Q4 2020 Iteris Inc Earnings Call
Good day and welcome to the I chairs fiscal fourth quarter and full year Twentytwenty financial results Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jim Byers MK, Our Investor Relations. Please go ahead Sir.
Thank you operator, good afternoon, everyone and thank you for participating in today's conference call you discussed I terraces financial results oriented 2020 fiscal fourth quarter and full year ended March 31 2020.
Joining us today, <unk>, President and CEO, Mr., Joe, Virginia, and the company's CFO Mr. Doug gross.
Following their remarks, we'll open the call for your questions.
Before we continue we would like to remind all participants that during the course of this call. We may make forward looking statements regarding future events for the future performance of the company.
Such 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 is discussed today.
No one should assume that at a later date the companys comments from today will still be ballot.
Terrorists refers you to the documents at the company files from time to time with the FCC.
Basically 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'll find a supplementary reported Q4 and full year financial metrics as well as a webcast replay of today's call on the Investor section of the company's website www I terrorists dot com.
With that said I'd like to turn the call over to I cherish as president and CEO Jobin here.
Great. Thank you Jim and good afternoon, everyone I'm I appreciate you joining us today.
As you saw at the close of the market, we issued a press release announcing that financial results for our fiscal fourth quarter and full year ended March 31 2020.
Our fourth quarter fiscal 2020 results reflect a significant financial inflection points right terrorists and also demonstrate the unique agility of our company.
Recognizing the potential disruptions from Cobot 19, we moved early and fastest remote operations some of which was only feasible because of our software enabled delivery model.
This is minimized any disruption to our fourth quarter operations, and even enabled us to accelerate certain commercial activities.
As a result, I cherish is reporting record fourth quarter total revenue of 30.9 million and record full year total revenue of 114.1 million, which represents an 18% and 15% year over year increase respectively.
We secured record fourth quarter total net bookings of 28.7 million, representing a 19% increase year over year and record full year total net book gains of 121.9 million.
Representing a 14% increase year over year.
The strong bookings growth resulted in a total ending backlog on March 31st 67.2 million, which represents a year over year increase of 21%.
The company's record total revenue total net bookings in total ending backlog results reflect strong performance across all reporting segments.
Take a few minutes to summarize the commercial and operational performance of each segment.
Which Doug will discuss our fourth quarter financial results in more detail.
Our transportation systems segment recognized record fourth quarter revenue of 16.3 million, representing a 26% year over year increase in recognized record full year revenue, that's 58 million, representing a 17% year over year increase.
Yes.
On a full your basis revenue performance reflects particularly strong growth in this segment software and managed services lines of business as well as the benefit from Albert Gerken incorporated which was acquired on July 2nd 29 King.
The transportation systems segment recorded fourth quarter net bookings of 13.6 million, representing an 11% increase from the same prior year period.
Full year net bookings of 62.9 million also representing an 11% increase from the same prior year period.
The segment solid net bookings growth resulted in ending backlog on March 31st of 53.4 million.
The segment's fourth quarter and full year net bookings performance reflects continued demand for all lines of business consulting software and managed services as well as an increase in market penetration in Texas, and Florida, two strategic geography.
Almost 50% of the segment's fourth quarter net bookings will be recognized annual recurring revenue.
Some notable fourth quarter bookings included 4.4 million and combined task orders to provide traffic operations related managed services to four different agencies.
1.3 million in combined software as a service contracts for clear guide, our mobility intelligence application with several customers, including two international entities.
And 900000 dollar task order was Los Angeles County to evaluate the addition of high occupancy toll Express lane, the cresta across the Eyeq four or five.
Except for data corridor.
800000 in combined software contracts for commercial vehicle operations reporting and compliance.
650000 in past quarters or at least under a recent 3 million dollar contract with the Texas Department of Transportation and 500000 and combine task orders for two to lead to public private partnerships funded.
I'm, sorry to public private partnership funded connected vehicle pilots, one of which is being funded by Cisco systems.
Now, let's discuss our roadway sensors segment.
Roadway sensors segment reported fourth quarter revenue of 12.6 million, representing a 10% year over year increase and record full year revenue of 49.4 million, representing a 14% year over year increase.
These results reflect particularly strong performance in for geographic territories, Texas, Southern California, the southwest in the Pacific Northwest.
Additionally, we experienced positive customer response, the falling three major product releases first the introduction of a standard vantage slide eight <unk> now enables third party applications to ingest vehicle count data from vantage lives.
Second the introduction of by terrorists video view work streams real time video and data new mobile and web applications from any intersection equipped with a terrorist attack some products and third the second generation of our radar detection product, which is branded advantage lies.
Agriculture, whether analytics segment reported fourth quarter revenue of $2 million, representing a 15% year over year increase and a full year and full year revenue of 6.7 million also representing a 15% year over year increase.
Segments secured fourth quarter net bookings of 500000 and full year net bookings of 7.2 million, which represents a year over year increase of 152% and 15% respectively.
Segments net bookings growth resulted in ending backlog on March 31st of 5.2 million.
As a reminder, we completed the sale of our agriculture, and whether analytics segment to DTN L.C. I made that 2020.
Now I'd like to turn the call over Doug.
Thank you Joe.
Good afternoon, everyone.
As a reminder, please see the company's 10-K filing press release and supplemental financial metrics document posted on our website for further disruption description other matters under discussion today during the call.
Consistent with a third quarter results, we've seen the performance of the business in Q4, continuing to improve with favorable year over year trends in certain key metrics, including topline growth.
Increasing backlog and margin expansion.
Well move to the details of the fourth quarter results as Joe mentioned total revenues for the fiscal 2024th quarter increased 18% to 30.9 million compared to 26.1 million in the same quarter, a year ago and was a new record for the company.
Our gross margins in the fourth quarter was 45.4% compared to 37.8% from the same quarter last year.
Improvement in margins was driven by increased volume as we get more scale with our AG I acquisition, increasing demand in our software and managed service offerings and improved product mix across the portfolio.
Operating expenses in the fourth quarter with 13.9 million compared to 12.3 million in the same prior year quarter and were down 200000 sequentially over the third quarter 2020.
The increase over the prior year quarter was primarily due to cash retention bonuses related to the AG I acquisition and retention cost for certain agriculture, and whether analytics segment employees, which were both nonrecurring in nature.
As we mentioned last quarter, we are improving our profitability and expect this trend to continue as Joe noted we completed the sale of the agriculture and whether segment on May 15, 2020, which will significantly improve the profitability of the company going forward since that segment lost nearly $3.9 million in fiscal year two.
20.
We reported GAAP operating income in the fourth quarter of 100000, compared with a GAAP operating loss of 2.5 million in the same quarter a year ago.
GAAP net income in the fourth quarter was 200000 or a penny a share compare with a $2.4 million loss and seven cents per share loss last year.
Non-GAAP net income for the fourth quarter increased 3.1 million for eight cents per diluted share to 1.8 million or four cents per diluted share. This compares to 1.3 million dollar loss or four cents a share loss on a non-GAAP basis a year ago.
Now, let me turn to our segment results.
Transportation systems revenue for the fourth quarter was 16.3 million compared to 12.9 million in the prior year quarter, an increase of 26%.
Gurkin contributed 2.5 million of this growth.
Segment level operating income for the fourth quarter was 4.4 million compared to 1.6 million from the prior year quarter and the related operating margins were 27% compared to 12.6% last year.
The margin expansion was primarily driven by increased volume as we get more scale in this segment with our AG I acquisition, and increasing order demand within our software and managed service offerings.
Oh roadway sensors revenue for the fourth quarter was 12.6 million compared to 11.4 million in the prior year quarter or an increase of 10%.
Segment level operating income was 1.7 million for the quarter compared to 1.5 million last year, and then related operating margins were 13.9% versus 13.6% last year driven by the increase volume.
Our agriculture, and whether analytics revenue for the fourth quarter was 2.0 million compared to 1.7 billion in the prior year corner, an increase of 15%.
Segment level operating loss in the fourth quarter was 865000 versus a loss of 1.2 million last year.
Corporate expenses in the fourth quarter were 4.7 million 4.4 million in the prior year. The increase was driven primarily by an increase in compensation and benefit costs.
Now turning to liquidity in capital resources total cash and short term investments were 25.8 million at the end of the fourth quarter.
We spent 188000 and capital expenditures and capitalized software costs in the quarter.
Which consistently running below 1% of revenue, reflecting our asset light business model.
We continued to be focused on improving working capital and with our expected improvement in profitability, our cash position should start to build going forward.
In summary, we're pleased to report another solid quarter performance and continued progress improving both the bottom in the top line with that I will turn the call back over to John.
Great. Thanks, Doug.
I'll now provide some commentary on our broader market strategy key product in commercial initiatives for both reporting segments and associated expectations for fiscal year 2021.
We believe the convergence of ubiquitous connectivity cloud computing and various innovations in mobility is profoundly changing the operation and utilization of transportation infrastructure.
For example, we anticipate public sector spending will continue to be reallocated from traditional pick and shovel projects to advanced technology initiatives.
And at the same time, new software enabled service delivery models would change how transportation agencies at all levels of government fulfilled their missions.
These dynamics represent meaningful opportunities to increase our annual recurring revenue in general and our software as a service revenue in particular.
By terrorists clear mobility platform as a key element of our market strategy. It applies cloud computing artificial intelligence advanced sensors advisory services and managed services, it's been able cloud based monitoring and operation at mobility infrastructure.
Agencies made continued to purchase integrate and use discrete components of the clear mobility platform, such as our clear guide and vantage lives software products.
However, we plan to also deliver these individual components increasingly in the form of new software enabled managed services to address changing customer preferences.
These new software enabled managed services will expand upon the intersection service offer we introduced last year.
The maximize operating leverage from this managed services model, we plan to introduce the eye care as cloud and physical 2021.
It's unified cloud enablement services will support licensing provisioning identity management work flow and other common services and processes for the clear mobility platform.
Going forward the roadmaps for each of our individual products will be a line so I'd terrorists cloud roadmap.
It's a line should increase the efficiency of our development resources and accelerate the adoption of our clear mobility platform.
Now, let's discuss the key product in commercial initiatives for boats reporting segments.
And that's why 21, the transportation systems segment will focus on three key initiatives first our continued penetration of strategic geography, which principally include Texas and Florida.
Second the customer adoption of several major software as a service releases and third the further development and commercialization of our growing managed services portfolio.
Well bookings growth may fluctuate in any given quarter, especially as we continue to pursue more multimillion dollar contracts.
Sales pipeline for our transportation systems segment continues to grow and our conversion rate remains favorable.
Therefore, we're cautiously optimistic about continued bookings grow through fiscal 2021, Despite cobot 19, and the recent political unrest.
Likewise, we've yet to experienced any deterioration in revenue despite the broader economic uncertainty and we continue to anticipate the transportation systems segments fiscal 2021 first quarter revenue to increase year over year by about 20%.
We also expect this segment's fiscal 2021 first quarter gross margin and operating income dollars increase year over year.
Oh, the segment's operating income will decline sequentially due to product mix.
Now, let's discuss the roadway sensors segment.
And that's why 21 the segment will focus on three key product in commercial initiatives first improvements in sales enablement and channel development.
Second the alignment of our advantage sensors value offer with our clear mobility platform, which we expect to drive more cross sell and up sell revenue.
And third an introduction of new product capabilities to create additional competitive differentiation and further increased customer adoption, while also contributing to our eye care as cloud roadmap.
I want to take up or make a particular note of three upcoming product releases.
First a new detection platform that among other features will include high definition video.
Second the use of artificial intelligence by our edge detection devices for real time deep level object classification.
And third the ability to provide real time streaming of intersecting data from our detection devices to support adaptive traffic control.
Each of these upcoming product releases is expected to create significant customer value measured in economic safety and sustainability terms as well as contribute to our eye care as cloud vision.
Assuming no significant adverse events. The roadway sensors segment is expected to report a year over year increase in fiscal 2021 first quarter revenue.
That said the segment's first quarter growth rate will be lower than recent quarters.
For example, in the low single digits due to a very unusual prior year comparable.
As a reminder, we experienced a surge in sales in our fiscal 2021 first quarter due to the reinstatement of the Texas smart by contract and the associated release of several months of accumulated orders.
Still based on the expected first quarter fiscal 2021 volume increase and product mix, we anticipate both sequential and year over year improvements in the segment's gross margin and operating income dollars.
In summary, we are aware of some softening in the transportation infrastructure construction segment due to cobot 19, but our primary exposure is to essential infrastructure operations that have been less affected.
Our software enabled delivery model has proved quite resilient to date.
Therefore, as we enter fiscal year 2021, the demand for products and services remained strong.
And given the current financial expectations for our reporting segments, we anticipate fiscal 2021 first quarter total revenue growth in the low double digits.
As well as adjusted EBITDA and non-GAAP net income profitability.
So we will incur various gas expenses associated with the sale of our agriculture, and whether analytics segment and some additional restructuring charges as previously communicated.
For the balance of the year, we remain cautiously optimistic for the reasons noted in today's prepared remarks.
However, the current environment, certainly poses unusual degrees of uncertainty and we believe it could actually be misleading to attempt to characterize expectations too far in the future.
As a result, we do not plan to provide commentary more than one quarter I had until the economic environment Reestablishes some form of equilibrium.
So with that we'd be delighted to respond to your questions and comments operator.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment, but good press star one to ask a question well pause for just a moment told everyone an opportunity to signal for questions.
The first question will come from just van Sinderen with B. Riley. Please go ahead with your question.
Hi, everyone. So I know you touched on some of this in your prepared comments, but any more color you can give us some while you're experiencing with agencies in terms of new business procurement has that changed in recent weeks with using of restrictions covered restrictions just any other color you can give us there.
Yeah, Jeff I'm, saying through the question so.
Uh huh.
To be honest, we really didn't see any.
Any.
You know meaningful impact.
Yes.
For the last couple of months and as a result, we haven't really seen any significant change.
As.
Various geographic areas of kind of come out of the locked down.
And I think it's largely due to the fact that again you know what.
We're involved in is supporting the delivery of essential infrastructure, which was never subject to any of the work from home restrictions you know it is critical and you know that activities that we're supporting are provided 24 by seven by 360.
Five so.
You know again, we really didn't experience any significant slowdown in activity and therefore, we haven't really seen any.
Significant resumption, either it's been largely steady state now that being said there were a couple instances, where there were kind of.
You know unusual in some respects almost a little bit funny had disruptions.
A lot of these agencies as a matter practice require west signatures for new contracts and in some cases some of the executives were not in office and therefore, we weren't able to get on wet signatures and so we've had to work with agencies to help them.
Start to use docusign and other things like that but those things have started to happen and again those were those kinds of things that.
The where we did see some slowdowns were not significant in terms of a contract value perspective.
Now all that being said I want to be really clear that if we have a long sustained recession no terrorist is not immune right. I think every sector is going to be impacts impacted we would certainly be impacted as well, but again today, we have not seen any slowdown and we've not seen any change to either really sense they're strip.
Extensive since I've been listed.
Okay. That's helpful. And then I know you touched on new product introductions can you speak a little bit more about those maybe what they include in terms of differentiating features and then maybe timing of revenues around that just wondering when revenues might start there and our most of those incremental products or are they more so.
<unk> new generation.
Oh, replacing cornered products.
Hi, Good question. So in general all of the most all everything that I've talked to represents a feature enhancements and platform modernization activities. The managed service offerings. However that were wrapping around the.
These new capabilities those are represent pull new offers so again from a software and from a technology perspective.
You know, we're continuing to push the on below we've always said the performance and feature standard in the industry will continue to do that and so that again is just continuing to move the bar.
But with respect to the managed services offers these are entirely new product concepts errors.
Really not anything comparable in the market to date on some degree we're creating new categories. You know as we do that and so just to set expectations. You know we there is some degree of Evangelists Asian, that's gonna have to you know occurs we introduce particularly the new managed services.
Concepts.
We would expect to see some tangible.
Financial benefit, but its from the introduction of some of these managed services, but that will probably be limited to the form of bookings.
Given that the.
Evangelists Asian work that needs to happen and then the length of typical contracts cycles and the time that it takes to convert bookings to revenue I wouldn't expect no material impact on revenue from the introduction of getting these managed services and enough by 21.
Okay. That's helpful. And then just one final one if I could squeeze it and just given the coded and recessionary environment.
How are you thinking about opportunity cat opportunistic acquisitions to use you think that there may be some opportunities that they come up that maybe wouldn't come up otherwise.
Well so first of all.
We.
It did when.
The country began to shut down due to covert 19.
You will like most companies we eat.
Not understanding what the new normal was gonna look like you know we had we.
Would've been reticent to undertake and acquisition at that point, but now fast forward a couple of months, we feel like.
You know we understand our market you know that specifically the categories in which we compete we know you know some of the acquisition targets are within those particular categories.
And while I wouldn't say that we reestablished you know a new norm. We we do think we understand you know the risk environment again within the existing categories in which we currently operate and so.
Well I don't think that we'd want to go out and do an acquisition in an entirely new category, where we don't feel like we understand the current dynamics. If we were able to find an acquisition candidates that participates in categories in which we already participating we understand well we would be open to that at this point in time at.
And you know we would we do believe that the current environment.
Oh my.
Might lead to more possibilities for acquisitions, then and then perhaps you would've seen you know six or 12 months ago now that being said you know I.
I I don't see.
Like valuation expectations, you know declining dramatically at it at this point anything most people did you know or.
You know considering you know the possibility of stuff you know of the sale are tending to take the position that this is somewhat of a transitory situation and you know and therefore, they're still expecting.
I think reasonably strong valuation swept to see you know how things play out over the next couple of months, but to answer. Your question. Yes. No. We are now open you know duplak, we understand particularly in our congressmen, who participate we understand the risks and we'd certainly be open to an acquisition we can find the right.
The right target.
Okay fair enough. Thanks for taking my questions and best of luck.
Thank you.
Thank you.
Thank you. The next question will come from Mike Latimore with Northland Capital markets. Please go ahead with your question.
Yeah. Thanks, congratulations on the great here there.
He.
The service gross margin was up a fair amount sequentially I guess, what what drove that and you know that stay animal.
Doug do you want to ensure answer that sure. So something like that that is where you know we report our software revenue is in the service gross margin so's alluded to in the prepared remarks.
We're seeing a nice increase in our SAS offerings, and so that is helping drive you know and increase in the margins.
Great.
And then.
When you you sold your.
I want division and a you'd be doing this additional.
<unk> cost reduction I guess, what is what can you get too in terms of data base operating expense level, then given those parts.
Two dynamics.
Sure so with the restructuring a you know that we previously announced you know we signaled that a you know there's probably a cost savings across the enterprise.
A little over a million dollars a year.
And so that's what we're working towards and it's kind of spread across the company. It's not in any one given segment or you know strictly isolated to the corporate line. So you know we would expect through.
The elimination of that head count, we would see about a million a little over a million dollars annual cost savings coupled on top of obviously the divestiture.
And whether business, which you know as I said it was about a $4 million not quite $4 million drag on earnings in fiscal year 2020.
Got it and then just some that a couple of these new products the real time streaming.
Is that something that is gonna be sold mainly into sort of new installations are there some easy upgrade path there as well.
Yeah, so that that feature.
Is.
It is.
Only gonna be available with.
The most current release and then the new platform that I referred to are going forward. So so you're correct, Mike that there won't be.
There'll be some some intersections running some of our older products, which from which you would not be able to support the streaming capability.
I don't know what.
The did.
The adoption rate is of the of the versions of our products that would support the streaming capability offhand, but I could get back to you, but that information if you'd like.
Great and then just last one on the managed service I know, it's more bookings this year, but what would be that.
Maybe most attractive used case, you think deal he would have there and then well what kind of gross margins are you thinking about understands server.
Yeah, So I'll talk to the first part and then talk to the gross margins, so where we're seeing the most interest right now.
With respect to these new managed services concepts is.
Working particularly with small and medium size cities to take over certain aspects of our cereal Road management, and particularly it is monitoring and optimizing.
Good.
[noise] not just our own detection equipment, but any detection equipment that's deployed at intersections in particular.
So we view this as part of a larger arterial management managed service.
Okay.
And on the gross margins might get it really varies by contract depending upon you know how much of our software as bundled in and the types of managed service that we're providing so you know generally speaking it's gonna be you know at least at or above what those current service.
Margins you know run at so [laughter] depends on the side of the contract and.
Different services that were going to provide and how much of software versus other professional services.
Yeah [laughter] club.
Thank you. The next question will come from Mike Shlisky with Colliers Securities. Please go ahead.
Good afternoon guys.
And your comments shows you noted two international entities in a in a.
I said pretty big orders and I'm curious.
I think opportunity.
Going forward are going to other countries and how should pipeline of opportunities that you're looking actively grown.
Outside of the U.S.
Yeah, Mike that's a good question, so I mentioned that because we're really excited about it.
This was a in bound.
These are inbound opportunities, we don't have a channel per se to market our software products internationally, we do have.
So international distributors.
Who sell or roadway sensor products, but not our our hardware products, but not our software I'm one of the opportunities was actually with a commercial entity first from a commercial entity that operates in Greece.
And the second one was and expansion on some worked with previously sold in Canada. So yeah. We were really excited to see you know the inbound interest I'm in the softer products, we would like to believe that there is an international opportunity, but at this point you know we have not.
Yet made the investment in developing you know but.
True International distribution channel for our software products, we will however, as it makes sense continue to respond to inbound demand.
I would hope we would continue to see that based on you know that market response that we've had particularly to our clear got product, which is fully internationalized.
Got it one that turns to your gross parties in the quarter gross margin outlook, maybe give us a little more detail you had mentioned some of the gross margin upside was due to scale. Some was due to mix can you make kind of just kinda brick house breast, which was the most prevalent piece of the upside down kind of curious do you have strong.
Growth in fiscal 21.
This just based on scale you know there could be some pretty had some upside here just can you just because of.
Okay, Great town.
Between between just your your fixed gross margin and Youre.
And your and your contract mix.
Sure. So I'll take that Joe. So you know if you looked at just in contrast to say our Q3 results you know as a as a comp you know the revenue you know was up pretty significantly and we saw a good portion of that really fall through to the bottom line because a lot of our costs our fear.
Mix, particularly in you know our software business. So you know depending upon the mix in any given quarter. How much is software versus say professional services consulting business, which is little bit more variable that will drive a you know what the gross margin is gonna be so yeah, we did.
Nice quarter with the with the volume and you know we did have it actually is.
Really good mix in the quarter, so it will vary quarter to quarter.
But I think you know our expectation as we've been signaling as the margins will continue to expand as the volume increases.
Okay.
Fair enough and not just one more for me and there's been headlines very recently I'm.
So some studies have already started to act to do fund or change the police Department operations.
Yes, because 'cause I first have any role to play and.
Future she should business to help to help cities.
Enforcement asked the reporting and things like that to help them leasing costs in their traffic businesses that can maybe deploy what could be a scarce budget elsewhere.
Yeah, that's a interesting question so.
There, there's a difference in our market between.
Products and services that are designed.
To operate manage that the transportation infrastructure.
Versus products that are designed really for enforcement.
So like Red light camera running for example.
Some but.
I'd like.
Certain zones, where they'll be variable on speed limits and dynamic pricing those those kinds of solutions will have you know enforcement component to them.
We actually do get <unk>, we have been getting involved and the design of those sections of highways and certain.
Arterial core doors, but.
Currently we do not have any software or hardware products that are part of an enforcement application.
And so therefore I I don't cancer. Your specific question I I don't think we have a and offer today that you know when.
You know would address that particular potential demand that's not say that we couldn't get into that market, but we don't currently compete in that category.
Right fair enough I'll pass it along because pretty much guys.
Thank you okay.
Thank you. The next question will come from riots adult with Craig Hallum Capital Group. Please go ahead Sir.
Good afternoon, guys. Thanks for taking the questions.
Just on transportation system. So the outlook you gave for fiscal Q1 on a year over year basis, My back of the envelope math implies that's down.
Something like 10% sequentially quarter over quarter, I guess is that correct and then or can you help elaborate I guess.
There was an awful lot of seasonality there what's going on.
Doug do you want to speak to that.
Sure, Yes, it's generally has to do with yes.
Seasonality and just the timing of you know the recognition of revenue on certain of the contracts. I mean, you know as we said it will be down sequentially, but you know almost 20% year over year or so I think the you know we're still expecting strong performance in Q1 firm transportation systems.
And Ryan when you're and then those numbers are you comparing just the two transportation businesses to one another you.
Comparing the entire enterprise results, including all of the.
Q1 results I always told you obviously, if we back.
I was just looking at the transportation system segment.
Okay.
Yeah. So the.
So did you I think your question it was.
Not sure of Doug totally understood. What you were saying that that typically just seasonality goes the other way for us.
And Oh, yeah that that has historically been true. However, we did see some unusual seasonality in the second half of that of our fiscal 20.
As you might recall, our third quarter was actually unusually strong and there was sort of a typical seasonality and again, we stopped particularly robust results and in the fourth quarter. So no. We're not 100% sure what happened there, but again on a year to doug's point on a year over year basis.
We're still expecting you know very very strong growth in the first quarter of fiscal 21.
Got it.
And then maybe said the follow up but if you can break out what al but Kirk and its included in that assumption because presumably that's that's a lot of that girl.
You know actually al the gerken doesn't we're not going to be able to break that out going forward.
We.
When we acquired Albuquerque, and you know we talked about the fact that you know their primary operations were in Florida.
And.
In India, and you might remember that we had some made some investments to develop that market ourselves and so we already had some resources in the Florida market and I terrorists, even pre Albuquerque, and trends I Terrace transportation systems, even pre Albuquerque, and had some Florida based revenue.
But in addition to Albert Gherkins presence in Florida.
They also had some activities in the mid Atlantic and also the Midwest and so there is <unk>.
Pointing this out as we've now reached organized our transportation systems region and created a south East region.
Which combines what was formerly Albert gerken as well as.
Our I terrorists is south eastern operations, but prior to acquisition and then Abbott Gerken resources that were in the mid Atlantic in the Midwest have now been absorbed into you know those respective.
Transportation systems regions. So, it's really not possible for us any longer to break out Albuquerque and revenue.
But I would say that it we previously estimated that Albuquerque in your revenue like in a typical quarter would be on the order of about 2 million. So you could kind of think about it that way, but again, we fully integrated the operations and just if you can't really did I don't think it makes sense to thing.
It's about breaking it out any longer.
Got it.
That's it for me guys. Good luck fix.
Thanks.
Yeah.
Thank you for the question. The next question will come from Joseph Osha with JMP Securities. Please go ahead with your question.
[noise] other guys a couple of questions first back to this managed service question you spoke earlier in the call.
About a your transportation services bookings being I believe Joe you said half were were recurring I don't recall, if that's that's correct yeah that I'm wondering about.
Yeah, that's right about half of the transportation systems bookings in Q4 or annual recurring revenue.
Okay, So let's imagine.
Oh, it's the end of fiscal 2021, what what percentage of that divisions revenues.
You imagine might be comprised by by recurring revenues at that point.
Yeah, Yeah. So yeah, we don't have a good view that right now.
I was obviously over the Moon, you know with that bookings mix. The there was fantastic resolved I wish I could say that.
No that that was planned and that we had a good view of what the you know this split is gonna be going forward.
Unfortunately, we don't you know I would expect there will be some.
Probably large degree of variability from quarter to quarter, but the reason I wanted to highlighted is because I think it demonstrates the potential.
You know of shifting the you know the mix of revenue for not only transportation systems, but for then the entire enterprise and I would say, you know, which which we previously talks to today are on a total enterprise basis, excluding all Oh, you know, which is now you know obviously.
Had been sold about 21% of our total revenues and recurring and you know we do have an internal objective to try to.
Uh huh.
Increase the mix of annual recurring revenue to 30% or the total enterprise revenue over three years.
Okay, and I I assume it would be fair to assume that more of that recurring revenues and transportation services that sensors, yes, yeah, and then yes on an absolute basis. That's absolutely correct. We do believe that there are opportunities to increase that annual recurring revenue in our sensors business.
We'll continue to work on that.
But that's obviously on a much lower base and so you're correct on an absolute basis, most of the and the recurring revenue will be in our system segment.
Okay. Thanks next question you mentioned that you had a trial are connected vehicle project or do we two of them.
So long till we might see some of that turned to the actual production revenue, that's an interesting and interesting area.
Yeah.
I think so as well so that one of them is in.
Minnesota.
And the other one is in Las Vegas.
The one in Minnesota is.
It's.
It's a multi phase pilot and we're currently in the first phase the second pilot for the second phase of the pilot.
Assumes the.
Release of Ah They are a mobile application.
And.
So I.
Yeah, we have better visibility you know to what are the follow on revenue could look like on that particular project than we do on the Las Vegas project, which at this point as a little bit more speculative, but to your point Joe that that you.
You know that the.
Billion dollar question as you know what does how do you monetize.
You know these connected vehicle models that are being.
Yeah experimented with across the country and the answer right now is it still unclear but.
But we do believe that there will be opportunities to monetize it and then of the to the one in Minnesota has Ah, yes, the shortest password a clear path.
To some kind of recurring revenue model and it will be I've got form of Ah Ah Ah Ah mobile application.
Okay. Thank you and then the final question, there's been lots to talk about revenue growth.
Gross margin today.
There is I think some some room further down the piano as well so understanding you're not guiding revenue for the full year, let's imagine that revenue growth is decks column is operating cost growth are going to be flat is it going to be X minus 2% <unk>. How do you think about your your operating model.
<unk> 21.
Yeah, Doug you ought to talk about that.
Yes, Joe I think as we look at the infrastructure of the company you know we have on two reporting segments now moving forward and then our corporate costs I would expect a corporate costs too you know remain flat as we go through this year.
You know because we've already made significant investments in the past so there shouldn't be much of an increase in all those corporate costs and then as we see the revenue growth in the two reporting segments. We should see some margin expansion. There. So combination of those two things you know when you roll it up should be expanding.
Operating margins at the company wide level moving through fiscal year 21.
Okay, and so to be clear that that's.
Yeah, Let me flat a dollar terms right. So that that would represent a pretty significant reversal from this trend where your overhead has been are growing percentage of revenue for the last several years, you're saying you can hold that number flat in dollar terms, while your revenue gross.
That's right that's the plan.
Okay. Thank you very much.
Thank you I show no further questions at this time I'll turn it back to Jokers Europe for closing remarks.
All right great.
Thank you.
We appreciate everybodys support and and all the good questions today.
We are as always look forward to updating you on our continued progress I'm at this point, we would expect to and now it's our first quarter for 21 results in August and so we hope it will be speaking to you at that time.
At this point a will conclude today's call and thanks again, we appreciate everyone participating.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect your lines.
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