Here's What Drove CalAmp's Record Quarter

Don't look now, but CalAmp Corp. just put together an excellent quarter, and the market couldn't be more pleased. After climbing 3% during Tuesday's regular session, shares of CalAmp jumpedanother 9% in after-hours trading after the machine-to-machine communications specialist released fiscal fourth-quarter 2015 results.

Consolidated quarterly revenue climbed 16% year over year to $69.2 million and translated to 60% growth in adjusted net income to $0.32 per share. Both figures easily exceeded analysts' expectations for sales and earnings of $67.8 million and $0.28 per share, respectively.

It's (still) all about Wireless DatacomFirst, note that CalAmp's revenue growth came despite a 17.9% decline inSatellite segment revenue to $8.7 million. But keep in mind that's roughly in line with expectations and follows what managementpreviously describedas an "exceptional year" in fiscal 2014. CalAmp's core Wireless Datacom segment is its primary growth driver, but in the meantime the company is happy to enjoy the Satellite segment's relatively steady contributions to operating cash flow and overall profitability.

Speaking of which, Wireless Datacom revenue climbed23% to $60.5 million, an acceleration over the segment's full-fiscal year growth of 14%. Driving those results was record quarterly revenue from CalAmp's mobile resource management products business, and increased sales of its telematics products to their "key OEM customer in the heavy equipment industry."

That's a not-so-subtle reference to CalAmp's relationship withCaterpillar, to which it ships telematics devicesfor both factory and after-market installations. After volume shipments to Caterpillar commenced last quarter, CalAmp CEO Michael Burdiek said the resulting revenue ramp not only exceeded expectations by reaching roughly $5 million, but was also expected to continue "into the fourth quarter and into fiscal 2016." This could be a solid opportunity for incremental growth if CalAmp can successfully translate its relationship with Caterpillar to additional clients in the heavy-equipment space going forward.

Burdiek also highlighted the contribution of recent wins for CalAmp's fleet management software-as-a-service solutions, which drove a more than 10% sequential increase in higher-margin enterprise fleet subscribers. Most notably, this includes the January commencement of volume shipments of wireless products, services, and solutions to Sascar, Brazil's largest fleet management and freight security company.

Finally, Burdiek noted that before the close of the quarter, CalAmp acquired Crashboxx, "an early stage technology company with unique intellectual property focused on insurance telematrics applications across the entire Auto Insurance lifecycle, from driver risk assessment through claims processing automation."

According to CalAmp's press release on the acquisition yesterday, consideration for the purchase was minimal, including $1.5 million in upfront cash and future "earn-out payments" determined by post-acquisition sales."Once fully commercialized," Burdiek elaborated, "I believe that the Crashboxx technology will play a critical role in expanding CalAmp's growth prospects in this enormous and largely untapped market."

According to a study last year from LexisNexis, the type of usage-based insurance plans supported by CalAmp's technology only account for around 2% of all U.S. personal auto insurance policies. If CalAmp can use Crashboxx to bolster its leadership position and grab meaningful share of this market as it grows from its small base, so much the better.

There's more where that came fromFinally, CalAmp expects current-quarter consolidated revenue of $63 million to $67 million, which should result in adjusted net income of $0.24 to $0.28 per share. Analysts, for their part, were expecting fiscal first-quarter earnings right in the middle of that range on higher sales of $67.4 million. To be fair, CalAmp noted that the sequential decline in revenue is due mostly to a combination of slightly lower Satellite sales, as well as the timing of shipments to Caterpillar. But going forward, the influence of Satellite should continue to wane as Wireless Datacom grows, and the Caterpillar shipments are expected to pick up once again in subsequent quarters.

And besides, if CalAmp stock's after-hours pop is any indication, the market is rightly willing to accept CalAmp's explanation for its lighter-than-expected revenue guidance. In the end, I agree there was little not to like about this report. If CalAmp can keep executing on its strategic initiatives and continue delivering profitable growth, I see no reason the stock won't be able to continue rewarding patient shareholders from here.

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