Earnings call transcript Q4 2023

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Operator

Good day and welcome to the Iteris Fiscal 2023 Fourth Quarter and Full-Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded.

I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Todd Kehrli

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

President Iteris' CFO, company's Shiba. are today Kerry me and Mr. and Mr. Joe CEO, the Bergera Joining

Following we'll call open for company's from the their sell-side analysts. remarks, covering the questions

events based subject performance may future. are Before course of the the the performance. participants that make to and statements statements we forward-looking during continue, future we'd are like to to or any on not obligation updates in does regarding statements future which company, of change these future call, current of information forward-looking provide all we to are the not Iteris undertaking remind guarantees this

time-to-time factors may valid. the any XX-K, documents a the which later one important what today is are from in XX-Q, Actual that substantially today refers date be identify most forward-looking the from contain the Iteris from you at discussed that will actual and should with and risk that results recent company and forms differ those files still the SEC, could assume to from differ X-K, company's cause comments no contained results materially the statements. of that company's specifically to

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

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

Joe Bergera

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

our to date earnings our for begin want earnings changing of regular we announcement. Before apologize I the commentary,

statement procedures to the In fiscal this in XXXX our these explain procedures confirm XXXX the impact have company's remarks, closing fiscal or meantime, Kerry During reason to for income want the will delay. to some no comparisons. additional for resulted that I led his that additional

for revenue Iteris and reported representing growth of XXXX fiscal respectively. XXXX those to fourth XX% rates first as our products significant which total the shipment demand We experienced million attribute Vantage and supply economics of XX% we continues sensor of XX.X in record year plan, full-year record our total lines. normalize the significant XXXX, strong constraints fiscal and revenue our growth over So, of the let's fiscal mitigated services, XXX.X a turn progress half the results. the year as chain of to quarter and to improvement of product well million,

fiscal that the improved our to as Our sequential fourth would even product we points margin boards, basis improvement third XXX began XXXX on quarter. have to been alternative margins we circuit production released with gross greater. The gross sensor Vantage quarter a XXXX in product basis ship fiscal

to more shipped with purchase customer requirements in price address period. units the we high However, variances

flush had us more fiscal this fourth While price improvement which income the position to in gross quarter helped our margin purchase we statement, enter XXXX. our variance improves constrained as

reminder, the improvement X,XXX improvement quarter and gross follows a of in a As margins fiscal basis quarter fourth our product XXXX third points. in our sequential

and plan some I'll our margin improvement our and gross minutes, will service more provide more product status color in the supply course in of few of a on chain comments. detail Kerry his In address dynamics

our metrics, customers specifying of slowdown, a of remains use instances solutions. bookings, ClearMobility strong adoption economic and Despite including rates, the on based concerns win possible about very Platform competitive key the customer of net

bookings net record as as XXXX total XX.X of For full-year million. fiscal well reported million, record total example, of XXXX XXX.X net we bookings fiscal

specified of for by offerings, solutions procurements our rate increasingly in in XX%, new win include service as as a managed our our hit were Additionally, services, consulting, a software which high fiscal various and competitive service, requirements XXXX and customers. record

agencies These funded Iteris Jobs of value million are examples of IIJA. is total the all or are who to the million in Act that these grants. combined particularly are grants awarded total for we're Safe of of Streets of report Iteris XX The initial implementation Investment a technology, grants there pleased wave or implementation first in X specifying customers many specified While Infrastructure XXX XX% through the grants. is XX by

backlog at how unclear Due demand, Iteris Iteris of a customer much this million, this XX% period a but XX, It's funding we of this with strong result XXXX of preference March a high representing for total customer the will clearly demonstrates record ended year-over-year. time increase solutions. receive, level ending XXX.X to

ending from total customer net always, of XXX% portion, value. reflect and to within figures The about that which backlog. our which varies often bookings than excludes our a Also rather averages quarter. convert As of shipments a contract historical total backlog quarter our a basis in varies quarter contracts, orders since of value total bookings period-to-period mind firm on these backlog our to from orders ending sensor keep single customer

about performance the Speaking portfolio. our of I'd detail like some product of to our sensors, share

revenue hardware, million, products, revenue third XX.X collectively XX% sensors fiscal respectively. reported For increase a quarter party XX.X year-over-year we fourth XXXX XX% we and representing and XXXX million full-year of that fiscal to our as refer of and

the estimate of which share weighted average represents range that sensors demonstrate the grew of at X% over rate, sensor sales significant revenue excellent majority revenue the portfolio, to our of than more superior growth significant product to past due implies take market product share for gains in believe performance to categories our continue that XX Xx to in and execution about sensors the both We grew market The rate. our X% market performance. we This a our months.

and connected connected vehicle well of use directly massive and as quarter, we red participants. to ClearMobility in optimizations ease delay the to and data as queue running, fourth algorithms; enhancements to improvements such And sensor setup light algorithms with detection scale length, continue to performance various cloud, our radar sensors; and and video superior of process our publish to packets vehicle extend our ecosystem at to as the

every our vehicle win travel fixed cellular Due continue and country. detection, sourced advantages large the to of strong initiatives sensor CVXX performance everything sensors, or competitively virtually to time, to we across

smart following the initiatives: and deployment the were as representative In CVXX Mobility quarter, Regional program. for FRAME Orlando part or Tampa selected expanded Florida on of mobility the Advanced fourth between I-X sensors our an the Elements sensors of

earnings initiative. discussed You on previous of similar – may calls, our purchases this vehicle large that scale we this multi-year multi recall Spectra for large connected scale sensors

large AI detection Vantage of Another high initiative Richardson, was Apex deployment the based our in sensor. scale of a quarter This Texas wide deployment sensors. first is definition

with our and software. Vantage sensors video was our using in ClearGuide life of Our Vantage corridor vector hybrid words, and deployment our our signal intersection cloud sensors, both technology Sunnyvale, that bundled other California in detection radar

Rio deploying Fredericksburg, deployment corridor Tennessee sensors our VantageRadius. and by attached Virginia of Sensors, System, the Vector cloud-based the time travel ClearMobility the our Central are to Vantage sensors Signal across The Cloud the [ph]. Department of Valley of in Texas to of Nashville, deployment our software] in connected brand Radar our of segment VXX and Virginia ARGUS our in Grande that The quarter Transportation as [Blue we which cellular

our three talked These representative about demonstrate previously. against that priorities strategic fourth quarter orders the following we've progress

to third, our including category. sale the adjacent deployments; share annual recurring leverage point modernization a the emerging ability attach second, to our to at demonstrates of disproportionate leadership and scale it detection categories revenue intersection in the large to CVXX of quarter-wide to First, win our initiatives; sensor penetrate

we travel and in in connected time, process more For reference are sensors connected intersections, CVXX ClearMobility time of to have the that this than being our X,XXX at or X,XXX Cloud.

we a As Xth recently now chain boards, eight to released released alternative we quarter progress production. additional improvement supply two of plan. on total And mentioned continued our circuit alternative circuit we've in to earlier, the boards excellent to make production meaning

optimize With XXXX we've earnings chain on as our of constraints, electronics call. load primary components, and June alternative boards the our cost our enhance to electronics of X, source improve now chain this met improvement our capacity. Besides goals mitigating to manufacturing achievement, plan our our the circuit the all ability level will outlined ability supply supply components,

chain internal of develop to engineering development to success have and use engineering we external sustaining product resources boards, we the circuit to new started improvement discontinued Due our the supply redeploy to activities. resources plan, help alternative and of

reported record year-over-year XX.X revenue Now, review XX and services service revenue X% of record performance XXXX our quarter let's in full-year a respectively. portfolio. of X% increase We XXXX service representing fiscal the fiscal million million, of fourth

in about As offers. a service words of comprised XX% consulting based, reminder, now and service, a is managed of software with other services data revenue and our XX% revenue project our service, comprised associated is as a revenue as recurring of line annual

increased fiscal XXXX, revenue our annual XX% year-over-year. recurring In

During fiscal XXXX, to shortage capacity in and a the some activity, consulting to instances our revenue growth due of constraints resources. us hampered required internal subcontract of labor

project critical due quarter, which to more revenue to the in delays, moderate meet service milestones ability growth fourth Additionally, affected we pushing experienced right. to recognition our customer some the

demand service In in quarter, of is delivery million, our relative million our recurring of level our or the annual will recognized Despite quarter net representing prior of bookings we that reported for year bookings XX% same XX.X service to service delays, period. increase offerings a fiscal XX% estimate We the revenue. roughly fourth the XX the XXXX historic. be fourth net future's

task services from the service task management to order $X agency's centers notable Orange for for traffic scope estimates network the Department of of corridors I-XXX an three project of specifications, $X.X cities Commonwealth. modernize Iteris key million Department quarter, order the to task task center, expand of California, service a million managed virtualization Virginia and and related million a operation I-X order of quarter-wide in the operations million to a Orange task synchronization Minnesota. Transportation book County Virginia to $X.X $X Authority quarter project process a the for to our traffic almost to for the extend and Habra, fourth our $X.X Cloud construction County, manage and order improvement in transportation from the critical management or task In order activities to the plan, million included A with more in order La design the complete from for Florida $X Transportation signal develop traffic across Transportation I-XX corridors; million the and a enabled activities the of Department integrated support

be going revenue by consulting which of annual is to revenue the attach of to forward. as As the service bookings annual continue demonstrated Minnesota projects, recurring project, to increase we recurring our the mix recognized accelerating rate

Platform, to and as sustain ClearMobility service, of customer quarter cloud-enabled our service, a To enhance strong we the solutions. managed as continued our services in software adoption a data fourth

ClearMobility the cloud we new and efficiencies. example, applications in manner, seamless software to development also together library a a software to improve enable For various standard released component of operate ability

additional to solutions. which security began an framework, competitive roll-out will We differentiation create enhanced our cloud for

innovative an enhanced API asset new feature data to clear address to enhance integrated application programming data, predict ClearGuide and used a obsolescence to travel our We and continue time feed, software we our intelligence introduced to We artificial or the the publish released interface data. clear and new vehicle uses and of assets feed that new connected cases. with transportation

are ending while meeting backlog, full-year total In well to fiscal the critical pleased we're record goals against XXXX of summary, Also, particularly operating our improvement during with and we with deliver our chain revenue, supply an complicated as our aggressive environment. fourth as quarter difficult pleased record ability roadmap and plan. our very a solutions

we As product a successfully backlog. unlocked result, our

service of our gross a to to normalization managed customers, continue We we margins. full our and approach product

to trend has an achieved further that important direction, financial favorable financial Iteris metrics a demonstrated continue we inflection these point. With in

provide after come the to which our some call and So, talk note, to back over fiscal on further to more turn XXXX financial I'll color quarter and about Kerry also I'll our results, expectations. on that full-year like fourth I'd

Kerry Shiba

afternoon and everyone. or Joe, good you, evening Thank

I that participate to intelligent Before space. I meet evolving our and very full-year business Iteris. joined We is in excited growing developing that I'm a technologically the to results, needs address environment want and say have fourth quarter to transportation in

with getting foundation the and our future. value has to and breadth market both to position shape that the I enterprise a And marketplace solid that our has shareholders Directors the and propositions, the Board forward team join Joe, to and of better of analysts a with in Iteris Iteris. it's coupled know our When opportunity to great help firm been closely my Working rest an look cover significant pleasure. of the

I to speak is next with respect like our year-end cycle. what happening would reporting to to

has X-K this before described in closing Form call, we filed just process our we year-end As convening fiscal been extended. a

that the balance We predates adjustments in amounts previously periods, well may possible in as recorded of the as from process that activity are from evaluating any sheet this result evaluation. current

conversion or start focusing identified that to occurred fiscal process be may XXXX. but cloud-based of fiscal a that was year year our yet matter systems recently evaluation ERP This before affected is new by and at the began not the XXXX data company we complete, on transactions are migrated the in

complete I in make evaluation before activity amounts on or the stress grace We report intend any the the predates which the today to under not evaluation intend XX-K XX, compliance annual tomorrow. cash a that do to We our again in the current business to our or want related file with is June we should sheet on adjustments. the with filing under and focused health results, Rule XXb-XX to Form on balance file later or period Exchange financial that SEC would be need to of balance affect our and Form XXb-XX Act.

Okay.

the some fourth fiscal on Let's address to details results full-year. move of our regarding underlying for and quarter XXXX the now financial

significant made fiscal commercial in noted, we As progress XXXX. Joe

the various strength and market that in Joe in to While I revenue underscore of both do don't our that accomplishments is our of the value the highlighted, growth backlog the want to nominal I bookings. repeat and rate reflected want

provided, the related down would gross $XX XXXX. million semiconductors purchases on I supply XXXX, price back to purchases to profit other amount of electronic gross top was and negative This the on In to price on commentary began on fiscal almost variance variances to in from of in purchase incurred we chain Joe aftermarket incur purchase income made that components. particularly negative the fiscal our half of Moving of performance. statement expand dynamics like we profit line, some the impact the

alternative year After Joe our initially chain plan, purchases to hit incorporating were supply XXXX components we through in significantly is our [flowing] aftermarket due we to the statement able fiscal as sold Due to $XX approximated those balance the the what boards, success sheet, introduction reduce income circuit our of improvement progressively described. product as [ph] of also million. and progressed, the

over purchase From six for a just of high XXXX. new almost in the negative to first per to fell $X QX purchases incurred quarter variance months, XXX,XXX million over fiscal price

of basis. I and both impact gross dramatic look on and a our think at the rapid these the important year-over-year Given dynamics, to it's margins sequential

From to perspective, $X.X fiscal revenue. XXXX largely gross million XX%, fourth quarter increased profit in consolidated increase year-over-year product quarter or the a fourth due

However, specific to points XXXX impacted and a in higher quarter subcontractor mix our year-over-year, gross decline profit of XX between basis gross consolidated service purchase due to margin a lesser labor that fiscal our fourth XX.X% and cost extent shift did data. direct margins content for

three but We do not a on believe may more two in the labor mix shift is acquisition systemic that start in benefit persist the it to initiatives long will development detail talent the in to Joe until talent and minutes. we touch run, quarters few realize for of

of also grow. for XXXX quarter. software improved fiscal to the to expect basis service trend progressive XX.X% service acquisition we quarter XXX demonstrate margin as to data was as important a the over and XX.X% fourth as leverage gross for our our continues on a revenue to prior Likewise, margin debt the points Aggregate sequential agreements understand. gross These of

that The reflect in was decline hitting this the improvement million in basis decline resulted negative $X portfolio. primarily offsetting was the I the the the improvement for purchase more for gross margins same pronounced year-to-year factors a which the variance noted. margin services improvements income price of a products gross portfolio, from XXX also which sequential the statement, for than comparison Partially while in reflected amount point just

market XXXX some originally of of hitting demand. mix pivoted very as As of meet was fourth sensor as mentioned, we expected products higher income sold in the Joe quarter purchase price to strong shifted amount the negative than statement the variance fiscal the

is balance news on now good variance the offsetting sheet therefore negative the only approximates was that $XXX,XXX. price and remaining reduced However,

per purchases a Just current to from comment at to on currently quarter $XXX,XXX expected previously, $XXX,XXX of incoming is new reiterate has and variance that I is between to abated rate the the based levels, made equally prior range significantly market important quarters conditions. on remain

all involved, fiscal as look factors through margins gross at XXXX. we we our we the to improve expect proceed As progressively aggregate

leverage price the of latter that the consulting levels approximating overall data the year. gross we better mix purchase fundamental cost, half to our related grow, should slightly margins return XX% exceeding labor software on as and projects, minimization on variance, expect other in and or the better of revenues With negative currently the

on XXX fiscal quarter. the controls spending Operating expenses the large in when in reflects lower continued lower expense leverage basis significantly G&A aggregate improved in were as fourth the X% compared as prior of sales, increase. current reflecting fourth to quarter implemented aggregate declined The earlier the year And in year percent revenue a the year. points, decline

reflecting The largely were to marketing offset increase with albeit cost, than incurred third rate reengineer commissions relatively sales a G&A boards, higher costs sales as to enhancements. nominally flat ongoing continuing development small expenses incurred R&D lower for some continuing and in product sales of in increase the primarily significant by portfolio. quarter, higher product circuit a reduction various as well products was due on the at a

factors revenue, fundamentally expense, the and major comparisons operating The income, operating to discussed net EBITDA. in adjusted gross related and profit, just explain income,

million which million of For quarter the we X.X delivered adjusted in a this $X.X year-over-year and million EBITDA, year, improvement. sequential represents $X.X a fourth

that compared $X.X XX.X million, improvement cash is to related lower and improvement EBITDA at $X.X of sequential further poised and year. unrestricted Iteris for last going sequentially higher XXXX adjusted margin which XQ The the million forward. underscores end was Total was million

supply sequential of fiscal improvement and impact result combination the strong income a the reflects year-to-year management. balance during chain the difficult of sheet is While higher a of the negative XXXX, decline conditions encountered

key cash were to investment collection position. receivable the reduced accounts inventory contributors Effective and improved

for be improvement and balance good forward. the liquidity improvement can sheet management going foundation earnings around in future trajectory balance short-term, provide sheet the cash continued affected While cutoffs,

over call the Joe, who will our to Joe? fiscal back turn discuss closing guidance and XXXX provide some now I'll comments.

Joe Bergera

you, Thank Great. Kerry.

to from represent favorable Congress the smart mobility targets our secular opinion, In infrastructure the [machinations] [ph], the XXXX. ceiling IIJA funding So, Congress market some significant this to by largely opportunities do opinion sector through occur to political our current negotiates summer agreement. to trends infrastructure management when both recent that and confusion been insulated long-term the debt historic has budget is though to apply how we transportation market expect established by committed in also temporary

very remain behind our that prospects very we resources As major to includes us and a and largely chain plans end, challenges that supply excited XXXX roadmap an engineering releases: solutions deliver long-term Iteris, growth back be fiscal about the front we're management result, to optimistic of To following Iteris with in strategic the redirecting initiatives. aggressive attention to

First, collection next time system vehicle APIs. data generation presentation travel data and ClearMobility a by and Cloud connected powered

Second, leverage our collection software a connected presentation that applications of will enhanced vehicle suite connected vehicle capabilities. data and

international planning, for of cloud state additional enhance a Fourth, ClearMobility commercial administration system, among fusion the factor radar and for addressable registration new based Third, will specifications capture And benefits form Apex technical expand other video the algorithms. various Vantage tax to Apex. to for fuel our new Cloud. market industry, valuable and vehicles, releases international for secure which a datasets fifth,

will Platform, of adoption continue our plan, we'll improve ClearMobility our fiscal various to the datasets. accelerate productivity release the cross-sell our increase release sales XXXX our of monetization of and expanding mobility channels. of To the believe offerings We improve the capitalize on ClearMobility plan the

retention a revenue. sensor to For a the sectors small dedicated than expand sales team and rate, more maintain and customer create enterprise our on portfolio, distribution greater private example, up-sell function for focused our drive we'll success XX% network segments, further optimize

teams. sales of talent improve fiscal In various to consulting development implement the capacity talent in we’ll acquisition channel and our labor addition to improvements XXXX, initiatives

even the we've which civil tight in engineering seen supply We'll science supply talent. though focus engineering traffic and remains on talent, some in improvement software data software the of very of

source on level the all tactics our Our capabilities professional programs, number our job the training hire, employees. candidates, will select brand that increasing of improving we existing include expanding increasing international to and enhancing and presence provide employer of generalists we internship our technical campuses,

of some backlog perhaps create competitive require to forward. going and should conversion are short-term they operational course for of efficiencies but consulting of accelerate initiatives going historic the investment, our certain us importantly more and pace These advantages

acquisition revenue fiscal in chain, range investments the a and expect million be XX% the with year-over-year development. revenue Given of significant and even adjusted organic after these of XXX to of the supply at dynamics, and expect to representing our mid-point in some increase we million, normalization improvement EBITDA the talent talent we growth dollars, XXXX XXX in in

adjusted to improvement X% fiscal forecast in in a anticipate continued of EBITDA liquidity As the we range $XX and revenue flow of XXXX of result, a range net with $XX XXXX fiscal margin to in million. X% we an million cash the

a rate remains revenue representing in we benefits Looking growth also XXXX substantial estimate targets. to before this revenue, XXXX, margins EBITDA continue believe million XX%. we organic XXX Iteris we progressive to of other our of range additional midpoint. range annual to beyond fiscal revenue in in XXX anticipate on in With to five-year achieve words, fiscal fiscal the million to track adjusted acquisitions, increase any XXXX In vision of from XX% result the XX% at the scale XXXX

improvements additive vision liquidity anticipate targets. in organic to of we would XXXX Iteris course enable program, to be resume our acquisition our to which Additionally, our

difficult centric period then we supply business to subsequent in time. develop improvement challenges, a the global demonstrated was and chain XXXX face our fiscal of the closing, model those platform our significant Still, of the and due same objectives COVID to chain in continuing achieving at So, agility the constraints. supply plan,

significant As in a our leadership market, enter XXXX create mobility operating we poised to the position fiscal to are smart XXXX now result, targets. we infrastructure Vision shareholder and for management extend achievement value of our

any respond for to like delighted to and see line questions comments So so, to have I'd us. any to the with up that, open questions you operator, and we'd be if

Operator

Jeff, Jeff Thank first with B. question Absolutely. [Operator proceed. The from Riley. Sinderen Instructions] is you. Van please

Unidentified Analyst

Sinderen. for for This our Hello. call. Thank is you in Van [Richard [ph] Jeff Magnusson] taking

quarterly other believe around to additional progression, I on backlog can any give what color we expectations us but You revenue on revenue of margin OpEx, converting gross you percent, fiscal through us as the progress some lumpiness year? gave color,

Joe Bergera

I'll And about talk expense, operating Sure. to that's of I'll it if gross to you kind margin then about Kerry and progression just lumpiness [indiscernible] talk and okay. Maybe the Richard. quarterly over, percent turn revenue

for So, full-year the growth terms year fairly quarter-to-quarter. We of revenue, to said, XX% in of I the at expect midpoint. consistent guidance quarterly fiscal providing would as from the we're that look over

being half That confusion, we we confusion some and but possibility of potentially Administration, first due are state in which occur said, the anticipating can the fiscal confusion initial year, some level. Congress the of expect between that modest, at has to to create – on and the some debate local the

but Additionally, modest second significant, to modest, quarter, of we some terms have for expect our from limitations labor not in and our impact capacity. first some

our that, year-over-year we in fiscal progress of range. And the for each again, should through expect growth we're So be similar aside as midpoint the that at we the to from year. year XX% quarter approximately guiding growth

time-to-time like was bookings, In point perhaps I difficult which comparison. have do think from terms about of some the we lumpiness,

So, for which for reporting. example, quarter in we're currently the fourth

had a As fiscal prior almost order we Miami-Dade. our a from for of million fourth detection product reminder, $XX XXXX, quarter

represented booking fiscal XXXX. of in in the for that of product challenge So fourth quarter terms us a

standardly fluctuations And a to able we basis on growth increase of through forward the year-over-year bookings comparisons to and rate we've to million nominal progress in in But this bookings substantial at terms could bookings growth. bookings would expect continue of in course, certain as terms been reporting we range. that you sort some quarter fiscal mid-$XX comparisons, be result point, be know there'll XXXX. of of the, have difficult some going report We of in in, overall, to progress as each that substantial

margins you do Kerry, And gross and expense? about talk to want

Kerry Shiba

I directionally, of quarterly Richard, Yes, we're guidance specifically. not releasing think course,

leverage I as when would that's business] as far some margin as [ph] of particularly However, continue increasing to [software in And the as expect to second look you year our had the discussed, to regard trajectory, half projections. evident going this of I be with at progress, some clearly the we revenues on grow. steady think

So that progress. through also start we should as to show

sequential will Operating expenses, year the again, particularly bit unusual be of I show clouded go we the cost to in came we and trajectory the forward. think back on, be all little out not the year-over-year should through price inflation by it went the in standing the anything us of But but continued progression, steady regard goes or are that of as think The the margin on. as reflect comparisons sales to I year what going quarter-by-quarter to of somewhat is a course variance hit with year. purchase half as the that going

Unidentified Analyst

you. All right. Thank

Joe Bergera

questions, additional Any Richard?

Unidentified Analyst

it for No, that's now. you. Thank

Joe Bergera

you. Thank Great.

Operator

Okay. The Markets. next question proceed. with is from Mike Please Latimore Northland Capital

Mike Latimore

Great. Thanks very much.

moved services I business, Joe, there. right you was think said the On some the revenue to

project or the bit? you So, the in And revenue a quarter projects? little it dynamic recognize can you cost this that quantify was that didn't or incurred the in in but quarter,

Joe Bergera

incur don't in X.X where take but revenue. I it's was associated to around of the it weren't situation expense, number probably front million, maybe X a in X think precise able million revenue. the And and I have we yes, correct. but did Yes, me, million we

Mike Latimore

okay. it, Got

Joe Bergera

that think impact I XXX about way, translated point the XXX or our on basis by basis point a And to EBITDA.

Mike Latimore

Got it.

the gross margin after is service quarter fact in here of and that? And quarter Okay. would the then improve the that improve first sort every

Joe Bergera

margin a in true. gross backlog was able if previously of say you I we'll will, is job do labor we're to some underperformance, that, better we fourth I quarter, capacity trying of is constraints. generally isolated. that's But the the our overcome largely unlocking the think Yes, think as to What services

and did a see more slip gross the perspective. the margin both then just expect and driven right really by that from It's benefit we the to revenue timing a yes, of projects. specific And and to recover we'll some also EBITDA revenue

Kerry Shiba

we also as to but it labor our own improves the begin will only improve the will mix and revenue, Mike, labor help our mix also. margin to step-up, contract unlock between and not

Joe Bergera

of Yes, the that subcontractors we kind Thanks own our that some we do capacity order work realize with it's point. Because to we on margin the in and Kerry. really a in don't great our labor. that of instances, same used some to direct labor for revenue deal constraints, perform out pointing Mike,

Mike Latimore

on just And Okay. the XX-K analysis.

provide there? clarity little years? are can sheet balance So, and thinking you which about you then a items Which more

Joe Bergera

Yes.

So, I clearly going expect, through. adjustments Mike, that to have we're flow are going sheet some to that balance

we didn't You those and earnings to example, a may balance the have we release subject because put going to sheet, when are for out noticed change. be include

The hardware to more focus nothing deferred the business, straightforward. the part contracts our do business, our has really relate items is to with of much that services which around really in is

I'll a I poking deferrals. balance guess this past. sheet that back at analysis, we're the into go years it reiterate the does So, is

but And complete, had at lot I the in a sift through. contracts time of there's primarily back the I there's a to deferred of look items sheet. on the balance But we're detail and rather going lot on wish to evaluation and

Mike Latimore

Joe, what several, you this in [indiscernible] basically have Got you then, I an more? you a that proposals from is, believe, can little not we mentioned it they're doing I clarify on, Okay. specified that it. is want And of spend or seen Act, I the think, to before? like sounds Safe Iteris Cities kind mean, money that just

Joe Bergera

levels. multiple at specification Well, Yes. happens

for And them So, of we jurisdictions. can and are for able work extent we're devices be deployed example, help to beneficial sold specifications detection that for states a the Iteris. obviously influence their that lot to in that, set with the to that

happens. that thing one that's So,

of to in To obviously technical the the for request that's us. able the competitive evaluation beneficial to specifications proposals, certain we're extent influence criteria, procurements the that

instance, we'll to those talking specifications. appropriate, so, this particular influence about And But as something we're different. attempt in

in funding. software U.S. initiatives agencies Department specified These proposals the the through those Iteris, submitted that for where grants particular instances, going And are written, be were from IIJA way funded the the received are instances that agency and to the services. Transportation several grant or of technology,

subsequently instances, they solutions are just specified could us funding required in technical were the event, we've must specifications, But other some so in the of grants was that selected. be In because when we felt they that the but then they're the their the be any the appropriate received solution the U.S. envisioned that states to has to stipulated were grant. those mechanisms, that state for we either when already the project state because – use influence instances, we because DOT managed from one submitted that and

Mike Latimore

great. sense. Makes Okay,

Joe Bergera

though, that's there's for all that to that working like funded. clear through activity some of which agencies going all scope mean does to clarification – million, the to what were our in We're to represent of be of that not XX to the get cycle. now [indiscernible] all just necessarily recent projects. Now the XX% as that all XX% it's been again, all grants XXX% But total represents with of we grants is most I almost XX% in those was that the awarded those be think activity of funded is

Mike Latimore

rates keep Should high Yeah. the well. help win as

Joe Bergera

really competitive Absolutely. And I that. services as the on mentioned, XX% was fourth is win we're hardware, And obviously we're in this excited setting super aside that focused our our for business, rate, quarter. I'm the

Mike Latimore

you. Thank

Operator

Please Hutton. from The with Tim proceed. next question Moore is EF

Tim Moore

growth was sales see talk him It nice to for strong service good to models. last and the on on business based chain, ops, congratulations Kerry’s to the month of conference. a year. It's Thanks supply and addition at expertise our also

more virtualization, revenue margin up really an point million XX my about do that you So, more those reach I'm from in to solution, gross with subscriptions you the Specifically process starting more? with just get need more estimate to wanting to about move just direct step-up inflection the your margin businesses combined services, acceleration gross there? the significantly or for licensing and off needle of of cloud-based incremental first question

Joe Bergera

right. I inflection reach revenue. Tim, I think you're recurring XX a incremental when critical we million that add we’d point do in an think Yes.

that our improvement but we report like when XXXX. yet, right. to and going not obvious do would continue think be definitely we're seeing want progress we every incremental quarter feel any But we we don't mean, I may that see improvement. I to will. as through we people to see, expect results we're some absolutely expect fiscal enterprise it to see I you're mean, not would So, We to

the services And the coming our the expected It is from revenue is second and growth improvement some as in margin driving mean, the Kerry mentioned, gross I lines. absolutely fiscal EBITDA margin half of current that in year. of

Tim Moore

When obviously to XX We'll improve to that get sense. super and gross get makes you margin that then extra revenue? just boost. extra That Great. maybe expect million

Joe Bergera

margins more lines, are product just like? SaaS well, should So, our XX% little SaaS people to realize we lines. look we terms like, provide inflection does gross at And bit able to clarification, product our of wondering previously, Tim, what point a on that also scale, in said we've as believe be plus that

step-up going margins we plus. mid-XX% to see towards an as move a revenue, in more we meaning gross XX was improvement million specifically to moving products. we saying, was in incremental to in like probably like That's that mid-XX% When I as additional will the you're from XX big million where revenue. to I like SaaS have those XX% relates incremental But need

Tim Moore

for around that switching and That's income that pretty some like the adjusted nearly sounded wrap going expense] and hiring operating it be gears, in more color [ph]. you [off labor great. EBITDA elaboration. the Thanks much trying just and head my investments. there's timing, breakeven training maybe your quarter was Maybe ignore the positive just to that SG&A expense I to if

You higher that from labor want cost away subcontractors. get for to

a about still the incremental hiring and of margin labor you achieving just Do So, be know How EBITDA it and we it training? from unfold EBITDA gross I quarters the magnitude positive we as do about will another take the quarter will to September positive you year. level, think sequentially think if drag adjusted or be this that? that talked maybe

Joe Bergera

if quarter that expect specifically. that So, fiscal sure just talk product just first that But positive kind to absolutely, we in understands of second also context mix in adjusted the EBITDA everybody quarter. make And Kerry let I'll we our of some shipped what terms we And had will, expectation resulted margins. against fourth our are of quarter point in that about basis original than was were EBITDA different was the fluid. the in XXX a requirements, expected you we customer negative to responding because what impact, and and about provide which

service was then basis some labor which And revenue, approximate the impact. constraint then capacity delays of two XXX a in function point and resulted another things, the also

guys us. are put sure things. Those So, we've behind I that want both both temporary you understood to just make issues

what not with want about anyway, forward. to see to talk that kind But expect you do of the going more we do be? specifically So, should expectation that, impact, Kerry,

Kerry Shiba

– touched for and our initiatives access Tim, labor-related I people Joe Well, recruiting services mentioned improving ability really skills on you business. are to in and training on think focused this, but to related our the investments

about positions. customer-facing to these think that fact really have the revenue-producing you and are So,

from while proceed bit a probably resources be of these it and margin. So, By increase there'll and cost think little large, into that of will that perspective. converting should revenue producing you

those types our other of to on more hope to in are pace. regard that a we nature, improve continues the at of revenue continue as expenses operating fixed With leverage would double-digit to costs to aspects grow

Tim Moore

agencies how in customers quantifying agencies? migration. the of for It of two XXX kind service That's you there, migrating to than that of the basis the overlaying seems you bottom and centers gears, are just at Just [DOT] drag people remotely point very some on helpful. [ph] elaborate [ph] maybe California this in seeing are benefit Thanks But Great. their letting those the – office from quarter. you rather excellence the from having can switching your sets remote new really office have in the handle the the each maybe of March like the [easily] bottom. your

Joe Bergera

Yes.

seeing we're the This really account bleeding But we to resonate actually customer that on probably at beginning a of receptivity. this, that original level on it quickly meaningful it's when actually actually, we embarked our we of ahead different. were would begin general, we're edge. with to uncertain I'd how is but agencies, believe resonate is So, and kind And a expectations. high every evangelizing. we're say a in model

tapping this demand, latent that I fantastic. sort of So, we're is into, which think

their The they through, we out is where figure trying frameworks. can outline we've services position however, their procuring practices basis as work procurement and that how with them agencies thing working the from into in to on need for within interested fit budget been to and a get to are work that that

that of here, like get agencies more to sort that we'll tapping those, that delivery feel there’s form. very are kind we're in hurdles. more being then of of But we them still able very alternative who into work that, But work think success that and capitalizing into I migrate those, so, perhaps identified with to to to we're And through like be And us is of there. basic we forward increasingly as next take be underlying and vein we've market that level some agencies finding other less to are get practices thinking. more more the progressive terms done best in eager what with gold a interest confident this that and tapping said, demand, on those

kind you of And primary the I think that’s to hit degree, some on one case. the maybe of reasons why

to was As lost labor among And right? these there's drain kind a that tremendous had if lot like generation, baby of a may labor loss of that boomer that labor or huge to a – look know, that everybody as exposure not in particularly be labor, like a they It happened result was of boomers. there on may force, capacity that generation, is evaporated. as employees meaning knows, COVID-XX, been the public – you a are sector you there at And high agencies. the

now starting services, are to we're of Texas, from although that work this we so, only but to the great answer us only we're And and more desperate a the high the like managed I for us for And for and And issue such procure to try to automation which states, out figure to of interest through seeing is do the frankly, not the how now that these level gap plug cloud-enabled our for now, a is probably to ability bigger think again, just virtualization. they're help with some and point generally, level it's Florida. agencies issue that where offer we get issue, process agencies, them. interest seeing to them in And country, primary and of California, services include why across would that's in model a interest. easy

Kerry Shiba

all, because time of fixed think, and ramp all looking scalability, in also on up underneath great flexibility, outcome It's too. now that, to you're supporting about our a at enhances think you cases. cost all when return And those I model, operations investment

Tim Moore

it helpful And you. very color. Thank that's sharing. for for my Thanks questions. Great. That's

Joe Bergera

Thanks, Tim.

Operator

The next question Ryan is Craig-Hallum. Sigdahl proceed. from Please with

Ryan Sigdahl

just potential two, any questions of answered. my that to the weaknesses control internal to sheet deficiencies Hi, two the of One, willing then or restatements? clarifications. But was operational have material one balance the end guys. metric? if give you're as what related And cash been All quarter,

Kerry Shiba

at nominal is Yes, points, restricted were the Ryan, the where period-to-period, ended really from seen we you've both unrestricted quarter. as very up the cash million we very, cash $XX.X and but is

the to know The the So cash a improvement again, supply most realize I year-over-year due of cost was affected very you comparison, as sequentially. the nice had issues that span by the to incur of, chain it was excess continue during to especially a XXXX, we enhance to And QX. turn months, fiscal expect the to first but year QX close nice in our we position a comes XXXX. six again to as from in end the of will cash

On right the through now, Ryan. controls the that or assessment, we're going still material

with numbers really that the the past. since quite been the the comfortable controls very I've The measuring fact certainly. on fiscal can at part years I and the been goes activities I've sequentially kind for here certainly, of honestly. looking that is the activity to first tell correct, and into you last three the as evaluation of I'm I that focusing we're think, looked years, back, year-by-year, have get

arose to that related had but could to like that that, from companies related a that we're but in really I manifested, large-scale The to ways maybe to be time would goes the different ERP like culprit have conversion. struggles that. immunized that again, conversions of is I've seen back that when a lot for we say issue looking is the

back the something we is past and I'm years conclusion So, few not about haven't a come controls that yet. at a goes in really controls on worried current all, assessment the to

Ryan Sigdahl

Good guys. Thanks Great. luck.

Kerry Shiba

Thanks.

Joe Bergera

additional there any Is questions?

Operator

We session, and We've of to closing the call back have question-and-answer no for will queue. the Joe Bergera now reached I the remarks. further questions turn in over end

Joe Bergera

Great. right. Well, All operator. thank you,

thoughtful support everybody's and I So, as really your appreciate questions. always,

our IIJA On that we the to Investor in Relations front, provide I an want update. to know everybody second fiscal XXXX quarter plan let

we continue that's about into past. that talked conflicts to that We that run and planned information, in to this pull recall organize event the present but we transparency, become schedule difficult off. may just to virtual a You had increasingly in full had to

the decided of Therefore, as to will paper a to created IIJA legislation, the of budget programs aspects will line and such due new instead and be white of business. our the to we've publish breakdown status that a we'll of describe various items, map lines the that

intersection. understanding of an of point the have We

conduct to should activities. investor we'll guys as Additionally, various outreach you And with investors speak any questions. available are have always, follow-up we

In results. our on we go look forward going to call. with that, again we Thank XXXX first meantime, conclude updating continued you, the And and we're ahead to on fiscal quarter everyone. you progress when report today's our

Operator

disconnect your you Thank at today's may This and conference, for lines this concludes participation. your you time.

Iteris (ITI) 13 Jun 232023 Q4 Earnings call transcript