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Edited Transcript of CAMP earnings conference call or presentation 18-Apr-17 8:30pm GMT

Thomson Reuters StreetEvents

Q4 2017 CalAmp Corp Earnings Call

Oxnard Apr 19, 2017 (Thomson StreetEvents) -- Edited Transcript of CalAmp Corp earnings conference call or presentation Tuesday, April 18, 2017 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael J. Burdiek

CalAmp Corp. - CEO, President and Director

* Nicole Noutsios

* Richard K. Vitelle

CalAmp Corp. - CFO, EVP, Treasurer and Corporate Secretary

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Conference Call Participants

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* Gregory Burns

Sidoti & Company, LLC - Analyst

* Howard S. Smith

First Analysis Securities Corporation, Research Division - MD

* Jonathan Ho

William Blair & Company L.L.C., Research Division - Technology Analyst

* Michael James Latimore

Northland Capital Markets, Research Division - MD and Senior Research Analyst

* Michael Roy Crawford

B. Riley & Co., LLC, Research Division - Senior MD, Co-Head - The Discovery Group and Senior Analyst

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Presentation

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Operator [1]

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Welcome to the CalAmp Fourth Quarter and Full Year Results Earnings Release Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference call, Nicole Noutsios, Investor Relations for CalAmp. Nicole, you may begin your conference.

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Nicole Noutsios, [2]

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Thank you, operator. Good afternoon, and welcome to CalAmp's Fiscal 2017 Fourth Quarter and Full Year Results Conference Call. With us today are CalAmp's President and Chief Executive Officer, Michael Burdiek; and Chief Financial Officer, Rick Vitelle.

Before we begin, let me remind you that this call may contain forward-looking statements. While these forward-looking statements reflect CalAmp's best current judgment, they are subject to risks and uncertainties that could cause actual results to materially differ from those implied by these forward-looking projections. These risk factors are discussed in the earnings release which was issued today and is available on our website and our periodic SEC filings. We undertake no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances.

Michael Burdiek will begin today's call with a review of the company's financial and operational highlights. Rick Vitelle will then provide additional details about the company's financial results and outlook. This will be followed by a question-and-answer session.

With that, it's now my pleasure to turn the call over to CalAmp's President and CEO, Michael Burdiek.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [3]

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Thank you for joining our call today. As we close out fiscal 2017, we are pleased with the progress we have made on a number of financial and business objectives, which have helped set the stage for long-term growth and profitability.

On the financial front, we reported fourth quarter revenue of $86.1 million, up 22% year-over-year, and record revenue of $351 million for the year as a whole, up 25% in fiscal 2016. We also experienced strong margin expansion in the fourth quarter, with consolidated gross margin of 41.6%, up from 38.9% in the prior year. In addition, we delivered adjusted EBITDA margin of 14.9%, and we expect to see steady bottom line improvements in fiscal 2018.

We exited fiscal 2017 with momentum on a number of fronts, none more important than the strong bookings and revenue growth that we experienced in the fourth quarter for MRM Telematics products. In the latest quarter, sales of our MRM products for fleet applications reached a record level, with bookings at the highest level of the last 2 years. We also made good progress on programs with our newer strategic customers and have a firming pipeline of emerging global opportunities.

For the company overall, bookings picked up markedly in the fourth quarter, reaching an all-time single-quarter record. We are especially encouraged by growing demand for our largest-generation MDT 7P Android in-cab display terminal, targeted at fleet applications, including tracking hours of service for compliance with the electronic logging device mandate. MDT revenues in the fourth quarter represented a new high watermark, with solid backlog scheduled for delivery over the course of fiscal 2018.

Strategically, we made substantial progress during fiscal 2017 executing on initiatives to help deliver steady long-term growth. A year ago, we completed the acquisition of LoJack, which materially increased industry touch points with automotive OEMs and their dealer networks, both domestically and internationally. Over the course of fiscal 2017, we successfully integrated LoJack and introduced the first LoJack-branded telematics services in LotSmart and SureDrive to LoJack's vast U.S. dealer network. We also made excellent progress in revitalizing relationships with LoJack's international licensees by leveraging our ability to offer a comprehensive portfolio of the world's most advanced telematics products and services. We could not be more pleased with the financial performance and pipeline of opportunities this acquisition has brought to CalAmp.

We also saw solid progress on multiple fronts in the construction equipment market, and we continue to believe there are large greenfield opportunities throughout that industry ecosystem. Caterpillar remains a key customer for us in this market, accounting for fiscal 2017 revenues of $30 million, with incremental revenue growth expected in fiscal 2018. More broadly, we see opportunities emerging with other construction equipment OEMs and rental companies that go beyond just hardware.

To address some of these opportunities, we recently announced the availability of AssetOutlook, a next-generation telematics application to optimize construction operations for off-road equipment and on-road vehicles. By leveraging our broad portfolio of technologies and solutions, we developed AssetOutlook on the CalAmp Telematics Cloud platform as a customized application for the construction industry to enhance equipment management, improve operating efficiency and help prevent unauthorized use and theft. We also had good success in growing recurring revenue with software and services revenue reaching $59.4 million for fiscal 2017 as a whole, representing a 39% year-over-year increase.

With the recent introductions of AssetOutlook, LoJack, LotSmart, SureDrive and SCI cold chain solutions, along with international activities of LoJack Italy, we are now delivering on a broad suite of SaaS applications and cloud services around the world, putting us on a path to achieve $100 million of annual recurring revenue within the next few years.

International expansion has been a focus area for the company. And over the course of fiscal 2017, we also transformed CalAmp into a growing global enterprise. As one indication of this, our fiscal 2017 revenue from customers outside the United States reached $91 million or 26% of consolidated revenue, with record revenues generated in Europe, along with substantial growth in Latin America. Over the course of the next several quarters, we expect to make continued progress on the international front, supported by investments in channel initiatives in both existing markets and newer unpenetrated regions.

Fiscal 2017 was also a remarkable year at CalAmp from a technology leadership perspective. In addition to the rollout of the suite of SaaS applications mentioned earlier, we also delivered on a number of additional telematics innovations. Earlier in the year, we introduced the CalAmp Telematics Cloud service and throughout the year, made a number of announcements for partners who have adopted our Telematics Cloud to underpin their own proprietary fleet and asset-tracking application services.

LoJack Italy is in the process of moving their telematics services onto the CalAmp Telematics Cloud, following the lead of our U.K. affiliate, SmartDriverClub. Our wholly owned LoJack Italian licensee and our SmartDriverClub investment provide a ready international proving ground for various telematics services concepts such as Crashboxx for both enterprise and consumer applications. Crashboxx was officially launched in fiscal 2017 as a key feature bundled with LoJack SureDrive and also serves as a component of the integrated Telematics Cloud service supporting the SmartDriverClub in the U.K.

Fiscal 2017 was clearly a transformational year for CalAmp on multiple fronts, with record revenue, development of new channels and strategic partnerships, expansion of our international footprint, commercialization of unique connected vehicle technologies and the acquisition of one of the most venerable vehicle safety and security brands in LoJack. These were some of the outstanding achievements by our nearly 1,000 strong CalAmp global team, and we are now well positioned as a clear leader in the global connected vehicle economy in the broader industrial IoT landscape.

With that, I will now turn the call over to Rick Vitelle, our Chief Financial Officer, for a closer look at our fiscal 2017 fourth quarter financial results and Q1 guidance.

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Richard K. Vitelle, CalAmp Corp. - CFO, EVP, Treasurer and Corporate Secretary [4]

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Thank you, Michael. My commentary will include reference to the non-GAAP financial measures of adjusted basis net income, adjusted EBITDA and adjusted EBITDA margin. Our adjusted basis net income excludes intangibles, amortization expense, stock-based compensation, acquisition and integration expenses, litigation provisions and includes certain other adjustments. Our adjusted EBITDA excludes interest expense, taxes, depreciation, amortization, stock-based compensation and includes certain other adjustments. A full reconciliation of these non-GAAP measures with the closest corresponding GAAP basis measures is included in our fourth quarter earnings press release that was issued earlier today.

Consolidated revenue for the fiscal 2017 fourth quarter was $86.1 million, an increase of 22% year-over-year. This increase is the result of the revenue contribution of LoJack, which was acquired in March 2016, and higher revenues for our MRM Telematics products, partially offset by Satellite revenue of $12 million in the prior year's fourth quarter that did not recur in the latest quarter due to the midyear wind-down of this business.

Fourth quarter revenue from LoJack products and services was $27.8 million, which was in line with our expectations. As mentioned last quarter, LoJack typically is seasonally weak in our fourth quarter, both domestically and in Italy. For fiscal year 2017 as a whole, revenue increased 25% year-over-year to $351 million, primarily due to the $117 million revenue contribution from LoJack products and services. In addition, our international revenue in fiscal 2017 increased about 90% year-over-year, which was also largely attributable to the LoJack acquisition.

Telematics systems revenue in the fiscal 2017 fourth quarter was $54.6 million, 60% of which represents MRM products, with LoJack’s Stolen Vehicle Recovery products accounting for the remainder. MRM Telematics products revenue in the fourth quarter was up 13% year-over-year.

Software and services revenue was $14.5 million in the fourth quarter, up 43% year-over-year due to the contribution of LoJack's recurring revenue streams. Across all of our SaaS and recurring service platforms, we had approximately 628,000 unique subscribers at the end of the fourth quarter compared to approximately 624,000 at the end of the immediately preceding quarter and up from 482,000 at the end of fiscal 2016.

Subscriber numbers at the end of fiscal 2017 were impacted by approximately 12,000 deactivations due to the 2G network sunset in the U.S. Network and OEM product revenue was $16.3 million in the fourth quarter, which includes sales to Caterpillar of $8.6 million. For fiscal 2017 as a whole, sales to Caterpillar were $29.6 million.

Gross profit for the fourth quarter was $35.8 million, an increase of $8.2 million over the same quarter last year. Gross margin was 41.6% in the fourth quarter of fiscal 2017, up from 38.9% in the fourth quarter of fiscal 2016. For fiscal 2017 as a whole, gross profit increased by $40.4 million to $143.4 million. Fiscal 2017 gross margin was 40.8% compared to 36.7% in fiscal 2016. These improvements in gross profit and gross margin performance in the fourth quarter and the year as a whole were primarily attributable to the addition of LoJack.

In OpEx, our R&D, sales and marketing and G&A expenses in the fourth quarter as percentages of revenue were 5.5%, 14.2% and 20.1%, respectively. The G&A percentage includes the effect of the $6 million charge recorded in the fiscal 2017 fourth quarter for the treble damages awarded by the trial court judge in the Omega patent infringement case. Looking ahead to fiscal 2018, we expect that R&D as a percent of revenue will be in the mid-6% range. We also expect that G&A expense in fiscal 2018 as a percent of revenue will be in the 12% range, primarily due to anticipated lower legal fee expenses.

The GAAP basis net loss in the fourth quarter was $3.5 million or $0.10 per diluted share compared to net income of $5.5 million or $0.15 per diluted share in the comparable quarter last year. For the year as a whole, GAAP operating results were a $0.20 net loss per diluted share compared to $0.46 net income per diluted share in fiscal 2016. The aforementioned $6 million litigation provision impacted fiscal 2017 fourth quarter and full year GAAP basis results of operations by about $0.11 per diluted share.

Non-GAAP net income for the fourth quarter was $9.9 million or $0.28 per diluted share compared to $11.7 million or $0.32 per diluted share in the comparable quarter last year. For fiscal 2017 as a whole, non-GAAP earnings were $1.06 per diluted share compared to $1.15 in the preceding year.

Adjusted EBITDA was $12.8 million in the latest quarter, with an adjusted EBITDA margin of 14.9% compared to adjusted EBITDA of $13.7 million and an adjusted EBITDA margin of 19.3% for the fourth quarter in the prior fiscal year.

Now moving on to our liquidity position and balance sheet. At the end of fiscal 2017, the company had total cash and marketable securities of $100.4 million and total outstanding debt of $146.8 million, which represents the carrying value of our 1 5/8% convertible unsecured notes that we issued in May 2015. Net cash provided by operating activities was $6 million during the fourth quarter and $25.8 million for fiscal 2017 as a whole.

Our consolidated accounts receivable balance was $67.2 million at the end of the fourth quarter, representing an average collection period of 64 days, while total inventory at the end of the fourth quarter was $29.4 million, representing annualized inventory turns of approximately 7x. Our cash conversion cycle was 55 days at the end of the latest quarter, down from 60 days at the end of the preceding quarter.

Now taking a look at our tax rate. The consolidated effective tax rate in fiscal 2017 was 15.8%, which represents a blend of the higher U.S. tax rate and the lower rates in foreign jurisdictions, principally Ireland. Our non-GAAP tax rate in fiscal 2017 as a whole was about 3%, which we expect will also be the approximate non-GAAP tax rate for fiscal 2018.

Now turning to our Q1 outlook. We expect first quarter consolidated revenue in the range of $84 million to $90 million. At the bottom line, we expect first quarter GAAP basis net income to be in the range of $0.01 to $0.09 per diluted share and non-GAAP net income in the range of $0.24 to $0.32 per diluted share. We also expect adjusted EBITDA in the range of $11 million to $14 million.

Looking further ahead to fiscal 2018, we expect our business to strengthen as the year progresses, driven by growth in MRM Telematics, product revenues and our recurring revenue, both domestically and with LoJack Italy.

With that, I'll turn the call back over to Michael to provide some final comments before we open the call for questions.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [5]

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Thank you, Rick. As I've mentioned in my introductory remarks, our outlook improved over the course of the fourth quarter, supported by multiple market indicators and solid financial results.

During fiscal 2017, we built a foundation for global technology leadership and expanded our product portfolio in emerging connected vehicle market and the broader IoT landscape. Fiscal 2018 promises to be a continuation of CalAmp's transformation through ongoing technology innovation, channel development and greater global prominence.

Operator, please open the line up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Mike [ Lockley ]

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Unidentified Analyst, [2]

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Great. Michael, it's good to see the MRM business and the comments on the backlog improving. Maybe you could walk us through some of the drivers for that, say, you talk about the Omnitracs business and the other large unnamed telematics customer. And it sounds like you're kind of signaling on your guidance, even though you didn't give full year guidance, that you expect kind of slow steady growth throughout the year. Is that kind of how we should think about the MRM business and your overall business combined?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [3]

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Yes. Well, Mike, yes, to answer your last question. That's what we expect through the year. Obviously, we'd like to try to be a little more euphoric than we were in the prepared comments. But I think we're optimistic that we'll continue to see progress, not only for MRM telematics product sales with customers in the U.S. and globally, but really, across our core business, including network and OEM products. And obviously, a driver of that growth will be some of our key customers. And of course, earlier last year, we announced our relationship with Omnitracs. That relationship is very solid. Omnitracs was a nice contributor to revenue in the fourth quarter. And the other unnamed customer is following closely behind them and I think will be a solid contributor to revenue growth through FY '18 and into future years. But we are quite optimistic. We think that there's been fundamental turn in the market compared to where we were a year ago. And I would say that not only have we seen an improvement in market conditions, but I think we have a more outstanding team and a more solid portfolio and obviously, a broader global footprint to leverage as it relates to exploiting both existing as well as new opportunities that might come in to our pipeline.

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Unidentified Analyst, [4]

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Great. And just on the short-term guidance, just given the strong backlog and I would expect LoJack might have a little bit of a seasonal recovery in the range that could be kind of flat at the midpoint or slightly down at the low end. Can you kind of walk through the puts and takes on the sequential basis on some of your key business units?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [5]

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Yes. It's actually fairly easy to summarize. So we do expect a seasonal recovery -- or seasonal improvement, I should say, in the LoJack U.S. SVR business. That, however, is somewhat offset by a lower outlook for LoJack SVR sales to licensees around the world. And you might recall, last quarter, we talked about some significant orders that had carried over from Q3 and were expected to ship in early Q4. That created a little bit of an anomaly and really a sequential quarter headwind as it relates to sales of SVR products to licensees Q4 versus our outlook for Q1. And then also in Q4, we had a lot of strength in the PTC area as part of our OEM products' numbers. And looking into Q1, we expect that to be down roughly $2 million sequentially. So between the international licensee revenue outlook being lower in Q1 versus Q4 and the expectation of lower PTC product sales in Q1 versus Q4, it's roughly a $4 million headwind that's being offset by -- being more than offset by an improved outlook for LoJack U.S. as well as across our other product lines.

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Unidentified Analyst, [6]

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Okay, good. That's helpful. Last question for me, and I'll pass it on. Just more on the comments on the SaaS revenue growing throughout the year. Maybe you can update us on some of the drivers you see there and the early feedback from some of the new products you launched such as SureDrive.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [7]

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Sure. That outlook for improvement through the year and solid growth for FY '18 and hopefully, years onward is really not so much a discussion around or a focus on LoJack or SureDrive. We think that our core SaaS offerings, namely, the recently introduced AssetOutlook as well as growing opportunities for the CalAmp Telematics Cloud with customers around the world will be a primary driver of SaaS growth in FY '18. And then in subsequent years, we think LoJack, LotSmart and SureDrive products will be a contributing factor to future years of growth.

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Operator [8]

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Your next question comes from the line of Howard Smith.

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Howard S. Smith, First Analysis Securities Corporation, Research Division - MD [9]

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I want to follow up on Mike's question regarding the Q1 guidance. You did a pretty nice job of giving the puts and takes sequentially. Was hoping maybe for something similar year-over-year. I think if you adjust for the Satellite and the short stub period for LoJack, it could be kind of flat to down. And so with all the growth and nice trends you've pointed out, what's the offset kind of from a weakness on an organic basis?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [10]

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Well, if you take an expectation that LoJack overall will be roughly flat, that being somewhat softer outlook or secular decline of SVR product demand by licensees outside the U.S. mostly offset by MRM Telematics product sales to those same licensee customers and the same puts and takes with LoJack here in the United States, perhaps a small secular decline in SVR product sales offset by some upside opportunities around LotSmart and SureDrive. So if you set that aside, it's sort of a $117 million bias in FY '18. And you -- then you look at the full year, our expectation is we're going to see pretty broad-based growth, not only in the MRM Telematics area, but also for network and OEM products. And I would say the expectation across the product line is generally upper single digits to lower double-digit growth in each of those areas.

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Howard S. Smith, First Analysis Securities Corporation, Research Division - MD [11]

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Okay. And then on a specific thing, the MDT, very strong, you said, in terms of bookings and backlog. Maybe you can give a little more color around that product. I think it's higher ASP than some of the things you sell, and if there's any margin implications. Just to get a better flavor since that's becoming a more important dynamic.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [12]

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Sure. Great question. Yes, it is a higher-margin product family. And I think that's an interesting point to make here, and that is that we expect the MDT-P product to become more of a product line through the year. And in fact, some of the backlog that was booked in Q4 that will ship throughout the year is actually not only for the MDT-P product that we shipped in Q4, but with variations or derivatives of that product that which we think are more tailored towards the ELD mandate and market segmentation opportunities around that. So generally speaking, the MDT product line is higher margin than our average MRM Telematics product, but it's still a relatively small percentage of the overall revenue mix. We expect it to grow as a percentage of the mix through the year and contribute its fair share to margin expansion in the telematics device family throughout FY '18.

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Operator [13]

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Your next question comes from the line of Mike Crawford.

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Michael Roy Crawford, B. Riley & Co., LLC, Research Division - Senior MD, Co-Head - The Discovery Group and Senior Analyst [14]

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I think you had mentioned perhaps at a conference that LotSmart, you were rolling out initially with a single brand dealer. What's the status of that?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [15]

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With that dealer, it's deployed. It's roughly 1,200 units. And that dealer -- it’s actually a dealer group. We were rolling it out with a single brand in a single store. And it's rolling out to additional brand stores with that dealer group. It's a bit of a slow start, I would say, a little bit of uncertainty or perhaps discomfort with the whole concept of telematics playing a role in dealer operations. But I think we've overcome that. And we're starting to see some good momentum around LotSmart. And clearly, as LotSmart becomes more broadly deployed, we have an increased opportunity to sell through the SureDrive product to the consumers that come through those stores. So we're probably a little bit behind where we'd hoped to be, but I think the momentum is building, and we’re quite optimistic that LotSmart is going to be a dealer -- a win with the dealer partners of LoJack and will clearly make a difference in their dealer operations.

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Michael Roy Crawford, B. Riley & Co., LLC, Research Division - Senior MD, Co-Head - The Discovery Group and Senior Analyst [16]

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And what do you think needs to be done to make the dealer sales force more aware of the upsell opportunity with SureDrive, because that does not seem to be resonating yet?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [17]

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No. I think a lot of it has to do with education. Some of it has to do with consumer awareness and pull. Some of it has to do with the economics. And I think those stars are all starting to line up. And I think dealers are still quite enthused about the opportunity to sell more and make more money with some of these aftermarket products. And clearly, if the LotSmart device is already helping them with dealer operations, they're going to be more encouraged to sell through these sorts of products. And we'll clearly become more comfortable with the whole concept of technology, and help -- how -- technology can help their bottom line from really 2 points of view: more efficient dealer operations as well as additional revenue sources with the consumer that comes through those stores.

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Michael Roy Crawford, B. Riley & Co., LLC, Research Division - Senior MD, Co-Head - The Discovery Group and Senior Analyst [18]

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Okay, great. And then switching gears to AssetOutlook. Is that an application that you expect Cat will take? Or is there really more for others in the construction vertical?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [19]

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I think it's well targeted to the construction vertical overall. And whether or not Cat ever adopts AssetOutlook, I think there are opportunities for us to do more with Cat that goes beyond just selling them telematics devices. We're very optimistic there. But AssetOutlook is really a tailored solution for the construction equipment OEMs as well as the rental equipment companies that service various clients as well as the construction companies themselves that both buy, lease and rent various pieces of heavy equipment or industrial machines.

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Michael Roy Crawford, B. Riley & Co., LLC, Research Division - Senior MD, Co-Head - The Discovery Group and Senior Analyst [20]

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Okay. And then last question relates to the status of SmartDriverClub. Any milestones or progress you can share there or change in expectations?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [21]

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No change in expectations. The SmartDriverClub over the course of the last few months has actually brought on board 3 different dealer groups and are engaged with marketing their products or services through those dealer groups, one being a very large used-car dealer network in the U.K. and 2 others being sort of small to medium-sized new car dealers. But the feedback on the SmartDriverClub offering has been quite positive. We're very encouraged by the opportunities that SmartDriverClub has uncovered in the U.K. And we look to leverage, obviously, that investment in multiple ways, not only in terms of SmartDriverClub's success in the U.K., but also translating some of those successes and experiences back into the United States or to other of our partners and LoJack licensees around the world.

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Operator [22]

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Your next question comes from the line of Jonathan Ho.

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Jonathan Ho, William Blair & Company L.L.C., Research Division - Technology Analyst [23]

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I just wanted to start with LoJack and just wanted to understand, you guys, during the time of the acquisition, talked about the opportunity to expand the coverage within the U.S. to cover additional states and with the full integration and some of the work that you've done with the international licensees. I just wanted to get maybe a sense of where we are in terms of that progress on expanding the coverage as well as the ability to replace maybe some of the products that the international licensees were selling that were not CalAmp-oriented.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [24]

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Well, let's start with the broader question, which is the expansion of LoJack brand into new service areas, where our primary focus is on launching LotSmart and SureDrive amongst the current dealer groups where LoJack has typically had relationships. The next stage will be the expansion with those dealer groups that LoJack has traditionally serviced that have operations outside their traditional LoJack coverage areas. And then the next step will be a broader base rollout of telematics products, not only to those traditional LoJack partner dealer groups, but to new groups that LoJack had never been able to service outside of the 29-state coverage area. So this will be a multi-phased process and probably multiyear process. But we want to make sure we're successful first with the current partners and not get too far ahead of ourselves. But as it relates to the LoJack licensees and that opportunity, we're very encouraged with the progress we've made in terms of transitioning them away from potentially other telematics device suppliers. And further, we've had some interesting success, I would say, early on, potentially even converting some of those licensees over to our full Telematics Cloud service offering. We were going to be hosting the first Global LoJack Partner Summit here in another month. And we're going to have a complete technology showcase at that event. And I think it's going to be well received. And I think a year from now, we're going to be talking about the licensees in a completely different light than we're able to talk about them today.

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Jonathan Ho, William Blair & Company L.L.C., Research Division - Technology Analyst [25]

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Got it, got it. And then just relative to -- I know you guys don't give annual guidance, but is there any sort of expectation around unusual seasonality, either for revenue or for expenses that we should be aware of during the course of the year?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [26]

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No, other than the seasonality that we've experienced with LoJack. We think there will be a summer season and essentially a winter season for LoJack Stolen Vehicle Recovery product sales, both domestically and with LoJack Italy. But outside of that, I don't think that there's really any discernible seasonal effect that one could bake into a financial model.

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Operator [27]

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Your next question comes from the line of Greg Burns.

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Gregory Burns, Sidoti & Company, LLC - Analyst [28]

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With FirstNet seemingly moving forward now, could you just talk about how CalAmp might participate in that opportunity and how you might size the annual revenue opportunity for CalAmp?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [29]

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Well, that's a great long-term question. And I guess that's our view of that opportunity, it's a long-term opportunity. But we are exceptionally well positioned. We rolled out so-called Band 14 or FirstNet-compatible router products probably 4 or so years ago. And we actually private-labeled those products to some of the larger players in the traditional public safety communications marketplace. Given that those products are so old now and the FirstNet rollout is really just to the point where it's going to begin, we'll have to refresh those products. But given that we're essentially one of the last people standing from that prior FirstNet era, we think we're well positioned to be able to be the supplier of choice for not only communication devices, but potentially some services built around our CalAmp Telematics Cloud that may or may not be derived from the investments we've made in AssetOutlook. And obviously, the carriers are going to play a large role, not only in terms of the network buildout, but also in terms of managing the network and the services around the network. And we have, I'd say, a burgeoning opportunity there with carriers and our opportunity to work closely with them as they take on those managed service roles as a partner of choice.

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Gregory Burns, Sidoti & Company, LLC - Analyst [30]

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Okay. Is there any -- I mean, I know it's early, but any way to size maybe how you view the potential annual revenue opportunity? Is it single-digit millions, tens of millions of revenue potential for CalAmp?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [31]

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It's a hard question to answer, because it is so early. If it were in the single-digit millions, clearly, we wouldn't be interested in it. We'd be more interested if it's in the double-digit millions. And I think our long-term expectation would be in that neighborhood, but it's so early.

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Gregory Burns, Sidoti & Company, LLC - Analyst [32]

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Okay. And you mentioned you expected Caterpillar revenue to potentially grow year-over-year in fiscal '18. Could you just -- is there -- could you just give us maybe a little bit more color on where you expect that growth to come from? Is it new services or just continued expansion with the existing programs you're on with them?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [33]

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Potentially, all of the above. In terms of sizing expectations there, I would be disappointed if Cat revenue wasn't up at least 10% versus where we were in FY '17, but I wouldn't be surprised if it was up 20% or more versus FY '17.

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Gregory Burns, Sidoti & Company, LLC - Analyst [34]

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Okay. And lastly, in terms of the SmartDriverClub, I think they've put an announcement out at the end of last year that they were using TrackMate devices and potentially their back end, but I think you might have mentioned that they're moving over to the CalAmp Telematics Cloud now. Is that what -- are they replacing TrackMate now with CalAmp hardware and back-end software?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [35]

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First of all, I wouldn't necessarily believe everything you read, in particular, if it's not sourced directly from the SmartDriverClub. But remember, SmartDriverClub has been pursuing various pilots and has done their appropriate due diligence around the best device for the best opportunity, all things considered. And we believe that we are extraordinarily well positioned to be the fundamental technology partner for the SmartDriverClub and not just because we're an investor.

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Operator [36]

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Your next question comes from the line of Mike Latimore.

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Michael James Latimore, Northland Capital Markets, Research Division - MD and Senior Research Analyst [37]

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Just on the MDT product, I mean, what kind of unit volume or revenue volume do you think would be a good year for fiscal '18 year? Are we talking low single-digit millions? Just bracketing the opportunities here would be kind of interesting.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [38]

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Well, to sort of help frame or at least form 1 bracket, Q4 revenue was solidly over $1 million. In fact, MDT product revenue in Q4 was as high as it had been in the entire prior fiscal year. And we would be disappointed if it wasn't mid-single digits in terms of revenue contribution for FY '18.

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Michael James Latimore, Northland Capital Markets, Research Division - MD and Senior Research Analyst [39]

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Okay, great. And then I guess just on Caterpillar, is the thought there that most of the growth would come from getting on more SKUs? Or is it that -- and heavy equipment market, just the overall market, broadly speaking, might improve this year?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [40]

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Both, but probably more the former than the latter. I think it's just an expansion of the relationship, including shipping more SKUs into more machine opportunities. I mean, Caterpillar's business has also improved. So that's a factor, but it's not the primary factor.

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Michael James Latimore, Northland Capital Markets, Research Division - MD and Senior Research Analyst [41]

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Got it. And then did you say earlier -- I thought you gave some general guidance for what you thought LoJack overall would do this year in terms of growth, like a pro forma organic growth rate. I guess, can you go back to that? Did you say you expect some growth there? Or do you expect it to be flattish?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [42]

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Relatively flat with some secular decline in legacy SVR product sales, offset by telematics device and services.

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Michael James Latimore, Northland Capital Markets, Research Division - MD and Senior Research Analyst [43]

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Got it. And then just last question on AssetOutlook. It sounds like you're expecting that to be a good software systems driver. Can you just elaborate a little more there? What kind of customers do you have? And so far, kind of where are they in their deployment? What’s the pipeline look like?

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [44]

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We just announced the release of AssetOutlook a few months ago, so it's fairly early. But the receptivity or the reception in the equipment rental market, in particular, has been very positive. But we're dealing with some fairly large companies. And the larger the company, the larger the opportunity, the longer it takes to gestate and close. So I would expect that over the course of FY '18, we'll have an opportunity to make some important announcements around customers who adopt AssetOutlook. By the way, one additional point on LoJack, Mike, and if our outlook is more or less accurate that LoJack would be flat for this coming fiscal year, that would be a significant change from the slow decline that LoJack has experienced over the last several years. So we think we're on the right track there in terms of monetizing that investment and then putting it back on a growth track from FY '18 into future years.

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Operator [45]

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At this time, there are no further questions. This concludes the question-and-answer session. I would now like to turn the conference back over to Michael Burdiek, CalAmp's CEO.

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Michael J. Burdiek, CalAmp Corp. - CEO, President and Director [46]

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Well, thank you for joining us today. We’d like to remind everyone that we will kick off a busy month of investor conferences in May when we -- where we will be participating in several conferences across the country. We hope to see many of you at these events. Thank you.