Due to the improvement in our supply chain position and the higher volume, we also experienced an increase in gross margin in the fiscal 2024 third quarter and nine months of 780 basis points and 1,250 basis points year-over-year respectively. In turn, our fiscal third quarter adjusted EBITDA of $3.1 million and nine-month adjusted EBITDA of $10 million improved $3.5 million and $18.1 million year-over-year respectively. In addition to the significant improvements in our income statement for the fiscal year-to-date, we continue to experience strong demand for our clear mobility platform. For example, our total qualified sales pipeline now exceeds $650 million and our third quarter and year-to-date win rates were 66% and 67% respectively. As context, a win rate of 66% to 67% is exceptional given there are often three or more bidders in any competitive procurement.

Despite the high level of demand for our clear mobility platform, we did experience some bookings lumpiness, which is common in our industry during our third quarter. These delays included an almost $10 million signal timing order originally expected to occur in the third quarter that pushed to the right. Last week, we did receive official notice from the agency of its intent to award this contract to Iteris, but the order and associated booking is now not expected to occur until late in our fourth quarter or early in the first quarter of our next fiscal year. Due to these customer delays, we recorded fiscal 2024 third quarter total net bookings of $31.4 million, resulting in total ending backlog of $113.3 million, which was up 1% year-over-year.

Based on our expected fourth quarter bookings forecast, that includes some orders that were previously forecast to occur in our fiscal 2024 third quarter, we expect fiscal 2024 fourth quarter bookings to reflect significant sequential and year-over-year bookings growth. In turn, this will drive further improvements in our total ending backlog. As a reminder, our reported net bookings are comprised of firm customer orders, meaning net bookings represent only a portion of the total value of all contracts in hand. Historically, total contract value averages about 200% of our total ending backlog. Based on this math, total contract value as of December 31, 2023 was approximately $225 million, despite the softness in third quarter net bookings. To help you better understand our consolidated results, I'd like to share some details about the performance of our product portfolio.

As noted previously, product revenue includes sales of our sensors, as well as certain third party hardware. In fiscal 2024, third quarter product revenue was $23.1 million, and nine month product revenue was $70.2 million, representing a 1% and 17% increase year-over-year respectively. As a reminder, these year-over-year comparisons are distorted by unusual prior period shipping patterns. In addition to our continued product revenue growth, we realize significant improvements in product gross margin as we move beyond last year's global supply chain issues. Our product gross margin in the fiscal 2024 third quarter was 43.9% and first nine months was 45.6%, representing a 1,380 and 2,500 basis point improvement year-over-year respectively. Despite some customer delays that occurred across our industry, we continue to win virtually every large-scale intersection modernization initiative in the market.

Leverage our leadership and video detection to penetrate adjacent categories, including the emerging cellular vehicle to everything or CV2X category, and attach annual recurring revenue to our vantage and spectra connected vehicle sensors. To maintain this market leadership, we released important new capabilities in the fiscal 2024 third quarter that will continue to expand our qualified sales pipeline and drive above market growth rates going forward. For example, on December 6, 2024, we announced that VantageCare is available with all Vantage sensors as a managed service. VantageCare is a comprehensive program that helps transportation agencies optimize their Iteris' traffic detection technology to improve overall intersection performance.

We believe this program will help agencies better maximize their traffic detection investments and ensure more efficient, safe, and reliable travel through intersections. Then on December 13, 2024, we launched Vantage CV, which is an integrated detection and connected vehicle system for safe intersections. Vantage CV combines traffic detection, cellular vehicle to everything communication, and connected vehicle safety applications into a single system. With this release, our Vantage Next and Vantage Apex product families will now support certain sensor fusion capabilities we developed in partnership with Continental AG, in which we've talked about previously. Vantage Next and Vantage Apex will inherit additional sensor fusion capabilities in our fiscal 2024 fourth quarter.

Now I'd like to provide some more color on our services portfolio, which includes our consulting services, managed services, software as a service, and data the service offers. We reported fiscal 2024 third quarter service revenue of $19 million and nine month service revenue of $59 million, representing a 7% and 10% increase year-over-year respectively. Due to an improvement in our internal labor capacity in the fiscal 2024 third quarter, we also realized the 60 basis points improvement in our services gross margin. However, our nine month services gross margin was 210 basis points below the same prior year period due to a particularly high mix of subcontract labor in our fiscal 2024 first half. As with our product portfolio, the demand for our services portfolio remains very strong, whether measured by our historic sales pipeline, or nine month services net bookings of $70.6 million, which are up 19% year-over-year, despite the bookings delays encountered in our fiscal 2024 third quarter.

To sustain strong demand for our services portfolio, we continued to introduce important new enhancements to our clear mobility platform and extend the platform's ecosystem. For example, in the fiscal 2024 third quarter, we released VantageARGUS CV, the next generation travel time and connected vehicle data collection and presentation system. We also announced the new partnership with Arity, which is a mobility and data analytics company owned by the Allstate Corporation. This partnership further enriches our mobility data sets and improves our ability to address various new end markets. As a result of our significant traction in North America, we continue to experience inbound demand from various international markets, which will continue to evaluate opportunistically.

For example, in the fiscal 2024 third quarter, we signed a contract to develop an intelligent transportation systems master plan for the metropolitan area of Cebu, which is a major domestic and international port in the Philippines. In summary, we're pleased with our fiscal 2024 third quarter and first nine month revenue, our gross margin and adjusted EBITDA improvement. We continue to deliver against our ClearMobility platform roadmap and our commercial execution remain very strong, especially as measured by our qualified sales pipeline and competitive win rate. Therefore, we continue to believe our platform strategy will drive significant customer value, resulting in sustained above market growth rates going forward. So on that note, I'm going to pass the mic to Kerry to provide more color on our fiscal '24 third quarter and nine month financial results, after which I'm going to come back and I'll discuss our expectations for the fourth quarter and full year.

Kerry Shiba: Thanks Joe, and good afternoon everyone. As you review our third quarter results, I encourage you to consider Joe's comments regarding our nine month revenue results when assessing the overall momentum of the business. You may recall that I talked about the seasonality dynamic on last quarter's call, because Joe provided this context already on this call. I'll focus my current comments primarily on third quarter results. As Joe also described, we continue to make exciting commercial progress. I only want to underscore that our strength in the market continues to be demonstrated by strong double digit revenue growth for the first nine months, a significant sales pipeline, and an expectation for strong fourth quarter bookings.

Because Joe already addressed revenue results, I will move down the income statement to the gross profit line and expand some on the commentary Joe provided. As Joe noted, the impact of improved supply chain dynamics was reflected in our gross profit performance. In the third quarter of fiscal 2023, i.e. last year, we expensed about $3.9 million of negative purchase price variance, which compares to only 400,000 in the current year third quarter. As you may recall, last year's negative purchase price variance resulted from aftermarket purchases of semiconductors and other electronics components. On a consolidated basis, fiscal 2024 third quarter consolidated gross profit reached $15.5 million, an improvement of 32% over last year. Products gross profit drove about 88% of the total improvement, increasing 48%, while our services gross profit grew 9%.

The products gross profit growth basically reflects supply chain improvement with the benefit of a 1% revenue growth offset by a slightly weaker product mix. The services gross profit improvement reflects higher sales, as well as a stronger labor mix resulting from increased internal labor capacity when compared to last year. Looking at gross margins, the third quarter of this year improved by 780 basis points in the aggregate, reaching 36.9% in total, the increase was driven by a 1380 basis point improvement for products, which was augmented by a 60 basis point increase for services. Product gross margin was 43.9% for the current year third quarter, and as I just mentioned, the benefit of having last year's negative cost impact from supply chain issues clearly behind us was offset slightly by a weaker product mix.

Gross margin for services was 28.4% for the third quarter this year, with the increase due to the improvement in labor mix relative to the same period last year. Operating expenses in aggregate were 8% higher in the current year third quarter when compared to the same period last year, and 162 basis points higher measured as a percent of revenue. In general, prior year cost levels reflect very tight spending controls imposed in the midst of the supply chain crisis. The current year increase was most significant in the research and development category, and reflects increased activity focused on improving our software products. Sales and marketing expense also was higher due to increased commissions and G&A expense decline when compared to last year as lower salaries and wages cost and professional services cost declines were offset partially by higher litigation costs.

The factors just discussed related to revenue, gross profit, and operating expense fundamentally explain the major comparisons in operating income, net income, and adjusted EBITDA. As Joe mentioned, adjusted EBITDA was $3.1 million for the third quarter and improvement of $3.5 million compared to the same period last year. This brings adjusted EBITDA to $10.0 million for the first nine months of fiscal 2024, a turnaround of $18.1 million over last year. Total cash and cash equivalents at the end of the third quarter this year was $21.2 million which was $11 million above the balance at the same time last year, and $1 million higher than the balance at the end of last quarter. Cash flow for this year's third quarter included a variety of items, including $200,000 for share repurchases and $900,000 for capital investments, primarily in new software development, as well as $800,000 in fees related to a non-routine legal matter that we discussed on our prior earnings call, and finally a $700,000 increase in inventories.

The improvement from last year continues to reflect the combination of higher income and strong balance sheet management, while cash trajectory can always be affected in the short term around balance sheet cutoffs. Future earnings improvement and good balance sheet management provide the foundation for continued liquidity improvement going forward. I now will turn the call back over to Joe who will discuss our fiscal 2024 guidance update and provide closing comments.

Joe Bergera: Great. Thank you, Kerry. The smart mobility infrastructure management market, in our opinion, represents a significant long-term opportunity due to historic federal funding that's been committed by Congress through 2026, but should have a multi-year funding tail as state and local agencies will continue to spend obligated funds well past the legislation statutory end date. Additionally, technology trends that include the adoption of cloud infrastructure, artificial intelligence, and connected and autonomous vehicles will continue to drive significant investments from state and local agencies, as well as various private sector entities. Given the breadth of our platform capabilities, significant brand equity, and extensive customer reach, we're very optimistic about Iteris's ability to capture a disproportionate share of this revenue stream.

Iteris will continue to deliver against an aggressive fiscal 2024 roadmap with the following major releases in our fourth quarter. The release of a new state-of-the-industry software as a service solution will use both probe and infrastructure-based data sets to characterize and optimize the performance of individual intersections and entire transportation corridors. We believe this new solution, which can be provisioned dynamically, will further expand our addressable market. Second, the introduction of an integrated communication module to facilitate more efficient communication between our Vantage sensors and our clear mobility cloud, which we expect to drive more VantageCare up-sale revenue and accelerate the attach rate of ARR to our sensor install base.

And third, the application of additional artificial intelligence capabilities at various levels of the ClearMobility platform will further enhance our ability to identify, verify, and predict certain transportation events. As noted on previous calls, we believe our fiscal 2024 release plan will continue to drive further adoption of the ClearMobility platform, increase our wallet share among existing customers, and improve the monetization of our expanding mobility data sets. Over the long term, we believe these dynamics will support an above-market rate of growth in our total bookings, as well as continue to increase the average size of individual bookings. In addition to focusing on our solutions portfolio, in the fiscal 2024 fourth quarter, we'll continue to pursue key operational priorities, including the productivity of our distributor network, the maturity of our customer success function, and internal labor capacity of our consulting teams.

As a reminder, the tactics outlined on our prior earnings call are already producing a measurable improvement year-to-date in our internal labor capacity. Based on recent market feedback, we've also made an operational decision to continue to reduce our lead times to ship certain sensor product lines, which we determined to be a significant point of competitive differentiation. Before I address our guidance, I want to reiterate that supply chain constraints in fiscal 2023 push product shipments from our fiscal 2023 first half for our fiscal 2023 second half, inverting normal seasonality, and creating unusual prior period comparisons. Additionally, the fiscal 2024 third quarter bookings delays, which are only temporary, may shift some revenue recognition from our fiscal 2024 fourth quarter to subsequent periods.

With this context, we're tightening our full-year revenue guidance to a range of $171 million to $173 million, representing organic revenue growth of 10% at the midpoint of our range. We're reiterating our full-year adjusted EBITDA margin guidance of 79%, representing a significant improvement year-over-year, and we're adjusting our full-year net cash flow guidance to a range of $8 million and $12 million. This adjustment is due largely to a recent operational decision to build and maintain higher inventory to further reduce lead times to ship certain sensors, and also due to the timing of expenses for the unplanned litigation that we referenced on our prior earnings call. Despite the adjustment to our net cash flow guidance, the new range would represent a $17.1 million increase year-over-year at the midpoint.

Looking beyond fiscal 2024, we believe Iteris remains on track to achieve our vision 2027 targets. In other words, we continue to estimate fiscal 2027 revenue in the range of $245 million to $265 million before any additional acquisitions. This represents a 5-year organic revenue CAGR of 13.7% at the midpoint, which I would point out is consistent with the average of our fiscal 2023 actual growth rate in the midpoint of our fiscal 2024 revenue range. With this substantial increase in revenue over the five-year period, we anticipate progressive benefits from economies of scale to result in fiscal 2027 adjusted EBITDA margins in the range of 16% to 19%. Additionally, we anticipate that further improvements in our liquidity will enable Iteris to resume our acquisition program, which would be additive to our organic vision 2027 targets.

So with that in mind, I would be delighted to respond to any questions and comments. And so, I'll pass it back to you, operator.

Operator: Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] And the first question today is coming from Jeff Van Sinderen from B Riley. Jeff, your line is live.

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