Iteris Reports Record Revenue and Backlog

“We are pleased to report record revenue and backlog for the fiscal fourth quarter and year due to continued growth in our transportation segments, as well as the beginning of revenue contribution from our digital agriculture platform, ClearAg,” said Joe Bergera, President and CEO. “Our solid progress across all lines of business in FY16 provides a strong foundation for continued growth in the new fiscal year.”

“While we only recently entered the digital agriculture market, we are confident about the opportunity in front of Iteris. ClearAg is a robust platform with the demonstrated capability to address not only the critical challenges facing large agribusinesses, but also individual growers worldwide. We look forward to reporting on our continued progress in fiscal 2017.”

Total revenues in the fourth quarter of fiscal 2016 increased 10% to a record $19.8 million, compared to $18.0 million in the same quarter a year ago. This growth was primarily driven by a 20% increase in Transportation Systems and a 19% increase in Performance Analytics revenues, which includes ClearAg, while quarterly Roadway Sensors revenue was comparable with the year ago quarter.

Operating expenses in the fourth quarter were $9.3 million, compared to $8.3 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 employee headcount was increased to support the sales and marketing of the Company’s ClearAg solutions.

Operating loss in the fourth quarter was $1.3 million, compared to an operating loss of approximately $1.1 million in the same quarter a year ago. Net loss in the fourth quarter was $1.3 million or ($0.04) per share, compared to a net loss of $766,000 or ($0.03) per share in the year-ago quarter.

Total revenues in fiscal 2016 increased 8% to a record $77.7 million, compared to $72.3 million in fiscal 2015. The increase was primarily driven by an 11% increase year over year in Roadway Sensors revenues and a 7% increase in Transportation Systems revenue. Performance Analytics revenues decreased approximately 8% year over year to $5.2 million.

Operating expenses in fiscal 2016 were $34.1 million, compared to $30.3 million in fiscal 2015. The increase was primarily due to increases in selling, general and administrative expenses, including increased headcount, particularly in the Performance Analytics segment where employee headcount was increased to support the sales and marketing of the Company’s ClearAg solutions, and additional headcount was added to its corporate headquarters to strengthen its back office infrastructure.

Operating loss in fiscal 2016 was $3.5 million, compared to operating loss of $2.1 million in fiscal 2015. Net loss in fiscal 2016 was approximately $12.3 million, or ($0.39) per share from continuing operations, primarily driven by an approximate $10.1 million valuation allowance recorded against the Company’s deferred tax assets, compared to net loss of $1.1 million, or ($0.04) per share from continuing operations, in fiscal 2015.

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 twelve months ended March 31, 2016, 2015 and 2014.

Non-GAAP operating expenses in the fourth quarter increased to $9.3 million, compared to $7.4 million in the same quarter a year ago. Non-GAAP operating loss in the fourth quarter was $1.3 million, compared to an operating loss of $140,000 in the same quarter a year ago. Non-GAAP net loss in the fourth quarter was $1.3 million, or ($0.04) per share, compared to a net loss of $198,000, or ($0.01) per share, in the same quarter a year ago.

Non-GAAP operating expenses in fiscal 2016 were $33.8 million, compared to $27.4 million in fiscal 2015. The increase was primarily attributable to planned increases in sales and marketing expenses in the Performance Analytics segment, including planned increases in headcount and accelerated research and development expenses.

Non-GAAP operating loss in 2016 was $3.1 million, compared to operating income of $781,000 in fiscal 2015. Non-GAAP net loss was $2.0 million, or ($0.06) per share from continuing operations, compared to net income of $675,000, or $0.02 per share from continuing operations, in fiscal 2015.

Iteris will conduct a conference call today to discuss its fiscal fourth quarter and full year 2016 results.

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 and program 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.

Costs and estimated earnings in excess of billings on uncompleted contracts

Billings in excess of costs and estimated earnings on uncompleted contracts

Change in fair value of contingent acquisition consideration

Loss per share from continuing operations – basic and diluted

Gain per share from sale of discontinued operation – basic and diluted

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In addition to results presented in accordance with GAAP, the Company has included the following non-GAAP financial measures in this release: non-GAAP operating expenses, non-GAAP operating (loss) income, non-GAAP net income and non-GAAP basic and diluted earnings 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 services; (d) severance and transition related costs paid to the Company’s former Chief Executive Officer; (e) executive management recruiting costs; (f) the estimated income tax effect of the foregoing non-GAAP adjustments; and (g) the recording of a valuation allowance on the company’s deferred tax assets.

Iteris believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Iteris’ management believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in its industry. The Company’s management believes that the exclusion of the items described above provides insight into core operating results, the ability to generate cash and underlying business trends affecting performance. Iteris has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate ongoing core operations.

Management uses certain non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies’ financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

Details of the items excluded from GAAP financial results in calculating non-GAAP financial measures and explanatory footnotes are as follows:

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