Executive Summary

Iteris delivered record Q1 FY2025 revenue of $45.8M (+5.1% YoY) with gross margin of 37.9% (-70 bps YoY) and diluted EPS of $0.01 (vs $0.05 YoY), while maintaining FY2025 guidance; bookings and backlog remained strong, positioning H2 for acceleration .
Q2 FY2025 outlook calls for revenue of $44–48M and adjusted EBITDA margin of 6–7%; management reiterated full-year revenue guidance of $188–194M and adjusted EBITDA margin of 8–10% .
Record trailing six-month net bookings of $102.1M and record backlog of $126.8M underpin visibility; management expects high-teens H2 organic revenue growth driven by new product launches (Vantage PedSafe with Sumitomo, Apex Rackmount) .
Cost pressure weighed on profitability: operating expenses rose 15% (sales & marketing and R&D), products gross margin faced mix/inventory headwinds, and GAAP EPS declined YoY; however, services margin improved on better labor mix and ARR growth .

What Went Well and What Went Wrong

What Went Well

Record revenue and durable demand: “Iteris reported record total revenue of $45.8 million… given the unusual prior year comparison” with strong adoption of the ClearMobility platform and record trailing six-month net bookings ($102.1M) and backlog ($126.8M) .
Product pipeline as catalyst: “We believe our fiscal 2025 release plan will increase our total and serviceable addressable markets… a highly advanced radar-based pedestrian detection system… expected to transform pedestrian detection” and double detection TAM from ~$500M to ~$1B .
Services strength and operational progress: Services revenue rose 8% YoY to a record $21.4M; services gross margin improved 220 bps on better internal labor capacity and mix .

What Went Wrong

Profit dilution versus prior year: GAAP net income fell to $0.4M ($0.01 EPS) from $2.1M ($0.05 EPS) as operating expenses rose 15% (notably sales & marketing and R&D) and product gross margin declined due to mix and inventory adjustments .
Bookings lumpiness and tough comp: Q1 bookings decreased 8% YoY versus a record-boosted prior-year quarter that included a $15M 4-year SaaS order; management continues to flag timing variability in large orders .
Legal cost overhang: “Other legal expenses” tied to a breach-of-contract dispute were $0.3M in Q1 (and $0.4M in the prior-year quarter) with trial expected around September 2024, implying near-term expense elevation (company views loss probability as remote) .

Financial Results

Summary metrics (oldest → newest)

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Total Revenue ($M)	$42.129	$42.750	$45.777
Gross Margin (%)	36.9%	37.4%	37.9%
GAAP Diluted EPS ($)	$0.01	$0.00	$0.01
Adjusted EBITDA ($M)	$3.107	$2.848	$2.900
Adjusted EBITDA Margin (%)	7.4%	6.7%	6.3%
Cash & Equivalents ($M)	$21.2	$25.9	$21.4

Notes: Q1 FY2025 GAAP diluted EPS $0.01 and gross margin 37.9% per press release; adjusted EBITDA reflects non-GAAP reconciliation .

Segment/Line-of-business revenue (oldest → newest)

Metric ($M)	Q3 FY2024	Q4 FY2024	Q1 FY2025
Product Revenues	$23.133	$21.592	$24.396
Service Revenues	$18.996	$21.158	$21.381
Total Revenues	$42.129	$42.750	$45.777

KPIs

KPI	Q3 FY2024	Q4 FY2024	Q1 FY2025
Net New Bookings ($M)	$31.4	$53.3	$48.8
Trailing 6-Month Net Bookings ($M)	—	—	$102.1
Ending Backlog ($M)	$113.3	$123.8	$126.8

Discrepancy note: Press release bullet references backlog of $126.8M “as of March 31, 2024” while the call states “ended the June 30, 2024 period with… $126.8M,” suggesting a likely press release dating inconsistency; management commentary supports the June 30 figure .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	FY2025	$188–$194M (6/13/24)	$188–$194M (8/8/24)	Maintained
Adjusted EBITDA Margin	FY2025	8.0–10.0% (6/13/24)	8.0–10.0% (8/8/24)	Maintained
Total Revenue	Q2 FY2025	N/A	$44–$48M	New
Adjusted EBITDA Margin	Q2 FY2025	N/A	6.0–7.0%	New

Management reiterated expectation of high-teens organic revenue growth in H2 FY2025 tied to new product releases (Apex Rackmount and Sumitomo-based PedSafe) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 FY2025)	Trend
AI/Technology initiatives	Emphasis on ClearMobility platform, AI models, and data partnerships (Arity); pipeline >$650M; ARR attach rising .	Reiterated multilayer AI strategy (edge and cloud); new intersection safety and work zone AI models; continued AI roadmap with measured disclosures .	Positive, expanding use-cases
Product launches	Announced roadmap: Apex new form factor, connected edge, CV apps, Sumitomo radar; shipping in FY25 Q3 .	PedSafe launched (orders, pilots), Apex Rackmount shipping Oct; expected to double detection TAM to ~$1B .	Near-term catalysts (H2 ramp)
Supply chain	Supply chain headwinds largely behind; some inventory/obsolescence charges in FY24 Q4 .	Company supply chain robust; some third-party dependencies (cabinets/controllers) may delay project timing .	Improving internally; external timing risk persists
Labor capacity	Talent acquisition improved services margins and ARR attach; continued hiring plans .	Internal labor capacity improving; still mid-level engineering tightness; international hiring ramp at ~60–80% of goal .	Improving; continued focus
Bookings & backlog	Record Q4 bookings, record FY24 bookings/backlog; note lumpiness .	Q1 bookings down 8% YoY vs tough comp; trailing 6-mo bookings and backlog at records; expect lumpiness .	Strong but variable
Budgets/macro	Historic federal funding tailwind; above-industry growth aspiration .	No notable budget issues in key states; occasional projects shift right; federal funds can backfill gaps .	Supportive
Litigation	Elevated legal expenses; trial targeted for Sept 2024 .	Q1 “other legal” $0.3M; trial still expected around Sept; costs likely near-term elevated .	Cost overhang near-term
International	Cebu ITS master plan (Philippines) in Q3; growing inbound interest .	Cebu on schedule; international consulting demand highlighted .	Gradual expansion

Management Commentary

“We are pleased to report another quarter of solid organic revenue growth… we continued to meet the major milestones for our planned new product launches… which we believe will accelerate revenue growth in our fiscal 2025 second half.” – CEO Joe Bergera .
“We believe our fiscal 2025 release plan will increase our total and serviceable addressable markets… [and]… transform pedestrian detection in North America.” – CEO Joe Bergera .
“Services gross margin improved 220 basis points, reflecting the improvement in labor mix.” – CFO Kerry Shiba .
“We are not experiencing any… global supply chain constraints… [but] third‑party product delays can… delay projects.” – CEO Joe Bergera .
“We continue to expect fiscal 2025 full year total revenue to be in the range of $188 million to $194 million… and adjusted EBITDA margin… 8% to 10%.” – CEO Joe Bergera .

Q&A Highlights

H2 revenue cadence: Management implied high-teens organic growth in H2, driven by shipping of Apex Rackmount (Oct) and PedSafe (Q3), with normal seasonality making Q4 stronger than Q3 .
Gross margin trajectory: Expected “small ticks upwards” through the year; OpEx to ease from Q1 spike (sales/marketing), R&D to run higher YoY as planned .
New products: PedSafe launched (orders, demos, pilots) with strong interest; Apex Rackmount expands serviceable market where rack form factor is standard .
Supply chain and timing: Company’s supply chain is solid; timing risk from third-party components (cabinets, controllers) can delay deployments .
ARR and NDR: Targeting 110% software NDR in FY25; reiterated anything >105% as “very good”; Q1 specific NDR not disclosed on-call .
Large contracts: OCTA ~$10M project on schedule; ~$2M SaaS recognized ratably over 3 years; professional services revenue expected to be steady over the term .
SG&A outlook: Management suggested SG&A dollars could be down sequentially in Q2 .

Estimates Context

S&P Global consensus estimates for ITI could not be retrieved via our system due to a missing CIQ mapping for this ticker, so we could not validate beats/misses versus Wall Street consensus at this time. We searched for Q1 FY2025 and Q2 FY2025 consensus EPS and revenue but did not obtain values from S&P Global through the tool and therefore do not present estimate comparisons here [SpgiEstimatesError].
Implications: With FY2025 guidance reiterated and Q2 outlook framed by pre-launch costs, models may need to reflect a back‑half revenue acceleration and modest gross margin expansion in H2 from product mix and operating leverage, aligned with management commentary .

Key Takeaways for Investors

Backlog and bookings support visibility: Record trailing six‑month bookings ($102.1M) and a record backlog ($126.8M) underpin H2 growth and FY guidance confidence .
H2 product catalysts: PedSafe and Apex Rackmount shipping timelines suggest product-led revenue acceleration in Q3/Q4 and incremental gross margin improvement from mix/scale .
Profitability mix shift: Services margin improvement from internal labor capacity and ARR growth is offsetting product mix/inventory headwinds; adjusted EBITDA margins should progress after Q2 pre‑launch spend .
Operating expense discipline: Sales & marketing and R&D spiked to support large pursuits and launches; management expects SG&A to ease sequentially in Q2 .
Timing risks remain: Bookings are lumpy and third‑party dependencies (cabinets/controllers) can delay deployments, impacting quarterly cadence without changing demand .
Legal expense overhang: A contract litigation trial expected around September 2024 implies near‑term elevated “other legal” costs, though the company views loss probability as remote .
Narrative for the stock: Near‑term inflection hinges on execution of H2 launches and ARR attach; reiteration of FY guide and visibility from backlog are supportive, while quarterly timing and legal costs are the principal swing factors .

Supporting Detail: GAAP vs Non-GAAP and Adjustments

Q1 FY2025 adjusted EBITDA of $2.9M (6.3% margin) excludes stock-based comp, amortization/depreciation, executive severance/transition costs, other legal expenses, and related tax effects; adjusted net income was $2.8M ($0.06 per diluted share) .
Management notes product gross margin pressure (mix and inventory adjustments) and services gross margin uplift (labor mix), aligning with YoY gross margin −70 bps to 37.9% .

All data and statements are sourced from the Q1 FY2025 8-K earnings release and transcript, and prior quarter materials as cited above.

ITERIS, INC. (ITI)·Q1 2025 Earnings Summary