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CalAmp Corp. (NASDAQ:CAMP): Navigating Challenges, Positioning for Growth
Published on September 24, 2024 | Ticker: CAMP

CalAmp Corp. (NASDAQ:CAMP) is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. The company operates in two reportable segments: Software & Subscription Services and Telematics Products.

Financials

In the third quarter of fiscal year 2024, CalAmp generated revenues of $53.6 million, a 32% decline from the prior year period. The company's annual revenue for the fiscal year 2024 was $186.2 million. This decline was primarily driven by lower sales to the company's Telematics Service Provider (TSP) customers, which the company attributes to post-COVID supply chain corrections and inventory rebalancing, as well as increased competition in the telematics solution ecosystem.

The company's annual net loss for fiscal year 2024 was $93.3 million, compared to a net loss of $24.4 million in the prior year. This significant increase in net loss was largely due to a $74 million goodwill impairment charge recognized in the third quarter, as well as lower revenues and gross margins. CalAmp's annual operating cash flow for fiscal year 2024 was -$22.9 million, and its annual free cash flow was -$34.0 million.

On a quarterly basis, CalAmp's third quarter revenues of $53.6 million declined 13% sequentially from the prior quarter and 32% year-over-year. Gross margin in the third quarter was 33%, down from 36% in the prior quarter, driven by unfavorable product mix, lower volumes, and higher excess and obsolescence accruals and warranty expenses.

Adjusted EBITDA in the third quarter was $1 million, or 2% of revenues, down from $4.7 million in the prior year period. The company's cost reduction initiatives, which are expected to result in $16 million in annualized savings, helped to partially offset the impact of lower revenues and gross margins.

Outlook

Looking ahead, CalAmp expects revenues in the fourth quarter to be slightly down from the third quarter, with adjusted EBITDA remaining stable. The company is seeing early signs of recovery in the TSP market, which it expects to partially offset a decline in revenues from the industrial market segment, which had experienced multi-quarter highs.

Liquidity

To address its liquidity position and upcoming debt maturities, CalAmp recently closed a $45 million term loan with Lynrock Lake Master Fund LP. This new financing replaces the company's previous asset-backed line of credit and provides additional financial flexibility as it navigates its business transformation.

Geographical Revenue Breakdown

Geographically, CalAmp's revenues are primarily derived from the United States, which accounted for 54% of total revenues in the third quarter. The company also has a presence in EMEA (24% of revenues), LATAM (9%), and APAC (10%) markets.

Segment Performance

In terms of revenue breakdown by segment, the Software & Subscription Services segment generated $34.5 million in the third quarter, a 30% decline year-over-year, while the Telematics Products segment reported revenues of $19.2 million, a 35% decrease. The decline in Software & Subscription Services was driven by lower shipments to TSP customers that had transitioned to multi-year subscription arrangements, while the Telematics Products segment was impacted by the conversion of certain customers to subscription-based models.

Strategic Initiatives

To address these challenges, CalAmp has implemented a strategic focus on core market segments and cost reduction initiatives. The company has also made progress on the technical migration of over 8.5 million devices to its new DMCTC device management system, which it believes will improve the customer experience and enable the team to focus more on driving revenue growth.

Additionally, CalAmp has seen positive developments in its industrial and international connected car segments. The company's upgraded AI dash cam solution, Vision 2.1, has been released for K-12 and commercial fleet applications, and its edge computing platform, EdgeCore, is gaining traction with industrial OEMs. In the international connected car business, the company has achieved milestones such as Toyota Genuine certification and Jaguar Land Rover's endorsement of its Stolen Vehicle Recovery system.

Recent Developments

Looking ahead, CalAmp has appointed veteran technology leader Chris Adams as its new President and CEO, effective January 22, 2024. The company believes Adams' technical depth, operational skills, and general management experience will be valuable in leading CalAmp through its transformation and driving greater value for customers and investors.

Conclusion

Overall, CalAmp is navigating a challenging period, with declines in revenues and profitability. However, the company's strategic focus on core market segments, cost reduction initiatives, and new leadership appointments suggest it is positioning itself for a potential return to growth and improved financial performance in the future.

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