CalAmp (CAMP) 5 Oct 232024 Q2 Earnings call transcript

Welcome to CalAmp's Second Quarter 2024 Financial Results Conference Call. My name is Cole, and I'll be the moderator for today's call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Logan Lucas, Corporate Strategy and Investor Relations Manager at CalAmp. Logan, you may begin.

to Second welcome Results XXXX and Call. Conference afternoon, CalAmp's Quarter Fiscal Financial Good Corporate Investor Strategy CalAmp. Lucas, Logan I'm and Relations at Manager With Financial Interim Jason CalAmp's us Chief today Officer, Executive President Cohenour, Jikun Officer, and Chief Kim. and are

certain Exchange During statements meaning Act the Act of within of Section and forward-looking of today's XXXX. XXA will XXXX Section XXE the we Securities call, make of of the

and current actual as factors about are result, future other events this expectations predictions, and from based are could to communication. statements to assumptions, Forward-looking subject in materially statements on a Many are forward-looking risks future projections that uncertainties. statements the differ and and events cause

the forward-looking the that call You should results today's statements listen expectations our understanding to disclosed in intentions we plans, and different make. the may with from actual be materially

about differ Securities obligation to the and and disclaims call. discussed the today information filings are specifically this the put actual more to refer forward-looking materially company press company's from the forward-looking not any reliance during factors as release cautioned on that cause to update statements, we that issued please as undue may statements, the earnings statements may results For well forward-looking be Exchange to Commission. with Readers

begin operational of will the session. results call highlights, Jason financial provide question-and-answer today's of more recent review review detailed Now by and with will the company's a a then Jikun followed a

go turn great to CEO, CalAmp's my the is Cohenour. President it pleasure Jason ahead. over that, please call and With Interim Jason, to

testament our I a Jeff for call to and the and us Logan, you will moment heartfelt on by family, to today. thanks of friends you, start Thank condolences teammates taking joining to compassionate passionate put express in of countless to the was late he friend hours and a following leader many. into and kind August. resilience. his following He a CalAmp positivity Jeff Gardner this appreciate had We effort challenges and organization, years, his the team on the hearts but a and life passing for is only these had he and not all passing career this impact in and thoughts unexpected and difficult outreach others The a taking Jeff the CalAmp way. his behalf, few opportunities time. is positive along loved remarkable our his to on received through past truly the ones the and keeping with over has on company

our second to quarter XXXX fiscal mixed company's results. The for year produced results. Moving

with encountered OEM with strength attributed While we including of the customer. continue industrial car fulfillment customer demand few other of connected others the fiscal of volume the saw due inventory many TSP our These in softness to constraints large softness following The and orders rebalancing, TSP the that to parts we a chain years. been we half second and in experience orders continued have the backlogged is XXXX. supply year business, customers, large severe international to past of over

experienced Additionally, process. customers competitive rebalancing our pressures by have inventory complicated the TSP

below they EBITDA than miss. was our was our We Revenue each with the range. $X.X TSPs customers levels are was million, continuing QX the was key QX align of expected million, adjusted demand. revenue as their $XX.X guidance these which work to of within with revenue which Consolidated was driver lower which was inventory range. from guidance

cash million. cost result The flow strength The initiatives. adjusted the cash of from from of company delivered strong primarily $X.X operations also savings operations is flow in and EBITDA

actions from during our we second previous incremental carried of these in expense reductions to half so Some expect initiatives of the see back the were some year. the out quarter,

We the continue to and simplify evaluate refocus, streamline to opportunities business.

value our on with initiatives team focused our customers. front, to On forward continues several the push creation for product

their compliance launched ELD, to example, help we device logging electronic For quarter, streamline our in second customers or the workflows.

our of gross fleet segments. ELD a Our rest in drive margins solution ARPU that suite to plan our management with and leverage increased adds portfolio and to to product integrated fleet we is the

of also our We new X.X successful shipments during the commercial and first quarter commenced Vision installations. solution our dash now have cam

to vision customers fleet with at see our and quarters. coming the months additional commercial expect We traction in

new We logistics operations, of seamless visibility Castores, many their systems, data also from in with to illustrates and integrate wins The both and to data that during CalAmp's into secured ability Castores in-cab the with and tracking a tailored Transportes enterprise asset the highly drive trailer providing Mexico. applications. pull several customers' customer variety largest safety thereby the and unique efficiency insights our integrate across proprietary provides assets their data including different from transportation of solution quarter, leveraging the one to and types compliance. solutions Transportes companies is

to this optimize with We to partnership fleet. embark are Transportes excited of on their management the Castores

Our car relationships expanding large rental by international deliver performance the to strong with customers, connected Europe. OEMs business during driven quarter, particularly in continued automotive and

secure deliver customers, may our BXB Chief and profitable Officer. With we new our as Spain. to the you to markets consistent as expect team, expand We CalAmp seen Revenue regarding the continue news grow of segment growth departure this new such geographical respect have customers to with the

to departure, individuals critical function. this highly elevated response lead we In qualified have to two this

Both generation, been operations. of transition and CEO the success leads leads report the One sales has to members other while team revenue these leaders now the directly seamless. and new customer

news no Our no position met interest news to the CEO at of and high. regarding excellent time. we strategic at search have to in alternatives this we we share some our the ongoing, with report is And while new Similarly, is exploration is ongoing, additional candidates, this have time. additional have search and

since been XX, team believe I've passing. CalAmp that and as can August CEO Jeff's and serving tragic talented I before the in us. the passionate without report opportunity interim hesitation CalAmp of following is the me, for they As

opportunity. addition having has excellent a growing great and assets. In and the company and a base solutions, blue-chip tremendous to large products Including other team, customer a market

flow. the focus, to be team. positive supporting and to and will operationally strive profitable the cash will efficiencies capture I deliver to team will here, be hone customers, supporting am While I as we growth, to be execute I helping and I

to turn over I'll discuss second to in Jikun financial results call that, detail. quarter the With Jikun? more our

and Jason, of commentary this non-GAAP last measures. earnings our for million. The Revenues XX% revenue and include to stepping sequentially reconciliation GAAP million will non-GAAP second from total you, XX% transition. the A references $XX.X was full quarter. included thank up with financial declined quarter the My year-over-year in Thank measures our these is you $XX.X to measure corresponding release. in

to year-over-year provider service sequential Much revenue was our and the driven telematics lower customers. sales by of decline

from inventory TSP increases the than customers by inventories rebalancing offset take by expected. while revenue also Revenue TSP previously the continuing competitive to their longer his our in markets. our mentioned was with our declines were pressures Jason car rebalance customers As expect from industrial remarks, and partially revenue TSP customers their international now end navigating in businesses. this driven to connected decline We

quarter. quarter well the and the million, Recurring ended GSP revenues and driven hardware period decline $XX XX% were unfavorable by and margin application hardware catch-up and backlog for June as accounting been $XX a a million gross mix. quarter backlog was subscription million, The RPO cleanups $XX.X XX% sequentially. The Consolidated last have sequential already decline. driven by fulfillment in $XXX decline that million million the prior was conversions backlog customer respectively. RPO decline compared product margin completed. declined Most hardware at was and driven RPO as volumes lower to declined $XXX,XXX $X gross quarter second the of PO $XXX,XXX sequential by was in and corrections.

implemented $X.X operating over Year-over-year, to $X.X X.X% quarter $X.X of sold OpEx, in but Second a increased flat CapEx. million are compared cash QX and GAAP as FY essentially end $XX.X million. $XX 'XX quarter, equivalents The the cash EBITDA expenses EBITDA QX of had quarter. of starting past sequentially million prior $X or last that 'XX, the months an the of At XX and FY year-over-year. $X.X of we also compared adjusted cost the impact million. increase to only significantly million reductions total declined and million million we our adjusted not was million revenue, $X.X cost by goods our to

million stability our in Compared million Cash increased $X.X well second operations as is capital by volume Cash in a operations, worked by our working favor despite capital prior working flow to excluding from million driven continues QX. prior reductions. in flow strong capital changes cash was cash working flow changes as $X.X flow excluding $X.X from in by was flow net a cost driven the the to and quarter, reductions. be quarter, the Positive $XXX,XXX cash from working capital, quarter. operations, reductions. Unlike sequentially

million, $XXX This on XXXX. availability. million At X% undrawn subject are of to notes customary quarter, have convertible line the tests. end August $XX.X covenant The in the availability is coupon X, due we asset-backed

high-quality the a Our run objective generate to refinancing optimize convertible EBITDA notes. order rate our is in options to for

few growth we market to demonstrated growth significant in rate stabilize has and As we as the EBITDA factors our of with normalization then segment, TSP new revenues, customers. by past believe increases future driven expect by growth over run which ARPU this were initiatives, such as EBITDA and that solution revenues, to return drive X.X been in strong Vision recurring driven and new existing and the including stable. quarters, performance several We introductions

cost continued Improvements historical back levels gross margin, and trending in our to our focus on management.

and have cash will we vigilance with to our flow generation. addition, to cash respect In continue

EBITDA strong it and to positive retire the portion matures. a cash convertible Continued us enable loan will flow as of

From of to actively can for be continue sequentially. we I'll capital expect customers TSP structure. some back play and Jason standpoint, revenues exploring EBITDA down how to a in With through a and our adjusted over range with are additional addition, final business call the to outlook dynamic our FY thoughts. a situation they we turn that, QX options manage and we In 'XX Jason? slightly financing

to assert Thank investors. commitment you, closing, and partners, I will our unwavering In customers, Jikun. employees our

growth. also opportunity ability we see your continued to we and experienced return all you the of ahead, are our have for support to to in challenges, profitable these tremendous While and company. overcome and to obstacles in confident Thanks interest we

open that, your With we call to the questions. Operator? now will

begin [Operator Instructions] Goldman We Q&A Revich question with Jerry will Our is Sachs. session. first now the from

ops. Adam cash flow Nice the This Bubes today. is on for to Jerry from see positive

like how flow this can Just And you cash wondering normalized look trajectory in you about free business? thinking about when you're talk from cash get conversion What free here? does could flow if there? the

Yes.

asked last I me question this quarter also. think Jerry

you for question. your thank So

last that based at been cash excluding flow operations, So statements few you We're cash million quarters can have the right? million changes $X.X from $X this quarter. working capital of range, flow see on the in

we asked you about The that our last free quarter. didn't It capital question flow I at Working stability. quarter. were this quarter. $X.X cash worked favor in million think and last

it should be where need right, I to we that future. project the to and to think, is one, into then be, that our sure revenue make back able

But continued what management is very well as as vigilance you're in experiencing capacity. cost strong from management that

to it's costs will capital generate but we So continue you sure now, on manage we for make that that cash hardest our our working and to right here. the that changes have me can utmost say difficult we be I based sure think to do and

like was subscriber And down revenue sequentially. Software it segment per Subscription the and looks in

wondering Just now should you through of price mix is here true starting ARPU metric? that the core higher forward we And flow path to that What's could going if versus there? impact? through, unpack price versus pieces what's expect the the -- most conversion moving

Yes.

a release. prepared impact That in earnings keep as we in quarter. in recurring commented we was revenue $XXX,XXX our well churn it mind, catch-up corrected that think the remarks So our about I had as

up. -- recurring in corrected had that in We this revenue the the past I should quarter, So caught be higher. we just right? $XXX,XXX errors roughly is accounting some

you'll applications and are Vision business, do a the back think on So ELD. that, new Fundamentally, it's see looking ARPUs a to our better standpoint. and recurring if you we little grow I from coming calculation revenue like

the those We just starting months accelerate good need and ago, into ago, customer months X to very and we're X to quarter. fourth those Vision and interest. we're convert pipeline -- seeing just see launched We

school kids go have to frame fleets. opportunity an of school we'll vacation December during school in those opportunities versus vision time, lot be up more Christmas on customers' and coming us as a during the time the We fit onto buses, able our

I'll in, a bit color. add of I'll then And little add

mix, ELD. come ARPU complete these TSP low a and So going going And that's as count. will, lower customers -- of customers as going win right? if a that's As -- we're at Vision to be ARPU come we those to conversions, subscriber boost higher and customers products ARPU, you to have battle with we as in in like new these those

ARPU. to there So moving couple with a parts of respect

Helpful. segments sequentially. it. color QX are software will up you lastly provide EBITDA revenue What me, guide segment both subscription by down? expecting and then be be And be Could to Got slightly and for there? any adjusted to Or on down we sequentially? the

Yes.

out So you has very again, of we our business. can don't see that the the our a but on break revenue, large TSP subcomponents impact

you're what -- our customers continuing their you'll so is seeing inventory continued And the to positions. rebalance --

terms hope recurring would of better. could do In revenue, that I we

from Scott is question next Our with Searle Ralph.

absolute to questions. wanted this us half the sounds team that Jeff's that I'm more is -- my calibrate OpEx just down. condolences like then will Maybe some Is of number -- you, out the follow there's to there on the and and of his to an extend of follow come your Jason, back expect family untimely up Jikun, normalized with? It up and what would could on that you wondering level earlier coming front, the been year. TSP passing. you that's to on in

Yes.

so mean, were periods that that OpEx various were we of responsible, the on done that people. the to tasks make we had transferred side to appropriate where reductions just cost I had were year. implemented most that transition We in So sure the the employees earlier

going you're not little lot, a just to -- going to and not be I down So little see it's it but $X.X quarter-over-quarter, a it's bit. million mean, should a be but

'XX, it's did Those million, I I XXXX, and we $XXX In terms did normalization are you can million 'XX, $XXX in of Yes. of we tell historical we I million right? did TSPs. numbers. TSPs. in $XX mean mean

figure customers need we that? as whether there that's our when sustainable obviously, and back or feedback and You to get information. Jason, out, us not, thoughts can provide on any

Yes.

color, mean on I was more little the QX. Scott, TSPs. of considerably expected was in we a that it than the softer our part Just business

down and QX from from considerably run down historical rates. So considerably

competitive be inventory thing, we -- our Scott, stability uncertainty and bit operate we're hoping So a to in keep conscious little a and we're an we candid, inventory to pretty need to that in believe the but around that are competitive environment, marketplace. we're But through compete this So channel, as should we're also We're of around very fact from and levels here, TSPs rebalancing our we battling here. a there's of the where of can that TSPs on be still grow eye right? well. ability

our in it know getting us will QX more come. we're arms and say would quarters Obviously, in I that we So around the that. surprised

be relates that? model line tightened been little has where as the OpEx Okay. I'm and we start a now you've you the like it a be to to implies you to or of close in timing it otherwise you going to and Very helpful. current subscription. transition And are guess as as be to what my Currently, convert getting little quarters handle seems are as I that, about higher follow-up, in do EBITDA But perhaps get think that able XX, about you terms It several about and little bit to more if and EBITDA more unfair to up. more a doing given than that XX top convert? events. from Because to fully refinance out think got EBITDA or today. to able could bit bit wondering we get got quarterly talk to the to levels need margins

Yes.

have increase been quarter roughly but midpoint in million that -- from been $X $X million some revenues next guidance, would The we million would like, current quarter, have provided revenue if our generated higher. we guidance. the an again, revenue mean direction have I missed $XX So So right? can point you I would

but assumption the you add guidance. our normalized And sometime margin where $XX number a saying a our have is I'm if drops that we the revenue, for of And you that. of feel to can gross You that, a make revenues ] down, kind the [ was future. in get normalize not million be, midpoint that could

you're maximum options In to you're need I'll combination of but we with on well. and on faced add, base to optionality, all have respect respect EBITDA to. cost OpEx that vigilance I levels through get and And COGS with got as come continued Scott. to convert, has the mean, not maximum obviously, to Yes. to not order off and not a growth, just --

next Our Notter with from question is George Jefferies.

monologue? I that guess give guys metrics a in clarification. you the Can in earlier us the backlog metrics referenced you RPO

in that for you minute. dig have I'll you Do Sure. up another question? a

Yes. then what thinking What I obviously, part of as on you growing options convertible the are how here. EBITDA the to about wondering you? I'm options wanted contemplating? of are debt? of wondering go And are just also But guys available the are refinancing to kind you kind kind I'm the just what formula it, of through

Sure.

to back and $XX million quarter. was RPO your million, the our on Anything first that? quarter going question, backlog just the in else I'm So At was $XXX sorry. of end the our hardware

your I'm refinancing about you options. curious no, it? then And about How do just think

sure. Yes, yes, sure,

to financial to us, cash we're off EBITDA and be looking enough, I then that we line. X% might So loans coupon, has It's to might line coupon Right? take it look some of we But on available high going sufficient a very maturity term to it do flow us. revenues RPO And the once ideally, note the to a And increase mean, we've convertible different optionality clear -- the bottom at same valuable, and X% this instruments back, the top got of generate our better X% to it. the EBITDA like I'd at sustainable, you're time, it's have. come more see from the standpoint EBITDA. pay have available get right? to drop at you and EBITDA that So portion types we'll maturity. as more Higher at

levers the on. we to So growth revenue which pull growth, various key might EBITDA operational and provide performance, build is will that

are no questions additional There waiting this at time.

back pass I'll to call So Jason remarks. over Cohenour any the closing for

us Thank to everybody may third your disconnect and Operator, thank for for in you our joining the you to and you We with call earnings call. quarter during continued the today forward very speaking you much, call. on now CalAmp. interest look