Q1 2022 CalAmp Corp Earnings Call
Welcome to talent for the first quarter 2021, and financial results Conference call.
As a reminder, this call is being recorded I would now like to introduce your call and your host for today's conference call Joel Chronowitz, managing director and Shelton group.
And Investor Relations firm Joel you may begin.
Good afternoon, and welcome to <unk> fiscal first quarter 2022 financial results Conference call I'm joined the crowds managing director of Shelton Group <unk>.
And Investor Relations firm with US today are challenged President and Chief Executive Officer, Jeff Gardner, and Chief Financial Officer, Curt vendor.
Before we begin I'd like to remind you that this call may contain forward looking statements. While these forward looking statements reflect <unk> 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 in our periodic SEC filings and and 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 now 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 the financial results and outlook followed by a question and answer.
And recession with that and it's my great pleasure to turn the call over to <unk>, President and CEO, Jeff Gardner Joseph Please go ahead.
Joe.
We started the 'twenty 'twenty 2 fiscal year with solid results.
And total consolidated revenue of $85 million, including <unk> 8.
And $8 million of revenue from the Lojack North America operation that was sold for Sperry on back in March.
Revenue from continuing operations was up 8% and the prior year.
Software and subscription services revenue increased 26% over the prior year.
Including the shipment of approximately 15000 devices to our large package delivery and transport customer.
Part of our program to upgrade and additional 35000 trailers to for <unk> technology.
And our CTC cloud platform.
We believe the and the rents and consistency of our relationship with this customer is a testament to the effectiveness and utility of our CTC technology.
These installations represent almost 1 half of the total deployment. So we still have additional upside with this retrofit as well as other exciting potential projects with this important customer.
With the pivotal 3 G to for G upgrade cycle, continuing and the U S. We saw yet another strong quarter of demand.
Including our largest customer caterpillar.
Our shipments were limited unfortunately, due to the continuing chip shortages.
Ross global supply chains.
However, the continuous growth of our backlog to record levels demonstrates our clients confidence and our products and.
And the significant potential for a resumption of more rapid revenue growth as this bottleneck eases.
In the meantime, we are working closely with our suppliers to source as much inventory as we can to fulfill these orders.
Importantly.
We are also now seeing orders for our for G devices outside the U S.
As many international accounts are beginning to accelerate there are 3 G to for G transitions before the older cellular systems are shut down.
These orders contributed to our international revenue, reaching 36% of revenue and the quarter.
We expect and continued ramping of our orders for for G solutions from both domestic and international accounts and the quarters ahead.
As part of our global expansion strategy, we recently announced the launch of a wholly owned subsidiary in Spain that opens the market for us to sell our cloud based connected car SaaS solutions and services across that country as well as across the Pan European region.
And.
Spain, and Europes third largest market with the highest vehicle theft rates.
And we're excited about this opportunity to serve this lucrative region and other countries on the continent.
I'm also pleased with the increased activity, we are seeing across our other international markets, such as Italy, The U K and Mexico.
We're beginning to see a resurgence of activity across these regions as businesses slowly returned to normal operating schedules.
We're also working with a number of major new global accounts as a part of our expansion efforts in Europe and hope to be able to discuss these opportunities further in coming months.
At this time I also want to discuss briefly and initiatives that we've undertaken to upgrade our pulse device management software system, which customers recognize as our crown jewel and has been and use for over 10 years.
We've started to transition customers to our new state of the art SaaS platform we've developed.
Which we're currently calling <unk> telematics cloud device management.
For C T C D M for short.
This nextgen SaaS device management service.
Which will be re banding shortly leverages, the same infinitely scalable infrastructure and technology that powers, the Cal and telematics cloud platform.
And it provides even more configure ability and management of our devices.
With over the air updating device health alerts and new analytic dashboards, providing actionable insights.
New powerful web graphical dashboards and other features and this new platform will allow customers to get more from their investments and our telematics system solution software and services.
The system allows customers much more flexibility to innovate and manage their devices proactively.
Thus saving time and money.
It includes advanced edge to cloud security technology.
Which of course is critical today more than ever.
And it enables us to deliver expanded features and functionality to subscribers directly over the air.
This major software development project reflects our continued focus as a SaaS solutions provider and I'm proud of the work our product and engineering teams have put into this new platform.
The transition to see T. C. D M will take some time to implement across the customer base, but the ultimate goal is to bundle all of our edge devices with our subscription services on this new device management platform.
Overtime, we believe this will add significant incremental revenue for our software and subscriptions services business.
On another note Cal Amp was recognized recently by the organization and 50.50 women on boards for our continuing commitment to gender balance and diversity.
While also representing a solid model for others and the industry.
I'm proud of the strides we've made at the board level to a point a powerful slate of executives with very gender and ethnic and professional backgrounds.
A day 3 of our members are women and.
Including our chair.
And 2 are ethnically diverse directors.
Since my appointment as CEO the composition of our board has been a key focus of mine.
Along with its continuing commitment to the environment, social issues and prudent corporate governance.
Even with the recent planned retirements of long standing directors, Bert Moyer and Larry Wolf, we proactively manage the composition of our board to retain a solid depth and breadth of the App attributes among our board members.
Thus, ensuring that we remain focused on key issues at the board level.
The recent appointments of Henry Mayer from Fedex, and Kirsten Walberg Adachi sign are a testament to this.
At the same time, we bag and the decades of counsel, we receive from both Bert and Larry during their tenures.
And we wanted to take this time to sincerely thank them for their tireless commitment to the company.
I've worked with both of them for years on behalf of the <unk> family.
I wish him all the best.
With that I'll now turn the call over to Kurt for a closer look at our fiscal first quarter financial results and then we'll open the call to questions Kurt.
Thank you Jeff today My commentary will include reference to the non-GAAP financial measures of adjusted basis net income adjusted EBITDA and adjusted EBITDA margin 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 2022 first.
And earnings that was issued this afternoon.
Also as a reminder, the financial results of our Lojack North America business that was sold effective March 15, and are being accounted for as discontinued operations.
So the financial results I will review, mainly reflect our continuing operations, except where noted and we have revised prior periods for historical comparison purposes.
Total consolidated revenue and the first quarter was $85 million, including $800000 and revenue from the Lojack North America and discontinued operations.
Revenue from continuing operations was up 8% year over year to $79.7 million and down 3% from the prior quarter.
The year over year revenue growth was attributable to solid performances and the industrial heavy equipment government government municipality and connected car market verticals.
International revenue totaled $28.5 million for 36% of total revenues for the quarter. This was driven by solid sequential revenue growth and EMEA and APAC regions.
Software and subscription services revenue was up year over year, 26% to a record $35 million or approximately 44% of revenue.
Our software and subscription and services business is experiencing a strong recovery from the prior period low point at the onset of the pandemic as growing demand for our software solutions has contributed to this revenue, becoming an increasing portion of our total revenue.
Although customer demand remains very strong for our telematics solutions, we are managing through our supply chain challenges and lingering effects of the pandemic, which have impaired our ability to ship and activate devices and we're doing everything reasonably possible to prioritize product allocations for our subscription based customers.
In terms of and performance metrics for our software and subscription and services business annual recurring revenue for the trailing 12 months was up 9% and the first quarter of fiscal 'twenty, 2 to $87.6 million from $85 million and the prior year and up slightly sequentially.
<unk> as.
As mentioned last quarter a R. R represents revenue from recurring application subscriptions and services, which excludes revenue from the hardware devices and a bundled arrangement with the customer that is recorded at a point in time or upon installation.
Remaining performance obligations rose, 12% to $137 million and the first quarter compared to $123 million in the prior year's quarter and was also up slightly sequentially.
This metric represents all contracted revenue, including deferred revenue and contracted but unbilled revenue related to bundled contracts with customers.
And as Jeff mentioned earlier, a primary focus and the first quarter was the shipment of almost 15000 devices to 1 of our larger SaaS customers on our CTC cloud solution as they transition their devices to the newer for GE technology.
Our total number of active subscribers at the end of the first quarter was 954000 consistent with the prior quarter and due mainly to shipment limitations.
Telematics products revenue in the first quarter was down 3% year over year, and 6% sequentially to $44.6 million, primarily due to constraints and the supply chain. Despite continued strength from the 3 D to for the upgrade cycle.
Within the telematics products reporting segment.
<unk> products revenue decreased 13% sequentially, but increased 38% year over year to $23 million, primarily due to our largest customer caterpillar.
Pat represented $17.3 million and revenue for the quarter.
This was up over 50% from $10.9 million during the prior year's quarter, although down from an all time high of $18.6 million and the prior quarter due to the supply constraints and previously mentioned.
We continue to expect solid demand for cat for the remainder of the calendar year, along with many of our other telematics customers also engaged and the pivotal transition to for Jeep.
Consolidated gross margin from continuing operations and the first quarter increased to 47% from 39, 5% and the same quarter a year ago and was down from 42, 2% last quarter.
Although we are pleased with the year over year progress and gross margin performance. The sequential decrease resulted from product mix, coupled with cost increases by suppliers as a result of the supply chain challenges and component shortages.
In response, we implemented price increases on customer purchase orders received in the quarter. However, since the price increases were imposed later in the quarter. We expect this action to have a more offsetting impact cost and that's a benefit to gross margins in future quarters.
Our non-GAAP operating expenses as a percentage of revenue was approximately 36, 2% for the first quarter.
As we begin to see renewed operating activity and our markets and the easing of the pandemic Lockdown, we are realigning our staffing to support the increased business activity and additional investments necessary to drive our future growth.
Adjusted EBITDA and the first quarter was $8.4 million with an adjusted EBITDA margin of 11% comp.
Compared to adjusted EBITDA of $8.3 million or 11% and the prior year's quarter.
And $9.9 million and on an adjusted EBITDA margin of 12% and the prior quarter.
The decrease in adjusted EBITDA is primarily due to the lower revenue base and associated gross margin impact as we align our operations and navigate through the global supply chain challenges.
Now turning to our current liquidity position at the end of the first quarter, we had total cash and cash equivalents of approximately $96.2 million as compared to $94.6 million last quarter.
And our aggregate outstanding debt is approximately $237 million, including $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 second quarter of 2022, we are maintaining our policy of not providing quarterly guidance as visibility into product shipments remains uncertain due mainly to the global supply shortages.
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 excited with our start to the new year and the progress the team is making to further position the company as a SaaS telematics leader in the industry.
And we've made great progress, particularly in the area of software development. Furthermore, with conditions opening up.
Around the World, we remain encouraged with the prospects ahead.
Nonetheless, we remain cognizant of uncertainties related to the continuing supply chain limitations discussed earlier and there are temporary effect on our ability debts and still growing demand for <unk> solutions around the world.
With that now I would like to open the call to your questions operator.
To ask a question you will need to press star 1 on your telephone.
On your question press the pound key.
Please standby, while we compile the Q&A roster.
And your first question is from Michael Walkley with Canaccord Genuity.
Great. Thanks for taking my question and congrats on the quarter I guess for.
First question for me is just.
Can you update us on how supply is shaping up for the remainder of the year and when do you think he might reach a supply demand balance and.
And did I hear correct that telematics systems backlog increased.
From what you've shared last year and near record backlog and you're saying now you'll have a record backlog, so maybe somewhere north of that $65 million you shared last quarter.
Yeah, Gerry it was incredible Mike It was incredible but we saw.
This quarter with the weekly bookings some of the best I've seen some of the best we've ever seen at the company. So very strong orders from our customers interest in our products.
Overall market conditions were pretty difficult on a quarter and remain difficult today I do think we'll see improvement each quarter throughout the year our teams being.
Very.
Innovative in terms of how we're trying to mitigate these issues with suppliers and doing everything from reengineering bombs.
Looking for spot buys where we can do it entering into longer term purchase orders and so we're going to work really hard the good news I think the really good news is as you pointed out our backlog is stronger than it has ever been.
We're right in the middle of this 3 G to for G migration. So.
Even though it would've been nice to get a lot more of that revenue and the first quarter. We could've had a much bigger number because we have the orders to support. It. These orders are coming and we're going to fill these it's just gonna be a later in the year.
Great and then just building on that just <unk>.
Based on what you see for visibility on the supply side do you think you can get more supply. So you start to eat away some of that backlog next quarter or should we kind of think of I know, you're not giving guidance, but just any color you can talk about on supply to maybe start working down that record backlog and so you can think about sequential modeling.
Yeah.
Yeah, Mike This is Kurt so I think debt over the second half of this year, we'll start to see some rebalancing between supply and demand.
I think next quarter or second quarter, maybe a little bit difficult for us to to actually eat into that backlog, but we're optimistic and a lot of the orders that are coming in and now are actually out for our Q4 and even into Q1 of next year. So obviously the 3 D.
For G chat and transition is real and our customer base is realizing it and there's now this renewed sense of urgency to try to get ahead of it but we're doing everything possible as Jeff mentioned to execute on the demand that we have and we have faith that our supply chain team will be pretty innovative to make it happen.
And we'll take a couple of quarters for us to get alignment between supply and demand.
Okay, Great I'll ask 1.
And more question I'll pass fly and just just thinking about the software and services continues to grow and the mix, which is great to see.
Yes, the mixed potentially changes more towards tracking and monitoring from recovery services. How should we think about just the potential uplift to our people over time and as you talk about moving to the new platform to how should we think maybe about gross margins for this area of the business.
You know 1 from the platform and then when from the potential <unk> changes over time.
Yeah.
Certainly Mike so.
And as we've noted in the past you know the rfps associated with tracking and monitoring are higher than the ARPA and our recovery business you.
You know that we recently announced the launch of our ion suite here.
Or 2 ago that is generating solid <unk> right now and so we're pleased with the with the results. There 1 thing, though I do want to mention is and as Jeff talked about and as our earlier remarks, we are working very hard to transition our telematics device hardware customers.
On to our C. T C cloud environment and in so doing that will mean that we will generate greater stickiness and move them onto our platform, but the the mix in terms of ARP, who may come down and that effort, but generally we're extremely pleased with the way the tracking and monitoring are.
Tracking and monitoring services are coming along and the <unk> that we're generating from the ion suite.
Great. Thank you.
Welcome.
Your next question is from Anthony Stoss with Craig Hallum capital.
And Jeff and Kurt.
Maybe just a follow up a little bit on on the component shortages do you think you'll get more componentry and the August quarter than you did and the may quarter.
Right now the.
And again, we're not providing any guidance, but we think that on our August quarter will probably be 1 of our more difficult quarters from the supply chain management standpoint.
We had a very good as you know a very good Q4, when we started to see.
The effects of it we've been pulling down our inventory and I think we did very well in Q1, but Q2, we probably will have some additional headwinds as it relates to getting the components and we do see a rebound and the second half, but Q2 is probably the quarter that will see the greatest impact from the component shortage.
Okay.
We're hearing from a lot of companies clearly the same thing, but some of them are starting to flip the page a little bit and talking about you know 234 months from now seeing a lot more supply is there a light at the end of the tunnel here for you guys would you concur and kind of that same timeframe or how long do you think it'll it'll be before you guys start to see anything.
And cool.
No we expect over time Curt made some comments specific specifically really near time determined and the second quarter, we expect to her 2 improvement through this.
Our fiscal year, 'twenty 'twenty, 2 and into 'twenty 3 so it will get better each quarter and.
Our team is doing everything imaginable to work with these vendors I'm actively involved and that calling other ceos trying to improve our allocation, we're not the only company and the world doing that obviously today, but we're also we've had some good success with spot buys and.
As I said, we're making some design changes that I think will help us along the way. So yeah, I think it's going to get better and we we still see a very strong year on.
And on the equipment side as we really help our customers manage through this 3 G to for GE transition so.
We're bullish about that are as I said, when we were looking at the weekly bookings.
Bookings this quarter were just amazing and so it's it's good to see there is some real strength in the business.
Got it thanks for that and then Jeff what I found really interesting was your comments about a new global global accounts and Europe, maybe can you define those a little bit more of the hardware only hardware plus recurring revenue kind of what industries, if you could share.
Curious if you can give us a little bit more on on those.
Well, we have something that began about 3 months ago, maybe a little before that called Mut and Cal and where we were really trying to look like a single company across the globe.
<unk> head of EMEA and the head of Latam now report directly to me. This is mostly software as a service business that we're talking about it it ranges from large deals with Oems that we'll be able to talk about later and this year. We've got a couple of really good things going there.
And to really selling the ion suite for the first time outside of the U S and we're.
We're excited about about that as well we have an opportunity to really leverage all of this country knowledge that we have with an excellent sales force and our sales teams are doing a wonderful job working together to really for them account strategies at the customer level, they're going to really allow us to grow.
Faster rate going forward.
But most of it is going to be SaaS.
Got it thanks, Jeff and best of luck.
Thank you.
Your next question is from Mike Latimore with Northland capital.
Yeah, Hi, guys.
Just on the.
Topic of the component shortages and you highlighted maybe a little bit tougher next quarter, but that would have a similar effect on both.
Telematics systems business sense, and SaaS or does the SaaS have less and less of an impact from that shortage.
Yeah.
Well as we mentioned, Mike and pass through.
Every 1 of our SaaS solutions does involve the shipment and activation of <unk>.
A device and order to activate the services. So there will be some impact although.
As I mentioned and my my remarks.
We are doing everything we possibly can to our reasonably possibly can to rationalize.
The product.
Allocations to our subscription based customers so yeah.
And so to answer your question day. There is there is an impact for the SaaS business on a we're trying and mitigated by our product allocation.
Yeah.
I'll add there.
We are expecting.
Really good year, as we kind of manage through this.
Shortage and and in the near term and so we've been investing and the business, adding salespeople and.
Engineers.
And product people that are going to allow us to kind of hit the demand that we think is out there today. So.
It's not like for pros and it's really an odd time, because things are going extremely well and as I said, we could have put up much bigger numbers in the quarter if not for this global supply chain, but I'm Curt said it earlier, we've got a very fine group of people running our global supply chain. So I I still believe that we're doing as well.
Anyone in the industry in that regard.
Great.
And you talked about really strong bookings weekly bookings during the quarter and how this record backlog.
And where those bookings skewed more towards your subscription business are both sides of the business.
There were mixed and they were both we have very strong bookings on the <unk>.
Hardware side MRM and OEM.
Related to <unk>, and <unk> and and also some and some good things on the SaaS side.
Yeah.
Got it and just last question.
Realigning sorry go on.
And I would just say well 1 of the things we are working extremely hard to do is as.
As we mentioned on.
And navigate our device customers into a subscription based model and so as these bookings are coming in and we are having conversations for those customers to move them on to the Cowen and telematics cloud product and.
And those conversations are going very well.
Okay.
Great and then just.
Last question, you talked about realigning staff and I couldn't tell if you were moving people to sort of re prioritizing where people were or if you were like.
Increasing staff as well.
We increased a bit we definitely reprioritise towards those verticals that we expect to have the fastest growth. So as we've said before we're really focused on transportation and logistics as we made some some changes there, but I think all of those to support.
Verticals that we think will grow at a faster rate and the future.
Okay. Okay. Thanks.
Sure.
Your next question is from George Notter with Jefferies.
Yeah.
Hi, guys. Thanks, very much I was I'm definitely interested and the conversation around the transition from the pulse product too.
I guess rebranding of the pulse product to the Cta T D M product it sounds like Youre, adding a lot of features and there and.
Now kind of pushing I assume you're pushing folks more into a SaaS model here, but can you just sort of.
Bottoms up kind of walk us through the difference and the selling motion and the difference and the product.
I'm curious as to how it helps grow your SaaS business.
Give us the before and after of pulse vs. CTC DM. Thanks.
Yeah Yeah.
Yeah, well, it's it's a it's a much more robust tool that we think will enable our customers to be more successful and the marketplace. Some of the features that we mentioned.
Device health alerts so that they can get a sense for how their devices across their customer platforms are working and.
And improved easy easier over the air updates that they can do much faster than they ever had before dashboards, providing real time insights for.
And for their customers and new UI, UX and enhanced edge capability.
And all of our customers are quite interested in not just in the cloud, but in the edge capability and.
So the C. T C D M, where we've spent a lot of.
Resources too I think there's going to be.
Very good things for our customers, so that's pretty sad and.
How's us to really.
And convert our our traditional hardware customers into more of a blended hardware software customer.
Got it okay any thoughts on.
What that might look like incrementally for you guys in terms of additional revenue or additional SaaS customers.
It's a little early I will tell you there are discussions with our customers are going well, we're having strategic level discussions with all of our customers and.
And so it'll be implemented over time, but I think it's a very very positive move for the company.
If you've been following us for a long time and something we've been trying to.
Accomplish for some time and I think this is absolutely a product that is a win win it gives a lot of benefit to our customers that's going to allow them to save money and build more revenue and.
And it's going to allow us to get more subscription business.
Okay. Thank you.
Your next question from Scott Searle with Roth capital.
Good afternoon, and thanks for taking my questions.
Hey, Jeff I apologize for going back to the supply chain, our questions, but I did want to follow up.
For your your question and sort of your commentary related to limitations on the quarter that you could have shipped a lot more I was wondering if you could quantify that and what the gross margin impact was in the quarter on having to go on and do more spot component pricing and you also referenced.
Sorry go ahead.
Oh go ahead, and I'm listening no I was just going on and as well it sounds like you started to implement some increased pricing.
And the quarter as well to offset some of that so does that mean gross margins get better for MRM as we look forward into the next couple of quarters.
Yeah, most of the price increase impact will be felt and.
And second quarter, we've talked for our customers and the first quarter, but it was later in the quarter and.
And on the first part of your question, it's difficult for us to say how much it's clear that our top line could have been much better we've got a pretty big.
We've got a pretty big base cost base that supports that business. So I mean, I think the underlying financials would have been better as well because we werent fully utilizing at and <unk>.
Having said that.
And we're not going to be able to give you precise numbers there Kurt I know and I'm stupid add anything to that I'd, just say that we were really pleased with the gross margin expansion year over year.
But as we pointed out earlier the sequential decline in gross margin.
Jos that there was an impact by the supply chain challenges and order to quantify that Scott I mean, I think that we're probably talking somewhere between 100 and 220 basis points of pressure.
But that pressure was a combination of say 2 thirds supply chain related 1 third maybe mix related.
What I would also say is that we were I think fairly proactive and instituting.
The price increases, although those price increases came towards the latter half of the quarter. So we do see that debt the benefit of that will probably be experienced more into Q3 Q2 and into Q3, so that being said the supply chain is pretty volatile right now.
And we're watching the cost factors that are coming in and so we'll manage that through the remainder of the year.
Very helpful and the way.
Yeah.
I would just say 1 more thing on that the way I think about the quarter is.
Very happy that we were able to get to consensus with all that pressure, we could have beaten it.
More significantly.
Without the supply chain and challenge, that's how I'd think about it okay and 2 other follow ups, if I could maybe on the pulse front kind of what you expect the attach rate and remind us what the pricing would be on debt and then in terms of the backlog.
Got a lot of new products, you've had with with eye on and more tracker applications I'm wondering what the composition of that backlog looks by by vertical or end market is that starting to morph a little bit maybe give us an idea of where you are today and what do you think that starts to look you know 6 or 12 months out. Thanks.
Well.
In terms of the attach rate on the CTC D. M. We think that's going to be very.
Very high.
In terms of pricing.
Too early we're still we're still working this out with our customers. So we want this to be a win win for our customers and so.
We're continuing to work through that with them, but it's going to be a very positive development.
Biggest way we can increase.
Value with this company is to drive more towards SaaS and this gets us this gets us there with the product that provides huge benefits to our customers and.
And Kurt could you have and the second part on the backlog, yes, so the backlog.
Is obviously broken down by our 4 market verticals transportation and logistics connected car industrial heavy equipment and government and municipal fleets.
I would say there is more of a heavy concentration and that backlog around transportation and logistics and industrial heavy equipment.
And those make up a larger portion of our our MRM and OEM customer base and they're the ones that certainly are now.
Proceeding quickly or with the sense of urgency as a result of this 3 day to forgey transition that is now upon us.
Great. Thank you.
Youre welcome.
And as a reminder, if you would like to ask a question at this time and simply press star and the number 1 on your telephone keypad.
Your next question is from Jerry Revich with Goldman Sachs.
Yes, hi, and good afternoon.
Jeff I'm wondering if you could talk about the.
Cadence of subscribers in the quarter, you know over the past couple of quarters, you folks have been steadily growing the subscriber count by.
Over to you.
Subscribe water and.
That obviously slowed this quarter can you just talk about the puts and takes.
And are there parts of the platform that are growing.
Yeah, We we had we definitely had some impact and a couple of areas like in the U K where.
Covid related.
Impacts on subscribers and the quarter that had some impact and we also had when we did our conversion to the ion suite, we have a little bit of churn of some smaller customers there Jerry but I think we'll get right back on track and we know what it's going to take to grow.
Are you here and that's to drive subscribers, our pool and reduce churn.
Okay.
And yet for us.
Kate and says when you think about what the August quarter could look like for for this.
Subscription business or are you expecting a return to subscriber growth can you.
Could you say a bit more about that.
And maybe how things are tracking and June or just provide a bit.
A bit more context on that on a return to the.
Yep.
You just talked to.
Yeah, we're definitely expecting a return to subscriber growth and the next quarter. When you looked across our connected car business, which there's quite a few subscribers and that.
They were particularly hit with the supply chain issues and then in the U K, we had that Covid issue that I discussed earlier, so we expect those to get a lot better into Q.
Got it and then you know as we think about for for the hardware business price cost.
Going forward can you just say more so we've got price increases that are.
Going in.
Are they enough to.
Essentially offset the inflation.
That you're seeing and then as you think about you know what.
Price cost it looks like a couple of quarters out from now once the.
Chip shortage is hopefully resolved.
Where do you expect your price cost to look like compared to before the shortage.
Yeah, I think I think we were pretty prescriptive.
Prescriptive about our price increases and we think we did a nice job estimating our what our additional cost was without over burdening our customers on that so I think we hit that pretty precisely we did a lot of work on that going forward I mean before this supply chain problem, Jerry we were making a ton.
Progress on bomb reduction and we still haven't stopped doing that so long term I'm very bullish on our ability to continue to drive costs out of our products and more of a regular routine routine methodical way.
We are still working on that it gets kind of covered up with what's happening.
And in the broader shortage arena, but yes, I expect that to continue to be and area. We're very focused on improving our margins over time.
Okay.
And lastly, can you talk about and any changes in customer behavior. As a result of the chip shortage or are you seeing any of your customers or potential customers moving from single source to dual source and that creating any.
And any opportunities or any potential headwinds that we should be aware of as we think about how the customers are responding to the shortage.
Yeah, I think we definitely had the opportunity to get some new new logos and which was nice.
With our with our customers I'll say I'm, particularly pleased with our.
Our customers have chosen us because we help them solve complex problems and were pretty sticky so.
Even though some of these supply dates are pushed out I believe by far the majority of our customers are sticking with us.
Okay. Thank you.
Youre welcome.
And there are no further questions at this time and I'll turn the call back over to Mr. Jeff Gardner for closing remarks.
Thank you for joining us on the call today and for your continued interest and Cal App.
1 final note, Kurt and I will be attending the upcoming Canaccord conference on August 12, and the Jefferies semi.
Infrastructure conference on August 31st if you'd like to request a meeting with US please contact the respective firms or the shelf subgroup I look forward to discussing our continued progress during our fiscal second quarter call in September and have a great day. Operator, you may disconnect the call.
This concludes today's conference call. Thank you for participating you may now disconnect.
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