Cantaloupe Stock: Overlooked Tech Company Reports Super Q1 Results

CTLP Stock Has 110% Upside

Shares of Cantaloupe Inc (NASDAQ:CTLP) have made some decent gains since November 2022, climbing by about 40% since then.

Conservative Wall Street analysts think Cantaloupe stock has a lot more room to run, potentially making gains of 110% over the next 12 months.

Why do analysts think CTLP stock is such a big deal? Cantaloupe Inc is a leading provider of payment software services for the self-serve retail market, a rapidly growing but overlooked market.

The company recently reported excellent financial results for the first quarter of its fiscal 2023. Management believes the first-quarter results position Cantaloupe Inc for financial growth and profitability in the rest of the fiscal year. There aren’t many tech penny stocks with this kind of outlook.

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On top of that, Cantaloupe Inc recently completed an acquisition, accelerating its international expansion. The company also announced an agreement that will see its hardware be used in more than 20,000 new self-service locations.

Chart courtesy of StockCharts.com

About Cantaloupe Inc

I don’t work in retail, but some days it feels like it when I’m forced to use self-serve checkouts. I may not like it, but this is the future of shopping, and Cantaloupe Inc is leading the charge.

Cantaloupe is a software payments company that provides technology for the “unattended retail” market. The company’s technology is designed to increase customer engagement and sales through digital payments, digital advertising, and customer loyalty programs. (Source: “Investor Day,” Cantaloupe Inc, December 12, 2022.)

Cantaloupe’s customers include businesses in the vending machine, “micro market,” gas station, electric vehicle charging station, laundromat, metered parking terminal, kiosk, amusement, entertainment, and gaming sectors.

Between fiscal 2017 and 2022, the company’s total revenue expanded at a compound annual growth rate (CAGR) of 15%. Its subscription fee revenue climbed at a CAGR of 15% and its transaction fee revenue rose at a CAGR of 22%.

Recent Business Deals

In December 2022, Cantaloupe announced that it had completed its acquisition of Three Square Market (also known as 32M) for $41.0 million. (Source: “Cantaloupe Acquires Three Square Market (32M), Accelerating the Company’s Micro Market Presence and International Expansion,” Cantaloupe Inc, December 5, 2022.)

32M is a leading provider of software and self-service kiosk-based point-of-sale and payment solutions for the micro market industry.

The acquisition gives Cantaloupe full-service capabilities in the high-growth micro market industry and immediately expands Cantaloupe Inc’s international footprint. The acquisition also:

• Expands Cantaloupe’s micro market foothold by nearly 3,000 locations in North America and countries including the U.K., Sweden, and Romania
• Is immediately accretive to Cantaloupe’s revenue growth and earnings before interest, taxes, depreciation, and amortization (EBITDA) margins
• Is estimated to generate $19.0 million of revenue, with EBITDA margins of at least 20%, for calendar year 2022

Also in December 2022, Cantaloupe Inc announced that Sodexo’s convenience business InReach chose Cantaloupe to bring its cashless payment systems to all 18 of its U.S. branches, for 18,800 vending machines and 1,200 micro markets. (Source: “Sodexo’s InReach Chooses Cantaloupe’s Complete Business and Payments Platform to Power 20,000+ Self-Service Locations,” Cantaloupe Inc, December 8, 2022.)

Sodexo North America is a food services company with operations in all 50 U.S. states, Canada, Puerto Rico, and Guam. It’s also part of a global Fortune 500 company that has operations in 55 countries. The company provides catering, culinary, nutritional service, and vending operations. 

Sodexo North America serves more than 100 million customers in the corporate, defense, education, energy/resources, government, health-care, long-term care/retirement center, and remote-site sectors.

Strong Q1 Revenue Growth

For the first quarter of fiscal 2023 ended September 30, 2022, Cantaloupe Inc announced that its revenues increased by 26% year-over-year to $57.8 million. This was fueled by the company’s sixth consecutive quarter of record transaction revenue. (Source: “Cantaloupe, Inc. Reports First Quarter Fiscal Year 2023 Results,” Cantaloupe Inc, November 7, 2022.)

The company’s transaction fees went up by 18% year-over-year to $31.3 million, its subscription fees increased by 11% to $15.8 million, and its equipment sales jumped by 108% to $10.7 million.

Cantaloupe Inc reported a first-quarter net loss of $8.9 million, or $0.13 per share, compared to a net loss of $1.6 million, or $0.02 per share, in the same prior-year period.

The company’s active customers increased in its first fiscal quarter by 21% year-over-year to 25,019, while the number of its active devices increased by three percent to 1.2 million.

Ravi Venkatesan, Cantaloupe Inc’s chief executive officer, noted, “Gross margin and adjusted EBITDA were negatively impacted primarily due to one-time migration costs related to our transition to the [Amazon Web Services] cloud environment, and procurement of higher priced components to fulfill customer demand.” (Source: Ibid.)

He continued, “However, this positions us well for growth and profitability for the remainder of the fiscal year.”

For its full fiscal year, Cantaloupe Inc expects to report:

• Revenue between $225.0 and $235.0 million, representing year-over-year growth of 10% to 15%
• Net income between $1.0 and $5.0 million
• Adjusted EBITDA between $12.0 and $17.0 million
• Total operating cash flow between $10.0 and $15.0 million

Analyst Take

Cantaloupe stock is a great tech stock in the burgeoning and lucrative unattended retail sector. The company has been adding new customers, increasing the number of its active devices, launching new products, and announcing strategic acquisitions.

The outlook for Cantaloupe Inc is stellar, with the recurring nature of its business driving reliable revenue growth.

The company’s dynamics are expected to continue in fiscal 2023 and beyond, meaning CTLP stock could be set to rise.