Q4 2024 Iteris Inc Earnings Call
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Operator: Good day, and welcome to the Iteris fiscal 2024 fourth quarter and full year 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.
Speaker Change: Good day and welcome to the terrorists fiscal 2020 for fourth quarter and full year financial results Conference call.
Speaker Change: 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.
Operator: Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.
Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Todd Curly of MTR Investor Relations. Please go ahead.
Todd Kehrli: Thank you, Operator. Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris's financial results for its fiscal 2024 fourth quarter and full year ended March 31, 2024. Joining us today are Iteris's president and CEO, Mr. Joe Bergera, and the company's CFO, Mr. Kerry Shiba. Following their remarks, we'll open the call for questions from the companies covering sell-side analysts. Then we will answer investor questions that were submitted to the company in advance of the call for instructions in our press release dated May 30, 2024.
Todd Kehrli: Thank you operator, good afternoon, everyone and thank you for participating in today's conference call to discuss the terrorists as financial results for its fiscal 2020 for fourth quarter and full year ended March 31 2024.
Speaker Change: Joining us today are <unk>, president and CEO, Mr. Joe Bush era, and the company's CFO, Mr. Kerry Shiba.
Speaker Change: Following their remarks, we'll open the call for questions from the company's covering sell side analysts then we want to answer investor questions that were submitted to the company in advance of the coal for the instructions in our press release dated May 32024.
Todd Kehrli: Before we continue, I'd like to remind all participants that during this 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.
Speaker Change: Before we continue I'd like to remind all participants that during this 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.
Speaker Change: This is not undertaking an obligation to provide updates to these forward looking statements in the future.
Todd Kehrli: Actual results may differ materially 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.
Speaker Change: Our results may differ materially 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.
Speaker Change: The terrorists 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 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.
Todd Kehrli: 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 President and CEO, Mr. Joe Bergera. Joe, please proceed.
Speaker Change: Today's call on the investors section of the company's website at Www dot terrorists dot com.
Speaker Change: Now I'd like to turn the call over to the terrorists as president and CEO, Mr. Joe <unk> Joe. Please proceed.
Joe Bergera: Great. Thank you, Todd. And a good afternoon to everyone.
Speaker Change: Great. Thank you Todd.
Speaker Change: And good afternoon to everyone I appreciate all of you joining us today.
Joe Bergera: I appreciate all of you joining us today. Iteris reported fiscal 2024 fourth quarter total revenue of $42.8 million and fiscal 2024 full year total revenue of $172 million, representing growth rates of 1% and 10% year-over-year, respectively. As a reminder, the fiscal 2023 fourth quarter comparison was unusual, with us shipping a very large level of backlog that accumulated over several preceding quarters in the wake of global supply chain constraints. Therefore, our full-year double-digit growth rate provides a more normalized view of the business.
Speaker Change: Terrorists reported fiscal 2020 for fourth quarter total revenue of $42 8 million in fiscal 2020 for full year total revenue of 172 million representing growth rates of 1% and 10% year over year, respectively.
Speaker Change: As a reminder, the fiscal 2023 fourth quarter comparison was unusual with those shipping a very large level of backlog that accumulated over several preceding quarters in the wake of global supply chain constraints. Therefore, our full year double digit growth rate provides a more normalized view of the business.
Joe Bergera: In addition to reporting double-digit organic growth, our fiscal 2024 fourth quarter and full-year gross margins improved 558 and 1,063 basis points, respectively. In turn, this gross margin expansion and our continued operating expense discipline drove substantial improvement in adjusted EBITDA and adjusted EBITDA margin, increasing year-over-year by 1.4 million or 33 basis points, respectively, in our fiscal 2024 fourth quarter and 19.5 million or 1,174 basis points, respectively, in our fiscal 2024 full year.
In addition to reporting double digit organic growth our fiscal 2020 for fourth quarter and full year gross margins improved 558, and 1063 basis points year over year, respectively.
Speaker Change: In turn this gross margin expansion and our continued operating expense discipline drove substantial improvement in adjusted EBITDA and adjusted EBITDA margin.
Speaker Change: Creasing year over year by $1 4 million or 33 basis points, respectively. In our fiscal 2020 for fourth quarter, and $19 5 million or 1174 basis points, respectively, and our fiscal 2020 for full year.
Joe Bergera: Of course, Kerry is going to address our profitability dynamics in more detail in his comments. Despite some expected bookings lumpiness in our fiscal 2024 third quarter, customer adoption of the Clear Mobility Platform remained very strong through fiscal 2024, with Iteris achieving what we believe is a best-in-class, revenue-based win rate in competitive procurements of 69%. This win rate translated into record fiscal 2024 fourth quarter total net bookings of $53.3 million, increasing 20% year over year, and record fiscal 2024 full year total net bookings of $181.6 million, increasing 7% year over year. We estimate 59 million, or 32%, of our full year total net bookings will be recognized as annual recurring revenue.
Speaker Change: Of course carrier is going to address our profitability dynamics in more detail in his comments.
Speaker Change: Despite some expected bookings lumpiness in our fiscal 2024 third quarter customer adoption of the clear mobility platform remained very strong through fiscal 2024 with terrorists achieving what we believe is a best in class revenue based win rate in competitive procurements is 69%.
Carrier: This win rate translated into record fiscal 2020 for fourth quarter total net bookings of $53 3 million, increasing 20% year over year and a record fiscal 2020 for full year total net bookings of $181 6 million, increasing 7% year over year.
Speaker Change: We estimate 15 9 million or 32% of our full year total net bookings will be recognized as annual recurring revenue.
Joe Bergera: This represents a 32% increase year-over-year, and total net bookings will be recognized as annual recurring revenue. We attribute these positive leading indicators to our strong product roadmap and commercial execution as well as the distinct advantage of our unique flywheel. In other words, we believe Iteris has and will continue to capture a disproportionate share of the opportunity in our end market because, on the one hand, our consultants are positioned as trusted technology advisors, and, on the other hand, our software and sensors, all of which are recognized as best of breed in their own right, are even more valuable when deployed in combination.
Speaker Change: This represents a 32% increase year over year and total net bookings will be recognized as annual recurring revenue.
Speaker Change: We attribute these positive leading indicators to our strong product road map and commercial execution as well as the distinct advantage of our unique flywheel and.
Speaker Change: In other words, we believe Vitaros has and will continue to capture a disproportionate share of the opportunity in our end market because on one hand, our consultants are positioned as trusted technology advisors and on the other hand, our software and sensors all of which are recognized as best of breed in their own right are even more valuable.
Speaker Change: When deployed in combination.
Joe Bergera: These synergies are powerful differentiators for Iteris, especially since we've aligned our capabilities to our ClearMobility platform, making it simple for our customers to benefit from the full breadth of our portfolio. Due to our strong net bookings, we ended the March 31, 2024 period with a total ending backlog of $123.8 million, representing an 8% increase year over year. Our ending backlog and net bookings figures reflect firm customer orders rather than total contract value.
Speaker Change: These synergies are powerful differentiators for <unk>, especially since we have aligned our capabilities to our clear mobility platform, making it simple for our customers to benefit from the full breadth of our portfolio.
Due to our strong net bookings we ended the March 31, 2024 period with a total ending backlog of $123 8 million, representing an 8% increase year over year.
Speaker Change: Ending backlog and net bookings figures reflect firm customer orders rather than total contract value. The total value of customer contracts, which of course varies from quarter to quarter averages on an historical basis, it's about 200% of our total ending backlog also our backlog excludes the sizable portion.
Joe Bergera: The total value of customer contracts, which of course varies from quarter to quarter, averages on a historical basis about 200% of our total ending backlog. Also, our backlog excludes a sizable portion, which of course varies from period to period, of sensor bookings that convert to shipments within a single quarter. At this point, I'd like to share some details about the performance of our product portfolio. We reported fiscal 2024 fourth-quarter product revenue of $21.6 million and fiscal 2024 full-year product revenue of $91.8 million, representing a 14% decrease and an 8% increase year-over-year, respectively. As a reminder, the fiscal 2024 fourth quarter comparison was significantly affected by an unusually high prior year result due to a shift being a very large level of backlog that accumulated over several prior quarters.
Speaker Change: Which of course varies from period to period of sensor bookings that convert to shipments within a single quarter.
Speaker Change: At this point I'd like to share some details about the performance of our product portfolio.
Speaker Change: We reported fiscal 2020 for fourth quarter product revenue of $21 6 million in fiscal 2020 for full year product revenue of 91, 8 million, representing a 14% decrease and an 8% increase year over year respectively.
Speaker Change: As a reminder, that fiscal 2020 for fourth quarter comparison was significantly affected by an unusually high prior year results due to a shipping a very large level of backlog that accumulated over several prior quarters.
Joe Bergera: Over the course of fiscal 2024, we believe Iteris won virtually every large competitively sourced detection, fixed travel time, and cellular vehicle-to-everything, or what we'll sometimes call CV-to-X, sensor initiative across the country. Additionally, we continue to improve the attach rate of SAS and other annual recurring revenue to our various smart sensors at the point of sale. Some notable deals include a new Master Purchase Agreement with Maricopa County in Arizona, which, as you may know, is the fourth most populous county in the nation, to use our VANTAGE Next Detection System and Bluetooth Travel Time Sensors, as well as our VANTAGE Live ClearGuide signals and VANTAGE Argus CV software for a multi-year comprehensive arterial modernization initiative. A new purchase agreement with the City of Cedar Park, Texas, to deploy our VANTAGE APEX detection system, connected vehicle sensors, and VANTAGE Live and ClearGuide signal software for a comprehensive citywide intersection modernization initiative.
Speaker Change: Over the course of fiscal 2024, we believe by terrorists won virtually every large competitively sourced detection fixed travel time and cellular vehicle to everything her well, sometimes called C V to X sensor initiative across the country.
Speaker Change: Additionally, we continue to improve the attach rate of SaaS and other annual recurring revenue to our various smart sensors at the point of sale.
Speaker Change: Some notable deals include a new Master purchase agreement with America County in Arizona, which as you May know is a fourth most populous county in the nation to use our advantage next detection system and blue towed travel time sensors as well as our vantage live clear guide signals and vantage Rguest CV software.
Speaker Change: For a multi year comprehensive arterial modernization initiative.
Speaker Change: New purchase agreement with the city of Cedar Park, Texas to deploy our vantage apex detection system connected vehicle sensors, and vantage live and clear guide signals software for a comprehensive citywide intersection modernization initiative.
Joe Bergera: And a purchase order for our VANTAGE APEX detection system and VANTAGE Live software from the Coachella Valley Association of Governments in California for the second phase of a regionwide intersection modernization initiative. Effectively, these handful of new customer agreements represent more than $10 million in future sensor sales. In addition to solid commercial execution, throughout fiscal 2024, we will continue to extend the feature and performance advantages of our sensor portfolio. For example, we released a comprehensive managed service branded as Vantage Care that leverages edge and cloud services to help agencies better maximize their traffic detection investment; an integrated intersection detection and connected vehicle system, which is branded as Vantage CV, that combines traffic detection, cellular vehicle-to-everything communication, and connected vehicle safety applications into a single system.
Speaker Change: And a purchase order for our vantage apacs detection system and vantage live software from the Coachella Valley Association of governments in California for the second phase of a region wide intersection modernization initiative collectively this handful of new customer agreements represent a more than $10 million.
Speaker Change: And future sensor sales.
Speaker Change: In addition to solid commercial execution throughout fiscal 2024, we continue to extend the feature and performance advantages of our sensor portfolio. For example, we released a comprehensive managed service branded as vantage care, the Leverages edge and cloud services to help agencies better Maxim.
Speaker Change: <unk> their traffic detection and investments.
Speaker Change: And integrated intersection detection and connected vehicle system, which is branded as vantage C. V that combines traffic detection cellular vehicle to everything communication and connected vehicle safety applications into a single system.
Joe Bergera: A new central control unit for Vantage Next that doubles the number of sensors supported by each in-cabinet processor API enhancements that enable our connected vehicle sensors to process and publish connected vehicle data packets at massive scale to the ClearMobility platform as well as directly to other ecosystem participants, and new sensor fusion features in both our Vantage Apex and Vantage Next product lines. Furthermore, we entered into an exclusive technical and commercial partnership with Sumitomo Electric Industries to integrate its Advanced Pedestrian Detection Sensor into our ClearMobility platform.
Speaker Change: A new central control unit for vantage next the doubles the number of sensors supported by each in cabinet processor API enhancements that enable our connected vehicle sensors to process and publish connected vehicle data package at massive scale to the clear mobility platform as well as directly to <unk>.
Speaker Change: Other ecosystem participants.
Speaker Change: And new sensor fusion fusion features in both our vantage apacs and vantage next product lines.
Speaker Change: Furthermore, we entered into an exclusive technical and commercial partnership with Sumitomo Electric industries to integrate its advanced pedestrian detection sensor into a clear mobility platform. We believe this integrated state of the art solution will transform pedestrian detection in the United States and double aisle terrorists as total.
Joe Bergera: We believe this integrated, state-of-the-art solution will transform pedestrian detection in the United States and double Iteris's total addressable market for detection solutions from about $500 million today to about $1 billion going forward, further enhancing our uniquely curated mobility data set.
Speaker Change: Addressable market for detection solutions from about five five.
Speaker Change: $500 million today to about $1 billion going forward and further enhancing our uniquely curated mobility dataset.
Joe Bergera: With that, I'd like to review the performance of our sensors portfolio. We reported fiscal 2024 fourth quarter service revenue of $21.2 million and fiscal 2024 full year service revenue of $80.2 million, representing a 22% and 13% increase year-over-year, respectively. The increase in fourth quarter and full year service revenue demonstrates the Talent Acquisition Program, which we initiated in our fiscal 2024 first quarter, is starting to benefit our labor capacity and services backlog conversion.
Speaker Change: With that I'd like to review the performance of our sensors portfolio.
Speaker Change: We reported fiscal 2020 for fourth quarter service revenue of $21 2 million in fiscal 2020 for full year service revenue of $80 2 million, representing a 22% and 13% increase year over year, respectively.
Speaker Change: The increase in fourth quarter and full year service revenue demonstrates that talent acquisition program, which we initiated in our fiscal 2020 for first quarter is starting to benefit our labor capacity and services backlog conversion.
Joe Bergera: In fiscal 2024, about 40% of our services revenue was comprised of project-based, in other words, consulting revenue, and 53% was comprised of annual recurring revenue from our software-as-a-service, data-as-a-service, platform-as-a-service, and managed services offers. If you look at it on an enterprise basis, ARR represented 25% of our total revenue in fiscal 2025.
Speaker Change: In fiscal 2024 about 40% of our services revenue was comprised of project based in other words consulting revenue and 53% was comprised of annual recurring revenue from our software as a service data as a service platform as a service and managed services offers.
Speaker Change: If you look at on an enterprise basis are represented 25% of our total revenue in fiscal 2025.
Joe Bergera: In addition to the solid improvement in our services revenue, we posted fourth quarter net services bookings of $34.6 million and full year net services bookings of $103.5 million, increasing 27% and 12% year-over-year, respectively. As demonstrated by the recent Orange County Transportation Authority order that we announced on March 27, 2024, we continued throughout fiscal 2024 to increase the attached rate of annual recurring revenue to our consulting projects. This capability, which is again unique to Iteris Flywheel, will continue to contribute to further improvements in the growth rate of our annual recurring revenue going forward.
Speaker Change: In addition to the solid improvement in our services revenue, we posted fourth quarter net services bookings of $34 6 million in full year net services bookings of $103 5 million, increasing 27% and 12% year over year, respectively.
Speaker Change: As demonstrated by the recent Orange County Transportation Authority order that we announced on March 27, 2024, we continued throughout fiscal 2024 to increase the attach rate of annual recurring revenue to our consulting projects. This capability, which again is unique to that terrorists fly well, we'll continue to.
Speaker Change: Contribute to further improvements in the growth rate of our annual recurring revenue going forward.
Joe Bergera: In fiscal 2024, we continue to introduce significant enhancements to our software-as-a-service, data-as-a-service, platform-as-a-service, and managed services portfolio that we believe will also drive future annual recurring revenue growth. For example, in the fiscal 2024 second half alone, we released Vantage Argus CV, which is a next-generation travel time and connected vehicle data collection and presentation system. ClearGuide SignalTrends, which uses anonymized trajectory data to optimize signal timing without any dependence on temporary traffic count data or communications infrastructure, and OpenLR MapSupport for our ClearData contextual mobility data feed, which we recently announced TeleNav will use for its ScoutMaps application.
Speaker Change: In fiscal 2024, we continued to introduce significant enhancements to our software as a service data as a service platform as a service and managed services portfolio that we believe will also drive future annual recurring revenue growth.
Speaker Change: For example in the fiscal 2020 for second half alone, we released vantage Rguest CV, which is a next generation travel time and connected vehicle data collection of presentation system clear.
Speaker Change: Clear guide signalled trends, which uses anonymize trajectory data to optimize signal timing without any dependence on temporary traffic count data or communications infrastructure.
And open L. Our map support for our clear data contextual mobility data fee, which we recently announced telling NAV will use for its scout maps application.
Joe Bergera: So, in summary, we're pleased with our fiscal 2024 double-digit organic revenue growth and significant gross margin and adjusted EBITDA improvement, as well as our strong commercial execution, whether you measure that by bookings, backlog, or our competitive win rate. With the impact of COVID-19 and the associated supply chain disruptions in our rearview mirror, we believe the company's fiscal 2024 results validate our business strategy and represent an important inflection point for So on that note, I want to turn the call over to Kerry to provide some more color on our fourth quarter and also our full year financial results, after which I'll come back and discuss our fiscal 2025 expectations. Thanks, Joe, and good afternoon or evening, everyone.
Speaker Change: So in summary, we're pleased with our fiscal 2020 for double digit organic revenue growth and significant gross margin and adjusted EBITDA improvement as well as our strong commercial execution, whether you measure that by bookings backlog, where our competitive win rate.
Speaker Change: With the impact of COVID-19, and the associated supply chain disruptions in our rearview mirror, we believe the company's fiscal 2024, our results validate our business strategy and represent an important inflection point for our tariffs.
So on that note I'm going to turn the call over to Kerry to provide some more color on our fourth quarter and also our full year financial results after which I'll come back and discuss our fiscal 2025 expectations.
Kerry A. Shiba: Thanks, Joe and good afternoon or evening everyone.
Kerry A. Shiba: As you review our fourth-quarter results, I encourage you to consider Joe's comments regarding our full-year revenue results when assessing the overall momentum of the business. You may recall that both Joe and I noted in our call for the last two quarters that the combination of seasonality and unusual shipping dynamics stemming from prior year global supply constraints affected comparisons of our fiscal 2024 third and fourth quarter product revenue relative to the prior year.
As you review, our fourth quarter results I encourage you to consider Joe's comments regarding our full year revenue results when assessing the overall momentum of the business.
Kerry A. Shiba: You may recall that both Joe and I have noted in our last call for the lab or in our call for the last two quarters that the combination of seasonality and unusual shipping dynamics stemming from prior year global supply constraints that affected comparisons of our fiscal 2020 for third and fourth quarter products revenue.
Kerry A. Shiba: Relative to the prior year.
Kerry A. Shiba: 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 our double-digit revenue growth for the full year, a significant sales pipeline, and record booking levels, both for the fourth quarter and the full year. Because Joe already addressed revenue results, I will move down the income statement to gross profit. As Joe noted, our gross margin results were markedly improved in fiscal 2024, increasing 558 and 1,063 basis points, fourth quarter and full year, respectively, when compared to the prior year.
Kerry A. Shiba: 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 our double digit revenue growth for the full year, a significant sales pipeline and record bookings levels, both for the fourth quarter and the full year.
Kerry A. Shiba: Because Joe already addressed revenue results I will move down the income statement to the gross profit line.
Kerry A. Shiba: As Joe noted our gross margin results were markedly improved in fiscal 2024, increasing 558 in one thousands and 63 basis points for the fourth quarter and full year, respectively, when compared to the prior year.
Kerry A. Shiba: Let me provide some details, first for the fourth quarter comparison, followed by the full year. On a consolidated basis, the fiscal 2024 fourth quarter consolidated gross profit reached $16 million, an improvement of $2.5 million or 18% over last year. The increase was driven by a $3 million improvement in services, which partially was offset by a $500,000 decline in product. The 22% year-over-year revenue increase, Joe mentioned, as well as the benefit of a stronger labor movement. Resulting from increased internal labor capacity.
Speaker Change: So let me provide some details first for the fourth quarter comparison, followed by the full year on.
On a consolidated basis, the fiscal 2020 for fourth quarter consolidated gross profit reached $16 million, an improvement of $2 $5 million or 18% over last year the.
Speaker Change: The increase was driven by a $3 million improvement in services, which partially partially was offset by a $500000 decline in products to services gross profit improvement reflects the 2020 or the 22% year over year revenue increase Joe mentioned as well as the benefit.
Speaker Change: Have a stronger labor mix, resulting from increased internal labor capacity.
Kerry A. Shiba: The fourth quarter decline in product gross profit primarily reflects the 14% year-over-year revenue decline, which, as Joe noted, reflects the comparison to an unusually strong prior year. The impact of the product's revenue decline more than offset a benefit from lower negative purchase price variance, hitting the P&L this, excuse me, this year. In the fourth quarter of fiscal 2023, we expensed about $2.2 million of negative purchase price variance and expediting fees, which compares to only $100,000.
Speaker Change: The fourth quarter decline in products gross profit primarily reflects the 14% year over year revenue decline, which as Joe noted reflects the comparison to an unusually strong prior year.
Speaker Change: The impact of the products revenue declined more than offset a benefit from lower negative purchase price variances hitting the P&L.
Speaker Change: Excuse me this year and the fourth quarter of fiscal 2023, we expensed about $2 $2 million of negative purchase price variance and expediting fees, which compares to only $100000 in the current year's fourth quarter.
Kerry A. Shiba: As you may recall, last year's negative purchase price variance resulted from aftermarket purchases, semiconductors, and other electronics components. Looking at gross margins, the fourth quarter of this year reached 37.4% in the aggregate, an improvement of 558 basis points compared to the same period last year. Margins were up for both services and products. For services, the increase was $1,024, basically. Well, for products, the improvement was 391 based on revenue. The services gross margin was 31.9% of revenue for the current year and reflects the improvement in labor mix supported by the success of our talent acquisition program, which Joe mentioned earlier. Products Gross Margins. 42.7% for the current year's fourth quarter.
Speaker Change: As you May recall last year's negative purchase price variance resulted from aftermarket purchases of semiconductors and other electronics components.
Speaker Change: Looking at gross margins the fourth quarter of this year reached 37, 4% in the aggregate and improvement of 558 basis points compared to the same period last year.
Speaker Change: Margins were up for both services and products.
Speaker Change: For services, the increase was 1024 basis points buffer products the improvement was 391 basis points.
Speaker Change: Services gross margin was 31, 9% of revenue for the current year and reflects the improvement in labor mix supported by the success of our talent acquisition program, which Joe mentioned earlier.
<unk> gross margins was 42, 7% for the current year's fourth quarter as 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.
Kerry A. Shiba: Is the benefit of having last year's negative cost impact from supply chain issues clearly behind it? was upset slightly by a weaker product and some inventory. For the full year fiscal 2024, consolidated gross profit was $64.6 million, almost $23 million or 54% higher than in the prior year. Products drove about 85 percent. Total Gross Profit Improvement of just over $15 million resulting from having the supply chain issues behind us, and approximately $5 million reflecting a combination of a stronger product mix, higher pricing, and increased volume.
Speaker Change: And some inventory adjustments.
Speaker Change: For the full year fiscal 2024 consolidated gross profit was $64 6 million almost $23 million or 54% higher than in the prior year.
Speaker Change: Products drove about 85% of the total gross profit improvement with just over $15 million, resulting from having the supply chain issues behind us and approximately $5 million, reflecting a combination of stronger product mix higher pricing and increased volume.
Kerry A. Shiba: For services, gross profit grew 17% in 2024 as the benefit of higher revenues and improved labor was partially offset by higher costs as we had to adjust for the one-time loss of two data providers during the year. However, costs increased due to this adjustment.
Speaker Change: For services gross profit grew 17% in 2024 is the benefit of higher revenues and improved labor mix were partially offset by higher costs as we had to adjust for the one time loss of two data providers during the year.
Speaker Change: Although costs increased due to this adjustment the structure of our realigned data supply contracts are expected to provide positive cost leverage as our software revenues growing in the future.
Kerry A. Shiba: The structure of our realigned data supply contract is expected to provide positive cost leverage as our software revenue grows. For gross margins, we reached 37.6% in the aggregate for the full fiscal year 2024, an improvement of 1,063 basis points compared to the prior year. Margins were up both for products and services, with the overall increase driven primarily by a 1,897 basis points improvement for products. The margin growth for services was 102 basis points.
Speaker Change: For gross margins, we reached 37, 6% in the aggregate for the full fiscal year 2024, an improvement of 1063 basis points when compared to the prior year margins were up both for products and services with the overall increase driven primarily by a one.
Speaker Change: 897 basis points improvement for products.
Speaker Change: The margin growth for setup for services was 102 basis points.
Kerry A. Shiba: Products' gross margin was 44.9% for fiscal 24, and similar to the fourth quarter, primarily reflects the benefit of having last year's negative cost impact from supply chain issues behind it. A smaller improvement resulting from stronger product mix and higher, Service's gross margin was 29% for fiscal 24, and primarily reflects the same factors affecting gross profit. Operating expenses in aggregate for the fourth quarter of fiscal 2024 were 14.5% higher compared to the same period last year.
Speaker Change: Products gross margin was 44, 9% for fiscal 'twenty, four and similar to the fourth quarter primarily.
Speaker Change: Reflects the benefit of having last year's negative cost impact from supply chain issues behind us with smaller improvement, resulting from stronger product mix and higher prices services gross margin was 29% for fiscal 'twenty four and primarily reflects the same factors affecting the gross profit comparison.
Speaker Change: Operating expenses in aggregate for the fourth quarter of fiscal 2024 were 14, 5% higher when compared to the same period last year and 449 basis points higher when measured as a percentage of revenue. The increase was largest in the G&A category with just over two <unk>.
Kerry A. Shiba: 449 basis points higher when measured as a percentage of revenue. The increase was largest in the GNA category, with just over two-thirds of the increase resulting from the cost of a litigated dispute related to a contract signed back in 2015. These litigation costs are excluded from adjusted EBITDA.
Speaker Change: <unk> of the increase resulting from the cost of litigated dispute related to a contract signed back in 2015. These litigation costs are excluded from adjusted EBITDA.
Kerry A. Shiba: We will also continue to invest in R&D, as well as in sales and marketing to support the product's revenue. For the full year, fiscal 2024 operating expenses were 9.3% higher than in the prior year, but declined 32 basis points when measured as a percentage of revenue. About 54% of the entire increase in total operating expenses, more than the full increase in G&A costs reflects the litigation expenses I just mentioned. The operating expense increase in fiscal 2024 categorically was most pronounced in sales and marketing expenses.
Speaker Change: We also continued to invest in R&D as well as well as in sales and marketing to support the product's revenue increase.
For the full year fiscal 2024 operating expenses were nine 3% higher than in the prior year, but declined 32 basis points when measured as a percentage of revenue.
Speaker Change: About 54% over the entire increase in total operating expenses and more than the full increase in G&A cost reflects the litigation expenses I just noted.
Speaker Change: The operating expense increase in fiscal 2024 categorically was most pronounced in sales and marketing expenses, primarily to support the revenue increase the research.
Kerry A. Shiba: The research and development category reflects increased activity focused on improving our software product. The factors just discussed related to revenue, gross profit, and operating expense fundamentally explain the major comparisons between operating income and net income. For Adjusted EBITDA, these same factors also apply, with the exception of the impact of litigation costs, which, as I mentioned previously, are excluded from Adjusted EBITDA.
Speaker Change: And development category reflects the increased activity focused on improving our software products.
Speaker Change: The factors just discussed related to revenue gross profit and operating expense fundamentally explain the major comparisons in operating income and net income.
Speaker Change: For adjusted EBITDA. These same factors also apply with the exception of the impact of the litigation costs, which as I mentioned previously are excluded from adjusted EBITDA.
Kerry A. Shiba: As Joe noted, adjusted EBITDA was $2.8 million for the fourth quarter of fiscal 2020-21, which was approximately double the result for the prior year. The full-year adjusted EBITDA was $12.9 million for fiscal 2024, with an improvement of $19.5 million over last year. Total cash and cash equivalents at the end of fiscal 2024 were $25.9 million, representing an increase of $9.3 million or Proceeding.
As Joe noted adjusted EBITDA was $2 8 million for the fourth quarter of fiscal 2024, which was approximately double the result for the prior year for the full year. Adjusted EBITDA was $12 9 million for fiscal 2024, an improvement of $19 $5 million or.
Speaker Change: Last year.
Speaker Change: Total cash and cash equivalents at the end of fiscal 2024 were $25 9 million, representing an increase of $9 $3 million or 56% over the balance at the same time last year and $4 $7 million higher than the balance at the end of the preceding quarter.
Kerry A. Shiba: Full year 2024 cash flow from continuing operations increased by $15.9 million compared to the prior year. Investing activities for fiscal year 2024 were $3 million in total, primarily reflecting capitalized software development. I now will turn the call back over to Joe, who will discuss our fiscal 2025 guidance and provide closing comments. Great. Thank you, Kerry.
Speaker Change: Full year 2024 cash flow from continuing operations increased by $15 $9 million compared to the prior year invest.
Speaker Change: Investing activities for fiscal year, 2024 were $3 million in total primarily reflecting capitalized software development.
Speaker Change: I now will turn the call back over to Joe who will discuss our fiscal 2025 guidance and provide closing comments.
Great. Thank you Carrie.
Joe Bergera: The smart mobility infrastructure management market continues to represent significant long-term opportunities due to historic federal funding that's been committed by Congress through 2026 and is expected to have a further 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 automated vehicles will continue to drive significant smart mobility investments by state and local governments, as well as by various private sector entities.
Joe: The smart mobility infrastructure management market continues to represent significant long term opportunities due to historic federal funding. That's been committed by Congress through 2026 and is expected to have a further multiyear funding tail as state and local agencies will continue to spend.
Speaker Change: The obligated funds well passed the legislation statutory end date.
Additionally, technology trends that include the adoption of cloud infrastructure artificial intelligence and connected and automated vehicles will continue to drive significant smart mobility investments by state and local agencies as well as by various private sector entities.
Joe Bergera: Given the breadth of our platform capabilities, significant brand equity, and extensive customer reach, we are very optimistic about Iteris' ability to capture a disproportionate share of this revenue stream. To that end, Iteris will continue to deliver against an aggressive solutions roadmap with the following major releases planned for fiscal 2025. A new form factor for our latest AI-based detection system that will significantly expand the serviceable available market for Vantage APEX, our most advanced intersection detection system. A new mobility data set that will address various new use cases and will expand the universe of prospective buyers for mobility data.
Speaker Change: Given the breadth of our platform capabilities significant brand equity and extensive customer reach we are very optimistic about <unk> ability to capture a disproportionate share of this revenue stream.
To that end I'd tariffs will continue to deliver against an aggressive solutions roadmap with the following major releases planned for fiscal 2025.
Speaker Change: A new form factor for our latest AI based detection system through a significantly expand the serviceable available market for vantage apex, our most advanced intersection detection system.
Speaker Change: Our new mobility data set that will address various new use cases and will expand the universe of prospective buyers for our mobility data.
Joe Bergera: A cloud-connected edge solution provided on a subscription basis for remote monitoring and management of critical third-party assets deployed across both local and statewide transportation networks A combination of new cloud and edge applications will expand our connected vehicle solutions portfolio and will drive both product and annual recurring revenue. Additionally, we have developed a highly advanced radar-based pedestrian detection system developed in partnership with Sumitomo that will be fully integrated with our ClearMobility platform and is expected to transform pedestrian detection and pedestrian safety in North America.
Speaker Change: Our cloud connected edge solution provided on a subscription basis for remote monitoring and management of critical third party assets deployed across both local and statewide transportation networks a.
Speaker Change: A combination of new cloud and edge applications will expand our connected vehicle solutions portfolio and will drive both product and annual recurring revenue.
Speaker Change: And a highly advanced radar based pedestrian detection system developed in partnership with Sumitomo that will be fully integrated with our clear mobility platform and is expected to transform pedestrian detection and pedestrian safety in North America.
Joe Bergera: We believe our fiscal 2025 release plan will increase our total addressable market, accelerate the adoption of our ClearMobility platform, and improve the monetization of our expanding mobility data sets in fiscal 2025 and beyond. For example, as noted earlier, the release of our new pedestrian detection system will more than double Iteris's total addressable market for detection solutions from approximately half a billion to one billion dollars. And also, I want you to know that we'll begin shipping this new system in our fiscal 2025 third quarter.
We believe our fiscal 2025 release plan will increase our total addressable market accelerate the adoption of our clear mobility platform and improve the monetization of our expanding mobility datasets in fiscal 2025 and beyond.
Speaker Change: For example, as noted earlier the release of our new pedestrian detection system or more than double I terraces total addressable market for detection solutions from approximately half a billion dollars to $1 billion.
Speaker Change: And also I want you to know that will begin shipping this new system and our fiscal 2025 third quarter.
Joe Bergera: To capitalize on our release plan, we will continue to improve the productivity of our various sales channels. For example, we'll further optimize the distribution network for our sensor portfolio, expand our dedicated enterprise sales team that focuses on private sector segments, and enhance our customer success model to both maintain a greater than 95% retention rate and increase our software net dollar retention rate from a current 105% to 110%. In addition to sales channel improvements, in fiscal 2025, we'll continue to implement various talent acquisition and talent development initiatives to further improve the labor capacity of our consulting teams.
Speaker Change: To capitalize on our release plan, we will continue to improve the productivity of our various sales channels. For example will further optimize the distribution network for our sensor portfolio expand our dedicated enterprise sales team that focuses on private sector segments and enhance our customer success model to both maintain a greater than nine.
Speaker Change: 85% retention rate and increase our software net dollar retention rate from our current 105% to 110%.
Speaker Change: In addition to sales channel improvements in fiscal 2025, we will continue to implement various talent acquisition and talent development initiatives to further improve the labor capacity of our consulting teams. This activity will focus primarily on civil and traffic engineering talent given the supply of such talent remains very tight.
Joe Bergera: This activity will focus primarily on civil and traffic engineering talent, given the supply of such talent remains very tight, even while we have seen some improvement in the supply of software engineering and data science talent. These talent initiatives will continue to require some short-term investment but should further accelerate the pace of conversion of our historic consulting backlog and create operational efficiencies, as well as enable us to pursue more sales opportunities going forward. Given these dynamics, we expect fiscal 2025 total revenue to be in the range of $188 to $194 million, representing organic growth of 11% year-over-year at the midpoint.
Speaker Change: Even while we have seen some improvement in the supply of software engineering and data science talent.
Speaker Change: These talent initiatives will continue to require some short term investment, but should further accelerate the pace of conversion of our historic consulting backlog and create operational efficiencies as well as enable us to pursue more sales opportunities going forward.
Speaker Change: Given these dynamics, we expect fiscal 2025 total revenue to be in the range of $188 million to $194 million, representing organic growth of 11% year over year at the midpoint.
Joe Bergera: As a result of the increase in total revenue and our continued cost discipline, we also expect an improvement in our adjusted EBITDA margin to be in the range of 8% to 10% of revenue. This represents a 150 basis points improvement in adjusted EBITDA margin at the midpoint of the guidance range, even after we continue to invest in talent acquisition and talent development initiatives. While we're not providing net bookings guidance, I do want to reiterate that we expect some continued bookings lumpiness over the next several quarters due to the timing of several large pending orders. And I also want to note that our particularly high fiscal 2024 first and fourth quarter bookings results will create some difficult comparisons in fiscal 2025.
Speaker Change: As a result of the increase in total revenue and our continued cost discipline. We also expect an improvement in our adjusted EBITDA margin to be in the range of 8% to 10% of revenue. This represents a 150 basis points improvement in adjusted EBITDA margin at the midpoint of the guidance range, even after we can.
Speaker Change: To invest in talent acquisition and talent development initiatives.
Speaker Change: While we're not providing net bookings guidance I do want to reiterate that we expect some continued bookings lumpiness over the next several quarters due to the timing of several large pending orders and I also want to note that are particularly high fiscal 2024 first and fourth quarter bookings result will create some difficult compare.
Speaker Change: This ends in fiscal 2025.
Joe Bergera: With respect to our fiscal 2025 first quarter guidance, we expect total revenue to be in the range of $43.5 million to $45.5 million, representing organic growth of 2% year-over-year at the midpoint of the guidance range. This revenue growth rate reflects a very difficult prior year comparison, as well as the timing of various new product releases scheduled for the end of our fiscal 2025 second quarter and the start of our fiscal 2025 third quarter.
Speaker Change: With respect to our fiscal 2025 first quarter guidance, we expect total revenue to be in the range of $43 5 million to $45 5 million, representing organic growth of 2% year over year at the midpoint of the guidance range.
Speaker Change: This revenue growth rate reflects a very difficult prior year comparison as well as the timing of various new product releases scheduled for the end of our fiscal 2025 second quarter and the start of our fiscal 2025 third quarter.
Joe Bergera: Due to costs for the associated final development and pre-launch activities related to the release of those products, we expect our fiscal 2025 first quarter adjusted EBITDA margins to be in the range of 5.5% and 6.5% of revenue, representing a 324 basis points decline year over year at the midpoint.
Speaker Change: Due to costs associated final development and prelaunch activities related to the release of those products. We expect our fiscal 2025 first quarter adjusted EBITDA margins to be in the range of five 5% and six 5% of revenue representing a 324 basis points.
Speaker Change: Klein year over year at the midpoint, while we're not providing fiscal 2025 second quarter guidance. At this time, we certainly anticipate sequential improvement in adjusted EBITDA margin as our fiscal 2025 full year guidance implies.
Joe Bergera: While we're not providing fiscal 2025 second quarter guidance at this time, we certainly anticipate sequential improvements in adjusted EBITDA margin as our fiscal 2025 full-year guidance implies. Due to the forecasted increase in our fiscal 2025 total revenue and adjusted EBITDA margin, we anticipate continued improvement in our liquidity that should provide adequate cash to fund tuck-in acquisitions similar to our purchases of Albuquerque and TrafficCast International prior to CO At the same time, we believe the public market currently undervalues Iteris relative to some precedent private market transactions where intelligent transportation systems businesses have been acquired at more than 20 times trailing 12-month adjusted EBITDA. Therefore, while our liquidity outlook and capital allocation decisions can be affected by a number of variables, we are evaluating various options to enhance shareholder value, including share repurchases, to return excess liquidity to Iteris shareholders.
Speaker Change: Due to the forecasted increase of our fiscal 2025 total revenue and adjusted EBITDA margin. We anticipate continued improvement in our liquidity that should provide adequate cash to fund tuck in acquisitions similar to our purchases of Albuquerque, and traffic cast international prior to COVID-19.
Speaker Change: At the same time, we believe the public market currently undervalues ITER is relative to some precedent private market transactions, where our intelligent transportation systems businesses have been acquired at more than 20 times trailing 12 month adjusted EBITDA, Therefore, while our liquidity outlook and capital allocation.
Speaker Change: <unk> can be affected by a number of variables, we are evaluating various options to enhance shareholder value, including share repurchases to return excess liquidity to our terra shareholders.
Joe Bergera: Looking beyond fiscal 2025, we believe Iteris remains on track to achieve our Vision 2027 targets, especially given the significant progress on our key solutions roadmap and labor capacity initiatives that will support further revenue growth. Therefore, we continue to estimate fiscal 2027 revenue in the range of $245 million to $265 million before any additional acquisitions, which would represent a five-year organic revenue CAGR of approximately 14 percent, or more specifically, 13.7 percent at the midpoint.
Speaker Change: Looking beyond fiscal 2025, we believe <unk> remains on track to achieve our vision 2027 targets, especially given the significant progress on our key solutions roadmap and labor capacity initiatives that will support further revenue growth.
Speaker Change: Therefore, we will continue to estimate or we continue to estimate <unk>.
Speaker Change: 2027 revenue in the range of 245 million to $265 million before any additional acquisitions, which would represent a five year organic revenue CAGR of approximately 14% or more specifically 13, 7% at the midpoint.
Joe Bergera: With a substantial increase in annual revenue, we also anticipate progressive benefits from scale to result in fiscal 2027 adjusted EBITDA margins in the range of 16 to 19 percent. So with that, we'll conclude the prepared remarks and would be delighted to respond to any questions or comments. Operator, do you have any questions for our analysts? Certainly. Everyone will be conducting a question and answer session at this time. If you have any questions or comments, please press star 1 on your phone at this time.
Speaker Change: With a substantial increase in annual revenue. We also anticipate progressive benefits from scale to result in fiscal 2027, and adjusted EBITDA margins in the range of 16% to 19%.
Speaker Change: So with that we'll conclude the prepared remarks, and we'd be delighted to respond to any questions or comments.
Speaker Change: Operator, do you have any questions from our analysts.
Speaker Change: Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time we.
Joe Bergera: We do ask that while you're posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Again, if you have any questions or comments, please press star 1 on your. Your first question is coming from Jeff Van Sinderen from B. Reilly. Your line is locked.
Speaker Change: We do ask Hello posing your question. Please pickup your handset if you're listening on speaker phone to provide optimal sound quality.
Speaker Change: Once again, if you have any questions or comments. Please press star one on your phone.
Speaker Change: Your first question is coming from just then syndrome from B Riley Your line is live.
Jeffrey Wallin Van Sinderen: Hi, everyone. Joe, and Terry, you mentioned, and I mentioned too, that this is kind of a tough compare here for the first quarter on revenues. But I guess, is there any more color?
Speaker Change: Hi, everyone.
Speaker Change: Joe I know you mentioned and Terry you mentioned too that kind of a tough compare here or the first quarter on revenues.
But I guess is there any more color and I know you said some things about Q2, but any more color you could give us on how you're thinking about kind of the revenue growth progression, we should book or this year.
Joe Bergera: And I know you said some things about Q2, but any more color you could give us on how you're thinking about the revenue growth progression we should look for this year? Yeah, well, Jeff, as you know, we've been just providing quarterly guidance, one quarter at a time, but obviously, if you look at the full year guidance and our first quarter guidance, it's obvious that we expect that there's going to be a step up in the rate of revenue growth throughout the year.
Speaker Change: Yes, Jeff as you know we've been just providing quarterly guidance one quarter at a time, but obviously.
Speaker Change: If you will get the full year guidance and our first quarter guidance. It's obviously, we expect that there's going to be a step up in the rate of revenue growth throughout the year.
Joe Bergera: And again, if you look at it relative to the prior year, please keep in mind that our first quarter of fiscal 2024 was an unusually strong period due to the fact that we continued to ship a lot of backlog that had previously built up as a result of supply chain constraints that we've been experiencing. And then, also, we had a couple of milestone achievements that impacted or led to a substantial amount of services revenue recognition in the period. So that creates a difficult comparison.
Speaker Change: And again, if you look at it on a relative to the prior year. Please keep in mind that our prior the first quarter of fiscal 2024 was an unusually strong period due to the fact that we continue to ship a lot of backlog that had previously built up as a result of the supply chain constraints.
Speaker Change: So we've been experiencing and then also we had a couple of milestone achievements, which impacted or led to a substantial amount of services revenue recognition in the period, so that creates a difficult comparison.
Joe Bergera: We also have a couple new products, which I discussed, which we're going to be releasing into the market. I want to be very clear that we will be selling and marketing those products in the first quarter and the second quarter of the current fiscal year. However, revenue recognition for the sensors won't occur until we actually ship those products, which will occur late in the second quarter and early into the third quarter. And that's going to result in, like, a higher rate of sequential growth and also improved year-over-year revenue growth rates as we progress through the year. Okay, that's really helpful.
Speaker Change: We also have a couple of new products, which I discussed which are going to be releasing into market I want to be very clear that we will be selling and marketing those activities in the first quarter and the second quarter of the current fiscal year. However revenue recognition for the sensors won't occur until we actually ship.
Speaker Change: Those products, which will occur late in the second quarter and early into the third quarter and that's going to result in like a higher rate of sequential growth and also improved year over year revenue growth rates as we progress through the year.
Joe Bergera: And then can you speak, I know you mentioned the new product introductions, but maybe can you speak a little bit more about the R&D and sales team investments that you've made and kind of how you're supporting the new product introductions? Sure, there are some, I'll say broadly, and then Kerry, I'll turn it over to you to talk about some of the specifics, but there are some external development costs that we're incurring in the third quarter following the release of these products. We will not continue to incur those costs, so it's episodic.
Speaker Change: Okay, that's really helpful.
Speaker Change: And then can you speak I know you mentioned, the new product introductions, but maybe can you speak a little bit more on the R&D and sales team investments that you've made and kind of how you're supporting the new product introductions.
Speaker Change: Yes.
Speaker Change: Sure. There is some I'll say broadly and then Carrie I'll turn it over to you to talk to some of the specifics, but there is some external development cost that we're incurring in the third quarter. Following the release of these products, we will not continue to incur those costs. So it's episodic.
Joe Bergera: There's also, similarly, some external launch-related investments that are occurring in the first quarter to create assets that will be leveraged over the course of the launch programs for these various new products, and so, again, those are sort of episodic expenses and won't necessarily continue going forward. Kerry, I don't know if there's anything additional that you want to add in response to Jeff's question. Yeah, thanks, Joe. Jeff, a couple
Speaker Change: There's also similarly, some external <unk>.
Carrie: Launch related investments that are occurring in the first quarter to create assets that will be leveraged when dry over the course of the launch programs for these various new products and so again those are sort of episodic expenses and won't necessarily continue going forward.
Speaker Change: I don't know if there's anything additional that you want to add.
Speaker Change: And Jeff's question.
Speaker Change: Yes.
Joe: Thanks, Joe.
Kerry A. Shiba: Sales and marketing does have a pretty big variable component to it all. GoToMarket.com, as our revenues continue to ramp up as we progress, go off. I like the bit of that curve, although..., hopefully, keep that expense line relatively flat.
Speaker Change: Just a couple of things sales and marketing does have a pretty good size variable component to it all because of commissions in there that are that are involved as we go to market. So.
As our revenues continue to ramp up as we progress through the year for the reasons Joe offered.
Speaker Change: From a nominal perspective.
Speaker Change: Sales and marketing expense should reflect a bit of that curve, although I would expect as a percentage of revenue.
Speaker Change: We should hopefully keep that expense line relatively flat from a percent of revenue perspective, I would tell you that our R&D we've been progressively.
Kerry A. Shiba: I would tell you that in R&D, we've been progressively... more and more notwithstanding the episodic nature Joe mentioned last. We are continuing to invest and continue to build out. R-N-D-Y run higher than it has in fiscal year 24. Okay, that's helpful. And if I could just squeeze in one more, since we're talking about kind of all these different line items in the P&L, just any help you can give us on gross margin progression as the year plays out, realize some of these things are lumpy, as you said, you've got new product introductions. Perhaps there are some early things around those new product introductions that play into gross margin that are not, that don't continue, or you get more leverage as you reach scale on your products.
Speaker Change: Investing more and more notwithstanding the episodic expenses that Joe mentioned in the last year associated associated without using outside contractors to help us we are continuing to invest in resources in R&D to support <unk>.
Speaker Change: Continued build out of our software platform. So.
You should expect that.
Speaker Change: The R&D line will run higher than it has in fiscal year 'twenty four.
Speaker Change: Mhm.
Speaker Change: Okay. That's helpful on that if I could just squeeze in one more since we're talking about kind of all these different line items in the P&L.
Speaker Change: Just any help you can give us on gross margin progression as the year plays out realized some of these things are lumpy as you said, you've got new product introductions.
Speaker Change: Perhaps there are some early things around those new product introductions planned to gross margin, but that are not.
Speaker Change: Yes.
Speaker Change: That don't continue or you get more leverage as you reach scale and new products. Maybe if you can just touch on gross margin progression for the year.
Kerry A. Shiba: Maybe if you can just touch on gross margin progression. Yeah, to be quite candid with you, Jeff, I was caught a little bit by surprise with the fourth quarter gross margin result. We took Fundamentally, it came out of our year-end physical inventory calendar, that count, shortages that were higher than normal, that it was a very thorough process, need for some process improvement as we go throughout the year, obsolescence charges that were identified during that physical count. We got hit in the fourth quarter of this year with roughly half a million dollars worth of charges that were, certainly directionally high for this.
Speaker Change: Yes.
Speaker Change: To be quite candid with you <unk>.
Speaker Change: Caught a little bit by surprise with the fourth quarter gross margin result, we took some.
Speaker Change: Some charges that were.
Fundamentally it came out of our our year end physical inventory.
Out in that count, we incurred some shortages that were higher than normal and I.
Speaker Change: I'd only comment there that it points to the fact that it was a very thorough process of physical count, but it also points to the need for some process improvement as we go throughout the year. So that was a little bit higher number than normal and we also.
Speaker Change: It took some obsolescence charges that were identified during that physical count and we got hit in the fourth quarter of this year with roughly about a half a million dollars worth of charges that were.
Speaker Change: Certainly directionally high for this and as I was talking to you last quarter.
Speaker Change: They weren't they werent expected to tell you the truth.
Kerry A. Shiba: That number is worth, you know, like 220 basis points worth of product area, gross profit. And on an even-though margin perspective... EBITDA. With other noise going back and forth, I wanted to point that item out just to say that that really affected the kind of launch. As far as the progression next year, I think that I would expect to continue to see directional improvement in gross profit as we go forward, quarter by quarter throughout the year. This is going to be driven by a couple of areas.
Speaker Change: That number is worth.
Speaker Change: 220 basis points worth of the products area.
Speaker Change: Gross profit, which is where all those inventory items of course relate and on an EBITDA margin perspective, those expenses added up to almost 120 basis points of EBITDA margin.
Speaker Change: With other noise going back and forth I wanted to point that item just to say that that really affected kind of the launch pad looking at Q4 of this year as a starting point as far as the progression next year I think that I would expect to continue to see directional.
Speaker Change: <unk> gross profit as we go.
Speaker Change: Quarter by quarter throughout the year.
Speaker Change: I think it's going to be driven by a couple a couple of areas.
Kerry A. Shiba: We do expect our services area gross profits to continue to progress upwards due to the improvement in the labor mix. As we've talked about in the past, the rate of growth in the software products area is going to start to contribute some leverage. In the products area, I would expect the gross margins to be.
Speaker Change: I do expect our services area.
Speaker Change: Gross profits to continue to progress upwards.
Speaker Change: Improvement in labor mix is going to clearly help and.
Speaker Change: As we've talked about in the past the.
Speaker Change: The rate of growth in the software products area is going to start to contribute some leverage to the overall gross margins in the services area.
Speaker Change: In the products area I would expect the gross margins to be.
Speaker Change: More.
Kerry A. Shiba: Iteris Inc., Ryan Sigdahl, Allen Klee, Kerry Shiba, Timothy Moore, Aditya Dagaonkar, Todd, in contrast to a quarter by quarter introduction of the new products that Joe has mentioned, we would expect. Okay, great. Thanks for all that. I'll jump back.
Speaker Change: Stable in relative terms, but <unk>.
Speaker Change: Directionally small tick upwards as we progressed throughout the year, especially if you're looking first half to second half in contrast to a quarter by quarter progression. There I think the introduction of the new products that Joe has mentioned, we would expect will help.
To help provide.
The incremental improvement in the gross profit there.
Speaker Change: Okay, great. Thanks for all that.
Speaker Change: I'll jump back in the queue.
Jeffrey Wallin Van Sinderen: Thank you. Your next question is coming from Mike Latimore from Northland Capital Markets. All right, thanks, and yes.
Speaker Change: Thank you. Your next question is coming from Mike Latimore from Northland Capital markets. Your line is live.
Michael James Latimore: He wraps up on a great Cisco 24-year nice profit improvement. I just saw the service growth. It ticked up really well sequentially, and I know it's from the talent acquisition, but I guess, Kerry, do you think that can continue to grow? Yeah, I think the fourth quarter was very...
Speaker Change #100: Alright, thanks, Yeah, congrats on that.
Speaker Change #101: Great fiscal 'twenty four year nice profit improvement.
Speaker Change #100: Yeah.
Speaker Change #102: On the just on the service gross margin.
Speaker Change #102: It ticked up really well sequentially.
Speaker Change #103: And I know, it's from a talent acquisition, but I guess.
Terry do you think that can continue to grow from there.
Terry: Yes, I think.
Speaker Change #105: Fourth quarter was very strong and there's no doubt about it and I think as we move into the first quarter of fiscal 'twenty five.
Kerry A. Shiba: I hope you enjoyed the video. I'll see you next time. I think as we move into the first quarter of fiscal 25, we may be even down a small tick compared to the unusually strong fourth quarter, but from that point forward, I think we should continue to see progression as we march through the rest of the year. So fourth quarter to first quarter, I would be more conservative on that, but then second quarter on out, I think the improvement in labor... All right, great. Thanks, Tom.
Speaker Change #106: I would expect the services gross margins to be maybe even down a small tick compared to the unusually strong fourth quarter, but from that point forward I think we should continue to see progression.
Speaker Change #106: As we March through the rest of the year, so fourth quarter to first quarter.
Speaker Change #106: I would.
Speaker Change #107: It would be more conservative on that but then second quarter on out I think the improvement in labor mix should continue to bear fruit for us progressively.
Alright, great that makes sense.
Michael James Latimore: And then on the last earnings call, when you were talking about bookings for the fourth quarter, you said there might be potentially a $10 million deal. I guess, does that close in the quarter, or is that still in the pipeline? Yeah, so I'll answer that, Mike. So, yeah, that one of those did close.
Speaker Change #107: And then.
Speaker Change #108: On the last earnings call. When you were talking about bookings for the fourth quarter, you said there might be potentially a 10 million dollar deal.
Speaker Change #109: I guess did that close in the quarter or is that still in the pipeline.
Joe Bergera: That was a CTA deal, which was just under 10 million. I will say that we are tracking a number of other very large orders of similar magnitude to the CTA contract. It, They continue to kind of move around, you know, so the timing is somewhat unpredictable, but you know, we do expect to close them in the relatively near future. There was the possibility, when we provided our comments on our last earnings call, that in addition to the OCTA transaction, there may be another, which could have closed in the March 31 period, but you know, obviously, it didn't. We are again continuing to track that opportunity as well as others that, you know, we do expect to close in the relatively near future. What do you think about America?
Michael James Latimore: Yes, so I'll answer that Mike So yes.
Michael James Latimore: One of those did close that was a cta deal, which was just under $10 million.
Michael James Latimore: I will say that we are tracking.
Speaker Change #111: A number of other very large.
<unk>.
Speaker Change #111: Orders.
Speaker Change #111: Similar magnitude to the Oc Ta contract.
Speaker Change #111: It.
They continue to kind of move around.
Speaker Change #111: The timing is somewhat unpredictable but.
Speaker Change #111: We do expect to close them in the relatively near future.
Speaker Change #112: There was the possibility when we provide.
Speaker Change #112: Provided our comments on our last earnings call that in addition to the Oce Ta transaction there may be another which could have closed in the March 31 period, but obviously it didn't.
Speaker Change #112: And again, we are continuing to track.
Speaker Change #112: That that opportunity as well as others that we do expect to close in the relatively near future.
Speaker Change #112: Yeah, when you think about it.
Speaker Change #112: Hmm mm.
Joe Bergera: I'm sorry, but when you think about the momentum of Booking's business, last year had a lot of lumpiness in it, to take our total bookings for the year to $180,000. That's about an average of about $45 million per quarter. There was only one quarter out of four last year that Iteris Inc. Iteris Inc., quite lumpy so when you look at the first quarter of this year, Bye, mentioned more than once, perfect foresight on the timing of some of these, but to have some timing.
Speaker Change #113: I'm sorry, when you think about momentum on bookings momentum in the business last year had a lot of lumpiness in it.
Speaker Change #114: If you take our total bookings for the year of 181 or 2 million. That's about an average of about 45 million per quarter.
Speaker Change #114: There was only one quarter out of four of last year that was close to that average so it was either higher or lower but but quite lumpy. So when you look at the first quarter of this year.
Speaker Change #114: Tough comp against the first quarter of last year again, because of the high and low amplitude that occurred quarter to quarter.
Speaker Change #114: But.
Speaker Change #115: As we've mentioned more than once Mike is we keep looking at some of these larger deals I wish we had perfect foresight on the timing of some of these but to have.
Speaker Change #115: Some timing.
Speaker Change #115: Effective here is something to be expected.
Joe Bergera: Yeah, no, it makes sense. And among those larger deals in the pipeline, do they skew more towards product? It's actually a mix of both, Mike. And then, did you say that you expected NDR to be 110% this year? I didn't quite understand that.
Speaker Change #116: Yeah, no it makes sense makes sense.
Speaker Change #116: Among those larger deals in the pipeline I.
Speaker Change #116: <unk> product or service.
Speaker Change #116: It's actually a mix of both Mike.
Speaker Change #117: Got it.
Speaker Change #117: Okay.
Michael James Latimore: Got it and then did you say that you expect <unk> to be 110% this year I didn't quite get that.
Joe Bergera: Correct, yeah, our software NDR was 105% in Fiscal 24, and we expect that to improve to about 110% in Fiscal 25. And then, just curious about the Telenab announcement, can you sort of just highlight why you won that deal and what the differentiation was? Yeah, sure. It really came down to data quality.
Speaker Change #118: Correct, Yeah, our software.
Speaker Change #118: N D. R was 105% in fiscal 'twenty, four and we expect that to improve to about 110% in fiscal 'twenty five.
Speaker Change #118: Okay great.
Speaker Change #119: Very good and then just curious on the Telenet announcement can you sort of just highlight.
Speaker Change #119: Why you won that deal and you know what.
Speaker Change #120: The differentiation.
Joe Bergera: And as we've talked about, we think we have a very unique, very valuable, highly curated data set on mobility. And, you know, whenever we do a transaction with a commercial entity, they do extensive, you know, comparisons to other data providers. And, you know, almost always, when they put us and other vendors through that detailed data evaluation, we always end up coming out on top.
Speaker Change #121: Yeah sure it really came down to data quality.
Speaker Change #121: And.
Speaker Change #122: As we've talked about we think we have a very unique very valuable highly curated dataset mobility dataset and.
Speaker Change #123: Whenever we do a transaction with a commercial entity that they do.
Speaker Change #123: Extensive comparisons to other data providers.
Speaker Change #123: And.
Speaker Change #123: You know almost always.
Speaker Change #123: When when they put us.
Speaker Change #123: US and other vendors through that detailed.
Speaker Change #123: And data evaluation, we we always end up coming out on top.
Joe Bergera: And again, that's because, you know, our mobility data sets, we draw upon a variety of different data sources, unlike a lot of other vendors that really are largely relying on a single source. And then we go through a lot of effort to, you know, validate that data and ground truth test it. And so, we're not surprised when, you know, after... whenever we do a side-by-side comparison, we come out on top. But anyway, that, at the end of the day, that's why we won that deal. It was certainly not a price.
Speaker Change #123: And again, that's because you know our mobility data sets you know are we draw upon a variety of different data sources. Unlike a lot of other.
Speaker Change #123: Vendors that really are largely relying on a single source.
Speaker Change #123: And then we go through a lot of effort.
Speaker Change #123: Validate that data and no ground to test it and so we're not surprised when you know app.
Speaker Change #124: Whenever we do like side by side comparison, we come out on top but anyway that at the end of the day that the.
Speaker Change #124: That's why we won that deal was certainly not on price it was due to data quality.
Joe Bergera: It was due to data quality. Okay, great. Very good. Thanks very much.
Okay great.
Speaker Change #125: Thanks, very much sure. Thank.
Michael James Latimore: Thank you. Your next question is coming from Tim Moore from EF. Your line is live. Thanks, and it was nice to see the new orders up 20 percent. That was impressive, Joe and Kerry.
Speaker Change #125: Thank you. Your next question is coming from Tim Moore from E. F. Hutton Your line is live.
Timothy M. Moore: Thanks, and it was nice to see the new orders up 20% that was impressive John Kerry.
Timothy M. Moore: I was just wondering, maybe, you know, I know Joe has touched on this twice. Can you talk a little bit more about the Tuesday news announcement by Simutomo Electric Industries to double the pedestrian detection addressable market and, you know, what kind of enhanced features are maybe coming over from its own Japanese safety system? Yeah, sure. In the United States, we're not actually particularly advanced in terms of pedestrian detection.
Speaker Change #127: No I was just wondering maybe you know I know Jim touched on this twice can you talk a little bit more about the Tuesday, and the Sumitomo Electric industries news announcements to double the pedestrian detection adjustable market.
Speaker Change #127: And you know what kind of enhanced features are maybe coming over from its own Japan safety success.
Speaker Change #128: Yeah sure so.
Speaker Change #129: In the United States.
Speaker Change #129: We're.
Speaker Change #129: Actually.
Speaker Change #129: Not particularly advanced in terms of a pedestrian detection I think a lot of you guys. If you are.
Joe Bergera: I think a lot of you guys, if you're, you know, just in your own personal lives, you know, you, it's probably not unusual for you when you're standing at an intersection. You know, you'll see that there's a push button at that intersection, you know, which you press to alert the signal controller of your presence. There are a lot of problems with that very outdated approach. In the Japanese market, where there is just an unbelievably high level of pedestrian traffic. In fact, Japan is known for having more pedestrian traffic than any other country.
Speaker Change #129: And in your own personal lives.
Speaker Change #129: It's probably not unusual for you and you're standing at an intersection.
Speaker Change #129: Youll see that Theres, a push button at that intersection which youll pressed it.
Speaker Change #129: Alert the signal controller of your presence.
Speaker Change #129: There are a lot of problems with that very outdated approach.
Speaker Change #129: In the Japanese market, where theres, just an unbelievably high level of pedestrian traffic in fact, Japan is known for having.
Speaker Change #129: More pedestrian traffic then.
Joe Bergera: They recognize that the push button is just not an adequate device. Sumitomo has invested over the course of a number of years in a very, very advanced radar sensor, which can be used for very, very precise pedestrian detection. I don't want to go into all the details, but it's a very difficult thing because you need to understand intent, speed, and trajectory of pedestrian movement.
Speaker Change #130: Any other country.
Speaker Change #130: They have they recognize that the push button is just it's just not an adequate device and so sumitomo's investing over a course of a number of years and are very very advanced radar sensor, which can be used for.
Kerry A. Shiba: Very very precise pedestrian detection and I don't want to go into all the details, but it's a very difficult thing because you need to understand like intent.
Sumitomo: The speed and trajectory of pedestrian movement and you also need to be able to distinguish unique individuals' when you've got like a large group of people standing at intersections. So it's very very complex anyway, Sumitomo's developed what we believe to be really.
Joe Bergera: You also need to be able to distinguish unique individuals when you've got a large group of people standing at intersections, so it's very, very complex. Anyway, Sumitomo has developed what we believe to be the best in class, I mean on a worldwide basis, pedestrian detection sensor. We've been in discussions with Sumitomo for some time about introducing that sensor in the US market. We're integrating that into our Clear Mobility Platform and into our detection systems, which will be deployed at intersections with this additional sensor, which we think will dramatically improve intersection detection and pedestrian detection at signalized intersections.
Sumitomo: The.
Sumitomo: Best in class and I mean on a worldwide basis pedestrian detection sensor we'd been in discussions with Sumitomo for some time about introducing that sensor in the U S market.
Sumitomo: We're integrating that into our clear mobility platform and into our detection systems, which will be deployed at intersections with this additional sensor, which we think will dramatically improve intersection detection and pedestrian detection at signalized intersections, but that same device can also be deployed at nine.
Joe Bergera: This device can also be deployed at non-signalized intersections, including mid-block crossings, which are more and more. I'm sure a lot of you in your own personal lives will see that they're like lights and other indicators at these various mid-block crossings, which get lit up when pedestrians are present. And again, today, those are only activated when someone actually pushes the button. So with this new sensor, we'll be able to do that without requiring people to activate the sensor, which is going to really revolutionize the way pedestrian detection is done in the United States.
Sumitomo: Signalized intersections, including like mid block crossings, which are.
Speaker Change #132: More and more.
Speaker Change #133: I'm sure a lot of you in your own personal lives, we'll see that they're going to they're like lights and other indicators at these various midblock crossings, which get lit up when pedestrians are present and again today those are only being activated when someone actually pushes the button and so with this new sensor will be able to do that without.
Speaker Change #134: Out requiring people to activate the sensor, which is going to really revolutionize the way pedestrian detection occurs in the United States with respect to why does that increase you know that.
Joe Bergera: Now, with respect to why does that increase our addressable market, it's because our intersection detection products today are only sold at intersections that have signals. But this new device is applicable at other intersections, which may not have traffic lights and also at mid-blocks as well. And so it significantly enhances the total number of intersections where we can deploy our technology, and that results in a significant increase in our addressable market. That was a great color; it was nice to paint that picture.
Speaker Change #134: Our addressable market. It's our intersection detection products are today are only sold into intersections that have signals, but this new device is applicable at other intersections, which may not have traffic lights and also a mid blocks as well and so significantly enhances that.
Speaker Change #134: Total number of intersections, where we can deploy our technology and that's what results in a significant increase in our addressable market.
Speaker Change #135: No that was great color and it was nice to paint that picture.
Timothy M. Moore: I think I grasped that pretty well. You know, I was just wondering, you know, in the U.S., what states, you know, like Arizona, are you expecting to maybe enter more over the next year? You mentioned that wind. Yeah, sure.
Speaker Change #136: Grasp that pretty good and I was just wondering you know.
Speaker Change #137: And then you asked you know what states like Arizona.
Speaker Change #138: Speaking to maybe enter more over the next year, you mentioned that win.
Joe Bergera: Well, again, it kind of depends on the specific offer. So our detection products, you know, have significant market share, all on the West Coast and throughout the Sun Belt. And so, as we've talked about previously, there are lots of opportunities for us to expand, you know, our penetration into the Northeast and the central regions, so that's a big focus for us. With respect to our consulting services, there's sort of still yet a different, you know, footprint.
Speaker Change #139: Yeah sure well.
Speaker Change #140: Again, it kind of depends on the specific offer so our detection products.
Speaker Change #140: Have significant market share.
Speaker Change #140: On the West coast and throughout the Sun belt, and so as we've talked about previously there are lots of opportunities for us to expand our penetration into the northeast and the central region. So that's a big focus for us.
Speaker Change #140: With respect to our consulting services are sort of still yet a different footprint.
Joe Bergera: Our software products are different, and those are sold on a – or are easy to sell on a national basis. They don't require that we actually have consultants like boots on the ground like our consulting services and sometimes our detection products do. So that's more evenly distributed across the country.
Speaker Change #140: Our software products are different and those are sold on it.
Speaker Change #140: Z to sell on a national basis. They don't require that we actually have consultants like boots on the ground like our consulting services, sometimes our detection products do so that's more evenly distributed across the country, but anyway. So again it kind of depends on the specific products, but I'd say in general geographic areas that we're very focused on trying to.
Joe Bergera: But anyway, so again, it kind of depends on the specific products, but I'd say, in general, geographic areas that we're very focused on trying to continue to develop would still be the southwest, where there's significant growth and substantial opportunity for us. The Florida market, where we have a substantial presence, but it's a massive market. And then markets where we're underserved or underpenetrated today, I'd say it would be the central region in the northeast.
Speaker Change #140: Turning to develop would still be the southwest where theres significant growth and substantial opportunity for us the Florida market, where we have a substantial presence, but there is it's a massive market and then markets, where we're underserved underpenetrated today, I'd say would be the central region in the northeast and we are pursuing a variety of actions to incur.
Joe Bergera: And we're pursuing a variety of actions to increase our presence in those markets, including continuing to optimize our distribution channels, putting – you know, putting in a lot of effort on the street, and then also entering into various marketing arrangements or co-marketing arrangements with local firms that have a local presence but lack the breadth of capabilities that we have, and so we see that as an opportunity for us to access those markets through these unique local partnerships that we That's terrific!
Speaker Change #141: Our presence in those markets, including continuing to optimize our distribution channels putting.
Speaker Change #141: Feet on the Street, and then also entering into various marketing arrangements or co marketing arrangements with local firms that have like a local presence, but lacked the breadth of capabilities that we have and so we see that as an opportunity for us to access those markets through these unique local partnerships that we're developing.
Joe Bergera: And my last question is regarding that deployment in the Philippines you announced last month. Are there any more countries or international cities part of that USTDA-funded ITS modernization project that you can jump into to win, maybe over the next few quarters? Yeah. Yeah, great question.
Speaker Change #142: That's terrific and my last questions regarding.
Speaker Change #143: Regarding that deployment in the Philippines, you you announced last month are there any more countries or international cities part of that U S. TDA funded Ics monetization project that you can jump into to win maybe over the next year, Yeah, Yeah, Great question and absolutely yes.
Joe Bergera: And absolutely, yeah. And by the way, what all this stems from, as we've talked about, Iteris originally developed the nation's ITS architecture, which then became the Connected Vehicle Reference Information architecture and is now ARCIT, the Architecture Reference for Cooperative Intelligent Transportation. That standard is not only a national standard, but it's effectively become a global standard.
By the way what all this stems from as we've talked about we are terrorists originally developed the nation's <unk> architecture, which then became the connected vehicle reference information architecture and is now our get the architecture referenced a cooperative intelligent transportation.
Speaker Change #143: That standard is not only a national standards, but it's effectively become a global standard and as a result, <unk> has really world a worldwide reputation our recognition as a leading vendor of Ics planning capabilities and.
Joe Bergera: And as a result, Iteris has really a worldwide reputation or recognition as a leading vendor of ITS planning capabilities. And therefore, we're seeing a lot of inbound interest from various international markets in USTDA for providing similar consulting services to those foreign countries as we've been delivering here in the U.S. for some time. And as a result of that inbound interest, we've been working with the U.S. Trade Development Agency to create a contract mechanism to make it easy for these foreign countries to procure our services.
Speaker Change #144: Therefore, we're seeing a lot of inbound interest from various international markets and us.
Speaker Change #144: Providing similar consulting services to those foreign countries as we've been delivering here in the U S for some time.
Speaker Change #144: And as a result of that inbound interest we have been working with the U S trade development agency to us to create a contract Mac mechanism to make it easy for these foreign countries to procure our services.
Joe Bergera: We would expect to continue to see more interest from various international entities, and we would expect to continue to announce more contracts like that. Thanks, and that's it for my questions. Thank you. Once again, everyone, if you have any questions or comments, please press star, then 1 on your phone. Your next question is coming from Allen Klee from Maxim Group. Your line is live. Yes, hello.
Speaker Change #144: We would expect to continue to see more interest from various international entities and we would expect to continue to announce more contracts like that.
Speaker Change #145: Thanks, and that's it from my questions great.
Speaker Change #146: Thank you once again, everyone. If you have any questions or comments. Please press star then one on your phone.
Speaker Change #147: Your next question is coming from Allen Klee from Maxim Group. Your line is live.
Speaker Change #148: Yes Hello.
Allen Robert Klee: For your as-a-service offerings, what would you point to as kind of the driver for increased attach rates? Um, yeah, so the it depends. But I'd say first of all, in general, we're just getting better at cross selling. You know, our market historically has been super fragmented, and most agencies have just been in this model of buying like point solutions. And we're trying to disrupt that model.
Allen Klee: For your as a service offerings.
Allen Klee: What would you point to as kind of the driver.
Speaker Change #150: <unk> increased attach rates.
Speaker Change #150: Yeah.
Speaker Change #150: Yes, so the it.
Speaker Change #151: It depends but I'd say first of all a ball in general we're just getting better at cross selling.
Speaker Change #151: Our market historically has been super fragmented and most agencies have just been in this model of buying point solutions.
Speaker Change #151: And we're trying to disrupt that model N.
Joe Bergera: And you know, I think we've gotten pretty effective at offering compelling value propositions and also, frankly, overcoming objections, which has allowed us to increasingly sell these larger integrated solutions where we're bundling various capabilities. We expect to continue to do that. The great thing about our market, our public sector market, as opposed to our private sector market, in the public sector, our agency customers don't compete with one another, and so they're more than happy to share best practices with one another.
Speaker Change #151: And I think we've gotten pretty effective at offering.
Speaker Change #151: At compelling.
Speaker Change #151: Compelling value proposition and also frankly overcoming objections.
Speaker Change #151: And which has allowed us to increase increasingly sell these like larger integrated solutions, where we're bundling various capabilities.
Speaker Change #152: We expect to continue to do that the great thing about our market is our public sector market as opposed to a project or in the public sector. Our agency customers don't compete with one another and so there are more than happy to share best practices with one another and so as we're successful and.
Joe Bergera: As we're successful in executing on this model and then demonstrating value to those agencies, those agencies become great customer references for us, and so we see other agencies follow suit. We think we're really at the early stages in terms of the development of this alternative procurement model. That's it.
Speaker Change #152: Executing on this model and then demonstrating value to those agencies those agencies become great customer references for us and so we see other agencies follow suit. So we think we're really.
Alan: Early stages in terms of the development of this kind of alternative procurement model. That's at the end of the day Alan It really comes down to the fact that we've just gotten a lot better at articulating the value proposition to their customers. Our customers are responding to that and it's beginning to snowball to our benefit.
Allen Robert Klee: At the end of the day, Allen, it really comes down to the fact that we've just gotten a lot better at articulating the value proposition to our customers. Our customers are responding to that, and it's beginning to snowball to our benefit. And then just a small question, but related to two things you said about costs during the quarter or, well, one of the things you said during the past fiscal year that you had a negative impact from adjusting to data contracts, but that will be positive going forward. I was just trying to understand that a little better. If you adjusted them to lower the contracts, why did it have a negative impact?
Speaker Change #154: Thank you and then just.
Speaker Change #154: Small.
Speaker Change #155: But related to two things you said about costs during the quarter.
Speaker Change #155: Well one of the things you said it during the past fiscal year that you had a negative impact from adjusting to data contracts, but that will be a positive going forward.
Speaker Change #156: Just trying to understand that a little better.
Speaker Change #157: If the contract if you adjusted them to lower contracts.
Speaker Change #157: Why did why was it a negative impact and then the second thing.
Speaker Change #157: Litigation costs related to an older lawsuit.
Joe Bergera: And then the second thing, litigation costs related to an older lawsuit. How do you think about how long that's going to last? Thank you. Yeah, sure. So the data cost, the background there is that we had an agreement with one company called WeJo and another one called Autonomo for connected vehicle data. Both of those companies were D-SPACs. They had very interesting business models, and we, you know, entered into agreements – we're probably some of their earliest customers – and entered into agreements with them to get access to this connected vehicle data. Ultimately, both of those businesses went bankrupt.
Speaker Change #158: How do you think about how long that's going to last for thank you.
Joe Bergera: Because they were relatively early stage businesses and we were kind of their first marquee customer, we were able, generally, to negotiate sort of preferential pricing with them, at least for the first 12 to 24 months. Over time, there would have been price escalations in those original contracts, but as it turns out, they both entered bankruptcy, were unable to continue to provide mobility data to us, so we went into the market and we entered into agreements with alternative providers, including with Arity, but because of the circumstances, we weren't able to negotiate as favorable pricing up front with these other entities, but it was an all-you-can-eat multi-year agreement where we were able to lock in pricing, so there was a negative impact to our cost of goods sold in fiscal 24, but in fiscal 25, we'll benefit from the fact that we've got this all-you-can-eat fixed license agreement with alternative providers, and so that's the dynamic that Kerry was referring to.
Speaker Change #159: Yeah sure. So the data cost the background there is that we had.
Joe Bergera: And that will continue to benefit us going forward because these are multi-year agreements with fixed costs, which is unlike the prior agreements that we had. And then with respect to the litigation costs, Kerry, maybe I'm going to punt that to you and see if you would mind answering Alan's question. Um, Allen, I'm sorry if I missed part of the question. The cost we incurred this year was roughly $2.8 million.
Speaker Change #159: In agreement with.
Speaker Change #159: One company called Huizhou and another one called autonomy for connected vehicle data both of those companies were dis backs.
Speaker Change #159: They had very interesting.
Speaker Change #159: Yeah.
Speaker Change #159: Business models.
Speaker Change #159: And we.
Speaker Change #159: Entered into agreement were probably some of their earliest customers and entered into agreements with them to get access to this connected vehicle data.
Speaker Change #159: Ultimately both of those businesses went bankrupt.
Speaker Change #159: Because they were relatively early stage businesses and we were kind of their first marquee customer we were able to generally to negotiate sort of preferential pricing with them at least for the first 12 months to 24 months over time, there would have been price escalations in those original contracts, but as it turns out.
Speaker Change #159: They both entered bankruptcy were unable to continue to provide mobility data to us. So we went into the market and we entered into agreements with alternative providers, including with arity.
Speaker Change #159: But because of the circumstances, we werent able to negotiate as favorable pricing upfront with.
Speaker Change #159: With these other entities, but it was an all you can eat multiyear agreement, where we're able to lock in pricing. So there was a negative impact to our cost of goods sold in fiscal 'twenty four but in fiscal 'twenty five we'll benefit from the fact that we've got this.
Carry: All you can eat fixed license agreement with alternative providers and so that's the dynamic that carry was referring to.
Carry: And that will continue to benefit us going forward again, because these are multiyear agreements with fixed cost which was unlike the prior agreements that we had.
Speaker Change #161: And then with respect to the litigation cost correct me, if I'm going to punt that to you and see if you could if you wouldn't mind answering Allen's question.
Speaker Change #161: So.
Speaker Change #162: And I'm, sorry, if I missed part of the question the costs, we incurred this year was roughly $2.8 million.
Kerry A. Shiba: The cadence going into next year, based on our current expectation of the trial..., is going to be sort of going into the fall of next year. We would expect... There is expected to be a spike in, probably an RQ-2, as all the pre-trial preparation. Iteris Inc. would hope that, as a result of the trial. And Kerry, I just want to add for the benefit of people who have been following some of our prior comments regarding this trial, we had previously anticipated that the trial would actually occur in April. And because of the court's calendar being very full, it was pushed to September.
Speaker Change #162: The cadence going into next year.
Speaker Change #162: Based on our current expectation of the trial date, which is going to be sort of going into the fall of next year, we would expect.
Speaker Change #162: There to be a spike in expenses, probably in our Q2.
As all of the pre trial preparation and filings and everything else occurs.
Speaker Change #162: And we certainly would hope that as a result of the trial.
Speaker Change #162: You know we can put this thing in the rearview mirror favorably for us.
Speaker Change #163: And can I just add for the benefit of people who have been like following some of our prior comments regarding this trial. We had previously anticipated the trial would actually occur in April.
Speaker Change #163: Because of the court's calendar being very full it was pushed the September. Unfortunately, when you push out litigation it seems to create opportunities for lawyers to find like new motions and other things that they can do which ends up sort of increasing that cost. So obviously our desire.
Joe Bergera: Unfortunately, when you push out litigation, it seems to create opportunities for lawyers to find new motions and other things that they can do, which ends up sort of increasing the cost. So obviously, our desire is to get to trial as quickly as possible. And as Kerry said, put this behind us. But anyway, just in case anyone remembers any prior comments that we made, the trial date did move from April to the current estimated trial date, which is now September. Great. Thank you very much.
Speaker Change #163: Here is to get to trial as quickly as possible and as Carey said put this behind us, but anyway that just in case anyone remembers any prior comments that we made the trial date did move from April to the current estimated trial date is now September.
Speaker Change #164: Great. Thank you very much.
Operator: Thank you. Mr. Brugera, there are no more questions from the floor... Would you like to address any investor questions before providing your closing remarks? Yes, Operator.
Speaker Change #164: Thank you Mr. Boucher there are no more questions from covering analyst would you like to address any investor questions before providing closing remarks, yes. Thank.
Joe Bergera: I would like to because we actually did receive one investor question. And that question is, how is Iteris positioned to work productively with Google's Green Light initiative? And also, can you comment on any strategic positions and collaboration opportunities with Google? Which is a great question.
Speaker Change #165: Operator, I would like to because we actually did receive one investor question.
Speaker Change #165: And that question is how is <unk> positioned to work productively with Google's screen Light initiative and also can you comment on any strategic position in collaboration opportunities with Google, which is a great question for those of you guys, who don't know theres been some recent.
Joe Bergera: For those of you guys who don't know, there have been some recent media reports and stories regarding Google Green Light. So anyway, I would just say that we have ongoing collaboration with various stakeholders, actually across all of Alphabet, including Google. And I'd characterize that collaboration as very constructive and very complementary. Based on our collaboration with Google, but also based on our dialogue with agencies, including some that are referenced in the reporting on Google Greenlight, I just want to say that, you know, we understand that Google Greenlight is a lab project within Google.
Joe Bergera: It is not mainstream. Google Greenlight is used occasionally for research purposes associated with signal timing studies by really only a handful of agencies, and most of them, if you look at the reporting or do any actual research on it, you're going to see that most of them are international. To be clear, a signal timing study is a planning activity, and it's very, very different from signal operations, and it's especially different from intersection detection and signal control.
Media reports some stories regarding Google Greenlight.
Speaker Change #165: So anyway, I would just say that we've been.
Speaker Change #165: We have ongoing collaboration with various stakeholders actually across all of alphabet, including Google and I'd characterize that collaboration is very constructive and very complementary.
Joe Bergera: Google Greenlight is not a production-ready commercial solution, and just so everybody knows, we never encounter the product in any competitive procurement. That said, we do feel that the concept of Google Greenlight does validate the benefits of our ClearGuide SignalTrends software in particular, but I want to note that SignalTrends is production-ready. It's a commercial solution, and it's being deployed at thousands of intersections. Additionally, I want to note that the recent stories about Google Greenlight replacing traffic signals, while they're a kind of titillating, those stories conflate technical and operational concepts, and they represent a basic misunderstanding of actual signal operations.
Speaker Change #165: Based on our collaboration with Google, but also based on our dialog with agencies it including some that are referenced in our reporting on Google Green Light I just wanted to say that we understand that Google Green light is a lab project within Google It is not mainstream.
Speaker Change #165: <unk> Green light is used occasionally for research purposes associated with signal timing studies by really only a handful of agencies and most of them. If you look at our reporting or do any actual research on it youre going to see that most of them are international.
Speaker Change #165: To be clear signal timing study is a planning activity, it's very very different from signal operations, and it's especially different from intersection detection and signaled control.
Speaker Change #165: Go Green light is not a production ready commercial solution and just so everybody knows we never encounter the product in any competitive procurements.
Speaker Change #165: That said, we do feel that the concept of Google Green light does validate the benefits of our signal our clear guide signal trend software in particular, but I want to note. The signal trends is production ready, it's a commercial solution and it's being deployed at thousands of intersections.
Speaker Change #165: Additionally, I want to note that the recent stories about Google Green lie, replacing traffic signals out there like kind of titillating those stories conflate technical and operational concepts and they represent a basic misunderstanding of actual signal operations. So therefore my boss.
Joe Bergera: So, therefore, you know, my bottom line here is I want to make sure everybody understands that we do not see Google Greenlight as a competitive threat, and again, we're engaged in various collaboration opportunities across Alphabet, including Google, and we believe that the companies are highly complementary, not competitive. So anyways, having addressed that question, I also wanted to just kind of briefly talk about our Investor Relations Program. Just so everybody knows, we'll be participating in the Northland Virtual Investor Conference on June 25, 2024.
Speaker Change #165: Bottom line here is only make sure we understand that we do not see Google Green light as a competitive threat and again, we're engaged in various collaboration opportunities across alphabet, including Google and we believe that our companies are highly complementary not competitive.
Speaker Change #165: So anyway, having addressed that question I also wanted to just kind of briefly talk about our Investor Relations program I'm, just everybody knows who will be participating in the Northland Virtual Investor Conference on June 25, 2024, and so if you guys would like to speak to US. Please contact your Northland Securities Representative.
Joe Bergera: And so, if you guys would like to speak to us, please contact your Northland Securities representative. Additionally, we're planning to be engaged in various other investor outreach activities this summer, and there'll be more communication about that. And, of course, we're always happy to speak with investors should any of you have any questions for us. So please don't hesitate to contact us. Anyway, if we don't speak with you beforehand, we look forward to updating all of you again on our progress when we report our fiscal 2025 first quarter results in actually just a few weeks.
Speaker Change #166: Additionally, we are planning to be engaged in various other investor outreach activities. This summer and there'll be more communication coming about that and then of course, we're always happy to speak with investors should any of you have any questions for us. So please don't hesitate to contact us.
Speaker Change #166: And even if we don't speak with you beforehand, we look forward to updating all of you again on our progress when we report our fiscal 2025 first quarter results and actually just a few weeks so anyway with that we'll conclude today's call. Thank you everyone.
Joe Bergera: So anyway, with that, we'll conclude today's call. Thank you, everyone. Thank you, everyone. This concludes today's event. You may disconnect at this time and have a...
Speaker Change #167: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.