CalAmp(US:CAMP)2023-04-28 00:32Financial Data and Key Metrics Changes - Fourth quarter revenue was $78.5 million, flat compared to the prior quarter and up 15% year-over-year from $68.4 million [65] - Full year revenue was $295 million, flat with the prior year [65] - Adjusted EBITDA in the fourth quarter increased 44% sequentially to $6.8 million, or approximately 9% of revenue, compared to $4.7 million or 6% of revenue in the prior year [82] - Full year adjusted EBITDA was $18.1 million, or 6% of revenue, compared to $24.7 million or 8% of revenue in the prior year [69] Business Line Data and Key Metrics Changes - Software and subscription services revenue in the fourth quarter grew 4% sequentially and approximately 25% year-over-year to a record $51.4 million, representing 65% of total revenue [39] - Telematic products revenue in the fourth quarter was $27.1 million, down 8% quarter-over-quarter and flat year-over-year [66] - Full year telematic products revenues declined 22% to $110 million from $142 million, reflecting ongoing supply shortages and customer transitions to a subscription model [67] Market Data and Key Metrics Changes - The largest OEM customer revenues increased 17% quarter-over-quarter and 95% year-over-year, totaling $15 million in the fourth quarter [50] - Annual recurring software application subscription revenue declined from $94 million to $80 million, primarily due to the discontinuation of the auto leasing business and foreign exchange headwinds [51] Company Strategy and Development Direction - The company aims for long-term recurring revenue growth of 10% driven by full stack solutions sales, with a target gross margin of around 50% [20] - The transition from a hardware-only business to a software and subscription model is ongoing, with 78% of hardware customers converted to a subscription model [42] - The focus will be on upselling existing customers to higher-margin software solutions while securing new software customers [46] Management's Comments on Operating Environment and Future Outlook - Management believes they have turned the corner and expects to return to year-over-year revenue growth by the end of fiscal year 2024 [33] - The company anticipates continued improvements in gross margins in 2024, with a focus on driving recurring revenues [69] - Management expressed confidence in the ongoing transformation to a software systems enterprise, aiming for a high level of execution during this transition [63] Other Important Information - The company announced a restructuring plan expected to result in annualized cash savings of approximately $10 to $12 million [54] - Total net borrowing capacity at the end of the year was $34 million, with aggregate outstanding debt of approximately $232 million [55] Q&A Session Summary Question: What is the path and timing around a positive inflection in free cash flow? - Management indicated that improvements in cash flow should be seen in the second half of the year, driven by cost reductions and improved gross margins [8] Question: Can you provide details on the cost-saving plans? - The company expects annual cash flow reductions of $8 to $10 million, with 80% coming from operating expenses [16] Question: What is the expected organic growth rate for connected devices? - The long-term goal for recurring revenue growth is 10%, with significant progress expected in the coming year [20] Question: Will the software and subscription business continue to grow sequentially throughout the year? - Management confirmed that the goal is for the software and subscription business to grow sequentially [23] Question: How has the upsell pattern been for customers converted to DMC TC? - Management noted that customers are beginning to realize the value of DMC TC, with opportunities for upselling additional features [26] Question: What is the impact of pricing increases on gross margins? - Management confirmed that pricing adjustments have been implemented successfully, contributing to improved gross margins [88]