Index falls as earnings results weigh; pound above $1.33, Bodycote soars
Cantaloupe Inc. (CTLP) reported its first-quarter 2025 financial results, revealing a significant earnings beat but a revenue shortfall compared to forecasts. The company posted an earnings per share (EPS) of $0.65, far exceeding the forecasted $0.09, largely due to a $42.2 million tax asset valuation release. However, revenue came in at $75.4 million, below the anticipated $79.83 million. According to InvestingPro analysis, the company maintains a GOOD financial health score, with liquid assets exceeding short-term obligations. Despite the earnings beat, Cantaloupe’s stock fell 3.39% in aftermarket trading, reflecting investor concerns over the revenue miss.
Key Takeaways
- Cantaloupe’s EPS of $0.65 significantly surpassed the forecast of $0.09.
- Revenue fell short of expectations, reported at $75.4 million against a forecast of $79.83 million.
- Stock declined by 3.39% in aftermarket trading.
- Adjusted EBITDA saw a 37% increase year-over-year.
- The company revised its FY2025 revenue guidance to $322-$328 million.
Company Performance
Cantaloupe demonstrated robust financial performance in Q1 2025, with total revenue growing by 11% year-over-year, consistent with its trailing twelve-month revenue growth of 12.88%. The company reported strong growth across its revenue streams, with equipment revenue leading at an 18% increase. While trading at a relatively high P/E ratio of 41.4x, InvestingPro data suggests the company remains undervalued based on its Fair Value analysis. Despite the positive earnings, the revenue miss against forecasts seemed to weigh on investor sentiment. For deeper insights into Cantaloupe’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Financial Highlights
- Revenue: $75.4 million, up 11% year-over-year
- EPS: $0.65, significantly boosted by a tax asset valuation release
- Adjusted gross margin: 41.6%, up from 39.6%
- Adjusted EBITDA: $13.9 million, up 37% year-over-year
Earnings vs. Forecast
Cantaloupe’s actual EPS of $0.65 was a substantial surprise compared to the forecasted $0.09, marking a notable earnings beat. However, revenue of $75.4 million fell short of the $79.83 million forecast, representing a miss of approximately 5.5%.
Market Reaction
Following the earnings release, Cantaloupe’s stock fell by 3.39% in aftermarket trading, closing at $7.99. This decline reflects investor concerns over the revenue shortfall, despite the strong earnings performance. The stock’s movement is within its 52-week range, with a high of $11.36 and a low of $5.78. Notably, analysts maintain an optimistic outlook, with price targets ranging from $11.50 to $14.00, suggesting significant upside potential. InvestingPro subscribers have access to additional insights, including 8 more exclusive ProTips and detailed financial metrics that help evaluate the stock’s potential.
Outlook & Guidance
Cantaloupe revised its FY2025 total revenue guidance to a range of $322-$328 million, indicating a 13-15% growth. The company expects adjusted EBITDA between $46-$50 million and total operating cash flow of $24-$32 million. This guidance reflects optimism about future growth, particularly in the SmartStore segment. InvestingPro analysis reinforces this positive outlook, indicating expected net income growth this year and continued profitability. The company’s strong financial health score and robust growth metrics are detailed in the exclusive Pro Research Report, which provides comprehensive analysis of Cantaloupe’s market position and growth trajectory.
Executive Commentary
Ravi Venkatesan, CEO, highlighted the success of SmartStore technology, stating, "SmartStore has been such a runaway hit because it solves both [theft and experience] problems." CFO Scott Stewart emphasized the impact of the tax asset valuation release, noting, "The release of the $42.2 million valuation allowance shows our sustained profitability."
Risks and Challenges
- Economic uncertainty impacting equipment purchases
- Weather events affecting transaction revenue
- Potential over-reliance on tax asset valuation for EPS boosts
- Competitive pressures in the self-service commerce sector
- International market expansion risks
Q&A
During the earnings call, analysts inquired about the impact of weather events on revenue, which Cantaloupe estimated at $2 million. There were also questions regarding the economic uncertainty’s effect on equipment sales, with management noting a rebound in April. Additionally, strong demand for SmartStore was highlighted, expected to comprise 25-30% of new sales.
Full transcript - Cantaloupe Inc (CTLP) Q3 2025:
Conference Operator: Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to Meghna Mera, Investor Relations. Please go ahead.
Meghna Mera, Investor Relations, Cantaloupe: Thank you. Good afternoon, everyone. 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.
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 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 made. Cantaloupe undertakes no obligation to update any forward looking statements, whether because of new information, future events or otherwise. This call will also include a discussion of certain non GAAP 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. Details of these non GAAP financial 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.canceloute.com. And with that, I would like to turn the call over to Ravi.
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: Thank you, Magna. Good afternoon, everyone, and thank you for joining us today for our third quarter fiscal year twenty twenty five call. I’ll first start with a high level view of our Q3 performance and outlook for fiscal year twenty twenty five, before turning it over to Scott to dive deeper into the numbers and our outlook. Q3 financial highlights. During the third quarter, our total revenue increased 11% year over year to $75,400,000 driven by a 10% year over year transaction revenue growth and 10% year over year subscription revenue growth.
Our equipment revenue was $10,200,000 an increase of 18% compared to Q3 fiscal year twenty four. 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. Total adjusted gross 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 $13,900,000 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 $22,400,000 Now on to Q3 operational highlights. We continue to see strong growth in micro markets 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, BestVending, 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, micro market and office coffee business, and also deploying add on modules such as analytics and remote price 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, and also see wins in the small business segment, including a rollout of micro markets with amazing rays. 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. We 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 $2,000,000 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 suite management for creating a cohesive fan game day experience. Moving on to the product side, at the start of q three, our Engage Pulse Cacheless 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 win functionality. We’ve already received positive response from customers, including Tim Zan, Vice President of Operations at Lieberman Companies, who stated, 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 mall locations, are seeing up to 53% year over year sales increases. In late January, we held our largest Cantaloupe customer conference to date, Cantaloupe University in Miami, Florida, where we hosted over two fifty 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.
We debuted the Smart Aisle as a preview to what customers can expect to see at the upcoming NAMMA show in May. We also showcased new seed features that continue to enhance experience with add on services such as seed analytics and remote price 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. Since launch, we’ve already signed a 17 registered users through this platform, approving over 300,000 in capital funds. 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.
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 acquisitions. 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 twenty five. Scott?
Scott Stewart, Chief Financial Officer, Cantaloupe: Thanks, Robbie. As Robbie mentioned, we delivered another strong quarter. Our Q3 ’twenty five revenue was $75,400,000 up 11% compared to Q3 ’twenty four. Our combined transaction subscription revenue grew 10% to $65,200,000 during the quarter. This includes $21,200,000 of subscription revenue, a year over year increase of 10%, and $44,000,000 of transaction revenue, an increase of 10 compared to Q3 ’twenty four.
Transaction revenue in the quarter was materially impacted by several adverse weather events and storms 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. Since March and April, we have seen traffic trends and transaction volumes normalize. During the quarter, we also saw a pullback in large equipment purchases due to economic uncertainty, as Ravi mentioned earlier. This appears to have rebounded in the fourth quarter as we have seen strong equipment sales in April. As of 03/31/2025, we have over 34,000 active customers and 1,260,000 active devices, an increase of 114%, respectively, compared to the prior year.
The average revenue per unit for ARPU for 3Q ’twenty five was $2.00 $6 up 11% from the prior year period. As a reminder, this is defined as our total subscription and transaction fees for the trailing twelve months divided by average total active devices for the same period. Our equipment revenue was $10,200,000 an increase of 18 compared to Q3 FY24, driven by continued success in our SmartStore offering. 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 margin on equipment revenue for Q3 FY ’twenty five increased to 12.3% from 7.2% in the prior year. Total operating expenses in Q3 FY ’twenty five increased to $24,500,000 compared to twenty two point six million dollars in Q3 FY ’twenty four, driven by higher G and A and other expenses incurred by our newly acquired company, SP Software. Now turning to income taxes. During q three f y twenty five, the company released 42,200,000.0 of its valuation allowance associated with the federal and state deferred tax assets.
These deferred tax assets were created as a result of net operating loss carry forwards from historical business operations. The company 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 carryforwards, making the valuation allowance on the deferred tax assets no longer necessary. The release of the 42,200,000.0 valuation allowance shows as an income tax benefit on the income statement. Net income applicable to common shares for the third quarter was $48,900,000 or $0.65 diluted earnings per share. Without the previously mentioned tax benefit, net income attributable to common shares would have been 6,700,000.0 compared to net income of $4,400,000 or $06 diluted earnings per share in the prior year period.
Adjusted EBITDA was $13,900,000 in the third quarter compared to $10,200,000 in the prior year period, an increase of 37%. We ended the third quarter with cash and cash equivalents of $46,300,000 This represents $18,600,000 of sequential growth for the quarter. The growth was largely driven by $22,400,000 of cash from operating activities, offset by cash used in investing activities. Now turning to our fiscal year ’20 ’20 ’5 guidance. As Ravi mentioned earlier, we are revising our 2025 outlook as follows.
Total revenues to be between $3.00 $2,000,000 and $3.00 $8,000,000 representing growth of 13% to 15%. 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%. We now expect total US GAAP net income to be between $64,000,000 and $70,000,000 with the increase being driven by the release of the large valuation allowance on our deferred tax assets. We now expect adjusted EBITDA to be between $46,000,000 and $50,000,000 Total operating cash flow is still expected to be between $24,000,000 and $32,000,000 With that, we would now like to turn the call back over to the operator for the Q and A session. Operator?
Conference Operator: Our first question comes from the line of Josh Nichols with B. Riley.
Josh Nichols, Analyst, B. Riley: Yes. Thanks for taking my question. And 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 for the quarter?
Scott Stewart, Chief Financial Officer, Cantaloupe: Yes. Thanks for the question. This is Scott. And yes, this is approximately $2,000,000 mostly in January and a little bit in February.
Josh Nichols, Analyst, B. Riley: Got it. And then good to see the SmartStore sales, I think you said like $2,000,000 during the quarter. And looking at the guidance, 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?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: Yeah. 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. I’m actually at the NAMMA show today, which is the largest conference for our industry. And it’s the smart store 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.
Josh Nichols, Analyst, B. Riley: 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?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: We 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.
Josh Nichols, Analyst, B. Riley: Appreciate it. Thanks.
Conference Operator: Our next question comes from Chris Kennedy with William Blair.
Chris Kennedy, Analyst, William Blair: Good afternoon. Thanks for taking the question. Just wanted to follow-up on your comments on the SmartStore. We saw your micropayment 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?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: Yeah, Chris. Thanks for the question, first of all. What we are seeing is an evolution in the form factors that support self-service commerce. It it used to be vending and 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 is 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. 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, etcetera, 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 SmartStore 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. 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, etcetera, to be sold. And then, by the way, there are other form factors coming, such as the 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, more evolutions coming. The way I see it pan out is, I think vending will continue to grow kind of in the 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 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.
Chris Kennedy, Analyst, William Blair: Yeah, no, that’s fantastic. Really appreciate that. 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?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: 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 vending machine. And oh, by the way, when I deploy a smart store, I get twice even that. And the margins are better. We think in the next, you know, at least the next twelve to eighteen months, smart stores will be a considerable portion, maybe 25%, thirty % of the new sales that we do.
Chris Kennedy, Analyst, William Blair: Great. Thanks for taking the questions.
Conference Operator: Our next question comes from Gary Prestopino with Barrington.
Gary Prestopino, Analyst, Barrington: Robbie, Scott, how are you?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: Wonderful, Gary. How are you?
Gary Prestopino, Analyst, Barrington: Oh, just great. Thanks. Hey. Just a couple of questions in in terms of the slippage in sales. Because I 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 Or was there something else going on there?
Scott Stewart, Chief Financial Officer, Cantaloupe: No. That that that’s and really, it was the storms have blew through on the January. Those were 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 then there’s also another storm that blew through in February that lasted longer.
It was from the thirteenth to the February 17. That also had a fairly significant impact.
Gary Prestopino, Analyst, Barrington: That’s when like places like New Orleans were getting snow. Right?
Scott Stewart, Chief Financial Officer, Cantaloupe: Right. And the tornadoes that also came with it and the flooding that also came with it.
Gary Prestopino, Analyst, Barrington: Okay. So that’s good. And then I guess on the equipment side, I mean, 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 something else that was out there, say, micro markets, things like that that that really hit you?
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: Yeah. No. SmartStore is actually it was the the opposite. We, you know, we were more supply constrained than 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 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 the, you know, broader markets have settled down and the light at the end of the tunnel around bilateral kind of tariff deals. And, you know, maybe it’s not going to be as bad as it once felt is starting to become the tone.
Seeing those purchases happen now in the fourth quarter. 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.
Gary Prestopino, Analyst, Barrington: Okay. So so the equipment kinda snapped back here in May? Because, I mean, look. The the whole thing with tariffs is 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 happen with tariffs and the stock market has started to do a little bit better, You you have you have seen an increase in in in equipment sales.
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: We we we have. 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 there was a rhetoric around something’s going to happen.
People didn’t know what’s going happen. Least with liberation day, you know, people then knew, okay, this is what’s happened, and this is what we think will now happen, and so let’s get on with it, right? So it actually had the opposite effect. It kinda settled some of the decisions down, because it provided a worst case analysis for a lot of people.
Gary Prestopino, Analyst, Barrington: Okay. Thank you.
Conference Operator: As a reminder, if you’d like to ask a question at this time, please press 11 on your touch tone phone. Again, is 11 to ask a question. Our next question comes from the line of Mike Latimore with Northland Capital.
Chris Kennedy, Analyst, William Blair: Hey. Hi. This is Aditi on behalf of Mike Latimore. Could you give some color on what do you expect the international revenue to be as a percentage exiting this year?
Scott Stewart, Chief Financial Officer, Cantaloupe: Sure. So as we exit our fourth quarter twenty twenty five fiscal year, we’re anticipating international revenue to be in the three to 4%, and then continue to climb from there through our FY ’26 year.
Chris Kennedy, Analyst, William Blair: Got it. And some color on the free cash flow that we can expect?
Scott Stewart, Chief Financial Officer, Cantaloupe: 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 $18,600,000 As we look to fourth quarter, we’re anticipating it to be around that same range. So operating cash flow is somewhere in the, let’s say, 16,000,000 to $22,000,000 and free cash flow being somewhere in the 15,000,000 to 18,000,000
Chris Kennedy, Analyst, William Blair: Got it. Thank you.
Conference Operator: That concludes today’s question and answer session. I’d like to turn the call back to Ravi for closing remarks.
Ravi Venkatesan, Chief Executive Officer, Cantaloupe: 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 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 margin 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. 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. And with that, we conclude the call.
Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
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