CAMP4 Therapeutics Corporation

Welcome to Cal Amps First Quarter 2024 Financial Results Conference Call. My name is Bethany and I will 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. If you would like to ask a question, please press star one 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, Logan Lucas, Corporate Strategy and Investor Relations Manager at CalAMP. Logan, you may begin.

Good afternoon and welcome to CalAMP's fiscal first quarter 2024 financial results conference call. I'm Logan Lucas, Corporate Strategy and Investor Relations Manager at CalAMP. With us today are CalAMP's President and Chief Executive Officer, Jeff Gardner, 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. 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 These refer to the earnings press release we issued today, as well as the company's filings with the Securities and Exchange Commission. Leaders 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 on today's call. Now, Jeff 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. With that, it's my great pleasure to turn the call over to CalAMP's president and CEO, Jeff Gardner. Jeff, please go ahead.

Thank you, Logan. And thanks to all of you joining us on the call today. Over the past few years, CalAMP has been executing a strategy to enhance shareholder value as an independent company. In the past weeks, we have received unsolicited inbound inquiries. As a result, the Board of Directors has engaged advisors and formed a special committee to help us explore all strategic alternatives available to the company. We will not be answering any questions on this topic today. Overall, the CalAMP team is more focused than ever on driving top line revenue with a leaner and more efficient cost structure to increase the profitability of the company. Strategically, we have converted the installed base to a subscription model, focused the sales organization on selling full-stack solutions stood up a customer success team to drive retention and upselling, and restructured the business to improve cash flow and profitability. Regarding the first quarter, we saw varying degrees of strength and weakness in demand across the customer base. Specifically, we had a particularly strong quarter with our large industrial customer, with the account generating around $16.6 million in revenue. We expect this performance to continue into the future as we are increasingly able to shift against their demand. On the other hand, demand from our telematic service providers, or TSPs, and channel customers demonstrated some softness in the quarter as they adjusted their order volumes in inventory strategies to better align with a more normalized shipping environment. Due to supply improvements, customers no longer need to order as far in advance to secure a supply. So, order volumes were lower as they sell existing inventory. We expect this to take a few quarters to correct, and we will continue to drive additional revenue from other areas of business. Now, to dive into our performance in the first quarter of fiscal year 2024, we recognized $70.9 million in revenue. Despite missing the low end of guidance, the team's focus on cost efficiencies produced gross margin growth of 280 basis points and generated over $6 million of adjusted EBITDA. The gross margin expanded due to better revenue mix and decreased PPV costs as the supply chain continues to normalize. Further, the company continued to realize expense efficiencies from the recent cost management initiatives resulting in $5.4 million in operating expense reductions year over year. Improvements in gross margin and cost structure culminated in a strong adjusted EBITDA performance, which fell within our guidance range. Overall, we are pleased with the progress we are making on the expense side of the business and feel that the profitability we achieved despite an unexpected top line shortfall, demonstrates the effectiveness of our cost initiatives. We will maintain an increasingly lean expense structure to continue enhancing the profitability of the company. To help accelerate revenue growth, the sales organization will be dedicating additional bandwidth to new logo generation. Since Q1 marked the completion of the team's efforts to actively convert the installed base of device customers to subscription contracts. In addition, the team gained traction selling CalNAP software products, resulting in a modest sequential growth in our recurring application subscription revenue of approximately $100,000. The sales team closed multiple deals with new enterprise fleet customers, including an opportunity with R&L carriers that added around 18,000 subscribers following the first quarter. In addition, the team continued to execute on renewals and upselling opportunities. New products such as our next generation vision solution will also help us drive new bookings into the second quarter and beyond. This new solution is a standalone dash camera powered by advanced AI software that will help police optimize driver behavior and significantly decrease operating and liability-related costs. Since the full release, the team has qualified more than 65 different opportunities, and the pipeline continues to grow. Sales of this product will have a substantial positive impact on ARPU as we sell to both new logos and the existing customer base. Finally, to organizationally align behind our growth goals for recurring revenue, we rolled out new sales compensation programs. Built and implemented by Brennan Carson, our chief revenue officer, the new compensation plans reward sales personnel based on the bookings value of new logo acquisitions and reward customer success personnel according to the net revenue retention target. This will help to drive our operating model towards the revenue growth, gross margins, and free cash flow we are aiming for. Internationally, the consumer automotive business continues to perform well, demonstrating profitable growth in the quarter. The company expects to continue ramping up revenues from the BMW relationship for the remainder of the year and into fiscal year 25. The relationships with BMW and several other of the world's top automotive brands will drive consolidated and recurring revenue growth well into the future for this segment. Further, the operating models across the various geographies have been aligned under a single leader to maximize cost efficiency and operating effectiveness. We have already begun to see significant benefits to this new organizational structure and expect this trend to continue. The modest growth in our recurring application subscription line, which occurred despite declines in overall revenue and software and subscription services revenue, demonstrates the value and strength of the recurring software revenue we are focused on growing. We look forward to accelerating execution in this area of the business, which is positioned to grow as we execute on a robust pipeline of opportunities. These deals with direct fleet customers will continue to drive up ARPU as the mix of recurring revenue shifts away from the low ARPU device management solutions purchased by converted telematic service providers and channel customers and towards high ARPU cloud API and application solutions purchased directly by fleet. Finally, we will continue to work with our TSP and channel customers to return to normalized order volume over the coming quarters. With that, I'll turn the call over to Gcon to discuss our first quarter financial results in more detail. Gcon?