| DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”) is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. We solve complex problems for customers within the market verticals of transportation and logistics, commercial and government fleets, industrial equipment, and consumer vehicles by providing solutions that track, monitor, and recover their vital assets. The data and insights enabled by CalAmp solutions provide real-time visibility into a user’s vehicles, assets, drivers, and cargo, giving organizations greater understanding and control of their operations. Ultimately, these insights drive operational visibility, safety, efficiency, maintenance, and sustainability for organizations around the world. We are a global organization that is headquartered in Irvine, California. Basis of Presentation In the opinion of our management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly our financial position at November 30, 2023 and our results of operations for the three and nine months ended November 30, 2023 and 2022. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year ending February 29, 2024. Certain notes and other information included in the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023 are condensed in or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with our 2023 Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on April 28, 2023. All intercompany transactions and accounts have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared with the assumption that the Company will continue as a going concern. Based on our current and projected level of operations, we believe that our future cash flows from operating activities, our existing cash and cash equivalents and our revolving credit facility will provide adequate funds for ongoing operations and working capital requirements for at least the next 12 months. However, our business is subject to various factors that could materially impact our assumptions leading to the future consumption of our available cash. As a subsequent event, on December 15, 2023, the Company entered into a credit agreement under which it borrowed $ 45 million, bearing an interest rate equal to the secured overnight financing rate plus 6.75 % with a maturity date of December 15, 2027 (the "Term Loan"). Concurrent with the Term Loan, the Company paid off the remaining liabilities under its asset-based revolving credit facility and terminated that arrangement. The Company further concurrently entered into a supplemental indenture granting a first priority interest in substantially all the Company's assets to the holders of the 2025 Convertible Notes. Defaults under the Term Loan and supplemental indenture to the 2025 Convertible Notes constitute default events under each respective indebtedness. See Note 15, Subsequent Events , for additional information. Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have considered all known and reasonably available information that existed throughout the three and nine months ended November 30, 2023 in making accounting judgments, estimates and disclosures. Revenue Recognition Revenues from subscription services are recognized ratably on a straight-line basis over the term of the subscription, which generally ranges from two to five years . We recognize revenue from telematics product sales upon the transfer of control of promised products to customers in an amount that reflects the transaction price. Customers generally do not have a right of return except for defective products returned during the warranty period. We record estimated commitments related to customer incentive programs as reductions of revenues. From time to time, we provide various professional services to customers. These services include project management, engineering services and installation services, which are often distinct from other performance obligations and are recognized as the related services are performed. For certain professional service contracts, we recognize revenue based on the proportion of total costs incurred to-date over the estimated cost of the contract, which is an input method. In many customer arrangements, subscription services are bundled with the sale or lease of telematics devices within the same contractual arrangement. To determine the performance obligations under these arrangements, we assess the contractual elements and, in particular, whether the telematics products within the arrangement are distinct. This is an area of judgment that includes the consideration of all elements of the arrangement. Significant factors in determining whether telematics devices are distinct are whether such devices are sold separately, as well as the degree of integration and interdependency between the subscription elements of the arrangement and the associated telematics devices. If we conclude that the telematics devices within a customer arrangement are distinct and therefore represent a separate performance obligation, the total expected consideration associated with the contract is allocated between the performance obligations based upon the relative stand-alone selling price associated with each performance obligation. We base stand-alone selling prices on pricing for the same or similar items. For some customer arrangements, we have concluded that the subscription services and associated telematics devices are not distinct performance obligations and thus represent a single combined performance obligation. For certain other customer arrangements under which devices are leased in combination with subscription services, we consider the arrangement to be predominately a subscription service and thus a combined single performance obligation for purposes of revenue recognition. In both of these circumstances, we generally recognize the total expected consideration as revenue over the term of the subscription. In customer arrangements for which the embedded lease is an operating lease, we utilize the practical expedient that allows for the combining of lease and nonlease components. Device related costs associated with arrangements in which title to the device is transferred to the customer under a single combined performance obligation are recorded as deferred costs on the balance sheet and are amortized into cost of revenues over the term of the subscription or the estimated in-service lives of the devices. In contractual arrangements under which we provide devices as part of the subscription contract but we retain control of the devices, the cost of the devices is capitalized as property and equipment and depreciated over the estimated useful life of three to five years . We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer. The timing of revenue recognition may differ from the timing of our invoicing to customers. Contract assets are comprised of unbilled amounts for which we have transferred products or provided services to our customers and are classified as accounts receivable. Contract liabilities (deferred revenues) are comprised of billings or payments received from our customers in advance of performance under the contract. During the three and nine months ended November 30, 2023, we recognized $ 4.4 million and $ 20.5 million , respectively, in revenue from the deferred revenue balance of $ 36.6 million as of February 28, 2023. Incremental costs of obtaining a contract with a customer consist of sales commissions, which are recognized on a straight-line basis over the life of the corresponding contracts. Sales commissions included in prepaid expenses and other current assets and other assets were $ 1.8 million and $ 2.3 million , respectively, as of November 30, 2023. We disaggregate revenue from contracts with customers into reportable segments, geography, type of goods and services and timing of revenue recognition. See Note 13, Segment Information and Geographic Data , for our revenue by segment and geography. The disaggregation of revenue by type of goods and services and by timing of revenue recognition is as follows (in thousands):
Three Months Ended Nine Months Ended
November 30, November 30,
2023 2022 2023 2022
Revenue by type of goods and services:
Telematics devices and accessories $ 31,217 $ 53,331 $ 114,866 $ 138,420
Rental income and other services $ 4,583 6,307 $ 15,673 17,233
Recurring application subscriptions (1) $ 17,825 19,251 $ 55,691 60,790
Total $ 53,625 $ 78,889 $ 186,230 $ 216,443
Three Months Ended Nine Months Ended
November 30, November 30,
2023 2022 2023 2022
Revenue by timing of revenue recognition:
Revenue recognized at a point in time $ 33,090 $ 57,337 $ 122,850 $ 149,511
Revenue recognized over time $ 20,535 21,552 63,380 66,932
Total $ 53,625 $ 78,889 $ 186,230 $ 216,443 (1) Recurring application subscriptions includes $ 0.0 million and $ 0.5 million during the three months ended November 30, 2023 and 2022, respectively, and $ 0.0 million and $ 1.9 million during the nine months ended November 30, 2023 and 2022, respectively, attributable to the auto vehicle finance business which has been completely wound down. Telematics devices and accessories revenues presented in the table above include devices sold in customer arrangements that include both device and subscription services. Revenues related to recurring application subscriptions include subscription revenues as well as amortization of deferred revenue for contractual arrangements under which the subscription services and associated telematics devices were determined to be a single combined performance obligation. Remaining performance obligations for Software & Subscription Services represents contracted revenue that has not yet been recognized, which includes deferred revenue on our consolidated balance sheets and unbilled amounts that will be recognized as revenue in future periods. As of November 30, 2023 and February 28, 2023, we have estimated remaining performance obligations for contractually committed revenues of $ 186.0 million and $ 234.5 million respectively. As of November 30, 2023, we expect to recognize approximately 19 % of the revenue under these remaining performance obligations in the remainder of fiscal 2024 and 46 % in fiscal 2025 . As of February 28, 2023, we expected to recognize approximately 49 % of the then remaining performance obligations in fiscal 2024 and 27 % in fiscal 2025 . We exclude contracts that have original durations of less than one year from the aforementioned remaining performance obligation disclosure. Cash and Cash Equivalents We consider all highly liquid investments with maturities at date of purchase of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consists of amounts due to us from sales arrangements executed in our normal business activities and are recorded at invoiced amounts or in some cases amounts expected to be invoiced. In addition, this balance includes unbilled amounts as discussed within Revenue Recognition above. Our payment terms generally range between 30 to 60 days of our invoice date with a few exceptions that extend the credit terms up to 90 days, and we do not offer financing options. We present the aggregate accounts receivable balance net of an allowance for doubtful accounts. Generally, collateral and other security is not obtained for outstanding accounts receivable. Credit losses, if any, are recognized based on management’s evaluation of historical collection experience, customer-specific financial conditions as well as an evaluation of current industry trends and general economic conditions. Past due balances are assessed by management on a periodic basis and balances are written off when the customer’s financial condition no longer warrants pursuit of collection. Actual collections may differ from estimated amounts. We group all accounts receivables and lease receivables into a single portfolio and analyze the credit risk associated with our accounts receivables and lease receivables. Our historical loss rates have not shown any significant differences between customer industries or geographies. As disclosed in Note 13, Segment Information and Geographic Data , we do not have significant international geographic concentrations of revenue, and, as a result, we do not have significant concentrations of accounts receivables or lease receivables in any single geography outside of the United States. The allowance for doubtful accounts totaled $ 2.8 million and $ 1.8 million as of November 30, 2023 and February 28, 2023 , respectively. Goodwill and Other Long-Lived Assets Goodwill and long-lived assets to be held and used, including identifiable intangible assets, are reviewed for impairment annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans or changes in anticipated future cash flows. If an impairment indicator is present, we evaluate recoverability by a comparison of the carrying amount of the assets or reporting unit to the estimated fair value of those assets or reporting unit determined using either an income approach, a market approach, or a combination of both. If the assets are impaired, the impairment recognized is the amount by which the carrying amount exceeds the fair value of the assets. As of November 30, 2023 we identified potential impairment indicators relating to the overall decline in our stock price and the performance of certain business units. Overall, our revenue and gross margin performance continued to deteriorate, and our stock price continued to decline during the three and nine months ended November 30, 2023, declining approximately ( 48 %) from the August 31, 2023 closing price and ( 93 %) from the February 28, 2023 closing price to $ 0.32 as of November 30, 2023, reflecting a market capitalization that was below our November 30, 2023 net book value. As of November 30, 2023, the decline in our stock price and other factors were deemed to be sustained, a nd therefore a triggering event as of November 30, 2023 was deemed to have occurred, requiring impairment assessments of our goodwill and long-lived assets to be held and used. In accordance with the accounting guidance within ASC 350, Intangibles – Goodwill and Other ("ASC 350"), and ASC 360, Property, Plant and Equipment , our long-lived assets to be held and used were initially tested to determine if the related assets were recoverable, which required a comparison of undiscounted cash flows of the asset groups to their carrying value. Our long-lived assets to be held and used include our property and equipment, right-of-use assets, and amortizable intangible assets. Triggering events were identified within specific asset groups within the Software and Subscription Services businesses. The Company identified the cash flows for each asset group over a period of time reflective of the remaining useful life of the primary asset within each asset group, along with the cash flows associated with a hypothetical sale of each asset group at the end of the respective periods. Based on this comparison, the sum of the undiscounted cash flows for each asset group was in excess of the respective asset group’s carrying value, and each asset group was deemed to be recoverable with substantial cushion. No additional consideration of impairment of our long-lived assets to be held and used was required. Subsequently, the Company evaluated the impairment of its goodwill by determining the fair value of the Company’s three reporting units using the assistance of a third-party valuation specialist. In accordance with ASC 350, the impairment of goodwill is determined through a comparison of the fair value of a reporting unit compared to the reporting unit’s carrying value; if the carrying value exceeds the fair value of the reporting unit, the difference is to be recognized as goodwill impairment of the reporting unit until such time that the goodwill balance is $ 0 . The fair value of the reporting units was determined using a combination of the income and market approaches. For each reporting unit, we applied a weighting to the fair value determination under each approach in order to determine the fair value of the respective reporting unit. The income approach for each reporting unit used the discounted cash flow method to determine the fair value, which included the following Level 3 significant inputs: projected financial information, income tax rates, and discount rates. The market approach for each reporting unit reflected a fair value calculated by the product of selected public company multiples, Level 3 inputs, and the reporting unit’s revenue and EBITDA. A weighting for each reporting unit was then applied to the fair value results from each method to estimate the fair value of the respective reporting units. In order to ensure the reasonableness of the individual reporting unit’s fair value, we utilized a reconciliation of the market capitalization of the Company as of November 30, 2023, a Level 1 input, to the sum of the fair value of the reporting units with an implied control premium applied. Based on the comparison of the individual reporting unit’s fair value and the respective reporting unit’s carrying value, the estimated fair value of the Tracking & Monitoring Reporting Unit within the Software and Subscription Services segment and the Telematics Reporting Unit within the Telematics segment was $ 67.3 million and $ 14.3 million respectively, compared to carrying values of $ 126.6 million and $ 33.0 million , respectively, as of November 30, 2023. As such, impairment charges related to the Company’s United States operations within these reporting units were recognized in the condensed consolidated statement of operations during the quarter ended November 30, 2023 of $ 74.4 million , reflecting the sum of the difference between the carrying values and fair values of the Tracking & Monitoring Reporting Unit and Telematics Reporting Unit. Fair Value Measurements We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in our financial statements. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly manner in an arm’s-length transaction between market participants at the measurement date. Fair value is estimated by using the following hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. Litigation and Other Contingencies We accrue for litigation and other contingencies whenever we determine that an unfavorable outcome is probable and a liability is reasonably estimable. The amount of the accrual is estimated based on a review of each claim, including the type and facts of the claim and our assessment of the merits of the claim. These accruals are reviewed at least on a quarterly basis and are adjusted to reflect the impact of recent negotiations, settlements, court rulings, advice from legal counsel and other events pertaining to the case. Such accruals, if any, are recorded as general and administrative expenses in our condensed consolidated statements of comprehensive loss. Although we take considerable measures to mitigate our exposure in these matters, litigation is unpredictable; however, we believe that we have valid defenses with respect to pending legal matters against us as well as adequate provisions for probable and estimable losses. All costs for legal services are expensed as incurred. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern over the next twelve months from the issuance of the accompanying consolidated financial statements. The Company is currently listed on the NASDAQ Global Select Market, LLC (“Nasdaq”), a national securities exchange. The Nasdaq requires companies desiring to list their common stock to meet certain listing criteria including total number of shareholders, minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. The Company’s failure to meet such applicable listing criteria could prevent the Company from listing its common stock on the Nasdaq. The Company has received a delisting notice from Nasdaq as the Company’s shares are currently trading below the minimum $1 stock price listing requirement. In addition, at the date of issuance of its interim consolidated condensed financial statements, the Company has measured its compliance with the continued listing criteria set forth in Nasdaq listing rules 5450(a) and 5450(b)(1)-(3) with respect to the minimum market value of publicly held shares, minimum market value of listed securities, and minimum stockholders' equity requirements, and concluded that it was not in compliance with the aforementioned listing standards. The Company has not yet received an additional non-compliance notice from Nasdaq. If the Company’s common stock ceases to be listed on any of The NASDAQ Global Market or The NASDAQ Global Select Market (or any of their respective successors), then a “fundamental change” under the 2025 Convertible Notes would occur. If such a fundamental change under the 2025 Convertible Notes were to occur, holders of the Company’s 2025 Convertible Notes may require the Company to repurchase their 2025 Convertible Notes following the fundamental change at a cash repurchase price generally equal to the principal amount of the 2025 Convertible Notes to be repurchased, plus accrued and unpaid interest. As of November 30, 2023, and through the date the financial statements are issued, the Company believes it has sufficient liquidity to be able to operate its business for at least 12 months following the date that the financial statements are issued. However, as of November 30, 2023 the principal amount of the 2025 Convertible notes plus accrued and unpaid interests is in excess of the Company’s available cash resources. Management concluded that the uncertainties associated with the Company’s ability to cure noncompliance with the Nasdaq listing requirements coupled with the repurchase rights of the 2025 Convertible Note holders under a fundamental change scenario represent conditions raising substantial doubt regarding the Company’s ability to continue as a going concern. In response to these conditions, management intends to request a waiver from the holder of the 2025 Convertible Notes to waive the fundamental change provision in the Convertible Notes agreement and concede the right to require the Company to repurchase the Convertible Notes in the event that the Company is delisted from the Nasdaq. However, these plans have not been finalized and are not within the Company’s control, and therefore cannot be deemed probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. As a subsequent event, on December 15, 2023, the Company entered into a credit agreement under which it borrowed $ 45 million, bearing an interest rate equal to the secured overnight financing rate plus 6.75 % with a maturity date of December 15, 2027 (the "Term Loan"). Concurrent with the Term Loan, the Company paid off the remaining liabilities under its asset-based revolving credit facility and terminated that arrangement. The Company further concurrently entered into a supplemental indenture granting a first priority interest in substantially all the Company's assets to the holders of the 2025 Convertible Notes. Defaults under the Term Loan and supplemental indenture to the 2025 Convertible Notes constitute default events under each respective indebtedness. Defaults under the Term Loan and supplemental indenture to the 2025 Convertible Notes constitute default events under each respective indebtedness. See Note 15, Subsequent Events , for additional information . Foreign Currency Translation We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in accumulated other comprehensive income (loss) during the period. The aggregate foreign currency transaction exchange rate gain (loss) included in determining income (loss) before income taxes was ($ 0.1 ) million and $ 0.6 million for the three and nine months ended November 30, 2023 , respectively. The aggregate foreign currency transaction exchange rate gain (loss) included in determining income (loss) before income taxes was $ 0.5 million and ($ 0.1 ) million for the three and nine months ended November 30, 2022, respectively. Comprehensive Loss Comprehensive loss consists of two components, net loss and other comprehensive loss (“OCI”). OCI refers to revenue, expenses and gains and losses that under GAAP are recorded as an element of stockholders’ equity and excluded from net loss . Our OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency. Recently Issued Accounting Pronouncements, Not Yet Adopted There are currently no accounting standards that have been issued but not yet adopted that we believe will have a significant impact on our unaudited condensed consolidated financial position, results of operations or cash flows. |
