SEC Form 10-Q filed by Cantaloupe Inc.

11/9/23 4:43:09 PM ET

Office Equipment/Supplies/Services

Miscellaneous

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ctlp-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-33365

Cantaloupe, Inc.

_______________________________________________________________

(Exact name of registrant as specified in its charter)


Pennsylvania						23-2679963
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Deerfield Lane,

Suite 300,

Malvern,

Pennsylvania

19355

(Address of principal executive offices)

(Zip Code)

(610) 989-0340

_______________________________________________________________

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name Of Each Exchange On Which Registered
Common Stock, no par value	CTLP	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of November 3, 2023 there were 72,727,360 outstanding shares of Common Stock, no par value.


Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets - September 30, 2023 (unaudited) and June 30, 2023	3

	Condensed Consolidated Statements of Operations - Three Months ended September 30, 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity - Three Months ended September 30, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows - Three Months ended September 30, 2023 and 2022 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

Part II - Other Information

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

	Signatures	35


($ in thousands, except share data)	September 30, 2023 (Unaudited)		June 30, 2023

Assets
Current assets:
Cash and cash equivalents	$	54,597	$	50,927
Accounts receivable, net	36,998		30,162
Finance receivables, net	6,439		6,668
Inventory, net	32,216		31,872
Prepaid expenses and other current assets	3,741		3,754
Total current assets	133,991		123,383

Non-current assets:
Finance receivables due after one year, net	12,362		13,307
Property and equipment, net	26,683		25,281
Operating lease right-of-use assets	3,963		2,575
Intangibles, net	26,236		27,812
Goodwill	92,380		92,005
Other assets	5,080		5,249
Total non-current assets	166,704		166,229

Total assets	$	300,695	$	289,612

Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities:
Accounts payable	$	59,591	$	52,869
Accrued expenses	24,831		26,276
Current obligations under long-term debt	977		882
Deferred revenue	1,940		1,666
Total current liabilities	87,339		81,693

Long-term liabilities:
Deferred income taxes	318		275
Long-term debt, less current portion	37,278		37,548
Operating lease liabilities, non-current	4,153		2,504
Total long-term liabilities	41,749		40,327

Total liabilities	129,088		122,020
Commitments and contingencies (Note 15)
Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 385,782 issued and outstanding, with liquidation preferences of $22,433 and $22,144 at September 30, 2023 and June 30, 2023, respectively	2,720		2,720
Shareholders’ equity:

Common stock, no par value, 640,000,000 shares authorized, 72,695,265 and 72,664,464 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively	479,332		477,324
Accumulated deficit	(310,445)		(312,452)
Total shareholders’ equity	168,887		164,872
Total liabilities, convertible preferred stock, and shareholders’ equity	$	300,695	$	289,612


	Three months ended
	September 30,
($ in thousands, except share and per share data)	2023		2022
Revenues:
Subscription and transaction fees	$	55,135	$	47,075
Equipment sales	7,548		10,707
Total revenues	62,683		57,782

Costs of sales:
Cost of subscription and transaction fees	31,728		30,370
Cost of equipment sales	6,627		13,250
Total costs of sales	38,355		43,620

Gross profit	24,328		14,162

Operating expenses:
Sales and marketing	4,142		2,525
Technology and product development	4,168		6,865
General and administrative	10,438		11,578
Investigation, proxy solicitation and restatement expenses, net of insurance recoveries	—		397
Integration and acquisition expenses	78		—
Depreciation and amortization	2,747		1,315
Total operating expenses	21,573		22,680

Operating income (loss)	2,755		(8,518)

Other income (expense):
Interest income from leases	517		567
Interest expense	(1,107)		(477)
Other expense	(77)		(120)
Total other expense	(667)		(30)

Income (loss) before income taxes	2,088		(8,548)
Provision for income taxes	(81)		(26)

Net income (loss)	2,007		(8,574)
Preferred dividends	(289)		(334)
Net income (loss) applicable to common shares	$	1,718	$	(8,908)

Net earnings (loss) per common share
Basic	$	0.02	$	(0.13)
Diluted	0.02		(0.13)

Weighted average number of common shares outstanding used to compute net earnings (loss) per share applicable to common shares
Basic	72,717,965		71,207,750
Diluted	74,305,512		71,207,750


	Convertible Preferred Stock			Common Stock			Accumulated Deficit		Total Shareholders' Equity
($ in thousands, except share data)	Shares	Amount		Shares	Amount
Balance, June 30, 2023	385,782	$	2,720	72,664,464	$	477,324	$	(312,452)	$	164,872
Stock-based compensation	—	—		20,801	1,934		—		1,934

Exercise of stock options	—	—		10,000	74				74
Net income	—	—		—	—		2,007		2,007

Balance, September 30, 2023	385,782	$	2,720	72,695,265	$	479,332	$	(310,445)	$	168,887


	Three months ended
	September 30,
($ in thousands)	2023		2022
Cash flows from operating activities:
Net income (loss)	$	2,007	$	(8,574)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock based compensation	1,932		1,318
Amortization of debt issuance costs and discounts	32		29
Provision for expected losses	1,000		1,436
Provision for inventory reserve	—		200
Depreciation and amortization included in operating expenses	2,747		1,315
Depreciation included in cost of subscription and transaction fees for rental equipment	342		242

Other	443		657
Changes in operating assets and liabilities:
Accounts receivable	(7,784)		(4,693)
Finance receivables	1,122		(346)
Inventory	(344)		(3,948)
Prepaid expenses and other assets	171		(70)
Accounts payable and accrued expenses	5,152		3,596
Operating lease liabilities	(391)		(369)
Deferred revenue	274		175
Net cash provided by (used in) operating activities	6,703		(9,032)

Cash flows from investing activities:

Capital expenditures	(2,916)		(4,956)

Net cash used in investing activities	(2,916)		(4,956)

Cash flows from financing activities:



Repayment of long-term debt	(193)		(193)
Contingent consideration paid for acquisition	—		(1,000)

Proceeds from exercise of common stock options	76		—
Repurchase of Series A Convertible Preferred Stock	—		(2,151)
Net cash used in financing activities	(117)		(3,344)

Net increase (decrease) in cash and cash equivalents	3,670		(17,332)
Cash and cash equivalents at beginning of year	50,927		68,125
Cash and cash equivalents at end of period	$	54,597	$	50,793

Supplemental disclosures of cash flow information:
Interest paid in cash	$	889	$	248
Income taxes paid in cash	$	13	$	44


	Three months ended September 30,
($ in thousands)	2023		2022
Balance, beginning of period	$	10,815	$	9,328
Provision for expected losses	958		1,044
Write-offs	(60)		(127)
Balance, end of period	$	11,713	$	10,245


($ in thousands)	September 30, 2023		June 30, 2023
Current finance receivables, net	$	6,439	$	6,668
Finance receivables due after one year, net	12,362		13,307
Total finance receivables, net of allowance of $2,149 and $2,098, respectively	$	18,801	$	19,975


	Leases by Origination
($ in thousands)	Up to 1 Year Ago		Between 1 and 2 Years Ago		Between 2 and 3 Years Ago		Between 3 and 4 Years Ago		Between 4 and 5 Years Ago		More than 5 Years Ago		Total
Current	$	4,142	$	8,970	$	3,080	$	1,084	$	723	$	27	$	18,026
30 days and under	19		129		85		32		35		32		332
31-60 days	14		107		35		19		30		38		243
61-90 days	9		99		25		7		28		38		206
Greater than 90 days	29		948		219		252		140		555		2,143
Total finance receivables	$	4,213	$	10,253	$	3,444	$	1,394	$	956	$	690	$	20,950


($ in thousands)
2023 (remaining 3 months)	$	6,183
2024	6,659
2025	5,153
2026	3,324
2027	1,351
Thereafter	89
Total amounts to be collected	22,759
Less: interest	(1,809)
Less: allowance for receivables	(2,149)
Total finance receivables	$	18,801


($ in thousands)	Balance Sheet Classification	As of September 30, 2023		As of June 30, 2023

Assets:	Operating lease right-of-use assets	$	3,963	$	2,575

Liabilities:
Current	Accrued expenses	$	1,015	$	1,266
Long-term	Operating lease liabilities, non-current	4,153		2,504
Total lease liabilities		$	5,168	$	3,770


	As of September 30, 2023
($ in thousands)	Gross		Accumulated Amortization		Net		Amortization Period
Intangible assets:
Brand and tradenames	$	2,161	$	(1,517)	$	644	1 - 7 years
Developed technology	20,188		(11,989)		8,199		5 - 6 years
Customer relationships	24,714		(7,321)		17,393		5 - 18 years
Total intangible assets	$	47,063	$	(20,827)	$	26,236

Goodwill	92,380		—		92,380		Indefinite


	As of June 30, 2023
($ in thousands)	Gross		Accumulated Amortization		Net		Amortization Period
Intangible assets:
Brand and tradenames	2,161		(1,414)		747		1 - 7 years
Developed technology	20,188		(11,066)		9,122		5 - 6 years
Customer relationships	24,714		(6,771)		17,943		5 - 18 years
Total intangible assets	$	47,063	$	(19,251)	$	27,812

Goodwill	92,005		—		92,005		Indefinite


($ in thousands)
Closing cash consideration	$	36,605
Stock consideration	4,506
Fair value of total consideration transferred	$	41,111


	Three months ended September 30,
		2023			2022
Expected volatility (percent)		61.3% - 69.7%			74.6% - 75.1%
Weighted average expected life (years)		4.2 - 4.5			4.5
Dividend yield (percent)		0.0		%	0.0		%
Risk-free interest rate (percent)		4.2% - 4.3%			2.7% - 3.2%
Number of options granted		110,000			600,000
Weighted average exercise price		$	7.00		$	6.51
Weighted average grant date fair value		$	4.35		$	3.91


($ in thousands)	Three months ended September 30, 2023		Three months ended September 30, 2022

Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	604	$	546

Non-cash activity:
Lease assets obtained in exchange for new operating lease liabilities	$	1,788	$	—


($ in thousands)	Operating Leases
Remainder of 2024	$	1,007
2025	1,604
2026	1,576
2027	952
2028	506
Thereafter	$	564
Total lease payments	$	6,209
Less: Imputed interest	(1,041)
Present value of lease liabilities	$	5,168


	As of September 30,		As of June 30,
($ in thousands)	2023		2023

JPMorgan Credit Facility*	38,375		38,563
Other obligations	44		50
Less: unamortized issuance costs and debt discount	(164)		(183)
Total	38,255		38,430
Less: debt and other financing arrangements, current	(977)		(882)
Debt and other financing arrangements, noncurrent	$	37,278	$	37,548


2024	$	765
2025	1,333
2026	36,321
2027	—
Principal amounts payable	38,419
Unamortized issuance costs	(164)
Total outstanding debt	$	38,255


($ in thousands)	Amount
Consideration
Cash	$	2,966
Contingent consideration arrangement	1,000
Fair value of total consideration transferred	3,966

Recognized amounts of identifiable assets
Total net assets acquired	21
Identifiable intangible assets	1,235
Total identifiable net assets	1,256

Goodwill	$	2,710


	Three months ended September 30,
($ in thousands, except per share data)	2023		2022

Numerator for basic and diluted loss per share
Net income (loss)	$	2,007	$	(8,574)
Preferred dividends	(289)		(334)
Net income (loss) applicable to common shareholders	1,718		(8,908)

Denominator for basic earnings (loss) per share - Weighted average shares outstanding	72,717,965		71,207,750
Effect of dilutive potential common shares	1,587,547		—
Denominator for diluted earnings (loss) per share - Adjusted weighted average shares outstanding	74,305,512		71,207,750

Basic earnings (loss) per share	$	0.02	$	(0.13)
Diluted earnings (loss) per share	$	0.02	$	(0.13)


	As of and for the three months ended
	September 30, 2023	June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Devices:
Active Devices (thousands)	1,192	1,168		1,150		1,150		1,151

Customers:
Active Customers	29,670	28,584		27,598		26,335		25,019

Volumes:
Total Number of Transactions (millions)	283.6	273.6		267.8		273.7		276.3
Total Dollar Volume of Transactions (millions)	724.8	$	703.5	$	653.6	$	649.4	$	639.5


	Three months ended September 30,						Change
($ in thousands)	2023			2022			Amount		Percentage
Revenues:
Subscription and transaction fees	$	55,135		$	47,075		$	8,060	17.1	%
Equipment sales	7,548			10,707			(3,159)		(29.5)	%
Total revenues	62,683			57,782			4,901		8.5	%

Costs of sales:
Cost of subscription and transaction fees	31,728			30,370			1,358		4.5	%
Cost of equipment sales	6,627			13,250			(6,623)		(50.0)	%
Total costs of sales	38,355			43,620			(5,265)		(12.1)	%

Gross profit:
Subscription and transaction fees	23,407			16,705			6,702		40.1	%
Equipment sales	921			(2,543)			3,464		136.2	%
Total gross profit	$	24,328		$	14,162		$	10,166	71.8	%

Gross margin:
Subscription and transaction fees	42.5		%	35.5		%
Equipment sales	12.2		%	(23.8)		%
Total gross margin	38.8		%	24.5		%


	Three months ended September 30,				Change
Category ($ in thousands)	2023		2022		Amount		Percentage
Sales and marketing	$	4,142	$	2,525	$	1,617	64.0	%
Technology and product development	4,168		6,865		(2,697)		(39.3)	%
General and administrative expenses	10,438		11,578		(1,140)		(9.8)	%
Investigation, proxy solicitation and restatement expenses, net of insurance recoveries	—		397		(397)		(100.0)	%
Integration and acquisition expenses	78		—		78		100.0	%
Depreciation and amortization	2,747		1,315		1,432		108.9	%
Total operating expenses	$	21,573	$	22,680	$	(1,107)	(4.9)	%


Exhibit Number						Description

3.1						Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 10-Q filed on February 4, 2022).

3.2						Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to Form 8-K filed on August 10, 2021)

31.1*						Certifications of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*						Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1**						Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**						Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC on November 9, 2023, is formatted in Inline Extensible Business Reporting Language (“iXBRL”): (1) the Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023, (2) the Condensed Consolidated Statements of Operations for the three-month periods ended September 30, 2023 and 2022, (3) the Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity for the three-month periods ended September 30, 2023 and 2022, (4) the Condensed Consolidated Statements of Cash Flows for the three-month periods ended September 30, 2023 and 2022, and (5) the Notes to Condensed Consolidated Financial Statements.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*						Inline XBRL Taxonomy Extension Schema

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase

104						The cover page from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC on November 9, 2023, is formatted as Inline iXBRL and contained in Exhibit 101.

SEC Form 10-Q filed by Cantaloupe Inc.

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