Q3 2021 Iteris Inc Earnings Call
Mhm.
Good day, ladies and gentlemen, and welcome to the terrorists fiscal third quarter 2021 financial results Conference call. Today's conference is being recorded at this time of like turn the conference over to Todd Curly in KR Group. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for participating on today's conference call to discuss the terrorists and its financial results for its fiscal 2021 third quarter ended December 31, 2020, joining us today are on tariffs as president and CEO, Mr. Joe for share and the company's CFO Miss.
Sure Doug Groves.
Before we continue we'd like to remind all participants the during the course of this call. We may make forward looking statements regarding future events or the future performance of the company. These statements are based on current information are subject to change and are not guarantees of future performance the tariff.
This is undertaking its not undertaking and the obligation to provide updates to these forward looking statements on the future.
Actual results may differ materially from what is discussed today and no one should assume the at a later date the company's comments from today will still be balance.
Cash refers you to the documents of the company files from time to time with the SEC specifically the company's most recent forms 10-K, 10-Q on 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in the report.
The statements.
Like to remind everyone that you will find the supplementary report of our third quarter financial metrics and the webcast replay of today's call on the Investor Relations section of the company's website the terrorists dot com.
Now I'd like to turn the call over the Iqos as President and CEO Mr. Joe <unk>. Please proceed.
Great. Thanks, Todd and good afternoon, everyone.
Appreciate you joining us today.
As you saw at the close of the market, we issued a press release announcing our financial results of our fiscal third quarter ended December 31 2020.
Please bear in mind the effect of two recent transactions on the presentation of this period's results.
On May five 2020, we completed the sale of our agriculture and weather analytics segment, the DTA and I'll see therefore, 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 all of our continuing operations during the remainder of this call.
Firstly, we completed the acquisition of the assets of traffic cash international incorporated on disk.
A number seven on 2020.
Although the substantial portion of the acquisition costs were incurred in our December 31, 2020 period, the revenue impact for the stub period was minimal the.
The results for traffic cash commercial business, which is software is included in our transportation systems segment results and the results of traffic cash public sector of business, which is primarily Iot devices, including the roadway sensors segment.
Given the Doug will discuss the traffic cost accounting implications in more detail on a few minutes I'd like to now turn your attention to our third quarter highlights.
Our software enabled delivery model continued to demonstrate its resiliency in our third quarter. However, COVID-19 impacted the operations of some of our subcontractors. This led the milestone in revenue recognition delays on a couple of large projects in southern California in particular.
Similarly, the transportation systems segment experienced some timing issues that impacted our third quarter net bookings result of 26 million the.
Despite these issues, we reported $28 2 million in total revenue, representing a 5% increase compared to the same prior year period.
Our year to day total net bookings of $88 9 million represents a 3% year over year increase.
At the end of our third quarter of the Companys total ending backlog was a record $76 9 million, which is the 22% year over year increase and of 5% sequential increase.
The total ending backlog figure does include the addition of $13 2 million in backlog from the traffic cast acquisition all of our total ending backlog would have increased on a year over year basis without the traffic cast acquisition.
The combination of the company's continued growth and improved cost structure of following the strategic actions. We took on our first quarter drove a significant increase in adjusted EBITDA and net income even after the impact of the traffic cash acquisition costs.
Now, let me provide an overview of our third quarter sales and product performance by segment.
Our transportation systems segment recognized $14, one going in in the third quarter revenue, representing an 8% decrease versus the same prior year period as referenced earlier the decline in segment revenue was due to softness in subcontractor revenue stemming mostly from the Covid related delays on two very large projects and so.
Other in California, which is the only partially offset by the revenue contribution from the trough of cast acquisition.
At this time of the various projects are moving forward and we expect the segment to recoup the subcontractor revenue over the next couple of quarters.
During the third quarter of the segment's direct labor revenue in other words, our non subcontractor revenue was consistent with our expectations.
Similarly, the heightened COVID-19 restrictions led to some delays in a couple of large orders and impacted the segment's third quarter net bookings, which are reported as $6 8 million versus $13 million on the same prior year period.
About 43% of the segment's third quarter net bookings will be recognized in the future is annual recurring revenue that's up from 26% last year. As a reminder, we typically experienced the significant sequential decrease in the third quarter bookings due to the various seasonal factors therefore, the year over year comparison.
As the most relevant.
We had anticipated of potential year over year decline in bookings due to a relatively higher concentration of large orders in the period often affected by seasonality, but the abrupt re institution of Covid mitigation measures in parts of the U S exacerbated the situation, causing a larger fluctuation in net.
Bookings and expected.
That said the delayed orders have not been canceled and we expect to begin booking at least some of these orders originally contemplated for the third quarter as early as our fourth quarter.
Notable third quarter contract awards and our bookings in the period include of for your on call contract with an $8 million ceiling from Hillsborough County, Florida for specialized consulting and software as a service as.
As we receive future task orders under this contract the orders will be recorded as bookings, but they were not reported as such in the third quarter.
Our five year on call contract with the $5 million. So you won't hear from the Florida Department of Transportation District, seven per traffic signal of the timing and specialized consulting again against which will receive future task orders that will then be reported as bookings.
At $600000 task order from the Virginia Department of transportation to develop a strategy and roadmap for the Commonwealth to achieve connected and automated vehicle readiness.
And the contract with an undisclosed multiline insurance company for an undisclosed value to complete a proof of concept related to the use of our mobility intelligence software solutions to help determine auto insurance rates.
The transportation systems segment ended the quarter with the backlog of 64 million, which represents a 3% sequential increase and of 14% year over year of your increase the traffic cast acquisition contributed $9 4 million of backlog to the segment.
Now moving to our roadway sensors segment.
This segment reported record third quarter revenue of $14 1 million, which represents the 23% increase versus the same prior year period.
This rate of growth is well above the category of 6% to 8% historical growth rate demonstrating that we continue to take market share based on our superior product performance and customer support.
In addition to the strong revenue performance the roadway sensors segment made tangible progress against various other important initiatives. For example, the segment received an approximate $3 million contract to provide the Coachella Valley Association of governments of combined detection travel time and cellular vehicle to infrastructure.
Communication system there'll be booked and deployed over the next several quarters.
The segment continued to develop our Cisco relationship by among other things finalizing of new contractual mechanism fright terrorists provide cisco products, the Texas public agencies on preferable terms. The segment completed a successful pilot and launched the new managed service that utilizes process virtualization to continuously and proactive.
We monitor intersections on Arterials. The question of Vitaros advanced detection sensors and the segment continued to deliver against critical launch milestones for our next generation detection platform. The will include among other competitive new features high definition video and artificial intelligence for best in class object classification.
<unk>.
With that I'll, let Doug comment on our financial results after which I'll conclude my remarks.
Doug.
Thank you Joe 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 IR website for further description of matters under discussion during the call today.
As Joe noted the results of the agriculture and weather analytics segment are reported as discontinued operations on our SEC filings of the name of my comments will be focused only on our continuing operations. Likewise, the traffic has acquisition, which closed on December seven 2020.
Are included on our results for the quarter, albeit one month.
The business, which is all software is included on our transportation systems segment results on the public sector business, which is primarily Iot devices is included in our roadway sensors business results.
Consistent with the last several quarters' results, we've seen the performance of the business on the third quarter continued to improve with favorable year over year of trends in certain key metrics, including the top line growth increasing backlog and margin expansion.
We continue to diligently manage our costs, which is helping to drive the year over year operating margin expansion.
Now I'll move on to the details of the fourth quarter results.
Revenue for fiscal 2021 third quarter increased five 4% of $28 2 million.
For the $26 7 million in the same quarter a year ago.
Our gross margins in the third quarter were $41 four per cent compared to 39, 8% from the same quarter last year. The increase in gross margins was driven primarily by better product mix and increased volume in the roadway sensors segment.
Operating expenses on the third quarter were $12 million and flat compared to the prior year quarter.
As we mentioned on our second quarter earnings call were continuing to improve our profitability year over year and remains focused on solid execution to drive improved results. We reported a GAAP operating loss on the third quarter of 300000, which included 300000 and acquisition costs comparable to GAAP operating.
The loss of 1.35 million of in the same quarter a year ago the.
GAAP net loss from continuing operations on the third quarter was 261000 or a loss of <unk> <unk> per share.
Paired with a $1 million to $5 million loss or three cents loss.
Loss per share last year.
Adjusted EBITDA for the third quarter increased $1 million to $1 four of $5 million or five two per cent of revenue, which compares the 512000 of one 9% of revenue in the third quarter of last year.
Now, let me turn to our segment results.
Our transportation systems revenue from the third quarter was $14 1 million compared to $15 3 million in the prior year quarter, a decrease of 8% of.
Joe mentioned this segment was negatively impacted by temporary cohort of related supply chain and logistics issues that affected some of our subcontractors and led to project on revenue recognition of delays, particularly in southern California.
During the period of the segment's direct labor.
Revenue was consistent with our expectations.
The segment level operating income for the third quarter was $2 million and probably the key point 7 million from the prior year quarter and the related operating margins were 14% compared to $17 four per cent last year. The margin decrease was primarily driven by the decreased volume in the segment.
Our roadway sensors revenue the third quarter was $14 1 million compared to $11 4 million in the prior year quarter or an increase of 23% the.
Segment operating income was $2 7 million for the quarter compared the $1 5 million last year and the related operating margins were 19, 2% versus 13% last year. The improvement in margins was driven primarily by the increased volume and improved product mix.
Corporate expenses in the third quarter were $4 3 million compared to $5 2 million in the prior year.
Prior year period did include the 553000 and executive severance and transition charges.
Turning to liquidity and capital resources, the total cash and short term investments were $22 5 million at the end of the third quarter.
The decrease quarter over quarter and over prior year was the result of the $15 million payment made in closing the profit cast the acquisition.
We spent 283000 capital expenditures and capitalized software costs in the quarter.
These expenditures remain under 1% of revenue for the whole year, reflecting our asset light business model.
Operating cash flow from continuing operations was down 898000, compared to Q2 and was impacted by the <unk>.
Decreased profitability, but also of the timing of certain inventory and accounts payable activity.
We remain focused on improving our profitability and cash generation the fund our expected future growth.
So in summary, we're pleased to report another solid quarter performance along with the closing of traffic past the acquisition. Despite seeing some revenue impact from Q3 due to COVID-19, we remain focused on improving the business on vigorously managing our working capital on our cost structure to improve margins despite a difficult operating.
With that I will turn the call back over to Joe Joe.
Great. Thank you.
Doug.
Although we expect the economic environment to remain volatile and uncertain in the near term, we do expect our rate of revenue growth from the fourth quarter to increase compared to the rate of growth in our third quarter and we remain bullish about the long term prospects for the smart mobility infrastructure management market.
Indeed mobility of the service vehicle electrification of vehicle to infrastructure integration and connected and automated vehicles represent favorable secular trends will continue to shift the allocation of transportation infrastructure budget from traditional pick and shovel projects to advanced technology initiatives.
And then the same trends will foster new software enabled service delivery models that will continue to change our transportation agencies at all levels of government fulfill their missions.
Joe It's clear mobility platform is a key element of our strategy to capture these public sector opportunities and with the recent acquisition of traffic cash we've added intellectual property each of our clear mobility platform the positions us to address new commercial markets as well.
The traffic cash commercial line of business develop software the collects filters and models real time traveller information and traffic incident data for global media companies and other commercial customers.
Public sector of line of business provides sensors and related software that helps state and local agencies measure visualizing manage traffic flow.
We believe the acquisition of trap the cash will enhance our chances of leadership in the smart mobility infrastructure management market by among other things accelerating the development of our clear mobility platform.
On a related note, we recently announced the general availability of the initial release of our clear of mobility cloud, which is the mobility data management of engine API framework and micro services ecosystem for HRS is clear mobility platform.
The initial release of current mobility cloud includes the unified portal that enables users to access multiple HR software applications for easy navigation between modules within on terrorism clear guide transportation performance measure solution the <unk>.
The release of career mobility cloud also facilitates integration between clear Guy.
On the IRS open sourced advanced traffic management system.
From an operating perspective, both of our transportation systems and roadway sensors segments continue to experience healthy demand. Despite the overall economic environment and at this time, we believe <unk> has instituted appropriate measures to minimize the probability of direct disruptions to our business.
That said some of our revenue, especially associated with large multi element projects is dependent on the ability of third parties to navigate COVID-19, and recent history does suggest this will continue to represent a source of near term risk.
The total value of our transportation system sales pipeline is near historic highs. The other pipeline does have a higher than normal concentration of large sales opportunities.
The concentration suggests the segment will remain more susceptible than normal to some timing effects.
Some lumpiness.
Similarly, our roadway sensors segment continues to experience helped the order flow and an increase in the size of certain purchases, we recorded a $1 million plus of order from the city of Marino Valley of California, and our second quarter and as mentioned in my earlier remarks, we received an approximate $3 million award from the Coachella Valley Association of government.
And our third quarter.
This reward is yet to convert the bookings or recognized revenue.
In general the increase in the number of very large orders as a positive development, but it could cause of the roadway sensors segments of experienced some atypical of sequential fluctuations in revenue due to the timing of revenue recognition on such deals.
Notwithstanding our overall long term bullishness, we will continue to provide financial commentary on the one quarter at the time until the economic environment reestablish of some form of equilibrium.
And accordingly, our guidance commentary today will focus only on our fourth quarter.
That's where our fourth quarter, we are pleased to enter the period with the record backlog on an active sales pipeline, but our transportation systems segment. As I have said is of high degree of exposure to subcontractor revenue during the fourth quarter period, and an unusual prior year comparable of compounds that situation.
As you May recall, the transportation systems segment realized a significant revenue on contribution margin benefit in the prior fourth prior year fourth quarter due to the timing of certain project milestones.
Given the circumstances in front of of the transportation systems segment.
The high.
Closure to large deals and also the challenging comparable we expect the segment's revenue growth to be in the mid single digits in our fiscal 2021 fourth quarter due to our near term again, youre darn near term exposure to subcontractor revenue.
Whereas we expect the revenue growth for our roadway sensors segments of be in the mid teens.
This should result in total fourth quarter revenue for the company in the high single digits.
Please note that we are cautiously optimistic about a potential nationwide infrastructure investment initiative.
And our expectation regarding fourth quarter results does not assume or anticipate any such investment having an impact in our fiscal 2021 fourth quarter.
In terms of profitability, we anticipate the transportation systems segment reported a decrease in the year over year segment level of gross margin and operating income dollars due to the segment's current exposure to further of short term delays and subcontractor revenue and again the unusual prior year comparable.
However, we expect the roadway sensors segment reported an increase in year over year segment level of gross margin and operating income dollars as well as an expansion in both margin rates.
Corporate expense is expected to be in line with recent quarters.
Our total net income and adjusted EBITDA for the fourth quarter is likely to be similar to our third quarter results.
Now with that we'd be delighted to respond to your questions and comments operator do we have any questions. We do ladies and gentlemen, as a reminder to ask a question you may do so by pressing star one on your telephone keypad. Please make sure that mute function on your phone is turned off of the signal can be read by our equipment.
During the one for questions from a pause a moment to assemble the queue.
We will take our first question from Jeff Van <unk> with B Riley. Please go ahead.
Good afternoon everybody.
Maybe you can just talk a little bit more about the supply chain issues with some of the subcontractor was just I guess kind of what the nature of those are.
The status of the supply expected duration of it sounds like it's still going to be a headwind in Q4.
One of you would kind of expect those the law on the segment to resume of organic growth.
Yeah.
Yeah, Jeff.
The excellent questions and obviously, we're spending a lot of time thinking about those very things.
I don't want to comment on.
The specific operational issues of the specific company, so I'm going to talk in generalities here of that hopefully will provide some useful color.
In.
The.
Hi.
The.
Particular.
Projects that I talked about we have a.
Dependency on.
Some equipment, which is provided by third parties.
Some of this equipment is.
The signal controller of equipment and in the case of this particular company the.
Signal controller of equipment is actually manufactured outside of the United States.
And this.
Particular vendor.
Our experienced.
Four to six weeks during which manufacturing facility was shut down.
On the international manufacturing facility was shut down due to COVID-19.
They subsequently resumed manufacturing, but then the encountered issues.
Importing that equipment into the U S. There's a lot of people may be familiar there is a lot of backlog at a number of our ports right now.
And when the equipment was finally received.
Bye.
This customer the cause.
Customers are unable to take possession.
They had.
Recently, the this particular customer in southern California was being impacted by.
Some of the more aggressive mitigation measures of shelter in place measures were instituted by the state.
And so as a method of a particularly severe in southern California and impacted this agencies work force. So it's just a series of events that led to an approximate three months delay.
And prohibited us from proceeding to a critical milestone at which point, we would've been able to recognize revenue.
At this point the equipment has been shipped and I actually I believe it's been received I'm not sure whether we've cleared the technical milestone, but we would anticipate to do so shortly so that particular issue. We think we're going to get over and will put behind us, but what were trying to say here is that based on the.
Experienced in the third quarter and the fact that the overall environment hasn't changed a lot. We are anticipating that there could be other similar situations like this that might occur in the fourth quarter and therefore, we're taking a slightly more cautious note.
With respect to your question about when they expect us to lift.
No one has a crystal ball on these.
These questions are obviously being asked of many people, including all of our public health issue. The officials who would also say the this is a very dynamic environment, but I would hope.
Debt.
As we get into our first quarter, we will start to see some.
Higher degree of normalization in the broader economy and as a result, I would like to think that our business would begin to re normalized.
But obviously theres a lot that can happen between now and April one and we will be monitoring that closely but again, we do feel that in general with the availability of the vaccines.
On.
Some other measures that are being taken and not the least of which is potential additional stimulus.
We would expect to see things begin to resume some normalcy hopefully as early as our first quarter. The was more to report on that.
In March or April.
Okay, that's really helpful.
And then it's a good time to quit on mobility cloud from all of them I know you've talked about that during your analyst day, you talked a lot about the mobility day during the analyst day, and you spoke to the cloud launch in the prepared comments today.
It's more about the kind of partners that you're aiming to bring on board of integrate with clear mobility cloud and also if you could remind the sort of the commercial opportunity there.
[laughter].
Yes, sure there are a number of different types of partners.
On one August partner would be.
Different data providers.
As we've talked about in the past we have a.
Quite mature partnership with your technology, which provides.
In particular of lot of connected vehicle data that we we use extensively.
The other potential sources of similar data.
And then there are sources of entirely different data.
Further enrich our overall dataset.
<unk>.
Some of these relationships are somewhat.
Not necessarily proprietary but theres some level of trade secret. So I don't want to get into discussing all of the various parties that were in conversations with them.
Because we think that you know our know how.
As a.
A competitive differentiator and we don't want to share that with the competition, but I would just say that there are certainly additional data providers that we would like to.
On develop relationships with and those data sources would be ingested and processed in career mobility cloud as today, we do with share technology data various agency data on some other third party datasets.
On another logical partner for us would be other application vendors as I mentioned on this call.
In the first release of career mobility cloud.
Certified.
On them out of the box integration with Iris, which is an open source commonly used ATM as.
<unk> operates in the cloud.
We would.
I expect that you can expect that we would likely be announcing on relationships.
With commercial other commercial software application vendors or integrations with other open source software applications, such as such as the IRS.
Yeah.
And then beyond that.
We are also interested in working with solution providers that can incorporate components of our clear mobility cloud into their own solution sets and so those potential partners would be.
Likely would be kind of like systems integrators or other traffic engineering traffic operations firms.
Yeah.
Okay great.
That was below the launch of ball or so I'll jump back into the queue. Thank you for taking my questions.
Of course, thanks, Joe.
We'll take our next question from Mike Latimore with Northland Capital markets. Please go ahead.
Great Hey, guys.
On all of the results of their solid profitability.
On the recurring revenue side of things can you kind of update us on.
What percentage of revenue was recurring in the December quarter.
And then.
On.
What should we think about traffic katz contributing to the <unk>.
Each quarter.
Doug you want to take that.
Yeah, Yeah. So.
Mike in the in the car.
Quarter, the recurring revenue was about 20% because we only on one month's worth of traffic cash revenue in our quarter.
Because of that business is almost 60% software recurring revenue, we expect that 20% to start moving towards you know the mid twenty's like 24% over the next.
Several quarters as we get them under our belt on their results and of our consolidated results. So it will you know increase in addition to the bookings that you know we've been recording of the last few quarters, which have been.
Heavily weighted to the annual recurring revenue.
So I think you know.
What we're expecting we're going to continue to grow that much faster than the top line.
As part of our overall strategy and improving the business model.
As far as of the run rate goes you know I think in our press release, we put out that they were doing a trailing 12 months of about $14 three.
Year on revenue.
Sure.
What kind of grow that as well.
Got it okay.
Then on the recurring piece of your business or the EBITDA margins on that similar to the overall business or the little you know little worse, because you're investing a little bit better how should we think of it just kind of EBIT margins on your recurring revenue.
So the.
The EBITDA margin is definitely well continue to improve with traffic as you know in the portfolio as as we've talked about I think in the past with investors are.
Related to SaaS platforms today are subscale.
And I.
Well the operating leverage.
Yeah, we're certainly expecting to see margin expansion with a.
Traffic cast and more recurring revenue.
Got it got it great.
And then I guess just last one.
You know well will you be able to over time.
Bundle some of your hardware sales.
Into the maybe larger deals or I guess small city of deals too and the.
Then you know could that become a part of recurring revenue.
Well, that's absolutely our strategy when we think about the platform the claim.
The only platform that that's you know all of the products and services that we offer and you know we've got several initiatives underway to you know go to market I'll say more of as one company than maybe we had been in the past so.
Right.
<unk> revenue is by definition are not recurring but the services that will go along with it and they were able to bundle certainly well. So that's going to be you know part of what we're doing.
Doing well.
Going forward.
Okay.
What.
Okay.
Our weighted for questions. We will take our next question from Joshua Osha with JMP Securities. Please go ahead.
Hello, everybody.
Hi, Joe Hi, Joe.
Alright.
The two relatively simple financial questions and then the product question.
The kind of talked around this but like can you just help us understand.
What the non traffic cast organic rate of growth for the business in aggregate was in the December quarter. If you wanted to talk about that sequentially or year on year. It's fine I'm just trying to I think I can keep debt number out but it would be the easier to just do the accident.
Sure so.
Year over year are in the 5% growth a little less than half of that was.
Traffic cash related revenue, because we only had them for one month so it will.
Well, it's disclosed in our 10-Q it was about $800000.
Alright, okay. So the about half of debt year on year growth comes from the the one month of of traffic yes.
Right.
Okay, and then looking into the March quarter on.
Is there a decent amount of buy one year already that we can just take that December traffic cash number and sort of multiply it by three to get a sense as to how that's impacting the March quarter.
No. We I mean, we think it's going to do a little better I mean, the good thing about the business as you know about half of it is software and SaaS revenue. So it's really pretty much straight line, but the hardware of the Iot devices, just like our hardware business can be a little bit lumpy with you know of.
The big orders swing in any given quarter. So I think we're going to do a little bit better you know the first month under our ownership.
We're getting to know them, they're getting to know us. So we would expect the fourth quarter revenue to do better than just a straight line of the one month we had.
Our third quarter.
Okay and by hardware that the traffic cast hardware component was all right.
Exactly correct.
I like the name.
And then just to help us understand a little bit of the at the operating level.
How should we be thinking Oh, yeah, you're you're on.
SG&A and R&D 10.1, and one four in the December quarter, I mean, the DAC.
To what extent is there.
At a reasonable bogie per our run rate going forward for the wine items.
Well I think it is I mean, you know that's moving in our comments and you know it was flat year over year, and that's really none of our objective. So you know what I mean I.
I would expect R&D to probably reach about 5% of revenues on an annualized basis, but we should be able to keep SG&A close to you know what it has been running.
Well, you're down you're in Europe, because the drops of business out I mean, there's a lot of puts and takes you of that that's why I'm asking the question of last year. It was $14. One so I'm just trying to understand what the what that run rate is going forward.
The it's about what it would be you know that we experienced in the third quarter.
Okay alright. Thanks.
Alright, Okay. Thanks, and then the last question is just shifting to the technology side, you talked about you're in other other platforms there.
Enormous proliferation of the.
Data aggregation platforms out there at this point you know you've got you have.
Not just the year end an index, but you know.
Some of the orbital folks of.
<unk> got the expiry of planet orbital insights all of the stuff.
Have you thought at all about.
Maybe kind of broadening the the funnel in terms of the type of of dataset that you've taken of death.
Yes.
We have now that's not to say the.
We.
Our.
Hi.
Stepping back from our relationship with here I mean here is a fantastic partner.
We utilize both of their mapping technology and in the house will provide.
Credibly valuable data to us and we expect to continue to collaborate closely but to your point Joe there are various data providers and we think the part of our secret sauce is is getting the best data from the.
The best sources.
And then aggregating that.
Applying our domain knowledge to present.
<unk> insights to our end customers. So we're very focused on getting the best possible.
The data again to benefit.
The are larger dataset like Theres, no one provider and our.
In our opinion the that has access to all of the data and of course.
We have access of our own effectively proprietary data through our own detection products as well. So I don't I don't want people to lose sight of that but again, we're very focused on getting the most robust datasets possible. We think that we're uniquely able to do that because of our domain expertise.
Our.
One position at the intersection and in a number of cases, our trusted advisor relationship with agencies through which we're able to get.
Access to data and it's not necessarily proprietary because agencies.
And the business of providing the public with information, but our know how we think is unique and therefore, we think that the resulting aggregate datasets are datasets are unique and therefore more valuable than what other data platforms or either of them able to provide.
Okay. Thank you that's interesting inside of all why I'll jump off thanks again.
Sure.
We'll take our next question from Mike Szeliski of colors Securities. Please go ahead.
Good afternoon.
Hum.
Kind of wanted to start by asking.
Asking about the kind of medium and long term outlook here.
Given what's happened in this quarter on what may happen in the fiscal fourth quarter. I mean is there any sense as to whether the.
The longer term outlook for lets say the next fiscal year.
<unk> been saying you can get you know of mid teens organic growth most of the time is that is.
Is that is that number of at risk you still feel Joe you can get that of course, if it doesn't get any worse from here.
Yes, something like that.
It's a tough question to answer and we've been very intentional I just talking.
The one quarter at a time of about one quarter at a time, because I mean, nobody has a clue.
Crystal ball and we continue to be amazed at the pace of change in the you know the.
Extremes of the gyrations that we seem to be going through.
From week to week, and even sometimes day to day, so it's super Super hard to predict but I would say that there are some things that you know we were monitoring and one is for example state budgets.
And there's been a lot of research lately, which is generally consistent with what I think you know.
We talked about.
And to some degree at our Investor Conference, which is the state budgets.
Actually no.
The revenue is coming closer to expectations.
And then most states predicted in actually a number of states, including California. For example, which is probably our largest market is expected to have a revenue surplus this year.
So.
The things are.
Not at least of the state level or probably not as dire as people had expected and in also.
Being focused on the transportation infrastructure market benefit from having dedicated.
<unk> of revenue.
The cannot be redirected under most state.
No.
La <unk>.
And so you know.
We're.
We're cautiously optimistic.
About next year.
You know given where things stand in terms of the current.
Budget situation and the current outlook.
But of course the.
Market is the highway or the environment is highly unpredictable and we will certainly know more in March than we know today.
Alright.
And I also wanted to get a little.
More information about what you called.
I think they were called the awards that aren't actually being called bookings of backlog right now because you have to be conscious of that you've mentioned in your prepared comments.
Right I guess, that's fine that's the kind of like figure out.
Is that kind of I havent heard that happened too many times with the parents here so is that kind of thing.
And then.
Is this ultimately going to end up being backlog of all of it or does it kind of get booked and burned in the same quarter of.
The more.
You know short term debt other kinds of business of you on that you kind of deal.
Yeah. So yeah, we don't get a ton of these contracts, we do you might recall debt.
In the past, we've talked about our federal Highway administration contract or we maintain the connected vehicle reference architecture for the United States and we will get awarded large indefinite delivery indefinite quantity contracts on sport that program and then there'll be subsequent task orders against that so we have no.
<unk> talked about those contract awards and then the subsequent task orders, but at the state level, it's actually pretty unusual for us to win such large in this case, Florida cause them on call contracts, but they're essentially indefinite delivery indefinite quantity contracts and we don't get many of those at the state level. So that was.
On what unique and we thought it was noteworthy that we were awarded you know between the two contracts $8 million.
On on call Con.
The contracts.
You know from the state and yes goes we would expect that the full 8 million will eventually convert to a formal order will become the booking and then you know.
It will go into our backlog and eventually it will convert to revenue.
On the contracts of different periods.
Two of them, but I do want to point out that they are both multi year contracts.
Okay. So so you you spent the time coffey.
Got the bit and got the award of it just doesn't it just can't officially put into your backlog.
Not yet.
I'm not showing up yet, it's not showing up as the booking and it's not in our backlog at this point, but it is those are sizable deals, particularly at the state level and so we wanted to make sure that people understood that we did receive those awards, they're not in our reported bookings number or a backlog number for the December 31 period.
Got it and again just like in the well convert to revenue.
I guess I just have just trying to look at it from a.
Over the course of the prior year of the prior quarter that was probably a little of this type of.
Business last quarter and in the prior year is that correct.
That's correct yeah, Yeah, I mean, we tried to be very.
The explicit when it went on.
We differentiate between awards and task orders or bookings.
And the only notable.
Q that we've recently announced as was the the FH.
H W. A contract extension.
Occasionally we'll also win similar contracts in Texas, but we haven't done so recently.
And you know the two deals in Florida, We thought were notable on and we wanted to make sure of that people were aware that we had one of those awards.
Got it okay.
I will leave it there from now thanks, so much Joe.
Sure. Thank you.
As a reminder, star one for questions or comments Star one please.
We'll take our next question from Ryan signal.
Great volume capital Group. Please go ahead.
Good afternoon guys.
One follow up from me here is so based on the the segment guidance you gave kind of mid teens growth per sensors mid single digits systems does that include the trough of cast acquisition.
Yes, it does.
So if I assume kind of the 14 million.
Break that down by quarter, it implies negative low single digit organic growth in Q4 is that correct.
On the on the base business, we're expecting it to be you know about flat.
<unk>.
And maybe possibly down just depending on timing on a couple of big orders that were working on.
Gotcha.
And then.
Ryan and Ryan just two here.
Brian just as a reminder, too I mean, we've got a couple of things that are working against US in this particular period, one is that the overall environment, which we've talked about but also I just wanted to.
Read state that we have a very unusual comparable.
Due to the.
A sizable amount of.
Revenue recognition, which occurred in the prior fourth quarter.
And that was due to simply to the timing on a number of large projects.
We ended up hitting milestones and.
Therefore, these are fixed price fixed time fixed price deals and so we ended up taking all of that revenue in the period and also recognizing all of that contribution margin. There was no expense associated with that revenue in the prior year. So we have the very unusual comparable I just want to make sure of but I understand that.
Alright, Thanks, guys. That's it for me.
Star one of my questions, well pause a moment to assemble the queue.
[noise]. It appears there are no further question of the queue I'll turn the conference back to Joe pagan for any additional or closing remarks.
[noise] Super.
I appreciate that off operator, thank you very much.
We appreciate everybody's support and the thoughtful questions. It seems a very complicated period.
And.
We've done our best to try to explain the puts and takes in the answered various questions.
Always happy to take additional questions from investors and so we encourage people to reach out to us anytime if you have specific questions.
Additionally, I wanted to note debt.
We'll be presenting of the JMP Securities Technology Conference taking place from March one through March 2nd.
And if you are participating at that conference that's a great opportunity to schedule a visit with us and we hope to hear from you.
In the meantime, we're continuing the work very hard through this.
The dynamic period, and we look forward to updating you again on our continued progress when we reported our fiscal 2021 fourth quarter and our full year results and with that we'll conclude today's call. Thank you again everyone.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
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