Iteris Reports Strong Third Quarter Revenue of $26.0 Million

Iteris, Inc. (NASDAQ: ITI), the global leader in applied informatics for transportation and agriculture, today reported financial results for its fiscal third quarter ended December 31, 2017.

Fiscal Third Quarter 2018 Financial Highlights

• Total revenue of $26.0 million, up 15% year over year
• Transportation Systems revenue of $13.6 million, up 14% year over year
• Roadway Sensors revenue of $11.0 million, up 18% year over year
• Agriculture and Weather Analytics revenue of $1.4 million, up 2% year over year

Management commentary:

“We are pleased to report record third quarter total revenue results reflecting solid growth in all business segments and positive market fundamentals,” said Joe Bergera, president and CEO. “With ongoing innovation in both our technology and business models, we remain excited about our business outlook.

“As anticipated, our Roadway Sensors segment activity in Texas recovered nicely following the prior quarter disruptions from Hurricane Harvey. As a result, the business segment returned to healthy double-digit growth in the third quarter, thanks in part to strong distribution performance.”

Fiscal Third Quarter 2018 Financial Results

Total revenues in the third quarter of fiscal 2018 increased 15% to a record $26.0 million, compared with $22.7 million in the same quarter a year ago. This growth was driven by an 18% increase in Roadway Sensors sales, as a result of business recovery in two of our most strategic markets – Texas and Florida, which were affected by hurricanes Harvey and Irma in 2017. Our Roadway Sensors segment also had strong performance in the distribution of third-party products. Third quarter revenue growth was also attributable to the solid 14% growth in Transportation Systems revenues and, to a lesser extent, a 2% increase in Agriculture and Weather Analytics revenues. While our Agriculture and Weather Analytics segment showed modest growth this period, our ClearAg^® product line revenue continued to show significant growth, which was partially offset by a decline in our ClearPath Weather^® products revenue. The decline in ClearPath Weather was due to a business model change, which we expect to create improved product operating margins. More specifically, we eliminated our dependence on a third-party royalty, which reduces ClearPath Weather’s gross revenue while improving its gross margins and creating positive pricing flexibility going forward.

Operating expenses in the third quarter were $11.1 million, compared with $10.1 million in the same quarter a year ago. The rise in operating expense was primarily due to increases in selling, general and administrative costs, driven by higher compensation costs that were driven by higher revenues, and an increase in business development costs aimed at the pursuit of large contracts in the Transportation Systems segment.

Operating loss in the third quarter was $1.1 million, compared with an operating loss of approximately $1.5 million in the same quarter a year ago. Net income in the third quarter was approximately $343,000 or $0.01 per share, compared with a net loss of approximately $1.4 million or ($0.04) per share in the year-ago quarter. The main driver of net income in the third quarter was an income tax benefit of $1.4 million, which contributed $0.04 per share, as a result of the passage of new tax legislation known as the Tax Cuts and Jobs Act.

Earnings Conference Call

Iteris will conduct a conference call today to discuss its fiscal third quarter 2018 results.

Date: Wednesday, February 7, 2018
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-free dial-in number: 1-800-263-0877
International dial-in number: 1-323-794-2094
Conference ID: 3213732

To listen to the live or archived webcast of the earnings call or to view the press release, please visit the investor relations section of the Iteris website at www.iteris.com.

A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through February 21, 2018. To access the replay dial-in information, please click here.

About Iteris, Inc.

Iteris is the global leader in applied informatics for transportation and agriculture, turning big data into big breakthrough solutions. We collect, aggregate and analyze data on traffic, roads, weather, water, soil and crops to generate precise informatics that lead to safer transportation and smarter farming. Municipalities, government agencies, crop science companies, farmers and agronomists around the world use our solutions to make roads safer and travel more efficient, as well as farmlands more sustainable, healthy and productive. Visit www.iteris.com for more information and join the conversation on Twitter, LinkedIn and Facebook.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This release may contain forward-looking statements, which speak only as of the date hereof and are based upon our current expectations and the information available to us at this time. Words such as "believes," "anticipates," "expects," "intends," "plans," "seeks," "estimates," "may," "will," "can," and variations of these words or similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements about the Company’s anticipated growth opportunities, the impact of the new management team, the impact and success of new product introductions and acquisitions, our future performance, growth, operating results, financial condition and prospects. Such statements are subject to certain risks, uncertainties, and assumptions that are difficult to predict and actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.

Important factors that may cause such a difference include, but are not limited to, federal, state and local government budgetary issues, constraints and delays; the timing and amount of government funds allocated to overall transportation infrastructure projects and the transportation industry; the potential impact of the recently extended Federal Highway Bill on the Intelligent Transportation industry and the expected benefits to Iteris; the potential unforeseen impact of product and service offerings from competitors, increased competition in certain market segments and other competitive pressures; our ability to secure additional Transportation Systems consulting contracts and successfully complete such contracts on a timely basis; our ability to specify, develop, complete, introduce, market and gain broad acceptance of our new and existing products and technologies the timing and successful completion of customer qualification of our products and the risks of non-qualification; the availability of components used in the manufacture of certain of our products; the effectiveness of efficiency, cost, and expense reduction efforts; our ability to successfully identify, complete and integrate acquisitions of products, technologies and companies; our ability to retain, integrate and incentivize our new management team and their ability to shape the strategic direction of the company and implement change; any softness in the real estate development market, and the impact of general economic and political conditions and specific conditions in the markets we address, and the possible disruption in government spending and commercial activities related to terrorist activity or armed conflict in the United States and internationally. Further information on Iteris, Inc., including additional risk factors that may affect our forward-looking statements, as contained in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and our other SEC filings that are available through the SEC's website (www.sec.gov).

ITERIS, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
			December 31,				March 31,
			2017				2017
ASSETS:
Cash			$	16,803			$	18,201
Trade accounts receivable, net				13,645				14,299
Unbilled accounts receivable				7,175				6,456
Inventories				2,972				2,250
Prepaid expenses and other current assets				1,452				2,108
Total current assets				42,047				43,314
Property and equipment, net				2,444				2,064
Deferred income taxes				652				-
Goodwill				15,150				15,150
Intangible and other assets, net				3,374				1,817
Total assets			$	63,667			$	62,345
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Accounts payable and other current liabilities			$	16,827			$	16,530
Deferred revenue				4,654				4,049
Total current liabilities				21,481				20,579
Long-term liabilities				841				1,542
Total liabilities				22,322				22,121
Stockholders’ equity				41,345				40,224
Total liabilities and stockholders’ equity			$	63,667			$	62,345

ITERIS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
			Three Months Ended												Nine Months Ended
			December 31,												December 31,
			2017						2016						2017					2016
Product revenues			$		11,995				$		10,046				$	35,620				$	32,139
Service revenues				14,031							12,645					42,837					38,539
Total revenues				26,026							22,691					78,457					70,678
Cost of product revenues					7,299						5,581					20,438					17,731
Cost of service revenues				8,784							8,490					28,203					25,463
Total cost of revenues				16,083							14,071					48,641					43,194
Gross profit				9,943							8,620					29,816					27,484
Operating expenses:
Selling, general and administrative				9,098							8,035					26,948					23,698
Research and development				1,946							1,979					5,554					5,287
				18							80					84					248
Amortization of intangible assets
Total operating expenses				11,062							10,094					32,586					29,233
Operating loss				(1,119		)					(1,474	)				(2,770	)				(1,749		)
Non-operating income (expense):
Other income (expense), net				(9		)					(1	)				(14	)				(7		)
Interest income, net				3							4					8					9
Loss from continuing operations before income taxes				(1,125		)					(1,471	)				(2,776	)				(1,747		)
Benefit for income taxes				1,373							4					1,407					11
Income (loss) from continuing operations				248							(1,467	)				(1,369	)				(1,736		)
Gain on sale of discontinued operation, net of tax				95							87					258					278
Net income (loss)			$	343					$		(1,380	)			$	(1,111	)			$	(1,458		)
Income (loss) per share from continuing operations –				0.01						(0.05		)				(0.04	)					(0.05	)
basic and diluted			$						$						$					$
Gain per share from sale of discontinued operation –				0.00						0.01						0.01						0.01
basic and diluted			$						$						$					$
Net income (loss) per share - basic and diluted			$		0.01				$	(0.04		)			$	(0.03	)			$		(0.04	)
Shares used in basic per share calculations				32,877							32,205					32,670					32,125
Shares used in diluted per share calculations				34,258							32,205					32,670					32,125

ITERIS, INC. UNAUDITED SEGMENT REPORTING DETAILS (in thousands)
			Roadway Sensors				Transportation Systems					Ag & Weather Analytics					Iteris, Inc.
Three Months Ended December 31, 2017
Product revenues			$	11,008			$	987				$	-				$	11,995
Service revenues				34				12,584					1,413					14,031
Total revenues			$	11,042			$	13,571				$	1,413				$	26,026
Segment operating income (loss)			$	2,048			$		2,207			$	(1,815	)			$	2,440
Corporate and other income (expense), net																		(3,541	)
Amortization of intangible assets																		(18	)
Operating loss																	$	(1,119	)
			Roadway Sensors				Transportation Systems					Ag & Weather Analytics					Iteris, Inc.
Three Months Ended December 31, 2016
Product revenues			$	9,377			$	669				$	-				$	10,046
Service revenues				20				11,244					1,381					12,645
Total revenues			$	9,397			$	11,913				$	1,381				$	22,691
Segment operating income (loss)			$	1,940			$		1,920			$	(1,892	)			$	1,968
Corporate and other income (expense), net																		(3,362	)
Amortization of intangible assets																		(80	)
Operating loss																	$	(1,474	)
			Roadway Sensors				Transportation Systems					Ag & Weather Analytics					Iteris, Inc.
Nine Months Ended December 31, 2017
Product revenues			$	33,438			$	2,182				$	-				$	35,620
Service revenues				145				39,210					3,482					42,837
Total revenues			$	33,583			$	41,392				$	3,482				$	78,457
Segment operating income (loss)			$	7,384			$		6,472			$	(5,882	)			$	7,974
Corporate and other income (expense), net																		(10,660	)
Amortization of intangible assets																		(84	)
Operating loss																	$	(2,770	)
			Roadway Sensors				Transportation Systems					Ag & Weather Analytics					Iteris, Inc.
Nine Months Ended December 31, 2016
Product revenues			$	30,815			$	1,324				$	-				$	32,139
Service revenues				82				35,314					3,143					38,539
Total revenues			$	30,897			$	36,638				$	3,143				$	70,678
Segment operating income (loss)			$	6,897			$		6,813			$	(5,582	)			$	8,128
Corporate and other income (expense), net																		(9,629	)
Amortization of intangible assets																		(248	)
Operating loss																	$	(1,749	)

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