$ITI Earnings Report
Yesterday, $ITI reported earnings. The results were mixed and there is a lot to dig into. Starting with the negatives, the guide for 2023 was weaker than I expected. Iteris management projected a midpoint of $151 million in revenue and $8.3 million in adj EBITDA.

While the revenue projections are weaker than I expected, the bottom end of the range still came above analyst estimates, albeit, there are only three. Adj EBITDA was below analyst estimates and mine, but management cited supply chains and margins will improve throughout the year.

For the positives, Iteris backlog continues to be on fire. I continue to question when these contracts will flow to the revenue line, but unfortunately, that was not asked on the earnings call. I am surprised the guide was not stronger given the backlog.

Iteris management noted how they continue to take share from the smaller players in the detection market. Their only public competitor’s revenue decreased significantly.

Iteris also announced multiple partnerships in the private sector. Private sector revenue is now ~10% of total revenue. They also got statewide approval from New York State DoT. These are two greenfield opportunities for Iteris to grow.

My biggest concern about Iteris coming into the call was their capital allocation strategy. I am excited to hear they announced a $10million buyback which equates to ~9% of their float. I am excited that management expressed confidence in the business and took action.

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I wonder why no one on the earnings call asked about the disconnect between strong backorders but weak guidance— something is amiss if backorders don’t eventually convert into revenue.

Sometimes I feel like people on earnings calls aren’t willing to ask tough questions… or they only call on people who will be friendly. I didn’t get the chance to listen to the call on this one— would you say the people on the call were asking good questions otherwise? Or did most of the questions asked feel like softballs?
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$ITI Backlog
$ITI just signed a contract that is worth between $15.5m and 19.5m over the next five years. To put this in perspective, their entire backlog was a record 40.9m in their last reported quarter.

My full ITI thesis is here. I think the projections probably need to be revised up.
Thanks for the information! This is why I use the platform 😁
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Nathan Worden's avatar
$320m follower assets
Young Money Capital pitches Iteris
@youngmoneycapital pitched Iteris $ITI at 'The Market' stock pitching game. Check it out here:

Iteris is a micro-cap company worth around $123 million.

Iteris installs sensors into the ground at intersections to track where cars are. And these sensors communicate with the traffic light to more effectively time the traffic light.

This is extremely important because traffic accidents cost over 30,000 US lives per year, and $1 trillion per year. And 50% of these accidents happen at intersections.

Also a ton of wasted fuel happens at these intersections, and by employing this technology, Iteris will be able to save people time and money and save oil.

Iteris is extremely effective. There's been multiple case studies done around their technology— At one intersection, they concluded that they prevented 15 to 25 close calls per day. And they reduced travel time by 13%.

Iteris has multiple competitive advantages. One of their biggest advantages is scale. Over one third of the intersections in the United States are signalized by Iteris.

Their market share is significantly higher than that, because not all intersections in the United States are signalized. Also timing the lights is a machine learning application, which means that when they have more data, they're able to have a more accurate model and better time the lights to save lives and save people money.

Also there's extensive government approval processes in messing with traffic lights. You have to be on the qualified products list and you also have to sign deals with local and municipal governments. And this is an extremely expensive process and Iteris has the relationships and the brand name.

There are also multiple signs that revenue is accelerating.

The Infrastructure And Jobs Act was recently passed, which is a $1.2 trillion act. Iteris happens to be on multiple boards that help distribute the funds. So they should probably get a lot of the funding.

Looking at some alternative data, 45 new jobs have been posted on LinkedIn in the last month and they only have 414 employees total. So this suggests that they have multiple projects in the works. They've also had multiple press releases announcing that they have won contracts last quarter. They had a record backlog in this quarter.

Looking at the revenue drivers—

They have two sides to their business:

1) The product side, which is installing the sensors into the ground,
2) The services side, which is in timing the lights.
On the services side, they're going through a transition into an annual recurring revenue type business.

So about half of the services, revenue is annual recurring revenue. They've had a decrease in gross margins in 2022 due to supply chain issues, but that should subside and their gross margins should improve from there on out.

And despite that, and including significant EBITDA multiple compression, their projected IRR is 28%.

Have you ever heard of Iteris before?
39 VotesPoll ended on: 05/04/22
ITI has been on my buy watchlist for months now. Just haven't been wowed enough yet to pull the trigger.
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'The Market' Stock Pitching Game is this Friday, April 8th at 1:00pm EST!
"The Market" stock pitching game is a bracket-style elimination tournament for investors.

Six brave contestants will each give a three minute pitch on an investment idea.
Quality discussion ensues—
The audience decides the best pitch of the day!

Here's an example of the kind of discussion that goes down at the game: VIDEO

Sign up to get the Zoom link for the Friday, April 8th game HERE

Here's the awesome lineup!:

@iangray — Wix $WIX
@paulcerro — Xponential Fitness $EXP
@sohaibab9 — Cardnial Energy $CRLFF, TSE $CJ
@youngmoneycapital — Iteris $ITI
@growthinvesting — Amplitude $AMPL
@strib — Mcdonalds $MCD

What is the best investment idea of the month? The Market will decide!

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$ITI and Alternative Data
While revenue acceleration is not needed for $ITI valuation to work, there are multiple signs that revenue is accelerating. Iteris’s net bookings are a leading indicator. In Q4, they had a record 40.9 million of net bookings, 8.9 mill above revenue implying future acceleration.

This quarter, Iteris has released six press releases about contracts they have signed with different municipals. Of these contracts, three of them had a dollar amount referenced. Those three combined to equal 13.5 million or 1/3 of their total record net bookings last quarter. By comparison, in their record Q4 last year, they had seven press releases for contracts and five of which referenced different dollar amounts. This totaled 9.6 million in contracts. Iteris’s press releases suggest an acceleration in net bookings, thus, revenue.

Iteris also has 45 new job postings posted in the last month. Many of which are for engineering roles. For a company with only 414 employees (according to ZoomInfo), this is a serious uptick in hiring. This hiring surge could be due to an expected increase in contracts and revenue.

My original thesis on $ITI is here for your reference
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A hiring surge certainly sounds like a positive for growth. Is there any way it could also be a bad sign? Genuinely trying to think that through but can’t see anything but good!
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