When CalAmp Corporation (CAMP 2.75%) released third-quarter results last week that arrived near the high end of expectations, it might have seemed strange at first when shares of the machine-to-machine communications specialist fell 11% the following day. That is, until you realize that the market was underwhelmed by CalAmp's subsequent earnings guidance for the current quarter. CalAmp called for Q4 adjusted earnings of $0.27 to $0.33 per share, Wall Street was modeling a figure closer to the high end of that range.

But considering CalAmp has made a habit of under-promising and over-delivering, investors shouldn't necessarily be too concerned. And I think shareholders would do well to look past the headline numbers and dig deeper in an effort to better understand what's driving CalAmp's business.

To that end, let's take a closer look at five key points management discussed during this quarter's conference call with analysts.

Cityscape with connected nodes indicating wireless communication.

Image source: Getty Images.

1. New and expanded telematics relationships are leading the way

We reported Q3 consolidated revenue of $93.7 million, up 12% year-over-year and at the high-end of our guidance range. Our revenue growth was driven principally by our Telematics Systems business, which grew by building upon our existing base of blue-chip customers including Caterpillar. [...] Our Telematics Systems business had an exceptional quarter with revenues of $77.8 million, up 5% sequentially and 15% year-over-year. -- CalAmp CEO Michael Burdiek (all quotes courtesy of Seeking Alpha)

More specifically within the telematics business, revenue from CalAmp's long-standing relationship with Caterpillar climbed 24% sequentially to $13.2 million, setting a fresh quarterly high mark for sales from the heavy equipment giant. What's more, CalAmp anticipates demand will continue to be "robust" through the next fiscal year thanks to the recovery in Caterpillar's core business and a recent expansion of its partnership with the company.

Investors should also recall that CalAmp only just commenced shipments to another unnamed heavy equipment OEM last quarter. That new customer contributed sales of roughly $1 million in the third quarter, and CalAmp expects that total to continue to grow on a sequential basis in Q4.

2. On continued progress in software and subscriptions

[W]e continued our steady and meaningful progress in the development of our Software and Subscription Service business, with sequential revenue growth to $15.9 million. We feel good about our momentum in this business as we have now formally armed our global sales organizations with a comprehensive suite of SaaS application including AssetOutlook, GovOutlook, FleetOutlook, and the Supply Chain Integrity Command Center, which provide go-to-market opportunities in multiple market verticals. We are starting to see the benefits of these investments amplify our sales pipeline. -- Burdiek

For perspective, CalAmp only formally launched the aforementioned suite of software-as-a-service (SaaS) applications in August, though several of the included items had been launched as stand-alone solutions in previous quarters. AssetOutlook targets the construction asset management market, GovOutlook offers fleet asset tracking and diagnostics for government organizations, FleetOutlook helps larger mixed fleet customers maximize the efficiency of their assets and operations, and CalAmp Supply Chain Integrity (SCI) propels it into the multi-billion-dollar cold chain and supply chain visibility markets.

Noting CalAmp only just won its largest-ever SaaS contract last quarter with an unnamed blue-chip freight company, this quarter it struck another significant SaaS deal with a large state government agency that should add more than 5,000 new fleet management subscribers in the next several quarters. As it stands, CalAmp currently has around 689,000 unique subscribers.

3. On CalAmp's global ambitions

Looking more broadly, global expansion remains the principal focus of ours, and we are making steady progress leveraging our integrated network of sales resources including channel partners and international licensees. We feel that our investments in this area are bearing fruit as we achieved record international revenues of $26.2 million in the third quarter, representing 28% of consolidated revenues driven by ongoing strength in Europe and across Latin America. -- Burdiek

CalAmp's wholly owned LoJack Italian licensee contributed more than their fair share to this quarter's international outperformance, growing revenue 13% year over year. Much of that success, according to Burdiek, came from LoJack Italia's ability to deliver new products that utilize the best of both companies. That includes LoJack Connect, a recently launched SaaS fleet management solution targeting car rental and insurance providers throughout Europe that leverages LoJack's market-leading vehicle recovery technology and CalAmp's own suite of telematics products.

4. A reminder on settlement-related cash flows

Net cash provided by operating activities was $58.7 million through the first nine months of fiscal 2018, which is attributable to our strong cash flows from operations plus the $28.3 million of net proceeds from the favorable settlement earlier this year with the former LoJack's supplier. Pursuant to the settlement, we expect to receive approximately $18 million of additional net proceeds over the next three quarters, thereby further contributing to our strong free cash flows. -- CalAmp CFO Kurtis Binder

As expected, this quarter CalAmp recognized roughly $13 million from its previously announced legal settlement with former LoJack battery supplier EVE Energy, a case concerning quality issues dating back to 2013. CalAmp should receive its next payment in the amount of $13 million in February 2018, followed by a final $5 million payment in June 2018. So while CalAmp will gladly accept the resulting boost to its GAAP results, which will in turn provide added flexibility to invest in extending its technological leadership, investors should know this particularly large influx of cash is only temporary.

5. On that light guidance

I would like to point out that Q3 was much stronger than we anticipated. And some of the opportunities specifically in the OEM area, we expected to hit a little bit later in the year than they did. And so we were able to benefit from that in Q3 and some of that will not be recurring in Q4. But as it relates to the business outlook across the Company, [...] everything feels strong. We've got good momentum on most fronts. I would say the only exception to that is really on the Caterpillar accounting Q4. Although, the outlook there being down sequentially will still be quite strong relative to the prior year period. So overall I would say the outlook is quite bright. -- Burdiek

In short, some of CalAmp's relative outperformance this quarter came from OEM orders arriving sooner than expected. But that also means its light fourth-quarter guidance simply wasn't as weak as the market's sharply negative post-earnings response indicated. If anything, it's a zero-sum game that leaves CalAmp firmly on track with regard to its ambitious long-term growth initiatives. 

The fact that CalAmp stock is still up 46% so far in 2017 likely doesn't help appease its more skittish investors. But for those patient shareholders willing to take advantage of the recent drop and bet on its long-term success, I think CalAmp is still a compelling place to put your investing dollars to work.