CAMP4 Therapeutics Corp (CAMP) 2014 Q4 法說會逐字稿

Greetings and welcome to the CalAmp fiscal 2014 fourth quarter and full year results conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Lasse Glassen of Addo Communications. Thank you. You may begin.

Thank you Operator. Good afternoon, and welcome to CalAmp's fiscal 2014 fourth quarter and full year results conference call. With us are CalAmp's President and Chief Executive Officer, Michael Burdiek, and Chief Financial Officer, Rick Vitelle.

Before I turn the call over to management, please remember that our prepared remarks and responses to questions may contain forward-looking statements. Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal, 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 due to a variety of factors, including product demand, competitive pressures and pricing declines on the Company's wireless and satellite markets, the timing of customer approvals of new product designs, intellectual property infringement claims, interruption or failure of our internet based systems used to wirelessly configure and communicate with tracking and monitoring devices that we sell, and other risks and uncertainties that are described in the Company's Annual Report on Form 10-K for fiscal 2014, as filed today with the Securities and Exchange Commission.

Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions it can give no assurance that its expectations will be obtained. The Company undertakes no obligation to update any forward looking statement, whether as a result of new information, future events, or otherwise.

Michael Burdiek will begin today's call with a review of the Company's financial and operational highlights. Rick Vitelle will then provide additional details about the Company's financial results, and Mike then will wrap-up with the Company's business outlook and guidance for fiscal 2015 first quarter. This will be followed by a question-and-answer session. With that, it is now my pleasure to turn the call over to CalAmp's President and CEO, Michael Burdiek.

Thank you Lasse. CalAmp's fiscal 2014 was highlighted by strong growth in our core markets, strategic M&A activity, and focused operational execution that together resulted in a strong period of expansion for the Company. For the full year we achieved record consolidated revenues of $236 million, representing 31% year-over-year growth. Our performance was driven by a 34% year-over-year increase in wireless datacom segment revenues. And 19% growth in our satellite segment results. The revenue growth in both of our reporting segments, along with improving gross margins, boosted our profitability in fiscal 2014, with non-GAAP net income growing 36% compared to the prior year.

Also during this past year, we laid the groundwork for CalAmp's growth in emerging opportunities such as auto insurance and heavy equipment telematic solutions, as well as the continued expansion of our international footprint. In fiscal 2014, we announced supply agreements with three key customers in the insurance telematic space, and expect to execute additional agreements with customers and channel partners during fiscal 2015 and beyond. Insurance telematics applications were a key driver of product revenue growth in the second half of fiscal 2014, and we expect that this trend will continue in the current fiscal year.

In the heavy equipment market in early fiscal 2014, we announced an important agreement with Caterpillar to supply specialized telematic products that will enable data communications for equipment deployed anywhere around the globe. Our activities with Caterpillar are on track, and we continue to believe that this important customer will become a meaningful contributor to consolidated revenue beginning in the second half of the current fiscal year.

On the international front, revenue from customers outside of the United States grew to $45 million, or 19% of consolidated revenues in fiscal 2014. We made significant progress in developing opportunities with customers in western Europe, while also building a pipeline of future opportunities in Latin America and other regions around the world. In addition to the progress made with core initiatives during fiscal 2014, we successfully integrated two acquisitions that further expand our addressable market, improve our margins, and strengthen our competitive position. Early in fiscal 2014, we acquired Wireless Matrix as a foundational component of our long-term growth strategy to position CalAmp as a leading provider of integrated hardware, software, services and solutions within our core verticals.

During the fourth quarter we acquired Radio Satellite Integrators or RSI, a privately held provider of fleet management solutions, primarily for applications such as public works, waste management, transit and public safety. The RSI acquisition expands our presence in the state and local government market by augmenting our existing public safety products with high margin, software as a service, or SaaS solutions. The integration of both acquisitions has now been completed, and we are pleased to report that these acquisitions were accretive to CalAmp's margins and non-GAAP earnings in fiscal 2014, and are expected to contribute to our future growth and profitability.

Looking at our fourth quarter results, consolidated revenue was $59.8 million, up 24% year-over-year with wireless datacom revenue up 32% to $49.2 Satellite revenue was $10.6 million. Satellite revenue in the quarter was $10.6 million, down 4% year-over-year, but somewhat better than our earlier outlook. At the bottom line we generated GAAP basis earnings per diluted share of $0.08 in the fourth quarter, with non-GAAP earnings of $0.20 per share. We generated cash flow from operating activities of $3.4 million in the fourth quarter, and $22.8 million for the full year. This strong cash flow performance enabled us to pay off our term loan in full in the third quarter, and end the year with zero bank debt.

Now I would like to review our operational highlights for the quarter. The wireless datacom segment posted solid revenue growth, as we continued to experience healthy customer demand for our products in our core verticals. Fleet management which continues to be the largest contributor to MRM product sales, along with asset tracking and the vehicle finance verticals, all grew at a healthy year-over-year rate. However, performance issues on the part of the contract manufacturer inherited with the Navman wireless product acquisition, prevented us from shipping approximately $2 million in product orders in the fourth quarter. We are in the process of transitioning away from this contract manufacturer, and expect to fulfill this backlog in the first half of fiscal 2015.

Also in the fourth quarter we experienced some softness in stolen vehicle recovery product sales in Latin America, due to economic disruptions in Venezuela, and slower order flow from customers in Brazil. We continue to have a healthy pipeline of opportunities throughout Latin America, especially in Brazil. We expect this region to contribute to overall revenue growth during the coming fiscal year. We continue to be keenly focused on opportunities involving auto insurance telematics applications. Revenue from this vertical climbed to approximately $4 million in the fourth quarter, based on shipments into three mainstream insurance telematics programs. In addition we are currently addressing two opportunities that are in pilot phases, one domestic and one international. We are also participating in proof of concept phases for an additional half dozen opportunities in the US and Europe.

Though our near term opportunity in the insurance telematics market is mostly hardware centric, we believe that longer term there are opportunities for CalAmp to add additional value beyond just hardware devices. As our technology matures and our customers validate their business models, revenue from insurance telematics applications could become a significant growth catalyst for CalAmp in the coming years.

Moving onto other verticals, fourth quarter revenues increased in the energy and automotive segments on a sequential basis along with an uptick in the municipal government sector that was primarily due to contributions from the newly acquired RSI business. Recurring revenues from fleet management, automotive aftermarket, vehicle finance applications, and satellite communication services comprised 17% of consolidated revenue for the fourth quarter, and 16% of consolidated revenue for the full year. At the end of the fourth quarter we had approximately 460,000 unique software application subscribers, up from approximately 430,000 subscribers at the end of the third quarter.

Fourth quarter energy revenues benefited from contributions from an OEM customer in the commercial solar power industry. We anticipate business with this solar OEM to be somewhat lumpy in the current fiscal year due to the project-based nature of the demand, with revenues expected to be down in the first quarter, but picking up strongly in the second quarter of this fiscal year. Elsewhere in the government vertical, we are now seeing good traction for our fleet management SaaS offerings for municipal customers with several recent contract wins, which we expect will continue to SaaS subscriber growth in the coming quarters. We hope to announce additional details about these key customer wins in the coming months as we progress from the award phase.

Turning to our satellite segment, revenue in the fourth quarter was $10.6 million, lower on both a year-over-year and sequential quarter basis, but a bit better than what we originally expected. Satellite gross margin in the fourth quarter was 20.5% reflecting a 400 basis point improvement year-over-year, driven by an evolving product mix, and targeted cost reductions on legacy products. Overall we remain quite optimistic about our long-term growth prospects. We continue to invest significant resources and new initiatives that we expect will drive revenue and earnings growth on a sustained basis over the coming years.

An example of one of these initiatives was a recently announced new product category for CalAmp, the MDT7. This Android-based 7-inch mobile data terminal is ideally suited for commercial mobile workforce management applications, and is a natural complement to a range of fleet management telematics devices, targeted at the same fleet management service provider customer base. More importantly around mid-year we plan to launch the CalAmp private App Store to support commercial transactions, and the delivery of value-added applications to the MDT7, whether developed and supplied by CalAmp, third-party content providers, or our own current product customers. The App Store should enable an ecosystem of partners and customers to both deliver and extract value from applications over the life cycle of various product and service deployments. Many of the service platform elements such as PULS and COLT that we have developed for our current range of products and services, are key infrastructure elements that will be leveraged to turn the app store concept into a reality. We look forward to sharing additional details about the app store as we reach key development and commercial milestones.

In summary, we made tremendous progress in fiscal 2014 as we grew revenues to record levels, and executed on key strategic growth initiatives. We remain energized and bullish on our ability to maintain markets and thought leadership over the coming years. With that, I will now turn the call over to Rick Vitelle, our Chief Financial Officer for a closer look at our fourth quarter financial results.

Thank you Michael. I will provide a summary of our gross profit performance, income tax position, working capital management, and cash flow results for the fiscal 2014 fourth quarter. Consolidated gross profit for the fiscal 2014 fourth quarter was $20.6 million, an increase of $5.6 million over the same quarter last year, primarily as a result of higher revenue in the wireless datacom segment. Consolidated gross margin improved to 34.4% in the latest quarter, compared to 31.1% in the fourth quarter of last year, due primarily to the contribution of the higher margin SaaS revenue from the Wireless Matrix acquisition, and margin improvement in the satellite segment.

Looking more closely at gross profit by reporting segment, wireless datacom gross profit was $18.4 million in the fourth quarter, with a gross margin of 37.5%. Year-over-year wireless datacom gross profit was up by $5.2 million, while gross margin improved more than 2 percentage points, primarily due to the shift in revenue mix towards higher margin subscription-based revenues. On a sequential quarter basis wireless data com gross margin improved a full percentage point over the third quarter primarily as a result of product mix changes.

Our satellite business had a gross profit of $2.2 million in the fourth quarter, with a gross margin of 20.4%. This compares to gross profit of $1.8 million, and a gross margin of 16.5% in the fourth quarter of last year. These year-over-year profitability improvements in our satellite business are primarily due to a shift in product mix in favor of more higher margin home networking products.

Next looking at bottom line results, GAAP net income for the fiscal 2014 fourth quarter was $3.1 million, or $0.08 per diluted share, compared to net income of $32.6 million, or $1.06 per diluted share in the fourth quarter of last year. That included an income tax benefit of $29.2 million from eliminating substantially all of the deferred tax asset valuation allowance associated with net operating loss and tax credit carry-forwards. Excluding this income tax benefit and applying the same effective tax rate to the fiscal 2013 fourth quarter that applied to the fiscal 2014 fourth quarter, pro forma GAAP basis net income in the prior year's fourth quarter was $2.3 million, or $0.07 per diluted share.

Notwithstanding the fact that beginning in fiscal 2014, the Company's GAAP basis effective tax rate approximates the US federal statutory tax rate of 35%, the Company's pretax income is still largely sheltered from taxation by NOL and R&D tax credit carry-forwards. I will come back to this topic in a minute.

Our non-GAAP net income for the fiscal 2014 fourth quarter was $7.1 million, or $0.20 per diluted share, compared to non-GAAP net income of $4.8 million, or $0.16 per diluted share for the same quarter last year. Non-GAAP earnings excludes the impact of intangible asset amortization and stock-based compensation expense, and includes an income tax provision for cash taxes paid or payable for the period. For a reconciliation for the GAAP and non-GAAP financial results, please see our fourth quarter earnings press release that was issued today, which is available on our website.

At the end of fiscal 2014, the Company had NOL and R&D tax credit carry-forwards for Federal income tax purposes of $99 million and $5 million respectively. In addition, the Company has tax deductions on exercised stock options and vested restricted stock awards that exceed stock compensation expense amounts recognized for financial reporting purposes. These excess tax deductions which amounted to $12.8 million and $5.3 million in fiscal years 2014 and 2013 respectively,reduce current taxable income and thereby prolong the tax shelter period of the NOL and the R&D tax credit carry-forwards. The Company expects to generate additional excess tax deductions on equity awards in the future. In view of the NOL and tax credit carry-forwards, and the additional excess tax deductions on equity awards expected to be generated in the future, the Company anticipates that its taxable income will be largely sheltered from taxation the next several years.

Moving to the balance sheet, at the end of the fiscal 2014 fourth quarter, the Company had cash and equivalents and marketable securities of $28.3 million, down from $31.1 million at the end of the prior quarter. The reduction is primarily due to the acquisition of RSI that was completed in the fourth quarter forma net cash consideration of $6.1 million. This cash outflow was partially offset by cash flow from operations of $3.4 million generated during the fourth quarter.

Our total outstanding debt at the end of the fourth quarter was $1.9 million, which represents the carrying value of the noninterest bearing note payable issued in May of 2012 as part of the purchase consideration for the product line acquired from Navman Wireless. This note is payable in the form of sales price rebates as sales are made to Navman under the five-year $25 million supply agreement that was entered into concurrent with the Navman product line acquisition.

Our total inventory at the end of the fourth quarter was $15.0 million representing annualized inventory turns of 10 times. At the end of the immediately preceding quarter inventory was 12.5 million, which represented annualized inventory terms of 13 times. Our consolidated Accounts Receivable balance was $36.9 million at the end of the fourth quarter. This represents an average collection period of 53 days compared to the Receivables collection rate of 43 days during the previous quarter. The increase in the average collection period in the fourth quarter is primarily attributable to the fact that a significant portion of fourth quarter sales were made in the latter part of the quarter, which has the effect of skewing the collection period upward as a result of the formula used to calculate this metric.

With that I will now turn the call back over to Michael for our guidance and some final comments.

Thank you Rick. Now let's turn to our outlook, including our financial guidance for the first quarter and year as a whole. During the first quarter of fiscal 2015, we expect consolidated revenue in the range of $56 million to $60 million. We anticipate wireless datacom revenue in the first quarter will be higher on a year-over-year basis, but relatively flat on a sequential quarter basis, due primarily to an expected $3 million decline on a sequential quarter basis in revenue from our solar energy OEM customer.

Satellite revenue in the first quarter is expected to be down slightly on a sequential quarter basis. At the bottom line we expect first quarter GAAP basis net income in the range of $0.05 to $0.09 per diluted share, and non-GAAP net income in the range of $0.17 to $0.21 per diluted share. We enter fiscal 2015 with continued strong customer demand across most of our key market verticals, and significant growth opportunities that are expected to gain momentum as the year progresses. As a result, similar to fiscal 2014, we anticipate that the second half of fiscal 2015 will be stronger than the first half with contributions from our emerging insurance and heavy equipment customers. In addition in fiscal 2015 we expect satellite will return to a normalized revenue run rate of approximately $10 million per quarter, as experienced prior to fiscal 2014, and that our wireless datacom business will grow at or above market rates for the full year, resulting in overall fiscal 2015 growth in non-GAAP earnings per share of approximately 30%.

In closing I would like to recap some key points. First, emerging opportunities in the heavy equipment sector, insurance telematics applications, and international expansion initiatives, are expected to be growth catalysts in fiscal 2015 and beyond. Second, we are quite pleased with the early performance of the RSI acquisition, and expect this transaction will improve CalAmp's reach and growth prospects in the state and local government market. This coupled with the Wireless Matrix acquisition completed early this past fiscal year, wrapped up a highly-successful year of strategic M&A activity that has established a platform for growth in recurring revenues over the coming years. Finally, we firmly believe our unique hardware, software and service solutions, supported by established channel partnerships with global reach, gives us the leverage to win a disproportionate share of opportunities and drive broader adoption of emerging M2M applications. With a record year behind us, we are now working to take CalAmp to new heights by continuing to focus on short-term execution, while strategically positioning the Company to benefit over the longer term from emerging M2M trends.

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

Thank you. At this time we will now be conducting a question-and-answer session. (Operator Instructions). Our first question comes from Mike Walkley of Canaccord Genuity. Please proceed with your question. Your line is live.

Great, thank you. First to start with a housekeeping question. Are you guys still breaking out within wireless datacom, the wireless networks and the MRM business pieces?

Hi, Mike. This is Michael. We did not break that out separately in the press release or obviously the earnings call script. If I can give you a rough idea of the breakout, it was roughly 59% MRM products, and about 41% wireless networks products and solutions for Q4.

Great. Thanks. Michael, within the wireless networks, it has had some strong contracts may be a little lumpy like the Pepco Holding and solar deal, and then the PTC in the past. Can you walk us through how the pipeline looks for that division, and where you might see some opportunity to reaccelerate later in the year?

Sure. Well you have to start with the largest opportunities first, and obviously the largest opportunity in that pipeline is Caterpillar. Given our anecdotal full year earnings guidance, you have to assume that we assume that ramp should be quite strong in the second half of this fiscal year. That is by far the biggest opportunity in the wireless networks pipeline. Besides that we have a number of good opportunities in the energy market. Not the least of which is ongoing business with our solar OEM customer, and although we expect that business to be down quite a lot in Q1, we expect it to rebound very strongly in Q2, and potentially run at an elevated rate through the balance of the fiscal year. We have some confidence in that given we have a fair amount of backlog with that customer on the books at this point in time.

In terms of the standard run rate business and the energy sector with oil and gas and utility customers, the pipeline is quite good. We would expect that the opportunity flow to be pretty consistent with what we experienced in FY14. And looking across into the fleet management applications in specific verticals we see a number of good opportunities in the municipal government sector, for additional fleet management types of wins. We also see a number of good opportunities for fleet management service contracts in the utility market. The integration and alignment of the Wireless Matrix sales resources into our vertical market sales infrastructure appears to be quite effective, and again the opportunity flow there and the pipeline of opportunity seems to be growing at a pretty healthy clip.

Great, thanks. And then just on the MRM site, can you talk about any trends in your large fleet business? Have you seen things slowing there at all? Do you expect another strong year of growth in that business? Are there any seasonal trends with the colder winter months that affect the deployments?

It is difficult to detect seasonal trends, given the rapid growth of the business over the last few years. The fleet management product sales remains one of the largest revenue drivers for consolidated revenues, let alone MRM product revenues. Had we not had delinquent backlog stuck at this contract manufacturer in Q4, our fleet management product sales would have been relatively flat Q3 to Q4. So if there was a seasonal effect maybe that was expressed or the weather affect, maybe that is expressed in those relatively flat numbers. What we see happening domestically is a relatively modest growth rate over the next year or so. As we normalize to the industry rate of growth. We see a number of good opportunities moving through our pipeline for fleet customers in Europe, as well as in Brazil and South Africa. We think our above market growth opportunity for fleet management products is really outside of the USat this point in time.

Thanks, one more question and I will pass it on. On the usage base insurance, it sounds like you have some strong momentum there. Have you seen the pick-up in activity just with the Progressive and that Liberty Mutual case coming to a close? And then also with Quindell on the acquisition of Himex, and the joint venture with RAC, has that improved visibility on the timings of ramps with that customer? Thank you.

Well, in terms of the litigation effect or effects, hard to detect anything, our pipeline has not changed because of the things happening in the courts with Progressive, and defendants there. As it relates to your Quindell question, obviously one of our larger insurance clients at this point in time is the RAC. Quindell announced the joint venture with the RAC. We see that joint venture as essentially a rounding out or formalization of RAC's mobile telematics program. Obviously Quindell is going to be bringing elements to that party. Hopefully we will continue to be a key hardware supplier into that joint venture strategy.

Okay. Thank you.

Our next question comes from Mike Crawford with B. Riley and Company. Please proceed with your question.

Thank you. Continuing with insurance, you talked about recognizing $4 million in revenues in Q4, and a desire to move from the hardware-centric supply today more into services, so what needs to be done for you to move more into services?

Use the word services. We didn't use the word services. We used words like value-add around our hardware portfolio. So we see potentially some opportunity to add additional value to our hardware portfolio in the form of embedded software and potentially analytics. It allows some of the analysis of driver information and vehicle information to be processed in real time. And potentially reported on an exception basis. Given our software infrastructure elements like PULS and COLT we are able to potentially support some of those analytics types of applications, whether they are on board or they are off board and off into the clouds somewhere. That's one area we are focused on. I'm sure there will be a number of different opportunities that develop in the insurance market place, as the ecosystem matures somewhat.

Thank you. Just a second question related to insurance. Modus is also a customer, since you have made your announcement with them, they have made their announcement about expanding into some more parts of Europe and into Asia with some other partners. Are those regions you are expanding with Modus as well, or is that separate from you?

As it relates to Modus or any of our other partners, we don't expect to be an exclusive partner. We are not with Modus or Himex, Evogi or with the RAC. However, we think as it relates to domestic opportunities we are well-positioned to win additional business with the likes of Modus and Himex for some of the newer opportunities that we talked about anecdotally in the script a few minutes ago.

Thank you. And then there has also been some talk of rolling out maybe a next generation platform, taking the best of what you have had with the best of what Wireless Matrix brought to the table. And maybe I don't know what you would call if you call it a new platform, but can you comment on that process?

Just for fun let's call it the CalAmp cloud for a moment. That's not an official title. I am just making it up as I go. Yes we are investing in the harmonization of our Wireless Matrix fleet outlook platform, as well as our COLT platform. The key areas of focus there are really scalability, and the ability to support additional types of applications outside of fleet, outside of vehicle finance, and outside of some of the things we do with the direct electronics. We are focused on scalability and flexibility, in terms of different types of applications that platform can support, including the CalAmp app store, which we talked about a little bit earlier.

And you might have some kind of, I don't know do you call it an end result? A beta, or is there some target date for this process?

That process never stops. As anybody who is in the software business understands that. As it relates to the app store roll out timing, that's what you might call the beta platform.

Okay, great. Thank you very much.

You are welcome.

Our next question comes from Michael Latimore of Northland Capital Markets, please proceed with your question.

This is Ryan McDonald on for Mike Latimore. With insurance I know you said it was about a $4 million contribution during the quarter. Do you expect that to grow sequentially?

Perhaps not sequentially because as we go into Q1 we will essentially be running the same programs that we were supporting in Q4. But sometime during Q1 we expect one of the opportunities in our pipeline to convert into an actual supply opportunity. So through Q1 roughly flat to where we were in Q4, but potentially ramping again in Q2 as we bring another program online.

Okay, 2Q ramp. And then do you see any other obviously Caterpillar will be a material contributor this year. Do you see any other opportunities within heavy equipment that are in the pipeline right now?

Yes.

Any of those that could become material this year, or is it something that we could expect an announcement the first half of the year?

Depends on your definition of materiality. If you consider materiality to be $1 million or more of revenue from a specific customer or client, that is possible. When you deal with companies like Caterpillar or its peers, obviously they are quite sensitive about public announcements, until they are quite confident that the partnership with CalAmp is one that is going to produce positive results for its customers. We would expect to see revenue probably in advance of a public announcement.

Okay, revenue in advance of that. And finally do you see gross margin improving sequentially? If so what are the key levers in order for that to happen?

We see gross margin improving incrementally pretty much through the entire fiscal year. Some of the key factors there, one we obviously have now integrated RSI into the enterprise. RSI is an accretion element to gross margin. That will be a contributor certainly in Q1. We think that as the mix as a recurring revenue component of consolidated revenue probably grows at least at the rate of product sales,Q1 through Q2. And we also believe in the back half of the year that Caterpillar could be accretive to gross margin.

And actually one final question. Typically you give a cumulative devices sold number. What was that after this quarter now?

We have approximately 3.5 million units in service with customers in various applications.

Awesome. Thank you very much.

You are welcome.

Our next question comes from Jeanette Omdalen with Craig-Hallum. Please proceed.

Hi guys, thanks for taking my questions, in for Tony Stoss. Can you please provide any more color on changes you may be seeing in the competitive landscape in Brazil? And how do you see your market share here? That would be helpful, thanks.

Great, hello. In terms of the competitive landscape in Brazil, interesting. We are a late entry into that market. We didn't really have any material revenue in Brazil until early in fiscal 2014. Brazil was quite strong in Q2, because we brought a new set of channel partners online and supplieda significant amount of stolen vehicle recovery product into the country which filled the channel. That channel inventory seems to be burning off fairly quickly, and we have seen a little bit of pick up in order flow in Brazil in Q4. We expect that to continue in Q1 and onwards through this fiscal year.

We were a late entrant, we encountered a number of competitors in the market that were not necessarily present. In other parts of Latin America and certainly not present in the United States. In some cases some of the application service providers have been developing their own hardware. That doesn't make a great deal of economic sense. I think a number of players, particularly the larger players in the market have realized that it makes more economic sense to look at high quality outsourced partners like CalAmp. That has created a number of opportunities for us.

There were some of what I will say are low quality Asian suppliers in the market place. We are able to compete effectively even with the Asian suppliers on cost. And certainly we can out compete, we think Asian suppliers on quality support and value-add around the hardware device. And so we see ourselves gaining market share in Brazil for both stolen vehicle recovery hardware products, as well as and some of the budding fleet opportunities that we see in that market place. And I'm sorry I lost sight of your second question. If you wouldn't mind repeating?

I think you answered it. Just regarding stolen vehicle recovery versus fleet management, do you see growth in both of these product lines similar or one growing faster than the other in Brazil, and particularly Latin America as a whole?

I see as compared to say FY14 revenue I expect fleet management product sales grow faster than stolen vehicle recovery product sales in Brazil for FY15.

Perfect, thanks.

By the way, the same commentary would apply to South Africa which has many of the same market dynamics.

Perfect. Thanks for taking my questions.

You are welcome.

Our next question comes from Scott Thompson with FBR. Please proceed with your question.

Hi, good afternoon guys. Wanted to ask a couple of questions here. How would you suggest we think about year-over-year revenues? You talked a little bit about growing faster than the overall market, and I'm talking specifically about wireless datacom. Can you give us a little more color on how you see 2015 shaking out? Then we will ask a couple more after that.

So we talked about, I will start with satellite. We talked about the satellite returning to a more normalized run rate of $10 million a quarter plus or minus a couple million a quarter. There is nothing that we see in the full year that would suggest that revenues for satellite would fall outside of that range. Which means it could be $32 million to $48 million let's say. Obviously it would be wise to pick a midpoint, or somewhere around the midpoint. In terms of wireless datacom revenue growth, we talked about at or greater than market rates of growth. Historically we have talked about a blended wireless datacom market growth rate of roughly 15%. We believe we could do better than that, something in the mid to upper teens, in terms of consolidated revenue growth for wireless datacom year-over-year.

Okay. Let's move back to the satellite business. If you've got year-over-year revenue declines , how might that impact your gross margins? Do we have any issues there?

Well satellite gross margin is lower than the blended wireless datacom gross margin. If satellite is a smaller part of the mix, then you would expect to see gross margin expansion.

And then on the operating income line within satellite?

Our margin outlook is actually good for satellite. We have seen margins improve over time. In fact, we reached roughly 20% this last quarter. That may be sustainable in the short to medium term.

Alright. Give us a little more information if you would on Brazil. There is the Contran 245 legislation, I think we were hopeful that in fiscal 2015 that starts to be enforced a little better. Also can you drill in a little bit, or drill down a little bit on your statements about fleet being maybe a larger opportunity than the stolen vehicle there? How large was that opportunity in 2014, and how should we tee it up for 2015?

Sure let's start with the last question first. I think you seed fleet will be stronger than stolen vehicle recovery. I suggested in an earlier answer that fleet would grow faster than stolen vehicle recovery. But we still believe stolen vehicle recovery will be the core application, the core opportunityin Brazil, as well as South Africa. But we see fleet opportunities coming to us and moving through our pipeline. So that's augmenting the core SVR opportunity that we see throughout Latin America.

In terms of the Contran 245 opportunity, I think on the last earnings call we talked about our sense that the market is coming to a reality, that the law or the legislation will be fully enforced at some point in the middle of calendar 2015. So if that is true or that becomes a reality, then we would expect to see some of the Contran 245 automotive OEM opportunities that we have been nursing in our pipeline, potentially moving through the pipeline late this calendar year, or essentially late in our FY15 flowing into FY16, and hopefully on from there.

And then any update on the aftermarket business there for stolen vehicles?

Well that's all of our business right now. We are not shipping into any mainstream automotive OEM factory install opportunity. Probably don't expect to for the bulk of this calendar year. Everything we are doing in Brazil at this point in time is aftermarket.

And a couple of quarters ago you had some pretty significant channel fill. Is that sell through, you are starting to burn through that channel fill?

We think that inventory is pretty much exhausted, and we are now into a flow business.

So we could see that coming back just a bit?

Yes.

Sounds good, guys, thank you.

Our next question comes from Greg Burns of Sidoti & Company. Please proceed with your question.

Good afternoon. In an answer to a previous question about the opportunities in the wireless network, part of the business, I don't think you mentioned anything about Positive Train Control. Is that still an opportunity potentially ramping at the later part of the year?

It is probably still an opportunity. We had roughly $1 million of PTC related business. We booked some orders and booked some business in Q4 that we will ship in Q1. We will expect Q1 to be quite a bit better than Q4. And we will have to see how this plays out through the year. The deadline still stands. The end of calendar 2015 is the ultimate deadline. But the industry is certainly not acting as if that is a hard deadline. We are hopeful that we will have a better year in FY15 than we had in FY14 for Positive Train Control sales. And in FY14 overall I think that we had roughly $4 million of revenue that was PTC related. To be honest we think that the greater opportunity in the rail market place relates to our other products and services, including fleet management services, asset tracking products and services, to help the rail operators better manage the supply chain elements that they are responsible for.

And in terms of the satellite market I know that Dish and Sprint have been trialing fixed wireless broadband solutions, is that something that down the road potentially could provide some upside for you in the satellite market?

It is possible. If Dish becomes very serious about rolling out a terrestrial broadband network, obviously that is something that is right in the sweet spot of what we do. Hopefully there would be an opportunity for us if they move in that direction.

Thank you.

You're welcome.

Thank you. (Operator Instructions). Our next question comes from Rajesh Ghai of Macquarie. Please proceed.

Thanks, good afternoon. A couple of questions. A couple of housekeeping questions. What is the international revenue as a percentage of total, and how much was recurring revenue?

Q4 international revenue as a percentage of consolidated revenue was right around 20%. And then in terms of recurring revenue Q4 was right around 17%.

Good, and considering that you really overachieved in the satellite business in fiscal 2014 what is the risk that in fiscal 2015 this business could run at a run rate less than $10 million a quarter, given obviously as there is finite business out there?

We talked about this in addressing an earlier question. We have been pretty straightforward about our expectations for the business, it being a $10 million a quarter plus or minus $2 million type of business. So you take the lower end of that range, and multiply it times four. It could potentially be as low as $32 million. But I think it is unlikely that we will string together $8 million dollar quarters for the full fiscal year. Hopefully we will do better than that in some if not all of the quarters through FY15.

That is helpful. And in terms of the Q1 guidance, it appears to be pretty broad. What kind of uncertainties are you factoring in that drives that broad guidance range?

The $4 million guidance range is actually pretty typical for us. The original Q4 guidance range that we gave which was $3 million was unusual for us. I wouldn't consider the range to be broad.

You mentioned earlier that you see the scope of your insurance telematics business expanding from just hardware to more value-added services. What is the time frame in terms of that expansion after the initial ramp, and what gives you the confidence at this point in time in terms of trends, and your own strengths that would happen in that time frame? Thanks.

Sure. For the bulk of this fiscal year, I think the opportunity for us in the insurance telematics market is primarily hardware in nature. But I think as we become more involved in playing a foundational role in the development of the ecosystem, we will be one of the first to identify value-added opportunities. Whether they come in the form of recurring revenue types of services, or they come in the form of better margins for our hardware portfolio, we are optimistic that we will be able to identify those incremental opportunities. So I would look at it as mostly sort of a calendar 2015, FY15 or FY16 sort of opportunity to do much more than we are doing currently with our hardware portfolio.

And last question from me. I know you put the last quote about 1.5 months ago, but in terms of the competitive landscape, obviously a lot of hype related to Internet of Things, has that resulted in, have you seen any entry of new entrants especially after the World Congress that you are concerned about? Have you seen any of your suppliers or partners trying to take a similar vertically integrated approach as you have taken? Do you see any of that starting to happen?

Well, I think if you talk about yourself as an Internet of Everything company, it is very, very hard to be vertical. We don't talk about ourselves as an Internet of Everything company. We talk about ourselves as a vertically-focused M2M communication solutions company. So by definition we are not the Internet of Everything. We are the Internet of Some Things. And those Some Things we think we understand very, very well, which allows us to be in a sense first to identify opportunities within specific verticals. In the terms of our ability to compete, we think we are quite unique in that we have scale, and a very broad portfolio of hardware devices. We also have scale and maturity in terms of the platform elements that we can use to support those devices in a range of different applications, whatever those applications are, and wherever they develop.

Thank you.

You're welcome.

Thank you. At this time, I would like to turn the floor back over to management for closing comments.

Thank you again for joining us today. We look forward to speaking with you at the end of our first quarter.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.