Q4 2021 CalAmp Corp Earnings Call
Welcome to Kathy on the fourth quarter 2021 financial results Conference call.
As a reminder, this call is being recorded I would now like to introduce your host for today's conference call. It's all accomplished managing director of Shelton Group Investor.
Investor Relations from Jos you May begin.
Good afternoon, and welcome to calendar fiscal fourth quarter 2021 financial results Conference call I'm, Joel the Cromwell <unk> managing director of Shelton Group.
<unk> Investor relations firm with us today on a calendar <unk>, President and Chief Executive Officer, Jeff Gardner, Chief Financial Officer, Kirk Denver before we begin I'd like to remind you that this call may contain forward looking statements. While these forward looking statements reflect talents best current judgment they are subject to risks and uncertainties that could cause actual.
Results to differ materially from those implied by these forward looking projections. These risk factors are discussed on our periodic SEC filings.
The earnings release issued today, which are available on our website, we undertake no obligation to revise or update any forward looking statements to reflect future events or circumstances.
Jeff will begin today's call with a review of the company's financial and operational highlights and then Kurt will provide additional details about our financial results and our outlook followed by a question and answer session with that it's my great pleasure to turn the call over to <unk>, President and CEO, Jeff Gardner Jeff. Please go ahead.
Thank you Joe welcome.
Welcome everyone and thank you for joining us today.
We finished fiscal 2021 on solid footing with revenue from continuing operations in the fourth quarter, increasing 6% year over year, primarily due to robust customer demand in support of the global <unk> to <unk> upgrade cycle, which continues to accelerate and was the key.
<unk> results as well as our largest customer caterpillar setting another quarterly record.
We saw some of our smaller T S p's resuming more normal ordering patterns, both because of this industry upgrade and also due to the gradually improving global conditions as more businesses and regions. Reopen. We also continued to see sustained demand in our SaaS solutions in the quarter, which exceeded 42%.
Net of total revenue from continuing operations all in all it was a solid finish to our fiscal year.
As we look back over this past fiscal year.
I wanted to take some time to review the progress that <unk> made since I <expletive>umed the CEO role in March of 2020.
Over that time it has of course been very challenging for companies across the globe due to the COVID-19 pandemic, but I'm very pleased with the accomplishments we have been able to achieve against this backdrop and the progress we have made as a company as.
As you May recall, one of my key strategic priorities was to improve the performance metrics across the organization.
Clothing improvements to our EBITDA by focusing on our efforts on the most profitable markets.
Two key actions, we took to help drive. These efforts were first the decision to transition out of the automotive vehicle finance business as part of our efforts to improve the quality of our overall SaaS revenue, while increasing margins and profitability within the business.
And more recently, we announced the sale of the Lojack U S and Canada business disappearing on what.
As a very positive development, both for our customers and the company following our earlier decision to wind down this business.
The decision aligns with the commitment we made to customers in December as well as to the public safety groups to seamlessly transition dealers to a leading provider of aftermarket GPS and sensor based telematics.
In addition to being an exceptional financial outcome for Cal App. It further supports our aggressive efforts to expand our strategic staffs initiatives worldwide.
Another one of my top focus areas over the past year has been establishing and sustaining a strategic level of engagement with our key customers.
I believe that we've never been closer to our customers than we are today in particular, we've been helping customers navigate their three G to for GE transition cycles with a powerful technology migration plan.
The growth we have achieved with caterpillar over the past year, which includes an extension of our relationship in August is an example of the depth of the relationships, we have enhanced with our key customers.
Moreover, when looking at our other large enterprise accounts.
Gauged in the LTE migration revenue from these important customers has grown over the past year and is evidence that the technology transition is building momentum.
Aaron Diamond, our Chief revenue Officer, who joined US about a year ago has really been instrumental to sustaining these relationships and building new ones with his team.
We've also implemented new recurring revenue programs with our large global freight transport and package delivery customer.
And we now have 135000 trailers under contract.
Recently, we have begun to retrofit 35000 of them with new devices and we're working on various projects after that offering exciting potential in the months ahead.
These examples reflect the progress we are making with customers around the world, who utilize our telematic solutions both to improve their operations and fulfill their business objectives as another one of my top priorities, we've been making great progress on key product development initiatives by focusing our valuable R&D resources.
On the most promising verticals, our senior VP of product development, Jeff Clarke Who's also been here for about a year has been a key factor in leading these efforts with his team working in concert with our SVP of engineering and non from.
Recently, our team has completed the development and release of our new data enriched intuitive user interface on our eye on family of Telematic solutions.
This easy to use software interface provides actionable insights to fleet operators. So they can manage their entire mobile workforces from a single screen dashboard.
The new platform provides real time data alerts and utilization reports to customers on their fleet operational dynamics, thus, allowing them to make better decisions, leading to improved performance workflow efficiency and lower cost.
It's an innovative AI enabled resource that fleet managers will really appreciate as they look to streamline operations to improve customer satisfaction.
We put a lot of time and effort into this development after spending a great deal of time talking to customers to understand their key pain points the.
As a result of this work is reflected in this best in cl<expletive> application platform that provides a real time snapshot of all fleet activities across geographies and a unique level of control for our customers.
I'm very pleased with our team's innovation here is this new platform represents the unified and consistent interactive interface for all of our software solutions going forward.
We'll be providing more updates in the coming months with additional features and functionalities as we rollout I on to our customers across our suite of solutions.
Going forward, we're committed to the regular and consistent enhancements to our innovative software stack to demonstrate to customers that the softer they werent using today will continue to deliver more value in the years ahead.
I also wanted to mention that we unveiled our new S. C 13 O to single use smart tracking device. This week that can monitor temperatures as low as minus 20 degrees Celsius.
This smart device provides granular visibility for the safe and efficient transport of COVID-19, vaccines and other pharmaceuticals and perishables.
As well as various electronics and other high value cargo with first shipments anticipated in the first half of 2021.
In summary, the count on team has made great progress over the past year.
Positioning the company for increasing profitable growth by improving the quality of our revenue.
And also driving a higher percentage from our SaaS solutions.
As a result of our execution on strategic initiatives. Our SaaS revenue now represents more than 42% of total revenue with the objective to continue increasing its contribution to overall results.
As we enter our new fiscal year.
Our backlog is at near record levels supported by strong customer demand across our business and target geographies.
We're working closely with our suppliers to manage the supply shortages for certain components that are also impacting companies across the globe.
This cooperation has certainly helped us keep our lead times below what others in the industry are quoting, but they're impacting our ability to fully ship against the increasing demand.
We also continue to see lingering effects from the COVID-19 pandemic that are still affecting installation schedules, mainly in Italy, and the U K.
However, I want to be clear that we remain very optimistic about the prospects ahead as we seek to drive further improvements in our operating performance and expand our SaaS solutions in the coming year and beyond.
With that I will now turn the call over to Kurt for a closer look at our fiscal fourth quarter and full year financial results.
And then we will open the call to your questions Kurt Thank.
Thank you Jeff.
My commentary will include reference to the non-GAAP financial measures of adjusted basis net income adjusted EBITDA and adjusted EBITDA margin of.
On a full reconciliation of these non-GAAP measures with the closest corresponding GAAP basis measures is included in the press release announcing our fiscal 2021 fourth quarter and full year earnings.
That was issued this afternoon.
Also as indicated in our press release today, the financial results of our Lojack North America business that was sold to spirit on in March are being accounted for as discontinued operations.
Unless indicated otherwise these financial results reflect our continuing operations and we have revised prior periods for historical comparison purposes.
Quarterly revenue together with revenue from discontinued operations increased sequentially to $89 $5 million, including $7 $6 million from Lojack North America.
Revenue from continuing operations increased six 3% year over year to $81 $9 million.
For the full year 2021 total revenue from continuing operations declined four 1% to $308 $6 million from $321 $8 million due mainly to the impact from the global pandemic.
International revenues totaled $27 5 million or 34% for the quarter and $107 $9 million or 35% for the year.
For the full year 2021 revenue by region was $206 $2 million for the United States and Canada combined.
$58 $5 million from EMEA.
$27 $1 million from Latam.
And $16 $8 million from the Asia Pacific region.
The revenue breakdown by vertical market for the year included $142 million from transportation and logistics.
$69 $3 million from industrial heavy equipment.
$57 $1 million from connected car.
And $42 million from government municipalities.
Software and subscription services revenue was up slightly from the prior quarter at $34 7 million and represented approximately 42% of consolidated revenue from continuing operations.
For the full year software and subscription services revenue rose five 2% to $129 $9 million from $123 $5 million and represented 42 per cent of the total.
In today's earnings announcement, we provided additional performance metrics related to our software and subscription services business.
This was done in an effort to help investors track the progress in our transformation to a global SaaS solutions provider.
In preparing these metrics, we excluded our automotive vehicle finance business, which we decided to exit earlier in our fiscal year.
The first metric annual recurring revenue or a R. R represents revenue from recurring application subscriptions, which excludes revenue from the hardware device and a bundled arrangement with the customer that is reported at a point in time or upon installation.
A R. R was up 15, 1% in fiscal 2021 to $87 4 million from $75 $9 million in the prior year.
Another key metric remaining performance obligations or RVO is all contracted revenue, including deferred revenue and contracted but unbilled revenue related to bundled contracts with customers.
R. P O rose 18, 6% to $136 $5 million at the end of 2021 compared to $115 1 million in the prior year.
And finally, our total active subscribers grew 8% year over year to 954000 from 884000 at the end of fiscal 2020.
Telematics products revenue in the fourth quarter was up six 3% sequentially and.
And 10, 9% year over year to $47 $3 million, primarily due to continued strong demand from the three G to <unk> upgrade cycle, especially at our larger customers.
For the full year telematics products revenue declined nine 9% to $178 7 million from $198 $3 million due to the impact of the pandemic primarily in North America.
Within the telematics products reporting segment network and OEM products revenue increased 22, 4% sequentially.
And 38% year over year to $23 $4 million.
Primarily due to record revenue from our largest customer caterpillar, which increased 12, 9% to $18 $6 million from $16 $4 million in the prior quarter.
For the full year cash revenue increased 19% to $59 $6 million from $51 million in the prior year.
We continue to expect solid demand from cat for the remainder of the calendar year, along with many of our other telematics customers also engaged and is pivotal transition to force G.
Consolidated gross margin in the fourth quarter increased 240 basis points to 42, 2% compared to 39, 8% last quarter and gross margin for the full year increased 70 basis points to 39, 7% from 39%.
<unk> in 2020.
The increase in gross margin is due to improvement in revenue mix with our software and subscription services business along with the benefit from certain cost reduction initiatives. While we expect these initiatives to provide continued benefit to our gross margin over time. The recent supply shortages have resulted in cost increases by suppliers, which we are working to p<expletive>.
Through to our customers as we were able to.
We anticipate the short term impact to margins could be between 100 to 200 basis points until such time that the supply shortages normalize or our price increases are able to offset some of the additional costs that we're seeing from suppliers.
Adjusted EBITDA in the fourth quarter was $9 $9 million with an adjusted EBITDA margin of 12% compared to adjusted EBITDA of $8 $2 million.
And on an adjusted EBITDA margin of 10% in the prior quarter.
The increase in adjusted EBITDA is primarily due to the increase in revenue coupled with the improvement in gross margin as previously mentioned for.
For the full year 2021, adjusted EBITDA declined to $32 1 million or 10% of total revenue from $38 $9 million or 12% of total revenue in 2020.
The annual decline is due to reduced revenue and the resolution of a product performance matter that we addressed earlier in the year on.
Also we generated $21 $6 million and free cash flow from continuing operations for the year compared to a net free cash outflow of $14 5 million in the prior year.
The improvement in free cash flow of approximately $36 million is primarily due to working capital improvements and reduced capital expenditures compared to fiscal year 2020.
Our non-GAAP operating expense as a percentage of revenue was approximately 35% for the fourth quarter and the full year 2021.
With the sale of our Lojack North America operations, the various cost reduction measures related to this business had been accelerated and incorporated within the transition service agreement with spirit on we.
We believe the sale transaction, coupled with ongoing internal initiatives will help to further align our cost structure to a SaaS based business model that should result in certain operating efficiencies leading.
Leading to solid improvement in our consolidated operating margin over time.
Now turning to our current liquidity position.
We ended the fourth quarter, we had total cash and cash equivalents of approximately $94 $6 million as compared to $91 $7 million last quarter.
Subsequent to quarter end, we received $6 8 million from spirit on including estimated adjustments for working capital.
Related to the sale of the Lojack North America operations.
Our aggregate outstanding debt is approximately $238 million.
<unk> the $230 million of the 2% convertible senior notes due August 2025.
<unk> expects to continue to maintain a strong financial position and balance sheet with significant cash for working capital going forward.
In reference to our outlook for the first quarter of 2022, we are maintaining our policy of not providing quarterly guidance as visibility into product shipments remains uncertain due to both global supply shortages and the lingering effects from the COVID-19 pandemic.
With that I'll turn the call back over to Jeff to provide some final comments before we open the call up for questions.
Thank you Kurt I'm pleased with the progress we've made but look forward to raising the bar in the new year as our <unk> team continues to execute on our strategic initiatives across the organization.
Our efforts are squarely set on driving our SaaS business to a level will be the driving force of our growth profitability and cash generating potential with that now I'd like to open the call up to questions operator.
Thank you ask a question you will need to press star one on your telephone.
Sorry, your question press, the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from the line of Mike Walkley from Canaccord. Your line is open.
Great. Thanks for taking my questions and congrats on the strong results and margins.
First question from me is just on the other.
Three <unk> to four <unk> upgrade cycle.
Any way you can help us think maybe about longer term organic growth post the cycle and particularly for caterpillar I know you've extended your agreement and have a strong relationship there, but any way to segregate what to 40 upgrade cycle versus maybe a sustainable annual amount of revenue. You think you can generate from your long term caterpillar relationship.
Oh.
Yeah. Thanks, Mike This is Jeff Thanks for the question.
We there's no doubt that the <unk> to <unk> upgrade cycle has really helped on the caterpillar side, but at the same time, we're seeing increasing demand as their business do you think about their business early on in the pandemic their outlook was.
<unk> and they're really delivering more product today. So I think the mix will change over time, but our our we're pretty bullish on caterpillar over the next 12 months as we look at all that we have to do with them and I think it's a great opportunity for us.
And Mike just on the <unk> I mean, it's broader than cat, obviously, and we've seen the demand come in more recently from a lot of our small to medium sized customers that are rebounding. After the pandemic, probably about close to 95% 97% of all of our orders right now.
On our for the LTE product, which is evidence that we're building momentum coming into the three D <unk> sunset.
So I just wanted to highlight that and additionally, we also are seeing increased demand internationally and so we tried to highlight some of the markets that we're selling into for just that purpose because as we look at it although the current sunset on opportunity resides primarily in United States most of our customers outside of the U.
<unk> are just starting that transition as well, which we think is another wave of demand.
Okay.
That's helpful. It sounds like there's still quite a tail to it though.
Jeff maybe just switching gears for my follow up question here, just you know lots of progress on your and your team transforming the business model too.
<unk> recurring revenue subscription services.
With the eye on family of Telematics solutions.
You're adding more and more capabilities, such as our low temperature monitoring et cetera.
Can you share with us kind of what areas you're most excited about in terms of new growth opportunities for the company and with these low temperature solutions as cold chain, an area that you really aggressive going after and with like Orbcomm being acquired does that maybe open up the market and create even a new opportunity for for your.
Thanks.
Yeah. Thanks.
Well, we're really pleased with the way.
With what we've done this year in terms of.
I think Mike what you talked about focusing the business on those verticals that are most promising.
As we look forward I think with the rollout of our new.
Ion suite product with the new user interface puts it in a very good position to compete.
In a number of areas and the team is making good progress so in terms of areas.
Areas I'm most excited about I mean, I think we're going to continue to do very well in the government and municipal sector. Our connected car business internationally is strong.
But overall when you look at transportation and logistics and our announcement around the cold chain today, we think there's a there's a ton of opportunity that's a very big market today, and there's very few companies that bring the full package to market the device the platform and the end solution like Cal App can do.
And so that's really where our team is focused.
We're investing there not only on the R&D side, but also on the sales and product side. So.
And we've already proven ourselves in those spaces, you look at our customer list across the board and we can demonstrate very clearly that we can serve.
A very large complex markets.
That's what I would say about that.
Okay.
Follow up on that and I'll p<expletive> the line just just with sharing a IRR on our P O.
Those new metrics, but.
Some of these opportunities on these new areas or it could take quite a long time to close I know, you're not providing guidance, but should we expect steady growth in subscription services revenue going forward are there any seasonality or any any trends. Currently you should think about in the short term that might slow that growth trajectory.
Well.
Thanks, Mike for highlighting the the SaaS metrics.
Yeah, we are we feel pretty confident right now that those.
Those metrics are good indicators, showing how we as an enterprise are transforming to a global SaaS enterprise. So we felt like this was the right time to highlight those metrics in terms of the growth coming in this upcoming fiscal year and beyond.
A couple of things are in play obviously, we are coming out of the lows of the pandemic and that has impacted principally our telematics services or telematics device business.
So that's a big driver of growth and additionally.
Obviously the move.
Moving to four G.
As we've talked about in the past one other key things to our strategy is as we move from <unk> to <unk> is working with our customer base to transition them out of the one time transaction and onetime sales transaction of hardware into those subscription arrangements and the first step in that overall strategy has been trying to deploy enterprise agreements and work closely.
With their customers to bring a package solution or bundle of services to play we believe that we can do that effectively. So I think it's a combination of factors that are in play here, which should allow us to ride that momentum of growth into fiscal 'twenty two.
Great. Thank you.
Your next question comes from the line of George Notter from Jefferies. Your line is open.
Hi, guys. Thank you very much.
I guess.
<unk>.
Also add my congrats on the results and thank you for providing the additional metrics on air are an RP O I.
I guess I wanted to.
Kind of.
Ask you more about the lack of guidance.
You guys cited I think lack of visibility and then also obviously component issues.
But at the same time.
He said record backlog, a near record backlog and obviously, we've got a higher mix of recurring and the business now so I guess I'm.
Hoping you could kind of square those statements and.
Kind of give us some more color on why no ongoing guidance. Thanks.
Yeah, George it's really about it's more driven by this global supply chain issue related to semiconductor shortages across the world really when you look at it you've seen companies like <unk>.
Automotive companies shutting down.
<unk>.
We have we have problems with some of our components and so that's really the good news is we've got a great backlog and net where our customers are really.
Interested in our products and that will be good but that's really the only reason that we're hesitating on guidance going forward and personally I will take a look at that we're not saying that's going to be the case for the whole year, but we will look at that each quarter as we kind of play through right now there's a pretty.
I would say the uncertainty is just.
At a level, where we just feel more comfortable not providing guidance at the time, but as I said, well, we'll take a look at it going forward.
Got it and then just as a follow up.
So the only thing I'll add is just George since you highlighted the visibility and predictability into our SaaS business and although that's true I mean, the one challenge we have like any telematics service provider is.
In order to activate our SaaS services, we have to have the device and we have to.
We have to transact on that installation so that in combination with the supply chain, obviously creates some uncertainty, but as Jeff pointed out I think we're going to evaluate it quarter to quarter end.
I don't think it's very far off it will be back to providing guidance.
Got it and then just as a quick follow up could you talk about the impact you may have had in the quarter.
In terms of Covid impact on installations is there are some amount of revenue that you could point to that.
Because of installation issues or even component shortages anything you could give us just metric wise that could help us understand how much revenue is getting held up and then any impact on gross margin.
Thanks.
Sure. So I'll just highlight a couple of things I, it's very hard to give specifics, but what I would say to you and we've talked about this a bit in the past is as you look at our MRM business that business has historically been on a quarterly run rate that's been in the low $30 $35 million range and we're still.
Working through some other challenges around the pandemic in that space, but I think it's a combination of not only the impact of the pandemic, but also some of the supply chain challenges. So that's why we felt it was really important to highlight on.
Our backlog and if you look at the current backlog as we presented in our 10-K from a hardware perspective, we're right now at about 65% to $66 million in the quarter, which I think from a historical perspective is that it is a.
Near if not on a record level.
Great. Thank you.
Youre welcome.
Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open.
Yes, hi, good afternoon.
Hey, Jerry how are you.
Doing well thank you.
Congratulations on a on the strong progress here.
I'm wondering if we could talk about.
The cadence.
Subscriber growth.
Folks are seeing thus far.
In the quarter.
Can you just talk about whether the year over year growth run rate. Excluding vehicle financing has continued in the quarter and any comments on on cadence there would be helpful.
Well right so.
Jerry in terms of the new metrics that you see that we've presented obviously the one key to that will be increased subscribers and we.
We went on a highlight that and we'll continue to highlight that as we give on quarterly information financial information year over year, you're correct. We grew within our core businesses about 8% was our overall subs growth.
At 8% has come out of both the what we call tracking and monitoring services that we provide primarily to our fleet transportation logistics as well as within connected car.
Services, which we referenced internally as a recovery services. So it's broad based we think that trend and subscriber growth.
You can expect to be continue so we're we're very optimistic about that additionally, what we also saw was.
Close to an equivalent increase in our overall monthly <unk> rate.
And I do want to highlight that when we gave information and those new metrics. We were focused on just the application subscription services. So that doesn't incorporate as you know Jerry that theres, a hardware elements to all of our arrangements but.
We think that that subscriber growth in ARPA growth can expect that to continue into fiscal 2022, but we're at this point not going to provide any specific guidance.
Okay Gary.
With the whole team is focused on is.
I mean, especially if we've simplified the business with the transactions that we did this year is three key metrics subscriber growth our pool from continuing to deliver value added services in our stack of software and then managing attrition. So we hang on to our customers and so I feel like when you look at us overall.
Store he is going to be a lot simpler go forward and really in businesses that we feel are growing we've got great sales team great product people and R&D people on each of these verticals. So yeah, we're optimistic about growth in the future and driving improvements in those three metrics.
And in terms of the cadence of revenue per subscriber growth.
You definitely interest that excludes vehicle financing could you help us understand.
The cadence of that ARPA growth.
Over the course of the quarter and into the new fiscal year as well.
Yes, it does.
I think our intention is to continue to provide similar metrics each quarter. So.
In terms of our cadence, we would expect to bring some more guidance or information each quarter.
Yeah, sorry, Kurt.
I bet.
What's the year over year and sequential performance on net ARPA metric excluding vehicle financing in other words have you.
You folks built momentum.
The new year on that metric.
So Jeremy I.
I think overall ARPA growth year over year was about 7%.
And that ARPA growth.
We would expect to continue into fiscal 2022 as it relates to sequential growth I don't have that number on the top of my head.
Okay.
I appreciate the color and then in terms of.
Telematics systems.
Can you just talk about what the first quarter is looking like based on shipments made obviously demand is very strong.
On one hand, but there are supply chain shortages.
But we all know about on the other hand, so are we at a point, where we can see year over year shipment growth in the quarter or can you just calibrate us on.
The magnitude of the supply chain shortages.
Okay.
Well all I can say right now is that our backlog right now within the telematics device space is about 65% to $66 million, which is a near record high for us in terms of our ability to ship for the first quarter, where we're not in a position to give give guidance given the supply chain challenges.
We're working through.
And our team is doing everything possible you might imagine as it relates to that too.
Deliver for our customers, but it's been a really challenging environment, we covered most of that in the fourth quarter.
And so I think that's just going to be a battle, we're going to fight probably for the next couple of quarters.
Okay.
And the great Great News Jerry is the backlog and customers are what they want our products they understand that the <unk> transitions taking effect.
And so that business is there for us.
Okay got it.
Lastly, you mentioned the margin headwind from the supply chain issues.
Was that a comment about the fourth quarter or is that the current magnitude of headwind, but we can expect until the supply chain shortages.
Or relief.
Well, we were extremely pleased with the margin performance in the fourth quarter.
We were over 42% for the fourth quarter and as we look to fiscal 2022. There are couple of areas that do give us pause net as I mentioned could result in some downward pressure on the 100 to 200 basis points, obviously, the debt component shortage and a number of the spa.
Popeye's it we're being forced to execute on in order to try to meet customer demand. Those two factors, we expect to impact us over the next two quarters. We are seeing some signs that in the second half of our upcoming fiscal year that may subside, but for right now we felt like it was important given the strength.
Q4 to highlight that there is a bit of risk out there and we think that risk will reside for probably the first half of fiscal 'twenty two.
Okay I appreciate the discussion thank you.
Sure. Thanks, Joe.
Again, if you would like to ask a question. Please press star and then one on your telephone. Your next question comes from the line of Scott True from Roth Capital. Your line is open hey, good afternoon. Thanks for taking my questions nice quarter guys.
Hey, just a couple of quick clarifications.
Given given the reporting of continuing operations. So the Opex now is fully reflective of the.
The self lojack to spray on the Opex that goes along with it is that correct. So going into the first quarter. Here is this a normalized opex number that we should be working off of or are there any one time events in either direction that we should be modifying that going forward.
Well.
He's got so yes, so because of the fact that.
We've been able to cl<expletive>ify the lojack business in discontinued operations and because of the fact that we.
Have a transition service agreement with spirit on we have been able to reduce our on X to a level, which is in what I would characterize as a more normalized level going forward on that.
That being said on there.
There are some what I would characterize as indirect costs that we're still going to have to carry for a little bit longer until the relationship with spear on and.
At the conclusion of our transition services agreement the way we had executed that agreement was that all of the direct cost of that business would be carried by them and then additionally, the indirect cost a portion or I should say a reasonable portion of those costs, we can't be carried by them, but we will continue to have to absorb some of those costs.
I would expect that over the next fiscal.
<unk> fiscal year and into fiscal 'twenty, three we're going to continue to work on optimizing our opex. Our focus is really on reducing DNA and moving that cost really up to where it matters, which is sales and marketing R&D and so we've embarked on a number of them.
To make that happen and I'm pretty optimistic on the progress we've made so far but theres still a little bit of work to do there.
Got you very helpful. Just to clarify, though Curt so any of those indirect costs over the next couple of quarters are you gonna be netting them out in terms of.
One time charges or otherwise or we go to just expect to see that rolled into normalized opex.
Yeah, So I think.
It would most likely be normalized into our typical opex for a period of time when were being held to servicing the transition service agreement with spirit on got you and if I could caterpillar front record quarter for you guys sounds like the book of business from the backlog is very strong there I'm not sure. If you commented specifically.
On them in terms of the outlook for the year, but I'm wondering.
Without without component constraints, what your visibility is to caterpillar. This year is it kind of in the ballpark of flattish or is it something that actually grows given the three G to Ford you upgrade cycle and then extending the three Judah for G upgrade cycle to the rest of the MRM business.
I'm wondering what you saw on the quarter as it relates to the non network OEM business was there a big component of that was going through the upgrade cycle as well because it still looks like it's at relatively depressed levels. So there's room for growth or any color you can provide on that front would be helpful.
Yeah, Scott on on Caterpillar I would just say that we're bullish on as we look at the year, we're continuing to work very closely with them.
Improving our quality with them.
So I talked about in my script debt.
They're one of the customers that we really are.
I think there's a great example of we've gotten a lot closer to our customers. So the outlook is positive there I don't want to give any specific direction in terms of but you can see the trend is very good and.
Our relationships in a very good spot. So we're going to continue to focus on them going forward for the balance of the business I think our backlog really reflects the fact that some of these smaller tsp's are really now starting to understand that they need to move quickly more quickly with respect to the <unk>.
<unk> to <unk> transition, so I feel like that.
That it's more broad based now not because we've seen it with our large customers throughout the year, but now you're seeing it show up in our backlog I think that's one of the reasons, we're Kurt talked about of $66 million backlog, which is a record for us got you, but just to clarify that's backlog as opposed to fourth quarter revenue, so you're starting to see it but we didn't actually.
See it in the numbers in the just reported quarter.
That's fair Okay.
Lastly, if I could starting to broaden the mix the mix of the business and on the SaaS side in terms of the iron product portfolio et cetera on some of the announcements related to cold chain. Historically this has been a connected car right with lojack and Synovia business, but I'm wondering.
If you look at that sub base of 950000 subs, if we look out a year or two how do you kind of expect the composition of that business to be across some of the different end markets and if I could just throw on the backend there as well, Jeff any thoughts related to five G are customers talking about it they concerned about it you're seeing interest there whether it's in an industrial or private networks that kind of cropping up.
And where does the cat M fitting into the overall discussion these days thanks.
Yeah, and so as we look as we look at our end markets you've talk about connected car Gov Muni transportation logistics, we see the outlook is positive for all of those we've.
We've had very good growth in our connected car business over the last few years. So I mean, I I feel like what we've done with the company as we've kind of focused on the verticals that we think can provide us growth in the future. So I.
I feel good about all of our verticals in terms of their potential to deliver bulk subscriber growth in our pool.
As it relates to <unk>.
We do we are talking to our customers about that.
Sure.
It's not it's not really generated anything meaningful in the business, yet, but I mean cat M is all about that right. It's what enables that and so our engineering team and product team has done a great job delivering cat M products.
Across the world and so.
That's been a focus of ours throughout 'twenty 2021.
And Scott one of your first part of your question was just around the mix of subscribers. So if you look at the subscriber mix for fiscal 'twenty. One it was probably about a 60 40 split with 60% coming from recovery services are closely aligned to our connected car services and 40% coming from tracking and monitoring.
<unk>, which is really fleet and golf municipalities, we do see that going into fiscal 'twenty, two and into 'twenty three debt that mix shifting a bit it's important for us because it has an impact on the overall.
<unk> cause mix impacts our monthly arpus so we.
We are working hard to increase the number of subscribers and are tracking monitoring space and not necessarily decrease the recovery, but make sure that we're accelerating growth in the key areas in those key areas from an end market standpoint, our transportation logistics government municipality and industrial heavy equipment.
Great. Thanks, so much.
Thanks Scott.
Your next question comes from the line of Michael Latimore from Northland Capital. Your line is open.
Hi, This is other there on behalf of Michael Latimore. So.
Could you talk about the opportunities you see are on the school I mean, other more greenfield or replacement prospects that on the school.
Yes.
Thanks for the question, Yes, I think that we've.
We've seen good strength in our K 12 business.
All year long, despite the pandemic and you know.
That that market, although many of the large districts have telematics equipment theres still quite a few that don't.
We're doing very well on the team's done a nice job this year innovating in that space with adding some new features particularly ones that were real relevant during the pandemic. So.
We continue to.
Be very excited about that business, we've got a great sales team Theyre a great support team there we've got a very nice pipeline going into 2022, our fiscal year 2022.
Alright, alright fine on regarding the restrictions.
In Europe in countries, such as Italy, and U K. So how much did it affect in terms of revenue for this particular quarter.
In terms of the fourth quarter.
We are well.
Yes, Okay in terms of the fourth quarter fourth quarter from.
From the international.
<unk> recovered connected car space is typically.
There is seasonality in it and we did see a bit of a dip when you looked at Q3 going into Q4 relative.
Relative to last year at this time I think it was fairly consistent but if you call on we started to feel the impact of the pandemic in our fourth quarter, which is really that junior into January or February time frame.
We are seeing some I would say limited, but some limitations on.
On installations, but nowhere near the magnitude that we experienced back in March April may timeframe. So as we look forward I think we're feeling pretty good about that business. We think that we're still not totally out of the woods as it relates to the Covid 1919 pandemic the U K.
Our office there.
<unk> indicated that there are some things that we have to be aware of and just be sensitive too, but I think generally we're feeling that we should be beyond this in the <unk>.
Beginning of Q2 and throughout the remainder of fiscal 'twenty two.
Alright, alright.
Thank you.
Thank you.
There are no further questions at this time I'll turn the call back over to Mr. Jeff Gardner.
Yeah.
Well, thank you for joining us on the call today and for your continued interest in <unk>.
One final note, we will be attending the upcoming Needham virtual Tech and media conference on May 19th.
Like to request a meeting please contact Needham or the Shelton group, our Investor Relations firm I look forward to discussing our continued progress during our fiscal first quarter call in June thanks for joining us today.
Operator, you may now disconnect the call. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Okay.
Okay.
Yes.
[music].
Good day.
[music].