CalAmp(CAMP) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements CalAmp's Q1 FY2022 saw $79.7 million in revenue, an 8.1% increase, and a narrowed net loss of $1.9 million, aided by a $4.1 million gain from discontinued operations Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Account | May 31, 2021 | February 28, 2021 | | :--- | :--- | :--- | | Total current assets | $203,813 | $214,288 | | Total assets | $420,664 | $433,805 | | Total current liabilities | $96,310 | $107,245 | | Total liabilities | $324,937 | $338,720 | | Total stockholders' equity | $95,727 | $95,085 | Condensed Consolidated Statements of Comprehensive Loss Statement of Comprehensive Loss Summary (in thousands, except per share amounts) | Metric | Three Months Ended May 31, 2021 | Three Months Ended May 31, 2020 | | :--- | :--- | :--- | | Total revenues | $79,674 | $73,731 | | Gross profit | $32,447 | $29,105 | | Operating loss | $(1,230) | $(2,081) | | Net loss from continuing operations | $(6,000) | $(6,588) | | Net income (loss) from discontinued operations | $4,052 | $(7,834) | | Net loss | $(1,948) | $(14,422) | | Basic loss per share - continuing operations | $(0.17) | $(0.19) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended May 31, 2021 | Three Months Ended May 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $78 | $5,941 | | Net cash provided by (used in) investing activities | $3,523 | $(3,091) | | Net cash used in financing activities | $(813) | $(7,712) | | Net change in cash and cash equivalents | $1,560 | $(3,333) | | Cash and cash equivalents at end of period | $96,184 | $104,071 | Notes to Unaudited Condensed Consolidated Financial Statements - The COVID-19 pandemic negatively impacted revenues through fiscal 2021 due to postponed capital expenditures by customers and created global supply shortages of certain components[22] - As of May 31, 2021, the company had estimated remaining performance obligations for contractually committed revenues of $144.3 million, with approximately 47% expected to be recognized in fiscal 2022[40] Revenue Disaggregation (in thousands) | Revenue by Type | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Telematics devices and accessories | $51,997 | $47,921 | | Recurring application subscriptions | $24,067 | $23,792 | | Rental income and other services | $3,610 | $2,018 | | Total | $79,674 | $73,731 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Revenue grew 8.1% to $79.7 million, driven by 26.2% growth in Software & Subscription Services, offsetting a decline in Telematics Products due to supply shortages, while the LoJack North America sale generated $6.6 million Revenue by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Software & Subscription Services | $35,043 | $27,773 | 26.2% | | Telematics Products | $44,631 | $45,958 | (2.9%) | | Total | $79,674 | $73,731 | 8.1% | - The decrease in Telematics Products revenue was attributed to global supply imbalances and shortages of silicon wafers and other components, which limited the company's ability to fulfill customer orders[149] - The company sold its LoJack North America business to Spireon, receiving net proceeds of $6.6 million and recognizing a gain on sale of $5.0 million[143] Adjusted EBITDA by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Software & Subscription Services | $5,894 | $6,473 | (8.9%) | | Telematics Products | $3,632 | $3,215 | 13.0% | | Corporate Expenses | $(1,141) | $(1,397) | (18.3%) | | Total Adjusted EBITDA | $8,385 | $8,291 | 1.1% | Quantitative and Qualitative Disclosures About Market Risk The company faces minimal foreign currency exchange risk from international operations and no material interest rate risk from its short-term investment portfolio - The company has international operations, which creates exposure to market risks from changes in currency exchange rates; the aggregate foreign currency transaction impact was de minimus for the quarter[192] - Interest rate risk is primarily related to the investment portfolio of fixed debt securities and money market funds; due to the short-term nature of the portfolio, management does not believe a sudden change in interest rates would have a material effect[194][195] Controls and Procedures Management affirmed the effectiveness of disclosure controls and procedures, noting ongoing modifications due to a phased ERP system implementation - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[198] - The company is undergoing a phased implementation of a new ERP system, which has led to modifications and implementation of new internal controls over financial reporting[199] PART II – OTHER INFORMATION Legal Proceedings The company faces ongoing patent infringement claims, with a $2.2 million accrued liability for Omega and an unestimable, reasonably possible loss for Philips - Omega patent infringement claim: The company has accrued its best estimate of probable liability of $2.2 million; however, it is reasonably possible that a prior judgment could be upheld, resulting in losses up to $3.2 million in excess of the accrued amount[125] - Philips patent infringement claim: Philips filed four separate legal actions alleging infringement of 3G and 4G wireless patents; while a loss is reasonably possible, it is not reasonably estimable at this time[128][130] Risk Factors This section directs readers to the Annual Report on Form 10-K for a comprehensive discussion of material risk factors - The report directs readers to the Risk Factors section of the Annual Report on Form 10-K filed on April 22, 2021, for a full discussion of potential risks[203] Unregistered Sales of Securities and Use of Proceeds The company acquired 49,981 common shares in Q1 FY2022, primarily from employees surrendering stock for tax withholding upon restricted stock vesting Share Repurchases in Q1 FY2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 2021 | - | - | | April 2021 | - | - | | May 2021 | 49,981 | $13.87 | | Total | 49,981 | $13.87 | - The shares purchased represent common stock surrendered by employees to the company to satisfy tax withholding requirements upon the vesting of restricted stock[204]