Adjusted EBITDA of $2.9 million, representing
an $8.1 million improvement year over year
Iteris, Inc. (NASDAQ: ITI), the global leader in smart mobility
infrastructure management, today reported financial results for its
fiscal 2024 second quarter ended September 30, 2023.
Fiscal 2024 Second Quarter Financial Highlights
- Record revenue of $43.6 million, up 11% year over year
- Gross margins of 37.3%, up 2,060 basis points year over year
due to successful supply chain improvement plan
- GAAP net income of $0.6 million, or $0.01 per share, a $7.9
million, or $0.18 per share improvement from the prior year
- Adjusted EBITDA of $2.9 million, an $8.1 million improvement,
consistent with GAAP net income improvement (see “Non-GAAP
Financial Measures and Reconciliation” below for important
information)
- Continued strong net bookings of $43.8 million, up 4% year over
year
- Notable new public- and private-sector contracts include:
- $9.5 million contract awarded by US Department of
Transportation to drive the development of the nation’s
architecture reference for cooperative and intelligent
transportation, including the definition of standards for
infrastructure to vehicle communications and vehicle
electrification
- Consulting contract awarded by global automotive OEM to conduct
North American Intelligent Transportation System market
assessment
- Record total ending backlog of $124.0 million, up 11% year over
year
- Ending cash and cash equivalents balances of $20.2 million on
September 30, 2023, which reflects total payments of $3.8 million
for the company’s annual performance bonuses
Fiscal 2024 First Half Financial Highlights
- Record revenue of $87.1 million, up 19% year over year
- Gross margins of 38.0%, up 1,510 basis points year over year
due to successful supply chain improvement plan
- GAAP net income of $2.7 million, or $0.06 per share, a $14.9
million, or $0.35 per share, improvement from the prior year
- Adjusted EBITDA of $6.9 million, a $14.6 million improvement,
consistent with GAAP net income improvement (see “Non-GAAP
Financial Measures and Reconciliation” below for important
information)
- Record net bookings of $96.9 million, up 14% year over
year
- Net cash flow of $3.9 million, reflecting earnings improvement
and strong working capital management
Management Commentary:
“Due to a combination of strong customer demand and solid
commercial execution, we are pleased to report record revenue of
$43.6 million and record total ending backlog of $124.0 million for
our fiscal 2024 second quarter,” said Joe Bergera, President and
CEO of Iteris. “Additionally, we are pleased with the successful
outcome of our supply chain improvement plan that drove a 2,060
basis point improvement in gross margins and an associated $8.1
million improvement in adjusted EBITDA year over year.
“Given the compelling capabilities of the Iteris ClearMobility®
Platform, we expect to continue to benefit from favorable trends in
smart mobility infrastructure management, including the adoption of
Cloud technologies, artificial intelligence, and Connected and
Autonomous Vehicles. Therefore, we continue to anticipate a
five-year organic revenue CAGR of approximately 14% and associated
improvements in our operating structure to drive adjusted EBITDA
margin expansion to approximately 16% to 19% consistent with our
Vision 2027 targets.”
Fiscal Year 2024 Third Quarter and Full Year Outlook
- Third quarter total revenue guidance in the range of $41.0
million to $43.0 million, representing growth of 3% year over year
at the mid-point of the guidance range, which accounts for a return
to typical seasonality and temporary federal budget
uncertainty
- Third quarter adjusted EBITDA margin guidance in the range of
4% to 6%, representing a significant year-over-year improvement
(see “Non-GAAP Financial Measures and Reconciliation” below for
important information) and reflective of seasonality and related
revenue mix expectations for the quarter
- Raising the low end of full-year total revenue guidance to a
range of $171.0 million to $175.0 million, representing organic
growth of 11% year over year at the mid-point of the guidance
range, which accounts for a return to typical seasonality and
temporary federal budget uncertainty
- Reiterating full-year adjusted EBITDA margin guidance in the
range of 7% to 9%, representing a significant year-over-year
improvement (see “Non-GAAP Financial Measures and Reconciliation”
below for important information)
- Reiterating full-year net cash flow guidance in the range of
$12.0 million to $16.0 million, driven by adjusted EBITDA
improvement and continued working capital management
GAAP Fiscal Year 2024 Second Quarter Financial
Results
- Total revenue in the second quarter of fiscal year 2024
increased 11% to $43.6 million, compared with $39.3 million in the
same quarter a year ago. This revenue growth was driven primarily
by increased demand for Iteris’ ClearMobility® Platform, in
particular its sensor products
- Operating expenses in the second quarter increased 17% to $15.8
million, compared with $13.5 million in the same quarter a year
ago
- Net income in the second quarter was approximately $0.6
million, or $0.01 per share, compared with a net loss of
approximately $7.4 million, or $(0.17) per share, in the same
quarter a year ago. The improvement was primarily attributable to
an improvement in gross margin, which was impacted in the prior
period due to supply chain constraints and resulting high raw
material costs
Non-GAAP Fiscal 2024 Second Quarter Results
In addition to results presented in accordance with generally
accepted accounting principles in the United States (“GAAP”),
Iteris (the “Company”) has included the following non-GAAP
financial measure: net income (loss) before interest, taxes,
depreciation, amortization, stock-based compensation expense,
restructuring charges, project loss reserves, other legal expenses,
and executive severance and transition costs (“Adjusted EBITDA”). A
discussion of the Company’s use of this non-GAAP financial measure
is set forth below in the financial statements portion of this
release under the heading “Non-GAAP Financial Measures and
Reconciliation,” along with a reconciliation of Adjusted EBITDA to
net income (loss).
Adjusted EBITDA in the second quarter of fiscal 2024 was
approximately $2.9 million, or 6.7% of total revenues, compared
with an approximate $5.2 million loss, or (13.1)% of total
revenues, in the same quarter a year ago. The improvement mirrors
the increase in GAAP earnings.
Earnings Conference Call
Iteris will conduct a conference call today to discuss its
fiscal 2024 second quarter results.
Date: Thursday, November 9, 2023 Time: 4:30 p.m.
Eastern time (1:30 p.m. Pacific time) Toll-free dial-in number:
877-545-0523 International dial-in number: +1 973-528-0016
Participant access code: 320838
If joining by phone, please call the conference telephone number
5-10 minutes prior to the start time. An operator will register
your name and organization. If you have any difficulty connecting
with the conference call, please contact MKR Investor Relations at
1-213-277-5550.
To listen to the live webcast or view the press release, please
visit the investor relations section of the Iteris website at
www.iteris.com.
A telephone replay of the conference call will be available
approximately two hours following the end of the call and will
remain available for one week. To access the replay, dial
+1-877-481-4010 (US Toll Free), or +1 919-882-2331 (International)
and enter replay passcode 49309.
About Iteris, Inc.
Iteris is the world’s trusted technology ecosystem for smart
mobility infrastructure management. Delivered through Iteris’
ClearMobility® Platform, our cloud-enabled end-to-end solutions
monitor, visualize and optimize mobility infrastructure around the
world, and help bridge legacy technology silos to unlock the future
of transportation. That’s why more than 10,000 public agencies and
private-sector enterprises focused on mobility rely on Iteris every
day. Visit www.iteris.com for more information, and join the
conversation on Twitter, LinkedIn and Facebook.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
This release may contain forward-looking statements, which speak
only as of the date hereof and are based upon our current
expectations and the information available to us at this time.
Words such as "believes," "anticipates," "expects," "intends,"
"plans," "seeks," "estimates," "may," "will," "can," and variations
of these words or similar expressions are intended to identify
forward-looking statements. These statements include, but are not
limited to, statements about the Company’s anticipated demand and
growth opportunities, conversion of bookings to revenue, the impact
and success of new solution offerings, the Company’s acquisitions,
our future performance, growth and profitability, operating
results, and financial condition and prospects. Such statements are
subject to certain risks, uncertainties, and assumptions that are
difficult to predict, and actual results could differ materially
and adversely from those expressed in any forward-looking
statements as a result of various factors.
Important factors that may cause such a difference include, but
are not limited to, federal, state and local government budgetary
issues, spending and scheduling changes, funding constraints and
delays, and impact related to the federal government debt ceiling
and; uncertainties regarding potential multiple negative impacts
that may occur in the future due to COVID-19; our ability to source
key raw materials in light of the current global economic and
supply chain situation, including data supplier Wejo’s appointment
of an administrator due to insolvency; the timing and amount of
government funds allocated to overall transportation infrastructure
projects and the transportation industry; risks related to our
ability to recruit, integrate and/or retain key talent; our ability
to replace large contracts once they have been completed; the
effectiveness of efficiency, cost, and expense reduction efforts;
our ability to successfully complete and integrate acquired assets
and companies; our ability to specify, develop, complete,
introduce, market and gain broad acceptance of our new and existing
product and service offerings; the potential unforeseen impact of
product and service offerings from competitors, increased
competition in certain market segments, and such competitors’
patent coverage and claims; any softness in the markets that we
address; adverse effects of the COVID-19 pandemic on our vendors
and our employees; and the impact of general economic and political
conditions and specific conditions in the markets we address, and
the possible disruption in government spending and commercial
activities, such as the COVID-19 pandemic, import/export tariffs,
terrorist activities or armed conflicts in the United States and
internationally. Further information on Iteris, Inc., including
additional risk factors that may affect our forward-looking
statements, as contained in our Annual Report on Form 10-K, our
Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K,
and our other SEC filings that are available through the SEC's
website (www.sec.gov).
ITERIS, INC.
UNAUDITED CONDENSED
BALANCE SHEETS
(in thousands)
September 30,
2023
March 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
20,161
$
16,587
Restricted cash
449
140
Trade accounts receivable, net
24,929
23,809
Unbilled accounts receivable
8,562
8,349
Inventories
10,781
10,841
Prepaid expenses and other current
assets
4,079
3,128
Total current assets
68,961
62,854
Property and equipment, net
1,325
1,297
Right-of-use assets
7,509
8,345
Intangible assets, net
9,968
10,190
Goodwill
28,340
28,340
Other assets
502
768
Total assets
$
116,605
$
111,794
Liabilities and stockholders’
equity
Current liabilities:
Trade accounts payable
$
14,942
$
12,943
Accrued payroll and related expenses
10,837
12,923
Accrued liabilities
5,654
5,453
Deferred revenue
7,322
6,720
Total current liabilities
38,755
38,039
Long-term liabilities
10,284
10,849
Total liabilities
49,039
48,888
Stockholders’ equity
67,566
62,906
Total liabilities and stockholders’
equity
$
116,605
$
111,794
ITERIS, INC.
UNAUDITED CONDENSED
STATEMENT OF
OPERATIONS
(in thousands, except per
share amounts)
Three Months Ended
September 30,
Six Months Ended
September 30,
2023
2022
2023
2022
Product revenues
$
23,398
$
20,788
$
47,056
$
37,169
Service revenues
20,165
18,471
40,052
35,757
Total revenues
43,563
39,259
87,108
72,926
Cost of product revenues
13,086
20,026
25,190
31,683
Cost of service revenues
14,213
12,682
28,851
24,533
Cost of revenues
27,299
32,708
54,041
56,216
Gross profit
16,264
6,551
33,067
16,710
Operating expenses:
General and administrative
6,344
4,978
12,145
11,405
Sales and marketing
6,236
5,674
12,526
10,872
Research and development
2,565
2,173
4,673
4,309
Amortization of intangible assets
651
651
1,302
1,319
Restructuring charges
—
—
—
707
Total operating expenses
15,796
13,476
30,646
28,612
Operating income (loss)
468
(6,925
)
2,421
(11,902
)
Non-operating income (expense):
Other income, net
48
117
247
94
Interest income (expense), net
2
(300
)
70
(332
)
Income (loss) before income taxes
518
(7,108
)
2,738
(12,140
)
Benefit from (provision for) income
taxes
33
(289
)
(62
)
(122
)
Net income (loss)
$
551
$
(7,397
)
$
2,676
$
(12,262
)
Net income (loss) per common share
Basic net income (loss) per share
$
0.01
$
(0.17
)
$
0.06
$
(0.29
)
Diluted net income (loss) per share
$
0.01
$
(0.17
)
$
0.06
$
(0.29
)
Shares used in basic per share
calculations
42,742
42,288
42,654
42,334
Shares used in diluted per share
calculations
43,713
42,288
43,677
42,334
ITERIS, INC.
Non-GAAP Financial Measures and
Reconciliation
In addition to results presented in accordance with GAAP, the
Company has included the following non-GAAP financial measure in
this release: net income (loss) before interest, taxes,
depreciation, amortization, stock-based compensation expense,
restructuring charges, project loss reserves, other legal expenses,
and executive severance and transition costs (“Adjusted
EBITDA”).
When viewed with our financial results prepared in accordance
with accounting principles generally accepted in the U.S. (“GAAP”)
and accompanying reconciliations, we believe Adjusted EBITDA and
the related financial ratio provide additional useful information
to clarify and enhance the understanding of the factors and trends
affecting our past performance and future prospects. We define
these measures, explain how they are calculated and provide
reconciliations of these measures to the most comparable GAAP
measure in the table below. Adjusted EBITDA and the related
financial ratio, as presented in this press release, are
supplemental measures of our performance that are not required by
or presented in accordance with GAAP. They are not a measurement of
our financial performance under GAAP and should not be considered
as alternatives to net income (loss) or any other performance
measures derived in accordance with GAAP, or as alternatives to net
cash provided by operating activities as a measure of our
liquidity. The presentation of these measures should not be
interpreted to mean that our future results will be unaffected by
unusual or nonrecurring items.
We use Adjusted EBITDA non-GAAP operating performance measures
internally as complementary financial measures to evaluate the
performance and trends of our businesses. We present Adjusted
EBITDA and the related financial ratio, as applicable, because we
believe that measures such as these provide useful information with
respect to our ability to meet our operating commitments.
Adjusted EBITDA and the related financial ratio have limitations
as analytical tools, and you should not consider them in isolation
or as a substitute for analysis of our results as reported under
GAAP. Some of these limitations include:
- They do not reflect our cash expenditures, future requirements
for capital expenditures or contractual commitments;
- They do not reflect changes in, or cash requirements for, our
working capital needs;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and Adjusted EBITDA does not reflect any
cash requirements for such replacements;
- They are not adjusted for all non-cash income or expense items
that are reflected in our statements of cash flows;
- They do not reflect the impact on earnings of charges resulting
from matters unrelated to our ongoing operations; and
- Other companies in our industry may calculate Adjusted EBITDA
differently than we do, limiting its usefulness as comparative
measures.
Because of these limitations, Adjusted EBITDA and the related
financial ratio should not be considered as a measure of
discretionary cash available to us to invest in the growth of our
business or as a measure of cash that will be available to us to
meet our obligations. You should compensate for these limitations
by relying primarily on our GAAP results and using Adjusted EBITDA
only as supplemental information. See our Unaudited Condensed
Financial Statements contained in this Press Release. However, in
spite of the above limitations, we believe that Adjusted EBITDA and
the related ratio are useful to an investor in evaluating our
results of operations because these measures:
- Are widely used by investors to measure a company’s operating
performance without regard to items excluded from the calculation
of such terms, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired, among other
factors;
- Help investors to evaluate and compare the results of our
operations from period to period by removing the effect of our
capital structure from our operating performance; and
- Are used by our management team for various other purposes in
presentations to our Board of Directors as a basis for strategic
planning and forecasting.
The following financial items have been added back to or
subtracted from our net income (loss) when calculating Adjusted
EBITDA:
- Income tax. This amount may be useful to investors because it
represents the taxes that might be payable for the period and the
change in deferred taxes during the period, and therefore could
reduce cash flow available for use in our business.
- Depreciation expense. Iteris excludes depreciation expense
primarily because it is a non-cash expense. These amounts may be
useful to investors because it generally represents the wear and
tear on our property and equipment used in our operations.
- Amortization expense. Iteris incurs amortization of intangible
assets in connection with acquisitions. Iteris also incurs
amortization related to capitalized software development costs.
Iteris excludes these items because it does not believe that these
expenses are reflective of ongoing operating results in the period
incurred. These amounts may be useful to investors because it
represents the estimated attrition of our acquired customer base
and the diminishing value of product rights.
- Interest income and expense. Iteris excludes interest income
and expense because it does not believe this item is reflective of
ongoing business and operating results. This amount may be useful
to investors for determining current cash flow. For the three and
six month ended September 30, 2022, interest expense includes
amortization of the remaining capitalized deferred financing costs
due to the termination of the Credit Agreement in the fiscal year
ended March 31, 2023.
- Stock-based compensation. These expenses consist primarily of
expenses from employee and director equity based compensation
plans. Iteris excludes stock-based compensation primarily because
they are non-cash expenses and Iteris believes that it is useful to
investors to understand the impact of stock-based compensation to
its results of operations and current cash flow.
- Other legal expenses. Iteris excludes legal expenses that it
believes are infrequent, unusual and not reflective of ongoing
operating results in the period incurred. These amounts may be
useful to our investors in evaluating our core operating
performance. We do not adjust for any ordinary course legal
expenses. For the three and six months ended September 30, 2023,
other legal expenses consist of costs related to a specific breach
of contract dispute for which the Company previously expected a
settlement to be reached, however, due to a change in facts and
circumstances that now point to a more protracted and costly
process, we included the legal costs of $0.6 million incurred
during the three months ended September 30, 2023, and in addition
included related expenses of $0.4 million incurred during the three
months ended June 30, 2023 in results for the six months ended
September 30, 2023. The Company believes that an outcome resulting
in a loss is remote.
- Restructuring charges. These expenses consist primarily of
employee separation expenses, facility termination costs, and other
expenses associated with Company restructuring activities. Iteris
excludes these expenses as it does not believe that these expenses
are reflective of ongoing operating results in the period incurred.
These amounts may be useful to our investors in evaluating our core
operating performance.
It is impractical to attempt to reconcile expected Adjusted
EBITDA to expected GAAP net income (loss) because many of the
adjustments are difficult to forecast, including stock-based
compensation because it depends on the price of our stock in the
future, which is difficult to predict. Reconciliations of
historical net income (loss) to Adjusted EBITDA and the
presentation of Adjusted EBITDA as a percentage of net revenues
were as follows:
Three Months Ended
September 30,
Six Months Ended
September 30,
2023
2022
2023
2022
(In Thousands)
Net income (loss)
$
551
$
(7,397
)
$
2,676
$
(12,262
)
(Benefit from) provision for income
taxes
(33
)
289
62
122
Depreciation expense
136
149
286
308
Amortization expense
787
804
1,570
1,626
Interest (income) expense
(2
)
300
(70
)
332
Stock-based compensation
872
696
1,396
1,544
Other adjustments:
Restructuring charges
—
—
—
707
Other legal expenses
604
—
1,019
—
Adjusted EBITDA
$
2,915
$
(5,159
)
$
6,939
$
(7,623
)
Percentage of total revenues
6.7
%
(13.1
)%
8.0
%
(10.5
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109663154/en/
Iteris Contact Kerry A. Shiba Senior Vice President,
Chief Financial Officer, Secretary and Treasurer Tel: (949)
270-9457 Email: kshiba@iteris.com
Investor Relations MKR Investor Relations, Inc. Todd
Kehrli Tel: (213) 277-5550 Email: iti@mkr-group.com
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