CAMP4 Therapeutics Corp (CAMP) 2007 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the CalAmp fiscal 2007 first-quarter conference call. At this time all participants are in a listen only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Thursday, July 13th, 2006. I would now like to turn the conference over to Lasse Glassen with the Financial Relations Board. Please go ahead, sir.

Thank you operator and good afternoon, everybody. Welcome to CalAmp's fiscal world 2007 first-quarter earnings call. With us today are CalAmp's President and CEO, Fred Sturm and the Company's Chief Financial Officer, Rick Vitelle.

Before I turn the call over to management, please remember that our prepared remarks and responses to your questions may contain forward-looking statements. Words such as may, will, expects, believes, estimates, could and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those implied by such forward-looking statements made today due to risks and uncertainties, including but not limited to fluctuations in market demand for CalAmps' products and services, general industry economic conditions, competition, continued pricing pressure in the DBS market, supplier constraints in manufacturing yields, the timing and market acceptance of new products, introductions and new technologies and the Company's ability to efficiently and cost effectively integrate acquired businesses. We therefore encourage you to read the more detailed discussion of these risks and uncertainties that are described under the heading "Risk Factors" in the Company's annual report on Form 10-K filed with the SEC on May 10th, 2006 and in the Form 10-Q filed with the SEC today. Any projections as to the Company's future financial performance represents management's estimates as of today July 13th, 2006. CalAmp assumes no obligation to update these projections in the future due to changing market conditions or otherwise.

With that, it's now my pleasure to turn the call over to CalAmp's President and Chief Executive Officer, Fred Sturm. Fred?

Thank you, Lasse. Good afternoon and thank you for joining us today to discuss CalAmp's fiscal 2007 first-quarter results. I will begin my remarks with the financial and operational highlights from the first quarter, including an overview of the Company's performance and then I'll give you an update on the key business initiatives that we are working on currently.

Rick Vitelle will then provide additional details on our financial results, balance sheet, working capital management and cash flow for the first quarter, including our current outlook for the fiscal 2007 second quarter. I will then wrap up with some concluding remarks, which will be followed by a question-and-answer session. With that, I will begin with our first-quarter financial highlights and overview.

Our core business operating results were solid and we believe we were able to achieve the guidance we provided for revenues for the first quarter. Excluding the impact of one time non-cash charges related to the Dataradio acquisition and the Solutions division goodwill impairment, which Rick will discuss in more detail in a few minutes, we achieved adjusted earnings of $0.09 per diluted share for the quarter, which also fell within our expected range. We also continue to see evidence of improved operational execution, as once again we generated a year-over-year improvement in gross margin and cash flow from operations.

Another important achievement during the quarter was the completion of the acquisitions of Dataradio and at Mobile Resource Management or MRM product line of TechnoCom. These acquisitions represent significant milestones in our strategy to build a substantial wireless datacom business by expanding CalAmp's existing business for public safety and machine to machine applications. When combined with our existing wireless business, the annual revenue run rate is in excess of $60 million. Our wireless datacom business has reached a critical mass of market presence and of core competencies, which should allow us to take advantage of opportunities in these markets.

Moving on to the financial revenue overview. Total revenue for the first quarter of fiscal 2007 was $46.3 million, a slight decline on both a year-over-year and sequential quarter basis. As we anticipated, first-quarter revenue was adversely impacted by product transitions that were initiated last quarter by our key DBS customers. Nonetheless, development efforts on our next generation products are on track and we expect DBS product shipments to ramp higher in the second half of our fiscal 2007.

Looking at the breakdown of revenue for the quarter, non DBS products accounted for 27% of the total revenue in the latest quarter compared to 23% of the total revenue in the first quarter of last year. At $43 million, our Products division revenue was up more than 4% from the same period last year. This was due to a combination of factors, including an extra week of operations in the quarter, growth in our wireless datacom business, including our [M2M] acquisitions of two years ago and our public safety applications and the inclusion of results from Dataradio and MRM product line acquisitions a week before the end of the quarter.

Our Solutions division revenue for the first quarter of fiscal 2007 was $3.4 million compared to $6.4 million for the same period last year. During the quarter, we began to phase out some nonstrategic Solutions division activities and shortly after the end of the first quarter, we transferred our design engineering service business from the Solutions division into the Products division.

Going forward, the Solutions division will focus on its primary business, which is comprised of the industry-leading TelAlert urgent messaging software applications, as well as the CalAmp Media Manager software.

To provide a little background on these products, TelAlert's technology mobilizes organizations by extending applications such as network monitoring, enterprise management, help desk, dispatch and call center systems to mobile users. Currently, TelAlert has more than 4500 installed sites in 58 countries and currently licenses include about 80% of the Fortune 100 companies in the U.S.

We also had recent success in the licensing of our Media Manager software to provide secure delivery of movies and other video content over broadband conduits to PCs and select portable devices. The CalAmp Media Manager is designed for and targeted to owners of premium entertainment content as opposed to corporate or industrial media applications. For example, as customers of CalAmp Media Manager include Movie Link, a joint venture of five major entertainment companies, Starz Vongo, which is part of Liberty Media Click Star, which is a joint venture between Intel and Morgan Freeman's production company, and Comcast Interactive Media. These two software platforms, TelAlert and Media Manager, now comprise the Solutions division product portfolio as we conclude the Vytek acquisition integration.

Now let's move onto an update on several of our business initiatives. Similar to prior periods, the first-quarter products division sales continued to be driven by DBS products that support our customers multi-satellite and integrated digital video recorder service offerings. These products help enable the DBS service providers enhanced offering such as high-definition TV or HDTV and/or digital video recorders commonly referred to as DVRs, along with other popular DBS programming services. These high-complexity, high-value added products also carry higher average selling prices or ASP's, which provide a long-term revenue growth opportunity for CalAmp.

I'd like to take a moment to provide an update on the product mix shift of our DBS products.

As you may know in the past, we have grouped our DBS products into three categories based on ASP ranges. Low ASP's, which are $25 or less, medium ASP's, which are between $25 and $50 and high ASP's, which are $50 or more.

During fiscal 2007 first quarter, low, medium and high ASP's comprised 20%, 63% and 17%, respectively, of our DBS sales. On a sequential quarter basis, this compares to a low, medium and high ASP products that accounted for 17%, 60% and 23%, respectively, of DBS sales in the fiscal 2006 fourth quarter. As expected, the revenue from high ASP's products as a percent of total DBS product sales declined slightly compared to the fourth quarter as both DirecTV and Echostar are in the process of transitioning their higher complexity outdoor equipment to next generation products and (indiscernible) of their expanded HDTV and integrated DVR services. Until we begin shipping these next generation products, we expect our DBS customers to maintain lower inventory levels of our higher ASP products, which we have factored into our business outlook.

Now let's review the progress we made during the quarter on this product transition effort, beginning with our combination [KAK Yuban] product for DirecTV. We recently commenced production tooling and are scheduled to submit production approval samples during our second quarter. We anticipate a production ramp-up in the second half of fiscal 2007 based on our obtaining early Q3 product qualification approval. Echostar is also addressing the (indiscernible) bandwidth requirements brought on by HDTV and other services with the transition to a new three satellite integrated outdoor unit. We continue to make good progress on our development efforts for this new Echostar product and are in the latter stages of product qualification. Final approval and production ramp-up are expected to be in the second half of our fiscal 2007.

Although Dataradio and the MRM product line required from TechnoCom have only been a part of CalAmp for about six weeks now, we have begun the process of integrating these acquisitions with CalAmp's existing wireless datacom businesses. And our initial focus is on achieving material procurement cost savings and capitalizing on cross-selling opportunities.

Going forward, a talented and experienced executive will be leading CalAmp's efforts in the wireless datacom marketplace. Hopefully, many of you read the press release we issued late last month announcing the appointment of Michael Burdiek to the position of Executive Vice President of our wireless datacom strategy and integration. In this role, Michael is responsible for developing and implementing our wireless datacom strategy as we pursue new opportunities in private wireless networks and machine-to-machine solutions for public safety, fleet management, asset tracking and remote monitoring of critical infrastructure. Michael will be overseeing the integration of these recent acquisitions.

We are very excited about the opportunity in the wireless datacom marketplace because it provides us a tremendous long-term growth opportunity. The ability to increase our operating margins and it also helps diversify the Company's market segments and customer base. We expect our wireless datacom business will become a significant part of CalAmp's overall operations and I look forward to reporting to you the progress we make in this area in future periods.

I will now turn the call over to Rick Vitelle, our Chief Financial Officer, for a closer look at the first-quarter financial details and business outlook.

Okay, thanks, Fred. Before our customary discussion of the first-quarter results, I would like to provide some details on the charges we recorded during the quarter related to the acquisition of Dataradio and the Solutions' division goodwill impairment write-down.

During the first quarter, we incurred a onetime non-cash write-off of in-process R&D, research and development, also known as IPR&D, totaling $6.9 million, which was quantified by an independent evaluation consultant. IPR&D is that portion of the purchase price of a technology company assigned to (technical difficulty) R&D projects in process in the Company being acquired that must be written off by the acquiring company under the prevailing accounting rules. Partially offsetting this IPR&D charge was a non-operating gain of $689,000 associated with foreign currency hedging activities in conjunction with the Dataradio acquisition, for which the purchase price was denominated in Canadian dollars. In addition, in the first quarter, as a result of the annual impairment test of the Solutions' division goodwill, that was conducted by an independent valuation expert during the first quarter, we recorded a non-cash impairment charge of $29.8 million. This impairment charge reflects the declining revenues associated with the Solutions division's information technology professional consulting business. Despite our efforts to grow this portion of the Solutions division's business, CalAmp does not have the size and scale to compete effectively in this market against the large IT consulting companies or against service providers at low-cost geographic regions such as India.

As a result, during the fiscal 2007 first quarter, we recorded a GAAP basis net loss of $34.1 million or $1.47 per diluted share. Excluding the effects of the Solutions division impairment charge, the Dataradio IPR&D write-off and the foreign currency hedging gain, fiscal 2007 first quarter adjusted net income was $2.2 million or $0.09 per diluted share compared to GAAP net income of $2.0 million or $0.09 per diluted share in the same period last year. A reconciliation of the adjustments made to compute adjusted net income in the latest quarter is included in the financial tables of the press release we issued this afternoon.

I would also like to point out the results of operations for the fiscal 2007 first quarter on both a GAAP basis and adjusted earnings basis include stock-based compensation expense of $260,000 net of tax equal to approximately $0.01 per diluted share. Stock-based compensation was not expensed in the income statement prior to the current fiscal year.

I will now move on to a summary of our gross profit performance, working capital management and cash flow results for the fiscal 2007 first quarter and ramp up with our financial guidance for the fiscal 2007 second quarter.

For the first quarter of fiscal 2007, gross profit in the Products division increased by 14.5% to $10.1 million, up from $8.8 million in the first quarter of the prior year. In addition to the higher gross profit dollars, gross margin for the Products division improved to 23.5% in the quarter from 21.4% in the first quarter of last year. The higher gross margin in the Products division is attributable primarily to increased shipments of higher margin products of our wireless datacom product lines.

Gross profit for the Solutions division was $840,000 or 25% of sales compared to $1.9 million or 29.4% of sales last year. Compared to last year, the Solutions division gross margin was impacted primarily by lower revenue.

Now moving onto the balance sheet, our total inventory was $30.6 million at the end of the latest quarter, up from $18.3 million at the end of the fourth quarter of fiscal 2006 and up from 26.5 million at the end of the fiscal 2006 first quarter. About half of the increase on a sequential quarter basis was attributable to the acquisitions of Dataradio and the TechnoCom product line and the remainder of the sequential quarter inventory increase is due to a buildup of DBS inventory in the latest quarter, resulting from the delayed ramp-up of a latest generation product by one of our customers. Our current inventory levels represent an annualized turnover of about six times.

Accounts Receivable of $28.5 million represents approximately 43 days outstanding. This average collection period is essentially unchanged from a year ago. Accounts receivable at May 31, 2006, the end of our latest quarter, includes $4.6 million attributable to Dataradio.

Our primary sources of liquidity are our cash and cash equivalents, which amounted to $30.8 million at the end of the first quarter. To finance the acquisition of Dataradio, during the first quarter, we obtained a new credit facility with the Bank of Montreal totaling $45 million, of which $38 million was borrowed, comprised of a $35 million term loan and a $3 million draw-down on a new $10 million revolving line of credit. Of the $38 million proceeds of the new borrowings, $7 million was used to pay off CalAmp's previously existing bank loans. The Bank of Montreal term loan and the line of credit mature in May 2011 and bear interest at the rate of LIBOR plus 7/8 of a point, which for the first year is an effective rate -- at the present time, is an effective rate of about 6.3%.

Operating cash flow for the first quarter of fiscal 2007 was $4.7 million, attributable primarily to the adjusted net income, excluding the effects of non-cash charges related to goodwill impairment and in process R&D, depreciation and amortization of $1.1 million. Offsetting the first-quarter operating cash inflow were cash outflows of $52.5 million for the Dataradio and TechnoCom product line acquisitions net of cash acquired and about $800,000 for capital expenditures.

Now turning to our financial guidance, based on our current forecast, we expect that fiscal 2007 second-quarter revenues will be in the range of 55 to $60 million. On a sequential quarter basis, after normalizing the first quarter to account for a 13-week quarterly run rate, our second-quarter revenue forecast reflects growth of 7 to 19% on our base business and includes $9 million for the recent acquisitions. Our forecasted GAAP earnings are expected to be in the range of $0.05 to $0.09 per diluted share. Included in our GAAP EPS guidance is stock option expense of approximately $370,000 net of taxes or about $0.015 per share, amortization expense related to recent acquisitions of $800,000 and net interest expense of $300,000 versus net interest income of $301,000 in the prior quarter.

With that, I will now turn the call back over to Fred for some final comments.

Thank you, Rick. Just to recap the highlights form the first quarter, operationally our results were solid and we achieved our expected range for both revenues and adjusted earnings. Our overall gross margin in the fourth quarter remained strong and we generated operating cash flow of $4.7 million, a 15% improvement over the prior year. We made steady progress in our development efforts for the next generation of satellite products for our key DBS customers. Although the total DBS sales declined marginally, we expect an increase in our second quarter and expect a stronger second half of the year. And of course, we completed the acquisitions of Dataradio and the MRM product line from TechnoCom, which I believe will be a key element of CalAmp's future for growth and profitability.

Additionally, our current wireless datacom business forecasted in our second quarter is at a $70 million run rate, which I think is a fantastic accomplishment.

So that concludes our prepared remarks. Thank you for your attention and at this time, I would like to open up the call for questions. Thank you. Operator?

(OPERATOR INSTRUCTIONS). Matt Robison, Ferris Baker Watts.

What I would like to do is first, Rick, I'd like to give you a couple of housekeeping ones I'll come back to after a couple of questions for Fred. What I was interested from you, Rick, is pretax FAS 123(R) and the year-over-year comparison for the ASP's? And Fred, first question I have for you is on this inventory situation versus the new units that you indicated are targeted for production approval by both your customer A and customer B. (technical difficulty) interest from the Dataradio what is going to happen with that inventory you built when you have the new units coming out?

Okay, let me address that, Matt. I think if you'll remember in the last conference call, we had mentioned that we thought we would see a fairly significant gross margin reduction and since the actual shipments of that product in our first quarter weren't as high as we thought they were, that reduction was about half of the impact that we had originally anticipated and so that is actually pushing into and is part of our projection in our second-quarter results. So we are actually forecasting lower margins on our satellite side of our business in the second quarter. But we expect to sell all of that product.

Okay. What is the -- I understand that -- okay so they're going to take that product -- it's not necessarily going to be obsolete by the new products that are --?

Currently, that's not in our forecast. We believe that by the time all the product qualifications are completed that we will be able to run through the product that we have in our pipeline.

Okay. Can you comment on linearity and seasonality for the Dataradio business?

There's some seasonality to the business but it's not as drastic as what we see in the satellite side of our business. There is some lumpy sales, particularly on the public safety side, as you can imagine, where it's project oriented. But the M2M side or the machine-to-machine side, tends to be a fairly linear. So that any lumpiness comes out of the public safety side, which is only 50% of the overall revenue to begin with.

Is it federal -- it wouldn't be federal, would it?

Not necessarily federal. It could be, but it's generally municipalities or third-party integrators.

So it's fourth-quarter strength, is that -- or fourth calendar quarter strength?

No, actually, in our projections, we see strength in I think our third quarter.

Okay, all right. By linearity, I also mean during the quarter is it the kind of -- is it like an enterprise business where you get you know, 40 plus percent of your revenue from that business in the third month?

I guess we'll go back to the same -- the type of -- I mean what's important is first of all, the customer base is really diversified, particularly on the Dataradio side, as well as the MRM we bought from TechnoCom. And so, by virtue of having a very diverse customer base, you should be able to eliminate that -- everything is shipping in one quarter -- or not one quarter, one month, at the end of the quarter. Because you have various customers taking product over time on different programs. But there is on the public safety side, again, there is a tendency to have it be more project oriented. So if there is any nonlinearity such as that, it's generally on the public safety side, which is again, 50% of the overall revenues.

I could see given that you guys don't have calendar quarters then some might benefit from being out of phase with normal purchasing cycles, I suppose.

Yes, I don't know yet. We haven't had the experience yet.

Does Dataradio have any key vendors or in general do you have any key vendors that --?

Yes, certainly we have some contract manufacturers that are key and we have sole source component suppliers that are key. In particular, we have a new product introduction that came out a couple months ago in which there is a key supplier of a microprocessor. So we absolutely have some key suppliers.

So, Rick, also on that FAS 123(R), can you break it down by operational category?

Yes, roughly -- well let's start with I think one of your first questions, the pretax amount? The pretax amount in the latest quarter was $420,000. The amount that is reflected in cost of sales is about $30,000. The amount in research and development expense is about $40,000. The amount in sales and marketing is about $45,000. And the remainder is in G&A expense.

You said 45K for sales and marketing?

About 45, yes.

Now, for modeling those expenses, should we apply some sort of proportionality as you just adjusted?

I think that's a reasonable assumption.

And the tax that we -- what do you expect the tax to be for the Company and is that -- should we be using that tax to impute the pretax for the FAS 123 370K that you gave for guidance?

I think that 370K was already tax effected.

Right, that's why I said to impute the pretax.

Oh, okay. Yes, the effective rate is right around our overall normalized effective rate, which is, call it 40%.

Okay, so we're flat on that going forward.

Until further notice, yes.

Yes, so the year-over-year percentages for the different ASP levels, do you have that, for first quarter of '06?

Yes, I think (indiscernible) was at the -- last year, the low ASP dollar category accounted for about 27% of our DBS sales dollars, medium category accounted for 46% and that high ASP category accounted for 27%. And in the latest quarter --

I got the rest of it. Okay, so, nice cash generation. Anything going on that you would expect could change that trend? I mean your current accounts even were pretty decent given that you picked up this new balance sheet.

Well there is one thing that will affect our operating cash flow in the second quarter, and that is as a result of how the Dataradio acquisition was structured and the terms negotiated between the parties, the Dataradio sellers left roughly $6 million of cash in the Company and then shortly after the acquisition was consummated, paid out those bonuses, paid that $6 million out to its workforce as bonuses and that expense was accrued in the pre-acquisition income statement of Dataradio and is accrued as a liability in Dataradio's closing balance sheet at the date of acquisition. But that will manifest itself in our second quarter as a cash outflow to liquidate that accrued liability that we then assume.

Matt, I'm going to give you something I normally don't give you. If you take a look at our second quarter, if you take a look at the midpoint of our guidance, I would like to try to break that down for you. We believe at this point that our wireless datacom business will do about $18 million. The Solutions division approximately $3 million, with the remainder of the midpoint being satellite products.

So, the TechnoCom product line [for] Dataradio really represent about half the (multiple speakers)

Half of that, correct.

That implies that the EFJ business and the Skybility legacy are cooking right along.

We're happy with them. And then the margins are approximately 40% for the M2M, or the wireless datacom, excuse me and roughly 50% for the Solutions, and the remainder being satellite, and of course, you do some math.

The Solutions division lost about 1.4 million in the first quarter?

Correct.

And you figure that is going to be near breakeven at that margin level?

It should be close now, yes.

All right, I'll let somebody else ask a question.

[Deborah Seakis], Crystal Equity Research.

I'd like to go back to the questions about the inventory. You mentioned that there had been some trends among your DBS customers to carry lower inventory. Is this just an aspect of transitioning from one product group to another or do you believe that this is a pattern that they will continue going forward, keeping lower inventories and perhaps ordering in smaller quantities at faster rates?

Well they're always after lower inventories. But in particular, I think what we were referring to was the fact that both of our key customers were in a product transition from essentially a technology that one of them elected to obsolete even though we had just integrated it and provided into the marketplace. And so what they didn't want to do is prolong (technical difficulty) next generation into the marketplace. So that inventory reduction was more about not having a giant pipeline full of products that they did not want to sell into the marketplace on a long-term basis. And it was a product conversion for the other customer. And they over time become very good at managing their inventory and so we would not expect them to have major changes downward in inventory unless they had an over-inventory situation.

So the buildup then has taken place on your books instead.

Yes.

When they resume more normal patterns, are we going to see an upsurge in your ordering for a period of time as that inventory then moves out of your shop?

And that is what we anticipate in the second half of fiscal 2007.

In the second half?

Yes. Although we have some. We do have (technical difficulty) if you take our revenue for our first quarter and normalize it for a 13-week period, our revenue in our satellite business is up well over 10%, in terms of our projections using that midpoint.

Okay, good. And then if you could just repeat then the net interest expense figure that you had given as part of your guidance for the second quarter?

Yes, Deborah. We're forecasting -- because of the much higher level of debt that we now have and the fact that we have used roughly $23 million of our cash, what was running at a net interest income level of about 300,000 in this most recently concluded quarter will swing to a net interest expense amount of about $300,000 in our second quarter.

And for clarification, this is Fred. The $800,000 -- it's additional amortization related to the acquisition. So we have had a base of about $400,000 a quarter, I believe of amortization. So the total amortization, as you're doing your cash flow calculations, the total amortization is closer to $1.2 million.

Brian Freckmann, Crown Capital.

You know what, I think I need a little more guidance on the back half of the year. You guys have talked about the DBS a little bit. I was hoping you could give us a little more color as to what you're seeing from your customers there, I mean, the two of them, how they're talking to you about HD product specifically? And then the other business as well for the back half of the year.

Okay, Brian. In terms of -- I can give some color on it. Obviously, we have historically have not given that of guidance. But the color I think that we can give you, in particular on the DBS side, is we expect a couple of product launches and new product launches in our second half of the year. Some of those will cannibalize other product sales we have today and some of them will be additional. But we do expect the revenue to be much higher in our second half than our first half.

With respect to the other product lines, we have not given that guidance but we're looking to try to grow those businesses 15% a year. So you can do your math on what that takes. But we have not provided that kind of guidance in the past and we're not prepared at this point to do that.

And remind me then, I guess what was the base that 15% comes off of then?

Okay, for this quarter, we are using -- you can 18 going in as sort of our midpoint for the wireless datacom business; 3 million for our Solutions business, with the remainder being the satellite business. The midpoint of our range so at 57.5.

Matt Robison.

Rick, those breakdowns on the FAS 123, was that pretax or after-tax?

That was pretax.

Patrick Forkin, Tejas Securities.

Rick, how much goodwill is left on the balance sheet related to the Solutions division after this impairment charge?

I think it's just 2 or $3 million. I might also mention, Patrick, that as you will see when you get our 10-Q and have a chance to read that, the $29.8 million goodwill impairment charge is in reality an estimated goodwill impairment charge because we have only had time to complete Phase I of what is a two-phase analytical process. When Phase I result in an indicated impairment, then you have to drill down and basically do a lot more work on the entire balance sheet. And even though we haven't had a chance to complete Phase II, we think that $29.8 million is a pretty good estimate of what the ultimate goodwill impairment charge will be when we have a chance to firm it up. And I fully expect it will be firmed up in Q2.

Okay great, appreciate that. And then this inventory buildup. As you flush that out, will that be over Q2, Q3 and Q4 or a shorter period?

I believe it will be over Q2 and a little -- will dribble into Q3.

Okay. And Rick, you mentioned gross margins for the Products division at 23.5%. Any guidance on what that would be for Q2 here? Relative if nothing else?

Products division?

Yes.

I think you can get there with the numbers we gave. Roughly 40% gross margin for wireless datacom, 50% for our Solutions and the remainder with an overall gross margin of approximately 25 to 26%.

Okay, very good, thanks, guys.

Pat, I was a bit low on the response to your first question. The remaining goodwill on the Solutions books after giving effect to this impairment charge is about $4.6 million.

John Bucher, BMO Capital Markets.

In the wireless data side of your Products division, I was just wondering if you could possibly characterize for us the growth rates that you expect for the three verticals that appear to be there -- public safety, enterprise and industrial or critical infrastructure. And if you can't give exact rates, if you can just rank order what you see as being the growth opportunities of these three subsegments? You talked a little bit about the project oriented nature of public safety. Just wondering, what does the opportunity funnel look like there and then some of the other segments, maybe qualitatively talk about those verticals. Thanks.

Okay. On the public safety side, the pipeline, as you can imagine, is a couple years long. So we have a pretty good view based on history of what the growth rate can be. We would expect the public safety side to be in the 5 to 12% range by its very nature, with the enterprise and the machine-to-machine being more in the 10 to 20% range. And in some cases, it can be much higher depending on if you get into a program that is running at a higher rate itself. But from an ongoing basis, on customers we already have in place, we would expect a 10 to 20% overall for the two pieces and the third piece being a lower amount, 5 to 12.

(OPERATOR INSTRUCTIONS). There are no further questions at this time. I would now like to turn the call back to management for any further remarks.

I have no further remarks and I thank everybody for joining us today.

Ladies and gentlemen, this concludes the CalAmp fiscal 2007 first-quarter conference call. If you would like to listen to a replay of today's conference call, please dial 1800-405-2236 or for international participants, please dial 303-590-3000 with pass code 11066007 followed by the #. (OPERATOR INSTRUCTIONS). You may now disconnect and have a great day.