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CalAmp Corp. (NASDAQ:CAMP)

F4Q2014 Earnings Conference Call

April 24, 2014 4:30 p.m. ET

Executives

Lasse Glassen – IR

Michael Burdiek – President and CEO

Rick Vitelle – EVP, CFO and Secretary

Analysts

Michael Walkley – Canaccord Genuity

Mike Crawford – B. Riley & Co.

Scott Thompson – FBR Capital Markets

Greg Burns – Sidoti & Company

Rajesh Ghai – Macquarie

Operator

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.

Lasse Glassen

Thank you, Operator. Good afternoon and welcome to CalAmp’s fiscal 2014 fourth quarter and full year results conference call. With us today 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 in 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 the 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 the expectations reflected in such forward-looking statements are based upon reasonable assumptions it can give no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Michael Burdiek will begin today’s 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 Michael will then 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’s now my pleasure to turn the call over to CalAmp’s President and CEO, Michael Burdiek.

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 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 telematics 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 telematics space and we expect to execute additional agreements with customers and channel partners during fiscal 2015 and beyond.

Insurance telematics applications were 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 telematics 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 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 to further expand our addressable market, improve our margins and strengthen our competitive position. Early in fiscal 2014 we acquired Wireless Matrix as the foundational component of our long-term growth strategy to position CalAmp as the leading provider of integrated hardware, software, services and solutions within our core verticals.

And 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 SaaSs solution. 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 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 in 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 within our core verticals. Fleet management which continues to be the largest contributor to MRM product sales along with asset tracking in 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're 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 and 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 a 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 on to 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 communications services comprised 17% of consolidated revenue for our 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 and 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 contribute 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.

Now 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 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 in new initiatives that we expect will drive revenue and earnings growth on a sustained basis over the coming years. An example of one of the initiatives was a recently announced new product category for CalAmp, the MDT-7. 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 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 MDT-7 whether developed and supplied by CalAmp, third-party content providers or 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 lifecycle of various product and service deployments. Many of the service platform elements such as [indiscernible] 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 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 market 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.

Rick Vitelle

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 Wireless Matrix acquisition and margin improvement in the satellite segment.

Looking more closely at gross profit performance by reporting segment, wireless datacom gross profit was $18.4 million in the fourth quarter with the gross margin of 37.5%. Year-over-year wireless datacom gross profit was up by $5.2 million while gross margin improved by more than two percentage points primarily due to the shift in revenue mix towards higher-margin subscription-based revenues.

On a sequential quarter basis, wireless datacom 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 of $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 carryforwards.

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 credits carryforwards. 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 of 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 carryforwards for federal income tax purposes of $99 million and $5 million respectively. In addition the company had 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 R&D tax credit carryforwards.

The company expects to generate additional excess tax deductions on equity awards in the future. In view of the NOL and tax credit carryforwards 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 for the next several years.

Now moving on to the balance sheet, at the end of 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 for a 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 non-interest-bearing note payable issued in May 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 were 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 up 10 times. At the end of the immediately preceding quarter inventory was $12.5 million which represented annualized inventory turns of 13 times.

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'll now turn the call back over to Michael for our guidance and some final comments.

Michael Burdiek

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 be 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 entered 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 and 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 the platform for growth in recurring revenues over the coming years.

And 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 opportunity and drive broader adoption of emerging antenna applications.

With the 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 antenna 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?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Mike Walkley of Canaccord Genuity.

Michael Walkley – Canaccord Genuity

First, sort of the housekeeping question, are you guys still breaking out within wireless datacom, the wireless networks and the MRM business pieces?

Michael Burdiek

Hi Mike, this is Michael. We did not break that out separately in the press release or obviously earnings call scripts. 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.

Michael Walkley – Canaccord Genuity

And then Michael, just within wireless network you had some strong contracts maybe a little lumpy like the Pepco Holdings and solar deal and in the PTC in the past, can you just kind of walk us through how the pipeline looks for that division and that where you might see some opportunities for it to reaccelerate later in the year?

Michael Burdiek

Sure, well I think you have to start with the largest opportunities first and obviously the largest opportunity in that pipeline is Caterpillar. And given our anecdotal full-year earnings guidance you have to assume that we assume that that ramp could be quite strong in the second half of this fiscal year. So 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. And 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 in the energy sector with oil and gas and utility customers the pipeline is quite good. We would expect that the opportunity to flow to be pretty consistent with what we experienced in FY ‘14 and looking across into the fleet management applications and specific verticals we see a number of good opportunities in the municipal government sector for additional fleet management types of wins. And we also see a number of good opportunities for fleet management service contracts in the utility market and 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 to flow there and the pipeline of opportunities seems to be growing at a pretty healthy cliff.

Michael Walkley – Canaccord Genuity

And then just on the MRM side, can you talk about any trends in your large fleet business, have you seen things slowing there at all there, you expect another strong year of growth in that business, and were there any seasonal trends with the colder winter months that affected deployments?

Michael Burdiek

Well it's very difficult to detect seasonal trends given the rapid growth of the business over the last few years. Fleet management product sales remains one of the largest revenue drivers for consolidated revenues let alone MRM product revenues. Had we not had the 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's expressed in, or the weather effect, maybe that's expressed in those relatively flat numbers. What we see happening domestically is relatively modest growth rate over the next year or so as we sort of normalize to the industry rate of growth. However we see a number of good opportunities moving through our pipeline for fleet customers in Europe

So we think our above market growth opportunity for fleet management product is really outside the US at this point in time.

Michael Walkley – Canaccord Genuity

Just on the usage based insurance, it sounds like you have some strong momentum there, have you seen any pickup in activity just with Progressive and Liberty Mutual case coming to a close and then also with Quindell on the acquisition of Himax and the joint venture with RAC, has that improved any visibility on the timing of ramps with that customer?

Michael Burdiek

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 that the defendants there. As it relates to your Quindell question obviously our one of our larger insurance clients at this point in time is the RAC. Quindell announced the joint venture with the RAC but we see that joint venture is essentially a rounding out or formalization of RAC’s mobile telematics program. Obviously Quindell is going to be bringing some elements of to party hopefully, we will continue to be a key hardware supplier into that joint venture strategy.

Operator

Our next question comes from Mike Crawford with B. Riley & Co.

Mike Crawford – B. Riley & Co.

Continuum insurance [ph], you talked about recognizing 4 million of revenues in Q4, and a desire to move the hardware et cetera [ph] supply today more in the services, so what needs to be done for you to move more into services?

Michael Burdiek

You used the word services, we didn’t use the word services. We use 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 that allow some of the analysis of driver information and vehicle information to be processed in real time and potentially reported on an exception basis. And given our software infrastructure elements like [indiscernible] we’re able to, to potentially support some of those analytics types of applications whether they are on board whether off board, off into the clouds somewhere, so that's one area that we’re focused on. And I'm sure there will be a number of different opportunities to develop in the insurance marketplace as the ecosystem matures somewhat.

Mike Crawford – B. Riley & Co.

Okay, just second question related to insurance, so Motis is also a customer, since you've made your announcement, they've made some announcements about expanding in more parts of Europe and into Asia with some other partners, is that – are those regions you’re expanding with Motis as well, or is that separate from you?

Michael Burdiek

Well as it relates to Motis or any of our other partners, we don't expect to be an exclusive partner. We’re not with Motis or Himax [indiscernible] 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 Motis and Himax for some of the newer opportunities that we talked about anecdotally

Mike Crawford – B. Riley & Co.

And then there has also been some talk of rolling out maybe a next-generation platform taking the best of what you've had, with the best of what Wireless Matrix brought to the table and maybe what you would call, if you would call on a new platform or what but can you comment on that process?

Michael Burdiek

Well, just for fun let’s call the CalAmp cloud for a moment and that's not an official title, I am just making it up here as I go. Yes we are investing in the harmonization of our Wireless Matrix fleet outlook platform as well as our call platform and 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 direct electronics. So we are focused on scalability and flexibility in terms of different types of applications that that platform can support, including the CalAmp app store which we talked about a little bit earlier.

Mike Crawford – B. Riley & Co.

And you might be – have some kind of, I don’t know what you call it, end result or a beta or is there any some target dates of this process?

Michael Burdiek

Well, that process never stops, anybody who is software business understand that. But as it relates to the app store rollout timing that would be sort of what you might call the beta platform.

Operator

Our next question comes from Michael Latimore of Northland Capital Markets.

Unidentified Analyst

This is Ryan McDonald [ph] on for Mike Latimore. First, with insurance and you said it was about $4 million contribution during the quarter, do you expect that to grow sequentially?

Michael Burdiek

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.

Unidentified Analyst

And then do you see any other -- obviously Caterpillar is going to be a material contributor to this year, do you see any other opportunities within heavy equipment that are in the pipeline right now?

Michael Burdiek

Yes.

Unidentified Analyst

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

Michael Burdiek

Depends on your definition of materiality, but if you consider materiality to be million dollars or more revenue from a specific customer or client that’s 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's going to produce positive results for its customers. So we would expect to see revenue probably in advance of a public announcement.

Unidentified Analyst

And then finally do you see gross margin improving sequentially and if so, I mean what are the key levers in order for that to happen?

Michael Burdiek

Actually we see gross margin improving incrementally pretty much through the entire fiscal year. And some of the key factors there are one, we obviously have now integrated RSI into the enterprise. So RSI is an accretion element to gross margin, so that will be a contributor certainly in Q1. We think that as the mix, the 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 the Caterpillar could be accretive to gross margin.

Unidentified Analyst

And actually just one final question, I think typically you give a cumulative devices sold number, what was that for that or after this quarter now?

Michael Burdiek

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

Operator

Now our next question comes from Janet Enblem [ph] with Craig Hallum.

Unidentified Analyst

Could 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?

Michael Burdiek

In terms of the competitive landscape in Brazil, interesting, as we’re late entered into the market, I mean we didn't really have any material revenue in Brazil until early in fiscal 2014. Brazil was quite strong in Q2 because we bought a new channel partners online, supplied a 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've seen a little bit of pick up in order flow in Brazil in Q4 and expect that to continue in Q1 and onwards to the fiscal year. We were late entrant. We encountered a number of competitors in the market that were not necessarily present in other parts of Latin American 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, and I think a number of players particularly large players in the market have realized that makes more economic sense to look at high quality outsource partners like CalAmp. Certainly that's created a number of opportunities for us. Also there were some what I will say are low quality Asia suppliers in the marketplace and we’re able to compete effectively even with Asian suppliers on cost and certainly we can outcompete 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 some of the budding fleet opportunities that we see in that marketplace.

Unidentified Analyst

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?

Michael Burdiek

I see, as compared to say, FY ‘14 revenue I would expect to see fleet management product sales grow faster than stolen vehicle recovery product sales in Brazil for FY.’15. Wait, that same commentary would apply to South Africa which has many of the same market dynamics.

Operator

Our next question comes from Scott Thompson with FBR.

Scott Thompson – FBR Capital Markets

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 am just talking specifically about wireless datacom, can you give us a little more color on how you see 2015 checking out?

Michael Burdiek

Sure, so we talked about 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 that range, which means it could be anywhere from 32 million to 48 million let’s say. Obviously we would be probably 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. I mean historically we talked about a blended wireless data comp growth rate, market growth rate of roughly 15%. And 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.

Scott Thompson – FBR Capital Markets

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?

Michael Burdiek

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

Scott Thompson – FBR Capital Markets

And then on the operating income line within satellite?

Michael Burdiek

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

Scott Thompson – FBR Capital Markets

So 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 ‘15 maybe that starts to be enforced a little better. Also can you drill in a little bit on – drill down a little bit on your statements about fleet being maybe large opportunity than the stolen vehicle there? How large is that opportunity in ’14 and then where does it – how should we tee it up for ’15?

Michael Burdiek

Sure, let’s start with the last question first. I think you said the fleet will be stronger than stolen vehicle recovery. I suggested in 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 opportunity in Brazil as well as South Africa. But we see fleet opportunities coming to us and moving through our pipeline. So that’s augmenting sort of the core SVR opportunity that we see throughout Latin America.

In the 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 reality then we would expect to see some of the Contran 245 automotive OEM opportunities that we’ve been nursing in our pipeline, potentially moving through the pipeline late this calendar year or essentially late in our FY’15 flowing into the early FY ‘16 and hopefully on from there.

Scott Thompson – FBR Capital Markets

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

Michael Burdiek

Well that's all of our business right now. We’re not shipping into any mainstream automotive OEM factory installed opportunity, probably don't expect to for the bulk of this calendar year. So everything we’re doing in Brazil at this point in time is aftermarket.

Scott Thompson – FBR Capital Markets

And a couple of quarters ago, you had some pretty significant channel filled, is that sellthrough starting to – or you’re starting to burn through that –

Michael Burdiek

We that inventory is pretty much exhausted and we’re now into a flow business.

Operator

Our next question comes from Greg Burns, Sidoti & Company.

Greg Burns – Sidoti & Company

In a 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 to potentially ramping at the later part of this year?

Michael Burdiek

Well, it’s probably still an opportunity, we had roughly $1 million of PTC related business in Q4. We booked some orders and booked some business in Q4 that we will ship in Q1. So we expect Q1 to be actually 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's a hard deadline. We’re hopeful that we will have a better year in FY ‘15 than we had in FY ‘14 for positive train control sales and in FY ‘14 overall I think we had roughly $4 million of revenue, those PTC related but to be honest we think that the greater opportunity in the rail marketplace relates to our other products and services including fleet management services, after tracking products and services to help rail operators better manage the supply-chain elements that they are responsible for.

Greg Burns – Sidoti & Company

And in terms of the – in the satellite partner [indiscernible] Sprint are I think trailing fixed wireless broadband solutions. Is that something that down the road potentially provide some upside for you in the satellite market?

Michael Burdiek

It is possible. If DISH becomes very serious about rolling out a terrestrial broadband network obviously that's something that's right in the sweet spot of what we do and hopefully there will be an opportunity for us if they move in that direction.

Operator

Our next question comes from Rajesh Ghai [ph] of Macquarie.

Rajesh Ghai – Macquarie

A couple of questions, a couple of housekeeping questions, what was the international revenue as a percentage of total and how much it was recurring revenue?

Michael Burdiek

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

Rajesh Ghai – Macquarie

And considering that you really over achieved in the satellite business in fiscal ’14, what is the risk that in fiscal ’15 this business could run at a run rate less than 10 million a quarter given obviously you have a finite business out there?

Michael Burdiek

We think, well 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 2 million type of business. So you take the low end of that range and multiplied times four could potentially be as low as 32 million. But I think it’s unlikely that we will string together $8 million quarters for the full fiscal year, hopefully we will do better than that in some if not all of the quarters through FY ’15.

Rajesh Ghai – Macquarie

And in terms of the Q1 guidance, it used to be pretty broad, what kind of uncertainties are you factoring in, that drives that broad guidance range?

Michael Burdiek

Well, 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. So I wouldn’t consider the range to be broad.

Rajesh Ghai – Macquarie

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

Michael Burdiek

Sure, so 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 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’re optimistic that we will be able to identify those incremental opportunities. So I would look at it as mostly sort of the calendar 2015, FY’15 or FY ‘16 sort of opportunity to do much more than we’re doing currently with our hardware portfolio.

Rajesh Ghai – Macquarie

One last question from me, [indiscernible] last quarter, a month ad half ago, but in terms of the competitive landscape, obviously a lot of hype related to the internet of things, has that resulted in -- have you seen any entry of new entrants especially after Mobile World Congress that you’re concerned about or have you seen any of your suppliers or partners kind of trying to [indiscernible] approach that you have taken, I think you need to see any of that –

Michael Burdiek

Well, I think if you talk about yourself as an internet of everything company it's 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 end to end communications solutions company. So by definition we’re not the internet of everything, we’re 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 terms of our ability to compete we think we’re 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.

Operator

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

Michael Burdiek

Well, thank you again for joining us today and we look forward to speaking with you at the end of our first quarter.

Operator

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

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