CalAmp (NASDAQ:CAMP) released fiscal second-quarter 2020 results on Thursday after the markets closed, detailing positive trends within its telematics systems segment, encouraging contributions from acquired businesses, and the continued outperformance of its burgeoning software and subscription services offerings. 

After initially climbing in early after-hours trading in response, however, shares of the machine-to-machine (M2M) communications specialist turned sharply lower as the market absorbed its seemingly conservative forward earnings guidance. Let's dig deeper, then, for a better idea of how CalAmp finished its first half, as well as what investors should be watching in the coming months.

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IMAGE SOURCE: GETTY IMAGES.

CalAmp results: The raw numbers

Metric

Fiscal Q2 2020*

Fiscal Q2 2019

Growth

Revenue

$93.2 million

$96.0 million

(2.9%)

GAAP net income (loss)

($7.4 million)

($0.9 million)

N/A

GAAP earnings (loss) per diluted share

($0.22)

($0.02)

N/A

Data source: CalAmp. *For the quarter ended August 31, 2019. GAAP = generally accepted accounting principles.

What happened with CalAmp this quarter?

  • Adjusted for one-time items like stock-based compensation and acquisition costs, CalAmp generated non-GAAP adjusted net income of $4.8 million, or $0.14 per share, down from $11 million, or $0.31 per share a year ago.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 22.2% year over year, to $10.6 million.
  • These results were near the high end of CalAmp's guidance ranges provided in late June, which called for revenue of $89.5 million to $94.5 million, adjusted EBITDA of $7.5 million to $11.5 million, and adjusted earnings per share of $0.08 to $0.14.
  • Telematics systems revenue declined 20% year over year (as expected), to $62 million, driven by lower sales of MRM telematics devices and network and OEM products.
  • Software and subscription services revenue grew 65% year over year, to $31.2 million -- or roughly one third of CalAmp's total revenue -- thanks to acquisitions and growth in LoJack subscription services.
  • Worldwide subscribers increased to 1.3 million, up from 1.2 million last quarter, driven by CalAmp's acquisitions of Tracker, Car Track (formerly LoJack Mexico), and Synovia Solutions.
  • CalAmp is seeing global-enterprise customers like Caterpillar begin to more aggressively retrofit their existing fleets to transition from 3G to LTE connectivity. 
  • Earlier this week, CalAmp announced a partnership with Sprint revolving around intelligent telematics devices and software.
  • CalAmp also secured a partnership with Toyota Italy making LoJack Italia's SVR (Stolen Vehicle Recovery) services available to Toyota vehicles sold in the country.

What management had to say

CalAmp CEO Michael Burdiek noted that the company's results arrived near the top end of guidance with the help of strong software and subscription services growth, adding:

Our recent acquisitions performed well, generating both increased revenue opportunities as well as newly identified cost synergies. Additionally, we are beginning to see the benefits from the 3G to LTE transitions by our Telematics Systems customers, which helped contribute to solid bookings in the quarter. Overall, I am pleased with our progress on key initiatives as we advance our strategic transformation to a global SaaS solutions provider.

Looking forward

Looking ahead to the third quarter of fiscal 2020, CalAmp expects revenue to be in the range of $92 million to $98 million, translating to adjusted EBITDA of $9.5 million to $13.5 million and adjusted earnings per share of $0.11 to $0.17. For perspective -- and this explains the after-hours decline -- consensus estimates predicted higher adjusted net income of $0.20 per share on revenue right around the midpoint of CalAmp's guidance range.

Then again, recall that the market effectively ignored a similarly mixed outlook that came with last-quarter's report. When all is said and done in fiscal Q3, it remains to be seen whether CalAmp will extend its habit of under promising and over delivering on the earnings front. But in isolation, there was little not to like about the momentum CalAmp's overall business demonstrated in the first half.