Q2 2024 CalAmp Corp Earnings Call
Welcome to <unk> second quarter 2024 financial results Conference call. My name is cole and I'll be the moderator for today's call.
Speaker 1: Welcome to Cal-AMP's second quarter 2024 financial results conference call. My name is Cole and I'll be the moderator for today's call.
Speaker 1: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker 1: As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Logan Lucas, Corporate Strategy and Investor Relations Manager at Cal-AMP. Logan, you may begin.
As a reminder, this call is being recorded I would now like to introduce your host for today's conference call Logan Lucas corporate strategy and Investor Relations manager at Cal App.
You may begin.
Speaker 2: Good afternoon and welcome to Cal Am's fiscal second quarter 2024 financial results conference call.
Good afternoon, and welcome to <unk> fiscal second quarter 2024 financial results Conference call.
Speaker 2: I'm Logan Lucas, Corporate Strategy and Investor Relations Manager at Callen.
Logan Lucas corporate strategy and Investor Relations manager at talent.
Speaker 2: With us today are Cal Am's interim president and chief executive officer Jason Koehnauer and chief financial officer
With us today, our covenants interim President and Chief Executive Officer, Jason Cohen, Our Chief Financial Officer, Ken.
Speaker 2: During today's call, we will make certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934.
During today's call, we will make certain forward looking statements within the meaning of section 27, a of the Securities Act of $19 33, and section 21 E of the Exchange Act of $19 34.
Speaker 2: Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions, and as a result are subject to risks and uncertainty.
Forward looking statements are predictions projections and other statements about future events that are based on current expectations and assumptions.
As a result are subject to risks and uncertainties.
Speaker 2: Many factors could cause actual future events to differ materially from the forward-looking statements in this communication.
Many factors could cause actual future events to differ materially from the forward looking statements in this communication.
Speaker 2: You should listen to today's call with the understanding that our actual results may be materially different from the plans, intentions, and expectations disclosed in the forward-looking statements we make.
You should listen to today's call with the understanding that our actual results may be materially different from the plans intentions and expectations disclosed in the forward looking statements we make.
Speaker 2: For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings press release we issued today, as well as the company's filings with the Securities and Exchange Commission.
For more information about factors that may cause actual results to differ materially from forward looking statements. Please refer to the earnings press release, we issued today as well as the company's filings with the Securities and Exchange Commission.
Speaker 2: Readers are cautioned not to put undue reliance on forward-looking states.
Readers are cautioned not to put undue reliance on forward looking statements and the company specifically disclaims any obligation to update the forward looking statements that may be discussed during this call.
Speaker 2: and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call.
Speaker 2: Now, Jason will begin today's call with a review of the company's recent operational highlights, and then Jee-Kun will provide a more detailed review of the financial results, followed by a question and answer session.
Now Jason will begin today's call with a review of the company's recent operational highlights and then <unk> will provide a more detailed review of the financial results followed by a question and answer session with that it is my great pleasure to turn the call over to <unk> interim President and CEO , Jason Kohinoor, Jason. Please go ahead.
Speaker 2: With that, it is my great pleasure to turn the call over to Calam's interim president and CEO Jason Cohenauer. Jason, please go back.
Speaker 3: Thank you Logan and thanks to all of you for joining us on the call today.
Thank you Logan and thanks to all of you for joining us on the call today.
I will start by taking a moment to express our heartfelt condolences to the family friends and teammates of Jeff Gardner following his passing in late August .
Speaker 3: I will start by taking a moment to express our heartfelt condolences to the family, friends, and teammates of Jeff Gardner following his passing in late August .
Speaker 3: Jeff was not only a passionate leader for this organization, but a kind and compassionate friend to many.
Jeff look not only a passionate leader for this organization.
But our kind and compassionate friend to many.
Speaker 3: We appreciate the effort and countless hours he put into CalAPS over these past few years, taking on challenges and opportunities with positivity and resilience.
We appreciate the effort and countless hours he put into kind of laughs over these past few years, taking on challenges and opportunities with positivity and resilience.
Speaker 3: He had a truly remarkable life and career and the outreach the company has received on his behalf following his unexpected passing
You had a truly remarkable life and career and the outreach. The company has received on his behalf following his unexpected passing.
As a testament to the positive impact he had on others along the way.
The <unk> team is keeping Jeff and his loved ones and our thoughts and hearts through this difficult time.
Speaker 3: The Calam team is keeping Jeff and his loved ones in our thoughts and hearts through this difficult time.
Moving to our results the.
Speaker 3: The company's second quarter for fiscal year 2024 produced mixed results.
The company's second quarter for fiscal year 2024 produced mixed results.
Speaker 3: While we continue to experience demand softness with PSP customers, we saw strength in other parts of the business, including international connected car, and with our large industrial OEM customers.
While we continue to experience demand softness with TSP customers, we saw strength in other parts of the business, including international connected car and with our large industrial OEM customer.
Speaker 3: The TSP softness is attributed to continued customer inventory rebalancing, following the fulfillment of a large volume of orders in the second half of fiscal year 2023.
The TSP softness is attributed to continued customer inventory rebalancing.
Following the fulfillment of a large volume of orders in the second half of fiscal year 2023.
Speaker 3: These orders have been backlogged due to the severe supply chain constraints that we and many others encountered over the past few years.
These orders had been backlog due to the severe supply chain constraints that we and many others encountered over the past few years.
Speaker 3: Additionally, competitive pressures experienced by our PSP customers have complicated the inventory rebalancing process.
Additionally, competitive pressures experienced by our TSP customers have complicated the inventory rebalancing process.
We are continuing to work with each of these customers as they align their inventory levels with demand.
Speaker 3: We are continuing to work with each of these customers as they align their inventory levels with the NAS.
Speaker 3: Consolidated 22 revenue, with $61.7 million, which was below our guidance.
Consolidated Q2 revenue with $61 7 million.
Which was below our guidance range.
Speaker 3: Revenue from TSP's, which was lower than expected, was the key driver of the revenue.
Revenue from TSP, which was lower than expected was the key driver of the revenue mess.
Speaker 3: Q2 adjusted EBITDA was $5.9 million, which was within our guidance range.
Q2, adjusted EBITDA was $5 $9 million, which was within our guidance range.
Speaker 3: The company also delivered strong cash flow from operations of $7.1 million.
The company also delivered strong cash flow from operations of $7 1 million.
Speaker 3: The Strength and Adjusted EBITDA and Cash Low from Operations is primarily the result of cost savings initiative.
The strength in adjusted EBITDA and cash flow from operations is primarily the result of cost savings initiatives.
Speaker 3: Some of these initiatives were carried out during the second quarter. So we expect to see some incremental expense reductions from our previous actions in the back half of the year.
Some of these initiatives were carried out during the second quarter.
So we expect to see some incremental expense reductions from our previous actions in the back half of the year.
We continue to evaluate opportunities to refocus and simplify and streamline the business.
Speaker 3: We continue to evaluate opportunities to refocus, simplify, and streamline the business.
On the product front, our team continues to push forward with several initiatives focused on value creation for our customers.
Speaker 3: On the product front, our team continues to push forward with several initiatives focused on value creation for our customers.
Speaker 3: For example, in the second quarter, we launched our electronic logging device for ELD to help customers streamline their compliance work flow.
For example, in the second quarter, we launched our electronic logging device or <unk> to help customers streamline their compliance workflows.
Speaker 3: Our ELD solution is integrated with the rest of our fleet management products week and adds to a portfolio that we plan to leverage to drive increased our poo and gross margins in our fleet segment.
Our <unk> solution is integrated with the rest of our fleet management product suite and.
And adds to our portfolio that we plan to leverage to drive increased <unk> and gross margins in our fleet segments.
Speaker 3: We also commenced commercial shipments of our new vision 2.0 dash cam solution during the quarter and now have our first successful installation.
We also commenced commercial shipments of our new vision, two dot O dash Cam solution during the quarter and now have our first successful installations.
We expect to see additional commercial traction with vision at our fleet customers in the coming months and quarters.
Speaker 3: We expect to see additional commercial traction with vision at our fleet customers in the coming months and quarter.
Speaker 3: We also secured several new customer wins during the quarter, including with transport as castores, one of the largest transportation and logistics companies in Mexico.
We also secured several new customer wins during the quarter, including with transport test kits towards one of the largest transportation and logistics companies in Mexico.
Speaker 3: Transport Discast Torres is leveraging both Calence, Incab and Trailer tracking solutions to pull data.
Transport desk as far as leveraging both <unk> in cab and trailer tracking solutions to pull data from their assets and to integrate the data with their proprietary enterprise applications.
Speaker 3: to integrate the data with a proprietary enterprise application.
The solution provides seamless visibility across the customer's operations and illustrates our unique ability to integrate data from many different asset types into a variety of systems, thereby providing highly tailored insights that drive the efficiency safety and compliance.
Speaker 3: The solution provides seamless visibility across the customer's operations and illustrates our unique ability to integrate data from many different asset types into a variety of systems.
Speaker 3: thereby providing highly tailored insights that drive the efficiency, safety, and compliance.
Operator: Welcome to CalAmp's second quarter, 2024 Financial Results Conference call. My name is Cole, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
We are excited to embark on this partnership with transport, there's catch Torres to optimize the management of their fleet.
Speaker 3: We are excited to embark on this partnership with Transportes Castores to optimize the management of their fleet.
Speaker 3: Our international connected car business continue to deliver strong performance during the quarter.
Our international connected car business continued to deliver strong performance during the quarter.
Operator: If you would like to ask a question, please press star one on your telephone keypad. As a reminder, this call is being recorded.
Speaker 3: driven by expanding relationships with large automotive OEMs and rental customers, particularly in Europe .
Driven by expanding relationships with large automotive Oems and rental customers, particularly in Europe .
Logan Lucas: I would now like to introduce your host for today's conference call, Logan Lucas, corporate strategy, and investor relations manager at CalAmp. Logan, you may begin. Good afternoon and welcome to CalAmp's fiscal second quarter, 2024 Financial Results Conference call. I'm Logan Lucas, corporate strategy and investor relations manager at CalAmp.
Speaker 3: We expect this segment to continue to deliver consistent, profitable growth. As we expand with our customers, secure a new B2B customers, and grow new geographical markets such as Spain.
We expect this segment to continue to deliver consistent profitable growth as.
As we expand with our customers secure new <unk> customers and grow new geographical markets such as Spain.
Logan Lucas: With us today, our CalAmp's interim president and chief executive officer, Jason Cohenour, and chief financial officer, Jikun Kim. During today's call, we will make certain forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Exchange Act of 1934. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions, and as a result are subject to risks and uncertainties.
Speaker 3: with respect to the CalAMP team, you may have seen the news regarding the departure of our chief revenue office.
With respect to the Cath lab team you may have seen the news regarding the departure of our Chief revenue Officer.
In response to this departure, we have elevated two highly qualified individuals to lead this critical function.
Speaker 3: In response to this departure, we have elevated to highly qualified individuals to lead this critical function.
Logan Lucas: Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. You should listen to today's call with the understanding that our actual results may be materially different from the plans, intentions, and expectations disclosed in the forward-looking statements we make. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings press release we issued today, as well as the company's filings with the Securities and Exchange Commission. Readers are cautioned not to put undue reliance on forward-looking statements, and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call.
One of these team members now leads new revenue generation.
Speaker 3: One of these team members now leads new revenue generation while the other leads customer success and sales operates.
While the other leads customer success and sales operations.
Both leaders report directly to the CEO and the transition has been seamless.
Speaker 3: both leaders report directly to the CEO and the transition has been seen.
Our CEO search is ongoing and interest in the position is high.
Speaker 3: Our CEO search is ongoing and interest in the position is high.
Speaker 3: And while we have met with some excellent candidates, we have no new additional news to share regarding the search at this time.
And while we have met with some excellent candidates we have no new additional news to share regarding the search at this time.
Speaker 3: Similarly, our exploration of strategic alternatives is ongoing, and we have no additional news to report as we've had this time.
Similarly, our exploration of strategic alternatives is ongoing and we have no additional news to report at this time.
As for me I've been serving as the interim CEO of <unk> since August 28th following Jeff's tragic passing.
Speaker 3: As for me, I've been serving as the interim CEO of CalAM since August 28th following Jeff's tragic path.
Speaker 3: I can report without hesitation that the CalAMP team is talented and passionate, and they believe in the opportunity before us.
I can report without hesitation that the <unk> team is talented and passionate and.
And they believe in the opportunity before us.
In addition to having a great team the company has other tremendous assets, including excellent products and solutions are.
Speaker 3: In addition to having a great team, the company has other tremendous assets, including excellent products and solutions, a blue chip customer base, and a large and growing market opportunity. Well,
Logan Lucas: Now, Jason will begin today's call with a review of the company's recent operational highlights and then Jikun will provide a more detailed review of the financial results followed by a question-and-answer session.
Our blue chip customer base, and a large and growing market opportunity.
While I am here I will be supporting the team.
Jason Cohenour: With that, it is my great pleasure to turn the call over to talent interim president and CEO Jason Cohen Howard. Jason, please go ahead. Thank you, Logan, and thanks to all of you for joining us on the call today.
I will be supporting customers.
Speaker 3: and I will be helping the team to hone focus, to execute operationally.
And that will be helping the team to hone focus to execute operationally.
Speaker 3: and to capture efficiencies as we strive to deliver profitable growth and positive cash.
And to capture efficiencies as we strive to deliver profitable growth and positive cash flow.
Jason Cohenour: I will start by taking a moment to express our heartfelt condolences to the family, friends, and teammates of Jeff Gardner following his passing in late August. Jeff was not only a passionate leader for this organization, but a kind and compassionate friend to many. We appreciate the effort and countless hours he put into talent over these past few years, taking on challenges and opportunities with positivity and resilience. He had a truly remarkable life and career, and the outreach the company has received on his behalf following his unexpected passing is a testament to the positive impact he had on others along the way. The Calam team is keeping Jeff and his loved ones in our thoughts and hearts through this difficult time.
Speaker 3: With that, I'll turn the call over to Jekun. Discuss our second quarter financial results in more detail. Jekun?
With that I'll turn the call over to <unk> to discuss our second quarter financial results in more detail.
<unk>.
Thank you, Jason and thank you for stepping up to this transition.
Speaker 4: My commentary will include references to our non- GAAP financial measures. A full reconciliation of these non- GAAP measures with the corresponding-
My commentary will include references to non-GAAP financial measures.
Reconciliation of these non-GAAP measures with the corresponding GAAP measure is included in our earnings release.
Speaker 4: Total revenue in the second quarter was 61.7
The total revenue in the second quarter was $61 7 million.
Speaker 4: Revenues decline 15% year over year and 13% sequentially from 70.9 million last
Revenues declined 15% year over year, and 13% sequentially from $70 9 million last quarter.
Speaker 4: Much of the year over year and sequential revenue decline was driven by lower sales to a telematic service provider.
Much of the year over year and sequential revenue decline was driven by lower sales to a telematics service provider customers.
Speaker 4: As Jason mentioned in his remarks, the revenue decline was driven by our TSP customers continuing to...
As Jason mentioned in his remarks, the revenue decline was driven by our TSP customers continuing to rebalance their inventories while also navigating competitive pressures in their end markets.
Jason Cohenour: Moving to our results. The company's second quarter for fiscal year 2024 produced mixed results. While we continue to experience demand softness with PSP customers, we saw strength in other parts of the business, including international connected car and with our large industrial OEM customer. The of a large volume of orders in the second half of fiscal year 2023. These orders had been backlog due to the severe supply chain constraints that we and many others encountered over the past few years.
Speaker 4: while also navigating competitive pressures in their end.
Speaker 4: We now expect this inventory rebalancing with RTSP customers to take longer than
We now expect this inventory rebalancing with our TSP customers to take longer than previously expected.
Speaker 4: Revenue declines from the TSP customers were partially offset by revenue increases from our industrial and international.
Revenue declines from the TSB customers were partially offset by revenue increases from our industrial and international connected card businesses.
Speaker 4: Recurring application subscription revenues in the quarter were 18.7 million. A $500,000 sequential decry...
Recurring application subscription revenues in the quarter were $18 7 million.
$500000 sequential decline.
Most of the decline was driven by a $400000 June catch up for prior period accounting.
Speaker 4: Most of the decline was driven by a $400,000 tune catch up for prior periods accounting.
And corrections.
Speaker 4: RPO and hardware backlog ended the quarter at 194 million and 14 million respect.
Po and hardware backlog ended the quarter at $194 million and $14 million respectively.
Jason Cohenour: Additionally, competitive pressures experienced by our PSP customers have complicated the inventory rebalancing process. We are continuing to work with each of these customers as they align their inventory levels with demand. Consolidated Q2 revenue at $61.7 million, which was below our guidance range. Revenue from PSP's, which was lower than expected, was the key driver of the revenue miss. Q2 adjusted EBITDA was $5.9 million, which was within our guidance range. The company also delivered strong cash flow from operations of $7.1 million.
Speaker 4: RPO declined 24 million and hardware backlog declined 6 million
<unk> declined $24 million and hardware backlog declined $6 million sequentially.
Speaker 4: The RPO and hardware backlog decline was driven by customer PO fulfillment as well as Thank you very much and I have provided you with a quick excuseITES Thank you very much and I have provided you with a quick excuseITES
The <unk> and hardware backlog decline was driven by customer appeal fulfillment as well as TSB conversions that have already been completed.
Speaker 4: Consolidated growth margin in the second quarter was 36%, compared to 38% last.
Consolidated gross margin in the second quarter was 36% compared to 38% last quarter.
Speaker 4: The sequential gross margin decline was driven by lower volumes and unfavorable products.
The sequential gross margin decline was driven by lower volumes and unfavorable product mix.
Speaker 4: Second quarter gap operating expenses decline 3.9 million C-Funtually and 8.8 million Euro.
Second quarter GAAP operating expenses declined $3 9 million sequentially, and eight 8 million year over year.
Speaker 4: cost reductions that we implemented over the past 12 months are starting to significantly impact not only our px but are also costs good
Jason Cohenour: The strength and adjusted EBITDA and cash flow from operations is primarily the result of cost savings initiatives. Some of these initiatives were carried out during the second quarter, so we expect to see some incremental expense reductions from our previous actions in the back half of the year. We continue to evaluate opportunities to refocus, simplify, and streamline the business.
The cost reductions that we implemented over the past 12 months or so.
Starting to significantly impact not only our opex.
But also our cost of goods sold and Capex.
Speaker 4: 22 FY 24 adjusted EBITDA was 5.9 million or 9.5% of revenue. Essentially flat compared to...
Q2, FY 'twenty four adjusted EBITDA was $5 9 million or nine 5% of revenue.
Essentially flat compared to the $6 million in the prior quarter.
Speaker 4: Year over year, adjusted EBITDA increased by 1.1 million.
Year over year, adjusted EBITDA increased by $1 1 million.
Jason Cohenour: On the product front, our team continues to push forward with several initiatives focused on value creation for our customers. For example, in the second quarter, we launched our electronic logging device for ELD to help customers streamline their compliance workflows. Our ELD solution is integrated with the rest of our fleet management products week and adds to a portfolio that we plan to leverage to drive increased ARPU and gross margins in our fleet segments.
Speaker 4: At the end of Q2 FY24, we had a total cash and cash equivalent of 38.5 million as compared to 35 million last quarter.
At the end of Q2, FY 'twenty four we had a total cash and cash equivalents of $38 5 million.
As compared to $35 million last quarter, an increase of $3 6 million.
Speaker 4: Cash flow from operations with 7.1 million in the
Cash flow from operations was $7 1 million in the second quarter.
Speaker 4: Positive cash flow was driven by a 4.2 million cash flow from operations excluding working capital
Positive cash flow was driven by a $4 2 million cash flow from operations, excluding working capital changes as well as a $2 9 million in net working capital reductions.
Speaker 4: as well as a 2.9 million in rent working capital.
Jason Cohenour: We also commenced commercial shipments of our new vision 2.0 dash cam solution during the quarter and now have our first successful installations. We expect to see additional commercial traction with vision at our fleet customers in the coming months and quarters. We also secured several new customer wins during the quarter, including with transport as casteris, one of the largest transportation and logistics companies in Mexico. Transport as casteris is leveraging both Kalans in cab and trailer tracking solutions to pull data from their assets and to integrate the data with their proprietary enterprise applications.
Speaker 4: Unlike the prior quarter, working capital changes worked in our favor.
Unlike the prior quarter working capital changes worked in our favor in Q2.
Speaker 4: Compared to the prior quarter, cash flow from operations, excluding working capital, increased by 100,000 sequentially, and continues to be strong despite volume reduction. illegal reduction.
Compared to the prior quarter cash flow from operations, excluding working capital increases.
100000 sequentially and continues to be strong despite volume reductions.
Cash flow stability is driven by our cost reductions.
Speaker 4: At the end of the quarter, we have 32.7 million in undrawn asset-backed line availability. This availability is subject to...
At the end of the quarter.
Of $32 7 million and Undrawn asset back line availability.
This availability is subject to customary covenant tests.
Speaker 4: 230.000002 million% coupon. Convertible notes are due on August first.
232% coupon convertible notes are due on August one 2025.
Speaker 4: Our objective is to generate a high quality EVTA run rate in order to optimize our options for refinancing the convertible notes.
Our objective is to generate a high quality EBIT da run rate in order to optimize our options for refinancing the convertible notes.
Jason Cohenour: The solution provides seamless visibility across the customer's operations and illustrates our unique ability to integrate data from many different asset types into a variety of systems. James. Thereby providing highly tailored insights that drive the efficiency, safety and compliance. We are excited to embark on this partnership with Transportes Kestores to optimize the management of their fleet. Our international connected car business continue to deliver strong performance during the quarter, driven by expanding relationships with large automotive OEMs and rental customers, particularly in Europe. We expect this segment to continue to deliver consistent, profitable growth, as we expand with our customers, secure a new B2B customers and grow new geographical markets such as Spain.
As demonstrated over the past few quarters EBITDA performance has been strong and stable.
Speaker 4: EBITDA performance has been strong and stable. We believe our future EBITDA run rate increases will be...
We believe that our future EBITDA run rate increases will be driven by several factors and initiatives, including the normalization of TSP revenues as we stabilize and then return to growth in this market segment.
Speaker 4: including the normalization of PSP revenues as we stabilize and then return to growth in this market segment, growth in recurring revenues driven by new solution introductions such as
Growth in recurring revenues driven by new solution introductions, such as vision two point, though.
Which we expect to drive significant <unk> growth with new and existing customers.
Speaker 4: Improvements in gross margin, trending back to our historical levels, and continued focus on our cost management. In addition, we will have to...
Improvements in gross margin trending back to our historical levels and continued focus on our cost management.
In addition, we will have to continue our vigilance with respect to cash flow and cash generation.
Jason Cohenour: With respect to the CalAmp team, you may have seen the news regarding the departure of our chief revenue officer. In response to this departure, we have elevated to highly qualified individuals to lead this critical function. One of these team members now leads new revenue generation while the other leads customer success and sales operations. Both leaders report directly to the CEO and the transition has been seamless. Our CEO search is ongoing and interest in the position is high.
Speaker 4: Continuous strong EBITDA and positive cash flow will enable us to retire a portion of the convertible loan as a
Continued strong EBITDA and positive cash flow will enable us to retire a portion of the convertible loan as it matures.
Speaker 4: In addition, we are actively exploring a range of additional financing options.
In addition, we are actively exploring a range of additional financing options and how they can play in their capital structure.
Speaker 4: From a business outlook standpoint, we continue to manage through a dynamic situation with our TSP customers.
From a business outlook standpoint, we continue to manage through a dynamic situation with our TSP customers and we expect Q3, FY 'twenty for revenues and adjusted EBITDA to be slightly down sequentially.
Speaker 4: If that, I'll turn the call back over to Jason for some final thoughts.
Jason Cohenour: And while we have met with some excellent candidates, we have no new additional news to share regarding the search at this time. Similarly, our exploration of strategic alternatives is ongoing and we have no additional news to report at this time.
With that I'll turn the call back over to Jason for some final thoughts.
Jason.
Thank you Jay.
Speaker 3: In closing, I will assert our unwavering commitment to our customers, partners, employees, and investors.
In closing I will assert our unwavering commitment to our customers partners employees and investors.
Speaker 3: While we have experienced challenges, we also see tremendous opportunity ahead.
While we have experienced challenges, we also see tremendous opportunity ahead and.
Jason Cohenour: As for me, I've been serving as the interim CEO of CalAmp since August 28th following Jeff's tragic passing. I can report without hesitation that the CalAmp team is talented and passionate and they believe in the opportunity before us. In addition to having a great team, the company has other tremendous assets, including excellent products and solutions, a blue chip customer base and a large and growing market opportunity. While I am here, I will be supporting the team. I will be supporting customers and I will be helping the team to hone focus, to execute operationally, and to capture efficiencies as we strive to deliver profitable growth and positive cash flow.
Speaker 3: And we are confident in our ability to overcome these obstacles and to return to profitable growth.
And we are confident in our ability to overcome these obstacles and to return to profitable growth.
Speaker 3: Thanks to all of you for your continued support and interest in the company. With that, we will now open the call.
Thanks to all of you for your continued support and interest in the company.
With that we will now open the call to your questions.
Operator.
Speaker 1: Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. It has been asked that all question askers hold themselves to one question with one follow-up question. We will pause here briefly as questions are registered.
Thank you we will now begin the Q&A session.
You'd like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you'd like to remove that question. Please press star followed by two again to ask a question press Star. One. It has been asked that all question Askers hold themselves to one question with one follow up question.
We will pause here briefly ask questions are registered.
Yeah.
Logan Lucas: With that, I'll turn my call over to Jekun to discuss our second quarter financial results in more detail.
Speaker 1: Our first question is from Jerry Revish with Goldman Sachs. Please go ahead.
Our first question is from Jerry Revich with Goldman Sachs. Please go ahead.
Jikun Kim: Jekun? Thank you, Jason, and thank you for stepping up to this transition. My commentary will include references to our non-GAP financial measures. A full reconciliation of these non-GAP measures with the corresponding gap measure is included in our earnings release. The total revenue in the second quarter was 61.7 million. Revenues declined 15% year over year and 13% sequentially from 70.9 million last quarter. Much of the year over year and sequential revenue decline was driven by lower sales toward telematic service provider customers, as Jason mentioned in his remarks, the revenue decline was driven by our TSP customers, continuing to rebalance their inventories while also navigating competitive pressures in their end markets.
Speaker 5: Hi, thanks for taking my question. This is Adam, UBIS on for Jerry today. Good nice to see the positive cash flow from Ops. Just wondering if you could talk about how you're thinking about the free cash flow trajectory from here. What does normalize free cash flow conversion look like in this business and when can you get there?
Hi, Thanks for taking my question. This is Adam <unk> on for Gary today.
Oh.
Nice to see the positive cash flow from ops, just wondering if you could talk about how youre thinking about the free cash flow trajectory from here.
What does normalized free cash flow conversion look like in this business and when when can you get there.
Speaker 4: Yeah, I think Jerry asked me this question last quarter also, so thank you for your question.
Yeah, I think Jerry asked me. This question last quarter also so thank you for your question.
Speaker 4: So you can see based on the last few quarters of cash flow statements that cash flow from operations, excluding working capital changes have been in the $4 million range, right? We're at 4.2 this quarter, I think we're at 4.1 last quarter. Working capital worked in our favor of this quarter. It didn't last quarter.
So you can see based on the last few quarters of cash flow statements that cash flow from operations, excluding working capital changes have been in the $4 million range. We're at $4. Two this quarter I think we were at $4 one last quarter working capital worked in our favor this quarter it didn't last.
Jikun Kim: We now expect this inventory rebalancing with our TSP customers to take longer than previously expected. Revenue declines from the TSP customers were partially offset by revenue increases from our industrial and international connected car businesses. Recurring application subscription revenues in the quarter were 18.7 million, a $500,000 sequential decline. Most of the decline was driven by a $400,000 tune catch-up for prior period accounting and corrections. RPO and hardware backlog ended the quarter at $194,000,000 and $14,000,000 respectively.
Order.
Speaker 4: The question that you ask about free cashflow and stability.
The question that you ask about free cash flow and stability.
Speaker 4: I think one, we need to make sure that our revenue is back to where it should be, and then be able to project out and...
I think one we need to make sure that our revenue is back to where it should be right and then be able to project out into the future but.
Speaker 4: But what you're experiencing is very strong cost management from management as well as continued visualists in the capacity. So it's difficult for me to say based on the working capital changes that we have right now, but I think you can be sure that we will do our hardest and up most to make sure that we manage our costs and continue to generate cash.
What you're experiencing as very strong cost management from management as well as continued vigilance and capacity. So it's difficult for me to say based on the working capital changes that we have right now but.
Thank you can you assure that we will do our hardest and.
Utmost to make sure that we manage our costs and continue to generate casher.
Jikun Kim: RPO declined $24,000,000 and hardware backlog declined $6,000,000 sequentially. The RPO and hardware backlog decline was driven by customer PO fulfillment as well as TSP conversions that have already been completed. Consolidated gross margin in the second quarter was 36%, compared to 38% last quarter. The sequential gross margin decline was driven by lower volumes and unfavorable product mix. Second quarter gap operating expenses declined $3.9 million sequentially and $8.8 million year over year.
Speaker 5: Thanks for that. And it looks like revenue per subscriber in the software and subscription segment was down sequentially. Just wondering if you could unpack the moving pieces there. What's the price versus two core price versus mix impact? And what's the path here going forward? Now that most of conversion is through, should we expect higher R2 starting the flow through that metric?
Thanks for that and it looks like revenue per subscriber in the software and subscription segment was down.
Sequentially, just wondering if you could unpack the moving pieces there.
Price versus.
Two core price versus mix impact and what's the path here going forward now that most of conversion is through should we expect.
Higher <unk>.
Starting to flow through that metric.
Yeah.
Speaker 4: Yeah, so keep in mind, I think it was, you know, the comment it in our prepared remarks as well as our, you know, earnings release that we had about a $400,000 recurring revenue tune catch up impact that we corrected in the quarter. So the recurring revenue is, you know, it should be roughly $400,000 higher. You know, we had some accounting errors in the past that we corrected in this quarter.
Yes, so so keep in mind I think it was commented in our prepared remarks as well as our.
Jikun Kim: The cost reductions that we implemented over the past 12 months are starting to significantly impact not only our OPEX, but are also our cost of goods sold and capex. 22 FY24 adjusted EBITDA was 5.9 million or 9.5% of revenue. Essentially flat compared to the 6 million in the prior quarter. Year over year adjusted EBITDA increased by 1.1 million. At the end of Q2 FY24, we had a total cash and cash equivalent of 38.5 million as compared to 35 million last quarter.
Earnings release that we had about a $400000 of recurring revenue to catch up impact.
That will be corrected in the quarter. So the recurring revenue as it should be roughly $400000 higher we had some accounting errors in the past that we corrected in this quarter.
Speaker 4: So if you do that, I think you'll see the ARP who's coming back a little better from a calculation standpoint. Fundamentally, we are looking to grow our recurring revenue business and it's on new applications like vision and ELD.
Just caught up.
If you do that I think youll see the <unk> coming back a little better from a calculation standpoint fund.
Fundamentally we are looking to grow our recurring revenue business and it's on new applications like vision and yield.
Jikun Kim: An increase of 3.6 million. Cash flow from operations was 7.1 million in the second quarter. Positive cash flow was driven by a 4.2 million cash flow from operations excluding working capital changes as well as a 2.9 million in net working capital reductions. Unlike the prior quarter, working capital changes worked in our favor in Q2. Compared to the prior quarter, cash flow from operations excluding working capital increased by 100,000 sequentially and continues to be strong despite volume reductions.
Speaker 4: We just launched the vision, two months ago, three months ago, and that we're starting to see, we're seeing very good pipeline and customer interest. We just need to convert those and accelerate those into the
We just launched our vision that two months ago, three months ago, and we're starting to see we're seeing very good pipeline and customer interest you just need to convert those and accelerate those into the fourth quarter, we have an opportunity coming up in the December timeframe now as school buses.
Speaker 4: We have an opportunity coming up in the December timeframe as school buses, kids go on vacation during school buses during the Christmas time and that will be able to fit a lot more of those vision opportunities onto our customers' fleets.
Kids go on vacation during school buses during the Christmas time, and that will be able to put a lot more of those vision opportunities onto our customers fleets.
Yes got it and then.
Ill.
Speaker 3: I'll add a little bit of color. You know, as we complete these conversions, that's gonna goose subscriber count.
Adam I'll add a little bit of color as these as we complete these conversions.
Jikun Kim: Cash flow stability is driven by our cost reductions. At the end of the quarter, we have 32.7 million in undrawn asset back line availability. This availability is subject to customary covenant tests. The 230 million 2% coupon convertible notes are due on August 1, 2025, or Objective is to generate a high-quality EBITDA run rate in order to optimize our options for refinancing the convertible notes. As demonstrated over the past few quarters, EBITDA performance has been strong and stable.
That's kind of goose subscriber count.
Speaker 3: And those TSC customers come in at a lower RPU, right? So that's going to be, we're going to have a battle of mix, if you will, as those lower RPU customers come in. And as we win new higher RPU customers with products like Vision and ELD. So a couple of moving parts there with respect to R.
And those TSP customers come in at a lower ARPA alright, so that's that's going to be broken out.
A battle of mix, if you will as those low <unk> customers come in and as we win new higher <unk> customers with products like vision and LD. So a couple of moving parts there with respect to ARPA.
Speaker 5: out at helpful and then lastly from me uh... on the q3 revenue and just to the dot guy to be down slightly sequentially uh... could you provide any color by segment there uh... could what will software and subscription uh... be up sequentially or you know are we expecting both segment to be down
Got it helpful. And then lastly from me on the Q3 revenue and adjusted EBITDA guide to be down slightly sequentially.
Could you provide any color by segment, there what will software and subscription be up sequentially or are we expecting both segments to be down.
Jikun Kim: We believe that our future EBITDA run rate increases will be driven by several factors and initiatives, including the normalization of TSP revenues as we stabilize and then return to growth in this market segment. Growth in recurring revenues, driven by new solution introductions, such as Vision 2.0, which we expect to drive significant output growth with new and existing customers. Improvements in growth margin, trending back to our historical levels, and continued focus on our cost management.
Speaker 4: Ah, yeah, so again, you know, we don't break out sub components of the revenue, but you can see that our TSP has a very large impact.
Yes, so again, we don't break out the sub components of the revenue, but you can see that our TSP has a very large impact.
Speaker 4: on our business and so you know what you're seeing is the you know continued our customers continuing to rebalance their inventory position
On their business and so what Youre seeing is the continued our customers.
Continuing to rebalance their inventory positions.
Speaker 4: In terms of recurring revenue, I would hope that we could do better.
In terms of recurring revenue.
I would hope that we could do better.
Got it thanks, so much.
Jikun Kim: In addition, we will have to continue our vigilance with respect to cash flow and cash generation. Continued strong EBITDA and positive cash flow will enable us to retire a portion of the convertible loan as it matures. In addition, we are actively exploring a range of additional financing options and how they can play in our capital structure.
Sure.
Speaker 1: Our next question is from Scott Cyril with Roth. Your line is now open.
Our next question is from Scott Searle with Roth. Your line is now open.
Speaker 4: Hey, good afternoon. Thanks for taking my questions. Jason just wanted to extend my condolences to you, your team and Jeff family and, you know, his own timely past.
Yeah.
Hey, good afternoon, thanks for taking my questions.
Jason just wanted to extend my condolences to you and your team and Jeff's family and.
His untimely passing.
Speaker 6: Maybe the follow up on
Maybe to follow up on.
Jikun Kim: From a business outlook standpoint, we continue to manage through a dynamic situation with our TSP customers and we expect Q3 FY24 revenues and adjusted EBITDA to be slightly down sequentially.
Speaker 4: you know, to follow up on some of the earlier questions. I'm wondering what is the level of normalized TSP that you would expect? And then on the op-x front, you can, you know, that's been coming down. It sounds like there's more that'll come on the back half of this year. Is there an absolute number that you could calibrate us with?
The follow up on some of the earlier questions I'm wondering what is the level of normalized TSP that you would expect and then on the Opex front chicken.
Thats been coming down it sounds like there is more that will come out in the back half of this year or is there an absolute number that you could calibrate us with.
Jason Cohenour: With that, I'll turn the call back over to Jason for some final thoughts. Jason? Thank you, Jicun.
Yes, so I mean, so most of the cost reductions that we implemented on the Opex side. We're done earlier in the year you just had the transition periods, where we had to make sure that the various tasks that employees responsible were transferred to the appropriate.
Speaker 4: So most of the cost reductions that we implemented on the op-ex side were done earlier in the year. We just had transition periods where we had to make sure that various tasks that employees were responsible were transferred to the appropriate people. So you're gonna see, I mean, it's not gonna be $3.8 million a quarter over a quarter, but it should be a little down. And it's not a lot, but just a little bit. It shouldn't be a thing like that. In terms of...
Jason Cohenour: In closing, I will assert our unwavering commitment to our customers, partners, employees, and investors. While we have experienced challenges, we also see tremendous opportunity ahead and we are confident in our ability to overcome these obstacles and to return to profitable growth. Thanks to all of you for your continued support and interest in the company.
People, so youre going to see I mean, it's not going to be $3 $8 million quarter over quarter, but it should be a little down and then some.
Yes, it's not a lot, but just a little bit.
In terms of Tsp's, yes.
Operator: With that, we will now open the call to your questions. Operator? Thank you.
Speaker 4: Yeah, I mean, it's normalization of TSPs. I mean, I can tell you in 2021, we did 104 million and 22, we did 91 million and 23, we did 110 million. Right, those are.
Yeah, I mean, it's a normalization of Tsp's I mean I can tell you in 2021, we did $104 million in 'twenty. Two you did 91 million in 'twenty, three we did $110 million.
Operator: We will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. It has been asked that all question-askers hold themselves to one question with one follow-up question. We will pause here briefly as questions are registered.
Alright, those are historical numbers.
Speaker 4: need to figure out, obviously, when we can get back there, you know, and whether that's sustainable or not, as our customers provide us feedback and information. Jason, any thoughts on that?
Need to figure out obviously, when we can get back there.
Whether that's sustainable or not.
As our customers provide us feedback and information Jason.
Thoughts on that.
Speaker 3: Yes, just a little more color-scot on the TSPs. I mean, it was the part of our business that was considerably softer than we expected in Q2.
Yes, just a little more color Scott on the Tsp's I mean that was the part of our business that.
Adam Bubis: Our first question is from Jerry Revish with Goldman Sachs. Please go ahead. Hi, thanks for taking my question.
That was considerably softer than we expected in Q2.
Speaker 3: So down considerably from Q1 and down considerably from historical run rates. So we believe we're battling through this inventory of rebalancing thing, but we're also conscious of the fact that RTSP's operate in a very competitive environment. So we need to keep an eye on that as well.
So down considerably from Q1 and down considerably from historical run rates So were we.
Jikun Kim: This is Adam Bubis on for Jerry today. Good nice to see the positive cash flow from Ops. Just wondering if you could talk about how you're thinking about the free cash flow trajectory from here. What does normalize free cash flow conversion look like in this business and when can you get there? Yeah, I think Jerry asked me this question last quarter also. So thank you for your question. So you can see based on the last few quarters of cash flow statements that cash flow from operations, excluding working capital changes have been in the $4 million range, right?
We believe we're battling through this inventory rebalancing thing, but we're also conscious of the fact that our tsp's operate in a very competitive environment right. So we need to keep an eye on that as well.
Jikun Kim: We're at 4.2 this quarter. I think we're at 4.1 last quarter. Working capital worked in our favor of this quarter. It didn't last quarter. The question that you ask about free cash flow and stability. I think, you know, one, you know, we need to make sure that our revenue is back to where it should be, right? And then be able to project out into the future. But, you know, what you're experiencing is very strong cost management from management, as well as continued vigorous in the capacity.
Speaker 3: You know, we're hoping we're around stability here, Scott, and we can grow from here, but, you know, to be candid, there's still a little bit of uncertainty around that channel where inventory levels are and should be.
We're hoping we're around stability here, Scott and we can grow from here, but to be candid theres still a little bit of uncertainty around that channel where inventory levels are and should be.
Speaker 3: and the ability of RT and PSU to compete in a pretty competitive marketplace. So I would say we're getting our arms around that. Obviously, it's priced us in Q2.
And the ability of <unk> to compete in a pretty.
Pretty competitive marketplace. So I would say, we're getting our arms around that obviously it surprised us in Q2.
Speaker 3: and we will know more in the quarters that come.
And we will know more in the in the quarters that come.
Speaker 4: Very helpful and as my follow up and perhaps a little bit unfair given the transition in current events.
Okay very helpful and as my follow up and perhaps a little bit unfair given the transition in current events, but as you start to think about the convert and what you need to do to be able to refinance that it implies that EBITDA levels are higher than where we are today clearly you've got to get the top line go in a little bit more and more.
Speaker 4: But as you start to think about the convert and what you need to do to be able to refinance that it implies that EBITDA levels are higher than where we are today. Clearly you've got to get the top line going a little bit more and more subscription. It seems like OpEx has been tightened up. I'm wondering if you could talk a little bit about
It seems like Opex has been tightened up I'm wondering if you could talk a little bit about timing and model as it relates to EBITDA margins or otherwise as we get out.
Speaker 4: Timing and model as it relates to EBITDA margins or otherwise as we get out, you know, several quarters from now to think about that. Cause I guess you gotta be getting close to doing, you know, 10, 12 or more in terms of quarterly EBITDA to be able to fully handle second, thanks.
Jikun Kim: So, you know, it's difficult for me to say based on the working capital changes that we have right now. But I think you can be sure that we will do our hardest and up most to make sure that we manage our costs and continue to generate cash.
Several quarters from now to think about that because I guess, you've got to be getting close to doing.
10, 12 or more in terms of quarterly EBITDA.
To be able to fully handle that convert.
Speaker 4: Yeah, so, you know, again, we provided next quarter guidance, but I can point in some direction from the current quarter, if you like, right? So, we missed revenue guidance. The midpoint would have been $70 million.
Yes so.
Again.
We provided next quarter guidance, but I can I can point, then some direction from the current quarter issue like right. So yes.
Jikun Kim: Thanks for that. And it looks like revenue per subscriber in the software and subscription segment was down sequentially just wondering if you could unpack the moving pieces there. What's the price versus two core price versus mix impact? And what's the path here going forward now that most of conversion is through? Should we expect, you know, higher R2 starting the flow through that metric? Yeah, so, so keep in mind, I think it was, you know, the commented in our prepared remarks as well as our, you know, earnings release that we had about a $400,000 recurring revenue to catch up impact that we corrected in the quarter.
We missed revenue guidance, the midpoint would've been $70 million that would have generated roughly an $8 million revenue.
Speaker 4: generated roughly an $8 million revenue, you know, in create a chain, I mean, you know, our revenues would have been $8 million higher. You can add a gross margin number to that. And if you make the assumption that that drops down, you kind of get a feel for where we could be, have our, you know, revenues normalized sometime in the future. And I'm not saying 70s are normalized revenue, but that was the mid-
I mean, our revenues would have been $8 million higher you can add a gross margin number to that and if you make the assumption that that drops down you kind of get a feel for where we could be.
Have our revenues normalize sometime in the future and I'm, not saying, 70% normalized revenue, but that was the midpoint of our guidance.
Speaker 3: Yeah, I'll add Scott. I mean, thank you not all face with respect to, you're not all face with respect to EBIT down levels. We need to get to.
Yes.
Scott Thank.
Thank you Paul off base with respect to Youre, not youre not off base with respect to EBITDA levels, we need to get to.
Speaker 3: in order to have maximum optionality, maximum options on the convert, and that has got to come through up.
In order to have maximum optionality maximum options on the convert and that has got to come through.
Jikun Kim: So, the recurring revenue is, you know, it should be roughly $400,000 higher. You know, we had some accounting errors in the past that we corrected in this quarter, right? Just caught up. So, if you do that, I think you'll see the the arpus coming back a little better from my calculations standpoint. Fundamentally, you know, we are looking to grow our recurring revenue business and it's on new applications like vision and ELD.
Speaker 3: obviously and continue vigilance on cost and not just obfx but cost as well.
The combination of growth, obviously and continued vigilance.
On cost and not just opex, but but but cogs as well.
Great. Thank you.
Okay.
Okay.
Speaker 1: Thank you, Scott. Our next question is from George Nutter with Jeffries. Your line is now open.
Thank you Scott. Our next question is from George Notter with Jefferies. Your line is now open.
Jikun Kim: You know, we just launched vision not two months ago, three months ago and that we're starting to see, you know, we're seeing very good pipeline and customer interest. We just need to convert those and accelerate those into the fourth quarter. We have an opportunity coming up in the December timeframe as school buses, you know, kids go on vacation during school buses during the Christmas time. And that will be able to fit a lot more of those vision opportunities onto our customers' fleets.
Speaker 7: Hi, thanks for all guys. I guess I clarification. Can you guys give us the backlog metrics and RPO metrics that you referenced earlier in the monologue?
Hi, Thanks, a lot guys I guess.
Clarification.
Can you guys give us the backlog metrics and <unk> metrics that you referenced earlier in the monologue.
Speaker 7: Sure. Do you have another question? I'll dig that up for you in a minute. Yeah, and then I also wanted to just kind of go through, you know, what are the options on refinancing the convertible debt?
Sure.
Do you have another question I'll dig that up for you in a minute.
Yeah, and then I also wanted to just kind of go through what are the options on refinancing the convertible debt.
Speaker 7: kind of wondering how you guys are thinking about it. Obviously growing the EBITDA is part of the formula here, but I'm just wondering what kind of options are available to you. What do you call it?
Jikun Kim: Yeah, and then you're all, I'll add a little bit of color, you know, as these, as we complete these conversions, you know, that's going to, that's going to goose subscriber count. And those TSP customers come in at a lower arpus, right? So, that's going to be, we're going to have a battle of mix, if you will, as those lower arpus customers come in. And as we win new higher arpus customers with products like vision and ELD. So, a couple of moving parts there with respect to our, about it helpful.
Kind of wondering how you guys are thinking about it obviously growing EBITDA as part of the Formula here, but I'm just wondering what kind of options are available to you what are you contemplating.
Speaker 4: So just going back to your first question, our RPO was 194 million and our hardware backlog was 14 million in the quarter.
Sure. So just going back to your first question.
Our <unk> was $194 million and our hardware backlog was $14 million in the quarter.
At the end of the quarter I'm sorry.
Anything else on that.
Speaker 7: And then, no, I'm curious about your refinancing options. How do you think about it? Yeah, sure, sure.
And then.
Jikun Kim: And then lastly, from me, on the Q3 revenue and adjusted EBITDA guide to be downed slightly sequentially, could you provide any color by segment there? What will software and subscription be up sequentially or are we expecting both segments to be downed? Yeah, so again, you know, we don't break out sub components of the revenue, but you can see that our TSP has a very large impact on our business. And so you know what you're seeing is the continued our customers continuing to rebalance their inventory positions. In terms of recurring revenue, you know, I would hope that we could do better. Got it.
And then Im just.
About your refinancing options, how do you think about it yeah, yeah sure sure so I mean.
Speaker 4: It's clear that we've got to do better from a top line standpoint and generate sustainable sufficient EBITDA.
It's clear that we've got to do better from a top line standpoint, and generate sustainable sufficient EBITDA.
Jikun Kim: Thanks so much. Sure.
Speaker 4: You know, higher the EBITDA, more optionality will have, but look at it at the same time. The RPO, the 2% convertible note has a 2% coupon on it's very valuable, right? So as we increase our EBITDA and revenues come back, you're going to see more cash flow drops.
No.
Higher EBITDA more optionality will have.
Look at it at the same time.
The RP.
2% convertible note has a 2% coupon on its very valuable right. So.
As we increase our EBITDA and revenues come back youre going to see more cash flow drop too.
Speaker 4: to the bottom line and ideally, you know, some portion of this 2% coupon I like to take to maturity and pay it off at
The bottom line and ideally some portion of this 2% coupon and I'd like to take the maturity and pay it off at maturity right.
Speaker 4: And then we're looking at, once you get the EBITDA high enough, we might have turn loans available to us, different types of financial instruments that might be available to us. So the key is operational performance, revenue growth, EBITDA growth, and which will provide various levers that we might build a poll on. You know, there are one machine that works with Reinhard, and whoever you can. You know, there are two machines.
Then.
We're looking at once you get the EBITDA high enough.
Scott Searle: Our next question is from Scott Searle with Roth. Your line is now open. Good afternoon. Thanks for taking my questions.
Might have term loans available to us different types of financial instruments that might be available to us.
The key is operational performance.
Jason Cohenour: Jason just wanted to extend my condolences to you, your team and Jeff family and, you know, his own timely passing. Maybe to follow up on, you know, to follow up on some of the earlier questions. I'm wondering what is the level of normalized TSP that you would expect? And then on the op-x front, you can, you know, that's been coming down. It sounds like there's more that'll come on the back half of this year.
Revenue growth EBITDA growth, and which will provide various levers that we might be able to pull on.
Got it okay, great. Thank you.
Sure.
Speaker 1: Thank you, George. There are no additional questions waiting at this time, so I'll pass the call back over to Jason Cohen-Hour for any closing remarks.
Thank you George there are no additional questions waiting at this time, so I'll pass the call back over to Jason <unk> for any closing remarks.
Speaker 3: Thank you very much. And thank you to everybody for joining us on the call today for your continued interest in CalEP. We look forward to speaking with you during our third quarter earnings call. Operator, you may now...
Jason Cohenour: Is there an absolute number that you could calibrate us with? Yeah, so, I mean, so most of the cost reductions that we implemented on the op-x side were done earlier in the year. You just had transition periods where we had to make sure that, you know, various tasks that employees were responsible for transfer to the appropriate people. So you're going to see, I mean, it's not going to be, you know, $3.8 million quarter over quarter, but it should be a little down.
Thank you very much and thank you to everybody for joining us on the call today and for your continued interest in khalaf.
We look forward to speaking with you during our third quarter earnings call. Operator, you may now disconnect the call.
Jason Cohenour: Yeah, it's not a lot, but just a little bit. In terms of TSP. Yeah, I mean, it's normalization of TSP. I mean, I can tell you in 2021, we did 104 million and 22, we did 91 million and 23, we did 110 million. Right? Those are historical numbers. Need to figure out, obviously, when we can get back there, you know, and whether that's, you know, sustainable or not, as our customers, you know, provide us feedback and information.
Jason Cohenour: Jason, any thoughts on that? Yes, just a little more color Scott on the TSP's. I mean, it was the part of our business that, that was considerably softer than we expected in Q2. So down considerably from Q1 and down considerably from historical run rates. So we're, you know, we believe we're battling through this inventory rebalancing thing, but we're also conscious of the fact that RTSPs operate in a very competitive environment. Right?
Jason Cohenour: So we need to keep an eye on that as well. You know, we're hoping we're around stability here, Scott, and we can grow from here, but, you know, to be candid, there's still a little bit of uncertainty around that channel, where inventory levels are and should be. And the ability of RTSPs, you know, to compete in a, in a, in a pretty competitive marketplace. So I would say we're getting our arms around that. Obviously, it's priced us in Q2. And we will know more in the in the quarters that come.
Jikun Kim: Okay, very helpful. And as my follow up, and perhaps a little bit unfair given the transition and current events, but as you start to think about the convert and what you need to do to be able to refinance that it implies that EBITDA levels are higher than where we are today. Clearly, you've got to get the top line going a little bit more and more subscription. It seems like OptX has been tightened up.
Jikun Kim: I'm wondering if you could talk a little bit about timing and model as it relates to EBITDA margins or otherwise as we get out several quarters from now to think about that, because I guess you've got to be getting close to doing 10, 12, or more in terms of quarterly EBITDA to be able to fully handle that convert. Thanks. Yeah, so again, we provided next quarter guidance, but I can point in some direction from the current quarter, if you like, right?
Jikun Kim: So, we missed revenue guidance. The midpoint would have been $70 million. That would have generated roughly an $8 million revenue or revenues would have been $8 million higher. You can add a gross margin number to that. And if you make the assumption that that drops down, you kind of get a feel for where we could be, have our revenues normalize sometime in the future. And I'm not saying 70s are normalized revenue, but that was the midpoint of regard.
Jikun Kim: Yeah, I'll add Scott. I mean, you're not off base with respect to, you're not off base with respect to EBITDA levels. We need to get to in order to have maximum optionality, maximum options on the convert. And that has got to come through a combination of gross, obviously, and continue vigilance on cost, and not just OpEx, but COGS as well. Sorry, thank you.
Scott Searle: Thank you, Scott.
George Notter: Our next question is from George Nauder with Jeffries. Your line is now open. Hi, thanks for all the guys.
George Notter: I guess I clarification. Can you guys give us the backlog metrics and RPO metrics that you referenced earlier in the monologue? Sure. Do you have another question? I'll dig that up for you in a minute.
George Notter: Yeah, and then I also wanted to just kind of go through, you know, what are the options on refinancing the convertible debt? I'm kind of wondering how you guys are thinking about it, you know, obviously growing EBITDA is part of the formula here, but I'm just wondering what kind of options are available to you? What are you contemplating? Thanks. Sure. So just going back to your first question. Our RPO was 194 million, and our hardware backlog was 14 million in the quarter.
George Notter: At the end of the quarter, I'm sorry. Anything else on that? And then, no, I'm just curious about your refinancing options. How do you think about it? Yeah, yeah, sure, sure. So I mean, you know, It's clear that we've got to do better from a top line standpoint and generate, you know, sustainable, sufficient EBITDA, you know, higher the EBITDA, more optionality will have, but, you know, look at it at the same time.
George Notter: The RP, the 2% convertible note has a 2% coupon on it, it's very valuable, right? So as we increase our EBITDA and revenues come back, you're going to see more cash flow drop to the bottom line, and ideally, you know, some portion of this 2% coupon, I like to take to maturity and pay it off at maturity, right? And then, you know, we're looking at once you get the EBITDA high enough, we might have turn loans available to us, you know, different types of financial instruments that might be available to us. So the key is operational, you know, performance revenue growth, EBITDA growth, and which will provide various levers that we might be able to pull on.
George Notter: Okay, great. Thank you. Sure. Thank you, George.
Operator: There are no additional questions waiting at this time, so I'll pass the call back over to Jason Cohen hour for any closing remarks. Thank you very much, and thank you to everybody for joining us on the call today for your continued interest in Calib. We look forward to speaking with you during our third quarter earnings call operator, you may now disconnect the call.