iti-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________________________________

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-08762

ITERIS, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

1250 S. Capital of Texas Hwy., Building 1, Suite 330

Austin, Texas

(Address of principal executive office)

95-2588496

(I.R.S. Employer

Identification No.)

78746

(Zip Code)

(512) 716-0808

(Registrant’s telephone number, including area code)

(Former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.10 par value

ITI

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of August 4, 2023, there were 42,741,744 shares of our common stock outstanding.


PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS	1

	UNAUDITED CONDENSED BALANCE SHEETS AT JUNE 30, 2023 AND MARCH 31, 2023	1

	UNAUDITED CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2023 AND 2022	2

	UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022	3

	UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2023 AND 2022	4

	NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34

ITEM 4.	CONTROLS AND PROCEDURES	34

PART II.	OTHER INFORMATION	36

ITEM 1.	LEGAL PROCEEDINGS	36

ITEM 1A.	RISK FACTORS	36

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37

ITEM 4.	MINE SAFETY DISCLOSURES	38

ITEM 5.	OTHER INFORMATION	38

ITEM 6.	EXHIBITS	38


	June 30, 2023		March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	19,994	$	16,587
Restricted cash	274		140
Trade accounts receivable, net of allowance for doubtful accounts of $295 and $357 at June 30, 2023 and March 31, 2023, respectively	25,429		23,809
Unbilled accounts receivable	8,471		8,349
Inventories	11,534		10,841
Prepaid expenses and other current assets	4,644		3,128
Total current assets	70,346		62,854
Property and equipment, net	1,315		1,297
Right-of-use assets	7,955		8,345
Intangible assets, net	9,986		10,190
Goodwill	28,340		28,340
Other assets	434		768
Total assets	$	118,376	$	111,794
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	15,581	$	12,943
Accrued payroll and related expenses	12,653		12,923
Accrued liabilities	6,454		5,453
Deferred revenue	7,356		6,720
Total current liabilities	42,044		38,039
Lease liabilities	7,122		7,641
Deferred income taxes	442		422
Unrecognized tax benefits	81		79
Other long-term liabilities	2,880		2,707
Total liabilities	$	52,569	$	48,888
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $1.00 par value:
Authorized shares — 2,000
Issued and outstanding shares — none	—		—
Common stock, $0.10 par value:
Authorized shares - 70,000 at June 30, 2023 and March 31, 2023
Issued and outstanding shares — 42,869 and 42,569, respectively, at June 30, 2023 and 42,808 and 42,808, respectively, at March 31, 2023	4,288		4,282
Treasury stock	(891)		(891)
Additional paid-in capital	190,852		190,082
Accumulated deficit	(128,442)		(130,567)
Total stockholders' equity	65,807		62,906
Total liabilities and stockholders' equity	$	118,376	$	111,794


	Three Months Ended June 30,
	2023		2022

Product revenues	$	23,658	$	16,381
Service revenues	19,887		17,286
Total revenues	43,545		33,667
Cost of product revenues	12,104		11,657
Cost of service revenues	14,638		11,851
Cost of revenues	26,742		23,508
Gross profit	16,803		10,159
Operating expenses:
General and administrative	5,801		6,412
Sales and marketing	6,290		5,198
Research and development	2,108		2,136
Amortization of intangible assets	651		668
Restructuring charges	—		707
Total operating expenses	14,850		15,121
Operating income (loss)	1,953		(4,962)
Non-operating income (expense):
Other income (expense), net	199		(23)
Interest income (expense), net	68		(32)
Income (loss) from continuing operations before income taxes	2,220		(5,017)
(Provision) benefit for income taxes	(95)		167
Net income (loss) from continuing operations	2,125		(4,850)
Loss from discontinued operations before gain on sale, net of tax	—		(15)
Net loss from discontinued operations, net of tax	—		(15)
Net income (loss)	$	2,125	$	(4,865)

Income (loss) per share - basic and diluted
Income (loss) per share from continuing operations	$	0.05	$	(0.11)
Loss per share from discontinued operations	—		—
Net income (loss) per share	$	0.05	$	(0.11)

Shares used in basic per share calculations	42,567		42,380
Shares used in diluted per share calculations	43,640		42,380


	THREE MONTH PERIODS ENDED JUNE 30, 2023
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2023	42,808	$	4,282	369	$	(891)	$	190,082	$	(130,567)	$	62,906
Stock option exercises	60	6		—	—		251		—		257
Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes	1	—		—	—		(6)		—		(6)
Stock-based compensation	—	—		—	—		525		—		525
Treasury stock purchases	—	—		—	—		—		—		—
Net income	—	—		—	—		—		2,125		2,125
Balance at June 30, 2023	42,869	$	4,288	369	(891)		$	190,852	$	(128,442)	$	65,807


	THREE MONTH PERIODS ENDED JUNE 30, 2022
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount


Balance at March 31, 2022	42,416	$	4,242	—	$	—	$	186,720	$	(115,712)	$	75,250
Stock option exercises	1	—		—	—		1		—		1
Issuance of shares pursuant to vesting of restricted stock units, net of payroll witholding taxes	4	—		—	—		24		—		24
Stock-based compensation	—	—		—	—		848		—		848
Treasury stock purchases	—	—		300	(884)		—		—		(884)
Net loss	—	—		—	—		—		(4,865)		(4,865)
Balance at June 30, 2022	42,421	$	4,242	300	(884)		$	187,593	$	(120,577)	$	70,374


	June 30, 2023		March 31, 2023
	(In thousands)
Raw materials	$	7,833	$	7,840
Work in process	387		315
Finished goods	3,314		2,686
	$	11,534	$	10,841


	June 30, 2023						March 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(In thousands)
Technology	$	4,986	$	(3,676)	$	1,310	$	4,986	$	(3,444)	$	1,542
Customer contracts / relationships	9,550		(4,724)		4,826		9,550		(4,371)		5,179
Trade names and non-compete agreements	782		(770)		12		782		(770)		12
Capitalized software development costs	8,068		(4,230)		3,838		7,489		(4,032)		3,457
Total	$	23,386	$	(13,400)	$	9,986	$	22,807	$	(12,617)	$	10,190


Year Ending March 31,
(In thousands)
2024	$	2,789
2025	3,263
2026	2,038
2027	1,266
2028	618
Thereafter	—
	$	9,974


Warranty Reserve Activity	Three Months Ended June 30,
	2023		2022
	(In thousands)
Balance at beginning of fiscal year	$	758	$	616
Additions charged to cost of sales	193		51
Warranty claims	(96)		(44)
Balance at end of reporting period	$	855	$	623


Balance at March 31, 2023	$	242
Charged to expenses	—
Cash payments	(197)
Balance at June 30, 2023	$	45


	As of June 30, 2023
	(In thousands)
	Amortized Cost		Gross Unrealized Loss		Gross Unrealized Gain		Estimated Fair Value
Assets:
Level 1:
Securities held in deferred compensation plan (1)	$	1,337	$	(434)	$	354	$	1,257
Total	$	1,337	$	(434)	$	354	$	1,257

Liabilities:
Level 1:
Deferred compensation plan liabilities (2)	$	1,356	$	(296)	$	552	$	1,612
Total	$	1,356	$	(296)	$	552	$	1,612


	As of March 31, 2023
	(In thousands)
	Amortized Cost		Gross Unrealized Loss		Gross Unrealized Gain		Estimated Fair Value
Assets:
Level 1:

Securities held in deferred compensation plan (1)	1,426		(437)		321		1,310






Total	$	1,426	$	(437)	$	321	$	1,310

Liabilities:
Level 1:
Deferred compensation plan liabilities (2)	$	1,201	$	(296)	$	563	$	1,468

Level 3:
Contingent consideration (3)	$	600	$	—	$	—	$	600
Transfer out	(600)						(600)
Subtotal	—		—		—		—
Total	$	1,201	$	(296)	$	563	$	1,468


Cash paid for amounts included in the measurement of operating lease liabilities	$	673
Weighted average remaining lease term (in years)	3.9
Weighted average discount rate	4.7		%


Fiscal Year Ending March 31,	Operating Leases
(In thousands)
2024	$	1,972
2025	2,459
2025	2,178
2027	2,207
2028	1,315
Thereafter	204
Total lease payments	10,335
Less imputed interest	(960)
Present value of future lease payments	9,375
Less current obligations under leases	(2,253)
Long-term lease obligations	$	7,122


	Classification	June 30, 2023		March 31, 2023
		(In thousands)		(In thousands)
Assets
Operating lease right-of-use-assets	Right-of-use assets	$	7,955	$	8,345
Total operating lease right-of-use-assets		$	7,955	$	8,345

Liabilities
Operating lease liabilities (short-term)	Accrued liabilities	$	2,253	$	2,339
Operating lease liabilities (long-term)	Lease liabilities	7,122		7,641
Total lease liabilities		$	9,375	$	9,980


	Options	Weighted Average Exercise Price Per Share
	(In thousands)
Options outstanding at March 31, 2023	6,287	$	4.11
Granted	—	—
Exercised	(60)	2.93
Forfeited	(195)	4.20
Expired	—	—
Options outstanding at June 30, 2023	6,032	4.11


	# of Shares	Weighted Average Price Per Share
	(In thousands)
RSUs outstanding at March 31, 2023	497	$	4.12
Granted	—	—
Vested and released	(1)	6.22
Forfeited	(43)	3.95
RSUs outstanding at June 30, 2023	453	4.13


	# of Shares	Weighted Average Price Per Share
	(In thousands)
PSUs outstanding at March 31, 2023	83	$	4.45
Granted	—	—
Vested and released	—
Forfeited	(9)	3.83
PSUs outstanding at June 30, 2023	74	4.53

SEC Form 10-Q filed by Iteris Inc.