Q1 2021 Iteris Inc Earnings Call
[music].
Thank you operator, good afternoon, everyone and thank you for participating in todays conference call to discuss factors. So.
Actual results for fiscal 2021 first quarter ended June Thirtyth 20 Twond.
Joining us today versus president and CEO Mr. Joe there.
And the company's CFO Mr., Doug Groves.
<unk> culture questions.
Before we continue we'd like to remind all participants are during the course of those calls we may make forward looking statements regarding future events for the future performance or the company such statements are based on current information are subject to change and are not guarantees of future performance.
Just undertakes no obligation to provide updates to these forward looking statements against the future.
Actual results may differ substantially from what has discussed today no one should assume that at a later date the company's comments from today. It will still be Dallas I Trust refers you to the documents with the company files from time to time that the FCC specifically the company's most recent forms 10-K tend to an 8-K, which country.
And then identify important risk factors that could cause actual results to differ materially from those that are contained in any forward looking statements.
To remind everyone that if that you'll find a supplemental report it.
Well the financial metrics.
The webcast replay of todays call an investor relations section of the company's website at <unk> Dot com.
I'd like to turn the call overdoses, President and CEO Mr. Joseph.
Please proceed.
Great. Thanks, Todd and good afternoon everybody.
I appreciate you joining us today.
As you saw at the close of market, we issued a press release announcing that financial results for our fiscal first quarter ended June 30 2020.
I'm, sorry June 30 2020.
Given the sale of our agriculture, and whether analytics segment to DTN X L. C. On May 15, 2020, we're reporting the results of that segment as discontinued operations for all periods presented in today's earnings announcement and as such I'll be discussing and we are continuing operations during the remainder of.
This call.
And our first quarter I terrorists experienced strong demand for our smart mobility infrastructure management solutions. Despite cobot 19.
For the company's to transportation segments, combined we reported 28 million in total revenue and 33.8 million in total net bookings representing year over year increases of 11% for both measures.
Due to the solid bookings growth, our total ending backlog again for two transportation segments combined increased 21% year over year to reach a record 67.9 million.
Few minutes.
And Q1, our transportation systems segment recognized 14 $8 million in revenue, representing a 20% increase versus the same prior year period.
The segments growth reflects particularly strong performance in our western region.
With our mid Atlantic in southeast regions experiencing some minor delays and backlog conversion as a few projects slip to the right due to cover at 19.
Although we expect to pick up the majority of this revenue in future quarters that dynamic market conditions in which we are operating create high degrees of uncertainty.
Our transportation systems segment reported record first quarter net bookings of 21 million representing of 21% year over year increase.
The solid first quarter net bookings performance as a function of strong demand for all of the segments lines of business and demonstrates the essential nature of our solution portfolio.
About 40% of the segments first quarter net bookings will be recognized in the future is annual recurring revenue.
Notable recently executed customer contracts include at $9 million indefinite delivery indefinitely quantity contract with the Federal Highway administration to support connected an automated vehicle preparedness.
Six $9 million contract managed to traffic operation centers for the San Francisco Bay area Metropolitan Transportation Commission.
Five $4 million agreement to continue to provide our next generation advanced traveller information system to the San Francisco Bay area Metropolitan Transportation Commission.
A four $7 million contract in Orange County Transit authority to increase traffic flow and safety across the could tell US Street corridor. This contract includes a terraces intersections a service solution, which will provide 24 by seven monitoring of device and system help throughout the corridor.
Several software is the service contracts for a total value of one and a quarter million dollars from various agencies for use of our performance measurement solution branded as clear guide and for use of our commercial vehicle operation software products and finally in intersections a service contract with Hayward, California valued at 330 with.
This contract, we now have more than one.
Intersections at various stages of deploying are intersections a service model.
With a segment strong first quarter bookings the transportation systems segment ended the quarter with a backlog at 59 $6 million, which represents a 20% year over year increase and at 12% sequential increase.
Now moving to a roadway censors segment.
Q1, the roadway censors segment recorded revenue of 13 2 million, representing a 3% year over year increase.
While the segments growth rate was below our recent average the result was consistent with our expectation and we were satisfied with the result, given the very unusual prior year comparable.
As a reminder of the segment experienced a surge in revenue in our first quarter last year due to the reinstatement of the Texas smart by contract and the associated release of several months of accumulated orders.
During our fiscal 2021 first quarter segment made tangible progress against each of the three products and commercial priorities that we discussed on our lost earnings call.
For your reference these priorities are first improvements in sales enablement and channel development second alignment of our vantage censors value offer with our clear mobility platform, which we expect to drive more cross sell in upsell revenue and third an introduction of new product capabilities to create additional competitive differentiation and.
Further increase customer adoption, while also contributing to our terrace cloud roadmap.
For example in Q1, the roadway censors team cross sold certain capabilities of our transportation systems offering an intersection detection account secure a new $1 million managed service order from the city of round Rock, Texas.
With our clear mobility platform, we expect to see more opportunities for this type of cross sell between a roadway sensors and transportation systems segments.
Additionally, the roadway censors segment introduced in new partner certification program to improve channel sales productivity and technical expertise as well as reduce our partners dependence on a terrorist field resources during cove at 19 restrictions.
On the product front the segment introduced a new API for our vantage next detection platform that will enable I'd terrace cloud as well as customers and partners to ingest realtime streaming data from our smart sensors.
The initial consumers of this new API include a non disclosed global automotive parts manufacturer and Cisco systems, who is ingesting our streaming data into the edge intelligence layer of Cisco's connected communities infrastructure.
With that I'll, let Doug comment on our financial results.
Thank you Jill good afternoon, everyone.
As a reminder, please see the company's 10-Q filing press release and supplemental financial metrics document all of which are posted on our website for a further description of matters under discussion during the call today.
Is Joe noted in the first quarter. The company completed the sale of the agriculture, whether analytics segment <unk> LLC.
[noise] results today, and and whether analytic segment Ah reported as discontinued operations on our SCC filings in my comments, we'll be focused only on a continuing operations today.
A consistent with the last few quarters results, we've seen the performance of the business and Q1, continuing to improve favorable year over year trends and certainty metrics, including topline growth increasing backlog and margin expansion.
In fiscal year 21, we've introduced a new non gap financial metric adjusted EBITDA or earnings before interest taxes depreciation and amortization will also include one time nonrecurring items like restructuring charges in stock based compensation and this metro calculation.
Just it EBITA lines with our goal of creating more leverage in the P&L and we also believe it's a reasonable proxy for our cash generation and our ongoing normalized operations.
Now moved to the details of the first quarter results.
Joe mentioned total revenues for fiscal 21 first quarter increased 11% to $28 million compared to 25 $2 million in the same quarter, a year ago or gross margins in the first quarter with 38, 8% compared to 38, 1% from the same quarter last year.
Improvement in margins was driven by increased volume as we get more scale in the business and improved product and channel mix of the roadway censor segment.
Operating expenses, and the first quarter, where 10 $5 million compared to $10 $1 million in the same prior year quarter.
The current quarter did include a one time nonrecurring restructuring charge of 600000.
After adjusting for the restructuring charge operating expenses were down 250000 over the prior year quarter.
As we mentioned last quarter, we're improving our profitability and expect this trend to continue.
We reported gap operating income in the first quarter of nearly 400.
Paired with the gap operating loss of about 500000 in the same quarter a year ago.
The gap net income from continuing operations in the first quarter was 400000 or one per share compared with a 500 dollar loss or two per share loss last year.
Adjusted EBITDA for the first quarter increased 182 $3 million or eight 2% of revenue, which compares to approximately 500000 or 2% of revenue and the first quarter of last year.
Now, let me turn to a segment results are transportation systems revenue for the first quarter was $14 $8 million compared to 12 $4 million in the prior year quarter and increase of 20%.
Albert Gerken was the main contribute to this grow since it was not included in our Q1 2020 results segment level operating income for the first quarter was two $3 million compared to one $6 million from the prior year quarter and it related operating margins, we're 15, 3% compared to 12, 7% last year the margin expanse.
And was primarily driven by increased volume as we get more scale in this segment.
A roadway centers revenue for the first quarter was 13 2 million compared to 12 $8 million in the prior year quarter or an increase a 3% and Q1 was impacted by a difficult prior year compare is Joe noted.
Level operating income was three $1 million for the quarter compared to two $3 million last year and related operating margins, where 23, 5% versus 18, 2% last year.
The improvement in margins was driven by increased volume improved product minutes and more direct sales verse distributor sales compared to the prior year quarter.
Corporate expenses, and the first quarter, where for $1 million compared to four $4 million in the prior year and down 600000 sequentially from Q for fiscal year 20 <unk>.
<unk> was driven primarily by decreased compensation benefit costs.
Turning to liquidity and capital resources total cash in short term investments with 34 $5 million at the end of the first quarter and reflected the net proceeds from the sale of the agriculture and whether analytic segment.
We spent 458000 capital expenditures in capitalized software costs and the quarter and we expect those expenditures to remain under 1% of revenue for the whole year.
Operating cash flow from continuing operations was one $8 million compared to 900000 that prior year quarter and you increase reflects are improved profitability and continued focus on improving working capital.
Alison any acquisitions, we expect our cash position to continue to build going forward.
In summary, we're pleased to report another solid quarter of performance, which included the sale of the egg and whether analytic segment restructuring of the company and solid execution as we continue improving both top and bottom line results with that I'll turn the call back over to Joe.
Great. Thank you Doug.
Notwithstanding the temporary challenges of Covid 19, we continue to believe this smart mobility infrastructure management market will enjoy favorable secular trends with agencies continuing to reallocate budget from traditional pick and shovel projects to advanced technology initiatives.
And at the same time, we believe new software enabled service delivery models will emerge that change how agents transportation agencies at all levels of government fulfill their missions.
As mentioned on prior calls I terrorists clear mobility platform is a key element of our strategy to capture these opportunities.
And Q2, we will continue to align are solution portfolio to the clear mobility platform and execute against <unk> cloud roadmap, which underpins declare mobility platform.
For example, we plan to introduce in new SaaS offering that will augment the application layer of the career mobility platform and begin customer trials for two new managed service offers one of which leverage as the round rock model referenced earlier.
Additionally will continue to advance are common API framework with the release of enhanced integration interoperability among our various SaaS products.
From a commercial perspective, both our transportation systems in roadway censors segments I've seen an increase in the dollar value of their sales pipelines.
Growth is driven by an increase in the average size of new sales opportunities, while the total number of new opportunities.
Decreased somewhat.
While it is too early to draw conclusions Cove at 19 may at least temporarily shift purchasing requirements to favor solution providers like <unk>, we were able to provide turnkey solutions at scale.
In general we believe such a shift would benefit I terrace. However, this phenomenon will increase our exposure to the timing of a few large awards and therefore could lead to some bookings lumpiness.
Since our last conference call, we remain cautiously optimistic about fiscal 2021, however, with the current level of uncertainty we believe it would be imprudent to attempt to characterize expectations too far ahead.
As a result will provide commentary only one quarter out until the economic environment reestablish there's some form of equilibrium.
As such for the second quarter, we expect the current backlog strength for transportation systems, and overall sales activity for roadway sensors to support revenue growth in the mid to high single digits with Covid 19, pushing some revenue recognition to the right similar to our experienced in Q1.
Additionally, we expect both segments largely driven by volume growth to report a year over year increase in segment level operating income, while our corporate expenses will be flat year over year.
Therefore, and the second quarter, we anticipate another significant year over year improvement in both net income and adjusted EBITDA, Despite the challenging economic environment.
Now would be delighted to respond to your questions and comments.
Greater.
Thank you.
I'd like to ask a question.
One on your telephone.
Thank you.
Reeker phone please into your meal.
After a while you're signal to Rachel.
S. At any point, you would like Terminator yourself from the question Q.
Start to you again, please press star one to ask a question.
Okay, we'll take our first question from Jeff Van Syrian of be Riley.
Hi, everyone.
Joe maybe you can give us a little more color on how the picture around procurement is evolving during call that I know you you mentioned, some things potentially pushing to the right.
And actually I should say first of all congratulations on great metrics, that's terrific to see the year over year improvement.
But.
The dynamics around the agency budgets timing other considerations that maybe we should be aware of regarding winning incremental business. During the covet area error, just anything else you can add on that.
Yeah sure gladly Hi, Jeff it's good to hear your voice hours.
So <unk>.
Environments changing rapidly and.
What.
Seeing today could be different in a couple of weeks or a month or two from now. So I just wanted to first of all make sure everybody understands it continues to be very dynamic situation.
But that being said as.
As far as where we are today.
We have seen that some smaller projects.
Things that.
You were may be sort of exploratory without clear Roy.
I have.
Maybe even pushed to the right a little bit we haven't seen as many sort of small procurements.
Or small opportunities as we would've seen a couple of months ago.
But that being said, we absolutely see agencies continue to move forward with large strategic initiatives and in fact as I said interestingly that average dollar value of the opportunities in our pipeline has grown over the last couple corridors and the total valley.
You of our sales pipeline is increased as a result, so there's kind of an interesting dichotomy going on there.
Another interesting aspect that we're seeing is that it's increasingly difficult for.
That non incumbents to pursue new business and.
That actually is we see that is benefiting I'd terrace.
We have.
Strong presence and our primary geographic markets.
And.
In most cases at least within a specific categories.
Tend to focus on.
The market leader and so we're finding that.
We are continuing.
Our position, even growing our position and a number of accounts because competitors.
Finding it increasingly difficult to penetrate new new accounts and the current environment. So.
This is actually interestingly another trend, which we think is somewhat favorable for <unk>.
This current point.
But all of that being said.
It is a very challenging economic environment.
And we certainly don't feel like we have particularly good visibility, especially as we look ahead into the second half of our fiscal year and so we're continuing to take things quarter by quarter, but again at this point things actually.
On balance fairly fairly positive.
Okay, that's good to hear.
And then I think and you're prepared comments, you mentioned, 40% of systems bookings R.
<unk>.
Maybe you can just yeah.
Go ahead.
Yeah for sure yeah. So.
When we define.
Recurring revenue it includes.
<unk> other nonsense software, we do have some as we continue to work to transition some of our legacy accounts into our to our SaaS model and then it would also include managed services revenue and so when we look at the total the $21 million and bookings that transportation system has recorded in the first quarter 40.
Percent of that would fall into a recurring bucket.
Either be software it'd be managed services related.
Okay. Good and then I think you were you spoke to targeting about 30% SAS or 30% recurring revenue maybe you can just.
Hutch on whether that's still the target I mean, if you're already hating, 40% and part of the business.
How should we think about that today and then I guess, how do you kind of get to the 30% or whatever that new number is on a consolidated basis. What timeframe do you think we should think about around that.
Yeah, so that is still or target with.
Sale of the AG on whether analytics business in particular, while I mean, obviously clear acura's entirely recurring but also.
Roadway whether business was recurring in at all we <unk>.
Packaged in some cases, we bundled that with some of the.
Products that we were selling in.
[noise] core transportation sectors.
As we talked about previously we still have access to the weather in the pavement business, but no it did it.
That that recurring revenue those recurring revenue streams went went away with the sale. So anyway, we have been.
Calculating are updating our model to.
Determine what are recurring revenue as we would expect it to be over that same time horizon and at this point, we're looking at it being still in the high 20% range, but probably a little bit less than 30%.
Of course, that's before any acquisitions and obviously, we're going to do everything we can to try to get back to that 30% target or even exceed it but at this point would still expected to be in the high 20% percentage.
And if I can squeeze one more and since you mentioned acquisition surface to any update you can give us there in terms of what you're saying.
Yeah. So as we talked about previously we were concerned when we.
Spoke to people and on our call in February about.
Sort of the overall marketplace in one of the questions. We had in our head is.
How would you think about valuing businesses in the current market and won't be the risk of trying to do a transaction.
Even though I don't feel like we've resumed normal economic equilibrium at this point, we do feel like we more or less understand at least in the categories in which we compete generally what the risks are and we feel that we would be in a position to appropriately value.
And acquisition should we find one that would be actionable.
We do feel like there probably is more deal flow. Now then there was a few months ago and so we think the probability being able to do a transaction now is is better than it than it has been for awhile that being said.
I'm surprised that a lot of sellers.
Are still reluctant to make any adjustments to their.
<unk> view on valuation [laughter] so.
It's it's still it's never easy to do a good deal.
Continue to find that there are some challenges, but net net I think that the environment is relatively favorable and it's something we continue to work on.
Okay. Good to hear thanks, very much and continued success.
Thank you.
Thank you.
Take our next question.
Craig Harlem.
Good afternoon, guys. Thanks for taking our questions.
Right.
Just on the profitability Whittington positive commentary you guys selected last quarter nice sequential improvement here positive kind of outlook commentary, but just directionally overall for the business is Q1 kind of a good base to build off of.
Going forward here.
Well I think it's going to check.
Sure Yeah Ryan.
I guess reflective of all the actions of the company has been taking.
Obviously.
The egg on whether being the biggest but then the restructuring and the continued to focus on managing are caused so.
I think it's going to be a little it goes up and down every quarter, we have certain expenses like in the second quarter. Then we won't have in the first quarter.
Shareholders meeting recently completed aboard search some things like that but I think it's a reasonable proxy and it's really driven by the top line.
Honest because.
The cost structure, while variable.
It is relatively fixed so to the extent that there's a little bit of.
Fluctuation on the top line that obviously impacts the bottom line, a little bit, but I think.
A reasonable proxy for.
[noise] we're headed.
And then maybe more specifically just trailing down and R&D, but looking at Q1.
It took a step down presumably most about was was part of the divestiture, but is that the right baseline there to about a million Bucks a quarter.
Yes, we would expect R&D to run about 4% to 5% of revenue.
This year.
Good then just higher level.
Been hearing a lot of municipal budgets in depth.
Ballooning up but have you what's your conversations like recently with.
Different.
Some local municipalities given.
Budgets out there.
Yeah. This is Joe I'll take a crack at that.
We're finding that it is variable to be honest, there's a lot of variation from state to state and then at different levels within even individual states.
Some instances you'll find a jurisdiction that has a pretty healthy rainy day fund for whatever reason they've had.
Less impact.
At least from an economic perspective, and perhaps a a different priorities or approaches. So there's a tremendous amount of variability.
That being said.
We.
Ed.
He was probably important for everyone understand it.
<unk> seemed very little reduction in spending against activities that are already funded and the question Mark is going to be.
What the revenue streams look like for these various agencies going forward and what would be the impact on future spending and that is unclear at at this point.
There are a number of things that are again.
Play into that.
One thing is.
Possibility of any kind of federal stimulus.
The second thing is how quickly we rebound the third thing which is.
Complicated and it kind of goes back to the initial point that there's a lot of variation from jurisdiction the jurisdiction, but you need to look at what is the underlying funding mechanism for that particular jurisdiction.
Gas tax our sales tax a property tax.
Is it.
Predominantly rely on an.
Annual budget authorization process for that jurisdiction and then what is the economic exposure for that particular jurisdiction. So again, we're seeing a tremendous amount of variability.
Another thing to which is important people keep in mind as it sometime certain types of revenue is fungible and other things or not.
And so we're looking closely at all of those different things in every major geography in which we're working right now.
To be honest, we don't have a clear picture.
I would expect it on our next.
Call in November would have better visibility because many of the jurisdictions in which we operate will have started a new fiscal year on October one so at this point.
Not a lot of change will be looking at what could possibly happen and then all the various dynamics that I mentioned will be a factor in.
Determining what future funding levels looks like.
And then last one for me and then I'll hop back Q, but it seemed like a bigger emphasis are you in order to a few projects that were cross hold kind of hardware services to software it back and forth.
How much opportunity to think is with existing customer base to really kind of bundle.
All in solution here in cross cell kind of all of the offerings you guys have.
Yes, we think that there's a significant amount of opportunity and.
Yeah, it's part of our strategy.
With a clear mobility platform to leverage what we think is the general position of strength, but we think particularly in the current Covid 19 environment.
Is a significant.
Pettit of differentiator for us.
As I mentioned.
Couple of seconds ago.
Interestingly, we're finding it's really difficult for competitors to enter existing account that are owned by particular vendors. So the strength that we have.
Either through the transportation systems.
Penetration or roadway censors account penetration into existing account puts us in a really strong position to try to cross sell the respective capability into that account and shut out competitors that don't have the same.
Number of customers are the same degree of market penetration. So it's absolutely we think point of differentiation something we're actively trying to capitalize on.
Great.
Good luck.
Thank you. Thank you.
Okay I'll take our next question from might squeeze ski.
<unk>.
Hi, good afternoon guys.
Okay.
We may be how can I ask maybe one of the other questions in a different way.
Certain states and counties City do have July 1st budget start.
Can you let me get assistance usually ask this is like this but how are the July bookings with some of the jurisdictions.
July 1st was.
Was the starter the fiscal year.
Yeah, so like I have to be honest with you I don't know, specifically, which jurisdictions had new fiscal year is beginning in July I'll tell you that like for US one of the biggest jurisdictions that we're focused on is Texas.
And their new fiscal year starts on September one.
I'm sure you're right mm mm certainly there must have been some jurisdictions. It began a new fiscal year on the first but I'm not personally aware of which ones. They are and what particular opportunities. We're pursuing in that period, but I would generally say that we didn't see any slow down and.
And deal flow or opportunity flow.
In the month of July and that's true across both roadway sensors and transportation systems.
Do you want to point out again, however that the transportation systems.
Current bookings opportunities are made up of a.
Like a relatively smaller number of really big deals and so.
I said the next couple quarters, you could see a little bit of Lumpiness, but it's not a reflection of a decrease in that.
The value of the sales opportunities, we're pursuing it's rather the composition of their sales opportunities.
Okay, that's great color for sure. Thank you.
Wanted to turn.
To some of the state the Ot budgets out there.
We are hearing a lot of states are cutting their road construction budgets.
And I'm kind of wondering if anyone's come into you, saying that they can afford a nine figure road construction budget to fix them intersections congestion how they ask you maybe.
And.
As an alternative to supply a perhaps a six or seven contracts with a terrorist at a time being until there.
They can afford that much larger asphalt pavement project.
Yeah. That's a great question, so a lot of the really big multibillion dollar.
Programs are funded through bond initiatives or other kind of special funding mechanisms and we have seen.
Some of those push to the right that doesn't tend to impact us as I think I've mentioned on prior cause we really only have.
One big major construction project.
That is currently part of our portfolio. That's the work we're doing on the four O five expansion project in Orange County.
As a result of that work, we've actually had a lot of inbound interest from various global construction companies that one.
To use us and sort of similar capacities on other deals not just in North America, but actually around the world and some of those deals, which we are tracking but.
Far out that's over at 12 to 24 month horizon, some of those who pushed out they were not in our plan. So it didn't doesn't impact our expectations.
Financial perspective over the near term, but we did see those kinds of things shipped out.
Kind of core <unk>.
Operations activities, which really makes up the vast majority of the work that we do we haven't yet seen any kind of.
Impact or any sort of significant.
Reduction in funding.
And we will continue to watch that but so far we haven't I would say that unfortunately, because of that nature and the funding mechanisms for these big multibillion dollar construction projects.
It isn't fungible those those programs probably can't be reallocated to operations, but you do raise a good point, Mike if particular jurisdiction was expecting some benefit in terms of safety or throughput associated with that investment and now it's been pushed out a couple of years. They may look it up.
Other ways to try to mitigate for that which.
Possibly benefit us, but we haven't yet seen that it's something we would certainly.
Watch for.
Okay.
Got it one more for me.
I guess now you're so clear.
You've owned Albequerque for a little over a year now you've made opex.
Opex reductions can you give us any sense.
That you're looking at EBITA more closely adjusted EBITDA is there any way you can give us some sense of what maybe a longer term EBITA margin goals are now that some of these.
One time items.
Left a portfolio or at least stabilized.
Yeah, do you want to talk to that.
Sure Yeah. So.
Just introduce that metric and we would expect that we should be able to grow are adjusted EBITDA over the next couple of years.
Mid to high team so.
Kind of 15% range.
Give or take depending upon the year and what's happening, but I mean, that's certainly at a minimum what we'd be looking to do as we we've talked about in the past get more leverage and the company through scale because the.
Shouldn't need a big investment and the infrastructure to support.
A much larger operation.
So then that just sounds like just to kind of a follow up there that sounds like it adds up 15%, perhaps or not targeting revenue growth quite that high.
Certainly there is.
No point is you're going to be seen some additional operating scale.
As you get more contracts.
Does that exactly.
That's right that's exactly right.
Okay, great. Thanks, so much I'll pass it along.
Thank you.
Hi, Sarah Minder, if you would like to ask a question you may Crestar one the question.
We will take our next question from Mike Lattimore as North capital market.
Hi, guys.
Michael anymore.
How do listen.
What percentage.
What is it getting and hopefully.
Last year.
So it's about 20% and the current quarter, that's annual recurring revenue if I heard your question correctly.
Yes.
Regarding that.
Avenue.
Does it have higher loyal operating margins Dakota right now.
Generally speaking the annual recurring revenue, particularly the software as a higher margin than some of the other lines of business now having said that is we've talked about in the past some of the software platforms really aren't to scale yet either so we would expect that.
There was a great opportunity for not only growth, but margin expansion as we get more scale in each of the SaaS offerings software that we've got.
Thank you.
Thank you.
At this time, we have no further questions. We will now turn the conference.
Milkshakes.
Great. Thank you operator.
We appreciate everybody's support and thoughtful questions today.
On the Investor Relations front I wanted to let everybody know that will be presenting at the 23rd Ano Oppenheimer technology Internet and Communications conference on August 12th.
Collier's Investor confidence on September 10th.
If you're participating in either conference. Please schedule a visit with US we would I appreciate the opportunity to talk to you in the meantime, we look forward to updating you again on our continued progress and we report on our fiscal 2021 second quarter results and with that will conclude today's call. Thank you.
Thank you enrolled Wolfram gentlemen, this concludes present pulse.
Disconnect.
[music].