Q3 2020 Earnings Call
Good afternoon, you were currently on hold for today's teleconference call. We're currently assembly today's audience and plans to be underway. Shortly we appreciate your patience. Please remain top line.
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Okay and welcome to the I Cherish fiscal third quarter 2020, <unk> financial results Conference call. Today's conference is being recorded at this time I want to turn the conference over to talk Curley. Please MTR group. Please go ahead Sir.
Thank you operator, good afternoon, and thank you for participating in todays conference call to discuss I Trust as financial results for fiscal 2023rd quarter ended December 31st 2019.
Joining us today, our terrorist as president and CEO Mr., Joe, but is there and the company's CFO Mr. Doug Groves.
Following their remarks, well open the call for your questions.
Well, we continue we'd like to remind all participants that during the course of this call. We may make forward looking statements regarding future events as a future performance. So the company, which statements are based on current information are subject to change and are not guarantees of future performance.
This is not undertaking an obligation to provide updates to these forward looking statements in the future.
Actual results may differ substantially from what has discussed today and no one should assume that at a later date the company's comments from today will still be ballot.
Yes refers you to the documents with the company files from time to time with the FCC specifically the company's most recent forms 10-K, 10-Q, an 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any of the forward looking statements.
Like to remind everyone that you will find a supplementary report of our third quarter financial metrics and a webcast replay of todays call on the Investor Relations section of the company's website at Www Dot a terrorist dot com [noise].
Now I'd like to turn the call over do I Trust as President and CEO Mr. Joe Berger. Please proceed.
Thank you Todd and good afternoon, everyone.
Thanks for joining us today.
As you start to close the market, we issued a press release announcing the financial results for our fiscal third quarter ended December 31 2019.
In Q3, I terrorists continue to experience strong demand for smart mobility and digital agriculture solutions.
Recorded 28.7 million in total revenue, representing a 24% increase relative to the same prior year period.
Some other growth is attributable to some project revenue moving forward. However, even without this timing effect, we would have exceeded analysts' consensus for the corridor. So we're very pleased with our results.
Our third quarter total net bookings or 27.5 million was 28% better than the same prior year period.
And our third quarter total ending backlog was 69.4 million what is the third quarter record and represents a 21% year over year increase.
Now let me provide a brief overview of performance by segment.
In Q3, our transportation systems segment recognized 15 point Threemillion in revenue, representing a 35% increase versus the same prior period.
The segment's growth is due to a combination of strong organic growth and the contribution of 2.3 million in revenue from our acquisition of Albert Gergen on July 2nd.
At this time the integration of Albert Gergen is complete and the acquisition continues to meet all of our original expectations.
And our second quarter earnings call. We noted delays in the receipt of five notices to proceed which affected that quarter's results.
As of December 31, 2019, we received two or the five notices to proceed but the timing of those particular notice as had only a modest impact on the segments organic third quarter revenue results.
We expect received one more of the remaining three outstanding notices to proceed and then next 90 days.
In the meantime, this segment continues to experience significant bookings growth. Despite the delay in converting these specific contract awards to bookings and then to revenue.
During our third quarter. The transportation systems segment recorded third quarter net bookings of 13 million, which is a 60% increase relative to the same prior year period.
Notable third quarter bookings in cleared.
A 3.6 million dollar contract from the Orange County Transit authority to increase traffic flow and safety across the main street corridor of Threed Orange County cities.
This contract includes intersect I'm sorry. This contract includes by terrorists as intersections a service solution, which will provide 24 by seven monitoring of device and system held throughout the corridor.
A 1.6 million dollar task order under a nearly $2 million subcontract provide traffic operations analysis and design services for a new light rail transit system in Los Angeles County.
Several software as a service contracts for a total value of 1.4 million from various agencies for use of our performance measurements deletion brand. It is clear guide and for use of our commercial vehicle operations software products.
Several additional software contracts for a total value of 900000 from various agencies far advanced traveler information system. Once you provide on a hosted basis and a 900000 dollar contract to provide a transfer signal priority system for pace, which is the Chicago suburban Boston Division other regional transferred a door.
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With the segment's strong third quarter bookings the transportation systems segment ended the quarter with 56.1 million in backlog, which represents a 24% increase year over year.
In Q3, the roadway sensors segment recorded revenue of 11.4 million, representing a 12% year over year increase.
We were especially pleased with this result, because our third quarter sales are historically constrained due to the holiday season, inclement weather, which limit the window for product installations.
Well, we believed inherent performance of our detection products is and will remain demonstrably superior to our competitors. We continued in our third quarter to enhance our related cloud enabled services, which further differentiate our core detection products. For example, we released additional enhancements to our SaaS based intersection analytics.
Platform Vantage live.
And a new real time traffic video mobile App that provides traffic engineers and technicians remote access to analytics and live streaming intersection video.
In Q3, our agriculture, and whether analytics segment recognized 2 million in revenue, representing a 27% increase compared to the same prior year corridor.
The segment also experienced strong bookings performance recording third quarter net bookings, a 4 million, which represents a 70% increased year over year.
Notably three recent bookings represent meaningful additional account penetration for example in Q3, one of the world's largest crop science companies expanded its use of clear eyed, bringing our annual recurring revenue from this one account to $1 million.
Before I turn the call over to Doug Groves to walk through our financial results I want to take a minute to think Andy Schmidt for his contributions to I terrorists, Andy was a strategic asset in a strong business partner during our previous stage of development.
Looking ahead, however, I'm delighted to add Doug to the team Doug brings unique set of expertise in talent they'll be vital terraces next stage of development.
With that Doug can you comment on our financial results.
Thank you Joe and good afternoon, everyone. As a reminder, please see the company's 10-Q filing press release in key financial metrics document posted on our website for further description other matters under discussion during the call today.
During our fiscal year 2020 [noise].
Third quarter, we've seen the performance of the business continued to improve looks favorable year over year trends in certain key metrics, including topline growth increasing backlog in merchandise expansion now I'll move to the detail other results as Joe mentioned total revenue for the fiscal 2023rd quarter increased 24% to 28.7 million.
Good to 23.1 million in the same quarter a year ago.
Our gross margins in the third quarter were 41.5% compared to 38.4% from the same quarter last year. The improvement in margins was driven by increased volume and improved product mix across the portfolio.
Operating expenses in the third quarter were 14.1 million compared to 11.4 million in the same prior year quarter and were up 400000 sequentially over the second quarter of 2020.
The sequential increase includes 553000, and nonrecurring executive severance and transition costs.
One of my primary goals as the new CFO is to better manage our operating expenses. So that as we get more operating leverage and RPL as we move into fiscal year 2021 and beyond.
The company reported a GAAP operating loss in the third quarter of 2.2 million compared with 2.5 million in the same quarter a year ago.
The net loss in the third quarter was 2.1 million or five cents per share compared with 2.5 million or seven cents per share last year.
We achieved a major milestone this quarter by basically breaking even on a non-GAAP basis or zero cents per share compared with a non-GAAP net loss of approximately 1.5 million or four cents per share in the same quarter a year ago.
As we had previously communicated we do expect to be non-GAAP profitable in the second half of 2020, and we're well underway now let me turn to the segment results.
Our transportation systems revenue was 15.3 million compared to 11.3 million in the prior year quarter or an increase of 35%.
Gerken contributed 2.3 million of this growth.
Operating income was 2.7 million compared to 1.1 million from the prior year quarter any related operating margins were 17.4% compared to 10.1% last year. The margin expansion was primarily driven by increased volume as we get more scale in this segment.
Our roadway sensors revenue was 11.4 million compared to 10.2 million in the prior year quarter or an increase of 12%.
Operating income was 1.5 million compared to 1.2 million last year and the related operating margins were 13% versus 11.3% last year, driven by the increased volume and favorable product mix.
Our agriculture, whether analytics revenue was 2 million compared to 1.6 million in the prior year quarter or an increase of about almost 27% with the operating loss at 800000 versus 1.1 million last year.
The improvement is consistent with our goal the continuing to drive this business to breakeven over the next several quarters.
Corporate expenses were 4.9 million compared to 3.6 million in the prior year. This increase was driven by the executive severance and transition costs I previously mentioned.
An increase of 250000 and compensation and benefit costs, and 300000 and nonrecurring charges related to several strategic initiatives. The company is working on.
Turning to liquidity and capital resources total cash and short term investments or 27.4 million and we spent 115000 and capital expenditures and capitalized software costs in the quarter, reflecting our asset life business model.
We continued to be focused on improving working capital and as I mentioned with our expected improvement in profitability, we should see our cash position start to build going forward.
So in summary, we're pleased with our progress this quarter and I couldn't be more delighted to be joining the company. It's such an exciting time with that I'll turn the call back over to Joe.
Great. Thank you Doug I appreciate it.
Our terrace remains in a strong position to capitalize on favorable secular trends in smart mobility and digital agriculture and during our fiscal 2024th quarter. We will continue to introduce product and service innovations to expand our addressable market and enhance our competitive differentiation with our.
Primary focus being our smart mobility infrastructure management platform I terrorists clear mobility.
We believe this platform will enable us to better package and promote our portfolio smart mobility products and services, while also enabling new sources of recurring revenue for the company.
Although the clear mobility platform spans our two transportation segments and the road whether product line of our agriculture, and whether analytics segment.
Each of our three reporting segments will continue to pursue additional unique opportunities in our fourth quarter and beyond that will take a couple of moments to describe.
The sales model for our transportation systems segment has matured into a hybrid model, which includes a mix of consulting led sales pursuits complemented by a small dedicated national business development team focused on strategic pursuits, and a small dedicated national software sales team.
This model has produced a robust sales pipeline and a strong conversion rate and we believe this model will continue to produce strong bookings results in our fourth quarter and for the full year fiscal 2020, with the highest rate of opportunity conversion coming from three areas.
First customer adoption of our software as a service products for example, clear guide I terrorists SPM and our commercial vehicle operations product family second customer adoption of our business process outsourcing and managed services offerings such as intersection of service, which is a software enabled managed service.
Yes, and third additional penetration in the Midwest, Texas and of course, Florida, where we have significantly enhanced our presence with the recent acquisition of Alpha Gerken.
And our fiscal fourth quarter, the transportation systems segment should realize year over year growth in the mid 20% range.
Based on our forecasted product and service mix, the segment's fourth quarter gross margin and segment level operating margin should expand modestly to yield a sequential improvement in operating income dollars.
Now, let's discuss the roadway sensors segment.
We continue to believe three factors will drive full year segment growth of more than 10% first several product innovations that will continue to increase market share and product revenue for our core detection products second an increase in product differentiation customer stickiness and SaaS revenue from our cloud enabled services such as.
Advantage live and third the implementation of programs to enhance the productivity of our direct and indirect sales channels, including the further optimization of our sales and customer success organization.
Well, we continue to expect the roadway sensors segment to grow more than 10% for the full year, we expect fourth quarter revenue to increase in the mid single digits. The more modest growth is largely due to the prior period difficult comparable as you may remember, we had a significant number of pent up orders in the state of Tech.
Says that we finally, we're able to process for an alternative purchasing cooperative the led to a revenue spike in our prior fourth quarter. This segment's fiscal 2024th quarter gross margin should be similar to our fiscal 2023rd quarter. However, we expect the segment's operating income margin to expand on higher revenue.
Yeah.
And finally, let's discuss our agriculture and whether analytics business.
During the fourth quarter fiscal 2020, we will continue to leverage clearags enhanced market position to increased customer adoption and increase our penetration in existing strategic accounts due to continued revenue growth and cost containment in our fourth quarter, we expect our net investment in clear active further decline.
I think in a further improvement in the segment's operating income performance.
In summary, we continue to anticipate fourth quarter total revenue growth in the mid teens and second half revenue to be in the high teens. Additionally, we continue to expect the transportation systems and roadway sensors segments to produce a sequential increase in operating income dollars. While we further decrease our net investment income.
Clearags and hold our corporate expenses essentially flat.
As Doug noted. This noted this should yield enterprise wide positive non-GAAP operating income for our fiscal 2024th quarter and our second half.
Now I'd be delighted to respond to your questions and comments.
Operator.
Thank you if you'd like to ask a question the signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question Oh pause for just like everyone opportunities for questions.
Our first question the Q comes from Jeff Van Sinderen with B. Riley. Please go ahead.
First let me say congratulations on the on the strong metrics in the quarter.
Great to see.
Just wanted to circle back to the discussion around the the contracts that were I guess floater converting Q2 and it sounds like a couple of those are converting and you're expecting one more to convert.
Maybe you could just give us a sense of how you think we're going to see that revenue.
Hey, European out any other color you can give us on that.
Yeah sure. So one thing I'd I guess I want to start off where there's just some context, because I think that.
Perhaps could have done a better job of messaging last quarter.
We never meant to say that we need it all five of these contracts to come in in order to achieve our original expectations were originally trying to say is that we were frankly surprised when we didnt hit our second quarter results. Because we were had a high degree of confidence at least one of those five major contracts would have.
Converted to revenue.
Based on our receipt of at least one of those notices to proceed. So I just wanted it makes everybody understands that conscious we never said we need it all five we're just saying we're frankly shocked that we didn't get one of five that were cued up to convert to revenue in our second quarter. So anyway. At this 0.2 of them have converted to revenue they did late.
And our third quarter, because it was the specific contracts that converted in the revenue recognition, especially where they had a minimal effect in our third quarter results. They will certain those two will certainly contributed to our revenue in the fourth quarter and that's one of the reasons that we're expecting sequential growth you know from Q3 to Q4.
Just another one to convert within the next 90 days so it could be in our fourth quarter can be early in our first quarter that will add to our.
Our sequential growth going forward and ultimately you know the other two will also convert but again just makes everybody understands we never expected that all five of them would have converted into second quarter. We were just shocked that not a single one did and we're glad to see that they are now starting to convert to revenue and they will continue.
To sustain sequential growth going forward.
Okay good to hear.
And then if we can turn a little bit to your SASSA recurring revenue.
I think recently you said that was running about 25%.
It is 12 mods and.
I'm not mistaken what was the the LTM figure for that if you had it including Q3 and then given your product evolution that focuses on recurring revenue platforms. How should we think about SASSA recurring revenue penetration looking.
Say out a year from now where do you what do you think that percentage might be hopefully higher.
Your honor comment on that yeah.
Revenues, but sure so.
Hi, Jeff Doug Groves so.
As a percentage of revenue. It remain you know constant but as I was alluded to buy Joe. There you know we did start to see continued momentum in several of our SaaS platform. So you know we're expecting that that rate of growth should gross you know.
Much faster than the overall companies revenue growth rate. So when we talk about you know low double digits for the company. We would expect that you know the SaaS growth rate to be you know substantially more than that as we get more adoption from our customers on these you know new platforms.
Okay Fair enough just with respect to like our future expectations I think we'll feel more comfortable commenting on that at our and our next earnings call. When it will be providing more color on slide 21, but just to build on what Doug is and is basic point is that we absolutely expect it to recur.
Turning revenue growth will be greater than the total enterprise growth rate for the foreseeable future.
Okay good to hear.
And then I think smas forgot how many sensors you guys have out there.
Maybe you could just your modest kind of what that number is me installed base and and as the end markets continue to move toward smart mobility. If you will how do you think about the value.
Data those sensors produce or provide and how might you be able to monetize that data in the future.
Is that all Jeff [laughter] [laughter], yes.
Yeah, there's a view that a number of signalized intersections in the country is anywhere between 320000 400000 intersections I usually refer to 400000, but there is some debate in the industry.
We by far had the largest well so and then let's talk about those signalized intersections. They could have a simple actuated signals, where you know that timing is strictly due to the time. The phase timing is signaling time based simply time base and there's no.
Detection occurring.
A lot of those intersections also will have wired loops or magnetometers, which are placed under the pavement and they detective president.
Have a magnetic field, which they extrapolates mean, there must be a vehicle there and you know.
There's a wide adoption of magnetometers or wired lives.
To date the minority of those let's say 400000 intersections are running what we would call advanced detection or above ground detection.
Probably less than 40% of the total 400000 would have above ground or advanced attacks on we are by far the leader in that market, we would have the.
Major installed base.
In access of 30% of you know those intersections with above ground detection.
But theres still a huge number of intersections that are running.
More outdated technology magnetometers, there, that's still simply I'd actually weighted signals and so that certainly represents a greenfield opportunity for us to convert those intersections to above ground or advanced detection, but it is important to note that especially across the sunbelt there continues to be.
A lot of economic development a lot of growth. There are lot of new intersections. You know that are continuing to be built and then there is establishing intersections, which will become signalized and it is important I think everybody understands it they're actually a total of over 1.2 million total intersections in the country and all.
Only a very small percent about a third or less than 400000, even have signals.
With respect to that kind of data that we collected these intersections. There's just there's a plethora of information to advanced detection sensors, such as ours are able to clack, including the number of vehicles that type of vehicles. The speed of vehicles the number of pedestrians the number of.
The goals the time at which you know those vehicles those pedestrians those bicycles pass through an intersection you can do trend analysis to look at how that's changed you know from day to day from month to month, how it compares to other intersections was just a tremendous amount of data that we collect.
And also just remind everybody that unfortunately, even though we're collecting all that interesting data and we're doing very sophisticated edge processing and increasingly applying AI against that data at the edge a lot of these intersections even if they are signalized may not be connected to anything and so historically that data has been stranded.
Why we introduced vantage live and we're working with companies like Cisco and communication service providers to increase the connectivity to the intersections. So that we can get access to the data that we're collecting and we believe that there are many many ways of monetizing that data, so hopefully that answers which was.
What was a pretty big complicated question got everything there Jeff.
It's there was no I appreciate that you did a great job I'll, let somebody else jump and thanks for taking my questions.
Sure.
Our next question the Q comes from Mike Latimore with Northland Capital markets. Please go ahead.
Great. Thanks, Congratulations looks great.
In terms of the just some of the regional flavor you touched on little bit, but can you can you talk about how some of your more important states outperformed and maybe are there any aries strength or weakness.
Yeah sure. My good question. So we continue to see a lot of strength on the west coast and particularly in California. I mentioned for example, the C.T. a deal which was a huge win for us.
California remains a major market. It is by the way the by far the largest market for intelligent transportation systems and the entire country and so if you're gonna be a leader in a market. That's a great market to be a leader in and so we're glad to continue to own you know this geography.
But that being said, we don't want to stop there and so as you know are.
Our roadway sensors business has a pretty established presence in Texas, which actually worked against US last year, because there was a delay in being able to utilize a cooperative purchasing agreement there, which has now been fully resolved, but anyway, we have a huge.
Our roadway sensors Didnt has a huge presence in Texas, but interestingly our transportation systems segment is actually had modest exposure.
So the Texas market and we've seen significant growth in our transportation systems business in that geography over the last couple of years that continues we continue to win more business. We've got a sizable backlog already in Texas and we're tracking so a number of very very large I'm opportunities in the state of Texas.
So I feel very confident about the opportunities in front of us in that state, Texas by the way is another one of the top five largest geographic markets for intelligent transportation systems in the entire country. The third largest market is Florida, and that's a market where.
Both our roadway sensors and our transportation systems business. It had some exposure over the last period, but to be honest or penetration has been modest for both of our segments.
We continue to win new roadway sensors business in that market and we're pursuing some very large very exciting deals in that market, which I hope, we won't convert and be able to talk about in the near future. Our transportation systems businesses benefited considerably from the recent acquisition of Alpha Gergen and.
As I think I mentioned, we are.
Secure bookings in the broader southeast region, but it's mostly made up of Florida in excess of 2 million our transportation system segment in excess of 2 million in our third quarter alone, which is a huge increase for us and it's largely based on the positive Rick.
Also we're seeing from the acquisition and our ability to leverage our business development infrastructure, and Albert Gherkins existing relationships and sort of feet on the street and so we expect out market to grow considerably.
Greg It and then in terms of that.
<unk> contribution to the corridor does that should we think of that is a good baseline number or is there seasonality to that on a quarterly business.
Yeah excellent question. So there is a little bit of seasonality. So as you guys may recall I kinda tried to alluded to it just couple of moments ago in our prepared remarks, but typically for our transportation systems and roadway sensors business, our third quarter or the period ending December 31 is the.
Seasonally slow period for us and that's because we do have decent amount of exposure really kind of generally concentrate and sort of the sun belt, we absolutely have exposure.
The Midwest and the Pacific Northwest and the northeast and for weather reasons that tends to slow down the deployment of our roadway sensors products in those geographies and then the holiday season tends to impact our transportation systems business units. We just don't have as many billable days.
We actually saw some counter seasonality in our most recent corridor, which is kind of unique but generally that's kind of a slow quarter anyway, Albuquerque, and has kind of the reverse because most of their revenue was concentrated in Florida as everybody knows.
You get into the hurricane season in the late summer Theres a lot of disruption typically in September and so that tends to be a seasonally slow period for Albuquerque, and the most recent period ending December 31 tends to be one of their strongest because weather tends to be really great in Florida.
Good thing is that kind of balances out our historical seasonality somewhat although again you are presence in Florida still much smaller than other regions, but.
Anyway, and that's probably more information that you want then you want it but I wanted to make sure but he understood that we've got a unique seasonality scenarios in each of our segments and then Albuquerque and had yet another twist now going forward, we certainly expect Albuquerque and to continue to grow consistent with the over.
While growth for our transportation systems segment, which we've said would be an excess of 10%, but at the time of the acquisition, but we were saying is that Albuquerque was doing approximately 8 million in revenue. If you averaged it out on average the quarterly revenue would be about 2 million with a little bit softer revenue in the period ending.
September 30, and a little bit higher revenue in the period ending December 31 due to weather.
So hopefully that helps Mike yeah perfect. No. Thanks, very last question just want to make sure I got this correctly did you say you you expect your your cash position to build in the in the fourth quarter or was it was that a longer term comment.
Oh that Doug comment I know, we should start to see it turned positive you know we had a slight use of cash in the current quarter due to an increase in inventory related to some product transition in the sensors business, but we expect that inventory to snap back down in Q4, and as we turned the quarter corner on non.
GAAP profitability the cash will yeah, we'll definitely start to build as we exit this year and head into 21.
Okay, great. Thanks, a lot.
Our next question in queue comes from Ryan Sick Dahl with Craig Hallum Capital Group. Please go ahead.
Hey, guys.
So maybe first off I generally think you mentioned in your prepared remarks that there was some pull forward and sales can you allude to explain what that was and then what segment that was then.
Yeah sure that was in our transportation systems segment and it was related to some subcontract out for which we don't have as good of visibility to as our own Drx labor.
And so we.
Got a bit of a surprise was positive surprise, so we like that.
The.
Total revenue pull forward would probably be in the range of like 600, 800000, probably a little bit closer to 800.
So that it was certainly was positive and you know it wasn't insignificant I want to be no cleared people about that but I do want to say that notwithstanding that pull forward, we would still be analysts' consensus with respect to you know the revenue estimate so I don't want people to feel like Oh, well you know they only had this great.
Number because there was this pull forward that's not the case, we would still exceeded analyst consensus and had a really strong result, regardless, but there was a little bit of pull forward and it was associated with sub contract content.
And right. So for the got good well I was just say so right for the full year you know, it's really unchanged from what we were talking about last quarter from a year over year growth perspective is just had a little bit of revenue slip between then and that's true obviously since true for the year, it's absolutely true for the half so.
We're not changing our expectation for the half, but there was a little bit of movement between Q3 in Q4 for the transportation systems subcontract revenue.
Got it yep pull that out of Q4 <unk>.
But as it relates to our India.
So it's up a half a million quarter over quarter versus Q2, I guess can you elaborate on what that's being spent on and then it's I think you said that you expect a corporate costs to remain flat Smith is that the rate run rate for Q4, and then going forward.
Well it was up a little bit because of their was less capitalization of the R&D sell from quarter to quarter, it's going to fluctuate between the efforts you know we're spending on sustaining the products that we've got versus you know brand new products are brand new functionality. So I.
I would say that it's probably a range between what we saw in the second quarter and the in the third quarter.
Great last.
Last one for me a great to see the million dollar EMR and a large crop science company can you talk about how that relationship has evolved and then how the scope of services change from before to know.
Yeah sure so HM.
The this particular.
Customer has embedded.
Clear AG into its digital farming platform and they continue to expand.
The the use of the plot what they continue to expand that feature set of their digital farming platform and as a result, there extending their use of clear AG and so the I don't want to.
Yeah like pre announce what this particular customer is planning to do with their digital farming platform. So I'm kind of I guess I'm going to avoid getting into specifics other than to say that they're extending you know their platform and as a result, they're expanding their use.
Largely from a feature function perspective or capabilities perspective.
But also somewhat from a geographic perspective, as well, but it's largely capabilities driven as opposed to geographic driven.
In addition to that are they they've also adopted the use of clear act for some internal use is in addition to using clearags as an essential element of their digital farming platform.
Thanks, guys I'll hop back in the queue. Good luck.
Thanks.
Once again, if you'd like to ask a question. Please press star one.
We'll take our next question from Mike Shlisky without <unk> Company. Please go ahead.
Good afternoon.
Do you follow ons that last question about whether group.
Can you give us a sense does to what the pipeline of opportunities is that you're looking on right now.
Both on the large customer side in the small customer side.
Thanks for the ramp up to positive profit there.
If possible.
Yeah sure so that pipeline continues to be a.
Robust.
The.
We kinda to your point are we sort of distinguish between large agribusiness opportunities and then sort of smaller allied provider and AG solution provider deals in that case of the large agro businesses they tend to incorporate clearags into there.
Digital farming.
Platforms, such as the customer I just talked about in other cases, they use clear AG internally for you to support their R&D function or potentially their sales and marketing or their field service functions.
And generally those deals tend to be larger for each sort of program and deployment you know we would expect.
Generally sort of a minimum of 100000, a our for that individual program use.
Those programs can grow like the one customer that I talked about in and also were in shouldn't seeing them string together a number of programs and eventually you know we would expect to realize significant account penetration as a result to that but anyway. So as we looked at our pipeline we continue to see.
More opportunities to be deployed for additional programs within our existing large agribusiness customers, we still see opportunities to penetrate new large agribusiness is that we've yet to penetrate those would include tier two and tier three crop science companies additional AG equipment.
Actually there is additional irrigation companies and then there literally hundreds if not thousands of allied providers another AG solution providers.
That use clearags for a variety of purposes, they can embed our components into their software products or their agronomists use it in the field perform certain tasks.
And you know we just we have literally you know probably hundreds of opportunities with these smaller companies. So there's a interesting mix of opportunities and we continue to see really nice you know a growth in the pipeline inconsistent customer adoption.
That being said.
Yeah. It's.
I just want to go on record to say that God I in my opinion, I think clear AG is already.
I think will my expectation continues to go out going forward to be probably the largest independent digital AG solution in the marketplace, but that being said that overall Roe.
You know of that.
Digital AG market you know for independent solutions is clearly materialize slower than we thought so while we are the leader the overall market just isn't as sizable for independent solutions that is not a sizable as we'd expect it and as a result, we're trying to be very thoughtful about our investments and.
The same time, we're talking about revenue growth. We're also talking about cost containment and as both Doug and I mentioned, our expectation is that you know.
Based on what we believed to be reasonable growth expectations. This segment will be break even within the next few quarters.
Okay. That's that's great color. Thanks, I wanted to ask secondly, about M&A activity.
Got to cast from last year, your even generating more it seems over the next few quarters can you update us on.
What you're pursuing how following Monday with certain targets and kind of what.
Spaces, you're looking right now.
Yes, I've talked a lot and actually thing is kind of interesting to get doug's perspective on this because you know.
It's great that somebody new come in and take a fresh look at what we're doing in how we're doing things. So maybe Doug you could kind of talk about that sure. So I think the company has for its size I think a good process set in place to both not only just identify the targets, but begin to vet. The targets you can imagine a lot of these targets are on the much smaller.
Our scale. So are there, it's a little bit more challenging from that perspective, because you know putting together a small deal takes almost the same level of effort as some that are much much larger. So a you know we have to be selective and which ones. You you know, we pursue but I would say that the.
Environment is solid and we've got plenty of things too to look out as we look at making the acquisitions you know as part of our growth story going forward.
Yeah, and I guess I'd just add to that that you know, we definitely see opportunities in both that AG and transportation market, but we see many more opportunities for a variety of reasons and the transportation space and some expectation is there going forward, we will do additional acquisitions and they'd be much more likely to be transportation then agriculture.
Sure and to Doug's point due to valuations and kind of up.
You know an odd bimiodal distribution curve, where you got a few really big companies and transportation and a lot of little ones. You know, it's the acquisitions that we do we'll probably be relatively small you know more or less sort of on the size of of Albert Gergen, you know and we believe that theres substantial opera.
Unity there to string a number of these things together and.
Create a formidable platform and that's our expectation that we'll do that.
Okay, well, thanks for that color I will pass along.
And at this time I would like to turn the call back to management for closing remarks.
Alright, great. Thank you.
So.
I appreciate everybodys support and your thoughtful questions.
I do want to noted on the Investor Relations front, we'll be presenting at a couple upcoming conferences. So please look for us the JMP Securities Technology Conference in San Francisco on February 24, and the B. Riley FBR institutional Investor Conference in Beverly Hills on May 20, and 21, so if any of your attending these conferences.
As you know we hope you'll please come see our presentation and or set up some time to visit us a visit with us while you're there in the meantime, we look forward to updating you again on our continued progress when we report our fiscal fourth quarter and our full year 2020 results and with that it concludes today's call. Thanks, everybody.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
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