Company Quick10K Filing
Calamp
Price10.15 EPS-0
Shares34 P/E-65
MCap347 P/FCF37
Net Debt171 EBIT5
TEV518 TEV/EBIT97
TTM 2019-11-30, in MM, except price, ratios
10-Q 2020-05-31 Filed 2020-06-25
10-K 2020-02-29 Filed 2020-05-06
10-Q 2019-11-30 Filed 2019-12-19
10-Q 2019-08-31 Filed 2019-09-26
10-Q 2019-05-31 Filed 2019-06-28
10-K 2019-02-28 Filed 2019-05-01
10-Q 2018-11-30 Filed 2018-12-20
10-Q 2018-08-31 Filed 2018-09-27
10-Q 2018-05-31 Filed 2018-06-28
10-K 2018-02-28 Filed 2018-05-10
10-Q 2017-11-30 Filed 2017-12-21
10-Q 2017-08-31 Filed 2017-09-28
10-Q 2017-05-31 Filed 2017-06-27
10-K 2017-02-28 Filed 2017-05-15
10-Q 2016-11-30 Filed 2016-12-21
10-Q 2016-08-31 Filed 2016-09-29
10-Q 2016-05-31 Filed 2016-06-29
10-K 2016-02-29 Filed 2016-04-20
10-Q 2015-11-30 Filed 2015-12-22
10-Q 2015-08-31 Filed 2015-10-01
10-Q 2015-05-31 Filed 2015-06-30
10-K 2015-02-28 Filed 2015-04-21
10-Q 2014-11-30 Filed 2014-12-23
10-Q 2014-08-31 Filed 2014-10-06
10-Q 2014-05-31 Filed 2014-07-01
10-K 2014-02-28 Filed 2014-04-24
10-Q 2013-08-31 Filed 2013-10-02
10-Q 2013-05-31 Filed 2013-06-27
10-K 2013-02-28 Filed 2013-04-25
10-Q 2012-11-30 Filed 2012-12-20
10-Q 2012-08-31 Filed 2012-09-25
10-Q 2012-05-31 Filed 2012-06-28
10-K 2012-02-28 Filed 2012-04-26
10-Q 2011-11-26 Filed 2011-12-22
10-Q 2011-08-27 Filed 2011-09-29
10-Q 2011-05-28 Filed 2011-06-30
10-K 2011-02-28 Filed 2011-04-28
10-Q 2010-11-27 Filed 2011-01-04
10-Q 2010-08-28 Filed 2010-10-06
10-Q 2010-05-29 Filed 2010-07-08
10-K 2010-02-28 Filed 2010-05-06
10-Q 2009-11-28 Filed 2010-01-07
8-K 2020-07-29 Shareholder Vote
8-K 2020-07-02 Regulation FD, Exhibits
8-K 2020-06-25
8-K 2020-05-28
8-K 2020-05-05
8-K 2020-04-24
8-K 2020-04-21
8-K 2020-04-15
8-K 2020-03-27
8-K 2020-03-20
8-K 2020-03-05
8-K 2020-01-29
8-K 2020-01-09
8-K 2019-11-30
8-K 2019-11-26
8-K 2019-11-04
8-K 2019-10-24
8-K 2019-10-23
8-K 2019-09-30
8-K 2019-08-31
8-K 2019-07-24
8-K 2019-05-31
8-K 2019-05-28
8-K 2019-04-30
8-K 2019-04-12
8-K 2019-04-08
8-K 2019-03-19
8-K 2019-02-28
8-K 2019-02-28
8-K 2019-02-25
8-K 2018-12-10
8-K 2018-12-06
8-K 2018-11-30
8-K 2018-09-27
8-K 2018-08-01
8-K 2018-07-25
8-K 2018-07-20
8-K 2018-07-17
8-K 2018-07-16
8-K 2018-06-27
8-K 2018-05-07
8-K 2018-04-26
8-K 2018-03-30

CAMP 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Description of Business and Summary of Significant Accounting Policies
Note 2 - Acquisitions
Note 3 - Cash, Cash Equivalents and Investments
Note 4 - Inventories
Note 5 - Goodwill and Other Intangible Assets
Note 6 - Other Assets
Note 7 - Financing Arrangements
Note 8 - Restructuring Charges
Note 9 - Leases
Note 10 - Income Taxes
Note 11 - Earnings per Share
Note 12 - Stockholders' Equity
Note 13 - Concentration of Risk
Note 14 - Product Warranties
Note 15 - Other Financial Information
Note 16 - Segment Information and Geographic Data
Note 17 - Legal Proceedings
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-10.5 camp-ex105_175.htm
EX-10.6 camp-ex106_61.htm
EX-10.7 camp-ex107_59.htm
EX-31.1 camp-ex311_7.htm
EX-31.2 camp-ex312_8.htm
EX-32 camp-ex32_9.htm

Calamp Earnings 2020-05-31

Balance SheetIncome StatementCash Flow
0.70.60.40.30.10.02012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.10.0-0.0-0.12012201420172020
Ops, Inv, Fin

10-Q 1 camp-10q_20200531.htm 10-Q camp-10q_20200531.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2020

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

COMMISSION FILE NUMBER: 0-12182

 

CALAMP CORP.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

95-3647070

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

15635 Alton Parkway, Suite 250

 

 

Irvine, California

 

92618

(Address of principal executive offices)

 

(Zip Code)

 

(949) 600-5600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of Each Exchange On Which Registered

Common stock, $0.01 per share

CAMP

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

The number of shares outstanding of the registrant’s common stock as of June 22, 2020 was 34,364,533.

 


 

CALAMP CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MAY 31, 2020

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Financial statements

 

3

 

 

 

 

 

 

 

Condensed consolidated balance sheets (unaudited) as of May 31, 2020 and February 29, 2020

 

3

 

 

 

 

 

 

 

Condensed consolidated statements of comprehensive income (loss) (unaudited) for the three months ended May 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed consolidated statements of cash flows (unaudited) for the three months ended May 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed consolidated statements of stockholders’ equity (unaudited) for the three months ended May 31, 2020 and 2019

 

6

 

 

 

 

 

 

 

Notes to unaudited condensed consolidated financial statements

 

7

 

 

 

 

 

ITEM 2.

 

Management’s discussion and analysis of financial condition and results of operations

 

25

 

 

 

 

 

ITEM 3.

 

Quantitative and qualitative disclosures about market risk

 

31

 

 

 

 

 

ITEM 4.

 

Controls and procedures

 

31

 

 

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

 

Legal proceedings

 

32

 

 

 

 

 

ITEM 1A.

 

Risk factors

 

32

 

 

 

 

 

ITEM 6.

 

Exhibits

 

33

 

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALAMP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

 

 

 

May 31,

 

 

February 29,

 

Assets

 

2020

 

 

2020

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

104,071

 

 

$

107,404

 

Accounts receivable, net

 

 

66,997

 

 

 

72,273

 

Inventories

 

 

36,079

 

 

 

36,778

 

Prepaid expenses and other current assets

 

 

23,334

 

 

 

21,411

 

Total current assets

 

 

230,481

 

 

 

237,866

 

Property and equipment, net

 

 

54,150

 

 

 

55,878

 

Operating lease right-of-use assets

 

 

24,220

 

 

 

20,626

 

Deferred income tax assets

 

 

4,357

 

 

 

4,437

 

Goodwill

 

 

101,419

 

 

 

106,335

 

Other intangible assets, net

 

 

42,725

 

 

 

45,895

 

Other assets

 

 

22,894

 

 

 

24,768

 

 

 

$

480,246

 

 

$

495,805

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

5,490

 

 

$

33,119

 

Accounts payable

 

 

31,841

 

 

 

28,450

 

Accrued payroll and employee benefits

 

 

8,891

 

 

 

9,049

 

Deferred revenue

 

 

33,706

 

 

 

34,704

 

Other current liabilities

 

 

19,050

 

 

 

16,153

 

Total current liabilities

 

 

98,978

 

 

 

121,475

 

Long-term debt, net of current portion

 

 

198,120

 

 

 

177,088

 

Operating lease liabilities

 

 

25,692

 

 

 

24,279

 

Other non-current liabilities

 

 

32,262

 

 

 

35,044

 

Total liabilities

 

 

355,052

 

 

 

357,886

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 3,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $.01 par value; 80,000 shares authorized; 34,362 and 34,322 shares

   issued and outstanding at May 31, 2020 and February 29, 2020, respectively

 

 

344

 

 

 

343

 

Additional paid-in capital

 

 

224,047

 

 

 

220,482

 

Accumulated deficit

 

 

(96,087

)

 

 

(81,531

)

Accumulated other comprehensive loss

 

 

(3,110

)

 

 

(1,375

)

Total stockholders' equity

 

 

125,194

 

 

 

137,919

 

 

 

$

480,246

 

 

$

495,805

 

 

See accompanying notes to condensed consolidated financial statements.

3


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

May 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Products

 

$

53,106

 

 

$

65,763

 

Application subscriptions and other services

 

 

27,109

 

 

 

23,307

 

Total revenues

 

 

80,215

 

 

 

89,070

 

Cost of revenues:

 

 

 

 

 

 

 

 

Products

 

 

35,996

 

 

 

39,806

 

Application subscriptions and other services

 

 

13,166

 

 

 

13,853

 

Total cost of revenues

 

 

49,162

 

 

 

53,659

 

Gross profit

 

 

31,053

 

 

 

35,411

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

6,324

 

 

 

6,886

 

Selling and marketing

 

 

12,886

 

 

 

14,647

 

General and administrative

 

 

13,669

 

 

 

17,484

 

Intangible asset amortization

 

 

1,892

 

 

 

3,040

 

Restructuring

 

 

1,908

 

 

 

 

Impairment loss

 

 

4,289

 

 

 

 

Total operating expenses

 

 

40,968

 

 

 

42,057

 

Operating loss

 

 

(9,915

)

 

 

(6,646

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

Investment income

 

 

18

 

 

 

2,081

 

Interest expense

 

 

(4,077

)

 

 

(5,456

)

Other expense

 

 

(208

)

 

 

(399

)

Total non-operating expense

 

 

(4,267

)

 

 

(3,774

)

Loss before income taxes and equity in net loss of affiliate and related impairment loss

 

 

(14,182

)

 

 

(10,420

)

Income tax benefit (provision)

 

 

(240

)

 

 

2,257

 

Loss before equity in net loss of affiliate and related impairment loss

 

 

(14,422

)

 

 

(8,163

)

Equity in net loss of affiliate and related impairment loss

 

 

 

 

 

(530

)

Net loss

 

$

(14,422

)

 

$

(8,693

)

Loss per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.42

)

 

$

(0.26

)

Diluted

 

$

(0.42

)

 

$

(0.26

)

Shares used in computing loss per share:

 

 

 

 

 

 

 

 

Basic

 

 

34,024

 

 

 

33,381

 

Diluted

 

 

34,024

 

 

 

33,381

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

Net loss

 

$

(14,422

)

 

$

(8,693

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,735

)

 

 

(269

)

Total comprehensive loss

 

$

(16,157

)

 

$

(8,962

)

 

See accompanying notes to condensed consolidated financial statements.

4


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

May 31,

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

$

(14,422

)

 

$

(8,693

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation expense

 

4,910

 

 

 

3,845

 

Intangible asset amortization expense

 

1,892

 

 

 

3,040

 

Stock-based compensation expense

 

3,623

 

 

 

2,543

 

Amortization of discount and debt issuance costs

 

2,753

 

 

 

3,743

 

Impairment loss

 

4,289

 

 

 

 

Noncash operating lease cost

 

1,184

 

 

 

 

Revenue assigned to factors

 

(1,744

)

 

 

(1,109

)

Deferred tax assets, net

 

149

 

 

 

(2,158

)

Equity in net loss of affiliate and related impairment loss

 

 

 

 

530

 

Tax benefits on vested and exercised equity awards

 

 

 

 

56

 

Other

 

289

 

 

 

(69

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

4,961

 

 

 

9,858

 

Inventories

 

505

 

 

 

(4,059

)

Prepaid expenses and other assets

 

(424

)

 

 

1,415

 

Accounts payable

 

2,690

 

 

 

(12,252

)

Accrued liabilities

 

1,703

 

 

 

(2,664

)

Deferred revenue

 

(4,502

)

 

 

422

 

Operating lease liabilities

 

(1,915

)

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

5,941

 

 

 

(5,552

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from maturities of marketable securities

 

6,264

 

 

 

17,506

 

Purchases of marketable securities

 

(6,264

)

 

 

(9,835

)

Capital expenditures

 

(3,091

)

 

 

(4,954

)

Acquisitions, net of cash acquired

 

 

 

 

(63,010

)

Advances to affiliate

 

 

 

 

(530

)

NET CASH USED IN INVESTING ACTIVITIES

 

(3,091

)

 

 

(60,823

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from Paycheck Protection Program Loan

 

10,000

 

 

 

 

Repayment of Paycheck Protection Program Loan

 

(10,000

)

 

 

 

Proceeds from revolving credit facility

 

20,000

 

 

 

 

Repayment of 2020 Convertible Notes

 

(27,599

)

 

 

 

Payments of issuance cost of the revolving credit facility

 

(56

)

 

 

 

Taxes paid related to net share settlement of vested equity awards

 

(80

)

 

 

(219

)

Proceeds from exercise of stock options and contributions to employee stock purchase plan

 

23

 

 

 

97

 

NET CASH USED IN FINANCING ACTIVITIES

 

(7,712

)

 

 

(122

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

1,529

 

 

 

293

 

Net change in cash and cash equivalents

 

(3,333

)

 

 

(66,204

)

Cash and cash equivalents at beginning of period

 

107,404

 

 

 

256,500

 

Cash and cash equivalents at end of period

$

104,071

 

 

$

190,296

 

 

See accompanying notes to condensed consolidated financial statements.

5


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

May 31,

 

 

2020

 

 

2019

 

Total stockholders' equity, beginning balances

$

137,919

 

 

$

205,653

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

Beginning balances

 

220,825

 

 

 

208,541

 

Stock-based compensation expense

 

3,623

 

 

 

2,543

 

Shares issued on net share settlement of equity awards

 

(80

)

 

 

(219

)

Exercise of stock options and contributions to ESPP

 

23

 

 

 

97

 

Ending balances

 

224,391

 

 

 

210,962

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

Beginning balances

 

(81,531

)

 

 

(2,227

)

Cumulative effect of adoption of ASC 326

 

(134

)

 

 

 

Net loss

 

(14,422

)

 

 

(8,693

)

Ending balances

 

(96,087

)

 

 

(10,920

)

 

 

 

 

 

 

 

 

Accumulated other comprehensive income:

 

 

 

 

 

 

 

Beginning balances

 

(1,375

)

 

 

(661

)

Foreign currency translation adjustment

 

(1,735

)

 

 

(269

)

Ending balances

 

(3,110

)

 

 

(930

)

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balances

$

125,194

 

 

$

199,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


CALAMP CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MAY 31, 2020 AND 2019

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

 

CalAmp Corp. (referred to herein as “CalAmp”, “the Company”, “we”, “our”, or “us”) is a global technology solutions pioneer leading transformation to a mobile connected economy. We help reinvent businesses and improve lives around the globe with technology solutions that streamline complex mobile Internet of Things (“IoT”) deployments through wireless connectivity solutions and derived data intelligence. Our software applications, scalable cloud services, and intelligent devices collect and assess business-critical data anywhere in the world from industrial machines, commercial and passenger vehicles, their drivers and contents. We are a global organization that is headquartered in Irvine, California.

Historically, we had two reportable segments, Software & Subscription Services and Telematics Systems. During the first quarter of fiscal 2021, our interim President and Chief Executive Officer, who is our new Chief Operating Decision Maker (“CODM”), realigned our operational structure into three reportable segments: Software & Subscriptions Services, Telematics Products and LoJack U.S. SVR Products. We have recast certain prior period amounts to conform to the way our CODM regularly reviews the segment performance. 

 

In March 2020, the World Health Organization declared the spread of COVID-19 as a pandemic. The full impact of the COVID-19 outbreak is inherently uncertain at the time of this report. The pandemic has resulted in travel restrictions, prohibitions of non-essential activities, disruption and shutdown of businesses and greater uncertainty in global financial markets. We cannot predict the extent to which the COVID-19 outbreak will negatively impact our business or operating results at this time.

 

We have considered all known and reasonably available information that existed as of May 31, 2020, in making accounting judgments, estimates and disclosures. We are monitoring the potential effects of the health care related and economic conditions of COVID-19 in assessing certain matters including (but not limited to) supply chain disruptions, decreases in customer demand for our products and services, potential longer-term effects on our customer and distribution channels particularly in the U.S. and relevant end markets as well as other developments. If the impact results in longer-term closures of businesses and economic recessionary conditions, we may recognize additional material asset impairments, charges for uncollectible accounts receivable in future periods and incur additional restructuring charges.

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 29, 2020 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 2020 Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission on May 5, 2020.

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 May 31, 2020 and our results of operations for the three months ended May 31, 2020 and 2019. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year.

All intercompany transactions and accounts have been eliminated in consolidation.

 

 

Revenue Recognition

We recognize revenue as follows:

 

Products. We recognize revenue from product sales upon transfer of control of promised products to customers in an amount that reflects the transaction price, which is generally the stand-alone selling prices of the promised goods. For product shipments made on the basis of “FOB Destination” terms, revenue is recorded when the products reach the customer. 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.

 

Accessories may also be sold to these customers. We recognize revenue for sales of accessories upon transfer of control to the customer based on stand-alone selling prices.

 

Software-as-a-Service (“SaaS”). We recognize our SaaS revenues and related cost of revenues in our Application subscriptions and other service revenues and cost of revenues on SaaS arrangements that combine various hardware devices over a stipulated service period.

 

7


Our integrated SaaS-based solutions for our fleet management, vehicle finance and certain other verticals provide customers with the ability to wirelessly communicate with monitoring devices installed in vehicles and other mobile or remote assets through our software applications. The transaction price for a typical SaaS arrangement includes the price for the customized device, installation and application subscriptions. We have applied our judgment in determining that these integrated arrangements typically represent single performance obligations satisfied over time.

 

Accordingly, we defer the recognition of revenue for the customized devices that only function with our applications and are sold only on an integrated basis with our proprietary applicable subscriptions. Such customized devices and the application services are not sold separately. In such circumstances, the associated device related costs are recorded as deferred costs on the balance sheet. The upfront fees for the devices are not distinct from the subscription service and are combined into the subscription service performance obligation. Generally, these service arrangements do not provide the customer with the right to take possession of the software supporting the subscription service at any time. Revenues from subscription services are recognized ratably on a straight-line basis over the term of the subscription. The deferred revenue and deferred cost amounts are amortized to application subscriptions and other services revenue and cost of revenues, respectively, on a straight-line basis over the estimated average in-service lives of these devices, which are three years in the vehicle finance and four to five years in the fleet management verticals. In certain fleet management contracts, we provide devices as part of the subscription contracts but we retain control of such devices. Under such arrangements, the cost of the devices is capitalized as property and equipment and depreciated over the estimated useful life of three to five years. The related subscription revenues of these arrangements are recognized as services are rendered. Our deferred revenue under ASC 606 also includes prepayments from our customers for various subscription services but does not include future subscription fees associated with customers’ unexercised contract renewal rights.

 

In certain customer arrangements, we sell or lease vehicle location devices together with related monitoring services as part of the contractual arrangement. The devices leased to our customers are capitalized as property and equipment and being depreciated over the life of the devices. From time to time we sell devices and monitoring services separately to customers and sell similar devices on a stand-alone basis to licensees. Accordingly, we recognize revenues for the sales of the devices upon transfer of control to the customer and recognize revenue for the related monitoring services over the service period. The allocation of the transaction price is based on relative estimated stand-alone selling prices for the devices and the monitoring services.

 

Professional Services. We also provide various professional services to customers. These include project management, engineering services, installation services and an on-going early warning automated notification service, which are typically distinct from other performance obligations and are recognized as the related services are performed. For certain professional service contracts, we recognize revenue over time based on the proportion of total costs incurred to-date over the estimated cost of the contract, which is an input method.

Sales taxes. We have elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within the caption Other current liabilities until remitted to the relevant government authority.

 

Contract Balances. Timing of revenue recognition may differ from the timing on our invoicing to customers. Contract liabilities are comprised of billings to or payments received from our customers in advance of performance under the contract. We refer to these contract liabilities as “Deferred Revenues” in the accompanying condensed consolidated financial statements. During fiscal quarter ended May 31, 2020, we recognized $13.5 million in revenue from the deferred revenue balance of $62.2 million as of February 29, 2020. Certain 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. Prepaid commissions totaled $4.0 million as of May 31, 2020, of which $1.9 million was classified as non-current.

 

We disaggregate revenue from contracts with customers into reportable segments, geography, type of goods and services and timing of revenue recognition. See Note 16 for our revenue by segment and geography. The disaggregation of revenue by type of goods and services and by timing of revenue recognition, which reflect the immaterial corrections as discussed below, was as follows (in thousands):

 

 

Three Months Ended

 

 

May 31,

 

 

2020

 

 

2019

 

Revenue by type of goods and services:

 

 

 

 

 

 

 

Telematics devices and accessories

$

53,106

 

 

$

65,763

 

Rental income and other services

 

2,437

 

 

 

4,430

 

Recurring application subscriptions

 

24,672

 

 

 

18,877

 

Total

$

80,215

 

 

$

89,070

 

8


 

 

 

Three Months Ended

 

 

May 31,

 

 

2020

 

 

2019

 

Revenue by timing of revenue recognition:

 

 

 

 

 

 

 

Revenue recognized at a point in time

$

55,227

 

 

$

69,284

 

Revenue recognized over time

 

24,988

 

 

 

19,786

 

Total

$

80,215

 

 

$

89,070

 

 

Product revenues presented in the table above include devices sold in customer arrangements that include both the device and monitoring services. Recurring application subscriptions revenues include the amortization for customized devices functional only with application subscriptions.

 

Remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue on our condensed consolidated balance sheets and unbilled amounts that will be recognized as revenue in future periods. As of May 31, 2020 and February 29, 2020, we have estimated remaining performance obligations for contractually committed revenues of $135.7 million and $134.5 million, respectively. As of May 31, 2020, we expect to recognize approximately 40% in fiscal 2021 and 28% in fiscal 2022. As of February 29, 2020, we expected to recognize approximately 44% in fiscal 2021 and 26% in fiscal 2022. We have utilized the practical expedient exception within ASC 606 and exclude contracts that have original durations of less than one year from the aforementioned remaining performance obligation disclosure.

 

Revision of Previously Issued Condensed Consolidated Financial Statements. Subsequent to the issuance of the consolidated financial statements for the year ended February 29, 2020, we concluded that the presentation of revenues and cost of revenues should be adjusted to present product and service revenues and the related cost of revenues for each separately in accordance with SEC Regulation S-X, Rule 5-03(b). Additionally, certain historical information in the notes to the condensed consolidated financial statements have been revised to reflect the impact of these corrections. We have determined that the correction of these classification errors is not material to the previously issued consolidated financial statements. The following table summarizes the impact of the immaterial adjustments.

 

 

Three Months Ended May 31, 2019

 

 

As Reported

 

 

Adjustment

 

 

As Corrected

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Products

$

63,559

 

 

$

2,204

 

 

$

65,763

 

Application subscriptions and other services

 

25,511

 

 

 

(2,204

)

 

 

23,307

 

Total revenues

$

89,070

 

 

$

-

 

 

$

89,070

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Products

$

38,548

 

 

$

1,258

 

 

$

39,806

 

Application subscriptions and other services

 

15,111

 

 

 

(1,258

)

 

 

13,853

 

Total cost of revenues

$

53,659

 

 

$

-

 

 

$

53,659

 

 

 

Three Months Ended May 31, 2019

 

 

As Reported

 

 

Adjustment

 

 

As Corrected

 

Revenue by type of goods and services:

 

 

 

 

 

 

 

 

 

 

 

Telematics devices and accessories

$

68,168

 

 

$

(2,405

)

 

$

65,763

 

Rental income and other services

 

1,947

 

 

 

2,483

 

 

 

4,430

 

Recurring application subscriptions

 

18,955

 

 

 

(78

)

 

 

18,877

 

Total

$

89,070

 

 

$

-

 

 

$

89,070

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

Revenue recognized at a point in time

$

68,168

 

 

$

1,116

 

 

$

69,284

 

Revenue recognized over time

 

20,902

 

 

 

(1,116

)

 

 

19,786

 

Total

$

89,070

 

 

$

-

 

 

$

89,070

 

 

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.

9


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. Our payment terms generally range between 30 to 60 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. Although we expect to collect amounts due, actual collections may differ from estimated amounts.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Except for the increase in expected credit losses, we are not aware of any specific event or circumstances that would require an update to our estimates or assumptions or a revision of the carrying value of our assets or liabilities as of the date of this Quarterly Report on Form 10-Q. These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.

During the quarter ended May 31, 2020, we analyzed 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, and, upon adoption of ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13”), we grouped all accounts receivables and lease receivables into a single portfolio. As disclosed in Note 16, 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. As a result of our adoption of ASU 2016-13, we recognized the cumulative effect of initially applying the guidance as a $0.1 million addition to our allowance for doubtful accounts with an offsetting adjustment to accumulated deficit.

The allowance for doubtful accounts totaled $3.6 million and $3.1 million as of May 31, 2020 and February 29, 2020, respectively.

Goodwill and Other Long-Lived Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. We test goodwill for impairment in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other, (“ASC 350”). Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired. ASC 350 provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform an impairment test.

 

In accordance with Accounting Standards Update 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which we adopted in the fourth quarter of fiscal 2020, the impairment test involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, then an impairment loss is recognized in an amount equal to the amount that the book value of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

 

Long-lived assets to be held and used, including identifiable intangible assets, are reviewed for impairment 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 asset group to future undiscounted net cash flows expected to be generated by the lowest level of asset group. If the assets or asset group are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of discounted cash flows. The discount rate used in any estimate of discounted cash flows would be the rate required for similar investment of like risk. In the fourth quarter of fiscal 2020, we determined that the prolonged secular decline in revenues from our legacy LoJack U.S. SVR products coupled with the slower than anticipated market penetration of our telematics solutions in the U.S. automotive dealership channel represented determinate indications of impairment. These factors were further exacerbated by the immediate unfavorable impact that the COVID-19 pandemic has had on the automotive end markets over the past four months. We recorded an impairment loss of $19.1 million during the fourth quarter of fiscal 2020 related to certain intangible assets and other long-lived assets. As the COVID-19 pandemic continues to impact the market and our business operations, we reevaluated the carrying amount of goodwill as well as intangible and long-lived assets supporting these products during the first quarter of fiscal 2021. Based upon our assessment of economic conditions, our expectations of future business conditions and trends, our projected revenues, earnings, and cash flows, we determined that goodwill and dealer relationships utilized in our LoJack U.S. SVR reporting unit were impaired as of May 31, 2020. As a result, we recorded an impairment loss of $3.9 million for goodwill and $0.4 million for dealer relationships during the first quarter of fiscal 2021. Any deterioration in future operating cash flows of this reporting unit may result in further impairment of goodwill and other long-lived assets, including intangible assets.

 

10


We estimate the fair value of goodwill and other long-lived assets including dealership relationships based on discounted cash flow techniques (Level 3 determination of fair value). Significant inputs to the valuation model include:

 

 

estimated future cash flows;

 

growth assumptions for future revenues as well as future gross margin rates, expense rates, capital expenditures and other estimates; and

 

rate used to discount our estimated future cash flow projections to their present value (or estimated fair value) based on our estimated weighted average cost of capital.

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.

Convertible Senior Notes and Capped Call Transactions

We account for our convertible senior notes as separate liability and equity components. We determine the carrying amount of the liability component based on the fair value of a similar debt instrument excluding the embedded conversion option at the issuance date. The carrying amount of the equity component representing the conversion option is calculated by deducting the carrying value of the liability component from the principal amount of the notes as a whole. This difference represents a debt discount that is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component of the notes is included in stockholders’ equity and is not remeasured as long as it continues to meet the conditions for equity classification. We allocate transaction costs related to the issuance of the notes to the liability and equity components using the same proportions as the initial carrying value of the notes. Transaction costs attributable to the liability component are being amortized to interest expense using the effective interest method over the respective term of the notes, and transaction costs attributable to the equity components are netted with the equity component of the note in stockholders’ equity. We account for the cost of the capped calls as a reduction to additional paid-in capital.

Patent Litigation and Other Contingencies

We accrue for patent 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 expense in our condensed consolidated statements of comprehensive income (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.

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 (losses) included in determining income (loss) before income taxes was $0.2 million and $0.4 million for the three months ended May 31, 2020 and 2019, respectively.

 

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss) (“OCI”). OCI refers to revenue, expenses and gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity and excluded from net income (loss). Our OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency.

11


Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments - Credit Losses, or ASC 326. The new standard amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology. We adopted the new allowance for credit losses accounting standard on March 1, 2020 by means of recognizing the cumulative effect of initially applying the guidance as a $0.1 million addition to our allowance for doubtful accounts with an offsetting adjustment to accumulated deficit. See Accounts Receivable and Allowance for Doubtful Accounts above.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. We adopted this standard prospectively effective March 1, 2020. As a result of the adoption, we recorded certain costs, particularly those incurred during the application development phase, related to the implementation of cloud computing arrangements in prepaid expenses which historically had been recorded in property and equipment. Capitalized costs related to cloud computing arrangements for the three months ended May 31, 2020, which are included in prepaid expenses and other current assets on our condensed consolidated balance sheets, were not material.

NOTE 2 – ACQUISITIONS

We acquired LoJack Mexico and Synovia in March 2019 and April 2019, respectively. The following are the final purchase price allocations for the two acquisitions (in thousands):

 

 

 

LoJack Mexico

 

 

Synovia

 

Purchase price

 

 

 

 

 

$

14,306

 

 

 

 

 

 

$

29,500

 

Add debt paid at closing

 

 

 

 

 

 

-

 

 

 

 

 

 

 

20,296

 

Less cash acquired, net of debt assumed

 

 

 

 

 

 

(1,586

)

 

 

 

 

 

 

(889

)

Net cash paid

 

 

 

 

 

 

12,720

 

 

 

 

 

 

 

48,907

 

Add previously held interest

 

 

 

 

 

 

2,021

 

 

 

 

 

 

 

-

 

Fair value of net assets and liabilities assumed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets other than cash

 

$

4,537

 

 

 

 

 

 

$

9,637

 

 

 

 

 

Property and equipment

 

 

3,652

 

 

 

 

 

 

 

24,840

 

 

 

 

 

Customer relationships

 

 

7,000

 

 

 

 

 

 

 

16,700

 

 

 

 

 

Trade name

 

 

-

 

 

 

 

 

 

 

1,600

 

 

 

 

 

Developed technology

 

 

-

 

 

 

 

 

 

 

3,800

 

 

 

 

 

Deferred tax assets

 

 

-

 

 

 

 

 

 

 

2,061

 

 

 

 

 

Other non-current assets

 

 

1,301

 

 

 

 

 

 

 

177

 

 

 

 

 

Current liabilities

 

 

(2,586

)

 

 

 

 

 

 

(4,645

)

 

 

 

 

Due to factors

 

 

-

 

 

 

 

 

 

 

(19,692

)

 

 

 

 

Deferred revenue

 

 

(4,507

)

 

 

 

 

 

 

(4,319

)

 

 

 

 

Deferred tax liability

 

 

(943

)

 

 

 

 

 

 

-

 

 

 

 

 

Total fair value of net assets acquired

 

 

 

 

 

 

8,454

 

 

 

 

 

 

 

30,159

 

Goodwill

 

 

 

 

 

$

6,287

 

 

 

 

 

 

$

18,748

 

 

We paid a premium (i.e., goodwill) over the fair value of the net tangible and identified intangible assets acquired for the two acquisitions as we believe the extensive customer relationships with these businesses will expand our fleet management and vehicle safety services portfolio and increase our customer reach by gaining access to a base of high-value and low-churn subscribers in those geographic regions.

 

We incurred approximately $1.2 million for the acquisition of these entities in fiscal 2020. The acquisition-related costs were primarily legal expenses, which were recorded as part of our general and administrative expenses.

 

Pro forma financial information for the three months ended May 31, 2019 for the acquired companies is not disclosed as the results are not material to our condensed consolidated financial statements.

 

12


LoJack Mexico

 

On March 19, 2019, we acquired LoJack Mexico, the exclusive licensee of LoJack technology for the Mexican market. LoJack Mexico will leverage our telematics and software-as-a-service solutions to expand product offering to its substantial subscriber base as well as serve auto dealers and OEMs, insurance providers and leasing companies throughout Mexico. We purchased the remaining 87.5% of LoJack Mexico shares that we did not own for a cash purchase price of $14.3 million. Our previously held 12.5% equity interest in LoJack Mexico was determined to have a fair value of $2.0 million at acquisition date which resulted in a gain of $0.3 million, which was recorded as investment income for the three months ended May 31, 2019. LoJack Mexico is consolidated with our financial statements effective March 19, 2019 as a component of our Software & Subscription Services reportable segment.

 

The goodwill arising from the acquisition of LoJack Mexico is not deductible for income tax purposes.

Synovia

 

On April 12, 2019, we acquired Synovia, a North American market leader in fleet safety and management for K-12 school bus and state and local government fleets, for a total cash purchase price of $49.8 million. The Synovia acquisition expands our fleet management and vehicle safety services portfolio as well as accelerates our transformation to high-value subscription based services. Synovia is consolidated with our financial statements effective April 12, 2019 as a component of our Software & Subscription Services reportable segment.

 

The goodwill arising from the acquisition of Synovia is deductible for income tax purposes.

NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS

The following tables summarize our financial instrument assets (in thousands):

 

 

As of May 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Classification