Iteris, Inc (ITI) PT Lowered to $8 at B.Riley

B.Riley analyst Jeff Van Sinderen lowered the price target on Iteris, Inc (NASDAQ: ITI) to $8.00 (from $8.50) while maintaining a Buy rating.

The analyst commented: "Buy-rated Iteris, Inc. reported F4Q24 on AMC 6/13 with sales/AEBITDA coming in above/below consensus. Revenue was $42.8M versus our/consensus estimates of $41.8M/ $42.5M. AEBITDA was $2.8M compared to our estimate/consensus of $2.3M/$3.1M. Revenue increased 0.7% (challenging comparison to LY when previously supply-chain-constrained demand was unleashed), with product and service segments down 13.9% and up 21.8%, respectively. ITI’s supply chain has stabilized (recall that the company designed its own circuit boards during the supply chain crisis LY) and the company expects engineering labor to continue improving. Recurring revenue accounted for ~25% of revenue for FY24. Recurring revenue that included SaaS, DaaS, PaaS, and managed services accounted for 53% of services revenue in FY24. Overall SaaS-DaaS and PaaS continue to outgrow managed services and concentration is likely to increase over the next few years. ITI continues to target normalized recurring revenue penetration north of 30%, which will contribute to expanding GM over the LT. Gross margin of 37.4% was above our estimate of 36.9% and below consensus of 38.6%, up 558bps Y/Y, driven by improvement in supply chain and internal labor capacity. Importantly, end demand remains solid with total backlog increasing 8% to $123.8M. Total net bookings were up 20% to a record $53.3M (up 7% to $181.6M for FY24) after a significant amount of orders were pushed out from 3Q to 4Q/1Q. The company estimates that ~32% of these net bookings will be recognized as ARR, a 32% Y/Y increase to ~$59M. The attach rate of ARR to smart sensor sales and to consulting projects continues to increase. The company believes the recently announced partnership with Sumitomo Electric Industries will double ITI’s detection solutions TAM from ~$500M to ~$1B. We believe that margin recovery and growth are intact. Moreover, the demand backdrop remains solid and we anticipate accelerating revenue growth and further expansion in margins over the next few years. All things considered, including M&A transactions completed at substantially higher multiples, we are lowering our estimates and PT from $8.50 to $8.00. We reiterate our Buy rating."

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