CAMP4 Therapeutics Corp (CAMP) 2019 Q1 法說會逐字稿

Welcome to the CalAmp First Quarter Fiscal Year 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference call, Nicole Noutsios, Investor Relations for CalAmp. Nicole, you may begin your conference.

Thank you, operator. Good afternoon, and welcome to CalAmp's First Quarter Fiscal year 2019 Financial Results Conference Call. With us today are CalAmp's President and Chief Executive Officer, Michael Burdiek; and Chief Financial Officer, Kurt Binder.

Before we begin, let me remind you that this call may contain forward-looking statements. While these forward-looking statements reflect CalAmp's best current judgment, they're subject to risks and uncertainties that could cause actual results to materially differ from those implied by these forward-looking projections. The risk factors are discussed in our periodic SEC filings and the earnings release issued today, which are available on our website. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

Michael Burdiek will begin today's call with a review of the company's financial and operational highlights. Kurt Binder will then provide additional details about the company's financial results and outlook. This will be followed by a question-and-answer session.

With that, it's now my pleasure to turn the call over to CalAmp's President and CEO, Michael Burdiek.

Thank you for joining our call today. We had a strong first quarter in fiscal 2019, and we are pleased with our revenue growth and profitability performance. Consolidated revenue for the first quarter once again reached a record level of $95 million, up 8% over the same period last year. Revenue growth was driven by strong momentum in our Software and Subscription Services business, along with steady customer demand for our products within our Telematics Systems business. Additionally, we continue to fortify our strong balance sheet as we generated free cash flow of $29 million in the first quarter, an increase of 226% year-over-year.

Within our Telematics Systems business, we recorded revenue of $76.4 million, up 6% over the same period a year ago. MRM Telematic products' revenue was again a highlight, with growth of 24% year-over-year, driven by persistent demand across our diversified customer base. The revenue results from our Network and OEM customers were also solid, driven by another strong quarter with our largest customer, Caterpillar.

During the first quarter, revenue with Caterpillar increased 11% year-over-year to $11 million. As we previously stated, we expect modest revenue growth with CAT, with the longer-term outlook very positive as we expand our partnership to develop next-generation telematics devices to address their product range more broadly.

Additionally, shipments with another global-heavy equipment OEM were a little ahead of expectations and contributed approximately $1.7 million to the first quarter of fiscal 2019. We continue to explore additional opportunities to expand our existing OEM relationships and will land other potential new logos in the heavy equipment market around the globe.

During the first quarter, momentum increased markedly in our Software and Subscription Service business, with revenue of $18.5 million, up 15% both sequentially and year-over-year. Growth was attributable to continued strength in our LoJack Italia operations, coupled with subscriber additions with our large global freight transport and parcel delivery customer. We expect these key reference accounts, along with new contract wins, to contribute to incremental growth in SaaS recurring revenue through fiscal 2019.

On the business and operational fronts, we accelerated the realignment of our global operations and sales organization to drive synergies and further establish a platform for future growth. This is most evident with our LoJack brand as we are establishing a LoJack recurring revenue franchise and telematics-driven brand transformation built around bundled telematics services. We believe that this LoJack Telematics pivot will result in a more sustainable, predictable and profitable business model than was the case in the past. We are investing in digital marketing activities and a dealer point-of-sale platform to create consistency and efficiency in customer engagement and onboarding nationwide for a second-generation LotSmart and SureDrive applications. Though it's still early days in the transformation, there are positive indications that our efforts are paying off as we saw LoJack branded solutions contribute nearly 50% of our Software and Subscription revenue in the most recent quarter.

On the international front, our expansion efforts through our broad network of channel partners and LoJack licensees continues to pay dividends. To that end, our wholly-owned LoJack Italian licensee reported strong financial results in the first quarter, with revenue growth of 41% year-over-year. LoJack Italia has cultivated impressive enterprise customer relationships, a prime example being ALD Automotive Italia where we will provide real-time vehicle data and crash-management capabilities to its customers. We believe that many of LoJack Italy's enterprise customer relationships, such as with ALD, could be leveraged for ongoing growth not only in Italy but across Europe as a whole.

On the data monetization front, we are amplifying our efforts to leverage our install base of millions of connected devices. For example, we just announced a CrashBoxx land-and-expand program for CalAmp install base devices, enabling the vast majority of our customers to receive automated crash notifications and CrashBoxx Portal access for the online purchase of accident reconstruction reports. This is just one example of our strategic thrust to expand our addressable market through unique high-margin, over-the-top services as well as through other data monetization activities with partners such as TransUnion.

In summary, we've built on our strong foundation for revenue growth and profitability as we head into fiscal 2019. We are very pleased with our financial results and our ability to consistently generate exceptional free cash flow each quarter. These financial achievements, coupled with our proven ability to execute against an ambitious strategic roadmap, set the stage for steady growth throughout the year.

With that, I will now turn the call over to Kurt Binder, our Chief Financial Officer, for a financial overview and a closer look at our Q1 financial results and Q2 guidance.

Thank you, Michael. It is a pleasure to be here today. My commentary will include references 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 first quarter earnings that was issued earlier today.

As Michael mentioned, we had a strong start to the year. Consolidated revenue for the first quarter of fiscal 2019 was $94.9 million, an increase of 8% year-over-year. Additionally, there are a number of balance sheet and liquidity metrics that highlight our strong business and financial performance that I will discuss later in the call.

Our Telematics Systems and our Software and Subscription Service businesses both delivered solid financial results for the first quarter. Within our Telematics Systems business, revenue for the first quarter was $76.4 million, up 6% year-over-year. The revenue growth is due to solid demand and increased sales volume within our MRM Telematics and Network and OEM Product categories.

Revenue from MRM Telematics products reached another new record in the first quarter of $43.9 million, an increase of 24% year-over-year. The revenue performance is attributable to consistent demand from a well-balanced base of customers, especially our global enterprise accounts, several of which are transitioning to our newer LTE products.

Sales of LoJack SVR products were down year-over-year, though, U.S. SVR product sales were modestly up from the prior quarter. The year-over-year decline is due principally to lower SVR product sales to U.S. auto dealers. This decline was partially offset by an increase in CalAmp Telematics products sold to LoJack international licensees as well as new telematics-based technology solutions sold through domestic dealership channels.

Network and OEM Products revenue was $16.1 million for the first quarter of fiscal 2019, representing an increase of 9% year-over-year. The increase in revenue is due to continued demand from Caterpillar as well as from one other global heavy equipment OEM customer. Caterpillar continues to be our largest customer, representing 12% of our consolidated revenue in the first quarter. Additionally, one other global heavy equipment OEM customer demonstrated strong revenue growth in the first quarter of fiscal 2019, generating revenue of $1.7 million, which represents a 6% sequential increase over the prior quarter.

The Software and Subscription Services business experienced notable revenue growth in the first quarter of fiscal 2019. Software and Subscription Services revenue was $18.5 million, up 15% sequentially and year-over-year.

This strong first quarter performance offers clear evidence that our investment in building a foundation for increased recurring revenue is starting to pay dividends. Across all of our SaaS and recurring service platforms, now -- we now have approximately 776,000 unique subscribers compared to approximately 730,000 in the prior quarter. This increase was driven principally by new subscriptions from our fleet management applications and LoJack Italia operations.

LoJack Italy once again produced exceptional results in the first quarter, generating revenue of $5.6 million, up 41% year-over-year. LoJack Italy, as well as our network of international licensees, have been key drivers to our international revenue growth. For the first quarter of fiscal 2019, our international revenue was $24.5 million or 26% of consolidated revenues, driven by strong demand from European customers.

Consolidated gross profit for the first quarter was $38.1 million, an increase of 2% year-over-year. Consolidated gross margin was approximately 40% in the first quarter, down from 43% in the same period last year. Gross margin was down from the prior year, partly due to product mix, but a larger factor was the impact of high-margin revenue earned on a strategic technology partnership arrangement in the first quarter of fiscal 2018.

As we migrate our customers from the older 3G products to the newer LTE technologies, we may experience near-term fluctuations in our gross margins from new product releases. However, over the long term, we expect our expanding LTE product portfolio to help drive gross margin expansion.

In OpEx, our GAAP basis R&D, sales and marketing and G&A expenses in the first quarter as percentages of revenue were 7%, 13% and 14%, respectively. Our G&A expenses increased in the quarter due to nonrecurring professional service fees of approximately $1 million for certain existing legal matters as well as incremental accounting and auditing services. We do not expect these unusual expenses to have a material impact on the remaining quarters of fiscal 2019. For fiscal 2019 as a whole, GAAP basis R&D, sales and marketing and G&A expenses as percentages of revenue are expected to be approximately 8%, 13% and 13%, respectively.

Turning to our non-GAAP basis OpEx for the full year, R&D, sales and marketing and G&A expense as percentages of revenue are expected to be 7%, 12% and 10%, respectively.

In the first quarter of fiscal 2019, we commenced the plan to capture certain synergies and cost savings related to streamlining our global operations and sales organization as well as through the consolidation of lease properties that are not fully utilized. Our plan is to integrate the global sales organization and further outsource manufacturing functions in order to drive future growth and reduce operating expenses. Effective May 31, 2018, we recorded an accrual of $3.4 million for severance and employee-related costs as well as costs for idle facilities. We do not expect any material financial impact from these efforts in future quarters.

The GAAP basis net income in the first quarter was $8.5 million or $0.23 per dilutive share compared to a net loss of $2.7 million or a loss of $0.08 per dilutive share in the same prior year period. The increase in GAAP basis net income for the first quarter is attributable to revenue growth as well as the $13.3 million gain on the favorable settlement with a former LoJack supplier that was recognized during the quarter.

Non-GAAP net income for the first quarter was $10.5 million or $0.29 per dilutive share compared to $10.4 million or $0.29 per dilutive share in the same prior year period. The slight increase in non-GAAP net income is due to an increase in gross profit attributable to revenue growth.

Adjusted EBITDA was $12.2 million in the first quarter, with an adjusted EBITDA margin of 13% compared to adjusted EBITDA of $13.2 million and an adjusted EBITDA margin of 15% in the same prior year period. The reduction in adjusted EBITDA is principally a result of the high-margin revenue earned on a strategic technology partnership arrangement in the first quarter of fiscal 2018 that I mentioned earlier.

I will now provide some additional details on our balance sheet and strong liquidity position as of our quarter-end. At the end of the first quarter, we had total cash and marketable securities of $179 million and total outstanding debt of $156 million, which represents the carrying value of our convertible unsecured notes that we issued in May 2015. We used $5.7 million in the first quarter to purchase 270,000 shares as part of a 1-year share repurchase program authorized by our Board of Directors in early May.

Net cash provided by operating activities increased 183% to $30.9 million for the first quarter of fiscal 2019, which is attributable to our strong cash flows from operations plus the $13.3 million of net proceeds from the favorable settlement with a former LoJack supplier. We expect to receive the final $5 million of net proceeds from this settlement in the next few months.

Our free cash flow for the quarter was $28.8 million, representing an increase of 226% over the prior year, which includes the $13.3 million received as part of the legal settlement.

Our consolidated net accounts receivable balance was $69.8 million at the end of the first quarter, representing an average collection period of 60 days, while total inventory at the end of the quarter was $32.6 million, representing annualized inventory turns of approximately 6.9x.

Our cash conversion cycle was 40 days at the end of the latest quarter compared to 55 days in the prior quarter. Additionally, our deferred revenue balance was $43.8 million at quarter-end compared to $34.5 million at the end of fiscal 2018. This is attributable to continued growth in our contract backlog as well as the adoption of the new revenue recognition standard, commonly referred to as ASC 606.

During the first quarter of fiscal 2019, we adopted ASC 606. Upon adoption, we recorded a onetime transition adjustment of $1.6 million net of income taxes as an increase to our accumulated deficit. Additionally, we recorded an increase of $7.2 million to deferred revenues and $4.5 million to deferred cost in Q1. The incremental deferred revenue and cost balances will be recognized over the remaining service periods of up to 48 months. The modest impact of ASC 606 is primarily related to our Software and Subscription Services business and the requirement to recognize revenue over the expected average contract life for fleet and vehicle finance customers instead of our historic practice of recognizing revenue for each individual noncancelable contract term.

As we adopted this standard using the modified retrospective transition approach, we are not restating our prior financial results. For the remaining quarters of fiscal 2019, the financial impact of adopting ASC 606 is immaterial to our consolidated revenues and results of operations.

As discussed in the fourth quarter of fiscal 2018, we adopted the Tax Cuts and Jobs Act on December 22, 2017, and recorded the estimated charges related to remeasuring of certain deferred income tax balances and the onetime transition tax.

We've continued to assess certain aspects of this new legislation and refine our current year estimates. For the first quarter of fiscal 2019, our GAAP basis effective tax rate was approximately 17%, which is attributable to the reduction in the federal tax rate due to the enacted tax legislation as well as over half of the $13.3 million gain from legal settlements being taxable in the U.S.

Moving into fiscal 2019, we expect our full year GAAP basis effective tax rate to approximate 20%. However, the impact of the new tax law is not expected to materially impact our cash taxes due to our remaining federal net operating losses and other income tax credits.

Now turning to our Q2 outlook. We expect the second quarter consolidated revenues in the range of $93 million to $98 million. At the bottom line, we expect second quarter GAAP basis net income to be in the range of $0.10 to $0.16 per dilutive share, which includes the expected contribution of approximately $5 million from the receipt of the final settlement of the legal settlement with LoJack's former supplier. We also expect second quarter non-GAAP net income in the range of $0.25 to $0.31 per dilutive share and adjusted EBITDA in the range of $11 million to $15 million.

With that, I'll turn the call back over to Michael to provide some final comments before we open the call up for questions.

Thank you, Kurt. We remain intensely focused on expanding our technology leadership and leveraging our scale, channels and partnerships in new and existing markets around the globe. We continue to make steady progress on our growth initiatives and are pleased with our momentum in both our Software and Subscription Service and Telematics Systems businesses. We remain quite energized by the opportunities that lie ahead for the company.

Operator, I will now open up the call to questions.

(Operator Instructions) Your first question comes from the line of Mike Walkley with Canaccord Genuity.

Congratulations on the strong start to the fiscal year, especially with the ramp in the Software and Subscription revenue. My question is just building on the record SaaS revenue. Can you just update us on kind of the rollout with that large fleet customer? And how the overall pipeline looks for, as outlook, for wins for this year?

Yes, the large freight transport customer is ramping nicely. In fact, about 60% or so of the incremental subscribers that we reported were related to that contract. So we're very, very pleased with how that's rolling out, and we believe that there are a lot of other opportunities that can be cultivated with that customer as we prove our success here on this initial program. But overall, I would say we're very happy with how our pipeline is developing, not only with existing accounts but with new opportunities, including some newer opportunities related to converting existing hardware customers to more platform service opportunities. And that's sort of a new development here, and we're very, very happy to see some progress there as it's been an initiative on our strategic roadmap for some period of time.

Great. And then just on the Telematics Systems business, can you just walk us through maybe on the guidance provided, how you're seeing the different areas of that business, both on a sequential and year-over-year basis?

Yes. Well, obviously, we're very bullish on the MRM Telematics device business. We had solid growth in Q1. We expect that business to continue on a nice pace here in Q2. Network and OEM Products is very strong. CAT had a solid quarter. The outlook in Q2 is better than Q1. We have a second OEM customer there that's, obviously, ramped nicely, and we have new opportunities in that pipeline. We're still in transition as it relates to SVR -- legacy SVR product sales in existing channels and converting them both to subscription services as well as some of our newer Telematics products with licensees. And as we tried to describe in our prepared remarks, we're happy that we're making progress there, but that's a long-term initiative. So overall, I think the outlook is pretty good.

Great. Last question for me and I'll pass it on. Just kind of building on the LoJack strategy, can you just update us on how your transition towards the Telematics brand is going, and any early feedback from dealers on the offerings?

We -- as we talked about on our last earnings call, we made a big announcement at the NADA show back in March, and it was basically a rollout of a new brand as well as version 2.0 of LotSmart and SureDrive. And coupled with that rollout was what we call the LoJack Beyond initiative, which includes the capability of creating a hybrid solution around legacy SVR capabilities and the law enforcement relationships there, coupled with the Telematics capabilities where it looks like one integrated solution. And the reception on that initiative with dealers has been very positive, especially as it relates to the modernized capabilities around the LotSmart application as well as the dealer lot management portal. We've also had some very positive response as it relates to our point-of-sale initiatives in providing digital collateral to salespeople with the dealerships as well as the personnel in the F&I office. And we're going to continue to make some additional developments there around the integration of that point-of-sale application into some of the digital signing platforms that are used pretty regularly as part of the paperwork process when customers come in and buy new cars. So very, very positive response around all of our digital activities there.

And just as it relates to numbers, last quarter, we talked about roughly 13 active dealers either selling or onboarding LotSmart with the sell-through of SureDrive. That number has more than doubled. We have about 15 of those dealers being very active in terms of the sell-through of SureDrive, and we've onboarded a significant number of new dealers who are either going to leverage the capabilities of LotSmart and/or focus on SureDrive as a sell-through application either coupled with LotSmart or as an independent sell-through product.

One last housekeeping for me actually. Kurt, just on the GAAP to non-GAAP net income guidance, did you say the last $5 million legal settlement was or was not included in the walk-through from GAAP to non-GAAP net income?

Yes, Mike, so for the second quarter, we do factor in the $5 million final installment from that legal settlement. We haven't received it yet, but we're assuming that we will receive it in the second quarter. So it's actually -- it's treated like we've treated all the previous installments.

Your next question comes from the line of Jonathan Ho with William Blair.

Just wanted to, I guess, get back to some of your commentary around the gross margin. How should we be thinking about that trend over the balance of the year, just given the product mix shift?

I'll address that qualitatively, and I'll let Kurt talk a little bit about it quantitatively. We do expect to see some gross margin improvement as we work our way through the year, and those improvements will come sort of in 3 streams. One, we've expedited the release of a number of LTE products over the last quarter or so. And those expedited activities were sort of put on the back burner, cost optimization activities, which has resulted in product launches probably a little bit below normalized run rates as it relates to gross margin profile. Secondly, we've got ongoing pressures on the SaaS side as it relates to transitioning legacy platforms from on-premise infrastructure to the cloud, we've talked about that on previous calls. And then we also have a fairly significant initiative underway to transition away from domestic internal manufacturing resources to a fully outsourced model. So that's burdening our operational overhead a little bit and probably resulting in a certain amount of pressure around product gross margins. But we -- as I say, qualitatively, we would expect to see some improvement as we work our way through the year.

Yes, Jonathan, so as Michael pointed out, I mean, there are a number of initiatives in the works here. Obviously, we expect to see our gross margin improve. In order to give you some quantitative feedback, I'd suggest that it's going to tick up slightly, somewhere in the range of, say, 50 to 100 basis points over the next several quarters.

Got it. And then I think you guys talked about rolling out CrashBoxx over the entire base. Can you maybe give us a sense of what you have baked into either guidance or sort of your expectations for the year in terms of contribution from CrashBoxx? And maybe how you aim to monetize this product?

Sure. Well, as it relates to Q2 guidance, virtually nothing is baked in. But our objective would be to see roughly 200,000 to 300,000 devices enabled with CrashBoxx services by the end of the year. Again, that's an objective. It's not necessarily certain that we'll be able to achieve that. We would expect a large percentage of our install base and new product customers to onboard with CrashBoxx enabled. If you assume annual crash rates of, say, 6% to 10% for those vehicles which have that CrashBoxx capability on board, and you assume that a fraction of those, let's say 20% to 40%, would choose to buy a report as a consequence of having a reported accident, the numbers can start to add up pretty quickly. I would not want to venture to forecast anything in Q2, but we're optimistic that by the end of the fiscal year, we could be at an annual run rate of something north of $1 million from that CrashBoxx land-and-expand initiative.

Excellent. And by...

Annual run rate of $1 million, not on a quarterly basis. But obviously, once you build in that install base, it can ramp fairly quickly.

Your next question comes from the line of David Gearhart with First Analysis.

Most of what I wanted to ask has already been asked. So I kind of want to go back just to some of your ongoing smaller initiatives we haven't heard an update on in a while, whether that's PTC or things going on like -- excuse me, besides PTC like the solar OEM customer. Just a general update there since you haven't mentioned it in a while.

Sure. Well, you're certainly talking about some legacy revenue streams. PTC has been winding down over the last several quarters. In Q1, we saw roughly $0.5 million of business, so it was a very small contributor to our Network and OEM Products revenue. In the prior quarter, it was around $1 million. We expect it to trail off as we work our way through the year. So it's becoming a very immaterial contributor to revenue. As it relates to the solar OEM, we actually have not seen any revenue related to those products for a couple of quarters. So that's essentially at a 0 run rate currently. And then there is one other legacy revenue stream around satellite data communication services, and that declined, actually, from about $4.5 million in FY '17 to about $2.5 million in FY '18. And in Q1, it was around $250,000. So it's almost trailed off to 0 as well. So if you look at those legacy revenue streams, they've been actually creating a bit of a headwind as it relates to our growth metrics. But now they're at such minimal levels that I would say they're no longer a headwind and they're pretty much behind us.

Your next question comes from the line of Josh Nichols with B. Riley FBR.

Just wanted to ask, some great progress it looks like on the company's second heavy equipment manufacturer. Can you help frame that a little bit for how that might pan out as we think about things going through the remainder of the fiscal year?

Certainly. Well, on the last couple of calls, we've talked about that customer being roughly a $5 million to $6 million annual run rate customer. Clearly, $1.7 million in the latest quarter is a little bit above that, so I'd say we would like to reset expectations there a little bit, and it's probably more in the range of $6 million to $8 million a year on existing programs. We continue to work with that customer on new initiatives, and we believe that there's probably some long-term upside in that relationship. So we're happy there.

We also alluded to other OEM opportunities in our pipeline. And I would say, we've been making some notable progress as it relates to engagement with some of these other heavy equipment OEMs. And we are optimistic that in the medium to long term, the population there will be more than just the 2 that we ship to currently.

And then I did want to ask, you mentioned about an initiative to move manufacturing outside the U.S. Any details you could provide as far as how long that may take from a timing front or costs associated with that?

Yes. Well, our objective is by this time next year that 100% of our manufacturing activity will be outsourced. We've engaged with 2 primary tier 1 EMF companies that give us a modicum of geographic diversity and global scale, one being located in Asia, another being located in Latin America, with the opportunity to provide flexible manufacturing services in the U.S. when and if we need them for specific customer requirements. Again, that will take the better part of a year to transition. And during that period of time, we'll have some overlap as it relates to manufacturing overhead, which will put some pressure on margins. But as Kurt pointed out, we -- despite that, we expect to see some product margin accretion during that transition period.

And then last question for me, and then I'll pass the torch. Any updates you can provide on the company's work with TransUnion? Clearly, doing some more work with -- or on the services and analytics front. Auto insurance companies and insurers is a sizable opportunity for the company. And your thoughts on also doing some work potentially might be usage-based insurance market as well.

Boy, I think that was all about insurance. The relationship with TransUnion is very, very good. We're getting very, very close to launching our initial engagement with TransUnion, and we believe that that program will be positive for both parties. But we see a longer-term opportunity to leverage TransUnion and its relationships with insurance carriers in the U.S., specifically on additional data monetization activities. And really a key area of focus there is on the claim side. We think our CrashBoxx land and expand strategy plays neatly into that relationship and monetization opportunities here in the U.S. And we're working with other companies outside the U.S. on potential data monetization opportunities. Again, mostly centered around crash and claims, but we will provide details as those other relationships develop down the line.

Your next question comes from the line of Michael Latimore with Capital Markets.

On the Software and Subscription business, it sounds like good trajectory there. Should we assume that that kind of grows sequentially throughout the year? Or is there some seasonality periods in there?

There is a little bit of seasonality with LoJack Italy, typically the second -- our fiscal second quarter, which captures the month of August, tends to be a little bit weaker than other periods during the year, so we would not expect to see necessarily sequential growth in LoJack Italy going into Q2. And in fact, it could be a bit -- a little bit lower in Q2 than Q1. However, the outlook for the full year is very, very positive there. And as it relates to our freight transport customer and the rollout of additional subscriptions, we expect that to progress on a fairly monotonic rate through the year.

Okay, excellent. And then what kind of gross margin are you getting on your Software and Subscription business now?

Approximately 50% on a blended basis. And obviously, there are push and takes there. LoJack Italy is a little bit above that. Fleet is solidly above that, vehicle finance is well below that. So taken on a blended basis, right around 50%.

And then just last one on the -- you mentioned LTE a few times. I guess, what percent of the mix or hardware mix is LTE nowadays. It sounds like there's good demand there.

It's a great question. In Q1, again, this is a percentage of MRM Telematics revenue. It was around 25% of revenue. LTE products are a little bit higher ASP than the average, so unit volumes were actually below 25%. We expect that to pick up pretty markedly as we work our way through the year.

(Operator Instructions) Your next question comes from the line of Anthony Stoss with Craig-Hallum.

Kurt, you rattled off quite a few adjustments or add backs in the quarter. I'm curious in your $11 million to $15 million adjusted EBITDA guide, can you list off or let us know what you're assuming on the adjusted -- adjustment or add-back side to get to that $11 million to $15 million?

Sure. Well, Anthony, most of those adjustments are fairly consistent with what we shared in the past. There is nothing that I would suggest to you that is anything unusual than what we've done over the last couple of quarters. The adjustments that you see in our press release come from the customary stuff like investment income, interest expense, amortization, stock-based compensation, and then there are some litigation items. This quarter, in particular, we had the adjustments for the gain on the legal settlement. And as I mentioned in the earlier comment to one of the previous questions for Q2 guidance, we expect the adjustment to be similar, but the installment payment is now $5 million. And then the restructuring charge we had in this quarter, we don't expect any material similar type charges in the future.

At this time, there are no further questions. This concludes the question-and-answer session. I will turn the call back over to Michael, CEO.

Thank you so much. We look forward to speaking with you at the end of our second quarter.

This concludes today's conference call. You may now disconnect.