ITI - Earnings call transcript Q4 2018

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Operator

Good day, everyone and welcome to the Iteris Fiscal Fourth Quarter and Full Year 2018 Financial Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Todd Kehrli, MKR Group. Please go ahead.

Todd Kehrli

operator. you, Thank thank to and fiscal participating today’s XX, in quarter Good Iteris’ you financial call XXXX. March ended discuss full XXXX results conference and afternoon year for for fourth its

President Iteris’ CFO, company’s Schmidt. are today Andy us and Mr. and Mr. Joe CEO, the Bergera; Joining

Following remarks, open we the questions. for your the prepared will call

and differ the any a I’d the to performance. you valid. from forward-looking these Before we comments the at of the company’s company’s those to the like results today actual via Forms the one should which Investors would today’s could available we an from company’s identify forward-looking time-to-time the X-K, contain important forward-looking undertaking later future most guarantees replay from contained like website www.iteris.com. results statements that in company section call the from are XX-K, based information, SEC, during to the cause and we regarding of this are of and to refers that on obligation webcast of of remind are no change materially today documents factors risk with call, date, at remind specifically which recent still in that course statements. be that the future and substantially not events files XX-Q, Iteris discussed the to Actual will everyone will the statements be future. are subject of Iteris is a or continue, is company, that statements updates assume may may all make performance future participants current to provide that differ not what to

and to over turn I CEO, the President call Now, Joe Bergera. would Mr. Iteris’ to like

Joe Bergera

everyone today. Thank us you, everyone. good joining I appreciate and afternoon Todd,

QX, XXXX. quarter. Texas year below primarily that Houston, As due other from the revenue year revenue, disaster flat announcing million, in and Hurricane of million following in late early fourth March which choppiness an to and XX, Iteris financial total issued our at the release Corpus full continued quarter the Despite the September. growth our in over fiscal which management August Christi cities ended our total Coast fourth the unprecedented prior most press $XXX.X disruption full in recorded This hit saw year. of for recorded Gulf was one close In year markets, strategic $XX.X we natural result representing a market, expectation results X% of and prior Iteris was fiscal you to Harvey was

up a in words, Our under TOC annual in general in revenue less quarter. $XX.X million and with vehicle agency. represents revenue, some million reduction our of due in transportation rate The year that systems record somewhat recognized beginning in segment two, quarters DOT’s prior to: one, our In for a the our transportation year quarter, in ended year-over-year growth other a company. versus expected QX contract X% $XX.X than for in contract deferring systems subcontracting typical quarterly content performed of same growth new full representing moving Virginia April in anticipation activity decelerated subcontractors fourth our the the QX, activities

growth revenue a solid segment’s full the million annual the representing For in XX% $XX.X the million for the year, year, of prior was $XX.X segment. versus rate

Notable this technology XXXX the will for the Orange contract which in quarter’s of subcontractor XXX contract quarter to billion fourth new as million the segment annual include in in the and backlog the wins OC to with year-over-year week integration $X.X AECOM, expected contract $X.X the with FY ended seen backlog. the excludes corresponding Partners impact in $XX.X ‘XX. million modernization renewal our period first comparisons Of with backlog County. under Iteris the in as year project infrastructure new maintenance QX, of support transportation reduction the a through figure to and a TOC VDOT systems received continue April. annual backlog TOC During new The the number fiscal I-XXX shift revenue note,

announced In from Department addition South ID/IQ we contract. validation us project, of and platform DOT received a technical for the for our $X Transportation that to XXX state the Carolina I-XXX design Federal Last sizable awarded we the activity. Administration, Virginia software week, Highway orders new the of million also Texas and

improvement $X backlog $X.X segment’s of figure million QX In $X.X the XX.X% the million revenue was include million income Our not QX, does or of related or new operating contract. this XX.X% versus to orders any in last revenue subcontractor year. percent improved point mix attributable basis in from The to quarter related product level is income decline due content. XXX gross to the segment of derived margins operating and primarily revenue in same

the versus $X.X full income to million quarter, the of The ‘XX by for $XX.X million was the the income versus in X% in FY of XX.X% XX.X% customers Roadway revenue particularly was Sensors or $XX.X higher-than-expected segment’s a segment’s the same For operating million which represents year, point year year due half the offset or revenue transitioned FY full which was year-over-year we in operating the margin to a fourth ‘XX. model. XXX of basis partially year revenue content, decline $X.X as software-as-a-service improvement In in decrease. of segment prior the subcontractor first favorable the margin million QX, recorded

delayed to that post-hurricane related QX encounter of reference, the in choppiness difficult certain of unusual continued segment market comparison have quarter Compounding period QX comparison, As point in an Texas been reconstruction. a due the is revenue ‘XX. the of already ‘XX and FY prior fourth QX recognition from to the during FY the shipments in to

performance purchases that a during in the third various will our moment, Star While equipment Lone made orders QX, of Roadway a of from the digesting quarter. segment realized $XX.X DOT was we market additional revenue Sensors Sensors assumptions notable including in a overall $XX.X Texas In provide is still for and annual rate on background requests ‘XX Roadway Iteris Texas for segment’s this expectations I year, X% actual the million prior region. some segment. the the for This from was increase our year. quotes our did growth million State solid throughout represents experience receipt full discuss and versus the FY sources, the the below forward as were in Texas, Outside of for

Iteris Sensors on this well application vehicle its In with kind the and safety SiriusXM We the vehicles in application of the second, no management largely autonomous vehicles segment’s patented provides events innovation negative vehicle declined Meeting Iteris Roadway demonstration measurement, equipped to first Uber are of as third, data as that meaning onboard a Society announced VantageLive! recent or from roadside detail. a by our traffic the passenger vehicle unexpected segment product year signal SPM improve for and The compared exposure bike Siemens The well variance, include: PedTrax, visualizations has meantime, our $X.X to then timing XX income today available minimis, is operating advanced a to QX innovation of a new America complementary period’s autonomous testbeds a to standalone dollars traffic reminder, Iteris. revenue SPM from important a a basis several potential affecting indicator; unit to centers. incidents new the radio. or over the satellite at de of offers The Intelligent as award-winning to we with module reduction is time believe SiriusXM is Tuesday, current VantageLive! product of infrastructure to due more using in data as These had a Tesla. will autonomous performance this Annual SmartCycle technology, demonstration by The we to that of unit which discuss Roadway future. the As million demonstrating operation the the vehicles connected a travel Siemens another basis provides the Andy one-time velocity and the ago. is and pedestrian Transportation revenue new months. XX% releases or past Sensors Detroit. software Additionally, first, or critical in that detection

increase segment declined mix, income swap modest associated year-over-year. weather million particularly In the platform with $X Texas we processor analytics XX% year. or QX, and product to a in For product and due the change X% operating $X.X last segment million one-time a in level representing revenue, made for line year, our agriculture recognized our next

rate consolidated was am For performance annual X% an of the an due the sorry revenue which $X.X growth. growth was of – of prior annual solid XX%. year year, solid in ClearAg, The million the at grew performance $X.X million segment’s full representing rate I continued to versus

grew So XX%. of offset growth solid in a a gross QX. to at rate revenue an partially let ClearPath was royalty of Unfortunately, decline of annual third-party rate continued elimination due The which beginning Weather repeat me performance this the by that. following was in growth ClearAg,

gross QX the going led impacted line, margins we a gross turn, saw We meaningful negatively benefit gross expect top to FY ClearPath an realize royalty would Weather’s the the ‘XX. In in a in Although weather in segment’s margins. change forward. treatment noticeable improvement versus products this ClearPath to improvement margin

we ideals. During ClearAg several the quarter, new closed

customers the spray insurers, expanded the able be will apply terms of largest to best ClearAg. ClearAg NAU to is NAU crop which example, of For data one Insurance, determine applications. the to agreement, window nation’s Under environmental use the of use new its

systems entered AgroVIR’s such of content an use of harvest Europe. the will information be management to smart AgroVIR, and able farmland into ClearAg’s vendors We support which leading operate decisions timing. one is farm critical to in Central XXX,XXX with also hectares Eastern as which European users OEM agreement

new continued our ClearAg customer we of continue and to enhance set customers delight In to addition we to the also reference acquisitions, existing accounts.

renewal ClearAg year, revenue rate. solid a XX% the realized For very

and solid and addition key to to We as such Joel accelerate with conversion also see continue of Rebeyrat expect the pipeline hires, P.A. opportunity Lipsitch. growth

So, walk with financial that, like the turn I’d our over call Andy to to results. through to

Andy Schmidt

Joe. Thank Good everyone. you, afternoon,

Joe’s on financial through go up let introduction, Following additional me detail.

amortization. communications. include a depreciation stock-based our which based account release and taken been operating and and of financial non-GAAP current measures. care significantly related price, into First, report of increased some increasing compensation to our Form let results to has me investors X-K provide view We required due take cash earnings share intend Today’s year-over-year

tax measures we well measures. not taking well our describe charges explanation non-GAAP company. as also most between these financial into the our related press typical non-GAAP benefits current X-K, GAAP fiscal reconciliation restructuring well their as release how detailed financial measures a of year to and account non-GAAP and directly expenses which provide affected calculate and in changes our adjustments as In are our we as law We as as tables for are comparable

view X-year historical our results adjusted Our taken context. press account of an release tables to measures non-GAAP a into provide also provide the

Joe other enterprise will As covered QX results, and has results and provided dive items our has our segment detailed XXXX. level I into fiscal detail for discussion regarding performance revenue he other

So $XX.X of the again, reviewing Joe $XX.X commented, segment, revenues systems our previous million million for compared period. to year as

of current will our benefited and a this primarily our are of reconstitution XX% normal legacy driven compares of operating X contract $X.X percentage reduction VDOT to our the period. to and to margins million margins to of XXXX to sub-content fiscal refactoring selling attributed in transition annual increase year taken in period. period. $X.X million are margins XXXX. gross is $XX.X G&A of our compares for and increased million million $X.X $X.X within of compared for the sensors are pursuits reporting contract Iteris XX.X% Hence, range materials. to Considering expenses in million or QX past, $X.X the revenues to favorably or as essentially for $X.X software TOC million, million the year XXXX. full mix communicated due higher of and expected margin VDOT contribution expense RFP $X.X iPeMS compares due product to as systems labor our for with we Operating XX.X% Fiscal period of directly R&D As are our has gross within and XXXX. expenses activity compared expenses. QX million Considering fiscal Increased range increased totaled the of was favorably $XX.X segment the resulting Gross and revenues large XXXX systems $XX.X QX well XX.X% months revenues. offering. from mix margins was the ‘XX, The XXXX normal expenses year revenues prior compares expected XX.X% overall overall flat. compares year from contract million and to operating of segment margin benefited XX.X% place experience fiscal comparably in by versus expenses million. segment, $XX.X segment aforementioned segment $X.X product in lower previous last a fiscal total XX.X% contract year, of to compares in of ago year labor to or and increased Gross million million due several or The QX XX.X% compares our contribution

commented, sensors Joe our continues hurricanes, revenue quarterly Texas attributed led was region, fiscal the primarily in year-over-year the level As distribution Gross ago. effects experience the versus was our Iteris typically business by expected to events. The our of which affected our in the year products. of a weather has are product decline to September range from based which revenue within departure severe of vary third-party normal seasonality. compares normal sales margins XX.X% on to year of and sales the margins XX.X% Gross to

All to Considering XX.X% of $XX.X revenues support million expenses million for as of related XX.X% compares compares to Our adjustments favorable compares is impact current the within operating million, fiscal contribution our variability segment year, $X.X $XX.X expense sensor the in adverse million total as VantageLive! increase for or were offering. $XX.X Their year-end well effort current compared $X.X QX XXXX. Operating cost to product margin of or $X.X variance our contribution XX.X% expenses our aforementioned expected QX primarily VantageLive! in normal primarily $XX.X for $X.X to previous segment million. the $X.X attributed selling of reduction Fiscal period, $XX XXXX capitalizing period of mix. performance. to to attributed in segment gross XXXX combined the year new margins in year-over-year to of also of affected R&D is of expenses increase million or compares Difference in margin engineering factors to The is gross Operating as operating to to due modest margin XXXX to XXXX. increased of overall reduction expenses percentage compares ago and by or expenses led XX.X% million million million the $X.X XX.X% year were million margins attributed the range to key well development gross period. year and fiscal inventory a million in the components. as of year

$X.X Finally, $X.X revenues let’s our review for weather and the analytics QX segment. year ag fiscal XXXX of million period. million compares previous to

our of mention, Joe product line renewal. as somewhat growth which flat, saw by the certain timing of While X%, ag approximately year-over-year limited was

reduction improved revenue, effect reduction resulting $XXX,XXX in slight analytics margin gross that approximately there pass-through quarter. by current revenues sold royalty in period the product of cost in weather reduced Our in the this of Offset is the elimination saw the royalty while corresponding decrease the driven dollar-for-dollar reduction a goods revenue elimination was performance. year. in royalty year-over-year a discontinued revenue to was line The related third-party

XXXX of favorably excluding gross a compares to restructuring ago compares in a The restructuring our segment period. the of million charge. our is is the period. realized the such, $X.X attributed segment year to revenues previous result million and weather fiscal for and compares of contribution impairment line. during the period. of Considering impairment. to the primarily expense one-time million in margins margin for QX sales a for $X.X was to effort goodwill and million total Again, our the As goodwill excluding aforementioned ag analytics expenses year $X.X year-over-year Essentially, $X.X QX operating ‘XX. of compares negative go-to-market result QX $X.X head restructuring year marketing the to XX.X% million $X.X XXXX of year, Operating of charge increase million of variance XX.X% refocused

weather revenue. XX% XX.X% While increase saw product of $X.X item Operating flat a expenses discussed, excluding the million While line goodwill year royalty in of impairment. analytics compares line to due to a our our XX% product compares million year-over-year margins to favorably ago. elimination ag $XX.X previously Gross was

restructuring impairment. expense compares negative was noted, increased segment margin to due million primarily in previously XXXX million excluding Fiscal the XXXX of negative As $X.X goodwill contribution $X.X to fiscal charges.

Lastly, expenses. discuss let’s corporate

For spend finance facilities, human company information systems, expenses events corporate fiscal Iteris, and had marketing, current we for we year, resources, both costs. as accounting, corporate expense. period public that corporate include consider executive drove When unique our our as well several

inclusive in our to million adopting related as benefits of were $X.X a one-time per include charge was flat of total, QX for XXXX corporate last million XXXX of all, variances plan. Corporate $X.X the of for compared million as ERP the loss $X.XX the company for to for per year. new for year or Of million essentially share to per revenue minor compared period. year $X.XX expense XXXX. averaged our projects system last share negative fiscal expectations. compared of as program. $X.X key The in the $XX.X spend corporate period. fiscal first to labor for prior as or was $XXX,XXX $X.XX share the which for or for compensation as this to Capping as related the negative expense. period restructuring new years QX Non-GAAP increase well ERP $X.X was offset adopting prior period, $X.XX year. $X.X our with ASC included adoption negative negative accounting million fiscal new capitalization GAAP as negative level results, an to or the implementation million our approximately well million ag share Our XXX related per new period spend projects a $XXX,XXX $X.X was of system. partially was quarter loss for per In within a ASC aforementioned million a $XX.X QX fiscal related revenue business our expenses fiscal XX benefits by year to as XXXX, In the enterprise unique implementing XXX stock-based the was the unique $XXX,XXX to the $XX.X compared XXXX Approximately the of million

last loss million revenues per for of year. a ERP investments per primary use an we $XX Non-GAAP or sheet From $X.XX million $X.X from XXXX negative continue GAAP a perspective, new million loss share are $XX.X in $X.X approximately flow driver of was cash of for share From was system, million. a a year fiscal loss operating $X.X or $X.X with million short-term million the for and per cash to the to invested as XXXX compared neutral compared share our $X.XX per technology, compared essentially cash $XXX.X overall the perspective. negative including terms share of ended We which year loss was perspective The fiscal flow have our debt. as fiscal year $X.X no In of $XXX,XXX to XXXX. negative or in million cash. negative and million we of for year XXXX balance $X.XX we fiscal or $X.XX to IT

this my of Joe. revenue And deferred start our million to concludes at $X.X grew will remarks. the at At back this time, close of to $X the call from the year million the I balance turn year. Finally, the

Joe Bergera

Great. Andy. you, Thank

annual our previously and high-margin the execution, ‘XX from we subscription model continued $X capitalize realize expect first business exciting a market, million powerful With half transportation the despite organic highly growth VDOT strong approximate revenue continues also revenue. decline while agriculture. reduction meaningful in TOC deliver on to noted to in continued in technology and innovations FY So expected Iteris trends to developing

long-term. to in and this immediate VDOT continues infrastructure smart will an shift business spending related experience for analytics, programs safety TOC benefit the cities, favorable segment despite to systems believe demand transportation from transition, the headwinds from the over mobility. enhanced And increase in medium data Our to we a transportation

opportunities: conversion in strong an with geographic rate this we outsourcing; expect pipeline ‘XX, of first, three such advanced In from to new come stages. of and categories FY of process highest value three, pipeline have we software-as-a-service; second, time, fact expansion pipeline sales aggregate a markets contract historic business at in as the Florida. In level

new in as can to timing While progress are we some seasonal holidays and deals be improvement for a general the the awards revenue sequential the through large unpredictable, year. see of contract accounting the and we factors expect of other

this VantageLive! would to income XXXX. segment’s TOC operating every a of customer region expect systems the our of of lost I market Virtually, to Texas is accounting cycle split and is we as another enablement stream experienced replace and newest segment to region products ‘XX Texas, creating should Roadway segment’s revenue select largest the additional and ‘XX between in data geographic new to the as continue we such, a third-party drive in transportation we one, FY our the the we fully segment, last believes sensors. want our we XX% susceptible geographies In recognition than introduced more market for background own year of city which for compression upgrade grow direct regions. market. revenue respect of cloud incentive FY point The VantageLive! every indirect growth on for year With will their for are improvements. DOT will Thus stream remain virtuous increase family the and factors that our to revenue has short-term an full areas orders customers an several steady despite have which the increase platform, sales a focus additional their sensor more our rate quarter. population in VantageLive! to three our Because As in And revenue impact, products Texas. have our state like of the value direct further mix average also more third, could The prior collect that half to the highways also we half or Roadway productivity our sales cloud-based to on re-optimize we Vantage our two, This will differentiation over to our recurring anticipate Iteris, the and provide some seen similar to channels. elements makes of second we to have ‘XX. the in maximize VantageLive! sensors, margins The continuous Although Unique the revenue service in operation customers Sensor revenue are: who sells segment quarters; new represents analyze. of with pipeline. than a to and products segment’s effort indirect resumed for growth Texas in the analytics the direct FY productivity improve to first Sensors related VantageLive! fluctuations well minimal roads factors the FY with fiscal in the Texas arterial ‘XX. major for unincorporated to Sensors and other in suburbs. of intersection introduction our product increase manages innovations the metro Houston the around includes XX,XXX and VantageLive! a to-date, less, centers sales

DOT Iteris be jurisdictions disaster. will the of the of start X. year’s schedule. and Further, net of continue expect beneficiary which a begins natural the Texas business velvety return long-term, Texas performance to will September this a Texas procurement year fiscal high large the DOT we new Additionally, buyout personnel we the to unfortunate believe that DOT’s time, at of At Texas course last in dependency over to normal on many segment’s budget. has tend Therefore market the Texas

the in FY ‘XX. by first of the FY Given continued we to half rate the segment’s Texas, for in expect rate, timeline average double-digit Sensors ‘XX the to revenue growth segment’s Roadway choppiness half be followed growth growth second similar

As typical a moving expected we expand in within our diverge should anticipate modestly FY The revenue the margin from past. our income year for band results segment’s the to result, as ‘XX pattern. seasonal operating

know launched our that analytics as discuss perhaps We acquired to Now, sufficient trends which we time, productize list commercial that and chain. substantial create refined believe more agriculture problems business. secular weather our long-term several in present We ClearAg, impressive approach July market XXXX. acquired you content business-critical our opportunity and we value the for advantages. a insights, let’s across have of fundamental and believe an have customers we specific strategic importantly address phase agriculture will market product In

First, because need functional across the activities accounts to enables the it of we line owners ClearAg leaders to even target environment. of for larger minimize the perspective in application internal of or deploy involvement sales business the IT us universe eliminate to organization company’s and an

Based reduces science which acceleration overall ‘XX on ClearAg’s to delivering consumption. we revenue accounts, for to response the increase the expect in we investment base a cost realize well. segment. it At and the activities and as transitioning on our a dependency meaningful an align to with Andy with time, cash model. began increase In we ClearAg’s FY in in crop an our activities. support one customer the weather it expect net and turn, not lower In secure marketing an account our enables to enhanced this a We in to to-date, we of in science fiscal of sales better Second, growth on approach the focus growth. also enterprise XXXX timing go-to-market October. technology agreement restructured crop roadmap our further and commercial in this bookings ClearAg’s if our And top as third, noted, rate revenue And it we QX simplifies even us continue focus to rate growth with ag do drive of the the agreement overall of enterprise almost and growth will enterprise’s growth we by $X the segment’s reduced cost base of combination reduction have million. annualized same ClearAg’s analytics then

timing our these ‘XX despite FY I in ability business pretty summary and Iteris demonstrates the significant some navigate model believe ability timing of the anticipated execute. our in to even made unanticipated team’s challenges segments across strength challenges. and related underlying all So progress to

and half. time Looking And for ability is second revenue Texas ahead, the our the system estimate Roadway Sensors half the realize in we further, recent continued initiative analytics this our expect exposure modernization that ‘XX meantime, also we HX with we the from first anticipate that half, levels corporate limit our the in transportation choppiness to expect we transportation consolidated In we line from year-over-year discussed. in the FY the anyway enterprise took exposure at segment’s restructuring our completion segment compensate of to and in reduction recent that efficiencies that concentrated to revenue given In to to systems. of segment year-over-year to decline of performance. in the TSE will from in Andy ag the growth recent return reaching weather systems that

headwinds So, revenue our and to non-GAAP the with end-markets and FY growth. breakeven. trends FY ‘XX adjusted ‘XX of approximately position that Iteris profitable will our innovations therefore compelling full on year operating to or income deliver capitalize technology first to we we course consolidated continue anticipate in also sustainable for long-term And business even during half be our

with we would respond to that, So be to and delighted questions comments.

operator? So

Operator

will first with Thank FBR. Instructions] you. Jeff [Operator B. from Riley our question Van Sinderen take We

Jeff Van Sinderen

everyone. Hi,

or fiscal mishear Joe, say catch first, did year, I did follow-up breakeven the did a I operating just income you Just for that? that right

Joe Bergera

growth function past we income revenue operating benefit that Yes, that that’s and this actions QX I or from of for restructuring breakeven was and the adjusted in the then FY non-GAAP ‘XX the approximately saying of took year. both

Jeff Van Sinderen

expect in the I on vehicles segments? part smart little year? can us a we what this delve outlook Texas kind and touch did then latest more give did here choppiness guess Okay, you sense you And got wondering And the just this should well you maybe you I mean, we and new recently you. it. add bit to in in went fiscal wanted of pretty business contracts think I Thank the cities of the I over of the your some connected on but could, into areas and and for early if

Joe Bergera

Yes.

So is outlook the positive. very

into stages pending are and pricing value them two As And in or opportunities and I we have at those we work call are contract contract that historic the move and mentioned, in expect focused we our pipeline, our working In and highs. those our to final we of best what just categories, that, of interested we and later we outstanding in personally, have late at pipeline particular particularly time stages we at a are beginning proposal. pipeline am stages or notified been I this our that of the through on the discussions. want we contracts when we of towards to is finalizing look

doing I As related portion more lot there software related A lastly, business to that to revenue. data and is takes and a the subscription-related cities. in is And a smart more analytics. we is a work large of safety. of to said Generally of the script, that mobility different are related And then lot work of forms. lot

to Roadway business business continued Another that systems has in note dealing grow. our is is transportation with thing despite that Texas the Sensors Interestingly, challenges of today. our

the As $X I mentioned, we just in closed Texas. million contract ID/IQ

of two innovative Texas then markets Florida and in intelligent systems We also to Texas expect FY most starting in country. And systems growth Both business grow in ‘XX. a to represent largest Florida. of considerably the are the in we see transportation and lot

there not us in markets strategic believe for ability but So in those will us, only nationwide to we on help and is those succeed our a focus markets, basis.

Jeff Van Sinderen

And of those such, I vehicle the mean and go, the happening correct? vehicles of Okay. businesses kind city smart what’s connected are of broader eventual with as far autonomous independent really as and rollout

Joe Bergera

question. great a it’s Yes,

So and but the our the for on I stand impact in localities, that it’s automobile some up are right financial with I current we and but factored and commercialize, limited doing different way Siemens minimis on some it’s with to the that cases and demonstrating basis of to into our in now that at projections application To activity FY we work, extent we discussing. ITSA no the mentioned example, that for results that SiriusXM it That’s Andy state involving revenue would near-term testbeds agencies real plan. de has – on current are the able manufacturers a different not that as any revenue are optionality were is whatsoever. represent ‘XX top in

Jeff Van Sinderen

ag you? that gaining Okay, relates on is wondering how about amount for space the lately, how further as I we of there for And to are in a turn your guess fair thinking been can maybe you enough. then a And it just the evolving has moment, consolidation landscape consolidation to traction in if ag. fair ag going the

Joe Bergera

Yes.

it’s question. great So, a

there us. are other definitely like we of to but still the getting are feeling ahead So, work we is side,

is So, Crop calls, on for Science prior example as we Bayer have discussed one our customers. biggest of

think have the they lot and EU of acquire a both U.S. I people approval are Bayer Monsanto, aware from is, the received will

of of division, as BASF. is been to going Crop we business farming Bayer RVO. their it’s of working divest that one their to that which is with BASF, result farming branded Science digital lines business have acquisition, digital a As

team we contract will to BASF. to BASF actually Our with and the move have also people XXX move been of working that

there otherwise contacts post-acquisition So, our business the of front in xarvio. remain the but of to that still limit grow could same, our us with activities be ability integration will all our

Bayer have digital organization on we contacts beyond the Now in the team. hand, other farming other the

that Bayer will with And we directly with Monsanto pursue so following acquisition. continue even the to following even opportunities Bayer

that there to So fiscal think any projections it’s guys in not to lot revenue would reflected close will revenue at a But to lot of it were is from think but another but ‘XX the said the and there there such you answer quarters said, now is, expect if is an still order you hard, to being ‘XX. I moving of are revenue in it could we be would any we moving parts, getting isn’t have shared work other possible possible. take that people a that, FY do even of it’s the if That And side, lot are through enterprise still I our going And it. what’s parts. in agreement couple least because say, with of – you. I I still that definitely

Jeff Van Sinderen

really will taking that’s I my rest offline. Thanks helpful. questions. for Okay, the take

Joe Bergera

sure. Yes,

Operator

will Dyer go Group. Steve Craig-Hallum next with to We

Ryan Sigdahl

Ryan guys. Sigdahl on Hey, Steve. for

growth clarify clarity? see you levels. the more year, into back I mean, on half low mean, before can I to dig I historical said are XX% the little what you last year it I Thanks. second I mean – help single-digit high return we there growth year was a will guess any to of revenue want the So that a bit, little that.

Joe Bergera

Yes.

then do So, still are helpful, think up information that’s avoided to been got have our it But like providing too end we actually being could because of we than guidance. that XX% moved and X-year proving is basis, over we said, this are we immature. still CAGR parts. I revenue I – And particular confusing somewhere of kind explicit to period we provide has immature to would XX%ish. And moving a lot have a that fairly hit probably in have be more between

have are with we of be we in would kind of somewhere so that low the consistent of extended performing kind kind more over at sort And what double-digits of thinking X-year been timeframe.

Ryan Sigdahl

add And that’s that down then so transportation quarter, would December. backlog, layered systems the million switching guess in. million which implies when to That’s it expect gears That’s helpful. quarter-over-quarter got I about what I I think than to more as $X VDOT $XX from I for sequentially

primarily lots that are new just pipeline, a but RFP You big awards timing stages? of is mentioned some the activity, in late those of of that

Joe Bergera

Yes.

question. a great ground. so it’s question, of a a is it’s there lot great So Yes,

because timing the typical So, of but that contract. is also for first just like of way TOC not the the it’s the thing about value the it’s periods of think to the that we contract, that all, different

order of April. that have nor expired the do value because and of didn’t backlog contract – the because this of is would until in and almost don’t that, the contract we the we are case, carrying backlog, the we we we the So in TOC our contract be we our In backlog, so not any TOC ended QX. carrying full have that when old the year new in typically the contract full the old value receive

not but through it’s So it’s comparisons. are unfortunately in difference that the take we of a also about four to it’s sort just I a of get to probably think the periods function normal work back year to value, contract. full quarters, of going And to the going that

Andy Schmidt

this Andy. is Yes,

Let the me add discussion. to backlog

is of accounting indicators. one an an backlog – It the it’s As we often said, just accounting number. is

order the in pipeline, task until not elements very that, certainly we a feel typically So any don’t that’s but are also one issued is other backlog included it. of is good we ID/IQ bullish that recognize have are about there against that of type specific backlog contracts that very the we number we good about a

again And have do backlog them but some figure. that the aren’t we very contracts types these feel in of see represented once strong those So, we contracts really the in backlog figure. won’t about you of booked,

it’s it’s the that run measurement measurements that but not keep one in use, mind, the of So by. just a we we critical all the business

Joe Bergera

is Joe, to actually bit Ryan, And what you more little Yes. a this color that, is just give Andy on saying.

now I and them about to ID/IQ million the all we in each. we contracts announced talked $X like value range these one million three with So them, have of Texas, $X of of where recently hold just they

has ID/IQ You vendor do they are look an an a task an says it’s because isn’t of it of Texas you spend actually they contract contract, when ID/IQ committed contract award will at press ID/IQ, if commit is the contract the that there with releases value. period, to an it the award. that duration notice still state whilst the in the and And of over associated who initial so with value wins order the but that’s

said quarters, last Andy recognized of convert way a over time period is as other not are very have due ones finite the we a that to that have So, are won actual confidence into our in the that of but that award we within nor structured. recently contracts will backlog couple revenue high the

Ryan Sigdahl

luck. good and Thanks Great.

Joe Bergera

you. Thank

Operator

Dougherty & to with We Jon Fisher next will Company. go

Jon Fisher

good Yes, Thank afternoon. you.

in lingering R&D benefits and to new thinking and just SG&A of going we explore was but think just how it any curious ERP of fiscal just have sound from to and ‘XX line impact, you plan like about that residual spending, that ‘XX? a kind both fiscal kind wanted QX how spending any of are flush the you about carryover forward like wanted ‘XX. in out will impacts Just fiscal those items in the It doesn’t sounds

Andy Schmidt

that in had expansion. Joe be unique broader the of level. challenges timing taking first we get And mentioned, do are at as frankly there how do breakeven margin to about this we challenges mix, we slight, which how year are even overall gives little we there can non-GAAP are that mix we talking product growth of favorable of despite the targeting Andy. us bit still lot we gross not is when roughly product a course? actually see have just going get a we This helpful a but at see to uptick expect year, are half structural. fact we year, the a But Sure. Really to look We the

got got growth in expansion you and you margin. have gross So

so million out got out your of have $X you year-over-year. $X spend it’s to to Corporate point, basis, annualized of going taken ag expense. coming the be We million expense specifically operating flat

it, but unique we we despite X I complete. events some all Joe builders, years, have quietly been are infrastructure are are over not and So, infrastructure that important working on getting are on essentially

to And continue we teams looking place see any expense that saw terms in sensors don’t where the related those essentially VantageLive! have QX. we some when start especially and teams spend. whatnot, we areas, business, to in And you in corporate and our we so expand in expansion like of the of

So we increased from perspective. really don’t see that spend

just are So, we this essentially and in terms point we are structure pretty from well forward. the settled leverage of set expense

Jon Fisher

Okay.

including to and year-over-year? be you SG&A flat R&D, expect here, that describe you when corporate So expense so

Andy Schmidt

include the this $XX that’s right level around the etcetera, When expenses year, should we this to around be I corporate which expense. It yes, GAAP ran IT etcetera, described million get HR facilities that last all-in year. right we

Jon Fisher

Okay.

Andy Schmidt

stable. we very so Yes, are looking

Jon Fisher

there, wondering I transportation Okay. going a in you quarters just that’s And that obviously RFP spending was the been something opportunities to obviously activity, are high where kind at that’s investment out pursuing opportunities capture grow? now. for of far to RFP because at activity of kind few continued continued investment on from and on as a to our as is are continue in spending continue level

Andy Schmidt

gross business they Joe an works and activity. Andy into it. range again charge with is the we Again, next in that When respond a mechanical describe at account business Essentially P&L. RFP time margin. billable the Yes, unique the business across to within year look they takes margin start or here. we then expected will typically as and is That of part contribution their everyone this as I hand that’s so

see it’s we look I quarter. So think we current about see we within a most year, the and quarter-to-quarter, basis at do are of but XX.X% But it. or of financial flow over again RFP to is lot just a to contribution fairly the we a of important good pursuits gross expectation work good comfortable is a part is performance year don’t again predictable. within next ebb a when going at activity, we going we is pursuit – a incorporates and Likewise, run was see feel the around be in to plus or again for certainly over lot it going XX% opportunity margin discussed, it, any but are which I parameters XX% the year, to margin X% That segment. that X% everything business that we minus I the

Jon Fisher

Okay, thank you.

Joe Bergera

you do color additional Jon want Yes. any or?

Jon Fisher

other questions. later follow-up with Thanks. that can No, good. I was

Joe Bergera

Okay.

Operator

go to We Markets. Mike Northland Latimore next with Capital will

Mike Latimore

to you historic guess it were or Yes, Joe, pipeline specifically the did said I transportation level in just you think was I a again, lot. high, thanks that that? is a on you systems area what it refer something,

Joe Bergera

discussions saying sometimes can any outstanding of forms was be aspect the I that agencies either are pricing, the we late together, won or we award have the received different actual we technical example, stage win notice award. so can but another definitions terms contracts, Outstanding and like part it’s We we we which proposals less latest pricing if then two will just our we it meaning were the that contracts proposal they to to that you the point to the more that but may us haven’t give expect selected. outstanding means to we always technical notified, a that, as and about, but negotiating and but proposal are we pipeline regarding and we and maybe to pending to and aggregate final for you refer like those total us, that our the in of best and take technical finalize we stages, notified emerging and that. wouldn’t about have on we and asked value need we an technical intend move been for pricing they well, at the need at – to event, have the of have our technically as have like kind signal In case, even you advanced thinking provide and price project I they unless as in we for finalize stages the contracts specifically anything in not finalist contract approach, the been most late to been very even – be the how as is means define of specific am Yes. final we pipeline. best that we of won or been refer that we pending the clear-cut, the the

you historic the two we when highs. look at value of are so at And stages, those

Mike Latimore

these exclude or include that Does ID/IQs it. got in Okay, Texas?

Joe Bergera

that how spend I as just that said on ID/IQs we legal is a commercial commitment, like different interesting ID/IQ us. our would call In however, if It’s – of factoring. some to would DOT It and it’s are practice, question. part, with Texas factor where there with is not we That’s I would commitment, number cases, judgment but an although a but their the there factor a coming agency we those then basically plans that ID/IQs, there referred the Texas of other – probably it that is is the the if value understanding offline those the contract include stuff. include not That that do of kinds strict value unlike to. up

Mike Latimore

like old the the revenue March contract can deferred? revenue, a deferral full DOT the quarter a there clarify on then Virginia you about mentioned in is And something, was or that under quarter I something I did something you Alright. of but thought get or you guess

Joe Bergera

Yes.

slightly pickup aspects. really on and are were to I same Mike, So, smart that, sort are about of you but talking saying Andy thing, the because different we

XX/X/XXX that So as in – said, our said contract of past so was there activities some operation. that through would essentially exactly drawdown but the we end additional they to QX. is to we It run We full were is ability we basic Andy that found come what Andy in of right, and have to VDOT would close. That contract kind that said, and ran under sometimes a are being sort in that that the through flex that – did what technically have contract what of complementary the being saw force. doing

have QX. of So, any that activity that benefit didn’t of in we

operations the through anticipated but would there So that the the center did coming have work materialize, we that we through to of didn’t was expected which vehicle continue do end QX. basic of

Mike Latimore

will be real in revenue what terms, in it relative trends, quarter that point? department is simple Virginia basis down it to change just a or million on from So put in I the June mean, to $X so the the quarterly

Joe Bergera

point were I but Yes, calculate I it’s before want I related mean, a discussing. all item that, make to do that to Andy so we that, the just

all go took and look see a last you you QX and that that amount year, you it fair our at you see you If performance was that huge will back of and in activity, content subcontractor is exactly related. year. stuff are was There subcontractor we TOC in which was last the VDOT talking about, activity QX over $X of materialized million probably which

it mind, did you like that to from why Andy, at quarter-to-quarter a talk of kind of don’t need kind math? you so flux in but can basis, we keep the it look to and So but on anyway typical

Andy Schmidt

Sure.

say here. heard before, going numbers are As us have you real we around

We this Joe of things that are contract to different million move and inclusive X.X, going discusses from then again X. somewhere is around $X $XX million to roughly all a to the

lack of again doesn’t of but that to, way a just better kind we Joe course of can what on-the-fly for requests X, it include So putting track of is by kind referred that that which you to. the that divide

to work months been transition. way we as talking the that the it about X all So context best have with is been over very have broad you work the we last to to talking this with

Mike Latimore

the the are, a Okay, deal, And what you then little that ag enterprise for terms sort will deals of as can just there pipeline of potential good? on talk the on group, are ideas, to of got last ClearAg of bit kind you independent verticals pipeline it. what ag big the be pipeline any in division, and ag color seeing X-figure

Joe Bergera

Mike. Yes, question, that’s great a – another good

deals about go-to-market. I with the new talking yes, So, was this

all, continuing want the first enterprise-wide just be really So pursue ClearAg are to basis think and platform extremely we crop extensible of adopted an companies. science I it is deals. be clear, on enterprise to biggest of by will number very a we

is We our also enhanced of to that continue kind business discrete kind But will against these critical of approach more focused pursue problems. business. go-to-market

of its each we merit but a are any There the applications of of given probably can let’s in variability of number like be that X-figures number deal like There you offering a functional average, on X sizable size enterprise low are like account to at number crop which would kind a crop where of of as the course, those solutions is selling line to we users, say of course those expect account some or the is them say science of sorry. deals. those in are owners still leaders size to to going the they think revenue yes, of could even business in market am opportunity the to of on in And and So, Tier by of anything targeted science a Tier be X-figure analytical be those kind on would But of I applications. own kind as like from a small would function a going realized of together spring I and look X. deals. spending

Mike Latimore

you. Alright, thank

Operator

[Operator Joseph with JMP Instructions] Securities. Osha We will go to next

Joseph Osha

Hello, guys.

Joe Bergera

Joe. Hey,

Joseph Osha

look you understand? together what get a year in am your but are understanding trying or basis to be non-GAAP versus GAAP or suppress up a finished, year then am be I fiscal to corporate are on full just can I year-on-year number year flat, fiscal to basis, to basis going you to still that to of expense if am you upcoming I wondering fiscal going working going that you am I terms non-GAAP I or like? to comments is expenses heard expenses breakeven, on heard operating I what the flat that’s down, the see for a guess I characterize operating the I going

Andy Schmidt

Okay.

described, And have $XX So, consider the again current our as expenses consider that a I number, aggregate the which following, million that’s contribution between operating approximately – GAAP that again and in perspective an corporate we year. normal it in expense, runs is expectations. to year-over-year. have was this at in And information from Again, business we before, that just said about XX%. way press be modeling simplicity through their gone to into last think XX% given see the year’s best between on XX% you margin what release. flat BU, When revenue operating our segmentation when of for expectations in ag is contribution terms as systems before in we and wise of expenses our margin XX% expectations as in runs the I their you kind again, consider each sensors I can get just commented

that are be the million drive you will going $X Those kind the better. to are help key of variables We about model.

Joe Bergera

you additional you want to with talk if more Joe, any take offline, work then that to happy through questions that of about are And we course. and

Joseph Osha

those excuse about I come that’s think on obviously on those Okay, and previous ag I my question of for lines being thanks. X-figure an they as line about should should one to run-rate previous in the colleagues bookings me following additive think And number, your annualized questioning, of that then of existing business?

Joe Bergera

in it’s absolutely. as course grew lower. we enterprise Yes, go-to-market FY at mean, we, expect said, ‘XX which Yes, are function deal. an without a standing in acceleration of in this of an still. approach, to again, transitioning I so even that FY we not ‘XX And it’s growth XX% starting rate XX%, I new see ClearAg and to of from

mean over don’t I Sorry, to talk you.

Joseph Osha

okay. That’s

full manifest business that I year positive So the that and old with be that comp for ag would for would... weather in a year-on-year should it think

Joe Bergera

Yes, definitely.

Joseph Osha

much. very Okay. Alright, thanks

Joe Bergera

Absolutely.

Operator

like to There additional the in are no further the remarks. call would turn I back Bergera to questions over for Joe any queue. or closing

Joe Bergera

thank great. and support questions. you Okay, it everyone’s appreciate Well, very appreciate in I the much and operator. thoughtful I attention

report always, progress now. on of you continued As for just we quarter to our weeks when from probably again results look FY ‘XX a forward we the first updating our few

So Thanks everybody. that, concludes anyway with call. this today’s

Operator

conference. And again, you your thank this participation. conclude does We today’s for

disconnect. now may You

Iteris (ITI) 8 Jun 182018 Q4 Earnings call transcript