CalAmp Endures Supply Chain and Telematics Headwinds

CalAmp (CAMP +0.00%) released fiscal fourth-quarter 2019 results on Tuesday after the market closed, highlighting lighter-than-expected revenue growth but solid profitability and a number of intriguing acquisitions as the company continues to transition toward its promising recurring subscription and software-as-a-service (SaaS) model.

With shares of the machine-to-machine communications company down around 9% in after-hours trading, let's dig in for a better idea of how CalAmp ended its fiscal year and what to expect in the coming quarters.

IMAGE SOURCE: GETTY IMAGES.

CalAmp results: The raw numbers

DATA SOURCE: CALAMP. *FOR THE QUARTER ENDED FEB. 28, 2019. GAAP = GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 

What happened with CalAmp this quarter?

• Adjusted for items like restructuring costs, stock-based compensation, and -- perhaps most notable -- the benefit of a $16.3 million reversal of a litigation provision this quarter following a favorable ruling in a patent infringement case brought by Omega, CalAmp's (non-GAAP) earnings were $9.4 million, or $0.28 per share, down from $0.30 per share in the same year-ago period.
• Adjusted EBITDA fell 16.4% to $10.9 million.
• These results were mixed relative to CalAmp's latest guidance (provided in December), which called for higher revenue of $86 million to $92 million, EBITDA of $10 million to $14 million, and adjusted earnings per share of $0.23 to $0.29.
• Telematics Systems segment revenue declined 16.5% year over year to $65.4 million, driven by lower MRM telematics and legacy LoJack stolen vehicle recovery product sales.
• Software and subscription services revenue climbed 18% to $19 million, driven by higher fleet management and LoJack subscription service sales.
• Similar to last quarter, revenue growth was also hindered by "lingering supply chain challenges" as the company transitions away from Chinese manufacturers in an effort to offset the impact of tariffs.
• Worldwide subscribers exceeded one million, driven by the recent acquisitions of Tracker Network, Synovia Solutions, and Car Track.
• CalAmp repurchased $10 million of common stock under its $20 million repurchase program during the quarter.

What management had to say

CalAmp CEO Michael Burdiek spoke to the mixed results:

While we are disappointed by our fourth quarter revenue coming in below guidance, we remain on track in our transformation to a SaaS solutions provider with 20% organic revenue growth for the year. Organic growth initiatives, in addition to our three recent acquisitions, put us on course to record $30 million a quarter in Software and Subscription Services recurring revenue by the second half of our current fiscal year, supported by a base of more than one million subscribers worldwide.

Looking forward

For the first quarter of fiscal 2020, CalAmp expects revenue of $84.5 million to $89.5 million -- down from $94.9 million in the same year-ago period -- with adjusted EBITDA of $6.5 million to $9.5 million and adjusted net income per share of $0.06 to $0.12. Most analysts were looking for fiscal first-quarter earnings of $0.25 per share on revenue closer to $91 million. 

Looking out to the full fiscal-year 2020, CalAmp sees software and subscription services revenue climbing to roughly $120 million to comprise more than 30% of its total sales. Telematics System revenue will fall between $25 million and $30 million from $287.4 million last fiscal year -- which equates to an approximate fiscal 2020 revenue guidance range of $382.4 million to $387.4 million, up from $365.9 million in fiscal 2019.

To be fair, the market was already well aware of the acquisitive contributions thanks to financial details CalAmp shared shortly after its Synovia acquisition earlier this month. But between CalAmp's light fiscal Q1 guidance and with shares having rebounded nearly 20% from their March lows, the stock is unsurprisingly pulling back in response.