Overview of Cantaloupe, Inc.

Cantaloupe, Inc. (Nasdaq: CTLP) is a global technology company that provides self-service commerce solutions. The company offers a range of products and services, including micro-payment processing, self-checkout kiosks, mobile ordering, point-of-sale systems, and cloud-based enterprise software. Cantaloupe serves customers across various industries, including food and beverage, hospitality, entertainment, and laundromats.

The company’s revenue streams consist of subscription fees, transaction processing fees, and equipment sales. During the three and nine months ended March 31, 2025, Cantaloupe derived approximately 86% and 88% of its revenue from subscription and transaction fees, respectively, with the remaining 14% and 12% coming from equipment sales.

Key Developments and Highlights

Some key developments and highlights for Cantaloupe during the fiscal quarter ended March 31, 2025 include:

1. Amended credit facilities and entered into a new $100 million credit facility, providing the company with additional borrowing capacity.
2. Launched a new product called Engage Pulse card readers for the arcade and amusement industry, designed to enhance revenue potential through a pricing interface that allows players to pay once and enjoy multiple plays.
3. Collaborated with Fundbox to launch Cantaloupe Capital, which provides small businesses with access to capital for equipment investments and flexible cash flow.
4. Increased the number of active devices on the company’s platform to 1.26 million, up from 1.22 million in the same quarter last year.
5. Grew the number of active customers to 34,115, an increase of 11.2% compared to the same quarter last year.
6. Saw a 11.1% increase in total dollar volume of transactions to $852.4 million, up from $767.4 million in the same quarter last year.

Financial Performance

Cantaloupe’s total revenues increased by $7.5 million, or 11.1%, for the three months ended March 31, 2025 compared to the same period in 2024. This increase was driven by a $4.0 million increase in transaction fees, a $2.0 million increase in subscription fees, and a $1.5 million increase in equipment sales.

The increase in transaction fees was primarily due to higher average ticket items sold, increased average ticket prices, and higher processing volumes, as well as the acquisition of Cheq. Subscription fees grew due to the company’s focus on expanding its recurring revenue streams, an increase in active devices, and the acquisition of SB Software.

Costs of sales increased by $3.1 million, primarily due to a $2.2 million increase in transaction costs resulting from the higher processing volumes and a $0.9 million increase in equipment costs due to the higher equipment sales.

Amortization of internal-use software and developed technology assets increased by $3.8 million, primarily due to certain capitalized internal-use software that is no longer expected to provide future economic benefits as a result of changes in business strategy and evolving technology initiatives, as well as the amortization of intangible assets from the acquisitions of Cheq and SB Software.

Total U.S. GAAP gross margin decreased from 37.4% in the three months ended March 31, 2024 to 34.5% in the three months ended March 31, 2025, primarily due to the increase in amortization expenses.

Operating Expenses

Cantaloupe’s total operating expenses increased by 8.2% for the three months ended March 31, 2025 compared to the same period in 2024. This was primarily driven by a $3.9 million increase in depreciation and amortization expenses, as well as the impact of the acquisitions of Cheq and SB Software.

Sales and marketing expenses increased by $0.1 million, primarily due to higher advertising costs, partially offset by lower compensation costs and other sales and marketing expenses.

Technology and product development expenses decreased by $0.6 million, driven by a $0.4 million decrease in compensation and benefits and a $0.2 million decrease in subscriptions and cloud hosting fees.

General and administrative expenses decreased by $0.1 million, primarily due to a $1.3 million smaller release in sales and use tax reserves compared to the same period last year, offset by a decrease of $1.3 million in non-recurring project work related to the remediation of material weaknesses in internal controls over financial reporting.

Integration and acquisition expenses decreased by $1.4 million, as the company recognized a $0.6 million gain due to the decrease in the fair value of the contingent consideration associated with the SB Software acquisition, partially offset by $0.1 million in integration expenses.

Depreciation and amortization expenses increased by $3.9 million, primarily due to the same factors that drove the increase in amortization of internal-use software and developed technology assets.

Other Expense and Income Taxes

Other expense, net, decreased by $0.1 million for the three months ended March 31, 2025 compared to the same period in 2024. This was primarily due to a $0.2 million decrease in interest expense from debt and tax liabilities, partially offset by a $0.1 million decrease in interest income.

The income tax benefit for the three months ended March 31, 2025 was $41.9 million, primarily due to a $42.2 million valuation allowance release, offset by state income and deferred taxes related to goodwill amortization for tax purposes.

Non-GAAP Financial Measures

Cantaloupe uses several non-GAAP financial measures to evaluate its business and operations, including Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA.

Adjusted Gross Profit and Adjusted Gross Margin exclude the impact of depreciation and amortization of internal-use software and developed technology assets, providing a more accurate view of the company’s underlying gross profitability. Adjusted Gross Margin was 41.6% for the three months ended March 31, 2025, up from 39.6% in the same period last year, driven by the increase in subscription and transaction fee revenue.

Adjusted EBITDA, which excludes the impact of interest, taxes, depreciation, amortization, stock-based compensation, and certain other non-recurring items, was $13.9 million for the three months ended March 31, 2025, up from $10.2 million in the same period last year. The increase in Adjusted EBITDA was primarily due to the growth in revenue and improved operational efficiency.

Liquidity and Capital Resources

As of March 31, 2025, Cantaloupe had $46.3 million in cash and cash equivalents on hand. The company’s primary sources of capital are cash from operating activities and the $100 million credit facility it entered into during the quarter.

For the nine months ended March 31, 2025, Cantaloupe generated $10.9 million in net cash from operating activities, which was used to fund $23.0 million in investing activities, primarily for property and equipment investments and acquisitions. Net cash used in financing activities was $0.4 million, primarily due to debt repayments and deferred cash consideration for the Cheq acquisition.

The company believes its current financial resources will be sufficient to fund its operations for the next 12 months. Cantaloupe’s focus is on increasing cash flow from operating activities through collection efforts, utilizing existing inventory to support equipment sales, and improving overall profitability.

Outlook and Conclusion

Cantaloupe has demonstrated strong financial performance in the quarter, with increases in revenue, active devices, active customers, and transaction volumes. The company’s focus on expanding its recurring revenue streams, investing in innovative technologies, and strategic acquisitions has positioned it well for continued growth.

However, the company faces some challenges, including the increased amortization expenses related to internal-use software and acquired intangible assets, which have put pressure on its gross margins. Additionally, the company’s operating expenses have increased, driven by higher depreciation and amortization, as well as the impact of recent acquisitions.

Overall, Cantaloupe appears to be well-positioned to capitalize on the growing demand for self-service commerce solutions. The company’s diversified revenue streams, focus on innovation, and strategic investments in both organic growth and acquisitions suggest a positive outlook for the future.