Shares of CalAmp Corp. (CAMP -0.31%) are down around 9% so far in 2015, but that doesn't mean the machine-to-machine communications specialist isn't thriving. In fact, CalAmp stock has already staged two sharp post-earnings rallies this year after its quarterly reports in April and July, but simply couldn't sustain those gains in recent weeks as the broader markets pulled back.
Another large customer
Adding insult to injury was the fact that CalAmp stock was little changed last week after the company revealed a significant new partnership with Toyota Industrial Equipment, or TIE. Under the agreement, CalAmp will provide products installed directly on Toyota Industrial's production line to power its new T-Mtaics MOBILE Vehicle Management System, a fleet management tool for forklifts that operates over public cellular networks.
Not to be confused with Toyota Motor, note that TIE is a division of Toyota Industries Corporation, which itself was spun off from the larger automaker decades ago. With a market cap north of $16 billion, however, and ranked as the largest forklift supplier in the world for the past 12 years, Toyota Industries can arguably hold its own with its former parent.
Its most recent guidance calls for revenue this fiscal year of 2.2 trillion yen, or more than $18 billion. Within that, material handling equipment -- including forklifts, automated guided vehicles, tow tractors, and fleet management services -- should comprise around 955 billion yen, or just less than $7.85 billion of the total.
CalAmp is comparatively small, with a market capitalization around $600 million, and expected full-year revenue of $260 million to $280 million. Even so, it's still unclear exactly how much this deal will contribute to CalAmp's top and bottom lines.
For perspective, we can consider CalAmp's existing agreement with heavy equipment juggernaut Caterpillar. When that agreement was announced in February, 2013, CalAmp stated its role was to provide "ruggedized wireless routers that will enable vital data communications for equipment deployed around the globe." As a result, revenue from Caterpillar came in at approximately $7 million in CalAmp's most recent quarter, and is expected to enjoy further sequential growth later this year. "
All in all, CalAmp CEO Michael Burdiek insisted the Caterpillar deal represents "a significant year-over-year growth opportunity for CalAmp" this fiscal year.
An exciting twist
These two deals have one big difference: While the Caterpillar agreement focuses primarily on hardware, CalAmp will provide hardware and software platform services to power TIE's fleet vehicle management system. Even if Caterpillar's larger scale -- as a behemoth $45 billion company -- means higher hardware unit volumes for CalAmp, the incremental high-margin services provided to TIE could make up for the difference.
Ironically, during last quarter's conference call, Burdiek hinted this might happen:
[O]utside of [Caterpillar] we're seeing a lot of activity, including some piling activities with some of the other larger players around the world. And the engagements are actually extending beyond what we would term just the heavy equipment component of some of those companies' offerings, including some of the heavy duty truck OEMs. And the engagement and the piling activities are in some cases involving more than just a hardware device, which is also exciting for us. [emphasis mine]
If one thing is clear, it's that CalAmp's latest win is merely one of several opportunities it had in the pipeline. As a result -- and at risk of adopting a "What have you done for me lately?" attitude -- you can bet analysts will be pressing for more information on not only the Toyota deal when CalAmp reports fiscal second-quarter results in early October, but also progress on any other prospects with both hardware and software solutions in mind.
