10:33 am CalAmp (CAMP)
CalAmp (CAMP) is trading 10% lower today after reporting 3Q15 (Nov) earnings last night. CAMP is a supplier of antennas, amplifiers and transceivers. It has two segments: Wireless Datacom (86% of NovQ revs) and Satellite (14%).
Its Wireless Datacom (WD) segment sells equipment to utilities, oil & gas, mining, railroad and government customers in remote/rural areas where there is little infrastructure. Breaking down the WD segment a bit more: About 2/3 of WD segment sales are Mobile Resource Management (:MRM) products which allow customers to know where and how their assets are performing (fleet management, asset tracking, school bus tracking, remote asset security, pipeline flow monitoring). CAMP's products streamline what are otherwise complex Machine-to-Machine (M2M) communications. The other third of WD segment sales is the Wireless Network side. This is the recurring revenue/service business (Wireless Matrix, vehicle finance and RSI).
Fleet management is by far the largest vertical within the WD segment. In fact, CAMP believes it is the largest fleet management provider in terms of market share. A new and exciting vertical for CAMP is the Insurance Telematics vertical (usage based insurance, stolen vehicle recovery). For example, it allows insurance companies to monitor driver behavior etc. Also, a bank could disable a vehicle if customer defaulted on paying etc.
The other 14% of sales comes from CAMP's Satellite segment. Basically, the Satellite segment sells equipment almost entirely to EchoStar (Dish Network) to improve satellite TV reception. This is a mature, legacy business and not really part of the growth story. The growth is on the WD side. Management is not spending much time on the Satellite segment. It's being managed for cash and it has a breakeven point well below $10 mln per quarter so CAMP is no hurry to dispose of it.
Turning to the NovQ results, non-GAAP EPS rose 9% YoY to $0.25 while revenue was basically flat (down 0.4%) to $63.2 mln. The non-GAAP EPS was at the higher end of prior guidance of $0.21-0.25 while revenue was right about in the middle of prior guidance of $61-65 mln. So why is the stock down? It seems to be the revenue guidance for Q4 (Feb), which at $66-70 mln, is a bit below expectations. The Q4 EPS guidance is basically in-line with what was expected.
Breaking it down by segment, Wireless Datacom revenue rose 10% YoY and 9% sequentially in NovQ to a record $54.6 mln while Satellite segment revenue fell 37% YoY and 4% sequentially to $8.6 mln. On the WD side, specialized telematics device shipments to a key OEM customer (Caterpillar) in the heavy equipment industry boosted CAMP's WD segment this quarter.
Looking ahead, management believes that Caterpillar will be a significant growth catalyst for CalAmp over the next several quarters. In addition, important wins for fleet management SaaS systems, as well as robust demand for fleet management and asset tracking products, are expected to drive growth in the coming quarters. On the Satellite side, segment revenue was in line with the company's expectations. Looking ahead to Q4 (Feb), WD revenue should be higher on both a YoY and sequential basis, while Satellite segment revenue is expected to be down modestly on a sequential basis to approximately $8 mln.
In sum, CAMP's quarters can be pretty rocky on a quarter-to-quarter basis and this was one of the bad quarters for CAMP. However, from a broader perspective, CAMP is seen as a play on the explosion in connected devices to come online over the next few years. This is not related to smartphones etc. but rather machines talking to machines. A lot of companies (onshore oil pipelines, utility lines etc.) have assets that are located in remote areas where there is not much communications infrastructure. CAMP is bridging that divide. Corporations want more and better performance data in real time from their remote assets so they can make better operational decisions and be more efficient. The total addressable market (:TAM) for M2M products at end of 2013 was $3.4 bln. By end of 2016, that TAM is expected to double to $6.4 bln.
9:57 am Oil prices slide lower following API/ahead of EIA storage data, now below $56
Shortly after U.S. markets closed yesterday, API oil inventory data was released, reporting a build of 5.4 million barrels. This sent WTI crude oil futures trading lower to around $56.50/barrel (Feb crude closed at $57.09/barrel yesterday, up $1.71).
This morning, crude oil extended those losses ahead of the weekly EIA storage and fell as low as $56.63/barrel. One catalyst that drove crude oil prices higher was an interesting one. Some OPEC members came out to the media and said they see Brent crude oil around $70-80/barrel next year.
However, Saudi Arabia continues to maintain that OPEC won't cut output and are comfortable with oil prices going even lower from here. Whether this is exactly true or not remains up for debate. The oil markets are still in a search of finding a floor since no big catalyst for the upside are out there right now.
Well permit applications and rig count are two of the largest catalysts to watch for every month. Both have been declining, which does lend some positive price support to crude. However, so far, it's not enough to provide any major upside support.
Feb WTI crude oil just hit a new low for today at $55.37/barrel . In current trade, crude is -2.8% at $55.52/barrel.
9:08 am Hortonworks (HDP)
Hortonworks (HDP) has risen as much as 10% this week following a Market Outperform initiation at JMP Securities on Monday, Dec 22. JMP also set a $30 price target for the stock. Prior to this bullish initial rating, HDP submitted a filing on Dec 19 that disclosed Yahoo's (YHOO) 16.7% passive stake in the company. The stock reached its post-IPO high of $26.50 on its initial trading day, but has drifted lower since. These two positive news stories have sparked increased demand for the stock, pushing it as high as $26.26 in this shortened holiday week.
Hortonworks is a developer of Hadoop, a data management tool for enterprises. In fact, its mission is to establish Hadoop as the foundational technology of the modern enterprise data architecture. Hortonworks is seeking to advance the market adoption of Hadoop and provide enterprises with a new data management platform that enables them to harness the power of big data.
A Hadoop cluster combines commodity servers with local storage and an open source software distribution to create a reliable distributed compute and storage platform for large data sets scalable up to petabytes, or PBs, with thousands of servers or nodes. Its platform is an enterprise-grade data management platform built on a unique distribution of Apache Hadoop and powered by YARN, the next generation computing and resource management framework.
The company was founded in 2011, and during 2012 it launched its Enterprise Grade Hadoop platform, the Hortonworks Data Platform for which it provides support subscriptions and professional services. The company currently has 233 support subscription customers and 292 total customers, including professional services customers. Hortonworks has strategic relationships with Hewlett-Packard, Microsoft, Rackspace, Red Hat, SAP AG, Teradata and Yahoo. Consistent with its open source approach, the cmopany generally makes the Hortonworks Data Platform available free of charge and derives most of its revenue from customer fees from support subscription offerings and professional services.
Hadoop was originally developed in the early 2000s. Partnering with the Apache Hadoop community, Yahoo led major innovations in the technology to help tackle big data challenges and operate its business at scale. The traditional Hadoop offering (i.e., Hadoop Version 1.x) is largely a batch system that enables users to manage data at scale, but requires siloed computing clusters by application with pre-selected data sets, thus limiting accessibility, interoperability and overall value.
Taking a quick look at the financials, the company has never been profitable but its top line growth is strong. Revenue for the nine months ended Sep 30 rose 109% YoY to $33.4 mln. Its largest customer is Microsoft, which accounted for 22.4% of revenue for the fist nine months of 2014. Its top 3 customers accounted for 37.4% of revenue.
For the nine months ended Sept 30, 2014, the company reported a net loss of $86.7 million, a 79% increase compared to the same period in 2013. This increase can largely be attributed to an 81% increase in operating expenses as HDP aggressively ramps up sales, marketing and R&D. For the same period, HDP reported a $42.7 million cash balance to support its operations.
8:00 am j2 Global Goes Hostile with Carbonite Offer
It may be the holiday season and all, yet j2 Global (JCOM 63.58) isn't knocking on Carbonite's (CARB 13.60) board room door with glad tidings. On the contrary, it is going hostile with its offer to acquire Carbonite for $15.00 per share in cash.
Recall that j2 Global, which provides Internet services through its Business Cloud Services and Digital Media divisions, disclosed on December 2 its intent to acquire the remaining shares of Carbonite it did not already own.
The offer earlier this month was actually j2 Global's second attempt to acquire Carbonite, which provides cloud backup solutions for consumers and small and medium-sized businesses.
In August 2012, j2 Global sought to acquire Carbonite for $10.50 per share. Carbonite said at the time that it was not interested in the proposal and that it expected to create additional value over time in excess of j2 Global's offer.
When j2 Global made its latest offer, Carbonite was trading at $11.76 per share.
Today, however, j2 Global issued a press release signaling that it is tired of waiting around for Carbonite's board to make a decision. To that end, the press release contained a copy of the letter sent on December 23 to Carbonite CEO, Mohamad Ali, who assumed his post on December 3, in which j2 Global disclosed its intention to commence a cash tender offer today to acquire all outstanding shares of Carbonite.
The letter revealed j2 Global's exasperation over an inability to start confirmatory due diligence, Carbonite's admission that it needed more time to consider its own value, and Carbonite's offer in the interim to acquire MailStore Software GmbH for a price j2 Global said was higher than it would have paid.
It is j2 Global's conclusion that the MailStore acquisition offer and Mr. Ali's own hiring has reduced the value of Carbonite shares to j2 Global by more than $0.50 per share.
Terms of the MailStore acquisition were not disclosed, yet j2 Global said in an amended 13D filing that the cost of Mr. Ali's hiring was approximately $7.5 million or $0.26 per share assuming shareholders didn't receive a higher price than j2Global's offer.
The offer on the table today for Carbonite shareholders is $15.00 per share in cash and it does not contain a financing condition.
6:27 am Piedmont shares little changed following lower than expected earnings
Piedmont (PNY $38.76 +0.00) reported fiscal year 2014 earnings of $1.84 which is lower than expected, while revenues rose 15% to $1.47 billion which is slightly less than expected.
System throughput in 2014 totaled 410.7 million dekatherms, up 6% from 387.6 million dekatherms in 2013. Weather during 2014 was 9 percent colder than normal and 6 percent colder than 2013.
Margin was $690.2 million, an increase of $68.7 million from the prior year. The increase in margin is primarily attributable to increased volume deliveries in the South Carolina and Tennessee retail markets due to colder weather, regulatory rate adjustments, customer growth, increased transportation services in the power generation markets, and higher margin sales from secondary market activity.
The company reaffirmed fiscal year 2015 guidance of $1.82-1.92 which is line with estimates.
PNY shares are higher by 17% YTD, outperforming the S&P 500. Shares are currently trading near multi-year highs.
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