Iteris Inc (ITI) 2021 Q1 法說會逐字稿

Good day, and welcome to the Iteris Fiscal First Quarter 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Todd Kehrli from MKR Investor Relations. 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 its fiscal 2021 first quarter ended June 30, 2020.

Joining us today are Iteris' President and CEO, Mr. Joe Bergera; and the company's CFO, Mr. Douglas. Following their remarks, we'll open the call for your questions.

Before we continue, 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 undertakes no 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 statements.

I'd like to remind everyone that you'll find a supplementary report of our first quarter financial metrics and a webcast replay of today's call in the Investor Relations section of the company's website at iteris.com.

Now I'd like to turn the call over to Iteris' President and CEO, Mr. Joe Bergera. Please proceed.

Great. Thanks, Todd, and good afternoon, everybody. I appreciate you joining us today. As you saw at the close of market, we issued a press release announcing the financial results for our fiscal first quarter ended June 30, 2020 -- I'm sorry, June 30, 2020. 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 announcement. And as such, I'll be discussing only our continuing operations during the remainder of this call.

In our first quarter, Iteris experienced strong demand for our smart mobility infrastructure management solutions despite COVID-19. For the company's 2 transportation segments combined, we reported $28 million in total revenue and $33.8 million in total net bookings, representing year-over-year increases of 11% for both measures. Due to the solid bookings growth, our total ending backlog, again, for our 2 transportation segments combined, increased 21% year-over-year to reach a record $67.9 million. In turn, the company's continued growth and enhanced cost structure, following the sale of our Agriculture and Weather Analytics segment, drove a significant increase in net income, even after restructuring charges recognized in the period and also in adjusted EBITDA. Doug will discuss this profitability dynamics in more detail in a few minutes.

Now let me provide a brief overview of performance by segment. In Q1, our Transportation Systems segment recognized $14.8 million in revenue, representing a 20% increase versus the same prior year period. The segment's growth reflects particularly strong performance in our Western region, with our Mid-Atlantic and Southeast regions experiencing some minor delays in backlog conversion as a few projects slipped to the right due to COVID-19. Although we expect to pick up the majority of this revenue in future quarters, the dynamic market conditions in which we are operating create high degrees of uncertainty.

Our Transportation Systems segment reported record first quarter net bookings of $21 million, representing a 21% year-over-year increase. The solid first quarter net bookings performance is a function of strong demand for all of the segment lines of business and demonstrates the essential nature of our solution portfolio. About 40% of the segment's first quarter net bookings will be recognized in the future as annual recurring revenue. Notable recently executed customer contracts include a $9 million indefinite delivery, indefinite quantity contract with the Federal Highway Administration to support connected and automated vehicle preparedness; a $6.9 million contract to manage 2 traffic operation centers for the San Francisco Bay Area Metropolitan Transportation Commission; a $5.4 million agreement to continue to provide our next-generation Advanced Traveler Information System to the San Francisco Bay Area Metropolitan Transportation Commission; a $4.7 million contract from the Orange County Transport Authority to increase traffic flow and safety across the Katella Street Corridor. This contract includes Iteris' intersections with service solution, which will provide 24/7 monitoring of device and system help throughout the corridor; several Software-as-a-Service contracts for a total value of $1.25 million from various agencies for use of our Performance Measurement Solution printed as ClearGuide, for use of our commercial vehicle operations software products; and finally, an Intersection-as-a-Service contract, with Hayward, California valued at $330,000. With this contract, we now have more than 1,000 intersections at various stages of deploying our Intersection-as-a-Service-model.

With the segment's strong first quarter bookings, the Transportation Systems segment ended the quarter with a backlog of $59.6 million, which represents a 20% year-over-year increase and a 12% sequential increase.

Now moving to our Roadway Sensors segment. In Q1, the Roadway Sensors segment recorded revenue of $13.2 million, representing a 3% year-over-year increase. While the segment's growth rate was below our recent average, the result was consistent with our expectation, and we were satisfied with the result given the very unusual prior year comparable. As a reminder, the segment experienced a surge in revenue in our first quarter last year due to the reinstatement of the Texas SmartBuy contract and the associated release of several months of accumulated orders.

During our fiscal 2021 first quarter, the segment made tangible progress against each of the 3 products and commercial priorities that we discussed on our last earnings call. For your reference, these priorities are: first, improvements in sales enablement and channel development; second, alignment of our Vantage sensors value offer with our ClearMobility platform, which we expect to drive more cross-sell and upsell revenue; and third, an introduction of new product capabilities to create additional competitive differentiation and further increase customer adoption while also contributing to our Iteris Cloud road map. For example, in Q1, the Roadway Sensors team cross-sold certain capabilities of our transportation systems offering into an intersection detection account to secure a new $1 million managed service order from the City of Round Rock, Texas. With our ClearMobility platform, we expect to see more opportunities for this type of cross-sell between our Roadway Sensors and Transportation Systems segments.

Additionally, the Roadway Sensors segment introduced a new partner certification program to improve channel sales productivity and technical expertise as well as reduce our partners' dependence on Iteris Field resources during COVID-19 restrictions.

On the product front, the segment introduced a new API for our Vantage Next detection platform that will enable Iteris Cloud, as well as customers and partners to ingest real-time streaming data from our smart sensors. The initial consumers of this new API include a non-disclosed global automotive parts manufacturer and Cisco Systems, who is ingesting our streaming data into the edge intelligence layer of Cisco's connected communities infrastructure.

With that, I'll let Doug comment on our financial results.

Thank you, Joe. Good afternoon, everyone. As a reminder, please see the company's 10-Q filing, press release and supplemental financial metrics document, all of which are posted on our IR website for a further description of matters in our discussion during the call today. As Joe noted, in the first quarter, the company completed the sale of the Agriculture and Weather Analytics segment to DTN LLC. The results of the Ag Weather Analytics segment are reported as discontinued operations in our SEC filings, and my comments will be focused only on our continuing operations today.

Consistent with the last few quarters' results, we've seen the performance of the business in Q1 continuing to improve, with favorable year-over-year trends in certain key metrics, including top line growth, increasing backlog and margin expansion. In fiscal year '21, we've introduced a new non-GAAP financial metric, adjusted EBITDA or earnings before interest, taxes, depreciation and amortization. We'll also include onetime nonrecurring item, like restructuring charges and stock-based compensation in this metric calculation. Adjusted EBITDA aligns with our goal of creating more leverage in the P&L, and we also believe it's a reasonable proxy for our cash generation and our ongoing normalized operations.

Now I'll move to the details of the first quarter results. As Joe mentioned, total revenue for the fiscal '21 first quarter increased 11% to $28 million compared to $25.2 million in the same quarter a year ago. Our gross margins in the first quarter were 38.8% compared to 38.1% from the same quarter last year. The improvement in margins was driven by increased volume as we get more scale in the business, and improved product and channel mix in the Roadway Sensors segment. Operating expenses in the first quarter were $10.5 million compared to $10.1 million in the same prior year quarter. The current quarter did include a onetime nonrecurring restructuring charge of $600,000. After adjusting for the restructuring charge, operating expenses were down $250,000 over the prior year quarter. As we mentioned last quarter, we are improving our profitability and expect this trend to continue.

We reported GAAP operating income in the first quarter of nearly $400,000 compared with a GAAP operating loss of about $500,000 in the same quarter a year ago. The GAAP net income from continuing operations in the first quarter was $400,000 or $0.01 per share compared with a $500,000 loss or $0.02 per share loss last year. Adjusted EBITDA for the first quarter increased $1.8 million to $2.3 million or 8.2% of revenue, which compares to approximately $500,000 or 2% of revenue in the first quarter of last year.

Now let me turn to our segment results. Our Transportation Systems revenue for the first quarter was $14.8 million compared to $12.4 million in the prior year quarter, an increase of 20%. Albeck Gerken was the main contributor to this growth since it was not included in our Q1 2020 results. Segment level operating income for the first quarter was $2.3 million compared to $1.6 million from the prior year quarter, and the related operating margins were 15.3% compared to 12.7% last year. The margin expansion was primarily driven by increased volume as we get more scale in this segment.

Our Roadway Sensors revenue for the first quarter was $13.2 million compared to $12.8 million in the prior year quarter or an increase of 3%, and Q1 was impacted by a difficult prior year compare, as Joe noted. Segment level operating income was $3.1 million for the quarter compared to $2.3 million last year, and the related operating margins were 23.5% versus 18.2% last year. The improvement in margins was driven by increased volume, improved product mix and more direct sales versus distributor sales compared to the prior year quarter.

Corporate expenses in the first quarter were $4.1 million compared to $4.4 million in the prior year and down $600,000 sequentially from Q4 fiscal year '20. The decrease was driven primarily by decreased compensation and benefit costs.

Turning to liquidity and capital resources. Total cash and short-term investments were $34.5 million at the end of the first quarter and reflected the net proceeds from the sale of the Agriculture and Weather Analytics segment. We spent $458,000 in capital expenditures and capitalized software costs in the quarter, and we expect those expenditures to remain under 1% of revenue for the whole year. Operating cash flow from continuing operations was $1.8 million compared to $900,000 in the prior year quarter, and the increase reflects our improved profitability and continued focus on improving working capital. Absent any acquisitions, we expect our cash position to continue to build going forward.

In summary, we're pleased to report another solid quarter of performance, which included the sale of the Ag and Weather Analytics segment, restructuring of the company and solid execution as we continue improving both top and bottom line results.

With that, I will turn the call back over to Joe.

Great. Thank you, Doug. Notwithstanding the temporary challenges of COVID-19, we continue to believe the smart mobility infrastructure management market will enjoy favorable secular trends, with agencies continuing to reallocate budget from traditional pick and shovel projects to advance technology initiatives. And at the same time, we believe new software-enabled service delivery models will emerge to change how agents -- how transportation agencies at all levels of government fulfill their missions. As mentioned on prior calls, Iteris ClearMobility platform is a key element of our strategy to capture these opportunities.

In Q2, we will continue to align our solution portfolio to the ClearMobility platform and execute against Iteris Cloud road map, which underpins the ClearMobility platform. For example, we plan to introduce a new SaaS offering that will augment the application layer of the ClearMobility platform and begin customer trials for 2 new managed service offers, one of which leverages the Round Rock model referenced earlier. Additionally, we'll continue to advance our common API framework with the release of enhanced integration and interoperability among our various SaaS products.

From a commercial perspective, both our Transportation Systems and Roadway Sensors segments see an increase in the dollar value of their sales pipelines. The growth is driven by an increase in the average size of new sales opportunities, while the total number of new opportunities has decreased somewhat. While it is too early to draw conclusions, COVID-19 may, at least temporarily, shift purchasing requirements to favor solution providers, like Iteris, who are able to provide turnkey solutions at scale.

In general, we believe such a shift would benefit Iteris. However, this phenomenon will increase our exposure to the timing of a few large awards and, therefore, could lead to some bookings lumpiness.

Since our last conference call, we remain cautiously optimistic about fiscal 2021. However, with the current level of uncertainty, we believe it would be imprudent to attempt to characterize expectations too far ahead. As a result, we'll provide commentary only one quarter out until the economic environment reestablishes some form of equilibrium.

As such, for the second quarter, we expect the current backlog strength for transportation systems and overall sales activity for Roadway Sensors to support revenue growth in the mid- to high single digits, with COVID-19 pushing some revenue recognition to the right, similar to our experience in Q1. Additionally, we expect both segments, largely driven by volume growth, reported year-over-year increase in segment-level operating income, while our corporate expenses will be flat year-over-year. Therefore, in the second quarter, we anticipate another significant year-over-year improvement in both net income and adjusted EBITDA despite the challenging economic environment.

Now we'd be delighted to respond to your questions and comments. Operator?

(Operator Instructions) We will take our first question from Jeff Van Sinderen of B. Riley.

Joe, maybe you can give us a little more color on how the picture around procurement is evolving during COVID. I know you mentioned some things potentially pushing to the right -- actually, I should say, first of all, congratulations on great metrics. It's terrific to see the year-over-year improvement. But kind of the dynamics around the agency budgets, timing, other considerations that maybe we should be aware of regarding winning incremental business during the COVID era, just anything else you can add on that?

Yes, sure, gladly. So the environment is changing rapidly. And what I'm seeing today could be different in a couple of weeks or a month or 2 from now. So I just want to, first of all, make sure everybody understands that it continues to be a very dynamic situation. But that being said, as far as where we are today, we have seen that some smaller projects, some things that were maybe sort of exploratory without clear ROI, have -- we've maybe even pushed to the right a little bit. We haven't seen as many sort of small procurements or small opportunities as we would have seen a couple of months ago. But that being said, we absolutely see agencies continue to move forward with large strategic initiatives. And in fact, as I said, interestingly, the average dollar value of the opportunities in our pipeline has grown over the last couple of quarters, and the total value of our sales pipeline has increased as a result. So there's kind of an interesting dichotomy going on there.

Another interesting aspect that we're seeing is that it's increasingly difficult for the nonincumbents to pursue new business. And that actually is -- we see that as benefiting Iteris. We have strong presence in our primary geographic markets. And we, in most cases, at least within the specific categories that we tend to focus on, are the market leader. And so we're finding that we are continuing our position, even growing our position in a number of accounts because competitors are finding it increasingly difficult to penetrate new accounts in the current environment.

So again, this is actually, interestingly, another trend, which we think is somewhat favorable for Iteris at this current point. But all that being said, it is a very challenging economic environment. And we certainly don't feel like we have particularly good visibility, especially as we look ahead into the second half of our fiscal year. And so we're continuing to take things quarter-by-quarter. But again, at this point, things actually are on balance, fairly positive.

Okay. That's good to hear. And then I think in your prepared comments, you mentioned 40% of systems bookings are recurring. Maybe you can just touch on that, and -- go ahead.

Yes. For sure, yes. So we -- when we define recurring revenue, it includes SaaS, other non-SaaS software. We do have some as we continue to work to transition some of our legacy accounts in to our SaaS model. And then it would also include managed services revenue. And so when we look at the total, the $21 million in bookings that Transportation Systems recorded in the first quarter, 40% of that would fall into a recurring bucket. It'll either be software or be managed services related.

Okay, good. And then I think you were -- you spoke to targeting about 30% SaaS or 30% recurring revenue. Maybe you can just touch on whether that's still the target. I mean, if you're already hitting 40% and part of the business, how should we think about that today? And then, I guess, how do you kind of get to the 30%, or whatever that new number is, on a consolidated basis? What time frame do you think we should think about around that?

Yes. So that is still our target. With the sale of the Ag and Weather Analytics business, and in particular -- well, I mean, obviously, ClearGuide was entirely recurring, but also the Roadway weather business was recurring, and it also -- we packaged -- in some cases, we bundle that with some of the products that we were selling in our core transportation sectors. As we talked about previously, we still have access to the weather and the pavement business, but it did -- that recurring revenue, those recurring revenue streams went away with the sale.

So anyway, we have been recalculating or updating our model to determine what our recurring revenue is we'd expect it to be over that same time horizon. And at this point, we're looking at it being still in the high 20% range, but probably a little bit less than 30%. Of course, that's before any acquisitions. And obviously, we're going to do everything we can to try to get back to that 30% target or even exceed it. But at this point, we'd still expect it to be in the high 20% range.

Okay. And if I could squeeze one more in. Since you mentioned acquisitions, just any update you can give us there in terms of what you're seeing?

Yes. So as we talked about previously, we were concerned, when we spoke to people on our call in February, about sort of the overall marketplace. And one of the questions we had in our head is how would you think about valuing businesses in the current market? And what would be the risk of trying to do a transaction? Even though I don't feel like we've resumed a normal economic equilibrium, at this point, we do feel like we, more or less, understand, at least in the categories in which we compete, generally what the risks are. And we feel that we would be in a position to appropriately value an acquisition should we find one that would be actionable. We do feel like there probably is more deal flow now than there was a few months ago. And so we think the probability of being able to do a transaction now is better than it has been for a while. That being said, I'm surprised that a lot of sellers are still reluctant to make any adjustments to their view on valuation. And so it's still -- it's never easy to do a good deal, and we continue to find that there are some challenges. But net-net, I think that the environment is relatively favorable, and it's something we continue to work on.

We will take our next question from Ryan Sigdahl of Craig-Hallum.

Just on the profitability, and there's some positive commentary you guys reflected last quarter, nice sequential improvements here, positive kind of outlook commentary. But just directionally, overall, for the business, is Q1 kind of a good base to build off of going forward here?

Doug, do you want to take this?

Well, I think it's sort of reflective -- sure, yes. Ryan, I think it's reflective of all the actions that the company has been taking. Obviously, the sale of the Ag and Weather being the biggest, but then there's restructuring and the continued focus on managing our costs. So I think it's going to be a little -- it goes up and down every quarter. We have certain expenses like in the second quarter that we won't have in the first quarter, our shareholder meeting, we've recently completed a board search, some things like that. But I think it's a reasonable proxy. And it's really driven by the top line, to be honest, because the cost structure, while variable, it is relatively fixed. So to the extent that there's a little bit of fluctuation on the top line, that obviously impacts the bottom line a little bit. But I think it's a reasonable proxy for where we're headed.

And then maybe more specifically, just drilling down on R&D, but looking at Q1, take a step down, presumably, most of that was as part of the divestiture of that. Is the right baseline there too, about $1 million a quarter?

Yes, we'd expect R&D to run about 4% to 5% of revenue this year.

Good. Then just higher level. We've been hearing a lot of municipal budgets and deficits ballooning up. But have you -- what's your conversations like recently with different states and local municipalities, given budgets out there?

Yes, this is Joe. I'll take a crack at that. We're finding that it's variable, to be honest. There's a lot of variation from state to state, and then at different levels within even individual states. In some instances, you'll find a jurisdiction that has a pretty healthy rainy day fund. For whatever reason, they've had less impacts, at least from an economic perspective. And perhaps, they have different priorities or approaches. So there's a tremendous amount of variability. That being said, we -- it's probably important for everyone to understand that we've seen very little reduction in spending against activities that are already funded. And the question mark is going to be what the revenue streams look like for these various agencies going forward, and what would be the impact on future spending. And that is unclear at this point. There are a number of things that are going to -- that play into that. One thing is the possibility of any kind of federal stimulus. The second thing is how quickly we rebound. The third thing, which is more complicated, and it kind of goes back to the initial point that there's a lot of variation from jurisdiction to jurisdiction. But you need to look at what is the underlying funding mechanism for that particular jurisdiction. Is it gas tax or sales tax or property tax? Is it -- are they predominantly reliant on the annual budget authorization process for that jurisdiction? And then what is the economic exposure for that particular jurisdiction. So again, we're seeing a tremendous amount of variability. Another thing which is important for people keep in mind is that sometimes certain types of revenue is fungible, and other things are not. And so we're looking closely at all of those different things in every major geography in which we're working right now. To be honest, we don't have a clear picture. I would expect that on our next call in November, we'd have better visibility because many of the jurisdictions in which we operate will have started a new fiscal year on October 1. So at this point, not a lot of change. We'll be looking at what could possibly happen. And then all the various dynamics that I mentioned will be a factor in determining what future funding levels look like.

And then last one for me, and then I'll hop back on the queue. But it seemed like a bigger emphasis, or you noted a few projects that were cross-sold, kind of hardware and services to software and back and forth. How much opportunity do you think is with the existing customer base to really kind of bundle an all-in solution here and cross-sell kind of all of the offerings you guys have?

Yes. We think that there's a significant amount of opportunity. And it's part of our strategy with the ClearMobility platform to leverage what we think is a general position of strength. But we think, particularly in the current COVID-19 environment, it is a significant competitive differentiator for us. As I mentioned a couple of seconds ago, interestingly, we're finding it's really difficult for competitors to enter existing accounts that are time owned by particular vendors. So the strength that we have, either through the transportation systems, account penetration or roadway sensors, account penetration into existing accounts, puts us in a really strong position to try to cross-sell the respective capability into that account and shut out competitors that don't have the same number of customers or the same degree of market penetration. So it's absolutely, we think, a point of differentiation, something we're actively trying to capitalize on.

We will take our next question from Mike Shlisky of Colliers Securities.

Can we maybe -- can I ask maybe one of the other questions in a different way? Certain states and counties and cities do have a July 1 budget start. Can you give us a sense -- I don't usually ask questions like this, but how are the July bookings for some of the jurisdictions where July 1 was the start of the fiscal year.

Yes. So Mike, to be honest with you, I don't know specifically which jurisdictions had new fiscal years beginning in July. I'll tell you that, like, for us, one of the biggest jurisdictions that we're focused on is Texas, and their new fiscal year starts on September 1. I'm sure you're right. Certainly, there must have been some jurisdictions that -- beginning a new fiscal year on the first, but I'm not personally aware of which ones they are and what particular opportunities we're pursuing in that period. But I would generally say that we didn't see any slowdown in deal flow or opportunity flow in the month of July. And that's true across both Roadway Sensors and Transportation Systems.

Now I do want to point out again, however, that the transportation systems, current bookings opportunities are made up of like a relatively smaller number of really big deals. And so as I said, in the next couple of quarters, you could see a little bit of lumpiness, but it's not a reflection of a decrease in the value of the sales opportunities we're pursuing. It's rather the composition of the sales opportunities.

Okay. That's great color, for sure. I wanted to turn to some of the State DoT budgets out there. We are hearing that a lot of states are cutting their road construction budgets. And I'm kind of wondering if anyone's come into you saying that state can afford a 9-figure road construction budget to fix some intersections congestion. Have they asked you maybe an alternative to supply a perhaps a 6- or 7-year contract with Iteris for the time being until their state can afford a much larger asphalt pavement project?

Yes, that's a great question. So a lot of the really big multibillion-dollar programs are funded through bond initiatives or other kind of special funding mechanisms. And we have seen some of those push to the right. That doesn't tend to impact us. As I think I've mentioned on prior calls, we really only have one big major construction project that's currently part of our portfolio. That's the work we're doing on the I-405 expansion project in Orange County. As a result of that work, we've actually had a lot of inbound interest from various global construction companies that want to use us in sort of similar capacities on other deals, not just in North America but actually around the world. And some of those deals which we are tracking, but they're far out, that's over a 12- to 24 month horizon. Some of those have pushed out. They were not in our plan, so it didn't -- doesn't impact our expectations from a financial perspective over the near term, but we did see those kinds of things shift out.

The kind of core operations activities, which really makes up the vast majority of the work that we do, we haven't yet seen any kind of impact or any sort of significant reduction in funding. And we'll continue to watch that. But so far, we haven't. I would say that, unfortunately, because of the nature and the funding mechanisms for these big multibillion-dollar construction projects, it isn't fungible. Those program dollars probably can't be reallocated to operations. But you do raise a good point, Mike. If a particular jurisdiction was expecting some benefit in terms of safety or throughput associated with that investment, and now it's been pushed out a couple of years, they may look at other ways to try to mitigate for that, which could possibly benefit us. But we haven't yet seen that. It's something we would certainly watch for.

Okay. Got it. Maybe one more for me. I guess now you sold ClearAg, you've owned Albeck Gerken for a little over a year now, you made OpEx reductions. Can you give us any sense -- now that you're looking at EBITDA more closely, adjusted EBITDA, is there any way you can give us some sense of what maybe your longer-term EBITDA margin goals are? Are some of these sort of onetime items to kind of either left the portfolio or at least stabilized?

Yes. Doug, do you want to talk to that?

Sure, yes. So we're -- we just introduce that metric, and we would expect that we should be able to grow our adjusted EBITDA over the next couple of years sort of in the mid- to high teens, so at kind of 15% range, give or take, depending upon the year and what's happening. But I mean that's certainly, at a minimum, what we'd be looking to do as we've talked about in the past, get more leverage in the company through scale because we shouldn't need a big investment in the infrastructure to support a much larger operation.

So then that just sounds like -- just to kind of follow up there, that sounds like EBITDA is up 15%. Perhaps you're not targeting revenue growth quite that high. But certainly, there is -- your point is going to be seeing some additional operating scale as you get more contracts? Is that correct?

Exactly.

That's right. That's exactly right.

(Operator Instructions) We will take our next question from Mike Latimore of North Capital Markets (sic) [Northland Capital Markets].

This is [Shravan] on for Mike Latimore. I have 2 questions. What percentage of revenue was recurring? And how fast did that grow over last year?

It's about 20% in the current quarter, that's annual recurring revenue, if I heard your question correctly.

Yes. Regarding the recurring revenue, does it have higher or lower operating margins than the corporate average?

Generally speaking, the annual recurring revenue, particularly the software has a higher margin than some of the other lines of business. Now having said that, as we've talked about in the past, some of the software platforms really aren't to scale yet either. So we would expect that there's a great opportunity for not only growth, but margin expansion as we get more scale in each of the SaaS offerings and software that we've got.

At this time, we have no further questions. We will now turn the conference back over to Mr. Joe Bergera.

Great. Thank you, operator. We appreciate everybody's support and the thoughtful questions today. On the Investor Relations front, I wanted to let everybody know that we'll be presenting at the 23rd Annual Oppenheimer Technology, Internet and Communications Conference on August 12; and at Colliers Investor Conference on September 10. If you're participating in either conference, please schedule a visit with us. We would appreciate the opportunity to talk to you.

In the meantime, we look forward to updating you again on our continued progress when we report on our fiscal 2021 second quarter results. And with that, we'll conclude today's call. Thank you.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.