Iteris, Inc.

and welcome to the Iteris Fiscal First Quarter 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Todd Curley, MKR Group. Please go ahead, sir.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris' financial results for its 2022 Fiscal First Quarter into June 30, 2021. Joining us today are Iteris' president and CEO, Mr. Joe Bergera, and the company's CFO, Mr. Doug Groves. Following their remarks, we'll open the call for questions from the company's covering sell-side analysts. Although we invited investors to submit questions to the company in advance of the call for instructions in our press release dated July 22, 2021, we did not receive any written investor questions. Before we continue, we'd like to remind all participants that during the course of 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. Actual results may differ substantially from what is discussed today, and no one should assume that at a later date the company's comments from today will still be valid. Myterish refers you to the documents that the company files from time to time with the SEC, specifically the company's most recent forms 10-K, 10-Q, and 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any of the forward-looking statements. As always, you'll find a webcast replay of today's call in the investor relations section of the company's website at www.iteris.com. With that said, I'd now like to turn the call over to ITERIS's president and CEO, Mr. Joe Bergera. Joe?

Great. Thank you, Todd, and good afternoon to everyone. I appreciate all of you joining us today. Before we begin our regular earnings commentary, I want to remind everyone that on March 8, 2021, the board announced that ITERAS initiated a comprehensive review of strategic alternatives. We believe it would disadvantage our shareholders to impose an artificial deadline on this review, and at this time the review is still ongoing. While there are no material updates to share right now, I know that everyone is eager to understand the status, so I'll provide some color on the state of play. Our board has been highly engaged with the company's external financial, legal, and other strategic advisors to identify and assess a range of alternatives to enhance Iteris's value and market position. All of us have found it very interesting and constructive to conduct an independent assessment of our competitive environment, core competencies, marketplace dynamics, technology trends, and relevant public and private market valuations. This work has reinforced our view that we participate in a large and dynamic market, and Iteris is in a unique position to capitalize on opportunities ahead. We'll have more to say as we conclude the review and hope to be able to update you with our progress in the near future. In the meantime, we don't have anything to say beyond what we included in our prepared remarks, so we'd appreciate everyone keeping today's questions focused on our operational and financial performance. On a separate note, I want to remind everyone of two events that will impact the presentation of our results. First, we completed the sale of our agriculture and weather analytics segment to DTN LLC on May 5, 2020. As such, we're reporting the results of that segment as discontinued operations for all periods presented in today's earnings announcement. And I'll be discussing only our continuing operations for the remainder of this call. Second, on April 1, 2021, we reorganized Iteris to accelerate the development of our platform-enabled ecosystem, which we've branded the Iteris Clear Mobility Platform. Our new organization includes three product delivery teams, applications and cloud solutions, advanced sensor technologies, and mobility consulting solutions, all of which are supported by a new chief technology officer, and shared service teams responsible for sales, marketing, and support activities. We believe these organization changes will create various development efficiencies, increase our recurring revenue contribution, and accelerate the execution of our platform-enabled business strategy. Due to this new structure, we'll be reporting our results as a single reporting segment, which reflects that we've organized all of our product delivery activities around a single unified platform. With that background, let's discuss the results for the period ending June 30, 2021. So first of all, Iteris had a solid start to fiscal year 2022. The company reported record total revenue of $34.1 million in the first quarter of our new fiscal year, representing a 22% year-over-year increase. About $8.2 million, or 24%, of our total revenue was recorded as annual recurring revenue. In the first quarter, we also secured total net bookings of 36 million. That's a record bookings result for the company. About 10.1 million or 28% of our total net bookings will be recorded in the future as annual recurring revenue. Due to our record net bookings, we ended the June 30 period with record total ending backlog of 79.9 million, which is an 18% increase year over year. The company's record total revenue, record net bookings, and record ending backlog results reflect solid performance across virtually all product and service lines of business. In the interest of time, I'll take only a few minutes to provide some color on those products and service lines of business with particularly notable commercial or operational performance in the period, after which Doug will discuss our financial results in more detail. So let's review our product lines of business first. Our product revenue is composed of two components. One is products we develop and market. In other words, those products for which we operate as the original equipment manufacturer. And two, third-party products that we distribute, deploy, and we often integrate with our own products. Our fiscal 2022 first quarter product revenue was $18 million versus $14.4 million in the same prior year period. representing a 25% year-over-year increase. The sales of ITERAS products represented about $16.2 million, or 90% of total product revenue. And the sales of third-party products represented about $1.8 million, or the balance of our fiscal 2022 first quarter product revenue. For the period, we experienced exceptionally strong product sales in our central and eastern regions. And we've put a lot of effort over the last several quarters into enhancing our position in both these regions where we've been historically underpenetrated relative to other regions in which we operate across North America. Therefore, we're particularly pleased with our first quarter product sales result. The strong first quarter product sales performance, in our opinion, was due to two factors. One, excellent sales execution, which we would expect to continue to drive market share gains for the balance of fiscal 2022. And two, the continuous innovation across our product portfolio that enables us to continue to set the product performance standards for the industry. In the first quarter, we continue to extend our product performance lead. Some of the notable first quarter product innovations include, first, we validated and began deploying hundreds of our new spectra CV or spectra connected vehicle devices that enable infrastructure to vehicle or I to V connectivity via both DSRC and cellular communications across regions of California and Florida. This is an extremely important milestone because it establishes ITERAS as a highly credible participant in this new highly dynamic I2V communications product category and also enables us to capture and ingest valuable proprietary connected vehicle data in our Clear Mobility Cloud. Second, we began pilots of various connected vehicle applications that leverage both our new Spectra CV devices and Clear Mobility Cloud to address a number of critical safety use cases. Third, we completed the official launch of our next-generation radar-based detection product, which is branded as Vantage Radius Plus. Among other new innovations, Vantage Radius Plus offers 4D high-definition forward-fire radar up to 600 feet and further reinforces that Iteris is the new performance standard-bearer in radar as well as video detection, a market which we have created and have led for over a decade. Fourth, we began to deploy Vantage Radius in the highway market, which provides Iteris with exposure to a sizable new product category. Additionally, this positions us to capture and publish highly granular proprietary highway traffic flow data to clear Mobility Cloud for further monetization. Now let's discuss our service lines of business. We recognize two forms of service revenue. First, project-based revenue that is associated with our consulting activities. And second, annual recurring revenue from our software as a service solutions and from our managed services activities. Our fiscal 2022 first quarter services revenue was $16.1 million versus $13.6 in the same prior year period, representing an 18% year-over-year increase. About $7.8 million or 49% of our services revenue was project-based whereas about 8.2 million, or 51%, of our services revenue was annual recurring revenue. We continue to work very deliberately to increase the contribution of annual recurring revenue. There are a number of tactics that we're deploying. First, we're focused on increasing the adoption rate of our family of SaaS solutions. Second, bundling our SaaS solutions into our multi-year consulting projects. Third, developing and commercializing a portfolio of cloud-enabled managed services that leverage our SaaS solutions. And fourth, evolving our clear mobility platform to support new innovative platform-as-a-service and data platform-as-a-service offers that address emerging needs of both public agencies and commercial entities whose business models depend on mobility infrastructure. Given our strategic focus on annual recurring revenue, we're delighted to have achieved a key inflection point in the first quarter with our annual recurring revenue exceeding project-based revenue for the first time. As mentioned earlier, ARR now represents 24% of our total enterprise revenue. In the fiscal 2022 first quarter, we saw an increase in both the size and velocity of our sales pipeline for new services. We also seem to experience a modest reduction in the length of time between contract award and contract execution. And this is a really important metric for ITERIS because we're required to have a fully executed contract or task order in hand to record a service award as a booking. In the first quarter, we recorded 16.2 million in net services bookings, of which 60% 60% will be recognized as annual recurring revenue in future periods. Some of the notable first quarter services bookings include a seven-figure data platform as a service contract extension to provide traffic flow and incident data to a North American media company, a $2.4 million extension for a managed services contract with the San Francisco Bay Area Metropolitan Transportation Commission, Approximately 1.9 million in total task orders for our SAS-based mobility intelligence application, ClearGuide. Over 1 million in total task orders for our advanced traveler information systems that we brand as ClearRoute. About 900,000 task orders for our SAS-based commercial vehicle operations software. And approximately 600,000 in total task orders related to connected and automated vehicle planning and standards development. So overall, we had a great start to our fiscal year 2022 as demonstrated by strong sales execution and measurable progress against our platform-based business strategy. And with that, I'll turn the call over to Doug.