Iteris, Inc. Reports Second Quarter Revenue of $14.9 Million

-- Operating Income of $1.1 Million Represents a Significant Increase Sequentially Compared to the First Fiscal Quarter of 2010 --

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 fiscal second quarter ended September 30, 2009.

For the quarter ended September 30, 2009, Iteris, Inc. (the ?Company?) reported net sales and contract revenues of $14.9 million which represents a sequential increase of 1.6 percent compared to $14.6 million reported in the preceding quarter. The sequential increase was primarily a result of a 20.5 percent increase in Roadway Sensors net sales to $7.1 million and a 30.5 percent increase in Vehicle Sensors net sales to $1.4 million. This sequential growth was partially offset by Transportation Systems contract revenues which decreased 16.9 percent to $6.4 million compared to the preceding quarter. The current quarter net sales and contract revenues of $14.9 million represents a 22.0 percent decrease when compared to net sales and contract revenues of $19.1 million reported in the same quarter of the prior fiscal year.

Gross margins increased to 44.2 percent in the current fiscal quarter compared sequentially to 38.1 percent reported in the preceding quarter and compared to 41.3 percent reported in the same quarter of the prior fiscal year. The sequential increase in gross margins was primarily a result of a higher mix of Roadway and Vehicle Sensors net sales as a percent of total net sales and contract revenues. Roadway and Vehicle Sensors net sales historically produce higher margins than Transportation Systems contract revenues. Additionally, the sequential increase and year-over-year improvement in gross margins benefited from current period Transportation Systems gross margins of 39.4 percent compared to 32.4 percent in the preceding quarter and 33.6 percent in the same quarter of the prior fiscal year primarily due to a lower amount of sub-consultant revenue and a higher concentration of internal direct labor.

Operating expenses were $5.5 million for the quarter, representing a sequential increase of 3.6 percent from $5.3 million in the preceding quarter and a decrease of 6.2 percent from $5.8 million reported in the same quarter of the prior fiscal year. The sequential increase in operating expenses was a result of increased sales and marketing activities while the decrease in operating expenses year-over-year was primarily related to reductions in certain general and administrative expenses as well as reductions in research and development expenses due to a higher degree of efficiency and a further refinement of our engineering skill set.

The Company reported operating income of $1.1 million for the quarter ended September 30, 2009 compared sequentially to operating income of $321,000 in the preceding quarter and compared to operating income of $2.1 million in the same quarter of the prior fiscal year. Reported net income was $543,000 or $0.02 per fully diluted share for the quarter ended September 30, 2009, compared sequentially to net income of $144,000 or $0.00 per fully diluted share and compared to net income of $1.1 million or $0.03 per fully diluted share in the same quarter of the prior fiscal year.

For the six months ended September 30, 2009, net sales and contract revenues were $29.5 million, representing a decrease of 19.2 percent compared to net sales and contract revenues of $36.5 million in the same period of the prior fiscal year. Operating income for the six months ended September 30, 2009 was $1.4 million compared to $3.4 million in the same period of the prior fiscal year. The Company reported net income of $687,000, or $0.02 per share, for the six months ended September 30, 2009 compared to net income of $1.7 million, or $0.05 per share, for the same period in the prior fiscal year.

Abbas Mohaddes, the Company's president and chief executive officer, commented, ?I am encouraged by the sequential increase of sales in our sensor products and the increase of our overall profitability. Operational excellence, market acceptance of new products as well as margin improvement contributed to the increase in profitability.?

?Iteris is a recognized leader in traffic management and we plan to expand our leadership position through aggressive innovation and an ongoing commitment to research and development and sales and marketing,? Mr. Mohaddes continued. ?I believe our financial strength and expanded cash position will allow us to execute our strategic plan and give us the ability to invest in R&D and other initiatives that we believe are necessary to position us for accelerated growth and market share expansion.?

As of September 30, 2009, the Company had no borrowings against its line of credit, and approximately $9.2 million in cash on hand.

Operational and Other Highlights

• Began shipping the VantageView central software. VantageView is an integrated software platform that enables a traffic manager to manage and ?see? Iteris? Vantage video detection assets remotely over a network connection. Web-based VantageView provides the user with a street map display of the road network, enabling the user to simply and intuitively click on locations and the devices the user needs to view. VantageView provides the capability to optimize the performance of a network of Iteris? video detection systems, which we believe will reduce our customer?s operational costs, and provides the ability to see in real-time what is happening at an intersection.

• Net inventory levels declined by $1.5 million from the June 2009 quarter to $3.7 million at September 30, 2009, the lowest level since June 2006.

• Delivered several Forward Collision Warning samples to North American Heavy Truck market customers and began development of next generation Lane Departure Warning hardware.

• Approximately $8.4 million in new Transportation Systems consulting contracts were signed during the quarter ended September 30, 2009. Transportation Systems consulting backlog at the end of the second fiscal quarter was $30.9 million, slightly up from $29.5 million reported at the end of the prior fiscal quarter.

ITERIS, INC.

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