Iteris Inc (ITI) 2012 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris Financial results for its fiscal fourth-quarter and year-ended March 31, 2012. Joining us today are Iteris President and Chief Executive Officer, Mr. Abbas Mohaddes, and the Company's CFO, Mr. Jim Miele. Following their remarks, we'll open the call for your questions. At that time, if you would like to ask a question (Operator Instructions).

Before we start 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 may make forward-looking statements regarding future events or the future performance of the Company. The forward-looking statements discussed during the call are based upon currently (technical difficulty) -- this information will likely change over time. By discussing the Company's current perceptions of the market and the future performance of the Company, its products and services, 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 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 Form 10-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.

Now I would like to turn the call over to Iteris President and CEO, Mr. Abbas Mohaddes. Please go ahead.

Thank you, Alyssa. Good afternoon, everyone. As you saw at the close of the market today, we issued a press release announcing financial results for our fiscal fourth-quarter and year-ended March 31, 2012.

We ended fiscal 2012 with our third consecutive quarter of year-over-year double-digit revenue growth, supported by a 19% increase in organic sales from our Transportation Systems segment. Roadway Sensors benefited from our Product Development Program, which delivered innovative solutions like Vantage Vector that are cost-effective for our clients and set the standards in the traffic industry.

Since the completion of our non-core Vehicle Sensors divestiture, we have turned our focus to growing our core Roadway Sensors and Transportation Systems segments, and plan to leverage our knowledge, decades of industry expertise and leadership position, to develop and enhance technologies and software-based solutions that address the needs of the intelligence traffic management market. So with the last year's momentum to build on, we are particularly excited about the recent breakthroughs in traveler information as well as performance measurement and management, both of which involve the application of technology to deliver intelligent actionable traffic information to traffic management operators, managers, and the traveling public.

But before I comment further, I would love 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 full-year. Afterwards, I'll return to discuss some more of the highlights for the quarter and year, and how we plan to build shareholder value in fiscal 2013 and beyond. Finally, we will open the call for your questions. Jim?

Great. Thanks, Abbas. And good afternoon, everyone, and thank you again for joining us today.

For the fourth quarter ended March 31, 2012, our net sales and contract revenues increased 12% to $15.2 million. The increase was primarily attributed to a 27% increase in Transportation Systems contract revenues. And as Abbas stated, 19% of this was organic, with the remainder provided by the acquisition of Berkeley Transportation Systems, or BTS, in November 2011. As there are different characteristics affecting each of our revenue streams, and various attributes affecting our financial results, Abbas will provide more detail regarding our net sales and contract revenues later in his comments.

Gross margin in the fourth quarter was 37.6% or $5.7 million compared to 44.4% or $6.1 million in the same year-ago quarter. Gross margin in the fourth quarter was primarily impacted by a shift in mix toward Transportation Systems contract revenues, which typically provide a lower margin than product revenue, as well as a 220 point basis decline in product net sales gross margins to 49.4%, mainly due to sales mix.

Additionally, Transportation Systems gross margin decreased during the quarter as a result of work performed on certain contracts, with large subconsultant content. These types of contracts tend to provide lower gross margins. Operating expenses decreased 2% to $5.4 million compared to $5.5 million in the year-ago quarter. GAAP net income was $358,000 or $0.01 per diluted share compared to $480,000 or $0.01 per diluted share in the same year-ago quarter.

We repurchased approximately 239 shares of stock in the fourth quarter, bringing our total to 547,000 shares were purchased when the program was initiated in August 2011. Now the 547,000 shares is through March 31, 2012.

Now turning to the results for the full year. For the year ended March 31, 2012, our net sales and contract revenues increased 12% to $58.4 million. Gross margin for the year was 39.5% or $23.1 million compared to 44% or $22.9 million in fiscal 2011, due primarily to the aforementioned shift in product mix.

Operating expenses decreased 24% to $21.1 million, primarily due to an $8 million non-cash goodwill impairment charge which incurred in the third quarter of fiscal 2011. Excluding goodwill impairment, operating expenses increased 7% in fiscal 2012, mainly due to Roadway Sensors product development, and sales and marketing, the inclusion of Meridian Environmental Technology and BTS operating expenses, and the development of iPerform performance measurement and management software.

GAAP net income was $2.5 million or $0.07 per diluted share compared to a net loss of $5.2 million or $0.15 per diluted share in fiscal 2011, which was primarily attributed -- attributable to the fiscal 2011 goodwill impairment. At March 31, 2012, cash on-hand was $18.7 million for an increase of $6.9 million compared to $11.8 million at March 31, 2011. The increase was mainly as a result of the second fiscal quarter sale of our Vehicle Sensors segment for $12 million in cash.

Total term debt at March 31, 2012 was $634,000, compared to $3 million at March 31, 2011. We've not yet drawn upon our $12 million line of credit with our senior lender.

This concludes my prepared remarks on the financials. Now I'd like to turn the call over back to Abbas, who will further discuss our quarter and the year, as well as our strategy for fiscal '13 in greater detail. Abbas?

Thank you, Jim. Fiscal year 2012 was an important year in our Company's history, as we continue to execute our strategic plan to focus on the intelligent traffic management market, and positioning the Company for accelerated growth.

We completed the acquisition of successful integration of MET and BTS, and divested our non-core Vehicle Sensors business. We then turn our focus to growing our Roadway Sensors and Transportation Systems segment, and by leveraging our years of experience and expertise to develop and enhance technologies and software-based solutions that address the needs of the intelligent traffic management market.

We are focusing on specific segments within this market that we believe are growing much faster than the traffic industry as a whole. These include Traveler Information 511 and Performance Measurement and Management, both of which involve the application of technology to deliver intelligent actionable traffic information to traffic management operators and the traveling public. Our penetration of these markets should continue to transform Iteris into a traffic management information organization.

With our acquisition of MET, we have made substantial progress in Traveler Information 511. Our 511 technology provides real-time traffic information systems that help commuters take optimal routes. In fiscal 2012, we recognize revenues of over $5 million in this area, which is classified in our contract revenues line item. We believe we are now the market leader in Traveler Information on 511 offerings, with nine states and three metros using our proprietary and actionable traffic intelligence.

Just last week, we launched one of the nation's most advanced 511 systems for the Commonwealth of Virginia, where we have developed applications that are expected to provide accurate and real-time traffic information, as well as a streaming video of traffic conditions. The contract now goes into the maintenance phase for up to eight years and is estimated at about $2 million annually. We expect several more awards as we continue to pursue similar programs in other states.

Further, we have made internal investments and purchased BTS to establish the iPerform Group in the high-growth segment of Performance Measurement and Management. Our first product called Iteris PeMS creates real-time actionable traffic information that empowers agencies to improve their transportation network performance.

We believe we possess game-changing technology in a largely untapped and expansive market. We expect this market to significantly expand for the next five years, and believe we possess the technology and relationships to be the leader in this segment. Our bullish view stems from the government's increased emphasis on accountability in transportation infrastructure expenditures.

The US Department of Transportation as well as the State DOTs are expected to use performance measures as the funding gauge for agencies. In addition, we expect legislation requiring real-time interstate traffic programs by 2013 and metro area routes by 2016. We believe Iteris PeMS offers a powerful solution to improve an agency's oversight and transportation network capabilities. Iteris PeMS is our first of what is expected to be several software offerings. And we recently kicked off an extensive marketing campaign that includes visiting many of our prospective customers.

We plan to continue to provide progress updates on this exciting development, and expect to see initial software revenues from this initiative in fiscal Q3 and expanding in Q4. We plan to provide Software-as-a-Service as well as the traditional licensing model for Iteris PeMS.

We feel as strongly about the growth prospects available within these market segments and believe we are well on our way to capture significant marketshare. Our Roadway Sensors net sales decreased slightly over the same quarter last year. We experienced several international customer orders in the prior year which did not recur in the current year. Furthermore, a delay in end-user delivery requirements of one of the large contracts awarded constrained the segment's growth for the quarter.

Internationally, we plan to focus on distribution channel expansion, and expect to continue to refine the products that address the market, notably our Abacus and Pico products. We are very pleased to shift our sales orders of Vantage Vector, the new flagship sensor of the Vantage Vehicle Detection family, during the fourth quarter. Vantage Vector is the industry's first vehicle detection sensor that combines video and radar technologies to provide a broader range of detection functions.

We consistently push ourselves to meet the challenges of the evolving traffic market, and expect Vector to be a very powerful and cost-effective solution for many special applications and adaptive traffic control systems. We ended the year with a solid backlog in Roadway Sensors, and expect the business to resume growth as we continue our channel-building and product development efforts.

Roadway Sensors' backlog at the end of the quarter was strong at $3.1 million. Quarter-end backlog was over 35%, higher than at the end of fiscal year 2011, and is one of the highest ending backlog levels in this segment in recent years. The strength of our backlog, the positive early feedback on the Vector product, and incremental improvements in budget conditions in several states, reinforces my expectations about our prospects for growth during this fiscal year.

In Transportation Systems, sales increased 27% over the prior-year quarter, which in part, was due to several significant project wins. Sequentially, revenues in this segment have grown six straight quarters, and at $8.8 million in revenues, this is a record revenue quarter. We are certainly encouraged by the continued sequential growth in this segment and believe our investments are paying off.

Over the last few quarters, we added several senior associates possessing business development experience as well as technical expertise. Again, much of the expansion has been in software-based information technology, which we believe is one of the fastest-growing segments in the intelligent traffic management market.

I would like to briefly comment on Transportation Systems as well as the overall Iteris gross margins. Historically, Transportation Systems gross margin has been in the low to mid-30% range. Top consultants have accounted for approximately 10% to 15% of contract revenues and normally provide only a 5% to 10% margin. In fiscal year 2012, our subconsultant content increased beyond the normal range, which resulted in lower Transportation Systems margins. I don't expect this to be a long-term trend.

We do expect our overall margins to stabilize and the subconsulting content as a percentage of revenue to decrease. In addition, we expect the margins on the Traveler Information contracts to improve, as some of them move into the maintenance phase. Finally, we expect the overall Iteris gross margins to gradually improve as we expand on our software-based products and services. Specifically, VantageView and Abacus software, as well as Iteris PeMS, are expected to generate higher margins than Iteris has historically enjoyed. Therefore, going forward, we anticipate an overall higher gross margin for the Company as we gain traction with these products.

Now, moving on to the Federal Highway bill, the current expenditure level was extended until the end of June. Although it recently appeared that a multiyear Highway bill has had some bipartisan support on Capitol Hill, at the moment, and in light of the election year, the passage of the bill before the election seems uncertain. However, I returned from Washington, D.C. last week, and tremendous activities and discussion among the staffers and various involved organizations are taking place.

In our view, we expect the bill's funding attributed to the application of technology and transportation, and intelligent traffic management, will be significantly higher than previous bills, ultimately benefiting Iteris. Also, there are a variety of other transportation-related funds flowing into our market, including infrastructure funds, transit funds, state and local agency bonds, tax hikes focused on transit, and transportation infrastructure improvements.

We will also remain optimistic in our acquisition strategy, looking to acquire companies like MET and BTS that enhance our IP or position us in a new geographic location. As we begin fiscal 2013, we believe we are in a strong position to sustain double-digit organic growth, supplemented by further penetration of technology-focused market segments. These high-growth segments should represent the perfect fit for our IP-centric intelligent traffic management solutions.

In summary, I'm very enthused about Iteris going forward, as we continue transitioning the Company to provide actionable information for the intelligent traffic management market. We plan to continue to execute on this strategy we set to position the Company in the fastest-growing segments of our industry.

We plan to leverage our years of experience and expertise within our core products and services, and believe they provide a solid platform to build upon. We plan to continue to invest in R&D, sales and marketing, and acquisitions, to accelerate growth and lead the fast-growing intelligent traffic management information market. Our goal is to position the Company to enjoy 20% sustainable annual topline growth with operating margins of 10% to 15%.

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

(Operator Instructions). Jeff Van Sinderen, B. Riley & Co.

Just wanted to follow-up a little bit on your business in Abu Dhabi, because it seems like you're building on the success there. Do you think that there's more opportunity in that region? And I guess maybe you could just talk a little bit more about that and some of your other international growth plans.

Thanks for the question Mr. Van Sinderen, and good afternoon to you. Yes, we are delighted to be able to expand on our international revenues and prospects and opportunities internationally, particularly in Middle East, as you indicated.

We announced a $2.4 million award about a week ago in Abu Dhabi that we are very happy about, particularly because this is the first Traveler Information program and system being deployed in Middle East. They have been progressive and we started working with them about a year ago on other assignments. We opened up an office in Abu Dhabi and we are now seeing more of the fruits of our investment.

I do believe that not only opportunities continue to present themselves in the United Arab Emirates, we also see opportunities in Qatar, in Saudi Arabia, and a handful of other Middle Eastern countries that we are currently either in reconnaissance or in the proposal mode. In fact, we are -- we have partnered with a few various firms to propose on additional major projects.

So, I do anticipate our expansion and growth to continue in Middle East. In addition, elsewhere in the world, as I have indicated in the past, Latin America is a focus for us as well. And we have been investing in sales and marketing, distribution channel expansion. I expect that that market -- to be fruitful for Iteris as well, going forward.

Okay. Good to hear. Then maybe we can switch gears and talk a little bit about the V.511. Just wondering if you can talk more about some of the new features and improvements of that system? And whether or not you can apply those to new 511 business that you win?

And also maybe you could just touch on the margins for that business, and how they are in the maintenance and the ops phase on 511. And then also, what can we look for in growth in 511 this year?

Wonderful. So, yes. VDOT -- we were quite pleased. Again, we announced this last week that 511 was launched in Virginia. It's a very prestigious contract for us. It covers all the Washington, D.C. and statewide. And we have some technological breakthroughs in the 511 that I truly believe are transferable and we could replicate those for other states.

For one, we integrated third-party data -- not only the data that organization had and enjoyed for many years, third-party new data came to play to help the information to be more accurate and more reliable. We also integrated about 800 CCTV cameras, so that through handheld apps, a user could literally see the video stream of the corridor that he or she is driving through.

These types of technologies, I believe, would really help us to continue receiving additional awards elsewhere in other states. As far as maintenance, again, we are fortunate to continue with VDOT, and support them and provide them with maintenance. We are in discussion and are completing the first-year maintenance of the over $2 million with VDOT. The contract, VDOT has options to exercise this up to additional eight years.

The margin overall for the 511 activities -- and this is -- I'm referring to the operating margins. At about 10% or so, as we replicate and use the technologies that we have developed for other states, we believe that we could improve those margins, because we don't necessarily have to develop some of the technologies over again. And so there is a tremendous amount of leverage that could help us.

As far as your last point about the growth, you know, about a couple of years ago, when we had strategically decided to penetrate more into this growing segment, Iteris was probably number three, number four in the market. And at the time, Meridian Environmental Technologies or MET, they're probably about the same situation, maybe number three or number four. Because we have the combined forces, we are now considered the leader in the industry.

We have now nine states plus three metropolitans. Just this last couple of quarters, we have received two awards on a couple of additional states. I would envision going forward, we should enjoy more growth. I would be very disappointed if this growth wasn't in a double-digit level as we go forward. So, travel information on 511 are one of the key areas that we believe would help accelerate Iteris's growth domestically, and of course, now internationally.

Okay. And then you also mentioned the Iteris PeMS software. Maybe you can just touch on a little more detail in terms of what that product actually does -- the functionality. And then any competition out there for that and margins associated with that?

Sure. So over a year ago, we began developing our own software to focus on better measurement and management of traffic network activities. We then, about six months ago, acquired BTS, whom already had a software of their own and they call it PeMS. This was BTS PeMS Performance Measurement System. But they have already sold it to a dozen or more customers, including California Department of Transportation here in California.

What the system does is primarily gathers data from variety of sources, and then adds our expertise to make sense out of this data in a very short period of time -- and I want to say in real-time -- and turn that data into -- that information into actionable information that you could use if you're an operator, if you're a manager, to be able to really make quick decisions to improve your traffic management system. So, this is the type of information that has not been available to the industry in the past.

In the past, you have to do studies, prepare reports; much of it is not real-time. And now you have an opportunity to really make decisions to improve traffic, based on this real-time information, and really make a big difference in saving the end-user's maybe travel time, stops, delays, reduction of that, of course. And they may be saving them some fuel.

So, that's simply what this software does. And we believe that the market is largely untapped. We have a few competitors, although we believe that from a technology standpoint, we are ahead of the game at the moment.

The Iteris PeMS software itself we envision the margins to be in 60% range or better. A typical contract could be something as follows. You might have, let's say, for a metropolitan area, $100,000 to $200,000 license fee. You may have maybe a few hundred thousands dollars worth of integration. And that is getting all the data and prepare the database, and getting it ready to operate. And then, we would have a component, let's say, 15% to 20% of the overall contract as a maintenance to help them, on an annual basis, address the needs that they have.

So, we are planning to sell the software both in sort of a SaaS and also the traditional license business model. We believe that as we get traction in Iteris PeMS and enjoy a more expanded margins, that should have a positive impact overall on the Iteris margins.

Okay, good. That's great to hear. I'll jump back in the queue and let someone else ask a question. Thank you.

Thank you very much, Jeff.

(Operator Instructions). Chris Biles, Cjb Capital.

Question for you on the debt reduction. Can you walk me through what appears to be about a $2.4 million reduction in debt?

Yes. Sure, Mr. Biles. This is Jim. So, that is term debt from basically legacy from the 2004, 2005 reverse merger. It's just principal and interest payments. And we're planning on completely paying down the debt by the June 30 quarter. So we'll be debt-free as of June 30.

Got it. And on the share repurchase, what do you have remaining on the plan as of the beginning of the quarter?

Okay. So as of the beginning of the quarter, as I stated in the comments, we had repurchased about 573,000 or 574,000 shares. (multiple speakers) Since we're on a call and this is public data, currently, we've repurchased in the neighborhood of 700,000 to 800,000 shares, and we've spent about $1 million. So, in August of last year, the Board authorized a plan to spend up to $3 million to repurchase shares. So as we discuss this with you today, we've spent about $1 million.

Okay, so $2 million remaining in the plan and then it has an expiration of when in August?

It's -- I think it's the middle. I think it's August 11th or 12th.

Okay. And on your balance sheet, the cash position of $18.7 million at the end of the quarter, can you talk about -- I recall on the LBW divestiture, there was an earnout component and I believe there was an escrow component. Is there additional cash that you can access or will access at some point?

Abbas here. Yes, certainly, Mr. Biles. So, according to the agreements, we have two components that additional funds could come our way.

First, there is a $2 million holdback that, eventually, a component of that would come to us, once the buyer makes clear the IP that they have received, what they refer to as the freedom of operations. In addition, we have up to seven years since they executed the contract, a percentage of the royalty that we have been enjoying from the car business that we have with the value company that we had a partnership at the time. A portion of that would be coming to us.

Also, for additional couple of years, we would have funds coming to us from other activities and development in that contract. So, overall, we envision, let's say I would just estimate somewhere between $0.5 million to several million dollars worth of additional funds coming to us in the future years.

Okay. And that's in addition to the $2 million holdback? Or does that include that?

In addition.

Okay. And (multiple speakers) --

The $2 million -- I'm sorry, Mr. Biles, the $2 million, by the way, just to be clear, is not guaranteed for us to get all of it. We envision a component of it; now hopefully, the majority of it, we could get back.

Okay. One last question before I hop back in the queue. You had mentioned in your remarks, Abbas, about some slippage in the fourth quarter on an international deal or a few international deals. I mean, can we assume that that carried over into Q1 and was booked business?

Yes. The one in particular one -- and I just won't mention the customer, but I'll tell you -- the value of that was about $700,000. We believe that it has shift into this Q. We are not quite sure, but I'm pretty confident that within the first two quarters of this year, we'll be executing and shipping that.

Thank you.

You're welcome. And thank you for the questions.

Brett Reiss, Janney Montgomery Scott.

I just want to make sure I heard this correct. You're guardedly optimistic that you can enjoy 20% topline growth in the overall corporation for the foreseeable future?

That is indeed our goal. It is our goal -- again, just to be clear, I was not intending to provide any guidance for this specific fiscal year, but our goal is to position the Company so that it could enjoy 20% sustainable growth year-over-year. And I believe that we are doing everything we can to position the organization to get there.

And expanding upon it, we believe a goal of 10% to 15% operating income is also achievable -- again, with the way we are headed, with the way we are positioning the Company to be a leader in information technology, to be able to enjoy higher margins, all of this together ought to be able to get us to that sustainable activity.

When is that happening? I'll be disappointed if we don't get there within a couple of years or so.

All right, but let's say you achieve that, then you did $58 million in sales for the fiscal year ending 2012. Two years from now, if -- and I know things can happen, but -- if you were able to achieve 20% topline growth, you -- two years from now, you'll be doing north of $80 million in sales. And if you can achieve 10% to 15% operating margins, pretax, you'll be making all else -- assuming the share count hasn't come down, and it might be lower -- you're earning $0.15 to $0.23 a share -- just trying to get a sense of, if you're able to achieve these goals, what's the earnings power here two years from now?

Mr. Reiss, I think you did the math excellent in this. That is indeed our goal and that's what we are doing, really trying very hard. And I believe, really, the kind of investments that we have done, and the way the Board has set their strategy for us since a few years ago, you know, this process has started a little bit over two years ago to really continue investing, positioning, transforming, really, the Company into an information company.

And those are really the type of margins that we should get when the Company starts enjoying these types of offerings and the level of software sales that we envision doing. So, I concur with your calculation and the way you conclude it in your mathematics, in a couple of years, what it should be, the Company.

Right. Right. And just to drill down so everybody is on the same page -- this year, and when you did $58 million in sales, your operating income pretax was a little over $2 million or 3.45%. When you look at your budgets, and in moving from $58 million to $80 million-plus, you have some sense of what your SGA and your R&D is going to be with that greater level of sales. And do you feel comfortable that you can go from 3.5% in operating margins to that 10% to 15% with the $80 million run rate in sales two years down the road?

Well, again, I wouldn't want to provide any comments that would be construed as guidance, but just to help you and other listeners on the call is that, obviously, we have to continue our investments in R&D and sales and marketing. But we want to be very prudent about it and not doing that to a level of erosion of, let's say, operating income.

So we'd love to be able to certainly gain on operating income -- not to the levels this year that would get us to the goal that we liked to have in the percentages that I indicated. That would be wonderful if we could; but it takes a little bit of time and a handful of quarters to get into steady-state opportunities. So, I think your comment is quite correct with the calculation that you did.

The key thing, though, when you look at the SGA and other overall costs, as we grow, we would be leveraging. So, let's say, as an example, I'm just going to pick a number -- let's say that, year-over-year, we grow 15%. I really feel that the increased incremental added cost on SGA would be marginal and it would not be to the same level. So, you see, the whole point is to be able to leverage the infrastructure that we have now going forward.

We established an initiative a few years ago and called it Operational Excellence. The idea is to look at all components of the business and to make them quite efficient. So, I believe that for a few years, going forward, as we grow, the SGA as a percentage of sales would continue to decrease. That is another goal that we have. So, therefore expanding the operating margin. Does that help?

Yes. You know, look, I own the stock. I'm rooting for you. Thank you for answering my questions.

Thank you for asking those questions, Mr. Reiss. I appreciate that.

(Operator Instructions). Jeff Van Sinderen, B. Riley & Co.

Yes, I just wanted to see if maybe you can talk a little bit more about Vantage Vector, and why that being a hybrid video and radar system makes sense for your customers?

Sure, Mr. Van Sinderen. So, with your indulgence, I'm going to make a few technical remarks on this one just to help our participants.

So, traditionally, our video detection has focused on the -- what we call a stop bar, at the intersection, which has a cone of view of, let's say, about 400, 450 feet. You have passed the traffic signal many, many times, and at times, I would imagine you have seen a yellow light coming on, and you wonder, should I stop or should I go through? We call that in our industry a dilemma zone, so you are really in a dilemma. And it's a safety issue.

Many organizations often wonder, well, at this intersection for various geometric or other reasons, do we need to expand that yellow? Do we need to -- what we call a all-red on the crossing intersection to set it as such to make sure that the vehicles are clear. So it is always a technical challenge.

What Vantage Vector does, it takes the beauty and the strength of video detection and it combines that with radar. So now with radar, all of a sudden, we get additional 200 feet, so we could get to about 600 feet or so of this cone of view, if you will. And that gives us additional data from what we call the back of a pew of vehicles.

So, this longer zone gives us more information to be able to deal with this dilemma zone and the traffic engineers absolutely love it. Something that has not existed in our industry. What they have done in the past is that some of our customers, as an example, in Texas, they buy a video from us, they buy radar yet from somebody else, and they put ours at the intersection, they put theirs at about 400, 500, 600 feet beyond, and they connect them together.

With our technology, the combination actually costs 20%, 30% less than this combination. So, many would enjoy that there are additional benefits I don't bore you with, but let me just mention that there are some tough weather conditions such as fog, dense fog, and others that radar could also help us. So this is really sort of a game-changing product in the traffic management industry and we expect that to really expand our sales.

So you have, basically, a comprehensive video/radar solution that increases the zone by about 50% and costs your customers less than if they bought it -- they bought the components separately.

Well said.

Okay. Thanks very much. The only other thing I was going to ask was really along the lines of the Federal Highway bill. I know you mentioned that. Any sense at this point of how long it will take, you think, once the bill is signed, for that to start to impact your numbers? And then, anything you can say about the emphasis on ITS and performance measurements in the new bill?

Absolutely. So, similar to the past few bills, once the bill passes, it does two things. A, it has a positive psychological impact on many of the agencies that they could let go of a lot of the RFPs that they have in-hand, and requests for bids. So it has a quick impact. And then by the time you really see recognition of revenue, it takes about a couple of quarters to do that.

The key thing in this particular bill, you mentioned the Performance Measurement, of course, that is one of the key issues that is embedded in the bill, asking and requiring agencies to adhere to use of the Performance Measurement and Management. But I may want to take this opportunity and indicate, this bill, no less than 70 locations in various pages in this bill, intelligent transportation systems is mentioned. What that is, is that, the magnitude is a revenue attributable to traffic management is significantly more than the previous bills. So we would expect a shot in the arm when the bill goes through.

Okay, great to hear. Thanks very much. Thanks for taking my questions and good luck this quarter.

Thank you very much, sir.

Thank you. And at this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Mohaddes for his closing remarks.

Well, thank you, Alyssa. We appreciate everyone's support and thoughtful questions. And we look forward to updating you again on our continued progress. Thank you very much.

I would like to remind everyone this call will be available for replay via telephone through June 12, 2012, starting at approximately 7.30 p.m. Eastern Time today. Please follow the instructions in today's earnings release. An audio webcast of this call will also be available for replay 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 and for our presentation. You may now disconnect.