Partner Letter-2006 - Guidepoint Systems

2006 Report to Partners

We’re #1 (again).
Guidepoint’s technology and business
model have earned “best in class”
ratings from independent research
firms nationwide. In August 2006,
Guidepoint was rated the top
North American Aftermarket
Telematics Vendor for the second
year in a row by the ABI Research, a
leading tech research group based in
Oyster Bay, NY.
Then, in February 2007, global research
and consulting firm Frost &
Sullivan rated Guidepoint The #1
Stolen Vehicle Tracking Service
in North America. Frost & Sullivan
notes: “The Guidepoint system stands
unique among all competing devices, including
original equipment and aftermarket
products.”
Page 2

TO OUR PARTNERS:
2006 was something of a watershed
year for GPSi. We made
great strides on many fronts, as we
transitioned the business from a
“startup” to a growth company.
There are any number of accomplishments
– including new customers,
new products, new employees
and new resources – that serve as
proof of our progress.
On the following pages, we’ve highlighted
some of the key activities,
accomplishments and results of the
past year, as well as the challenges
on the horizon.
Financial Highlights
Revenues increased 45% compared
with 2005, and our cumulative base
of subscribers nearly doubled,
growing 93% versus a year ago.
Service revenues grew more than
52% on a year-over-year basis, reflecting
increased “upgrade sales”
of services to newly activating customers
as well as higher renewal
revenues from existing customers.
Even with the strong growth, we
were careful to manage our costs.
We were virtually break-even on a
cash flow (EBITDA) basis, reflecting
our efforts to manage the business
for cash. Perhaps most importantly,
we bolstered our balance
sheet in 2006 through a recapitalization
and paid down our bank
debt to zero, where it remains today
(as of 3/31/2007).
Sales & Marketing
We expanded our
presence in the newcar
dealer channel
in 2006, working
closely with expediters
in key metro
markets we have determined
offer the
most opportunity.
Today, Guidepoint is sold at more
than 700 new car dealerships and
300 pre-owned vehicle dealerships
around the country in markets such
as New York, Boston, Tampa, Miami,
Los Angeles, San Francisco,
Phoenix, Houston, Dallas and others.
We have been able to increase
our market share by offering newcar
dealers a quality product they
can sell at a fair profit with a
minimum of hassle.
One of our more significant
accomplishments in the new
car dealer channel was the
launch of a new test with the
largest privately owned
dealer group in North
America: Van Tuyl Automotive
(VT, Inc.) Following a
successful test in three key markets,
VT has initiated plans to roll out
Guidepoint to its dealers around
the country. VT is known as one of
the premier automotive operations
in the world and has historically
been one of the largest customers
of our competitor, Lojack®.
Insanely Great Service & Sales
Guidepoint opened its first companyowned
response center in 2006, as
part of its effort to deliver “insanely
great” customer service and increase
upgrade sales. Operators use a variety
of web-based tools – from online
scripts to Google Talk® instant messaging
– to handle customer requests
efficiently.
BOYO...What a Deal!
Driving-related items like this
BOYO nav system are offered to
Guidepoint customers at deep
discounts — or even for free —-
when they upgrade to a Guidepoint
service plan.
Page 3

In addition to new-car dealers, GPSi
last year launched a new service aimed
at further leveraging its technology,
service and brand in the pre-owned
vehicle market. In the spring of
2006, the Company debuted a new
Guidepoint device that provides online
tracking, starter disable, payment reminder
function and stolen vehicle recovery.
The market entry was done as a pilot
program for a major North American
sub-prime finance company, with the
Guidepoint device installed on vehicles
purchased at dealerships specializing in
pre-owned vehicles (e.g., “buy here/pay
here” lots). As of this writing, our
partner in the pilot program has indicated
that it plans to roll the program
out nationally in the latter half of 2007.
In addition to car dealerships, GPSi
also increased it sales to aftermarket
retailers, including 12-volt specialists.
Though this is still a relatively small
piece of our overall revenues, it does
represent promise for the future.
Over the past 18 months, the aftermarket
retailers have begun to figure
out the sales and profit potential of the
GPS and online tracking category. We
offer these specialty retailers a solution
that’s easy to sell, easy to install and
easy to administer.
Consumer Services
After four years of outsourcing our call
center and customer service support
functions, we opened our first company-owned
center in 2006. The new
Guidepoint Support Center in Fort
Worth, Texas has allowed us to meet
our two goals of delivering “insanely
great” customer service and a high
level of upgrade/renewal sales.
Suffice to say, the capital investment
and the cost of operating the center
has been substantial for a company
of our size. The reality is that many
of our services can be accessed via
the Guidepoint Website, but we believe
that operating our own
24/7/365 response centers offers the
best opportunity to deliver a responsive
and satisfying “one-on-one” user
experience for Guidepoint subscribers.
To support the center, we also developed
many new tools and best practices
for recruiting, hiring and training
our GuidePoint Specialists (GPS).
Given our anticipated growth, we believe
these tools and practices will allow
us to scale the business to meet
demand. More immediately, the investment
in the Support Center is
helping improve customer service and
increase revenues from upgrades and
renewals.
“We believe that
operating our own
24/7/365 response
center offers the
best opportunity to
deliver a responsive
and satisfying oneon-one
user experience
for Guidepoint
subscribers.”
GPS Tracks Tanks, Troopers
Industry competitors are fond of telling
people that GPS doesn’t work
once the car is parked in a garage or
underground structure. That’s misleading.
Guidepoint can track a vehicle
via advanced wireless networks.
We simply contact the Guidepoint unit
and get the last-known GPS reading,
then locate the vehicle. So we may
not be able to tell you the exact space
you are parked in, but we can tell you
the address and location of the parking
garage, as well as when you entered
- and exited. In most recoveries,
that’s sufficient for the police.
The U.S. military spends an estimated
quarter-billion dollars a year to put
GPS on its vehicles, and a growing
number of U.S. police departments
are installing GPS units in police vehicles
as well as “bait cars” used to lure
(and then bust) car thieves. If GPS is
good enough to track a tank or a
trooper, it should be good enough to
track your car.
Page 4

GPSi’s business model depends on our
ability to sell value-added services to
our customers, who typically buy the
product on a “no monthly fee” plan.
In 2006, we continued to broaden the
range of unique, auto-related services
we offer customers with new service
plans for online tracking, driver safety
and convenience, and fleet management.
Additionally, we launched a new online
store – the Guidepoint Mall – that allows
our members to buy discounted
merchandise for driving and travel.
Product Development/IT
On the product development front,
we made significant strides reducing
costs and building out our technology
infrastructure.
In 2006, we invested time and funds
into developing a new hardware unit –
our “black box” – that is smaller, easier
to install and will allow us to reduce
our overall cost in the future. Right
now, the new box allows us to dual
source our hardware and provides us
with additional intellectual property (IP)
rights compared with previous generations
of Guidepoint hardware.
In addition to a new black box, we also
re-engineered our existing unit to create
a new, proprietary service for lenders
in the “buy here/pay here”
market, which caters to car buyers
with poor credit. The new Guidepoint
GPS-SID device allows the lender to
send a reminder message to the customer
if a payment is late or missed.
If the customer
does not contact
the lender in a
timely manner,
the vehicle’s
starter can be disabled
and our
GPS tracking can
be used to aid in
the repossession
or recovery of
the vehicle. As mentioned, this
was launched as a pilot program
with a lender, but we have further
refined the device and service to
sell directly to interested dealers
under the SurePay brand.
The growth of our business over
the past few years required us to
make additional investments in our
I.T. infrastructure to ensure we can
keep up with demand in the future.
In 2006, we relocated our network
operations center (NOC)
to a secure, redundant facility in the
Dallas area and expanded our engineering
and development staff at
our Fort Worth facility. As with
our support center, we have focused
on putting in place the tools
and best practices that will allow us
to scale the network operations
and IT infrastructure to meet our
growth.
What’s in a name
Consumer interest in GPS technology
and applications is soaring. GPSi is
leveraging that interest with valueadded
products and services that car
dealers and 12-volt retailers are finding
easy to sell with the new tagline “GPS
means GuidePoint Systems!”
Page 5

Looking Ahead
One of the members of our senior
management team likes to say:
“Survival is easy – growth is the hard
part.” Having run 13 companies over
the years, I can attest to the truth of
that statement. Here at Guidepoint,
we have spent a lot of time “surviving”
since being spun out of Code-Alarm in
March 2002. We have lots of battle
scars, but frankly we wouldn’t have it
any other way.
Now comes the tricky part. The opportunities
presented to us by VT and
the sub-prime market, along with the
continued steady growth of our core
business with new-car dealers, will
challenge us in the coming 24
months. We have bolstered the balance
sheet and embedded scalability in
everything we do, but face the twin
challenges of maintaining our culture
and our focus on the tasks at hand.
Guidepoint’s culture is entrepreneurial
and sales-driven. Every single person
in the company knows his or her role
when it comes to driving sales –
whether it be of black boxes, upgraded
service plans, renewals or merchandise
sold in our online store. We have succeeded
because of this mentality and
we will never waver from it.
We will continue to focus on sales
growth and continuous improvement
in the coming year in order to execute
on the opportunities in front of us. A
huge part of that, of course, is “people
development.” As we add people, we
will look for those who offer a good fit
and complementary skills so we can
indoctrinate them into “the Guidepoint
way” of doing things.
That’s where you can help. As we
grow, we will be looking for people
who can bring us skills, contacts and
drive. If you know of someone who
might be able to help us grow, please
put them in touch with me or any of
our senior management team.
We have many opportunities to pursue
in the coming weeks and months. We
appreciate your support and continued
interest in GPSi.
Best regards,
Rand Mueller
Chairman and CEO
“Guidepoint’s culture
is entrepreneurial and
sales-driven. Every
single person in the
company knows his or
her role when it comes
to driving our sales,
whether it be sales of
black boxes, upgraded
service plans, renewals
or merchandise
sold in our online
store. We have succeeded
because of this
mentality, and we will
never waver from it.”
Page 6

What’s New with Guidepoint

More dealers, more
brands, more markets.
Guidepoint’s penetration in
the new car dealer channel
continues to grow rapidly.
Today, Guidepoint is sold
throughout the U.S. as an alternative
to Lojack®, OnStar®
and other navigation and security
devices at more than
1,000 dealerships selling new
and pre-owned vehicles with
all major nameplates.
Page 8

Good (tech) things come in small packages.
Guidepoint has created a new hardware unit that is nearly
50% smaller than its previous generation of hardware. In
fact, it’s about the size of an iPod® (and every bit as powerful!)
While it won’t play tunes, the sleek new Guidepoint is
easier to install and features a very forward thinking bit of
engineering: the capability to download wireless software
updates. That will come in handy as Guidepoint adds new
user features (e.g., speed monitoring, diagnostics) because it
will allow the customer to have his or her device reconfigured
without needing a technician to make a service call.
And yes, you’ll also be able to download iTunes® with your
Guidepoint in the near future. It is, after all, a wireless connection
to the vehicle. Coming in 2008.
Page 9

Can I get a visual on that
Maps are great, but it also helps to get
visual cues when you’re out driving
around. Likewise, it helps to know the
terrain when a vehicle turns up missing.
Guidepoint’s R&D team recently
began testing satellite maps powered
by Google Earth® as an alternative to
help provide enhanced service to customers
tracking their vehicles or law
enforcement officers working with
Guidepoint on stolen vehicle recoveries.
Because knowing a street address
is great, but pinpointing the location to
a garage in a secluded neighborhood is
even better.
Page 10

Touching the Customer
Guidepoint marketing, customer service
and IT teams worked together to
improve outreach to customers, including
welcome kits, outbound calls, promotions,
direct mail, bill stuffer, email
offers and renewal notices. The typical
customer will be “touched” up to 20
times during the course of a year with
printed or digital materials, as well as
friendly courtesy calls from Guidepoint
staff. The goals: improve service, build
brand familiarity and sell more services
and merchandise.
Page 11

Creative Finance Service
Guidepoint re-engineered its device
to create a new service for
the sub-prime auto finance market.
The GPS-SID allows the finance
company to send an audible
reminder to the vehicle if a payment
is missed. If necessary, the
GPS-SID can be used to disable
the starter, then locate and aid in
the repossession of the vehicle.
Consumers also benefit from the
device, which allows them to rebuild
their credit, save up to 35% a
year on insurance costs and recover
their car or truck if it’s ever
stolen.
More Creative Finance
In 2007, Guidepoint got creative
again and introduced SurePay to
assist buy-here/pay-here dealers
with their collections.
Page 12

Board of Managers
Rand Mueller, Chairman
Founder & CEO of GPSi, LLC
Brian Edwards, Secretary
VP of GPSi, LLC
Joe Belz
Auto club executive, real estate developer
John Jameson
Principal, Dealer Resources, Inc.
Dan Mattox
Executive Vice President, VT Inc.
Michael O’Brien
Serial entrepreneur, restaurateur
Jack Rutherford
Former Chairman International Harvester, Inc.
Corporate Information
GPSi Senior Management
Rand Mueller
Chief Executive Officer
rand@guidepointsystems.com
Geoff Dixon
VP Sales & Market Development
gmdixon@guidepointsystems.com
Tom Gafford
VP Product Development
tom@guidepointsystems.com
Brian Edwards
VP Corporate Development
brian@guidepointsytems.com
For more information about GPSi, including
opportunities for investment, partnership or
other alliances, contact Brian Edwards, vice
president of corporate development at 877-
GPS-FIND or brian@guidepointsystems.com.
Page 13

GuidePoint Systems (GPS) integrates global positioning satellites, advanced wireless
technology, the Internet and 24/7/365 response centers to provide stolen vehicle
recovery, driver safety & convenience, vehicle tracking and fleet management
services.
Available through more than 1,000 new-car and pre-owned vehicle
dealerships and select specialty retailers in the United States and
Mexico, Guidepoint is often sold as an alternative to Lojack®,
OnStar® and other branded navigation, security, fleet management
and vehicle tracking products. Guidepoint is currently
offered by dealers of Audi, BMW, Buick, Cadillac, Chevrolet,
Chrysler, Ford, GM, Honda, Hyundai, Jeep, Kia, Lexus, Lincoln,
Mercedes, Mercury, Nissan, Porsche, Subaru, Toyota
and other vehicle brands.
Guidepoint is the creation of a group of executives
and engineers with more than 100 years experience
in the automotive and technology industries. Owned
and operated by Pontiac, Mich.-based GPSi, llc,
Guidepoint was spun out of automotive security
supplier Code-Alarm, Inc. in 2002, following three
years and several million dollars in development
funding.
GPSi has partnered with a number of leading automotive,
telecom and technology firms in the development
of Guidepoint, including Auto Club of
America, @Road (Nasdaq: ARDI), Cingular Wireless®,
Code-Alarm®, Hennessey Capital, Pegasus
Investors, Plymouth Venture Partners, Telcel® Mexico
and others.
GuidePoint Systems
Pontiac, MI 48342
877-GPS-FIND
www.guidepointsystems.com
The seeds of Guidepoint were planted in 1987 by
CEO Rand Mueller, who founded automotive security
supplier Code-Alarm. Following an initial public offering
(IPO), Mueller pioneered the development of the first
commercially available vehicle location and tracking device.
The system, called Intercept, used cellular phones
and LORAN C, a radio-navigation system that preceded the
global positioning satellite (GPS) system. In 1999, Mueller and
co-founder Tom Gafford revamped the concept to take advantage
of emerging GPS and wireless technology—and Guidepoint
was born.
Today, the Company is recognized at the #1 rated stolen vehicle tracking
system in North America and a market leader in technology and service.
For more information, visit us on the Web at www.guidepointsystems.com or
call 877-GPS-FIND.
© GPSi, LLC 2007