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Calamp (CAMP)

Participants
Joel Achramowicz Managing Director, The Shelton Group, IR
Jeff Gardner President and Chief Executive Officer
Kurt Binder Chief Financial Officer
Cindy Yang Senior Vice President of Financial Planning and Analysis
Mike Walkey Canaccord
Adam Bubes Goldman Sachs
Mike Latimore Northland Capital Markets
Scott Searle ROTH Capital
Blake Mielke Jefferies
Call transcript
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Operator

Welcome to CalAmp's Second Quarter 2023 Financial Results Conference Call. My name is Tamia, and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Joel Achramowicz, Managing Director of Shelton Group, CalAmp's Investor Relations firm. begin. may you Joel,

Joel Achramowicz

are welcome Cindy call. fiscal Director I'm Investor Financial Kurt Analysis. us Group, and Officer, and Chief financial Gardner; Planning Senior Jeff of quarter Vice results CalAmp's CFO, today With firm. conference Joel and Relations President to afternoon, and second Executive also CalAmp's Binder; XXXX Shelton CalAmp's Zhang, Good Achramowicz, of Managing President

statements. you remind Before we this may contain like begin, that forward-looking call to I'd

undertake current forward-looking the future judgment, results these our are statements release on from which circumstances. issued forward-looking no discussed CalAmp's best that SEC projections. statements events actual While risks to revise or cause today, those forward-looking We uncertainties are available obligation to update they or to and and in to risk regular reflect any in these reflect subject earnings are website. materially filings factors These implied our could by differ

of with Jeff a question-and-answer President detailed Now review go call to by the financial followed Jeff that, more will results, highlights. review CEO, please of CalAmp's a call begin over turn the a session. and Kurt the provide operational to Gardner. today's my will Jeff, pleasure great it's Then ahead. With Company's

Jeff Gardner

and you, Thank Joel, us call for joining on of the you thanks to all today.

up revenue, also in Our was Software second Services quarter results sequentially sequential growth reflecting driven year-over-year. primarily that consolidated by approximately exceeded growth our expectations, and Subscription revenue XX% X% and XX%

to conversions recurring represented more also Product the the chain revenue resulted orders and customers in growth our Subscription customer to quarter. supply Services This to Telematics revenue us allowed for from Software of XX% prior contracts fulfill revenue. total and than software that improvements accelerate

notable XX% As of customers by converted, more Trimble, of than including Localiza and among recent transitions our customers, others. have today, eligible

second quarter. the all Santander. total including new the region We logos, subscribers recent and EMEA with We traction traction in BMW's sequentially million to $X.X at gain increasing continue strong XX% end MINI year-over-year the global X% with to from geographies along of in and conversions, gained Wabi

valuable conversions, customers strides these opportunities but as secure to also existing we logos. operators asset we most offerings, advance the with in contract current technology Additionally, smart working to to reduce video-based and the and made around our existing not subscribers opportunities our our XX help real-time telematics transportation update comply completed expanded Together us during great these solutions contracts initiatives been quarter. including with the from their solutions only maximize and our on them CalAmp our remain vehicles current SaaS other subscription areas information the upgrade. eligible fleet us a resources as software as Dallas, use signed appointed extension our and complete we and roughly press. video and of since webinars added have subscription we on the quarter, June deployed assess, help branding, to in performance. customer customers, new only businesses commercial XX% million expand way document stated base website asset and as train, deepen new telematics of for along track not Carson product operate. investments. trailer trucks and by new Brennen also but the technology more and With of logistics Also investors relationships offerings. world safety a the year, broaden two overall and conversions increased with with solution, North City CalAmp's customers today, we improve technology in major million the past. end which as operation Visits the video offering empowers fiscal in will by improve can video-based performance, customers We website to gain during regulations, these trailer with customer transportation to also have monitor safety, to on-time from heavy the and the CRO prospects, our also America XX in utilization fleet best-in-class of our in more of solution such was and We increase operation customer our to corporate safety has strengthen conversions, expand smart our to transforming such testimonials, cost hard tools even thereby brochures to

this thank and and him service CFO earnings wish his last I in best Kurt's his for with new thereby, the know, day be you last support us. will as our call endeavor. him be As his and of will to tomorrow, want years

In several update executive on search, an terms have leading firm our the past weeks. working CFO of over a been we search with

will to oversight. who XXXX, like integrity in named. since mentioned as to turn with the now Kurt? are effective financial Senior Planning has that, of operations call until over With results in more successor Cindy team detail. Analysis, our a discuss As CFO, our and Company our under Kurt financial I'd finance the press consistency Financial qualified our is to the release, her and maintain fully tomorrow and to Zhang, my close VP interim serve been She of current

Kurt Binder

in had your entire GAAP financial well though approximately growth the income, down reference EBITDA A the in is $XX.X quarter full net appreciate the EBITDA adjusted its that afternoon. measures up Jeff. The ago. competitor. margin. to dive to year work revenue our to from that commentary was $XX basis was million fiscal positioned quarter XXXX X% same quarter corresponding the and my the adjusted and With to I in second Total million million, telematics non-GAAP quarter SaaS-based earnings to reconciliation that, the recurring prior availability release $XX.X to our product a of these sequential in approximately with year million basis the you, from and in team. second of acceleration the measures I closest quarter second this CalAmp a issued as Today, attributable the kind to as International non-GAAP conversions announcing support I the increase or well Company transformation include and the the is time continue you words Telematics in for totaled let's included numbers. quarter demand adjusted XX% with of customer of believe was $XX.X leading Products. revenue customer subscription the contracts revenues. revenue of of the into Thank measures fulfillment will press XX% mainly total

Services from to period $XX.X million, year XX% It's revenue. upgrades of our of Services quarter X% year-over-year XG representing sequential Subscription to Software in a to and the prior sequentially progress Subscription with large growth converting subscription equipment reflects in current XX% instructive customers we're customer, did and approximately which to Software recurring and associated not revenue for XG the device eligible that making in up recur was the was year Both million the approximately year. revenues prior $X.X and business contracts. consolidated the telematics mention

end over quarter, device convert As total remaining of by to of we've the the fiscal our and eligible customers XX% converted our of the year. end expect the telematics customers just of second

in in business, X% from Software $XXX performance decline in our the of quarter a In of for XX% remaining Services quarter Subscription the a $XXX performance but to obligations and metrics prior million compared up same second year $XXX was the terms ago. quarter, million million, approximately

to million fiscal this recognize XX% $XX obligations expect year. performance over approximately the We or during the of remainder of

which to XX% base our second year-over-year. XX% X% quarter, subscriber year-over-year a and represented sequentially the increased decrease X.X $XX.X increase sequentially revenue million, and the in was XX% During Telematics Products million. a quarter

segment, second prior compared in $XX.X quarter, products totaled the and $XX.X in quarter year the revenue million Within million the Telematics in Products reporting the same a to OEM ago. quarter $XX.X million

$X.X the largest Our million in year from revenue million million for of was represented which last same but $XX $XX.X the a quarter, down ago. from quarter, customer quarter up

revenue the pressure quarter by margin to cycle. margin the XX.X% costs be from product XX.X% logistics to and XX.X% customers Our prior our Gross compared XG gross the backlog in to an to this increases quarter was the we've with ago. one margin under yet to Contributing the increasing Consolidated a last high in solid. remains second continues was quarter the with in price to same increase offset fully to and largest associated have of year be in customer year date. due that XG upgrade implemented gross

of revenues and expect We fiscal lesser improve as extent, mix. result to gross over margin increased year of a favorable the slightly a product to remainder this

drive basis operating changes quarter in to sales on our our resulting Second sales an services. by subscription compensation force composition of the sequentially, increased expenses telematics absolute to from costs due non-GAAP dollar increased for primarily X%

of and last in by expenses or the the in an remains quarter absolute an adjusted the dollar year, to on increase $X.X quarter our general quarter million $X.X administrative the in X% year. the operating focus expenses, quarter X% the in the in second million and quarter. principally ahead. decreased Second attributable in decrease margin prior a revenue higher sequential was G&A driven X% reducing compared over $X.X was with expenses in non-GAAP second EBITDA quarter prior basis in margin Adjusted to of by a EBITDA adjusted same million XX% quarters The on EBITDA

million over matter as cash we attributable unbilled cash of supply billings services deferred for consistent In of to compared as arrangements cash result reduction receivables. at telematics Omega settlement free eligible to terms subscription total subscription $XX last of of the deferred and conversion with legal revenue combined of billing payment due The X/X under well of some constraints $XX due with in end our overall billings or of to The and cash expenses lower period. discussed quarter. the provision an for the increase equivalents total quarter, liquidity from to sequential resulting flows equivalents device cash in cash approximately multiyear operating in customers cycle quarter last as the position, our upfront multiyear conversion the a decline of and second the The outlays the devices coupled are levels subscription million a is deferred cash arrangements. the to had extends

borrowings At was we credit under on based and to us eligible no give as added asset-based revolving receivable Bank million. facility outstanding capital. the XX, this inventory $XX with $XX to there working of quarter, accounts line a total flexibility PNC relates it the were capacity borrowing and During executed new August million

availability transformation credit XX support with months. and our liquidity our in growth revolving to Additionally, and the we credit, facility. cash and under our believe that coupled with were revolving adequate on next And our provide the we equivalents, this cash covenants of compliance over line current

structure. be should noted outstanding convertible debt we our evaluating senior including aggregate optimize approximately visibility quarterly due quarter the million, are XXXX. product is maintaining its to always not policy our Our to Company guidance is that assess. X% to $XXX difficult the capital for the into of In shipments notes as accurately It ways remains million reference outlook third of August providing XXXX, of $XXX

revenue expect sequential call comments up With call final third before to I'll However, we percentage low- achieve your for provide over to growth mid-single-digit to questions. in back we Jeff? the some the the do to turn quarter. Jeff that, open

Jeff Gardner

Operator? Thank team revenue subscribers. to in solid by the that, of from open major With and fueled total in achieved questions. inventory with you, Kurt. we call and In sequentially rate will the summary, resulting growing CalAmp your now incremental global SaaS device an increase a conversions quarter increasing a

Operator

Absolutely, we comes Canaccord. will Instructions] Please begin from session. proceed. question Our the Walkey now Mike with question-and-answer [Operator first

Mike Walkley

look looking the bet and wishes. that wishes you with XX% just across new work all us supply improvements chain mark. strong Jeff, you congratulations Best years. in your Kurt, opportunity, support to Well, the quarters? does And update conversions supply future how on It's to that get in helped conversion the great quarter? on the Great. Can these to

Jeff Gardner

and the of in Yes. saw some woods but we modest pleased. us working said, very everything out improvement important, half saw that better in I of our was few in progressive -- are of terms in clarity that terms well. revenue, a can. Services We you improvement see, of, Subscription redesigns quarter future-looking of give throughout made We've and do helped BOM doing products make and the we're to terms still with which and that the us we're conversions, able more not totally were Software Mike, We the grow the half We're of back better as assisting the as in equally back on hard I in of steady to the terms improvement, us us one, see looking we improvement driving yet, year. year, as

Mike Walkley

million, Is kind Okay. levels? had not that Good. over down too record as backlog? go. through now Or backlog $XX working Any coming of that know you're long is similar still a you update? it I

Kurt Binder

it Yes. a Mike, bit. it's down still pretty has high, but little come

pleased of orders. year. So still And the of on have that robust that Obviously, at second demand. constant in the we're we're continues that, of pretty backlog, ship the the we as nature inflow we hoping half

pleased we're made with progress the robust. backlog chain, down Jeff So, a mentioned, still as with supply little bit, but the the we've and pretty has had come

Mike Walkley

now margins through, gross any Last Great. the quarters. can Once know from I'll improved just you over on it. going gross side pass would current the the your question But the and term go levels? I your price couple trend longer and of margins hardware cost improve through where increases me, thoughts halfway the over Kurt, for you're indicated well, next is slightly line. transition that

Kurt Binder

Mike So is monetizable, as I expanding expand that discussed past, gross mean, increased thing us revenue we've installed that helps installed business the our the on as base that that this margins. yes, about we in base becomes with base, great and model

to our impact fiscal installed So, things be supply have to close the in base over major proceeding it done getting year conversions, and margin. the about stabilize will Once meaningful XX% starts of accomplishment. our chain, pretty of will excited we're that's monetize, that super that all and a subscription to this the gross on a model, through customers

model target gross we XX% suggests before, indicated medium- that financial our margin. to long-term we've As

So across entire enterprise. that's our still the goal

Operator

Revich Thank Jerry you. Goldman Sachs. with The next comes from question

Your open. line is

Adam Bubes

Revich This for Jerry on is my Adam taking for Bubes today. Thanks question.

expectations in achieve help Can you about quarter. revenue parse talked out that mid-single-digit two third the the just growth to segments? You low- to between sequential us

Jeff Gardner

our Services all Well, continue growth by well that's led Adam, been along. to revenue I and we'll Subscription see think, performing Software

We more do expect to conversions.

a thought looked at If ahead be. little for where the numbers of you've conversion our I we're would quarter, actually we

a And that the so, again, continue driving very at the gotten line pace. -- of of big there, fact When going to in our lot specific think the additional we're And look be I as in we'll at terms we've third over conversions we customers finish that quarter. through more force our base. And will be base, get to all across we towards new the sales me focused logos, on which Subscription going to is really of us exciting, will new continue help and customer particular, turn Software is which the Services. grow our sales to in

Adam Bubes

what in look then And EBITDA this the was what profitability Great. And here? telematics, margin in from to quarter? like path does

Kurt Binder

Right.

So Adam, segment. for lay we filed EBITDA you in afternoon, the by out XX-Q reportable did that this margin we

of EBITDA gross they Obviously, is those evolve to model -- margin document. Services customers as to we've The we subscription Subscription So and that part business. roll you file in over a a to that or segment. that and to reference associated Software first the it's margin that reportable But the bit over a telematics over move can with your question, journey here. answer on focused the of been journey moving

balance is So time, Telematics we the the that that, right now, take it to the actually bit the EBITDA reportable EBITDA little negative the Over on and profitable to even as Products certainly will and but customers within take out. year OEM conversion essentially time, finalize of probably positive, margin reporting be our focus segment, a all we or of that going segment it's we believe for can segment. this

Operator

you. Thank

comes Please Our Latimore Capital Mike proceed. next Markets. Northland question from with

Mike Latimore

Great.

to wanted be on So conversions. the I clear just

clarify ones heard by, I I had year-end, converted. that also conversion XX% you you get heard which Can maybe you accurate? So to just and think, the I finished

Jeff Gardner

model. and percent a I a by of We Mike. of Yes, confusion. to that to converted Yes. we'll Services as our But think subscription believe XX%, think that to revenue little Software ultimately, just Subscription increase there's the base a of XXX% year, we the will end get our think we

Mike Latimore

Got year-end, that of and represent of it. that or represent what revenue does And level what then conversions for through kind subscription? would in terms ARR those software

Jeff Gardner

Yes.

got We not And XX% has through are. some model. there. customers out today. do a couple our big we conversions, we've we on been guidance for customers these mix. -- not we customers As strategy base you in subscription only a convert a the of we ARR the We're volumes. commitment Obviously, about customer our our again, of of terms remaining a what it's a when little But generally, do three-year to we're that reported get know, bit providing got

to to we realize on execute relative change So, to is front only to desire to The made continue the our that cash is our we've on terms that. end. and expect change faster

So quarter front, months our see on the as year a and of different arrangement sheet two cash in position six or first think the balance and it I of up fee getting into next four which put as year starting benefit was will slightly first months the a the focus last cash better more you'll from it than quarters, the perspective. we

Mike Latimore

Would Or the on side? just rec? that rev is also really it change cash

Jeff Gardner

it no impact on has rev rec No, whatsoever.

Mike Latimore

Okay. kind most customers to look of would once logos from through then you the or conversion, into And current year, expanding? kind come as of from you this growth expect new of you're next

Jeff Gardner

that team, big we existing which a got One, customers and focus focus Brennen in Yes. When us next think six has that the biggest specifically customer the after program. I -- Well, on but the EMEA is forward But of CalAmp substantially this our and year-over-year change base LatAm rest be areas is key is our success the new difference. the working fleet through whole transportation team focus, and only reason logo months look on U.S. at logistics, clear in converted an a we've focus on the not marketing areas. hired been the new same in Carson the geographies. you will and in with of major those logos. sales in those And going is to our for the year on upgraded enterprise

Operator

comes The from question Please next Scott Thank you. ROTH with Searle Capital. proceed.

Scott Searle

you Kurt, you. working It's lot I always pleasure want forward. been best with to the a going a wish

looking of up in you quickly, on getting if wondering what on have visibility side, it what table. sequential service? as terms that? in constrained constraint can to to actually you terms of to growth what what things quarter parts sounds do ended dive And that the better out in that Just are already or you supply that Is terms the I'm in front. to in still like mid-single-digit were visibility service leaving you're be able of on the you have you

Jeff Gardner

a But chain. stronger increase could Having of a we that's terms revenue units we with No, said in absolutely, complicated that, see Yes. more done a supply did question. significant shipped. in have

in remarks, get mentioned it did I So, as my better.

to where some finally we nice solutions same We think feeling. year. the of progress see on even expect certain of time That's steadily a in to receive since over I that which order a rest been do We're been quarter, our third to the customers And goods more quarter. the in is able back progress the can that. point and we've will

a we're there high-end devices. most Now about because bit when we different the CalAmp, than our out have solutions, sophistication pretty we of and of think little

chain We the very our some everybody players, and than, device really better been quarter. out are is good. all with generic semiconductor demand everybody team, chain in more customers' situation including have the quarter. in our It good more visibility, and the to to But it's nonetheless, supply the to of the ahead have supply manufacturers, meet third relationships contract to chain fulfill different direct backlog do work our trying even to working with little their the and visibility. But very, in improve so in say, does get hard players We're the across some feels our ability of it to way with the our see in improve good. contact especially feel bit the me, And a the though there.

Kurt Binder

run -- -- maybe And it I look rate, to at within least all-time we especially Scott, an expected that the would for And fiscal Telematics segment quarterly Products. historically our have with historical the the at XX% the Telematics from going run where than look That's years. is more at the think of was this be done have backlog rate Product don't particular could high, unusual just two you last the it when what at done off quarter. we've

Scott Searle

point would running to seems more down revenue on maybe continue And follow longer-term MRM was Kurt, right? to think, the those the that expectation above, so like you it The given right? quarter. down thought $XX recurring would that on to that stream, come Great. of to it push we're I a million up or get telematics a side, levels But though,

OEM So once -- be higher of there strip Telematics level a sustained to you expect you going is Product that business the running new at out the forward? Company

Kurt Binder

telematics services. our I the doing we as of use device subscription support with only the with multiyear to what considering our makes post-sales to of MRM and sense arrangements. and we've customers mean, communicated devices a services really those think over It I in move the provide business that to past, customers tend objective No. those they're our to XXX% is

still moved ultimately, with this healthy existing revenue, Jeff think that of XX% customers But still in those all -- that's as Telematics And backlog. think I demand get of represent sitting the the Product are to I over we year. within So, then happen that over. mentioned. customers And going category, our that will they're course it's will consolidated of that the

will come time. it come but gradually extended will down, period over down it an of So,

Scott Searle

from how in now, incremental $X.X front? many is And an kind front on conversions was in versus were there idea any of you big figure Are to million us that kind that that those are quarter uptick also calibrate Services have the the I on events the and Great. And it a adds, of possible net one-time us lastly, there subscription non-conversions? if of in give Software on quarter. that the could, sequential Subscription mixed to

Jeff Gardner

part. the any take there to I'll Yes. subscriber -- one-time will respect answer In growth. regarding the first second Kurt part items. the weren't really

benefited we selling in up a think I terms customers well as healthy full solutions conversions. from to pretty new stack both of that our moving logos as success our

the I we're moving something XXs think the quarter. in from XX% in to

things. there. were one-time No two big events those So

Scott Searle

And addition just subscriber the net in mix Okay. quarter?

Kurt Binder

Yes, Scott. Sure.

So I probably coming was where would say it split XX-XX, XX% conversion from from have logos. we maybe XX% new like

Operator

next The from Instructions] [Operator comes with question Notter Jefferies. George

Blake Mielke

Notter. Blake is for Mielke This on George

or I From just wish of telematics the towards XX% congratulate wanted you're remaining First, to what converted to rather -- you customers. good larger saying, customers luck, forward. be Kurt, moving sounds like tilts it

expect we I remaining should So And the have larger these opportunity XX%? be to total than a with follow-up. then customers

Jeff Gardner

a you will maybe swoop. Well, there's of of large customers tail in but couple kind of bring one a also bit, there's think over smaller our the in I But there. that misheard customers me little fell

of and quarter, we over are customers. larger brought said Localiza as Trimble, So, this two brought in which our over script we we our --

also improved to seeing really customers. in the this work now, of capability. we've to our They're the terms we because I So, of in a they it's be are a switching of subscription couple ones, science -- that but terms model There bit which little their in tail is utilize of the we important front that software down small got tend but how a much to tremendous us. benefit have earlier, what giving that mentioned that large thing is we have to mix both of with

now versions. teams technical are it's hat and these that sales to old Our drive

Blake Mielke

And into price price Okay. terms when should for the is additional rounds fully those we this in of of increases to increases, there model? at then work expect point? any And evaluation

Jeff Gardner

purchase able when that we access been so go to something and We've offset, especially pass to price some and used in are costs our demand. on PPV steadily to we that that to we've steadily term -- buys high we or those customers. Well, out opportunistically done internally -- spot do variance low products we've

we price bit does some the see. of that Now the little a PPV behind lag increases

see look rest see the as throughout continue think in pressure. you'll use year, to of our opportunities to as offset cost I is both strategically increases And inflation other some BOMs use of So, the price a us in increase and we that that our tool. PPV to help to

Operator

no are time. queue There at questions the currently in this waiting

it back Excuse management to So, remarks. I'll pass the me. for closing team any

Jeff Gardner

Thank on okay. joining you for us the --

us. teasing You're

ahead, please. Go Okay.

Operator

Apologies. the closing proceed It they you remove with remarks. question, seems their may

Jeff Gardner

the No CalAmp. for us and on in worries. continued Thank interest today for call your joining you

look call. to customer we We half a transition look further the new focused remain our expanding revenue. second earnings of SaaS in Operator, global our quarter with drive you fiscal As program may into our higher the future recurring now third to you. securing of level we progress call XXXX Thank our logos sharing disconnect on you year, and forward during December.

Operator

This QX Conference concludes the participation. your CalAmp Fiscal Year Earnings XXXX Call. Thank for you

lines. your disconnect now may You