With the stock price of CalAmp (CAMP 3.12%) down more than 50% over the past year, to say its been a rough ride for shareholders would be an understatement.
But matters went from bad to worse for the machine-to-machine (M2M) communications leader after its more than 30% drop in the month of May, driven by a combination of its mixed fiscal fourth-quarter 2019 report and the analyst downgrades that followed it.
With its fiscal Q1 2020 report slated for release on June 27, the question on many investors' minds will be whether CalAmp can stem its losses in the near term. Here are a few specifics that will bear watching when those latest results hit the wires.
The sources of CalAmp's struggles
Revenue last quarter declined 11% to $84.4 million, and fell short of expectations. That was largely due to headwinds facing CalAmp's core telematics systems segment, where sales dropped 16.5% to $65.4 million. But sales were also held back by what management described as "lingering supply chain challenges," particularly as the company shifts away from manufacturers in China to mitigate the impact of the tariffs that President Trump has imposed on imports from that country.
To that end, noting Caterpillar is one of CalAmp's largest customers in the telematics space, analysts on Wall Street subsequently voiced concerns about how the company would be affected by a cyclical slowdown in the truck and construction end-markets. The extent to which growth from new partnerships -- including a recent deal with TransUnion to launch a new stolen vehicle recovery service in early May -- can offset these headwinds remains to be seen.
On the other hand, CalAmp has seen success finding growth and driving higher-margin recurring sales -- both organically and through a bevy of recent acquisitions -- within its budding software and subscription services segment. There, its worldwide subscribers exceeded 1 million last quarter, and revenue increased 18% (albeit from a much smaller base) to $19 million.
On the headline numbers, looking forward
Altogether, CalAmp's current guidance calls for fiscal Q1 revenue in the range of $84.5 million to $89.5 million, which at the midpoint would be modestly decelerated decline of 8.3% from $94.9 million in the year-ago period. On the bottom line, management says that should translate to adjusted earnings per share of $0.06 to $0.12, a steeper drop from the $0.29 per share a year it delivered earlier.
Assuming the company's results fall within those guidance ranges, investors should watch for any changes to its full fiscal-year outlook for revenue of $382.4 million to $387.4 million, up 5.2% at the midpoint. Of note: Thanks in no small part to acquisitions, this range assumes annual software and subscription services revenue will climb to approximately $120 million, or more than 30% of total sales.
Of course, the market wasn't exactly pleased with that outlook when CalAmp provided it. So a beat-and-raise performance next week would be an ideal way to prove the company is on its way to returning to sustained, profitable growth. But to do so, CalAmp will need to show it has what it takes to resolve its supply chain issues, and buck the broader macroeconomic weakness facing its core markets.