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ITERIS, INC. (ITI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue was $42.8M (+1% YoY), gross margin expanded to 37.4% (+558 bps YoY), and adjusted EBITDA doubled to $2.8M (6.7% margin), reflecting sustained benefits from clearing supply chain constraints and improved mix .
  • Record net new bookings of $53.3M (+20% YoY) and ending backlog of $123.8M (+8% YoY) position FY2025 for continued growth; management highlighted a 69% win rate and robust pipeline .
  • FY2025 guidance: revenue $188–$194M (midpoint +11% YoY) and adjusted EBITDA margin 8–10% (midpoint +150 bps); Q1 FY2025 revenue $43.5–$45.5M and adjusted EBITDA margin 5.5–6.5% due to timing of product launches and near‑term R&D/sales investments .
  • Strategic catalysts: new AI‑based detection form factor, connected‑vehicle applications, Sumitomo radar pedestrian detection (doubling detection TAM to ~$1.0B), and evaluation of share repurchases given perceived undervaluation versus private comps .
  • Watch points: elevated litigation cost ($1.0M in Q4; trial pushed to Sept‑2024), inventory/obsolescence charges (~$0.5M) depressed Q4 product GM by ~220 bps; bookings remain “lumpy” given large deal timing .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 37.4% in Q4 (+558 bps YoY) and 37.6% for FY2024 (+1,063 bps YoY) as negative supply chain pricing variances faded and mix improved .
  • Record Q4 net bookings of $53.3M (+20% YoY) and backlog of $123.8M (+8% YoY); ARR attachment improving and software NDR rose to 105% with expectation to reach ~110% in FY2025 .
  • Strong competitive position with 69% win rate and marquee deals (e.g., OCTA near‑$10M signal timing, Maricopa County, Cedar Park, Coachella Valley), plus AI/connected‑vehicle roadmap and Sumitomo radar partnership to expand TAM .

What Went Wrong

  • Elevated litigation expenses ($1.0M in Q4; $2.8M FY) and inventory/obsolescence charges ($0.5M) surprised management, reducing product GM by ~220 bps and EBITDA margin by ~120 bps in Q4 .
  • Products revenue declined 14% YoY in Q4 to $21.6M due to an unusually high prior‑year quarter and mix effects; customer and agency staffing constraints created bookings timing volatility .
  • Near‑term margin headwinds expected in Q1 FY2025 (adj. EBITDA margin 5.5–6.5%) from pre‑launch R&D and sales investments, and services GM may tick down sequentially from unusually strong Q4 before resuming improvement .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$43.563 $42.129 $42.750
Product Revenues ($USD Millions)$23.398 $23.133 $21.592
Service Revenues ($USD Millions)$20.165 $18.996 $21.158
Gross Margin (%)37.3% 36.9% 37.4%
Adjusted EBITDA ($USD Millions)$2.915 $3.107 $2.848
Adjusted EBITDA Margin (%)6.7% 7.4% 6.7%
GAAP Diluted EPS ($)$0.01 $0.01 $0.00
Adjusted Diluted EPS ($)n/a$0.07 equivalent noted for Q3 release $0.07

Segment margins (Q4 detail):

  • Products gross margin: 42.7%; Services gross margin: 31.9% .

Segment Breakdown

SegmentQ2 2024 Revenue ($M)Q2 2024 GM (%)Q3 2024 Revenue ($M)Q3 2024 GM (%)Q4 2024 Revenue ($M)Q4 2024 GM (%)
Products$23.398 44.1% $23.133 43.9% $21.592 42.7%
Services$20.165 29.5% $18.996 28.4% $21.158 31.9%

KPIs

KPIQ2 2024Q3 2024Q4 2024
Net New Bookings ($M)$43.8 $31.4 $53.3
Ending Backlog ($M)$124.0 $113.3 $123.8
Win Rate (revenue-based)n/a66–67% FYTD commentary 69%
ARR IndicatorsSaaS/DaaS/Managed services growing; ARR ~25% of enterprise revenue noted in FY context Services ARR attach rising Est. $59M of FY bookings recognized as ARR (32%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY2025n/a$188.0–$194.0M; midpoint +11% YoY New
Adjusted EBITDA MarginFY2025n/a8.0%–10.0%; midpoint +150 bps YoY New
Total RevenuesQ1 FY2025n/a$43.5–$45.5M; midpoint +2% YoY New
Adjusted EBITDA MarginQ1 FY2025n/a5.5%–6.5% (near‑term R&D/sales investments, product timing) New

Note: FY2024 guidance was tightened earlier (to $171–$173M revenue; adj. EBITDA margin 7–9%) and subsequently delivered $172.0M revenue and 7.5% adj. EBITDA margin for the year .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Technology initiativesAI at edge/cloud, connected‑vehicle data platform; ClearGuide enhancements VantageARGUS CV, Arity partnership; probe-based SPM rollout New AI‑based detection form factor; connected‑vehicle apps; ClearMobility data monetization; Sumitomo radar pedestrian detection Accelerating
Supply chain impactsMajor GM recovery; 2,060 bps GM improvement YoY; negative PPV largely behind Continued GM improvement; product GM +1,380 bps; reduced aftermarket component costs Prior-year constraints “behind us”; product GM affected by inventory/obsolescence charges (~$0.5M) Improving with isolated noise
Tariffs/Macro/federal fundingIIJA funding tail and budget uncertainty noted IIJA tail; bookings delays from budget/staffing constraints IIJA tail through 2026+; bookings lumpiness; agencies’ staffing constraints persist Stable tailwinds; near‑term timing risk
Product performanceSensors grew >3x market rate; VantageCare, Vantage CV launches Product GM 43.9%; Apex scaling to improve margins over time Q4 products GM 42.7%; new AI detection form factor to expand SAM Positive mix; scaling
Regional trends/new winsNY DOT, Maricopa County, Cedar Park, Coachella Valley Philippines ITS plan; pipeline >$650M OCTA (~$10M) closed; focus on Southwest, Florida, Central, Northeast Expanding footprint
Regulatory/legalLitigation dispute costs rising; trial shift from April to Sept Non‑routine legal costs; cash impact $1.0M Q4 other legal; trial expected Sept‑2024 Near‑term headwind
R&D executionIncreased R&D for software; cloud/data cost leverage expected Continued R&D; Apex volume scaling benefits Episodic pre‑launch investments in Q1; ongoing R&D buildout Up‑investing near term

Management Commentary

  • “Our fiscal 2024 full‑year results demonstrate Iteris has achieved a critical inflection point… financial and operational benefits of our platform strategy [with] four consecutive quarters of year‑over‑year revenue and earnings growth.” — CEO Joe Bergera .
  • “We believe our fiscal 2025 release plan will increase our total addressable market… [including] a highly advanced radar-based pedestrian detection system developed in partnership with Sumitomo… expected to transform pedestrian detection… [and] double Iteris’ total addressable market for detection solutions from about $500 million to about $1 billion.” — CEO Joe Bergera .
  • “Fourth quarter consolidated gross profit reached $16 million… services gross margin was 31.9%… products gross margin was 42.7%… [inventory/obsolescence] charges were roughly about $0.5 million… ~220 bps of products gross profit and ~120 bps of EBITDA margin.” — CFO Kerry Shiba .
  • “We expect fiscal 2025 total revenue… $188–$194M… adjusted EBITDA margin 8–10%… [and] evaluating various options to enhance shareholder value, including share repurchases.” — CEO Joe Bergera .
  • “Google Green Light is not a production‑ready commercial solution… we do not see Google Green Light as a competitive threat… [and] believe the companies are highly complementary.” — CEO Joe Bergera .

Q&A Highlights

  • Growth cadence: Management expects revenue growth to step up through FY2025 as product launches ship late Q2/early Q3 and tough prior‑year comps fade; Q1 revenue growth guided to ~2% YoY at midpoint .
  • Margin progression: Services GM may dip slightly in Q1 from an unusually strong Q4, then improve; products GM expected to be relatively stable with a small uptick second‑half as new products scale .
  • Bookings lumpiness: Large deals (e.g., OCTA) create timing swings; pipeline includes similarly sized deals across both product and service, with continued strong win rates .
  • Recurring software metrics: Software NDR was ~105% in FY2024; management targets ~110% in FY2025 .
  • Litigation costs: ~$2.8M in FY2024; trial rescheduled to Sept‑2024, with potential Q2 FY2025 spike in expenses .
  • Competitive/data differentiation: Won Telenav’s Scout Maps based on data quality and curated multi‑source mobility datasets .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for ITI were unavailable via our SPGI mapping, so estimate comparisons are not shown. Management provided FY2025 revenue and adjusted EBITDA margin guidance and Q1 FY2025 guidance instead .
  • Implication: With consensus unavailable, focus on company guidance and execution against bookings/backlog to infer estimate revisions post‑quarter.

Key Takeaways for Investors

  • Bookings and backlog strength (record Q4 bookings; backlog +8% YoY) plus a 69% win rate signal durable demand; watch for large deal timing to drive near‑term volatility .
  • Gross margin structurally higher post supply chain normalization; expect services margin mix benefits as internal labor capacity rises and SaaS/DaaS scale leverages fixed cloud/data costs .
  • Near‑term margin dip in Q1 FY2025 is investment‑driven; management guides to improved full‑year adjusted EBITDA margins (8–10%) as new products ship and cost discipline persists .
  • Product roadmap is a catalyst: AI‑based detection, connected‑vehicle solutions, and Sumitomo radar pedestrian detection expand TAM and support product and ARR growth .
  • Legal costs are a transitory headwind with a Sept‑2024 trial; monitor quarterly G&A for spikes and adjusted EBITDA exclusion of “other legal” costs .
  • Potential capital allocation upside: Management evaluating share repurchases given perceived public market undervaluation versus private ITS transaction multiples (>20x trailing 12‑month adj. EBITDA) .
  • Geographic expansion opportunities (Southwest, Florida, Central, Northeast) and international consulting via USTDA add incremental pipeline breadth .

Appendix: Additional Data Points

  • Q4 FY2024 detail: GAAP net income $0.1M; adjusted net income $2.9M; adjusted diluted EPS $0.07; cash & equivalents $25.9M (+$4.7M q/q) .
  • FY2024: Revenue $172.0M (+10% YoY); adjusted EBITDA $12.9M (7.5% margin); GAAP net income $3.1M; gross margin 37.6% (+1,063 bps YoY) .
  • Q3 FY2024 highlights: Revenue $42.1M (+4% YoY); adj. EBITDA $3.1M (7.4%); cash $21.2M; gross margin 36.9% .
  • Q2 FY2024 highlights: Revenue $43.6M (+11% YoY); adj. EBITDA $2.9M (6.7%); backlog $124.0M; gross margin 37.3% .