Nine-Month Adjusted EBITDA of $10.0 million,
an $18.1 million improvement from the prior year period
Iteris, Inc. (NASDAQ: ITI), the global leader in smart mobility
infrastructure management, today reported financial results for its
fiscal 2024 third quarter ended December 31, 2023.
Fiscal 2024 Third Quarter Financial and Business
Highlights
- Revenue of $42.1 million, up 4% year over year compared to an
unusually strong prior year period
- Gross margins of 36.9%, up 780 basis points year over year
- GAAP net income of $0.4 million, or $0.01 per share, a $2.4
million, or $0.06 per share improvement from the prior year
- Adjusted EBITDA of $3.1 million, equivalent to $0.07 per share,
a $3.5 million, or $0.08 per share equivalent, improvement from the
prior year (see “Non-GAAP Financial Measures and Reconciliation”
below for important information)
- Cash and cash equivalents of $21.2 million as of December 31,
2023, reflecting positive net cashflow of $0.9 million, including
$0.2 million used in the third quarter for share repurchases and
$0.9 million for investing activities
- Released cutting-edge integrated detection and connected
vehicle system for safety applications
- Awarded contract to develop intelligent transportation systems
master plan for the Cebu metropolitan area, a major domestic and
international port in the Philippines
- Recently announced a new partnership with Arity, a mobility
data and analytics company, founded by The Allstate
Corporation
Fiscal 2024 Year-to-Date Financial Highlights
- Record revenue of $129.2 million, up 14% year over year
- Gross margins of 37.6%, up 1,250 basis points year over
year
- GAAP net income of $3.0 million, or $0.07 per share, $17.3
million, or $0.41 per share, higher than the prior year
- Adjusted EBITDA of $10.0 million, equivalent to $0.23 per
share, an $18.1 million, or $0.42 per share equivalent, improvement
from the prior year (see “Non-GAAP Financial Measures and
Reconciliation” below for important information)
- Net cash flow of $4.8 million, $18.1 million higher than the
prior year reflecting earnings improvement and strong working
capital management
Management Commentary:
“We are pleased to report year-to-date organic revenue increased
14% from last year despite a return to normal pre-COVID seasonality
in the third quarter,” said Joe Bergera, President and CEO of
Iteris. “In addition to the strong nine-month revenue performance,
improvements in our gross margins drove a significant, $18.1
million year-to-date increase in adjusted EBITDA relative to the
same prior year period.
“Although the return to pre-COVID seasonality will also affect
fiscal 2024 fourth quarter prior year comparisons, we continue to
experience strong demand for our ClearMobility® Platform and expect
to end the fiscal year with 10% revenue growth at the midpoint of
our guidance range. Over the long term, we continue to anticipate
strong organic revenue growth consistent with our Vision 2027
targets, which assume a five-year organic revenue CAGR of
approximately 14%, as well as expanding operating leverage that
will drive further adjusted EBITDA margin improvement.”
Fiscal Year 2024 Full Year Outlook
- Tightening full-year total revenue guidance to a range of
$171.0 million to $173.0 million, representing organic growth of
10% year over year at the mid-point, which reflects temporary
customer delays largely due to current budget uncertainty and
agency labor constraints
- Reiterating our 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)
- Adjusting full-year net cash flow guidance in the range of $8.0
million to $12.0 million, which would represent a $17.1 million
increase year over year at the midpoint driven by adjusted EBITDA
improvement and continued working capital management
GAAP Fiscal Year 2024 Third Quarter Financial Results
- Total revenue in the third quarter of fiscal year 2024
increased 4% to $42.1 million, compared with $40.7 million in the
same quarter a year ago. This revenue growth was driven primarily
by an increase in revenues related to consulting services. Product
revenues also increased, but at a lower rate when compared to the
prior year which reflected a return to pre-Covid seasonality.
- Operating expenses in the third quarter increased 8% to $15.2
million, compared with $14.0 million in the same quarter a year
ago.
- Net income in the third quarter was $0.4 million, or $0.01 per
share, compared with a net loss of $(2.0) million, or $(0.05) per
share, in the same quarter a year ago. The improvement was
primarily attributable to higher gross margin, which was impacted
in the prior period by supply chain constraints and resulting high
raw material costs.
Non-GAAP Fiscal 2024 Third 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 third quarter of fiscal 2024 was $3.1
million, or 7.4% of total revenues, compared with a $0.4 million
loss, or (1.0)% of total revenues, in the same quarter a year ago.
The improvement primarily mirrors the increase in GAAP
earnings.
Earnings Conference Call
Iteris will conduct a conference call today to discuss its
fiscal 2024 third quarter results.
Date: Thursday, February 8, 2024 Time: 4:30 p.m.
Eastern time (1:30 p.m. Pacific time) Toll-free dial-in number:
888-506-0062 International dial-in number: +1 973-528-0011
Participant access code: 537202
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 49720.
About Iteris, Inc.
Iteris is the world’s trusted technology ecosystem for smart
mobility infrastructure management. Delivered through Iteris’
ClearMobility® Platform, our AI-powered 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;
uncertainties regarding potential multiple negative impacts that
may occur in the future due to COVID-19 or other similar global
health emergencies; our ability to source key raw materials in the
global supply chain; 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; 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 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)
December 31,
2023
March 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
21,185
$
16,587
Restricted cash
338
140
Trade accounts receivable, net
24,859
23,809
Unbilled accounts receivable
8,596
8,349
Inventories
11,456
10,841
Prepaid expenses and other current
assets
3,615
3,128
Total current assets
70,049
62,854
Property and equipment, net
1,290
1,297
Right-of-use assets
7,332
8,345
Intangible assets, net
10,021
10,190
Goodwill
28,340
28,340
Other assets
570
768
Total assets
$
117,602
$
111,794
Liabilities and stockholders’
equity
Current liabilities:
Trade accounts payable
$
14,249
$
12,943
Accrued payroll and related expenses
10,877
12,923
Accrued liabilities
5,304
5,453
Deferred revenue
8,619
6,720
Total current liabilities
39,049
38,039
Long-term liabilities
9,981
10,849
Total liabilities
49,030
48,888
Stockholders’ equity
68,572
62,906
Total liabilities and stockholders’
equity
$
117,602
$
111,794
ITERIS, INC.
UNAUDITED CONDENSED
STATEMENT OF
OPERATIONS
(in thousands, except per
share amounts)
Three Months Ended
December 31,
Nine Months Ended
December 31,
2023
2022
2023
2022
Product revenues
$
23,133
$
22,852
$
70,189
$
60,021
Service revenues
18,996
17,834
59,048
53,591
Total revenues
42,129
40,686
129,237
113,612
Cost of product revenues
12,985
15,981
38,175
47,664
Cost of service revenues
13,595
12,885
42,446
37,418
Cost of revenues
26,580
28,866
80,621
85,082
Gross profit
15,549
11,820
48,616
28,530
Operating expenses:
General and administrative
5,226
5,499
17,371
16,904
Sales and marketing
6,421
5,780
18,947
16,652
Research and development
2,858
2,047
7,531
6,356
Amortization of intangible assets
650
651
1,952
1,970
Restructuring charges
—
—
—
707
Total operating expenses
15,155
13,977
45,801
42,589
Operating income (loss)
394
(2,157
)
2,815
(14,059
)
Non-operating income (expense):
Other income, net
141
135
388
229
Interest income (expense), net
39
—
109
(332
)
Income (loss) before income taxes
574
(2,022
)
3,312
(14,162
)
Provision for income taxes
(219
)
(27
)
(281
)
(149
)
Net income (loss)
$
355
$
(2,049
)
$
3,031
$
(14,311
)
Net income (loss) per common share
Basic net income (loss) per share
$
0.01
$
(0.05
)
$
0.07
$
(0.34
)
Diluted net income (loss) per share
$
0.01
$
(0.05
)
$
0.07
$
(0.34
)
Shares used in basic per share
calculations
42,944
42,341
42,798
42,336
Shares used in diluted per share
calculations
43,784
42,341
43,762
42,336
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 GAAP and accompanying reconciliations, we believe Adjusted
EBITDA and the related financial ratios 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 ratios, 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 (used in) 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 ratios, 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 ratios 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 generally 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 they
represent 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 nine months
ended December 31, 2022, interest expense includes amortization of
the remaining capitalized deferred financing costs due to the
termination of the Credit Agreement in Fiscal 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 nine months ended December 31, 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 $0.8 million incurred
during the three months ended December 31, 2023 and $1.9 million
for the nine months ended December 31, 2023. This matter is
currently scheduled to go to trial in April 2024, so related costs
will likely increase in the near term. The Company believes that an
outcome resulting in a loss is remote. There were no such costs in
the prior year periods.
- 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
December 31,
Nine Months Ended
December 31,
2023
2022
2023
2022
(In Thousands)
Net income (loss)
$
355
$
(2,049
)
$
3,031
$
(14,311
)
Provision for income taxes
219
27
281
149
Depreciation expense
136
153
422
461
Amortization expense
779
770
2,349
2,396
Interest (income) expense
(39
)
—
(109
)
332
Stock-based compensation
822
438
2,218
1,982
Other adjustments:
Restructuring charges
—
—
—
707
Other legal expenses
835
—
1,854
—
Acquisition earnout payments
—
248
—
248
Adjusted EBITDA
$
3,107
$
(413
)
$
10,046
$
(8,036
)
Percentage of total revenues
7.4
%
(1.0
)%
7.8
%
(7.1
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240208565886/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: todd@mkrir.com
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