Greetings, and welcome to the CalAmp Second Quarter Fiscal 2013 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. Thank you, Mr. Glassen. You may begin.

Thank you, operator. Good afternoon and welcome to CalAmp's fiscal 2013 second quarter 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 satellite and wireless markets, the timing of customer approvals of wireless product designs, intellectual property infringement claims, interruptions or failure of our internet based systems used to wirelessly configure and communicate with the tracking and monitoring devices that we sell, the effects of the proposed automatic federal cuts, if the scheduled sequester were to take place early in 2013, and other risks and uncertainties that are described in the Company's annual report on Form 10-K for fiscal 2012 as filed April, 26,2012 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 assurances that expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. With that said, it's now my pleasure to turn the call over to CalAmp's President and CEO, Michael Burdiek.

Thank you, Lasse. Good afternoon and thank you for joining us today to discuss CalAmp's fiscal 2013 second quarter. I will begin today's call with a review of our financial and operational highlights and Rick Vitelle will provide additional details about our second quarter results. I will wrap up with our business outlook and guidance for fiscal 2013 third quarter, along with some concluding remarks. This will be followed by a question-and-answer session. We continue to experience operating momentum with strong performance once again driven by our Wireless Datacom segment, where revenue grew 34% year-over-year. This record-setting Wireless Datacom revenue was due to growing demand for our Mobile Resource Management, or MRM products and services, significant contributions from our Rail initiative as well as improving fundamentals in public safety. In addition, we continue to be pleased with the performance of our Satellite segment and its contribution to the bottom-line. Consolidated revenue for the second quarter was $44 million, up 30% compared to the second quarter last year with Wireless Datacom revenue increasing to $34.2 million and Satellite revenue of $9.8 million. At the bottom line, we earned $0.12 per diluted share on a GAAP basis, and $0.17 on a non-GAAP basis. Both, revenue and EPS results were at the high end of our guidance range for the quarter. Cash flow provided by operating activities was $4 million, and we ended the quarter with the cash balance of $10.2 million. Now I would like to review our operational highlights for the quarter. The Wireless Datacom segment posted record revenue in the second quarter with continued momentum across multiple market verticals. MRM products and services accounted for two-thirds of total Wireless Datacom revenue with wireless network applications accounting for the remaining third. Similar to what we've seen in recent quarters, we are…

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 2013 second quarter. Consolidated gross profit for the fiscal 2013 second quarter was $14.1 million, an increase of $2.3 million over the same period last year, predominantly as a result of higher revenue. Consolidated gross margin was 32.1% in the latest quarter, compared to 35.0% in the second quarter of last year, which included a $3 million patent sale for which there was no associated cost of revenue. Excluding the effect of last year's patent sale, the consolidated gross margin percentage in the latest quarter was up 3.4 percentage points year-over-year, due primarily to substantial improvement in Satellite margins. Looking closer at gross profit performance by reporting segments; Wireless Datacom gross profit was $12.4 million in the latest quarter, or 36.4% gross margins. Excluding the effects of last year's $3 million patent sale, year-over-year Wireless Datacom gross profit was up by $4 million and gross margin percentage was essentially flat. Our Satellite business had a gross profit of $1.7 million in the second quarter, 17.4% gross margin. This compares to gross profit of $445,000 or 5.4% in the second quarter last year. These significant improvements in satellite gross profit and gross margin are attributable to the conversion of this business to a variable cost operating model as well as the broadening of the product base. Next, looking at bottom line results, GAAP basis net income in the second quarter was $3.6 million, or $0.12 per diluted share. Our non-GAAP net income in the second quarter was $4.9 million, or $0.17 per diluted share. Non-GAAP earnings excludes the impact of intangible asset amortization and stock-based compensation expense, and includes an income tax provision that reflects…

Thank you, Rick. Now let's turn to our financial guidance. Based on our latest projections, we expect fiscal 2013 third quarter consolidated revenues in the range of $41 million to $45 million. We anticipate Wireless Datacom revenue in the third quarter will be significantly higher year-over-year and up slightly on a sequential quarter basis. Satellite revenue in the third quarter is expected to be up year-over-year, but lower on a sequential quarter basis due to normal demand fluctuations. At the bottom line, we expect third quarter GAAP basis net income in the range of $0.10 to $0.14 per diluted share, and non-GAAP net income in the range of $0.14 to $0.18 per diluted share. Looking further ahead into our fourth quarter, we expect continued strength within our Wireless Datacom segment and a strong rebound in Satellite revenues from the third quarter, with consolidated fourth quarter revenues projected to be in the range of $43 million to $49 million. In closing, I'd like to recap some key points drawn from our recent results and latest developments. First, our Wireless Datacom segment once again posted impressive revenue growth with the 34% increase driven by strength across all of our core verticals with particular momentum in MRM and significant contribution from our rail transportation initiative. Second, our unique hardware, software and service portfolio, supported by established channel partnerships with global reach has given us the leverage and scale to pursue ever-larger opportunities, and third we are operating from a position of financial strength. During the second quarter, we generated operating cash flow of $4 million and ended the quarter with $10.2 million in cash. Our strengthening balance sheet has improved our financial flexibility providing a solid foundation to execute on our strategic growth initiatives in core markets as well as new and emerging applications. Our competitive position is strengthening as we broaden our product portfolio and pursue opportunities for integrated hardware and software solutions for larger, global enterprise customers. We have established a solid foundation for growth and expect that our continued effective execution to meet growing market demand will drive profitable growth through fiscal 2013 and beyond. That concludes our prepared remarks. Thank you for your attention. At this time, I'd like to open the call up to questions.

Thank you. (Operator Instructions). Our first question comes from the line of Mike Crawford with B.Riley & Company. Please proceed with your question.

Thank you. A couple of questions about the quarter, and maybe a couple going forward. First, you said you also received some new PTC production orders. Can you talk about what those refer to?

Well, Mike, those were some smaller orders follow-on orders to the $5 million orders from the two Class-1 railroads we had announced earlier this year.

So, primarily radios?

All radios.

All radios? Okay. Thank you. Then regarding the tax situation, so we already have in our model the $20 million benefit in Q4 and 40% GAAP tax rate next year, and then Rick talked about 1% to 2% estimated cash tax payment for several years going forward. I mean, we've been using 2.5%. I think it was 1% in your pro forma calculation this quarter. Is it best do you think to use 1.5% going forward, so we are all on a same page with pro forma estimates or how should we be looking at cash taxes?

Well, we're really kind of splitting hairs here, but I am comfortable at 1.5% whether it's 1% or whether it's 2%, it will be in the ballpark.

Okay. Then, Michael, you talked about upper end scale to pursue ever-larger opportunities, so are some of these larger opportunities working through your pipeline now and close to fruition, or are any of those potentially incremental to expected guidance or you just expect to pressure these?

Sure. Let's first talk about the scale issue. For us scale really involves sort of two dimensions. One is on the hardware side and one is on the software or cloud platform side. As we talked about, we now at least at the end of the second quarter, had one 1.7 million units of M2M products in service with our customers. That's pretty substantial scale in the hardware side. We've also invested a good deal of resource in R&D funds in cloud services and application support, and we believe we have a state-of-the-art platform that can go well beyond the 293 subscribers that current reside on that platform from a recurring revenue standpoint, so we think we have the hardware and the software platforms in place to really go much larger than those numbers of 1.7 million devices and 293,000 subscriber suggest. In terms of opportunities in the pipeline, I would say they are all stages in the pipeline. We had some that are near-term opportunities and some that are just entering the pipeline that generally involve very large enterprise customers, generally with the global footprint. In terms of their ability to impact the potential numbers for Q3 or affecting the guidance range we gave for Q4 it's unlikely that there will be needle movers in that timeframe, but we expect them to be contributors sometime over the next year.

Okay. Great. Thank you. Then lasts question, your outlook which is above our model also implies 10% sequential growth in your February quarter from November, and part of that is due to a rebound in satellite, but is there anything else in particular on the Wireless Datacom side generating that growth other than what we have just more or the same of what we've seen?

Well, obviously, our visibility six months out is not as good as it is three months out, which obviously supports the wider revenue range we gave for Q4. Our expectation is that satellite would be larger contributor incrementally to revenue from Q3 to Q4 than will Wireless Datacom revenue growth, but we do expect growth in both areas.

Great. Thank you very much.

Thank you. Our next question comes from the line of Mike Walkley with Canaccord Genuity. Please proceed with your question.

Good afternoon, Michael and Rick. This is actually Matt Ramsay on for Mike today. I appreciate you guys taking my question, so just a couple. First of all, it was interesting to me that you chose to give revenue color around your fiscal Q4, and you talked just in the previous question there about a little less visibility in February quarter and November, which is logical. I just wonder, I guess, why you guys chose to give the additional quarter of color and what particular visibility led you to make that decision.

Hello, Matt, and welcome. We feel reasonably comfortable given the visibility, kind of extended visibility we have on the Satellite business as compared to the visibility we have on the Wireless business. We are seeing some signs that there will be a pretty strong rebound there and we feel comfortable kind of leaning forward a little bit in terms of revenue guidance into Q4.

Okay. You talked a little about on the call just improving gross margin trends in Satellite business. It looks like in our model that gross margin is up by four quarters in a row, and your verbal commentary talked about kind of mid-teens sustainable gross margin in that business. And, I think last quarter's commentary was at least double digits. Could you talk about maybe the reasons why your expectations now for that kind of gross margin going forward might be higher than they were say a quarter ago?

Well, I think the primary reason we feel more comfortable sort of stepping up our margin guidance for Satellite is the fact that we recently introduced our new lower cost triple product, which we discussed in the comments. That product is lower cost. It's also somewhat lower ASP, but the margins there are a little bit higher than we've experienced with some of our legacy products, and some of the challenges we've had in managing down the cost structure in those legacy product designs.

Okay. Great. I guess more particular question, and then I have a more longer scoped one. Michael, could you give a little bit of an update maybe in further detail, when you did in your prepared remarks about how the Navman kind of integration is going and you gave the stat on the call about $2 million in sales in the quarter from that up versus kind of $500,000, which was a partial quarter last quarter's. Is that a stable run rate we should look at is kind of the $2 million run rate for sales there? Could you give any color around gross margin profile of sales into Navman?

Sure. Let's start with how well it's going. Well, we are very pleased with how it's going both, in terms of the revenue contribution. Also, in terms of just our success in integrating the development team with our other MRM development programs. I mean it's gone exceedingly well. We couldn't be more pleased, and that comment really carries to the revenue contribution. In terms of our future quarters, I wouldn't expect $2 million every quarter, but certainly in the $1.5 million to $2 million range would be a reasonable expectation.

Okay. Thank you very much. I appreciate the color and the last question for me and then I'll pass the line. I guess looking forward into kind of fiscal '14 and maybe even longer term than that, do you have, Michael, any broader commentary about what you expect, say, the year-over-year CAGAR growth to be, or the potential TAM growth to be in your Wireless Datacom business and how should we think about the long-term resiliency or stability of your Satellite revenue on the next few year basis, obviously it's not particular quarter's and not looking for guidance here. Just some directional market commentary.

My, a few years of guidance? Wow.

No, no.

I am afraid we are not prepared to do that. Our outlook for Satellite is basically stable. The outlook there is probably better today than it's been for a couple of years, and we think the last few quarters' run rate 10 million plus or minus is probably reasonable expectation for that business going into the new fiscal year. In terms of growth rates, as it applies to Wireless Datacom, we've talked many times, and certainly it's in our investor presentation that the market for wireless applications, we believe, is growing roughly 10% per year. Whereas, MRM applications, or mobile resource management applications are growing probably closer to 20% per year. We've done better than that over the last couple of quarters in both areas. Our expectation is those market rates growth will sustain ongoing revenue and profit growth in our Wireless Datacom segment, so in terms of future outlook I would use those numbers and market size growth rates as guidance.

All right, guys. Thank you very much for taking my questions and congrats on a solid quarter.

Thank you.

Thanks, Matt.

Thank you. (Operator Instructions). Our next question comes from the line of Marc Robins with Catalyst Research. Please proceed with your question.

Thank you. Just a question regarding auto insurance, there was no mention made of that in your formal comments. Do you want to bring us up-to-date on anything in particular?

Hello, Marc. No. We didn't mention in our prepared remarks, because we were really using up too many words, but insurance is a still a very key focus for us, and we do believe that that represents a great growth opportunity for our MRM product segment. In terms of opportunities in the pipeline, it's been fairly stable and there are a number of good opportunities that are actually moving through the pipeline. So, in terms of maybe adding color or modifying color from past conference calls, I would say things were moving forward, at perhaps pace a little bit faster than we expected and we could see some meaningful contribution. When I say meaningful it's measurable contribution in terms of product shipments in that segment sometime in the next fiscal year.

That's good to hear. Very good, and then secondly, I noticed that your corporate expenses seemingly dropped rather dramatically. Did I missed any formal comments there, or is there something to add in that area?

Rick can add more detail, but our OpEx actually stepped up from Q1 to Q2, a big contributor to that step up was the integration of the Navman operation into our operating numbers.

I must have been looking at year-over-year and didn't.

You're talking about just the corporate expense and the operating income by segment?

Yes. Yes, sir.

Okay. We had some non-recurring stock compensation expenses that fell into Q1, and to a lesser extent that fell over into part of the second quarter, but that's really the main reason why we have the reduction the sequential quarter reduction.

Okay. Very good, and then I think everything else I had was pretty much. Is interest by the Class-1 railroads and PTC, is that broadening at all or is it still the couple major players?

Well, obviously, we have orders from a couple of major players, and in terms of pipeline opportunities, we are starting to see some additional interest from other large rail operating companies.

Is that in PTC alone, or is that in possibly car inventory and then tracking and so forth and so on? Is it the normal area that we focused on the last two, three four years or have we begun to broaden out a little bit?

In terms of qualified opportunities in our pipeline, things we monitor major and track it's primarily PTC radio opportunities.

But that's still good. Okay. Very good. I like the quarter that was excellent. Good going, guys.

Thank you.

Gentlemen, there are no further questions at this time; I would like to turn the floor back over to you for closing comments.

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

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.