CalAmp Corp. (CAMP 6.41%) is set to release fiscal third-quarter 2016 results next Tuesday. But that didn't stop the machine-to-machine communications specialist from giving investors an encouraging peek ahead of time.
Late last week, shares of CalAmp jumped after the company revised its outlook for both the quarter and full fiscal year. For fiscal Q3, CalAmp now expects revenue to be in the range of $74 million to $75 million, which was narrowed to the high end of previous guidance for revenue of $71 million to $76 million. CalAmp also anticipates more of each revenue dollar to fall to its bottom line. Quarterly adjusted net income per share should be $0.29 to $0.31, an increase from CalAmp's previous range of $0.26 to $0.30. By contrast, analysts' consensus estimates predicted revenue of $73.7 million, and earnings of $0.29 per share.
CalAmp didn't elaborate on the primary drivers of its new guidance and instead promised full details along with its formal earnings report next week. But in the meantime, last quarter's results might shed some light on the likely causes of CalAmp's relative strength.
Sustained momentum?
If anything, CalAmp's greater-than-expected profitability is an extension of previous trends. CalAmp's consolidated gross margin last quarter, for example, was 36.2%, up from 34.6% in the same year-ago period.
That included gross margin of 37.4% from CalAmp's core Wireless Datacom business, which also enjoyed solid 23.5% year-over-year revenue growth to $25.3 million. For that, investors can largely thank the continued additions of higher-margin fleet subscribers who drove recurring revenue sources to comprise around 15.9% of CalAmp's total revenue, up from 15.6% in the same year-ago quarter.
Meanwhile, revenue fell 11% year over year at CalAmp's Satellite segment to $8 million. But that was also in line with CalAmp's expectations and, thanks to its focus on operational efficiency, marked the segment's highest ever gross margin at 27.6%.
In the end, given CalAmp's latest bottom-line guidance increase, it seems likely it was able to sustain this momentum with solid execution in each of its primary segments in the most recent quarter.
Why so early?
At the same time, however, it's not as though CalAmp's new guidance blew estimates out of the water. And for the full fiscal year, CalAmp only narrowed the top and bottom ends of its previous revenue guidance by $1 million, resulting in the same mid-point but a new range of $282 million to $288 million.
What's more, three months ago CalAmp stock skyrocketed after quarterly results beat expectations by similar margins on both the top and bottom lines. So with less than two weeks until CalAmp's formal earnings report -- and with the caveat shareholders certainly shouldn't be complaining -- the company arguably could have waited until then to release these slightly better-than-expected results.
So why now?
Apart from simply wanting to keep investors in the loop, remember along with its increased guidance CalAmp also unveiled an unsolicited offer to acquire auto-recovery specialist LoJack Corporation (NASDAQ: LOJN) for $5.50 per share in cash. That values LoJack at roughly $113 million, and represents a 58% premium to LoJack's close the day before the announcement. And given CalAmp's relatively small market capitalization at under $700 million as of this writing, that also makes LoJack a relatively large pill for CalAmp investors to swallow -- even if CalAmp is still flush with cash after raising money through a convertible notes offering earlier this year.
I can't help wonderimg, then, whether CalAmp's decision to selectively increase guidance ahead of next week's report was a pre-emptive effort to reassure investors of its continued financial stability.
Noting CalAmp also revealed it has made a total of three all-cash offers to acquire LoJack over the past two years to no avail, it's evident CalAmp really wants this deal to happen in order to solidify its early leadership in the potentially lucrative vehicle telematics industry. For now, though, LoJack has responded by announcing its own "review of strategic alternatives," and insists it is "carefully reviewing and considering" CalAmp's proposal. But by the time CalAmp's quarterly report arrives next week, I won't be the least bit surprised if it's able to discuss the final details of a definitive acquisition agreement.
