CAMP4 Therapeutics Corporation Q3 FY2024 earnings call

• TSP segment faced soft demand due to post-COVID supply chain correction, inventory rebalancing, and competitive environment, but early signs of recovery are seen. - Migration of over 8.5 million devices from legacy PULS to DMCTC is essentially complete. - Released upgraded AI dash cam solution Vision 2.1 for K-12 and commercial fleet applications. - Industrial segment had a strong quarter, especially with a large OEM customer and encouraging traction with other industrial OEMs. - Implemented cost reduction initiative targeting $16 million in annualized cash savings, with 75% from operating expenses and capital expenditures, and 25% from cost of goods. - Closed a $45 million term loan with Lynrock Lake Master Fund LP. - Appointed Chris Adams as next President and CEO effective January 22nd, 2024.

Total revenues in the third quarter were $53.6 million, down 32% year-over-year and 13% sequentially from $61.7 million last quarter. Recurring application subscription revenue was $17.8 million, a $900,000 sequential decline. Industrial segment performed well, especially with a large OEM customer. Connected car segment had steady quarter-over-quarter revenues but saw a decline in recurring revenue from connected car UK operations due to a large insurance carrier exiting the UK market, partially offset by growth in K-12 segment. Consolidated gross margin was 33% in the third quarter, down from 36% in the prior quarter, driven by unfavorable product mix, lower volumes, and higher excess and obsolescence accruals and warranty expenses.

• In Q4, expect revenues from industrial segment to decrease to a normalized level, partially offset by TSP customer recovery, leading to slightly lower consolidated revenues and stable adjusted EBITDA relative to Q3 FY ‘24 levels. - Anticipate TSP revenue to stabilize and return to growth from current levels. - Adjusted EBITDA breakeven expected at approximately $42 million in quarterly revenue depending on product mix and gross margins.

• Soft demand from TSP customers related to post-COVID supply chain correction, inventory rebalancing, and competitive environment. - Difficult migration from legacy PULS to DMCTC initially causing pain. - Goodwill impairment risk due to significant revenue declines in TSP market segment.

Q: Can you put a finer point on what you're seeing in the TSP market that's driving confidence in a recovery soon and timing around return to revenue growth for the overall business?

A: Seeing order volume come up a bit, internal forecast is up, and getting favorable anecdotal commentary from TSPs. Recovery is slow but optimistic, with Q4 expected to see recovery relative to Q3. Cautious on forward guidance beyond Q4 but overall optimistic.

Q: Update on other strategic options to address the 2025 convertible note?

A: Operationally, grow the business, increase profitability, and generate more cash to create opportunities for refinancing, pushing out, or paying off debts at maturity.

Q: How are the growth trajectory of higher ARPU solutions and revenue subscriber trends over the next several quarters?

A: Vision 2.1 has been an ARPU driver, integrated with K-12 and commercial fleet apps with customer wins. Connected car has a business in Spain that's breakeven and growing, with evaluation of other geographical expansion opportunities and milestones with Toyota and Jaguar Land Rover.