CalAmp(CAMP) - 2023 Q4 - Annual Report

FORM 10-K Filing Information Registrant Information CalAmp is an accelerated filer, not a well-known seasoned issuer, with $188.4 million market value of non-affiliate shares - CalAmp Corp. is an accelerated filer, not a well-known seasoned issuer[2] Stockholder Information | Metric | Value | | :-------------------------------------- | :---------------- | | Aggregate Market Value (Non-affiliates) | ~$188.4 million | | Common Stock Outstanding (April 24, 2023) | 37,424,904 shares | Documents Incorporated by Reference Portions of the 2023 Proxy Statement are incorporated into Part III, Items 10-14 of this 10-K - Portions of the Proxy Statement for the Annual Meeting on July 27, 2023, are incorporated into Part III, Items 10-14 of this 10-K[2] PART I ITEM 1. BUSINESS CalAmp provides data-driven connected intelligence solutions, transitioning to a subscription model targeting a $62 billion market - CalAmp is a connected intelligence company focused on data-driven solutions for operational performance across various market verticals[122] - The company has an installed base of approximately 10 million devices reporting to its cloud-based platform, CalAmp Telematics Cloud (CTC)[122] - CalAmp is transitioning to a subscription-based business model, bundling services with telematics devices under multi-year contracts, to drive recurring revenue and enhance customer value[13][183][251] - The company operates in a highly fragmented market with an estimated $62 billion total addressable market (TAM)[13][122] Company Overview CalAmp is a connected intelligence company offering data-driven solutions to enhance operational performance via its CTC platform - CalAmp is a connected intelligence company leveraging a data-driven solutions ecosystem to improve operational performance[122] - The company's solutions provide real-time visibility into vehicles, assets, drivers, and cargo, driving operational visibility, safety, efficiency, maintenance, and sustainability[122] - CalAmp's cloud-based platform, CalAmp Telematics Cloud (CTC), manages data from approximately 10 million installed devices globally[122] Our Solutions CalAmp provides flexible solutions centered on its CTC platform, integrating edge computing with SaaS applications and APIs - CalAmp Telematics Cloud (CTC) is the core platform, integrating with edge computing products to provide data and insights via SaaS applications and open APIs[123] - Intuitive SaaS applications address needs for fleets, transportation, logistics, industrial equipment, and K-12 solutions like Here Comes The Bus® and Bus Guardian™[12] - The CalAmp Marketplace offers enhanced contextual information from third-party systems, augmenting core telematics data[12] - The CalAmp Developer Portal facilitates integration with third-party applications through open APIs[12] - Flexible Edge Computing Products, including asset tracking units and wireless gateways, form the foundation for collecting data insights[12] Customer Benefits CalAmp's solutions deliver clear ROI by improving efficiency, cost savings, sustainability, asset tracking, safety, and uptime - Solutions improve efficiency, cost savings, and sustainability by optimizing operations and reducing fuel usage[46] - Enhanced tracking and transparency provide greater understanding of asset, vehicle, and cargo usage[46] - Increased safety and compliance are achieved through monitoring employee behavior and ensuring adherence to governance policies, including K-12 school bus tracking[46] - Better maintenance and increased uptime are enabled by detailed insights into equipment diagnostics, preventing critical failures[46] Growth Strategy – Capitalize on $62B Total Addressable Market CalAmp aims to grow its subscription business by transforming to data-driven insights, targeting a $62 billion TAM - CalAmp is focused on growing its subscription-based business and transforming its model to data-driven insights and application experiences[13] - The growth strategy targets a $62 billion Total Addressable Market (TAM) by driving SaaS business model transformation, launching innovative software solutions (e.g., iOn™, Here Comes the Bus), expanding into key global verticals and geographies (North America, EMEA, LATAM, APAC), and increasing ARPU through fully connected ecosystems[13] Manufacturing and Operations CalAmp utilizes an outsourced manufacturing model with global contract manufacturers, ensuring flexibility and ISO 9001 quality - CalAmp outsources manufacturing to contract manufacturers in Taiwan, Vietnam, Malaysia, Mexico, China, and Hong Kong[15] - The outsourced model provides flexibility, low fixed costs, and adaptability to market changes[15] - The company and its contract manufacturers are ISO 9001 certified, focusing on product quality and supply chain cost reduction[15] Research and Development CalAmp's R&D focuses on innovative telematics products and software, with expenses consistently 8-10% of annual revenues - R&D focuses on innovative telematics products, services, and software for various applications like fleet management and stolen vehicle recovery[16] - The company utilizes a cloud-based telematics application enablement platform and 4G/5G LTE/CatM edge devices[16] Research and Development Expenses (in millions) | Fiscal Year | R&D Expense ($M) | | :---------- | :--------------- | | 2023 | 24.6 | | 2022 | 28.4 | | 2021 | 25.8 | - R&D expenses have ranged between 8% and 10% of annual consolidated revenues over the past three fiscal years[16] Sales and Marketing CalAmp markets globally through direct sales, channel partners, and OEMs, focusing on brand awareness and customer relationships - CalAmp uses a global direct sales organization, channel partner program, and OEM sales organizations for marketing and sales[48] - Sales teams are specialized to serve diverse customer categories, including large global enterprises, small-to-mid-sized companies, and industrial OEM customers[48] - Marketing programs focus on multi-channel product launches, brand awareness, and long-term customer relationships through various digital and traditional channels[48] Competition CalAmp competes in a highly fragmented market with rapid technological change, facing diverse players on multiple factors - CalAmp competes in a highly competitive and fragmented market with rapid technological change[49] - Principal competitive factors include global scale, innovation, reputation, customer service, product quality, functionality, reliability, time-to-market, responsiveness, and price[49] - Competitors range from specialized players (e.g., Geotab, Verizon Connect for fleet; Phillips Connect, Sky Bitz for trailer) to multi-vertical providers (e.g., Keep Truckin', Samsara)[49] Intellectual Property CalAmp protects its IP through patents, trade secrets, and trademarks, holding nearly 300 patents and over 170 trademarks globally - CalAmp protects its intellectual property through patents, trade secret, trademark laws, and contractual restrictions[50] Intellectual Property Portfolio (as of Feb 28, 2023) | Type | Count | | :---------- | :---- | | Patents | ~300 | | Trademarks | >170 | | Patent Apps | ~50 | - The company is not dependent on a single trademark, copyright, or patent[50] Backlog CalAmp's total consolidated backlog was $264 million as of February 28, 2023, with software backlog increasing and device backlog decreasing Consolidated Backlog (in millions) | Category | Feb 28, 2023 ($M) | Feb 28, 2022 ($M) | | :-------------------------------- | :---------------- | :---------------- | | Total Consolidated Backlog | 264 | 285 | | Software & Subscription Services | 234.5 | 202.0 | | Telematics Devices | 29 | 83 | - Software & subscription services backlog grew due to conversion of telematics products customers to multi-year subscription contracts[18] - Telematics devices backlog decreased significantly due to Fiscal 2022 supply shortages and the strategic shift towards bundling devices with multi-year subscription contracts[18] - Approximately 49% of remaining contractual performance obligations are expected to be recognized in Fiscal 2024[18] Governmental Regulation CalAmp is subject to U.S. and foreign environmental and product material compliance regulations, maintaining material compliance - CalAmp is subject to U.S. and foreign laws and regulations concerning environmental discharges, hazardous substances, and product material compliance[131] - The company maintains environmental management systems and believes it is in material compliance with applicable environmental laws[131] Human Capital and Company Culture CalAmp fosters an engaging, diverse, and inclusive work environment, driven by four core values, with 644 employees - CalAmp fosters an engaging, diverse, and inclusive work environment, empowering employees to develop skills and contribute to revolutionary technologies[52][116] - The company's culture is built on four core values: Customer Success, Innovation, Execution, and Inclusion[52][116] Employee Count | Date | Employees | | :-------------- | :-------- | | Feb 28, 2023 | 644 | - None of CalAmp's employees or contract workers are represented by a labor union[133] Corporate Responsibility and Sustainability CalAmp is committed to responsible and sustainable business practices, supporting its people, environment, and communities - CalAmp is committed to responsible and sustainable business practices, supporting its people, environment, and communities[116] - This commitment is demonstrated through sustainability policies, an inclusive workplace, efficient resource use, supply chain management, products that reduce carbon footprints, and an ethics and compliance program[116] AVAILABLE INFORMATION CalAmp provides SEC periodic and current reports, plus corporate governance information, free on its website - CalAmp provides SEC periodic and current reports (10-Q, 10-K, 8-K) free on its website (www.calamp.com)[118](index=118&type=chunk) - The Investor Relations section of the website offers corporate governance information, including guidelines, committee charters, and the Code of Business Conduct and Ethics[118] ITEM 1A. RISK FACTORS CalAmp faces numerous risks including liquidity challenges, operational disruptions, intense competition, cybersecurity, and stock price volatility - CalAmp faces significant cash flow and liquidity risks, including not being cash flow positive and potential inability to fund long-term operations or repay 2025 Convertible Notes[23][26][57] - Operational risks include component shortages, uncertainty in international trade, dependence on significant customers, inflationary pressures, and intense competition[24][31][32][143][144] - The company is vulnerable to cybersecurity breaches, disruptions in third-party wireless networks, and challenges in protecting its intellectual property[24][68][225] - Risks also include the volatility of its common stock price and potential dilution from future equity issuances[25][231][233] Summary of Risk Factors CalAmp's business is exposed to material risks including financial instability, operational challenges, regulatory compliance, and IP protection - Key risks include insufficient cash flow, inability to access additional funds, and challenges in repaying 2025 Convertible Notes[23][24] - Operational risks encompass component shortages, COVID-19 impacts, reliance on sole-source suppliers, dependence on significant customers, inflation, intense competition, and IT system breaches[24] - Regulatory, international expansion, and intellectual property protection risks are also significant[24][25] Risks Related to Our Cash Flow and Liquidity CalAmp faces significant liquidity risks, including not being cash flow positive, potential inability to repay debt, and credit facility restrictions - CalAmp is not cash flow positive and consumed substantial cash in Fiscal 2023, with $41.9 million cash and cash equivalents as of February 28, 2023, a $37.3 million decrease from Fiscal 2022[23][57] - The company may not have sufficient cash to fund conversions or repay its $230.0 million 2.00% 2025 Convertible Notes at maturity[26] - Access to its $50.0 million asset-based revolving credit facility is limited by covenants, including a 1.10 to 1.00 fixed charge coverage ratio if liquidity falls below $40.0 million, and a cash dominion trigger at $25.0 million liquidity[28][29][57] Risks Related to Our Business Operations and Financial Condition CalAmp's operations are impacted by component shortages, trade uncertainties, customer dependence, inflation, competition, cybersecurity, and product delays - Component shortages and international trade uncertainties, particularly with China, adversely impact business operations and financial condition[24][61] - The COVID-19 pandemic has disrupted operations and caused supply shortages, negatively impacting revenues and operating results[30] - Dependence on a few significant customers (some representing over 10% of revenues) and the absence of long-term contracts create revenue vulnerability[143] - Rising inflation increases labor and supply costs, affecting operating expenses and potentially impacting customer and supplier liquidity[32][63] - Highly competitive markets, rapid technological change, and evolving standards pose risks to product acceptance and market share[144][145] - Cybersecurity breaches could damage reputation, customer relationships, and service access, leading to significant costs and liabilities[68][69] - Unpredictable demand fluctuations make efficient business management difficult, potentially reducing gross margins and profitability[65] - Failure to meet product introduction deadlines or predict evolving wireless industry standards could adversely affect the business[73] - Acquisitions and dispositions carry risks of disruption, unanticipated costs, and integration difficulties[35][37][38][66] - Product liability, warranty, and recall claims could increase costs and adversely affect financial results[74] - Disruptions from ERP system initiatives could impact operations, including timely order fulfillment and financial reporting[76] Risks Related to Regulatory and Legal Matters CalAmp faces risks from mandatory regulatory approvals, evolving data privacy laws, and international trade restrictions, increasing compliance costs - Products are subject to mandatory regulatory approvals in the U.S. (FCC) and other countries, with changes potentially increasing compliance costs and unpredictability[79] - Evolving data privacy laws (e.g., GDPR, CCPA) may increase compliance costs or limit solution offerings, potentially harming the business[80][97] - Global operations and international expansion expose CalAmp to diverse regulatory regimes, trade restrictions, economic sanctions, and U.S. laws like the Foreign Corrupt Practices Act[94] - Ongoing changes to U.S. tax, tariff, and import/export regulations, especially concerning China, may negatively affect global economic conditions and CalAmp's business[95] Risks Related to Our Intellectual Property CalAmp's success relies on IP, but protections may be insufficient, and reliance on third-party patents or infringement litigation poses risks - CalAmp's intellectual property protection (patents, trademarks, trade secrets) may be insufficient against competitors' independent development or unauthorized use[98] - Reliance on third-party patents and intellectual property means inability to secure licenses could materially and adversely affect future results[83][99] - Competitors' patents could restrict CalAmp's ability to offer products or lead to costly intellectual property litigation, potentially resulting in lost rights, delayed launches, or substantial damages/royalties[101] Risks Related to Third Parties CalAmp's services depend on third-party wireless networks and AWS, where disruptions could materially and adversely impact operations - CalAmp depends on third-party wireless networks for its telematics products and software services; disruptions or insufficient capacity could decrease sales[225] - Reliance on Amazon Web Services (AWS) for cloud computing services means any disruption would materially and adversely impact operations due to difficulty in switching providers[204] Additional Risks Related to Our Convertible Notes and Indebtedness CalAmp's 2025 Convertible Notes pose risks including liquidity impacts from conditional conversion, negative effects on diluted EPS, and counterparty risk - If the conditional conversion feature of the 2025 Convertible Notes is triggered, CalAmp may be required to make cash payments, affecting liquidity, or reclassify debt as current[205][226] - The accounting method for 2025 Convertible Notes, specifically the 'if converted' method for diluted EPS, may reduce reported diluted earnings per share[202][227] - Capped call, convertible note hedge, and warrant transactions may adversely affect the value of the Notes and common stock, and the company faces counterparty risk if option counterparties default[203][207][229] - CalAmp may incur substantially more debt in the future, potentially diminishing its ability to make payments on the 2025 Convertible Notes[208][230] Risks Related to Our Common Stock and the Securities Market CalAmp's common stock price is highly volatile, influenced by financial performance and market expectations, with risks of dilution and anti-takeover defenses - The trading price of CalAmp's common stock is highly volatile, influenced by various factors including financial performance, market expectations, and global events[231][232][262] - Future issuances of common stock, including conversions of 2025 Convertible Notes, could dilute existing stockholders' ownership interests and decrease the trading price[210][233] - Anti-takeover defenses in the company's charter and Delaware law could prevent acquisition or limit the price investors might be willing to pay[212] - Adverse opinions from securities analysts or failure to meet investor expectations could cause stock price and trading volume to decline[236] - Exclusive forum provisions in bylaws may limit stockholders' ability to obtain a favorable judicial forum for disputes[236] General Risk Factors CalAmp faces general risks from unfavorable global economic conditions, talent retention challenges, internal control failures, and legal proceedings - Unfavorable global economic conditions, including downturns, financial crises, inflation, and rising interest rates, could adversely affect CalAmp's business[223][234] - Success depends on attracting and retaining senior management and technical personnel; loss of these individuals could slow product development[214][237] - Failure to maintain proper and effective internal controls could impair accurate and timely financial statements, harming operating results and investor views[215] - CalAmp may be subject to legal proceedings, including intellectual property infringement and contract disputes, which could have an adverse impact[216][240] - Inability to utilize net operating loss (NOL) and tax credit carryforwards, potentially limited by Section 382 of the Internal Revenue Code, could increase future income tax liability[218][241] - The lack of expected cash dividends on common stock may make the stock less attractive as an investment[224][239] ITEM 1B. Unresolved Staff Comments CalAmp has no unresolved staff comments to report - There are no unresolved staff comments[264] ITEM 2. Properties CalAmp's headquarters are in Irvine, California, with leased facilities across multiple countries, deemed sufficient for 12 months - CalAmp's headquarters are in Irvine, California, with operations in the U.S., U.K., Italy, and Mexico[264] - All properties are leased facilities, and current facilities are deemed sufficient for the next 12 months[264] - The Indianapolis facility, formerly for Synovia operations, was vacated in Fiscal 2021 and is sublet until February 2024[220] Leased Property Locations and Footage | Location | Footage (Square Feet) | | :------------------------ | :-------------------- | | Irvine, California | 23,000 | | Richardson, Texas | 24,000 | | Carlsbad, California | 29,000 | | Eden Prairie, Minnesota | 7,000 | | Guadalajara, Mexico | 3,000 | | Mexico City, Mexico | 17,000 | | Milan, Italy | 10,000 | | Rome, Italy | 2,000 | | London, U.K. | 6,000 | ITEM 3. Legal Proceedings CalAmp is involved in various legal proceedings, including intellectual property and contract disputes, which can adversely impact the company - CalAmp is a defendant in various legal proceedings, including intellectual property claims and contract disputes[244] - Litigation can adversely impact the company due to deferred costs and diversion of management resources[244] - Further details on legal proceedings are in Note 18 of the consolidated financial statements[244] ITEM 4. Mine Safety Disclosures CalAmp has no disclosures related to mine safety - Mine safety disclosures are not applicable to CalAmp[266] PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities CalAmp's common stock trades on Nasdaq under CAMP, with approximately 1,200 stockholders of record, and no cash dividends paid - CalAmp's common stock trades on the Nasdaq Global Select Market under the ticker symbol CAMP[222] Stockholder Information | Metric | Value | | :----------------------------------- | :---------------- | | Stockholders of Record (Apr 24, 2023) | ~1,200 | | Beneficial Owners (estimated) | ~14,000 | - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future; its revolving credit facility also restricts dividend payments[269] - No shares were repurchased by the company, and no unregistered equity securities were sold during the twelve months ended February 28, 2023[271][272] CalAmp Corp. Stock Performance vs. Indices (5-Year Period, $100 Investment) | Years Ended February 28/29, | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :-------------------------- | :--- | :--- | :--- | :--- | :--- | :--- | | CalAmp Corp. | 100 | 59 | 41 | 48 | 30 | 18 | | Nasdaq Composite Index | 100 | 90 | 120 | 187 | 196 | 165 | | Nasdaq Electronic Components| 100 | 99 | 99 | 139 | 153 | 147 | | Nasdaq Telecommunications | 100 | 105 | 116 | 136 | 136 | 117 | ITEM 6. Selected Financial Data This item is not applicable for CalAmp's Form 10-K - This item is not applicable[273] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CalAmp, a connected intelligence company, transitioned to a subscription model, impacting segment revenues and gross margins, while facing liquidity challenges - CalAmp is a connected intelligence company with an installed base of approximately 10 million devices and 1.6 million software and subscription services subscribers worldwide[274] - A strategic shift transitioned a substantial majority of MRM telematics customers to multi-year subscription contracts in Fiscal 2022-2023, driving growth in Software & Subscription Services and a decline in Telematics Products[251] - Consolidated gross profit decreased by $12.9 million (10.6%) in Fiscal 2023 compared to Fiscal 2022, with gross margin decreasing by 420 basis points, primarily due to supply constraints and increased component costs[314] - Net loss from continuing operations in Fiscal 2023 was $32.5 million, compared to $31.1 million in Fiscal 2022, driven by lower gross margins partially offset by reduced operating and interest expenses[294] - Net cash used in operating activities was $22.9 million in Fiscal 2023, and cash and cash equivalents decreased by $37.3 million to $41.9 million as of February 28, 2023, indicating substantial cash consumption[162][301][324] Overview CalAmp is a connected intelligence company providing data-driven solutions, with 10 million devices and 1.6 million subscribers, operating in two segments - CalAmp is a connected intelligence company that leverages a data-driven solutions ecosystem to improve operational performance[274] - The company has an installed base of approximately 10 million devices and 1.6 million software and subscription services subscribers worldwide[274] - CalAmp operates under two reportable segments: Software & Subscription Services and Telematics Products[275] Reportable Segments CalAmp's segments include Software & Subscription Services (cloud-based IoT solutions) and Telematics Products (advanced devices for connected vehicle and industrial IoT) - Software & Subscription Services segment offers cloud-based application enablement and telematics service platforms, bundling devices with services for mobile IoT solutions[276] - Telematics Products segment provides advanced telematics products, including asset tracking units and wireless networking devices, for connected vehicle and industrial IoT markets[277] Recent Developments CalAmp transitioned MRM telematics customers to multi-year subscriptions in Fiscal 2022-2023, boosting S&SS revenue and declining Telematics Products revenue - CalAmp transitioned a substantial majority of MRM telematics customers to multi-year subscription contracts in Fiscal 2022-2023[251] - This shift resulted in growth in Software & Subscription Services revenue and a decline in Telematics Products revenue[251] - The LoJack North America business was sold effective March 15, 2021, and its operations are presented as discontinued operations[252] Revenues CalAmp's revenues are from Software & Subscription Services (SaaS-based, bundled) and Telematics Products (device sales), with professional services recognized as performed - Software & Subscription Services (S&SS) revenues are from SaaS-based solutions bundled with telematics devices, recognized over the subscription period or at a point in time[253] - Telematics Products revenues are from sales of wireless networking devices, recognized upon shipment[253] - Professional services revenues are recognized as services are performed[253] Revenue by Segment (in thousands) | Segment | 2023 ($) | % of Revenue (2023) | 2022 ($) | % of Revenue (2022) | $ Change | % Change | | :----------------------------- | :-------- | :------------------ | :-------- | :------------------ | :--------- | :--------- | | Software & Subscription Services | 184,728 | 62.6% | 154,315 | 52.2% | 30,413 | 19.7% | | Telematics Products | 110,221 | 37.4% | 141,524 | 47.8% | (31,303) | (22.1%) | | Total | 294,949 | 100.0% | 295,839 | 100.0% | (890) | (0.3%) | - Software & Subscription Services revenue increased by 19.7% in Fiscal 2023 due to the transition of MRM telematics hardware customers to multi-year subscription arrangements, with active subscribers increasing by 50%[313] - Telematics Products revenue decreased by 22.1% in Fiscal 2023, primarily due to the conversion of MRM customers to subscription contracts and negative impacts from supply shortages[313] Cost of Revenues Cost of revenues includes personnel, software development, and infrastructure for subscriptions, and raw materials, manufacturing, and supplier costs for telematics products - Cost of revenues for application subscriptions includes personnel, software development, network access, infrastructure, and capitalized device costs[254] - Cost of revenues for telematics products includes raw materials, manufacturing overhead, labor, customs, and other supplier costs[254] - The company negotiates with suppliers to reduce costs and manages inventory for excess and obsolescence[254] Gross Profit Consolidated gross profit decreased by $12.9 million (10.6%) in Fiscal 2023, with gross margin declining to 37.0% due to supply constraints and elevated component costs Gross Profit by Segment (in thousands) | Segment | 2023 Gross Profit ($) | 2023 Gross Margin (%) | 2022 Gross Profit ($) | 2022 Gross Margin (%) | $ Change | % Change | | :----------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Software & Subscription Services | 79,478 | 43.0% | 76,945 | 49.9% | 2,533 | 3.3% | | Telematics Products | 29,533 | 26.8% | 44,941 | 31.8% | (15,408) | (34.3%) | | Gross Profit (Consolidated) | 109,011 | 37.0% | 121,886 | 41.2% | (12,875) | (10.6%) | - Consolidated gross profit decreased by $12.9 million (10.6%) and gross margin decreased by 420 basis points in Fiscal 2023, primarily due to supply constraints and elevated costs for scarce components[314] - Software & Subscription Services gross profit increased by 3.3% but gross margin decreased by 690 basis points due to increased component sourcing costs[314] - Telematics Products gross profit decreased by 34.3% due to lower revenues and higher component sourcing costs[314] Operating Expenses Consolidated operating expenses decreased by $1.7 million (1.2%) in Fiscal 2023 to $133.7 million, with R&D declining and restructuring charges significantly increasing Operating Expenses (in thousands) | Category | 2023 ($) | 2023 % of Revenue | 2022 ($) | 2022 % of Revenue | $ Change | % Change | | :------------------------------ | :-------- | :---------------- | :-------- | :---------------- | :--------- | :--------- | | Research and development | 24,570 | 8.3% | 28,444 | 9.6% | (3,874) | (13.6%) | | Selling and marketing | 47,389 | 16.1% | 48,564 | 16.4% | (1,175) | (2.4%) | | General and administrative | 51,819 | 17.6% | 52,333 | 17.7% | (514) | (1.0%) | | Intangible asset amortization | 5,332 | 1.8% | 5,415 | 1.8% | (83) | (1.5%) | | Restructuring | 4,586 | 1.6% | 600 | 0.2% | 3,986 | 664.3% | | Total Operating Expenses | 133,696 | 45.4% | 135,356 | 45.7% | (1,660) | (1.2%) | - Consolidated R&D expense decreased by 13.6% in Fiscal 2023 due to reduced activities in the Telematics Products business[291] - Consolidated general and administrative expense decreased by 1.0%, primarily due to reduced professional fees, partially offset by $1.9 million in incremental litigation reserves[291] - Restructuring charges increased significantly to $4.6 million in Fiscal 2023 (from $0.6 million in Fiscal 2022) due to cost savings initiatives and write-offs of non-core technology[291][500] Non-Operating Income (Expense) Non-operating income (expense) in Fiscal 2023 included a decrease in investment income and a significant $9.1 million reduction in interest expense due to ASU 2020-06 adoption - Investment income decreased by $0.2 million to $1.0 million in Fiscal 2023[292] - Interest expense decreased by $9.1 million to $6.3 million in Fiscal 2023, primarily due to the adoption of ASU 2020-06, which eliminated the separate accounting for the conversion feature of convertible notes[292] - Other non-operating expense was $1.4 million in Fiscal 2023, mainly from LoJack North America wind-down costs and foreign currency exchange rate fluctuations[292] Income Tax Expense (Benefit) Income tax expense was $1.2 million in Fiscal 2023, primarily from foreign operations, with estimates complicated by tax codes and deferred tax assets - Income tax expense was $1.2 million in Fiscal 2023, an increase from $1.1 million in Fiscal 2022, primarily due to foreign operations[293] - The effective tax rate varies due to income allocation across jurisdictions, tax credits, and changes in valuation allowances[257] Net Income (Loss) from Discontinued Operations, Net of Tax Net income from discontinued operations was $3.2 million in Fiscal 2022 due to the LoJack North America sale, with no such income or loss in Fiscal 2023 - Net income from discontinued operations was $3.2 million in Fiscal 2022, resulting from the sale of the LoJack North America business[320] - No net income (loss) from discontinued operations was reported in Fiscal 2023[178] Overall Profitability Measures CalAmp's net loss from continuing operations increased to $32.5 million in Fiscal 2023, with total Adjusted EBITDA decreasing to $18.1 million - Net loss from continuing operations in Fiscal 2023 was $32.5 million, compared to $31.1 million in Fiscal 2022, driven by lower gross margins partially offset by reduced operating and interest expenses[294] Adjusted EBITDA by Segment (in thousands) | Segment | Feb 28, 2023 ($) | Feb 28, 2022 ($) | $ Change | % Change | | :----------------------------- | :--------------- | :--------------- | :--------- | :--------- | | Software & Subscription Services | 25,374 | 32,979 | (7,605) | (23.1%) | | Telematics Products | (4,275) | (3,990) | (285) | 7.1% | | Corporate Expense | (3,025) | (4,309) | 1,284 | (29.8%) | | Total Adjusted EBITDA | 18,074 | 24,680 | (6,606) | (26.8%) | - Adjusted EBITDA for Software & Subscription Services decreased by $7.6 million due to higher operating expenses and lower gross margins, despite increased revenues[322] - Adjusted EBITDA for Telematics Products decreased by $0.3 million due to lower revenues and gross margins, partially offset by lower operating expenses[322] Liquidity and Capital Resources CalAmp's cash and cash equivalents decreased by $37.3 million to $41.9 million in Fiscal 2023, facing liquidity challenges from cash consumption and $230.0 million convertible notes - Primary cash needs in Fiscal 2023 were for working capital and capital expenditures[324] - Cash and cash equivalents decreased by $37.3 million to $41.9 million as of February 28, 2023, due to substantial cash consumption from operations[324] - The shift to a subscription model elongates the cash conversion cycle, requiring upfront cash outlays for devices[324] - The $50.0 million asset-based revolving credit facility is subject to borrowing base provisions and financial covenants, including a fixed charge coverage ratio and liquidity thresholds[353] - CalAmp has $230.0 million in 2025 Convertible Notes maturing in August 2025, with refinancing dependent on capital markets and financial condition[353] Material Cash Requirements As of February 28, 2023, CalAmp's total contractual obligations were $305.4 million, including $230.0 million for 2025 Convertible Notes and $45.0 million in purchase obligations Contractual Cash Obligations as of February 28, 2023 (in thousands) | Contractual Obligations | Less than 1 year ($) | 1 - 3 years ($) | 3 - 5 years ($) | > 5 years ($) | Total ($) | | :--------------------------------- | :------------------- | :-------------- | :-------------- | :------------ | :-------- | | Convertible senior notes principal | - | 230,000 | - | - | 230,000 | | Convertible senior notes stated interest | 4,600 | 6,900 | - | - | 11,500 | | Operating leases | 5,594 | 8,696 | 3,378 | 1,231 | 18,899 | | Purchase obligations | 44,982 | - | - | - | 44,982 | | Total contractual obligations | 55,176 | 245,596 | 3,378 | 1,231 | 305,381 | - Purchase obligations primarily consist of inventory purchase commitments[300] Cash Flows Net cash used in operating activities was $22.9 million in Fiscal 2023, primarily due to net loss and working capital changes, with $11.1 million used in investing Consolidated Statements of Cash Flows (in thousands) | Cash Flow Category | 2023 ($) | 2022 ($) | 2021 ($) | | :----------------------------------------------------- | :--------- | :--------- | :--------- | | Net Cash (Used in) Provided by Operating Activities | (22,932) | (4,218) | 28,585 | | Net Cash Used in Investing Activities | (11,100) | (7,577) | (13,694) | | Net Cash Used in Financing Activities | (909) | (2,643) | (27,316) | | Effect of Exchange Rate Changes on Cash and Equivalents| (2,352) | (965) | (355) | | Net Change in Cash and Cash Equivalents | (37,293) | (15,403) | (12,780) | | Cash and Cash Equivalents at End of Year | 41,928 | 79,221 | 94,624 | - Net cash used in operating activities was $22.9 million in Fiscal 2023, largely due to the net loss and changes in working capital, particularly increased accounts receivable from new subscription arrangements[301][302] - Net cash used in investing activities was $11.1 million in Fiscal 2023, primarily for capital expenditures[359] - Net cash used in financing activities was $0.9 million in Fiscal 2023, mainly driven by taxes paid for net share settlement of vested equity awards[360] Critical Accounting Estimates CalAmp's financial statements rely on critical accounting estimates for revenue recognition, litigation, goodwill, and income taxes, involving significant judgment - Critical accounting estimates include revenue recognition, patent litigation and loss contingencies, goodwill and long-lived assets, and income taxes[331] - Revenue recognition involves significant judgment in determining distinct performance obligations in bundled contracts (subscription services and telematics devices)[332][333] - Patent litigation and other contingencies require estimating probable losses, with accruals adjusted based on negotiations, settlements, and legal advice[334] - Goodwill and long-lived assets impairment testing involves significant estimates of fair value using discounted cash flow and market approaches, with re-allocation of goodwill due to customer transitions[365] - Income tax estimates require significant judgment in evaluating uncertain tax positions and determining valuation allowances against deferred tax assets, especially concerning net operating loss carryforwards[366] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK CalAmp is exposed to foreign currency and interest rate market risks, with $1.9 million in foreign currency translation losses and minimal impact from interest rate changes - CalAmp has exposure to foreign currency risk from international operations, with a cumulative foreign currency translation loss of $1.9 million as of February 28, 2023[188] - Foreign currency transaction exchange rate losses were $0.1 million in Fiscal 2023[188] - Interest rate risk primarily relates to its marketable securities investment portfolio and variable-rate borrowings under its revolving credit facility[189] - Due to the short-term nature of investments and no outstanding borrowings on the revolving credit facility as of February 28, 2023, immediate interest rate changes are not expected to materially affect operating results or cash flows[189] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents CalAmp's audited consolidated financial statements for Fiscal 2021-2023, with an unqualified opinion from Deloitte & Touche LLP, highlighting critical audit matters - The section includes audited consolidated financial statements: Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, and Cash Flows for the fiscal years ended February 28, 2023, 2022, and 2021[192][603] - Deloitte & Touche LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[192] - Critical audit matters include the significant judgments in estimating the fair value for goodwill impairment of the Telematics Products reporting unit[166][196] - Another critical audit matter is the significant judgment required for revenue recognition in contracts bundling subscription services with telematics devices, specifically determining if performance obligations are distinct[168][170][197] Consolidated Balance Sheets (in thousands) | Assets | Feb 28, 2023 ($) | Feb 28, 2022 ($) | | :---------------------------------------- | :--------------- | :--------------- | | Cash and cash equivalents | 41,928 | 79,221 | | Accounts receivable, net | 82,946 | 61,544 | | Inventories | 23,902 | 18,269 | | Prepaid expenses and other current assets | 26,019 | 22,348 | | Total current assets | 174,795 | 181,382 | | Property and equipment, net | 32,832 | 37,674 | | Operating lease right-of-use assets | 12,293 | 12,327 | | Deferred income tax assets | 3,275 | 4,165 | | Goodwill | 94,214 | 94,436 | | Other intangible assets, net | 26,633 | 31,965 | | Other assets | 36,078 | 29,632 | | Total assets | 380,120 | 391,581 | | | | | | Liabilities and Stockholders' Equity | | | | Current portion of long-term debt | 705 | 2,585 | | Accounts payable | 52,716 | 31,815 | | Accrued payroll and employee benefits | 11,766 | 10,929 | | Deferred revenue | 25,448 | 26,174 | | Other current liabilities | 15,865 | 18,951 | | Total current liabilities | 106,500 | 90,454 | | Long-term debt, net of current portion | 227,416 | 189,703 | | Operating lease liabilities | 12,314 | 13,382 | | Other non-current liabilities | 19,583 | 22,640 | | Total liabilities | 365,813 | 316,179 | | Total stockholders' equity | 14,307 | 75,402 | | Total liabilities and stockholders' equity| 380,120 | 391,581 | Consolidated Statements of Comprehensive Loss (in thousands, except per share amounts) | Revenues: | 2023 ($) | 2022 ($) | 2021 ($) | | :----------------------------------------- | :-------- | :-------- | :-------- | | Products | 188,881 | 182,916 | 193,486 | | Application subscriptions and other services | 106,068 | 112,923 | 115,101 | | Total revenues | 294,949 | 295,839 | 308,587 | | Cost of revenues: | | | | | Products | 127,154 | 119,850 | 129,578 | | Application subscriptions and other services | 58,784 | 54,103 | 56,604 | | Total cost of revenues | 185,938 | 173,953 | 186,182 | | Gross profit | 109,011 | 121,886 | 122,405 | | Operating expenses: | | | | | Research and development | 24,570 | 28,444 | 25,811 | | Selling and marketing | 47,389 | 48,564 | 46,202 | | General and administrative | 51,819 | 52,333 | 49,077 | | Intangible asset amortization | 5,332 | 5,415 | 4,781 | | Restructuring | 4,586 | 600 | 2,534 | | Impairment losses | - | - | 825 | | Total operating expenses | 133,696 | 135,356 | 129,230 | | Operating loss | (24,685) | (13,470) | (6,825) | | Non-operating income (expense): | | | | | Investment income | 989 | 1,175 | 2,119 | | Interest expense | (6,260) | (15,323) | (15,487) | | Other expense, net | (1,383) | (2,443) | (403) | | Total non-operating expenses | (6,654) | (16,591) | (13,771) | | Loss from continuing operations before income taxes | (31,339) | (30,061) | (20,596) |\ | Income tax provision from continuing operations | (1,151) | (1,087) | (561) |\ | Net loss from continuing operations | (32,490) | (31,148) | (21,157) |\ | Net income (loss) from discontinued operations, net of tax | - | 3,157 | (35,152) |\ | Net loss | (32,490) | (27,991) | (56,309) |\ | Loss per share - continuing operations: | | | |\ | Basic | (0.90) | (0.88) | (0.62) |\ | Diluted | (0.90) | (0.88) | (0.62) |\ | Earnings (Loss) per share - discontinued operations: | | | |\ | Basic | - | 0.09 | (1.02) |\ | Diluted | - | 0.09 | (1.02) |\ | Shares used in computing earnings (loss) per share: | | | |\ | Basic | 36,132 | 35,254 | 34,389 |\ | Diluted | 36,132 | 35,254 | 34,389 |\ | Comprehensive loss: | | | |\ | Net loss | (32,490) | (27,991) | (56,309) |\ | Other comprehensive (loss) income: | | |\ | Foreign currency translation adjustments | (543) | (395) | 390 |\ | Total comprehensive loss | (33,033) | (28,386) | (55,919) | ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure CalAmp has no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[580] ITEM 9A. Controls and Procedures CalAmp's disclosure controls and internal control over financial reporting were effective as of February 28, 2023, with an unqualified opinion from Deloitte & Touche LLP - Disclosure controls and procedures were effective as of February 28, 2023[554] - Management assessed and concluded that internal control over financial reporting was effective as of February 28, 2023, based on the COSO framework[555] - Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of CalAmp's internal control over financial reporting[558] - No material changes in internal controls over financial reporting occurred during the fourth quarter of Fiscal 2023[556] ITEM 9B. Other Information No other information is reported under this item - No other information is reported under this item[562] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS CalAmp has no disclosures regarding foreign jurisdictions that prevent inspections - This item is not applicable[588] PART III Item 10. Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[565][589] Item 11. Executive Compensation Information for this item is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[566][589] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[567][589] Item 13. Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[146][565] Item 14. Principal Accounting Fees and Services Information for this item is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[565][601] PART IV ITEM 15. Exhibits, Financial Statement Schedules This section lists consolidated financial statements, including auditor reports and notes, along with a comprehensive list of exhibits and certifications - The report includes consolidated financial statements: Reports of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, Statements of Cash Flows, and Notes to Consolidated Financial Statements[568][603] - A comprehensive list of exhibits is provided, covering material contracts, compensatory plans, and certifications (e.g., CEO/CFO certifications, consent of auditor)[569][570][571][572][594][595][596][597][598] ITEM 16. FORM 10-K SUMMARY No Form 10-K summary is provided - No Form 10-K summary is provided[599]