One. And welcome everybody to another
episode of smart money Circle. I'm your host, Adam, sorry.
Han with me today is Ravi, who's this CEO of cantaloupe ticker?
Symbol is see T LP. And it's the second time on the
show. Robbie, thank you so much for
coming on the show. We greatly, appreciate it.
Adam, it's great to be back here and look forward to the
conversation. Oh, can you just start wrapping
by giving us an overview about cantaloupe and explain some of
your competitive advantages? Please Yad cantaloupe.
We are the largest technology provider.
Enabling self-service Commerce in North America and are on a
journey to be the largest technology.
Provider powering self-service Commerce for the whole globe.
And in plain English, what we do is we build the technology that
accepts payments at unattended locations.
So they thus payment by definition has to be self
service because there's nobody no store clerk there.
And then we use the acceptance of payment combined with
telematics. Make an autonomous location
dispenser product or a service. The product could be a bag of
chips, from a vending machine. The service could be a car wash
or a parking gate opening and closing.
So in all those scenarios, we build the telematics to
interface with all those machines and make them dispense,
the service or product. And we also build Self Service
optimized payment acceptance device that takes Red card
payments, Apple pay, Loyalty cards and you know, various
kinds of payments and we also process the payments behind the
scenes and offer software as a service that lets companies that
have these self-service kind of businesses.
You know, I mentioned parking I mentioned car washes pending
cafeterias where you can grab scan pay at a kiosk and go all
those types of businesses? We provide software as a service
that's kind of like the Erp. For them to manage their
business sitting in their office at a computer and they get
visibility to inventory levels and warehouses different
locations. You know, drivers needing to be
scheduled to go out and restock all of those things.
So, that's kind of the business in a nutshell.
I love it. So, your publicly traded
company, we can see the numbers. You're expected to be profitable
this year and again next year. So I was going to ask you, how's
business, but I'm assuming business is pretty well, but I'd
like to hear from you, how's business?
Yeah, it's very exciting. Ting time for us at cantaloupe
because we've had a real Renaissance in the industry as a
whole with more people moving towards self service.
And I think that trend is just you know at the very beginning
of kind of a secure long-term Trend.
As far as the company itself is concerned, we went through a bit
of a turn around face between 2020 and 2022 and that was
driven by, you know, covid caused a lot of people to not
show up at offices. And a good portion of our
business is driven by office, break room experiences.
You know, whether they are, they are vending or whether they are.
As I mentioned, grabs can pay and go experiences, so that took
a hit. And then we also had some issues
with a prior management where the company was delisted went
through some trouble. And so there was an activist
shareholder, Hudson executive Capital that came in
reconstituted, the entire board and the management team
including bringing me on On and we sort of set up a turn around
face for a couple of years. And then a growth phase beyond
that. I'm happy to say.
We've executed on all metrics that we laid out for ourselves
through the turn around, and are now well into the growth phase
and at an analyst day at the NASDAQ last year.
In December, we outlined a 3-year vision for the company,
along, with operating metrics and financial metrics and that's
created quite a bit of excitement.
And as we have now, had a few Orders of executing against that
plan and building credibility. You know, in this bad Market
where most companies are pushing their 52, we close.
We are pushing our 52-week highs and, you know, the Russell's had
near - returns and our, our stock is since I've been in the
seat, our stock is 120% which, you know, not that I want to set
myself up to sustain that every six months, but very excited
about the market response so far.
Our and we're just beginning this journey.
So it's really early days and lots of upside, you know, I love
it. I mean, your stock is up 70
percent this year or thereabouts if I'm correct.
And yep. And it's more than doubled from
the October lows of last year and hats off to you that the
vision is the execution phenomenal job.
The turnaround is obviously working from the stocks that you
guys are expected to earn around seven cents this year and then
23 cents next year. Which is an increase of almost
230 percent. That's fantastic growth.
So let's talk about that vision of future and the compelling
future. The growth possibilities, were
you located now, as far as geography or only North America,
are you International, then your plans to expand going forward.
So we have historically been very strong North America.
So that's US and Canada presents more.
And now Mexico is included in that.
So, Continue to consolidate our presence there but we are now
also going into Latin America, more broadly and Europe.
So add those as kind of a phase one, international expansion, I
describe it as a three-year journey of setting up
operations, setting up partnership sales teams and
starting to actually derive Revenue.
We are around the midpoint of that three-year Journey for
those geographies. So we now have some revenues
that are already coming from those.
Those geographies though, it's not meaningful for this fiscal
year and our fiscal year ends in June.
So we are at the last last few weeks of our fiscal year but in
fiscal 24, which begins next month for us, we expect to get
too much more meaningful and material revenues.
And by the time we get to fiscal 26 which is a couple of years
out, we expect International to be 15, maybe even twenty percent
of our total revenues, our love that and I know your company has
very little debt. What are your plans there with
debt and how do you use? Heard you get rid of it or what
are the plans with that? Yeah, so we are in a net
positive position in terms of cash on hand versus debt.
It's always a choice to take down some of that debt and we
continue to evaluate that kind of on a quarter to quarter
basis, if interest rates stabilized, maybe even head
down, there may be less incentive to do that versus
other opportunities for Capital. Allocation, if interest rates
continue to stay this High, then there is incentive to kind of
take it down a little little bit and and use some of our capital
for that. So it's a, it's an ongoing
conversation with the board and with the leadership team to look
at the best use of the dollars that we're generating out of the
business as well as what we have from debt.
So yeah, I'm the company had a lot.
You have to keep free cash flow so it's a position to be in and
I know management owns a bunch of stock.
You've got Fun Zone, bunch of the stock.
The next question I have for you rabbie's.
Respect to go, I guess. Valued areas or under cap.
But I guess undervalued areas that you can grow and where some
areas that are you looking to grow, would it be possibly a i
yes or no. And or other areas that you can
speak to one is going to play a major role in many Industries,
including ours. And in ours, there are a few
specific areas where we've invested heavily and are now
starting to see some returns and and will continue to invest
heavily in those areas. So, number one is a high-powered
merchandising so when You think about these unattended
locations? You know, whether whether they
are little Bistro at an airport which is selling salads and
sandwiches to, you know, two lockers to catering dining
ahead. There's a convergence happening
of all ways in which somebody wants to shop for their food and
beverage right online, experience the delivery
experience, whether it's an Uber Eats or, you know, things like
that. The The break room experience,
they're all converging and the hot food cafeteria, which used
to be in corporate break rooms is going away.
It's going out, and it's too expensive, not economically
feasible, labor, shortages in all.
Those are driving it out, so which is great for us.
What that leads to is. I want to be smart about
freshness and variety, right? So if, if I'm at a office
location, I don't want to eat the same turkey sandwich every
day for lunch, I want to have sushi one day.
And I I'll have a tuna sandwich the other day, so it's just
creating that experience requires a lot of intelligence
and AI is great at, you know, that kind of merchandising and
it could be. Even as simple as you know, blue
Gatorade in a vending machine versus Coke on a particular time
of the year, you know, or whatever.
Those type of decisions, right, right.
That's finding a lot of value from that.
That's one the other place where we use AI, pretty heavily is
What we call Dynamic scheduling. So before we built this
Innovation, you used to have people show up every Tuesday to
restock, you know, whether it's office coffee supplies or you
know, or these marketplaces or whatever.
And the problem with that is half the time somebody would
show up with, you know, a lot of stuff and they would find that
sales hadn't happened and they wasted a trip and the other
half. They would find out that they
showed up in the Shelves were empty for two days and they lost
sales, right? So so on both sides, it was -
and with our Dynamic scheduling. Now it's real-time inventory
across warehouse and locations optimized for forecast sales,
you know, using artificial intelligence.
So and and then doing something called pre-treating.
So what happens is in the warehouse itself, they build
kids for each location, there are exactly tailored to what is
needed to be restocked at that location.
Okay? The god of them.
And artificial intelligence optimized.
When a driver is going to go to a location, it's not every
Tuesday or every Thursday anymore, it can vary and it's
dynamically scheduled and it gives them their, you know, pick
list and it gives them their products and it gives them their
go here on Monday and don't go to this other place and it's
very intelligent in terms of taking into account factors
like, hey, you're anyway going to this place.
So, even though this other place is not fully empty, it makes
sense to go there, right? Stuff like that, but those Those
are two big areas where we are doing a lot with AI, and then we
are doing a lot with aii around trouble management.
So, especially when you have unattended locations, you know,
if if that parking gate has a problem and it's not opening,
you're going to have some very pissed-off customers, right?
Especially if they're stuck inside.
So, go ahead proactively detects something, right?
And then dispatch for trouble is a is another big portion of kind
of what we do, right? So that's Hopefully, that gives
you some color on the AI side. Now, I love that.
And then is that proprietary AI? Or is that just chat EBT, or is
it? How does that work?
So it's the dynamic scheduling piece and the merchandising
pieces so far have been proprietary AI, but they use
fairly standard algorithms that are used by the the broader
retail World in terms of doing basket analysis and several,
things like that. Some of it is protected very
proprietary and protected by our patterns we have More than 70
patterns and that creates a nice mode for our business against
competition. Right?
And so, some of this is in that category, chat GP is exciting
for us, in accelerating, our customer support experience.
And in accelerating, our internal kind of data
intelligence platforms and things like that.
So, we're doing a lot with chat G, PT more in R&D at this stage
in those areas, right? And I think it's early, but I'm
very excited. What could come out of it and
not to mention the organic, you know, at our company I have
encouraged people to, you know, in a compliant way experiment.
And so, we've got marketing, people writing content, using
chat GPT. And I even have somebody who
wrote a contract using chargeability, and our chief
legal officer was actually, this is actually not bad, it was so,
so it can be a Time Saver in many different areas.
Engineers are obviously using it to write and refine code in some
Cases. So, in a lot of places, we've
got it. We're also putting a lot of
controls in place to make sure we don't shoot ourselves in the
foot from either compliance perspective or, you know, chat
GPT is stealing someone else's code or copying content from
somebody else's website. So you put controls in place to
ensure. All that doesn't happen.
Now. That's wonderful.
I heard of crazy story. A lawyer had used it for some
kind of historical precedent, and it was just all bogus was
all wrong. You got that, you got nailed for
it. Okay, wonderful.
So Cube to follow up, question to all of that.
First off, you mentioned to make sure the risks don't happen.
So like in other words, a machine doesn't know, not open,
right? So how do you handle risk and
then what steps do you take to mitigate risk and or help with
risk management? Yeah.
It's what we call Telemetry, which is, you know, we try to
get a lot of data points in the operating environments that we
are present in. So that way, we can detect
trouble way before it manifests in an Actual problem that
impacts a consumers experience. Okay.
So in a nutshell how we handle that and and it has a lot of
value and we charge our customers per month, you know,
per location price for it and and it's a good profitable
business and adds a lot of value.
Excellent. And then the next question with
respect to growth going forward, I know you guys by definition
your Innovative company. You see things, what areas are
you looking to grow into where either you haven't been there?
You're just starting to scratch the surface therefore for more
growth with your Five-Year Plan. You know, the EV charging
spaces, one of those. Not the only one and amusement
is another. Now, these are all areas where
or a variety of different reasons, the opportunity is
starting to mature. So, what happened in EV charging
was? Everybody came up with, hey, I'm
going to search for a location on my app when find it, and I'm
going to make the payment and do everything on my app.
Well, now the states in Ian particular are starting to take
the lead and saying that's not an inclusive solution and you
need an open-loop payment solution where I can use my
credit card. I can use other normal payment
mechanisms you know just as I can at a gas station, right?
So now the charging station manufacturers who didn't build
that into their solution out of the gate are looking for
retrofit opportunities where they can collaborate with
somebody like us and say put a card reader on there and and in
Will the telematics to tell the charging station to dispense
charge? And and also by the way, now
that you have that a company like us can monitor the
efficiency of the charging station.
We can monitor its connectivity to the grid, we can monitor, we
can report on all the transactions in a very clever
manner. So there is a value chain that
we are ascending. If you will, in that space,
Amusement is another, you know, we have a pretty good presence
already but there are various types of gaming machines in bars
in, you know, in various other locations that are also suitable
for Self Service payment in telematics and and we are
expanding that pretty aggressively as well.
I love it. No, the EV stuff.
And even the amusement stuff is fantastic.
Especially as people want those experiences, the TV cars.
I just had the CEO of wall box on which they specialize in
making EV boxes, and they have it where the generator for your
house. It could be your battery for the
car. So the car You know, and you
know better, it's fantastic. So okay that's beautiful.
I guess. My next question from a
shareholder standpoint is the growth looks very clear that in
my mind's eye at least I see that the risk.
You met, you doing your best to mitigate the risk.
The what? Let's talk Macro for a little
bit, the overall economy and pure fear of a recession, the
FED raising rates. How does all of that factor into
your plan going forward? Yeah.
There are some, some things that can be Tailwind for us in.
Some, that can be had when Zell Outline them, if we have a
recession that prompts a lot more companies to lay off a lot
more workers that's had been for our business because we do drive
a lot of business, through break room experiences at companies.
Now, what we've seen so far is that the layoffs have been
restricted more to Tech and very high and white collar jobs.
They in when you get to, you know, lower-income workers the
opportunity. Is it is true.
There is a severe shortage, and that hasn't changed.
And there are three jobs for every person, right?
Almost. So we have a long way to go
before I think that problem can become a reality but in past
recessions we've seen unemployment climb.
Very steeply very quickly. So that's a risk, right?
The Tailwind side is if the bargaining power, which is, you
know, been heavily with employees, especially in White
Collar jobs. Start shifting because of
recessionary conditions, more towards employers, then you
might have more employers, you know, like Google did like some
of the other companies have done start asking workers to come
back to the office, which is Tailwind for us, you know.
So if workers come back instead of two days a week, three days a
week. And if more remote workers,
start thinking that, hey, you know, I better be in the office
and interacting with people or my job is going to be at risk.
That's actually a positive for us and love that.
Anything else that I didn't ask that you'd like to share with
you before we wrap up for today. I think just in, you know, you
you've covered a broad swath of everything, the one area, which
maybe we didn't touch on is, hey, how are you?
How are you getting operating leverage in the business and how
is the comfortability growing, you know, this sharply because
our our forecast for the long-term or Outlook call for an
ebitda growth rate a kegger of 70%, right?
However, the top line revenue is growing at 15%, so that throws
some people off in terms of how you growing Revenue to 15%, and
yet you grow your ebitda at at 70%.
So the answer is this, when at least when I got here, the
business was more heavily tilted towards equipment and payments
and software was kind of a third leg of the stool, right?
Not necessarily the big portion. What?
We've now done is we've outlined a strategy where software is
going to become the biggest, Part of the business and and
software has just to break that down.
Historically equipment, margins have been - - climbing is 10%,
and it's the razors that you sell to sell the razor blades
late winter and the payment processing margins.
Historically were at 8 to 10% and they were stuck there for
many, many years and the software margins were good.
They were at 80% but the software business was growing
very slow 46%. So what we've done is We've done
a number of pivots and invested heavily in R&D on the software
side, to build a lot of new modules and a lot of additional
things. The AI powered merchandising is
a good example, ability to change prices remotely is
another example. So as a result, now we have
shifted to where this fiscal year, our software growth of the
subscription. Revenue growth has been in the
teens instead of being 46%. And next year and onwards we see
it in the low 20s. So we know the soft Revenue at a
much faster Pace in the 20-plus percent rate, right?
And that's 80, plus percent margin.
So as this becomes a bigger portion of the pie, the overall
profitability of the business improves drastically, that's
one. The second thing we've done is,
we've looked at the payment processing Revenue, very
carefully and how we route payments and made some
significant improvements there that have now brought it from
the eight to ten percent, where it was for many, many years to
the 14 to 16, Eighteen percent in the last several quarters and
we've Consolidated that expertise and proven that we can
do it. Not just, you know, flash in the
pan 1/4 but repeatedly and consistently and we have a
pathway to get it more closer to the 20% Mark.
So there is, you know, when we looked at it carefully and we
said here are all the levers is all the work we have to do.
We kind of outlined a 24-month roadmap and where the midpoint
of it and we realized, you know, It's a half the gain so that
that is another driver that makes it profitable.
And in combination, you know these things are what is going
to drive our business there? Plus, we also stopped the
heavier discounting on the equipment side, which have made
that be profitable as well though.
Marginally, it's not, you know, going to get to the the double
digit of significant margin numbers, but at least we're not
burning as much cash there. So that in combination all these
three things, I've led to the better profitability and the
better trajectory for profitability now, I love that.
So when you go, you said you're going to sell more software and
make that piece of the pie bigger, is that selling to
existing clients or is that going after new business or
both. Both both more of it is, you
know, to 70% is still continuing to upsell current customers.
But there is a 30% factor which is more selling to newer
customers and your logo. So it's a combination number.
I got it. And then your R&D that Creating
the new proprietary, all your patents.
Number one, number two, your proprietary AI.
So on and so forth, one of those things do they have the ability
to have a J curve where it could be exponential type growth or
those things more moderate growth as far as the leading to
the bottom line growing. So in terms of the revenue
growth as of now, it's all aimed more at continuing to expand
that software side and making it more profitable.
However, you know, like, any company we have, I call them our
list of 325 Moon shots that, you know, if they take off, then
they can dry the exponential growth.
So we make a few of those bets but we're very disciplined
about, let's not, you know, from a capital allocation
perspective, that's that tends to be in there. 10 to 15 percent
of our capex. Overall, Rd capex and the rest
tends to be very focused on, you know, driving better
profitability and driving incremental growth in the core
business, understood. Yeah, you just said, You meant
as far as earnings are concerned, right?
They tried the revenue and earnings got it.
Okay wonderful. Well beautiful wrapping this has
been fed super-fantastic. The company's cantaloupe ticker
symbol to see TLP everybody. Go check it out.
If people want to get in touch with you, Robbie what's the best
way? They go on the website or, how
should they connects going forward?
Yeah, my the website is great. My email is our venkatesa, which
is my first initial, and last name at cantaloupe.com.
That's a great way to get in touch as well.
Beautiful, thank you so much. Hopefully, we'll have you on
again soon. Alright, thanks Adam.
Hopefully, we'll have you on again soon.
Alright, thanks Adam.