What changed in CANTALOUPE, INC.'s 10-K — 2022 vs 2023

Item 1. Financial Statements — Note 2. Accounting Policies . The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Furthermore, the period to period comparison of our historical results is not necessarily indicative of the results that may be expected in the future.

OVERVIEW OF THE COMPANY Cantaloupe, Inc. is a global technology leader powering self-service commerce. With over a million active locations across the globe processing more than a billion transactions every year, Cantaloupe is enabling businesses of all sizes to provide self-service experiences for consumers.

The company's vertically integrated solutions fuel growth by offering micro-payments processing, enterprise cloud software, IoT technology, as well as kiosk and POS innovations. Cantaloupe’s end-to-end platform increases consumer engagement and sales revenue through digital payments, consumer promotions and loyalty programs, while providing business owners increased profitability by leveraging software to drive efficiencies across an entire operation.

Cantaloupe’s solutions are used by a wide variety of consumer services in North America, Europe, Latin America, and Australia including vending machines, micro markets and smart retail, laundromats, metered parking terminals, amusement and entertainment venues, IoT services and more. The Company's fiscal year ends June 30. The Company generates revenue in multiple ways.

Customers can obtain POS electronic payment devices from us in the following ways: • Purchasing devices directly from the Company or one of its authorized resellers; • Financing devices under the Company’s QuickStart Program, which are non-cancellable 60-months sales-type leases, through an unrelated equipment financing company, if available, or directly from the Company; and • Renting devices under the Company's Cantaloupe ONE program, which are typically 36-months duration agreements.

Highlights Highlights of the Company for the fiscal year ended June 30, 2023 are below: • Approximately 29 thousand Active Customers and 1.17 million Active Devices (as defined in Item 1. Business) connected to our service; • We migrated our cloud hosting services to Amazon Web Services (AWS) platform in July 2022.

The completion of this migration supports our continued focus on ensuring we have a reliable, resilient and scalable infrastructure to support our growing network of devices and customers; • We successfully closed on the acquisition of Three Square Market in December 2022; as a result, we have seen a successful acceleration in our micro market business where customers both existing and new are migrating their kiosks to the 32M platform; • In December 2022, we held our first investor day at Nasdaq where we articulated our renewed vision and strategy; 30 • We continued to see significant customer interest and growth in the newly launched Cantaloupe ONE Platform, a bundled subscription model, which provides operators the flexibility and predictability of a monthly, fixed subscription amount covering the hardware and service fees; • We announced the general availability of the newly designed and updated Seed Driver mobile app, available on both Apple and Android.

The Seed Driver app provides route drivers with a range of features to make servicing vending, micro market, and office coffees services (OCS) accounts more efficient and effective; • We released the 2023 Micropayment Trends Report, which studied micropayment trends (transactions less than $10) at food and beverage vending and at amusement machines throughout the United States and Canada in 2022. • We announced our first Seed software expansion in Europe with a Sweden-based customer HGM Dryckservice AB (HGM).

HGM is leveraging Seed Markets to support their growing micro market business, which was made easier through the integration between 32M’s kiosk technology and the Seed platform. • We unveiled the new Cantaloupe Go product line, bringing together all micro market and smart store technology under one cohesive brand.

Showcased at the NAMA show 2023, customers were able to experience Cantaloupe Go kiosks, smart stores, and the Cantaloupe Go platform for kiosk and smart store management. • We announced the unveiling and availability of Seed Pick Easy, a tablet-based warehouse picking system designed to deliver time and operational cost savings to operators of all sizes.

Integrated with Seed and the Cantaloupe Go platform, formerly known as 32M, Seed Pick Easy allows customers to generate digital pick lists to the warehouse in seconds, so pickers can pre-kit faster and more efficiently.

COVID-19 Update While there has not been any resurgence of the COVID-19 virus or new strains or variants emerge that significantly impacted the Company, its employees, or its customers, we have experienced lingering effects during fiscal year 2023. We incurred elevated component and supply chain costs necessary for the production and distribution of our hardware products.

Additionally, schools and other organizations have re-opened which has led to increased foot-traffic to distributed assets containing our electronic payment solutions, but we have not seen a full return to the office. Many companies have implemented a hybrid approach requiring employees to work in the office several days a week and allow work from home for the remaining days.

We have concluded that there have been no material impairments as a result of our evaluation for the year ended June 30, 2023. Where applicable, we have incorporated judgments and estimates of the expected impact of COVID-19 in the preparation of the financial statements based on information currently available.

We will continue to monitor the situation and follow any guidance from federal, state, and local public health authorities. Given the potential uncertainty of the situation, the Company cannot reasonably estimate the longer-term repercussions of COVID-19 on our financial condition, result of operations or cash flows.

CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”, "GAAP"), and they conform to general practices in our industry. The preparation of financial statements and related disclosures in conformity with U.S.

GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and strategic or economic assumptions may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods.

Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. We apply critical accounting estimates consistently from period to period and intend that any change in methodology occur in an appropriate manner.

Accounting estimates currently deemed critical to our business operations and the understanding of our results of operations are listed below. For a detailed discussion on the application of these and other accounting estimates, see Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report. Revenue Recognition.

The Company derives revenue primarily from the sale or lease of equipment and services to the small ticket, unattended POS market. The Company’s application of the accounting principles in U.S. GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Complex arrangements may require significant judgment in contract interpretation to determine the appropriate accounting.

The Company assesses the goods and/or services promised in each customer contract and separately identifies a performance obligation for each promise to transfer to the customer a distinct good or service. The Company then allocates the transaction price to each performance obligation in the contract using relative standalone selling prices.

The Company determines 31 standalone selling prices based on the price at which a good or service is sold separately. If the standalone selling price is not observable through historic data, the Company estimates the standalone selling price by considering all reasonably available information, including market data, trends, as well as other company- or customer-specific factors.

Capitalization of internal-use software and cloud computing arrangements. We have significant expenditures associated with the technological maintenance and improvement of our network and technology offerings. These expenditures include both the cost of internal employees, who spend portions of their time on various technological projects, and the use of external temporary labor and consultants.

Capitalization of internal-use software occurs when we have completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended.

We are required to assess these expenditures and make a determination as to whether the costs should be expensed as incurred or are subject to capitalization. In making these determinations, we consider the stage of the development project, the probability of successful development and if the development is resulting in increased features and functionality.

In addition, if we determine that a project qualifies for capitalization, the amount of capitalization is subject to various estimates, including the amount of time spent on the development work and the cost of internal employees and external consultants.

Internal-use software is included within Property and equipment, net on our Consolidated Balance Sheets and is amortized over its estimated useful life, which is typically 3 to 7 years. We capitalize certain costs related to hosting arrangements that are service contracts (cloud computing arrangements) following the internal-use software capitalization criteria described above.

Our cloud computing arrangements involve services we use to support internal corporate functions, our platforms and technology offerings.

Capitalized costs relating to cloud computing arrangements are included within Prepaid expenses and other current assets or Other assets on our Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life, which is typically 3 to 5 years. Goodwill. The Company operates under one operating segment with one reporting unit.

We test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that impairment may have occurred. Goodwill is reviewed for impairment utilizing either a qualitative or a quantitative goodwill impairment test.

If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we perform the quantitative goodwill impairment test, we compare the fair value of our reporting unit to its carrying value.

If the fair value of the reporting unit exceeds its carrying value, then goodwill is not considered impaired. An impairment charge is recognized for the amount by which, if any, the carrying value exceeds the reporting unit’s fair value. However, the loss recognized cannot exceed the reporting unit’s goodwill balance.

The quantitative impairment test process requires valuation of the reporting unit, which we determine using the income approach, the market approach or a combination of the two approaches.

Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash flows derived from assumptions that include expected growth rates and revenues, projected expenses, discount rates, capital expenditures and income tax rates.

Under the market approach, we estimate the fair value based on the quoted stock price, recent equity transactions of our business, market transactions involving similar businesses and market comparables. Business Combination. The Company allocates acquisition purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates.

The excess of total consideration over the fair values of the assets acquired and the liabilities assumed is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets.

We engage a third-party valuation firm to assist in establishing the fair value of the acquired intangible assets. Impairment of Long-Lived Assets.

We review long-lived assets, such as finite-lived intangible assets, property and equipment and operating lease right-of-use assets for potential impairment, when there is evidence that events or changes in circumstances which indicate that the carrying value of an asset may not be recoverable.