CAMP4 Therapeutics Corporation Q4 FY2023 earnings call

• Fourth quarter revenue was $78.5 million, in line with expectations, and full year revenue was $295 million flat with prior year.
• Software and subscription services revenue in quarter grew 4% sequentially and ~25% year-over-year to record $51.4 million, 65% of total revenue; full year grew 20% to $185 million, 53% of total revenue.
• Adjusted EBITDA increased 44% sequentially and 35% year-over-year to $6.8 million, ~9% of revenue.
• Discussed business transformation from hardware only to software and data insights with recurring subscription basis. 78% of hardware only customers converted to device management recurring application subscription model.
• Made significant R&D investments in application software stack. Subscriber base increased 9% quarter over quarter to $1.6 million and 51% year-over-year.
• Telematic products revenue down due to supply shortages and customer transitions to subscription model.

Fourth quarter revenue was $78.5 million. Software and subscription services revenue in the quarter grew 4% sequentially and approximately 25% from the prior year to a record $51.4 million, representing 65% of total revenue. Full year software and subscription services revenue grew 20% to $185 million and represented 53% of total revenue in 2023. Telematic products revenue in the fourth quarter were $27.1 million, down 8% quarter over quarter from $29.6 million and flat year over year. For the full year '23 telematic products revenues declined 22% to $110 million from $142 million.

• First quarter FY '24 revenues expected to range between $72 to $78 million, adjusted EBITDA expected to be between $5 and $9 million.
• Target to return to year-over-year revenue growth by end of fiscal year '24; cost reductions and supply chain improvements to return non-GAAP gross margin to historical norms and improve EBITDA margin performance.

• Complex contractual issues with some large customers in hardware conversion.
• Supply shortages negatively impacted ability to fulfil demand in prior year.
• Foreign exchange headwinds in connected car business affected recurring software application subscription revenue.
• Market competition may impact ability to grow software business.

Q: Can you give us the recurring application subscription number?

A: For the fourth quarter, it was $19.4 million plus the rental revenues of $8.6 million.

Q: What about the trajectory of recurring application subscription revenues?

A: Impacted by discontinuance of auto finance business, foreign exchange pressure, but sales team now 100% focused on driving recurring revenue businesses in K12 fleet TNL and automotive.

Q: How about the remaining hardware conversions?

A: Two large customers with complicated contractual issues, but making good progress and still on track to complete.

Q: Success in implementing pricing increases?

A: Had some PPB revenue items charged to customers, supply chain improvement led to reduced spot buys and improved gross margin impact.

Q: Impact of cost reductions on OpEx going forward?

A: Cost reductions implemented late in Q4, continue in Q1, full impact seen in Q2, ~$8 million to $10 million annual savings.

Q: Normalized gross margins?

A: Trending back towards ~40%-41% seen in 2021-2022, long term target 50% blended gross margin for software and subscription services.

Q: Organic growth rate of connected devices and ARPU?

A: Long term goal for recurring revenue growth 10%, with more units going out on full stack solution higher gross margin area.

Q: Upsell pattern for customers converted to DMC TC?

A: Early days, but opportunity to position TSP customers to compete better and sell additional features, customer success organization built to focus on upselling.

Q: Details on cost saving plans across COGS, OpEx and CapEx?

A: ~20% in COGS and CapEx, ~80% in OpEx, headcount reduction spread across sales, marketing, G&A and small amount in R&D