Abbas Mohaddes – President and Chief Executive Officer Craig Christensen – Chief Financial Officer (Interim) and Vice President, Controller

Jeff Van Sinderen – B. Riley & Company William Myers – Miller Asset Management Kyle K. Krueger – Apollo Capital Management Group, LP Chris Biles – CJB Capital Management

Good afternoon everyone and thank you for participating in today’s conference call to discuss Iteris’ Financial Results for its Fiscal First Quarter ended June 30, 2014. Joining us today are Iteris’ President and CEO, Mr. Abbas Mohaddes and the Company’s Interim CFO, Mr. Craig Christensen. Following their remarks, we’ll open the call for your questions. Before we continue, we would like to remind all participants that during the course of this call, we may make forward-looking statements regarding future events or the future performance of the company, which statement are based on current information, are subject to change and are not guarantees of future performance. Iteris is not undertaking an obligation to provide updates to these forward-looking statements in the future. Actual results may differ substantially from what is discussed today, and no one should assume that at a later date the Company’s comments from today will still be valid. Iteris refers you to the documents the Company files from time-to-time with the SEC, specifically, the Company’s most recent Forms 10-K, 10-Q and 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any of the forward-looking statements. I would like to remind everyone that a webcast replay of today’s call will be available until October 30, 2014 via the Investors section of the Company’s website at www.iteris.com. Now I would like to turn the call over to Iteris’ President and CEO, Mr. Abbas Mohaddes. Sir, please proceed.

Thank you, Shennal and good afternoon everyone. As you saw at the close of the market today we issued a press release announcing the financial results of our fiscal first quarter ended June 30, 2014. We previously reported an estimated Q1 range of results on August 20, 2014 and we are pleased to report that our actual results are close to the upper range of our estimates in each category. Our first quarter results are encouraging with double-digit growth in our Roadway Sensors business. The record first quarter in Roadway Sensors was primarily due to strong demand for key products, including Vector, Velocity, and SmartCycle and the increase in sales of our third party OEM distributed products, which I will discuss in further detail over this course of this call. While our Transportation Systems segment was down this quarter, we believe there are significant opportunities to improve this business. In fact, we entered into $10.1 million of new Transportation Systems contracts in the first quarter alone. Most importantly, these core segments continue to generate the necessary cash flow to drive our ongoing investment in iPerform. As we have said in the past, we believe iPerform represents a great growth opportunity in both the traffic and weather information marketplace and will continue to make strides with new product lines and initiatives. But before I comment further, I would love to turn the call over to Craig, our Interim CFO who will take us through the details of our financial results for the first quarter of fiscal 2015. Craig?

Thank you, Abbas. Good afternoon everyone. Total revenues in the first quarter of 2015 increased 6% to $18.1 million compared to $17 million in the same quarter a year ago. This was primarily driven by a 20% increase in Roadway Sensors as well as a 15% increase in iPerform revenues, while Transportation Systems revenues were down 7%. The increase in Roadway Sensors revenues was largely attributable to the success of various growth initiatives, including increases in the distribution of certain OEM products for the intersection market and higher unit sales of key Roadway Sensors products. iPerform revenues were primarily driven by increases in iPeMS performance measurement sales and ClearPath Weather services, which are legacy offerings in iPerform. The decline in Transportation Systems revenues was primarily attributed to timing delays of backlog fulfillment on certain project as well as lower sub-consultant activity on certain Transportation Systems projects. Gross margin in the first quarter of fiscal 2015 decreased 190 basis points to 37.6% compared to 39.5% in the same quarter a year ago. The decrease in gross margin was primarily due to the increase in OEM product sales in the Roadway Sensors segment, which generally yield lower gross margins than the company’s core products. Operating expenses in the first quarter increased to $6.9 million compared to $6.1 million in the same quarter a year-ago. As previously announced, we delayed our fiscal year 2014 earnings release and 10-K filing until September 3, 2014 due to additional procedures by auditors in connection with contract revenue testing. As a result of these additional procedures and related delays, we incurred an approximate $420,000 increase in audit fees which drove the majority of the increase in selling, general and administrative expenses in the current period. Though we expect higher related expenses in the second quarter of fiscal 2015 to the result of the 2014 audit, we’ve taken the necessary steps to strengthen internal control and mitigate the root cause of the incremental audit work and expect these costs to decline for future annual audits. Operating expenses in the first quarter also increased as a result of planned increases in headcount and sales and marketing expenses in Roadway Sensors and iPerform, as well as accelerated research and development expenses in iPerform. Operating loss in the first quarter was $95,000 compared to operating income of $669,000 in the year-ago quarter. Net loss in the first quarter was $19,000 or $0.00 per share compared to $460,000 or $0.01 per share in the same quarter a year-ago. The decrease was primarily due to significant investment in iPerform and an increase in audit fees for our fiscal year 2014 audit. Cash and cash equivalents at June 30, 2014 increased to $21.5 million compared to $20.4 million in the previous quarter and we continue to carry no debt. Total backlog at the end of the first quarter increased to $38.8 million compared to $35.6 million in the prior quarter and $34.2 million in the year-ago quarter. The increase in backlog was primarily due to Transportation Systems entering into $10.1 million in new contracts during the quarter. Backlog was comprised of $29.9 million and Transportation Systems $5.3 million from Roadway Sensors and $3.6 million from iPerform. This concludes my prepared comments on the financials. Now, I’d like to turn the call back over to Abbas. Abbas?

Thank you, Craig. As I indicated in my opening remarks, we reported overall good results in our fiscal first quarter most notably in our Roadway Sensors business segment. Although we are disappointed with the first quarter results in our Transportation Systems business, we remain enthuse about our recent success in capturing new contracts in this segment. We are pleased about the recent developments that have taken place in our iPerform segment both in development and partnership milestones, and expect to achieve and accelerate the customer acquisition and development milestones we planned for fiscal 2015. Before I speak more about our outlook, I would like to discuss our operating segments in more detail. Several of our key products in the Roadway Sensors segment continue to gain market traction including Vector, which is our first to market hybrid video and radar detection, as well as Velocity, the market leading travel time data collection product, and the SmartCycle, which combines video vehicle detection and bicycle detection in one. Finally, our OEM distribution revenue in Texas is growing, which we believe enhances our overall growth strategy in this business. This reseller agreement with Siemens includes the distribution of key traffic management and intersection equipment such as controllers and other electronics in the controller cabinet. Because we already have an established sales team and product support group in Texas, this distribution arrangement fits well with our video detection direct sales strategy in Texas without significant added infrastructure. We believe our investment strategy in product development and sales and marketing is working well and further believe the overall market demand for traffic management products and services should continue to improve. Our Transportation Systems sales were down 7% during the quarter. There are several key initiatives we are pursuing and we are focused on capturing new major contracts to expand our backlog. As we have announced recently, we have been awarded several systems contracts and our backlog had expanded in recent months and we continue to expand existing relationship with key clients such as the Virginia Department of Transportation and Orange County Transportation Authority. Furthermore, we are looking to expand our presence in certain markets in the U.S. where transportation business is experiencing more traction such as Texas and Florida. Our performance management segment or iPerform has carried over the momentum from last fiscal year with significant progress in the first quarter. As you may have seen in our latest series of announcements, we have won several new contracts and are currently engaged on another series of projects, which I’ll give preview shortly. We have also completed major technical developments to our platform of products for both the public and commercial sectors. As a reminder, the iPerform business model is transitioning from primarily a consulting business to further expand into software-as-a-service in the commercial markets. Our current suite of products can be broken down into three primary categories. First, Items is an ITS industry leading performance measurement and traffic analytics application for both public and commercial markets. Second, ClearPath Weather is a hyper-local road weather maintenance solution for a state and local transportation agencies that provides winter road maintenance strategies, which were expected to optimize the deployments of personnel, material, and equipment. And finally, our most exciting near-term development is ClearPath Ag, our big data and analytics platform for ag tech, which is the latest solution in the iPerform suite of products. The ClearPath Ag product line provides high resolution, field level, precision weather, and soil and climate information for the agriculture market. The ClearPath Ag product line is designed to aid in better crop management, chemical application, and risk mitigation to improve bottom line performance for growers and agri businesses. ClearPath Ag targets agri businesses in the genetics and crop protection, fertilizer and crop nutrition, crop risk, and retail sectors. To hope it gives the opportunity in this exciting new market, IBIS was estimated the U.S. precision agriculture market yielded approximately $1.4 billion in 2012 and is expected to grow at a 6.9% annual rate through 2018. Precision Ag, a special market report suggests that growth to be at 15%. While the U.S. represents the largest market for agriculture, several other countries around the globe represent substantial ag markets as well. Beyond this, agriculture exists in almost in every country and civilization along the world and as such opportunities are tremendous for climate and soil condition information provided by ClearPath Ag. In our view, these statics and market drivers along with recent market trends, a strategic alliances and M&A transaction such as Monsanto’s acquisition of the Climate Crop and Precision Planting as well as capital inflows such as Granular is funded by Google, Andreessen and Khosla collectively present a significant growth opportunity in ag technology. Now moving on to some specific project wins and developments across our three iPerform categories, in April, we were awarded a $1.2 million contract from the Virginia Department of Transportation to utilize our iPeMS software, our largest iPeMS software license deal to date. We also recently announced a key iPeMS contract opportunity with the I-95 Corridor Coalition, which expands the entire eastern seaboard from Maine to Florida. The I-95 Coalition has selected Iteris in partnership with HERE formally Nokia to compete with a small group of other companies to provide traffic data and analytics, support on a state-by-state basis. In May 2014, we introduced our next generation ClearPath Weather solution with new, expanded cloud based support for large state agencies and corporate facilities managers, as well as support for smaller customers, including contractors and municipalities. This updated solution provides winter maintenance strategies for optimizing personnel, equipment, and chemical purchases. It also provides actionable pavement information for effective maintenance response. We continue to enhance this industry-leading solution, releasing several improvements and updates, including storm playback capabilities, a storm motion display and traffic data layer integration that should allow agencies and maintenance managers to better understand the effect of traffic on weather operations. In the quarter, we signed three contracts in our ClearPath Weather segment including a renewal with Minnesota DOT, forecasting services with Arkansas DOT and an additional contract with Michigan DOT. As you may have seen in June, we launched our ClearPath Ag API platform and announced the first partnership agreement for our ag technology with Agrian, a leading provider of agriculture data tracking and information systems. They’ve continued this momentum with several prospective customers and are in various stages of engagement that for competitive purposes we cannot elaborate on, but we expect to announce over the coming quarters. Just last month, we also released the ClearPath Ag Select product line, which is a set of software services that provides customers with access to the information essential to making and form popping decisions. ClearPath ad select provides high resolution map visualizations of field specific weather data up to a one by one kilometer. The location is specific weather information derived from a targeted array of ag weather observation and forecasting platforms. Over the next quarter, we expect to release our next product ClearPath Ag prime a state-of-the-art software service that provides soil moisture models and climate information, as well as the first of our field-level advisory services, including planting and crop growth modeling. Finally, in our fourth quarter, we plan to further enhance our ClearPath Ag product line with the launch of a set of premium API and mobile component services. In addition to Clear Ag’s technical developments and our Agrian agreement, we have signed several new partnerships, meeting our customer acquisition milestone for the quarter with better than expected consumer demand. Also, five of the eight leading crop protection manufacturers and three of the top five ag retailers in the U.S. have been customers of Iteris first generation precision weather data product, WeatherPlot. We are in the process of transitioning these long-term customers to our next generation ag tech platform ClearPath Ag. To provide you with a rough idea on the economics of this business, the ClearPath Ag subscription services are currently priced based upon the acreage under management, the number of users for the partner application and how much geography the customer will deploy the product end. These subscription services should range up to enterprise cloud arrangements that are realizing subscription revenue from $5,000 per month to more than $100,000 per month per customer. These enhanced customer relationships should provide Iteris an immediate channel to sell subsection based services from our ClearPath Ag select, precision weather product line to our upcoming soil and climate products, ClearPath Ag Prime and ClearPath Mobile. Now, before I provide my closing remarks, we would be delighted to respond to your questions and comments. Operator?

Thank you, sir. (Operator Instructions) And our first question will come from Jeff Van Sinderen with B. Riley. Jeff Van Sinderen – B. Riley & Company: Hi, good afternoon everyone. Abbas let me ask you the systems business was still negative, but you’ve got a nice increase in backlog. I guess I am wondering when you think we’ll see that business turn positive year-over-year? Is that something that we should expect for the September quarter? That’s over I’d think you’d have a pretty good idea with that? Maybe you can just touch on that.

Jeff, what happens is that, that backlog or new contracts that we sign typically has a particular schedule, some of the contracts are shorter term, some of them are maybe taken over a few quarters or so, but I would expect that much of that impact is going to be in the third and fourth quarters of this fiscal year. Jeff Van Sinderen – B. Riley & Company: Okay. And then also maybe you can just touch on or talk a little bit more about the sensor OEM business and just the growth that you are experiencing in the sensor segment appear to be sustainable as it going to be driven more by OEM business going forward. And then I guess how should we think about that in terms of your overall plan for the sensor business if you’ve got more OEM?

Sure. So in this last quarter that we just reported, the growth was roughly half from the U.S. legacy business and then to other half was from just OEM. And then going forward, I would expect that they both would contribute plus we are doing sales and marketing and various initiatives internationally that I would expect that that would also contribute. So, we would love to see this as a continued growth opportunity for us. We continue developing new products offering to market, we are expanding our sales and marketing and the geographic presence, at the same time the market has been good to us as well, the market itself is expanding as well. Jeff Van Sinderen – B. Riley & Company: Okay. And then in iPerform, it seems like you are getting more traction there, you’ve got more partners, new products to migrate to and such, but it is still relatively small revenues and I guess I am wondering at this point what you see is being sort of the key things that need to happen and I guess what the timeframe is for those things to happen to sort of get that business to critical mass. As we look out to next year, I mean, what I know you won’t give guidance, but what do you think revenues in iPerform could be next year?

Sure. So just to be clear, Jeff, almost all the revenues that we generate in iPerform now is from our legacy business. In other words, it is not from results of these new R&D activities that we are doing. So, as you know, the business model for these new activities that we are doing is subscription based and as we get these new partners, we are beginning to generate backlog and it will take some time before it turns into revenue in this significant way. Further, we have launched two products so far. A key product that we need to launch that’s scheduled for December, as I indicated, is the sole content and then subsequent to that in March the mobile API. These are two significant products that we expect generating a much larger magnitude in a way of subscription. So our current development plan is to, over the next two quarters, developing at this rate that we have seen at about $1.5 million or so of investment, R&D in that business. And then I would envision, but then the next few quarters we would see gradually this revenue coming in from subscription. But it will take us a few quarters before it becomes material and obviously since we are now doing segment reporting, you would see that in our numbers. And we would be announcing those as we make these larger material relationships for the investors to know. So I would say that how does one monitor this progress, really two-fold. One, making sure that we have the product in a timely manner out, and b, simply forging relationship acquisition of the customers, which our team is doing really a good job lining up to the pipeline at the moment. Jeff Van Sinderen – B. Riley & Company: Okay, good.

I hope that helps. Jeff Van Sinderen – B. Riley & Company: Yes, that helps a lot. And then, finally, I guess as you look at everything comprehensively, how should we think about gross margins for the September and December quarter? I mean do you think we’re still down year-over-year just because of the business mix concentration? How should we think about it maybe sequentially? Anything you could help us with there, and also operating expenses going forward. Just anything that would help us model. Thanks.

Sure, sure. So let me start by the operating cost. You know this audit that we went through, the cost of that cascaded into Q1 as we announced about little bit over 400,000 of that was in Q1. That is going to continue in Q2 and in fact even expanded because we did much of the activities, we did our announcement in September 3, so we have quite a bit of expenses coming in from that into Q2. We also had a team of the consultants helping us with a lot of the contract. So that cost is going to get into Q2. Now we would expect that Q3 to reduce, because we won’t have really annual cost in Q3. It would be a normal quarterly cost and then we have some added cost for example we just hired a director of revenue recognition. So we have some internal cost. So we would have some cascading cost entering into Q3, but we would expect as we finish the year, the annual audit fee to drop significantly. At the same time from a margin standpoint, we really haven’t closed the books yet on Q2. So I want to be cautious not providing anything specific. But generally, I don’t expect really material change of margins from Q1 to Q2 and that is based on the assumption that let’s say the businesses are doing somewhat similar generation of activities and as far as the Roadway Sensors we have OEM impact quite a bit I think it is going to be about the same, which is a good thing in a way that we are expanding on that OEM revenue generation. Jeff Van Sinderen – B. Riley & Company: Got it.

Does that help you? Jeff Van Sinderen – B. Riley & Company: That’s helpful. Thanks very much and good luck.

You’re welcome. Thank you.

Our next question will come from William Myers with Miller Asset Management. William Myers – Miller Asset Management: Hi, thanks for taking my question. I’d like to – a little bit more detail on the Transportation Systems and the backlog, was there any particular reason that seems to be pervasive for the project delays like perhaps lack of funding or was it – can you characterize the nature of the project delays?

Yes, yes (indiscernible) thanks for the question. So there were three or four specific activities that took place. We have couple of projects that we have in a pipeline that actually move to the right. In fact one of them didn’t even materialize in Q2. We are about to sign the contract on that one in a week or so. So it was a really a contract delay. The business didn’t go away it just shifted to the right. We also had about several hundred thousand dollars worth of sub-consultant content. We make these estimates as to any given project how much content do they have, when do they send us the invoice so that we could recognize that, it just didn’t happened it moved to the right a little bit. So the combination of those two came about to, I think, $600,000 $700,000 or so, that was 7% down year-over-year. William Myers – Miller Asset Management: Okay. And when this sort of thing happens that means that effectively you have some under utilization of your employees, would that be correct?

At times one could expect that, but one other things that we do in a similar way, don’t have those folks idle, we put them on primarily writing proposals, doing sales and marketing activities, so that’s sometimes why we are fortunate to expand our backlog at that time. Also at times when we see that the revenue isn’t quite there, we always have on quarterly basis additional hedge. This business is about generating revenue per head. So we have slowed down that hiring and that’s what we did in that Q1, we added a few more in Q2, we are now adding some more in Q3. So that’s kind of how we grow. But we monitor that very closely to make sure that we are as efficient as possible. In fact, overall the utilization during the Q1 was about 74%, 75% which in our business is a pretty good utilization overall. William Myers – Miller Asset Management: Okay. Thank you very much.

You’re welcome.

(Operator Instruction) Our next question will come from Kyle Krueger with Apollo Capital. Please proceed. Kyle K. Krueger – Apollo Capital Management Group, LP: Thanks for taking my questions. The first question I’ve got is, before you encountered this accounting issue you were buying back stock with some regularity, now that you are past the accounting issue, do you intend to resume that purchase program?

We have the buyback as part of our program overall and we have resumed the buyback. So that is part of our current plan. We are running pretty much out of the cash in that program. So we’ll be discussing with our Board of Directors the possibility of continuing that program. Kyle K. Krueger – Apollo Capital Management Group, LP: Okay.

We did buyback 178,000 shares in Q1 for about $350,000. Kyle K. Krueger – Apollo Capital Management Group, LP: Okay, good. I haven’t seen the Q yet, so that was in the press release, I apologize that. Okay, and Abbas, what is your expectation with respect to iPerform getting to I heard your explanation as it related to revenue development, what’s your expectation with respect to that business getting to cash or earnings break-even? What’s the timeframe associated with that?

You know Mr. (indiscernible) it is difficult to provide any guidance if you will at this point. All of your focus right now is execution of development, execution of getting customers lined up, but I would envision that in the next fiscal year, we got to see really expansion of these revenues; it is really difficult to anticipate a specific timeframe for break-even. But I would say that just in general, if we were to spend at the current rate one should expect within a year to two years that we get to that break-even and then again really seeing the benefits of significant revenue. Kyle K. Krueger – Apollo Capital Management Group, LP: Okay, okay. So you’re thinking at a year to two year?

Yes, it’s really honestly a speculation. I don’t want this to be taken as a guidance. We have not completed our next year fiscal year plan yet, so we have to prepare that, we have present it to the Board and get their confirmation. So this is just based on, if we were spending at this rate that’s what, what we would anticipate. I would add one other thing though. So we see tremendous amount of opportunity in this group and our vision and goal is that in a few years, this group really rival the other two businesses really getting to that level of revenue and operation and really contribute significantly to our overall operating income. Kyle K. Krueger – Apollo Capital Management Group, LP: Right, okay. As a shareholder, I’m definitely looking forward to that. Thank you. And then my final answer or my final question rather is you talked about recurring monthly revenue range from iPeMS Ag as being $5,000 to $100,000 a month, which is pretty significant. What were revenues in the quarter from those products if you had any?

Probably none in this quarter, we just announced our products, so we are now just acquiring these customers, so very little, really non-material. I would envision that by the end of the third quarter, we begin to seeing some of that revenue and then it gradually would expand. As I indicated a key two additional products that would help us to be on the upper end of those subscriptions is the soil moisture and then the mobile content, those are two significant products that we are developing that the customers are demanding at the moment and we are lining them up for those types of products. Kyle K. Krueger – Apollo Capital Management Group, LP: Okay, okay. Thank you very much.

You’re welcome. So the revenue that we generated, just to be clear, the $1.4 million or so in the quarter of iPerform, those were from the legacy, they are not just new software, those were the weather information systems that we have been providing to public agencies and the iPeMS sales that we have been providing to public agencies. Thank you for your questions.

We’ll take our next question from Chris Biles with CJB Capital. Please proceed. Chris Biles – CJB Capital Management: Thanks for taking my questions. Craig, I just want to clarify on the stock buyback during the quarter, you said there was a 178,000 shares purchased for $350,000.

That’s correct. Chris Biles – CJB Capital Management: Okay, so roughly $2 a share or just under. Abbas, I have a few questions for you. If we can go to the ClearPath Ag and the agri-data announcement that was made, can you give us a little better context of how you’re working with agri-data? How that relationship works? Is it of a customer or is it just a joint venture, or they funding part of this and then how are they distributing to their customers?

I presume you are referring to the Agrian at this point… Chris Biles – CJB Capital Management: Correct, yes.

So the relationship that we have with them, they have a software and they managed significant amount of acreages. So what we are doing is that we are providing them with the API that they would take this application programmable information and they included in their software regarding our weather forecasting and then they filled up to their constituencies, primarily crop insurance companies, it could be some of them large farming organizations, crop protection agencies. So that’s kind of the relationship. And then we get to basically enjoy a portion of that revenue. There is no joint venture or any other relationship at this time with them. So that’s the current arrangement with them. Chris Biles – CJB Capital Management: Okay. And could we expect to see similar arrangements or similar customer wins in the near future?

Yes, we are looking – we are discussing as a matter of fact that with more than half a dozen firms with those types of capabilities. We are also discussing with crop protection firm themselves that would be interested in this type of product. So when you look at the types of customers that we have, I would put them in probably three, four different buckets. A part of them are the software providers themselves, part of them are large retailers that we could help them, some of them are genetics organizations that they want to have this information to help them with the type of, let’s say, fertilizers and crop protection products that they sell. So we’ve got three, four different specific markets that we worked with. And the types of arrangements could be some direct and some of them going through at distribution channels since they have the direct access to the end customers. Chris Biles – CJB Capital Management: Okay. And you referenced earlier the Climate Corp have been the roughly $1 billion acquisition that Monsanto made. Would that mean that Climate Corp would potentially be a customer rather than a competitor?

It could be, could be. We see them both as a potential customer and a competitor. You’ve got to realize that some of our products very much are similar to what they provide. At the same time that doesn’t mean that for certain types of products, we could be collaborating with each other. Chris Biles – CJB Capital Management: Okay. And then just one last data I was trying to clarify what you said earlier regarding ClearPath and under iPerform. It sounds like Michigan, Arkansas, and Minnesota are all new customers?

Yes, I think one of them isn’t added, they just renewed; the others are new. Chris Biles – CJB Capital Management: Great.

And this is of course that ClearPath weather where we provide decision support system help for them. Chris Biles – CJB Capital Management: Yes, got it. Thank you.

Thank you, Chris.

At this time, this concludes our question-and-answer session. I would now like to turn the call over to Mr. Mohaddes for his closing remarks.

Thank you again operator. While our focus in iPerform continues to be on the commercialization of traffic and weather information technologies, we believe there is a great near term opportunity within the precision agriculture technology marketplace as I discussed. We expect our core businesses to continue funding the ongoing investment in this exciting new marketplace along with our iPerform segment in general leading to growth in new target markets that we expect would generate a great return for our shareholders in the future. We appreciate everyone’s support and thoughtful questions and look forward to updating you again on our continued progress.

This concludes today’s call. Thank you ladies and gentlemen for joining us today for our presentation. You may now disconnect.