10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended August 31, 2023

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

COMMISSION FILE NUMBER: 0-12182

 

CALAMP CORP.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

95-3647070

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

15635 Alton Parkway, Suite 250

 

 

Irvine, California

 

92618

(Address of principal executive offices)

 

(Zip Code)

 

(949) 600-5600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of Each Exchange On Which Registered

Common stock, $0.01 per share

CAMP

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of shares outstanding of the registrant’s common stock as of September 29, 2023 was 37,903,632.

 


 

CALAMP CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED AUGUST 31, 2023

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I – FINANCIAL INFORMATION

 

 

ITEM 1.

Financial statements

3

 

 

 

Condensed consolidated balance sheets (unaudited) as of August 31, 2023 and February 28, 2023

 

3

 

 

 

Condensed consolidated statements of comprehensive loss (unaudited) for the three and six months ended August 31, 2023 and 2022

 

4

 

 

 

Condensed consolidated statements of cash flows (unaudited) for the six months ended August 31, 2023 and 2022

 

5

 

 

 

Condensed consolidated statements of stockholders’ equity (unaudited) for the three and six months ended August 31, 2023 and 2022

 

6

 

 

 

 

 

 

 

Notes to unaudited condensed consolidated financial statements

 

7

 

ITEM 2.

 

Management’s discussion and analysis of financial condition and results of operations

 

20

 

ITEM 3.

 

Quantitative and qualitative disclosures about market risk

 

28

 

ITEM 4.

 

Controls and procedures

 

28

 

 

 

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

 

Legal proceedings

 

29

 

ITEM 1A.

 

Risk factors

 

29

 

 

 

 

 

ITEM 2.

 

Unregistered sales of securities and use of proceeds

 

30

 

 

 

 

 

ITEM 6.

 

Exhibits

 

31

 

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALAMP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

 

 

 

August 31,

 

 

February 28,

 

Assets

 

2023

 

 

2023

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,562

 

 

$

41,928

 

Accounts receivable, net

 

 

71,385

 

 

 

82,946

 

Inventories

 

 

29,822

 

 

 

23,902

 

Prepaid expenses and other current assets

 

 

26,617

 

 

 

26,019

 

Total current assets

 

 

166,386

 

 

 

174,795

 

Property and equipment, net

 

 

28,791

 

 

 

32,832

 

Operating lease right-of-use assets

 

 

11,130

 

 

 

12,293

 

Deferred income tax assets

 

 

3,395

 

 

 

3,275

 

Goodwill

 

 

95,275

 

 

 

94,214

 

Other intangible assets, net

 

 

24,887

 

 

 

26,633

 

Other assets

 

 

34,054

 

 

 

36,078

 

Total assets

 

$

363,918

 

 

$

380,120

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

-

 

 

$

705

 

Accounts payable

 

 

46,206

 

 

 

52,716

 

Accrued payroll and employee benefits

 

 

8,597

 

 

 

11,766

 

Deferred revenue

 

 

24,764

 

 

 

25,448

 

Other current liabilities

 

 

16,200

 

 

 

15,865

 

Total current liabilities

 

 

95,767

 

 

 

106,500

 

Long-term debt, net of current portion

 

 

227,959

 

 

 

227,416

 

Operating lease liabilities

 

 

10,385

 

 

 

12,314

 

Other non-current liabilities

 

 

19,243

 

 

 

19,583

 

Total liabilities

 

 

353,354

 

 

 

365,813

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $.01 par value; 3,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $.01 par value; 80,000 shares authorized; 37,741 and 37,388 shares
   issued and outstanding at August 31, 2023 and February 28, 2023, respectively

 

 

377

 

 

 

374

 

Additional paid-in capital

 

 

188,200

 

 

 

184,672

 

Accumulated deficit

 

 

(177,073

)

 

 

(168,816

)

Accumulated other comprehensive loss

 

 

(940

)

 

 

(1,923

)

Total stockholders' equity

 

 

10,564

 

 

 

14,307

 

Total liabilities and stockholders' equity

 

$

363,918

 

 

$

380,120

 

 

See accompanying notes to condensed consolidated financial statements.

3


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

37,326

 

 

$

45,694

 

 

$

83,624

 

 

$

85,089

 

Application subscriptions and other services

 

 

24,388

 

 

 

27,134

 

 

 

48,981

 

 

 

52,465

 

Total revenues

 

 

61,714

 

 

 

72,828

 

 

 

132,605

 

 

 

137,554

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

26,195

 

 

 

30,298

 

 

 

56,810

 

 

 

56,033

 

Application subscriptions and other services

 

 

13,175

 

 

 

13,518

 

 

 

26,390

 

 

 

26,862

 

Total cost of revenues

 

 

39,370

 

 

 

43,816

 

 

 

83,200

 

 

 

82,895

 

Gross profit

 

 

22,344

 

 

 

29,012

 

 

 

49,405

 

 

 

54,659

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,800

 

 

 

6,757

 

 

 

10,642

 

 

 

13,757

 

Selling and marketing

 

 

9,618

 

 

 

12,734

 

 

 

20,641

 

 

 

24,212

 

General and administrative

 

 

10,014

 

 

 

13,530

 

 

 

21,368

 

 

 

28,692

 

Intangible asset amortization

 

 

1,128

 

 

 

1,330

 

 

 

2,350

 

 

 

2,672

 

Total operating expenses

 

 

25,560

 

 

 

34,351

 

 

 

55,001

 

 

 

69,333

 

Operating loss

 

 

(3,216

)

 

 

(5,339

)

 

 

(5,596

)

 

 

(14,674

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

277

 

 

 

(58

)

 

 

484

 

 

 

(172

)

Interest expense

 

 

(1,574

)

 

 

(1,464

)

 

 

(3,252

)

 

 

(2,997

)

Other income (expense), net

 

 

723

 

 

 

(507

)

 

 

594

 

 

 

(1,449

)

Total non-operating expenses

 

 

(574

)

 

 

(2,029

)

 

 

(2,174

)

 

 

(4,618

)

Loss from operations before income taxes

 

 

(3,790

)

 

 

(7,368

)

 

 

(7,770

)

 

 

(19,292

)

Income tax provision

 

 

(435

)

 

 

(126

)

 

 

(487

)

 

 

(375

)

Net loss

 

$

(4,225

)

 

$

(7,494

)

 

$

(8,257

)

 

$

(19,667

)

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.11

)

 

$

(0.21

)

 

$

(0.22

)

 

$

(0.55

)

Diluted

 

$

(0.11

)

 

$

(0.21

)

 

$

(0.22

)

 

$

(0.55

)

Shares used in computing loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,988

 

 

 

36,006

 

 

 

36,810

 

 

 

35,864

 

Diluted

 

 

36,988

 

 

 

36,006

 

 

 

36,810

 

 

 

35,864

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,225

)

 

$

(7,494

)

 

$

(8,257

)

 

$

(19,667

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

735

 

 

 

(1,830

)

 

 

983

 

 

 

(1,641

)

Total comprehensive loss

 

$

(3,490

)

 

$

(9,324

)

 

$

(7,274

)

 

$

(21,308

)

 

See accompanying notes to condensed consolidated financial statements.

4


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended

 

 

August 31,

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

$

(8,257

)

 

$

(19,667

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation expense

 

8,795

 

 

 

8,215

 

Intangible asset amortization

 

2,350

 

 

 

2,672

 

Stock-based compensation

 

3,902

 

 

 

6,156

 

Amortization of debt issuance costs and discount

 

554

 

 

 

594

 

Noncash operating lease cost

 

1,673

 

 

 

1,756

 

Revenue assigned to factors

 

(716

)

 

 

(1,524

)

Deferred tax assets, net

 

1

 

 

 

129

 

Other

 

30

 

 

 

(67

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

12,020

 

 

 

(14,242

)

Inventories

 

(5,522

)

 

 

(4,681

)

Prepaid expenses and other assets

 

2,205

 

 

 

(4,438

)

Accounts payable

 

(7,463

)

 

 

8,258

 

Accrued liabilities

 

(2,154

)

 

 

(2,842

)

Deferred revenue

 

(1,117

)

 

 

(3,093

)

Operating lease liabilities

 

(2,138

)

 

 

(2,901

)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

4,163

 

 

 

(25,675

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(3,824

)

 

 

(4,891

)

NET CASH USED IN INVESTING ACTIVITIES

 

(3,824

)

 

 

(4,891

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Taxes paid related to net share settlement of vested equity awards

 

(502

)

 

 

(1,568

)

Proceeds from exercise of stock options and contributions to employee stock purchase plan

 

131

 

 

 

502

 

NET CASH USED IN FINANCING ACTIVITIES

 

(371

)

 

 

(1,066

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(3,334

)

 

 

132

 

Net change in cash and cash equivalents

 

(3,366

)

 

 

(31,500

)

Cash and cash equivalents at beginning of period

 

41,928

 

 

 

79,221

 

Cash and cash equivalents at end of period

$

38,562

 

 

$

47,721

 

 

See accompanying notes to condensed consolidated financial statements.

5


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

August 31,

 

 

August 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Total stockholders' equity, beginning balances

$

12,444

 

 

$

28,589

 

 

$

14,307

 

 

$

75,402

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

Beginning balances

 

186,967

 

 

 

178,279

 

 

 

185,046

 

 

 

242,747

 

Cumulative-effect adjustment related to the adoption of ASU 2020-06

 

 

 

 

 

 

 

-

 

 

 

(67,003

)

Stock-based compensation expense

 

1,724

 

 

 

3,196

 

 

 

3,902

 

 

 

6,156

 

Shares issued on net share settlement of equity awards

 

(245

)

 

 

(1,143

)

 

 

(502

)

 

 

(1,568

)

Exercise of stock options and contributions to employee stock purchase plan

 

131

 

 

 

502

 

 

 

131

 

 

 

502

 

Ending balances

 

188,577

 

 

 

180,834

 

 

 

188,577

 

 

 

180,834

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

 

 

 

Beginning balances

 

(172,848

)

 

 

(148,499

)

 

 

(168,816

)

 

 

(165,965

)

Cumulative-effect adjustment related to the adoption of ASU 2020-06

 

 

 

 

 

 

 

 

 

 

29,639

 

Net loss

 

(4,225

)

 

 

(7,494

)

 

 

(8,257

)

 

 

(19,667

)

Ending balances

 

(177,073

)

 

 

(155,993

)

 

 

(177,073

)

 

 

(155,993

)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Beginning balances

 

(1,675

)

 

 

(1,191

)

 

 

(1,923

)

 

 

(1,380

)

Foreign currency translation adjustments

 

735

 

 

 

(1,830

)

 

 

983

 

 

 

(1,641

)

Ending balances

 

(940

)

 

 

(3,021

)

 

 

(940

)

 

 

(3,021

)

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balances

$

10,564

 

 

$

21,820

 

 

$

10,564

 

 

$

21,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


CALAMP CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED AUGUST 31, 2023 AND 2022

NOTE 1 - DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”) is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. We solve complex problems for customers within the market verticals of transportation and logistics, commercial and government fleets, industrial equipment, and consumer vehicles by providing solutions that track, monitor, and recover their vital assets. The data and insights enabled by CalAmp solutions provide real-time visibility into a user’s vehicles, assets, drivers, and cargo, giving organizations greater understanding and control of their operations. Ultimately, these insights drive operational visibility, safety, efficiency, maintenance, and sustainability for organizations around the world. We are a global organization that is headquartered in Irvine, California.

Basis of Presentation

In the opinion of our management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly our financial position at August 31, 2023 and our results of operations for the three and six months ended August 31, 2023 and 2022. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year ending February 29, 2024.

Certain notes and other information included in the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023 are condensed in or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with our 2023 Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on April 28, 2023.

All intercompany transactions and accounts have been eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared with the assumption that the Company will continue as a going concern. Based on our current and projected level of operations, we believe that our future cash flows from operating activities, our existing cash and cash equivalents and our revolving credit facility will provide adequate funds for ongoing operations and working capital requirements for at least the next 12 months. However, our business is subject to various factors that could materially impact our assumptions leading to the future consumption of our available cash.

Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have considered all known and reasonably available information that existed throughout the three and six months ended August 31, 2023 in making accounting judgments, estimates and disclosures.

 

Revenue Recognition

Revenues from subscription services are recognized ratably on a straight-line basis over the term of the subscription, which generally ranges from two to five years.

We recognize revenue from telematics product sales upon the transfer of control of promised products to customers in an amount that reflects the transaction price. Customers generally do not have a right of return except for defective products returned during the warranty period. We record estimated commitments related to customer incentive programs as reductions of revenues.

From time to time, we provide various professional services to customers. These services include project management, engineering services and installation services, which are often distinct from other performance obligations and are recognized as the related services are performed. For certain professional service contracts, we recognize revenue based on the proportion of total costs incurred to-date over the estimated cost of the contract, which is an input method.

In many customer arrangements, subscription services are bundled with the sale or lease of telematics devices within the same contractual arrangement. To determine the performance obligations under these arrangements, we assess the contractual elements and, in particular, whether the telematics products within the arrangement are distinct. This is an area of judgment that includes the consideration of all elements of the arrangement. Significant factors in determining whether telematics devices are distinct are whether such devices are sold separately, as well as the degree of integration and interdependency between the subscription elements of the arrangement and the associated telematics devices. If we

7


conclude that the telematics devices within a customer arrangement are distinct and therefore represent a separate performance obligation, the total expected consideration associated with the contract is allocated between the performance obligations based upon the relative stand-alone selling price associated with each performance obligation. We base stand-alone selling prices on pricing for the same or similar items.

For some customer arrangements, we have concluded that the subscription services and associated telematics devices are not distinct performance obligations and thus represent a single combined performance obligation. For certain other customer arrangements under which devices are leased in combination with subscription services, we consider the arrangement to be predominately a subscription service and thus a combined single performance obligation for purposes of revenue recognition. In both of these circumstances, we generally recognize the total expected consideration as revenue over the term of the subscription. In customer arrangements for which the embedded lease is an operating lease, we utilize the practical expedient that allows for the combining of lease and nonlease components. Device related costs associated with arrangements in which title to the device is transferred to the customer under a single combined performance obligation are recorded as deferred costs on the balance sheet and are amortized into cost of revenues over the term of the subscription or the estimated in-service lives of the devices. In contractual arrangements under which we provide devices as part of the subscription contract but we retain control of the devices, the cost of the devices is capitalized as property and equipment and depreciated over the estimated useful life of three to five years.

We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer.

The timing of revenue recognition may differ from the timing of our invoicing to customers. Contract assets are comprised of unbilled amounts for which we have transferred products or provided services to our customers and are classified as accounts receivable. Contract liabilities (deferred revenues) are comprised of billings or payments received from our customers in advance of performance under the contract. During the three and six months ended August 31, 2023, we recognized $6.6 million and $16.1 million, respectively, in revenue from the deferred revenue balance of $36.6 million as of February 28, 2023.

Incremental costs of obtaining a contract with a customer consist of sales commissions, which are recognized on a straight-line basis over the life of the corresponding contracts. Sales commissions included in prepaid expenses and other current assets and other assets were $1.9 million and $3.0 million, respectively, as of August 31, 2023.

We disaggregate revenue from contracts with customers into reportable segments, geography, type of goods and services and timing of revenue recognition. See Note 12, Segment Information and Geographic Data, for our revenue by segment and geography. The disaggregation of revenue by type of goods and services and by timing of revenue recognition is as follows (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

August 31,

 

 

August 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue by type of goods and services:

 

 

 

 

 

 

 

 

 

 

 

Telematics devices and accessories

$

37,358

 

 

$

45,694

 

 

$

83,649

 

 

$

85,089

 

Rental income and other services

$

5,656

 

 

 

6,656

 

 

$

11,090

 

 

 

10,926

 

Recurring application subscriptions (1)

$

18,700

 

 

 

20,478

 

 

$

37,866

 

 

 

41,539

 

Total

$

61,714

 

 

$

72,828

 

 

$

132,605

 

 

$

137,554

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

August 31,

 

 

August 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue by timing of revenue recognition: