Iteris Inc (ITI) 2011 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to assess Iteris financial results for its fourth quarter and fiscal year ended March 31, 2011. Joining us today are Iteris President and CEO, Mr. Abbas Mohaddes, and the Company's CFO, Mr. Jim Miele. Following their remarks, we will open the call for your questions.

(Operator Instructions)

Then, before the conclusion of today's call, I'll provide the necessary precautions regarding forward-looking statements made by management during this call. I would also like to remind everyone that a webcast replay of today's call will be available via the investor section of the Company's website at www.iteris.com until June 9, 2011.

Now, I will turn the call over to Mr. Mohaddes. Sir, please proceed.

Thank you, Shawn, and good afternoon, everyone. Thank you for joining us today to discuss our recent results. As you saw at the close of the market today, we issued a press release announcing our financial results for our fiscal fourth quarter and year 2011. Both the roadway and vehicle sensors segments continued to drive growth in revenues for the year, increasing 11% and 19%, respectively, and for the fourth quarter, our roadway sensors segment and revenues generated from our acquisition of Meridian Environmental Technology helped drive growth.

Although our transportation systems revenue decreased 15% for the year, it has grown sequentially for two straight quarters. We have certainly seen positive signs of growth in this segment through healthier requests for proposal activities. In response to this added demand, we have started to add staff in this segment.

Our overall performance helped us generate another sequential quarter of positive cash flow from operations and maintain a strong balance sheet. Our results also reflect actions taken to expand our market share through our investments in sales and marketing and R&D.

During the quarter, we successfully integrated our acquisition of Meridian Environmental Technology, or MET. MET has proven to be an ideal match, in terms of both culture and complementary capabilities, as well as being immediately accretive financially. This acquisition is with our accelerated growth strategy to target synergistic companies that enhance our intellectual property. The addition of MET strengthens our offerings in key niche markets, which include traveler information, weather, and decision support systems.

As we begin fiscal 2012, we are seeing increased traction of our products in the marketplace, both domestically and internationally. This traction is attributed to our prudent investments in sales and marketing and R&D, as well as further expansion of our market share.

We are also seeing strengthening indications from federal and regional agencies through an expanded number of requests for proposals in the traffic management space. We expect these multiple positive factors to drive increasing demand for our products and services throughout fiscal 2012 and beyond.

Now, before I comment further, I would like to turn the call over to our CFO, Jim Miele, who will take us through the details of our financial results for the quarter and fiscal year. Afterwards, I'll return to discuss some more of the highlights of the quarter, and year and how we plan to build shareholder value in 2012. Finally, we will open up to calls -- the call for your questions.

Jim?

Thank you, Abbas, and good afternoon, everyone, and thank you again for joining us. For the fourth quarter ended March 31, 2011, our net sales in contract revenues increased 4%, compared to the same year ago quarter, to $15.7 million. The overall increase was mainly the result of the acquisition of MET, which we completed in January, 2011, and that contributed an additional $1.5 million to contract revenues during the quarter. That was offset by a 10% decline in our traditional transportation systems contract revenues.

For fiscal year 2011, net sales and contract revenues increased 2.4% over the prior year to $59.4 million. The increase was a result of the 13% increase in net sales of our sensors products, the acquisition that I just spoke of, of MET in January, and again was offset by a 15% decline in traditional systems contract revenues. As there are different characteristics affecting each of our revenue streams and different attributes affecting our financial results, Abbas will provide more detail regarding net sales and contract revenues later in his comments.

Our gross margins for the fourth quarter were 44% versus 43% reported in the year ago quarter. For the year, gross margins were 44% versus 42%. The increase in margins was mainly a result of the sales mix more weighted towards product sales in both the quarter and the full year.

Operating expenses were $6.2 million for the fourth quarter, mainly related to increased sales and marketing expenditures and the inclusion of MET operating expenses. For the year, operating expenses were $30.7 million, and included an $8 million goodwill impairment charge we took in the third quarter.

GAAP net income was $479,000, or $0.01 per diluted share, in the fourth quarter of fiscal 2011 versus $807,000, or $0.02 per diluted share, in the same year ago quarter.

Excluding non-cash charges for goodwill impairment and other non-cash expenses, non-GAAP net income was $555,000 per diluted share in the fourth quarter of fiscal 2011. That compares to $911,000, or $0.03 per diluted share, in the same year ago quarter. Please refer to our press release issued today -- it's available on our website -- for a reconciliation of non-GAAP net income to GAAP net income, as well as other important details about our use of non-GAAP financial information.

For the year, our GAAP net loss was $5.2 million, or $0.15 per diluted share, versus GAAP net income of $2.2 million, or $0.06 per diluted share. The loss in fiscal 2011 is also attributable to the same non-cash charge for goodwill impairment taken in the third quarter. Excluding this non-cash charge and other non-cash expenses, our non-GAAP net income was $2.6 million for fiscal 2011, or $0.07 per diluted share, and this was virtually unchanged from the prior year.

We ended the quarter with $11.8 million in cash, which is up from $10.4 million at the end of fiscal 2010. Additionally, we generated another year of positive free cash flow and approximately $5.3 million in positive cash from our operations. The increase in accounts payable and other liabilities for the fiscal 2011 is mainly the result of an additional $2.5 million in deferred payment and earn out liabilities recorded in connection with the Meridian acquisition.

At the end of our fourth quarter, we maintained $13.8 million in remaining deferred tax assets, and those can be used to offset future taxes payable. We've not yet drawn on our $12 million line of credit with our senior lender, and we continue to reduce our long-term debt, which is now $3 million.

This concludes my comments on the financials. Now, I'd like to turn the call back over to Abbas, who will discuss the quarter and our year, as well as our strategy, in greater detail. Abbas?

Jim, thank you very much. We are tenaciously executing several initiatives, including strategic marketing agreements, key product developments, and working to achieve further market penetration in specific geographic areas, as well as pursuing complementary acquisition opportunities.

As I mentioned earlier, during the fourth quarter, we completed our accretive acquisition of MET and smoothly integrated them into our operation. With the addition of MET, Iteris is better equipped to empower travelers and traffic management authorities with more accurate and real-time information and network performance management.

As now a unified force in the marketplace, we are already marketing several new projects. We are now better positioned to capture a much larger market, while developing and enhancing software for the industry. We are also committed to growing the weather information and decision support system offerings of MET, which we expect to be a key growth area in the traffic management market.

Now, I would like to comment on each revenue stream and address key drivers that support our expected growth. In transportation systems, our most challenging segment presently, sales decreased 15%, year-over-year, which was largely due to ongoing weakness in the market and the lengthening of the overall sales cycle, as well as the delay of certain contracts. However, including the $1.5 million of revenue attributed to MET, our contract revenues increased 13% over the same year ago quarter.

We are also encouraged by sales in this segment growing sequentially for the last two quarters. We are seeing an expanded number of requests for proposals, particularly with regional agencies in many of the markets we serve. Over the last two quarters, we have also added several senior associates possessing business development experience, which we anticipate will result in more contract awards going forward.

We have also continued our expansion of leadership positions and investment in product and service development in this market, and we have seen positive indications for transportation funding to increase. Funding for the federal bill is being seriously considered this year, and regional agencies are preparing for more RFPs. So, as this funding increases, we believe the proactive steps we are taking today will strategically position us with best in class technologies for the future.

At the end of the year, we $25.5 million in total backlog, which includes over $3 million of new signed contracts during the quarter. Key drivers in this revenue stream for fiscal 2012 are expected to include, A, our focus on large opportunities, including design build contracts that are typically several million dollars.

We are tracking several such projects that we anticipate will grow revenues in this area. For example, subsequent to the end of the quarter, we were awarded a $1.3 million contract to provide traffic engineering and planning manuals for Abu Dhabi Department of Transport. We were also selected for a $1.3 million contract to analyze congestion improvement alternatives through the 91/605/405 Los Angeles corridors.

B, we anticipate progress in the development of new niche technical markets. We are developing a specific transit priority tool, which we are now marketing nationwide and receiving a favorable market reaction. We are currently completing a system integration tool, as well as developing a key software tool for arterial data collection and performance measurement and management.

C, we plan to make additional investments in sales and marketing, domestically and internationally. These investments should help us grow our offerings going forward. For example, we have recently hired key senior associates in San Diego and San Francisco to help us establish presence in those markets.

As I mentioned, a significant component of future federal funding will be the federal highway bill, which is up for renewal, and we expect it to be introduced to Congress in the coming weeks. While the magnitude of the bill remains difficult to estimate, there are positive indications that the bill will be seriously considered. In addition, we expect the funding attributed to traffic management in the new bill to be significantly higher than the previous bills, and this would ultimately benefit Iteris.

Also, there are a variety of other transportation related funds flowing into our market, including various stimulus funds, infrastructure funds, high speed rail transit funds, state and local agency bonds, tax hikes, focus on transit, and transportation infrastructure improvements. We are monitoring this progress and working closely with many of the agencies to benefit from these funds through the request for proposal process.

Our vehicle sensor business segment continued to grow during the year, increasing 19% in fiscal year 2011. We have seen relatively higher unit sales of our lane departure warning, or LDW, products to each of our key markets, particularly to our foreign OEM heavy truck customers in Japan and Europe, as well as our domestic truck fleet customers.

During the quarter, we made significant progress in various R&D milestones, including the development of additional features in safety direct software, the completion of the third generation LDW system, as well as progress in forward collision warning development.

In partnership with Audiovox, in our fourth fiscal quarter we introduced our new distracted driver lane departure and forward collision warning advanced driver assistance systems. This active safety machine vision technology will power a new customer product that addresses a leading cause of highway fatalities, that is, unintended vehicle lane changes due to distracted drivers.

We believe the following key drivers will help accelerate our growth in vehicle sensors. One, market penetration of our safety direct software. We plan to reach out to major fleets as part of our marketing campaign. We are already receiving a very positive reaction from the fleets and expect a significant market penetration.

Two, expansion of our active safety portfolio. We have competed the design and are now marketing our third generation platform, which offers extensive processing power capable of multiple functions, such as warning for forward collision, in addition to lane departure.

Three, the European Union mandates of key active safety features, which we believe will include a lane departure warning feature for all new commercial truck models, beginning in year 2013, and subsequently, all new commercial trucks by year 2015. We are preparing to respond to this anticipated demand and seeking partnership to help us take advantage of this potentially significant expanded market.

And, finally, penetration into the consumer aftermarket. Distracted driver accidents are finally getting more national attention, both from the media and the government. We believe our active safety technologies, including lane departure warning and forward collision warning, are excellent solutions. We are excited about our partnership with Audiovox and optimistic about the prospect of positive market reaction.

Our roadway sensor business segment net sales grew 11%, year-over-year, and despite increased pricing pressure in recent quarters, we were able to retain and, in some cases, improve our margins as a result of product mix and reduction in cost of goods. Sales were driven by higher unit volumes, domestically, from both our direct sales and dealer markets.

Some of the most recent new product offerings have been well received by the market, specifically, Pico, wide dynamic range, or WDR, cameras, and Abacus. In addition, our EdgeConnect product sales have continued to grow. If you recall, Pico is a video detection system designed to respond to the standards and functional requirements of the international market.

Wide dynamic range cameras are helping in better visibility during adverse conditions. As we announced earlier this week, this product is receiving an excellent reaction from the market and helping to grow our sales.

Abacus helps both domestic and international agencies leverage their current surveillance camera systems and turn them into detection and incident management systems. I am pleased to report that 22% of our roadway sensor product sales were derived from products we have developed over the last two years, and we believe we are recently gaining market share as a result of these new introductions.

Key drivers for this revenue stream in the upcoming quarters are expected to be increasing traction domestically as we grow our core and addressable markets through the depth and breadth of our product portfolio.

We plan to introduce new products in the upcoming quarters that address this demand, as well as a new generation of key products. In addition, we expect to benefit from an overall rise in the video detection addressable market. Innovative product offerings and partnerships tailored to the international market is another key driver.

I'd now like to focus on three areas where I see Iteris accelerating our growth in 2012 fiscal year. First, our video detection market. We plan to grow our product portfolio, both domestically and internationally, through the introduction of innovative and superior products that should benefit from the overall rise we are expecting in this market.

Second, we expect a material increase in our traffic management consulting and products business from the boost in the federal bill, as well as other funding sources. In addition, we expect to enjoy the benefits of our prudent investment in sales and marketing and R&D, which should translate into expanded market share in this space.

And finally, strategic acquisitions and partnerships. We are very pleased with the acquisition and integration of MET, and are currently evaluating a pipeline of additional acquisitions. We are focused on accretive and synergistic acquisitions to help us accelerate our growth and enhance our shareholder value.

In summary, we achieved our fifth consecutive quarter of year over year revenue growth in our roadway segment. Our vehicle sensor revenue continued to rebound, and we achieved major partnerships and R&D milestones. Finally, our transportation systems revenue and operating income enjoyed sequential growth, which we believe is a good indication of this segment beginning to turn around.

We believe our commitment to R&D and innovation operational excellence and expected demand for our expertise and technology has helped produce these results and will continue to push us competitively, going forward. Our balance sheet remains strong, and, coupled with significant operating cash flow, we have the stability needed to execute on our broader strategic initiatives.

The MET acquisition was a success, and I believe we will continue to strongly benefit from its synergist -- synergies with Iteris, as we see this acquisition as an excellent beginning to a number of opportunities in our pipeline that we are pursuing.

Finally, I remain optimistic about the traffic management market and Iteris' position in the upcoming quarters. Our investments in sales, marketing, and R&D, as well as our continued execution of values initiatives and our strategic plan, have helped our business achieve two straight quarters of revenue growth.

Now, with that, we would be delighted to respond to your questions and comments. Operator?

Thank you, sir. We'll now begin the question and answer session.

(Operator Instructions)

And our first question comes from the line of Jeff Van Sinderen with B. Riley. Please, go ahead, sir.

Good afternoon. I'm wondering if you could give us a sense of what you're seeing so far in the first quarter for your business, and then any directional guidance for Q1.

Thank you, Jeff. Yes, Q1, as we speak, is a good quarter for us. We have decided not to give any specific guidance for the quarter, but what I see and what we see in the market is quite encouraging. In the transportation systems, where we have been experiencing weakness over the last year, we see exceedingly major organizations, regional, federal, to produce a request for proposals, which translates into proposals and, ultimately, contracts for us. We see the beginning of the rebound and growth on that.

We also see a positive reaction from much of our new products in both product segments, roadway sensors and vehicle sensors. Overall, I believe that 2012 is going to be a good year for us. We expect both revenue and operating income growth in this year, and this quarter, so far, has been pretty good, and I anticipate to announce those results in about a couple of months or so.

Okay, good. And then, maybe, can you talk a little more about the benefits that you're seeing with the Meridian acquisition -- how that's being manifest in your business?

Sure. We have been working with them over the last several years on various opportunities, and we were excited about the culture fit. Our people work well together. One of the key areas that we have been working together has been travel information system. They are working on [67] statewide 511 projects. We have had a few. So, combining together, we are now at top two, three contenders in North America in that segment, and we have already started the integration.

It has been going quite smooth in accounting, in sales and marketing. We are doing joint business development together, proposing together. We, in fact, have received some awards. So, it has been quite a successful acquisition and integration. Over the last few years, we probably have looked at two dozen different companies. We are very careful about sensitivity of the firms that we like to work with and acquire, and we want it to be accretive, and they have financially been accretive immediately.

So, it has been, from our point of view, quite successful, and we intend to continue looking for the type of companies that either could provide expanded geographic presence or a new geographic presence for us or adding intellectual property to our toolbox. So that's -- has been our intent in our strategic plan to accelerate our growth, although, internally, we are doing that quite a bit. At the same time, where we need to get -- as far as our goals, we need to execute additional acquisitions.

Okay. Good to hear. And then, maybe you can just comment on if you feel like you're gaining market share, despite the backdrop of budget constraints or budget challenges.

We have sensed that, particularly the last couple of quarters. We, by design, made investments -- expanded investments in sales and marketing and R&D, and this really is in all three revenue segments that we have. And we are definitely seeing growth in sales, and some of that is coming, certainly, from market share.

And the market itself we are sensing is expanding. Obviously, the automotive has rebounded significantly, as of recent quarters, and then, the traffic management market -- we (inaudible) sense its traction, primarily through various quotes that we are getting in for our products, as well as the health of the RFPs coming from agencies, particularly regional agencies -- many of the regional agencies that we have been working with.

Okay. So, should I assume, then, that you probably will continue with your R&D and marketing investment? Maybe you can just give us a sense of how you're looking at that going forward.

Yes. Absolutely. We feel that this is a prudent strategy that has been helping us so far, and with that strength that we are enjoying from our cash flow and financial settings, we intend to continue and, perhaps, expand our investment in both sales and marketing and R&D in this upcoming fiscal year.

Okay. Good. And then, finally, I just wanted to ask your sense on whether you feel, at this point, that -- whether LDW is really a core part of your business, or is it really core or important to the traffic management part of your business?

That's an excellent question, Jeff. From a technology standpoint, it's a machine vision. It's really [be] leveraged at -- with activities that we have in the detection business. From a market standpoint, it's definitely a different market. Our challenge is as the demand, particularly for the European market, increases, identifying partners, contractors that could really help us achieve the kinds of benefits that are possible.

I should point out, however, though, our overall strategic approach is to grow the Company. We are now quite aggressive in our acquisition strategy, and despite the cash that we have and debt that we could actually add, we could always use more cash if a perfect fit of an opportunity comes along.

And, to that end, we wouldn't be adverse to divest any of our properties, if necessary, and so, that's something a public company like ours should be focused upon. But lane departure warning is a flagship of that segment, and we have invested, over the years, quite a bit, and we have every intention of capitalizing on it to the extent possible.

Right. And you have some of the best product there, too.

Thank you. Absolutely. [We invented] that product, and we have built upon it, and we have added and expanded our portfolio, but the challenge has always been, really, the proper magnitude of penetration in that market. We admittedly have struggled with that over the years.

Right. Okay. All right, fair enough. Thanks very much, and good luck this quarter.

Thank you very much, Mr. Van Sinderen.

Thank you. Our next question comes -- I'm sorry. Nick Halen with Sidoti & Company. Please, go ahead.

Good afternoon, guys.

Good afternoon.

Good afternoon.

I -- one quick question. In terms of -- what markets or regions are you guys actively marketing into? Abbas, I know you said earlier, talking about San Diego and San Francisco -- and I was wondering what regions outside of California that you guys see a presence?

Yes, sir. We have a presence in much of the North American geography from a traffic management standpoint, either direct or through our distribution channels. From consulting standpoint, we operate out of 17 offices nationwide, and we also have an office in Abu Dhabi in Middle East. So, some of these offices are regional, some of them are smaller.

And then, in the detection market, the other part of -- the product part of the traffic management -- again, we operate primarily out of our headquarters here in Santa Ana. In California, Texas, and Florida, we go direct. In other words, we have our own forces in sales. Elsewhere, we go through about a dozen highly reputable partners that sell our products in North America.

Does that respond -- and also, in vehicle sensors, we have a twofold approach. In passenger cars, we go exclusively through one of the top ten first tier automotive suppliers, a French company called Valeo, for all passenger cars. And then, for trucks, both OEM and aftermarket, we go direct. So, at the moment, we have majority of the OEMs as our customers, and then, we also sell to fleets. Any fleet, typically, that has 300 trucks or larger is an addressable market for us. I hope that responds to your question.

No. Yes, that helps. I guess -- in terms of the OEMs that you mentioned, do you have any updates on what is going on there? Do they continue to spend a lot of money and give you guys a lot of business?

Yes, they are. We have been enjoying increase in the European sales. Even in Japan, where they had the issues of reduction in production, due to tsunami and earthquake, we did okay in Q4. In Q1, it might be slightly down, but it is offset by some of the aftermarket activities that we are doing.

And, of course, we are enjoying OEMs in North America as well. The beauty of that market is that it has rebounded in excess of 30%, year-over-year, from a production of the truck standpoint, and we are enjoying the benefits of that in our market as well.

Okay, great. And also, lastly, just -- I know you talked a lot about acquisitions. I was just wondering if you could give us, maybe, a range and what size of acquisition you guys are looking at. Thanks.

Sure. There are two, generally, types of acquisition. There are the tuck-ins, $4 million or $5 million range, say, five to ten, and we also look at larger acquisitions, $20 million plus, to the extent that it's a good fit, and again, either providing a new presence or expanded presence in a particular geographic area or having a specific intellectual property that enhances our offering and, overall, helps us to accelerate our growth. Thank you for the question

Thank you. Our next question comes from Jim Gentrup with Discovery Investment Research. Please, go ahead.

Good afternoon. My -- I have three questions. Number one, revenue was up 4%, year over year, and expenses were up 19%. Both of those included the MET acquisition. Just give us a little bit more of an idea, going forward, if -- how well revenue is going to kind of catch up here and what kind of leverage you have in your income statement.

Yes. We certainly anticipate the revenue -- as we announced today, I believe, for the quarter, we recorded about $1.5 million revenues coming in from MET. That revenue is going to continue and, in fact, grow, as we go forward. With that, there will be an associated operated income that we expect coming also from MET. As I indicated, it was accretive financially.

We got quite a bit of leverage, as far as expenses, so we don't anticipate the expenses to be anything more than the business as usual, if you will, and I let Jim expand upon that. Jim, if you wish?

No, I think that's a fair statement. I mean, we certainly expect leverage in the business modeling. There's a little bit of maneuvering early on, and then, acquisition. There are some acquisition related costs in that number as well. I couldn't call those -- they're one-time related to Meridian. If we do future acquisitions, we would have similar type expenses.

So the SG&A run rate of approximately $20 million, a little more -- that would be a decent run rate to use going forward?

Well, additionally, there's the $8 million charge for -- non-cash charge for goodwill impairment that is in the full year number. So, when you mention 29, Jim, I assume you're talking to the full year?

$20 million is what I said. Yes, I was talking about the full year. Yes.

Yes. So, you look at the full year. We had roughly $30.7 million. You take away $8 million for the goodwill impairment, and then, going --

No, no, Jim. No, Jim. You're misunderstanding me. I'm talking about the current SG&A run rate of -- it was $5.1 million in this quarter. I'm really referring to what the run rate is for -- going forward for 2012 --

Okay. Very --

Jim, we don't typically give guidance, but our rule of thumb is that, to the extent that we grow the top line and bottom line, as a percentage, we like to reduce the G&A expenditure going forward. So, we always look at the leverage. So that would be our operating assumption, going forward.

Does that help?

Yes. Yes. That's fine. Meridian is a -- 511 service is a hands on type thing. You have to dial 511. You've got some advertising based programs out there that are not hands free. How are you guys going to compete in that area and if you could just talk a little bit more about your plans with Meridian and how that will work. I mean, are you going to go to more advertising based, and how is it funded right now? Is it DOT paid?

That's an excellent question. I would make some comments, but because of the competitive nature of that business, I may have to shy away from too much of specifics. But let me put it this way. We feel that we are a leader in that market, and, in fact, we are together working on the Georgia DOT that has an advertising business model that we are focusing on.

But we intend to use advertising models in other parts of the country, and we believe, at this point, that a prudent business model in 511 could definitely generate additional cash and recurring cash from an advertising model. So, that's the extent that I could share with you at this point.

And currently, the model is you're getting paid by the DOTs in the respective states. Is that who actually pays for the service, or --?

Yes. Currently, DOTs or system owners, if you will, are providing the funds for us, but what we intend to do, going forward, is adding additional recurring revenue or new sources of revenue that could sustain that type of a business, ideally, through a new business model, let's say, advertising.

And then, these contracts with the DOT -- are these one year, two year contracts? What are the lengths, typically?

Yes, it varies, case by case, but typically, multiyear and then, they have options, on annual basis, beyond that.

Okay. Thank you. And then, one more question. You've talked about the European mandate for -- I believe it's the LDW system. Correct?

Yes, sir.

You've talked about that before. Is that currently impacting sales in the LDW -- the vehicle sensor segment? Is that currently impacting the sales, or, if not, when do you start -- when do you expect it to start the impacting?

Yes. We anticipate the impact to start in the year 2013 -- in couple of years, and then -- because that would be the time that the new commercial vehicle models -- the new models would go into the mandate. And then, significantly more, and I'm talking about ten to 20 times more demand when we get to 2015, because at that time, every Class 8 or, let's say, 18 wheelers that come out of the assembly line has to have a lane departure warning on it.

Okay. So, not currently making any impact right now on current vehicle sensor.

No. At the moment, we are selling it as an option, and fleets are requesting it, and then, we are selling it aftermarket. So, the business dynamics and magnitude would drastically change when the mandate goes in.

There are other programs, by the way, as well. There's a bill headed to Congress in US that is hoping to get some tax incentives for the commercial vehicles. NHTSA and other safety organizations have done a study suggesting that these types of safety devices truly would prevent significant amount of fatalities that, unfortunately, we experience on our roadways and freeways, and these are incentives that if they get a tax break, that might be helpful.

When you look at, let's say, a typical commercial vehicle -- if they pay the premium, it would be, let's say, $7,000 to $10,000 a year, and if the insurance company is giving you 5% to 10% discount, it could easily pay for itself for a safety improvement device like our technology, LDW.

One last -- if I could ask one last question. All right?

Yes, sir. Please.

Last year you did $26 million without -- in contract revenues -- 2010, I'm talking about. 2010 -- you did $26 million -- $26.4 million in contract revenue, and that's without the Meridian, because you didn't -- obviously, you didn't have it. I'm just curious. You're talking about some growth in traffic management consulting -- Q1 looks good.

Can you give us any kind of idea? Is it -- are we going to go back to at least that area? And I know you've said you don't like to give guidance, but can you give us some idea of what -- when you say you're going to expect growth? I'd appreciate it. Anyway, thank you very much.

Sure. Thanks for the questions again. And, yes, we have seen the trend, in the last two quarters, of a rebound of the consulting segments, and we expect that trend to continue, and we anticipate to benefit from it.

And as a result of that, we have started, again, hiring again at various levels, and of course, these activities are gradual. That's why we like to give a longer term view of this. I'm confident to expect that 2012 would be a growth year and a rebound year for us in the consultant segments.

Thank you, again, for your questions.

Thank you.

(Operator Instructions)

And our next question comes from the line of William Meyers with Miller Asset Management. Please, go ahead.

Thanks. I'm interested in the consumer safety segment. How do you see the competition there? Who are the early adopters going to be, and when do you think there might be some material revenue from that?

Yes. Thank you for the question. The competition has already started -- you have, typically, two groups in vehicle sensors -- those that focus on passenger cars and those that focus on commercial. In the passenger car, we have already seen competition coming in from tier one providers of technologies, such as Continental and Bosch and Delphi and others.

And in trucks, we haven't seen them significantly yet, but we anticipate that, as we get closer to the mandate in Europe, it will wake up some of the 900 pound gorillas, and we have to compete with them.

I guess this is a double edged sword. In one hand, we invented this technology, and it is fun to see the market expanding significantly. On the other hand, we wouldn't be able to have the majority of the pie. We'll have a component of the pie, but we are quite confident that that pie -- that piece of pie would be much larger than what we enjoy today. I hope that helps.

Sure. Thanks.

You're welcome, sir.

Thank you. Our next question [comes from] Eugene Brodsky with Over the Top. Please, go ahead.

Hi, Abbas. My name is Gene Brodsky. I'm a very long-term private investor, and I think you've touched on what I want to ask, but my question is what is your overall plans for increasing top line revenue growth?

Yes, sir, Mr. Brodsky. Thank you for the question. We have essentially a multi-prong approach. In one hand, doing the proper sales and marketing and R&D expansion, as we have, to organically grow. We have an initiative called Operational Excellence that really focuses on leveraging on all components of the organization.

At the same time, we realize that, in order to reach our accelerated growth strategy, we need to do some acquisitions, and we are focusing on that. We are looking at variety of companies that, as I indicated earlier, that helps us either to penetrate into a new market or add a new IP that enhances our offering -- that it's a win-win situation.

It is one of those opportunities that we look at variety of criteria. It needs to be accretive, the culture fits, and we have been fortunate to be able to identify some of those, and we are at various stages of discussion and execution of that plan.

And our motto is innovation for better mobility. We believe in innovation, and we need to continue innovate. That, really, is a hallmark of our organization to really pave the way for us to grow in an accelerated fashion. Thank you very much for the question, Mr. Brodsky, and thank you for being a long-term investor.

The only thing I want to say additional is that I think, for the -- because I've been a long time investor -- for the valuation of the stock, I think it's very important for this top line revenue growth to increase.

Of course. And we couldn't agree more with you, although we also focus on bottom line growth. It's important to us, but top line growth is very important. Our strategy is to get to $100 million revenue as soon as we can. My hope is, say, within 18 months or earlier. That's our goal, sir.

Great. Thank you very much.

And thank you for participating.

Thank you. At this time, this concludes our question and answer session. I will turn the call back over to Mr. Mohaddes for his closing remarks.

We appreciate everyone's support and thoughtful questions, and we look forward to updating you again on our continue progress. And thank you very much, Shawn, for your help in this.

Thank you. Before we conclude today's call, I would like to take a moment to read the Company's Safe Harbor statement. We would like to remind all participants that during the course of this call, Iteris made forward-looking statements regarding future events or the future performance of the Company.

The forward-looking statements discussed during the call are based upon information currently available. This information will likely change over time. By discussing the Company's current perceptions of the market and the future performance of the Company and its products, Iteris is not undertaking any obligation to provide updates 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 form10-K and 10-Q. These documents contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any of the forward-looking statements.

30 P.M. Eastern time today. Please follow the instructions in today's earning release. An audio webcast of this call will also be available for reply via the investor relations section of the Company's website at www.iteris.com.

This concludes today's call. Thank you, ladies and gentlemen, for joining us today for our presentation, and you may now disconnect.