Good day and welcome to the Iteris, Inc. Fiscal First Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of The MKR Group. Please go ahead. Thank you, operator. Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris' financial results for its 2023 first fiscal quarter ended June 30, 2022. Joining us today are Iteris' President and CEO, Mr. Joe Bergera, and the company's CFO, Mr. Doug Groves. Following the remarks, we'll open the call for questions from the company's covering sell-side analysts. 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, which statements are based on current information, are subject to change and are not guarantees of future performance. Iteris is not undertaking an 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. As always, you'll find a webcast replay of today's call on the investors section of the company's website at www.iteris.com. Now I'd like to turn the call over to Iteris' President and CEO, Mr. Joe Bergera. Sir, please proceed. Great. Thank you, Todd, and good afternoon to everyone. I appreciate all of you joining us today. As a reminder, we completed the sale of our agriculture and weather analytics segment to DTN LLC on May 5, 2020. Therefore, reporting the results of that segment as discontinued operations for all periods presented in today's earnings announcement. I'll be discussing only our continuing operations for the remainder of this call. The company reported fiscal 2023 first quarter total revenue of $33.7 million, representing a 1% decrease year-over-year. The decrease is fully attributable to supply chain challenges that prevented us from shipping and recognizing $4.9 million in first quarter revenue on Vantage sensor backlog. If not for the supply chain challenges, first quarter total revenue would have increased 13% year-over-year to $38.6 million. To avoid confusion, I wanna be clear that we did not lose the $4.9 million in Vantage orders. Rather, these orders slipped to the right, and we've already started to fulfill some of the $4.9 million of backlog in the second quarter of fiscal 2023. I'll discuss our supply chain exposure and the status of our supply chain mitigation program in more detail in a few minutes. Despite supply chain challenges, the customer adoption of our ClearMobility Platform remains very positive, and we continue to strengthen our leadership position in the highly fragmented smart mobility infrastructure management market. In the first quarter, we reported record total net bookings of $42.6 million, representing an 18% increase compared to the same prior year period. This brings our trailing 12-month total net bookings to a record $162.1 million, representing a 31% increase relative to the same prior period. For your reference, our trailing twelve-month bookings figure does not include the very large opportunity in front of us with the Infrastructure Investment and Jobs Act or IIJA. Under the IIJA, federal funds will flow to local entities through either formula funding or grant funding. As we've said since the IIJA was signed into law on November 15, 2021, formula funding will begin to show up in state and local budgets in the first fiscal year after the law went into effect. For most state and local entities, that'll be October 1, 2022. With respect to grant funding, USDOT has not issued any intelligent transportation systems-related grant funding under the IIJA to date. The first tranche of grants will be in support of the US Department of Transportation's Safe Streets and Roads for All initiative, meaning they must meet the criteria of this initiative. These grants won't be awarded until late this calendar year or early next. At this time, various state and local entities have included pricing from Iteris in their grant applications. Due to sustained record total net bookings, we ended the June 30 period with record total ending backlog of $109 million, representing a 36% increase year-over-year and a 9% increase on a sequential basis. As always, our reported total net bookings and ending backlog figures reflect firm customer orders. Of our $33.7 million in fiscal 2023 first quarter total revenue, 49% was recorded as product revenue and 51% was recorded as service revenue. Whereas in our fiscal 2022 first quarter, 53% was recorded as product revenue and 47% was recorded as service revenue. The mix shift is largely attributable to our fiscal 2023 first quarter supply chain constraints. Fiscal 2023 first quarter product revenue was $16.4 million versus $18 million in the same prior year period, representing a 9% year-over-year decline. Again, if not for supply chain constraints, product revenue would have been $4.9 million higher, or $21.3 million for the quarter, representing an 18% increase relative to the product revenue in the same prior year period. The impact of our January 1, 2022 Vantage sensor price increase was de minimis in the first quarter due to the time lag from quote to order. Therefore, first quarter product revenue and unshipped sensor backlog reflect an increase in underlying unit demand. We continue to experience above the market levels of demand for our sensors, which have historically set the product performance standard for the industry. In the first quarter, we extended our product performance lead with the introduction of new artificial intelligence capabilities for Vantage Apex sensors, as well as the introduction of a new health monitoring application for Iteris' Spectra connected vehicle sensors and for third-party roadside units. Because of our relentless focus on superior product performance, we continue to win virtually every large, competitively sourced intersection detection, fixed travel time sensor, and cellular V2X modernization initiative across the country. For example, in the first quarter alone, we were selected for the following notable modernization initiatives. A Mississippi DOT phase I Hurricane Zeta restoration program, a Florida DOT phase I regional inner-city integrated corridor management program, a Colorado DOT rural intersection modernization program, an Arlington, Virginia, phase II modernization initiative, and a Pasadena, California, phase II citywide intersection modernization program. To maximize customer loyalty and consolidate our market share as much as possible in the first quarter, we had to source key components in the secondary market for a total of $5.6 million. The cost of these components range from 2x to more than 100x their normal cost. To manage the impact of global supply chain challenges and renormalize our business model, we devoted substantial management attention in the first quarter to the implementation of our supply chain mitigation program, which you'll remember we reviewed on our prior earnings call. During the quarter, we made significant headway toward overcoming these issues. More specifically, we completed the design of three alternative circuit boards that will reduce our dependency on specific chipsets going forward. All these boards are in different stages of testing at this time. We expanded our broker network from three to 10 partners, giving us direct access to major brokers in every major electronics market worldwide. We moved a reporting line for supply chain and manufacturing under Doug Groves to create various efficiencies and accelerate lean process automation and improvement. We sourced and appointed a new strategic hire to lead and enhance our supply chain and manufacturing organization, as well as reduce our reliance on outside consultants that you'll remember we engaged earlier this calendar year. This strategic hire reports directly to Doug Groves. We continued to build buffer inventory for key components which drove a planned $5.3 million increase in inventory and will help to unlock our Vantage sensor backlog in future quarters. As Doug will further discuss, we expect inventory levels to normalize as we complete the related supply chain mitigation plan. I'll discuss the next stages of our supply chain program in a few minutes. In the meantime, I wanna review the performance of our service lines of business. Fiscal 2023 first quarter service revenue was $17.3 million versus $16.1 million in the same prior year period, representing a 7% increase year-over-year. As a reminder, we recognize two forms of service revenue. First, there's annual recurring revenue from our software as a service, data as a service, platform as a service, and managed services offerings. Second, we have project-based revenue that is associated with our consulting activities. Our first quarter annual recurring revenue was $9.4 million, representing an increase of 14% year-over-year and representing 58% of our total service revenue. The growth in ARR is mostly attributable to adoption of our SaaS product lines, such as ClearGuide, which substantially outpaced the rate of growth of our managed services portfolio in the period. While our ARR revenue line experienced solid growth, our first quarter project-based revenue was flat year-over-year due to indirect supply chain constraints. For example, some large projects for which we function as a systems integrator or the program manager were delayed because certain third parties could not deliver critical equipment per the project schedule due to their own supply chain challenges. While this is frustrating and may continue for the next few quarters, our exposure is limited to a small number of projects, and we've identified and are taking actions to mitigate these disruptions. In the first quarter, we recorded $22.1 million in net service bookings, of which 71% of the net service bookings will be recognized in the future as annual recurring revenue. Again, 71% of the net service bookings will be recognized in the future as annual recurring revenue. Additionally, we executed several large contracts that will convert to future bookings. Some notable recent customer agreements include a multi-year contract with the Virginia Department of Transportation for traffic, traveler, and road infrastructure program, or what we call TTIP services. This contract has a minimum value of $20 million, but we expect the actual value will be approximately $70 million. We recorded a $1.8 million booking against this contract in our first quarter. Secondly, we received a $4.2 million task order from the Metropolitan Transportation Commission to extend the use of our Advanced Traveler Information System, ClearRoute. Third, we recorded a multi-million dollar contract extension to provide ClearData to a large U.S.-based broadcasting company. Fourth, we received a $2.7 million task order from the Bay Area MTC to extend our managed services activities. Additionally, we received more than $1.2 million in combined task orders for ClearGuide and more than $1.1 million in combined task orders for our commercial vehicle operations software. Finally, we received a contract with a large multi-line insurance company to transition a ClearData proof of concept into a production deployment for four states. To support our platform-centric business model and our aggressive solutions roadmap, we completed a restructuring in the first quarter to drive better alignment across our software and sensor portfolio to enhance our resource utilization, accelerate the development of ClearMobility Cloud, and support our continued organic and inorganic growth. In addition to the aforementioned benefits, this reorganization will produce an annualized cost savings of approximately $1.2 million to help offset materials cost increases until we begin to realize the full benefit of our supply chain mitigation plan. In summary, customer response to our ClearMobility Solutions roadmap continues to be very strong, resulting in record first quarter total net bookings as well as record total ending backlog. Although supply chain constraints prevented us from shipping $4.9 million of our first quarter Vantage sensor backlog, we believe that Iteris continued to outperform our competitors in a difficult environment, and we made good progress implementing our supply chain mitigation program, which will begin to produce financial benefits in our second quarter. Before I elaborate on those forward expectations, I'd like to turn the call over to Doug to provide some more color on our first quarter financials. Thank you, Joe. Good afternoon, everyone. As a reminder, please see the company's 10-Q filing and press release, which are posted on our IR website for a further description of matters under discussion during the call today. As Joe mentioned, and as we expected, we continue to face several supply chain challenges again this quarter that impacted both the top- and bottom-line results. We anticipated these challenges, and we continue to see certain components that were not available through our normal channels. To that point, we spent approximately $5.6 million in inventory purchases from the secondary market, i.e. brokers, which resulted in incremental material costs of $2.4 million in the quarter, which was up from $2.1 million in Q4. From a revenue standpoint, there continued to be approximately six core components within our Vantage sensor product family that we could not source in the quantities we needed from any suppliers, and the cost of many components continued to be up to 2x-100x their normal cost. This prevented us from manufacturing all the circuit board assemblies necessary to fulfill about 30% of the Q1 Vantage sensor shippable backlog, or approximately $4.9 million in product sales that slipped out of the quarter. If we had all the components we needed, the year-over-year revenue growth would have been 13%. As Joe mentioned, we have many ongoing initiatives to improve the situation. However, we do not expect there to be continued supply chain pressure. We do expect there to be continued supply chain pressure the next few quarters before we realize the full benefits of these initiatives. On the bright side, demand for our products and services continues to be strong, as evidenced by our record bookings of $42.6 million and record backlog of $109 million. Now I'll move on to the details of the first quarter results. Total revenue for fiscal 2023 first quarter decreased 1% to $33.7 million, compared to $34.1 million in the same quarter a year ago. Our gross margins in the first quarter decreased 1,110 basis points to 30.2%, compared to 41.3% from the same quarter last year. As previously mentioned, our revenue was constrained due to the unavailability of certain components, and the gross margin pressure was due to the higher cost for those components that were available. Turning to our revenue mix, the product revenues decreased 9% to $16.4 million, compared to $18 million in the same quarter last year. Taking into account the $4.9 million of revenue that was not recognized because of component shortages, the product revenue growth would have been 18% quarter-over-quarter. This clearly underscores our market-leading position in the sensor market as we continue to take market share from our competitors. Product growth margins declined 1,820 basis points and were 28.8% compared to 47% from the same quarter last year due to the supply chain cost issues mentioned previously. On a normalized basis, excluding the supply chain cost issues, the gross margins would have been 43.5%, which is about the same as the historical average of about 44%-45%. Our service revenues increased 7% to $17.3 million compared to $16.1 million in the prior year quarter, primarily driven by stronger software sales. In the first quarter, 28% of total revenue was annual recurring revenue, which was up from 24% in the same prior year quarter. As a reminder, our annual recurring revenues are comprised of our software managed service revenues. Service gross margins decreased 360 basis points to 31.4% compared to 35% from the same quarter last year. This was primarily due to increased labor costs, the timing of certain contract extensions, and the contract mix. Operating expenses in the first quarter were $15.1 million compared to $13.4 million in the same prior year quarter. G&A expenses were once again flat quarter-over-quarter, while R&D was up about $400,000 as we continued to invest in building out the ClearMobility Platform. Sales and marketing increased $600,000, which was related to some key investments in our sales and product support organizations to support our expected double-digit future revenue growth and record bookings. We reported a GAAP operating loss in the first quarter of $5 million, compared with a GAAP operating income of $700,000 in the same quarter a year ago. The operating loss was driven by the shortfall in product revenue of $4.9 million, $2.4 million in incremental product inventory costs, and $700,000 in restructuring charges. We expect the restructuring charge to reduce our ongoing costs by about $1.2 million over the next four quarters. The GAAP net loss from continuing operations in the first quarter was $4.9 million or a loss of $0.11 per share, which compares with the net income from continuing operations of $600,000 or $0.01 per diluted share in the same quarter a year ago. Adjusted EBITDA for the first quarter was a loss of $2.5 million or 7.3% of revenue, which compares to the positive EBITDA of approximately $2.5 million or 7.4% of revenue in the first quarter of last year. The GAAP operating loss, GAAP net loss, and adjusted EBITDA loss were all driven by the product revenue shortfall, restructuring charge, and supply chain issues previously noted. With the supply chain mitigation plans outlined by Joe, we anticipate a progressive improvement in our supply chain position beginning in our second quarter, with the majority of the improvement occurring in the second half of our fiscal year 2023, since it will take time for the redesign of all the key circuit boards to ship through to our customers. We will complete the redesign and deployment of three circuit boards in Q2, and expect to complete the redesign and deployment of another three circuit boards in Q3 and again in Q4 respectively. These key redesign activities should return the product gross margins to about 40% by the fourth quarter of this year. Now, turning to liquidity and capital resources. Cash and cash equivalents were $14.8 million at the end of the first quarter, and net working capital was $31.8 million. The $8.9 million decrease in cash and cash equivalents quarter-over-quarter was a result of the net loss, a planned increase in inventory of $5.3 million to build buffer stock as part of our supply chain recovery plan, and a repurchase of $900,000 in company stock. As previously mentioned, we procured $5.6 million in components from the secondary markets, so we were unable to get any extended payment terms, which is normal business practice in these markets, to offset the inventory carrying costs, and this also negatively impacted our working capital in the quarter. With the increased volume of inventory purchases in Q1, we do not expect to see such a large increase in inventory in Q2 or the remainder of the year. However, we do expect to still be constrained by the six key components previously mentioned until the redesign of all the remaining circuit boards is completed. Lastly, we spent $188,000 in purchases of property and equipment in the first quarter, which was up from $67,000 in the prior year first quarter. This increase is simply a timing difference, and we still expect the full year CapEx to be less than 1% of revenues, reflecting our asset-light business model. In summary, we continue to be laser focused on our supply chain challenges. As Joe mentioned, our multipoint plan is progressing well with the redesign and deployment of another three circuit board assemblies in Q2 as part of our mitigation plan. We've already began buying materials for the new designs, so we are confident we can weather this supply chain storm and come out even stronger on the other side with multiple circuit board designs for our market-leading Vantage sensor products and without sacrificing any features and functionality that our customers have come to rely upon. With that, I'll turn the call back over to Joe. Joe? Super. Thank you, Doug. Despite the global pandemic and associated supply chain disruptions, Iteris continues to enhance its position in the large, dynamic and highly fragmented smart mobility infrastructure management market. This market represents significant opportunities due to favorable secular trends as well as historic new investment flowing from the IIJA. Iteris' market access, know-how, and platform-based strategy provide degrees of freedom and optionality that most companies in our market lack. As a result, we remain very optimistic about the opportunity in front of Iteris and believe the current environment actually improves our ClearMobility value proposition and competitive position, as demonstrated by sustained above-market bookings growth despite some near-term disruption from supply chain constraints. In fact, the leading indicators we track suggest continued execution of our solutions roadmap, which we outlined on our last earnings call, should sustain future market share growth. For example, the total value of qualified sales opportunities is up 20% year-over-year, and our proposal win rate has increased over 200 basis points to reach a new record high. Due to the strength of our demand side performance, management is able to remain focused on the execution of our supply chain mitigation program that will unlock our historic backlog and begin to re-normalize our cost structure. To that end, we've identified the following near term supply chain mitigation program objectives, some of which Doug has already mentioned. First, we'll begin in the second quarter, the production and shipment of the three circuit board prototypes for which the designs were completed in Q1. Second, we'll develop three circuit board prototypes in Q2 for production and shipment beginning in Q3. Third, we'll complete the development of a final set of three additional circuit boards in Q3 for production and shipment beginning in Q4. Fourthly, we'll continue to build nine to 12 months of buffer stock for key supply chain components. We should reach that level by December 31 of this year. Fifth, we'll accelerate our lean manufacturing initiative to drive more efficiency and effectiveness in all our manufacturing and supply chain processes. Sixth, we'll implement an additional more surgical price increase effective October 1st that will average about 10% across our Vantage sensor portfolio. Our plan should meaningfully improve our supply chain position as we progress through fiscal 2023, even if the broader global supply chain environment remains largely the same as current conditions. In other words, we're insulating ourselves from broader global challenges. More specifically, we expect the revenue benefits to begin to bleed through our Vantage sensor revenue line in our fiscal 2023 second quarter, and our gross margin line in our fiscal 2023 third quarter as we rotate through our inventory of secondary market components. Based on our current record backlog and anticipated future bookings growth, we should resume our year-over-year revenue growth in our fiscal 2023 second quarter, and we continue to forecast fiscal 2023 total revenue of $147 million-$155 million, which would represent full year organic growth of 13% at the midpoint of the guidance range. Likewise, we expect a successive step up in EBITDA margin dollar performance starting in our fiscal second quarter as our supply chain mitigation program begins to produce progressive benefits. As a result, we continue to forecast full year adjusted EBITDA that should fall within a range of 5%-6% of full year revenue. In closing, our fiscal 2023 first quarter was extremely challenging, as it has been for most public companies that have reported this period. That said, our supply chain mitigation program offers a clear pathway for Iteris to navigate this difficult period, and we are very pleased with our execution of this program. Additionally, we believe the sustained high level of market demand validates our platform-centric strategy and represents the potential for significant shareholder value as outlined by our Vision 2027 operating model. With that, we'll conclude our prepared remarks, and we'd be delighted to respond to your questions and comments. Operator, do we have any questions at this time? Okay. Ladies and gentlemen, the floor is now open for questions. A reminder, if you have questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for additional questions. We do have some participants already in the queue, so I will join them in at this time. Our first participant or first questioner is Mike Latimore from Northland Capital Markets. Sir, the floor is yours. Hi. I'm sorry. This is Michael Shlisky from DA Davidson. Yes. Hey. Hi, it's Michael Shlisky of DA Davidson. Thank you and good afternoon. Some of the products and sensors that were delayed or were not shipped at the right time, I'm just curious of some of the risks there. Are you under deadlines in those contracts to have them in by a certain date? Do you have penalties if you don't deliver on time or you have to go back to the customer and ask for any kind of changes to the initial contracts? Mike, this is Joe. Thanks for the question. The answer is no. There are certain instances where we may have specific delivery dates, but in this particular period, we don't have any risks of that nature. Regardless, what the kinds of issues that we're facing are being faced by virtually every participant in the market right now. All of our customers are extending substantial latitude. As I said in my remarks, all of our orders are firm orders. In some cases, there may be some delay in terms of when they're gonna be shipped, but we will ship all the product. We have not had any orders canceled, and there aren't any penalties that we would be responsible for. Okay, great. My other question is about the infrastructure bill passed a couple quarters ago. I'm curious. Have you seen any customers with money to spend from that bill, or you have any feel for when we might start to see some new projects with funding from that bill directly hit the RFP market? Sure. Yeah. Thanks again, Mike. As I mentioned in the call that the infrastructure bill that I think you're referring to is the Infrastructure Investment and Jobs Act, which was signed November 15th of last year. At the time that was signed, we told everyone that they shouldn't expect any funds to begin flowing from the IIJA down to the state and local level until the next fiscal year for the respective local entity. We're just starting to see state and local jurisdictions begin their new fiscal year. In most cases, that new fiscal year will start on October 1 of this year, and so we would expect that formula funding will begin to show up in their budgets at that point in time. Formula funding, by the way, can get mixed in with other funding, so it's difficult in some instances to, you know precisely what the underlying source of the funding is. The other form of funding is gonna come in the form of grants. As I also mentioned, the grant funding is being doled out in a series of tranches. The first tranche is associated with US Department of Transportation Safe Streets and Roads for All initiative, and there's currently a call for proposals right now. The call for those proposals or the window is gonna close on September 15th, and we expect that there'll be approximately three to six-month period for various grant applications to be evaluated and for money to be dispersed through those grants. The answer to your question is that, I don't believe anybody in the ITS market has seen any funding from the IIJA show up at this point. We do expect to see that start to happen in the fall, and we expect to see it accelerate as we move into the next calendar year. By the way, as I also mentioned on the call, but I wanna make sure that nobody missed it, is that, as a vendor, we're not able to submit a grant application ourselves. We have to do that in cooperation with the state and local agency or in some instances, with a public university that's authorized to submit grant applications. As I said, we've provided pricing to several state and local agencies as well as universities, to support their grant applications, and so we would certainly expect that we'll benefit from the grant applications as they're awarded later this year. Great. Thanks so much for that color. I'll pass it along. Thanks, Mike. Okay. Our next question comes from Mike Latimore from Northland. Sir, the floor is yours. I guess just on the EBITDA guidance for the year. You're reiterating the EBITDA guidance for the year. You know, started off with a little bit lower first quarter, and I think you're talking about, you know, 40% gross margin sort of exiting the year on hardware now instead of 45%. Should we think of you're making up the difference here just on some OpEx savings? That's correct. You know, as we've been echoing, the G&A should be flat, you know, this year as it has been in this last quarter-over-quarter. We should see some pick up there. You know, the margin will be a reflection of, you know, how fast we can get the new circuit cards into the product shipped to the customer. I think the combination of both of those gives us the confidence to keep the EBITDA guidance where it's at. Got it. Should we think about reaching positive EBITDA in the second or third quarter? Sure. Definitely by the third quarter. Our plan is to, you know, try and get there by the second quarter, but it's gonna be a function of, you know, the flow-through of these expensive components that we bought at the tail end of the first quarter. That'll, you know, some but maybe not all of that will, you know, filter through to the second quarter. I think, you know, our plan is to try and get there, but we'll have to see how the products shipments go. Yep. I read in the IIJA. Do you have a sense of how much, you know, the budgets of your customers will expand because of this? Is this like a you know, increase of 20%, increase of 50%? Any sort of way to quantify how much more resources your customers will have for your types of products? Yeah. Mike, that's a great question. The formula funding is called formula funding for a reason. Basically the money gets allocated based on a number of predetermined criteria, which would be like, GDP, local jurisdiction, revenue that flows to the federal government, and then it comes back on a percentage basis, and the overall population, the number of road miles, among other factors. Given those criteria, as you might expect, California, Texas, and Florida are expected to receive the largest share of the formula funding under the IIJA. That being said, those states also have the largest transportation budgets to begin with. You know, there are some smaller states on an absolute basis will receive less, but since their budget is less, it may, on a percentage basis, have a larger impact. You need to really look at it state by state based on the specific formula, and then also relative to what the current funding level is in each of those states in order to understand what the uplift is gonna be. That being said, I think most executive directors of the various state departments of transportation are expecting that over the approximate five-year funding window, the IIJA could increase their total funding by as much as 20%-40%. Now, you know, just to be clear, the IIJA has a lot of components, you know, to it. A lot of it is actually directed towards things that are, you know, right in Iteris' wheelhouse. There's certainly, you know, some funding that's gonna go to, like, brick and mortar construction type projects, which would have only a peripheral benefit to Iteris. The bottom line is this is a huge infusion of funding. You know, we expect it to last for, you know, a substantial period of time, and we're doing everything that we can to maximize our share of that $1.2 trillion in federal funding. Yeah. Yeah. Okay. Makes sense. Great. Then on the Virginia deal, you talked about it, you know. I think you said $20 million initially, could go to $70 million. I guess just starting with the $20 million. How much of that is sort of incremental to what you're already doing there? Then what's the catalyst to get you to that $70 million level? I guess third would just be, how much of your kind of, you know, sort of software services is involved here? Yeah. All really great questions. The TRIP program includes some activity related to the Commonwealth's ATIS system, which I think you know you're getting at, we already hold that contract. By winning the TRIP contract, we preserve the work we're already doing, that ATIS work that we're already doing for the Commonwealth. I would guess it probably, you know, to be totally transparent, the majority of the $20 million is, you know, arguably replacement revenue because, you know, we currently are generating a, you know, meaningful amount of revenue from the Commonwealth related to the ATIS program. But I would say that the potential additional $50 million, that most of that. That's over, you know, a five-year period. I would say that, you know, that represents upside or that'd be incremental new revenue. What additional services would you be providing in that $50 million? This is a fantastic contract. As I've mentioned on prior calls, we're seeing that due to a variety of factors, including the general migration of all state agency activities to the cloud, including infrastructure management activities to the cloud, and then also related cybersecurity issues, that virtually every state, you know, the governor's office is mandating that the state CIO needs to be involved in the selection, the evaluation and even management of the technologies for all the various departments, including the transportation department. What that means in the case of Virginia is that the state CIO office was very involved in this particular contract evaluation process that we went through. To be honest, it took a lot longer to win this contract than we had expected because of the office of the CIO involvement in the contract evaluation process. The upside to it is this is the only contract related to Virginia Department of Transportation activities in Virginia that's authorized by the CIO office and that also is authorized by the Federal Highway Administration. As a result, it gives us a wide hunting license to pursue a huge range of technology-related activities across the Commonwealth. I'm not gonna go into the specific details, but we are extremely excited to hold this contract. No other vendor has a similar contract to date. Mm-hmm. We expect to see similar contracts being awarded by other states going forward. Right. It'll be a good reference account for sure. It'll be a fantastic reference account. This is a really important contract. As we've talked about in the past, we've been very focused on ensuring that all of our technology meets the requirements of the CIO offices of various states, because this is a phenomenon that we're seeing happening across the country. This is the first major contract of its type, and we're extremely excited to have won it. That's great. Does any of the IIJA funding help this or is this independent of that? No, that's a great question. As I mentioned, this contract is federalized, and not very many contracts are, meaning that it was not only approved by the Virginia Department of Transportation and the Commonwealth CIO office, but it was also approved by the FHWA, meaning that federal funding can flow directly from the U.S. Department of Transportation or FHWA through this contract to Iteris to perform various activities. It does mean that we are likely to receive IIJA funding through this contract because it is federalized, but it's not explicitly called out in the contract. Sure. Great. Just last on the price increases, so can you just remind me, you know, I think you had one already, and you're gonna do another one. Right. Can you just talk a little bit about, you know, which products are getting the price increase, when they should hit revenues and gross margin? Yeah, for sure. The first price increase was an across-the-board 10% increase on all of our Vantage products. As I mentioned, there is a delay between, you know, preparation of our quote, submission of the quote and the actual fulfillment of the order. We're only beginning right now to see any impact from the 10% across-the-board price increase that went into effect on January 1. We were pleasantly surprised that we didn't see a lot of pushback, you know, to the first price increase. I think it's due to the fact that, you know, our products are just so highly differentiated from a feature performance perspective that we can. We've always had a premium price in the market that, you know, we were able, especially under these circumstances, to take that additional price increase without any, you know, real customer pushback. In light of the current supply chain challenges, you know, and our customers are well aware of it, and considering the strength of our market position, you know, we feel that, you know, we have the latitude to take an additional price increase to cover, you know, continued supply chain costs. This second price increase will go into effect on October 1, so it's 10 months after the first. Unlike the first one, it's not gonna be across the board. We're gonna take, you know, potentially more than 10% increase on some components and then probably less on others, but it should average out to about another 10% increase across the portfolio. Obviously, we're not gonna get into specifics about which components we're, you know, we're gonna increase most at this point. I will say that, you know, the additional price increase will go into effect on October 1. Got it. Then I guess this last one for me, ARR grew 14%, I think you said. I think the goal is to grow that at, what, 1.5x-2x overall company growth rate? Can you just remind us on kind of what the goal is there and what the prospects are to getting there this year? Yeah. Doug, do you wanna talk about that? Sure, yeah. Yeah, your memory's good. That's right. I mean, we're expecting the ARR to grow at 1.5x to at least 2x what our normal total revenue growth rate is. You know, as Joe alluded to in his comments, in our service, you know, bookings, the majority of those bookings in the service line were all ARR. You know, we're seeing the backlog build and the bookings come in to be able to support that, as you probably know, because the software piece of ARR, that takes a while to bleed in because that's generally, you know, you get one-sixtieth, generally speaking, when you sign that contract and get it going. It's gonna take a while for it to ramp, but that's still our expectation to get the ARR north of 30%-35% in the next couple years. Mike, you may recall that I noted in my comments that the 14% growth included proportionally higher growth on our SaaS product lines and less growth on our managed services product line, and that was due to timing. You know, we've got some big managed services contracts, and so there can be some timing impacts and that drags down the total rate of growth for our annual recurring revenue. Our software, which isn't subject to, you know, those kind of big timing effects, was very healthy for the period. All right. Got it. Great. Thank you, guys. Good luck this year. Thanks. There are currently no additional questions in the queue. A reminder, if you intended to ask a question, to please press star one on your phone. Okay. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.