10-Q: Cantaloupe Reports Q2 Loss Amidst Merger Costs, Revenue Up

Cantaloupe, Inc. reported a net loss for the quarter ended December 31, 2025, primarily due to significant merger-related expenses, despite strong revenue growth and operational metric improvements.

Summary

• Cantaloupe, Inc. reported a net loss of $0.070 million for the three months ended December 31, 2025, a significant decline from a net income of $4.974 million in the prior year period.
• Total revenues increased by 6.8% to $78.712 million for the three months ended December 31, 2025, compared to $73.722 million in the same period of 2024.
• For the six months ended December 31, 2025, total revenues grew 10.4% to $159.565 million, up from $144.558 million in the prior year.
• Merger, acquisition, and integration expenses surged to $3.854 million for the quarter and $11.051 million for the six months, largely due to professional service fees related to the pending acquisition by 365 Retail Markets, LLC.
• Adjusted EBITDA, which excludes these merger-related costs, increased by 1.1% to $10.782 million for the quarter and by 14.9% to $22.535 million for the six months.
• Operational metrics showed growth: Active Devices increased 1.7% to 1.291 million, Active Customers rose 10.6% to 36,388, and Total Dollar Volume of Transactions grew 13.1% to $953.2 million for the quarter.
• The merger with 365 Retail Markets, LLC, for $11.20 per share in cash, received shareholder approval on September 4, 2025, but is subject to regulatory clearance, including a Second Request from the FTC.
• Net cash provided by operating activities for the six months ended December 31, 2025, was $10.123 million, a substantial improvement from net cash used of $11.496 million in the prior year period.
• The company entered into a new 2025 Credit Facility on January 31, 2025, providing a $40 million term loan, a $30 million revolving credit facility, and a $30 million delayed draw term loan facility, used to repay previous debt and for general corporate purposes.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive. While GAAP net income turned negative due to substantial merger-related expenses, underlying operational metrics and Adjusted EBITDA show healthy growth. The pending acquisition provides a clear exit for shareholders, though the FTC's Second Request introduces a delay and some uncertainty.

Positives

• Total revenues increased by 6.8% to $78.712 million for the three months ended December 31, 2025, and by 10.4% to $159.565 million for the six months.
• Subscription and transaction fees, the primary revenue stream, grew by 7.1% for the quarter and 8.6% for the six months.
• Equipment sales increased by 4.6% for the quarter and 24.8% for the six months, driven by the Smart Stores product launch.
• Key operational metrics demonstrated strong growth: Active Devices increased 1.7% to 1.291 million, Active Customers grew 10.6% to 36,388, and Total Dollar Volume of Transactions rose 13.1% to $953.2 million.
• Average Revenue Per Unit (ARPU) increased by 5.96% to $214.26.
• Adjusted EBITDA, excluding merger-related expenses and other non-recurring items, increased by 1.1% to $10.782 million for the quarter and by 14.9% to $22.535 million for the six months, indicating underlying operational strength.
• Net cash provided by operating activities was $10.123 million for the six months ended December 31, 2025, a significant improvement from net cash used in the prior year.
• The company was in compliance with all financial covenants under its 2025 Credit Facility as of December 31, 2025.

Negatives

• Reported a net loss of $0.070 million for the three months ended December 31, 2025, compared to a net income of $4.974 million in the prior year.
• Reported a net loss of $0.989 million for the six months ended December 31, 2025, compared to a net income of $8.546 million in the prior year.
• Gross margin decreased to 34.8% for the quarter (from 38.6%) and to 36.5% for the six months (from 38.4%), primarily due to increased cost of transaction fees.
• Operating income significantly declined by 73.9% for the quarter to $1.606 million and by 68.5% for the six months to $3.233 million.
• Merger, acquisition, and integration expenses increased substantially to $3.854 million for the quarter and $11.051 million for the six months, impacting profitability.
• The U.S. Federal Trade Commission (FTC) issued a Second Request regarding the merger, extending the waiting period and introducing regulatory uncertainty.

Risks

• Disruption to business caused by the acquisition by 365 Retail Markets.
• Ability to consummate the transaction with 365 Retail Markets within the contemplated timeframe, or at all, including securing necessary regulatory approvals (HSR Act) and satisfaction of other closing conditions.
• Impact on stock price, business, financial condition, and results of operations if the proposed transaction with 365 Retail Markets is not consummated.
• Costs, charges, and expenses relating to the proposed transaction with 365 Retail Markets.
• Proceedings, including litigation, that seek to prevent the proposed transaction from being consummated.
• General economic, market, or business conditions unrelated to operating performance, including inflation, elevated interest rates, supply chain disruptions, geopolitical conflicts, and declines in consumer confidence.
• Ability to compete with competitors and increase market share.
• Failure to comply with financial covenants in debt facilities.
• Disruptions in other card payment processors, software, and manufacturing partners.
• Customers' ability to cancel transaction processing and related services with thirty days' notice.
• Risks and uncertainties associated with expansion into and operations in Europe, Mexico, and other foreign markets, including foreign currency exchange rates.
• Ability to satisfy trade obligations included in accounts payable and accrued expenses.
• Ability to attract, develop, and retain key personnel, or loss of key executives.
• Incurrence of unanticipated or unusual non-operating expenses.
• Ability to predict or estimate future quarterly or annual revenue and expenses given the developing and unpredictable market.
• Ability to successfully integrate acquired companies into current products and services structure.
• Ability to add new customers and retain key existing customers.
• Ability of a key customer to reduce or delay purchasing products.
• Ability to obtain widespread commercial acceptance of products and service offerings.
• Whether patents provide competitive advantages or adequate protection, or would be challenged, invalidated, or circumvented.
• Ability of products and services to avoid disruptions to systems or unauthorized hacking or credit card fraud.
• Risks associated with cyber-attacks and data breaches.
• Ability to maintain effective internal controls and timely file periodic and current reports with the SEC.

Future Outlook

The company expects to complete its merger with 365 Retail Markets, LLC in the first half of calendar year 2026, assuming the required clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) is received and other closing conditions are satisfied or waived. The company anticipates its current financial resources will be sufficient to fund its operating budget for the next twelve months.

Management Comments

• Management attributes the increase in transaction fees primarily to increased average ticket items sold, increased average ticket price, and increased processing volumes.
• Management notes that the increase in subscription fees is attributed to a continued focus on growing recurring subscription services to the customer base, an increase in active devices, and the acquisition of SB Software.
• Management believes the restrictions imposed by the merger agreement will not prevent the company from meeting its debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements.
• Management states that the company will continue to cooperate with the FTC staff in its review of the Merger.

Industry Context

StockSavvy.ai notes that Cantaloupe's performance reflects a broader trend in the self-service commerce and digital payments industry, where increasing consumer engagement through digital payments and integrated software solutions drives revenue. The growth in active devices, customers, and transaction volumes aligns with the ongoing digital transformation in retail and vending. The acquisition by 365 Retail Markets, a key player in micro-markets, suggests industry consolidation aimed at creating more comprehensive self-service solutions and expanding market reach, particularly in specialized sectors like sports and entertainment through acquisitions like Cheq.

Comparison to Industry Standards

• Cantaloupe's 6.8% quarterly revenue growth and 13.1% increase in total dollar volume of transactions demonstrate solid performance within the digital payments and self-service commerce sector, which often sees high single-digit to low double-digit growth rates for established players.
• The decline in GAAP net income due to merger-related expenses is a common occurrence in M&A scenarios, where one-time professional fees can significantly impact reported profitability, making Adjusted EBITDA a more comparable metric for underlying operational health.
• The 14.9% growth in Adjusted EBITDA for the six-month period suggests healthy operational leverage and efficiency improvements when excluding non-recurring items, which compares favorably to peers focused on scaling payment processing and software services.
• The FTC's Second Request for the 365 Retail Markets merger indicates regulatory scrutiny typical for significant consolidations in competitive markets, similar to challenges faced by other payment processing or retail technology mergers, such as those seen in the POS or fintech space where market concentration is a concern.

Legal Proceedings

• The company is, or may be, a party to litigation and other legal proceedings that arise in the ordinary course of business, but currently has no legal proceedings with loss exposures considered both probable of occurrence and reasonably estimable.

Related Party Transactions

• A member of the Board of Directors serves as a strategic advisor to a consulting firm utilized by the company for payments analytics and advisory services. The company paid this firm $0.1 million for these services for the six months ended December 31, 2025 and 2024.

Stakeholder Impact

• Shareholders: The pending all-cash acquisition at $11.20 per share offers a defined return, but the FTC's Second Request introduces uncertainty regarding the timing and ultimate completion of the merger.
• Employees: The company has approximately 345 full-time employees and continues to invest in compensation and headcount growth in sales and marketing, and technology and product development.
• Customers: Growth in active devices and customers, along with increased transaction volumes, indicates continued adoption and reliance on Cantaloupe's self-service commerce solutions.
• Creditors: The company refinanced its debt with a new 2025 Credit Facility, extending maturities and maintaining compliance with financial covenants, which is positive for creditors.

Next Steps

• Cantaloupe and 365 Retail Markets will continue to cooperate with the FTC staff in its review of the Merger.
• The parties to the Merger Agreement currently expect to complete the Merger in the first half of calendar year 2026, assuming HSR clearance and other conditions are met.
• The company will continue its focus on prioritizing collection efforts to reduce outstanding accounts receivable, utilizing existing inventory to support equipment sales, focusing on operational efficiencies, and growing its business domestically and internationally.

Key Dates

Recommendation

The primary driver for Cantaloupe's stock is the pending all-cash acquisition by 365 Retail Markets at $11.20 per share. While operational metrics show underlying growth, the company reported a net loss due to significant merger-related expenses. The FTC's Second Request introduces regulatory uncertainty and potential delays, capping immediate upside to the $11.20 offer price and introducing risk if the merger fails. For investors, holding the stock is appropriate to capture the merger premium, assuming the regulatory hurdles are overcome. A 'buy' might be considered if the stock trades significantly below $11.20, representing an arbitrage opportunity, but the regulatory delay adds risk to such a strategy.

Keywords

Cantaloupe Inc., CTLP, SEC Filing, 10-Q, Quarterly Report, Financial Results, Merger, Acquisition, 365 Retail Markets, Self-service Commerce, Digital Payments, Fintech, Vending, Micro-markets, Transaction Fees, Subscription Fees, Revenue Growth, Net Loss, Adjusted EBITDA, FTC Second Request, Regulatory Approval, Cash Flow, Debt Facility, Operational Metrics