Iteris Reports Third Quarter Revenues of $14 Million
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SANTA ANA, Calif.--Iteris , a leader in traffic management that focuses on the development and application of advanced technologies, reported financial results for its third fiscal quarter ended December 31, 2010.
"Although our Transportation Systems segment revenues were down for the quarter due to the ongoing weakness of the market and lengthening of the overall sales cycle, as well as the delay of certain contracts, we remain optimistic on the growth prospects for this business segment"
Net sales and contract revenues for the third quarter totaled $14.0 million, representing a 3.4 percent increase from $13.6 million in the same year-ago quarter. The increase was primarily due to a 16.3 percent increase in net sales of sensors products, which was partially offset by a 12.2 percent decline in Transportation Systems contract revenues.
Gross margins for the third quarter were 41.0 percent, as compared to 40.8 percent reported in the same year-ago quarter.
Operating expenses were $13.5 million for the third quarter, including a non-cash goodwill impairment charge of $8.0 million. As a result of lower than expected operating results generated by the Transportation Systems segment and the ongoing weakness in the markets that segment serves, the company reassessed the carrying value of its goodwill as of December 31, 2010 and concluded its goodwill was impaired. The goodwill impairment charge is a non-cash adjustment which has no affect on cash flows or liquidity.
For the third quarter, GAAP net loss was $7.0 million and GAAP diluted loss per share was $0.20, as compared to GAAP net income of $709,000 or GAAP diluted earnings per share of $0.02 in the same year-ago quarter.
Excluding non-cash charges for goodwill impairment, amortization of intangible assets and stock-based compensation, non-GAAP net income was $403,000 and non-GAAP diluted earnings per share was $0.01 for the third quarter as compared to non-GAAP net income of $840,000 and non-GAAP diluted earnings per share of $0.02 in the same year ago quarter. See Use of Non-GAAP Financial Information below for important information regarding our use of non-GAAP financial measures.
Cash totaled $12.5 million at December 31, 2010, representing a $2.1 million increase from $10.4 million at the end of the previous fiscal year, with no borrowings on the company's $12.0 million working capital line of credit.
Fiscal Q3 2011 Operational Highlights
- Acquired privately-held Meridian Environmental Technology, Inc. (MET), a leader in 511 advanced traveler information and decision support systems.
- Selected by the Orange County Transportation Authority to complete the design, implementation, and support services for traffic signal synchronization on three corridors within Orange County, California. The contract is valued at approximately $1.7 million.
- Awarded a contract by the city of Oxnard for the design phase of the Oxnard Intelligent Transportation System Master Plan project valued at $750,000.
- Selected by the State of Utah to provide software support services for Iteris; CVIEW-Plus system and Commercial Vehicle Information Systems and Networks, carrying a potential value of approximately $700,000 over the next two years.
- Iteris and Meritor WABCO released and demonstrated their second generation of the SafetyDirect Fleet Performance System at the American Trucking Association Management Conference in Phoenix, Arizona.
- Partnered with Qualcomm, Inc. to deliver safety data to trucking fleets.
- Approximately $7.1 million in new Transportation Systems consulting contracts were signed during the quarter compared to $5.2 million in the prior quarter. Transportation Systems contract backlog at the end of the quarter was $27.9 million, up from $26.3 million reported at the end of the prior quarter.
Management Commentary
Our sensors segments continued to drive growth in revenues, while we generated another quarter of positive cash flow from operations and maintained a strong balance sheet,said Abbas Mohaddes, president and CEO of Iteris. We plan to utilize our strong financial position to build on our successes and make focused investments in R&D and sales and marketing to keep our technologies at the forefront of the Intelligent Transportation Systems market. This strength is evidenced by our fourth consecutive quarter of year-over-year revenue growth in the product side of our business. We believe we are expanding our market share as a result of our R&D activities and expect the uptake in demand for our offerings to continue.
Although our Transportation Systems segment revenues were down for the quarter due to the ongoing weakness of the market and lengthening of the overall sales cycle, as well as the delay of certain contracts, we remain optimistic on the growth prospects for this business segment, continued Mohaddes. "In fact, during the quarter, we expanded our Systems backlog by $1.6 million to $27.9 million, and have already seen an increase in requests for proposal in key markets. Further, we continue to believe funding for our Transportation Systems services will increase as a result of anticipated newly allocated funds and the expected priority of infrastructure spending by the current federal administration."
Conference Call
Iteris will conduct a conference call with analysts and investors later today (February 10, 2011) at 4:30 p.m. EST (1:30 p.m. PST) to discuss the operating results for the third fiscal quarter.
Iteris CEO Abbas Mohaddes and CFO Jim Miele will host the presentation followed by a question and answer period.
To participate by phone, dial 617-597-5325 at least 5-10 minutes prior to the start time and enter pass code 77596712. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.
Iteris will broadcast the conference call via its website over the Internet. To listen to the live webcast please visit the investor relations section of the Iteris website at:www.phx.corporate-ir.net/phoenix http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=114851&eventID=3695780.
To access the webcast, you will need Windows Media Player software installed on your computer, which is available on the webcast page under Pre-Event System Test. This may take up to 10 minutes to install. If you have any difficulty connecting to the conference call or webcast, please contact Liolios Group at (949) 574-3860.
A webcast replay of the call will be available until 5:00 p.m. PST on February 24, 2011.
About Iteris, Inc.
Iteris (NYSE Amex: ITI), is a leader in traffic management focused on the development and application of advanced technologies that reduce traffic congestion, minimize the environmental impact of traffic congestion, and improve the safety of surface transportation systems infrastructure. Combining outdoor image processing, traffic engineering, and information technology, Iteris offers a broad range of Intelligent Transportation Systems and driver safety solutions. Iteris is headquartered in Santa Ana, California, with offices throughout North America and in Europe, Asia, and the Middle East. Investors are encouraged to contact us at 888-329-4483 or at www.iteris.com.
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ITERIS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) |
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December 31,
2010 |
March 31, 2010 |
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| (unaudited) | ||||||||
| ASSETS: | ||||||||
| Cash | $ | 12,462 | $ | 10,405 | ||||
| Trade accounts receivable, net | 10,194 | 11,311 | ||||||
|
Costs and estimated earnings in excess of billings
on uncompleted contracts |
3,588 | 3,871 | ||||||
| Inventories | 3,473 | 2,727 | ||||||
| Prepaid expenses | 504 | 623 | ||||||
| Deferred tax assets | 14,609 | 14,732 | ||||||
| Property and equipment, net | 2,110 | 2,550 | ||||||
| Goodwill | 19,821 | 27,791 | ||||||
| Intangible and other assets, net | 547 | 652 | ||||||
| Total assets | $ | 67,308 | $ | 74,662 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
| Accounts payable and other liabilities | $ | 10,619 | $ | 10,552 | ||||
| Revolving line of credit | -- | -- | ||||||
| Unrecognized tax benefits | 585 | 751 | ||||||
| Term debt | 3,421 | 5,293 | ||||||
| Total liabilities | 14,625 | 16,596 | ||||||
| Total stockholders’ equity | 52,683 | 58,066 | ||||||
| Total liabilities and stockholders; equity | $ | 67,308 | $ | 74,662 | ||||
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ITERIS, INC. UNAUDITED GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) |
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Three Months Ended
December 31, |
Nine Months Ended
December 31, |
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| 2010 | 2009 | 2010 | 2009 | |||||||||||||||||
| Net sales and contract revenues: | ||||||||||||||||||||
| Net sales | $ | 8,608 | $ | 7,401 | $ | 26,938 | $ | 22,796 | ||||||||||||
| Contract revenues | 5,424 | 6,176 | 16,854 | 20,280 | ||||||||||||||||
| Total net sales and contract revenues | 14,032 | 13,577 | 43,792 | 43,076 | ||||||||||||||||
| Costs of net sales and contract revenues: | ||||||||||||||||||||
| Cost of net sales | 4,352 | 3,844 | 13,415 | 12,099 | ||||||||||||||||
| Cost of contract revenues | 3,929 | 4,198 | 11,308 | 13,290 | ||||||||||||||||
| Gross profit | 5,751 | 5,535 | 19,069 | 17,687 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Selling, general, and administrative | 4,603 | 3,915 | 13,515 | 12,695 | ||||||||||||||||
| Research and development | 882 | 890 | 2,863 | 2,738 | ||||||||||||||||
| Impairment of goodwill | 7,970 | -- | 7,970 | -- | ||||||||||||||||
| Amortization of intangible assets | 36 | 36 | 109 | 122 | ||||||||||||||||
| Total operating expenses | 13,491 | 4,841 | 24,457 | 15,555 | ||||||||||||||||
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Operating income (loss) |
(7,740 | ) | 694 | (5,388 | ) | 2,132 | ||||||||||||||
| Non-operating income (expense): | ||||||||||||||||||||
| Other income (expense), net | (7 | ) | 25 | 13 | 42 | |||||||||||||||
| Interest expense, net | (38 | ) | (58 | ) | (120 | ) | (215 | ) | ||||||||||||
| Income (loss) before income taxes | (7,785 | ) | 661 |
(5,495 |
) |
1,959 |
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| Income tax benefit (provision) | 758 | 48 | (193 | ) | (563 | ) | ||||||||||||||
| Net income (loss) | $ | (7,027 | ) | $ | 709 | $ | (5,688 | ) | $ | 1,396 | ||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||
| Basic | $ | (0.20 | ) | $ | 0.02 | $ | (0.17 | ) | $ | 0.04 | ||||||||||
| Diluted | $ | (0.20 | ) | $ | 0.02 | $ | (0.17 | ) | $ | 0.04 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 34,332 | 34,260 | 34,331 | 34,235 | ||||||||||||||||
| Diluted | 34,332 | 34,469 | 34,331 | 34,430 | ||||||||||||||||
ITERIS, INC.
UNAUDITED RECONCILIATION OF NON-GAAP
ADJUSTMENTS
(in thousands, except per share data)
The following non-GAAP adjustments are based upon our unaudited consolidated statements of operations for the periods shown. These adjustments are not in accordance with or an alternative for GAAP. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Iteris intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.
The following represents a reconciliation (unaudited)of GAAP net income (loss) to non-GAAP net income.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| GAAP net income (loss) | $ | (7,027 | ) | $ | 709 | $ | (5,688 | ) | $ | 1,396 | |||||||||
| Plus: | |||||||||||||||||||
| Impairment of goodwill (1) | 7,970 | -- | 7,970 | -- | |||||||||||||||
| Amortization of intangible assets (2) | 36 | 36 | 109 | 122 | |||||||||||||||
| Stock-based compensation (3) | 100 | 95 | 286 | 282 | |||||||||||||||
| Less: | |||||||||||||||||||
| Incremental income taxes associated with the non-GAAP items above | (676 | ) | -- | (677 | ) | -- | |||||||||||||
| Non-GAAP net income | $ | 403 | $ | 840 | $ | 2,000 | $ | 1,800 | |||||||||||
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| (1) | These charges were related to goodwill impairment associated with Iteris’ Transportation Systems segment in the third quarter ended December 31, 2010. | |
| (2) | These charges relate to capitalized identifiable intangible assets. | |
| (3) | These charges relate to stock options granted by Iteris to its employees, non-employee directors. | |
The following represents a reconciliation (unaudited)of GAAP diluted earnings (loss) per share to non-GAAP diluted earnings per share.
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||
| GAAP diluted earnings (loss) per share | $ | (0.20 | ) | $ | $0.02 | $ | (0.17 | ) | $ | $0.04 | |||||||
| Plus: | |||||||||||||||||
| Impairment of goodwill | 0.23 | -- | 0.23 | -- | |||||||||||||
| Amortization of intangible assets | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
| Stock-based compensation | 0.00 | 0.00 | 0.01 | 0.01 | |||||||||||||
| Less: | |||||||||||||||||
| Incremental income taxes associated with the non-GAAP items above | (0.02 | ) | -- | (0.02 | ) | -- | |||||||||||
| Non-GAAP diluted earnings per share | $ | 0.01 | $ | 0.02 | $ | 0.06 | * | $ | 0.05 | ||||||||
| Non-GAAP diluted weighted average shares outstanding | 34,530 | 34,469 | 34,535 | 34,430 | |||||||||||||
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* Does not foot due to rounding |
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