Presto Automation Inc. (PRST)·Q1 2024 Earnings Summary

Executive Summary

• Q1 FY2024 revenue was $4.885M, at the midpoint of prior guidance ($4.8–$5.0M), with net income of $5.372M and adjusted EBITDA loss of $(8.800)M; management guided Q2 FY2024 revenue to $4.8–$5.0M .
• Presto Voice momentum accelerated: now live in over 400 locations; pace of one new deployment every business day; four new franchisees signed (365 locations when fully expanded) and a major corporate pilot with over 2,000 global locations where Presto is the exclusive vendor .
• Cost actions and liquidity: ~17% reduction in force; equity raise ~$7.0M from Remus Capital-affiliated syndicate; prior $3M equity from Cleveland Avenue and $3M credit facility upsize/waivers with Metropolitan Partners support .
• Operating mix shifted: Platform revenue fell YoY (legacy touch hardware), Transaction revenue modestly down YoY; management continues evaluating strategic alternatives for Touch while prioritizing Voice .
• Catalysts: accelerating Voice adoption (exclusive pilot >2,000 locations), California $20 minimum wage tailwind for automation, ongoing cost reduction, and consistent revenue guide can drive sentiment near term .

What Went Well and What Went Wrong

• What Went Well

  • “Presto Voice is now installed in over 400 locations… we are now deploying a new store every business day,” reflecting accelerating execution and scale .
  • Signed four new franchisees totaling 365 locations when fully expanded and one major corporate pilot with >2,000 global locations where Presto is the exclusive vendor, expanding pipeline and network effects .
  • Liquidity bolstered via ~$7.0M registered offering to Remus Capital-affiliated investors; board strengthened with two tech-operator directors; monthly OpEx targeted to fall by ~$0.4M rising to ~$1.2M after ~8 months .

• What Went Wrong

  • YoY revenue declined to $4.885M from $7.779M on Platform weakness (legacy Touch upgrades and hardware revenue), and Transaction revenue decreased modestly (contract terminations partly offset by pricing) .
  • Adjusted EBITDA remained deeply negative at $(8.800)M; gross profit margin compressed to ~4.2%, highlighting profitability challenges despite net income benefits from non-operational fair value changes .
  • Touch portfolio uncertainty persists; Metropolitan agreement requires a plan if renewals fail; management is weighing sale/partial sale/wind-down to focus on Voice .

Financial Results

Segment breakdown:

KPIs and operating metrics (trend, oldest → newest):

Important non-GAAP notes:

• Adjusted EBITDA excludes interest expense, other income, loss on debt extinguishment, taxes, D&A, stock-based comp, fair value adjustments on warrants/convertible notes, and merger-related items; reconciliation provided in the press release .

Balance sheet/liquidity snapshot (Q1 FY2024):

• Cash and equivalents: $3.285M; restricted cash: $10.000M; total assets: $34.140M; total liabilities: $70.213M; current liabilities: $63.470M .
• Subsequent equity raise ~$7.0M (Nov 17, 2023) and prior $3.0M Cleveland Avenue investment plus $3.0M credit facility upsize; covenant waivers and PIK interest provisions agreed with Metropolitan .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are now deploying a new store every business day, and we expect this pace to accelerate… our Voice product is now live in over 400 locations” – CEO Xavier Casanova .
• “We have signed four new franchisees with a total of 365 locations… one major corporate pilot with over 2,000 global locations where Presto is the sole vendor” – CEO Xavier Casanova .
• “We have executed… a reduction in our operating expenses… reduced our global full-time employee base by approximately 17%… reducing expenditures by around $0.4M per month, rising to approximately $1.2M per month in mid-2024” – Management .
• “Less than 30% of the orders are taken autonomously by the AI… targeting ~50% automation by end of the second calendar quarter of 2024” – Management .
• “We expect fiscal second quarter 2024 revenue to be between $4.8M and $5.0M” – Interim CFO Nathan Cook .

Q&A Highlights

• Cost reductions and investor stance: RIF driven by management’s plan to align costs with future Voice growth; not dictated by investors .
• Humans-in-the-loop and automation trajectory: <30% orders autonomous today; target ~50% by end of Q2 CY2024; margins expected to improve as human intervention declines and allocation becomes more efficient .
• Touch renewals and strategic plan: Key client extension requests into early/mid-2024; evaluating options (sale/partial sale/wind-down) to maximize shareholder value while focusing on Voice; Metropolitan requires a plan if renewals fail .
• Guidance reaffirmed: Q2 FY2024 revenue guide $4.8–$5.0M, consistent with prior cadence .

Estimates Context

• S&P Global Wall Street consensus for PRST Q1 FY2024 revenue and EPS was unavailable in our SPGI/Capital IQ dataset due to missing mapping (no CIQ company ID found for PRST). As a result, consensus comparison could not be provided.
• Given unavailability, we anchor on company guidance and actuals (met midpoint of prior guide) .

Key Takeaways for Investors

• Execution momentum: >400 Voice sites live and daily deployments signal scaling capability and potential revenue expansion as MSAs/pilots convert to rollouts .
• Near-term growth visibility: Q2 guide ($4.8–$5.0M) aligns with recent quarterly run-rate; pipeline includes 4 franchisees (365 locations) and an exclusive pilot (>2,000 locations) .
• Profitability path: Margin improvement tied to increasing AI autonomy (target ~50% by end of Q2 CY2024) and cost actions (~17% RIF, monthly savings ramp) .
• Mix shift away from Touch: Platform revenue weakness (legacy hardware) persists; management is considering strategic alternatives for Touch to concentrate resources on Voice .
• Liquidity watch: Low cash at quarter-end ($3.285M) offset by ~$7M equity raise and facility support/waivers; going concern risk flagged in filings—monitor additional capital and covenant compliance .
• Macro tailwind: California $20 minimum wage and labor constraints drive adoption of automation, supporting Voice’s ROI narrative (labor savings, accuracy, upsell) .

Appendix: Additional Data

Revenue composition and YoY drivers (Q1 FY2024):

• Platform revenue fell to $2.066M (from $4.820M) primarily due to lack of Touch upgrades/hardware revenue; Transaction revenue decreased to $2.819M (from $2.959M) due to contract terminations partially offset by pricing increases .
• Adjusted EBITDA loss $(8.800)M; GAAP net income $5.372M benefited from non-operational fair value changes in warrants/convertible notes (excluded from adjusted EBITDA) .

Forward-looking guide:

• Q2 FY2024 revenue: $4.8–$5.0M .

Conference details:

• Q1 FY2024 earnings call held Nov 20, 2023; replay available on IR site .