Q4 2022 CalAmp Corp Earnings Call
Quickly through Toyota accustomed the Toyota original accessories program.
More recently, we announced that our long term relationship with BMW has proven to be a great success over the past two years as we have successfully delivered security solutions for the entire range of BMW vehicles sold across Italy.
Today Lojack stolen vehicle recovery system is offers as an option on all BMW group models to improve security and peace of mind for BMW group customers.
Over the past two years.
Growing number of motorists have decided to protect their BMW group vehicles with lojack unique technology.
And this trust has been fundamental for the development of new capabilities that will set unprecedented standards and stolen vehicle tracking.
This includes a forthcoming GPS based solution with additional features such as a smartphone app and intelligent driver tag and engine lock capability operated by Lojack secure operation centers after the occurrence of a theft.
The complete solution is based on <unk> telematics cloud platform and edge computing technology and is integrated with connected car data coming from the BMW group's connected drive OEM platform and accessible by the customer through their smartphone app. Unfortunately.
Our business continues to be impacted by the ongoing global components supply chain constraints.
However, as.
As outlined last quarter.
Our global supply chain and operations team is engaging in a number of initiatives to address these shortages.
Additionally, we are accelerating our next generation of edge device products that also align with suppliers investment roadmaps to ensure access to critical material supply for years to come.
In summary, I am very proud of the team's execution throughout the quarter and the success in transitioning customers to recurring subscription contracts, while also securing new logos partnerships and ultimately more subscribers now I'd like to turn the call over to Kirk.
To discuss our financial results in more detail.
<unk>.
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 a full reconciliation of these non-GAAP measures with the closest corresponding GAAP basis measures is included in the press release announcing our fiscal 2020.
Two fourth quarter and full year earnings that was issued this afternoon.
Total revenue in the fourth quarter was $68 4 million essentially flat from $68 8 million in the prior quarter and down 17% from 81 9 million in the same quarter a year ago.
For the full year of 2022 revenue declined 4% to $295 8 million from $386 million in fiscal 2021.
The year over year declines in both quarterly and annual revenue world attributable to the ongoing global component shortages limiting our ability to fulfill orders despite backlog remaining at near record levels.
Additionally, we are accelerating customer conversions to recurring software subscription arrangements, where in certain instances revenue is recognized over the contract term rather than recorded all upfront.
I will talk more about these new recurring subscription contracts in a minute.
International revenue in the quarter totaled $21 3 million or 31% of total revenues.
And $98 7 million or 33%.
For the 2022 fiscal year the.
The revenue breakdown by vertical market for the year included $137 million for transportation and logistics.
$62 $6 million from industrial heavy equipment sick.
$63 million for connected car.
And $42 $2 million from government and municipalities.
Highlighting the quarter was our software and subscription services business with revenue, increasing 19% year over year.
And 13% sequentially to $41 2 million representing.
Representing a record 60% of consolidated revenue.
For the full year, our software and subscription services revenue grew 19% to $154 3 million from $129 9 million in the prior year.
The year over year and sequential growth in this business reflects the success, we've achieved in converting eligible telematics device customers to recurring subscription contracts.
Bind with new logo generation and.
In the fourth quarter alone, we converted approximately one fifth of our total eligible customers and we expect to convert the remaining customers to multi year recurring contracts by the end of the current fiscal year.
In terms of performance metrics for our software and subscription services business. We are focused on growing our remaining performance obligations or rps.
Which is defined as all contracted revenue.
Including deferred revenue and contracted but unbilled revenue related to bundled contracts with customers.
This metric reflects a forward looking assessment of the total value of active subscription contracts.
It enables measurement of our progress and our business transformation and it serves as an indicator of future revenue growth.
Remaining performance obligations in the fourth quarter increased 47% to $200 million compared to $136 5 million during the same quarter, a year ago and was up 37% from $146 4 million in the prior quarter.
We expect to recognize over 45% or approximately $90 million of this obligation in this fiscal year.
This represents great progress driven by our ability to transition eligible telematics device customers to subscription contracts.
Additionally, as a result of these efforts and the new logos, we secure our base of subscribers grew to $1 1 million in the fourth quarter up from 954000 in the same quarter, a year ago, and 1 million subscribers in the prior quarter.
Our telematics products revenue in the fourth quarter was $27 $1 million, which was a decrease of 43% year over year and 16% sequentially.
For the full year telematics products revenue totaled 141 $5 million compared to $178 $7 million in 2021.
Although we exited the year with near record levels of backlog for our products the ongoing supply chain shortages limited our ability to fully ship against this demand.
However, we remain cautiously optimistic that the current supply environment will ease at some point this fiscal year and we are using this time to focus on accelerating the conversion of our customers to recurring subscription contracts.
Within the telematics products reporting segment OEM products revenue totaled $10 $4 million in the fourth quarter compared to $16 1 million in the prior quarter and $23 4 million in the same quarter a year ago.
For the full year OEM revenue was $62 7 million compared to $74 $4 million in 2021, our largest customer represented $7 $9 million of revenue for the quarter, which was down from $14 4 million last quarter.
And $18 6 million in the same quarter a year ago.
For the full year 2022 revenue from this customer was $53 7 million compared to $59 $6 million last year.
Though demand remains strong in support of the <unk> <unk> to <unk> upgrade cycle the supply.
<unk> changed shortages have continued to limit our ability to fully ship all booked orders. However, our current backlog with this customer suggest that estimated shipments will be more in line with historical shipment levels.
Consolidated gross margin in the fourth quarter was 41% and consistent with last quarter.
And 42% in the same quarter a year ago.
For the full year of fiscal 2022.
Gross margin increased to 41% from 40% in 2021.
Gross margin in the quarter continues to reflect the increased component costs across both of our reportable segments that are not being fully offset by the pass through of price increases since these generally take a couple of quarters to implement.
For the full year of fiscal 2022, non-GAAP operating expenses as a percentage of revenue and on an absolute dollar basis increased year over year as we emerged from the strict cost control measures brought on by the global pandemic, while also attempting to meet the solid customer demand that arose over the past.
18 months.
In the fourth quarter non-GAAP operating expenses as a percentage of revenue and on an absolute dollar basis declined.
Sequentially and year over year due to lower personnel and incentive compensation expense as our global employee base declined by approximately 5% from last quarter.
Adjusted EBITDA in the fourth quarter was $5 million with an adjusted EBITDA margin of 7% comp.
Compared to adjusted EBITDA of $3 million and a margin of 4% in the prior quarter.
And $9 9 million or 12% in the same quarter last year.
For the full year, adjusted EBITDA totaled $24 $7 million or 8% of revenue compared to $32 $1 million or 10% of revenue in the prior year.
The sequential increase in adjusted EBITDA in the fourth quarter was attributable to.
Operating expenses quarter over quarter the decline in adjusted EBITDA year over year was due mainly to lower revenue compared to the prior year.
Free cash flows was also under some pressure in the quarter due to the prolonged decline in shipment volumes attributable to supply constraints, coupled with our efforts to transition customers to multi year contracts, which changes the timing of cash flows as billings occur over the contract period.
Rather than upon device shipment.
We expect to experience similar effects, but in a lesser extent in the upcoming quarters as we complete customer transitions to multiyear recurring subscription contracts.
In terms of our overall liquidity position at the end of the fourth quarter, we had total cash and cash equivalents of approximately $79 million as compared to $91 million last quarter. Additionally.
Additionally, our unused $50 million revolving credit facility was extended to June 30.
Of 2022, as we negotiate the final terms of a longer term credit facility.
Our aggregate outstanding debt is approximately $234 million, including $230 million of the 2% convertible senior notes due in August 2025, we.
We do expect to maintain a strong financial position and balance sheet with solid cash for working capital purposes going forward.
In reference to our outlook for the first quarter of 2023, we are maintaining our policy of not providing quarterly guidance.
The ongoing customer conversions to subscription contracts along with uncertain. The uncertain nature of the current global economic situation make it very difficult to project revenue recognition in coming quarters.
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 in summary, we are advancing our transition of <unk> to recurring software subscription company.
And we're making significant progress.
Our efforts have been met with increasing success and we now enter the new year, well positioned with historically high levels of backlog combined with a robust portfolio of solutions and expanding partnership roadmap and a solid cadence of customer conversions to recurring software contracts with that.
I would like to open the call to your questions operator.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.
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To ask a question. Please press star one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we will pause briefly to allow questions to register.
Our first question is from the line.
George not it with Jefferies. Please go ahead.
Hi, guys, thanks very much.
Yes.
Very interested in.
The transition to the subscription.
I assume when you talk about eligible devices and moving a fifth of your customers I think on the telematics side. I think you are talking about the pulse to CTC transition is that correct and then.
Maybe talk about whats in it for the customers.
Are you getting pushback on that transition with what's that look like for you guys. Thanks.
Yes, George this is Jeff. Thank you for that question.
Yes, exactly it is it is transitioning from pulse to DM CTC for our customers and there are many advantages which.
We've spent a great deal of time going over with our customers everything from improved security to their ability to update devices over the air.
And much higher volumes and Theyre able to do today. It just gives us much better device management capabilities. So if you think about what we're doing here is shifting from a 15 year old software product to one that is built on all the latest software, which has tremendous capability going forward and will allow them to.
To really provide the kind of insights to their customers that they would otherwise not be able to do so while it is a transition for the customers they've been on pulse for a long time at the end of the day I've been very pleased that once we go out and spend time with the customers that how excited they were just.
Last week I was on the phone with one of our largest customers who was their technical folks. We're tremendously excited about the potential of the new product and how that fit into there.
Roadmap going forward, so I think that our sales team is doing the hard work.
To convince them of the Advair.
Advantages of our new product CTC, DM and our customers are migrating.
Well ahead of our expectations I'm very pleased with what we've been able to do if you think about our business for the last five or six years, we've talked about really transitioning to a software business and now it's exciting because we're actually seeing it happen and so fair to say with all of these transitions we've been successful today.
800% in converting our customers over to the new service and we have an ambitious schedule.
In the next quarter and as I mentioned on the call expect to fully complete this.
With very little customer loss throughout fiscal year 2023.
And George to the other I've got it and then ask regarding.
The eligible customer you are correct when we define the MRM telematics customers. These are our device customers that we've historically sold telematics devices too.
Are the customers that we're targeting to move over and that's the universe of customers that we have defined one fifth of have transferred over in the fourth quarter.
Do you know how many devices that rec represents that the universe of an installed base of eligible devices.
Yes.
I don't know the number of devices I can tell you that we have about we estimate 60% to 65 of our customers in this space that we're looking to target to move over and above that number of customers. We were successful at somewhere between <unk> 13, and <unk> core in the fourth quarter.
Okay, Alright, great. Thank you very much.
Youre welcome.
Thank you Ms <unk>.
The next question comes from the line.
Yeah.
Roth capital. Please go ahead.
Hey, good afternoon. Thanks for taking my questions, Hey, guys, maybe to attack the telematics side of the equation was a rough quarter is certainly a component availability issues I'm wondering if you could dig in a little bit deeper what did you leave on the table unable to ship because of component availability I'm not sure if I heard a gross margin number but kind of.
Looking at the overall blended gross margin for the company I would've thought it would've been higher if the telematics gross margins had been in the same ballpark. So can you help us out on that front and I think you also indicated that you expect caterpillar to bounce back to normalized levels I just wanted to clarify that and what you kind of think normalized levels are and then I had a follow up or two.
Sure I'll take that so Scott how are you.
Couple of things to highlight so first off we did disclose that in terms of our overall backlog. When you include both our RPI remaining performance obligations with our device backlog.
Total backlog and act aggregate was about $285 million, which.
As we mentioned is an extremely healthy backlog on the device side, that's about 80% to $85 million of potential revenue. So we believe that.
We had plenty of dish.
Additional demand to ship against but unfortunately, the supply was not not there for us.
In terms of what we left on the table, it's hard to quantify although I can just say that we believe that the overall device backlog is very healthy right now and it's because of a number of reasons, obviously, we've talked about the <unk> upgrade cycle.
But.
A lot of our customers are anxious to get more more product and we're doing everything we possibly can in particular caterpillar or I should say our largest customer.
The fourth quarter revenue was about seven.
$7 million to $8 million.
And when you look at our historical quarters that typically run somewhere between.
<unk> and as high as say $17 million to $18 million a quarter. So we were down from historical levels, albeit that was again driven principally because of supply constraints. The backlog there for caterpillar continues to be very healthy and we anticipate that we will rebound to more relevant levels. When you look.
At our historical levels.
As it relates to purchase the follow ups.
Sure.
Oh I'm sorry is there is there a timeline associated with that recovery and then I think youre going to answer the gross margin question.
Yes, well its timeline Scott is heavily predicated on what's happening in the in the supply chain.
We do or I should say, we're cautiously optimistic that things will start to rebound a bit with the supply chain at some point during fiscal 2023, but it's hard to say exactly when.
What I was going to respond to was your other question regarding <unk>.
Gross margin our gross margin has been in the 41% range here as of late.
Given the backdrop of what's happening with inflation component costs fuel costs labor costs, we feel like that's a pretty good gross margin.
Relative to this backlog now that being said as we mentioned I believe in the third quarter we.
We did institute.
Our program to pass on a number of the cost increases.
That program when effective during the fourth quarter and has been a continuing we expect to see some <unk>.
Return on that effort more so in the first half of fiscal 2023 as those price increases pass on through to our customers.
Got you and if I could follow up on the <unk>.
Okay.
I'm sorry go ahead.
Go ahead Scott.
No no no I'm, sorry, I was going to roll into another question. So I'd love to get your thoughts yes.
Just a few things to add to it.
Curt said.
Fair to say as Curt mentioned, we came nowhere close to fulfilling our demand.
I will say that our team is doing an excellent job, providing transparency with our customers so difficult time, but we're on the phone with them every day.
These customers are managed through important network initiatives like <unk> to <unk> conversion, we're doing our best to get them.
Products, so that they can continue to manage their business effectively so.
As hard as it is to believe or say, we are doing a very nice job maintaining good relationships with our customers in a very difficult time and when I look at the business overall.
We're not unique in this regard we're seeing very few if any canceled orders as a result of this so we're.
We're very enthusiastic about the backlog and committed to working with our customers everyday Curt and I and all the executives here along with our sales teams are spending much of our time communicating with our customers working with our suppliers to do the very best job possible on caterpillar more of the same caterpillar.
Is buying everything that we can build we're working with them very closely we've had very good conversations with caterpillar to work together with vendors and suppliers to improve the supply as necessary and so when <unk> says getting back to normal levels.
The demand is there for caterpillar theres still managing very effectively <unk>. The Ford GE transition our quality is very good there and our relationship with them is very strong.
Okay very helpful. Thank you and if I could just follow up on the.
Software subscription and services side was a big sequential step up in the quarter as you indicated it looks like Theres a lot of pulse conversions going on over there.
Are there any one time benefits that occurred in there either onetime software sale or something else to call out too to note and then in terms of that mix. It sounds like it's in the ballpark of around 100000.
Connected devices added during the quarter subscriptions, how much of that was from that $1 with conversion of the pulse space. Thanks, So much.
Well I'll start and let Kurt add in some color on that but I would say that theres not a lot of one time as we're negotiating these agreements with our customers. These msas or enterprise agreements, we're negotiating three year <unk>.
<unk>.
These customers so longer term commitments that include a bundled solution that includes the device plus software. So this is solid revenue. It's one of the reasons RPM growth grew so nicely. So not much in terms of one time I think we're pretty happy that we're able to get to 20% of our.
Customers embedded base in the quarter and you can expect more of that throughout 2023.
And Scott to your last question regarding the subscribers, yes, we added just north of a.
100000 subscribers and I would say a good portion of those were attributable to the.
These customers that we converted over to the to the subscription based model.
Great. Thanks, so much guys.
Sure. Thank you.
Thank you Mr <unk>.
Our next question comes from the line of Mike Walkley with Canaccord Genuity. Please go ahead.
Great. Thanks for taking my question.
Just a follow up I know youre, not giving specific guidance, but just thematically how should we think about telematics systems revenue in fiscal 'twenty three if you're successful with the MRM conversion does that MRM hardware line theoretically go to zero or exiting the year and all of that revenue then comes.
Into your subscription services line.
Just any color on to think about how we should model the hardware business over the course of 'twenty two would be helpful. Just directionally.
Yeah.
Yes, Mike Thanks for the question so.
Within our telematics products reporting unit, we have a combination of customers. When you look at our legacy customer description, the MRM telematics customers as well as our OEM customers.
<unk>, our largest OEM customer.
As we convert.
The base of our customers over to software and subscription services. The majority of the legacy MRM telematics device customers, we do expect to move into our software subscription services.
Reporting unit and to be in.
Engaged in multi year typically three year contracts whereby they are.
During our device enabled solutions, which includes the device plus access to our platform through our device management CTC.
Services.
In addition to that what we've been doing with these customers is working to get longer.
Longer term commitments out three years, whereby we have greater visibility to procure the necessary devices to deliver on those services and so the multi year contracts have the benefit not only of moving them into software and services and software.
Software and subscription services, but also to give us that visibility. So we can better manage our supply chain in the future. So that's a huge advantage to us.
But in terms of your question around how that trends in the business. We do not believe that our entire telematics products business will go to zero, we expect that there will be a base of customers that will remain as device customers. Those device customers will most likely be in the form of like high volume OEM customers, who PERC.
<unk> devices that are highly configured to a particular use case and are done so such that.
The development of those devices make them somewhat sticky so I would expect that over time, yes that telmex products business will decline as we cannibalize it and move it into software and subscription services, but it will eventually get to a baseline level.
Where it's primarily a servicing these larger OEM customers.
Yes, and I think from a <unk>.
Business perspective, something that we've been trying to accomplish for some time.
It is to put ourselves in a position where all we're all through with your purchases with Cal App with the exception of our large OEM customers will include a multiyear subscription and it feels good to be there we feel confident about continuing this throughout the year and ultimately feel better about when you look at our <unk>.
And our SaaS growth.
Hopefully investors are getting a good feel that we're moving towards more of a recurring revenue business, which is what theyre looking for us to do so we're feeling good about making progress that is really the most important part of our transformation.
That's helpful. I, just trying to understand the mechanics of the model.
Between the two divisions and then.
For gross margin trends between the two businesses, how should we think about that or should we just kind of think that's fair.
41% level is a good level to stay at over the intermediate term as a combined company.
No I think they are in the short run we're seeing some component cost increases we're trying to offset those.
A bit delayed because we pass on price increases a couple of quarters. After we see increases in the in the base. So we're trying to keep up with that but ultimately Mike.
What we're trying to do and the whole reason that we're moving to the software recurring business.
Revenue is that that revenue is definitely more profitable and on our software businesses tend to be 50% and above compared to historically, our telematic devices revenue more in the low 40%. So over time as you see US progress now we're up to 60% we expect that to continue to increase.
You should see a similar move in our margins going forward.
Understood makes sense, thanks, taking my questions.
Sure.
Yes.
Thank you Mr Walkley.
Our next question comes from the line of.
Mike Latimore with Northland Capital. Please go ahead.
Okay.
Hi, This is <unk> on behalf of Mike lack of intermodal could you tell me has the water new crane kind of affect any of your international revenue has the demand in Europe slowed down because of the work.
No we haven't seen any significant effects there is some.
Tertiary impact from Ukraine suppliers, but it's not a big part of our business. So we're much more focused or our supply chain is pretty diversified if you think about <unk> three.
Three years ago were primarily relying on China now, we have four or five locations mostly in Asia.
One in Mexico that are providing our supply so very little impact from Ukraine, we're paying a lot of attention to that today.
But to date it has not caused us any significant problems.
Alright could you also give some color on the sale cycle has the inflation at any of the macro concerns elongated the sales cycle.
No I think I think with our sales cycle, yes, I mean, I guess to be fair, yes. In some regards we're spending a lot of time with our customers talking to them about component prices et cetera, and we have passed on PPV or price increases that requires our sales team.
To do extra effort I don't think it's.
It's kept them away from.
Moving forward with our Msas you saw that we made great great progress on that.
In the quarter so.
I feel like going forward.
Sales cycle with with the MSA and the focus on software going forward.
<unk> is a bit more expertise, it's a more complicated solutions cell, but our team is navigating it nicely.
Nicely.
And gaining confidence every day as we continue with this solution selling methodology.
Alright, alright, thank you.
Youre welcome.
Thank you Mr Latimore.
Our next question comes from the line.
Orin Hirschman with H I G. H investment partners. Please go ahead.
Hi, how are you.
In terms of being able to protect our high in terms of being able to project on the recurring.
I realize you're not giving guidance.
What's the difficulty in terms of protecting on the recurring part of your business.
That being components.
Our component supply is also short changing that part of the business transitioning over customers.
That's the difficulty in projecting it doesn't there'd be some base level projects and you kind of know that much of it.
Yeah.
Well, it's a comment.
Couple of things there and I think the first off is as you can imagine there is a challenge just forecasting out the conversion of telematics device customers over to software and subscription services contract. We do have a roadmap of when we anticipate customers will convert.
But the sales process and the discussions they are a bit more complicated and take some time and so we want to make sure that we work through those.
Matters with our customers and they're comfortable with making that that conversion. The second thing is that as you know our solution is a device enabled solution.
So the actual delivery and activation of our solution does require.
The shipment of devices, we have been working very hard to ensure that the allocations of our devices to our subscription based customers are good are healthy.
But that still has an impact on our ability to forecast in the future. So there are a couple of complexities here that we're just managing through which has limited our ability to give guidance at this time. However, we do hope to get through the supply chain challenges resumed back to giving guidance towards the latter half of this fiscal year.
And all of that aside aren't I wouldn't say that.
When I look at our quarter and where we stand today.
Art mentioned in his script that we have $285 million.
Backlog, plus <unk> outstanding and that should give investors a clear view that we.
We are doing a really nice job driving our customers to committing to revenue going forward and it should drive more consistent revenue over the coming quarters and years. So I feel really good about that and I think as the supply chain improves we're going to get more and more visibility on average that aside we're getting.
Much more of our business, 60% today recurring revenue, which will make that easier and more straightforward for investors to understand going forward.
The couple of a couple of quick follow ups.
Are we to read from this that.
Your recurring would've been even higher if you would've had more device physical devices available.
Absolutely.
Okay.
And just.
Obviously, there is a.
Natural layering in throughout the quarter of devices going live.
<unk> revenue Rick.
Is it fair to assume that there is some.
Even if you ship no new devices, there's going to be sequential uptick in terms of recurring even though new devices going live.
That's a fair assumption, but.
To make the point.
Yeah, well that's the orange.
To the benefit of the subscription model, we do have.
Not only in future looking commitments from our customers through these MSA arrangements.
To activate additional device enabled solutions, but the install base in and of itself provides an added layer of revenue. So you would expect that installed base to help build for revenue growth as well as to help and enhancing our overall gross margins. So the answer the short answer to your question is yes, but our goal really.
He has to continue to move forward on converting a larger larger portion of that base of telematics device customers over and we plan to do that over the next three to four quarters.
Okay.
Question just on the side of the business just is there any RP calculation or something that would give us a flavor for how successful you are being on the conversion.
Okay.
Well, we we don't publish any <unk> information at this time.
We have indicated in the past that.
When you look at our business the <unk> fluctuate depending on the type of solution we're providing.
Riding a fully integrated solution, which includes the application of the platform and also our device enabled firmware software.
That has a higher ARPA versus customers that are just procuring or utilizing our baseline device management service. So depending on mix the <unk> will fluctuate, but at this point in time, we haven't given any <unk> guidance.
And we'll be looking at evaluating that in the medium to long term.
Yes.
Okay and my last question.
You are hopeful that the component shortages will.
We will begin to abate sometime during this year.
So my question is can you tell we've heard from a number of companies that component shortages were abating.
Lockdown started in China can you do you have a feel we're gonna qualitative feel it.
Related to still truly shortage of components versus.
Things that had been ramping but got stopped in their tracks because of the lockdown.
It's very hard to say.
As Jeff mentioned, we have contract manufacturers that do the final phase of assembly in locations outside of China. However, a lot of our downstream components that accumulate up into the bomb are dependent of coming out of China from different manufacturers.
So, it's very difficult to say where or why the the lockdown in China, how it's impacting our product we do know that certain areas things are easing, but because of the continued struggles around the pandemic, especially in certain areas of China. It continues to be a challenge for us so well.
We're watching it very closely where we're taking measures to try to circumvent. These this situation, but it's difficult to say, what's causing each each layer of the supply chain challenge.
Okay, great. Thanks, guys more offline.
Thank you.
Again to ask a question. Please press star followed by one on your telephone keypad.
Currently there are no additional questions waiting in queue I would like to pass the conference back to Jeff Gardner for any closing remarks.
Excuse me.
I do apologize we do have a question from the line of Jerry Revich with Goldman Sachs. Please go ahead.
Yes, hi, good afternoon, and good evening.
Curt I wonder if we could just put out.
Final point on what the subscription business might look like in 12 months once.
The.
Transmission is complete so this quarter.
You folks added 46000 subscribers and that's based on 20% transition so essentially 12 months from now.
Should we be thinking about a $1 2 million subscriber base.
Revenue rate pits.
Great that's commensurately higher for the subscription business compared to today is that.
A reasonable rough framework without getting into the unit economics.
But you mentioned you didn't want to get into it.
Our discussions.
Yeah, Hey, Jerry how are you, yes. So to answer your question. So we do see that the software and subscription services business continuing to grow we were extremely pleased with the fact that in the fourth quarter, we were able to get our software and subscription revenue to 60% of our overall consolidated revenue and our medium to long term mark.
Model that was a key metric for us and so although the full year concentration of SaaS was only about $50 to 52%. Our goal is to get that number to 60% over the next couple of quarters with that in mind and given the success, we're experiencing with converting our base of customers, we do believe that reaching a target.
Of somewhere between one two and $1 5 million subscribers is very reasonable and obviously that will help us to drive that revenue not only in the upcoming fiscal year, but obviously into the future because most of these contracts are 36 month contracts with renewal provisions that extended out close to 60 months so extremely.
With the success for the quarter and we think that it's going to be a good foundation to grow off on into fiscal 2023.
Jerry This is Jeff real quick.
We're going to be we're going to be focused on this conversion for the next couple of quarters.
But we're also continuing to invest in our sales pace of sales.
<unk>.
Subsequent to the conversion and really what we're looking at what gets US most excited about the future is that we're going to be focused on organic sales growth in the 10% to 15% range.
Fiscal year 2023, Youll see us out over 30 sales reps to our sales force across the globe, we're going to also add resources in product and marketing that's going to allow us to.
Realize that 15% growth rate in terms of.
Organic growth year over year, even with that given our transformation, we're going to keep our overall head count relatively flat, but I think it's important for investors to know that we're really investing in the important areas of sales marketing and product.
Okay.
Jeff just to expand on Curt's comment of one two to $1 5 million subscribers. So the bridge to 1.2 is pretty clear.
What gets you from one two to one five.
Is it new platform wins can you just expand on.
What would get you towards the high end of the range that Kurt just laid out.
Yes, absolutely.
The conversion of the base, which easily gets us to one point to hopefully a little more and then what are what our team is pivoting to is much more focused on new logos. We brought in a new chief marketing officer. This year the sales reps that I just mentioned, we're going all in in terms of we like where our product is going to be.
Like what's going on in the transportation logistics space I think there's a lot going on digital convergence during COVID-19 really pushed this board for many of our customers and they're very hungry for these insights that we can deliver so.
All of that's coming together with this transformation that's going on at Cal lamp, that's going to really deliver the kind of recurring revenue and growth that our customers have long been or that our investors have long been looking for.
Got it and then maybe one last one assuming a three year payback for subscription versus.
One time sale.
We've seen program historically that ratio would suggest.
About $25 million.
Lower MRM sales once the conversion is complete.
Realize the effect.
It's not perfect, but I'm wondering if you could comment on that relative to the $75 million run rate of the MRM product line today. Thanks.
Yes, Jerry I don't know if im prepared to kind of talk to.
The exact revenue.
You are referring to I mean, all I would say is that we do have a strong base of customers in that telematic device space, we've been servicing them for anywhere from five to 10 years.
There's probably a population of 60 of them that were really strong customers ours. We believe we can move them into the subscription area and those subscription arrangements.
That is incremental revenue and that revenue will be a lot more sticky given that its in a three year contract range that being said as we mentioned our largest customer in the OEM space.
It's still a very good customer a great great relationship you're familiar with them.
Storage <unk>, we've had good revenue generated from them and our plan is to to get back to those historical levels of revenue with them and grow it from there. So that's that's our focus right now.
Okay. Thanks.
Youre welcome.
Thank you Mr <unk>.
I would now like to pass the conference back to Jeff Gardner for any closing remarks.
Yes, Thank you Bethany and for joining us all today on the call. We appreciate the interest from our investors.
Kurt and I will be participating in the Oppenheimer emerging growth conference on May 10.
This will be a virtual event, if you'd like to request a meeting please contact your Oppenheimer representative or R.
Our firm Shelton group.
Very pleased with the quarter, especially grateful for the excellent efforts of our team it's been a really challenging year and I'm proud of every single employee at Cal am putting forth the effort.
To do the best job possible to take care of our customers. This year really excited about the future. So we look forward to our reporting our progress on our next quarter's call. Operator, you may now disconnect the call.
Thank you that concludes today's conference call I Hope you all enjoy the rest of few day you may now disconnect your lines.