Employee Benefit Plans

12 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Stock Incentive Plans

We currently maintain two stock incentive plans, the 2007 Omnibus Incentive Plan (the “2007 Plan”) and the 2016 Omnibus Incentive Plan (the “2016 Plan”). Each of these plans allows for the issuance of stock options, stock appreciation rights, restricted stock (“RSUs”), performance-based restricted stock units (“PSUs”), cash incentive awards and other stock-based awards to our employees, officers, consultants and directors at exercise prices which are equal to or greater than the market value of our common stock on the date of grant. Options expire no more than ten years after the date of grant and generally vest at the rate of 25% on each of the first 4 years anniversaries of the grant date. Stock appreciation rights, RSUs, and other stock-based awards are based on the value of our common stock. New shares are issued to satisfy option exercises and shares issuance under the plans although we may only grant future awards from the 2016 Plan.

In September 2007, our stockholders approved the 2007 Plan. In September 2009, our stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2007 Plan by 800,000 shares to a total of 1,650,000 shares. In September 2012, our stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2007 Plan by 800,000 shares to a total of 2,450,000 shares. In October 2014, our stockholders approved an amendment of the 2007 Plan to increase the number of shares of common stock authorized for issuance under the 2007 Plan by an additional 1,500,000 shares to a total of 3,950,000 shares. In September 2015, our stockholders approved an amendment of the 2007 Plan to increase the number of shares of common stock authorized for issuance under the 2007 Plan by an additional 1,000,000 shares to a total of 4,950,000 shares.

In December 2016, our stockholders approved the 2016 Plan. In September 2021, our stockholders approved an amendment of the 2016 Plan to increase the number of shares of common stock authorized for issuance under the 2016 Plan by an additional 3,360,000 shares to a total of 9,263,602 shares.

At March 31, 2024, there were approximately 1.6 million shares of common stock available for future grant under the 2016 Plan. Total stock options vested and expected to vest were approximately 5.9 million as of March 31, 2024.

Stock Options

A summary of activity in the Omnibus Incentive Plans with respect to our stock options for Fiscal 2024 is as follows:

	Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)			(Years)	(In thousands)
Options outstanding at March 31, 2023	6,287	$	4.11
Granted	475	4.13
Exercised	(173)	3.03
Forfeited	(417)	4.04
Expired	(314)	4.77
Options outstanding at March 31, 2024	5,858	4.11		5.5	$	5,410
Options vested and exercisable at March 31, 2024	4,268	4.16		4.4	$	3,879

Restricted Stock Units

RSU awards are stock-based awards that entitle the holder to receive one share of our common stock for each RSU upon vesting. RSUs granted under the 2007 Plan vest at the rate of 25% on each of the first four anniversaries of the grant date provided that the holder remains in service (as defined by the 2007 Plan) as of the vesting date. RSUs granted under the 2016 Plan vest at varying terms between 1 year and 3 year anniversaries of the grant date provided that the holder remains in service (as defined by the 2016 Plan) as of the vesting date. The fair value per RSU is determined based on the closing market price of our common stock on the grant date.

A summary of activity with respect to our RSUs for Fiscal 2024 is as follows:

	# of Shares	Weighted Average Price Per Share
	(In thousands)
RSUs outstanding at March 31, 2023	497	$	3.05
Granted	460	4.35
Vested and released	(118)	3.85
Forfeited	(46)	4.12
RSUs outstanding at March 31, 2024	793	4.18

Performance Stock Units

The Company approves a “target” number of PSUs for our executive officers with performance and service-based vesting conditions. The actual number of units that ultimately vest will range from 0% to 200% of the original units awarded based on level of achievement. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. In addition, the final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company’s total shareholder return relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the “target” number of PSUs. The PSUs are amortized over a service period of 3 years. We estimated the value and the derived service period of the PSUs using the Monte-Carlo simulation model.

In accordance with ASC 718 - Compensation – Stock Compensation, grant date is a date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. For PSU awards with performance conditions to be established by the Compensation Committee at a future date, the grant date does not occur until the vesting conditions are established and communicated to the employees.

The following table summarizes the details of the performance stock units:

	# of Shares	Weighted Average Price Per Share
	(In thousands)
PSUs outstanding at March 31, 2023	83	$	4.45
Granted	119	4.57
Vested	(43)	5.59
Forfeited	(42)	5.46
PSUs outstanding at March 31, 2024	117	4.75

Stock-Based Compensation

The following table presents stock-based compensation expense that is included in each functional line item in our statements of operations:

	Year Ended March 31,
	2024		2023
	(In thousands)
Cost of revenues	$	315	$	352
General and administrative	1,596		1,626
Sales and marketing	579		477
Research and development expense	475		435
Total stock-based compensation	$	2,965	$	2,890

At March 31, 2024, there was approximately $2.9 million, $1.7 million and $0.2 million of unrecognized compensation expense related to unvested stock options, RSUs, and PSUs respectively. This expense is currently expected to be recognized over a weighted average period of approximately 2.5 years for stock options, 1.8 years for RSUs and 1.8 years for PSUs. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock options, RSUs or other stock-based awards.

The grant date fair value of stock options granted was estimated using the following weighted-average assumptions:

	Year Ended March 31,
	2024		2023
Expected life—years	6.3		7.5
Risk-free interest rate	4.2	%	3.6	%
Expected volatility of common stock	52	%	51	%
Dividend yield	0	%	0	%

Expected Life: The Company’s expected life represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected life is based on expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury zero coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

A summary of certain fair value and intrinsic value information pertaining to our stock options is as follows:

	Year Ended March 31,
	2024		2023
	(In thousands, except per share amounts)
Weighted average grant date fair value per share of options granted	$	2.34	$	1.67
Intrinsic value of options exercised	$	254	$	141

Employee Incentive Programs

Under the terms of a Profit Sharing Plan, we may contribute to a trust fund such amounts as determined annually by the Board of Directors. No contributions were made during the fiscal years ended March 31, 2024 and 2023.

We sponsor a defined contribution 401(k) plan (the “401(k) Plan”), adopted in 1990, under which eligible employees voluntarily contribute to the plan, up to IRS maximums, through payroll deductions. We match up to 50% of contributions, up to a stated limit, with all matching contributions being fully vested after one month of service. Our matching contributions under the 401(k) Plan were approximately $2.0 million and $1.8 million for Fiscal 2024 and Fiscal 2023, respectively.

Other Stock-Based Compensation Plans

Beginning January 1, 2018, the Company adopted an ESPP which allows employees to withhold a percentage of their base compensation to purchase the Company’s common stock at 95% of the lower of the fair market price at the beginning of the offering period and on the last trading day of the offering period. There are two offering periods during a calendar year, which consist of the six months beginning each January 1 and July 1. Employees may elect to contribute 1-15% of their eligible gross pay up to a $0.03 million annual stock value limit. During Fiscal 2024 and Fiscal 2023, 173,273 and 180,000 shares, respectively, were purchased.

As of March 31, 2024 and 2023, approximately $0.1 million of cash was restricted for the purchase of shares under the ESPP and is recorded as restricted cash in the accompanying balance sheets.

Deferred Compensation Plan

Effective October 1, 2020, the Company adopted the Iteris, Inc. Non-Qualified Deferred Compensation Plan (the “DC Plan”). The DC Plan consists of two plans, one that is intended to be an unfunded arrangement for eligible key employees who are part of a select group of management or highly compensated employees of the Company within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and one for the benefit of non-employee members of our Board of Directors. Key employees, including our executive officers and our non-employee directors who are notified regarding their eligibility to participate and delivered the DC Plan enrollment materials, are eligible to participate in the DC Plan. Under the DC Plan, we will provide participants with the opportunity to make annual elections to defer a percentage of their eligible cash compensation and equity awards. A participant is always 100% vested in his or her own elective cash deferrals and any earnings thereon. Elective deferrals of equity awards are credited to a bookkeeping account established in the name of the participant with respect to an equivalent number of shares of our common stock, and such credited shares are subject to the same vesting conditions as are applicable to the equity award subject to the election. The Company established a rabbi trust to finance our obligations under the DC Plan with corporate-owned life insurance policies on participants regardless of employment status, and the assets held within this trust are subject to the claims of the Company’s creditors.

As of March 31, 2024, the amount invested under the DC Plan totaled approximately $1.6 million and is classified as trading securities, which are recorded at fair market value with changes recorded as adjustments to other income. This amount is included in prepaid expenses and other current assets on the balance sheets.

As of March 31, 2024, the vested amounts under the DC Plan totaled $1.6 million and are included in accrued payroll and related expenses on the balance sheets. Changes in the deferred compensation plan liabilities are recorded as an adjustment to compensation expense.

As of March 31, 2024, 147,991 equity awards were deferred and held in the rabbi trust. The shares deferred and held in the rabbi trust are classified as treasury stock, and the liability to participating employees is classified as deferred compensation obligations in the stockholders’ equity section of the balance sheets. The number of shares needed to settle the liability for deferred compensation obligations will be included in the denominator in both the basic and diluted earnings per share calculations.