Iteris Reports Record 3rd Quarter and Year-to-Date Revenues

- Transportation Segments Post Strong Quarter and Record Backlog, Leading Crop Protection Company Selects ClearAg -

SANTA ANA, Calif. — February 11, 2016 – Iteris, Inc., a leader in providing information solutions to the transportation and agriculture markets, reported financial results for its fiscal third quarter for year ending March 31, 2016.

Fiscal Q3 2016 Highlights

• Record high third fiscal quarter revenues of $19.0 million
• Transportation Systems gains significant momentum by expanding backlog $24 million, up approximately 62% from one year ago
• Roadway Sensors revenues up 21% YOY to $9.8 million
• Completed successful first phase of ClearAg v 2.0 alpha test with farms across 12 states and Canada
• Allied Provider coverage in fourteen countries with 65 million wholesale acres under management
• Leading crop protection company selects ClearAg for global deployment

Management Commentary

“We continue to see strong acceleration in our transportation segments, while building a position of global leadership in the agriculture analytics market,” said Joe Bergera, President and CEO. “Roadway Sensors continues to deliver exceptional year-to-date revenue growth. With the substantial new orders captured by our Transportation Systems business, we expect to see solid revenue growth through the first half of FY17.”

“We are thrilled that another leading crop protection company selected ClearAg, our ag analytics platform, as a key element of its strategy. With this new agreement, we are the ag analytics provider of choice to four of the world’s top ten crop protection companies. In addition, we continue to build strategic relationships with Allied Providers worldwide. These relationships now give us access to 65 million wholesale acres under management in 14 different countries.”

GAAP Fiscal Q3 2016 Financial Results

Total revenues in the third quarter of 2016 increased 8% to $19.0 million compared to $17.5 million in the same quarter a year ago. This was primarily driven by a 21% increase in Roadway Sensors revenues.

Gross margin in the third quarter decreased 120 basis points to 37.9% compared to 39.1% in the same quarter a year ago. The decrease in gross margin was primarily a result of sales mix within the Roadway Sensors segment, where we experienced an increase in the sales of OEM products, which generally yield lower gross margins than Roadway Sensors core products.

Operating expenses in the third quarter increased to $8.3 million compared to $7.5 million in the same quarter a year ago. The increase was primarily due to increases in selling, general and administrative expenses, including increased headcount, particularly in the Performance Analytics segment where we increased employee headcount to support the sales and marketing of our ClearAg solutions, and additional headcount in our corporate headquarters to strengthen our back office infrastructure. The higher operating expense was also attributable to (1) increased research and development costs, including increased headcount, (2) increased external development activities in support of ClearAg, and (3) increased time and resources spent pursuing intellectual property and establishing patents.

Operating loss in the third quarter was $1.1 million compared to an operating loss of approximately $593,000 in the same quarter a year ago. Net loss in the third quarter was $10.4 million or ($0.33) per share, compared to a net loss of $98,000 or ($0.00) per share in the year-ago quarter. The current period net loss was primarily driven by the recording of a non-cash $10.1 million valuation allowance on the Company’s deferred tax assets.

Total backlog at the end of the third quarter increased 55% to $62.0 million compared to $40.0 million in the year-ago quarter. Our Transportation Systems business was awarded two significant contracts that increased backlog by approximately $19.0, as well as other notable awards. Backlog was comprised of $51.7 million in Transportation Systems, $4.9 million in Performance Analytics, and $5.4 million in Roadway Sensors.

Non-GAAP Fiscal Q3 2016 Financial Results

In addition to results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company has included the following non-GAAP financial measures: non-GAAP operating expenses, non-GAAP operating loss, non-GAAP net loss and non-GAAP basic and diluted loss per share from continuing operations. These non-GAAP financial measures exclude the following items: (a) audit fee overruns; (b) quarterly review fee increases; (c) financial consulting service fees; (d) severance and transition related costs paid to the Company’s former Chief Executive Officer; (e) executive management recruiting costs; (f) the estimated tax effect of the foregoing non-GAAP adjustments; and (g) the recording of a valuation allowance on the Company’s deferred tax assets. A discussion of the Company’s use of these non-GAAP financial measures is set forth below in the financial statements portion of this release under the heading “Non-GAAP Financial Measures and Reconciliation,” which also includes a reconciliation of such non-GAAP financial measures to their most comparable GAAP financial measures for the three and nine months ended December 31, 2015 and 2014.

Non-GAAP operating expenses in the third quarter increased to $8.3 million compared to $7.1 million in the same quarter a year ago. The increase was primarily due to increases in selling, general and administrative expenses, including increased headcount, particularly in the Performance Analytics segment where we increased employee headcount to support the sales and marketing of our ClearAg solutions, and additional headcount in our corporate headquarters to strengthen our back office infrastructure. The higher operating expense was also attributable to (1) increased research and development costs, including increased headcount, (2) increased external development activities in support of ClearAg, and (3) increased time and resources spent pursuing intellectual property and establishing patents.

Non-GAAP operating loss in the third quarter was $1.1 million compared to operating loss of $289,000 in the same quarter a year ago. Non-GAAP net loss in the third quarter was $378,000 or ($0.01) per share, compared to net income of $90,000 or $0.00 per share in the same quarter a year ago.

Conference Call

Iteris will conduct a conference call today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its fiscal third quarter 2016 results.

Iteris’ CEO Joe Bergera and CFO Andy Schmidt will host the call, followed by a question and answer period. Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

Date: Thursday, February 11, 2016

Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)

Toll-free dial-in number: 1-888-430-8694

International dial-in number: 1-719-457-2083

Conference ID: 4567492

To listen to the live webcast or 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 today through February 25, 2016.

Toll-free replay number: 1-877-870-5176

International replay number: 1-858-384-5517

Replay ID: 4567492

About Iteris, Inc.
Iteris, Inc. is a leader in providing information solutions to the transportation and agriculture markets. We are focused on providing this information to practitioners in these markets to improve their effectiveness and efficiency. By combining our expertise, unique IP and information infrastructure in a suite of products and services,Iterisoffers a broad range of solutions to both domestic and international customers. The firm is headquartered inSanta Ana, California, with offices throughout the U.S. and in select locations internationally. For more information, please visit www.iteris.com or call 1-888-329-4483. Also visit us on Facebook, Twitter, LinkedIn, and YouTube.

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, and our future performance, 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 impact of the FAST Act on the intelligent transportation systems industry and fundable projects for Iteris, the timing and amount of government funds allocated to overall transportation infrastructure projects and the transportation industry; 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 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).