Iteris, Inc. Reports Second Quarter Revenue Growth of 12% and Record Revenues of $19.1 Million

-- The Company achieved $2.1M operating income and record Transportation Systems backlog of $35.7M--

SANTA ANA, Calif. - Iteris, Inc., a leader in the traffic management market that focuses on the application and development of advanced technologies, today reported financial results for its second fiscal quarter ended September 30, 2008.

For the quarter ended September 30, 2008, Iteris, Inc. (the "Company") reported net sales and contract revenues of $19.1 million, representing a 12.3 percent increase compared to net sales and contract revenues of $17.0 million reported in the same quarter of the prior fiscal year. The increase was primarily a result of a 29.2 percent increase in Transportation Systems revenues to $8.0 million. Roadway Sensors net sales for the quarter ended September 30, 2008 were $7.6 million while Vehicle Sensors net sales were $3.5 million.

Gross margins declined slightly to 41.3 percent in the second quarter compared to 42.8 percent in the prior year quarter mainly as a result of product mix. The Company expects the current mix to remain relatively the same for the remainder of its fiscal year. Operating expenses during the current quarter were $5.8 million representing an increase of 17.1 percent from $5.0 million in the prior year quarter. Operating expenses increased as a percent of net sales and contract revenues to 30.5 percent in the quarter ended September 30, 2008 from 29.2 percent in the prior year quarter, while declining from 36.7 percent reported in the quarter ended June 30, 2008.

Abbas Mohaddes, the Company's president and chief executive officer, commented, "I am pleased to report strong revenue growth and solid profitability for our fiscal second quarter. I am particularly pleased with our Transportation Systems consulting segment, which reported outstanding growth when compared to the prior year quarter and currently has record backlog of $35.7 million. I believe this is a testament to our sales and marketing efforts and the need for our products and services despite the state of the overall economy."

The Company reported operating income of $2.1 million and net income of $1.1 million, or $0.03 per share, for the quarter ended September 30, 2008 compared to operating income of $2.3 million and net income of $2.2 million, or $0.06 per share, in the same quarter of the prior fiscal year. In the prior year quarter, net income was positively affected by an income tax benefit of approximately $214,000 generated through the release of valuation allowance against certain deferred tax assets. There was no such release of valuation allowance for the quarter ended September 30, 2008.

For the six months ended September 30, 2008, net sales and contract revenues were $36.5 million, representing an increase of 11.5 percent compared to net sales and contract revenues of $32.7 million in the same period of the prior fiscal year. Operating income for the six months ended September 30, 2008 was $3.4 million compared to $3.9 million in the same period of the prior fiscal year. The Company reported net income of $1.7 million, or $0.05 per share, for the six months ended September 30, 2008 compared to net income of $3.3 million, or $0.09 per share, for the same period in the prior fiscal year.

On October 16, 2008, the Company entered in a new $19.5 million credit facility with California Bank and Trust. The facility consists of a $12.0 million revolving line of credit, and a $7.5 million term loan, which should be available to the Company any time between now and May 2009 for the sole purpose of repaying the $7.8 million in outstanding convertible debentures. The Company currently has no borrowings on this new line of credit and had approximately $4.0 million of cash-on-hand as of September 30, 2008. Additionally, on September 30, 2008, there were approximately 34.0 million shares of common stock outstanding.

"Iteris completed the second fiscal quarter in the strongest financial position in company history," Mr. Mohaddes continued, "We have significantly strengthened our balance sheet and access to working capital, demonstrating the confidence our bank has in Iteris' markets, strategic plan, cash flow and the viability of our business. While the recent turbulence in the US and global economies may adversely affect our business in ways that we cannot currently anticipate or control, we believe that the need and demand for Iteris' products and services remains strong today. We plan to continue to diligently lay a solid foundation for future growth and profits."

Operational Highlights:

• Approximately $17.0 million in new Transportation Systems consulting contracts were signed during the quarter ended September 30, 2008. Transportation Systems consulting backlog at the end of the second fiscal quarter was at a record $35.7 million as of September 30, 2008, up from $28.5 million reported at the end of the prior fiscal quarter, and representing a year over year increase of 37%.

• On September 11, 2008, the Company announced it signed an agreement to begin distributing ENCOM's wireless traffic control and monitoring solutions to the California and Florida traffic management markets. ENCOM Wireless Data Solutions, Inc. manufactures a complete line of pioneering spread spectrum wireless products, such as wireless interconnect, wireless broadband networking and video solutions, along with wireless contact closure systems.

• On August 18, 2008, the Company announced that it was selected by the Los Angeles County Metropolitan Transportation Authority (LACMTA) for a 30 month, $8.0 million bus signal priority system implementation for three Metro Rapid transit corridors in Los Angeles County, California.

• On August 12, 2008, the Company announced the debut of EdgeConnect, its new remote communications module, at the Institute of Transportation Engineers (ITE) 2008 Annual Meeting and Exhibit, in Anaheim, California. EdgeConnect provides both local and remote management of data and video over Ethernet - enabling system operators to manage their Vantage® video detection systems more effectively by allowing the user to view real-time video. EdgeConnect's advanced MPEG4/H.264 video compression ability minimizes bandwidth usage, and is scalable to fit bandwidth availability.

• On August 4, 2008, the Company announced that Iteris was named the exclusive distributor of Delphi's Forward Collision Warning System for North American commercial vehicles. Iteris will utilize its highly successful commercial truck OEM and aftermarket sales channels and application engineering expertise to integrate Delphi's radar-based technology into its product portfolio for heavy truck customers. Iteris will also be authorized to sell Delphi's Side Alert blind spot warning system in North America.

• To date, 66 US heavy truck fleets have selected the Iteris LDW system, collectively representing an estimated 49,000 vehicles, while testing of the LDW systems continues with 85 heavy truck fleets that the Company estimates represent more than 157,000 vehicles.