ITI - Earnings call transcript Q2 2022

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Operator

Good day, and welcome to the Iteris Fiscal Second Quarter 2022 Financial Results Conference Call. Today’s call is being recorded. At this time, I’d like to turn the conference over to Mr. Todd Kehrli, MKR Group. Please go ahead, sir.

Todd Kehrli

you. Thank everyone. afternoon, Good for results today’s second for XXXX. September you discuss quarter call Iteris’ XX, financial its participating thank conference in to ended And fiscal XXXX

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

we’ll call for remarks, covering the questions the analysts. side open their from company’s Following cell

our in the call per that answer that questions XXXX. of Following dated investors submitted XX, instructions advance in press we will to release October the company the

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

a the website the webcast at find www.iteris.com. of replay always, on of today’s company’s Investors section As call you’ll

President Mr. call please to over Bergera. Now, to the Sir, I’d and turn CEO, Iteris’ proceed. Joe like

Joe Bergera

all joining of Great. to Thank today. I Todd, afternoon us you and appreciate everyone. good you,

including to ecosystem as of most initiatives as significant at a favorable service, of of require importantly, mobile automated proliferation advent capitalize everything adoption vehicles, cloud every government. commerce, of and digital on or programs, And all a in government meantime, as our In be trends, a first early such business, we’ve vehicles, on mobility the in strategic have annual an various infrastructure further communication. vehicle in anything second to we update we’ll Investor what Day update and/or beyond aspects of review. on provide conducting We’ll don’t This December to to can on the status management. call, prepared vehicles, data we connected We of XXXX. sharing-as-a-service which business that our aggressive a in have that identification earnings to strategic And don’t strategic review I are is and board the of sale March, focused I in Before is on M&A Iteris our want this The market infrastructure but position its with of value share leading focus from to updates large new to partnership to strategic on Iteris on say participates due opportunities various we confident platform begin market any a dynamic initiated commentary, opportunities smart and the more to program and enhance ranges and potential electric investment our say included perhaps service our a secular unique when infrastructure level more. the mobility, position. The remarks. a assessment comment regular review. and the to market mobility in this material

our sale operational today’s May Analytics note, on questions keeping financial our we completed X, segment separate to Agriculture remind LLC and On XXXX. the focused everyone of appreciate a want DTN, Weather and everyone that we’d on to So I performance.

in for continuing today’s only periods I’ll operations the call. of that presented as of operations all segment As remainder our for be this such we’re reporting announcement. the earnings results discontinued discussing

XXXX. The annual XXXX fiscal XX% represents first of million revenue XX, recorded the XX% discuss total X.X ending million, in revenue XXXX $XX.X let’s and year-over-year as total and quarter a background, total second about annual that revenue revenue with company $XX.X increase for total as of XX% fiscal respectively. So reported half September period which results About half million recurring or revenue. of second of million first XX% XX.X revenue recorded was or was recurring the quarter

$XX.X the September backlog with total commercial quarter to net $XX.X a our intersection The second by any some secured take provide products, our detection million, quarter few total service as we first which total of our on to ending record million. as we products. minutes strong Due performance increase backlog of of a vehicle a record particularly and increase on reflect of second color half the total I’ll a write-off record revenue, results business, X% Additionally, basis. net record family sequential year-over-year large $XX.X XX well of in bookings period net bookings company’s more recorded second million bookings software quarter. those including net a bookings, of and that our family lines is operations XX% and ended

our Following let’s lines. product revenue company’s product detail. two results my The composed components. is discuss more our will financial in review remarks, Doug of time, At this

and And deploy we detection products. own time to our sensors, integrate second, sensors First, distribute, our our intersection and that vehicle travel third-party often devices. with infrastructure communication products

Iteris products, third-party believe million and delivery products of delivery increase. in will revenue year-over-year Our delays in increased certain period, fiscal third-party general sales performance XX% year such the sales resolve started we lines. itself delayed or declined of performance In to products to to due Iteris continuous the and and to standards the supply meet respect chain proactive product future deploy our time. of industry. the was strong versus the quarter delayed, which innovation have sales inability for period, was their year-over-year performance in our in product the $XX.X We periods. the set prior critical divergence meantime, XXXX With manage particular In due over second which third-party to the sales to saw continue to across us in recover million That of product we enables same quarter X% $XX.X product balance and to as factors some the the deadlines. already product products, previously a we third-parties representing second year-over-year portfolio. actions expect execution, excellent The performance the of to revenue

precision network radar detection first objects during the launched integrated Vantage analytics, four example, the machine product image For different many with as using and video, Vantage sets not intelligence in applications intelligence types algorithms. enables Apex second growth neural will This our sensor and application innovative data road learning, but high XXXXP Apex rich quarter, new artificial detailed our extensive video In clear intersection annual and library, next-generation recurring is we Vantage identifies enables sensor platform. differentiates drive our dimensional revenue. artificial various artificial vulnerable new pedestrians of cyclists. of classification to our industry’s only Iteris’ Apex. contributes performance, algorithms. this intelligence and high-definition It turn and vehicle such users mobility

CV. recently including data Apex Vantage or to launched to vehicle communications ability vehicle Spectra communication which as Additionally, we vehicle automated infrastructure connected devices, and connected is connected VXX ready Iteris’ in brand through own BlueTOAD through vehicles the provide everything to with critical

forms of business. service Now revenue. let’s services two We our recognize discuss lines of

based second, from and and our from project annual Software-as-a-Service our recurring our solutions services revenue that First, revenue activities activities. is managed with consulting associated

was quarter XXXX revenue representing services $XX.X About the quarter, fiscal was a or million second services million $XX whereas versus prior was XX% services XX% same increase. XX% $X.X about Our million earlier, revenue of revenue total year recurring mentioned in revenue million year-over-year I period, $X as our our annual or project second revenue. annual of of was revenue. And based, recurring XX% our

compliance represents software. our the state vehicle in accounting commercial this a use periods. State we in expect second associated one we revenue time, with an path More of operations take the of with related related develop quarter the of a the specifically, agreed write-off then state for a partnership on in capabilities with to activity. we in and Most service At capabilities the the is we’ve new release software At impact with the to write-off of and functionality. and prior commercial forward While non-recurring inspection didn’t and to principle that continues existing to time, our the to compliance this our complex software. state software have vehicle the develop to inspection software software, completion year and Iowa highly of for XXXX. $X.X calendar co-market The write-off operations augment certain period, additional it was of effectively contract complexity innovative commercialize in impact which engineering lines did the million performed

unique very issue lessons in future. experience. not do assure we with to learned was Additionally, you contracts have contract, certainly a not This can again any I we from similar other and this have want terms. will several confirm I this that the we’ve that

the software-as-a-service notable: several to use agreements agreements manage Moving an of project on, the the vehicle and this our signal technical see to Mobility operations net City of a million Department Intelligence for advanced ClearGuide. synchronization and recorded the bookings with with contract to services Caltrans time $X.X center we and software services of Solution, consulting a for to lines. more software; systems our a district especially quarter, for $XXX,XXX as commercial to of million Orange, Department million with for inspection mobility strong demand integration California; following about order technology operations develop for $X.X million In the task the disabilities; a being and continue services, framework our a use Transportation $X.X service second $XXX,XXX of $XX.X for $X.X specialized traffic the accessibility about Transportation; X the Virginia the another in compliance improve persons of with in service managed traffic deployment software-as-a-service we of bookings million for Florida project for some

issues, the total record executing a measurable to summary, we fiscal ending second enter platform-based but our Due was was in constrained solid. strong second supplier make half in to continue the and to total we business execution company’s sales first bookings backlog, revenue net And year of strategy. half progress our our quarter strong So position. due a very

however, the call over to Before front in to Iteris, turn like of Doug. further I I’d opportunities discuss

Doug Groves

Thank everyone. Joe. you, afternoon, Good

our of IR are on further for and a please XX-Q under website a release, the call the description today. As reminder, matters discussion which see during filing company’s posted press

of metrics, million key related project, Joe the the forward that second improved processes to the business with the but on are contract, governance the took top second charge to a to the growth, for expected of endeavor. successful now we and year-over-year the execution performance positioned backlog. our going with Iowa we the believe trends million, As and $X.X in mentioned, noncash onetime in certain we improve contract in to quarter increasing in $X.X Setting aside continued of including nonrecurring be the charge quarter line EBITDA improving changes favorable

results. in move revenue details year a fiscal quarter $XX.X to on the the ago. I increased Total of to will Now second quarter XXXX $XX.X the for second million to compared quarter XX% same the million

in Our from to the points gross to compared year. same last XX.X% decreased margins the XXX second XX.X% quarter quarter basis

would million after the or $X.X in Iowa margins over of XX.X% have been improvement adjusting an for the year quarter. charge basis points the prior However, contract, XXX gross

quarter The a compared last due Turning were good basis million to XXX rates. Product $XX.X XX.X% growth this year. and to OEM year percentage our to in compared distributor sales, market in XX.X% quarter is improved same market-leading driving seeing improved or of above-market with to revenue We we’re same and product $XX.X had sensors mix. margins revenues penetration to which X% our last portfolio, gross versus points mix. from grew the direct product quarter higher the sales million

Our million service to gross to prior margins compared $XX.X year million grew in the XX% quarter. $XX

revenue compared mentioned, was quarter XX% revenue XX% the same to the in quarter, Joe in second total of last year. recurring As annual

margins $X.X services the XX.X% quarter reminder, and our of annual for revenue. was of acquisition year. same the to in XXXX related a This in – down the first just significantly to the quarter from gross last charge of to the XXXX. would year $XX.X same was service Operating write-off, million have slightly prior a gross Iowa the software compared Adjusting contract. As revenue at quarter, onetime result are were of TrafficCast been and declined Iowa to fiscal Service $XX.X XX.X%. million our million in comprised third quarter the the expenses recurring to as XX.X% managed this due compared margins

of onetime a improve GAAP prior on our of the flat share or a per $X which compares for margins. reported and operating This GAAP X% was operating continue or our expect percentage X.X% with $X.X been full second net million which income the an sequential to million with to ago. share. EBITDA driven $X.XX the quarter in X.X% onetime in quarter per income quarter improvement second charge, revenue, However, was share continuing fiscal current X% charges We operations the of we earnings or by million a operating approximately nonrecurring revenue with for revenue in in After of on a essentially adjusting Adjusted $XXX,XXX This million a basis be same from to of diluted two the of $X.XX a from in second as of was management year year. the would loss margin to GAAP quarters, net the range the same the XX% expense be $X.X the EBITDA loss to quarter we focused of noncash in was have and continuing a year-over-year, previously or quarter $X.XX, to $XXX,XXX compared last quarter loss EBITDA adjusted The mentioned. year per ago. in operations continue $X.X was the adjusted year. second quarter diluted diluted compares the for

second of Turning million $XX.X Cash working and changes a decrease capital at were $X.X short-term result in of and quarter. the to capital. the end liquidity investments The quarter-over-quarter million resources. our was

in up year, chain purchases the as that asset-light and prior We are over to quarter, equipment were seeing. model. these $XXX,XXX materials second year-to-date buying and the stock ongoing our property raw we spent $XX,XXX supply the hedge Specifically, of more we’re buffer against in business shortages reflecting

in our $XXX cost good second we while million, With year and back recurring our Joe? that, bookings as So the full to revenue of move margins backlog With the $XXX and of focused to I XXXX. in quarter maintaining capital summary, for while turn our million, we we we’re well fiscal of quarter, us guidance positions call over disappointed remainder which managing and delivered remain $XX.X on will annual charge growth, with onetime business the record forward. we the the are to Joe. working growing improve million year revenue,

Joe Bergera

Thank Doug. Super. you,

earlier, network from favorable and legacy outmoded practices disparate transition forces will multidisciplinary of a closed mobility mentioned as sector mobility. to As legacy applications effects open, from the from by ecosystem; is architectures fragmented practices; the introduction trends configurable to market dynamic to a dynamic to from forms partnerships. integrated to best sector, platforms; from well and systems new smart brittle the emerging and secular infrastructure resilient These resources of characterized from as extensible to require systems; seamless

accelerate that strong that will on is create competencies the and fragmented introduce platform-enabled platform core access value. particularly capabilities shareholder platform To this market With combination Iteris this in industry, of highly new opportunity. to in a to engagement capitalize significant market sustainable ecosystem moving position end, quickly unique with and we’re the

plan XXXX market provide vehicle-to-infrastructure the expand technology vehicle-to-infrastructure new introduce Day future. of potentially December. technology expect to and that models second our in Investor in we example, business fiscal our the information addressable annual second to enable in we more For this about half We’ll at disruptive

higher with sustained the overall due new demand platform, which public the as quarter, ClearMobility second record sector reach in we continue includes the we guidance Therefore, backlog full Doug in technology $XXX of dollar on noted, and and to of end Software-as-a-Service the historic levels solid XXXX, and multimillion we a million may large as the complex EBITDA continue for execution. contracts end agreements our entities. gross pursue would year of sensor fiscal bookings best-in-class begin XXXX. to release to including growth, fluctuate in turn, to million. XX% bookings Based adjusted by sector Our increase we even high at private are and to improvements our sales growth range. as maintaining in improvement year, we concentration fiscal to anticipate both revenue continues continue XXXX the full half XX% of at revenue. solid our full current represent sector though year significant our Also, additional the company’s total profit relative to to and any sales a fiscal low the and private for scale year-over-year margin given continue $XXX prior driven This anticipate year especially fiscal our we anticipate pipeline, continued In of results more

questions with So would respond that, comments. be Operator? to we investor to any delighted or

Operator

Sinderen our B. And from question Instructions] [Operator with will come Van Jeff Riley. first

Richard Magnusen

Magnusen Richard longer-term regarding was your then growing Right that as first in revenue? now, what you’re you just My revenue? Could goals Sinderen. annual particularly that is or what Jeff as This of revenue. is around far are portion for recurring us XX%. And Hello. recurring Van question expectations SaaS remind again, of

Joe Bergera

you want recurring operating talk Doug, target annual revenue? the composition to about of and the model our do

Doug Groves

Sure. Hi, take Yes, to Richard. happy that.

the see over XX% next get said revenue we’ve to of the annual yes, total north years, of would couple of company. revenue of like So we recurring that

As you of prior towards this can made XX%. strides by in the see the against quarter great compare year that only we’ve quarter,

revenue. develop service software the disclose to is much And managed breakout currently to say between than with piece. So and it’s the relatively faster in SaaS that. we much growing split how we’re platforms, Other services managed don’t evenly than increase actual particular SaaS piece to continuing our the

Richard Magnusen

more on to aggressively targeting any that I’m regarding into? there or not only then organically, areas geographical now any geographically in And talking about acquisitions expand any Okay. this be color right is targets, might case. anything you

existing see offerings that use to grow. product you may technologies you your opportunity or of Just areas to want

Joe Bergera

I’m Joe, and Yes, for to that. glad is take sure. This

sure this based increasingly West is region. other said, at performance, to large spending everyone the Northeast. significant the everyone the market the this And penetration significantly we on at represent, represent be this which focus to Texas that have on then particularly results question, footprint That penetration in and in good for smart reviewed relative X growing markets for markets. I’m everybody’s particularly there time are don’t infrastructure time historical to and make Those Florida the mobility And market. benefit, for time. an big Just region, one Coast, have pleased substantial understands your penetration I That largest that want nice markets similarly, at the Eastern in the would Richard, say with we us. where just outstanding results really actually we a particular

terms may to that to related Northeast, in recall focus be continue initiatives You growth. across infrastructure Jersey, of lot couple opportunity we announced that see major projects connected of vehicle the in and us particular, in New region. in recently a vehicle, And and of a particular, in organic we big for a integration that will

Richard Magnusen

you All right. turn very Thank queue. much. the back into I’ll

Joe Bergera

Thanks.

Operator

Markets. come question with And our Latimore next Mike will from Northland Capital

Mike Latimore

gross about but Thanks little a see I up would over that and gross Yes, year-over-year, progressing recurring think where kind a might to guess I revenue lot. year-over-year. XX%. I talked guess that on then have you of And I do going you bumped have bit kind margin, service XX% question time? a flat of margin service to thought of just from

So little maybe that be great. color on would a

Doug Groves

Sure.

our been. what Iowa they have that that, generally XX% for reminder, of would item range. been a quarter in P&L as ran have in the business. close were the So professional They sort our line services to because just significantly particular write-off. yes, down they service Mike, Adjusting in has the this margins And of have

the expansion should begin expecting in we’re that item next we should as to line the the that expand quarters, So that, significantly over particular, grows margin several that that see particular line in really that revenue, so in in software margin P&L.

Mike Latimore

those color can opportunities or Can then And you pipeline. a – just are there? And little Great. you a SaaS little talked more the about product? private sector you talk Okay. more give bit in

Joe Bergera

Mike. Yes. Happy try to to answer that,

that effectively largely of the does would that SaaS-related is lines, private form product have of to in looking platform broadly managed component with content, very the some revenue. sensor is it will to by we’re further revenue like largely consulting So as that entities SaaS say, a private the What clouds technology which opposed do I are integrate public similar component the sector. ClearMobility are sector well. focused are sort annual It However, – recognized our is on opportunities, also Those most as there revenue. of are various high technology be that answer markets. addressing recurring will other look And product

to with certain platform see of which we some source in some strategy. or a by co-selling our critical our becomes the entities will commercial technology, as would is However, being viewed technology it’s be deployed through that either be an entities product instances, to pulling their of opportunity partner some do of of revenue fact who broader certain product once because

Mike Latimore

very Thanks Great. much.

Operator

next our And Ryan question Sigdahl with Craig-Hallum will come Group. Capital from

Matt Wegner

for Thanks This for is questions. on our taking Matt Ryan. Wegner

how Just estimate kind much the in revenue quarter? issues one of how impacted on on you the supplier that – cited, that any

Doug Groves

equipment actually was of separate the we raw our services in million was to issues And it over of quarter. sorry, now and different sets the engagements has subcontractor the with quarter. to the It delivered third delivered but – probably unable is two supplier large $X.X million, process chain professional two been separate I’m had second a of a really – also about in is was issues. project on into Sure. that and That the since circumstances, a that $X in being needed then quarter ran one had supply was deliver material One the being little in suppliers third

than anything issue So a it else. more really of was timing

Matt Wegner

some given global that the the of quarters? chain we’re crop issues of could up couple seeing? of in sort those I just kind I next sense issues that Any of mean supply mean

Doug Groves

yes. I answer is situation. It unfortunately, challenging be the mean, I continues think to very a

that dependent the we’re and third many upon to parties, execute companies our within it. when it to – power everything so highly facing. their issues comes manage doing it’s to manage are We’re ability But

no, a I say So I could statement. I wish don’t think that would fair but be

everything doing I have manage it. the to to can we’re up time ability these from crop But to So time. things we do think

Joe Bergera

The ability one team issues, say can supply to our haven’t experiencing chain impact though we’re experienced ship I so would is that been while not own our has incredibly which proactive I far, immune and add thing that to our product. we any.

there’s team we the stress any the product system really to impressed is certainly our and work internally, While haven’t doing. that on inability experienced with ship I’m

most subcontractors the exposure to with So far, of own and of is related have other opposed in our to terms to dependencies our larger we of as the to delivering third-parties projects technology. – related whom manufacture

just that wanted you I distinction. make sure that So understand to

Matt Wegner

Okay.

a of in that so And whereas where mentioned your revenue, products itself just the like XX% that, product third-party product on were you test up down? follow-up was math sort

Joe Bergera

Correct.

Matt Wegner

you. Got

for the one just think net give I housekeeping. got a I Did Last bookings number. Okay. me, wrong thought you it, number? but I I heard

Joe Bergera

that have you do Doug, Yes. handy?

Doug Groves

want give let we did. get let but give get the didn’t Matt, to me wrong to I that, but don’t you. No, back We you me you. to back number,

to but about I me get $XX it was back think let million, you.

Joe Bergera

correct, Yes. No, did give I that’s we it. believe and

Doug Groves

$XX.X Yes, be Yes. million to exact. Okay.

$XX.X Matt. million. Sorry, Yes,

Matt Wegner

problem. No

Joe Bergera

Matt, And that just figure. we million. figure And for was found half the $XX.X finally same first completeness, I net total also Yes. bookings that said

second quarter, the said, Doug it $XX.X as in for $XX.X And million. was million the half its first So

Matt Wegner

Thanks guys.

Joe Bergera

Thank you.

So any from covering are operator, there questions analysts? other

Operator

next our take and Silverman from ahead Alex go with will We Instructions] Investments. AWM question [Operator sir. Absolutely,

Alex Silverman

service in that the contract the quarter? the of I hear bookings was XXX part Virginia Did correctly

Joe Bergera

No, not No. that case, was the Alex.

Alex Silverman

I thought you… heard Okay. I

Joe Bergera

it’s There related generally the separate was not there contract. a but – a was specifically integration, to XXX systems project

Alex Silverman

Got it.

Okay. much quarter? And the revenue how can in was of increase you TrafficCash tell us the roughly

Joe Bergera

to that? want Doug, do you answer

Alex Silverman

conversely, growth Or what was? organic

Doug Groves

million in $X.X revenue quarter. about was the TrafficCash it Alex, Yes. in

Alex Silverman

Okay.

it, call organic? $XXX,XXX So of

Doug Groves

Yes.

Alex Silverman

Okay.

no? as growth half the we year, that the guidance lower of look have pretty be, So on quarter, a you is we lot wide to guidance. would to second the in Not second to think of here sit organic place the your range probably appropriate and end of the

Doug Groves

to top it the Well, squeeze we middle. didn’t end the bring to down

So we held it the same.

that half at a But still we again, are by that us the think it’s and range of that that, So look still is opportunities design. of appropriate. second as the some ahead we range

Alex Silverman

Thank you. got it. Okay,

Operator

Bergera, you. questions to questions in like Would Mr. Thank call? investor that And of any were no submitted this address at there you advance today’s are earnings time. more

Joe Bergera

questions was more is QX, fact, the how I and investor Thank I profit in I X.X%. ongoing Iowa, the either less the QX? is, to the question-and-answer asked But there like received with receive specifically, pretax the the that question And with to that, in one by on. covering to all gross already than were want answer beyond mean analysts. state do bookings, than do addressed contract regardless that investor the backlog would other And do ongoing of or touch the impact in remarks foresee much revenue, the – addressed immaterial. you. financial now not backlog, current one, negotiations, existing loss impact existing the profit to outcome you of we of it’s but we think to prepared did I one question period that Yes. in that. And covered And is

As I also that, profit the charge that the gross pretax in one that profit, future only note a since the did portfolio. for and quarter, just program the of hundreds immaterial revenues, contract also Iowa our the is in impact for is far impact in took of have contract while as current everybody’s our benefit, second big want second we quarter. to contracts

investor I not that covered. was anyway, only question, additional as the So already said, was that

I any today’s conclude session. investor believe questions. And so point, at further question-and-answer this We’ll any – are there don’t I have do not

your everyone’s thoughtful on, and appreciate that, So to want moving support always, I say we as questions.

is January on I that want XX On XX. the presenting Craig-Hallum to at we’re Conference Investor and to Needham XX Conference the January the Technology Relations Alpha aware Select make on December everyone that front, sure

conferences, a these us. to please plan and/or visit schedule in participating attend you’re our presentation If with

continued please we’ll updating forward the Additionally, on week today’s we watch this attend progress In when fiscal of annual and our plan call. our the third for X. at investor report time, second XXXX to you And results. to meantime, December conclude look quarter our we future details conference again

Operator

Thank today’s thank day. Have you. And do conclude an your excellent you does that for conference. We participation.

Iteris (ITI) 4 Nov 212022 Q2 Earnings call transcript