CalAmp Corp. [CAMP] Filings

10-K 1 camp-20230228.htm 10-K 10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2023

☐ 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 incorporation or organization)		(I.R.S. Employer Identification No.)
		(I.R.S. Employer Identification No.)


15635 Alton Parkway, Suite 250 Irvine, California
15635 Alton Parkway, Suite 250 Irvine, California		92618
(Address of principal executive offices)	(Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 600-5600

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS

TRADING SYMBOL(S)

NAME OF EACH EXCHANGE

$0.01 par value Common Stock

CAMP

The Nasdaq Stock Market LLC
(The Nasdaq Global Select Market)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. Yes ☐ No ☐

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

As of August 31, 2022, the aggregate market value of shares held by non-affiliates of the registrant was approximately $188.4 million. For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 10% or greater stockholders. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 10% or greater stockholders are, in fact, affiliates of our company. As of April 24, 2023, there were 37,424,904 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 27, 2023 are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Form 10-K. This Proxy Statement will be filed within 120 days after the end of the fiscal year covered by this report.

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		Page
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	29
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	29

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	86
Item 9A.	Controls and Procedures	86
Item 9B.	Other Information	88
Item 9C.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	88

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	89
Item 13.	Certain Relationships and Related Transactions, and Director Independence	89
Item 14.	Principal Accounting Fees and Services	89

PART IV
Item 15.	Exhibits, Financial Statement Schedules	90

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PART I

ITEM 1. BUSINESS

Company Overview

CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”) is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. We solve complex problems for customers within the market verticals of transportation and logistics, commercial and government fleets, industrial equipment, K12 fleets, and consumer vehicles by providing solutions that track, monitor, and protect their vital assets. The data and insights enabled by CalAmp solutions provide real-time visibility into a user’s vehicles, assets, drivers, and cargo, giving organizations greater understanding and control of their operations. Ultimately, these insights drive operational visibility, safety, efficiency, maintenance, and sustainability for organizations around the world.

Currently, CalAmp is generating data for a global customer portfolio across an installed base of approximately 10 million devices reporting to our cloud-based platform. The magnitude and diversity of this data generation has played an instrumental role in the development of our flexible and scalable cloud platform, the CalAmp Telematics Cloud™ (“CTC”). CTC’s ability to ingest vast amounts and types of data is critical to the company’s long-term strategy of providing differentiated insights to customers with a wide variety of needs and use cases. The platform also serves as the backbone for CalAmp’s software applications, which offer user-friendly interfaces to interact with the data and insights produced at the edge and in the cloud. Finally, to better address customer needs and enable a focused investment strategy, CalAmp is focused on enabling partnerships with third-party organizations, integrating devices, services, and application features into our consolidated solutions.

CalAmp’s ability to provide a full stack solution to end-users across the globe uniquely positions the company to capitalize on an estimated $62 billion total addressable market (“TAM”). The market in which we compete is highly fragmented, with the majority of competitors serving a range of subsets of CalAmp’s addressable market. We believe that this fragmentation will allow CalAmp to offer unparalleled value through a consolidated solution set. The company is focusing on transforming towards this vision by building out data-driven solutions, a robust portfolio of partners, and a world-class team of people.

The complexity that exists within CalAmp’s operating environment continues to be primarily driven by macro-economic conditions, competitive markets, global regulatory environments, technological evolution, global supply chain complications, the COVID-19 pandemic, and other macro-political and economic factors. We believe that the effect that these factors have on our customers further substantiates and augments the value of our solutions. As our customers’ operating complexity and costs continue to rise, the deployment of advanced telematics solutions becomes even more imperative. To maintain or enhance market share, revenue, profitability, and customer satisfaction, our customers require optimally efficient operating strategies, enabled by the visibility that CalAmp solutions provide.

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Our Solutions

CalAmp Telematics Cloud (“CTC”). Since not all customers’ needs are the same, CalAmp offers flexible solutions to meet the requirements of varying organizations, business processes and operational strategies. At the core of the CalAmp approach is the CTC platform. This dependable and highly scalable platform seamlessly integrates with CalAmp’s edge computing products to provide customers detailed information and insights via Application Programming Interfaces (“APIs”) or software applications built on this platform. The information captured here helps companies more efficiently manage their vital assets including fleet video intelligence, remote asset tracking, real-time crash response and driver behavior scoring, among others. Customers can choose to access this information via intuitive purpose-built Software-as-a-Service ("SaaS") applications and/or they can programmatically integrate information from CTC with their own custom in-house applications and workflows using open APIs also offered by CalAmp. In this way, customers who want a complete turnkey solution can quickly leverage CalAmp’s information and insights while those customers wishing to integrate that information into their own applications and processes can easily do so, also.

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Intuitive SaaS Applications. We provide our customers with intelligent analytics and reporting solutions that are accessible via a single view, user-friendly interface through a SaaS-based application designed to address market needs. The CalAmp application is purpose-built for fleets, transportation and logistics needs, and industrial equipment, turning multiple data feeds from previously unconnected networks of vehicles, drivers and associated assets into clear and actionable insights that optimize operations, increase productivity and deliver compelling return on investment for virtually any business challenge. The applications also deliver real-time visibility about the location and environmental status of pharmaceuticals, electronics, food or other perishables from the manufacturing plant or point of origin to the point of delivery, helping to manage quality and compliance across land, air or sea shipments. Our K-through-12 solutions include Here Comes The Bus®, an award-winning mobile application that provides real-time school bus location through push notifications and email alerts to help family members monitor bus arrival and keep students safe. Bus Guardian™ enables contact tracing and hygiene verification to keep students, drivers and other school staff safe amid the COVID-19 pandemic.

CalAmp Marketplace. The CalAmp Marketplace provides enhanced contextual information from third party systems or partners that augment the core telematics data being captured by CTC to provide customers with improved understanding of their business. Examples of these value-added insights include crash detection and notifications that speed life-saving assistance to drivers and fleet operators, and predictive remote diagnostics that enable preemptive alerts about vehicle issues before critical failures occur. This valued-added information provided by all the CalAmp Marketplace offerings bolsters the value we provide customers while also improving customer retention rates.

CalAmp Developer Portal. The CalAmp Telematics Cloud is the core engine that enables seamless management of data through a diverse set of assets, from service vehicles to high-value equipment. CTC is an enablement platform that connects our customers to edge data and insights for a wide range of applications and software services. Through CTC CalAmp provides the Developer Portal to facilitate integration with third-party applications through open APIs. Our partners leverage the multiple APIs we’ve created to rapidly deliver full-featured telematics solutions available to our mutual customers and markets. Our proven CTC platform is architected to integrate with numerous global Mobile Network Operator account management systems and leverage these carrier backend systems to provide customers access to services that are essential for creating and managing flexible end-to-end solutions.

Flexible Edge Computing Products. We offer a series of telematics edge products that serve as the foundation of our mobile connected ecosystem by collecting data insights from vehicles, drivers, assets, and cargo. These wireless enabled devices--including asset tracking units, mobile telematics devices, fixed and mobile wireless gateways and routers--underpin our wide range of proprietary and third-party software applications and services for business-critical deployments demanding secure and reliable communications and controls anywhere in the world. Our customers select our products and solutions based on optimized feature sets, programmability, configurability, manageability, long-term support, reliability and, in particular, overall value.

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Growth Strategy – Capitalize on $62B Total Addressable Market

Over the past several years, CalAmp has been focused on growing our subscription-based business through expanded data and application-driven solutions offerings. This transition has been driven by our desire to enhance the customer experience and maximize the value proposition that we provide our customers. By transforming our business model and solutions portfolio to focus on data-driven insights and the application experience, CalAmp offers customers the value and convenience of a consolidated full stack solution, while providing shareholders with the confidence that accompanies an increasingly recurring and predictable revenue model.

CalAmp operates at the nexus of several large market opportunities, including fleet, transportation and logistics, supply chain and connected-vehicle ecosystems, which includes tracking, monitoring, and recovering high-value vehicles, equipment, cargo and other vital assets in the markets around the world. We also operate at global scale, with a presence in the North American, EMEA, LATAM, and APAC regions, with plans to continue growing across the board. We believe these market opportunities constitute a TAM of approximately $62 billion. To capitalize on this TAM, our growth strategy includes the following key elements:

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Drive Ongoing Transformation to SaaS Business Model. We are relentlessly pursuing our goal to grow our software and subscription services business. To accomplish this goal, our team is focused on continual innovation across our proprietary full stack solution. We believe that by leveraging our existing brand presence and customer base, we can drive growth through the adoption of our software applications and open API solutions. As CalAmp continues to drive significant subscriber growth, the increased volumes of data will drive our innovation roadmaps towards increasingly unique and differentiated solutions. This strategy begins with converting the legacy installed base to SaaS arrangements, while simultaneously ramping up SaaS sales volumes to both new and existing customers.

•

Launch New Innovative Software Solutions in the Emerging Connected Asset Market Worldwide. Across the globe, CalAmp has established highly recognizable brands, as well as strong and unique relationships with the most reputable companies in each of our verticals. This is a direct result of the company’s ability to consistently push the frontiers of innovation and develop customer-focused solutions. With innovation as a central component of our culture, CalAmp continues to develop new telematics solutions for the connected asset market such as our award-winning iOn™ application, Here Comes the Bus application and Bus Guardian solution.

•

Expand in Key Verticals and Target Geographies. CalAmp continues to leverage our existing customer relationships and international subscribers to further expand into global markets including Latin America, Europe, Middle East & Africa, and Asia Pacific. Our global expansion strategy is focused on countries with anticipated demand for our full stack of SaaS applications and data services. The launch of iOn in EMEA demonstrates our commitment to execute on this strategy and extend the value of our CTC platform and applications into global markets. We expect this strategy to generate significant growth over time as our international solutions continue to mature and adjust to unique regional market needs.

•

Continue to Help Customers Realize the Value of Fully Connected Ecosystems. Because CalAmp solutions are capable of connecting diverse asset portfolios and offering consolidated insights, the value of our solution grows as we become more embedded across customers’ operational ecosystems. This value is not only attractive to new customers looking for a consolidated solution, but it is also the basis for our ability to upsell existing customers. As our teams continue to build out innovative data services and edge capabilities, we expect to see significant average revenue per unit (“ARPU”) expansion and new customer growth.

Customer Benefits

Our software and subscription services solutions and edge-computing products are deployed in a wide variety of applications across key market verticals ranging from small to large enterprises. Companies using CalAmp’s solutions require constant communication with remote and/or mobile assets as they perform business-critical tasks

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and services that are otherwise difficult to manage in real time. Our solutions provide a clear and demonstrable return on investment for these customers by:

•

Improving efficiency, cost savings and sustainability. CalAmp’s solutions enable customers to gain better control and visibility of how their drivers, cargo, assets and vehicles are operating. With this information they are better able to streamline and optimize their operations which reduces fuel usage, decreases labor costs and improves overall efficiency. Additionally, using less fuel reduces the carbon footprint of an organization and helps them in reaching their sustainability goals.

•

Improving tracking and transparency. One of the most important benefits our customers receive by using CalAmp’s solutions is gaining greater understanding of where and how their assets, vehicles, and cargo are being used. The insights we provide help organizations operate more effectively, provide better support to both their internal and external customers, and ensure that their resources are being properly deployed, used and delivered.

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Increasing safety and compliance. Because our solutions enable fleet operators to track, monitor and gain greater transparency of how their vehicles and assets are being used, they also allow customers to improve the behavior of employees which bolsters safety while also ensuring personnel are complying with governance policies. Additionally, for K-through-12 students all over the U.S. and Canada, our proprietary school bus tracking and mobile app provide pick-up and drop-off information to give parents and students peace of mind as they travel to and from school.

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Better maintenance and increased uptime. CalAmp’s solutions provide visibility into maintenance, usage, and tracking of on- and off-road high-value assets including assets like vehicles, “yellow-iron” and attachments, forklifts and loaders to generators, compressors and other mission-critical equipment. The detailed insights into information like engine hours, impact and other diagnostics help our customers head off issues before they occur in order to improve overall equipment/fleet uptime.

Manufacturing and Operations

While our products are largely designed in the U.S., we currently outsource our manufacturing to certain contract manufacturers in Taiwan, Vietnam, Malaysia and Mexico as well as some limited production in China and Hong Kong. The devices, components and assemblies used in our solutions and products can be obtained from these manufacturers, although a few components are obtained from sole source suppliers. Although we do not have any long-term purchase contracts, we have executed product supply agreements with these manufacturers, which provide for certain product quality requirements. We are not vertically integrated, which provides us with flexibility and an ability to adapt to changes in the market, product supply and pricing while keeping our fixed costs low. Our relationships with our manufacturers are critical to the success of our business. We have strong relationships with our manufacturers, helping us to meet supply and support requirements stipulated by our customers.

We focus on driving alignment of our solutions and product roadmaps with all our manufacturers and determining what we can do collectively to reduce costs across the supply chain. Our operations team based in the U.S. coordinates with our manufacturers’ engineers and quality control personnel to develop the requisite manufacturing processes, quality checks and testing as well as a general oversight of ongoing manufacturing activities. We believe this model has allowed us to deliver high quality and innovative products in a timely manner while enabling us to minimize costs, manage inventory risk and maintain flexibility.

We and our contract manufacturers are certified to the ISO (International Organization for Standardization) 9001 quality management systems standard.

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Research and Development

We compete in markets characterized by industry disruption, rapid technological change, evolving industry standards and new product features. We believe that our future success depends upon our ability to develop innovative new products and solutions as well as enhancements to our existing products and solutions with advanced functionality and ease of use to drive customer demand and to further enhance our global brand and drive recurring revenue. We will continue to focus our research and development resources primarily on developing telematics products, services and software solutions for fleet management, heavy equipment monitoring and optimization, stolen vehicle recovery, consumer aftermarket telematics, trailer and asset tracking, transportation and logistics, and industrial monitoring. We have developed a technology platform that can be leveraged across many of our vertical markets, applications and geographic regions. This includes a cloud-based telematics application enablement platform and end-user software applications, a comprehensive purpose-built telematics edge platform, cellular and satellite communications network-based asset tracking units as well as 4G and 5G LTE and CatM edge devices primarily for mobile applications. In addition, our development resources have been allocated to rationalizing existing product lines, reducing product costs, and improving performance through product redesign efforts. Our research and development efforts have resulted in generating significant intellectual property in the telematics vertical as is evident in our broad patent portfolio. We continue to actively pursue developing innovative solutions that add to our intellectual property portfolio.

Our research and development expenses from continuing operations in fiscal years ended February 28, 2023, 2022 and 2021, were $24.6 million, $28.4 million, and $25.8 million, respectively. During this three-year period, our research and development expenses have ranged between 8% and 10% of annual consolidated revenues.

Sales and Marketing

We market and sell our solutions and services through our global direct sales organization, channel partner program and Original Equipment Manufacturers (“OEM”) sales organizations while driving awareness through our websites and digital presence. Our global direct sales organization consists of teams of field salespeople, key account managers and business development managers, who work closely with solutions and applications specialists and other internal sales support personnel. We have organized our field sales personnel, together with internal sales and field support personnel, into teams within each business group based on their specialized knowledge and expertise relating to specific solutions and service areas, geographies and customer groups. These sales teams are closely aligned with their respective solutions management, engineering and operations organizations.

We sell our solutions and services to large global enterprises, small- to mid-sized companies, channel accounts and distributors as well as industrial OEM customers. These categories of customers require very different selling approaches and support requirements, and we have organized our sales teams to address these distinct requirements. Additionally, certain customers often have unique technical requirements and manufacturing processes, and may request specific system configurations, feature sets and designs. Sales to large enterprise customers often involve complex program management and long sales cycles, and require close cooperation between sales, operations and engineering personnel. As such, we have developed teams of key account managers and business development managers to serve the unique requirements of these customers.

We also actively sell our products in certain markets through independent sales representatives and distributors. In some cases, we have granted representatives and distributors exclusive authorization to sell certain products in specific geographic areas. These agreements generally have a term of one year, which automatically renews on an annual basis, and are generally terminable by either party following a specified notice period.

We will continue our investment in sales and marketing programs that further build brand awareness, improve revenue generation and foster long-term relationships with our customers. Our marketing programs are focused on supporting multi-channel product launches in new geographic markets.

Additionally, we are focused on maximizing our efficiency and the reach of our marketing spend by investing in product marketing, content development, public relations, social media and digital marketing programs. These programs are developed to educate our potential customers and other industry influencers to drive sales engagement around our products and services. Our activities around product marketing, content development, public relations, thought leadership, social media and digital marketing are aligned with our customary product launches, media campaigns and presence at tradeshows and high exposure venues focused in the transportation and logistics sector such as Technology and Maintenance Council (TMC), Management Conference & Exhibition (MCE) and other high-profile industry events, as such in-person events recommence amid easing of COVID-19 restrictions.

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Competition

Our markets are highly competitive. We face competition from small to large public and private competitors some of which have greater financial, distribution, marketing and other resources as well as greater economies of scale than we do. We believe the principal competitive factors impacting the market for our products and services are global scale, innovation, reputation, customer service, product quality, functionality and reliability, time-to-market, responsiveness and price. We believe that we compete favorably in all of these areas. Our continued success in our vertical markets will depend in part upon our ability to continue to innovate, design quality products and deploy solutions at competitive prices and with superior support services to our customers.

The competitive landscape is incredibly fragmented, and most companies offer solutions to solve the needs of specific verticals, sub verticals, or asset classes. For instance, many companies specialize in cab and fleet visibility, such as Geotab and Verizon Connect, while others specialize in trailer visibility, like Phillips Connect, Sky Bitz, and Xirgo. However, we also encounter competitors like Keep Truckin’ and Samsara, who specialize in multiple verticals.

Backlog

Total consolidated backlog, comprised of our remaining performance obligations for software & subscription services and telematics devices backlog aggregated $264 million at February 28, 2023, compared to $285 million at February 28, 2022.

As of February 28, 2023, our remaining contractual performance obligations for software & subscription services were $234.5 million as compared to $202.0 million as of February 28, 2022. The majority of our growth in contractual performance obligations was driven by conversion of significant telematics products customers to multi-year subscription contracts and renewals in the fleet market. We expect to recognize approximately 49% of our remaining contractual performance obligations in Fiscal 2024.

Total backlog for our telematics devices as of February 28, 2023 and February 28, 2022 was $29 million and $83 million, respectively. Substantially all of the backlog at February 28, 2023 is expected to be shipped in Fiscal 2024. Our backlog for telematics devices decreased year-over-year as during Fiscal 2022, we experienced significant supply shortages due to the lingering impact of the COVID-19 pandemic. As we drive toward a SaaS business model, we expect that a significant portion of the February 28, 2023 telematics devices backlog will ultimately be bundled and fulfilled in connection with multi-year subscription contracts.

Intellectual Property

Intellectual property is an important aspect of our business, and we seek protection for our intellectual property as appropriate. We rely upon a combination of patent, trade secret, and trademark laws and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our proprietary rights. In addition, we often rely on inbound licenses of intellectual property for use in our business.

We own and utilize the tradename “CalAmp” as well as the related logos and trademarks on many of our products and solutions. We believe that having distinctive marks that are registered and readily identifiable is an important factor in identifying our brand. As of February 28, 2023, we have over 170 active trademark applications and registrations throughout the world, with approximately 24 pending and registered trademarks in the U.S.

As of February 28, 2023, we had nearly 300 patents worldwide. In addition to our awarded patents, we have approximately 50 patent applications in process. Although a number of these trademarks, and patents relate to software and products that are significant to our business and operations, we do not believe we are dependent on a single trademark, copyright or patent.

In addition to the foregoing protections, we generally control access to and the use of our proprietary and other confidential information through the use of internal and external controls, including contractual protections with employees, manufacturers, and others. We will continue to file and prosecute patent applications when appropriate to protect our rights in our proprietary technologies.

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Governmental Regulation

We are subject to a variety of U.S. and foreign laws and regulations in connection with our operations, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and the clean-up of contaminated sites, and close oversight of our products’ material compliance including adherence to relevant EPA regulations under the Toxic Substances Control Act. While we believe that we are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us.

We have established environmental management systems and continually update our environmental policies and standard operating procedures for our operations worldwide. We believe that our operations are in material compliance with applicable environmental laws, regulations and permits. We budget for operating and capital costs on an ongoing basis to comply with environmental laws.

Corporate Responsibility and Sustainability

We believe responsible and sustainable business practices support our long-term success. As a company, we are deeply committed to protecting and supporting our people, our environment, and our communities. That commitment is reflected through various corporate initiatives as well as day-to-day activities, including our adoption of sustainability-focused policies and procedures, our publicly recognized focus on fostering an inclusive workplace, our constant drive toward more efficient use of materials and energy, our careful and active management of our supply chain, our services and products which help reduce carbon footprints and enhance road safety, and our impactful, globally integrated ethics and compliance program.

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Customer Success – We seek to understand, anticipate and respond to internal and external customer needs, and work to achieve total customer satisfaction to ensure their success and ours.

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Innovation – We are committed to transforming ideas into new and improved products and processes to advance, compete and differentiate ourselves and bring value to our customers and teams.

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Execution – We deliver results and exceed customer expectations with a can-do attitude that overcomes obstacles with solutions: we hold ourselves accountable, learn from errors and move forward productively.

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Inclusion – We believe in the integrity, honesty and trust of our employees, and are committed to building diverse teams that value differences of opinion and embrace positive, respectful collaboration.

Human Capital and Company Culture

People are our greatest asset and we are committed to being an employer of choice in our industry.

CalAmp offers an engaging and diverse work environment where people take pride in their contributions and share in the company’s success. We empower our employees to showcase their talent, sharpen their skills, develop new professional and leadership capabilities while being part of a global team that develops revolutionary technologies.

CalAmp continually strives to be a deeply inclusive employer with diversity reflected in our teams. We encourage employees to be truly themselves and thrive in an environment where their voices matter, differences are understood and valued, and where they are supported to express their unique ideas openly. We aim to foster a highly engaged and energized workplace, where everyone is treated with dignity and respect and is excited to achieve more.

Our employees engage in meaningful work with access to cutting-edge tools and technologies to develop solutions that disrupt entire industries.

CalAmp’s strategic leadership comes from a solid base of worldwide experience in technology, from connected vehicles to networking to public safety to energy and beyond. The executive team has years of expertise in both start-up and enterprise environments designing software and hardware for a wide variety of applications.

Our company culture is driven by four core values:

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Customer Success – we seek to achieve total customer satisfaction by understanding what the customer wants and delivering it flawlessly. We communicate and collaborate effectively with others for the benefit of the customer. Satisfied customers are essential to our success.

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Innovation – we do not accept the status quo. We are committed to transforming ideas into new and improved solutions and processes. We respond resourcefully to demands and challenges in order to advance, compete and differentiate ourselves successfully in the marketplace and bring value to our customers.

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Execution – we make and meet our commitments. We deliver results in tight timeframes. Our can-do attitude supports us in overcoming obstacles with solutions, and we are accountable when errors are made. We learn from mistakes and move forward.

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Inclusion – we believe in the integrity, honesty and trust of our employees, and we value their diversity of thought and opinion. We embrace collaboration by listening to the opinions of others, valuing their differences and speaking in a positive, respectful manner. We take personal responsibility for our actions and are committed to building diverse teams with fairness and respect for all.

As of February 28, 2023, we had 644 employees. From time to time we also hire contracted workers that are generally engaged through independent temporary labor agencies. None of our employees or contract workers are represented by a labor union.

AVAILABLE INFORMATION

Our primary Internet address is www.calamp.com. We make our U.S. Securities and Exchange Commission (“SEC”) periodic reports (Forms 10-Q and Forms 10-K) and current reports (Forms 8-K) available free of charge through our website as soon as reasonably practicable after they are filed electronically with the SEC. Within the Investor Relations section of our website, we provide information concerning corporate governance, including our Corporate Governance Guidelines, Board committee charters and composition, Code of Business Conduct and Ethics, and other information. The content of our website is not incorporated by reference into this Annual Report on Form 10-K or into any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Materials that we file with the SEC may be read and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.

ITEM 1A. RISK FACTORS

We operate in a rapidly changing environment that involves a number of risks and uncertainties, some of which are beyond our control. The following list describes several risk factors that are applicable to our business and speaks as of the date of this document. These and other risks could have a material adverse effect on our business, results of operations, financial condition, and cash flows and the trading price of our common stock. The risks and uncertainties described below are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employment relations, general economic conditions, geopolitical events and international operations. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us.

Summary of Risk Factors

Our business is subject to a number of risks of which you should be aware. Among others, including those described in more detail below, these risks include:

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We face several factors which may have a material adverse effect on our business, results of operations and financial condition, and effect our ability to continue as a going concern:

We are not cash flow positive and may not have sufficient cash to fund our long term planned operations. As of February 28, 2023, we had $41.9 million of cash and cash equivalents, a decrease of $37.3 million from February 28, 2022.

We may not be able to access additional funds under our asset-based revolving credit facility due, in part, to certain covenants regarding our fixed charge coverage ratio.

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We may not have the ability to raise the funds to pay our obligations under our 2025 Convertible Notes, or extend the maturity date of our 2025 Convertible Notes. Any adverse changes in our credit ratings could increase our borrowing costs and could adversely affect our ability to access the debt markets, and any equity financing could affect our stock price and be materially dilutive to existing stockholders.

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Our asset-based revolving credit facility contains covenant restrictions that may limit our ability to operate, including restrictions on our ability to incur additional debt, create liens, or make certain voluntary prepayments of specified debt.

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Component shortages and uncertainty in international trade relations with China may adversely impact us and have a material adverse effect on our business, results of operations and financial condition. A substantial portion of our products, components and subassemblies are currently procured from foreign suppliers located primarily in Hong Kong, Mainland China, Malaysia, Mexico and other Pacific Rim countries.

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The COVID-19 pandemic has disrupted our operations and the continued effects of the pandemic could have a material adverse impact on our business, results of operations and financial condition.

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Because some of our components, assemblies and electronics manufacturing services are purchased from sole source suppliers or require long lead times, our business is subject to unexpected interruptions, which may adversely affect our ability to bring products to market, damage our reputation and adversely affect our results of operations.

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Because we depend on a few significant customers for a substantial portion of our revenues and we generally do not have long-term contracts with customers, the loss or significant decline or slowdown of sales to these customers could have an adverse effect on our business, financial condition or results of operations.

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Our operations are subject to the effects of a rising rate of inflation. If the inflation rate continues to impact the costs of our labor and supplies, and the costs of our suppliers, it will adversely affect our operating expenses.

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Because the markets in which we compete are highly competitive and some of our competitors have greater resources than us, we cannot be certain that our products and services will continue to be accepted in the marketplace or will maintain or capture increased market share.

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We have been subject to breaches of our information technology systems, and are at risk of future attacks, which could damage our reputation, vendor and customer relationships, and our customers’ access to our services.

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If demand for our products and services fluctuates rapidly and unpredictably, it may be difficult to manage our business efficiently, which may result in reduced gross margins and profitability.

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If we do not meet product and services introduction deadlines or if we fail to predict carrier and end user customer preferences among the many evolving wireless industry standards, our business could be adversely affected.

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Any acquisitions we pursue could disrupt our business and harm our financial condition and results of operations.

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Our global operations and continued international expansion expose us to risks and challenges associated with conducting business internationally. The ongoing military action between Russia and Ukraine may amplify or precipitate these risks and the other risks described herein.

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Some of our products are subject to mandatory regulatory approvals in the U.S. and other countries that are subject to change, which could make compliance costly and unpredictable.

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Ongoing changes to U.S. tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business.

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We may not be able to adequately protect our intellectual property, and our competitors may be able to offer similar products and services that would harm our competitive position.

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We rely on access to third-party patents and intellectual property, and our future results could be materially and adversely affected if we are unable to secure such access in the future.

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We depend to some extent upon wireless networks owned and controlled by others, unproven business models, and emerging wireless carrier models to deliver existing services and to grow.

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The trading price of shares of our common stock may be affected by many factors and the price of shares of our common stock could decline.

Risks Related to Our Cash Flow and Liquidity

We are not cash flow positive and may not have sufficient cash to fund our long term planned operations, and we may not be able to access additional funds under our asset-based revolving credit facility due, in part, to certain covenants regarding our fixed charge coverage ratio, all of which could have a material adverse effect on our financial condition and ability to continue as a going concern.

Our operations have consumed substantial amounts of cash during Fiscal 2023, and we may continue to incur substantial losses and negative cash flow from operations for the foreseeable future. As of February 28, 2023, we had $41.9 million of cash and cash equivalents, a decrease of $37.3 million from February 28, 2022. Our future performance is subject to economic, operational, financial, competitive and other factors, including the current inflationary environment, supply chain constraints and the impact of uncertain international trade relations.

We may not be able to access additional funds under our asset-based revolving credit facility. The credit facility contains certain negative and affirmative covenants, including financial covenants that, among other things, require us to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00, measured as of the last day of each fiscal quarter, if our liquidity position (consisting of specified cash balances plus unused availability on the revolving credit facility) falls below $40.0 million on such day. Our ability to comply with the financial covenants in the credit agreement and access our revolving credit facility will be materially affected if our liquidity position falls below $40.0 million.

Additional funds may not be available on terms acceptable to us or at all. Specifically, we may be unable to secure additional debt financing without restrictive terms or issue additional equity without impacting our stock price or being materially dilutive to existing stockholders. If we are unable to generate sufficient cash flows or to access or raise adequate funds to finance our forecasted expenditures, we may have to make significant changes or reductions to our operations. We also may have to reduce sales, marketing, customer support or other resources devoted to our existing or new products, or we may need to cease operations. Any of these actions could materially impede our ability to achieve our business objectives and could materially harm our operating results. If our cash, cash equivalents and investments are insufficient to fund our projected operating requirements and we are unable to access additional funds under our credit facility or raise additional capital, it could have a material adverse effect on our business, financial condition and results of operations and prospects and ability to continue as a going concern.

We may not have sufficient cash flow from our business to fund conversions of the 2025 Convertible Notes in cash, or repay the 2025 Convertible Notes at maturity or repurchase them upon a fundamental change, which could have a material adverse effect on our financial condition and ability to continue as a going concern. We cannot provide any assurances that we will be able to fund through operations the necessary amount of capital to repay these obligations.

We have $230.0 million aggregate principal amount of 2.00% convertible senior unsecured notes due in 2025 (“2025 Convertible Notes” or “Notes”) outstanding. As of February 28, 2023, we had $41.9 million of cash and cash equivalents, a decrease of $37.3 million from February 28, 2022.

Upon maturity of the 2025 Convertible Notes, we may be required to make cash payments in repayment of the notes. In addition, upon conversion of the 2025 Convertible Notes, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock. Furthermore, holders of the 2025 Convertible Notes will have the right to require us to repurchase all or a portion of their 2025 Convertible Notes upon the occurrence of a fundamental change at a repurchase price equal to the principal amount of the 2025 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2025 Convertible Notes, to pay cash upon

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maturity of the 2025 Convertible Notes or to pay any cash amounts due upon conversion of the 2025 Convertible Notes. Our ability to pay cash upon conversion of or at maturity of the 2025 Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors including the current inflationary environment, supply chain constraints and the uncertainties regarding international trade relations due in part to the armed conflict in Ukraine. Our business may not generate cash flow from operations in the future sufficient to service our debt and to fund capital expenditures or acquisitions. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive, which could have a material adverse effect on our financial condition and ability to continue as a going concern.

Our ability to repurchase or to pay cash upon conversions or at maturity of the 2025 Convertible Notes may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase the notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of the 2025 Convertible Notes as required by the applicable indenture would constitute a default under the applicable indenture. A default under the indenture governing the 2025 Convertible Notes or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the notes.

Holders may convert their 2025 Convertible Notes into cash, shares of our common stock or a combination of cash and shares of common stock, at our election. The current conversion rate of the 2025 Convertible Notes is 32.5256 shares of common stock per $1,000 principal amount of the convertible notes, which is equivalent to an initial conversion price of approximately $30.75 per share of common stock. The conversion rate is subject to customary adjustments. Holders may convert their 2025 Convertible Notes at their option upon the occurrence of certain events, as defined in the indenture governing the 2025 Convertible Notes.

We may not have the ability to raise the funds required to pay our obligations under our 2025 Convertible Notes, or extend the maturity date of the 2025 Convertible Notes, and any adverse changes in our credit ratings could increase our borrowing costs and could adversely affect our ability to access the debt markets, all of which could have a material adverse effect on our financial condition and ability to continue as a going concern.

We may not be able to raise sufficient capital to repay our 2025 Convertible Notes at maturity. If we are unable to pay these obligations or otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to fund through operations the necessary amount of capital to repay these obligations, or that we will be able to extend the maturity dates or otherwise refinance these obligations, which could have a material adverse effect on our financial condition and ability to continue as a going concern.

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. Our 2025 Convertible Notes are rated by certain major credit rating agencies. These credit ratings impact our cost of borrowing and our ability to access the capital markets and are based on our financial performance and certain financial metrics including debt levels. There can be no assurance that we will be able to maintain our current credit ratings. Any downgrade of our credit rating by any of the major credit rating agencies could result in increased borrowing costs and could adversely affect our ability to access the debt markets to refinance our existing debt or finance future debt. Factors that we cannot control, such as disruption of the financial markets, including concerns regarding fiscal matters in the U.S. and other geographic areas, could also impair our ability to raise funding.

Our asset-based revolving credit facility contains covenant restrictions that may limit our ability to operate our business.

Our senior asset-based revolving credit facility contains, and any of our other future debt agreements may contain, certain affirmative and negative covenants, including covenants that restrict our ability to, among other things, incur additional debt or issue guarantees, create liens, repurchase stock, or make other restricted payments, and make certain voluntary prepayments of specified debt. As a result of these covenants, our ability to respond to changes in business and economic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted.

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Our revolving credit facility also contains a financial covenant that require us to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00, measured as of the last day of each fiscal quarter if our liquidity position, consisting of specified cash balances plus unused availability on the revolving credit facility, falls below $40.0 million on such day. Additionally, our revolving credit facility contains a cash dominion trigger whereby PNC Bank may direct domestic cash balances and receipts to pay down borrowings under the revolving credit facility should our liquidity position, consisting of specified cash balances plus unused availability on the revolving credit facility, fall below $25.0 million at the end of any month. As of February 28, 2023, we were in compliance with our covenants under the revolving credit facility. However, if we are unable to comply with our covenants under the revolving credit facility in the future, our availability of cash resources may be reduced and our business may be adversely affected. Our ability to comply with these conditions will be materially affected if our liquidity position falls below $40.0 million. Additionally, our ability to comply with these covenants may be affected by events and conditions beyond our control, including the factors discussed above. A breach of any of these covenants could result in a default under the credit agreement and related credit documents, which could cause all of the outstanding indebtedness under our revolving credit facility to become immediately due and payable. If any of our debt is accelerated, we may not have sufficient funds available to repay it.

Risks Related to Our Business Operations and Financial Condition

A substantial portion of our products, components and subassemblies are currently procured from foreign suppliers located primarily in Hong Kong, mainland China, Malaysia, Mexico and other Pacific Rim countries. We accelerated our supply chain diversification program to transition our manufacturing to tier one global contract manufacturers with facilities outside of China. This program was initiated against the backdrop of the escalation of trade tensions between the U.S. and China. This transition contributed to various supply disruptions, including component shortages, beginning in the third and fourth quarter of Fiscal 2020. Additionally, during Fiscal 2022 and Fiscal 2023, we experienced supply shortages as a result of global supply imbalances initially driven by the global pandemic, which have negatively impacted all parts of our business. Although we are taking steps to address these matters, the related operational challenges and supply chain disruptions may persist for some time.

The COVID-19 pandemic has disrupted our operations and the continued effects of the pandemic could have a material adverse impact on our business, results of operations and financial condition.

The COVID-19 pandemic, including the continued spread of new variants and the measures taken to limit its spread has had, and other pandemics in the future could have, adverse repercussions across global economies and financial markets, as well as on us. Through Fiscal 2022, our revenues were negatively impacted by COVID-19 as various small-to-medium customers postponed their capital expenditure due to the pandemic and related macro-economic uncertainties. We have experienced supply shortages as a result of global supply imbalances driven by the global pandemic. These global supply imbalances have negatively impacted our business during Fiscal 2023. It is difficult to predict the extent to which the pandemic will continue to impact our future business or operating results, which are highly dependent on uncertain future developments, including the severity of the continuing pandemic, the actions taken or to be taken by governments and private businesses in relation to its containment and the resolution of supply chain issues and supply shortages. Because our business is dependent on telematics product sales, device installations and related subscription-based services, the ultimate effect of COVID-19 and the current supply shortages may not be fully reflected in our operating results until future periods.

To the extent that COVID-19 adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the risk factors described in this “Risk Factors” section.

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We operate an outsourced manufacturing business model that utilizes contract manufacturers. We depend on a limited number of contract manufacturers to allocate sufficient manufacturing capacity to meet our needs, to produce products of acceptable quality at acceptable yields, and to deliver those products to us on a timely basis. Some of our key components are complex to manufacture and have long lead times. In the event of a reduction or interruption of supply, or degradation in quality, it could take up to six months to begin receiving adequate supplies from alternative suppliers, if any. As a result, product shipments could be delayed and revenues and profitability could suffer. Instances of continued supply chain disruptions and delays, as well as continued heightened inflation, could lead to inefficiencies and increased costs that could negatively impact our performance and our results of operations. In such circumstances, we may be unable to meet our customer demand and may fail to meet our contractual obligations. This could result in the payment of significant damages by us to our customers, a decline in net revenue and a loss of market share as our customers could choose to purchase competing products and services, all of which could adversely affect our business, financial condition and results of operations. Any substantial disruption in our contract manufacturers’ supply as a result of a pandemic, natural disaster, trade wars, political unrest, economic instability, equipment failure, inflationary pressures, component shortage or other cause, could materially harm our business, customer relationships and results of operations.

Because we depend on a few significant customers for a substantial portion of our revenues, the loss of or significant decline or slowdown of sales to these customers could have an adverse effect on our business, financial condition or results of operations.

Our revenues depend on a small number of significant customers and some of them represented more than 10% of our total revenues in fiscal year 2023, 2022 and 2021 (see Note 3 to our consolidated financial statements). They are also expected to represent a substantial portion of our revenues in the near future. As a result, the loss of any one of these customers, or a decline or slowdown in purchases from any of these customers, could have a material adverse effect on our business, financial condition and results of operations. In addition, because service revenue depends either partially or entirely on the usage levels of data transmission by our customers and end users, the decline or slowdown in the growth of usage patterns of these customers, which has and could continue to occur at any time and with or without a reduction in the number of our subscriber base could have a material adverse effect on our business, financial condition and results of operations.

Our operations are subject to the effects of a rising rate of inflation.

The United States has recently experienced historically high levels of inflation. According to the U.S. Department of Labor, the annual inflation rate for the United States was approximately 6.5% for the 12 months ended December 31, 2022. If the inflation rate continues to increase and increase our costs of labor and supplies, it will affect our operating expenses. The current inflationary environment related to increased aggregate demand, supply chain constraints and the effects from the armed conflict in Ukraine (including the effects of the sanctions that were implemented in response to the conflict and the resulting impacts on the commodity market and supply chains) have also increased our operating expenses and may continue to affect our operating expenses. Our operational costs, including the cost of supplies, labor, manufacturing and our other operational costs are subject to market conditions and are being adversely affected by inflationary pressures. Economic conditions may also adversely affect the ability of our customers and suppliers to obtain the liquidity required to buy inventory or raw materials and to perform their obligations under agreements with us, which could disrupt our operations. Additionally, rising interest rates could impact financing availability and the cost of refinancing our existing debt, and exchange rate fluctuations. The United States is experiencing a workforce shortage, which in turn, has created a competitive wage environment that may increase our operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations. To the extent periods of high inflation are prolonged, these results may be exacerbated.

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The markets for our products and services are intensely competitive and characterized by rapid technological change, evolving standards, short product life cycles, and price erosion. Given the highly competitive environment in which we operate, we cannot be sure that any competitive advantages currently enjoyed by our products and services will be sufficient to establish and sustain our products and services in the markets we serve. Any increase in price or other competition could result in erosion of our market share, to the extent we have obtained market share, and could have a negative impact on our financial condition and results of operations. We cannot provide assurance that we will have the financial resources, technical expertise or marketing and support capabilities to compete successfully. We expect competition to intensify in the future with the introduction of new technologies and market entrants and with the possible consolidation of competitors.

Information about our competitors is included in Part I, Item 1 of this Annual Report on Form 10-K under the heading “COMPETITION”.

If demand for our products and services fluctuates rapidly and unpredictably, it may be difficult to manage our business efficiently, which may result in reduced gross margins and profitability.

Our cost structure is based in part on our expectations for future demand. Many costs, particularly those relating to capital equipment and manufacturing overhead, are largely fixed. Rapid and unpredictable shifts in demand for our products and services may make it difficult to plan production capacity and business operations efficiently. If demand is significantly below expectations, we may be unable to rapidly reduce these fixed costs, which can diminish gross margins and cause losses. A sudden downturn may also leave us with excess inventory, which may be rendered obsolete if products and services evolve during the downturn and demand shifts to newer products and services. Our ability to reduce costs and expenses may be further constrained because we must continue to invest in research and development to maintain our competitive position and to maintain service and support for our existing customer base. Conversely, in the event of a sudden upturn, we may incur significant costs to rapidly expedite delivery of components, procure scarce components and outsource additional manufacturing processes. These costs could reduce our gross margins and overall profitability. Any of these results could adversely affect our business, financial condition or results of operations.

Any acquisitions we pursue could disrupt our business and harm our financial condition and results of operations.

As part of our business strategy, we continually review acquisition opportunities that we believe would be advantageous or complementary to the development of our business. If we make any acquisitions, we could take any or all of the following actions, any one of which could adversely affect our business, financial condition, results of operations or share price:

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use a substantial portion of our available cash;

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require a significant devotion of management’s time and resources in the pursuit or consummation of any acquisition;

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incur substantial debt, which may not be available to us on favorable terms and may adversely affect our liquidity;

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issue equity or equity-based securities that would dilute existing stockholders’ ownership percentage;

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assume contingent liabilities; and

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take substantial charges in connection with acquired assets.

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Acquisitions also entail numerous other risks, including, without limitation: difficulties in assimilating acquired operations, products, technologies and personnel; unanticipated costs; diversion of management’s attention from existing operations; risks of entering markets in which we have limited or no prior experience; potential loss of key employees from either our existing business or the acquired organization; and a negative effect on our existing relationships with suppliers and customers. Acquisitions may result in substantial accounting charges for restructuring and other expenses, amortization of purchased technology and intangible assets and stock-based compensation expense, any of which could materially and adversely affect our operating results. We may not be able to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies or personnel that we acquire, and our failure to do so could harm our business and operating results. Our industry is being affected by the trend toward consolidation and the creation of strategic relationships. If we are unable to successfully adapt to this rapidly changing environment, we could suffer a reduction in the volume of business with our customers and suppliers, or we could lose customers or suppliers entirely, which could materially and adversely affect our financial condition and operating results.

We may be unable to successfully implement a disposition or wind-down of business activities that no longer fit our strategic plan.

We may engage in future dispositions or wind-downs of certain businesses. Key risks associated with exiting a business include:

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our ability to price a sale transaction appropriately and otherwise negotiate acceptable terms;

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our ability to identify and implement key customer, technology systems, and other transition actions to avoid or minimize negative effects on retained business activities;

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our ability to assess and manage any loss of synergies that the exited business activity had with our retained business activities;

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our ability to replace legacy earnings from the exited business or activity with new revenues; and

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our ability to manage capital, liquidity, and other challenges that may arise if an exit results in significant legacy cash expenditures or financial loss.

We have been subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services.

Our presence in the Internet of Things (“IoT”) industry with offerings of telematics products and services, including vehicle telematics, could also increase our exposure to potential costs and expenses and reputational harm in the event of cyber-attacks impacting these products or services. Our business operations require that we use, collect, process, transmit and store, within our own systems and systems of third-party providers, sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information. We face a number of threats to our data centers and networks in the form of unauthorized access, security breaches and other system disruptions. It is critical to our business strategy that our infrastructure remains secure and is perceived by customers and partners to be secure. Despite our security measures, our information technology (“IT”) systems have been and will continue to be vulnerable to attacks by hackers or other disruptive problems.

In addition, we are subject to a variety of laws and regulations in the United States and abroad relating to cybersecurity and data protection. As a result, affected users or government authorities could initiate legal or regulatory actions against us in connection with any actual or perceived security breaches or improper access to or disclosure of data, which has occurred in the past and which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.

Our measures to prevent, detect and mitigate these threats may not be successful in preventing a security incident or data breach or limiting the effects of such a breach. This is particularly so because attack methodologies change frequently or are not recognized until launched, and we also may be unable to investigate or remediate incidents because attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

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Any security breach may compromise information used or stored on our networks and may result in significant data losses or theft of our customers’ or our business partners’ intellectual property, proprietary business information or personally identifiable information. A cybersecurity breach could negatively affect our reputation by adversely affecting the market’s perception of the security or reliability of our products or services. In addition, a cyber-attack could result in other negative consequences, including remediation costs, disruption of internal operations, increased cybersecurity protection costs, lost revenues or litigation, which could have a material adverse effect on our business, results of operations and financial condition.

Repurposing of satellite spectrum by adjacent operators of L-band spectrum for terrestrial services could interfere with our GPS IoT products and services.

In 2011, the U.S. Federal Communications Commission (“FCC”) granted Ligado Networks (then known as Lightsquared) (“Ligado”) a waiver to convert its L-band satellite spectrum to terrestrial use, including a 10 MHz band close to the spectrum that we use for all of our Global Positioning System (“GPS”) products and services. That waiver was subsequently suspended in 2012 due to concerns about potential interference to GPS operations. Ligado sought another waiver in 2015, that it then amended in 2018, to modify its L-band mobile satellite service network with a terrestrial-only proposal designed to address GPS industry-wide concerns. In April 2020, the FCC granted Ligado’s waiver request. We oppose this waiver grant out of concern for the interference that we believe Ligado’s proposed operations would cause to our IoT GPS devices. Ligado’s operations pursuant to the waiver would result in terrestrial use of L-band spectrum, and such operations may interfere with, and harmfully affect, the performance of the Global Navigation Satellite System (“GNSS”) receivers in our IoT GPS devices that operate in the 1559-1610MHz band, which is adjacent to, and within range of, the L-band downlink allocation for GPS operations. Ligado’s L-band terrestrial operations could impact our operations and impose costs on us to retrofit or replace affected GNSS receivers, which could have a material adverse effect on our business, results of operations, and financial condition.

Our business is subject to many factors that could cause our quarterly or annual operating results to fluctuate and our stock price to be volatile.

Our quarterly and annual operating results have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. A majority of our product orders are shipped in the final month of the quarter and a significant amount in the last two weeks of the quarter. Some of the other factors that could affect our quarterly or annual operating results include:

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the timing and amount, or cancellation or rescheduling, of orders for our products or services;

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our ability to develop, introduce, ship and support new products, services and enhancements, and manage product and services transitions;

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announcements of new product and service introductions and reductions in the price of products and services offered by our competitors;

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fluctuations in the cost of telematics devices due to supply shortages or other market factors;

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our ability to achieve cost reductions;

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our ability to obtain sufficient supplies of sole or limited source components for our products;

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our ability to achieve and maintain production volumes and quality levels for our products;

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our ability to maintain the volume of products and services sold and the mix of distribution channels through which they are sold;

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the loss of any one of our major customers or a significant reduction in orders from those customers;

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increased competition, particularly from larger, better capitalized competitors;

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fluctuations in demand for our products and services; and

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changes in telecommunications and wireless market conditions specifically and economic conditions generally, including as a result of a pandemic or other catastrophic event.

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Due in part to factors such as the timing of product release dates, purchase orders and product availability, significant volume shipments of products could occur close to the end of a fiscal quarter. Failure to ship products by the end of a quarter may adversely affect operating results in such quarter. In the future, our customers may delay delivery schedules or cancel their orders without notice. Due to these and other factors, our quarterly revenue, expenses and results of operations could vary significantly in the future, and period-to-period comparisons should not be relied upon as indications of future performance.

In the past, we have experienced design and manufacturing difficulties that have delayed the development, introduction or marketing of new products, services and enhancements and which caused us to incur unexpected expenses and lost revenue. In addition, some of our existing customers have conditioned their future purchases of our products and services on the addition of new features. In the past, we have experienced delays in introducing some new product features. Furthermore, in order to compete in some markets, we will have to develop different versions of existing products and services that comply with diverse, new or varying governmental regulations and evolving wireless industry standards in each market. In our industry, it is critical to our success that we accurately anticipate evolving wireless technology standards and that our products and services comply with these standards in relevant respects. We are currently focused on engineering and manufacturing products and services that comply with several different wireless standards. Any failure of our products and services to comply with any one of these or future applicable standards could prevent or delay their introduction and require costly and time-consuming engineering changes. Additionally, if an insufficient number of wireless operators or subscribers adopt the standards to which we engineer our products and services, then sales of our new products and services designed to those standards could be materially harmed. Our inability to develop new products, services, product features on a timely basis, or the failure of new products, services or features to align with evolving wireless standards and achieve market acceptance, could adversely affect our business.

Disruptions in global credit and financial markets could materially and adversely affect our business and results of operations.

There is significant uncertainty about the stability of global credit and financial markets. Credit market dislocations could cause interest rates and the cost of borrowing to continue to rise or reduce the availability of credit, which could negatively affect customer demand for our products and services if they responded to such credit market dislocations by suspending, delaying or reducing their capital expenditures. Moreover, since we currently generate more than 25% of our revenues outside the U.S., fluctuations in foreign currency exchange rates can have an impact on demand for our products and services for which the sales are generally denominated in U.S. dollars.

We may be subject to product liability, warranty and recall claims that may increase the costs of doing business and adversely affect our business, financial condition and results of operations.

We are subject to a risk of product liability or warranty claims if our products or services actually or allegedly fail to perform as expected or the use of our products or services results, or is alleged to result, in bodily injury and/or property damage. While we maintain what we believe to be reasonable limits of insurance coverage to appropriately respond to such liability exposures, large product liability claims, if made, could exceed our insurance coverage limits and insurance may not continue to be available on commercially acceptable terms, if at all. There can be no assurance that we will not incur significant costs to defend these claims or that we will not experience any product liability losses in the future. In addition, if any of our designed products are, or are alleged to be, defective, we may be required to participate in recalls and exchanges of such products. The future cost associated with providing product and service warranties and/or bearing the cost of repair or replacement of our products, including those that enable our service offerings, could exceed our historical experience and have a material adverse effect on our business, financial condition and results of operations.

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Our inability to identify the origin of conflict minerals in our products could have a material adverse effect on our business.

Many of our product lines include tantalum, tungsten, tin, gold and other materials that are considered to be “conflict minerals” under the SEC’s rules. Those rules require public reporting companies to provide disclosure regarding the use of conflict minerals sourced from the Democratic Republic of the Congo and adjoining countries in the manufacture of products. Those rules, or similar rules that may be adopted in other jurisdictions, could adversely affect our costs, the availability of minerals used in our products and our relationships with customers and suppliers.

We may experience significant disruptions in our operations resulting from our enterprise resource planning system initiatives.

We depend on our IT systems for the efficient functioning of our global business, including accounting, billing, data storage, purchasing and inventory management. In order to integrate and enhance our global operations, we initiated the phased implementation of an enterprise resource planning (“ERP”) system across our global operating locations to support our operations. The implementation of this ERP system required, and will continue to require, the investment of human and financial resources. We have incurred, and expect to incur, additional expenses as we continue to implement, enhance and develop our ERP system. As a result of our ERP initiatives, we may encounter difficulties in operating our business, which could disrupt our operations, including our ability to timely ship and track customer orders, determine inventory requirements, manage our supply chain, manage customer billing and adequately service our customers. If we experience significant disruptions resulting from our ERP initiatives, our business and operations could be disrupted, including our ability to report accurate and timely financial results. Accordingly, such events may disrupt or reduce the efficiency of our global operations and have a material adverse effect on our operating results and cash flows.

Because we currently sell, and we intend to grow the sales of, certain of our products and services in countries other than the U.S., we are subject to different regulatory regimes. We may not be able to develop products and services that comply with the standards of different countries, which could result in our inability to sell our products and services and further, we may be subject to political, economic, and other conditions affecting such countries, which could result in reduced sales of our products and services and which could adversely affect our business.

If our sales are to grow in the longer term, we believe we must grow our international business. Many countries require communications equipment used in their country to comply with unique regulations, including safety regulations, radio frequency allocation schemes and standards. If we cannot develop products that work with different standards, we will be unable to sell our products and services in those locations. If compliance proves to be more expensive or time consuming than we anticipate, our business would be adversely affected. Some countries have not completed their radio frequency allocation process, and therefore, we do not know the standards with which we would be required to comply. Furthermore, standards and regulatory requirements are subject to change. If we fail to anticipate or comply with these new standards, our business and results of operations will be adversely affected.

Sales to customers from continuing operations outside the U.S. accounted for 37%, 33% and 35% of our total sales for fiscal years ended February 28, 2023, 2022 and 2021, respectively. Assuming that we continue to sell our products and services to foreign customers, which is our expectation, we will be subject to the political, economic and other conditions affecting countries or jurisdictions other than the U.S., including those in Latin America, Africa, the Middle East, Europe and Asia. Any interruption or curtailment of trade between the countries in which we operate and our present trading partners, changes in exchange rates, significant shift in U.S. trade policy toward these countries, or significant downturn in the political, economic or financial condition of these countries, could cause demand for and sales of our products and services to decrease, or subject us to increased regulation including future import and export restrictions, any of which could adversely affect our business.

Additionally, a substantial portion of our products, components and subassemblies are currently procured from foreign suppliers located primarily in Hong Kong, Mainland China, Malaysia, Mexico and other Pacific Rim countries. Any significant shift in U.S. trade policy toward these countries or a significant downturn in the political, economic or financial condition of these countries could cause disruption of our supply chain or otherwise disrupt operations, which could adversely affect our business.

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Risks Related to Regulatory and Legal Matters

Our global operations and continued international expansion expose us to risks and challenges associated with conducting business internationally.

We face several risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, competition regulations, import and trade restrictions, economic sanctions, export requirements, U.S. laws such as the Foreign Corrupt Practices Act, the UK Bribery Act 2010 and other local laws that prohibit payments to governmental officials or certain payments or remunerations to customers. Given the high level of complexity of these laws there is a risk that some provisions may be breached by us, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements, or otherwise. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, or prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products or services in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business or operating results.

Global developments (including those related to the United Kingdom’s withdrawal from the European Union or other similar global regulations), or the perception that additional developments could occur, have had and may continue to have a material adverse effect on global economic conditions and financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital. Given our recent efforts to expand our business throughout Europe, these developments could affect our relationships with our existing and future customers, suppliers and employees. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

Some of our products are subject to mandatory regulatory approvals in the U.S. and other countries that are subject to change, which could make compliance costly and unpredictable.

Some of our products are subject to certain mandatory regulatory approvals in the U.S. and other countries in which it operates. In the U.S., the FCC regulates many aspects of communication devices, including radiation of electromagnetic energy, biological safety and rules for devices to be connected to the telecommunication networks. Although we have obtained the required FCC and various country approvals for all products and services we currently sell, there can be no assurance that such approvals can be obtained for future products and services on a timely basis, or at all. In addition, such regulatory requirements may change or we may not in the future be able to obtain all necessary approvals from countries other than the U.S. in which we currently sell our products and services or in which we may sell our products and services in the future.

Ongoing changes to U.S. tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business.

We import certain products and components from suppliers in China. In the past, the Office of the U.S. Trade Representative enacted tariffs on imports into the U.S. from China, resulting in ongoing trade tensions. Although some of the products and components we import are affected by the tariffs, at this time, we do not expect these tariffs to have a material impact on our business, financial condition or results of operations. However, it is possible that further tariffs may be imposed on imports of our products, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could have a negative impact on our revenue or operating results.

Evolving regulation and changes in applicable laws relating to data privacy and the Internet may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition.

As Internet commerce continues to evolve, increased regulation by federal, state or foreign agencies becomes more likely. We are particularly sensitive to these risks because the Internet is a critical component of our SaaS business model. In addition, taxation of services provided over the Internet or other charges imposed by government agencies or by private organizations for accessing the Internet may be imposed. Any regulation imposing greater fees

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for Internet use or restricting information exchange over the Internet could result in a decline in the use of the Internet and the viability of Internet-based services, which could harm our business.

Our products and solutions enable us to collect, manage and store a wide range of data related to fleet management such as vehicle location and fuel usage, speed and mileage and, in the case of our field service application, customer information, job data, schedule, invoice and other information. A valuable component of our solutions is our ability to analyze this data to present the user with actionable business intelligence. We obtain our data from a variety of sources, including our customers and third-party providers. The U.S. and various state governments have adopted or proposed limitations on the collection, distribution and use of personal information (including the California Consumer Privacy Act of 2018). Several foreign jurisdictions, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) that increase or change the requirements governing data collection and storage in these jurisdictions. Proposed or new legislation and regulations could also significantly affect our business. There currently are a number of proposals pending before federal, state, and foreign legislative and regulatory bodies. In addition, the European Union General Data Protection Regulation (“GDPR”) took effect in May 2018. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union. For example, we may be required to obtain consent and/or offer new controls to existing and new users in Europe before processing data. In addition, the GDPR includes significant penalties for non-compliance. Furthermore, other international jurisdictions, including Singapore, South Korea, China, Brazil, Mexico and Australia, have also implemented laws relating to data privacy and protection.

Violations of these laws, or allegations of such violations, could subject us to litigation, regulatory investigations, cash and non-cash penalties for noncompliance, disrupt our operations, involve significant management distraction and result in a material adverse effect on our business, financial condition and results of operations. Moreover, if future laws and regulations limit our customers’ ability to use and share this data, or our ability to store, process and share data with our customers over the Internet, demand for our solutions could decrease, our costs could increase, and our results of operations and financial condition could be harmed.

Risks Related to Our Intellectual Property

We may not be able to adequately protect our intellectual property, and our competitors may be able to offer similar products and services that would harm our competitive position.

Our ability to succeed in wireless data communications markets may depend, in large part, upon our intellectual property for some of our wireless technologies. We currently rely primarily on patents, trademark and trade secret laws, confidentiality procedures and contractual provisions to establish and protect our intellectual property. However, these mechanisms provide us with only limited protection. We currently hold almost 300 patents worldwide. As part of our confidentiality procedures, we enter into non-disclosure and invention assignment agreements with all employees, including officers, managers and engineers. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization, or develop similar technology independently. Furthermore, effective protection of intellectual property rights is unavailable or limited in some foreign countries. The protection of our intellectual property rights may not provide us with any legal remedy should our competitors independently develop similar technology, duplicate our products and services, or design around any intellectual property rights we hold.

We rely on access to third-party patents and intellectual property, and our future results could be materially and adversely affected if we are unable to secure such access in the future.

Many of our products and services are designed to include third-party intellectual property, and in the future, we may need to seek or renew licenses relating to such intellectual property. Although we believe that, based on past experience and industry practice, such licenses generally can be obtained on reasonable terms, there is no assurance that the necessary licenses would be available on acceptable terms or at all. Some licenses we obtain may be nonexclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent where we do not hold a license, we may be unable to sell some of our hardware solutions and services, and there can be no assurance that we would be able to design and incorporate alternative technologies, without a material adverse effect on our business, financial condition, and results of operations.

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Our competitors have or may obtain patents that could restrict our ability to offer our products, software and services, or subject us to additional costs, which could impede our ability to offer our products, software and services and otherwise adversely affect us. In addition, third parties may claim that we infringe their intellectual property and proprietary rights and may prevent us from manufacturing and selling some of our products and services and subject us to litigation over intellectual property rights or other commercial issues.

Several of our competitors have obtained and can be expected to obtain patents that cover products, software and services directly or indirectly related to those offered by us. There can be no assurance that we are aware of all existing patents held by our competitors or other third parties containing claims that may pose a risk of our infringement on such claims by our products, software and services. In addition, patent applications in the U.S. may be confidential until a patent is issued and, accordingly, we cannot evaluate the extent to which our hardware, software and services solutions may infringe on future patent rights held by others.

Even with technology that we develop independently, a third party may claim that we are using inventions claimed by their patents and may initiate litigation to stop us from engaging in our normal operations and activities, such as engineering and development and the sale of any of our products, software and services. Furthermore, because of rapid technological changes in the mobile resource management (“MRM”) and IoT marketplaces, current extensive patent coverage, and the rapid issuance of new patents, it is possible that certain components of our products, software, services, and business methods may unknowingly infringe the patents or other intellectual property rights of third parties. From time to time, we have been notified that we may be infringing such rights.

In the highly competitive and technology-dependent telecommunications field in particular, litigation over intellectual property rights is a significant business risk, and some third parties (referred to as non-practicing, or patent-assertion, entities) are pursuing a litigation strategy with the goal of monetizing otherwise unutilized intellectual property portfolios via licensing arrangements entered into under threat of continued litigation. These lawsuits relate to the validity, enforceability, and infringement of patents or proprietary rights of third parties. We may have to defend ourselves against allegations that we violated patents or proprietary rights of third parties.

Regardless of merit, responding to such litigation may be costly, unpredictable, time-consuming, and often involves complex legal, scientific, and factual questions, and could divert the attention of our management and technical personnel. In certain cases, we may consider the desirability of entering into such licensing agreements or arrangements, although no assurance can be given that these licenses can be obtained on acceptable terms or at all or that litigation will not occur. If we are found to be infringing any intellectual property rights, we could lose our right to develop, manufacture, or market products and services, product and services launches could be delayed, or we could be required to pay substantial monetary damages or royalties to license proprietary rights from third parties. If a temporary or permanent injunction is granted by a court prohibiting us from marketing or selling certain products, software and services, or a successful claim of infringement against us requires us to pay royalties to a third party, our financial condition and operating results could be materially and adversely affected, regardless of whether we can develop non-infringing technology.

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Risks Related to Third Parties

We depend to some extent upon wireless networks owned and controlled by others, unproven business models, and emerging wireless carrier models to deliver existing services and to grow.

Our telematics products and software services depend upon Internet-based systems that are proprietary to our business. These applications, which are hosted at independent data centers and are connected via access points to cellular networks, are used by our customers and by us to configure and communicate with wireless devices for purposes of determining location, speed or other conditions of vehicles and other mobile or fixed assets, and to deliver configuration code or executable commands to the devices. If we do not have continued access to sufficient capacity on reliable networks, we may be unable to deliver services and our sales could decrease. Our ability to grow and achieve profitability partly depends on our ability to buy sufficient capacity on the networks of wireless carriers and on the reliability and security of their systems. Some of our wireless services are delivered using airtime purchased from third parties. We depend on these third parties to provide uninterrupted service free from errors or defects and would not be able to satisfy our customers’ needs if such third parties failed to provide the required capacity or needed level of service. If these Internet-based systems failed or were otherwise compromised in some way, it could adversely affect the proper functioning of the wireless tracking and monitoring devices that we sell, and could result in damages to us as a result of the temporary or permanent inability of our customers to wirelessly communicate with these devices. In addition, our expenses would increase, and profitability could be materially and adversely affected if wireless carriers were to significantly increase the prices of their services. Our existing agreements with the wireless carriers generally have one- to three-year terms. Some of these wireless carriers are, or could become, our competitors.

We rely upon Amazon Web Services to operate certain aspects of our service, and any disruption of or interference with our use of the Amazon Web Services operation would impact our operations and our business would be materially and adversely impacted.

Amazon Web Services (“AWS”) provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a “cloud” computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities, and other services provided by AWS. Certain of our SaaS platforms and applications are hosted by AWS. Given this, along with the fact that we cannot easily switch our AWS operations to another cloud service provider, any disruption of or interference with our use of AWS would impact our operations and our business would be materially and adversely impacted.

Additional Risks Related to Our Convertible Notes and Indebtedness

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for the 2025 Convertible Notes, could have a material adverse effect on our reported financial results.

Under applicable accounting standards that became effective March 1, 2022, the shares underlying the 2025 Convertible Notes will be reflected in our diluted earnings per share using the “if converted” method. Under that method, diluted earnings per share would generally be calculated assuming that all the 2025 Convertible Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.

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The capped call, convertible note hedge and warrant transactions may adversely affect the value of our Notes and our common stock.

In connection with the sale of the 2025 Convertible Notes, we entered into privately negotiated capped call transactions with option counterparties. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. In connection with establishing any hedges of the capped call transactions, the option counterparties or their respective affiliates may enter into various derivative transactions with respect to our common stock and/or purchase shares of our common stock. This activity could increase (or reduce the size of any decrease in) the market price of our common stock or the Notes at that time. In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect investors’ ability to convert the Notes and, to the extent the activity occurs following conversion or during any observation period related to a conversion of Notes, it could affect the amount and value of the consideration that investors will receive upon conversion of the Notes.

The effect, if any, of these activities, including the direction or magnitude, on the market price of our common stock will depend on a variety of factors, including market conditions, and cannot be ascertained at this time. Any of these activities could, however, adversely affect the market price of our common stock and the trading price of the Notes.

We are subject to counterparty risk with respect to the convertible note hedge transactions.

The option counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that one or more option counterparties may default under the capped call and/or convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. If any of the option counterparties becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price of our common stock and in the volatility of the market price of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of any of the option counterparties.

We may incur substantially more debt or take other actions that could diminish our ability to make payments on the 2025 Convertible Notes.

We and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our future debt instruments, some of which may be secured debt. We are not restricted under the terms of the indenture governing the 2025 Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indentures governing the 2025 Convertible Notes that could have the effect of diminishing our ability to make payments on the Notes when due.

Risks Related to Our Common Stock and the Securities Market

The trading price of shares of our common stock may be affected by many factors and the price of shares of our common stock could decline.

As a publicly traded company, the trading price of our common stock has fluctuated significantly in the past. The future trading price of our common stock may be volatile and could be subject to wide price fluctuations in response to such factors, including:

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actual or anticipated fluctuations in revenues or operating results;

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acts of, or escalations in, war or terrorism;

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failure to meet securities analysts’ or investors’ expectations of performance;

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sales of our common stock by us, or insiders or our other stockholders;

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changes in key management personnel;

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announcements of technological innovations or new products by us or our competitors;

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developments in or disputes regarding patents and proprietary rights;

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proposed and completed acquisitions by us or our competitors;

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the mix of products and services sold;

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the effects of the recent global COVID-19 pandemic;

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the timing, placement and fulfillment of significant orders;

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product and service pricing and discounts;

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fluctuations in interest rates and inflation rates; and

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general economic conditions.

Future issuances of shares of our common stock could dilute the ownership interests of our stockholders.

Any issuance of equity securities could dilute the interests of our stockholders and could substantially decrease the trading price of our common stock. We may issue equity securities in the future for a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions, strategic collaborations or other transactions), to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of outstanding options or for other reasons. To the extent we issue common stock upon conversion of the 2025 Convertible Notes, that conversion could dilute the ownership interests of our stockholders. In circumstances other than at maturity, the 2025 Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of common stock, at our election, based on an initial conversion rate of 32.5256 shares of common stock per $1,000 principal amount of the convertible notes, which is equivalent to an initial conversion price of $30.7450 per share of common stock, subject to customary adjustments.

General Risk Factors

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

A severe or prolonged economic downturn, additional global financial crises, macroeconomic issues or trade imbalances caused by events such as the Russia-Ukraine conflict, inflation, rising interest rates, availability of capital markets, energy availability and costs or governmental initiatives to manage economic conditions could result in a variety of risks to our business, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in further supply disruption.

We cannot predict changes in worldwide or regional economic conditions and government policies, as such conditions are highly volatile and beyond our control. If these conditions deteriorate for extended periods, however, our business, results of operations and financial condition could be materially adversely affected.

Anti-takeover defenses in our charter and under Delaware law could prevent us from being acquired or limit the price that investors might be willing to pay for our common stock in an acquisition.

Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years from the time the person became an interested stockholder, unless specific conditions are met. In addition, we have in place various protections which would make it difficult for a company or investor to buy our business without the approval of our Board of Directors, including authorized but undesignated preferred stock and provisions requiring advance notice of board nominations and other actions to be taken at stockholder meetings. All of the foregoing could hinder, delay or prevent a change in control and could limit the price that investors might be willing to pay in the future for shares of our common stock.

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Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for:

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any derivative action or proceeding brought on our behalf;

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any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers, employees or agents to us or our stockholders;

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any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our restated certificate of incorporation, or our amended and restated bylaws;

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any action to interpret, apply, enforce or determine the validity of our restated certificate of incorporation or our amended and restated bylaws; and

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any action asserting a claim against us that is governed by the internal affairs doctrine;

provided, that with respect to any derivative action or proceeding brought on our behalf to enforce any liability or duty created by the Securities Exchange Act of 1934 or the rules and regulations thereunder, the exclusive forum will be the federal district courts of the United States of America. Our restated and amended bylaws further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

If securities or industry analysts issue an adverse or misleading opinion regarding our business or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us ceases coverage of our Company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if any of the analysts who cover us downgrade our stock or issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of the investor community, our stock price could decline.

Our success depends on the attraction and retention of senior management and technical personnel with relevant expertise.

As a competitor in a highly technical market, we depend heavily upon the efforts of our existing senior management and technical teams. The loss of the services of one or more members of these teams could slow product and services development and commercialization objectives. Due to the specialized nature of our products and services, we also depend upon our ability to attract and retain qualified technical personnel with substantial industry knowledge and expertise. Competition for qualified personnel is intense, and we may not be able to continue to attract and retain qualified personnel necessary for the development of our business.

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If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

We are subject to the rules and regulations of the SEC, including those rules and regulations mandated by the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies to include in their annual report a statement of management’s responsibilities for establishing and maintaining adequate internal control over financial reporting, together with an assessment of the effectiveness of those internal controls. Section 404 also requires the independent auditors of certain public companies to attest to, and report on, this management assessment. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Lack of expected dividends may make our stock less attractive as an investment.

We intend to retain all future earnings for use in the development of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. In certain cases, stocks that pay regular dividends command higher market trading prices, and so our stock price may be lower as a result of our dividend policy.

We may be subject to legal proceedings that could adversely affect our business.

We may be subject to legal claims or regulatory matters involving stockholder, consumer, antitrust, intellectual property infringement, product liability and other issues. Litigation is subject to inherent uncertainties, including increases in demands for attention on our management team, and unfavorable rulings could occur. An unfavorable ruling could include money damages. If an unfavorable ruling were to occur, it could have a material adverse effect on our business, financial condition and results of operations for the period in which the ruling occurred or future periods. See also “Item 3 – Legal Proceedings” in Part I of this Annual Report on Form 10-K.

Our stock price has been highly volatile in the past and could be highly volatile in the future.

The market price of our stock can be highly volatile due to the risks and uncertainties described in this Annual Report, as well as other factors, including substantial volatility in quarterly revenues and earnings due to comments by securities analysts and our failure to meet market expectations.

Over the fiscal year ended February 28, 2023, the price of our common stock as reported on The Nasdaq Global Select Market ranged from a high of $7.62 to a low of $2.96. The stock market has from time to time experienced extreme price and volume fluctuations that were unrelated to the operating performance of particular companies. In the past, companies that have experienced volatility have sometimes subsequently become the subject of securities class action litigation. If litigation were instituted on this basis, it could result in substantial costs and a diversion of management’s attention and resources.

We may not be able to generate sufficient future taxable income to utilize our net operating loss and tax credit carryforwards. In addition, our ability to utilize our federal net operating loss and tax credit carryforwards may be limited under Sections 382 and 383 of the Internal Revenue Code (the “Code”).

As discussed in Note 13, as of February 28, 2023, we maintained a valuation allowance with respect to certain of our deferred tax assets relating primarily to net operating losses and tax credits in U.S. and certain non-U.S. jurisdictions that we believe are not likely to be realized. We considered positive and negative evidence, including three years of cumulative losses considering forecasts of future profitability as of February 28, 2023, in assessing our ability to realize our domestic net deferred tax assets.

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Also, as of February 28, 2023, we had net operating loss carryforwards of approximately $80.6 million and $87.8 million for federal and state tax purposes, respectively. The federal net operating loss (NOL) carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code. The ability to utilize our NOL carryforwards to reduce taxable income in future years could become subject to significant limitations under Section 382 of the Internal Revenue Code if we undergo an ownership change.

The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than fifty (50) percentage point change (by value) in its equity ownership by stockholders who own directly or indirectly, 5% or more of our common stock, over a three (3)-year period. Future changes in our stock ownership, which may be outside of our control, may trigger an ownership change and, consequently, Section 382 and 383 limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset such taxable income may be subject to limitations, which could potentially result in increased future income tax liability to us. We continue to monitor stockholders who own directly or indirectly, 5% or more of our common stock to determine if we have experienced an ownership change pursuant to Section 382.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We are headquartered in Irvine, California with operations principally in the U.S., U.K., Italy and Mexico. We conduct engineering as well as research and development activities at our facilities in the United States, while our sales and administrative functions are performed in the U.S., U.K., Italy and Mexico. We periodically evaluate our facility requirements as necessary and believe our existing and planned facilities are sufficient for our needs for at least the next 12 months. All of our properties are leased facilities located in the following areas:


	Square			Square
Location	Footage		Location	Footage
Irvine, California		23,000	Guadalajara, Mexico		3,000
Richardson, Texas		24,000	Mexico City, Mexico		17,000
Carlsbad, California		29,000	Milan, Italy		10,000
Eden Prairie, Minnesota		7,000	Rome, Italy		2,000
			London, U.K.		6,000

We vacated our Indianapolis, Indiana facility as part of our plan to capture certain synergies and cost savings related to streamlining our global operations effective at the end of Fiscal 2021. This facility was used to support our Synovia operations. This facility is sublet through February 2024.

ITEM 3. LEGAL PROCEEDINGS

From time to time, various claims and litigation may be asserted or commenced against us arising from our ordinary course of business. In particular, we may receive claims concerning contract performance, or claims that our products or services infringe the intellectual property of third parties. Regardless of the outcome, litigation can have an adverse impact on us because of deferred costs, diversion of management resources and other factors. See Note 18, Commitments and Contingencies, of the Notes to the accompanying Consolidated Financial Statements below for information regarding the legal proceedings in which we are involved.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock trades on the Nasdaq Global Select Market under the ticker symbol CAMP. The following graph and table compare our stock performance to three stock indices over a five-year period assuming $100 investment was made on the last day of fiscal year 2018:


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

At April 24, 2023, we had approximately 1,200 stockholders of record. The number of stockholders of record does not include the number of persons having beneficial ownership held in “street name” which are estimated to approximate 14,000. We have never paid a cash dividend and have no current plans to pay cash dividends on our Common Stock. In addition, our revolving credit facility prohibits payment of dividends without the prior written consent of the lender under certain circumstances.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this Item will be included in our definitive proxy statement for the Annual Meeting of Stockholders to be held on July 27, 2023 and is incorporated herein by this reference.

Issuer Purchases of Equity Securities

For the twelve months ended February 28, 2023, there have been no shares repurchased by the Company.

Recent Sales of Unregistered Equity Securities

The Company did not sell any unregistered equity securities during the twelve months ended February 28, 2023.

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ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”), incorporated in 1981 and re-incorporated in Delaware in 1987, is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. We solve complex problems for customers within the market verticals of transportation and logistics, commercial and government fleets, industrial equipment, government and consumer vehicles by providing solutions that track, monitor and recover their vital assets. The data and insights enabled by CalAmp solutions provide real-time visibility into a user’s vehicles, assets, drivers, and cargo, giving organizations greater understanding and control of their operations. Ultimately, these insights drive operational visibility, safety, efficiency, maintenance, and sustainability for organizations around the world. Headquartered in Irvine, California, we have an installed base of approximately 10 million devices reporting to our cloud-based platform and approximately 1.6 million software and subscription services subscribers worldwide.

Reportable Segments

We operate under two reportable segments: Software & Subscription Services and Telematics Products.

Software & Subscription Services

Our Software & Subscription Services segment offers solutions comprised of telematics devices bundled with cloud-based application enablement and telematics service platforms that facilitate integration of our own applications, as well as those of third parties, through open APIs to deliver full-featured mobile IoT solutions to a wide range of customers and markets. Our scalable proprietary applications and other subscription services enable rapid and cost-effective development of high-value solutions for customers all around the globe. Services include tracking and monitoring services within Fleet Management as well as Supply Chain Integrity and International Vehicle Location.

Telematics Products

Our Telematics Products segment offers a series of advanced telematics products for the broader connected vehicle and emerging industrial IoT marketplace, which enable customers to optimize their operations by collecting, monitoring and effectively reporting business-critical information and desired intelligence from high-value remote and mobile assets. Our telematics products include asset tracking units, mobile telematics devices, fixed and mobile wireless gateways, and routers. These wireless networking devices underpin a wide range of solutions, and are ideal for applications demanding secure, reliable and business-critical communications. Telematics Products include OEM and MRM products.

Recent Developments

Transition of MRM Telematics Customers to Subscription Arrangements

In the second half of Fiscal 2022, we prompted a strategic shift with customers who historically purchased Mobile Resource Management (“MRM”) telematics devices from us whereby many of these customers were to be transitioned to subscription-based arrangements by way of bundling services with telematics devices under multi-year (generally three years) subscription contracts. Beginning in Fiscal 2022 and through Fiscal 2023, we transitioned a substantial majority of the MRM business to multi-year subscription contracts. As a result, our financial results associated with such subscription arrangements is reported within our Software & Subscription Services reporting segment prospectively from the effective date of such underlying contracts which in Fiscal 2023 led to growth in our Software & Subscription Services business with a corresponding decline in our Telematics Products business. Long term we believe this shift will allow us to drive revenue growth as we generate incremental revenue from our existing customer base as well as new customers through current and anticipated broader future subscription service offerings.

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Sale of LoJack North America Operations

Effective March 15, 2021, we sold certain assets and transferred certain liabilities of the LoJack North America business. Accordingly, the LoJack North America operations are presented as discontinued operations in the accompanying consolidated financial statements for the years ended February 28, 2022, and 2021, respectively.

Unless otherwise indicated, the financial disclosures and related information provided herein relate to our continuing operations and we have recast prior period amounts to reflect discontinued operations.

Results of Operations and Financial Condition

Revenues

Revenues associated with our reportable segments are as follows:

Software & Subscription Services (“S&SS”). Our SaaS-based solutions provide our customers with the ability to wirelessly communicate with monitoring devices installed in vehicles and other mobile or remote assets via our cloud-based telematics platform and software applications. S&SS customer arrangements generally include a bundling of subscription services combined with the sale or lease of telematics devices necessary to provide the associated services. Depending upon the elements of a given contractual arrangement, it may contain one or multiple performance obligations that are individually recognized as revenue over a subscription period or at a point in time based upon how the performance obligation is fulfilled.

Telematics Products. Our products revenues consist primarily of sales of our telematics products or wireless networking devices to large global companies as well as small and medium-sized enterprises. Revenues from our products are reported net of sales returns and allowances, and incentives. The prices charged for telematics products are determined through negotiation with our customers as well as prevailing market conditions and are fixed and determinable upon shipment.

From time to time, we provide various professional services to customers including project management, engineering services, and installation services. Revenues for professional services are typically distinct from other performance obligations and are recognized as the related services are performed.

Cost of Revenues

Our cost of revenues for application subscriptions and other services includes personnel costs and related benefits, consultants, software development activities, cellular network access costs, infrastructure costs for use of private networking services, and other costs that are required to deliver these services to our customers. Our cost of revenues for application subscriptions and other services also includes the cost of devices that are sold on an integrated basis with applicable subscriptions. If the subscription services and associated telematics devices are determined to represent a single combined performance obligation, the device costs are capitalized and are recognized ratably, on a straight-line basis, over the estimated average in-service lives of these devices.

Our cost of revenues for telematics products represent the cost of finished goods sold to our customers and are recognized at the point in time control passes to the customer. These costs include raw materials, manufacturing overhead and labor costs, as well as customs and duties, license royalties, recycling fees, insurance and other costs that are included in the price that we negotiate and pay to our contract manufacturers and component suppliers for the products. The cost of revenues also includes charges related to excess and obsolete inventories and the cost of fulfilling product warranties.

We continually negotiate to reduce the cost we pay to our suppliers in order to maintain consistent low prices for our customers. We accomplish this by working with our suppliers to find alternative, less expensive sources of raw materials and components as well as eliminating excess costs throughout our supply chain.

Gross Profit

Our gross profit and gross profit as a percentage of revenues, or gross margin, is influenced by several factors including sales volume, product and service mix, and excess and obsolescence (“E&O”) charges and other product costs. We expect gross margin to fluctuate over time based on how we control the mix of product and services and manage our inventory. Additionally, although we primarily procure and sell our products in U.S. dollars, we are susceptible to exchange rate fluctuations with other currencies. To the extent that exchange rates move unfavorably

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this may have an impact on our future selling prices and unit costs. Gross profit and gross margin may fluctuate over time based on the factors described above.

Operating Expenses

Our operating expenses consist principally of personnel related costs, including salaries and bonuses, fringe benefits and stock-based compensation as well as the cost of professional services, information technology, facilities and other administrative expenses. We classify our operating expenses into the following six categories:

•

Research and development expense consists of personnel related costs, professional services, certification fees and software licenses incurred to support our existing installed base of telematics devices through our field application engineers, software developers, program and product managers, as well as our effort to develop new products and technologies.

•

Selling and marketing expense consists of personnel related costs including our incentive programs to support our global sales organization as well as advertising and marketing promotions of our brands and products, including media advertisement costs, merchandising and display costs, trade show and event costs, and sponsorship costs.

•

General and administrative expense consists of personnel related costs to support our global enterprise as well as outside services for legal, accounting, insurance, information technology, investor relations and other costs associated with being a public company.

•

Intangible asset amortization is attributable to our acquired identifiable intangible assets from business combinations. Our acquired intangible assets with definite lives are amortized from the date of acquisition over periods ranging from four to fifteen years.

•

Restructuring expense consists of personnel and facility related costs resulting from our various cost savings initiatives. Personnel costs represent severance and employee related costs, and facility charges represent expenses for vacant office and manufacturing facility space under Corporate Expenses.

•

Impairment losses consist of write-offs of long-lived tangible and intangible assets for which carrying value is determined to be in excess of realizable value.

We expect our operating costs will increase in absolute dollars due to the anticipated growth of our business and related infrastructure as well as expansion into new geographic regions. Operating expense may fluctuate as a percentage of revenue throughout the year due to discrete quarterly events and seasonal trends.

Non-Operating Income (Expense)

Non-operating income (expense) consists of (i) investment and interest income earned on our cash balances and investments, (ii) interest expense on our convertible senior unsecured notes including the amortization of note discount and debt issuance costs, and (iii) other income (expense) that includes but is not limited to transaction gains and losses and foreign currency gains and losses.

Income Tax Expense (Benefit)

We are subject to income taxes in the U.S. and related states as well as foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different than the U.S. statutory tax rate. Accordingly, our effective tax rate will vary from the U.S. statutory income tax rate due to the amount of income allocable to each tax jurisdiction, tax credits, and changes in valuation allowances which are provided against net deferred tax assets when it is determined that it is more likely than not that the assets will not be realized.

Income (Loss) from Discontinued Operations, Net of Tax

Effective March 15, 2021, a wholly owned subsidiary of the Company and Spireon entered into an agreement pursuant to which we sold certain assets and transferred certain liabilities of the LoJack North America business to Spireon and we received net proceeds from Spireon of $6.6 million. On November 9, 2021, the purchase price was reduced by $0.9 million, which was paid to Spireon, due to final working capital adjustments. We recognized a gain on the sale of the LoJack North America business of $4.1 million during the fiscal year ended February 28, 2022.

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Operations for LoJack North America are presented as discontinued operations in the accompanying consolidated financial statements for the fiscal years ended February 28, 2022, and 2021, respectively. For the fiscal year ended February 28, 2022, we have reported the operating results and cash flows related to the LoJack North America operations through March 14, 2021. See Note 2, Discontinued Operations, for additional information.

Adjusted EBITDA

In addition to our U.S. GAAP results, we present Adjusted EBITDA as a supplemental non-GAAP measure of our performance. Our CEO, the Chief Operating Decision Maker (“CODM”), uses Adjusted EBITDA to evaluate and monitor segment performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that excludes or includes amounts to be different than the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the statements of comprehensive income (loss), balance sheets or statements of cash flows. We define Adjusted EBITDA as earnings before investment income, interest expenses, taxes, depreciation, amortization, net income (loss) from discontinued operations, stock-based compensation, acquisition and integration expenses, non-cash costs and expenses arising from purchase accounting adjustments, litigation and legal expenses, gains and losses from legal settlements, impairment losses and certain other adjustments. We believe this non-GAAP financial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors for a more consistent basis of comparison to help investors evaluate our results of ongoing operations and enable more meaningful period-to-period comparisons. Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission regarding the use of non-GAAP financial measures, we have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure. See Note 19, Segment and Geographic Data, to the accompanying consolidated financial statements for additional information related to Adjusted EBITDA by reportable segments and reconciliation to net income (loss).

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OPERATING RESULTS

The following table sets forth the percentage of revenues represented by items included in our consolidated statements of income for the three most recent fiscal years:


	Year Ended February 28,
	2023			2022			2021
Revenues		100.0	%		100.0	%		100.0	%
Cost of revenues		63.0			58.8			60.3
Gross profit		37.0			41.2			39.7
Operating expenses:
Research and development		8.3			9.6			8.4
Selling and marketing		16.1			16.4			15.0
General and administrative		17.6			17.7			15.9
Intangible asset amortization		1.8			1.8			1.5
Restructuring		1.6			0.2			0.8
Impairment losses		-			-			0.3
Operating loss		(8.4	)		(4.5	)		(2.2	)
Non-operating expense, net		(2.3	)		(5.6	)		(4.5	)
Loss from continuing operations before income taxes		(10.7	)		(10.1	)		(6.7	)
Income tax provision from continuing operations		(0.4	)		(0.4	)		(0.2	)
Net loss from continuing operations		(11.1	)		(10.5	)		(6.9	)
Net income (loss) from discontinued operations, net of tax		-			1.1			(11.4	)
Net loss		(11.1	)		(9.4	)		(18.3	)

Unless otherwise indicated, the discussion on our results of operations provided below relates to our continuing operations and we have recast prior period amounts for purposes of historical comparisons. See Note 2, Discontinued Operations, to the accompanying consolidated financial statements for additional information.

Fiscal year ended February 28, 2023 (“Fiscal 2023”) compared to fiscal year ended February 28, 2022 (“Fiscal 2022”):

Revenue by Segment


	Fiscal years ended February 28,
	2023					2022
(In thousands)	$		% of Revenue			$		% of Revenue			$ Change			% Change
Segment
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	%)

Our Software & Subscription Services enable customers to gather and analyze critical data used to track, monitor and recover vital mobile assets with real-time visibility and insights. Our services focus on three principal end markets: (i) transportation and logistics, (ii) government and municipalities, and (iii) connected car services. As described above, in Fiscal 2022 we began entering into subscription-based arrangements with customers that historically have purchased MRM telematics hardware from us, a shift that favorably impacted revenues in our Software & Subscription Services segment and unfavorably impacted revenues in our Telematics Products segment. In Fiscal 2022, we began experiencing supply shortages driven by the global pandemic. These supply imbalances intensified during Fiscal 2023 and adversely impacted all parts of our business. We expect these supply shortages to continue and to diminish in the coming year as suppliers strive to create additional production capacity.

As of February 28, 2023, our remaining contractual performance obligations for software & subscription services were $234.5 million as compared to $202.0 million as of February 28, 2022. The majority of the growth in contractual performance obligations was driven by the conversion of telematics products customers to multi-year subscription contracts as well as new contracts within the government and municipality markets and connected car markets.

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In Fiscal 2023, Software & Subscription Services revenue increased by $30.4 million or 19.7% compared to Fiscal 2022 largely due to increased transportation and logistics revenues generated through the transition of MRM telematics hardware customers onto multi-year subscription arrangements. Active subscribers increased 50% as of the end of Fiscal 2023 when compared to Fiscal 2022. As mentioned above, supply shortages have impacted our ability to procure the devices we utilize to deliver our subscription services, which has constrained our ability to install our devices and initiate new subscription services.

Telematics Products revenue, comprised primarily of MRM telematics and OEM/network products, decreased by $31.3 million or 22.1% in Fiscal year 2023 compared to Fiscal 2022. This decrease was largely driven by the conversion of certain MRM telematics hardware customers onto multi-year subscription contracts, and thus revenues generated after the contract effective dates for these customers are classified within Software & Subscription Services revenues to the extent they are associated with a subscription arrangement. Telematics Products revenues have also been negatively impacted by the supply shortages described above, thereby limiting our ability to fulfill customer orders.

Gross Profit by Segment


	Fiscal years ended February 28,
	2023					2022
(In thousands)	$		% of Revenue			$		% of Revenue			$ Change			% Change
Segment
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	$	109,011		37.0	%	$	121,886		41.2	%	$	(12,875	)		(10.6	%)

Consolidated gross profit for Fiscal 2023 decreased by $12.9 million or 10.6% versus Fiscal 2022 and consolidated gross margin decreased by 420 basis points in Fiscal 2023 compared to Fiscal 2022. These decreases were largely due to the continued supply constraints described above, which has in some cases prevented the sourcing of certain scarce essential semiconductors and electronics components at normal market prices. In particular, given aged backlog demand and critical backlog for customers impacted by Verizon’s February 2023 3G network sunset, during the second half of Fiscal 2023 we sourced various components through electronics brokers at elevated prices. We anticipate that we may need to source certain semiconductors and electronics components through brokers in the coming year, but to a lesser extent. Gross margin was also negatively impacted in Fiscal 2023 by an unfavorable shift in customer and product mix. These negative impacts to gross profit and gross margin were partially offset by the increased proportion of overall sales occurring within Software & Subscription Services, which has a higher margin profile, in Fiscal 2023.

Software & Subscription Services: Gross profit increased by $2.5 million or 3.3% in Fiscal 2023 compared to Fiscal 2022, as a result of increased revenues. Gross margin decreased by 690 basis points in Fiscal 2023 compared to Fiscal 2022 primarily driven by the increased cost of sourcing certain scarce essential components through electronics brokers predominantly in the second half of Fiscal 2023 as described above, as well as to a lesser extent, by customer and product mix.

Telematics Products: Gross profit decreased by $15.4 million or 34.3% in Fiscal 2023 compared to Fiscal 2022, primarily due to decreased revenues as well as the cost impact of sourcing certain scarce essential components through electronics brokers predominantly in the second half of Fiscal 2023 as described above. Gross margin decreased 500 basis points in Fiscal 2023 compared to Fiscal 2022 primarily due to the increased cost of sourcing certain components through electronics brokers.

As described above, we are presently experiencing adverse impacts to revenues as a result of global supply shortages of certain components, which are also leading to cost increases on many of these components. As a result, we may continue to experience lower gross margins in the coming quarters if we are unable to effectively mitigate or offset the impacts of these cost increases.

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Operating Expenses


	Fiscal years ended February 28,
	2023						2022
(In thousands)	$		% of Revenue				$	% of Revenue	$ Change	% Change
Research and development	$	24,570		8.3	%	&#