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CalAmp Reports Fiscal 2019 Third Quarter Financial Results

12/20/18
Q3 Software and Subscription Services revenue of $19.9 million, up 25% year-over-year
Q3 operating cash flow of $11.3 million

IRVINE, Calif., Dec. 20, 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 third quarter ended November 30, 2018.

"Our Software and Subscription Services (SaaS) business continued to perform well as our SaaS revenue increased 25% year-over-year. We continue to focus on accelerating our efforts towards a more comprehensive recurring revenue model," said Michael Burdiek, President and Chief Executive Officer. "Although we were disappointed in the short-term execution around our supply chain diversification efforts as previously announced, we are taking steps to address our operational challenges. As we look to the future, we believe we can capitalize on our SaaS pipeline and achieve our long-term growth targets." 

Q3 2019 Financial & Business Highlights

  • Consolidated revenue of $88.5 million, down 6% year-over-year, due to supply chain execution challenges.
  • Gross margin was 41.1%, up from 40.8% in the prior year.
  • Telematics Systems revenue for the third quarter was $68.6 million, down 12% year-over-year, principally due to a decline in legacy LoJack SVR product sales.
  • Software & Subscription Services revenue for the third quarter was $19.9 million or 23% of consolidated revenue. Revenue growth was driven by freight transport subscriber additions and LoJack subscription services.
  • GAAP net loss of $0.5 million or a loss of $0.02 per share due to a $1.2 million restructuring charge for vacant offices, severance and employee related costs.
  • Adjusted basis net income of $8.9 million or $0.25 per diluted share.
  • Operating cash flow of $11.3 million, with Adjusted EBITDA of $11.4 million and Adjusted EBITDA margin of 13%.
  • We entered into a multi-million dollar SaaS contract with a public cloud service provider for a high value asset tracking solution.
  • We entered into a global supply agreement with Telefónica, to provide intelligent telematics devices for fleet and asset management applications in Mexico with anticipated expansion across other Latin American and European markets.
  • We announced a partnership with Overhaul Group, Inc., a supply chain integrity solutions company, to enable global transportation service providers with actionable intelligence and predictive analytics to improve supply chain efficiency.
  • Our Board of Directors authorized a new one year share repurchase program under which we may repurchase up to $20 million of outstanding common stock.

Summary Financial Information:









(In thousands except per share amounts)




















Three Months Ended




November 30,


Description


2018



2017











Revenues:









Telematics Systems


$

68,552



$

77,775


Software & Subscription Services



19,943




15,894




$

88,495



$

93,669











Gross profit


$

36,381



$

38,187


Gross margin



41

%



41

%










Net income (loss)


$

(522)



$

11,806


Net income (loss) per diluted share


$

(0.02)



$

0.33











Non-GAAP measures:









Adjusted basis net income


$

8,905



$

11,241


Adjusted basis net income per diluted share


$

0.25



$

0.31


Adjusted EBITDA


$

11,423



$

13,838


Adjusted EBITDA margin



13

%



15

%












As of November 30,



As of February 28,


Description


2018



2018











Cash and marketable securities


$

301,761



$

156,003


Working capital



321,556




180,356


Deferred revenue



46,595




34,520


Convertible senior unsecured notes (carrying value)



272,420




154,299


 

Fiscal 2019 Fourth Quarter Business Outlook

(In thousands except per share amounts)


We are incorporating into our guidance factors including ongoing supply chain challenges, risks associated with the timing of Chinese New Year as well as a cautious macroeconomic outlook, particularly in our international markets where we have experienced some recent weakness.










Range

Description


Low


High








GAAP financial information:







Revenues


$

86,000


$

92,000

Net income (loss) per diluted share


$

(0.02)


$

0.04








Non-GAAP financial information:







Adjusted EBITDA


$

10,000


$

14,000

Adjusted basis net income per diluted share


$

0.23


$

0.29


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 Fourth Quarter Business Outlook reflects the effects of adopting this new accounting standard.  In the fourth quarter and fiscal year 2019, we do not expect ASC 606 to have a material impact on our revenue.

The fourth 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 fourth 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 third quarter results and outlook for our fourth quarter at 1:30 p.m. Pacific Time on December 20, 2018. 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# 6069225. 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# 6069225. The audio replay will be available through January 3, 2019.

About CalAmp

CalAmp (Nasdaq: CAMP) is a technology solutions pioneer transforming the global connected economy. We help reinvent businesses 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 LinkedInFacebookTwitterYouTube 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 November 30, 2018 filed with the SEC on December 20, 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, 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, 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


Nine Months Ended



November 30,


November 30,



2018


2017



2018



2017














Revenues


$

88,495


$

93,669


$

279,420


$

271,517

Cost of revenues



52,114



55,482



165,127



159,049

Gross profit



36,381



38,187



114,293



112,468














Operating expenses:













Research and development



7,177



6,296



21,377



18,853

Selling and marketing



12,746



12,981



37,766



38,167

General and administrative



11,719



10,993



37,146



38,159

Restructuring



1,247



-



5,196



-

Intangible asset amortization



2,893



3,710



8,534



11,278




35,782



33,980



110,019



106,457














Operating income



599



4,207



4,274



6,011














Non-operating income (expense):













Investment income



1,398



619



3,258



1,348

Interest expense



(5,134)



(2,573)



(11,566)



(7,658)

Gain on legal settlement



2,500



13,301



15,833



28,333

Loss on extinguishment of debt



-



-



(2,033)



-

Other income (expense)



(218)



12



(721)



442




(1,454)



11,359



4,771



22,465














Income (loss) before income taxes and equity in net loss of affiliate



(855)



15,566



9,045



28,476

Income tax benefit (provision)



778



(3,351)



(496)



(5,970)

Income (loss) before equity in net loss of affiliate



(77)



12,215



8,549



22,506

Equity in net loss of affiliate



(445)



(409)



(1,414)



(1,122)














Net income (loss)


$

(522)


$

11,806


$

7,135


$

21,384














Earnings (loss) per share:













Basic


$

(0.02)


$

0.33


$

0.20


$

0.61

Diluted


$

(0.02)


$

0.33


$

0.20


$

0.59














Shares used in computing earnings













(loss) per share:













Basic



34,561



35,347



34,950



35,206

Diluted



34,561



36,247



35,769



36,064



 

CALAMP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)











November 30,

2018



February 28,

2018

Assets
















Current assets:








Cash and cash equivalents


$

271,613



$

132,603

Short-term marketable securities



30,148




23,400

Accounts receivable, net



72,426




71,580

Inventories



31,515




36,302

Prepaid expenses and other current assets



13,733




12,000

Total current assets



419,435




275,885









Property and equipment, net



23,192




21,262

Deferred income tax assets



21,859




31,581

Goodwill



73,284




72,980

Other intangible assets, net



43,518




52,456

Other assets



26,759




18,829



$

608,047



$

472,993









Liabilities and Stockholders' Equity
















Current liabilities:








Accounts payable


$

31,556



$

35,478

Accrued payroll and employee benefits



8,314




10,606

Deferred revenue



20,030




17,757

Other current liabilities



37,979




31,688

Total current liabilities



97,879




95,529









Convertible senior unsecured notes, net



272,420




154,299

Other non-current liabilities



36,195




24,249









Stockholders' equity:
















Common stock



343




357

Additional paid-in capital



215,340




218,217

Accumulated deficit



(13,485)




(19,459)

Accumulated other comprehensive loss



(645)




(199)

Total stockholders' equity



201,553




198,916



$

608,047



$

472,993









- more -

 

CALAMP CORP.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Amounts in thousands)

(Unaudited)




Nine Months Ended



November 30,



2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:







Net income


$

7,135


$

21,384

Depreciation expense



6,602



5,953

Intangible assets amortization expense



8,534



11,278

Stock-based compensation expense



8,088



6,664

Amortization of convertible debt issue costs and discount



7,999



5,551

Loss on extinguishment of debt



2,033



-

Impairment loss on cost method investment



326



-

Tax benefits on vested and exercised equity awards



591



328

Deferred tax assets, net



(716)



2,873

Unrealized foreign currency transaction losses (gains)



397



(404)

Equity in net loss of affiliate



1,414



1,122

Other



(32)



59

Changes in operating assets and liabilities



5,722



3,923

NET CASH PROVIDED BY OPERATING ACTIVITIES



48,093



58,731








CASH FLOWS FROM INVESTING ACTIVITIES:







Proceeds from maturities and sale of marketable securities



36,461



11,273

Purchases of marketable securities



(43,103)



(17,209)

Capital expenditures



(8,884)



(5,970)

Advances to equity method investee



(1,519)



(1,312)

Other



(103)



(152)

NET CASH USED IN INVESTING ACTIVITIES



(17,148)



(13,370)








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



(3,520)



(2,452)

Proceeds from exercise of stock options



124



145

Repurchases of common stock



(39,000)



-

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES



108,578



(2,307)








EFFECT OF EXCHANGE RATE CHANGE ON CASH



(513)



1,335

Net change in cash and cash equivalents



139,010



44,389

Cash and cash equivalents at beginning of period



132,603



93,706








Cash and cash equivalents at end of period


$

271,613


$

138,095

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


Nine Months Ended



November 30,


November 30,



2018


2017


2018


2017

GAAP basis net income (loss)


$

(522)


$

11,806


$

7,135


$

21,384














Intangible assets amortization expense



2,893



3,710



8,534



11,278

Stock-based compensation expense



2,941



2,620



8,088



6,664

Non-cash interest expense from amortization of debt discount



3,157



1,661



7,224



4,924

GAAP basis income tax provision (benefit)



(778)



3,351



496



5,970

Equity in net loss of affiliate



445



409



1,414



1,122

Loss on extinguishment of debt



-



-



2,033



-

Realized gain on investment of equity securities



-



-



629



-

Gain on legal settlement



(2,500)



(13,301)



(15,833)



(28,333)

Litigation provision



633



324



1,520



6,810

Legal expense for LoJack battery performance issue



1,483



652



3,733



1,579

Restructuring



1,247



-



5,196



-

Impairment loss on equity investment



-



-



326



-

Other



106



159



472



514

Adjusted basis income before income taxes



9,105



11,391



30,967



31,912

Income tax provision (non-GAAP basis) (a)



(200)



(150)



(600)



(700)

Adjusted basis net income


$

8,905


$

11,241


$

30,367


$

31,212














Adjusted basis net income per diluted share


$

0.25


$

0.31


$

0.85


$

0.87














Weighted average common shares outstanding on diluted basis



35,153



36,247



35,769



36,064


(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


Nine Months Ended



November 30,


November 30,



2018


2017


2018


2017


















GAAP basis net income (loss)


$

(522)



$

11,806



$

7,135



$

21,384



















Investment income



(1,398)




(619)




(3,258)




(1,348)


Interest expense



5,134




2,573




11,566




7,658


Income tax provision (benefit)



(778)




3,351




496




5,970


Depreciation



2,261




1,970




6,602




5,953


Amortization of intangible assets



2,893




3,710




8,534




11,278


Stock-based compensation



2,941




2,620




8,088




6,664


Equity in net loss of affiliate



445




409




1,414




1,122


Loss on extinguishment of debt



-




-




2,033




-


Legal expense for LoJack battery performance issue



1,483




652




3,733




1,579


Litigation provision



633




324




1,520




6,810


Gain on legal settlement



(2,500)




(13,301)




(15,833)




(28,333)


Restructuring



1,247




-




5,196




-


Other



(416)




343




63




583



















Adjusted EBITDA


$

11,423



$

13,838



$

37,289



$

39,320



















Revenue


$

88,495



$

93,669



$

279,420



$

271,517



















Adjusted EBITDA margin



13

%



15

%



13

%



14

%

 

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