CalAmp's Momentum Accelerates With Another Strong Quarter

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CalAmp Corp. (NASDAQ: CAMP) announced solid fiscal second-quarter 2018 results on Thursday after the market closed, punctuated by continued strong growth of telematics product sales, the company's largest-ever software-as-a-service (SaaS) contract, and a number of expanded relationships with significant customers. Even so, CalAmp's results were largely in line with expectations, and shares of the machine-to-machine communications specialist are little changed in after-hours trading as of this writing.

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Let's take a deeper look at what CalAmp accomplished in recent months, as well as what investors can expect going forward.

CalAmp results: The raw numbers

Metric

Fiscal Q2 2018

Fiscal Q2 2017

Year-Over-Year Growth

Revenue

$89.8 million

$90.5 million

(0.8%)

Non-GAAP net income (loss)

$9.6 million

$10.1 million

(5%)

Non-GAAP earnings per share (diluted)

$0.27

$0.27

0%

What happened with CalAmp this quarter?

  • Based on generally accepted accounting principles (GAAP) -- which includes items like stock-based compensation, amortization of intangibles, and a $15 million net gain from a legal settlement in June with a former LoJack supplier -- CalAmp's net income this quarter was $12.2 million, or $0.34 per share, up from GAAP net income of just over half a million dollars, or $0.01 per share in the same year-ago period. CalAmp also expects to receive roughly $31 million of additional net proceeds from the settlement over the next four quarters.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 4.3% year over year, to $12.3 million.
  • By comparison, these results were roughly in line with CalAmp's latest guidance for revenue of $86 million to $91 million, adjusted net income per share of $0.23 to $0.29, and adjusted EBITDA of $10.5 million to $13.5 million.
  • Regarding CalAmp's top-line decline, note that last year's second quarter included roughly $6.7 million in revenue from the company's Satellite business, which ceased operations on August 31, 2016.
  • Software and subscription services revenue grew 5%, to $15.7 million.
  • Telematics systems revenue grew 7.6% year over year, to $74.1 million, including a 29% increase in mobile resource management (MRM) telematics product revenue, to $38.1 million.
  • Revenue from Caterpillar increased 7.4% sequentially, to over $10.5 million, setting a new quarterly high mark for CalAmp.
  • CalAmp also commenced shipments to another unnamed global heavy equipment OEM during the quarter, which should add roughly $2 million in revenue in the second half of the year.
  • CalAmp secured its largest-ever SaaS contract with an unnamed blue-chip freight transport company to track mobile assets in North America. As this new program rolls out over the next few quarters, CalAmp anticipates it will result in 10% incremental growth in SaaS recurring revenue.

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What management had to say

CalAmp CEO Michael Burdiek stated:

We experienced accelerating momentum on multiple fronts in the quarter, including strong financial results. We continue to be a leader and pioneer in the Connected Vehicle and Industrial Internet of Things ["IoT"] marketplace. We announced a number of novel product releases and also expanded on our important partnerships in the quarter, including a contract award from a new blue-chip customer representing the largest SaaS contract in the company's history. We also expanded our relationship with Caterpillar and launched a new program with another global heavy equipment customer. We continue to make progress and achieved a number of important strategic milestones while establishing a solid foundation for long-term growth.

Looking forward

For the current fiscal third quarter, CalAmp expects revenue in the range of $89 million to $94 million, GAAP net income per share of $0.28 to $0.34, adjusted (non-GAAP) net income per share of $0.27 to $0.33, and adjusted EBITDA of $12 million to $14.5 million. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- this guidance is roughly in line with consensus estimates for fiscal Q3 adjusted earnings of $0.30 per share on revenue of $90.8 million.

Though CalAmp's true growth is still masked as it laps the closure of its satellite business, this was an exceptional quarter in which CalAmp's solutions continued to gain traction with multiple big-customer wins. The company's relative strength should also begin to show as new programs begin to contribute to CalAmp's results in the coming quarters. I think CalAmp investors should be more than happy today, despite the market's initial muted reaction.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends CalAmp. The Motley Fool has a disclosure policy.