CalAmp Reports Fiscal 2019 Second Quarter Financial Results
IRVINE, Calif., Sept. 27, 2018 /PRNewswire/ -- CalAmp (Nasdaq: CAMP), a technology solutions pioneer leading transformation in a global connected economy, today reported its financial results for its fiscal 2019 second quarter ended August 31, 2018.
"We experienced accelerating growth in our Software & Subscription Services (SaaS) business, while delivering record consolidated revenue, gross margin expansion and earnings at the upper end of our guidance range. We had stronger than expected growth in Network and OEM products revenue, driven by solid demand from our heavy equipment OEM customers," said Michael Burdiek, President and Chief Executive Officer. "Our pipeline for SaaS solutions is robust and we are energized by the range of strategic opportunities to expand SaaS offerings to existing customers as well as to deliver newer over the top services to our telematics device installed base."
Q2 2019 Financial & Business Highlights
-- Consolidated revenue reached a new quarterly record of $96 million, up
7% year-over-year.
-- Gross margin was 41.5%, up from 40.1% in the prior quarter.
-- GAAP net loss of $0.9 million or a loss of $0.02 per diluted share due
to a $2.0 million charge for the early retirement of debt.
-- Adjusted basis net income of $11.0 million or $0.31 per diluted share.
-- Telematics Systems revenue for the second quarter was $77.1 million
driven by strong growth in Network and OEM products revenue, which was
up 37% year-over-year.
-- Software & Subscription Services revenue for the second quarter was
$18.9 million or 20% of consolidated revenue. Revenue growth was driven
by freight transport subscriber additions and our LoJack Italia
business.
-- Operating cash flow of $5.9 million, with Adjusted EBITDA of $13.7
million and Adjusted EBITDA margin of 14%.
-- We executed arrangements with large U.S. dealership groups including
Salinas Valley Ford to leverage the LoJack brand and deliver telematics
technology solutions to empower dealerships in delivering advanced
connected car services and driver safety features to customers.
-- We announced a partnership with Premier Wireless Solutions (PWS) to
provide telematics and IoT technologies coupled with data analysis to
support a scooter-based, vehicle-sharing service that provides on-demand
access to environmental friendly transportation alternatives in urban
areas across the U.S.
-- We partnered with Hello Tractor and Aeris to equip John Deere tractors
with intelligent telematics and wireless connectivity to create an "Uber
for tractors" to support small farmers requiring access to tractor and
other rental equipment to spur economic growth in Nigeria and other
developing regions.
-- We completed a $230 million convertible debt issuance with a portion of
the proceeds or approximately $54 million used to repurchase outstanding
convertible notes due in May 2020 and another $15 million used to
repurchase outstanding common stock.
Summary Financial Information:
(In thousands except per share amounts)
Three Months Ended
August 31,
Description 2018 2017
---
Revenues:
Telematics Systems $
77,100 $
74,070
Software & Subscription
Services 18,937 15,697
$
96,037 $
89,767
Gross profit $
39,821 $
36,838
Gross margin 41.5
% 41.0
%
Net income (loss) $
(854) $
12,232
Net income (loss) per
diluted share $
(0.02) $
0.34
Non-GAAP measures:
Adjusted basis net income $
10,976 $
9,575
Adjusted basis net income
per diluted share $
0.31 $
0.27
Adjusted EBITDA $
13,689 $
12,301
Adjusted EBITDA margin 14.3
% 13.7
%
As of August 31, As of February 28,
Description 2018 2018
---
Cash and marketable
securities $
304,998 $
156,003
Working capital 325,648 180,356
Deferred revenue 46,486 34,520
Convertible senior unsecured
notes (carrying value) 268,980 154,299
Fiscal 2019 Third Quarter Business Outlook
(In thousands except per share amounts)
Range
Description Low High
---
GAAP financial information:
Revenues $
94,000 $
99,000
Net income per diluted share $
0.07 $
0.13
Non-GAAP financial
information:
Adjusted EBITDA $
12,000 $
16,000
Adjusted basis net income
per diluted share $
0.29 $
0.35
Effective March 1, 2018, we adopted the new revenue recognition standard entitled Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASC 606"). The Fiscal 2019 Third Quarter Business Outlook reflects the effects of adopting this new accounting standard. In the third quarter and fiscal year 2019, we do not expect ASC 606 to have a material impact on our revenue.
The third quarter GAAP-basis net income outlook above includes the expected gain of approximately $2.5 million related to the legal settlement with a former LoJack supplier. This expected fiscal 2019 third quarter non-operating gain is excluded from the Non-GAAP Adjusted EBITDA and Adjusted basis net income per diluted share guidance range above.
Conference Call and Webcast
We are hosting a conference call for analysts and investors to discuss our fiscal 2019 second quarter results and outlook for our third quarter at 1:30 p.m. Pacific Time today. Participants can listen in via webcast by visiting the Investor Relations section of our website at www.calamp.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay of the webcast will be available for 30 days after the call. The conference call can also be accessed by dialing 855-302-8830 (+1-330-871-6073 for international callers) and using the Conference ID# 3966157. Following the call, an audio replay will also be available by calling 855-859-2056 or +1-404-537-3406 and entering the Conference ID# 3966157. The audio replay will be available through October 11, 2018.
About CalAmp
CalAmp (Nasdaq: CAMP) is a technology solutions pioneer leading transformation in a global connected economy. We help reinvent business and improve lives around the globe with technology solutions that streamline complex IoT deployments and bring intelligence to the edge. Our software applications, scalable cloud services, and intelligent devices collect and assess business-critical data from mobile assets, cargo, companies, cities and people. We call this The New How, powering autonomous IoT interaction, facilitating efficient decision making, optimizing resource utilization, and improving road safety. CalAmp is headquartered in Irvine, California and has been publicly traded since 1983. LoJack is a wholly owned subsidiary of CalAmp. For more information, visit calamp.com, or LinkedIn, Twitter, YouTube or CalAmp Blog.
Forward-Looking Statements
This press release contains forward-looking statements (including within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended) concerning CalAmp. These statements include, but are not limited to, statements that address our expected future business and financial performance and statements about (i) our plans, objectives and intentions with respect to future operations and products, (ii) our competitive position and opportunities, and (iii) other statements identified by words such as "may", "will", "expect", "intend", "plan", "potential", "believe", "seek", "could", "estimate", "judgment", "targeting", "should", "anticipate", "predict" "project", "aim", "goal", "outlook" and similar words, phrases or expressions. These forward-looking statements are based on management's current expectations and beliefs, as well as assumptions made by, and information currently available to, management, current market trends and market conditions, and involve risks and uncertainties, many of which are outside our control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include any risks associated with global economic conditions and concerns; competitive pressures; pricing declines; rates of growth in our target markets; prolonged disruptions of our or our contract manufacturers' manufacturing facilities or other significant operations; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margins; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product, warranty and indemnification claims; our ability to sell to new types of customers and to keep pace with technological advances; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature. Other risks and uncertainties are detailed in our periodic public filings with the U.S. Securities and Exchange Commission ("SEC"), including but not limited to, our Annual Report on Form 10-K for the fiscal year ended February 28, 2018, filed with the SEC on May 10, 2018 and our Quarterly Report on Form 10-Q for the quarter ended May 31, 2018 filed with the SEC on June 28, 2018. You may obtain these filings at the SEC's website at http://www.sec.gov. We undertake no intent or obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
"GAAP" refers to financial information presented in accordance with U.S. Generally Accepted Accounting Principles. This announcement includes non-GAAP financial measures, as defined in Regulation G promulgated by the SEC. We believe that our presentation of non-GAAP financial measures provides useful supplementary information to investors. These non-GAAP financial measures are provided in addition to, and not as a substitute for measures of financial performance prepared in accordance with GAAP.
In this announcement, we report the non-GAAP financial measures of Adjusted Basis net income, Adjusted Basis net income per diluted share, Adjusted EBITDA (Earnings Before Interest Income, Interest Expense, Income Taxes, Depreciation, Amortization, stock-based compensation, acquisition and integration expenses, non-cash costs and expenses arising from purchase accounting adjustments, litigation provisions, gain from legal settlement, restructuring charges and certain other adjustments as detailed in the accompanying non-GAAP reconciliation), and Adjusted EBITDA margin. Adjusted Basis net income excludes the impact of intangible asset amortization expense, stock-based compensation, non-cash interest from amortization of debt discount, acquisition and integration expenses, non-cash costs and expenses arising from purchase accounting adjustments, litigation provisions, gain on legal settlement, restructuring charges and certain other adjustments as shown in the non-GAAP reconciliation provided in the table at the end of this press release. We use these non-GAAP financial measures to enhance the investor's overall understanding of the financial performance and future prospects of our core business activities. Management does not believe that these items are reflective of our underlying performance. However, internally, these non-GAAP measures are significant measures used by management for purposes of evaluating our core operating performance, establishing internal budgets, calculating return on investment for development programs and growth initiatives, comparing performance with internal forecasts and targeted business models, strategic planning, evaluating and valuing potential acquisition candidates and how their operations compare to our operations, and benchmarking our performance against our competitors. We believe this non-GAAP financial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate our results of ongoing operations and enable more meaningful period-to-period comparisons. The reconciling adjustments in our non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.
CALAMP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
August 31
August 31
2018 2017
2018 2017
Revenues $
96,037 $
89,767
$ 190,925
$ 177,848
Cost of revenues 56,216 52,929 113,013 103,567
Gross profit 39,821 36,838 77,912 74,281
Operating expenses:
Research and development 7,599 6,725 14,200 12,557
Selling and marketing 12,523 12,515 25,020 25,186
General and administrative 11,991 10,756 25,427 27,166
Restructuring 566 3,949
Intangible asset amortization 2,893 3,710 5,641 7,568
35,572 33,706 74,237 72,477
Operating income 4,249 3,132 3,675 1,804
Non-operating income (expense):
Investment income 1,007 396 1,860 729
Interest expense (3,767) (2,567) (6,432) (5,085)
Gain on legal settlement 15,032 13,333 15,032
Loss on extinguishment of debt (2,033) (2,033)
Other income (expense) (277) 314 (503) 431
(5,070) 13,175 6,225 11,107
Income (loss) before income taxes
and equity in net loss
of affiliate
(821) 16,307 9,900 12,911
Income tax benefit (provision) 497 (3,699) (1,274) (2,619)
Income (loss) before equity in net
loss of affiliate
(324) 12,608 8,626 10,292
Equity in net loss of affiliate (530) (376) (969) (713)
Net income (loss) $
(854) $
12,232
$ 7,657
$ 9,579
Earnings (loss) per share:
Basic $
(0.02) $
0.35
$ 0.22
$ 0.27
Diluted $
(0.02) $
0.34
$ 0.21
$ 0.27
Shares used in computing earnings
(loss) per share:
Basic 34,850 35,204 35,141 35,136
Diluted 34,850 36,021 36,073 35,973
CALAMP CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
August 31, February 28,
2018 2018
Assets
Current assets:
Cash and cash equivalents $
273,972 $
132,603
Short-term marketable securities 31,026 23,400
Accounts receivable, net 70,981 71,580
Inventories 31,194 36,302
Prepaid expenses and other current
assets 14,482 12,000
Total current assets 421,655 275,885
Property and equipment, net 22,405 21,262
Deferred income tax assets 21,421 31,581
Goodwill 73,284 72,980
Other intangible assets, net 46,385 52,456
Other assets 25,773 18,829
$
610,923 $
472,993
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $
36,159 $
35,478
Accrued payroll and employee
benefits 7,544 10,606
Deferred revenue 20,683 17,757
Other current liabilities 31,621 31,688
Total current liabilities 96,007 95,529
Convertible senior unsecured
notes, net 268,980 154,299
Other non-current liabilities 36,200 24,249
Stockholders' equity:
Common stock 348 357
Additional paid-in capital 222,981 218,217
Accumulated deficit (12,963) (19,459)
Accumulated other comprehensive
loss (630) (199)
Total stockholders' equity 209,736 198,916
$
610,923 $
472,993
CALAMP CORP.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Amounts in thousands)
(Unaudited)
Six Months Ended
August 31,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $
7,657 $
9,579
Depreciation expense 4,341 3,983
Intangible assets amortization
expense 5,641 7,568
Stock-based compensation expense 5,147 4,044
Amortization of convertible debt
issue costs and discount 4,537 3,679
Loss on extinguishment of debt 2,033
Impairment loss on cost method
investment 326
Tax benefits on vested and exercised
equity awards 525 241
Deferred tax assets, net (211) 669
Unrealized foreign currency
transaction losses (gains) 187 (385)
Equity in net loss of affiliate 969 713
Other (72) 55
Changes in operating assets and
liabilities 5,753 5,863
NET CASH PROVIDED BY OPERATING
ACTIVITIES 36,833 36,009
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and sale of
marketable securities 32,792 7,268
Purchases of marketable securities (40,312) (4,548)
Capital expenditures (5,770) (3,713)
Advances to equity method investee (1,063) (650)
Other (78) (135)
NET CASH USED IN INVESTING ACTIVITIES (14,431) (1,778)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 2025
Convertible Notes 230,000
Payment of debt issuance costs of
2025 Convertible Notes (7,305)
Purchase of capped call on 2025
Convertible Notes (21,160)
Repurchase of 2020 Convertible Notes (53,683)
Proceeds from unwind of note hedges
and warrants on 2020
Convertible Notes 3,122
Taxes paid related to net share
settlement of vested equity awards (3,347) (2,335)
Proceeds from exercise of stock
options 101 128
Repurchases of common stock (28,564)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 119,164 (2,207)
EFFECT OF EXCHANGE RATE CHANGE ON
CASH (197) 906
Net change in cash and cash
equivalents 141,369 32,930
Cash and cash equivalents at
beginning of period 132,603 93,706
Cash and cash equivalents at end of
period $
273,972 $
126,636
CALAMP CORP.
RECONCILIATION OF NON-GAAP MEASURES TO GAAP
(Unaudited)
GAAP refers to financial information presented in accordance with U.S. Generally Accepted Accounting Principles. This press release includes historical non-GAAP financial measures, as defined in Regulation G promulgated by the SEC. We believe that our presentation of historical non-GAAP financial measures provides useful supplementary information to investors. The presentation of historical non-GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP.
In this press release, we report the non-GAAP financial measures of Adjusted basis net income, Adjusted basis net income per diluted share, Adjusted EBITDA (Earnings Before Interest Income, Interest Expense, Income Taxes, Depreciation, Amortization and stock-based compensation, loss on extinguishment of debt, gain on legal settlement, restructuring charges and other adjustments as identified below), and Adjusted EBITDA margin. We use these non-GAAP financial measures to enhance the investor's overall understanding of the financial performance and future prospects of our core business activities. Specifically, we believe that the use of these non-GAAP measures facilitates the comparison of results of our core business operations between current and past periods.
The reconciliation of GAAP basis net income (loss) to Adjusted basis (non-GAAP) net income is as follows (in thousands except per share amounts):
Three Months Ended
Six Months Ended
August 31
August 31
2018 2017 2018 2017
GAAP basis net income
(loss) $
(854) $
12,232
$ 7,657
$ 9,579
Intangible assets
amortization expense 2,893 3,710 5,641 7,568
Stock-based
compensation expense 2,680 2,227 5,147 4,044
Non-cash interest
expense from
amortization of debt
discount 2,355 1,653 4,067 3,263
GAAP basis income tax
provision (benefit) (497) 3,699 1,274 2,619
Equity in net loss of
affiliate 530 376 969 713
Loss on extinguishment
of debt 2,033 2,033
Realized gain on
investment of equity
securities 629
Gain on legal
settlement (15,032) (13,333) (15,032)
Litigation provision 459 411 887 6,486
Legal expense for
LoJack battery
performance issue 564 430 2,250 927
Restructuring 566 3,949
Impairment loss on
equity investment 326 326
Other 121 169 366 355
Adjusted basis income
before income taxes 11,176 9,875 21,862 20,522
Income tax provision
(non-GAAP basis) (a) (200) (300) (400) (550)
Adjusted basis net
income $
10,976 $
9,575
$ 21,462
$ 19,972
Adjusted basis net
income per diluted
share $
0.31 $
0.27
$ 0.59
$ 0.56
Weighted average
common shares
outstanding on
diluted basis 35,718 36,021 36,073 35,973
(a) The non-GAAP income tax
provision represents cash taxes
paid or payable for the period
after giving effect to the
utilization of net operating
losses and tax credit
carryforwards.
The reconciliation of GAAP-basis net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin are as follows (dollars in thousands):
Three Months Ended
Six Months Ended
August 31
August 31
2018 2017 2018 2017
GAAP basis net income
(loss) $
(854) $
12,232
$ 7,657
$ 9,579
Investment income (1,007) (396) (1,860) (729)
Interest expense 3,767 2,567 6,432 5,085
Income tax provision
(benefit) (497) 3,699 1,274 2,619
Depreciation 2,298 1,958 4,341 3,983
Amortization of
intangible assets 2,893 3,710 5,641 7,568
Stock-based
compensation 2,680 2,227 5,147 4,044
Equity in net loss of
affiliate 530 376 969 713
Loss on extinguishment
of debt 2,033 2,033
Legal expense for
LoJack battery
performance issue 564 430 2,250 927
Litigation provision 459 411 887 6,486
Gain on legal
settlement (15,032) (13,333) (15,032)
Restructuring 566 3,949
Other 257 119 479 239
Adjusted EBITDA $
13,689 $
12,301
$ 25,866
$ 25,482
Revenue $
96,037 $
89,767
$ 190,925
$ 177,848
Adjusted EBITDA margin 14.3 13.7 13.5 14.3
% % % %
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SOURCE CalAmp
