Telematics specialist CalAmp Corp. is starting 2019 on an international buying spree.
The Irvine-based company, which makes products and software that remotely tracks vehicles and other primarily mobile assets, recently closed a $13 million deal to expand operations in the United Kingdom.
Another pending acquisition, also for about $13 million, will do the same in Mexico.
The deals come a few weeks after a corporate shift in strategy; late last month the company signaled it planned to increase car service subscriptions.
The shift from sales of individual devices to a recurring revenue model is increasingly the goal of nearly every tech company in the age of cloud computing.
“Increasing software and subscription revenues, that’s a key area of focus,” Chief Executive Michael Burdiek told the Business Journal last week.
The “two acquisitions are big enablers” of that, he said.
Against this backdrop, CalAmp is ramping up local hiring and expanding its headquarters near the Irvine Spectrum.
The $416 million valued company (Nasdaq: CAMP) currently employs about 100 people in Irvine, and more than 800 companywide.
Tracking Overseas
In a move to help drive its European expansion, the company this month acquired Tracker, a LoJack licensee and market leader in stolen vehicle recovery and telematics services across the U.K.
The foundation for this line of work was set in 2016 when CalAmp purchased LoJack Corp. for $131.7 million.
LoJack’s supply chain sensors are primarily used to help police and commercial vehicle operators monitor and recover cars and trucks.
The deal boosted CalAmp’s distribution network and made the company a well-known brand in the used-car dealership market, as well as providing a line of vehicle theft-recovery systems and fleet telematics products. The purchase fueled business expansion in the U.S. and overseas.
The $13 million buy of Tracker, which includes about 60 employees, will be integrated to develop advanced connected car solutions targeting auto dealers and renters, original equipment manufacturers, insurance providers and other enterprise customers.
CalAmp plans to replicate the success of its LoJack Italia operation in the U.K, through extensive law enforcement relationships and a strong brand.
“Tracker in the U.K. is almost as well-recognized as the LoJack brand here in the U.S.,” Burdiek said.
CalAmp is also set to acquire Car Track S.A. DE C.V., the exclusive licensee of LoJack technology in Mexico, for about $13 million.
The transaction, scheduled to close this month, is for the remaining 87.5% interest in the company CalAmp didn’t already own.
The LoJack Mexico brand was created in 1998 and has about 400 employees who handle several more jobs in-house that CalAmp typically outsources, including call center and customer support, and vehicle installations.
“It’s a very profitable businesses,” Burdiek said.
The acquisitions are likely to contribute more than $10 million a quarter in recurring revenue in the second half of fiscal 2020 and add more than 400,000 subscribers across three countries, according to CalAmp projections.
“We’ve been looking at both these businesses for two or more years,” Burdiek said.
Stock Watch
CalAmp grew sales 4.2% in its last fiscal year to $366 million. Net income topped $16.6 million, compared to a loss of $7.9 million in the 12 months through February 2017.
T. Michael Walkley, an analyst at Canaccord Genuity LLC, believes CalAmp will be one of only a few Internet of Things specialists with a subscriber base exceeding 1 million with recurring revenue hitting $100 million by the end of fiscal 2020.
Canaccord maintained its buy rating and increased the target price on CalAmp shares to $24, just under its 52-week high of $24.81 last July.
CalAmp shares were trading at about $13.40 late last week, with a $416 million market cap.
“CalAmp management continues to execute and the company is well positioned to drive sales and earnings growth over the next several years driven by growing sales to Caterpillar, improving international sales, a growing product portfolio, an increasing list of new customer wins, and accelerating growth of higher-margin recurring revenue sales,” Walkley wrote in a March 3 investor note.
In another move to boost recurring revenue, the company last month released a cloud-based platform, called CalAmp iOn, which enables users to manage and monitor a variety of assets, from service vehicles to high-value construction and rental equipment.
A CalAmp iOn Tag smart sensor can be affixed to any asset, such as power tools, generators or ladders, and paired with a CalAmp telematics device installed on a vehicle. Users get an alert if the paired connection is lost.
The National Equipment Register estimates between $300 million and $1 billion worth of construction equipment is stolen annually.
HQ Growth
CalAmp is planning for growth in Irvine, with the latest purchases and new business lines.
The company is adding nearly 6,000 square feet of office space at its headquarters at 15635 Alton Parkway, which houses software and engineering teams and traditional corporate positions, including sales, marketing, finance, accounting and human resources.
It will occupy the entire second floor when construction concludes toward the end of May, boosting its local space to more than 28,000 square feet.
“We will then have capacity here for about 125 people,” Burdiek said. “The location is fantastic.”
