Executive Summary

Iteris delivered record Q2 FY2024 revenue of $43.6M (+11% YoY) and returned to profitability (GAAP net income $0.6M; $0.01 diluted EPS), with gross margin expanding to 37.3% (+2,060 bps YoY) as supply chain headwinds normalized .
Adjusted EBITDA improved to $2.9M (6.7% margin) from a $(5.2)M loss a year ago, reflecting better product costs and operating efficiency .
Bookings remained strong at $43.8M (+4% YoY) with record ending backlog of $124.0M (+11% YoY), and recurring revenue represented ~25% of revenue in the quarter .
Management raised the low end of FY24 revenue guidance to $171–$175M (from $168–$175M) and guided Q3 revenue to $41–$43M and Q3 adjusted EBITDA margin to 4–6%, citing typical seasonality and temporary federal budget uncertainty .

What Went Well and What Went Wrong

What Went Well

Record Q2 revenue ($43.6M, +11% YoY) and record backlog ($124.0M, +11% YoY) driven by strong demand for ClearMobility and sensors; management emphasized supply chain normalization as a key driver of gross margin recovery .
Gross margin expanded to 37.3% (+2,060 bps YoY), with product gross margin at 44.1% in Q2; adjusted EBITDA improved by $8.1M YoY to $2.9M .
Management highlighted platform momentum and secular tailwinds (cloud, AI, connected/autonomous vehicles), reiterating Vision 2027 targets (14% 5-year organic revenue CAGR; adjusted EBITDA margin 16–19%) .

What Went Wrong

Sequential margin pressure vs Q1: gross margin 37.3% in Q2 vs 38.6% in Q1; adjusted EBITDA $2.9M in Q2 vs $3.7M in Q1, reflecting product mix and seasonality .
Operating expenses rose 17% YoY (to $15.8M), with G&A elevated partly by litigation costs tied to a contract dispute; services gross margin saw pressure from higher subcontractor mix .
Management flagged federal budget uncertainty causing some delays (“shift to the right”) in task order execution, contributing to cautious Q3 outlook .

Financial Results

Headline P&L (vs prior year and prior quarter)

Metric	Q2 2023	Q1 2024	Q2 2024
Revenue ($M)	$39.259	$43.545	$43.563
Gross Profit ($M)	$6.551	$16.803	$16.264
Gross Margin (%)	16.7%	38.6%	37.3%
Operating Income ($M)	$(6.925)	$1.953	$0.468
Net Income ($M)	$(7.397)	$2.125	$0.551
Diluted EPS ($)	$(0.17)	$0.05	$0.01
Adjusted EBITDA ($M)	$(5.159)	$3.678	$2.915
Adjusted EBITDA Margin (%)	(13.1)%	8.4%	6.7%

Notes: Q2 FY2024 gross margin statement from press release; Q2 FY2023 gross margin derived from reported gross profit and revenue .

Segment/Revenue Mix

Metric	Q2 2023	Q1 2024	Q2 2024	Q3 2024
Product Revenues ($M)	$20.788	$23.658	$23.398	$23.133
Service Revenues ($M)	$18.471	$19.887	$20.165	$18.996
Product Gross Margin (%)	—	—	44.1%	43.9%
Service Gross Margin (%)	—	—	29.5%	28.4%

KPIs

KPI	Q1 2024	Q2 2024	Q3 2024
Net Bookings ($M)	$53.1	$43.8	$31.4
Ending Backlog ($M)	$123.8	$124.0	$113.3
Recurring Revenue (% of revenue)	—	~25%	—
Cash & Equivalents ($M)	$19.994	$20.161	$21.185

Estimates comparison: S&P Global consensus estimates for Q2 FY2024 were unavailable via our connector; we therefore do not present vs-consensus comparisons for revenue/EPS.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($M)	Q3 FY2024	—	$41–$43	New quarterly guide
Adjusted EBITDA Margin (%)	Q3 FY2024	—	4%–6%	New quarterly guide
Total Revenue ($M)	FY2024	$168–$175	$171–$175	Raised low end
Adjusted EBITDA Margin (%)	FY2024	7%–9%	7%–9%	Maintained
Net Cash Flow ($M)	FY2024	$12–$16	$12–$16	Maintained

Subsequent update (post-Q2): On Feb 8, 2024 (Q3 release), Iteris tightened FY2024 revenue to $171–$173M and adjusted net cash flow to $8–$12M; adjusted EBITDA margin maintained at 7%–9% .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2024)	Previous Mentions (Q3 2024)	Current Period (Q2 2024)	Trend
Supply chain and margins	Supply chain PPV largely flushed; GM up 840 bps YoY; sensor costs normalized	GM +780 bps YoY in Q3; product GM 43.9%	GM 37.3% (+2,060 bps YoY); product GM 44.1%, services GM 29.5%	Sustained margin recovery; product mix causes normal fluctuations
Federal budget/macro	Maintained FY24 outlook; noted seasonality and pull-forward on services	Bookings lumpiness; deferred large deals; tightened FY24 revenue	Guided Q3 conservatively; temporary federal budget uncertainty delaying some task orders	Near-term timing headwinds; long-term demand intact
AI/connected vehicles	Roadmap includes connected vehicle data apps and AI at edge/cloud	Launched Vantage CV; expanding connected vehicle apps	Emphasized AI at edge/cloud; CV2X opportunities; safety focus	Steady expansion of AI/CV capabilities
Labor capacity (services)	Initiatives improved capacity; targeting mid-teens growth by year-end	Service GM +60 bps; capacity improving; still tight for traffic engineers	Continued tight labor in specialized disciplines; progress ongoing	Gradual improvement; supports services GM over time
Recurring revenue/attach	Strong DaaS/SaaS bookings; higher attach to sensors	Software pipeline/ARR momentum; attach 20–30% range	Recurring ~25% of revenue; recurring bookings growth high-20s/low-30s (qtr)	Rising ARR mix toward Vision 2027

Management Commentary

“We are pleased to report record revenue of $43.6 million and record total ending backlog of $124.0 million for our fiscal 2024 second quarter.” — Joe Bergera, CEO .
“The gross margin improvement further demonstrates that our supply chain issues are behind us.” — Joe Bergera .
“We continue to anticipate a five-year organic revenue CAGR of approximately 14% and… adjusted EBITDA margin expansion to approximately 16% to 19% consistent with our Vision 2027 targets.” — Joe Bergera .
“The slight downtick [in product GM sequentially] was basically product mix-driven… we still may see some fluctuation going forward.” — Kerry Shiba, CFO .
On market backdrop: “Historic federal funding… as well as positive technology trends that include the adoption of cloud infrastructure, artificial intelligence, and connected and autonomous vehicles” underpin long-term demand — Joe Bergera .

Q&A Highlights

Federal budget uncertainty: Management saw task orders delayed around potential shutdown risk, applying conservatism to near-term outlook while reiterating long-term strength given IIJA funding flows and state/local budgets .
Gross margin trajectory: Product GM fluctuations tied to mix (third-party pass-through hardware, early volumes of new Apex sensors), with sequential volatility expected but baseline intact .
Labor capacity: Tight market for traffic engineers; internal initiatives improving capacity with a goal of reaching roughly two‑thirds of target by early calendar 2024; continued progress expected over the next few quarters .
Recurring metrics: Recurring revenue roughly 25% of revenue; recurring bookings growth high‑20s/low‑30s in Q2, following exceptionally high growth in Q1 .
M&A posture: Liquidity improving; pipeline “fairly rich,” but valuations for targets remain a consideration; preference for accretive tuck-ins .

Estimates Context

Wall Street consensus estimates (S&P Global) for ITI’s Q2 FY2024 EPS and revenue were unavailable via our data connector at this time; as a result, we cannot present vs-consensus comparisons for this quarter. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q2 2024, but no mapping was available for ITI in the connector. Therefore, please note that estimates-based comparisons are not included for Q2 FY2024 [GetEstimates error].

Key Takeaways for Investors

Iteris’ Q2 FY2024 marked a clean YoY inflection: revenue +11%, gross margin to 37.3%, and adjusted EBITDA to $2.9M, reflecting supply chain normalization and solid product execution .
Sequential profitability moderated vs Q1 on mix/seasonality (GM 37.3% vs 38.6%; adj. EBITDA $2.9M vs $3.7M), consistent with management’s guidance framework .
Strong demand indicators persist: Q2 bookings $43.8M, record backlog $124.0M, and ~25% of revenue from recurring streams, supporting multi-quarter visibility .
FY2024 outlook was raised at the low end ($171–$175M revenue), with Q3 guided to $41–$43M revenue and 4–6% adjusted EBITDA margin to reflect normal seasonality and temporary federal budget dynamics .
Strategic narrative centers on ClearMobility’s AI and connected-vehicle roadmap and higher ARR attach to sensors; management reiterated Vision 2027 (14% 5‑yr organic CAGR; adj. EBITDA margin 16–19%) .
Watch items: litigation-related G&A costs, subcontractor mix in services, and federal budget timing may pressure near-term margins/booking cadence, though long-term funding and pipeline remain robust .

Additional Relevant Press Releases (Q2 FY2024)

No additional standalone press releases were found in the period beyond the 8‑K furnished press release for Q2 FY2024, based on our search window (Oct–Dec 2023) [ListDocuments result].

ITERIS, INC. (ITI)·Q2 2024 Earnings Summary