CAMP4 Therapeutics Corporation

Good day and thank you for standing by. Welcome to the Cal Amp Corp FY24 Q3 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would not like to hand the conference over to your speaker today. Chief Financial Officer.

Good afternoon, and welcome to CalAMP's Q3 FY24 Financial Results Earnings Call. My name is Jikon Kim. I am the Chief Financial Officer at CalAMP. Also with us today is CalAMP's Interim President and Chief Executive Officer, Jason Konauer. 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 such, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from forward-looking statements in this communication. Investors 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 that we are about to make. For more information about these risk factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings press release that we issued today as well as the company's filings within the Securities and Exchanges Commission. Investors are cautioned not to put undue reliance on these forward-looking statements. The company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. Jason will begin today's call with the review of companies' recent operational highlights, and then I 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 CalAMP's Interim President and Chief Executive Officer, Jason Konauer. Jason, go ahead, please.

Thank you, Jikun, and thanks to all of you for joining us on the call today. In the third quarter, Calend continued to see strength in certain areas of the business while also experiencing demand softness in others. Specifically, our industrial and international connected car segments continued to perform well, whereas soft demand from TSP customers led to lower than expected consolidated revenue. Our view is that continued softness with TSPs is mainly related to the post-COVID supply chain correction and subsequent inventory rebalancing, as well as an intensified competitive environment in the overall telematics solution ecosystem. In response, we have reallocated strategic focus and resources to this segment and believe we are seeing early signs of recovery. We are optimistic that TSP revenue will stabilize and return to growth from current levels. Another complicating factor with our TSP customers has been a difficult but necessary migration from our legacy pulse device management system to its successor, DMCTC. I am very pleased to report that after 20 months of monumental effort, and some pain that the technical migration of more than 8.5 million devices to DMCTC is now essentially complete. All of our TSP customers can now look forward to fully leveraging the improved functionality and benefits of DMCTC as opposed to migrating devices. Furthermore, as the final strokes of the migration are completed, The CalAMP team can re-vector more of its time and attention to optimizing the customer experience and driving revenue growth. Overall, the company generated $53.6 million in revenue and $1 million of adjusted EBITDA in the quarter, both of which fell below our expectations at the time we provided directional commentary on October 5th. Adjusted EBITDA was lower than expected as a result of the lower revenue and gross margin. Non-GAAP OpEx was lower sequentially as a result of previous cost reduction initiatives, and this helped to cushion the impact of lower revenue and gross margin. On the product and sales front, the company continued to hone its focus on core market segments to maximize the effectiveness of our investments and resources. As a result, there were several developments in the quarter that we believe represent growth catalysts for the future. One of these developments was the release of an upgraded version of our AI dash cam solution, Vision 2.1. This new model offers the standalone video capabilities of Vision 2.0, but also includes other telematics functionality such as GPS tracking, without the need for a separate gateway or LMU device. Vision 2.1 has now been released for our K-12 and commercial fleet applications. As previously mentioned, we had another extraordinarily strong quarter in the industrial segment, particularly with our large OEM customer. We are also seeing some very encouraging market traction with other industrial OEMs who are showing significant interest in the flexibility and computing power of CalAMS Edge software platform, Edge Core. This Edge platform, together with our DMCTC Cloud, enables customized Edge computing capabilities for proprietary Edge apps, which can lead to lower operating costs, improve flexibility, and lower latency compared to traditional device-to-cloud solutions. We have customers integrating this unique edge capability today and are excited to expand our opportunity set with industrial OEMs. Also, our international connected car business continues to execute well, achieving several milestones in the quarter. First, we were granted Toyota Genuine certification enabling our solutions to be installed at Toyota's ports, thereby streamlining the sales and customer delivery process and providing an opportunity for geographical expansion. Additionally, Jaguar Land Rover has endorsed our stolen vehicle recovery system as its recommended solution to help mitigate the impact of a growing theft issue in the UK. Increasing theft of JLR's Range Rovers in the UK has led to significant increases in insurance premiums on these targeted models. With JLR's endorsement, select insurance companies are offering lower premiums on vehicles that have our SVR solution installed. We are encouraged by JLR's endorsement of our unique SVR technology and believe that it represents a catalyst for growth in the UK market and beyond. During the quarter, we also launched an initiative to narrow our strategic focus to market segments where we are particularly well positioned and see opportunities for profitable growth. In addition to concentrating our resources in those market segments with the best opportunity for growth, our narrower focus has also enabled us to take significant cost reduction actions. We estimate that our cost reduction actions will result in approximately $16 million in annualized savings compared to our fiscal Q2 run rate. We anticipate that approximately 75% of the savings will come from operating expenses and capital expenditures with the balance coming from reductions in cost of goods. While we expect to see some immediate benefit from our cost reduction initiatives, the full impact will be realized throughout fiscal year 25. With these reductions, we expect to significantly strengthen the leverage in our operating model and to achieve adjusted EBITDA breakeven at approximately $42 million in quarterly revenue, depending on product mix and gross margins. On December 18th, we announced the closing of a $45 million term loan with Lynrock Lake Master Fund LP. This new term loan replaces our previous asset-backed line of credit and enhances our strategic positioning as we engage with new and existing customers, partners, and suppliers. The new capital also provides financial flexibility in support of our strategy and business transformation. Lynrock is a longtime supporter of Cal-Am and is an existing holder of a large majority of CalAMP's 2% convertible senior notes, maturing in August of 2025. In connection with the execution of the term loan agreement, CalAMP is amending the notes to add a security interest. And finally, I am very excited that we very recently announced the appointment of veteran technology leader Chris Adams as CalAMP's next president and CEO effective January 22nd, 2024. Chris is an accomplished technology leader who will bring a wealth of knowledge and experience to CalAMP. He possesses a unique combination of technical depth, operational skills, and general management experience from a broad range of technology companies, most recently as General Manager of the Automotive Sensing Division at OnSemi. We have high confidence in Chris's ability to lead the company through its transformation and to greater value for customers and investors. As for me, I will continue to serve as CatLamp's interim CEO until Chris arrives. Following his arrival, I will work with him and the team to ensure a smooth handover of leadership responsibilities. Following the handover, I plan to resume my role as independent director for CatLamp. It has been a true pleasure to serve as CalAMP's interim CEO, and 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 also has other tremendous assets, including excellent products and solutions, a blue chip customer base, and a large and growing market opportunity. I look forward to supporting CalAMP's next chapter of profitable growth and market leadership. With that, I'll turn the call over to Chikun to discuss our third quarter financial results in more detail. Chikun?