SEC Form 10-Q filed by Cantaloupe Inc.

2/8/24 4:46:34 PM ET

Office Equipment/Supplies/Services

Miscellaneous

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ctlp-20231231

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 December 31, 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 February 5, 2024, there were 72,797,023 outstanding shares of Common Stock, no par value.


Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets - December 31, 2023 (unaudited) and June 30, 2023	3

	Condensed Consolidated Statements of Operations - Three and Six Months ended December 3 1 , 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss ) - Three and Six Months ended December 31, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity - Three and Six Months ended December 3 1 , 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows - Six Months ended December 3 1 , 2023 and 2022 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

Part II - Other Information

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

	Signatures	41


($ in thousands, except share data)	December 31, 2023 (Unaudited)		June 30, 2023

Assets
Current assets:
Cash and cash equivalents	$	43,478	$	50,927
Accounts receivable, net	40,211		30,162
Finance receivables, net	6,221		6,668
Inventory, net	34,789		31,872
Prepaid expenses and other current assets	6,307		3,754
Total current assets	131,006		123,383

Non-current assets:
Finance receivables due after one year, net	11,707		13,307
Property and equipment, net	27,751		25,281
Operating lease right-of-use assets	8,443		2,575
Intangibles, net	25,400		27,812
Goodwill	92,903		92,005
Other assets	5,178		5,249
Total non-current assets	171,382		166,229

Total assets	$	302,388	$	289,612

Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities:
Accounts payable	$	50,181	$	52,869
Accrued expenses	26,955		26,276
Current obligations under long-term debt	1,073		882
Deferred revenue	1,788		1,666
Total current liabilities	79,997		81,693

Long-term liabilities:
Deferred income taxes	362		275
Long-term debt, less current portion	37,010		37,548
Operating lease liabilities, non-current	9,203		2,504
Total long-term liabilities	46,575		40,327

Total liabilities	126,572		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 December 31, 2023 and June 30, 2023, respectively	2,720		2,720
Shareholders’ equity:

Common stock, no par value, 640,000,000 shares authorized, 72,739,058 and 72,664,464 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively	480,441		477,324
Accumulated deficit	(307,321)		(312,452)
Accumulated other comprehensive loss	(24)		—
Total shareholders’ equity	173,096		164,872

Total liabilities, convertible preferred stock, and shareholders’ equity	$	302,388	$	289,612


	Three months ended				Six months ended
	December 31,				December 31,
($ in thousands, except share and per share data)	2023		2022		2023		2022
Revenues:
Subscription and transaction fees	$	56,029	$	48,932	$	111,164	$	96,007
Equipment sales	9,330		12,398		16,878		23,105
Total revenues	65,359		61,330		128,042		119,112

Costs of sales:
Cost of subscription and transaction fees	31,885		30,202		63,613		60,572
Cost of equipment sales	9,158		12,687		15,785		25,937
Total costs of sales	41,043		42,889		79,398		86,509

Gross profit	24,316		18,441		48,644		32,603

Operating expenses:
Sales and marketing	4,367		3,210		8,509		5,735
Technology and product development	3,030		5,299		7,198		12,164
General and administrative	10,505		6,559		20,943		18,137
Investigation, proxy solicitation and restatement expenses, net of insurance recoveries	—		150		—		547
Integration and acquisition expenses	93		2,787		171		2,787
Depreciation and amortization	2,736		1,350		5,483		2,666
Total operating expenses	20,731		19,355		42,304		42,036

Operating income (loss)	3,585		(914)		6,340		(9,433)

Other income (expense):
Interest income from leases	493		878		1,010		1,445
Interest expense	(1,002)		(518)		(2,109)		(995)
Other income (expense), net	129		23		52		(97)
Total other (expense) income	(380)		383		(1,047)		353

Income (loss) before income taxes	3,205		(531)		5,293		(9,080)
Provision for income taxes	(81)		(42)		(162)		(67)

Net income (loss)	3,124		(573)		5,131		(9,147)
Preferred dividends	—		—		(289)		(334)
Net income (loss) applicable to common shares	$	3,124	$	(573)	$	4,842	$	(9,481)

Net earnings (loss) per common share
Basic	$	0.04	$	(0.01)	$	0.07	$	(0.13)
Diluted	0.04		(0.01)		0.07		(0.13)

Weighted average number of common shares outstanding used to compute net earnings (loss) per share applicable to common shares
Basic	72,743,162		71,629,939		72,730,563		71,418,845
Diluted	73,913,599		71,629,939		73,934,917		71,418,845


	Convertible Preferred Stock			Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		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
Stock-based compensation	—	—		43,793	1,109		—		—		1,109

Other comprehensive loss	—	—		—	—		—		(24)		(24)
Net income	—	—		—	—		3,124		—		3,124
Balance, December 31, 2023	385,782	$	2,720	72,739,058	$	480,441	$	(307,321)	$	(24)	$	173,096


	Six months ended
	December 31,
($ in thousands)	2023		2022
Cash flows from operating activities:
Net income (loss)	$	5,131	$	(9,147)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock based compensation	3,043		1,477
Amortization of debt issuance costs and discounts	63		59
Provision for expected losses	2,384		1,527
Provision for inventory reserve	—		135
Depreciation and amortization included in operating expenses	5,483		2,666
Depreciation included in cost of subscription and transaction fees for rental equipment	722		554

Other	1,104		979
Changes in operating assets and liabilities:
Accounts receivable	(12,278)		(6,737)
Finance receivables	1,886		(1,221)
Inventory	(2,941)		(5,411)
Prepaid expenses and other assets	(2,506)		755
Accounts payable and accrued expenses	(2,915)		(1,057)
Operating lease liabilities	(530)		(750)
Deferred revenue	122		77
Net cash used in operating activities	(1,232)		(16,094)

Cash flows from investing activities:
Acquisition of business, net of cash acquired	—		(35,913)
Capital expenditures	(5,912)		(9,436)

Net cash used in investing activities	(5,912)		(45,349)

Cash flows from financing activities:


Proceeds from long-term debt	—		25,000
Repayment of long-term debt	(384)		(388)
Contingent consideration paid for acquisition	—		(1,000)
Proceeds from exercise of common stock options	74		—
Repurchase of Series A Convertible Preferred Stock	—		(2,151)
Net cash (used in) provided by financing activities	(310)		21,461

Effect of currency exchange rate changes on cash and cash equivalents	5		—

Net decrease in cash and cash equivalents	(7,449)		(39,982)
Cash and cash equivalents at beginning of year	50,927		68,125
Cash and cash equivalents at end of period	$	43,478	$	28,143

Supplemental disclosures of cash flow information:
Interest paid in cash	$	1,931	$	920
Income taxes paid in cash	$	130	$	44
Common stock issued in business combination	$	—	$	3,942


	Six months ended December 31,
($ in thousands)	2023		2022
Beginning balance of allowance as of June 30	$	10,815	$	9,328
Provision for expected losses	958		1,044
Write-offs	(60)		(127)
Balance at September 30,	$	11,713	$	10,245
Provision for expected losses	1,266		91
Write-offs	(134)		(214)
Balance at December 31	$	12,845	$	10,122


($ in thousands)	December 31, 2023		June 30, 2023
Current finance receivables, net	$	6,221	$	6,668
Finance receivables due after one year, net	11,707		13,307
Total finance receivables, net of allowance of $2,257 and $2,098, respectively	$	17,928	$	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	$	2,760	$	8,615	$	3,907	$	1,088	$	626	$	48	$	17,044
30 days and under	12		99		103		37		36		36		323
31-60 days	8		85		56		12		26		40		227
61-90 days	7		82		38		2		25		40		194
Greater than 90 days	22		887		383		148		367		590		2,397
Total finance receivables	$	2,809	$	9,768	$	4,487	$	1,287	$	1,080	$	754	$	20,185


($ in thousands)
2024	$	7,403
2025	6,298
2026	4,571
2027	2,621
2028	727
Thereafter	48
Total amounts to be collected	21,668
Less: interest	(1,483)
Less: allowance for uncollectible receivables	(2,257)
Total finance receivables	$	17,928


($ in thousands)	Balance Sheet Classification	As of December 31, 2023		As of June 30, 2023

Assets:	Operating lease right-of-use assets	$	8,443	$	2,575

Liabilities:
Current	Accrued expenses	$	640	$	1,266
Long-term	Operating lease liabilities, non-current	9,203		2,504
Total lease liabilities		$	9,843	$	3,770


	As of December 31, 2023
($ in thousands)	Gross		Accumulated Amortization		Net		Amortization Period
Intangible assets:
Brand and tradenames	$	2,161	$	(1,619)	$	542	1 - 7 years
Developed technology	18,712		(12,350)		6,362		5 - 6 years
Customer relationships	26,824		(8,328)		18,496		5 - 18 years
Total intangible assets	$	47,697	$	(22,297)	$	25,400

Goodwill	92,903		—		92,903		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


	Six months ended December 31,
		2023			2022
Expected volatility (percent)		61.3% - 69.7%			74.6% - 77.6%
Weighted average expected life (years)		4.2 - 4.5			4.4 - 4.6
Dividend yield (percent)		0.0		%	0.0		%
Risk-free interest rate (percent)		4.2% - 4.3%			2.7% - 4.1%
Number of options granted		125,000			1,620,000
Weighted average exercise price		$	7.11		$	4.58
Weighted average grant date fair value		$	4.34		$	2.87


($ in thousands)	Six months ended December 31, 2023		Six months ended December 31, 2022

Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,220	$	1,064

Non-cash activity:
Lease assets obtained in exchange for new operating lease liabilities	$	6,657	$	—


($ in thousands)	Operating Leases
Remainder of 2024	$	633
2025	1,606
2026	2,324
2027	1,785
2028	1,359
Thereafter	$	6,571
Total lease payments	$	14,278
Less: Imputed interest	(4,435)
Present value of lease liabilities	$	9,843


	As of December 31,		As of June 30,
($ in thousands)	2023		2023

JPMorgan Credit Facility*	38,188		38,563
Other obligations	41		50
Less: unamortized issuance costs and debt discount	(146)		(183)
Total	38,083		38,430
Less: debt and other financing arrangements, current	(1,073)		(882)
Debt and other financing arrangements, noncurrent	$	37,010	$	37,548


2024	$	573
2025	1,333
2026	36,323
2027	—
Principal amounts payable	38,229
Unamortized issuance costs	(146)
Total outstanding debt	$	38,083


	Three months ended December 31,		Six months ended December 31,
(In thousands)	2022		2022
Revenues	$	64,614	$	127,450
Net income (loss)	$	1,241	$	(11,184)


($ 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


($ in thousands)	As of December 31, 2023
Remainder of fiscal year 2024	$	2,923
2025	5,703
2026	3,235
Thereafter	—
Total	$	11,861


	Three months ended December 31,
($ in thousands, except per share data)	2023		2022

Numerator for basic and diluted loss per share
Net income (loss)	$	3,124	(573)
Preferred dividends	—		$	—
Net income (loss) applicable to common shareholders	3,124		(573)

Denominator for basic earnings (loss) per share - Weighted average shares outstanding	72,743,162		71,629,939
Effect of dilutive potential common shares	1,170,437		—
Denominator for diluted earnings (loss) per share - Adjusted weighted average shares outstanding	73,913,599		71,629,939

Basic earnings (loss) per share	$	0.04	$	(0.01)
Diluted earnings (loss) per share	$	0.04	$	(0.01)


	As of and for the three months ended
	December 31, 2023		September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022
Devices:
Active Devices (thousands)	1,226		1,192		1,168		1,150		1,150

Customers:
Active Customers	30,027		29,670		28,584		27,598		26,335

Volumes:
Total Number of Transactions (millions)	286.7		283.6		278.6		267.8		273.7
Total Dollar Volume of Transactions (millions)	730.1		724.8		703.5		653.6		649.4

Subscription and transaction fees - Trailing 12 months (thousands)	$	215,380	$	208,283	$	200,223	$	192,147	$	183,045
Average revenue per unit (ARPU)	$	181.91	$	178.78	$	173.39	$	167.52	$	160.46


	Three months ended December 31,						Change
($ in thousands)	2023			2022			Amount		Percentage
Revenues:
Subscription and transaction fees	$	56,029		$	48,932		$	7,097	14.5	%
Equipment sales	9,330			12,398			(3,068)		(24.7)	%
Total revenues	65,359			61,330			4,029		6.6	%

Costs of sales:
Cost of subscription and transaction fees	31,885			30,202			1,683		5.6	%
Cost of equipment sales	9,158			12,687			(3,529)		(27.8)	%
Total costs of sales	41,043			42,889			(1,846)		(4.3)	%

Gross profit:
Subscription and transaction fees	24,144			18,730			5,414		28.9	%
Equipment sales	172			(289)			461		159.5	%
Total gross profit	$	24,316		$	18,441		$	5,875	31.9	%

Gross margin:
Subscription and transaction fees	43.1		%	38.3		%
Equipment sales	1.8		%	(2.3)		%
Total gross margin	37.2		%	30.1		%

SEC Form 10-Q filed by Cantaloupe Inc.

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