When CalAmp Corporation (NASDAQ: CAMP) announced fiscal second-quarter 2018 results last Thursday, the market couldn't have been more pleased. Shares of the machine-to-machine (M2M) communications specialist jumped 10% on Friday in response, as investors celebrated the addition of multiple large new customers, increased clarity from a new reporting structure, and an encouraging forward outlook.
To that end, CalAmp spent some time speaking with analysts during their subsequent conference call, offering valuable insight into both that quarterly performance and what investors should anticipate in the coming months. Here are five important points CalAmp management discussed during that call.
1. On progress in the heavy equipment market
More specifically on the former, CalAmp now expects revenue from Caterpillar to climb around 20% this fiscal year, which is at the higher end of its previous forecast. And diving further into the latter deal -- which represents the firstfruits of seeds that CalAmp began to plant when it signed a separate deal with Toyota Industrial Equipment two years ago -- Burdiek says this marks the new heavy equipment OEM customer's "initial foray into telematics" and should offer a "steady revenue contribution" to CalAmp's results over time.
2. The biggest software-as-a-service (SaaS) contract in CalAmp's history
Burdiek added during the call that this contract is tied to an unnamed "blue-chip" freight company and that CalAmp has been actively engaged with the customer for the "better part of two years." In fact, Burdiek says, this particular deal started as more of a "product-focused engagement" -- presumably meaning a less lucrative hardware-only agreement -- but evolved into a more comprehensive telematics services contract over time.
Considering CalAmp also only just launched its AssetOutlook platform in March, it should be interesting to see what kind of follow-on deals CalAmp can secure as more large customers follow suit.
3. On the favorable LoJack legal settlement
CalAmp reached this $46 million settlement early in the quarter with former LoJack battery supplier EVE Energy, resolving a contract dispute over quality issues that dates back to 2013. To be clear, though, this "only" bolsters CalAmp's GAAP financial results over the near term; CalAmp should recognize a second $13 million payment later this month, followed by another $13 million payment in February 2018, and the final $5 million payment in June 2018.
4. On CalAmp's "new" reporting structure
To be fair, CalAmp did provide separate commentary on both its Telematics Systems and Software & Services segments starting with its fiscal first-quarter report in late June for the period ended May 31, 2017. But until the second quarter, it hadn't formally completed the alignment of these two businesses. Rather, they were previously lumped under a single "Wireless Datacom" segment after its legacy Satellite business ceased operations just over a year ago. So, in addition to the aforementioned operational benefits, this should provide added clarity for investors on the drivers of CalAmp's growth.
5. Looking ahead
Going into CalAmp's report last week, consensus estimates on Wall Street had predicted roughly the same adjusted earnings ($0.30 per share), but on revenue of $90.8 million, which was slightly below the mid-point of CalAmp's respective guidance range. Assuming CalAmp isn't under-promising with the intention of over-delivering, that guidance likely wouldn't have been enough to drive CalAmp stock's big pop to end last week. But investors were rightly pleased when you combine that outlook with the adoption of CalAmp's latest products and platforms by several large customers, color on its business enabled by the new reporting structure, and icing on the cake from the positive legal settlement.
"We've built an unrivaled technology foundation and innovative roadmap endorsed by a growing number of blue-chip companies," Burdiek concluded during the call. "We remain focused on delivering profitable growth and believe more than ever that we are well positioned for the future."
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