CAMP
#Thanks.
We made kind of a cluster of announcements during CTIA but really centered around two themes.
One was the CalAmp telematics cloud.
We're very excited about our positioning with that platform.
We made a couple announcements at the show.
We continue to nurture some interesting opportunities who are considering moving over to our cloud service so that they can become more efficient and more agile as they roll out new applications and new services in their end markets.
We think that's a great subscription growth opportunity.
The other cluster of announcements was really around LotSmart and SureDrive which are our dealer lot management and consumer sell-through applications.
As we talked about in the prepared remarks, LotSmart was developed very much with dealer input and really was quite a product marketing exercise that we embarked on right after the LoJack acquisition.
I would say we've been quite efficient as relates to being able to roll out that application with really broad based North American auto dealer input.
We think we're very much on a good track there and there's lots of interest on that application, in particular from some of the larger dealer groups, who have significant challenges in managing inventory and thereby the customer buying experience, when consumers come onto the lot looking for specific make or model of vehicle that they may have researched in advance online.
Obviously, dealers are going to make investments in enterprise applications.
They want to monetize those in whatever way they can.
What makes SureDrive so compelling is it gives the dealer an opportunity to monetize that enterprise efficiency application, generate incremental revenues and profits, utilizing the LoJack brand, which is well recognized and accepted among consumers.
It resonates very, very well.
We're excited.
We think that over the next couple of quarters we'll be able to make some more material announcements as it relates to customer wins and revenue contribution there.
I can give you a little bit of color.
We lumped our solar customer in with our energy segment, if you want to refer to it as that.
Energy revenues for us, just to give sort of a historic benchmark, have ranged between $4 million and $6 million a quarter.
And again, solar's part of that.
Private radio, product sales to utilities, oil and gas customers is part of that.
Ruggedized routers sold into other industrial energy applications are part of that.
In the latest quarter, it was ---+ energy revenues were to the lower end of that $4 million to $6 million range.
The prior quarter right about in the middle of that range.
Going forward, I don't expect that range to vary much.
It's a relatively slow growth or no growth market opportunity for us.
As we focus on telematics and growth initiatives there, I would expect that over time, energy revenues will become much less material than they've historically been for us.
I'd say it is a lumpy business and I would say we took our lumps in the second quarter, coming in just about $4 million of combined energy product revenues.
Your other question was related to Positive Train Control product sales, I believe.
In the quarter it was actually pretty strong, but we expected it to be relatively strong.
We had a confluence of regional rail operators order products that we shipped within the quarter.
Looking ahead, we expect it to be down a little bit but we're going to come off what has historically been pretty high number that we experienced in Q2.
It was a little bit ---+ it was just under $8 million last year.
I think the outlook for this year is generally in the neighborhood of your guidance there.
Sort of a few items that I think give us confidence as it relates to the worst being behind us.
Number one, entering Q3 we started at a higher backlog level than where we started last quarter, so that's clearly a positive.
Obviously the two important customer wins that we talked about earlier on the call, that being OmniTRAX and the unmentioned one, they're both large and over time we expect the business to grow and be quite strong and sustainable, actually, for a long period of time.
The last thing I think gives us sort of material confidence is the fact that our international business is so strong, even with the currency exchange challenges that we faced, in particular over the last quarter with the whole Brexit phenomenon and the devaluation of the pound versus the dollar.
With a broader, more diverse customer base, with North America lagging a little bit but yet the outlook for North America improving if for no other reason than for the two new customer announcements that we just made, it gives us a lot of confidence that, again, the worst is behind us as it relates to MRM telematics product sales.
Again, I'll try to take them in order.
We haven't talked about Smart Driver Club, actually, in a couple of quarters but I'm glad you brought it up.
The team there is making what I would term excellent progress.
They launched their service and went public in April of this year and they've been engaging with all the major auto dealers across the UK.
They had a lot of positive feedback initially, even before they announced the launch of their consumer application suite.
I recently had an opportunity to catch up with them in face-to-face meetings and review their overall pipeline and I'm quite pleased with where they are today.
I think the outlook for that business is very, very positive and I would expect that they're going to have a few interesting announcements over the next few months.
Obviously, Smart Driver Club's not only focused on the traditional connected vehicle applications but also keenly focused on sort of an innovative, if not disruptive, approach to auto insurance underwriting, utilizing the core telematics platform, including our Instant Crash Notification service as enabler to understanding the risk factors associated with certain types of drivers.
As relates to ICN, we talked about the independent industry certification and the resonance on our Instant Crash Notification service and our ability to deliver it through any number of platforms, whether it's direct through our fleet management platform, whether it's as a telematics cloud service like with CTC, or if it's delivered as an over-the-top service, we see broad-based interest, not just in the insurance industry, but with enterprise customers who are interested in managing and monitoring their assets and the human factors around the operation of those assets.
We think that the ICN technology has broad-based appeal.
We think it's a critical enabler into potentially disrupting the insurance marketplace in different ways.
It obviously has a great bundling benefit to the SureDrive sell-through application that we're branding under the LoJack brand.
As it relates to revenue contribution or material revenue contribution from LotSmart and SureDrive, we expect to see some modest revenues late in this year.
I'm not willing to step out and give you a more formal forecast or outlook as to what the contribution might be when we get to some sort of run rate level, but I think it's safe to say that we think it's a growth catalyst for LoJack and LoJack branded products.
In many ways the fact that we've offered these dealer lot management solutions and SureDrive as a consumer sell-through application branded LoJack, it's actually solidified, I think, the relationship that we've had with many of the larger dealer groups in the United States, because they now know and believe that the older legacy LoJack stolen vehicle recovery offering is not a dead end.
So it's given us opportunities to reengage with those dealers and it's given them the opportunity to contemplate new and interesting consumer recognized branded solutions that allow us to get a larger share of the consumer's wallet.
Sure.
Great question, <UNK>.
Telematics, married with the core LoJack stolen vehicle recovery product, allows us to almost instantaneously expand the serviceable market, without necessarily having to make the investment in the infrastructure to cover those regions that aren't covered with the legacy LoJack communications infrastructure.
If we're able to communicate with the LoJack stolen vehicle device by a different communications pathway, which would be facilitated obviously by telematics, then we can avoid the infrastructure investment to expand that serviceable market, which is really an interesting opportunity.
There are many dealer groups that operate outside of the 29 states that LoJack has traditionally covered.
They've been eager to find a way to expand that service offering so they have a common offering throughout all of their store network.
Telematics is going to give us that opportunity.
As soon as LotSmart is completely released to market, we have in effect expanded the serviceable market for the LoJack core stolen vehicle recovery product offering.
I'm not sure if that was focused on one segment or another or it was a consolidated ---+ (multiple speakers) I would say there is a deferral effect.
If you listened to our last earnings call, we talked about this inventory overhang issue.
In theory, once the slack is taken up in the supply chain there, then we would expect the flow business to come back.
To a certain extent there's this disruption that's occurred and I do believe that the flow business from our key customers will get back to historic levels but just not as soon as we thought it would.
Sure.
Well, I think that may be a two-part question.
What's our incremental fleet management service, incremental service opportunity there and then what ---+ how big is the opportunity with any one of our customers as relates to the CalAmp telematics cloud service.
On this call and in fact last quarter, we talked about that sort of medium-term target of $100 million recurring revenue.
We think most of that growth from where we are today to $100 million comes in the form of fleet management service revenue or in more generic CalAmp telematics cloud revenue growth.
We think the near-term incremental opportunity for us is really amongst the LoJack licensees, beginning with LoJack Italy, which of course is a wholly owned entity in Europe.
There are a number of the LoJack licensees that are keenly interested in moving over to a cloud service like CTC because it gives them ability to build an application suite very, very quickly.
It gives them an opportunity to get to market with something scaled and secure much faster than they otherwise would, given the relative size of many of these licensee entities.
We think there's still some.
I mean, our guidance into Q3 didn't look like a hockey stick recovery.
We don't expect one.
We expect modest improvement into Q3 and further improvement from there.
Sure.
Great question.
We've made a number of changes this year as relates to our overall sales organization and infrastructure.
I would say our level of engagement with key customers, in fact, not only key, any customer, is much better today.
I think you could actually call it an engagement.
I think as it relates to visibility and interaction with our customers as it relates to their near- and medium-term outlook for product demand, it's probably better than it's ever been and shame on us for not having had that level of engagement in the not-too-distant past.
Nonetheless, I think given how engaged we are, our sense of where our customers are, what their long-term outlook is as well as their short-term outlook, I think we're much better positioned today than perhaps we've ever been in history as relates to that level of engagement and visibility into our customers' business.
You're welcome.
Thank you again for joining us today and we look forward to speaking with you again next quarter.
