Press Release

Itron Announces First Quarter 2021 Financial Results

May 3, 2021 at 8:30 AM EDT

LIBERTY LAKE, Wash.--(BUSINESS WIRE)--May 3, 2021-- Itron, Inc. (NASDAQ:ITRI) announced today financial results for its first quarter ended March 31, 2021. Key results for the quarter include (compared with the first quarter of 2020):

  • Revenue of $520 million, compared with $598 million;
  • Gross margin of 32.2%; compared with 28.7%;
  • GAAP net income of $13 million, compared with $9 million;
  • GAAP diluted earnings per share (EPS) of $0.30, compared with $0.21;
  • Non-GAAP diluted EPS of $0.52, compared with $0.57;
  • Adjusted EBITDA of $50 million, compared with $52 million;
  • Free cash flow of $39 million, compared with $6 million; and
  • Total backlog of $3.4 billion, compared with $3.0 billion.

"Overall, I am pleased with our ability to execute in what continues to be a challenging environment," said Tom Deitrich, Itron's president and chief executive officer. “While we are continuing to see improvement, business headwinds are likely to persist through the first half of the year."

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

Revenue
Total first quarter revenue decreased 13% to $520 million, or 16%, excluding the impact of changes in foreign currency exchange rates. The decrease was primarily due to the timing of customer projects, which continued to be impacted by COVID-19.

Device Solutions revenue decreased 15%, Networked Solutions revenue decreased 15% and Outcomes revenue increased 6%.

Gross Margin
Consolidated company gross margin of 32.2% increased 350 basis points from the prior year, primarily due to favorable product and solutions mix and operational efficiencies.

Operating Expenses and Operating Income
GAAP operating expenses of $136 million decreased $9 million from the prior year, and non-GAAP operating expenses of $128 million decreased $5 million from the prior year. The decreases were primarily due to continued discipline in discretionary spending.

GAAP operating income of $31 million was $5 million higher than the prior year due to lower operating expenses. Non-GAAP operating income of $39 million was in line with the prior year with lower revenue offset by a reduction in non-GAAP operating expenses.

Net Income and Earnings per Share
Net income attributable to Itron, Inc. for the quarter was $13 million, or $0.30 per diluted share, an increase from net income of $9 million, or $0.21 per diluted share in 2020. The increase was driven by higher GAAP operating income in the current period and a lower GAAP effective tax rate.

Non-GAAP net income, which excludes certain charges including amortization of intangible assets, amortization of debt placement fees, debt extinguishment, restructuring, loss on sale of business, corporate transition cost, acquisition and integration related expenses and the income tax effect of those adjustments, was $22 million, or $0.52 per diluted share, compared with $23 million, or $0.57 per diluted share, in 2020. The lower year-over-year results were due in part to a higher non-GAAP effective tax rate.

Cash Flow
Net cash provided by operating activities was $50 million in the first quarter compared with $19 million in the same quarter of 2020. Free cash flow was $39 million in the first quarter compared with $6 million in the prior year. The year over year improvement in cash flow was due in part to lower variable compensation payments in 2021.

Other Measures

Total backlog was $3.4 billion and 12-month backlog was $1.3 billion, compared with $3.0 billion and $1.3 billion, respectively, in the prior year. Bookings in the quarter totaled $688 million.

Impact of First Quarter Capital Markets Transactions

During the first quarter, Itron completed convertible note and equity offerings to accelerate de-levering and improve strategic and balance sheet flexibility. The completion of these transactions and use of proceeds resulted in changes to the average diluted shares outstanding and interest expense expected for the full year, which impact our non-GAAP EPS guidance range provided on February 24, 2021.

On February 24, 2021, Itron provided full year 2021 non-GAAP EPS guidance in a range of $2.15 to $2.55, with a midpoint of $2.35. That guidance assumed diluted weighted average shares outstanding of approximately 41 million and non-GAAP interest expense of approximately $36 million. Restating that guidance for the impact of the capital markets transactions results in an increase of Non-GAAP EPS expectations of approximately $0.15 per share. This assumes diluted weighted average shares outstanding of 44.7 million and non-GAAP interest expense of approximately $16 million. The resulting restated non-GAAP EPS range for 2021 is $2.30 to $2.70, with a midpoint of $2.50 per share.

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 and guidance contained in this release at 10 a.m. EDT on May 3, 2021. The call will be webcast in a listen-only mode. Webcast information and conference call materials will be made available 10 minutes before the start of the call and will be accessible on Itron’s website at http://investors.itron.com/events.cfm. A replay of the audio webcast will be made available at http://investors.itron.com/events.cfm. A telephone replay of the conference call will be available through May 8, 2021. To access the telephone replay, dial 888-203-1112 or 719-457-0820 and enter passcode 4211257.

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 plan, 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 such as the COVID-19 pandemic and other factors that are more fully described in Part I, Item 1A: Risk Factors included in our 2020 Annual Report and other reports on file with the SEC. We undertake no obligation to update or revise any forward-looking statement, whether written or oral.

The impact caused by the ongoing COVID-19 pandemic includes uncertainty as to the duration, spread, severity, and any resurgence of the COVID-19 pandemic including other factors contributing to infection rates, such as reinfection or mutation of the virus, the effectiveness or widespread availability and application of vaccines, the duration and scope of related government orders and restrictions, impact on overall demand, impact on our customers’ businesses and workforce levels, disruptions of our business and operations, including the impact on our employees, limitations on, or closures of, our facilities, or the business and operations of our customers or suppliers. Our estimates and statements regarding the impact of COVID-19 are made in good faith to provide insight to our current and future operating and financial environment and any of these may materially change due to factors outside our control. For more information on risks associated with the COVID-19 pandemic, please see our risk in Part I, Item 1A: Risk Factors in our 2020 Annual Report.

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, adjusted EBITDA margin, constant currency, and free cash flow. 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.

ITRON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

2020

Revenues

 

 

 

Product revenues

$

442,804

 

 

$

528,137

 

 

 

Service revenues

76,770

 

 

70,278

 

 

 

 

Total revenues

519,574

 

 

598,415

 

 

Cost of revenues

 

 

 

Product cost of revenues

307,691

 

 

384,681

 

 

 

Service cost of revenues

44,839

 

 

42,168

 

 

 

 

Total cost of revenues

352,530

 

 

426,849

 

 

Gross profit

167,044

 

 

171,566

 

 

 

 

 

 

 

Operating expenses

 

 

 

Sales, general and administrative

75,992

 

 

80,498

 

 

 

Research and development

51,727

 

 

53,781

 

 

 

Amortization of intangible assets

8,973

 

 

11,165

 

 

 

Restructuring

(1,980

)

 

(248

)

 

 

Loss on sale of business

1,392

 

 

 

 

 

 

Total operating expenses

136,104

 

 

145,196

 

 

 

 

 

 

 

Operating income

30,940

 

 

26,370

 

 

Other income (expense)

 

 

 

Interest income

542

 

 

553

 

 

 

Interest expense

(10,475

)

 

(11,277

)

 

 

Other income (expense), net

(2,766

)

 

1,066

 

 

 

 

Total other income (expense)

(12,699

)

 

(9,658

)

 

 

 

 

 

 

Income before income taxes

18,241

 

 

16,712

 

 

Income tax provision

(4,661

)

 

(7,550

)

 

Net income

13,580

 

 

9,162

 

 

 

Net income attributable to noncontrolling interests

977

 

 

478

 

 

Net income attributable to Itron, Inc.

$

12,603

 

 

$

8,684

 

 

 

 

 

 

 

Net income per common share - Basic

$

0.30

 

 

$

0.22

 

 

Net income per common share - Diluted

$

0.30

 

 

$

0.21

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic

41,526

 

 

40,043

 

 

Weighted average common shares outstanding - Diluted

41,964

 

 

40,474

 

 

 

ITRON, INC.

SEGMENT INFORMATION

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

2020

Product revenues

 

 

 

Device Solutions

$

170,331

 

 

$

200,168

 

 

 

Networked Solutions

258,703

 

 

315,437

 

 

 

Outcomes

13,770

 

 

12,532

 

 

 

 

Total Company

$

442,804

 

 

$

528,137

 

 

 

 

 

 

 

Service revenues

 

 

 

Device Solutions

$

2,450

 

 

$

2,111

 

 

 

Networked Solutions

29,611

 

 

25,408

 

 

 

Outcomes

44,709

 

 

42,759

 

 

 

 

Total Company

$

76,770

 

 

$

70,278

 

 

 

 

 

 

 

Total revenues

 

 

 

Device Solutions

$

172,781

 

 

$

202,279

 

 

 

Networked Solutions

288,314

 

 

340,845

 

 

 

Outcomes

58,479

 

 

55,291

 

 

 

 

Total Company

$

519,574

 

 

$

598,415

 

 

 

 

 

 

 

Gross profit

 

 

 

Device Solutions

$

32,296

 

 

$

32,367

 

 

 

Networked Solutions

112,759

 

 

121,750

 

 

 

Outcomes

21,989

 

 

17,449

 

 

 

 

Total Company

$

167,044

 

 

$

171,566

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

Device Solutions

$

21,701

 

 

$

18,198

 

 

 

Networked Solutions

79,291

 

 

88,680

 

 

 

Outcomes

10,336

 

 

8,198

 

 

 

Corporate unallocated

(80,388

)

 

(88,706

)

 

 

 

Total Company

$

30,940

 

 

$

26,370

 

 

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

(Unaudited, in thousands)

March 31, 2021

 

December 31, 2020

ASSETS

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

$

574,592

 

 

 

$

206,933

 

 

 

Accounts receivable, net

365,826

 

 

 

369,828

 

 

 

Inventories

169,412

 

 

 

182,377

 

 

 

Other current assets

150,271

 

 

 

171,124

 

 

 

 

Total current assets

1,260,101

 

 

 

930,262

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

199,650

 

 

 

207,816

 

 

Deferred tax assets, net

94,620

 

 

 

76,142

 

 

Other long-term assets

57,599

 

 

 

51,656

 

 

Operating lease right-of-use assets, net

74,815

 

 

 

76,276

 

 

Intangible assets, net

122,861

 

 

 

132,955

 

 

Goodwill

1,118,322

 

 

 

1,131,916

 

 

 

 

Total assets

$

2,927,968

 

 

 

$

2,607,023

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

 

Accounts payable

$

181,606

 

 

 

$

215,639

 

 

 

Other current liabilities

70,890

 

 

 

72,591

 

 

 

Wages and benefits payable

90,383

 

 

 

86,249

 

 

 

Taxes payable

14,256

 

 

 

15,804

 

 

 

Current portion of debt

400,000

 

 

 

18,359

 

 

 

Current portion of warranty

22,024

 

 

 

28,329

 

 

 

Unearned revenue

130,403

 

 

 

112,928

 

 

 

 

Total current liabilities

909,562

 

 

 

549,899

 

 

 

 

 

 

 

 

Long-term debt, net

496,531

 

 

 

902,577

 

 

Long-term warranty

17,310

 

 

 

13,061

 

 

Pension benefit obligation

115,257

 

 

 

119,457

 

 

Deferred tax liabilities, net

1,806

 

 

 

1,921

 

 

Operating lease liabilities

65,822

 

 

 

66,823

 

 

Other long-term obligations

100,512

 

 

 

113,012

 

 

 

 

Total liabilities

1,706,800

 

 

 

1,766,750

 

 

 

 

 

 

 

 

Equity

 

 

 

 

Common stock

1,768,517

 

 

 

1,389,419

 

 

 

Accumulated other comprehensive loss, net

(150,309

)

 

 

(138,526

)

 

 

Accumulated deficit

(421,742

)

 

 

(434,345

)

 

 

 

Total Itron, Inc. shareholders' equity

1,196,466

 

 

 

816,548

 

 

 

Noncontrolling interests

24,702

 

 

 

23,725

 

 

 

 

Total equity

1,221,168

 

 

 

840,273

 

 

 

 

Total liabilities and equity

$

2,927,968

 

 

 

$

2,607,023

 

 

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

(Unaudited, in thousands)

Three Months Ended March 31,

 

 

 

2021

 

2020

Operating activities

 

 

 

 

Net income

$

13,580

 

 

 

$

9,162

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

21,810

 

 

 

24,031

 

 

 

 

Non-cash operating lease expense

4,330

 

 

 

5,496

 

 

 

 

Stock-based compensation

6,498

 

 

 

8,482

 

 

 

 

Amortization of prepaid debt fees

2,695

 

 

 

1,007

 

 

 

 

Deferred taxes, net

2,109

 

 

 

4,062

 

 

 

 

Loss on sale of business

1,392

 

 

 

 

 

 

 

Restructuring, non-cash

(45

)

 

 

(955

)

 

 

 

Other adjustments, net

391

 

 

 

(874

)

 

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

 

 

 

 

Accounts receivable

(2,078

)

 

 

1,185

 

 

 

Inventories

9,008

 

 

 

(543

)

 

 

Other current assets

15,692

 

 

 

(4,526

)

 

 

Other long-term assets

(7,627

)

 

 

(6,501

)

 

 

Accounts payable, other current liabilities, and taxes payable

(26,978

)

 

 

135

 

 

 

Wages and benefits payable

5,458

 

 

 

(19,977

)

 

 

Unearned revenue

18,050

 

 

 

17,395

 

 

 

Warranty

(1,382

)

 

 

(4,250

)

 

 

Other operating, net

(12,948

)

 

 

(14,435

)

 

 

 

Net cash provided by operating activities

49,955

 

 

 

18,894

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

Net proceeds related to the sale of business

2,842

 

 

 

 

 

 

Acquisitions of property, plant, and equipment

(11,412

)

 

 

(12,602

)

 

 

Other investing, net

2,764

 

 

 

3,345

 

 

 

 

Net cash used in investing activities

(5,806

)

 

 

(9,257

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from borrowings

460,000

 

 

 

400,000

 

 

 

Payments on debt

(475,000

)

 

 

 

 

 

Issuance of common stock

2,238

 

 

 

2,911

 

 

 

Proceeds from common stock offering

389,419

 

 

 

 

 

 

Proceeds from sale of warrants

45,349

 

 

 

 

 

 

Purchases of convertible note hedge contracts

(84,139

)

 

 

 

 

 

Repurchase of common stock

 

 

 

(664

)

 

 

Prepaid debt fees

(11,722

)

 

 

(175

)

 

 

Other financing, net

(1,564

)

 

 

(335

)

 

 

 

Net cash provided by financing activities

324,581

 

 

 

401,737

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

(1,071

)

 

 

(6,758

)

 

Increase in cash and cash equivalents

367,659

 

 

 

404,616

 

 

Cash and cash equivalents at beginning of period

206,933

 

 

 

149,904

 

 

Cash and cash equivalents at end of period

$

574,592

 

 

 

$

554,520

 

 

About Non-GAAP Financial Measures

The accompanying press release contains 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 more information on these non-GAAP financial measures, 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 acquisition and integration related expenses, loss on sale of business, or restructuring charges. 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, corporate transition cost, and acquisition and integration. We define non-GAAP operating income as operating income excluding the expenses related to the amortization of intangible assets, restructuring, loss on sale of business, corporate transition cost, 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 related to acquisitions and restructuring projects. 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 attributable to Itron, Inc. excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, debt extinguishment, restructuring, loss on sale of business, corporate transition cost, 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 transaction 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 (a) minus interest income, (b) plus interest expense, depreciation and amortization of intangible assets, debt extinguishment, restructuring, loss on sale of business, corporate transition cost, acquisition and integration related expense, 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 and reconciling to free cash flow.

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,

 

 

 

 

2021

2020

 

NON-GAAP OPERATING EXPENSES

 

 

 

 

GAAP operating expenses

$

136,104

 

 

$

145,196

 

 

 

 

 

Amortization of intangible assets

(8,973

)

 

(11,165

)

 

 

 

 

Restructuring

1,980

 

 

248

 

 

 

 

 

Loss on sale of business

(1,392

)

 

 

 

 

 

 

Corporate transition cost

 

 

40

 

 

 

 

 

Acquisition and integration related expense

377

 

 

(1,272

)

 

 

 

Non-GAAP operating expenses

$

128,096

 

 

$

133,047

 

 

 

 

 

 

 

 

 

NON-GAAP OPERATING INCOME

 

 

 

 

GAAP operating income

$

30,940

 

 

$

26,370

 

 

 

 

 

Amortization of intangible assets

8,973

 

 

11,165

 

 

 

 

 

Restructuring

(1,980

)

 

(248

)

 

 

 

 

Loss on sale of business

1,392

 

 

 

 

 

 

 

Corporate transition cost

 

 

(40

)

 

 

 

 

Acquisition and integration related expense

(377

)

 

1,272

 

 

 

 

Non-GAAP operating income

$

38,948

 

 

$

38,519

 

 

 

 

 

 

 

 

 

NON-GAAP NET INCOME & DILUTED EPS

 

 

 

 

GAAP net income attributable to Itron, Inc.

$

12,603

 

 

$

8,684

 

 

 

 

 

Amortization of intangible assets

8,973

 

 

11,165

 

 

 

 

 

Amortization of debt placement fees

2,652

 

 

963

 

 

 

 

 

Debt extinguishment

1,681

 

 

 

 

 

 

 

Restructuring

(1,980

)

 

(248

)

 

 

 

 

Loss on sale of business

1,392

 

 

 

 

 

 

 

Corporate transition cost

 

 

(40

)

 

 

 

 

Acquisition and integration related expense

(377

)

 

1,272

 

 

 

 

 

Income tax effect of non-GAAP adjustments

(2,997

)

 

1,173

 

 

 

 

Non-GAAP net income attributable to Itron, Inc.

$

21,947

 

 

$

22,969

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted EPS

$

0.52

 

 

$

0.57

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted average common shares outstanding - Diluted

41,964

 

40,474

 

 

 

 

 

 

 

 

ADJUSTED EBITDA

 

 

 

 

GAAP net income attributable to Itron, Inc.

$

12,603

 

 

$

8,684

 

 

 

 

 

Interest income

(542

)

 

(553

)

 

 

 

 

Interest expense

10,475

 

 

11,277

 

 

 

 

 

Income tax provision

4,661

 

 

7,550

 

 

 

 

 

Debt extinguishment

1,681

 

 

 

 

 

 

 

Depreciation and amortization

21,810

 

 

24,031

 

 

 

 

 

Restructuring

(1,980

)

 

(248

)

 

 

 

 

Loss on sale of business

1,392

 

 

 

 

 

 

 

Corporate transition cost

 

 

(40

)

 

 

 

 

Acquisition and integration related expense

(377

)

 

1,272

 

 

 

 

Adjusted EBITDA

$

49,723

 

 

$

51,973

 

 

 

 

 

 

 

 

 

FREE CASH FLOW

 

 

 

 

 

Net cash provided by operating activities

$

49,955

 

 

$

18,894

 

 

 

 

 

Acquisitions of property, plant, and equipment

(11,412

)

 

(12,602

)

 

 

 

Free Cash Flow

$

38,543

 

 

$

6,292

 

 

 

Itron, Inc.
Kenneth P. Gianella
Vice President, Investor Relations
(669) 770-4643

Rebecca Hussey
Manager, Investor Relations
(509) 891-3574

Source: Itron, Inc.

 

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