Cantaloupe, Inc. (CTLP) Earnings Call Transcript & Summary

All right. Well, good afternoon, and welcome to Cantaloupe's Analyst Day. We're very excited to welcome you all here in New York with the management team. We also welcome everyone joining online. Before we jump in a little Housekeeping during today's presentation, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by the forward-looking statements. We will also be discussing certain non-GAAP financial measures. Please refer to the company's SEC filings for disclosures related to our non-GAAP financial measures, and to our SEC filings for more information on the risks regarding the forward-looking statements that could cause actual results to differ materially and factors associated with our business. For today's agenda first, we'll have Ravi Venkatesan, Cantaloupe's CEO to discuss Cantaloupe's advantage, then Gaurav Singal, Cantaloupe's CTO will be reviewing Cantaloupe's product innovation. Afterwards, Jeff Dumbrell, Cantaloupe's CRO will describe Cantaloupe's growth strategy, then Elyssa Steiner, VP of Marketing, will lead the customer panel. Scott Stewart, CFO, will finish us off with a discussion of our financial profile and outlook. And with that, I'm happy to turn the session over to Ravi.

Thanks, Dara. First of all, thank you, everyone, for coming here and spending this wonderful Monday afternoon with us. I see a lot of friendly faces, which is kind of an odd thing to say in this environment and equity markets. But it's good to see you all. We've interacted quite a bit through earnings calls. Look, the synthesis of this Investor Day is really trying to respond to questions, which we've heard enough over and over and over again especially over the last couple of years from investors, both current and prospective, from the analysts that cover us and so on. So there are certain measures that we've used to internally track and improve the business, and also to better assess the future trajectory of both growth and profitability, and we wanted to bring that to this group in a structured forum and something that's outside of an earnings call. So that's really the genesis of what led to this meeting. And as Dara pointed out, these are the areas that we will go through. But as we go through them, we'll kind of keep that theme in mind of what's this company going to be when it grows up from here and what's the future trajectory of growth and profitability. And a lot of you have been along for the ride from 2020 when we had a transition in kind of ownership and leadership. And so we'll cover a little bit of that background because it's important context. But we will really paint a picture for where it's going from here on. And just by way of introduction, I've been with the company from December 2020. I was brought in as part of the new management team when the proxy battle happened and Hudson Executive came in. I joined initially as CTO with an eye to succeed Sean Feeney, who was brought in as CEO at that time. And then I've since had the CTO role for a while, building new products that we've introduced last year and then subsequently COO running the operations of the company. And then since October, I've been playing the CEO role. And I'm very excited about laying in front of you a new vision for what the company is building now. So today, we are launching our new vision, which is to build the global technology leader that powers self-service commerce. It's a fairly high aspiration, and it requires certain key elements to make this happen, and I'll walk you through why we believe very strongly that we've got all the right elements to be able to make this vision a reality over the next 3 years or so. And we'll also cover how we are one of the few companies that are uniquely positioned to take advantage of some secular trends in the marketplace that we are now calling self-service retail, right? The other thing you might have -- those of you who have done research on our industry and this space, would have heard the term unattended retail a lot. I'm intentionally not using that term, because what we've seen happen in the industry is, over time, it's broadened from just use cases in commerce, where it's unattended like parking or laundry or vending. What's happening now is you're seeing regular retail stores because of labor shortage, go into hybrid mode where they have more sales checkout terminals and fewer store clerks and employees. So it's broadening to more self-service commerce. And that's the reason we are using this term as well. Okay. In terms of where we've been, we've had a transformation that's happened in this company over the last really 3 years, right? If you kind of turn the clock back to 2019, there were some challenges the company went through. The platform infrastructure was aging. There were issues with the network outages, service challenges and the like. There were challenges in terms of the profitability trajectory because it was more heavily weighted towards selling hardware and device prices, particularly credit card readers and telemeters, and it's hard to kind of get to profitability with kind of a red ocean highly competitive situation there. And so there was a need for kind of a pivot and the pivot really over the last couple of years has been how do you shift away to a lot more subscription revenue, recurring revenue, more software-powered or software-driven revenue and continue to use the hardware and the devices more to establish the beachheads and to grow that network, but not let that necessarily be the focus of what's driving growth and profitability for the business. So that transformation has happened over the last couple of years. The other thing we did is really look at how we report numbers to the street. There was a way we used to report connection, I think most of you who have been familiar with covering us for the long time, I know that. And the challenge was we were not really accounting for churn as precisely as we should have, so there were certain things like that, which we've just cleaned out, and we believe we've come a long, long way in now providing shareholder reporting in a much clearer manner, in a manner that's more transparent and represents both the opportunities as well as the risks underlying the business in a much better way. So that's the second thing that happened. So where I stand today. I feel like we've gone through a cleanup phase, a turnaround phase and all that is in the rearview mirror, and we are now poised for growth, operating leverage and profitability, which I'll outline to you in terms of how are we going to get there? What's the time we are going after, what's the moat we believe we have against competitors to make sure that we get there, okay? So let's jump right into our total addressable market and I've looked at how we did this in the past. I've also looked very carefully at how all of our competitors articulate their TAM. And I think, unfortunately, there is almost another pandemic right now where everybody just inflates their TAM to include everything under the sun, right? And I've even seen our competitors use retail automation or stuff that's essentially very large, but is really not addressable by them. So our approach has been, okay, what are the market verticals that we consider are part of our addressable market and do we really have a right to win in each one and have we built something and proven our right to win in each for those verticals. So what you see here whether it's food and beverage, whether it's micro markets or EV charging infrastructure, amusement, laundry, all these are areas where we have not just developed a couple of green shoots, but actually have established footprints, established a presence, and we've proven that we have a right to win. We look at it in 2 buckets. We call core verticals, verticals where we've been able to establish at least a 15% penetration level in that TAM. And then adjacent verticals where it's under 15%, but we have a high degree of confidence that we can rapidly grow that market presence. Okay? So that's the TAM you see on the right side in terms of geographic spread as well. And when we look at all of the verticals and their average growth, our TAM is growing at a 10% CAGR. So it's also a fairly healthy growing TAM. It's not a static TAM. Now to come to the question of why is Cantaloupe poised to be able to become this company that then is the global technology leader that's powering self-service commerce. When you think about self-service commerce, first, let's talk about what's driving self-service commerce. So it's just 3 simple trends. Trend number one is consumer preferences are changing. Fundamentally, consumers don't like interacting with other human beings to make a purchase, whether it's products or services, and that's been accelerated through the pandemic, and it's not stopping. The second trend is that labor shortages are not getting better. Populations world over are aging, and that just creates this fundamental secular trend of everywhere people are trying to automate more and more and more. Japan is a phenomenal example of this for its spreading to other geographies as well, right? And the third trend is that technology is becoming cheaper, easier, more feasible. Earlier only the big box retailers could put a self-checkout terminal and the terminals used to be made by [indiscernible] for Panasonic or NCR and they used to cost $20,000. Now what you will see in the next room when we have our cocktail hour is our Yoke and our Three Square Market kiosk-based self-checkout terminals that could cost a fraction of that and kind of do the same job, and so you can deploy it more ubiquitously, right? So those 3 trends are driving self-service commerce. And for us, when we look at it, we said, okay, there are 4 key things you need to succeed there. Number one, can you take a storefront and the storefront could be a massage chair in an airport, it could be a little Beastro in an office break room where you can grab scan and go products, or it could be a laundromat, but can you take a storefront and can you connect it to the cloud. So now that business instead of being managed by somebody on site, can be somebody sitting in an office on a computer and manage it. We have the technology to do that. And for us, we have 1.1 million such store fronts that are now connected to our cloud and that are managed by people remotely. And that's the largest footprint anybody has. Our competitors, the best competitors have half of that in terms of just to your footprint. So that's scale and ability to convert, the storefronts is capability #1. Capability #2 is to process digital payments, but not just any kind of digital payments, to combine online e-commerce as well as in-person commerce, small ticket as well as large ticket, micro payments, macro payments, all those and do it in a seamless manner is the second capability. There is a reason, the large payment providers like Stripe or PayPal, et cetera, don't play in our space because it takes a lot of specialization to be able to blend card-present, card-not-present, micro payment, large ticket payments and be able to handle all that. So that's the second capability. Then the third capability is when you have businesses that don't have boots on the ground, you need some way to manage that workflow, right? So to give you an example, if I'm a business and I've got products that I'm sending out to 5 retail locations and I have a warehouse where our products sitting, I need to have real-time visibility to my inventory, and I need to know when to send somebody out so that the shelves aren't empty and I have lost 2 days of sales, but I'm not sending them out so early that the shelves are all full, and I've just wasted a trip. So those types of workflow things and Gaurav will cover our incredible pattern or portfolio that protects our IP in those areas that let us do kind of cloud software to power those self-service commerce type businesses. And the reason this is also important is because software itself, the enterprise software has kind of gone through 4 generations of evolution, right? You had people who were doing all kinds of software and deploying them until Oracle and SAP came up and said, look, here is best practice in a box, use this, and then you had kind of the third generation where Salesforce and Workday came up and said, run it on the cloud. Don't deploy everything, don't have servers. And then the fourth generation, which -- when you hear from our customers who are here on the customer panel, you'll hear a lot of this. The fourth generation is vertical-specific software. If I'm in the construction business, I want construction-specific software. If I'm in the hospital business, I want hospital-specific software. So people just don't want a generic ERP anymore. And we are the best and market-leading vertical-specific software for self-service businesses. That's our Seed enterprise software. So that's the third piece of the puzzle. And then the final one, which we didn't have on our own and have acquired that innovation, is kiosk-based innovation for how consumers can grab scan and go and make purchases. So that's what we started with Yoke, and that's where we have now expanded considerably with our acquisition of Three Square Market. It's that last mile. How do you tune that interaction for the consumers in a manner where they can easily interact with a Kiosk, make purchases and you're going to see that trend explore not just in what used to be called unattended retail, but also attended and hybrid retail. Order ahead at every restaurant, all kinds of cater kind of approaches, ghost kitchens, lots of trends are contributing to kiosk-based innovations exploding. So in all those 4 areas, we've got unique capabilities that position us really, really well to execute on this vision of building essentially the technology leader for self-service commerce, okay? You'll hear over and over again about our scale, so I won't drain the bottom part of the slide, which tells you how many customers we have, how many devices we have, how many unique card holders we touch, et cetera, but that's just to share with you that we are already at an industrial scale and the sky is the limit in terms of taking this and then expanding it out into geographies and verticals. Our strategy in terms of how we're going to achieve this is a very simple one. It's -- I'm only going to talk about 4 pillars there, and there isn't a whole lot that we're going to add to this. Number one, in our core verticals, as I described, we have 15% penetration, we have a clear game plan and a pathway to get it to 25%. So that's in the North America market where we already have a well-established presence and we know how the math works in terms of how do we price a product, how do we sell it? who are our channels, and how can we grow that footprint from where it is to where it needs to be. So that's step number one, which is, I call it, closest to home stuff that we know how to do. We do it in our sleep and we continue to execute with discipline. The second one is to replicate our capabilities that we have in North America and that are very successful here in international markets. And in terms of our international expansion journey, we're at the midpoint of kind of a 3-year journey, and a 3-year journey involved creating capabilities, identifying partnerships, setting up fulfillment, setting up customer service, setting up all the nuts and bolts in the plumbing, and some of that has also been accelerated with the Three Square Market acquisition because Three Square had a great presence in Europe already. And our approach there has been to leave with the software side and then follow up with the devices and the payment processing and the telemetry and all those other capabilities. So that's the second part of the strategy. And as I said, we are at the midpoint where we now have customer pilots, we have all these capabilities through this year, the end of this fiscal year, which is June for us, we expect to see some international revenues, which are somewhat meaningful. And then through fiscal '24, we see it ramping up pretty material. The third piece of the puzzle in terms of strategy is to extend our revenue per connection. We are excited to share with you some new KPIs around ARPU, our average revenue per active device, which Scott will take you through. He'll also take you through the trends of how that has changed over time, which we think it's really exciting information for our investors to get visibility to, and our strategy is to deploy 2 or 3 meaningful revenue driving add-on modules that our customers can purchase on top of our current service stack that then extend that revenue per connection and will also walk you through a slide which shows you how that potential ARPU increases over time with the pipeline of innovation that Gaurav is now leading for us. The last part of our strategy is how we take what we've built in one vertical and then replicate it into other verticals. And this is something we've done over and over again and have a good track record. Many of you may not know this story, but the company actually started by essentially putting card readers on golf ball dispensers. So the game plan in the old days was wherever you see bills and coins, put a card reader and that's how this business started. So the ability to take that capability and replicate it is in our DNA. Now what a lot of times is missed and as a nuances, the card reader and the payment part is not the more important part. That's actually more or less commoditized, even though security is really hard to do. The important part is what we call telemetry, which is, hey, if it's a parking gate and you're taking a payment, something has to tell a parking machine to open and shut that gate. If it's a massage chair, something has to tell that machine to give you a massage or a launder mat to run a cycle, now when you think about the complexity of all these types of machines and that telemetry function to interface with them and make them do stuff. We do that better than any other company. So taking those capabilities, applying them, EV charging is a great example. When we arrived in EV charging and started doing this stuff, we realize that there are unique protocols like OCPI on OCPP that are used to do all kinds of things. You can monitor the grid connectivity. You can do various clever things with charging stations for another company that doesn't have this type of DNA and capability to replicate into those markets is really, really hard, okay? A comment about -- so that was our organic growth strategy. And then in addition to that, we continue to look at strategic M&A, and we have a very disciplined approach to this. As my chairman likes to say we kiss a lot of frogs before you find one that really fits like a glove and Three Square Market was a great example of that. You'll meet Tony Dana who's the president of that business and came to us with that business later, he's in the audience today. The business will do $90 million of revenue this calendar year. It's been growing at a 20% clip and it's got 20% EBITDA margins. Without taking any professional money, so this is the classic example of great midwest work at the culture, build a business that's profitable from the get-go, bootstrapped, family-owned, family-run kind of environment. And we really like what we saw there, adds a lot to us in terms of expanding in micro markets, expanding in international as well. So to give you a little insight finally on what we view as our moat, why is it that 2 guys in a garage cannot build something and compete with us or for that matter, our larger competitors cannot compete with us as they would like to, even though many of them have made statements over the last couple of years that they'll take away significant market share from us and have failed. There are a few reasons for why that happens. Number one, the the way our network is built, we don't route payments through a traditional payment switching network. So when you go to a retailer, when you go to a Nordstrom. So when you go to a Macy's and you buy something, the payments are usually processed through a classic payment network, which is run by one of the typical payment processors. We don't route our payments that way. We rout it through a wireless network that we control 100% and through a protocol that we control 100% off and through a payment gateway that is also our own and it's proprietary. The reason that's beneficial and important is because we can now do campus cards. We can take loyalty points as currency. We can take crypto payments as currency, so we can do all kinds of clever things with closed-loop payments and real-time payments, which is where the industry in terms of digital payments is moving towards. There's a big shift from a portion of the payments being open loop to being more closed loop and other geographies are actually ahead of North America in this, but North America is starting to catch up. So that's one big benefit. The other is that, that same network is also how we get telemetry and IoT information. There are a lot of IoT companies that have millions of devices on there but they are usually little sensors sitting somewhere sending small pieces of data. Our IoT network is able to monitor store fronts that are conducting commerce and get information on transactions and sales and inventory and things like that, which is pretty unique and unprecedented from just a commerce perspective, and there are a lot of alternative use cases where that can be applied. So that creates a pretty big moat by itself, that network of 1 million devices, proprietary protocol. The second one is in terms of micro payments, as I mentioned earlier, we have unique deals with all the payment networks, and we also have unique ways of routing those types of payments, which others cannot easily replicate. And we are one of maybe 3 to 5 companies that know how to do that blend of payments, not the only one, but one of very few companies. The third one, as I mentioned earlier, our enterprise cloud platform has a very rich patent portfolio over 50 patterns. Gaurav will share some insights there. And that creates a pretty bulletproof moat around the software is really best-in-class. We tend to price 4x our competition and still have a market leadership position there. So the Seed software product is highly differentiated and again, gives us a big competitive advantage. The last 2 factors as the platform scales and our customers adopt more and more of our services, and this our customers do a much better job of explaining this than I do, so I'm going to reserve it for the customer panel. But when a customer starts using more than one of our services, it makes us very sticky. Now we never take that for granted. We make sure that we wake up every day in the morning and everybody in the company is tuned towards being obsessed with customer success, but that makes it harder for our customers to leave us. And then finally, when it comes to self-service commerce, if somebody comes up with a new cool idea, whether it's, hey, I'm going to build a machine that can bake and dispense pizzas in an autonomous manner, and they search for what's the company I can collaborate with to take payments and to manage this infrastructure, they find us. We have that reputation and that brand in North America, and that's what gives us an advantage, okay? With that, I'll hand over to Gaurav Singal to take us through from a technology perspective, how we win and what we do and what our strategies are and take you through those aspects. Gaurav?

Thank you, Ravi. Good afternoon. My name is Gaurav Singal, I'm the Chief Technology Officer at Cantaloupe. I'm responsible for all the technology strategy, setting the direction as well as delivery. I joined from Georgia Lottery Corporation, prior to that, I was at XPO Logistics and prior to that, I was at Goldman Sachs. So today, I'm going to talk to you about our technology, our complete platform, how it actually innovate and help our customers in the self-service industry. We have a complete platform that supports our customers. So there are various merchant locations where our customers are present, which could be a vending machine, a charging station, a laundry or a car wash. When an end customer goes to any of these merchant locations, they can use their credit card, a debit card, a loyalty card or they can use an Apple Pay or an Android Pay to pay at these locations. And our platform supports that payment processing through our proprietary platform that Ravi talked about earlier. We are -- recently, we are also launching digital advertising, which will allow our customers to be able to advertise, spotlight their business and that will also draw more customers into their locations. So in all, what that will do is it will help them increase revenue in the front office. In the middle and back office, we actually have software that allows them to run their business processes efficiently. We have dynamic scheduling, we have route optimization that allows the customers to only go to those locations where there is a need. We generate an optimal product mix. We generate an optimal route that helps our customers save on labor as well as fuel costs. In the back office, we give them tools like driver app, warehouse app, data reporting, data analytics for them to be able to have a real-time view of their inventory as well as how their business is performing over a period of time. So in all, what we see is our platform helps them increase revenue in the front office up to 35%. And then in the back office, it helps them run efficiently using our software and cut the operational cost by 40%. So when our customers, they decide to do business with us, all these locations, they actually come on cloud. They join our IoT cloud, they're on Internet. So today, we have over 1 million devices that are connected to our cloud constantly. We are constantly monitoring these devices remotely, and we are also giving our customers an ability to monitor these devices remotely irregardless of where they are at. They can push updates. They can and take a preventive action remotely. And if there's a need, they can only go to the selective locations that are having an issue or they need to do a corrective action. So there's no need to physically monitor all the several hundred to thousands of locations that our customers may have. So let's take a look. We have a customer who have many locations. There are certain locations that are in need of new inventory. They actually selectively only go to those locations where they need to fill those locations and so that way they can function properly. So our IoT cloud is always on. It's always constantly monitoring. It never sleeps when our customers can go to sleep. With that how do we actually manage that kind of a scale, right? So very recently, we deployed our platform in cloud -- in AWS cloud. What that is giving us is a multitude of things. Our platform is highly available. It's highly scalable. And then it's also making our teams highly operationally efficient because our technology teams do not have to worry about racking and stacking our servers, right? Our team is focusing on new development. They are focusing on breaking ground. I'm happy to inform you that our platform is now internationalized. It is ready for parts of Europe, and it is being worked on for Latin America. We are reusing components of our platform like order management, inventory management, for reuse and scale. And then we are localizing country-specific items, which is like currency, tax, language in our platform. Our team is laser focused to support our business to grow internationally. And then we are secured by design. We have a layered security approach, we are continuously monitoring our assets and data to make sure they're running securely. We do full PCI, DSS as well as PCI PTS certification, while many of our competitors just do PCI, they do not do PTS. So it's a differentiator for us because it allows to give that digital trust to our customers that we are operating in a secure way on behalf of them. So how are we driving this innovation is because our platform is very open. It's a modular architecture. We have APIs and standard protocols like VDI and rest. So our philosophy is write once and reuse. Our philosophy is plug-and-play, architecture, where we are sharing the data. We are sharing our services through APIs. So what that has done is we have really honed in these APIs internally with our products and now expose it for our customers as well as third-party developers as well as our partners who can bring in their devices, who can bring their POS or they can consume certain services using our API and built custom solutions. One such example of our partnership fairly recently is with a company called HIVERY, where we are interacting with them using APIs. No data import or export, everything is happening through APIs. We are sharing with them our product data, sales data, location data, and we are actually looking at how we can do a smart merchandising using artificial intelligence, all of that innovation is being driven through APIs. So now let's see how the scalable platform that we have -- that we have built is actually helping us grow. How we are taking it to our current markets, how we're expanding there and then how we are going in new markets. So today, we have core verticals where we have a penetration of 15%, like food and beverage vending, micromarkets, air vacuum, laundry to name a few. We are expanding the use of our platform in these core verticals, so what that means is if you are going to a vending machine to buy a soda at LaGuardia Airport or you're going to micro markets at Chase Manhattan headquarters and buying a bag of chips or if you're going to a gas station and getting air in your car or doing vacuum or if you're going to a laundromat and doing laundry, you are using our platform to make that possible. We are laser-focused on growing our presence in these core verticals because we see there -- we have proven that we have a great product market fit in these verticals. So we'll grow our presence in North America. We'll take our learnings from North America and grow internationally in these core verticals. Now let's see how we are expanding our platform in adjusted verticals, right? So like EV charging, entertainment and gaming. So if you go to Dave & Buster's and you see a kid playing a claw game, and they have -- you get delighted by that experience, that delight is actually powered by payment through our platform. We are in smart retail, where the form factor is newer, nicer, modern looking, and you can buy medicines through paying through our platform. Quite soon, you will also be able to buy hot pizzas through smart retail, which is a thing that is happening as we speak. And then we are super excited about another vertical, which is IoT services, which is essentially our use cases are like waste management or ATM, where we are constantly looking at the fill levels. We are -- we have the sensors to manage that. So EV charging is -- electric vehicle charging is in a hyper-growth mode, and it is a spotlight vertical for us as well because of this growth. So today, we are doing payment processing with charging station manufacturers and charging point operators using API. Our platform is OCPP-compatible which is open charge point protocol. And we are also transforming -- we are playing a role in transforming this industry to make it open loop because now the EV drivers would have an ability to pay at our charge points or charging points with their credit card. And our operators would be able to attract a greater pool of EV drivers to their stations because now they can pay at the point of sale without the hassle of having a subscription. In the future, we are actually looking to integrate with system integrators so that way we can further grow in this vertical in the future. So now also moving on to more exciting stuff with product innovations and how it is helping us expand ARPU. One such feature that we recently launched is called Remote Price Change or RPC. RPC allows our customers to change the price of their products remotely. So whether they are in their house, whether they are a patio, kitchen, wherever they are at, they can use a computer to change the prices across their hundreds and thousands of locations with a click of a button. They don't have to send labor. So no more fuel cost, no more labor cost, no delays, instant updates using RPC. So here's an example where our operator, our customer has -- is selling a soda for $1.25 at their vending machine or different locations. And they've realized that tomorrow, it's going to be a hot day or it is going to be a big shopping day where my locations are. And I want to actually capitalize on that external factor. So they can actually go and raise the price to $1.50, and that change gets reflected across all their locations simultaneously. So they change the price in our system. It goes to the vending machine. It goes across all the vending machines, gets reflected instantaneously. So this is a differentiator for us, and we have got a lot of traction since we launched RPC. Another feature -- another innovation that we launched recently is artificial intelligence powered insights. So we are actually using data, product data, sales data and location data to be able to predict and do smart merchandising for our operators. It is helping them grow their revenue as we are actually answering some questions using data as to what are the products, what's an optimal product mix, what are the products that they should sell? What are the products they should not sell? What are the locations they should grow in, right? What is an optimal sales to space ratio that they should be doing? So we are leveraging the data with artificial intelligence. Our systems are constantly monitoring. They're learning from data, making recommendations so our customers can be more successful over a period of time. So one of our customers, Brett, who's the General Manager at Midwest Vending. He has told us that since they started using insights from artificial intelligence, they're seeing about 9% increase in their sales. So our goal is to continue honing in our artificial intelligence engine, so it can make our operators more successful over time as we truly believe that data paints an objective picture and we're looking back to project ahead. Another interesting -- another new innovation that we are launching is [ Ad Manager ], which allows our operators to do digital advertising. Our operators, our customers can advertise their business. They can do a spotlight of their business. They can do run promotions. They have an ability now to increase, even attract new customers to their locations, and this is available on our e-Port Engage device. And on the right of the slide, this is how our Engage device looks like. And we are running a pilot with Mastercard, where we are running their ads for a charity. And essentially, when our device is not in use, it will actually rotate the ads to be able to draw more customers into our operator's location to drive more revenue. So we see Ad Manager as a new digital -- as a new revenue stream for us as well as for our operators to be able to draw and increase their revenue. So we are also simplifying closed-loop mobile payments. We have a campus card. We have a mobile -- MORE mobile card, we have payroll data and store value card and you will be able to link credit cards, cash, crypto with our MORE card. So essentially, it's the MORE Loyalty Card, and we are unlocking the currency of loyalty to be able to use that on our platform to pay for buying merchandise at our operators' locations. The campus card and the MORE card are also available on the digital wallet on the mobile phone. So our end consumers would be able to pay using their phone using these closed-loop payments -- payment methods. We see more reward card as it will actually drive repeat customers. It will increase the same-store sales, and it will also expand wallet options with rewards, and we are unlocking the loyalty currency with launching the MORE card and more rewards in partnership with Mastercard. So with that, I would like to wrap up is why we win with technology, right? So what is our winning mode for technology. Number one, we have an open payments platform, right? What that means is, essentially, we allow our customers, our operators to be able to accept any form of payment and be able to grow their business. Second, we have a fully integrated suite. We offer a point of sale. We offer payment services, we offer software for our customers to be able to grow and run their business. Third, reliability. We have been in the business for 30 years, and our hardware is the best in the industry. It works in extreme conditions all the way from Alaska to Arizona. And number four, scalability. We are in cloud, and we have a common stack platform that is allowing us to scale rapidly across new verticals as well as internationally. So I think that's my last slide. Yes, I'll call it a wrap for technology. This is how we are actually helping our customers grow their business as well as run their business. With that, I'm going to hand over to Jeff, who is actually our CRO, who is going to talk about growth strategy.

Great. Thanks, Gaurav. Good afternoon. As Gaurav mentioned, my name is Jeff Dumbrell, I'm Chief Revenue Officer at Cantaloupe. I've been in the payments and point-of-sale industry for over 20 years. I've had the opportunity to work in North America, Europe, Middle East, Africa and Asia Pacific for a range of different technology providers. I was at VeriFone for 11 years and ran the last half of that career verified around EMEA and Asia Pacific. So excited to share with you some context around what we think is interesting in North America and more importantly, where we see repurposing our technology and our strategy, taking a page out of the playbook that made us successful in throughout my career. So I look forward to jumping into that. And I'm really excited to share with all of you why I think Cantaloupe is in an enviable position. We're really at the intersection of 4 different industry emerging -- interesting emergency -- interesting emerging trends. So there's -- we're really at the intersection of self-service commerce as well as the growth of IoT and connectivity services. Also, there's this convergence and conversion from cash to card in the electronic payments field. And then lastly, there's this proliferation of Software-as-a-Service, right? So we're in this environment where enterprise-level software historically may have been off limits for the small and midsized market segments. And we have a strategy to bring enterprise-level software downstream into different growth channels. So I'll walk you through that in a little bit more detail. So today, I'm really going to walk you through the different growth strategies that we're enabling to accelerate our growth on a global basis with a particular focus upon growing subscription revenue. Again, we'll talk to specific target markets and geographies. But really, we'll start with leveraging more growth within our existing customer base and repurposing our technology stack into adjacent verticals. And both of those setups really, again, lead us to the opportunity to accelerate subscription revenues. And of course, we'll touch on international and our exciting acquisition of Three Square Market. And I'll walk you through why we felt that was such a compelling acquisition for us. So as Ravi and Gaurav have mentioned, Cantaloupe is not in a one-size-fits-all business, right? So we're really, really focused upon delivering solutions that strike accord and that are meaningful quite candidly, with our wide and varied customer base. So I'll walk you through the way that we segment our markets, the different approaches, the different suite of solutions that we provide to those channels. And this -- you'll see over the coming slides, we are laser-focused on penetrating the underserved needs of the small and midsized market segments as well as providing a range of customers with cloud software and value services, like I mentioned previously, have candidly been off limits for many of them. So I'll also share our success of launching Cantaloupe ONE, which is the industry's first bundled subscription platform for self-service commerce. And like I mentioned, we'll wrap things up, walking you through the rationale for Three Square Market. So when we look at our go-to-market strategy, we leverage a combination of both direct and indirect channel partners across a variety of verticals, including food and beverage, vending, air and vacuum, laundry, amusement and gaming and others. In fact, when you look at our -- outside of our core food and beverage vending focus, we have 65,000 air and vacuum machines installed across gas stations and convenient stores in North America. We have 30,000 washing machines across the United States that use our integrated payments platform. We have 7,000 amusement gaming machines that you'd see in family entertainment centers. Again, the common thread here is they all use our integrated payments platform. So I just wanted to share with everybody while we're super focused on growing our incumbent position in food and beverage, we think there's tremendous opportunity into the adjacent verticals. In fact, today, we have 3 of our key customers in attendance today. I'd like to welcome Heidi Chico, who is the CEO of the The Wittern Group, Thanks, Heidi. Tim Makara, who is the Senior Vice President of Refreshment Services at Continental. And then Shane Burley, Vice President of Business Solutions at Compass Canada. So this will give you the opportunity after we break to frankly ask them what they like about Cantaloupe and why they feel we're a great technology partner. So here's a segmentation of our customer base. So we've historically focused on the enterprise segment where clearly we're the market leader. And we are the only player with a truly feature-rich suite of software that can really serve the demanding needs of enterprise customers. And then that really fits into what Shane and Tim's organization are really in this enterprise setting. And so again, I encourage you to ask them for their perspective on why they love Seed. And then really as a result of the success in the enterprise space, we've created a halo effect within the small to midsized market segment where we've been able to take, again, our enterprise-level software, drive it downstream into a suite of solutions that make the most sense for small and mid-market operators. And again, I would encourage you to ask Heidi who runs The Wittern Group, why she thinks there's value in offering Seed to her customers. So all good stuff. So the mid-market, so this is really interesting. So when we look at our mid-market segment, again, we know many of these operators are aspirational. Like I mentioned earlier, they want access to enterprise-level software. And in years previous, they likely would have had to pay $5,000, $10,000, $15,000 to get that software implemented. And with Seed cloud platform, we're able to deliver that same level of service on a Software-as-a-Service basis. So again, it's a game changer for the mid-market segment. And what's interesting is that in this segment, roughly 30% of the operators in the mid-market either have no vending management system or they're using Excel spreadsheets or they're using pen and paper, which is -- obviously doesn't equate to operational efficiency. So we think there's a huge TAM in this untapped mid-market segment. For the TAM of mid-market today, we only have 20% market share. So there's 80% up for grabs go get, as we call it. So I'm really, really bullish on our opportunity to go after this segment. And at the top there, we have the data to support the following statement. We know with complete certainty -- to 95% certainty that when a customer starts using the Seed cloud office platform, it becomes a requirement for them to run their business efficiently. So once we have customers using Seed, they tend to be very, very, very sticky. So that's obviously one of the key catalysts here. In terms of marketing and brand awareness, we're using -- we're leveraging a combination of marketing and demand generation channels. We leverage online and offline ranging from search engine optimization to webinars to affiliate referral programs as well as a variety of off-line tools, trade shows, direct mail, sponsorships and other means. So looking at Cantaloupe ONE. So as a trusted technology partner, we felt it was important to provide our customers with a range of options as they navigate their business through the complexities of migrating from non-EMV compliance to EMV compliance and migrating from 3G to 4G connectivity. So in response, we launched Cantaloupe ONE, which is the industry's first subscription-based platform for self-service. As you can see from the chart rafter, a very strong start with this new service offering and continue to accelerate our subscription revenue pipeline month-over-month. Scott Stewart, our CFO, will share more details shortly around the financial contributions of Cantaloupe ONE in his part of the presentation. So rounding out our fully integrated solutions in the micro market segment is Seed markets, which is a component of the broader Seed platform. It's our hardware agnostic cloud service platform. So what Seed markets does is it gives the micro market operator the ability to manage what we call the front of the house, right? So inventory selection, routing, scheduling, picking. And it also flattens the back office by automating manual -- eliminating manual entry task, and it actually reduces a lot of human errors. So in terms of a front office, back-office platform, it's become a -- it's actually evolved into the de facto standard. So you can see it -- I don't know if you can see at the bottom, but it's actually hardware agnostic. So we support Avanti, a range of competitors you may be aware of. So it's really, like I said, evolved into this ubiquitous platform for micro market operators who want to run their business more efficiently. So as noted earlier, outside of core food and beverage, we remain very focused upon repurposing our technology stack into other high-growth verticals, right? So as Gaurav mentioned, we have over 1,000 charging point operator locations using our integrated payment gateway. We're enabling disruptive technologies in the smart retail sector, which I'll share with you on the following slide. We're repurposing our telemetry technology into the IoT connectivity verticals. And as mentioned previously, when you add up air vac, laundry and amusement and gaming, we have over 100,000 locations across the United States, leveraging our integrated payments platform. So this is a really interesting customer. So I wanted to highlight Pharmabox. I mean this is an example of a disruptive technology in the traditional brick-and-mortar space. It really reinforces the fact that retailers are searching for ways to overcome labor shortages, inflation and other challenges to running their business. So I wanted to just give you a perspective on, this is certainly disruptive to the traditional over-the-counter pharmacy retailers. So I just figured I'd share that with you. And as I'm sure a lot of you have seen, we're seeing this trend with food service operators, whether it's vending machines, delivering fresh hot pizza or there's a whole range of traditional retail segments that we feel are right to be disrupted by self-serve. International. So like I mentioned previously, I was an Executive VP at VeriFone for Europe, Middle East, Africa and Asia Pacific. And one of the reasons I was most excited to come to Cantaloupe was from doing my own due diligence, I came to the conclusion that we have all of the technology assets. We have the stack, we have the IP, we have the patterns to really replicate some of the strategies that I was successful in implementing previously in my career. And what you'll see over the coming slides is we're leveraging channel partners. We're finding channel partners that already have existing relationships in key markets, key geographies that can benefit from Cantaloupe's range of solutions. Secondly, we're accelerating entry into those markets by leveraging existing technology where it may make sense to buy versus build, right? So we can find a partner who's been the incumbent technology provider in a geography that we think is really interesting. It may not make sense for us to spend 2 to 3 years building something when we can white label it. So there will be bits and pieces, and that's one of the approaches we're evaluating on a case-by-case basis. And then thirdly, with our recent acquisition of Three Square Market, we're able to leverage their existing footprint in 8 countries or 7 countries outside the United States, which we think is really interesting. And that really gives us a launchpad for growth in the U.K., Europe and then ultimately further down the road will be Asia Pacific. And the acquisition of Three Square Market gives us over 40 employees who are 100% dedicated to the growth of micro markets, and it also gives us a headquarters in Europe. So really exciting. And this slide gives you a snapshot of the different types of verticals that we think are particularly interesting. And it's actually a snapshot of some pilots that we're in the process of getting ready to launch in both Europe and Latin America. And the common thread here is similar to our approach in North America, we continue to lead with Seed. We know that Seed is the industry's preferred vertical-specific ERP system. So what you'll see from us is we're taking the Seed platform, and we are localizing it for our target geographies and the opportunity for us is that gives us significant operating leverage, right? We're not reinventing the wheel. We're repurposing the wheel, but we're not reinventing it. So again, we're very bullish on our opportunities, and we'll share more color on this over the coming weeks and months, but I just wanted to give you a snapshot of things that we think are interesting in terms of verticals. Three Square Market, so I'm excited to expand on what Ravi shared with you a little earlier regarding our acquisition of Three Square. This combination of the 2 companies really provides us with a launchpad for expanded growth in the accelerating micro market segment. Scott Stewart will talk a little later about the category growth in certain segments, including micro markets. And I think it will help round out why we thought this was such a compelling acquisition. And like I mentioned, we get over 40 employees, 100% focused on micro markets and gives us a great launchpad to really replicate what they've already done in Europe and expanded East. So here's the range of expanded micro market solutions. So moving from left to right, Yoke is the acquisition we did a little over 18 months ago, and it's been a great win for us because it gives us an opportunity to take a small form factor in a small back office environment at a very cost-effective price and meet the needs of those customers. But as you go from left to right, the range of solutions fit different needs of different customers. So something like the Chairman or Executive in the FedEx or UPS warehouse with 3,000 employees, right? So it's a ruggedized kiosk, meant for different retail environments. And the thing that's particularly interesting is that, I'll move to the next slide here. We also have, as part of the Three Square acquisition, we have a whole range of smart coolers. So these are all coolers that are locked and basically, the consumer walks up, they authenticate themselves by tapping their card or dipping their card into the card reader. And the nice thing is the kiosk on the previous slide as well as the coolers, we're all fully integrated into Seed market. So it all talks, they all report back to our Seed markets platform, which is exciting. Why we win? We have almost 30 years of expertise in the North American space. We have the greatest brand out there. And again, I encourage you to ask our customer panel why they think we're a great partner. We are really focused on making the ease of implementation of core value because we know if we're going to be a trusted technology partner, we need to make it easy for our customers to work with us. And again, like I said, you'll get a flavor for -- well, we feel we have the best customer relationships in the market. So I'll turn it over to Elyssa Steiner or maybe we'll take a break to...

Actually take a quick break. Call at 0215, we'll be back here to the customer panel.

I've been in the self-service industry for about 12 years now. I started my first 6 years at Avanti Markets, so actually being in the early stages of growing micro markets within the space and then move to Cantaloupe Systems and then now Cantaloupe through the acquisition. So I'm excited to be here. I've had over the last 12 years, I've served in both sales and marketing roles. So I've had the pleasure of working with these customers in various different aspects. And -- so let me welcome them today. We have Heidi Chico, Tim McAra and Shane Burleigh as I just go down. And so to start us off, I'm going to have them each introduce themselves, get a little bit about their background and share with you how long they've been a Cantaloupe customer. So Heidi, let's start with you.

Thank you. I've been the CEO for 20 years with the company for over 30 years, know all aspects of our industry from customer base to manufacturing. We also do finance and leasing of our hardware and started with Cantaloupe as a channel partner back in 2013.

Great. Thanks, Heidi. Tim?

I'm Tim McAra. I'm the Senior Vice President of our Refreshment Services Group. So we do vending, micro markets, OCS and pantries in 5 states. We're headquartered in the Detroit area in Michigan. We have about 750 micro markets, about 10,000 vending machines, something like 1,000 OCS customers. I've been there about 3 years. I came from logistics and distribution, and I'm responsible for our overall operation of those services at Continental.

Great. Shane?

Yes. Shane Burleigh, Compass Canada. I lead the strategy and operational systems for Compass across Canada. It started as a small independent vending operator and then was acquired by Compass Group back in 2018. Prior to that, I was with Coca-Cola Bottler running the vending business in Canada. And we scaled that business in Canada now over the last 4 years, done some serious M&A and moved that Compass Group canteen vending business across Canada to be about 20,000 connected devices now. So vending, micromarkets, coffee.

Great. Thanks, you guys. So I know you guys have all heard a lot about the different products, both that Gaurav and Jeff talked about today. So before I jump into some questions, I'm going to ask each of them to share what products they use today from Cantaloupe. So Heidi, can you start?

Okay. We utilize the ePort system, the G11 and the Engage as well as the Cantaloupe ONE, that's the most recent that we've added.

Great. Tim?

Yes, we use the hardware and the software. So we are -- we are using some portion, if not everything you heard Gaurav and Ravi and Jeff talk about today.

Shane?

Yes, on the same boat, exclusive connection with the hardware on the cashless side. And continue to grow that as we acquire companies. And then on the software side, it's our primary operating system.

So just for additional perspective for everybody. So Heidi is a great representation of our channel partner like she talked about really for the small business market. And then with Tim and Shane, you're getting the perspective of operators who use especially both ePort and Seed to scale their business. So a lot of different layers within the Seed platform. So we'll dive into a couple of those use cases. But I'm going to start with you guys, Tim and Shane because you do use -- you are both heavily Seed users today. Talk to me a little bit about what life was like before partnering and using Cantaloupe services and maybe what you were using before and what life is like now?

Yes. We used a vending management system, we won't name names, that was very cumbersome. We've grown extensively through M&A as well, buying up our competition in the area and continuing to expand as we go to other states. And the solution we were on was not scalable, wasn't cloud based. I would say it's very typical of this industry, not to disparage it, but it struggles with technology and new things. And one of the quotes from my team that made me feel like we made a good choice was on the old system, something that would take 30 clicks on a computer screen takes to in Seed. And it's things like controlling your planograms. It's things like dynamic routing that Seed just makes so easy, let alone the additional things like remote price change, which has been huge for us and some other things.

Great. Thank you, Tim. Shane?

Yes. similar experience for us. I think it's -- the biggest piece is just the data piece prior to see. We didn't have any information what was happening with the business remotely. If you think about a driver going out to fill a vending machine, if they like a chocolate bar that doesn't sell very well, but they're passionate about it, it ends up everywhere and really doesn't serve the business the best way. And it's funny, I had an experience in the washroom I was walking there trying to get the soap from the dispenser from 3 different sinks. I don't know if anybody has somebody use that one. I couldn't get soap anywhere. And it's the same thing with our business. our vending machines were sitting empty, not able to sell. Our markets didn't have the right stock. Our drivers weren't equipped with the right information. And having a system that connects that you can access anywhere was really a game changer for us. And I think I'd just add on the customer side, when we go to visit our customers, we used to have to say, "Oh, we can get back to you later with that information." Now being cloud-based, we can pull that information right in front of the client. We can speak to the Moody insights that we know about their business which helps us to grow the revenue.

It sounds like instead of being reactive, now you guys have become very proactive.

It's very real time. I mean, on the way here, we're lucky enough to service the airport where I flew out of this morning, and I can go to a vending machine. Now luckily, my guys expect me to send pictures, right, good or bad. And this morning, it was good. But if it would have been bad, I can pull up on my phone and see live real-time inventory and see if I've got a problem and an inventory problem in a vending machine or in a market means I'm losing sales. So to Shane's point, making sure we have the product there when we actually need it. And then from a responsibility standpoint, making sure we're not overservicing the account as well. That's kind of the other side of the spectrum that operators will go to is if they'll either under service or over service. And obviously, to be there exactly when you need to be there.

Great. Thanks, you guys. So Heidi, as a partner, tell us a little bit about how Wittern decided to start offering card readers to its customers and why Cantaloupe?

Well, back in 2013, the -- like Tim, you had mentioned, operators are typically slow to integrate to new technologies and we needed to help provide more opportunities for transactions in our equipment. And when you go from coin mix to validators to now cashless, it was on our road map to implement it into our equipment solutions for those customers that wanted cashless as well as all the other features of that time. The reason why we picked Cantaloupe was you guys were sort of the -- one of the founding members of cashless in our space. And back in 2013, and still today are the prominent providers in our convenience service industry. Because we service a lot of customers small -- large, medium and small operators. We want to provide a platform for them to grow. And with Cantaloupe and partnering up with Cantaloupe, it really helps those small operators become medium operators, medium operators to large operators. And when you talk about customers like these 2 who are relatively very large customers, they do a lot of acquisitions, so those mid- to small markets. and it's very easy for them to integrate if Cantaloupe is part of that package.

Great. Thank you.

Yes.

So let's talk a little bit about different use cases. We'll first start with cashless and ePort card readers. So Heidi, I'll continue with you really quick here. Can you talk to us a little bit about Cantaloupe's advantage from a credit card reader perspective in the market and why your customers like it?

Well, it's simple. It's easy. It's just really easy for those neo fights. We do service a lot of customers that never will get into the vending industry but need a vending machine through a wholesale club or just a one-off machine. Cantaloupe makes it a plug-and-play solution. The beauty for us is we work well with Cantaloupe in finding ways to try to hang a Cantaloupe device on every vending machine that we manufacture. Through the consignment arrangement that we have, it's easy. And with our first line of defense as a troubleshooting aspect at our facility, we sort of take those neo fights and hopefully get through that process if they have any problems. But with the support that Cantaloupe brings as a second tier, it's seamless.

Yes. So Tim and Shane, I'll ask you from a slightly different angle, how you guys use ePorts integrating them into Seed? And do they work better than putting a third-party device into Seed. Sure, if you could start, Tim.

Yes. So they do. Yes.

Great. Thanks.

Well done. There's a couple of things I would say about cashless devices. One is there are operators out there that still don't realize how important these things are. We did that acquisition not long ago where the founder owner of that business did not want to make the investment and they had about 1,000 vending machines that had no cashless on it. And so of course, we projected through the acquisition that we would make that investment. We anticipated a single digit, something like 7% or 8% lift in revenue based on adding cashless. And when after about 6 weeks, the team came back to me and said we're seeing 30% lifts on those machines. And I said, "Go check again." Because I just didn't believe it, and that is still holding that 30% on those 1,000 machines. And -- so I can't overemphasize if an operator was going say to me like, what should I do to kind of move down the path here, I would say, get cashless on your machines first. However integrates into Seed is terrific. There's a lot of information that Seed can provide to an operator when you're using an ePort or Cantaloupe hardware device that you just don't get from the third -- another third party or another vendor of that.

Shane?

Yes. I mean for us, Canadian payment is a little bit of a different landscape from an international perspective. So when we look for a partner that was well equipped to help us navigate the Canadian landscape, Cantaloupe came front of mind and through a great partnership with a ton of support, they helped us to execute quickly and realize that benefit that you've kind of brought up. And I think one of the things that's big for us is we typically do all [ source ] things like hardware. But in the payment space, we decided to single source Cantaloupe and make them more exclusive because of the integration into the software. So the software gives us alerts and alarms, and we get a deeper level of intelligence when we use their hardware.

Yes. And one of the hardest things about this space is you're not where your store is, right? It's not like you're going into -- you run a convenience store and you go in there and you see what the customer sees your customers are interacting with your product all the time and you can't -- I can't be in 10,000 locations at once. So I need something like Seed to tell me what's going on at those 10,000 locations from a centralized location, and that's what it does.

Awesome. Thanks to you guys. So I want to take a moment and kind of shift to some of your software experiences for the 2 of you. You guys have heard a lot about remote price change today. So we're going to start with Tim because he uses RPC quite a bit. And so Tim, tell me a little bit about what life was like at your organization without remote price change? And then how has it changed for Continental?

Yes. I said in my intro, I didn't come from this industry. And when I came into our organization, I was told that if you could change prices in a vending machine remotely, that would be the holy grail because you can do it with markets and the Holy Grail is doing with vending machines. And in my naiveness, that's a word, I thought how hard could it be to change pricing on a vending machine, and it is stupidly ridiculous. It takes about -- once you get there, right, so you have windshield time to get there. It takes 10 to 15 minutes per vending machine to do a price change on a vending machine. And I'm talking an experienced person, often your drivers, the guys and gals that are doing it every day don't have the ability, it is not as simple as it should be. So you're sending somebody that you're paying a higher wage to typically to drive out there. They're not bringing product. They're going there for the sole purpose of changing a price. So you've got the fuel cost. You've got the extra truck to or van to send that person in. And it creates a show at the workplace. We're going into somebody else's building. It's not our building. And believe it or not, especially like in blue collar environments, the employees there kind of know who their driver is. And when Tim goes in there and starts -- they make like beeping sounds when you're changing prices, and it's like, what are you doing? You're drawing all kinds of attention to yourself, which only then gets them angry that we raise the price and then they go to their HR representative and it just creates a lot of noise, right? Nobody wants to deal with vending. They just want it there and they want it to work. So remote price change allows us to do all of that remotely. Everything that Jeff and Ravi and [indiscernible] said, how it works, that's how it works. And it simply just works. There is no like, I hope it went through, I sent it out, oh God, did it go through, it just works. And I think a lot about as we continue to grow through M&A, I don't want other ideas 5 states away on what something should cost. I want to be able to control that. And so as an operator, it's very important to me to know that, that vending machine 3 or 4 states away is priced appropriately. And if we think centrally that it needs to be adjusted, we can do that and know that it got done because making sure it got done was always a challenge as well. There's human error involved. And so you find out often too late that something is priced wrong, and then you're sending somebody else out. Another advantage of the Seed integration is we can see live what any price point is for any of the [ coils ] for vending machines at any given time.

And it's 15,000 times. In our business, there's a lot of touch -- it's a huge amount of...

And one other point, sorry, I'm going on about this. I'm a little bit passionate about this. But everybody talks about the cost savings, and it's certainly there. It's -- we have a public university in Michigan, where it used to take us 3 weeks. We have like 800 vending machines there. So we take 3 weeks to deploy a price change. It takes us 3 days now to do that. And that's not unique. That's not like, oh, if you -- the stars aligned, that's how that's just how it works. But there's a real cost to revenue. So when we were trying to get our ROI on the investment of doing remote price change, you can find it in cost savings. It's absolutely there. You can find it in taking trucks off the road, fuel savings. Certainly, there's an environmental impact to all of that. But you also find it in revenue. So when you have 10,000 vending machines and you do a pricing event, which is how it was done before remote price changed, you'd have to preplan it out. And if you are a really good operator, you could increase prices twice a year. Now you can do it as often as you want. But if you think about doing 10,000 vending machines twice a year and you've got X amount of staff to do that because this is a skilled thing to do. It just takes time. There's amount of time it takes. And so you're missing out on all that revenue that you could be getting if you can make the change instantaneously and $0.25 across 10,000 vending machines across 30 items in a vending machine adds up really quickly to find that out to get your return back and become more efficient.

Well, and especially over the last year, you guys have taken a lot of price increases from CPGs and the pace at which you used to do that in the past, it was maybe what once or twice a year. And now it's like it's been like at least 4, right, in the last...

Yes, multiple. We've seen more price increases than we ever have. I don't know how you would survive honestly without something like remote price change when inflation is as high as it is without taking significant hits to margins. And frankly, from an M&A perspective, that's helping. I mean the operators are simply not able to keep up if they can't react quickly enough to the market. Plus labor shortage on top of that. Again, it's a skilled position. This was a great opportunity for us to get ahead of this and really positioned us well in partnership with Cantaloupe.

Yes. Thanks for sharing, Tim. So Shane, I want to talk to you about Seed Markets and Seed deliveries. So you guys have heard about those add-on services. And really as they diversify their business, which you've heard a couple of them actually do that today. But for you, Shane, as you guys scale and especially as you add on more OCS business, you guys are one of our largest OCS users. Talk to us a little bit about how all that just makes a lot more sense with Cantaloupe. And how do you guys -- how does Compass Canada adapt to doing that and to scale more efficiently?

Yes. So from a software perspective, some of our legacy businesses, whether they were a coffee business, a market business or a vending business, would run on some of these legacy systems that Tim described, whether it was as simple as pen and paper all the way up to more sophisticated systems. For us, it was really about how do we get one single source of truth for our business that we can leverage the data to be able to advance the business. So to be able to connect each of those verticals into one system, it allows us to make really good decisions based on the information that's there. And some of the products are shared across them. I really don't care if I sell a can of Coke or a bottle of Pepsi at a market, a vending machine or at a coffee or pantry account. I just need to know that it's got to leave my warehouse and it's got to go in a bin, it's got to be there. So my driver can take it. And it allows us -- that [ live time ] information allows us to see things like our market trends, [indiscernible] figure out what's selling to maximize our revenue. And it also allows us to manage our warehouse inventory and stock levels so operationally, it works. And then last, it really lets us go back to our suppliers and use that data to be able to drive purchasing efficiencies or share some of the market intelligence that we gather with them to leverage better pricing. I mean they love to hear about the insights of our business, and it's pretty unique that we're able to tell a supplier that we sold by 10:00 a.m. this many bottles of their orange juice, and they get excited about some of that intelligence we can share with them.

Shane brought up a really good point. The bottle of coke is the bottle of Coke regardless of whether it's in a vending machine or a market. So you might be thinking like why would an operator want to get Seed Markets. One, there's a couple of advantages. But one is if you just think about general inventory control practices without having Seed Market sales data flowing live in your system, you never know what your inventory is in real time. And you're chasing an inventory problem in a warehouse. And so it gives you that real-time inventory information. Otherwise, you're doing data transfers, which is costly and there's room for human error there, too. So getting everything together, one source of truth for data is a huge deal in running a business effectively.

We've done roughly 50 acquisitions in the last couple of years. And we're now at a point where we won't move a vending or market acquisition onto our system or open -- close the deal until that data is ready to go and see. We're that adamant about having the information on day 1 so that we can grow it and service the client effectively. And so that our operators know exactly what they're getting into versus say, hey, you try and run on this legacy system and merge it. We want them focused on the best [ break ].

[indiscernible] It allows you to even Tim's point, whether it's adding on cashless right away, there's some instance whether you're going to get -- maximized revenue quicker or get more efficient within your operations faster because you're doing it all right away out the gate with your M&A. Okay, guys. We talked a lot about what you guys have done and how you've used Cantaloupe. Let's talk a little bit about like what's next for each of you. So in thinking about how do you see Cantaloupe helping you grow into the next phase of your guys' company? Heidi, I'll start with you.

Don't start with me. Well, it's just about the connections, right, the transparency to our customers and the capability that we have from a customer service perspective. You have provided us with good data points being at the front line of the troubleshooting and it only gets better for us. So the ease of helping our customers and getting that information will help us grow as well as Cantaloupe.

Tim?

We are obsessed with our guests, and we will do whatever we have to do to make that moment of eating special and right for them. And to get that right is a very difficult thing. It requires an immense amount of time and place utility. And as we continue to grow what's next for us is continuing crazy acquisitions. And it is -- I can't imagine trying to go down that road to Shane's point, without being able to have the view right away of what's going on in the company we're about to acquire. We can install something called Seed Sync that you probably won't see in a slide today, but it allows us to see exactly what's going on in that company while they're still running whatever they're running today. It allows us to understand what kind of investment we're going to have to make. And we can make some pretty bold moves at that point because we've tested these things. If I -- for example, if the next company we acquired doesn't have cashless, it's a no-brainer. I'm not going to ROI it. I'm not going to think about it. I'm just going to figure out how many devices I need and kind of order them and get them on there as soon as possible. I mean there's just -- there's some steps that every operator should be doing and almost like a checklist, we can go down because they're repeatable and they're dependable. And so for us, having a partner like Cantaloupe that's available. And the other thing I would say is the CSM team, the partnership, I have weekly calls with Cantaloupe's development team. It's 2-way conversations. They are all about what makes us successful, which is great because I'm all about what makes my guests happy. It's a perfect circle.

Love it. It's -- for us, I mean, strong continued growth, continued M&A. There's a lot of runway in Canada for us [indiscernible] to our expansion. So we're excited about that. We're excited about having a partner who understands our business. We explored a lot of different ERP systems software to run our business. And ultimately, there's some great solutions out there like SAP and Oracle, but they really don't understand this industry and this business and are able to make those connections to the level of detail that we need based on the micro transactions that we continue to do. So really great partner from a growth perspective, there to grow, there to scale has been there through a challenging time from supply and it hasn't been issues. We'll be able to get hardware when we need it, we're able to get support when we need it, and it's a custom solution. That's how it feels to us.

Awesome. Well, thanks to you guys. I really appreciate you guys coming out here, and hopefully, you guys find us valuable and getting to hear the customer's perspective. I know we talk a lot from our team about what our products do, but it's always great to hear how they actually use it. So thanks to you guys. And with that, I would like to go ahead and welcome Scott Stewart, our CFO.

All right. I see everyone parking up with their seats a little bit. It's either because we're getting to the money slides or you know I'm the last speaker, and we're that much closer to happy hour, one or the other. So I'll introduce myself. I'm Scott Stewart. I'm the Chief Financial Officer here at Cantaloupe. Being at Cantaloupe for just over 2 years. Started out as the Chief Accounting Officer, then moved to the CFO seat in February of this year. Prior to that, I was at Intercontinental Exchange, also known at ICE. I was the Assistant Controller there. I was there for 14 years. When I first started, we were doing about $260 million in revenue, and we had operations in 3 different countries, which is pretty similar to the size of Cantaloupe right now. When I left 14 years later, we're doing $6 billion in revenue and had operations in 30 -- over 30 different countries. So just exponential growth. A lot of that was done as acquisitions. Part of my responsibilities there were overseeing the corporate accounting and then also being heavily involved in the M&A mostly overseeing the integration on the financial side of the house. So worked and delivered 30 different acquisitions, the smallest one being a $6 million tuck-in, the largest one being the acquisition of the New Year Stock Exchange, which I'll say real quietly just because we're at that right now. And then prior to that, I was at E&Y for 5 years. So enough about me though, let's dive into the financials. So this slide shows our key financial highlights, some of which have already been covered in other presentations. I think the key takeaway from this slide is the fact that we've got over 25,000 customers growing at a rate of over 21% per year over the past 2 years, over 1.1 million endpoints, and we guided over $2.4 billion that run across our rails that go through our platform. So we are a large-scale business that is growing rapidly and the best is still yet to come. So now let's talk about how we make money. The 3 primary revenue streams we have are subscription revenue, transaction revenue and equipment revenue. The way to think about our equipment revenue is similar to the printer and ink scenario or model to where we sell the equipment at breakeven or a slight loss but because we have very attractive margins on the subscription transaction or reoccurring revenue, it's worth it. Transaction revenue is recognized as a percentage of the gross merchandise value. Take rate varies depending on the size of the customer and the size of the average ticket price, but generally, it's around 5%. Subscription revenue is a SaaS fee for connectivity to the network and our suite of our software products. Margin profile is similar to software is about 80% to 85%. Transactions historically have been in the single digits, the 8% to 10%. We've done a lot of work over the past year for cost reductions, and we've been able to grow that up into about the mid-teens now. For equipment, like I said, has historically been breakeven, but now we're starting to see a shift in the market. So overall, we've been working through the 3G, 4G upgrade, the EMV upgrade cycle. And we're also seeing less competitive pressure now that that's about to end. So that ends on January 1. Once when that's over, we're already starting to raise our prices this quarter. And we're expecting to be able to sell the equipment at least a 5% margin through the rest of the year. And as we enter into the new year, we're pushing up to be 10%. Software and transactions are what we refer to as our reoccurring, the very, very [ occurring ] nature represents about 81% of our overall revenue. So thanks to the heavily reoccurring business model. We've been able to deliver consistent revenue growth over the past 5 years. You can see over the past 5 years, even through COVID, we've got a CAGR of 15% on our top line revenue. Looking at the recurring revenue subscription fees and transaction fees. We've got 22% growth on the transaction fees and about 15% growth on the subscription fees. Now the theme that you've heard throughout this presentation, you're going to continue to hear is that we are laser-focused on growing our subscription revenue. And because of that, we expect that to be the highest growing revenue stream in the future. Now let's spend some time on the unit economics of our business, which we historically haven't disclosed. We calculate our LTV and CAC on a device level. LTV is very attractive due to our low churn and to the stickiness of our products. Once the customer starts using the software, especially if it's Seed, they hardly leave us, which gives us a good long tail of recurring revenue for every device that we implement. CAC is also very attractive. Jeff spoke about this a little earlier about our go-to-market strategy with our targeted sales force, which we supplement with indirect channel partners, especially as we look to move into new verticals and to expand internationally. We've created a very cost-effective acquisition channel. So this gives us an overall LTV to CAC ratio of 9:1. With this highly attractive ratio, we're comfortable in investing more in our global sales efforts. And then given the consistent ARPU, the growth that we're seeing, which we'll touch on here in a minute, we see the LTV as being part of the equation that's going to improve as well. All right. Now let's take a look at our active device and active customer growth. Starting with active devices. Historically, we've been able to grow at about 10%. Now we saw a slowdown over the past couple of years due to COVID and then this past year due to the 4G EMV upgrade process. But now that dynamic is changing. As of January 1, like I said, that's over, and the sales team can start redirecting their efforts towards new device sales instead of upgrades, especially as it relates to expanding internationally. And I'll also take this time to remind you how I just spoke about the increase in our margin profile and equipment as well. Active customers, you'll see, have continued to grow with the CAGR of 16% and that's even throughout the pandemic. A lot of this is the effort that we've put into the SMB and mid-market customer base. The area of the market we feel has been underserved in previous years. but it's the highest margin and most profitable segment customers that we have. So we're continuing to focus on that in the future as well. Now let's spend some time on our transaction volume. Starting with a number of transactions, again, it's been able to continue to grow as a small little bump during COVID, an overall CAGR of 20% over the past 5 years. The interesting thing to note with the total number of transactions is that it outpaced our device growth. The reason for this is more and more people are taking advantage of self-service commerce. As we came out of the pandemic and right into the tight labor market, the tailwinds of customer preferences shifting towards self-service commerce increased same sales device -- same unit device -- same device sales, sorry. On top of that, you'll see the total dollar volume of transactions has grown at a higher rate than the total number of transactions. This is largely driven by inflation. So in January of 2022, our average ticket price was $2.15. When we closed out September 30, our average ticket price was $3.31. So an overall 8% increase over the past 9 months. A portion of our processing fees are fixed. So we are the -- one of the few companies that was able to benefit from all the inflation that we've had over the past year. I mentioned our gross margins on transactions a little earlier. I'll touch on it one more time. When I joined, the gross margins were in the 8% to 10% range. We've now increased that to be about the mid-teens now, and we believe there's more room for growth as we move forward. All right. Now let's take a look at our average revenue per unit or ARPU on an annual basis. We calculate this by dividing our total subscription and transaction revenue by the average number of active devices for the same period. You'll see we've experienced meaningful growth over the past 8 quarters. And this is largely due to the shift of cash versus cashless and the move to self-commerce -- sorry, to -- yes, self-commerce. Now let's just see we're at. Let's take a look at where we're going. So this chart depicts our path that we have to revenue growth on a single device on an annual recurring revenue basis. So starting with the left, if we were to sell a device, and this is last year, prior to this year, if we were to sell a device at the list price for our service fee and they ramped up to our average transaction fees and the list price for our Seed, they have a total recurring revenue of $295. Look at where we're at today, adding on the AI merchandising and the RPC, the ARPU could be $337 if they were all in. then take it to the very near future. As we talked about launching all these products that Gaurav had just spoke about, the ad manager, more loyalty, card-linked offers, Cantaloupe care, customer goes all in that can get us up to $400 on annual recurring revenue. Now when you look at where we were or where we're at right now, the $165, it shows that we have plenty of ramp if we continue penetrating the current customer base that we have. All right. Another great driver for our subscription revenue was our Cantaloupe ONE product. You heard Jeff speak about this earlier, and I'll cover the economics behind it. The contract itself is a 3-year agreement and then after 3 years, it rolls month-to-month. When we sell a device, we record it as a fixed asset, and we depreciate that over 5 years. And then the monthly service fee gets recorded as subscription revenue. If the device breaks or becomes obsolete, we're on the hook for it, which is one of the benefits for the customers. But this allows us to charge a premium for that. So overall, the customer benefits because there's no cash up front and they have no risk of obsolescence. We benefit because we can charge a lot higher subscription rate for it. Now walking through an example that we have up here. This shows the revenue related to a traditional sale of a unit and to Cantaloupe ONE for the same unit. So in year 1, we're going to recognize equipment, which is at a very slim margin. We're going to recognize the transaction revenue that we get from it and then we're going to recognize a smaller amount of the subscription fees. Under the Cantaloupe ONE, you'll see we're recognizing at a lot larger portion of the subscription fees in the transaction revenue, and it stays consistent over the next 3 years. So if you take a look at it over 3 years, we have 3.5x of subscription revenue versus a traditional sale model through the life of the contract. Now you ask maybe why we have a difference between the 3-year contracts and the 5-year depreciation that we're taking on it. And that's because history has shown us that the customers keep it for a lot longer than 3 years. Most of our devices will stay out in the field 5, 6, 7, 8 years. And we don't believe that the customers are going to be churning their devices because it's expensive for them to go out and change devices on their machines. So we believe that they'll roll past that 3 years. The other important thing to point out, because we've gotten lots of questions from a lot of people in this room is, hey, is this just a clever way for you guys to disguise your device sales, right, into your equipment and kind of roll it in. In some regards, it is, but overall, the gross -- the all-in combined gross margin that we're getting on this is 70% to 80%. So it is along the lines of what our subscription revenue is, a little bit lower, but right up there. So I would say, yes, it is a pretty clever way to do that. All right. Moving on. Now turning to our operating leverage. We have a very scalable model, where we continue to increase our ARPU -- we continue increasing our ARPU drives attractive contribution margin. With us increasing our subscription revenue and with that being at 80% margins, with that, there's very little incremental OpEx. And so as our subscription revenue increases, we hold the line on our OpEx that creates exponential growth for our bottom line. Now turning to capital. We've taken a very disciplined approach to our capital allocation. Over the past 2 years, we reduced our G&A costs, and we've used it to redirect it into our sales and marketing and to our technology expense. When I first came on 2 years ago, we were really spending millions of dollars a month on consulting fees for legal, finance, accounting. We're able to bring all of that in-house, and then we've taken those savings. We've redirected it to our sales force and to our IT group. So if you asked Ravi, when he first came on, he would tell you that we were severely underfunded on the IT side of the house 2 years ago. Last year, we invested $10 million in CapEx. That $10 million went to build out all those great products that Gaurav was talking about and RPC and the hybrid, the AI technology that we have as well. And then we're also investing probably up to $12 million in CapEx this year as well. And part of that is also going to fortify our platform, too. Then turning to M&A. We've been very opportunistic with the companies we're looking at, only considering ones that boost our strategic initiatives at a reasonable price. And we did the acquisition of Yoke last August and most recently, as you heard, we've acquired Three Square Market as well, which leads us to our next slide. So give you a little bit of the finances behind Three Square Market. So purchase price was $41 million. We had 90% cash and 10% stock. $25 million of that was funded with debt, which came from an existing credit facility that we already had. Overall, when you look at the financial profile, for the calendar year 2022, we're going to do approximately $19 million in revenue and have adjusted EBITDA margins of plus 20%. The customer base that they have and the customer base that we have, there's very, very little overlap, which means that there's lots of room for revenue synergies. And while they are up there, and Jeff probably told the story, but they reached out to all the customers of Three Square Market and we know that we have a very large customer base that they haven't penetrated or reached to yet. So we knew that there is that selling opportunity. What we didn't realize was a lot of their customers started asking about, see, why we are on these calls? So we realize that there's also a cross-sell opportunity there as well. And as far as talent, Tony Danna, who is with us here today. Tony, if you could raise your hand, say hello to everybody. He's the President of Three Square Market. He's coming over with Cantaloupe along with 40 other employees, and he's going to help lead Cantaloupe's micromarkets efforts. All right. Now to guidance. So with the acquisition of Three Square Market, we are revising our guidance. We previously said that we'd be at $225 million to $235 million for revenue. During the first quarter, we said that we're going to be at the high end of that range. Now with the addition of Three Square Market, we're projecting to be at $240 million to $250 million of revenue. U.S. net GAAP income, we're expecting to decrease to negative $2 million to a positive $3 million and that's because of a onetime acquisition costs that we've incurred. Those will be added back to adjusted EBITDA, so there's really no impact for those costs on adjusted EBITDA. Overall, for adjusted EBITDA we said we're going to be at $12 million to $17 million and in the first quarter, we said we're going to be at the lower end of the range, now with the acquisition of Three Square Market and layering them then, we anticipate being in the midpoint of the range. And there's no change to operating cash flow. Then for our 3-year outlook. Operating leverage driven by continued improvements in ARPU with the recurring revenue and very attractive contribution margins and subscription comprising -- subscription revenue comprising more of a mix of it. So we're expecting 15% sustainable growth for our revenue, driven by 20% of subscription revenue growth. With that, with the operating leverage that we had that we spoke about a little bit earlier, we're anticipating being at 20% margins. So if you look at where we're at now up to fiscal year 2026, that's a 70% CAGR on adjusted EBITDA. So in summary, key takeaways. One, we have very attractive unit economics. Two, we're focused on growing our ARPU, and we showed you how we're going to do that. We're also laser-focused on accelerating our subscription revenue. And with the operating leverage that we have, that's going to allow us to grow our bottom line exponentially. And with that, I will turn it over to Ravi.

Thank you, Scott, and I'll just take a couple of minutes to wrap it before [indiscernible] hopefully, the additional disclosures and some of the KPIs that we haven't shared before but are now sharing are exciting and provide people a little bit more of an inside view of what's going on in the business in the marketplace. If for one couldn't be more excited to be here at this time in terms of both the industry as well as the company. I view the future as really bright based on the information that we've shared. Again, to summarize this vision reset, if you will, our vision used to be we help the world, buy it and go, and that's still our mission. But our vision really is now to build this company to be the global technology leader powering self-service commerce, which we think is very feasible and achievable with the team that we've built and with the assets that we have. I want to leave you with kind of the key takeaways from this and those takeaways, if you kind of forget everything else that we went through and all of the details about our products, services, the market, everything else and is there something you want to -- just kind of remember it is, look, our growth strategy is where we have a presence already, we expand the average revenue per unit there and Scott took you through views of how we can do that. And our trajectory for longer-term sustainable growth comes from replicating into adjacent verticals and replicating into international geographies, both of which we now have a concrete footprint in. And then finally, we have a pretty clear pathway to get to that 20% EBITDA margin. And you've heard us talk about it for the last 2 years. And I know it's -- patience have been very thin with this room and beyond this room. So -- and we have not, in the past, answered the question on, okay, when are we going to get there? This is the answer to when are we going to get there. And how are we going to get there? If you forget all about our strategy and said, "Okay, how are you going to get there?" The simpler answer is, our revenue is going to grow 15% to 20%, we're damn confident of that based on both past track record and as well as the TAM and what we see in terms of our strategy. The portion of that revenue, which is subscription revenue is going to grow, and you've already seen evidence of that. We've started growing subscription revenue at a more accelerated pace, and we see that as the future. That's also a way in which our financial strategy is differentiated from our competitors. We don't believe in the hardware and the selling widgets being the future, we believe there's more differentiation in the software and the subscription side. So as that happens, we will exit this fiscal year in the high-teens for year-on-year subscription revenue growth; enter next year, next fiscal year in the 20%-plus range; and accelerate through the 20s through the next 3 years. The result of that subscription revenue being a higher portion will create more operating leverage because it's higher gross margin and higher margin business and that leads to this very attractive EBITDA growth rate of 70%-75% over the next 3 years that then gets us to the 20% EBITDA margin levels by FY '26. So with that, we'll wrap up, and I really appreciate all of the attention and the engagement this afternoon. And then we'll spend some time with Q&A here. And we've got a mic that can float around. So -- and Jeff, Scott and Gaurav if you want to join me, and...

Nice job, guys. So Scott, you talked about your analogy of ICE. You joined at $260 million, and they -- when you left it was $6 billion. Was that guidance?

I wish. I wish. I wish, we were there in 14 years, that'd be great.

So you heard what we heard relative to a couple of large customers who literally won't make acquisitions if they're not confident in being able to move over to Seed or have Seed on the platform. That tells me, I look at your 20% market share and I say something's wrong there. Can you kind of walk through why only 20%? And 1 other point, you mentioned that your price point is 4x your competitors. So perhaps that's the answer, but just curious if you can go into that?

So the 20% reference was for the mid-market. And admittedly, it's an area, again, we've been very focused in the very large enterprise segment and have done really well in the small market segment. But admittedly, we haven't been as focused in the mid-market. So now we are laser-focused in mid-market. So we anticipate, again, 30% of operators in the mid-market use excel, spreadsheets, pen or paper, right? So the 70% that use VMS systems, we have -- we're relevant in that space, but we're also at the point now where we know we can scale, we can take Seed enterprise version and push it down market into that mid-market very, very effectively given us incredible operating leverage. So that's the approach there.

And look, there are also other innovations that we've worked on the last couple of years to make the implementations go faster. And the earlier it used to take 4 to 6 months to do an implementation. Now we've accelerated it, in some cases, to a matter of 3 to 4 weeks. And so that's going to make a big impact as well.

Guys, some great commentary on the accelerating subscription growth that you're anticipating. And I know we're seeing some trends in kind of that direction in a nice contract win last week that Jeff had some great quotes in. But if you could give us some maybe something more anecdotal or quantitative in terms of your conviction in that subscription line moving pretty aggressively from here?

Yes. So the subscription line movement has, again, 3 elements behind it. One is, as we layer more add-on services, RPC and HIVERY are both examples of that, ad manager that you heard about, card-linked offers, these are all examples of that, they all tend to be software-based $1 or $2 a month per endpoint kind of services. So they come without necessarily additional G&A, but land right on the subscription side. So that's 1 way that subscription portion of the revenue is expanding. And the other way it's expanding is as we grow our endpoints for the number of devices or active devices, the device management fees associated with that creates additional subscription revenue, and we expect that to grow faster now as we are out of the 3G to 4G and EMV upgrade cycles.

Yes, I think Software-as-a-Service, it cannot be -- you take a step back, enterprise-grade software has been unaffordable for a huge segment of the market. That's no longer the case, right? So whether it's Cantaloupe 1 or a variety of our other software services, we're now in a position to again drive that downstream where margins are better in many cases. And we think that's a game changer, and that really translates into growing subscription and more importantly, creating much stickier relationships with our operating partner customers.

And the other part I'd just add to that, too, is the international piece, right? Because the international piece that Jeff has the [ motto lead ] was seen, right? And that's where a large part of that subscription revenue growth is going to come from as well.

Yes, I mean if you look at international, whether it's U.K., Western Europe, Continental, it doesn't matter, there is no dominant VMS provider there. There's a lot of homegrown, cobbled together, back of the office, VMS-light applications, but there's nobody out there who has the scale, the expertise -- and oh, by the way, 25-plus years of experience building this feature-rich elegant software. So you're going to see us take that profile and translated into different very, very targeted geographies on a very deliberate basis, we're not going to go and try and be all things to all people. We're being very specific on where we focus our resources, energy and technology assets, and we think we've got a great playbook.

Maybe just a quick follow-on. And maybe a more direct question for you, Jeff. But to my comment about the contract you just announced and that was a really nice deal, I think what you guys are seeing is accelerating actual conversion of the pipeline. So should we expect to see continued releases like that as well? I understand all the leverage and the add-ons, but signed wins you're seeing, what you're seeing in that pipeline?

Well, I think Tim mentioned it earlier, when Continental looks at acquiring a target, correct me if I'm misspeaking, Tim, but Continental will say to that target, "You must be on Seed before we will move on to more serious M&A discussions." So I think -- so what we're seeing is these very large enterprise customers see Seed as a must-have for a business that they acquire and that's a good thing for Cantaloupe.

It's also -- that conversion is also accelerating because of RPC. I mean it is one product, but it's come at such a perfect time for us with hyperinflation that many of the customers who were kind of, "Yes, I see the benefits, but maybe I'll convert, maybe I'll convert next year," or now going, "Can you help me convert in the next 6 months," right? So it's created an imperative, which we are excited about. So Cris?

Yes. When you think about your long-term margin targets, what's the contribution from either the adjacent market component or the international component? How big of -- how important is that versus your core business today to get to that 20%?

Yes. So here's how I would answer that. International -- let's take one by one. So international, this fiscal year, we expected to have some revenue contribution, not necessarily significant or meaningful contribution. By next fiscal year, we see that starting to ramp up. And by the time we get to sort of the later part of that 3-year outlook that we provided, we think International will get to close to kind of the 15% kind of mark, right? And then on the adjacent verticals, it's a little bit of a more nuanced story. So we see EV charging as growing much faster. We see micro market is growing much faster. So these are kind of two adjacent verticals I would as the stars, right? And the other ones are also growing, but they all have slightly slower growth rates. So EV charging as a vertical, we think today, it's been growing 25%-30%, we think it will grow at 100% especially in North America, with some of the things that are happening. Micro markets have been growing at 40% to 50%. Last year, they actually grew closer to 70%. So we think that will accelerate again to kind of the 80% range. So in a 3-year timeframe, I can see those 2 as being much bigger, i.e., maybe in the 15% range of the overall business and the other verticals are all starting to fill out the rest of the portfolio. But that's -- I want to caveat by saying that, that's very dynamic. And as we know things can change and evolve as we execute.

Yes. I mean, I think if you take a step back, okay, what does -- let's take core food and beverage, what does Cantaloupe do really, really well, right? We have our own proprietary hardware with our own firmware, right? We have our own proprietary payment gateway, payment platform. We have our own proprietary ERP system. So in traditional food and beverage vending, those technology assets are vertically integrated beautifully. But the payment gateway we have today is not a payment gateway for vending machines. It's a payment gateway, right? So there's no reason we can't decouple and unpack that technology stack and repurpose it into a variety of adjacent verticals, like Ravi mentioned, EV charging. So what that means for us is we get tremendous operating leverage, taking tried, true and tested technology into new verticals. And that's what's exciting for us. We're not -- again, we don't have to reinvent the wheel, right? We're getting real leverage out of assets that we've invested in over the years.

And then the 1 other thing I'll add to that. As we look at cross share, the thing that we're seeing is it's a lot more similar to the SMB market and mid-market here. So they don't have the big canteens of the world over there and it's more a margin profile long mid-market to SMB.

Go ahead.

A nice job this afternoon. Last week I traveled and I saw some guy by Lego set at an unattended machine in an airport. I also walked up to a CVS in Nebraska, 9:00 p.m. I figured out I got there too late. They actually had a sign on the door and said, "Oh, we had to close at 6:00 p.m. employee shortage." So there's some relevant experiences there that lead to where you're going with this. You mentioned point of sales, all the different connections, but with this ad feature and with kiosk now, a dormant kiosk screen is a screen where advertising can happen. So what are your thoughts about that ad manager going to points of advertisement as well as point of sales and coupling that? And how quickly you're going to get there because I know you're going to get there quickly?

We're already there. So our ad manager, while the displays that we showed you were where it is displaying on a point of sale, that point-of-sale device can power a big flat screen TV that can be connected to it, and that's also displaying ads. So yes, that -- because ultimately, remember, our capability is to take that storefront, make it connected. And once it's connected to the cloud, you can push content to it from the cloud and monetize that.

Yes, an interesting dynamic there where you're sharing that, it's your network, it's the operators of kiosk.

Yes.

However, Cantaloupe is the umbrella where you have 1 million connections where you can approach the vendor or certain beverage company, Disney, for instance, say, "Hey, we have these connections, we'd like to make an agreement with you, and then we'll subsequently make an agreement with our operators do some sharing there, that's a win-win."

Yes, so we have 2 models there, to squarely answer your question. We have essentially a BYOD model, which some of the folks that you heard from today on the customer panel if they are large sophisticated customers, they don't need us to get them the advertising deals, they bring their own advertising deals. And what we provide them is the plumbing and the technology capability to create those ads, push those ads, and we charge them for the technology capability, but they get the ad revenue from the advertiser, right? And the other model that we have is where we bring the deal as well as the technology capability, and we take a rev share, and that works well for mid-market and smaller market customers as well. So both -- both models operate.

And again, it's more of a subscription opportunity, right, targeted advertising. So there's -- it's all about the connectivity, and we have -- we know exactly where those devices are by the second, right? And we can geofence and be very, very deliberate on the content that we drive to that -- to those devices that are connected to our platform.

David?

Thanks for the presentation today, very different than 3 years ago when we had several buckets of minestrone soup with different ingredients, but now you're talking about things like an integrated digital commerce company, that's great progress.

Thank you.

Two questions, please, about Cantaloupe ONE. First, how will the company better manage customer credit risk associated with that than it has in the past? And second, from a capital allocation point of view, what are the opportunities for the company to use other people's money to fund the buildup of the hardware rather than allocating the growing amount of free cash flow that you're generating, allocating it away from R&D, you're allocating it away from M&A, trying to find sort of vendor leasing opportunities that you can take advantage of instead of using your own capital?

Yes. So the opportunity for the capital is there. We've historically leased before, we had a lease program with 5 different providers that we ran through because we've had a good amount of cash on our balance sheet up until this acquisition, we haven't recently looked at going out and doing any additional third-party financing for it, but that opportunity is there if we need it to be, okay? But right now, we still feel have enough cash to maintain on our balance sheet. But if that changes we might look to outsource. And then sorry, your first question?

Credit risk.

Credit risk. Yes, so the great thing about Cantaloupe ONE, if we sell a device, we're charging them the $17.95, $20.95 per month, that's automatically being pulled out of their flow of funds. So as we do the credit card processing that automatically is pulled out, as we make the payment to them each week or each month, depending on how the customer set it up. Historically, in the traditional model, when we sold the device, we'd sell them with a device for $200, $225 and then we have to go out and try to collect that payment. So with Cantaloupe ONE, it's automatically being pulled out of their funds.

I appreciated your comments on the TAM inflation early on. You mentioned kind of a right to play, and I know that TAM shrunk quite a bit from past presentations. Can you talk about what it takes to play in that old TAM versus what you've strictly delineated now in both your immediate TAM and your adjacencies?

Well, I think it's just establishing proof points, going through pilots, doing the hard work of integrating with partnerships and technology integrations with partners that are unique. I'm just not a big fan of taking things that we could do, would do and that are 2 way out pie in the sky. And so it was a very deliberate decision to kind of shrink down to here is what's addressable today and in a very real sense. And -- like I'll give you 1 example, right? It's -- people talk about IoT generic, right? So monitoring pharmaceutical plants and other things. We've got some pilots going in that kind of an area, and it's a massive TAM by itself. I don't want to count that TAM because we've got miniscule business and a few pilots. Now could it become huge? Yes, it could. We've got some pilots where Seed is used to go stock products, which are food and beverage related, but can very easily be used to track as ATM machines are running out of cash and when you need to go fill cash in them, and we've got some pilots in that. But I don't want to go count the TAM for all dynamic scheduling and routing for all ATM machines. So I mean, I'm giving you a couple of examples. So the short answer is we will continue to innovate and chase a few moon shots around where with very little R&D spend, we can try different new verticals and where we see some traction, will go deeper and broader. But otherwise, we'll kind of stick to our knitting and make sure that we execute on the verticals that we know are addressable and where we know the opportunity is there, and we have a proven right to win. Okay. Josh?

These are 2 questions for Scott. I guess the first question is your transaction and equipment revenue, 2 of your 3 segments basically or roughly very low digit EBITDA percentage at this point. Your transaction business is low 10% gross margin, your equipment business is not showing a profit, but...

Transaction revenue, I would say we're in the mid-teens now, but yes.

So what's changed in those 2 elements that make you so confident that those are going to have an incremental? And taking your numbers for the next 3 years, clearly, you're projecting a 70% increase in EBITDA, so your flow-through margins are going to be very, very high. What kind of confidence can you give us today that after a couple of years of not seeing that flow through that we'll be able to see it now in all segments? And the second question I had was regarding your updated guidance and your note you talked about you saw some good activity quarter-to-date. Maybe you could talk a little bit more about that as well?

Sure. So on your first question, when you look at our equipment revenue and what we've done over the past 2 years, and I mentioned a little bit of this in my presentation, but we've had COVID that came through and then right after that, that was followed up by the 4G to the going dark of the 3G network, upgrading to 4G and the EMV compliance issue as well. And so for the past year, we've been in the battle, right? We've been fighting for our lives against competition because a good portion of our customers with a good portion of their devices had to be replaced. And it was a little bit of a drive to the bottom between us, Nayax, Crane. But you fast forward to where we're at now and just here in the past recent months, we've seen a lot less competitive pressures. For one, most of our customers have already upgraded their devices. Two, I think there's just been a change in the economy when you look at some of our competition, Crane didn't do a very well good job of managing their supply chain. They ran out devices and they couldn't really compete with us. Nayax, if you look at them, they've been burning through a ton of cash, and we're not getting as much pricing pressure from them now either, right? And I think it's because they are running low on cash. And so we've tested the market a little bit just this past quarter to see, hey, how much price elasticity is there and how much can we increase our price. And we're seeing that we can increase it by a fair amount. And so I think for the third quarter, we -- it's very achievable for us to be a positive 5% margin as opposed to normally we're at the negative 5% margin. And as we roll into next year and especially as we start looking to go international, as I said, international is similar to the SMB market, where they're used to paying a lot higher price for their equipment and the margins over there are a lot better. And so I think you layer in international -- international component, we're seeing our competition have 30% margins internationally. So as we move out to the international side of the business, that's going to increase the margins there as well. On the transaction processing, like I said, we started at about 8% to 10%, we're up to 15% now. We still think there's more headroom there, too. There's other contracts that we can negotiate. There's some closed-loop payment types versus that Ravi has been looking at and working on with Gaurav. And so that will lower our overall cost of acceptance, and we'll increase the margin there. Now that's probably another year or so out. But both of those revenue streams, we're anticipating to be able to increase the margins. And then as you look to expanding out our subscription revenue, which as we said, has very little incremental OpEx to it as well. That's going to keep that margin up there, if not even drive it up a little bit more too. And that's how we feel comfortable that we're going to get to that 70% CAGR by 2026.

Yes. And Josh, I think it's important to add a little context on some of the discounting and what happened, right? So the 3G to 4G upgrade and the EMV upgrade plus supply chain issues created a dynamic where if we were to make decent margin on the devices, it would have been prohibitively expensive in some cases for our customers. So we made a kind of a strategic decision to keep that footprint and keep those customers close and invest in it because the ROI was there and the lifetime value was there. And customers have long memories, right? As we get past the cycle, that's the reason they will stay with us, they will buy more with us and they'll continue to invest in us. So it was a calculated decision which we don't regret, and we think it will create good upside in the future.

So the mass exodus that everyone seems, they're going to ring the bell, so that's what we do to.

All right. One more?

Yes. Just -- is that adjusted EBITDA margin in '26 is that an exit margin on Q4 or is that for the whole year?

Great question. We think we're going to hit it halfway through the year.

Any other question?

Sorry. Last question on the international. You guys had a couple of slides that I think referenced a fair amount more progress than I think we've heard about from you guys in terms of the partnerships, infrastructure and maybe more on the partnership side with pilots. And so when will we learn more about that? It seems like some pretty exciting stuff going on.

Yes, lots of momentum. I think we should have more updates as part of our second quarter earnings call when we get to that point. And then as we unlock more opportunities that have now become possible with the Three Square acquisition, we'll have color from that also, but lots of great momentum, and I think we'll have more to share there. Okay. Go ahead, Cris.

Yes. Just a follow-up. You keep talking and referencing the margin profile for certain grouping of customers are much better than the enterprise. Can you just provide a little bit more details and frame kind of what the margin profile for SMB is versus enterprise?

Sure. Yes. So I guess, we don't necessarily give that detailed level of guidance. But yes, I would say on the equipment side, where we're normally about breakeven I think the margins that we're selling to the SMB market is probably 10%-or-so to 20%. And when you look at it on the software, it's probably about the same increase.

And look, in many cases, it's simply driven by volume of purchase, right? I mean if a large company is going to buy 10,000 new connections in 1 shot, we give them a better deal than if there are 10,000 customers who are buying one, but the 10,000 are much more profitable for us. So we want more of them. Okay. Sounds like we're at a wrap. Please stay back for a cocktail hour and give us a chance to answer some more questions informally as well and interact a little bit. We'd appreciate all the time that you all have spent here with us this afternoon. Thank you.