Iteris, Inc.

In this report, I will go over Iteris, Inc for paid members. We will cover:

  • The Business

  • Management

  • Latest Earnings Call Breakdown

  • Fiducia Thoughts

 

The Business:


Iteris is a pioneer in the intelligent transportation systems "ITS" tech for over 20 years, the company has intellectual property, products and SaaS offerings that offer a wide range of solutions in the United States and Internationally.


"essential applied informatics that enable smart transportation. Municipalities, government agencies and other businesses use our solutions to make roads safer and travel more efficient." 2020 10-K


Iteris's products and solutions improve and safely optimize the mobility within communities, and a goal alongside that is to minimize the environmental impact on the roadways as well. Alright, this business is pretty easy to understand so far. That sits well with me.


Products and Services:


Iteris has a few reportable revenue segments:

  • Roadway Sensors

  • Transportation Systems

  • Prior to May 5, 2020, Agricultural and Weather Analytics

Let us breakdown the Roadways sensors segment first, so we have a firm understand of where their revenue is derived from. Then we will dig into the Transportation Systems.


Roadway Sensors:

This segment provides advanced detection sensors coupled with systems for traffic intersection management, communication systems, as well as roadway traffic data collection applications. Photo below:

Calling themselves the "Industry's Detection Experts", the business offers a wide range of reliable and cost-effective products for video detection, radar detection, and have a hybrid mix of detection solutions worldwide that monitor intersections large and small.


Transportation Systems:


This segment provides traffic engineering as well as consulting services. This is a more services oriented segment. Offerings under this segment also include services, performance measurement, traffic analytics, and traveler information as well as commercial vehicle operating software solutions.


This segment is VERY dependent upon state and local government funding, and to a lesser extent the federal government funding. Future expansion of this segment is largely depending on these variables, and I do believe this is a potential catalyst for future government spending (infrastructure spend).


Honestly, it is refreshing to study a very simple business to understand. I can explain this to a five year old, if needed.

 

Management


I am deciding to post screenshots here, because I want this report to focus more on the business and the opportunity. This company is against my founder-led, rapidly growing business type of investment, but I think there is a real tailwind here and while the company is still technology...there may be a larger IoT, 5G, autonomous vehicle play here coupled with infrastructure spending.

 

Now, I want to breakdown the latest earnings call. I like to do this by getting a sense of management, and a feel for the business.


Q3 2021 Earnings Call Notes

  • Sale of agricultural and weather analytics segment to DTN LLC

  • Acquisition of the assets of TrafficCast International - December 7th, 2020, this will show up in the Transportation Systems segment as it has to do with software assets.

  • Public sector business of TrafficCast will show up in the Roadway Sensor (primarily IoT devices)

  • Software-enabled model delivered resiliency, but COVID-19 impacted operations of subcontractors. There are revenue recognition delays on large projects in Southern California (in particular)

  • Despite this, the business posted $28.2m in total revenue which is a 5% increase YoY

  • Net bookings of $88.9m, up 3% YoY, but at the end of the 3Q total net bookings up 22% YoY to $76.9. Double digit net bookings are nice to see, for any business

  • However, $13.2m of that backlog include the TrafficCast acquisition, but it would still be up YoY.

  • Transportation segment saw $14.1m in revenue, which is 50% of the Q3 revenue, but this is a YoY decrease of 8% (due to softness in subcontractor revenue stemming from COVID), those projects are now moving forward

  • 43% of the segments 3Q net bookings with be recognized in the future as annual recurring revenue (ok, cool) up 26% from last year

  • Roadway Sensors segment, $14.1m in revenue up 23% YoY and this category is actually above the historical 6-8% growth rate. This demonstrates the ability to take market share based on superior products and customer support

  • Gross margins at 41.4%, compared to 39.8% last year same Q, driven primarily by better product mix and increased volume in Roadway Sensors

  • Remain focused on improving profitability and cash generation to fund expected future growth

Not a bad summary, the Q&A was alright. Implications of COVID seem to hit.


In the next report, I will go into the financials more to provide a better understanding. I wanted to get this post out originally so the idea can sit with my members.


I am a firm believer in starting with the idea, and slowly branching out. I am long shares in my actively managed account. I have purchased 1,000 shares at $6.21 to start. As I do my due diligence, I will add to conviction.



Fiducia Thoughts: This is an infrastructure and smart road play, as the world heads towards autonomous vehicles, safety will be a priority. Government contract wins are huge catalysts for the business, I expect those to continue with a healthy backlog. Biden spending on infrastructure may jolt the share price in short-term, so let us focus on the fundamentals.

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