CalAmp Corp (NASDAQ:CAMP) Q4 2020 Earnings Conference Call May 5, 2020 4:30 PM ET
Leanne Sievers - Shelton Group
Jeffery Gardner - President, CEO & Director
Kurtis Binder - EVP & CFO
Conference Call Participants
Thomas Walkley - Canaccord Genuity
George Notter - Jefferies
Paul Coster - JPMorgan Chase & Co.
Welcome to CalAmp's Fourth Quarter 2020 Financial Results Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Leanne Sievers, President of Shelton Group, CalAmp's Investor Relations Firm. Leanne, you may begin.
Good afternoon, and welcome to CalAmp's Fiscal Fourth Quarter 2020 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, CalAmp's Investor Relations Firm. With us today are CalAmp's Interim President and CEO, Jeff Gardner; and Chief Financial Officer, Kurt Binder.
Before we begin, I'd like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect CalAmp's best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in our periodic SEC filings and in the earnings release issued today, which are available on our website. We undertake no obligation to revise or update any forward-looking statements to reflect future events or circumstances.
Jeff will begin today's call with a review of the company's financial and operational highlights, then Kurt will provide additional details about the financial results and outlook followed by a question-and-answer session.
With that, it's my pleasure to turn the call over to CalAmp's Interim President and CEO, Jeff Gardner. Jeff, please go ahead.
Thank you, Leanne. First, I want to wish everyone and their families well in these unprecedented times. I'm very pleased to join you today and to have taken an operating role at CalAmp, as Interim President and CEO in late March after spending the last 5 years as a member of the Board. I'm incredibly excited to be a part of helping our customers further their digital transformation via the connected IoT landscape, which CalAmp is uniquely positioned to provide. My familiarity with the company and its business enabled me to seamlessly step into this position and make a strong contribution to its future.
For those of you who may not know me, I most recently served as President and COO of Brinks Home Security, a leader in the smart home market. For the past 5 years, and prior to that, I was CEO at Windstream, and CFO at Alltel, both Fortune 500 businesses in the wireless and wireline telecommunications industries. All these businesses were focused on a recurring revenue model. So I'm very familiar with the network communications, data capture and software services sectors and how to drive significant value from these powerful paradigms for enterprise customers and shareholders alike.
CalAmp has a long pedigree in distributed wireless data communications and application platforms with a tremendous potential for delivering increasing profitable growth, which presents an exciting opportunity. Being appointed to this position, right in the middle of this COVID-19 pandemic, was clearly not part of the original plan. But I have moved to California and become fully engaged over the past few weeks. I am doing all I can to help lead this team and our organization in the best possible direction. Our top priority, as an organization, is to accelerate our digital transformation to become a full stack software solutions provider with a profitable, recurring revenue stream. We've made progress over the past few years towards that goal. But clearly, there's still more left to do.
I will talk more about my top priorities in a minute, but let's turn to an overview of our fiscal fourth quarter and how CalAmp is responding to and addressing the current environment. The fact that we have grown CalAmp into a business that now generates over 35% of our revenue from SaaS solutions puts us in a much better position to weather this difficult economic period. In addition, being in a very fragmented market, we have the global scale and balance sheet to sustain, if not improve, our position. We have taken measures across the business to reduce expenses to help mitigate the COVID-19 impact. At the same time, we are taking great care to protect our associates, customers and partners. I am confident that we can emerge from this crisis as a stronger company.
Consolidated revenue in the fourth quarter rose 3% year-over-year to $87.2 million, which was at the high end of our revised guidance that we issued in March. As indicated in that announcement, our results were impacted by supply chain shortages, primarily related to the COVID-19 pandemic, combined with softness in the demand for our MRM Telematics business. Production capacity was noticeably impaired in February, due to the extended closures following the Chinese New Year holiday. Today, our team and partners are doing everything possible to minimize the impact to our customers, although these supply imbalances may likely extend for at least the next 2 quarters. The overall operational performance has been improving recently as we manage and diversify supplier relationships across China, Malaysia, Taiwan and Mexico.
Highlighting our fourth quarter and year was the combined performance of our Software and Subscription Services business, which posted another record quarter, with revenue up 83% year-over-year to $34.8 million or 40% of consolidated revenue. For the full year fiscal 2020, our SaaS revenue increased 63% to $124.9 million. As we navigate the COVID-19 worldwide crisis, our primary concern has been the health and safety of CalAmp's global employee base, especially our Italian subsidiary, LoJack Italia, which is headquartered in Milan, an area that has been extremely impacted by the virus. Our employees in that region, but also throughout the company, have effectively transitioned to working remotely by utilizing technologies to support virtual communications across our organization and also with our customers, partners and suppliers. I'm very proud of the team's flexibility in this regard and the manner in which our employees have adapted to this new way of doing business, as we mitigate the impact of COVID-19 on our business and communities.
Most importantly, we have stayed in close contact with all of our customers to efficiently and productively work with them during this crisis. But we, like many other companies across the globe, are being affected in a variety of ways, both from a supply and demand perspective, with the entirety of the impact still largely unknown, as visibility has been greatly reduced. Specifically for our business, we are seeing a broad impact across our global supply chain that is in turn creating delivery challenges. Additionally, visibility into customer demand remains uncertain, especially for end markets such as automotive. Our LoJack U.S. and international businesses have been more disrupted because of the reduced access to our dealer customers, thus limiting our ability to perform vehicle installations.
We are also seeing similar challenges with our Synovia business, which focuses primarily on the K through 12 school market. With schools closed across the U.S., new installations have also been impacted, even though, the rest of our Software and Subscription Services business continues to perform well overall. We are also proud that our technology has been able to help the community as schools across the country are using Synovia's Here comes The Bus application to provide breakfast and lunch to many students who rely on these school meals every day. Additionally, some of our customers are also using our iOn supply chain applications to track shipments of critical pharmaceuticals and food supplies to ensure the safe transport of these essential products.
On another positive note, our transportation logistics and fleet management businesses have been less affected during this pandemic, as freight continues to move across the country to supply stores, essential manufacturing facilities and the medical community. Demand for telematics data from the CalAmp's Telematics Cloud that drives our transportation and logistics customers' applications has seen an unprecedented increase beyond the peak demand during the busy shipping season that typically falls between Thanksgiving and Christmas. Further, our fleet management application iOn Suite is being utilized during this health pandemic by local government agencies to monitor and manage the efficient utilization of fleet and transportation resources to ensure minimal disruption of essential services. We are fast-tracking the rollout of innovative solutions like iOn Vision, CrashBoxx and iOn Tags within our flagship fleet management and supply chain products in order to provide our customers with significant operational benefits for their vehicles and operators to ensure minimal downtime.
The iOn Suite application has been further enhanced to support the ability to seamlessly integrate sensors and other peripherals, such as tire pressure monitors, weigh scales, road temperature sensors and spreader controllers, thus allowing our municipal and commercial customers to operate their mobile assets in the most efficient manner possible. Additionally, we are making significant investments and have a renewed focus on delivering an innovative user experience with our flagship fleet management and transportation and logistics application, iOn Suite, to an international customer base.
As I look ahead to the coming months, as we enter a new fiscal year, there are a number of key strategic priorities where I am focusing my attention and efforts to improve the performance metrics across the organization. I've developed a 100-day plan that will improve the business, which consists of 6 key elements: one, increase the organic growth rate of our SaaS business. In the past year, we acquired attractive SaaS businesses. And much of our growth last year was related to these acquisitions. In the current year, we are turning our focus to organic SaaS growth from new and existing customers; two, establish and sustain a strategic level of engagement with our key customers. In my first month, I have met with many of our customers and plan to continue to be very engaged with them to understand their needs.
I am committed to helping our TSP customers build unique vertical solutions in high-growth markets around the world, while we continue to develop our own vertical applications, primarily in market segments where our TSP partners do not focus; three, focus valuable R&D resources on our most promising verticals, including our flagship iOn suite of applications. We have developed unique, scalable applications in the fast-growing fleet and supply chain verticals; four, accelerating our supply chain improvements. We have a geographically diverse set of Tier 1 supply chain partners and are using technology to shorten our lead times and improve quality; five, focus on aggressively transitioning our U.S. LoJack SVR business to recurring telematics model that offers significant value to our dealer partners and their customers. The legacy SVR device business has been under pressure, and our goal is to focus on our large dealer groups and to build a more value-added service with the recurring revenue stream; and six, review opportunities to improve our EBITDA by focusing our efforts on profitable markets and drive further synergies with our acquisitions.
To further enhance our customer engagement model and sales delivery, we recently appointed Arym Diamond, as our new Chief Revenue Officer. Arym will lead global sales, build application engineering, implementation and customer success. He is primarily responsible for improving his team's strategic engagement with our broad and diversified global customers. With the extensive SaaS experience from salesforce.com and Oracle, his expertise with large enterprise accounts and solution selling will help accelerate our high-value subscription telematics services growth and market reach worldwide.
Additionally, we hired Jeff Clark, as our new Senior Vice President of Product Management. Jeff is an experienced product leader, whose mandate is to work closely with sales, engineering and our customers to improve the end-to-end product experience and drive focus of R&D resources on projects with the highest potential return on invested capital. Jeff led several product teams delivering SaaS-connected device solutions at ClearWire, Toshiba, Amp'd Mobile and AOL, where he drove the AOL Anywhere strategy. I'm excited to have both of these experienced leaders join my executive team at this important time in our transformation.
In summary, I believe, we have an exceptional team in place with outstanding products and solutions and a world-class customer base. CalAmp is in a solid position to build lasting shareholder value as we aggressively expand our SaaS businesses and enter new markets with the objective of generating increasing profitability and cash flow in the years ahead. My top priority is to deliver consistent execution for shareholders, while also providing transparent communications regarding our activities, progress and achievements. I remain fully committed to transforming CalAmp into a leading SaaS solution provider, supported by steady and predictable recurring revenue streams.
With that, I will now turn the call over to Kurt for a closer look at our fiscal fourth quarter and full year financial results and forward outlook. And then we will open the call to your questions. Kurt?
Thank you, Jeff. Today, my commentary will include reference to 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 fiscal 2020 fourth quarter and full year earnings that was issued earlier today.
First, I want to emphasize that we are actively monitoring the impact of COVID-19 on our operating results and liquidity. We have implemented certain cost containment and cash containment measures, especially in areas such as personnel, travel and other discretionary spending. We believe that our existing cash, future cash flows and available borrowing capacity are sufficient to fund our ongoing operations through these uncertain economic conditions, prompted by the pandemic.
As Jeff mentioned, our fourth quarter consolidated revenue increased 3% year-over-year to $87.2 million. For the full year 2020, consolidated revenue was $366.1 million, a slight increase over the previous year. In 2020, international revenue was $99.7 million or approximately 27% of consolidated revenue, compared to $95.3 million or 26% of consolidated revenue in 2019.
Software and Subscription Services revenue increased 83% year-over-year in the fourth quarter to a record $34.8 million or 40% of consolidated revenue, and $124.9 million or 34% of consolidated revenue for the full year. The revenue growth was driven by our recent acquisitions, especially the acquisition of Synovia Solutions, which contributed $11.3 million to our fourth quarter revenue as well as solid performance from our LoJack Italia subsidiary.
For the full year, our subscriber count grew by approximately 41% to $1.3 million. Telematics Systems revenue was $52.4 million in the fourth quarter and $241.2 million for the year, down over 15%, both sequentially and year-over-year. A large portion of the revenue decline for MRM Telematics products is due to the supply chain challenges with COVID-19 and softer-than-expected customer demand for our products, coupled with revenue displaced from the acquisitions. As Jeff mentioned, we continue to pursue new ways of serving our MRM Telematics customers with a focus on converting them to a recurring revenue model.
The legacy LoJack U.S. SVR products revenue was $9.8 million in the fourth quarter compared to $10.4 million in the third quarter. This revenue decline is in line with our expectations as the transition from proprietary radio frequency technology to GPS-based telematics solutions continues within the automotive market vertical. We expect this trend to continue, especially as the work-from-home mandates and travel restrictions remain in place, thereby, limiting our ability to schedule installations.
Network and OEM products revenue increased to $17.9 million from $17.4 million in the third quarter, with another solid quarter from our largest customer, Caterpillar. CAT revenue increased 8% sequentially to $14.7 million in the fourth quarter compared to $13.6 million in the prior quarter, and representing approximately 17% of our consolidated revenue. On a full year basis, revenue from Caterpillar was $50.1 million or approximately 14% of consolidated revenue. CAT continues to ramp its orders for our next-generation LTE-based telematics product family in support of its 3G to LTE upgrade. Consolidated gross margin was approximately 38% in the fourth quarter, which was flat with the prior quarter. For fiscal 2020, consolidated gross margin was approximately 39% compared to approximately 41% in the prior year. The full year gross margin reflects the decline in sales volume for our Telematics Systems products, coupled with unfavorable product mix, inventory obsolescence and manufacturing variances related to the closure of our U.S. manufacturing facility in Oxnard, California. We have provided additional disclosure in our reconciliation of adjusted EBITDA within the press release, announced earlier today, to help further quantify the impact of these items.
In OpEx, our GAAP basis R&D, sales and marketing and G&A expenses for fiscal 2020 as percentages of revenue were approximately 8%, 17% and 16%, respectively. For fiscal 2020, non-GAAP R&D, sales and marketing and G&A expenses as percentages of revenue were 7%, 15% and 12%, respectively. In general, the increase in OpEx as a percentage of revenue is due to the lower sales volume for Telematics Systems products and incremental operating expenses for our recent acquisitions, coupled with the deferred revenue haircut from the purchase accounting adjustments. As we manage our spend in this period of economic uncertainty, our focus is on personnel costs including delayed hiring as well as the timing of discretionary spend around T&E, professional services and marketing, to name a few.
The GAAP basis net loss in the fourth quarter was $55.8 million or a loss of $1.65 per share compared to net income of $11.3 million or $0.33 per diluted share for the same quarter last year. For the full year 2020, the GAAP basis net loss was $79.3 million or a loss of $2.36 per share compared to net income of $18.4 million or $0.52 per diluted share in 2019. Please note that both the fiscal 2019 fourth quarter and full year financial results included the reversal of a legal accrual of approximately $18 million related to the Omega patent matter. While the GAAP basis net loss for fiscal 2020 fourth quarter and full year reflects noncash charges for an impairment loss on intangibles and other long-lived assets of $19.1 million and an increase in our valuation allowance of $34.6 million recorded against our net deferred tax assets.
In the fourth quarter, we determined that the prolonged secular decline in revenue from our legacy LoJack SVR products, coupled with the slower-than-anticipated market penetration of our Telematics Solutions in the U.S. automotive dealership channel, represented determinate indications of impairment, and ultimately, the $19.1 million impairment loss. These factors are further exacerbated by the unfavorable impact that the COVID-19 pandemic is having on the automotive end market.
On a non-GAAP basis, net income for the fourth quarter was $1.1 million or $0.03 per diluted share, compared to net income of $5 million or $0.15 per diluted share in the third quarter. For the full year 2020, non-GAAP net income was $15 million or $0.44 per diluted share compared to a $39.8 million or $1.13 per diluted share in the previous year.
Adjusted EBITDA was $7.8 million in the fourth quarter with an adjusted EBITDA margin of 9% compared to adjusted EBITDA of $10.9 million and an adjusted EBITDA margin of 11% last quarter. For the full year 2020, adjusted EBITDA was $36.9 million with an adjusted EBITDA margin of 10% compared to $48.2 million and an adjusted EBITDA margin of 13% in the previous year.
Now I want to address our current liquidity position. At the end of the fourth quarter, we had total cash and cash equivalents of $107 million, and we recently extended our $50 million line of credit with JP Morgan through March 2022. Our aggregate outstanding debt balance is approximately $272 million, of which $27.6 million is due on May 15 of this month. At present, we plan to repay this current outstanding debt utilizing our cash on hand. Our total outstanding debt also includes $14.4 million of amounts due to factors or assignees, which was assumed in the acquisition of Synovia. During fiscal 2020, our net cash provided by operating activities was $11.5 million, which reflects our net loss of $79.3 million adjusted for certain noncash items, such as impairment charges against our intangibles and long-lived assets as well as depreciation, amortization, stock-based compensation and changes in working capital. The net cash provided by operating activities also reflects the working capital demands assumed with the post-sale integration activities of the 3 recent acquisitions. Additionally, we invested in internal infrastructure, including the build-out of our shared service center in Richardson, Texas, and the implementation of a cloud-based global ERP system to establish a foundation for growth and cost synergies, especially with the recent acquisitions.
Our consolidated net accounts receivable balance was $72.3 million at the end of the fourth quarter, representing an average collection period of 68 days. Even with the work-from-home mandates, our collection efforts have remained consistent and in line with our historical collection periods. Additionally, the total inventory at the end of the fourth quarter was $36.8 million, which decreased $7.3 million sequentially and represents annualized inventory turns of approximately 5.8x. As we execute on our supplier transition plan, our focus is on optimizing our inventory levels and working capital, while still meeting customer delivery requirements. Our cash conversion cycle time was 67 days at the end of the fourth quarter compared to 76 days at the end of the prior quarter. Additionally, our deferred revenue balance was $62.2 million at the quarter end, compared to $64 million at the end of the last quarter.
Fiscal 2020, we recorded an income tax provision of approximately $20.5 million, which is attributable to the $34.6 million valuation allowance that we recorded against our net deferred tax assets partially offset by an income tax benefit related to our pretax losses and available income tax credits. For the same period last year, we recorded an income tax benefit of $1.3 million. Regarding our cash basis taxes for fiscal 2020, we paid approximately $1.1 million in cash tax for the year, which is principally attributable to the cash taxes paid by LoJack Mexico, which is a tax paying entity. Looking to fiscal 2021, we do not expect any material changes to our cash taxes due to our federal net operating losses and our other available tax credits.
Now regarding guidance, with the timing, magnitude and duration of the worldwide COVID-19 pandemic, virtually impossible to fully ascertain at this present time, we have decided not to provide guidance for the fiscal 2021 first quarter. With the global work-from-home mandates and the indeterminate access to the labor force in Malaysia and Mexico, we are seeing a broad impact across our global supply chain that is, in turn, creating product delivery and scheduling challenges for device installations. Additionally, visibility into customer demand remains uncertain, especially for end markets such as automotive and an even more acute impact to those customers in Italy and other areas of Europe.
Overall, our team is doing an effective job proactively addressing and managing all of these factors in order to help mitigate the impact to our business. Although we hope to return to providing quarterly guidance as conditions and visibility improve, the current global situation prevents us from accurately doing so at this time.
With that, I'll turn the call back over to Jeff to provide some final comments before we open the call up for your questions. Jeff?
Thank you, Kurt. I'd like to reiterate, once again, to all of you, that we are adapting day-to-day and week-to-week as we work through this difficult situation, along with our customers and communities by using innovative ways to get things done. Looking back over the past year, we've accomplished some important things, not the least of which, was expanding our Software and Subscription Services revenue to well over 35% of our total revenue. And the new products and applications we've released into the market recently, including iOn Tags, iOn Vision and others represent exciting revenue opportunities. As we look to emerge from these temporary global conditions, I can tell you that the CalAmp team has a healthy perspective and a positive mindset to accomplish great things in the quarters and years ahead.
With that, I'd like to open the call up for your questions. Operator?
[Operator Instructions]. We have one question from the line of Mike Walkley.
Jeff, certainly, challenging time to take over a CEO role with lots of changes. Maybe just high level, can you discuss your first couple of weeks, how the message has been received from the employee base? And then just areas that you're most excited about in terms of opportunities for new recurring revenue services that you see for CalAmp?
Yes, Mike, as I said in my script - thanks for the question, and it is a challenging time to start. But I've got to tell you, the team has been incredibly receptive. We've jumped in, and we've attacked these challenges aggressively, which I'm very pleased about. And it's a difficult time, but I think the way the team is working, the way we're - I think people are working harder than they ever have. We're meeting virtually every day to really meet with our customers, kind of focus on our strategy and put ourselves in the best position to improve the operations here. And I really think that we've made some progress in some key areas.
You've got to step aside from COVID-19 for a minute, but the fact that we're now - we have a fully diversified set of global Tier 1 suppliers, the fact that our team has really changed this business with much more of an emphasis on SaaS, positions us well for the future. And I'm really excited about the product suite that we're developing. I've talked a lot about - in my comments about iOn and fleet and transportation and the opportunity that we have there. So I'm really excited about that.
We've got two members of the management team that I think are going to really add some great value and accelerate things. I think that's one of the challenges here is to kind of do everything we can to move faster to focus on the right products. We added Arym Diamond, who came from salesforce.com and Oracle before that, a real SaaS revenue expert, and very good with strategic customer relations and a real solid product person. And along with - and Jeff Clark, our Senior Vice President of Products. Together, I think they're going to add some real value. I can already see the pace of the company improving in just the last 30 days, and everybody is reacting really well in a difficult situation.
Great. And with that team in place, do you feel you need to add more areas of talent to transform the company? Or do you feel like you have the right resources now? I know Kurt also mentioned some costing objectives just during the uncertain times.
Sure. I think those were two of our key hires that we needed to make to kind of fill out our team and that we're in a good position now. And as Kurt mentioned, we're going to be very conservative go-forward with regard to investing in additional people. We've got some pressure on the business. So we've already been very sensitive to cost. If you look at the business and how - even before I arrived here, the team had made great progress on some of the synergies in the supply chain issues, our headcount is down significantly year-over-year. So I think we're in good shape as it relates to the talent that we need to be successful go-forward.
Okay. And just on the shorter term, I know you're not providing guidance, just - it makes sense with the may quarter end and a lot of the world still locked down. But just on the software subscription business, how sticky is that? And how should we maybe modeling that business in the shorter term? Is that kind of flattish? Or do you lose some customers, like you talked about on Synovia because a lot of school buses aren't shuffling kids back and forth. Just kind of puts and takes on that business in the short-term would be helpful.
Yes, sure. I'll let Kurt weigh in on this after me. But as I look at that, that's some quality - that's quality revenue, $124 million, 35%. And it's recurring. And there's a good portion and that's recurring and it's unaffected by what's going on out there. There is some portion of it, as Kurt mentioned, I believe, that, for instance, in the Synovia business, we have a little bit, not all, there's a huge recurring portion of the revenue, but some of it is affected by our ability to install the products and new bus fleets around the country, and we've - that's been put on hold. We were working every day with some of our partners around the country, and there's - just yesterday, a big installation that we had talked about where they just don't have anybody there to kind of receive our product or allow our technicians to access their buses at this time. So that will have some impact. But I mean, I think we're in such better shape with that recurring revenue stream than we would have been, say, a year or two ago.
Yes. And Mike, in terms of visibility, it's tough to give any guidance there, especially with the challenges around the installations and - but obviously, the SaaS business is much more stable and predictable in a normal environment. As we look at what's happening with COVID-19, we do see that or think that the business will rebound a bit in the second half of this year. We've been watching closely and listening to our advisers. Obviously, Q1 and Q2 are going to be a challenge. So very limited visibility there. But when you get out until our Q3 and Q4, we'd expect there to be some rebound, albeit, we're not in a position to give guidance. So I think we're pretty excited about the progress we made between fiscal '19 and fiscal '20. I think we've set ourselves up well for future growth in the SaaS business. And so once we get through this temporary economic situation, prompted by COVID-19, we'll be in a great position.
Great. And just one last question and I'll pass the line. I just wanted to clarify, Kurt, is Caterpillar an area of still relative strength? I think you talked about some visibility there with their LTE upgrades. So is that one of the areas in hardware that we should think about is stronger maybe than the other areas of hardware?
Well, Mike, as you know, CAT's an exceptional customer for us and one that we are very closely aligned with. We're strategic partner with them. And one of the things that we've been working on has been the 3G to 4G upgrade and their transition that they're going through. So in terms of outlook in the future, we expect them to be a significant contributor to our revenue. We see that, right now, there's still consistent demand coming out of CAT, and that they haven't modified their forecast in any great way. We do know that they are challenged a bit with some of the facilities being temporarily shut down. But right now, we think that it's still going to be a solid year with CAT for us.
And next question from the line of George Notter.
I guess, Jeff, maybe this is one for you. It's sort of an oddball question. But you've come in, you're implementing a 100-day plan, you're making changes on the personnel, you left your prior role at Brinks Home Security, I guess, I'm just curious about the interim tag to the title you have right now. Why is it interim? And maybe you could just help us understand that. And then I also wanted to ask about - maybe just answer that, and I've got another - a follow-up.
Okay. Sure. Well, first, I'm fully committed to this opportunity. I'm certainly not behaving like an interim CEO and asking one of the team members here, I've jumped in, and I want to do this, and I think I have the experience and energy to really add a lot of value here, and I'm jelling very well with the team. I obviously have submitted a 100-day plan to the Board that I think can accelerate our transformation. Being on the Board for 5 years gave me a head start on that. And the Board has not initiated a search yet. And I have the support of the Board and the management team. And so I hope to earn the support of the investors through improved financial performance and transparency. And having said that, of course, it's at the discretion of the Board. So that's kind of the situation of where we're at. But I feel great about the support I'm getting, both from the Board and from the management team.
Got it. Okay. Great. Fair enough. And then you talked about trying to drive organic growth on the software and subscription side of the business. Could you give us a sense for what that looks like right now? I think you guys mentioned 1.3 million subs. I think it was a similar number exiting the prior quarter. And certainly, I think, there's probably some rounding in here. But how many subs were you able to add in the quarter? And then what does that look like in terms of organic growth?
So George, I'll start that, and Jeff can add in here. So just in terms of full transparency, when we started fiscal 2020, the growth that we experienced was heavily influenced by the 3 acquisitions, Synovia being the largest, but Tracker, U.K. and Mexico were key contributors. When you look at our organic growth, we were actually in aggregate down about 6% to 7%. But in that variance, we did have some pockets of success in growth, specifically, the supply chain integrity solutions has actually shown growth, and we see longer-term opportunity there. Obviously, we've talked a lot about LoJack Italy, that up until the COVID-19 pandemic was growing consistently double-digit growth.
So what we know that we need to do better is just further engage strategically with our customers, align ourselves, help them understand the value proposition that we have to bring in integrating our hardware devices with our CalAmp Telematics Cloud and then a market vertical application that's perceived as value add. So we think we can do that. We think that the acquisitions, in particular, the Synovia acquisition, has really given us a road map to accomplishing that. That in combination with what we've been able to accomplish with LoJack Italy, really establishes a road map for us to be successful longer term. So more to come there.
Yes, and it's complicated, Kurt. On the - if I could just add something there. I think part of this is all about strategic engagement with the customers. We have such a great platform, and we are much more than a device company today. We're delivering a great set of products and services. So the fact that we brought Arym Diamond into the fold, as our Chief Revenue Officer, he really understands how to sell SaaS. At salesforce, to me, as a customer of salesforce and all my prior jobs, I know they're one of the most aggressive SaaS sales teams in the country, and they're very good at it. Arym's bringing all that skill set. In just his first 45 days here, I see a huge difference. And he and I are getting engaged at the strategic level. Our development team is developing great products like the iOn Suite. We talked about the iOn Tags, which has launched and soon iOn Vision. So we're rolling out products that really add value to our customers and partnering with our TSPs. So we're going to make that a real focus in 2021. And as Kurt said, some of the businesses that we acquired now are going to fall in the organic, and they're going to represent a huge opportunity.
Got it. And then I guess, just I'm inferring from the response that M&A is probably less of a tool here as we look forward. The balance sheet probably drives some of that certainly. But I - is that a fair assumption?
I think we have so much upside focusing on our current business. We were pretty acquisitive last year. Right now, I think, it's time to focus on organic growth and maintaining our balance sheet position.
Your next question is from the line of Paul Coster.
So you're more than 2/3 way through the quarter, and you're suspending guidance for this quarter. So I'm just wondering what typically is the third month of the quarter in terms of the linearity of the business?
Paul, yes. So when we look at - this is the Telematics Systems business, and in particular, MRM Telematics, and for - to a lesser extent, the network and OEM products shipments. They tend to be fairly back-end loaded. We - in moving to more of an outsourced model with our Tier 1 suppliers located in places like Malaysia, Mexico as well as Taiwan and China, there's still limited visibility there. And so given the fact that a fair amount of our hardware shipments, whether it be to international destinations or domestically here in the U.S., are heavily dependent on the suppliers and access to labor, especially in countries like Malaysia and Mexico, it's still difficult to get great visibility on. We thought that it was appropriate to hold on providing guidance.
So it's more to do with supply than it is demand then?
I think that's a fair statement. Yes, I think...
I think in the first quarter, for sure.
Yes. I mean we - as you know, Paul, we exited fourth quarter with an abnormally high amount of backlog. And then that, in combination with the consistent demand, particularly in the months of March and April, the customer demand was not as big a challenge. But we do think that on the supply side, we still have some work to do, and it's just tough to get great visibility there.
I was just going to say, we are working with these suppliers in all of these locations on a weekly basis, if not daily, to kind of monitor how we're doing in the month. So as Kurt said, it's important. The last 30 days is always important, and I just want to let you know that we're very focused on it, and they're doing their very best. These guys are doing their best to keep as much of their staff working as possible, and they're making progress every week.
Is there anything in the accounts receivable? I mean I know that it's not particularly elevated. But nonetheless, you must be scrutinizing the composition from a credit perspective, in addition to which you must be a little concerned about some of your customers from a subscription perspective. Can you just talk to us about your credit risk perceived or real?
Sure. Sure. So you are correct. I mean, that is an area that we're very focused on. And in fact, we have team meetings on a weekly basis to scrub through any of the past due accounts and to make sure that we have very diligent collection follow-up procedures in place. But as you know, we have a very diversified mix of customers. What we've seen so far is a lot of the larger ones, say the global enterprises, companies like AT&T, CAT, Verizon, have remained very consistent in their payment cycle, which we certainly appreciate. That being said, some of the smaller customers have reached out and indicated that they need potential deferred payment programs. So we're working on that on an individual case-by-case basis.
But generally, we haven't seen that, broadly speaking, across our entire portfolio of receivables. So we've been pretty pleased with the way we've been managing our cash balance and the fact that our customers have been still very responsive. And we're hopeful that this will continue over the next few months as we start to come out of this COVID-19 situation.
Okay. And my last question really is focused prospectively, the May quarter, I see you've got some supply uncertainty as we roll into the second - fiscal second quarter, though, if this is a real recession and it's got a tail to it, then you would expect to see a demand issue emerging. Are you seeing anything at the moment in terms of churn for your SaaS business? And are you seeing any - can you explain to us - you said it's recurring, but invariably, there's some way in which customers either roll off or they reduce certain types of options or there's some variable component to contracts on the downside. Can you just talk us through any of those risks?
Yes. I'll take the first part. And we haven't seen a lot of churn. Although we are concerned about the really first and second quarter about - as we talked about in this - on our - in our prepared remarks, our ability to access some of our customers, both, if you look at Italy, where - which is a big Software as a Service part of our business. We've had - it's pretty much shutdown. So things like that are affecting us on the demand side. And Kurt, maybe you can talk to the last part of that question on the contracts.
Yes. I mean most of the contracts range anywhere from, say, 24 months to as high as 60 months. As you know, as I pointed out earlier that Synovia was a big contributor of our revenue this year. Most of their contracts are at 60 months. And they're assigned to the appropriation process within various municipalities in K through 12 school districts. So we haven't seen any clear indication that there's been a dramatic increase in churn. Certainly, we're trying to keep tabs or keep in touch with our customers. So whether it's our sales force, that is focused on the government fleets or the commercial transportation fleets, or frankly, even in Italy and some of the LoJack subscription services, we've been really pressuring our sales team to be in constant touch or engagement with our customers to give us feedback. So at this point in time, Paul, we haven't seen an indication that there would be a dramatic increase in churn.
Next question from the line of Jerry Revich.
Thanks, operator. We can move on to the next call, and we'll circle back with Jerry at a later time.
And next question from the line of Pavan Kumar.
This is Pavan, on for Mike Latimore. I have two questions. Which LoJack service geographies are doing best and worst between Mexico, Italy and the U.K.?
So let me just rephrase the question. So which geographic region for the LoJack subscription services is doing best or worse? So let me frame up the response this way. So up until the impact of COVID-19, the LoJack Italia subsidiary, that particular entity and that geographic region was doing exceptionally well for us. Over the last few years, it had been growing at the high teens, even low 20s. And it's adversely full subscription model. So we've been extremely pleased with what Italia and the management team there have been able to do. And our vision really is to be able to take that model and emulated here in the U.S. So that's really been a beachhead and one that we've been extremely pleased with.
As it relates to both Mexico and the U.K., as you know, those were recent acquisitions that we closed at the beginning of this fiscal year. And those acquisitions have been performing to expectations. Both of those markets have been impacted by COVID-19. I will say that the U.K. market was impacted ahead of Mexico. Mexico is still - I think it's a bit of a delayed impact there. But I said up until the COVID-19 matter, those business were meeting our expectations. I think we lost that call.
At this time, we don't have any questions from the queue. Please continue.
Okay. This is Jeff. Thank you for joining us on the call today and for your continued interest in CalAmp. Next Tuesday, Kurt and I will be participating in the Oppenheimer Emerging Growth Conference. It's a virtual event, of course. So please let Oppenheimer know if you're interested in joining, we'd be glad to have a meeting with anyone on the call. Look forward to working with you in the future and keeping you updated on CalAmp in the June time frame. Thank you.
And that concludes today's conference call. Thank you, everyone, for participating. You may now all disconnect.