm very pleased that we've crossed that milestone. As you noted, earnings performance and cash flow generation, in spite of the slower revenue growth, have been really strong. And I'm particularly pleased that that comes from expansion, not cost reduction. And it evidences the strength of our business model and the fundamental tailwinds that the self-service commerce tech space enjoys.
Speaker Change: That concludes today's question and answer session. I'd like to turn the call back to Ravi for closing remarks.
Ravi: Thank you, operator. Again, thank you all for your engagement. I just want to leave you with kind of the highlights from my perspective from Q3, where that we breached the $200 or Pumar for the first time, which was part of our strategic goals and I'm very pleased that we've crossed that milestone.
Ravi Venkatesan: And also, thanks to an established ability to generate net income, we are now unlocking the benefit of accumulated losses from prior periods, which will benefit both income and free cash flow in the upcoming quarters. Thank you all for your attention.
Ravi: and also thanks to an established ability to generate net income we are now unlocking the benefit of accumulated losses from prior periods, which will benefit both income and free cash flow in the upcoming quarters.
Operator: And with that, we conclude the call.
Ravi: Thank you all for your attention and that we conclude the call.
Operator: This concludes today's conference call. Thank you for participating.
Operator: You may now disconnect.
Ravi: Disconcludes today's conference call. Thank you for participating. You may now disconnect.
Ravi: Okay.
Ravi: Okay.