Iteris Inc. (Nasdaq: ITI) grew its top line 23% in the past two years as more local and state governments installed “smart” transportation systems.
However, Wall Street enthusiasm for the company’s smart stoplights has waned, and Iteris’ sales growth has slowed with wider losses due to the U.S.-China trade war, a natural disaster, and a recent company restructuring.
The Santa Ana-based data provider and traffic systems maker, buoyed by contracts with the Orange County Transportation Authority and Caltrans, boosted revenue to $102 million in the 12 months through June. Its two-year sales growth was good enough to claim the 10th spot among midsize companies—those with revenue of $100 million to $499 million—on this week’s Business Journal’s list of the fastest-growing public companies based in Orange County.
The increase largely materialized in the first of the two years, when revenue jumped 19% to $99 million for the period ended June 30, 2017. Sales in the ensuing 12 months climbed at a slower 2.8%.
Smart Lights
The company has three segments: roadway sensors for traffic intersection management; engineering and consulting services; and agriculture and weather analytics to forecast weather for road construction and farming.
The consulting unit generated about 53% of Iteris’ fiscal 2018 revenue for the period ended March 30 as roadway sensors provided 43% and the agriculture unit garnered less than 5%. In the two years, its consulting unit, which are primarily services, also drove the gains, boosting revenue 60% from fiscal 2016 to fiscal 2018. Iteris cited three large contract wins, in addition to backlogs, for the boost.
Its competitors include Econolite, which is based in Anaheim, IBM and Farmers Edge Precision Consulting Inc.
Recent notable wins include a $2.4 million contract with OC 405 Partners to integrate and maintain technology infrastructure for the $1.9 billion modernization of the 405 freeway in Orange and Los Angeles counties. Iteris has since secured follow-up deals on the project, the largest undertaken by OCTA in cooperation with Caltrans.
The project, which stretches from the 73 toll road to the 605 freeway, will add two general-traffic lanes and two toll-express lanes.
OC 405 Partners is a joint venture of OHL USA Inc. in New York and Florida-based Astaldi Construction Corp.
New Orders
Iteris also received “sizable” orders from the Federal Highway Administration, the state of South Carolina for its 511 software system, and the Virginia Department of Transportation for technical validation and design, Chief Executive Joe Bergera said in a conference call with analysts.
The technology industry veteran was tapped to lead the company about three years ago, pushing diversification of its lines of sensors and related systems beyond transportation and into agriculture, leveraging decades of data and analytics.
The stock isn’t getting green lights on Wall Street, though.
Investors have pushed down shares 42% this year. They traded recently at $4.08 and a market cap of $136 million, its lowest share price since January 2017.
The company is lightly followed on Wall Street, only three analysts having initiated coverage, and its average daily trading volume is just 72,000 shares.
It posted net losses in each of the past four fiscal years totaling $21.6 million.
Sales Drop
Iteris’ fiscal first-quarter earnings report showed a 6.3% drop in revenue to $25.5 million due to an 11% decline in its consulting unit.
It reported a $1.6 million loss, or five cents a share, compared with a loss of $500,000, or 1 cent, a year earlier.
The company cited ongoing headwinds at its key Texas operation, which was negatively affected by Hurricane Harvey last year, as well as President Donald Trump’s escalating trade war with China.
“We believe that the Texas market will begin to normalize in our fiscal second half after the Texas Department of Transportation’s new fiscal year begins on September 1,” Bergera said in an analyst call. “We have some modest concern about apparent supply chain delays that seem to be associated with steel and aluminum tariffs. These delays could exacerbate lead times for third-party equipment, such as pulls, mounts and cabinets that we depend upon. For various reasons, we believe Texas presents more exposure to these potential delays than other regions.”
Iteris, which didn’t respond to Business Journal requests for an interview, is scheduled to report September quarter financials on Nov. 6.
