UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 
May 4, 2023
Date of Report (Date of Earliest Event Reported)

ITRON, INC.
(Exact Name of Registrant as Specified in its Charter)

Washington
 
000-22418
 
91-1011792
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)

2111 N. Molter Road, Liberty Lake, Washington 99019
(Address of Principal Executive Offices, Zip Code)

(509) 924-9900
(Registrant's Telephone Number, Including Area Code)

 
(Former Name or Former Address, if Changed Since Last Report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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, no par value   ITRI
  NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).

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. ☐

Item 2.02
Results of Operations and Financial Condition.

On May 4, 2023, Itron, Inc. issued a press release announcing its financial results for the three months ended March 31, 2023. A copy of this press release and accompanying financial statements are attached as Exhibit 99.1.

Item 9.01
Financial Statements and Exhibits.

(d)            Exhibits.

Exhibit
Number
 
Description
     
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)
     
   
*This exhibit is intended to be furnished and shall not be deemed "filed" for purposes of the Exchange Act.
 
Forward Looking Statements
This release contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements are based on our expectations about, among others, revenues, operations, financial performance, earnings, liquidity, earnings per share, cash flows and restructuring activities including headcount reductions and other cost savings initiatives. This document reflects our current strategy, plans and expectations and is based on information currently available as of the date of this release. When we use words such as "expect", "intend", "anticipate", "believe", "plan", "goal", "seek", "project", "estimate", "future", "strategy", "objective", "may", "likely", "should", "will", "will continue", and similar expressions, including related to future periods, they are intended to identify forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to execute on our restructuring plans, our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks, uncertainties caused by adverse economic conditions, including without limitation those resulting from extraordinary events or circumstances and other factors that are more fully described in Part I, Item 1A: Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2022 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update or revise any information in this press release.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
   
ITRON, INC.
 
         
   
By:
/s/ JOAN S. HOOPER
 
May 4, 2023
   
Joan S. Hooper
 
Date
   
Senior Vice President and Chief Financial Officer
 

Exhibit 99.1

Itron Announces First Quarter 2023 Financial Results

LIBERTY LAKE, Wash.--(BUSINESS WIRE)--May 4, 2023--Itron, Inc. (NASDAQ: ITRI), which is innovating the way utilities and cities manage energy and water, announced today financial results for its first quarter ended Mar. 31, 2023. Key results for the quarter include (compared with the first quarter of 2022):

  • Revenue of $495 million, increased 4%;
  • Gross profit of $156 million, increased 16%;
  • GAAP net loss of $12 million, a decrease of $13 million;
  • GAAP loss per share of $0.26, a decrease of $0.28 per share;
  • Non-GAAP diluted EPS of $0.49, increased $0.38 per share;
  • Adjusted EBITDA of $39 million, increased 109%; and
  • Total backlog of $4.6 billion increased 17%.

“Itron’s first quarter results benefited from strong operational execution, underpinned by improved component supply,” said Tom Deitrich, Itron’s president and CEO. “All three of our segments improved their profitability year over year.

“We are pleased with the building momentum to begin the year and remain mindful of some continued supply chain volatility and persistent inflation. We expect these factors to improve over time but are prepared for elevated levels of ongoing risks.

“The long-term trends of electrification in the economy, needed investment in critical infrastructure reliability, climate volatility, and the growth of distributed energy resources are presenting challenges that Itron is uniquely positioned to address. As the urgency around these issues increases, the demand for grid edge intelligence will only expand. Itron’s leading technology will ensure that our customers can address these increasing demands.”


Summary of First Quarter Consolidated Financial Results
(All comparisons made are against the prior year period unless otherwise noted)

Revenue

Total first quarter revenue increased 4% to $495 million, or 6%, excluding the impact of changes in foreign currency exchange rates. The increase was due to improved component supply, strong operational execution, and higher software license sales.

Device Solutions revenue declined 15% or 11% in constant currency due to the sale of mechanical C&I gas business and discontinuation of certain product lines.

Networked Solutions revenue increased 12% due to increased product shipments and higher installation and other services.

Outcomes revenue increased 10% due to higher software license sales and managed services.

Gross Margin

Consolidated company gross margin of 31.6% increased 320 basis points from the prior year due to favorable mix and operational efficiencies.

Operating Expenses and Operating Income (Loss)

GAAP operating expenses of $167 million increased $38 million from the prior year primarily due to a restructuring charge from the company's new plan announced in February. Non-GAAP operating expenses of $125 million decreased $1 million from the prior year.

GAAP operating loss of $(10) million was $17 million lower than the prior year due to higher operating expenses related to the new restructuring plan announced in February, partially offset by higher gross profit. Non-GAAP operating income of $31 million was $22 million higher than the prior year due to higher gross profit.

Net Income (Loss) and Earnings (Loss) per Share

Net loss attributable to Itron, Inc. for the quarter was $(12) million, or $(0.26) per share, compared with net income of $1 million, or $0.02 per diluted share in 2022. The decrease was driven by lower GAAP operating income.

Non-GAAP net income, which excludes the expenses associated with amortization of intangible assets, amortization of debt placement fees, restructuring, loss on sale of business, acquisition and integration, and the tax effect of excluding these expenses, was $22 million, or $0.49 per diluted share, compared with $5 million, or $0.11 per diluted share, in 2022. The higher year-over-year results were due to higher non-GAAP operating income.

Cash Flow

Net cash provided by operating activities was $1 million in the first quarter compared with $8 million in the prior year. Free cash flow was $(5) million in the first quarter compared with $2 million in the prior year. The decrease in cash flow was due to working capital outflow, partially offset by higher non-GAAP EBITDA.


Other Measures

Total backlog at quarter end was $4.6 billion compared with $3.9 billion in the prior year. Bookings in the quarter totaled $428 million.

Q2 2023 Outlook

Outlook for the second quarter of 2023 is as follows:

  • Revenue between $510 and $525 million
  • Non-GAAP diluted EPS between $0.25 and $0.35

A reconciliation of forward-looking non-GAAP diluted EPS to the GAAP diluted EPS has not been provided because we are unable to predict with reasonable certainty the potential amount or timing of restructuring and acquisition and integration related expenses and their related tax effects without unreasonable effort. These items are uncertain, depend on various factors and could have a material impact on GAAP results for the guidance period.

Earnings Conference Call

Itron will host a conference call to discuss the financial results contained in this release at 10 a.m. EDT on May 4, 2023. The call will be webcast in a listen-only mode. The webcast, along with a supplemental presentation, may be accessed from the company’s website at https://investors.itron.com/events.cfm. Participants should access the webcast 10 minutes prior to the start of the call. A webcast replay of the conference call will be available through May 10, 2023 and may be accessed on the company's website at http://investors.itron.com/events.cfm.

About Itron

Itron® enables utilities and cities to safely, securely and reliably deliver critical infrastructure services to communities in more than 100 countries. Our portfolio of smart networks, software, services, meters and sensors helps our customers better manage electricity, gas and water resources for the people they serve. By working with our customers to ensure their success, we help improve the quality of life, ensure the safety and promote the well-being of millions of people around the globe. Itron is dedicated to creating a more resourceful world. Join us: www.itron.com.

Itron® is a registered trademark of Itron, Inc. All third-party trademarks are property of their respective owners and any usage herein does not suggest or imply any relationship between Itron and the third party unless expressly stated.


Cautionary Note Regarding Forward Looking Statements

This release contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements are based on our expectations about, among others, revenues, operations, financial performance, earnings, liquidity, earnings per share, cash flows and restructuring activities including headcount reductions and other cost savings initiatives. This document reflects our current strategy, plans and expectations and is based on information currently available as of the date of this release. When we use words such as "expect", "intend", "anticipate", "believe", "plan", "goal", "seek", "project", "estimate", "future", "strategy", "objective", "may", "likely", "should", "will", "will continue", and similar expressions, including related to future periods, they are intended to identify forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to execute on our restructuring plans, our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks, uncertainties caused by adverse economic conditions, including without limitation those resulting from extraordinary events or circumstances and other factors that are more fully described in Part I, Item 1A: Risk Factors included in our Annual Report on Form 10-K for the year ended Dec. 31, 2022 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update or revise any information in this press release.

Non-GAAP Financial Information

To supplement our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (GAAP), we use certain adjusted or non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share (EPS), adjusted EBITDA, free cash flow, and constant currency. We provide these non-GAAP financial measures because we believe they provide greater transparency and represent supplemental information used by management in its financial and operational decision making. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies. A more detailed discussion of why we use non-GAAP financial measures, the limitations of using such measures, and reconciliations between non-GAAP and the nearest GAAP financial measures are included in this press release.


ITRON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 


 


 

(Unaudited, in thousands, except per share data)

 


Three Months Ended March 31,

 


2023


2022

Revenues


 


 

Product revenues


$

416,324

 


$

399,810

 

Service revenues


 

78,294

 


 

75,521

 

Total revenues


 

494,618

 


 

475,331

 

Cost of revenues


 


 

Product cost of revenues


 

297,343

 


 

294,820

 

Service cost of revenues


 

40,907

 


 

45,287

 

Total cost of revenues


 

338,250

 


 

340,107

 

Gross profit


 

156,368

 


 

135,224

 

 


 


 

Operating expenses


 


 

Sales, general and administrative


 

75,521

 


 

76,401

 

Research and development


 

49,565

 


 

49,596

 

Amortization of intangible assets


 

5,048

 


 

6,553

 

Restructuring


 

36,609

 


 

(6,366

)

Loss on sale of business


 

18

 


 

2,221

 

Total operating expenses


 

166,761

 


 

128,405

 

 


 


 

Operating income (loss)


 

(10,393

)


 

6,819

 

Other income (expense)


 


 

Interest income


 

1,818

 


 

217

 

Interest expense


 

(2,057

)


 

(1,592

)

Other income (expense), net


 

(1,475

)


 

(689

)

Total other income (expense)


 

(1,714

)


 

(2,064

)

 


 


 

Income (loss) before income taxes


 

(12,107

)


 

4,755

 

Income tax benefit (provision)


 

70

 


 

(3,859

)

Net income (loss)


 

(12,037

)


 

896

 

Net loss attributable to noncontrolling interests


 

(201

)


 

(10

)

Net income (loss) attributable to Itron, Inc.


$

(11,836

)


$

906

 

 


 


 

Net income (loss) per common share - Basic


$

(0.26

)


$

0.02

 

Net income (loss) per common share - Diluted


$

(0.26

)


$

0.02

 

 


 


 

Weighted average common shares outstanding - Basic


 

45,281

 


 

45,018

 

Weighted average common shares outstanding - Diluted


 

45,281

 


 

45,240

 


ITRON, INC.

SEGMENT INFORMATION

 


 


 

(Unaudited, in thousands)


 


 

 


Three Months Ended March 31,

 


2023


2022

Product revenues


 


 

Device Solutions


$

117,451

 


$

137,886

 

Networked Solutions


 

281,470

 


 

249,268

 

Outcomes


 

17,403

 


 

12,656

 

Total Company


$

416,324

 


$

399,810

 

 


 


 

Service revenues


 


 

Device Solutions


$

803

 


$

1,679

 

Networked Solutions


 

31,998

 


 

29,552

 

Outcomes


 

45,493

 


 

44,290

 

Total Company


$

78,294

 


$

75,521

 

 


 


 

Total revenues


 


 

Device Solutions


$

118,254

 


$

139,565

 

Networked Solutions


 

313,468

 


 

278,820

 

Outcomes


 

62,896

 


 

56,946

 

Total Company


$

494,618

 


$

475,331

 

 


 


 

Gross profit


 


 

Device Solutions


$

23,713

 


$

21,806

 

Networked Solutions


 

105,776

 


 

91,351

 

Outcomes


 

26,879

 


 

22,067

 

Total Company


$

156,368

 


$

135,224

 

 


 


 

Operating income (loss)


 


 

Device Solutions


$

14,078

 


$

11,578

 

Networked Solutions


 

74,956

 


 

61,007

 

Outcomes


 

12,911

 


 

8,341

 

Corporate unallocated


 

(112,338

)


 

(74,107

)

Total Company


$

(10,393

)


$

6,819

 


ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 


 


 

(Unaudited, in thousands)


March 31, 2023


December 31, 2022

ASSETS


 


 

Current assets


 


 

Cash and cash equivalents


$

196,013

 


$

202,007

 

Accounts receivable, net


 

305,275

 


 

280,435

 

Inventories


 

265,122

 


 

228,701

 

Other current assets


 

135,646

 


 

118,441

 

Total current assets


 

902,056

 


 

829,584

 

 


 


 

Property, plant, and equipment, net


 

136,397

 


 

140,123

 

Deferred tax assets, net


 

215,745

 


 

211,982

 

Other long-term assets


 

37,857

 


 

39,901

 

Operating lease right-of-use assets, net


 

49,147

 


 

52,826

 

Intangible assets, net


 

60,052

 


 

64,941

 

Goodwill


 

1,044,661

 


 

1,038,721

 

Total assets


$

2,445,915

 


$

2,378,078

 

 


 


 

LIABILITIES AND EQUITY


 


 

Current liabilities


 


 

Accounts payable


$

244,820

 


$

237,178

 

Other current liabilities


 

44,096

 


 

42,869

 

Wages and benefits payable


 

77,165

 


 

89,431

 

Taxes payable


 

21,481

 


 

15,324

 

Current portion of warranty


 

17,829

 


 

18,203

 

Unearned revenue


 

131,164

 


 

95,567

 

Total current liabilities


 

536,555

 


 

498,572

 

 


 


 

Long-term debt, net


 

453,094

 


 

452,526

 

Long-term warranty


 

7,002

 


 

7,495

 

Pension benefit obligation


 

59,127

 


 

57,839

 

Deferred tax liabilities, net


 

849

 


 

833

 

Operating lease liabilities


 

40,294

 


 

44,370

 

Other long-term obligations


 

154,851

 


 

124,887

 

Total liabilities


 

1,251,772

 


 

1,186,522

 

 


 


 

Equity


 


 

Common stock


 

1,796,005

 


 

1,788,479

 

Accumulated other comprehensive loss, net


 

(87,555

)


 

(94,674

)

Accumulated deficit


 

(537,168

)


 

(525,332

)

Total Itron, Inc. shareholders' equity


 

1,171,282

 


 

1,168,473

 

Noncontrolling interests


 

22,861

 


 

23,083

 

Total equity


 

1,194,143

 


 

1,191,556

 

Total liabilities and equity


$

2,445,915

 


$

2,378,078

 


ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 


 


 

(Unaudited, in thousands)


Three Months Ended March 31,

 


2023


2022

Operating activities


 


 

Net income (loss)


$

(12,037

)


$

896

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:


 


 

Depreciation and amortization of intangible assets


 

14,463

 


 

16,837

 

Non-cash operating lease expense


 

3,972

 


 

4,113

 

Stock-based compensation


 

6,919

 


 

6,127

 

Amortization of prepaid debt fees


 

889

 


 

839

 

Deferred taxes, net


 

(4,272

)


 

(4,362

)

Loss on sale of business


 

18

 


 

2,221

 

Restructuring, non-cash


 

1,070

 


 

390

 

Other adjustments, net


 

56

 


 

137

 









 

Changes in operating assets and liabilities, net of acquisition and sale of business:


 


 

Accounts receivable


 

(22,497

)


 

(8,816

)

Inventories


 

(34,791

)


 

(6,345

)

Other current assets


 

(17,129

)


 

(11,899

)

Other long-term assets


 

3,002

 


 

(2,887

)

Accounts payable, other current liabilities, and taxes payable


 

15,113

 


 

17,778

 

Wages and benefits payable


 

(12,895

)


 

(26,185

)

Unearned revenue


 

34,471

 


 

35,320

 

Warranty


 

(1,041

)


 

(928

)

Restructuring


 

33,209

 


 

(13,167

)

Other operating, net


 

(7,091

)


 

(2,478

)

Net cash provided by operating activities


 

1,429

 


 

7,591

 

 


 


 

Investing activities


 


 

Net proceeds (payments) related to the sale of business


 

(772

)


 

55,933

 

Acquisitions of property, plant, and equipment


 

(6,902

)


 

(5,369

)

Business acquisitions, net of cash and cash equivalents acquired


 

 


 

23

 

Other investing, net


 

16

 


 

362

 

Net cash provided by (used in) investing activities


 

(7,658

)


 

50,949

 

 


 


 

Financing activities


 


 

Issuance of common stock


 

607

 


 

784

 

Repurchase of common stock


 

 


 

(16,972

)

Prepaid debt fees


 

(517

)


 

(695

)

Other financing, net


 

(185

)


 

(222

)

Net cash used in financing activities


 

(95

)


 

(17,105

)

 


 


 

Effect of foreign exchange rate changes on cash and cash equivalents


 

330

 


 

(17

)

Increase (decrease) in cash and cash equivalents


 

(5,994

)


 

41,418

 

Cash and cash equivalents at beginning of period


 

202,007

 


 

162,579

 

Cash and cash equivalents at end of period


$

196,013

 


$

203,997

 


About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared in accordance with GAAP, we use certain non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, adjusted EBITDA, free cash flow, and constant currency. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and other companies may define such measures differently. For a reconciliation of each non-GAAP measure to the most comparable financial measure prepared and presented in accordance with GAAP, please see the table captioned Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures.

We use these non-GAAP financial measures for financial and operational decision making and/or as a means for determining executive compensation. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and ability to service debt by excluding certain expenses that may not be indicative of our recurring core operating results. These non-GAAP financial measures facilitate management's internal comparisons to our historical performance, as well as comparisons to our competitors' operating results. Our executive compensation plans exclude non-cash charges related to amortization of intangibles and certain discrete cash and non-cash charges, such as restructuring, loss on sale of business, or acquisition and integration related expenses. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they provide greater transparency with respect to key metrics used by management in its financial and operational decision making and because they are used by our institutional investors and the analyst community to analyze the health of our business.

Non-GAAP operating expenses and non-GAAP operating income – We define non-GAAP operating expenses as operating expenses excluding certain expenses related to the amortization of intangible assets, restructuring, loss on sale of business, and acquisition and integration. We define non-GAAP operating income as operating income (loss) excluding the expenses related to the amortization of intangible assets, restructuring, loss on sale of business, and acquisition and integration. Acquisition and integration related expenses include costs, which are incurred to affect and integrate business combinations, such as professional fees, certain employee retention and salaries related to integration, severances, contract terminations, travel costs related to knowledge transfer, system conversion costs, and asset impairment charges. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of expenses that are not related to our core operating results. By excluding these expenses, we believe that it is easier for management and investors to compare our financial results over multiple periods and analyze trends in our operations. For example, in certain periods, expenses related to amortization of intangible assets may decrease, which would improve GAAP operating margins, yet the improvement in GAAP operating margins due to this lower expense is not necessarily reflective of an improvement in our core business. There are some limitations related to the use of non-GAAP operating expenses and non-GAAP operating income versus operating expenses and operating income calculated in accordance with GAAP. We compensate for these limitations by providing specific information about the GAAP amounts excluded from non-GAAP operating expense and non-GAAP operating income and evaluating non-GAAP operating expense and non-GAAP operating income together with GAAP operating expense and operating income.


Non-GAAP net income and non-GAAP diluted EPS – We define non-GAAP net income as net income (loss) attributable to Itron, Inc. excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, restructuring, loss on sale of business, acquisition and integration, and the tax effect of excluding these expenses. We define non-GAAP diluted EPS as non-GAAP net income divided by diluted weighted-average shares outstanding during the period calculated on a GAAP basis and then reduced to reflect the anti-dilutive impact of the convertible note hedge transactions entered into in connection with the 0% convertible notes due 2026 issued in March 2021. We consider these financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income. The same limitations described above regarding our use of non-GAAP operating income apply to our use of non-GAAP net income and non-GAAP diluted EPS. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP measures and evaluating non-GAAP net income and non-GAAP diluted EPS together with GAAP net income attributable to Itron, Inc. and GAAP diluted EPS.

For interim periods the budgeted annual effective tax rate (AETR) is used, adjusted for any discrete items, as defined in Accounting Standards Codification (ASC) 740 - Income Taxes. The budgeted AETR is determined at the beginning of the fiscal year. The AETR is revised throughout the year based on changes to our full-year forecast. If the revised AETR increases or decreases by 200 basis points or more from the budgeted AETR due to changes in the full-year forecast during the year, the revised AETR is used in place of the budgeted AETR beginning with the quarter the 200 basis point threshold is exceeded and going forward for all subsequent interim quarters in the year. We continue to assess the AETR based on latest forecast throughout the year and use the most recent AETR anytime it increases or decreases by 200 basis points or more from the prior interim period.

Adjusted EBITDA – We define adjusted EBITDA as net income (loss) (a) minus interest income, (b) plus interest expense, depreciation and amortization, restructuring, loss on sale of business, acquisition and integration, and (c) excluding income tax provision or benefit. Management uses adjusted EBITDA as a performance measure for executive compensation. A limitation to using adjusted EBITDA is that it does not represent the total increase or decrease in the cash balance for the period and the measure includes some non-cash items and excludes other non-cash items. Additionally, the items that we exclude in our calculation of adjusted EBITDA may differ from the items that our peer companies exclude when they report their results. We compensate for these limitations by providing a reconciliation of this measure to GAAP net income (loss).


Free cash flow – We define free cash flow as net cash provided by operating activities less cash used for acquisitions of property, plant and equipment. We believe free cash flow provides investors with a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt. The same limitations described above regarding our use of adjusted EBITDA apply to our use of free cash flow. We compensate for these limitations by providing specific information regarding the GAAP amounts in the reconciliation.

Constant currency – We refer to the impact of foreign currency exchange rate fluctuations in our discussions of financial results, which references the differences between the foreign currency exchange rates used to translate operating results from the entity's functional currency into U.S. dollars for financial reporting purposes. We also use the term "constant currency", which represents financial results adjusted to exclude changes in foreign currency exchange rates as compared with the rates in the comparable prior year period. We calculate the constant currency change as the difference between the current period results and the comparable prior period's results restated using current period foreign currency exchange rates.


The tables below reconcile the non-GAAP financial measures of operating expenses, operating income, net income, diluted EPS, adjusted EBITDA, and free cash flow with the most directly comparable GAAP financial measures.

ITRON, INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share data)


 


 

TOTAL COMPANY RECONCILIATIONS


Three Months Ended March 31,

 


2023


2022

NON-GAAP OPERATING EXPENSES


 


 

GAAP operating expenses


$

166,761

 


$

128,405

 

Amortization of intangible assets


 

(5,048

)


 

(6,553

)

Restructuring


 

(36,609

)


 

6,366

 

Loss on sale of business


 

(18

)


 

(2,221

)

Acquisition and integration


 

(45

)


 

(62

)

Non-GAAP operating expenses


$

125,041

 


$

125,935

 

 


 


 

NON-GAAP OPERATING INCOME


 


 

GAAP operating income (loss)


$

(10,393

)


$

6,819

 

Amortization of intangible assets


 

5,048

 


 

6,553

 

Restructuring


 

36,609

 


 

(6,366

)

Loss on sale of business


 

18

 


 

2,221

 

Acquisition and integration


 

45

 


 

62

 

Non-GAAP operating income


$

31,327

 


$

9,289

 

 


 


 

NON-GAAP NET INCOME & DILUTED EPS


 


 

GAAP net income (loss) attributable to Itron, Inc.


$

(11,836

)


$

906

 

Amortization of intangible assets


 

5,048

 


 

6,553

 

Amortization of debt placement fees


 

845

 


 

796

 

Restructuring


 

36,609

 


 

(6,366

)

Loss on sale of business


 

18

 


 

2,221

 

Acquisition and integration


 

45

 


 

62

 

Income tax effect of non-GAAP adjustments


 

(8,347

)


 

999

 

Non-GAAP net income attributable to Itron, Inc.


$

22,382

 


$

5,171

 

 


 


 

Non-GAAP diluted EPS


$

0.49

 


$

0.11

 

 


 


 

Non-GAAP weighted average common shares outstanding - Diluted


 

45,572

 


 

45,240

 

 


 


 

ADJUSTED EBITDA


 


 

GAAP net income (loss) attributable to Itron, Inc.


$

(11,836

)


$

906

 

Interest income


 

(1,818

)


 

(217

)

Interest expense


 

2,057

 


 

1,592

 

Income tax provision (benefit)


 

(70

)


 

3,859

 

Depreciation and amortization


 

14,463

 


 

16,837

 

Restructuring


 

36,609

 


 

(6,366

)

Loss on sale of business


 

18

 


 

2,221

 

Acquisition and integration


 

45

 


 

62

 

Adjusted EBITDA


$

39,468

 


$

18,894

 

 


 


 

FREE CASH FLOW


 


 

Net cash provided by operating activities


$

1,429

 


$

7,591

 

Acquisitions of property, plant, and equipment


 

(6,902

)


 

(5,369

)

Free Cash Flow


$

(5,473

)


$

2,222

 

 

Contacts

For additional information, contact:

Itron, Inc.
Paul Vincent
Vice President, Investor Relations
(512) 560-1172

David Means
Director, Investor Relations
(737) 242-8448