CAMP4 Therapeutics Corporation

Welcome to Cal Amps Third Quarter 2023 Financial Results Conference Call. My name is Hannah, and I will be your 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. If you would like to ask a question, please press star 1 on your telephone keypad. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Joel Akramowitz, Managing Director of Shelton Group, CalAMP's Investor Relations Firm. Joel, you may begin.

Good afternoon and welcome to CalAMP's fiscal third quarter 2023 financial results conference call. I'm Joel Akramowitz, Managing Director of Shelton Group, CalAMP's Investor Relations Firm. With us today are CalAMP's President and Chief Executive Officer, Jeff Gardner, and Acting CFO, Cindy Zhang. Before we begin, I'd like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect CalM's best current judgment, they're subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in our regular SEC filings and in the earnings release issued today, which are available on our website. We undertake no obligation to revise or update any forward-looking statements to reflect future events or circumstances. Now, Jeff will begin today's call with a review of the company's recent operational highlights, and then Cindy will provide a more detailed review of the financial results, followed by a question and answer session. With that, it's my great pleasure to turn the call over to Calum's president and CEO, Jeff Gardner. Jeff, please go ahead.

Thank you, Joel, and thanks to all of you for joining us on the call. Our third quarter revenue grew 8% sequentially to $78.9 million last which exceeded the high end of our expectations. This higher than expected revenue resulted from additional components which we secured in the spot market to meet our customer commitments. This created significant margin pressure in the quarter, but the fulfillment of these orders accomplished several objectives for both CalAMP and our customers, including the avoidance of business disruption, for customers affected by Verizon's 3G network shutdown, and it allowed the fulfillment of aged order demand for our other customers. Given the unpredictable nature of component availability and pricing in the spot market, as well as the strategic importance of the conversions, the team felt it necessary to absorb the margin pressure in order to fulfill these orders. We view this situation as transitory, with some continued impact in Q4, but to a much lesser extent, and then return to a more normalized level of gross margin in early next fiscal year. Cindy will discuss the financial impact of this in more detail in a moment. Turning back to our progress in the quarter, our sales team has been working very hard to convert customers to recurring contracts while also setting the framework for securing new customers to drive our future growth. Our software and subscription services revenue in the third quarter increased 11% sequentially to a record $49.3 million. Remaining performance obligations also increased by 20% sequentially to $252 million. And the software and subscription Subscribers increased 12% sequentially to 1.5 million. Notably, we converted two large customers, Michelin and Nadman, to recurring contracts in the quarter, along with a number of other customers. As of quarter end, we have cumulatively converted approximately 75% of eligible customers to recurring contracts, and are on track to substantially complete the conversion process for remaining customers by fiscal year end. Other software highlights during the quarter included a software and subscription services renewal contract with our large parcels shipping customer, which is a multi-year, multi-million dollar commitment. This customer has approximately 130,000 trailers outfitted with our edge devices and industry-leading telematics software platform, the CalAMP telematics cloud. We also secured Ford North America as a major new subscription customer during the quarter. And we launched our new GPS-based vehicle tracking solution developed in collaboration with BMW in Europe. We expect to see increasing revenue from this partnership in the quarters ahead. Much of the recent business development success has been due to the focus between our sales and marketing groups to improve our go-to-market activities. Led by our CRO and our CMO, this joint activity has resulted in the implementation of a lead generation program that's enabled expanded opportunities for the company sales team. This work is setting the foundation for systematically building the sales pipeline and securing new recurring customers. On the product development side, I wanted to tell you about an exciting upcoming release that will represent a major milestone for our transportation logistics strategy. Soon, we'll release Cargo Insights for tracking shipments in our CalAMP application. This will be an innovative new user experience that will be simple to use and will make tracking and protecting assets even easier to manage. As we have shared for a long time, our industry-leading CalAMP telematics cloud platform aggregates data from our large portfolio of edge devices and sensors installed on tractors and trailers, including those from our recent partnership with Hyundai TransLead. We offer a plethora of trailer sensors for tire pressure, cargo door control, extreme temperature monitoring, tilt, shock, light, and other environmental factors. The CalAMP Telematics Cloud makes it easy to access data from these many sensors through APIs with 99.9% uptime in the cloud. But our new Cargo Insights application goes a step further. It will provide an industry-first experience that presents all this insight data in a single, multi-sided application, one that will appeal to all functional departments across the transportation and logistics industry ecosystem. CalAMP's cargo insight gives visibility into the cargo on the trailer, the vehicle, and the driver. It adds critical accountability to the customer for protection against insurance claims. to maintain compliance with regulations, and to keep informed as each trailer of precious cargo proceeds down the highway. This new release brings our strategy to life for the benefit of our customers. Before I hand the call over to Cindy Zhang, our acting CFO, I would like to take this time to thank her for her support during our CFO transition. Cindy and her team have done an exceptional job and ensured that our financial operations have been maintained with a tremendous level of detail and attention. At the same time, I'd like to welcome our new CFO, Jakun Kim, who will be starting on January 9th. He has a long, successful track record in executive financial management at various tech companies, including most recently as CFO of Momentus, a NASDAQ-listed space infrastructure company. Prior to Momentus, he served as CFO at tech firms Formlabs, MCOR, Merrick's Group, and Arrow Bereinman. Jakun received an MBA from Columbia Business School, an MS degree in electrical engineering from UCLA, and a BS degree in electrical engineering from the University of California at Berkeley. He'll be joining Cindy and me for the Needham Growth Conference on January 10th. So those of you planning to attend that event will have a chance to meet him, even though only a few days after his start date. With that, I now pass the call over to Cindy.