CalAmp Stays the Course As Macro Headwinds Persist

Image source: CALAMP CORP.

CalAmp Corp. (CAMP 12.71%) released weaker-than-expected fiscal second-quarter 2017 results Thursday after the market closed. Combined with a cautious outlook given what management describes as weak macroeconomic conditions in North America, its evident that investors aren't pleased, with shares down more than 13% in after-hours trading as of this writing.

But before we get there, let's take a closer look at how CalAmp capped the first half of its fiscal year.

CalAmp results: The raw numbers

YOY: YEAR OVER YEAR. DATA SOURCE: CALAMP CORP.

What happened with CalAmp this quarter?

• On an adjusted basis -- which excludes items such as stock-based compensation and acquisition expenses -- net income grew 2.5% year over year, to $10.1 million and remained flat on a per-share basis, at $0.27.
• Quarterly adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 8.9% year over year, to $12.9 million, while adjusted EBITDA margin fell from 16.9% to 14.2% over the same period.
• By comparison, CalAmp's guidance called for revenue of $90 million to $95 million, adjusted EBITDA of $12 million to $16 million, and adjusted net income per share of $0.25 to $0.31.
• Revenue consisted of:
• 35.6% year-over-year growth in wireless datacom segment sales, to $83.8 million, including $31.9 million from sales of products from recently acquired vehicle-recovery specialist LoJack.
• A 16.5% decline in satellite segment revenue, to $6.7 million.
• Two quarters ago, CalAmp said it would discontinue its satellite operations after key satellite customer EchoStar (SATS 3.50%) opted to discontinue purchases from CalAmp at the end of its current product-demand forecast in August, as part of a supplier consolidation. As such, the satellite segment ceased operations as expected at the end of this quarter.
• Quarterly cash from operations was $11 million.
• As of Aug. 31, cash and equivalents were $117 million, and total debt was $143 million, which is the carrying amount of CalAmp's 1.625% convertible notes in the face amount of $172.5 million.
• CalAmp repurchased roughly 580,000 shares of common stock for $8.5 million during the quarter, leaving $16.5 million remaining under CalAmp's repurchase authorization.

What management had to say

CalAmp CEO Michael Burdiek stated:

The company continues its rapid pace of innovation, expanding its product portfolio and leadership position in the connected vehicle marketplace. Our pipeline of opportunities is very healthy, and we recently won two significant MRM telematics device customers who are expected to contribute to our long-term growth. Although we have been impacted by tough macro conditions in North America, we continue to invest in market-leading telematics solutions, and we remain optimistic that we will see a pick-up in growth from CalAmp's core businesses and new opportunities emerging through LoJack channels.

Looking forward

For the current quarter, CalAmp anticipates revenue of $81 million to $87 million, up from $74.7 million in the same year-ago period. Similar to last quarter's guidance, CalAmp management stated that it remains "cautious in the very near term" given unfavorable macro-conditions in North America, which has once again resulted in soft demand from key customers for MRM telematics products.

"Though CalAmp has experienced weakness through the first half of this year," CalAmp's press release added, "the company is seeing some firming of demand and is optimistic that the company will see MRM product revenues begin to improve later this fiscal year and into 2018."

In the meantime, CalAmp expects current-quarter revenue to translate to adjusted EBITDA of $11 million to $14 million, and adjusted net income per share of $0.24 to $0.30.

Of course, that's little consolation for our impatient market. Though we don't typically pay close attention to Wall Street's short-term demands, keep in mind that analysts' consensus estimates predicted that CalAmp would achieve fiscal third-quarter revenue of $95 million and earnings of $0.31 per share -- both above the high ends of CalAmp's guidance ranges.

So in the end, while it appears CalAmp's long-term growth story remains firmly intact, it's no surprise to see shares trading lower right now.