Q3 2024 Iteris Inc Earnings Call

Good day and welcome to the eye terrorists fiscal third quarter 2024 financial results Conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. Please note. This event is being recorded I would now.

Operator: Good day, and welcome to the Iteris Fiscal Third Quarter 2024 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode.

Operator: And we will open the floor for your questions and comments after the presentation. Please note this event. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Iteris Inc. Thank you, operator.

I'd like to turn the conference over to Todd Carley of MTR Investor Relations. Please go ahead Sir.

Thank you operator, good afternoon, everyone and thank you for participating in today's conference call to discuss the terraces financial results for its fiscal 2024 third quarter ending December 31 2023.

Todd Kehrli: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris's financial results for its fiscal 2024 third quarter ending December 31, 2023. Joining us today are Iteris's president and CEO, Mr. Joe Bergera, and the company's CFO, Mr. Kerry Sheba. Following the remarks, we'll open the call for questions from the companies covering CellSide Analyst. Then we will answer investor questions, if any, that were submitted to the company in advance of the call for the instructions in our press release dated January 25, 2024. Before we continue, I'd like to remind all participants that during the call, we may make forward-looking statements regarding future events or the future performance of the company, which statements are based on current information, are subject to change, and are not guarantees of future performance. Iteris is not undertaking an obligation to provide updates to these forward-looking statements in the future.

Joining us today are terrorists as president and CEO, Mr. Joe <unk> and the company's CFO, Mr. Kerry Shiba.

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

Then we will answer investor questions. If any that were submitted to the company in advance of the call put their instructions in our press release dated January 25th 2024.

Before we continue I'd like to remind all participants that during the call. We may make forward looking statements regarding future events or the future performance of the company.

Which statements are based on current information are subject to change and are not guarantees of future performance.

<unk> is not undertaking an obligation to provide updates to these forward looking statements in the future.

Todd Kehrli: Actual results may differ substantially from what is discussed today, and no one should assume that at a later date the company's comments from today will still be valid. Iteris refers you to the documents that the company files from time to time with the SEC, specifically the company's most recent forms 10-K, 10-Q, and 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. As always, you'll find a webcast replay of today's call on the investor section of the company's website at www.iteris.com. Now, I'd like to turn the call over to Iteris's President and CEO, Mr. Joe Bergera. Joe, please proceed.

Actual results may differ substantially from what is discussed today and no one should assume that at a later date the company's comments from today will still be valid.

Hi terrorist refers you to the documents the company files from time to time with the SEC specifically the company's most recent forms 10-K, 10-Q, and 8-K, which contain and identify important risk factors that could.

Could cause actual results to differ materially from those that are contained in any of the forward looking statements.

As always you'll find a webcast replay of today's call on the investors section of the company's website at Www Dot I terrorists dotcom.

Now I'd like to turn the call over day tariffs as President and CEO, Mr. Joe <unk> Joe. Please proceed.

Joe Bergera: Great. Thank you, Todd, and a good afternoon to everyone. I appreciate all of you joining us today to learn more about the company's significant progress. As a reminder, the concentration of holidays and inclement weather depressed third and fourth quarter sales relative to our first and second quarters. However, in fiscal 2023, supply chain constraints pushed product shipments from our fiscal 2023 first half to our fiscal 2023 second half, inverting normal seasonality and creating an unusual prior period comparison. Therefore, I'll reference both our third quarter and our nine-month results throughout today's prepared remarks to adjust for some distortions in the prior period comparison. Iteris reported total revenue in our fiscal 2024 third quarter of $42.1 million and first nine months of $129.2 million, representing an increase of 4% and 14% year-over-year, respectively.

Great. Thank you Todd and good afternoon to everyone.

I appreciate all of you joining us today to learn more about the company's significant progress.

As a reminder, the concentration of holidays and inclement weather depressed third and fourth quarter sales relative to our first and second quarters. However in fiscal 2023 supply chain constraints pushed product shipments from our fiscal 2023 first half two.

Our fiscal 2023 second half inverting normal seasonality and creating unusual prior period comparisons.

Therefore, I'll reference both our third quarter and our nine months results throughout today's prepared remarks to adjust for some distortions in the prior period comparisons.

<unk> reported total revenue in our fiscal 2020 for third quarter of $42 1 million in first nine months of $129 2 million, representing an increase of 4% and 14% year over year, respectively.

Joe Bergera: Due to the improvement in our supply chain position and the higher volume, we also experienced an increase in gross margin in the fiscal 2024 third quarter and nine months of 780 basis points and 1,250 basis points, respectively. In turn, our fiscal third quarter adjusted EBITDA of $3.1 million and nine-month adjusted EBITDA of $10 million improved $3.5 million and $18.1 million, respectively. In addition to the significant improvements in our income statement for the fiscal year to date, we continue to experience strong demand for a clear mobility platform. For example, our total qualified sales pipeline now exceeds $650 million, and our third quarter and year-to-date win rates were 66% and 67%, respectively. For context, a win rate of 66 to 67 percent is exceptional given there are often three or more bidders in any competitive procurement.

Due to the improvement in our supply chain position and a higher volume. We also experienced an increase in gross margin in the fiscal 2020 for third quarter and nine months of 780 basis points, and 1250 basis points year over year, respectively.

In turn our fiscal third quarter, adjusted EBITDA of $3 1 million and nine month, adjusted EBITDA of $10 million.

$3 5 million and $18 1 million year over year, respectively.

In addition to the significant improvements in our income statement for the fiscal year to date, we continue to experience strong demand for our clear mobility platform.

For example, our total qualified sales pipeline now exceed $650 million.

And our third quarter and year to date when rates were 66% 67% respectively.

As context, a win rate of 66% to 67% is exceptional given theyre, often three or more bidders in any competitive procurement.

Joe Bergera: Despite the high level of demand for a clear mobility platform, we did experience some bookings lumpiness, which is common in our industry, during our third quarter. These delays included an almost $10 million signal timing order originally expected to occur in the third quarter to push to the right. Last week, we did receive official notice from the agency of its intent to award this contract to Iteris, but the order and associated booking is now not expected to occur until late in our fourth quarter or early in the first quarter of our next fiscal year. Due to these customer delays, we recorded fiscal 2024 third-quarter total net bookings of $31.4 million, resulting in a total ending backlog of $113.3 million, which was up 1% year over year.

Despite the high level of demand for a clear mobility platform. We did experience some bookings lumpiness, which is common in our industry during our third quarter.

These delays included an almost $10 million signal timing order originally expected to occur in the third quarter that pushed to the right.

Last week, we did receive official notice from the agency of its intent to award this contract I tariffs, but the order and associated booking is now not expected to incur occur until late in our fourth quarter or early in the first quarter of our next fiscal year.

Due to these customer delays, we recorded fiscal 2024 third quarter total net bookings of $31 4 million, resulting in total ending backlog of $113 3 million, which was up 1% year over year.

Joe Bergera: Based on our expected fourth-quarter bookings forecast, which includes some orders that were previously forecast to occur in our fiscal 2024 third quarter, we expect fiscal 2024 fourth-quarter bookings to reflect significant sequential and year-over-year bookings growth. In turn, this will drive further improvements in our total ending backlog. As a reminder, our reported net bookings are comprised of firm customer orders, meaning net bookings represent only a portion of the total value of all contracts in hand. Historically, total contract value averages about 200% of our total ending backlog. Based on this math, total contract value as of December 31, 2023, was approximately $225 million, despite the softness and third quarter netbook.

Based on our expected fourth quarter bookings forecast that includes some orders that were previously forecast to occur in our fiscal 2020 for third quarter. We expect fiscal 2020 for fourth quarter bookings to reflect significant sequential and year over year bookings growth.

In turn this will drive further improvements in our total ending backlog.

As a reminder, our reported net bookings are comprised of firm customer orders, meaning net bookings represent only a portion of the total value of all contracts in hand.

Historically total contract value averages about 200% of our total ending backlog based on this math total contract value as of December 31, 2023 was approximately 225 million. Despite the softness in third quarter net bookings.

Joe Bergera: Iteris Inc. To help you better understand our consolidated results, I'd like to share some details about the performance of our product portfolio. As noted previously, product revenue includes sales of our sensors, as well as certain third-party hardware. In fiscal 2024, third-quarter product revenue was $23.1 million, and nine-month product revenue was $70.2 million, representing a 1% and 17% increase year-over-year, respectively. As a reminder, these year-over-year comparisons are distorted by unusual prior period shipping patterns. In addition to our continued product revenue growth, we realized significant improvements in product gross margin as we move beyond last year's global supply chain issue. Our product gross margin in the fiscal 2024 third quarter was 43.9%, and in the first nine months it was 45.6%, representing a 1,380 and 2,500 basis point improvement year-over-year, respectively.

To help you better understand our consolidated results I'd like to share some details about the performance of our product portfolio.

As noted previously product revenue include sales of our sensors as well as certain third party hardware in fiscal 2024 third quarter product revenue was $23 1 million and nine months product revenue was $70 2 million, representing a 1% and 17% increase year over year, respectively.

As a reminder, these year over year comparisons are distorted by unusual prior period shipping patterns.

In addition to our continued product revenue growth, we realized significant improvements in product gross margin as we move beyond last year's global supply chain issues are.

Our product gross margin in the fiscal 2020 for third quarter was 43, 9% in first nine months was 45, 6%, representing a 1380 and 2500 basis point improvement year over year, respectively.

Despite some customer delays that occurred across our industry. We continue to win virtually every large scale intersection modernization initiative and the market leverage our leadership in video detection to penetrate adjacent categories, including the emerging cellular vehicle to everything our CVD.

Joe Bergera: Despite some customer delays that occurred across our industry, we continue to win virtually every large-scale intersection modernization initiative in the market, leverage our leadership in video detection to penetrate adjacent categories, including the emerging cellular vehicle-to-everything or CV-to-X category, and attach annual recurring revenue to our Vantage and Spectra connected vehicle sensors. To maintain this market leadership, we released important new capabilities in the fiscal 2024 third quarter that will continue to expand our qualified sales pipeline and drive above market growth rates going forward. For example, on December 6, 2024, we announced that Vantage Care is available with all Vantage sensors as a managed service. Vantage Care is a comprehensive program that helps transportation agencies optimize their Iteris traffic detection technology to improve overall intersection performance.

<unk> category and attach annual recurring revenue to our advantage and spectrum connected vehicle sensors.

To maintain this market leadership, we released important new capabilities in the fiscal 2024 third quarter that will continue to expand our qualified sales pipeline and drive above market growth rates going forward for.

For example on December six 2024, we announced the advantaged care is available with all vantage sensors as a managed service managed care is a comprehensive program that helps transportation agencies optimizer I terrorist traffic detection technology to improve overall intersection performance. We believe this program will.

Joe Bergera: We believe this program will help agencies better maximize their traffic detection investments and ensure more efficient, safe, and reliable travel through intersections. Then on December 31, 2024, I'm sorry, on December 13, 2024, we launched Vantage CV, which is an integrated detection and connected vehicle system for safe intersections. Vantage CV combines traffic detection, sailor vehicle-to-everything communication, and connected vehicle safety applications into a single system.

Help agencies, better maximize our traffic to tax investments and ensure more efficient safe and reliable travel through intersections.

Then on December 31, 2024, I'm sorry on December 13, 2024, we launched vantage TV, which is an integrated detection and connected vehicle system for safe intersections.

Vantage TV combined traffic detection cellular vehicle to everything communication and connected vehicles safety applications into a single system.

Joe Bergera: With this release, our VANTAGE Next and VANTAGE APEX product families will now support certain sensor fusion capabilities we developed in partnership with Continental AG, which we've talked about previously. Vantage Next and Vantage Apex will inherit additional sensor fusion capabilities in our fiscal 2024 fourth quarter. Now I'd like to provide some more color on our services portfolio, which includes our consulting services, managed services, software as a service, and data as a service office. We reported fiscal 2024 third-quarter service revenue of $19 million and nine-month service revenue of $59 million, representing a 7% and 10% increase year over year, respectively. Due to an improvement in our internal labor capacity in the fiscal 2024 third quarter, we also realized a 60 basis points improvement in our services gross margin. However, our nine-month services gross margin was 210 basis points below the same prior year period due to a particularly high mix of subcontract labor in our fiscal 2024 first half.

With this release, our vantage next and vantage apex product families will now support certain sensor fusion capabilities, we developed in partnership with Continental AG and which we've talked about previously.

Vantage next advantage apex will inherit additional sensor fusion capabilities and our fiscal 2020 for fourth quarter.

Now I'd like to provide some more color on our services portfolio, which includes our consulting services managed services software as a service and data as a service offers.

We reported fiscal 2024 third quarter service revenue of $19 million in nine months service revenue of $59 million, representing a 7% and 10% increase year over year, respectively.

Due to an improvement in our internal labor capacity in our fiscal 2020 for third quarter. We also realized a 60 basis points improvement in our services gross margin. However, our nine months services gross margin was 210 basis points below the same prior year period due to a particularly high mix of sub contract labor in our <unk>.

<unk> 2020 for first half.

Joe Bergera: As with our product portfolio, the demand for our services portfolio remains very strong, whether measured by our historic sales pipeline or our nine-month services net bookings of $70.6 million, which are up 19% year-over-year, despite the booking delays we encountered in our fiscal 2024 third quarter. To sustain strong demand for our services portfolio, we continue to introduce important new enhancements to our ClearMobility platform and extend the platform's ecosystem. For example, in the fiscal 2024 third quarter, we released Vantage Argus CV, a next-generation travel time and connected vehicle data collection and presentation system.

As with our product portfolio the demand for our services portfolio remains very strong whether measured by our historic sales pipeline or our nine months services' net bookings of $76 million, which are up 19% year over year. Despite the bookings delays we encountered in our fiscal 2024.

Third quarter.

This sustained strong demand for our services portfolio, we continued to introduce important new enhancements to our clear mobility platform and extend the platform's ecosystem.

For example in the fiscal 2020 for third quarter, we released vantage Rguest CV and next generation travel time and connected vehicle data collection and presentation system.

Joe Bergera: We also announced a new partnership with Arity, which is a mobility and data analytics company owned by the Allstate Corporation. This partnership further enriches our mobility data sets and improves our ability to address various new end markets. As a result of our significant traction in North America, we continue to experience inbound demand from various international markets, which we'll continue to evaluate opportunistically. For example, in the fiscal 2024 third quarter, we signed a contract to develop an intelligent transportation systems master plan for the metropolitan area of Cebu, which is a major domestic and international port in the Philippines.

We also announced a new partnership with <unk>, which is a mobility and data analytics company owned by the Allstate Corporation.

This partnership further enriches, our mobility datasets and improves our ability to address various new end markets.

As a result of our significant traction in North America, we continued to experience inbound demand from various international markets, which will continue to evaluate Opportunistically. For example in the fiscal 2020 for third quarter, we signed a contract to develop an intelligent transportation systems Master plan for the.

Metropolitan area of Cebu, which is our major domestic and international port in the Philippines.

Joe Bergera: In summary, we're pleased with our fiscal 2024 third quarter and first nine-month revenue, our gross margin, and adjusted EBITDA improvement. We continue to deliver against our clear mobility platform roadmap, and our commercial execution remained very strong, especially as measured by our qualified sales pipeline and competitive win rate. Therefore, we continue to believe our platform strategy will drive significant customer value resulting in sustained above-market growth rates going forward. So on that note, I'm going to pass the mic to Kerry to provide more color on our fiscal 24th third quarter and nine-month financial results, after which I'm going to come back, and I'll discuss our expectations for the fourth quarter and full year. Thanks, Joe. And good afternoon, everyone.

In summary, we're pleased with our fiscal 2020 for third quarter and first nine month revenue, our gross margin and adjusted EBITDA improvement.

We continue to deliver against our clear mobility platform Road map and our commercial execution remain very strong, especially as measured by our qualified sales pipeline and competitive win rate.

Therefore, we continue to believe our platform strategy will drive significant customer value, resulting in sustained above market growth rates going forward.

So on that note I'm going to pass the mic to Cary to provide more color on our fiscal 2000 and for third quarter and nine month financial results after which I'll come back and I'll discuss our expectations for the fourth quarter and full year.

Thanks, Joe and good afternoon, everyone.

Kerry Sheba: As you review our third-quarter results, I encourage you to consider Joe's comments regarding our nine-month revenue results in assessing the overall momentum of the business. You may recall that I talked about the seasonality dynamic on last quarter's call. Because Joe provided this context already on this call, I'll focus my current comments primarily on third quarter results. As Joe also described, we continue to make exciting commercial progress. I only want to underscore that our strength in the market continues to be demonstrated by strong double-digit revenue growth for the first nine months, a significant sales pipeline, and an expectation for a strong fourth quarter. Because Joe already addressed revenue results, I will move down the income statement to the gross profit line to expand some on the commentary Joe provided. As Joe noted, the impact of improved supply chain dynamics was reflected in our gross profit performance. For example, in the third quarter of fiscal 2023, i.e. Last year, we expensed about $3.9 million of negative purchase price variance, compared to only 400,000 in the current year.

As you review, our third quarter results I encourage you to consider Joe's comments regarding our nine months revenue results when assessing the overall momentum of the business you may recall that I talked about the seasonality dynamic on last quarter's call because Joe provided this context already on this call I'll focus.

My current common primarily on third quarter results.

As Joe also described we continue to make exciting commercial progress.

Only want to underscore that our strength in the market continues to be demonstrated by strong double digit revenue growth for the first nine months a significant sales pipeline.

And an expectation for strong fourth quarter bookings.

Because Joe already addressed revenue results I will move down the income statement to the gross profit line and expand some on the commentary Joe provided.

As Joe noted the impact of improved supply chain dynamics was reflected in our gross profit performance in the third quarter of fiscal 2023 last year, we expensed about $3 9 million of negative purchase price variance, which compares to only 400000 in the <unk>.

Current year third quarter.

Kerry Sheba: As you may recall, last year's negative purchase price variance... On a consolidated basis, fiscal 2024 third quarter consolidated gross profit reached $15.5 million, an improvement of 32% over last year. Products gross profit drove about 88% of the total improvement. Inc. Inc. Inc., while our services gross profit grew 9%. The product's gross profit growth basically reflects supply chain improvement, with the benefit of a 1% revenue growth offset by a slightly weaker product price. The service's gross profit improvement reflects higher sales, as well as a stronger labor mix resulting from increased internal labor capacity compared to last. Looking at gross margins. The third quarter of this year improved by 780 basis points, and the aggregate reached 36.9% in total. The increase was driven by a 1,380 basis point improvement for product, and was augmented by a 60-basis point increase for product gross margin was 43.9% for the current year's third quarter, and as I just mentioned, the benefit of having last year's negative cost impact, Supply Chain Issues Clearly Behind It, offset slightly by a Gross margin for services was 28.4% for the third quarter of this year, with the increase due to the improvement in the labor mix relative to the same period. Operating expenses in aggregate were 8% higher in the current year, third quarter, when compared to the same period last year, and 162 basis points higher measured as a percent of revenue.

As you May recall last year's negative purchase price variance resulted from aftermarket purchases with semiconductors and other electronics components.

On a consolidated basis fiscal 2024 third quarter consolidated gross profit reached $15 5 million an improvement of 32% over last year.

Products gross profit drove about 88% of the total improvement increasing 48%, while our services gross profit grew 9%.

The product's gross profit growth basically reflect supply chain improvement with a benefit of a 1% revenue growth offset by a slightly weaker product mix the.

Services gross profit improvement reflects higher sales as well as a stronger labor mix, resulting from increased internal labor capacity when compared to last year.

Looking at gross margins the third quarter of this year improved by 780 basis points in the aggregate, reaching 36, 9% in total the increase was driven by a 380 basis point improvement for products, which was augmented by a 60 basis point increase.

For services.

Product gross margin was 43, 9% for the current year third quarter and as I just mentioned the benefit of having last year's negative cost impact from supply chain issues clearly behind us was offset slightly by a weaker product mix.

Gross margin for services was 28, 4% for the third quarter of this year with the increase due to the improvement in labor mix relative to the same period last year.

Operating expenses in aggregate were 8% higher in the current year third quarter when compared to the same period last year, and 162 basis points higher measured as a percent of revenue.

Kerry Sheba: In general, prior year cost levels reflect very tight spending controls imposed in the midst of the supply chain. The current year increase was most significant in the research and development category and reflects increased activity focused on improving our software product. Sales and marketing expense also was higher due to increased commissions. G&A expense declined when compared to last year as lower salaries and wages costs and professional services cost declines were offset partially by higher litigation.

In general prior year cost levels reflect very tight spending controls imposed in the midst of the supply chain crisis.

The current year increase was most significant in the research and development category and reflects increased activity focused on improving our software products sale.

Sales and marketing expense also was higher due to increased commissions.

And G&A expense declined when compared to last year as lower salaries and wages cost and professional services cost declines were offset partially by higher litigation costs.

Kerry Sheba: The factors just discussed related to revenue, gross profit, and operating expense fundamentally explain the major comparisons between operating income, net income, and adjusted EBIT. As Joe mentioned, adjusted EBITDA was $3.1 million for the third quarter, an improvement of $3.5 million compared to the same period last year. This brings adjusted EBITDA to $10.0 million for the first nine months of fiscal 2024, a turnaround of $18.1 million. Total cash and cash equivalents at the end of the third quarter this year was $21.2 million, which was $11 million above the balance at the same time last year and $1 million higher than the balance at the end of last quarter. Cash flow for this year The third quarter included a variety of items, including $200,000 for share repurchases.

The factors just discussed related to revenue gross profit and operating expense fundamentally explain the major comparisons in operating income net income and adjusted EBITDA as Joe mentioned adjusted EBITDA was $3 1 million for the third quarter, an improvement of $3 $5 million.

Paired to the same period last year. This brings adjusted EBITDA to $10.1 million for the first nine months of fiscal 2020 for a turnaround of $18 1 million over last year.

Total cash and cash equivalents at the end of the third quarter of this year was $21 2 million, which was $11 million above the balance at the same time last year and $1 million higher than the balance at the end of last quarter cash.

Cash flow for this years.

Third quarter included a variety of items, including $200000 for share repurchases.

Kerry Sheba: $900,000 for capital investments, primarily in new software development, as well as $800,000 in fees related to a non-routine legal matter that we discussed on our prior earnings call. Finally, a $700,000 increase in. The improvement from last year continues to reflect the combination of higher income and strong balance sheet management. While cash trajectory can always be affected in the short term around balance sheet cutoffs, future Earnings Improvement and Good Balance Sheet Management. We provide the foundation for continued liquidity improvement going forward. All right, now we'll turn the call back over to Joe, who will discuss our fiscal... Great. Thank you, Kerry.

$900000 for capital investments, primarily in new software development as well as $800000 in fees related to non routine legal matter that we discussed on our prior earnings call and finally, a $700000 increase in inventories the.

The improvement from last year continues to reflect the combination of higher income and strong balance sheet management, while cash trajectory can always be affected in the short term around balance sheet cut off future earnings improvement and good balance sheet management provide the foundation for continued liquidity improvement going forward.

I now will turn the call back over to Joe who will discuss our fiscal 2024 guidance update and provide closing comments.

Great. Thank you Carrie.

Joe Bergera: The smart mobility infrastructure management market, in our opinion, represents a significant long-term opportunity due to historic federal funding that's been committed by Congress through 2026, but should have a multi-year funding tail as state and local agencies will continue to spend obligated funds well past the legislation's statutory end date. Additionally, technology trends that include the adoption of cloud infrastructure, artificial intelligence, and connected and autonomous vehicles will continue to drive significant investments from state and local governments, as well as various private sector entities. Given the breadth of our platform capabilities, significant brand equity, and extensive customer reach, we're very optimistic about Iteris' ability to capture a disproportionate share of this revenue stream. Iteris will continue to deliver against an aggressive fiscal 2024 roadmap with the following major releases in our fourth quarter. The release of a new, state-of-the-industry software as a service solution that will use both probe and infrastructure-based data sets to characterize and optimize the performance of individual intersections and entire transportation corridors.

The smart mobility infrastructure management market in our opinion represents a significant long term opportunity due to historic federal funding that's been committed by Congress through 2026, but should have a multiyear funding tail as state and local agencies will continue to spend obligated for.

<unk> well passed the legislation statutory end date.

Additionally, technology trends that include the adoption of cloud infrastructure artificial intelligence and connected and autonomous vehicles will continue to drive significant investments from state and local agencies as well as various private sector entities give.

Given the breadth of our platform capabilities significant brand equity and extensive customer reach we're very optimistic about <unk> ability to capture a disproportionate share of this revenue stream.

<unk> will continue to deliver against an aggressive fiscal 2024 road map with the following major releases in our fourth quarter.

The release of a new state of the industry software as a service solution will use both probe and infrastructure based datasets to characterize and optimize the performance of individual intersections and the entire transportation corridors. We believe this new solution, which can be provisioned dynamically will further expand our addressable.

Joe Bergera: We believe this new solution, which can be provisioned dynamically, will further expand our addressable market. Additionally, we believe the introduction of an integrated communication module to facilitate more efficient communication between our Vantage sensors and our ClearMobility cloud, which we expect to drive more VantageCare upsell revenue and accelerate the attach rate of ARR to our sensor install base. Third, the application of additional artificial intelligence capabilities at various levels of the ClearMobility platform will further enhance our ability to identify, verify, and predict certain transportation events.

Market.

Second the introduction of an integrated communication module to facilitate more efficient communication between our vantage sensors, and our clear mobility cloud, which we expect to drive more advantaged care upsell revenue and accelerate the attach rate of <unk> to our sensor installed base.

And third the application of additional artificial intelligence capabilities at various levels of the clear mobility platform that will further enhance our ability to identify verify and predict certain transportation events.

Joe Bergera: As noted in previous calls, we believe our fiscal 2024 release plan will continue to drive further adoption of the ClearMobility platform, increase our wallet share among existing customers, and improve the monetization of our expanding mobility dataset. Over the long term, we believe these dynamics will support an above-market rate of growth in our total bookings, as well as continue to increase the average size of individual bookings. In addition to focusing on our solutions portfolio, in the fiscal 2024 fourth quarter, we'll continue to pursue key operational priorities, including the productivity of our distributor network, the maturity of our customer success function, and internal labor capacity of our consulting team. As a reminder, the tactics outlined on our prior earnings call are already producing a measurable improvement year-to-date in our internal labor capacity.

As noted on previous calls we believe our fiscal 2024 release plan will continue to drive further adoption of clear mobility platform increase our wallet share among existing customers and improve the monetization of our expanding mobility datasets.

Over the long term, we believe these dynamics will support an above market rate of growth in our total bookings as well as continuing to increase the average size of individual bookings.

In addition to focusing on our solutions portfolio and the fiscal 2020 for fourth quarter, we will continue to pursue key operational priorities, including the productivity of our distributor network. The maturity of our customer success function and internal labor capacity of our consulting teams.

As a reminder, the tactics outlined on our prior the prior earnings call are already producing a measurable improvement year to date and our internal labor capacity.

Joe Bergera: Based on recent market feedback, we've also made an operational decision to continue to reduce our lead times to ship certain sensor product lines, which we've determined to be a significant point of competitive differentiation. Before I address our guidance, I want to reiterate that supply chain constraints in fiscal 2023 push product shipments from our fiscal 2023 first half to our fiscal 2023 second half, inverting normal seasonality and creating unusual prior period comparisons. Additionally, the fiscal 2024 third quarter bookings delays, which are only temporary, may shift some revenue recognition from our fiscal 2024 fourth quarter to the subsequent period.

Based on recent market feedback. We've also made an operational decision to continue to reduce our lead times to ship certain sensor product lines, which we determined to be a significant point of competitive differentiation.

Before I address our guidance I want to reiterate that supply chain constraints in fiscal 2023 pushed product shipments from our fiscal 2023 first half for our fiscal 2023 second half inverting normal seasonality and creating unusual prior period comparisons.

Additionally, the fiscal 2024 third quarter bookings delays, which are only temporary may shift some revenue recognition from our fiscal 2020 for fourth quarter to subsequent periods.

Joe Bergera: With this context, we're tightening our full-year revenue guidance to a range of $171 to $173 million, representing organic revenue growth of 10% at the midpoint of our range. We're reiterating our full-year adjusted EBITDA margin guidance of 7 to 9 percent, representing a significant improvement year-over-year, and we're adjusting our full-year net cash flow guidance to a range of $8 and $12 million This adjustment is due largely to a recent operational decision to build and maintain higher inventory to further reduce lead times to ship certain sensors, and also due to the timing of expenses for the unplanned litigation that we referenced on our prior earnings call. Despite the adjustment to our net cash flow guidance, the new range would represent a $17.1 million increase year-over-year at the midpoint. Looking beyond fiscal 2024, we believe Iteris remains on track to achieve our Vision 2027 targets.

With this context, we're tightening our full year revenue guidance to a range of $171 million to $173 million, representing organic revenue growth of 10% at the midpoint of our range. We're reiterating our full year adjusted EBITDA margin guidance of 7% to 9% representing a significant improvement.

Year over year, and we are adjusting our full year net cash flow guidance to a range of eight and $12 million. This adjustment is due largely to our recent operational decision to build and maintain higher inventory to further reduce lead times to ship certain sensors and also due to the timing of expenses.

For the unplanned litigation that we referenced on our prior earnings call.

Despite the adjustment to our net cash flow guidance, the new range would represent a $17 $1 million increase year over year at the midpoint.

Looking beyond fiscal 2024, we believe <unk> remains on track to achieve our vision 2027 targets in other words, we continue to estimate fiscal 2027 revenue in the range of $245 million to $265 million before any additional acquisitions. This represents a five year organic.

Joe Bergera: In other words, we continue to estimate fiscal 2027 revenue in the range of $245 million to $265 million before any additional acquisitions. This represents a five-year organic revenue CAGR of 13.7% at the midpoint, which I would point out is consistent with the average of our fiscal 2023 actual growth rate at the midpoint of our fiscal 2024 revenue range. With the substantial increase in revenue over the five-year period, we anticipate progressive benefits from economies of scale to result in fiscal 2027 adjusted EBITDA margins in the range of 16 to 19 percent. Additionally, we anticipate that further improvements in our liquidity will enable Iteris to resume its acquisition program, which would be additive to our Gann Act Vision 2027 target. So with that in mind, I would be delighted to respond to any questions and comments. And so I'll pass this back to you, operator. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. The confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your question.

<unk> CAGR of 13, 7% at the midpoint, which I would point out is consistent with the average of our fiscal 2023 actual growth rate in the mid point of our fiscal 2024 revenue range.

With this substantial increase in revenue over the five year period, we anticipate progressive benefits from economies of scale to result in fiscal 2027, adjusted EBITDA margins in the range of 17, excuse me, 16% to 19%.

Additionally, we anticipate that further improvements in our liquidity will enable <unk> to resume our acquisition program, which will be additive to organic vision 2027 targets.

So with that in mind, we'd be delighted to respond to any questions and comments so ill pass it back to you operator.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing star keys.

Jeff Van Sinderen: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 if you wish to ask a question. Hold while we poll for questions. This question today is coming from Jeff Vance. I'm B. Reilly. Jeff, your line is open. Hi, everyone.

Once again, please press star one if you wish to ask a question at this time, please hold while we poll for questions.

And the first question today is coming from Jeff Van <unk> from B Riley, Jeff Your line is live.

Hi, everyone.

Joe Bergera: Joe, the numbers you just gave are the FY27 targets. Did I get that right? The 245 to 265 in revenues and the 16 to 19 in EBITDA. Is that right?

Joe The numbers you just gave those were the FY 'twenty seven targets did I get that right. The 245 to $2 65 in revenues in the 16 to 19 in EBITDA is that correct. Yes, Okay. Just wanted to clarify that.

Joe Bergera: Correct. Yeah, correct. Okay. I just want to clarify that. And then maybe just kind of shifting and realizing there can always be things that kind of move around in bookings and so forth, just kind of the nature of the beast, but just kind of the best guess you have at this point as far as business mix in Q4. And then I don't know if Terry wants to weigh in on this, but consolidated gross margin that we might expect for Q4. And then, I guess any guidance you could give us for Q4 on OPEC. And realize you're not giving guidance on this, but maybe early thoughts on revenue growth, gross margin, and OPEX for the fiscal year that's about to begin. I realize there's a lot of questions packed in there. Joe, it's hard to keep track of all those questions within questions there. But I guess I'll just start off, and I'm going to pass it to Kerry.

And then maybe just kind of shifting and realize there can always be things that kind of move around in bookings and so forth just kind of the nature of the beast, but.

Just kind of best guess do you have at this point as far as business mix in Q4.

And then I don't know if Terry wants to weigh in on this but.

Consolidated gross margin.

That we might expect for Q4.

And then I.

Any guidance you can give us for Q4 on Opex and realize you're not giving guidance on this but maybe early thoughts.

On revenue growth gross margin opex for the fiscal year, that's about to begin realize theres a lot of questions packed in there.

Hey, Joe is like hard to keep track of all of those questions within questions Eric.

I guess I'll, just start off and I'm going to pass it to carry but I would say that we as I already mentioned.

Joe Bergera: But I would say that, as I already mentioned, in our industry, bookings tend to be very lumpy. Actually, as you recall, for the last several quarters, our bookings have fallen within a fairly small range, which has actually been very unusual. So the experience that we had in the third quarter is much more typical of what we'd expect to see across the industry. And there were a couple of large bookings that we didn't recognize, we didn't receive, and we didn't record in the December 31 period that will fall into the fourth quarter.

And our industry bookings tend to be very lumpy.

Actually as you'll recall for the last several quarters, our bookings have fallen within a fairly small range, which has actually been very unusual. So the experience that we had in the third quarter is much more typical of what we'd expect to see across the industry and there were a couple of large bookings, which we didn't recognize we didn't receive and didn't recur.

Cord in the December 31 period that will fall into the fourth quarter, one or two in EMEA also fall into the first quarter of our new fiscal year. So again, we're not going to provide any guidance, but we expect to have very strong bookings in both the fourth and the first quarter and I think it just talk at a really high level regarding mix.

Joe Bergera: One or two of them may also fall into the first quarter of our new fiscal year. So again, we're not going to provide any guidance, but we expect to have very strong bookings in both the fourth and the first quarter. And I think, just to talk at a really high level regarding mix, we would expect to see healthy bookings of both, you know, a services nature, and then also a product nature. And I'd further add that we would expect to see a lot of the services bookings to have a high annual recurring revenue content to them. But anyway, with that, I'm going to carry it, and if you don't mind, I'm going to pass it to you to respond to just kind of more specific financial questions. Sorry, go off mute.

We would expect to see healthy bookings both.

Our services nature, and then also our product nature.

And I would further add that we would expect to see a lot of the services bookings to have a high annual recurring revenue content to them.

But anyway with that I'm going to carry if you don't mind I'm going to pass it to you to respond to just kind of more specific financial questions.

Sorry come off mute.

Hi, Jeff.

For us.

I may have missed some of them. So repeat if I don't respond it's lumpy with regard to the gross margin expectation for the fourth quarter.

It should be stronger than what we saw in Q3, and I would say somewhere in the range of.

Kerry Sheba: Hi Jeff. And I may have missed some of them, so... If I don't respond to something with regard to the gross... Iteris Inc., and I would say somewhere in the range of The Bulletproof Executive 2013, of ours. I think he asked about... Spence, Guy Gillespie, Iteris Inc. And in the GNA category, I'd expect us to be, That's how we finish the year, we ought to be... The Bulletproof Executive 2013, That's the Also, by the time we see each other again next year.

Couple of hundred basis points improvement.

And I think we would expect for that to be primarily product mix, driven and then continued improvement of our.

Labor utilization.

Labor capacity utilization in contrast to.

Subcontractor labor, where we don't really get a markup on it.

I think he asked about some expense guidance.

And in the G&A category I would expect us to be.

By the time, we finish the year, we ought to be in the 13% to 15% of revenues range.

This would be.

Primarily normal inflationary increases and then.

That's the line item, where the litigation.

The unique litigation cost comes through.

Also by the time, we finished the year, we expect sales and marketing to be in the range of 14% to 15% of revenues and then R&D again.

It would be in the 5% to 7% of revenues.

Range for the entire year.

Kerry Sheba: Iteris Inc., and R&D again, back and back. Okay. Great. And then – sorry. Go ahead.

You'd have to come back and back calculate the fourth quarter itself, but that's.

That's how we would look at the year, finishing.

Finishing out.

Okay, Great and then.

Go ahead Joe.

Joe Bergera: Yeah. Joe, I was also just going to say before you left us, I was just reflecting on your initial question about our Vision 2027 targets, and I just wanted to confirm that the expected revenue range for our fiscal 27 would be between $245 and $265 million in revenue, and that's on a strictly organic basis. But I think you also made a reference to EBITDA, and I wanted to make sure that I was clear that, you know, our expectation would be EBITDA margins in the range of 16 to 19 percent as opposed to absolute EBITDA in the range of $16 to $19 million. I just wanted to make sure that that was very clear. Yes, yes, Okay. Thank you. Good point.

So just going to say before.

Leave us I was just reflecting on your initial question about our vision 2027 targets and I just wanted to confirm that.

<unk> revenue range in our fiscal 'twenty seven would be between 245 and 265 million in revenue and that's on a strictly organic basis, but I think you also made a reference to EBITDA and I wanted to make sure that I was clear that our expectation would be EBITDA margins in the range of 16% to 19%.

As opposed to absolute EBITDA in the range of $619 million I just wanted to make sure that was very clear yes, yes. Okay. Thank you good could point I'm glad you clarified that.

Joe Bergera: And then just any early thoughts – and again, I realize you're not giving guidance on this, but any early thoughts on the fiscal year that's about to begin in terms of – I know you spoke of sort of above-industry growth rates. Is the next fiscal year a year in which you think you will be running an above-industry growth rate? And then maybe, you know, should we anticipate gross margin improvement – further incremental gross margin improvement in the new year, and then leverage APEX to get to substantially higher adjusted EBITDA margins? So, Joe, we go through this every year, and I appreciate your tenacity, but, you know, we obviously don't want to provide fiscal 25 guidance at this point.

And then just any early thoughts and again I realize you're not giving guidance on this but any early thoughts on the fiscal year that's about to begin.

Terms of I know you spoke to sort of above industry growth rates.

Is the next fiscal year, a year in which you think you would be running an above industry growth rate and then maybe.

Should we anticipate gross margin improvement further incremental gross margin improvement.

In the new year, and then leverage on Opex to get to a substantially higher adjusted EBITDA margins.

So.

So we go through this every year and I appreciate your tenacity.

We don't provide fiscal 'twenty guidance at this point, we will certainly do that on our next earnings call.

Joe Bergera: We'll certainly do that on our next earnings call. But with respect to just kind of baseline on industry growth rates, I do want to remind everybody that, you know, we believe that historic, average growth rates in our industry are in the range of about 8 to 9 percent. And so I just want to be clear that even at the midpoint of our current guidance, which is 10 percent, we would be growing above growth rates. And again, the average growth rate between if you consider last year's actuals and the midpoint of our current range, you know, over the two years, we're averaging about 13.5 13.6 rate of revenue growth, which is, you know, more than 50% higher than the historical average growth rate. So I want to be very, very clear about that. But anyway, I think you're bigger...

But with respect to.

Just kind of base lining on kind of industry growth rates or do you want to remind everybody that we believe the historic.

Average growth rates in our in our industry are in the range of about 8% to 9% and so I just wanted to be clear that even at the midpoint of our current guidance, which is 10% we'd be growing above growth rates and again the average growth rate between lap if you consider last year's actual.

<unk> and.

Mid point of our current range.

Over the two years were averaging about $13 $513 six.

<unk> revenue growth, which is.

More than 50% higher than the historical average growth rate. So they want to be very very clear about that but but anyway I think the bigger the other part of your question is do you accept expect to see some kind of a step up and in your rate of growth in FY 'twenty five and again, we will go through our guidance on our next call but overall.

Joe Bergera: The other part of your question is, do you expect to see some kind of a step up in your rate of growth in FY25? And again, we'll go through our guidance on our next call, but overall, we feel very optimistic about our fourth quarter and first quarter bookings, which should set us up for some kind of a step up year over year in terms of our annual growth rate. Okay, great. That's really helpful. I appreciate you taking all my questions. I'll take the rest offline.

We feel very optimistic about our fourth quarter and first quarter bookings, which should set us up for some kind of a step up year over year in terms of our annual growth rate.

Okay, Great. That's really helpful. I appreciate you taking all my questions I'll take the rest offline. Thanks. Thanks, Jeff.

Joe Bergera: Thanks. Thanks, Jeff. Thank you. The next question is coming from Mike Landmoor from Northland Capital. All right, thanks. Yeah. Good to see the strong profits here. I guess on the fourth quarter bookings; it sounds like you're expecting strong bookings there. If this $10 million deal ends up in the first quarter, will you still see strong sequential growth? Yes, we would expect to have strong bookings in the fourth quarter regardless. And to be clear, it wasn't only that one order that split from the third quarter into the fourth quarter. There were actually a handful of relatively large ones.

Thank you. The next question is coming from Mike Latimore from Northland Capital markets. Mike Your line is live.

Alright, thanks, good to see the strong profits here.

I guess on the fourth quarter bookings it sounds it sounds like you're expecting strong bookings. There is this $10 million deal ends up in the first quarter will you still see strong sequential bookings.

Yes, we would expect to have strong bookings in the fourth quarter regardless.

Okay and to be clear it wasn't only that one order that slipped from the third quarter into the fourth quarter. They were actually a handful of relatively large ones.

Joe Bergera: That particular one is not only large, but we wanted to offer that additional commentary because it's very clear that we'd originally expected to receive that order in the December 31 period. And subsequently, we got the notice of intent to award even just last week. So I just thought it was a very specific thing that we could reference to help people understand how some of these things tend to slip; even a few weeks makes a big difference. But again, I want to be clear, that was not the only order that pushed from the third quarter into the fourth.

That particular, one is not only large but we wanted to offer that additional commentary because it's very clear that we had expected originally to receive that order in the December 31 period and then subsequently we got the notice of intent to award even just last week. So I just thought it was a very specific thing that we could reference to help people understand how so.

All of these things tend to slip even a few weeks makes a big difference, but again I want to be clear that was not the only order that pushed from the third quarter into the fourth.

Yes.

Joe Bergera: Yeah, okay, good. The pipeline sounds strong. I don't have a number from last year.

Yes.

The pipeline is strong.

I don't have a number from last year.

Joe Bergera: Do you know, like, is that up materially from last year, that $650 million pipeline? Yes, it'd be up substantially. And then on the Iteris Inc. service attach rate on the sensor deals. How is that trending?

Is that up materially from last year that $650 million pipeline yeah.

So you'd be up substantially.

Okay.

And then on the.

Service attach rate on the sensor deals how is that trending I wonder what are you seeing there.

Joe Bergera: What are you seeing? Yeah, it continues to be really strong. I don't have that number at hand, but I'd be happy to get it to you following the call.

Yes, it continues to be really strong.

I don't have that number at hand.

And I'd be happy to get it to you following the call, but my expectation is that it would be consistent with.

Joe Bergera: But my expectation is that it would be consistent with what we've been experiencing over the last couple quarters, which has been in the 20 to 30% range. Yeah, and then Is labor availability, Is labor availability loosening generally? It sounds like you guys are at least being able to hire internally, but what about just kind of among your subcontractors and customers and so on? Yeah, it's a good question.

What we've been experienced over the last couple of quarters, which has been in the.

20% to 30% range.

Yes.

And then.

Is the labor availability.

Is labor availability loosening generally it sounds like you guys are at least being able to hire internally, but what about just kind of among your subcontract periods in customers or.

Yes to your question so.

Joe Bergera: So, you know, as I talked about late on our last call, our impression is that, generally, the labor market does seem to be loosening. We had, for some period of time, had a very difficult time hiring software developers, for example. There have been a lot of publicized stories about big tech, small and medium-sized technology companies, in some cases, some reorganization, which has resulted in some job elimination, and also just kind of reducing their hiring plans. And that's certainly benefited us. We've definitely seen the availability of that kind of talent improve. However, the area where things still remain tight is traffic engineers, which is something we talked about previously. And if you look at USDOT's research, there's still a particular shortage of talent broadly in the transportation market, and then more specifically with respect to traffic engineers and civil engineers, because we're just simply not seeing as many people graduating from those programs today as we did 5 and 10 and 15 years ago. So you have more people, you know, competing for a relatively small pool.

As I talked about.

On our last call our impression is that generally the labor market does seem to be loosening.

We had for some period of time had a very difficult time hiring like software developers for example.

That.

A lot of publicized stories about.

Big Tech and <unk>.

Medium sized technology companies.

You read it.

In some cases, some reorganization, which has resulted in some job elimination and then also just kind of reducing their hiring plans and thats certainly benefited us we've definitely seen the availability of that kind of talent improve.

The area, where things still remain tight as traffic engineers, which thing we've talked about previously and if you look at the USDA Ts research.

There is still no particular shortage of talent broadly in the transportation market and then more specifically with respect to traffic engineers and civil engineers, because we're just simply not seeing as many people graduating from those programs today as we did five and 10 and 15 years ago. So you have more people.

Competing for a relatively small pool, but one of the things that we've.

Joe Bergera: But one of the things that we've introduced, which we talked about on a previous call, is various activities to try to source that kind of talent from international markets. And we're definitely finding that to be successful. And as I mentioned, I didn't go into a lot of detail, but we did see an improvement in our labor capacity in the December 31 period. And we have a very healthy pipeline of applicants, with, you know, we have obviously internal expectations in terms of how many of those we're going to be able to convert to new employees. And so our expectation is we'll continue to see an improvement in our labor capacity in the fourth and our first quarter and So to answer your question, in some respects, we see the market loosening; in other respects, we actually just think that certain tactics that we've you know undertaken are starting to bear fruit, and that's improving our position, even though I do think that the availability of traffic engineering talent, in particular, remains very tight. Okay, makes sense. Thanks very much.

Produce and we talked about on our prior call was.

Various activities to try to source that kind of talent from international markets.

And were definitely finding that to be successful.

And as I mentioned I didn't go into a lot of detail, but we did see an improvement in our labor capacity and the December 31 period, and we have a very healthy pipeline.

<unk>.

<unk>.

We have obviously internal expectations in terms of how many of those are going be able to convert to new employees and so our expectation is we'll continue to see an improvement in our labor capacity in our fourth in our first quarter and even beyond so.

So to answer your question in some respects, we see the market loosening in other respects, we actually just think it's certain tactics that we've.

Undertaken are starting to bear fruit and that's improving our position, even though I do think that that.

Availability of traffic engineering talent in particular remains very tight.

Okay makes sense.

Thanks very much.

Okay.

Operator: And once again, it is star number one if you wish to ask a question. And the next question is coming from Ryan Sigdahl on Craig Hallam. Ryan, you're live.

Thank you and once again it is star one if you wish to ask a question today.

And the next question is coming from Ryan Cig Dahl from of Craig Hallum Capital Group Ryan Your line is live.

Ryan Sigdahl: Hey, guys, good afternoon. Not to beat a dead horse here, but on the deferrals with the bookings, I guess, what's the underlying reason for the delays? Because I just went back many, many years and kind of skipped COVID years. But seems like there's always kind of some that slip through.

Hey, guys good afternoon.

Not to beat a dead horse here, but on the deferrals with the bookings I guess, what's the underlying reasons for the delays because I just went back many many years and kind of skeptical, but yours, but it seems like there is always kind of some of that slipped some that come in and it's usually pretty consistent from a booking standpoint quarter to quarter. So I guess I'm curious the underlying reasons.

Joe Bergera: And it's usually pretty consistent from a booking standpoint, quarter to quarter. So I guess, here's the underlying reasons. And then, second to that, any impact from kind of uncertainty with the federal government funding bill and getting the stopgap and not having a real permanent one yet. All right.

And second to that any impact from.

Kind of uncertainty with federal government funding, Bill and getting the stop gap, but not at a real permanent one yet.

Joe Bergera: Yeah, so, um, Ryan, I think that's kind of interesting, Ryan, because I don't think that we've historically reported enterprise-level bookings. I think that if you went back through prior periods, we did talk about our services bookings, but I'm not sure whether we provided a combined, like, consolidated bookings figure. So I think it might be hard for you to compare those things, but perhaps I'm wrong.

Yeah. So.

The.

That's kind of interesting Ryan because we I don't think that we've historically reported enterprise level bookings I think that if you went back through prior periods.

We did talk about our services bookings, but I'm not sure whether we provided at.

Combined our consolidated bookings figures, so I think it might be hard for you to compare those things, but perhaps I'm wrong.

Joe Bergera: But anyway, our internal view is that, particularly, you know, we've seen a high degree of variability in, like, our product bookings. It's associated with our sensor bookings and some of our third-party products. And so our experience in the December 31 period isn't really different from what we saw pre-COVID.

But anyway, our internal view is that particularly.

We've seen a high degree of variability and like our product bookings associated with our sensor bookings and some of our third party products.

And so our experience in the December 31 period isn't really different then.

What we saw pre COVID-19.

Joe Bergera: But anyway, as I said, there were a couple of large bookings that were delayed for various reasons. And, you know, because of their relative size, it had a big impact on the total number of bookings. You know, and there are very specific things that, you know, I won't belabor regarding each of those individual bookings, but I think your broader point is that some degree of budget uncertainty has had any sort of an impact. And I would say that, at the margins, it has. I mean, if I were to go, like, walk you through each individual instance, there are, again, particular things that happened.

But.

Anyway.

As I said there were a couple of large bookings.

Were delayed for various reasons and.

Because of their relative size it had a big impact on the total bookings number.

And they are very specific things that I won't belabor regarding each of those individual bookings, but I think to your broader point.

Is that some degree of budget uncertainty.

Has that had any sort of an impact and I would say that probably at the margins. It has I mean, if I were to go I heard it walk you through each individual <unk>.

<unk> there like a again particular things that occurred.

Joe Bergera: But, you know, if you try to distill that down to sort of what's happening, I'd say that, at the margins, there's a slight degree of hesitation at the state and local level as they're trying to understand, you know, what the federal budget landscape looks like. Again, state and local – if you look at the total amount of spending in the country, over 80 percent of it is coming from state and local revenue sources, so it's not like the federal government represents the majority of the funding.

But if you try to distill that down to sort of what's happening I would say that.

Okay.

The margins there is a slight degree of hesitation at the state and local level as they are trying to understand.

The federal budget landscape looks like again is state and if you look at the total amount of spending in the country over 80% of it is coming from state and local revenue sources. So it's not like it.

Government represents the majority of the funding, but that being said some of these state and local agencies not knowing what the status is of some of these federal funds.

Joe Bergera: With that being said, some of these state and local agencies not knowing what the status is of some of these federal funds can cause, you know, at the margins, some hesitation, and so we did see that. But I'd say that the bigger issue is – it really goes back to the staffing point that, you know, we talked about previously. It's simply that there is a shortage, generally, of transportation labor, and then, more specifically, traffic engineering, civil engineering, and talent, some of which would logically be playing program management roles for these various state and local agencies. And so what's kind of broadly happened is the federal government has increased the amount of federal funding substantially by 50, in some cases, depending on the specific, you know, category, as much as 100 percent from what the historical level But, you know, state and local agencies were not able to increase, you know, their employee base by, you know, 50 to 100 percent in order to be able to move all those funds through the pipeline.

That can cause.

The margins some hesitation and so we did see that but I'd say that the bigger issue is it really goes back to the staffing point that we talked about previously it's simply Theres a shortage generally transportation.

Labor and then more specifically traffic engineering Civil engineering talent, some of which would logically be planning program management roles for these various state and local agencies and so it is kind of broadly happened is the federal government increased the amount of federal funding substantially by.

50 in some cases, depending on the specific.

Category as much as 100% from what the historical level as Dan but.

State and local agencies were not able to increase their employee base by 50% to 100% in order to be able to move all of those funds through the pipeline and so you know that there are delays.

Joe Bergera: And so, you know, that there are delays, and to some degree, that has to do with uncertainty, but I think the bigger factor is, like, right now, there just aren't enough program management staff, most of whom would typically have traffic engineering backgrounds, to be able to program that funding and then distribute it to, you know, third parties like ITERIS. And so, you know, as much as the agencies are attempting to do that, we do continue to see that there are delays, and they sometimes are not able to deliver against their best estimates that they provide us in terms of when to expect orders. Joe, one other thing for Ryan as far as the unevenness or the lumpiness is concerned.

To some degree it has to do with the uncertainty, but I think the bigger factor is like right now there just aren't enough program management staff, most of whom would typically have traffic engineering background to be able to.

Program that funding and then distribute it.

Third parties like <unk> and so.

As much as the agencies are attempting to do that we do continue to see that there are delays in data, sometimes theyre not able to deliver against our best there.

Best.

Estimated they provide us in terms of when to expect orders.

Joe one other thing for Ryan as far as the unevenness over the Lumpiness in the bookings I think over time the company is.

Kerry Sheba: I think over time... The company has focused more and more on the large... Contract, and so as a result of just having a population, Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies, bound to be more violent. The Bulletproof Executive 2013, Let's focus on that. Agreed, Kerry. I appreciate you bringing that up

Focus more and more on the large.

Contract opportunities and so as a result of just having a population of.

Collection of all smaller deals there's.

I want to be more volatility based on the timing of these.

Specific large projects and as the company continues its focus on that end of the the opportunity scale. It's also going to result in some of the volatility quarter to quarter.

Great Kerry I appreciate you, bringing that up and Ryan that is something that we have.

Joe Bergera: And Ryan, that is something that we have talked about routinely on these calls, that as we focus more and more on some of these large deals, and we still have more exposure to a relatively small number of very large transactions, it is. We've tried to tell people that they should expect to see some degree of lumpiness, which occurred in the December 31 period. Yep, makes a lot of sense. It just hadn't been as evident until this quarter, but it makes sense.

<unk> talked about routinely on these calls that as we focus more and more on some of these large deals and we still have more exposure to relatively small number of very large transactions. It is.

We've tried to tell people that they should expect to see some degree of Lumpiness, which is what occurred in the December 31 period.

Yeah. It makes a lot of sense just had been as evident until this quarter, but it makes sense.

Joe Bergera: Switching over, curious about the Philippines, I guess, how that contract culminated, and what the international strategy is going forward for Iteris. Yeah, sure. So we've, as I mentioned, it kind of has to do broadly with just the amount of market visibility that we have in the North American market. And so to be clear, there isn't somebody in like Cebu, Philippines, that necessarily knew about us.

Switching over curious on so the Philippines, I guess, how that contract culminated and what the international strategy is going forward for the terrorists.

Yeah sure so we've.

As I mentioned.

It kind of has to do broadly with just the amount of market visibility that we have in the north American market and so.

To be clear, there isn't somebody and Mike Cebu, Philippines that necessarily knew about as bad what.

Joe Bergera: But what is happening is international development banks and global construction firms that operate on a worldwide basis. And obviously, like the World Bank, which is based in Washington, D.C., and other global construction firms that have a big presence in North America, we're on their radar screen. And so it's those entities that are bringing us into these kinds of opportunities. With respect to the Cebu opportunity, that is partially funded by the World Bank. And there's someone in Washington, D.C., aware of the work that we've been doing in North America, who approached us about this opportunity, and we thought it made strategic sense.

What is happening is <unk>.

International.

Development banks.

And and global construction firms.

That operate on a worldwide basis, and obviously like the World Bank, which is based in Washington D. C and other global construction firms that have a big presence in North America, where on their radar screen and so those entities that are bringing us into these kinds of opportunities with respect to the Cebu opportunity that is partially funded by the <unk>.

World Bank and.

That's.

There's someone in Washington D. C aware of the work that we've been doing in North America that approached us about this opportunity and we thought it made strategic sense.

Joe Bergera: And also, we're glad to help the Philippines. Good. Last one for me.

And also we're glad to help the Philippines.

Last one for me the Allstate partnership anything you can comment from I guess, <unk> financials or impact to terrorists.

Joe Bergera: The Allstate partnership. Anything you can comment on, I guess, the financials or impact on Iteris? Yeah, so that's an interesting partnership. We're obviously super excited about it.

Yeah. So.

It's an interesting.

Our partnership with soup, obviously super excited about it.

Joe Bergera: So in the initial phase, what we're doing is we're getting access to certain data sets that the Allstate company has. We, you know, we use that to enhance our analytics, supplement our own existing data sets. And actually, it is.

So in the initial phase what we're doing is we're getting access to certain data sets that the Allstate company has.

We will use that to enhance our analytics supplement our own existing data sets.

And.

Actually it's.

Ryan Sigdahl: Some of that data is critical to the probe-based SPM product. That's a product release that I mentioned is going to be available this quarter, actually, we're introducing to the market, and so the all-state relationship was essential to being able to launch that on time. Additionally, this relationship and the underlying data sets, we think, are going to provide access to other markets beyond the public sector, and as we've mentioned previously, some of those markets include the insurance sector. And we do believe that the combination of these various data sets, including the all-state or ARIDI data, in combination with some of our data science expertise and other domain knowledge will allow us to be able to package some of this data and produce insights that we think Thanks, guys. Good luck! Thanks. The next question is coming from Tim Moore from EFA. I'm here, Linus.

Some of that data is critical to that probe based SPM product. That's a product release that I mentioned is going to be.

Available this quarter actually we're introducing to the market and so that the Allstate relationship was essential to being able to launch out on time.

Additionally.

This relationship and the underlying datasets, we think is going to provide access to other markets beyond the public sector and as we've mentioned previously some of those markets include the insurance sector and we do believe that the combination of these various.

Datasets, including the all state or arity data in combination with some of our data science expertise and.

The other domain knowledge will allow us to be able to.

Package some of this data and produce insights that we think will have value again to various markets beyond the public sector, including insurance market.

Great. Thanks, guys. Good luck.

Yes.

Thank you. The next question is coming from Tim Mura from E. F. Hutton Tim Your line is live.

Tim Moore: Thanks, and half my prepared questions were already answered, but you know, I really kind of want to just delve in a little bit more to, What you're maybe noticing with customer conversion timing and their behavior and implementation, I'm just wondering, do you think it's a slower start to this calendar year, or do you think it's maybe because some of the agencies are taking longer because you're cross-selling them a larger ticket order value Oh, those are great questions. I do think, and we've tried to kind of make this point, maybe not very well. But, you know, as we pursue more and more of these large transactions, by definition, they're more complex. And to your point, Tim, you're right. Because being more complex, the evaluation process gets extended. So that is a phenomenon that's occurring, and it is impacting the business. So I think that that point is correct. Good That's helpful.

Thanks, and have my prepared questions already answered, but I really wanted to just delve in a little bit more to them.

What you may be noticing with customer conversion timing and their behavior and implementation I'm. Just wondering do you think it's a slower start to this calendar year or do you think it's maybe because some of the agencies are taking longer because they are cross selling them a larger ticket order value than you know a few years ago.

Oh those are great questions I do think in.

We tried to kind of.

At this point, maybe not very well, but you know as.

As we do pursue more and more of these large transactions by definition, they're more complex.

And to your point, Tim you're right.

Being more complex the evaluation process gets extended.

And.

So that that that is a phenomenon that is occurring and it is impacting.

The business. So I think at that point is correct.

That's helpful.

Joe Bergera: And, you know, Kerry started addressing some of my next questions earlier, and I know, Joe, you mentioned the traffic engineer shortage. But, you know, something I've always kind of watched you guys and just having been on the buy side, knowing that, you know, outsourced labor and subcontractors are usually a margin drag, but you guys have been making great progress on that. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional in both the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., a member of FINRA, SIPC, MSRB, NFA, and SIFMA. Accounts are carried by National Financial Services, LLC. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com.

Kerry started adjusting.

So my next question earlier, and I know, Joe you mentioned, the traffic engineers shortage, but.

That's something I've always kind of watched you and just having been on the buy side knowing.

Outsourced labor and subcontractors and usually a margin drag, but you guys have been making great progress on that.

Consulting labor capacity.

I know it was a drag.

Last winter than even the spring this year on your gross margin but.

Any way to just ballpark or give us a rough estimate of maybe what inning, you're in or percentage wise that maybe getting fulfilled with the internal consultant talent development that we're working on you know you always can have some subcontractor.

Every quarter, but just maybe are you like two thirds of the way there to be pretty happy and fulfilled on that or you think its another quarter or two to kind of nail that down and not need to be as reliant on a subcontract just yes.

Yeah, So I'll.

Kerry Sheba: Yeah, so I'll start and then Keir, maybe you can talk about it. And I guess the two points that I want to make. One is that, you know, we expect our consulting business to continue to grow, and as a result, we not only need to solve for the current labor capacity requirements but for future labor capacity requirements, right, as the business continues to scale. So therefore, this effort is going to continue for probably at least the next two to four quarters until I think we do get to a point where, hopefully, there will be some broader loosening in the labor market, and it will get a little bit easier. So you know, just to sort of manage expectations, I think we'll continue to talk about this for at least the next four quarters.

And then Karen maybe you can talk about it and I guess, the two points that I want to make one is it.

We expect our consulting business to continue to grow and as a result, we not only need to solve for the current labor capacity requirements, but for future labor capacity requirements right as the business continues to scale. So.

Therefore this is this effort is going to continue for probably at least the next two to four quarters until I think we do get to a point, where hopefully there'll be some broader loosening in the labor market and it will get a little bit easier. So.

Just to sort of manage expectations I think we'll continue to talk about this for at least the next four quarters, but the other bigger point that I want to make because when you look at our services gross margin the bigger opportunity.

Kerry Sheba: But the other bigger point that I want to make is when you look at our services gross margin, the bigger opportunity, you know, for material improvement is actually going to be as our software as a service and our data as a service revenue increases because the fixed costs for those services are fixed. And you know, we expect to see significant cost leverage as we add every sort of incremental million dollars in SAS and DAS revenue. And so that's what's going to really drive a change in our services gross margins. But Kerry, I don't know if you want to add anything additional. I don't think so.

For material improvement is actually going to be.

As you know our software as a service and our data as a service revenue increases because the fixed costs for those services are fixed.

And we expect to see significant cost leverage now as we add every sort of incremental million dollars and SaaS and daas revenue and so that's what's going to really drive a change in our services gross margins.

Gary I don't know if you want to add anything additional.

I don't think so I think your comment that you just offered on the SaaS businesses.

Joe Bergera: I think, you know, your comment that you just offered on the SAS, probably the most important one with regard to the, The Bulletproof Executive 2013, The labor capacity, the internal labor capacity. I would agree with Joe, this is going to be an ongoing effort. I think it's going to be an ongoing effort. There's going to be some investment in these people up front, so they're not going to hit the ground running.

Probably the most important one with regard to future trajectory of.

Margin growth on the services business.

The labor capacity internal labor capacity I would agree with Joe This is going to be an ongoing effort and.

Aye.

It's going to be an effort that continues.

Throughout probably at least the next four quarters before we can say we've reached a point where we're more.

More satisfied with the staff travel that work.

Gonna be some investment in these people upfront also Tim so theyre not going to hit the ground.

Joe Bergera: Iteris Inc., Productivity is, you know, they will be after they've had it. Iteris Inc., nonetheless, is that even at the beginning is your Subcontent. Thanks for that timing update on the talent development; that's really good. I know I asked about that a couple quarters ago, but this is a really helpful update, and it's a great reminder, I think for my... So my last question is really around the acquisitions update and, you know, the final update and just related to, you know, the international growth comments kind of given earlier today in the Philippines. Do you think that, you know, the target to do any acquisitions is still going to be solely in the United States in the near term? So, I'll start out by saying we're only looking at international opportunities opportunistically, you know, as I said, or situationally.

With as much.

Productivity is they will be after they've had a little bit of time under their belt with us, but nonetheless is that even at the beginning as youre displacing subcontractor labor, that's still going to be some margin upside for us there.

Thanks for that timing update on the talent development, that's really good.

Asked about that a couple of quarters ago, but this is really helpful update and it's a great reminder of incremental.

Gas margin mix I mean, because it's such a step up incremental margin almost a hockey stick as you get to the operating scale and ramping is there.

My last question is really around the acquisitions out.

The final update and just related to you know the international growth comments kind of gave earlier today in the Philippines.

Do you think that the targets are doing acquisitions, and you're still going to be solely in the United States near term.

So I'll start out by saying, we're only looking at international.

Opportunities Opportunistically.

As I said are situationally, it's not to say that we wouldn't ever do an international acquisition that if the opportunity in front of us in the North American market is so substantial that that's really what we're focused on in most all of the acquisition opportunities where they are currently on our radar in North America.

Joe Bergera: It's not to say that we would never do an international acquisition, but the opportunity in front of us in the North American market is so substantial that that's really what we're focused on, and most of the acquisition opportunities were, you know, they're currently on our radar in North America. Carey, I don't know if you want to offer any additional comments with respect to the status of our acquisition activities. Well, I think, um... This is really a continuation, I think, of Comet's last quarter.

I don't know if you want to offer any additional comments with respect to the status of our acquisition activities.

Well I think.

And this is really a continuation I think of commerce last quarter tender the.

Joe Bergera: The Bulletproof Executive 2013 and... Oh. I think that our view of, kind of, overall... Subs by www.zeoranger.co.uk or closing a transaction once every 12 days is probably still a fair target.

The pipeline of opportunities continues to be fairly rich and.

So.

I think that our view of kind of overall of the business.

Accomplishing or closing of the transaction kind of once every 12 to 18 months is probably still a fair target I think the.

Kerry Sheba: I think it talks about kind of the that are out there and some of the challenges the staff face. The Ultimate Parody Site! All rights reserved. We have a challenge with regard to valuation or price, relative to what our multiples are at, so we have to be very cognizant of that. They tend to be much smaller in their... And even if they can augment our IP in some way, them all, to Richard Magnusen. Thank you, pre-revenue or early revenue stages. Still Relying, https://www.fema.gov and the marketplace of potential opportunities, really. But nonetheless..., pipeline of possibles, fall.

We've talked about kind of the mix of businesses that are out there and some of the challenges the SaaS businesses still.

I haven't seen also with regard to valuation of pricing relative to what our our multiples are at so we have to be very cognizant of that and.

They tend to be much smaller and therefore time consuming and even if they can augment our IP in some way it's still pretty typical these are small.

Typically kind of venture capital backed businesses.

Pre revenue or early revenue stages, and therefore still relying some cash support along the way. So we're still focused on trying to ensure that whatever deals we do that they will be immediately accretive.

And the marketplace of potential opportunities really hasnt changed a whole lot from that perspective.

Joe Bergera: And so we're www.thevenusproject.com The Bulletproof Executive 2013, Great. Well, thanks, Joe and Kerry, and that's it for my questions. Thank you. That concludes today's Q&A. I would now like to turn the call back to Joe Bergera for a pre-submitted investor question. Okay.

But nonetheless.

The pipeline of Possibles continues to be I think.

Pretty full and so we're actively looking at things.

As we sit here today.

Great well, thanks, Joe and carry and that's it for my questions.

Yes.

Thank you that concludes today's Q&A I would now like to turn the call back to Joe for Zara for pre submitted investor questions.

Super Thank you operator, yes, I'd like to address.

Joe Bergera: Thank you, operator. Yeah, I'd like to address two questions. We have two questions, sort of, that we received prior to today's call. The first question from an investor was, what steps is Iteris taking to assure and show meaningful progress towards achieving the company's Vision 2027 target of 16 to 19 percent adjusted EBITDA margins? And in response to that question, I want to reconfirm the management.

Two questions sort of.

That we received.

Prior to today's call. The first question from an Investor was what steps <unk> taken to assure and show meaningful progress towards achieving the company's vision 2027 target of 16% to 19% adjusted EBITDA margin and interest parts to that question I want to reconfirm that.

<unk> management, we are extremely focused on delivering EBITDA margins in.

Joe Bergera: We are extremely focused on delivering EBITDA margins and improvements, and, of course, we just announced that our nine-month adjusted EBITDA represents an $18.1 million improvement year-over-year. As we look to 2027, we're pursuing many initiatives to expand our adjusted EBITDA margins, but I want to share some specific color on four drivers that, in our opinion, represent meaningful levers for adjusted EBITDA margin improvement. Some of these we've already talked about in response to some of the analysts' questions, but first, one area for improvement is related to cloud infrastructure and data acquisition costs for our software-as-a-service and data-as-a-service solutions. As I noted just a moment ago, those costs are largely fixed, resulting in gross margins that are currently suboptimal because we've got fixed costs on relatively low revenue.

Improvements and of course, we just announced that our nine month adjusted EBITDA represents an $18 $1 million improvement year over year.

As we look to 2027 were pursuing many initiatives to expand our adjusted EBITDA margins, but now I want to share some specific color on four drivers that you know in our opinion represent meaningful levers for adjusted EBITDA margin improvement. Some of these we've already talked to you on.

In response to some of the.

Analyst questions, but first one area for improvement is related to cloud infrastructure and data acquisition costs for our software as a service and data as a service solutions as I noted just a moment ago those costs are largely fixed resulting in.

Gross margins that are currently suboptimal, because you've got the fixed costs on relatively low revenue.

Joe Bergera: As that revenue steps up, every million dollars would be expected to realize significant cost leverage and associated margin expansion, which will flow through and you'll begin to see in the income statement. Second, as we've mentioned on various calls, including today's, and even just a couple seconds ago, our current project-based services gross margin, or consulting gross margin, has been depressed by the fact that our internal labor capacity is not at the level that we'd like. We're continuing to make progress on that, and that's going to bear some fruit, obviously not to the same degree as we'll see with respect to the SAS and DAS solutions for the reasons I mentioned. But then the third driver that I did want to also note, which we previously talked about, but we didn't discuss on this call, is that our Vantage APEX product, which is our newest sensor product line, is still relatively new, and the volume on it is relatively low. And that's because it takes agencies time to review and qualify new products before they can be installed within their respective jurisdictions.

But as that revenue steps up every million dollars would expect to realize significant cost leverage and associated margin expansion.

Which will flow through and you'll begin to see in the income statement.

Second.

As we've mentioned on various calls including today.

Even just a couple of seconds ago. Our current project based services gross margin of our consulting gross margin has been depressed by the fact that our internal labor capacity is not at the level that we'd like we're continuing to make progress on that and that's going to bear some fruit obviously not to the same degree as we will see.

With respect to the SaaS and Daas solutions for the reasons I mentioned, but then the third driver that I did want to also note. We previously talked about we didn't discuss yet on this call is that our vantage apex product, which is our newest sensor product line is still relatively new and the volume on it is relatively low.

<unk>.

And that's because it takes agencies time to review and qualify these new products before they can be installed within their respective jurisdiction and as the volume of the APAC shipments continuous decline will realize various internal efficiencies and begin to capture better volume pricing for certain electronics components that we only use on our vantage apex Prada.

Joe Bergera: And as the volume of APEX shipments continues to climb, we'll realize various internal efficiencies and begin to capture better volume pricing for certain electronics components that we only use on our Vantage APEX product line. And then there are also process benefits that we'll realize with respect to assembly, test, and shipping of that product line. And then, just broadly, an increase in revenue from various other service and product lines will, of course, improve our overhead absorption and yield operating expense leverage. So all four of those factors are going to drive significant improvements in EBITDA margins through the 2027 period. I'm not going to go into all the specific actions that we're taking to improve our adjusted EBITDA margins, but I do hope that that will give you a view of some of the structural dynamics that we expect to benefit us over the next couple of years. The second question, as I said, I'm going to kind of address that, was, you know, can you provide some general comments on Iteris's thinking on M&A, especially given Iteris has a clean balance sheet?

Line and then there are also process benefits that we'll realize with respect to assembly test and shipping of that product line.

And then fourthly and just broadly an increase in revenue from various other service and product lines will of course improve our overhead absorption and yield operating expense leverage. So all four of those factors are going to drive significant improvements in EBITDA margins through the 2027.

Horizon I'm not going to go into all the specific actions that we're taking to improve our adjusted EBITDA margins, but I do hope that that will give you a view of some of the structural dynamics that we expect to benefit us.

Over the next couple of years.

The second question as I said, I'm going to kind of and kind of address that was can you provide some general comments on tariffs is thinking on M&A, especially given I tariffs has a clean balance sheet and I feel that we.

Joe Bergera: And I feel that, you know, we kind of addressed that in responding to Tim's question, so I'm not going to belabor that. Anyway, having addressed those two investor questions, I do want to provide some brief comments about our overall investor relations program. So, on that front, before we wrap up, I wanted to just make sure everyone knows that we'll be engaged in various investor outreach activities over the next few months. For example, we will participate in a fireside chat hosted by SumZero on February 14, 2024. Thank you, SumZero, for inviting us. If you're a member of the SumZero community, we hope that you will attend. And then on March 14, we'll be traveling to New York City for a non-deal roadshow hosted by B. Reilly.

We kind of address that and responding to Tim's question, So I'm not going to belabor that.

Anyway, having addressed those two investor questions and I do want to provide some brief comments about our overall investor Relations program. So on that front before we wrap up I wanted to.

Just to make sure everyone knows it will be engaged in various investor outreach activities over the next few months. For example, we will participate in a fireside chat hosted by some zero on February 14, 2024. Thank you some zero for invest in inviting us if you're a member of the <unk> zero community. We hope that you will attend and.

Then on March 14th we'll be traveling to New York City for a non deal Road show hosted by B Riley and on March 2024 will participate in a fireside chat hosted by E. F. Hutton and if any of you would like to join us in either of those venues. Please contact your B Riley or E. F. Hutton representative and then on May 15 2002.

Joe Bergera: And on March 20, 2024, we'll participate in a fireside chat hosted by E.F. Hutton. And if any of you would like to join us in either of those events, please contact your B. Reilly or E.F. Hutton representative. And then on May 15, 2024, we'll participate in the E.F. Hutton Annual Global Conference in New York City. And on May 22 and 23, 2024, we'll participate in the B. Reilly 24th Annual Institutional Investor Conference in Beverly Hills. And obviously, if you plan to attend either of those conferences, we hope you'll schedule time to meet with us. We'd love the opportunity to talk to you in person. So anyway, one other thing I wanted to share with you if you didn't already see it, is that on January 10, 2024, we published a whitepaper on the use of AI in transportation. If you'd like a copy of that whitepaper, and you don't already have it, it's available for download from our investor site, or you can also contact Todd Kehrli at Todd at mkir.com for a copy. And if not, we look forward to updating you again on our continued progress when we report our fiscal 2024 fourth quarter and our full year results.

24 will participate in the EF Hutton annual Global Conference in New York City, and on May 22nd and 23 2024 will participate in the B Riley 24th annual institutional Investor Conference in Beverly Hills, and if obviously if you plan to attend either of those conferences, we hope youll scheduled time to meet with us.

The opportunity to talk to you in person.

So anyway I wanted to just one other thing I wanted to share with you. If you. If you didn't already see it is it on January 10, 2024, we published a white paper on the use of AI in transportation and if you'd like a copy of that White paper do you already have it it is available for download from our Investor site or you can also contact Todd Curly.

At Todd at MK, our IR dot com for a copy so anyway with that I wanted to just say that we're always available to speak with investors do you have any follow up questions. After todays call and if not we look forward to updating you again on our continued progress when we report our fiscal 2020 for fourth quarter.

<unk> and our full year results so with that we'll conclude today's call. Thank you.

Operator: So with that, we'll conclude today's call. Thank you. Thank you. This concludes today's conference. You may disconnect your lines at this time.

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

Yes.