Iteris, Inc. (ITI) Q4 2021 Earnings Call Transcript
Published at 2021-06-01 23:22:10
Joe Bergera - President, Chief Executive Officer Doug Groves - Senior Vice President, Chief Financial Officer Todd Kehrli - MKR Group
Good day! And welcome to the Iteris Fiscal 2021, Fourth Quarter and Full Year Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Todd Kehrli, MKR Group. Please go ahead sir.
Thank you, operator. Good afternoon everyone and thank you for participating in today's conference call to discuss Iteris' financial results for 2021, fiscal fourth quarter and full year ended March 31, 2021. Joining us today are Iteris' President and CEO, Mr. Joe Bergera; and the company's CFO, Mr. Doug Groves. Following the remarks, we’ll open the call for questions from the company’s covering sell-side analyst. Although we invited investors to submit written questions to the company in advance to the call for instructions in our press release dated May 18, 2021, we did not receive any written investor questions. Before we began, we'd like to remind all participants that during the course of this call we may make forward-looking statements regarding future events or the future performance of the company. These statements are based on current information, are subject to change, and are not guarantees of future performance. Iteris does not undertake an obligation to provide updates to these forward-looking statements in the future. Actual results may differ substantially from what is discussed today, and no one should assume that at a later date the company's comments from today will still be valid. Iteris refers you to the documents that the company files from time-to-time with the SEC, specifically the company's most recent Forms 10-K, 10-Q and 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any forward-looking statement. I'd like to remind everyone that you'll find a supplementary report of Q4 and full year financial metrics, as well as the webcast replay of today's call on the Investor section of the company's website at www.iteris.com. Now, with that I'd like to turn the call over to Iteris' President and CEO, Mr. Joe Bergera. Joe, go ahead.
Super! Thanks Todd, I appreciate. Good afternoon to everyone. I appreciate all of you joining us today. Before we begin our regular earnings commentary, I want to remind everyone that on March 8, 2021 the Board announced that Iteris initiated a comprehensive review of strategic alternatives. At this time the review is ongoing and we do not expect to make any further announcements about its status until the Board has approved a course of action requiring disclosure. Also, I want to remind everyone that given the sale of our Agriculture and Weather Analytics segment to DTN LLC on May 5, 2020, we are reporting the results of that segment as discontinued operations for all periods presented in today's earnings announcements. As such, I'll be discussing only our continuing operations for the remainder of this call. So jumping right in, I'm pleased to report that the company’s record fourth quarter revenue provided a nice cast on to our fiscal year 2021. During the fiscal year we recognize solid total revenue growth and we realized a significant improvement in net income and adjusted-EBITDA despite a challenging economic environment related to the COVID-19 pandemic. In fiscal 2021 we also launched our ClearMobility platform and introduced three Cloud enabled managed services: Asset Management, Congestion Management and Maintenance Management, all of which received positive market acceptance as measured by more than $5 million in combined bookings during the fiscal year. And finally, we used the proceeds from the sale of our Agriculture and Weather Analytics segment to complete its successful acquisition of TrafficCast International Incorporated. TrafficCast acquisitions produced several financial and strategic benefits such as accelerating our clear mobility cloud roadmap and creating new access to various commercial markets, which I’ll discuss in a few moments. As for financial metrics, Iteris reported record fourth quarter total revenue of $31.7 million and record full year total revenue of $117.1 million, representing a 10% and 9% year-over-year increase respectively. Total net bookings were $32.9 million for the fourth quarter and $121.8 million for the full year, representing growth of 17% and 6% year-over-year respectively. The strong bookings growth resulted in total ending backlog on March 31 to $78 million, representing a year-over-year increase of 26%. The company's record total revenue, total booking and total ending backlog reflected strong performance across both reporting segments. So our roadway sensors segment delivered particularly strong results. We'll take a few moments to summarize the commercial and operational performance of each segment, after which Doug will discuss our fourth quarter financial results in more detail. Our Transportation Systems segment recognized record fourth quarter revenue of $16.8 million, representing a 3% year-over-year increase against an unusually strong prior year comparison and recognized record full year revenue of $60.6 million, representing a 4% year-over-year increase. As noted on prior earnings calls, this segment experiences some COVID related delays that impacted revenue recognition throughout the fiscal year. Approximately 42% of the segment's total annual revenue was recurring revenue. The Transportation System segment reported fourth quarter net bookings of $19.3 million, representing a 41% increase from the same prior year period, and full year net bookings of $64.4 million, representing a 2% increase from the same prior year period. As a reminder, the segment experienced some booking softness in the periods ending Decrement 31, 2020 due to COVID related delays. As of March 31, 2021 the segments ending backlog was $66.5 million, representing a 25% year-over-year increase and a 4% sequential increase. The segment's fourth quarter and full year net bookings performance reflect continued demand for all of the segments lines of business; consulting, software and managed services, as well as a continued increase in market penetration in Texas and Florida, two strategic geographies. About 37% of the segment's fourth quarter bookings will be recognized as future annual recurring revenue. The mix of bookings that will convert to recurring versus nonrecurring revenue will fluctuate from quarter-to-quarter. Notable fourth quarter bookings include our contract of $3.7 million from Pulice-FNF-Flatiron Joint Venture to redesign and expand a critical segment of I-10 freeway adjacent to Phoenix’s Sky Harbor Airport. This contract includes the use of our ClearGuide and ClearRoute software, as well as the use of our Congestion Management Managed Service over the life of the multiyear contract. A $3.2 million task order from the U.S. Department of Transportation to maintain the architecture reference for collaborative and intelligent transportation, which is the nation's reference architecture for connected and automated vehicle enablement. Multiple task orders in the State of Florida for combined value of more than $2.3 million and $900,000 software agreement from the State of Utah for the use of our ClearGuide product, and $800,000 task order to support the I-405 modernization project in Orange County California and a $700,000 software agreement with the State of South Carolina for the continued use of our ClearRoute product. Now let’s discuss our Roadway Sensors segment. Roadway Sensors segment reported fourth quarter revenue of $15 million, representing a 19% year-over-year increase and record full year revenue at $56.5 million, representing a 15% year-over-year increase. These results reflect particularly strong performance in three geographic territories: Texas, Northern California and the Mountain State. In addition to its strong revenue performance, the Roadway Sensors segment made significant progress against various other business priorities. For example, this segment launched a Cloud Enabled Managed Service, Managed Care. It continuously monitors and optimizes Iteris’s advanced detection system, supported intersections and arterial. Completed successful field trials for our next generation radar based detection product, which is branded as VantageRadius plus and initiated a soft launch of the new product. And lastly, developed joint technology with Continental AG, that fuses vehicle and infrastructure sensors to improve the safety of connected and automated vehicles through infrastructure to vehicle connectivity. Overall, our fiscal 2021 operational performance across both segments was quite solid, with the business achieving several important operational goals despite the complications from COVID-19. Now, I'd like to turn the call over to Doug.
Thank you, Joe. Good afternoon everyone. As a reminder, please see the company's 10-K filing, press release and supplemental financial metrics document, all of which are posted on our IR website for further description of matters under discussion during the call today. The result of the Ag and Weather Analytics segment are reported as discontinued operations in our SEC filings and today my comments will be focused only on our continuing operations. Likewise, the TrafficCast acquisition which closed on December 7, 2020 is in our full Q4 results. TrafficCast commercial business which is all software is included in our Transportation Systems segment results and its public sector business, which is primarily IoT devices is included in our Roadway Sensors business results. Consistent with the last several quarter’s results, we've seen the performance of the business in the fourth quarter continuing to improve with favorable year-over-year trends in certain key metrics, including top line growth, improving cash flow from operations and increasing backlog. We continue to diligently manage our costs, which is helping to drive full year-over-year EBITDA and operating margin expansion. Now, I’ll move on to the details of the fourth quarter results. Total revenue for fiscal 2021 fourth quarter increased 10% to $31.7 million compared to $28.9 million in the same quarter a year ago. Our gross margins in the fourth quarter were 40.9% compared to 44% from the same quarter last year. The decrease in gross margins was driven primarily by the Transportation Systems segment, which have more subcontractor labor and revenue in Q4 fiscal year ‘21 compared to Q4 fiscal year 2020. Our subcontractor labor and revenue tend to have much lower margins. Operating expenses in the fourth quarter were $13.4 million compared to $11.7 million in the same prior year quarter. The increase reflects a full quarter of operating expenses for the TrafficCast business and an increase in intangibles amortization of $440,000, mostly related to the TrafficCast acquisition. We reported a GAAP operating loss in the fourth quarter of $382,000, which did include approximately $140,000 in one-time non-recurring inventory adjustments and $130,000 in acquisition expenses, both related to the TrafficCast acquisition. This compares with GAAP operating income of $979,000 in the same quarter a year ago. However, we did report a full year operating profit of $439,000 compared to a full year operating loss of $2.1 million last year. This is the first time in several years we've been able to report a positive operating profit. The GAAP net loss from continuing operations in the fourth quarter was $385,000 or $0.01 per share compared with a $1.1 million net income or $0.03 per share of last year. However, for the full year we reported net income from continuing operations of $491,000 or $0.01 per share compared to a full year net loss of $1.8 million or $0.04 per share loss in the prior year, hence a substantial improvement this year. Adjusted EBITDA for the fourth quarter was $1.8 million or 5.5% of revenue, which compares to $2.5 million or 8.7% of revenue in the fourth quarter of last year. Full year EBITDA increased $3.3 million to $7.5 million or 6.4% of revenue compared with $4.2 million or 3.9% of revenue in the prior year. This was a 64% improvement in EBITDA as a percentage of revenue and we expect our EBITDA as a percentage of revenues to grow under 20% for our fiscal year ’22 at the mid-point of our fiscal year ‘22 outlook. Now, let me turn to our segment results. Our Transportation Systems revenue for the fourth quarter was $16.8 million compared to $16.3 million in the prior year quarter, an increase of 3%. During the period the segment's direct labor revenue was consistent with our expectations, but was substantially lower when compared to the prior year Q4, which adversely impacted operating margins since our margins are much higher on our own labor, versus the margins on our subcontractors’ labor. Segment level operating income for the fourth quarter was $2.2 million compared to $4.4 million from the prior year quarter, and the related operating margins were 12.8% compared to 26.8% last year. The margin decrease was primarily the result of the mix of labor between our own staff and that of our subcontractors as I mentioned. Our Roadway Sensors revenue for the fourth quarter was $15 million compared to $12.6 million in the prior year quarter or an increase of 19%. This increase was driven by continued market share gains and the rapid adoption of our next product line that was launched several quarters ago. Segment level operating income was $2.7 million for the quarter compared to $1.7 million last year, and the related operating margins were 17.8% versus 13.9% last year, the improvement in margins being primarily driven by increased volume and improved product mix. Corporate expenses in the fourth quarter were $4.4 million compared to $4.9 million in the prior year. Total year corporate expenses were $17.3 million, down $1.7 million or 9% for the full year fiscal ‘21 as we continue to be laser focused on controlling our costs. Now, turning to liquidity and capital resources. Total cash and short term investments were $28.3 million at the end of the fourth quarter. The increased quarter-over-quarter and the prior year was a result of strong cash flows from continuing operations of $5.6 million in the current quarter. The full year cash flows from continuing operations was $8.9 million or an improvement of $9.4 million over the prior year. We spent $381,000 in capital expenditures and capitalized software costs in the quarter and these expenditures were approximately 1% of revenue for the whole year, reflecting our asset-light business model. We remain focused on generating cash to fund our expected future organic and inorganic growth. In summary, we're pleased to report another solid quarter of performance along with record backlog, which positions us well for the fiscal year ‘22 revenue guidance of $132 million to $142 million. Fiscal year 2021 was a big inflection point for the company as we swung to profitability and positive cash flow. We do expect to maintain this momentum in fiscal year 2022 as we look to grow our adjusted EBITDA to a percentage of revenue in the 20% range year-over-year. As a housekeeping matter, we are planning to file a New S3, Universal Shelf Registration in the next several days, since our last shelf registration expired in September 2020 and the shelf will be good for 3 years. Therefore, to sum it all up, we couldn't be more excited about the future. We remain focused on growing the business and our recurring revenue, while vigorously managing our working capital and cost structure to improve margins as we move forward. With that, I will turn the call back over to Joe. Joe.
Great! Thank you, Doug. At this time I want to share some commentary on our business strategy, certain key product and commercial initiatives, and associated expectations for fiscal ‘22. The convergence of ubiquitous connectivity in cloud computing and various innovations in mobility in our opinion is profoundly changing the operation and utilization of transportation infrastructure. As a result, agencies are committing to reimagine their internal operating models, overcome technology silos that limit collaboration with one another and enable new forms of interaction between the mobility infrastructure and those who use that infrastructure every day. This is demonstrated by a variety of data points, including our own direct engagement and numerous connected and automatized vehicle initiatives across the country, such as the new initiative with the New Jersey Department of Transportation and Rutgers University that we announced on April 24. Based on our own significant direct observation, and validated by various additional parties, it is technically infeasible and financially impractical for each individual agency to first modernize its technology stack and redesigned its very business processes without external resources. Second, integrate and maintain point-to-point integrations to facilitate collaboration with other agencies; and third, integrate and maintain point-to-point integrations with automotive OEMs, fleet operators and other commercial entities with the strategic business imperative to understand and interact with the mobility infrastructure. Therefore it is inevitable that new platform enabled ecosystems will emerge in the mobility infrastructure market to solve various network effects similar to what is occurring in industries as diverse, in finance, insurance, energy, distribution, manufacturing and entertainment. Recognizing this business opportunity, Iteris launched our ClearMobility platform in January 2020. This new platform included a unified service layer which we granted at ClearMobility cloud to enable a new portfolio of cloud enabled managed services that are aimed at providing the capability of agencies need to ensure their transportation infrastructure meets the demands of a connected world. Subsequently, the acquisition of TrafficCast as noted in my earlier remarks enhanced our clear mobility roadmap. To realize the full potential of our ClearMobility strategy we’ve reorganized Iteris effective April 1, 2021 into three business units: Applications and Cloud Solutions, Advanced Sensor Technologies, and Mobility Consulting Solutions, all of which are now supported by a new Chief Technology Officer. With this new business unit structure we have centralized all of our software and service development resource and created a team dedicated to the delivery of our ClearMobility cloud roadmap within our Application and Cloud Solutions business units. In addition to the business unit changes, we created an overlay team that is focused on the further development and commercialization of our cloud enabled managed services portfolio, and we organized both our product and software sales activities into a new shared services model. We believe these organizational changes will create various development efficiencies, increase our recurring revenue contribution and accelerate the execution of our platform enabled business strategy. In FY ‘22 we’ll be particularly focused on the following key initiatives: First, releasing our next generation video detection system that will bring machine learning to our edge devices for real time, deep level object classification and contribute rich new data sets to clear mobility cloud. Second, introducing our next generation radar detection system, which will open new end markets for our detection products and enable new cloud enabled managed service revenue streams. Third, continuing to develop and commercialize our portfolio of cloud enabled managed services to both planned enhancements and the introduction of new services. Fourth, introducing multiple connected vehicle solutions, including new software as a service application; and fifth, continuing to develop our partner ecosystem and further monetize our existing partnership through the release of new products with partners such as Continental AG and Cisco Systems. Our overall sales pipeline is already at historic levels, and the plan to lead to significant technology innovation should improve our competitive differentiation in existing markets, as well as expand our total addressable market. Therefore as we enter fiscal 2022, we look forward to continuing our trend of solid full year bookings growth, even though results may fluctuate in any given quarter, especially as we continue to pursue more multi million contracts. Also given the focus of our ClearMobility strategy, we would expect to see an increase in the percent of booking that will be recognized in the future as annual recurring revenue. As Doug noted, based on our expected bookings growth and record backlog entering fiscal 2022, we estimate total full year revenue to be in the range of $132 million to $142 million, which would represent a 22% rate of growth at the high end of the range. We would further expect the contribution of annual recurring revenue to further increase and fall within a range of 24% to 26% of total revenue. Our estimates of total revenue and annual recurring revenue mix do not, do not include any potential upsides from transformational initiatives we are pursuing, such a strategic partnerships and acquisitions, because we're unable to predict the timing of these initiatives. Based on the increase in our operating scale and the higher concentration of software as a service and sensor revenue, we anticipate further improvements in gross profit margin in fiscal 2022. Our development costs will increase as a percent of revenue in order to support our ambitious ClearMobility roadmap. However, our general and administrative costs should remain relatively flat. As a result, in fiscal 2022 we anticipate a significant year-over-year improvement in both net income and adjusted-EBITDA. In summary, the smart mobility infrastructure market is an increasingly dynamic sector due to favorable secular trends and emerging network effect that require agencies to reimagine their internal business processes their inner agency collaboration model and their interactions with commercial entities who are critically dependent on mobility infrastructure. With a unique combination of core competencies and market access in what has traditionally been a highly fragmented industry, Iteris is in a particularly strong position to create a platform enabled ecosystem that capitalizes on the significant market opportunity. Iteris’ ClearMobility platform which is the foundation of our platform enabled business strategy has already been adopted by a variety of public agencies within the first year of release and ecosystem partners are also already integrating our platform into their solutions. In addition, with the acquisition of TrafficCast we've seen an increase in the number and variety of commercial entities seeking to integrate with our platforms. As we look ahead, we believe Iteris will evolve into a critical mobility infrastructure digital platform that will not only benefit society, but will create significant long term shareholder value. With that, we’d be delighted to respond to your questions and comments. Operator.
Thank you. [Operator Instructions]. We’ll take our first question from Jeffrey Van Sinderen with B. Riley.
Good afternoon, everyone and congratulations on the strong outlook. You gave some guidance for the fiscal year, but wondering what's the outlook for the various business segments for first half of this year versus second half of this year. Again, for the fiscal year in terms of revenue growth, margins, etc., just wondering if we should be waiting one more than the other, if there are any things that are sort of anomalous in the picture that we might want to factor in.
Jeff, I’ll start off by first of all saying thank you for the question. I'll start off by just reminding everyone that as I said, we reorganized Iteris effective April 1, and that’s going to impact our financial reporting going forward, but I'll let Doug talk to your specific questions. So Doug, do you mind responding to Jeff.
Sure, no problem. Thanks for the question Jeff and yes, we are going to be reporting in just a single segment and you know the pacing of the revenue by quarter, we would expect to follow historical trends. So our first quarter and second quarter make up about 50% of the full year. It’s a little softer in our third quarter, because that's actually the winter months in a lot of parts of the country with a rebound in the fourth quarter. So we're not going to be reporting separate segments, but you could think about with that guidance range that we've given that you know both the segments are going to contribute to that growth. There's not one that's tremendously stronger than the other, because we'll expect to see a lot of our annual recurring revenue starting to pick up now with a lot more of these software contracts that Joe mentioned.
Okay, great. And then as you sort of look over things today, do you think that the higher end of the growth rate that you guided to for the fiscal year is a sustainable, organic growth rate for the company for the next few years. And also I guess wondering what needs to happen to kind of get to that higher end of guidance this year and conversely what could hold you back to have you end up closer to the lower end of guidance this year?
Sure. So there’s multiple questions in there, let me try and take them one at a time. So with the high end of the range, I mean obviously we're getting the benefit of the TrafficCast acquisition, right. We only had four months in our fiscal year ’21. We’ll have a full 12 months in our fiscal year ’22. I think we’d previously been guiding to over the longer term something closer to a low double digit growth rate, but as Joe emphasized in his comments, that excludes any of these collaboration of potential new agreements that we've been entering into with people such as Continental. So we do think it's possible, but to go out more than a year right now when there’s still a little bit of uncertainty in the environment, you know didn't feel that that was appropriate. So I think sticking with the targeted three-year model we put out there is probably closer for our longer term view, knowing that the shorter term is going to look much better than what's in our target operating model and are updated investor relations presentation.
Okay, that's helpful. A - Doug Groves: And as far as risk goes, yeah we tried to provide a broad enough range that would encompass the downside as well as the upside.
Okay, and then anything data and supply chain, because I know that was – you know that's been something that's been a bit of a headwind if you will for part of the systems business.
I would say, and I’ll let Joe jump in here as well. I’d say it's recovering, but not as fast as you know maybe we had thought. There's still several of our subcontractors that are behind in delivering you know critical pieces of equipment to job sites to help us complete the overall installation and completion of the projects. So it's getting better, but I wouldn't say we're out of the woods yet by any stretch and hence the reason, we've still got some risk that we’re trying to signal in that guidance.
Yeah, this is Joe. I just would add that as a reminder, in the prior fiscal year we had the two segment Transportation Systems and Roadway Sensors and there were sort of different supply chain dynamics for the two different segments. Doug was referring to Transportation Systems. As it turns out, it was more impacted by supply chain and kind of general COVID issues than Roadway Sensors, because they have a higher reliance on subcontractors to provide certain elements of these larger projects that we’re increasingly involved in, and a lot of these smaller companies were I think a little bit caught off-guard; in some cases surprised and unable to meet their delivery requirements and had a knock-on effect and Doug talked to that. You know we do think things are getting better, but we'll have to continue to monitor it. I just want to note though that Roadway Sensors had its own supply chain dynamics and they do rely on certain third party to provide various components. We were able to navigate that pretty successfully by buying ahead in some cases, sourcing from alternative providers and in some cases making some engineering changes in order to minimize our exposure. We'll continue to do that going forward, but I just wanted to be clear that those pieces of the business had some exposure, the specific exposure looks different. And then as a final reminder in FY ’22, you now obviously the segmentation changes, but the basic dynamics will stay the same for the various lines of business.
Okay, great. Thanks for taking my questions and best of luck!
We'll take our next question from Mike Latimore with Northland Capital Markets.
Great! Thanks. Yeah, very nice results. In terms of the recurring revenue, I think the 24% to 26% growth – 24% to 26% of revenue within the year guidance, I guess what kind of growth rate does that imply?
So yeah, [Crosstalk] A - Joe Bergera: Yeah, I believe it's in the mid-20% year-over-year. And as a reminder, annual recurring revenue includes – the way we're defining it includes both managed services, as well as our software as a service product line, that accelerates the growth for the various offerings. It obviously varies, but when you aggregated it all, it’s been approximate near 20% rate of growth.
Okay, I got it. And then just to be clear there then, you're not going to report Roadway Sensors and Transportation Systems separate anymore. It’s going to be one revenue line?
Well, there’ll be two revenue lines. There’ll be product, which is primarily just as we did today on Roadway Sensors and then services, which is a combination of our software business as well as the professional services. A - Joe Bergera: And my current plan is to provide better visibility for the different forms of service revenue over time. So with this change we’re actually hoping to provide better visibility to some of the key questions people have been asking, such as what is your enterprise-wide annual recurring revenue and what's the rate of growth of your annual recurring revenue, which today is difficult to present, because while most of the annual recurring revenue is in Transportation Systems, we do have some in Roadway Sensors as well and it gets complicated to try to present that.
Yeah, yeah, okay. And in fact on the federal infrastructure bill, if you do benefit from that, is it kind of across the board, all your products or is it more focused on ClearGuide or some specific thing?
Well, potentially it should benefit us across the board. Obviously the – well, first of all it’s the fact. Everyone right now in the media is very focused on the infrastructure bill, which is obviously important and we would love to see that get passed. But there's also going on is the re-authorization of the FAST Act, which is that federal transportation funding bill for various surface transportation initiatives. In our opinion, it's likely that these two people of legislation will actually be ganging together, but there are important elements to both legislative items that have a positive impact we believe in Iteris. I just wanted to be clear that currently there are two different pieces of legislation and I'm talking broadly about the two which I ultimately expect to be ganged together. But anyway, there is a sizeable element of both, the FAST Act reauthorization and the infrastructure bill that’s going to focus on technology and the use of technology to enhance the safety and the velocity of the physical infrastructure, and so that entire line item, which is going to be – you know we expect very large and would benefit virtually every aspect of Iteris’s business.
Okay. Again, thanks a lot. Good luck! A - Joe Bergera: Thank you.
We'll take our next question from Ryan Sigdahl with Craig-Hallum Capital Group.
Good afternoon guys! A couple of questions on organic growth and maybe I missed it in the prepared remarks, but what was organic revenue growth in the quarter excluding TrafficCast and Ag and Weather, which I think was pretty small given what you’ve divested it.
Yeah, so the other results presented were on continuing operations, so there's no Ag and Weather in either of the comparison. The organic revenue growth was about flat in Q4 as we kind of previewed in our Q3 results with the total quarter being up high single digits, which is right about where we finished.
Got you. What was TrafficCast’s revenue in Q4?
The TrafficCast revenue was just about $4 million.
Great! Then just on guidance, what does that imply? What's the assumption for organic growth, excluding TrafficCast at the midpoint?
So, the organic growth is mid to high single with the balance making up the TrafficCast full 12-months’ worth of revenue at the mid-point.
And Ryan, and to answer the next part of your question, it's in the low teens at the high end of the range, consistent with what we have previously indicated our expectation to be.
Got you and that does kind of segway. I guess at the mid-point it is lower than the long term targets you put out. So I guess maybe the assumption is we should assume the high end, but I guess if we just go to the mid-point of guidance, what are the headwinds that are causing you kind of mid-to-high single digit versus the 10% to 12% medium term annual CAGR you put out a couple months ago when you did your Analyst Day.
Yeah, we are trying to be – well, so first of all when we put out the number at our Analyst Day, that was a cumulative average growth rate and we still would stand by that. But right now where we sit, while we definitely feel like there – we are seeing an improvement in the economy, it is unclear exactly where we stand in terms of the recovery and what the actual pace of the recovery is going to be. And while I think most people for example the big increase in demand as we've been talking about on the call, there do continue to be supply issues which could negatively impact a lot of businesses, including Iteris, and so there are these countervailing effects and that, we did a pretty good job of managing through that in our fiscal ’21 and we would expect to still do that in fiscal ’22. But depending on how that plays out, you know we – we’re not confident, we’re not absolutely confident that we’d be able to deliver growth or strictly organic growth in the low teens due to some of these countervailing factors, and that's why it’s you know. If you pick the midpoint, it reflects high single digit organic growth and it’s really just a function of where we are in the recovery and what some of the bumps are looking ahead over the next couple of quarters.
Yeah, and Ryan, just to clarify my answer on the TrafficCast contribution in the quarter, I gave you the cumulative which was four months’ worth of revenue. In the quarter the revenue was about $3.2 million for TrafficCast.
Great! Thanks for that clarification. One last question for me. Just as you think about infrastructure bill and some bigger potentially more construction going on, can you talk through ClearGuideand really how you guys can play into that specifically?
Yes, so well first of all ClearGuide has a really broad value proposition and so I don't want, I want people to think that the value proposition for ClearGuide is strictly limited to construction. But that being said, I'm glad you asked the question, because we are seeing a lot of interest from global construction firms in using ClearGuide to help them manage their construction project in order to minimize disruption and specifically the disruption to the movement of traffic, and as a result to help them maximize their profitability on these various projects. And so what a lot of these global construction firms are looking to us to help them do, is to figure out exactly when to time their construction activities, how to maximize the window during which they can perform construction and then also how they can optimize any rerouting of traffic that sort of minimize disruption and congestion. The reason it's so important to global construction firms is that they generally today when they engage in a contract for like a large multiyear construction project, there's a very significant success fee that is associated with traffic impact and the success fee can actually make or break the entire profitability on like a multi-billion project for these big construction firms. We demonstrated our ability to significantly accelerate the pace of construction and improve the economic for the joint venture that is performing the I-405 expansion in Orange County and based on that success we’re seeing significant demand from other global construction firms to use ClearGuide and our Congestion Management Managed Service to help them realize the same kind of economic benefits that we created for OC 405 venture partners. But we expect significant demand not only in the United States but worldwide for our ClearGuide and Congestion Management project – Managed Service, I apologize.
Great! Thanks Joe. I’ll hop back in queue.
[Operator Instructions]. We’ll take our next question from Mike Shlisky with Colliers Securities.
Good afternoon guys. I was on a couple minutes late, so if you already covered some of these please feel free to refer me back to the transcript, I’m happy to do that. But let me ask first, you know one bill, you didn’t mentioned that. There’s an infrastructure bill that you mentioned other stuff, but there’s also – was a giant stimulus bill back in the calendar first quarter fiscal fourth quarter and quite a bit of local government aid attached to it. Some of the DoT's I've heard from have said they have never seen budgets this large in their entire lives and are trying to find ways to spend it. Have you got a lot of interest in some of these one-time projects that don’t involve SaaS to fix anything or improve anything given some of these large budget outlays?
Yeah Mike, this is Joe. We definitely – the market is very strong right now. This is a reminder for everyone. We’ll continue to provide all of our products and services as we – as discrete products, as we have in the past. So in another words, there are a lot of agency that will continue to buy our detection products and deploy them across arterial corridors and a lot of those purchases are often associated with modernization initiatives, which could be funded through some of the windfall let’s say, that these agencies realize, and so yes, we absolutely expect that to continue to happen. But we also think that there is a long term systemic change happening in the way mobility infrastructure is managed, and so over time there will be more and more of a transition to recurring revenue and our SaaS portfolio and our managed services portfolio is designed to maximize our share of that wallet. But anyway to answer your question, yes, the market is very robust. We expect to continue to be robust and it will benefit us across all of our product lines. Now coming back to the question that Ryan was asking, which is like, well then why isn't your organic revenue forecast even higher and again, the reason for that is despite the tremendous demand, there are some pressure points with – particularly with respect to the availability of certain inputs, and so it is hard to – so what that means is we would expect booking to be strong. Look at our backlog right now, it’s at historic highs; it’s up approximately 25% year-over-year, but the rate of backlog conversion could be impacted over the next couple of years – next couple of quarters, I'm sorry, due to supply chain and other disruptions to get – need to get worked though as the economy begins to renormalized. So we're trying to be prudent and again at the mid-point of our range, it reflects high single digit growth, but at the high end of the range, you know we would expect organic growth of about 13% and total growth of about 22%, and we're going to do our very best to navigate this environment and come in at the top of the range.
Okay, got it. I wanted to ask secondly about the Continental Agreement. In your comments Joe you emphasized traditionally that your outlook does not include any new arrangements or new expansions of its M&A or other kind of contracts. I wasn't sure it that included Continental, because that’s already been announced and signed or does that also include – at this point there is no Continental impact in your fiscal 2022 guidance.
In the guidance that we provided there is no Continental impact and just to be clear, what we announced already is we’ve entered into a collaboration agreement with Continental and it's our expectation that we’ll commercialize joint technology. At this point I’m not able to comment on precisely when that technology would be available and I'm not at liberty to talk about the potential pricing or the economic and so it is not included in our forecast to the extent that we were able to launch joint technology and we were to start to see sales of that technology in the current fiscal year, that would all be upside.
Got it. Just a follow-up there, can you maybe share with us your thoughts on how substantial Continental deal could be, when it’s kind of fully realized, probably not going to be this year but several years away for now at least. Is that going to be a large business for you or will it be just one of many products that Iteris offers?
Yes, well first of all I hope it will be large. We think it’s the technology that we're developing with Continental we think is groundbreaking, and we’ll create significant commercial and social benefits. So I would hope that it's going to have a – lead to a meaningful financial contribution to the business, because it's deserving of it because of the capabilities that we’ll be introducing. But in terms of talking about the specific total financial impact or like the larger addressable market associated to that technology, let me kind of step back a little bit and comment on like the more general nature of the activity that we’re pursuing at Continental, but with other people, other entities that include automotive OEMs, but other Tier 1 part suppliers. The general focus is on connected and automated vehicle enablement, and we think that in order to realize the full potential of connected and automated vehicles and particularly Level 3 to Level 5 automation, it is essential for the infrastructure to be able to communicate with vehicles. And we believe that both our technology, as well as our ClearMobility cloud platform will be a critical element of enabling infrastructure to vehicle communication. And that broader market place I think is extremely large, likely equivalent to – over time it’s going to take a while for that to develop and lets be very clear about that. I mean I think we're talking a number of years for that market to move from nascency to an established category. But when it does, I believe that that market will be on the order of the same size as our current total addressable market of approximately $6 billion. So in other words it would add, would double our addressable market let’s say, to potentially as much as $12 billion.
Got you. Thanks for that color, I appreciate it. I’ll pass it along.
That concludes today's question-and-answer session. At this time I’ll turn the conference back to Joe Bergera for any additional or closing remarks.
Super! Thank you, operator, and thanks to all of our analysts as always for the good questions. Obviously we appreciate everyone’s support and again thank you for making time to participate in today’s call. On the Investor Relations front, I did want to note that we're going to be presenting at the Craig-Hallum Capital Group Investor Conference tomorrow, June 2; and then also at the Stifel Virtual Cross Sector Insight Investor Conference on June 8, 2021. If you're participating in either of those conferences, please schedule a visit with us, we’d love to talk to you. In the meantime, we look forward to updating you again on our continued progress when we report our fiscal 2022 first quarter results. With that, that concludes today's call. Thanks again everyone.
This concludes today's call. Thank you for your participation. You may now disconnect.