Cantaloupe(US:CTLP)2023-11-08 16:00Part I - Financial Information Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 FY2024, showing a significant turnaround to profitability, increased assets, and positive operating cash flow Condensed Consolidated Balance Sheets As of September 30, 2023, total assets were $300.7 million, an increase from $289.6 million at June 30, 2023, driven by increases in cash and cash equivalents and accounts receivable Condensed Consolidated Balance Sheet Highlights ($ in thousands) | Account | Sep 30, 2023 (Unaudited) | Jun 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $54,597 | $50,927 | | Accounts receivable, net | $36,998 | $30,162 | | Total current assets | $133,991 | $123,383 | | Total assets | $300,695 | $289,612 | | Liabilities & Equity | | | | Accounts payable | $59,591 | $52,869 | | Total current liabilities | $87,339 | $81,693 | | Total liabilities | $129,088 | $122,020 | | Total shareholders' equity | $168,887 | $164,872 | Condensed Consolidated Statements of Operations The company achieved a net income of $2.0 million for Q1 FY2024, a significant turnaround from a prior-year loss, driven by 8.5% revenue growth and improved gross profit Statement of Operations Summary ($ in thousands, except per share data) | Metric | Q1 FY2024 (ended Sep 30, 2023) | Q1 FY2023 (ended Sep 30, 2022) | | :--- | :--- | :--- | | Total revenues | $62,683 | $57,782 | | Gross profit | $24,328 | $14,162 | | Operating income (loss) | $2,755 | $(8,518) | | Net income (loss) | $2,007 | $(8,574) | | Diluted EPS | $0.02 | $(0.13) | Condensed Consolidated Statements of Cash Flows The company generated $6.7 million in cash from operating activities for Q1 FY2024, a significant improvement from the prior year, leading to a $3.7 million increase in cash and cash equivalents Cash Flow Summary ($ in thousands) | Cash Flow Activity | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,703 | $(9,032) | | Net cash used in investing activities | $(2,916) | $(4,956) | | Net cash used in financing activities | $(117) | $(3,344) | | Net increase (decrease) in cash | $3,670 | $(17,332) | | Cash and cash equivalents at end of period | $54,597 | $50,793 | Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, financial statement items, and business operations, including the 32M acquisition and revenue disaggregation, confirming the company operates as a single segment - The company is a digital payments and software services company providing end-to-end technology solutions for self-service commerce, operating as one operating segment1923 - The acquisition of Three Square Market (32M) in December 2022 for $41.1 million expanded the company's presence in the micro market industry and global markets, resulting in $25.7 million of goodwill and $14.9 million of intangible assets576163 Disaggregated Revenue for Three Months Ended Sep 30 ($ in thousands) | Revenue Source | 2023 | 2022 | | :--- | :--- | :--- | | Transaction fees | $37,030 | $31,295 | | Subscription fees | $18,105 | $15,780 | | Total Subscription & transaction fees | $55,135 | $47,075 | | Equipment sales | $7,548 | $10,707 | | Total revenues | $62,683 | $57,782 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 FY2024 financial results, highlighting 8.5% revenue growth, improved profitability, strong operational metrics, and a positive Adjusted EBITDA of $7.8 million Quarterly Results of Operations The company's key performance indicators showed positive trends as of September 30, 2023, with growth in Active Devices, Active Customers, and Total Dollar Volume of Transactions Key Operating Metrics (as of Sep 30, 2023) | Metric | Sep 30, 2023 | Sep 30, 2022 | % Change | | :--- | :--- | :--- | :--- | | Active Devices (thousands) | 1,192 | 1,151 | +3.6% | | Active Customers | 29,670 | 25,019 | +18.6% | | Total Dollar Volume of Transactions (millions) | $724.8 | $639.5 | +13.3% | Revenues and Gross Profit Analysis Total revenues increased by 8.5% to $62.7 million, driven by subscription and transaction fees, while gross profit surged by 71.8% to $24.3 million, significantly improving gross margin Revenue and Gross Profit Breakdown ($ in thousands) | Category | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | | | | | Subscription and transaction fees | $55,135 | $47,075 | +17.1% | | Equipment sales | $7,548 | $10,707 | -29.5% | | Total Revenues | $62,683 | $57,782 | +8.5% | | Gross Profit | | | | | Subscription and transaction fees | $23,407 | $16,705 | +40.1% | | Equipment sales | $921 | $(2,543) | +136.2% | | Total Gross Profit | $24,328 | $14,162 | +71.8% | - The increase in subscription and transaction fees was driven by a 13.3% increase in transaction dollar volumes and an 18.6% increase in Active Customers, with the 32M acquisition contributing $3.4 million120 - Equipment sales decreased as the 3G to 4G network upgrade cycle has been completed, but equipment margin improved as strategic discounts for this transition ended121 Operating Expenses Analysis Total operating expenses decreased by 4.9% to $21.6 million, primarily due to reductions in technology and product development and general and administrative expenses Operating Expenses Breakdown ($ in thousands) | Category | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Sales and marketing | $4,142 | $2,525 | +64.0% | | Technology and product development | $4,168 | $6,865 | -39.3% | | General and administrative expenses | $10,438 | $11,578 | -9.8% | | Depreciation and amortization | $2,747 | $1,315 | +108.9% | | Total operating expenses | $21,573 | $22,680 | -4.9% | Non-GAAP Financial Measures - Adjusted EBITDA The company reported a positive Adjusted EBITDA of $7.8 million for the quarter, a significant turnaround from a $5.4 million loss in the prior year Reconciliation of Net Income (Loss) to Adjusted EBITDA ($ in thousands) | Line Item | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | U.S. GAAP net income (loss) | $2,007 | $(8,574) | | EBITDA | $5,767 | $(7,081) | | Adjustments to EBITDA | $2,054 | $1,715 | | Adjusted EBITDA | $7,821 | $(5,366) | Liquidity and Capital Resources As of September 30, 2023, the company had $54.6 million in cash and cash equivalents, with operations providing $6.7 million in cash during the quarter - Primary sources of capital are cash on hand of $54.6 million and expected cash from operating activities138 - Net cash provided by operating activities was $6.7 million for the quarter, compared to $9.0 million used in the prior-year quarter, driven by net income and non-cash charges143144 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on $38.4 million in variable-rate debt, where a 100 basis point SOFR increase would raise annual interest expense by $0.4 million - The company has $38.4 million in outstanding borrowings with variable interest rates based on SOFR150 - A hypothetical 100 basis point (1%) increase in the SOFR Rate would change annual interest expense by approximately $0.4 million150 Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to previously identified material weaknesses, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were not effective as of September 30, 2023153 - The ineffectiveness is a result of material weaknesses previously identified in the 2023 Form 10-K, and remediation efforts are in progress153155 Part II - Other Information Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 15 – Commitments and Contingencies - Information regarding legal proceedings is incorporated by reference from Note 15 – Commitments and Contingencies156 Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - The report refers to the 'Risk Factors' section of the Annual Report on Form 10-K for the fiscal year ended June 30, 2023 for a discussion of the company's risk factors157 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the quarter, as this item is marked as not applicable - No unregistered sales of equity securities or use of proceeds were reported for the quarter158 Defaults Upon Senior Securities The company reported no defaults on any senior securities, with the total liquidation preference on its Series A Convertible Preferred Stock at $22.4 million - There were no defaults on any senior securities during the period158 - The total liquidation preference on the Series A Convertible Preferred Stock was $22.4 million as of September 30, 2023158 Other Information No director or executive officer adopted, modified, or terminated any Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangements during the quarter - No director or executive officer adopted, modified, or terminated a Rule 10b5-1 trading plan during the fiscal quarter159 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data formatted in iXBRL - The report includes required CEO and CFO certifications and financial statements formatted in iXBRL as exhibits160