Q4 2020 Earnings Call
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Ladies and gentleman business. The operator today's conference is scheduled to begin momentarily.
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Welcome to columns fourth quarter 2020 financial results conference call.
As a reminder, baseball is being recorded I.
I would know likes to introduce your host for todays conference call B and C. <unk> President of Shelton Group got lumps Investor Relations firm you can you may begin.
Good afternoon, and welcome to tell him fiscal fourth quarter 2020 financial results Conference call I'm Leanne Sievers President of Shelton group talents Investor Relations firm.
With us today or calendar <unk> interim president and CEO, Jeff Gardner and Chief Financial Officer hurt vendor.
Well, we begin I'd like to remind you that this call may contain forward looking statements. While these forward looking statements reflect talent. That's current judgment, they're subject to risks and uncertainties that could cause actual results could differ materially from those implied by these forward looking projections.
These risk factors are discussed in our periodic SEC filings in in the earnings release issued today, which are available on our website. We undertake no obligation to revise or update any forward looking statement.
Reflect future events or circumstances.
I will begin today's call would the review the Companys financial and operational highlight the current will provide additional details about the financial results and outlook followed by question answer session with that it's my pleasure to turn the call ever talent interim President and CEO, Jeff Gartner, Jeff. Please go ahead.
Thank you Leann.
First I want to wish everyone and their families well in these unprecedented time.
I'm very pleased to join you today.
To have taken an operating ROE I'd tell him as interim president and CEO in late March.
After spending the last five years as a member of the board.
I'm incredibly excited to be a part of helping our customers further their digital transformation.
The connected I O T landscape.
Which calamp is uniquely positioned to provide.
My familiarity with the company and its business.
Enabled me to seamlessly step into this position.
And make a strong contribution to its future.
For those.
Have you may not know me.
I'm. Most recently served as president and CEO of brings home security.
Hey leader in the smart home market.
For the past five years and prior to that.
It was CEO at Windstream and CFO at Alltel, both fortune 500 businesses in the wireless and wireline telecommunications industries.
All these businesses were focused on a recurring revenue model.
So I'm very familiar with.
The network communications data capture and software services sectors.
And how to drive.
Significant value from these powerful paradigms for enterprise customers and shareholders alike.
Kelly I'm, having long pedigree.
In distributed wireless data communications and application platforms.
A tremendous potential for delivering increasing profitable growth.
Which presents an exciting opportunity.
Being appointed to this position right in the middle of this cobot 19 pandemic.
Was clearly not part of the original plan.
But I have moved to California and become fully engaged over the past few weeks.
I am doing all I can tell lead this team and our organization in the best possible direction.
Our top priority as an organization is to accelerate our digital transformation.
It could become a full stack software solutions provider.
With a profitable recurring revenue stream.
We've made progress over the past few you were years towards that goal, but clearly there's still more left to do.
I will talk more about my top priorities in a minute.
Let's turn to an overview of our fiscal fourth quarter, and how count lap is responding to and addressing the current environment.
The fact that we have grown Kelly I'm into a business that now generates over 35% of our revenue from South solutions puts us in a much better position to weather this difficult economic period.
In addition, being in a very fragmented market.
We have the global scale and balance sheet to sustain if not improve our position.
We have taken measures across the business to reduce expenses.
To help mitigate the Kobin 19 impact.
At the same time, we're taking great care to protect our associates.
Customers and partners.
I am confident that we can emerge from this crisis as a stronger company.
Consolidated revenue in the fourth quarter rose, 3% year over year to $87.2 million, which was at the high end of our revised guidance that we issued in March.
As indicated in that announcement, our results were impacted by supply chain shortages, primarily related to the Cobi 19 pandemic.
Combined with softness in the demand for our MRM telematics business.
Production capacity was noticeably impaired in February.
Due to the extended closures following the Chinese new year holiday.
Today, our team and partners are doing everything possible to minimize the impact to our customers.
Although these supply imbalances may likely extend for at least the next two quarters.
The overall operational performance has been improving recently as we manage and diversify supplier relationships across China, Malaysia, Taiwan and Mexico.
Highlighting our fourth quarter and year was the combined performance of our software and subscription services business.
Which posted another record quarter with revenue up 83% year over year to $34.8 million were 40% of consolidated revenue.
For the full year fiscal 2000 2020.
Our south revenue increased 63% to $124.9 million.
As we navigate the cobot 19 worldwide crisis, our primary concern has been the health and safety.
Okay, well lamps global employee base.
Especially our Italian subsidiary Lojack Italia, which is headquartered in Milan, an area that has been extremely impacted by the virus.
Our employees in that region, but also throughout the company have effectively transitioned.
Two working remotely by utilizing technologies to support ritual communications across our organization and also with our customers partners and suppliers.
I'm very proud of the teams flexibility in this regard and the manner in which our employees have adapted to this new way of doing business as we mitigate the impact of coping 19 on our business and communities.
Most importantly, we have stayed in close contact with all of our customers to efficiently and productively work with them during this crisis.
But we like many other companies across the globe are being affected in a variety of ways, both from a supply and demand perspective.
With the entirety of the impact.
Largely unknown as did visibility has been greatly reduced.
Specifically for our business, we're seeing I brought impact across our global supply chain that this in turn creating delivery challenges.
Additionally, visibility into customer demand remains uncertain, especially for end markets such as automotive.
Our lojack U.S. and international businesses have been more disrupted because of the reduced access to our dealer customers.
Limiting our ability to perform vehicle installations.
We're also seeing similar challenges with arsenault via business.
Which focuses primarily on the K through 12 school market.
With schools closed across the U.S. new installations have also been impacted.
Even though the rest of our software and subscription services business.
Continues to perform well overall.
We're also proud that our technology has been able to help the community as schools across the country are using sunovia pure comes about application to provide breakfast and lunch to many students who rely on these school meals every day.
Additionally, some of our customers are also using our eye on supply chain applications to track shipments of critical pharmaceuticals, and food supplies to ensure the safe transport of these essential products.
On another positive note, our transportation logistics and fleet management businesses have been less affected during this pandemic as freight continues to move across the country to supply stores central manufacturing facilities and the medical community.
Demand for telematics data from the Calamp telematics cloud.
That drives our transportation and logistics customers applications has seen an unprecedented increase beyond the peak demand during the busy shipping season that typically falls between Thanksgiving and Christmas.
Further our fleet management application.
I on suite is being utilized during this helped pandemic by local government agencies to monitor and manage the efficient utilization of fleet and transportation resources.
To ensure minimal disruption of a central services.
We are fast tracking the rollout of innovative solutions like high on vision.
Crashboxx in ion tags within our flagship fleet management and supply chain products.
In order to provide our customers with significant operational benefits for their vehicles and operators to ensure minimal downtime.
The eye on suite application has been further enhanced to support the ability to seamlessly integrate sensors and other peripherals, such as tire pressure monitoring we scales.
Temperature sensors and spreader controllers.
Thus, allowing our municipal and commercial customers to operate their mobile assets in the most efficient manner possible.
Additionally, we're making significant investments.
And have a renewed focus on delivering an innovative user experience with our flagship fleet management and transportation and logistics application I am suite to an international customer base.
As I look ahead to the coming months as we enter a new fiscal year.
There are a number of key strategic priorities, where I'm, focusing my attention and efforts to improve the performance metrics across the organization.
I've developed 100 day plan that will improve the business, which consists of six key elements.
One increase the organic growth rate of our SaaS business.
In the past year, we acquired attractive south businesses.
And much of our growth last year was related to these acquisitions in the current year, we're turning our focus to organic sales growth from new and existing customers.
Two.
Establish and sustain a strategic level of engagement with our key customers.
In my first month I've met with many of our customers.
Plan to continue to be very engaged with them to understand their needs.
I'm committed to helping our T.S.P. customers build unique vertical solutions.
In high growth markets around the world.
While we continue develop our own vertical applications.
Primarily in market segments, where our T.S.P. partners do not focus.
Three focus valuable R&D resources on her most promising verticals.
Including our flagship ion suite of applications.
We have developed unique scalable applications in the fast growing fleet and supply chain verticals.
For accelerating our supply chain improvements.
We have a geographically diverse set of tier one supply chain partners.
And our using technology to shorten our lead times and improved quality.
Five focus on aggressively transitioning our U.S. lojack fcr business to recurring telematics model.
Offer significant value to our dealer partners and their customers.
The legacy FBR device business has been under pressure and our goal is to focus on our large dealer groups and to build a more value added service with a recurring revenue stream.
And six review opportunities to improve our EBITDA by focusing our efforts on profitable markets.
And drive further synergies with our acquisitions.
To further enhance our customer engagement model and sells delivery, we recently appointed around Diamond as our new Chief revenue Officer.
Mmm LEED gold sales.
Dual application engineering.
Implementation and customer success.
He is primarily responsible for improving his team strategic engagement with our broad and diversified global customers.
With extensive SAS experience from Salesforce dot com and Oracle.
His expertise with large enterprise accounts.
And so solution selling will help accelerate our high value subscription telematics services growth.
End market reach worldwide.
Additionally, we are Jeff Clarke as our new senior Vice President of product management.
Jeff isn't experienced product leader.
Whose mandate is to work closely closely with sales engineering and our customers.
To improve the end to end product experience.
And dry focus of R&D resources on projects with the highest potential return on invested capital.
Jeff led several product teams delivering SAS connected device solutions at Clearwire Toshiba.
Amp mobile and AOL, where he drove the AOL anywhere strategy.
I'm excited to have both of these experienced leaders joined my executive team at this important time in our transformation.
In summary.
I believe we have an exceptional team in place.
With outstanding products and solutions.
And a world class customer base.
Kelly Amp isn't a solid position to build lasting shareholder value.
As we aggressively expand our SaaS businesses and enter new markets with the objective of generating increasing profitability and cash flow in the years ahead.
My top priority.
Is to deliver consistent execution for shareholders.
We're also providing transparent communications regarding our activities.
Progress and achievements.
I remain fully committed to transforming count lamp into a leading SaaS solution providers.
Supported by steady and predictable recurring revenue streams.
With that I'll now turn the call over to Curt for a closer look at our fiscal fourth quarter and full year financial results and forward outlook.
And then we'll open the call to your questions.
Kurt.
Thank you Jeff.
Today My commentary will include reference to non-GAAP financial measures of adjusted basis net income adjusted EBITDA and adjusted EBITDA margin.
A full reconciliation of these non-GAAP measures with the closest corresponding GAAP basis measures is included in the press release announcing our fiscal 2024th quarter and full year earnings that was issued earlier today.
First I would emphasize that we are actively monitoring the impact of coven 19 on our operating results and liquidity.
We have implemented certain cost containment and cash containment measures.
Especially in areas such as personnel travel and other discretionary spending.
We believe that our existing cash.
Future cash flows and available borrowing capacity are sufficient to fund our ongoing operations through these uncertain economic conditions prompted by the pandemic.
As Jeff mentioned.
Fourth quarter consolidated revenue increased 3% year over year to $87.2 million.
For the full year 2020, consolidated revenue was $366.1 million just slight increase over the previous year.
In 2020 international revenue was $99.7 million or approximately 27% of consolidated revenue compared to $95.3 million or 26% of consolidated revenue in 2019.
Software and subscription services revenue increased 83% year over year in the fourth quarter to a record $34.8 million or 40% of consolidated revenue.
And $124.9 million or 34% of consolidated revenue for the full year.
The revenue growth was driven by a recent acquisitions, especially the acquisition of Sonobi solutions, which contributed $11.3 million to our fourth quarter revenue as well as solid performance.
From our Lojack Italian subsidiary.
For the full year, our subscriber count grew by approximately 41% to 1.3 million.
Telematics systems revenue was $52.4 million in the fourth quarter and $241.2 million for the year.
Down over 15%, both sequentially and year over year.
A large portion of the revenue decline for MRM telematics products is due to the supply chain challenges with Kobin 19.
And softer than expected customer demand for our products, coupled with revenue displaced from the acquisitions.
As Jeff mentioned, we continue to pursue new ways of serving our MRM telematics customers with a focus on converting them to a recurring revenue model.
The legacy Lojack U.S. SBR products revenue was $9.8 million in the fourth quarter compared to $10.4 million in the third quarter.
This revenue decline is inline with our expectations as the transition from proprietary radio frequency technology to GPS based telematics solutions continues within the automotive market vertical.
We expect this trend to continue, especially as the work from home mandates.
And travel restrictions remain in place.
Thereby limiting our ability to schedule installations.
Network in OEM products revenue increased to $17.9 million.
From $17.4 million in the third quarter.
With another solid quarter from our largest customer caterpillar.
Cat revenue increased 8% sequentially to $14.7 million in the fourth quarter.
Compared to $13.6 million in the prior quarter.
And representing approximately 17% of our consolidated revenue.
On a full year basis revenue from caterpillar was $50.1 million or approximately 14% of consolidated revenue.
Cat continues to ramp its orders for our next generation L. T E Bay's telematics product family in support of its Threeg to LT upgrade.
Consolidated gross margin was approximately 38% in the fourth quarter.
Which was flat with the prior quarter.
For fiscal 2020.
Consolidated gross margin was approximately 39% compared to approximately 41%.
In the prior year.
The full year gross margin reflects the decline in sales volume for our telematics systems products, coupled with unfavorable product mix inventory obsolescence and manufacturing variances related to the closure of our U.S. manufacturing facility in Oxnard, California.
We have provided additional disclosure in a reconciliation of adjusted EBITDA within the press release announced earlier today to help further quantify the impact of these items.
In our Opex, our GAAP basis, R&D sales and marketing and Gina expenses for fiscal 2020 as percentages of revenue were approximately 8%.
17% and 16% respectively.
For fiscal 2020, non-GAAP, R&D sales and marketing and DNA expenses as percentages of revenue were 7%.
15% and 12% respectively.
In general the increase in Opex as percentage of revenue is due to the lower sales volume for telematics systems products and incremental operating expenses for our recent acquisitions, coupled with the deferred revenue hair cut from the purchase accounting adjustments.
As we manage our spend in this period of economic uncertainty our focus is on personnel costs, including delayed hiring as well as the timing of discretionary spend around teeny.
Special services and marketing to name a few.
The GAAP basis net loss in the fourth quarter was $55.8 million or a loss of $1.65 cents per share.
Compared to net income of $11.3 million or 33 cents per diluted share for the same quarter last year.
For the full year 2020, the GAAP basis, net loss was $79.3 million or a loss of $2.36 per share compared to net income of $18.4 million or 52 cents per diluted share in 2019.
Please note that both the fiscal 2019 fourth quarter and full year financial results included the reversal of a legal accrual of approximately $18 million related to the Omega patent matter.
While the GAAP basis net loss for fiscal 2024th quarter and full year reflects noncash charges for an impairment loss on intangibles and other long lived assets of $19.1 million and an increase in our valuation allowance of $34.6 million recorded again.
Our net deferred tax assets.
In the fourth quarter, we determined that the prolong secular decline in revenue from our legacy Lojack SBR products, coupled with the slower than anticipated market penetration of our telematics solutions in the U.S. automotive dealership channel represented determinant indications of impairment and ultimately the 19.1 million dollar.
Our impairment loss.
These factors are further exacerbated by the unfavorable impact that the Kobin 19 pandemic is having on the automotive end market.
On a non-GAAP basis net income for the fourth quarter was $1.1 million or three cents per diluted share compared to net income of $5 million or 15 cents per diluted share in the third quarter.
For the full year 2020, non-GAAP net income was $15 million or 44 cents per diluted share compared to $39.8 million or $1.13 cents per diluted share in the previous year.
Adjusted EBITDA was $7.8 million in the fourth quarter with an adjusted EBITDA margin of 9% compared to adjusted EBITDA of $10.9 million and an adjusted EBITDA margin of 11% last quarter.
For the full year 2020, adjusted EBITDA was $36.9 million with an adjusted EBITDA margin of 10% compared to $48.2 billion and an adjusted EBITDA margin of 13% in the previous year.
Now I want to address our current liquidity position.
We ended the fourth quarter, we had total cash and cash equivalents of $107 million and we recently extended our 50 million dollar line of credit with JP Morgan through March 2022.
Our aggregate outstanding debt balance is approximately $272 million.
Some of which $27.6 million is due on may 15th of this month.
At present, we plan to repay this current outstanding debt utilizing our cash on hand.
Our total outstanding that also includes $14.4 million of amounts due to factors or assignees, which was assumed in the acquisition of Sunovia.
During fiscal 2020, our net cash provided by operating activities was $11.5 million, which reflects our net loss of $79.3 million adjusted for certain noncash items, such as impairment charges against our intangibles and long lived assets.
As well as depreciation amortization stock based compensation and changes in working capital.
The net cash provided by operating activities also reflects the working capital demands assumed with the post sale integration activities of the three recent acquisition.
Additionally.
We invested internal infrastructure, including the build out of our shared service center in Richardson, Texas and the implementation of a cloud based global ERP system to establish a foundation for growth and cost synergies, especially with the recent acquisition.
Our consolidated net accounts receivable balance was $72.3 million at the end of the fourth quarter, representing an average collection period of 68 days.
Even with the work from home mandates are collection efforts have remained consistent and inline with our historical collection period.
Additionally, the total inventory at the end of the fourth quarter was $36.8 million.
Which decreased $7.3 million sequentially and represent annualized inventory turns of approximately 5.8 times.
As we execute on our supplier transition plan, our focus is on optimizing our inventory levels and working capital, while still meeting customer delivery requirements.
Our cash conversion cycle time was 67 days at the end of the fourth quarter compared to 76 days at the end of the prior quarter.
Additionally, our deferred revenue balance was $62.2 million at quarter end compared to $64 million at the end of the last quarter.
Fiscal 2020, we recorded an income tax provision of approximately $20.5 million, which is attributable to the 34.6 million dollar valuation allowance that we recorded against our net deferred tax assets.
Partially offset by an income tax benefit related to our pretax losses and available income tax credits.
For the same period last year, we recorded an income tax benefit of $1.3 million.
Regarding our cash basis taxes for fiscal 2020, we paid approximately $1.1 million in cash tax for the year, which is principally attributable to the cash taxes paid by Lojack, Mexico, which is a taxpaying entity.
Looking to fiscal 2021, we do not expect any material changes to our cash taxes due to our federal net operating losses and our other available tax credits.
Now regarding guidance with the timing and magnitude and duration of the worldwide Cobot 19 pandemic virtually impossible to fully ascertain at this present time, we have decided not to provide guidance for the fiscal 2021 first quarter.
With the global work from home mandates and the Indeterminant access to the Labor Force in Malaysia, and Mexico, We're seeing a broad impact across our global supply chain that is in turn creating a product delivery and scheduling challenges for device installations.
Additionally, visibility into customer demand remains uncertain, especially for end markets, such as automotive and an even more acute impact to those customers in Italy and other areas of Europe.
Overall, our team is doing an effective job proactively addressing in managing all of these factors in order to help mitigate the impact to our business.
Although we hope to return to providing quarterly guidance as conditions and visibility improve the current global situation prevents us from accurately doing so at this time.
With that I'll turn the call back over to Jeff to provide some final comments before we open the call up for your questions.
Jeff.
Thank you Kurt I'd like to reiterate once again all of you that we're adapting day to day and week to week as we work through this difficult situation, along with our customers and communities.
Using innovative ways to get things done.
Looking back over the past year, we've accomplished some important things.
Not the least of which was expanding our software and subscription services revenue to well over 35% of our total revenue.
And the new products and applications, we've released into the market recently, including ion tags.
I on vision and others represent exciting revenue opportunities.
As we look to emerge from these temporary global conditions.
I can tell you that the caliber team has a healthy perspective.
In a positive mindset to accomplish great things in the quarters and years ahead.
With that I'd like to open the call up for your questions operator.
Thank you at this time in order to ask the questions.
Please press star one on your it sounds missiles.
We have one question.
On the line of.
Mike.
Well well fleet.
Sir Your line is now open.
Oh, great. Thank you very much.
Yes, certainly a.
Challenging time to the take over as CEO role with lots of lots of changes maybe just high level to you discussed here. Your first couple of weeks how the message has been received from the employee base and then just areas that you're most excited about in terms of opportunities to introduce new a recurring revenue so.
Services that you see for calendar.
Yes, Mike as I said in my script. The thanks for the question and it is a challenging time to start but I've got to tell you. The team has been.
Incredibly receptive.
Jumped in and we've we've attack these Paul challenges aggressively, which I'm very pleased about and it's a difficult time, but I think.
The way the team is working the way we're I think people are working harder than they ever have we're we're meeting virtually every day to to really.
Meet with our customers.
Kind of focus on our strategy and put ourselves in the best position to improve the operations here and I really think that we've made some progress in some key areas you've got to step aside from.
Covert 19 for a minute, but the fact that we're now we have a fully diversified set of global tier one suppliers. The fact that our team has really changed the this business with much more of an emphasis on on staff positions us well for the future and I'm really excited about the product suite that were.
Developing I talked a lot about in my comments about ion and fleet and transportation and the opportunity that we have there. So I'm really excited about that we've got two members. The management team that I think are going to really add some great value and accelerate things I think thats one of the challenges here as to kind of.
Do everything we can to move faster to focus on the right products, we added Arab Diamond, who came from Salesforce dot com and Oracle before that a real Saf revenue expert and very good but strategic customer relations and a real solid product person and along with in Jeff Clark RC.
Your vice president of products.
Together, I think they're going to add some real value I can already see the pace of the company improving and just last 30 days and everybody's reacting really well in a difficult situation.
Great. Thanks, and you know with that team in place you do you feel you need to add more areas of talent to transform the company or do you feel like you have the right resources now I know.
Kurt also mentioned some cost savings objectives, just during these uncertain times sure I think I think those where two of our key.
Hires that we needed to make to kind of fill out our team.
And that we're in a great position now and as Curt mentioned, we're going to be very conservative go forward with regard to investing.
In in additional people, we've got some pressure on the business. So we've already been very sensitive to cost. If you look at the business and how even before I arrived here. The team has made great progress on some of the synergies in the supply chain issues real our headcount is down significantly year over.
A year so I.
I think we're in good shape as it relates to the talent that we need to be successful go forward.
Okay and just on on the shorter term I I know, you're not providing guidance. The keep makes sense within a quarter end and lot of the world still locked down but just on the software subscription business, how sticky is that and how should we maybe Bob modeling that business and the shorter term is that.
Flattish or to lose some customers like you talked about on Sonobi. It because blood school buses aren't to shuffling kids back and forth just just kind of puts and takes on that business and the short term will be helpful.
Sure.
I'll, let curt weigh in on this or after me, but.
As I look at that that's some quality that's quality revenue $124 million, 35%.
And you know its recurring and there's a there's a good portion and that's recurring and is unaffected by what's going on out there. There is some portion of it.
As Curt mentioned I believe that for instance, in a Sanofi a business and we have a little bit not all theres a huge recurring portion of the revenue, but some of its affected by our ability to install.
The products and new bus fleets around the country and Weve that's been put on hold we were working.
Everyday with some of our partners around the country and there's.
Just yesterday, a big installation that we had talked about where they just don't have anybody there to kind of received our product or allow our technicians to access their buses at this time, so that will have some impact, but I mean, I think we're in such better shape with that recurring revenue stream that we would've been say a year or two ago.
Yeah, and Mike in terms of a visibility it's tough to give.
Any any guidance, there, especially with the challenges around the installations and but obviously the size business is much more stable and predictable in a normal environment.
As we look at what's happening with Cowen 19, we do see that or think that the did the business will rebound a bit in the second half of this year, we've been watching closely and listening to our advisors. Obviously Q1 in Q2 are gonna be a a challenge so very.
I'd there, but when you get out until our Q3 in Q4, we'd expect there to be some some rebound, albeit we're not in a position to give give guidance. So I think we're pretty excited about the progress we made between fiscal 19 in fiscal 20, I think we've set ourselves up well for future growth.
In the size business and so.
Once we get through this temporary.
Economic situation prompted by Coven 19 will be in great position.
Great. Thanks, and just one last question I'll pass line I, just wanted to clarify Kurt.
As caterpillar an area of still relative strength I think you talked about some visibility there with the LTE upgrades. So that one of the areas and hardware that we should think about is stronger maybe than the other areas of hardware.
Well, Mike as you know cats, an exceptional customer for us and one that we are very closely aligned with we strategic partner with them.
And one of the things that we've been working on has been a.
Threeg to Fourg upgrade and their their transition that they're going through so.
In terms of outlook in the future, we expect them to be a significant contributor to our revenue we see that right now they're still consistent demand coming out of cat nothing they haven't modified their forecast and any great way, we do know that they are a challenge the bit with some.
One of the facilities being temporarily shut down but right now we think that it's still going to be a solid year with cat for us.
Right, well hope everybody stays healthy and thanks for taking my questions.
Thanks, Mike save you and your family.
Thank you.
Thank you next question from the line of George Notter.
Sir Your line is now open.
Hi, guys, thanks very much.
Yes.
I guess just maybe this is a one for you it's sort of an oddball question, but you know you've come in you you're implementing a 100 day planned you're making changes on the personnel.
Are you last year prior roll it brings home security I guess I'm, just curious about the interim tag to the a the title you have right now why is it into room and or maybe you could just help us understand now.
And then yeah I also wanted to ask about me.
Maybe just to answer that and I've got another a follow up okay sure well first I'm fully committed to this opportunity I'm certainly not behaving like an interim CEO and ask any one of the team members here I jumped in and I want to do this and I think.
I have the experience in energy to really add a lot of value here and im showing very well with the team I obviously.
Have submitted a 100 a plan to the board that I think can accelerate our transformation.
Being on the board for five years gave me a head start on now.
And the board has not initiated assert shot.
And I have the support of the board and the management team and so I hope to earn the supported the investors through improved proof announcement performance and transparency.
And having said that of course, it's a it's at the discretion of the board. So that's that's kind of the situation where we're out.
But I feel great about support I'm getting both from the board and from the management team.
Got it okay, great fair enough.
And then a you talked about trying to drive organic growth on the software and subscription side of business could you give assistance for what that looks like right. Now I think you guys mentioned 123 million subs I think that was a similar number exiting the prior quarter and certainly I think there's probably some rounding in here but.
How many subs were you able to add in the quarter and then what does that look like in terms of organic growth.
So George I'll, I'll start that and Jeff can add in here. So I just in terms of full transparency. When we started well fiscal 2020 the growth that we experienced was was heavily influenced by the three acquisitions sunovia being the.
Largest but tracker UK and and Mexico were key contributors when you look at our organic growth and we were actually an aggregate down about 6% to 7%.
But in that.
Variance, we did have some pockets of success and growth specifically on the supply chain integrity solutions has has actually shown growth and we see longer term opportunity. There. Obviously, we've talked a lot about lojack, Italy that up until the Covidien 19.
Pandemic was growing consistently on double digit growth. So what we know that we need to do better is it just further engage strategically with our customers align ourselves help them understand the value proposition that we have to bring in integrating our hardware devices.
With our Cowen and telematics cloud and then I'm market vertical application that's perceived value add so we think we can do that we think that the acquisitions in particular the snow. The acquisition has really given US a road map to accomplishing that that in combination with what we've been able to accomplish with a lower cost.
Really really establishes a a road map for us to be successful on longer term so more to come there, yes, and okay Kurt.
On on the if I could just add something there I think part of this is all about.
Strategic engagement with the customers, we have such a great platform and we are much more than a device company today, we're delivering a great set of.
Products and services so.
The fact that we bought their on diving into the fold as our chief revenue officer, he really understands how to sell south.
At Salesforce to me as a customer of Salesforce and all my prior jobs I know there one of the most aggressive soft sales teams in the in the country and they're very good at it Arab spring all that skill set and just his first 45 days here I see a huge difference and he and I are getting engaged at the strategic.
Level, our development team is.
Is developing great products like the eye on suite, we talked about the eye on pad, which is launched and soon I on vision. So we're rolling out products that really add value to our customers and partnering with our TSP.
So we're going to make that a real focus in in 2021 and as Curt said some of the businesses that we acquired now are going to fall in the organic and they're going to represent a huge opportunity.
Got it and then I guess I'm just I'm inferring from the response that M&A is probably less of the most of the tool here is we look for the balance sheet, probably drive some of that certainly but I because that is at a fair assumption I think we have so much upside focusing on our current business.
We were pretty acquisitive last year right now I think it's time to focus on organic growth and maintaining our balance sheet position.
Okay, great. Thank you very much.
You're welcome thanks.
Thank you.
Next question from the line of Poles.
Pasta.
Sure So let's now open.
Yeah. Thanks for taking my questions. So you are you moving too so its way through the quarter and I'm just suspending guidance for this quarter. So I'm. Just wondering you know what could lose the boot third month quarter in terms of the lyrics soup business.
Hi, Paul Yes, so when we look at this is the the telematics systems business and in particular, our MRM telematics and for but to a lesser extent the networking OEM products shipments they tend to be fairly backend loaded we in moving too.
More of an outsourced model with our tier one suppliers located in places like Malaysia, Mexico, as well as Taiwan, and China, There's still limited visibility there and so given the fact that a fair amount of our hardware shipments whether it be to international debt.
Destinations or domestically here in the U.S. are heavily dependent on the suppliers and access to two labor, especially in countries like Malaysia, and Mexico is still difficult to to get great visibility on we thought that it was appropriate to to hold on providing guidance. So it's moved to do supply them is demand then.
I think that's a fair statement, yes, I did the first quarter for sure. Yes. I mean, we we are as you know Paul we exited a fourth quarter with an abnormally high amount of of backlog.
And then that in combination with.
The consistent demand, particularly in the month of March and April.
The customer demand was was not a big as big a challenge, but we do think that on the supply side, we still have some work to do and it just tough to get great visibility there and also known as <unk>.
Sorry.
I was just going to say we are working with these suppliers in all these locations on a weekly basis, if not daily to kind of monitor how we're doing in the month. So as Curt said, it's important the last 30 days is always important and then just wanted to let you know that we're very focused on it and they are doing their very best.
Hi, guys are.
Doing their best to keep as much of their staff working as as as possible and they're making progress.
Every week.
Sort of thing I'm in the accounts receivables I mean, I know, it's not particularly at Liberty to but nonetheless, you must be scrutinizing the composition from Oh credit perspective <unk>. In addition switch you must be a little concerned about some of your customers from a subscription but so can you just talked about dual credit.
Risk or perceived or real real.
Sure sure so.
You are correct I mean that is an area that we're very focused on and in fact, where we have a team meetings on a weekly basis to scrub through any of the past two accounts and to make sure that we have very diligent collection follow up I procedures in place, but as you know I'm <unk>, we have a very diversified mix of customers what we.
I've seen so far is a lot of the larger ones hit a global enterprises companies like a TNT cat rising have remained very consistent and their their payment cycle, which we certainly appreciate that being said some of the smaller customers have reached out and indicated that they need a potential deferred payment programs. So were work.
And on that on an individual case by case basis, but generally we haven't seen that broadly speaking across our entire portfolio of receivable. So we've been pretty pleased with the way we've been managing our cash balance and the fact that our customers have been still very responsive and we're hopeful that this will continue over the next few months as we start to come.
I'm out of this covert 19 situation.
Okay. My last question reduce focused prospectively the money quarter work, so you'd go some supply uncertainty.
As we roll into the second fiscal second quarter, though if this is a real recession the scope of titles to it than you would expect to see a demand issue emerging.
Are you seeing anything at the moment in terms of churn.
If you assess business and are you seeing any or can you explain to us so its recurring but invariably there's some way in which customers all the roll off pool, they reduce certain types of auctions or there's some variable components or contracts will move down. So I can you just talk us through any.
Those risks.
Yeah, I'll take the first part and we haven't seen a lot of churn.
Although we are concerned about the really first and second quarter about as we talked about in this on our in our prepared remarks, our ability to access some of our customers. Both if you look at Italy, where which is a big software as a service.
Part of our business.
We've had you know is pretty pretty much shutdown. So things like that are affecting us on the demand side and Curt maybe you can talk to.
The last part of that question on the contracts Yeah, I mean, most of the contracts a range anywhere from say 24 months to its highest 60 months as you know the pointed out earlier that snowmobile was a big contributor of our revenue. This year most of their contracts are at 60, 60 month and their top assigned to the appropriation process.
Then various municipalities in K through 12 school districts. So we haven't seen any clear indication that there's been a dramatic increase in churn.
Certainly, we're trying to keep tabs or keep in touch with our customers. So whether it's our salesforce that is focused on the government fleets or the commercial transportation fleets or frankly, even in Italy, and some of the lojack subscription services, we've been really pressuring our sales team to be in constant tighter engagement.
With our customers to give us feedback so at this point in time, Oh, we haven't seen indication that there would be a dramatic increase in churn.
Thank you very much.
Thank you.
Thank you next question from doing a JV, let Mitch.
So long as snow Olson.
Hello, Jerry Revich. Your line is now open.
Please UN mute your line if youre a muted.
Again, so Jerry Revich. Your line is now open.
Hey, Thanks, operator, we can move onto the next call and we'll circle back with Jerry and later time.
Thank you and next question from the line of Southern Florida Your lines No open Sir.
Hi, guys abuse, Poland on for Mike Latimore, I have two questions, which lojack sudden loose geographies or doing best and was between Mexico, Italy and the UK.
So let me just rephrase the question, so which geographic region for the Lojack subscription services is doing is doing fast or worse. So let me frame. The the response this way.
Well I'll up until the impact of Cobot 19, the Lojack Italia subsidiaries that particular entity and that geographic region was doing exceptionally well for us over the last few years. It had been growing at the high teens, even low twentys.
And it's a oh virtually full subscription model. So we've been extremely pleased with what Italian the management team there have been able to do and our vision really is to be able to take that model and emulated here in the U.S.. So that's really been a beachhead and one that we've been extremely pleased with as it relates to both Mexico and the UK.
Hi, I you know those were recent acquisitions that we closed at the beginning of this fiscal year and those acquisitions had been performing to expectations. Both of those markets have been impacted by Kobin 19, I will say that the UK market was impacted ahead of Mexico.
Mexico still I think it's the bit of a delayed impact there, but I said up until the covert 19, a matter there's business, where we're meeting our expectations. So.
Thank you.
Hi.
I love it.
I think we lost that call.
At this time, we don't have any questions from the Q. Please continue.
Okay. No. This is Joe Thank you for joining us on the call today and for your continued interest in California.
Next Tuesday curtain I will be participating in the open heimer Oppenheimer emerging growth conference. It's a virtual events of course so please.
Let Oppenheimer know if you're interested in joining we'd be glad to have a meeting with anyone on the call look forward to working with you in the future and keeping you updated on cap in the June timeframe. Thank you.
That concludes today's conference call. Thank you, everyone sort of participating even though it's today.
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