Revenue of $46.3 million was in-line with Company guidance for the quarter, and declined 3.1% sequentially and 2.7% year-over-year. The Company’s blended gross margin of 23.6% declined 190 basis points sequentially and was lower than our estimate of 24.6%, a level which would have been necessary to reach the top-end of the Company’s guidance for the quarter. CalAmp’s gross margin has been pressured by price concessions to DBS customers and a slowing in orders for the highest margin DBS products. Cash flow from operations was $4.7 million, but after using cash for acquisitions and capital expenditures, cash and equivalents declined to $30.8 million at the end of May 2006.
We have fine-tuned our earnings model given management’s comments and our assessment of business conditions. We continue to demonstrate the upper end of management’s guidance range for the next quarter and an aggressive viewpoint in the long-term. We maintain our Buy rating on CAMP but extend out our $17.25 price target to the 12- to 18-month time frame. With a new earnings multiple of 20 times our revised FY08 non-GAAP estimate of $0.62, our near-term price target becomes $12.40.
Despite the substantial decline in expectations for the DBS market, we are not as worried as some investors about CalAmp at this point. In our view, even as earnings headed materially lower in the near-term, the Company has less overall concentration risks, its capital base is still sturdy and the organizational structure is stronger with the addition of new leadership in key positions.
CAMP 1-yr chart: