Press release

Itron Announces Fourth Quarter and Full Year 2020 Financial Results and 2021 Guidance

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Sponsored by Businesswire

Itron, Inc. (NASDAQ:ITRI), which is innovating the way utilities and cities manage energy and water, announced today financial results for its fourth quarter and full year ended Dec. 31, 2020. Highlights for the quarter and full year include:

  • Quarterly and full year revenue of $525 million and $2.2 billion;
  • Quarterly and full year gross margin of 28.3% and 27.7%;
  • Quarterly and full year GAAP net income of $22 million and net loss of $(58) million;
  • Quarterly GAAP diluted earnings per share of $0.53 and full year loss per share of $(1.44);
  • Quarterly and full year non-GAAP diluted earnings per share of $0.65 and $1.85;
  • Quarterly and full year adjusted EBITDA of $56 million and $178 million; and
  • Backlog of $3.3 billion and 12-month backlog of $1.2 billion.

“I’m proud of our team’s commitment during a challenging year with the COVID-19 pandemic,” said Tom Deitrich, Itron’s president and chief executive officer. “We have prioritized the health and safety of our employees, customers and the communities we serve, while continuing to execute on our strategy.”

“We are optimistic as we enter 2021 with a record backlog; over 74 million endpoints under management; and over 2.7 million Distributed Intelligent Riva® meters deployed.”

Summary of Fourth Quarter Consolidated Financial Results

(All comparisons made are against the prior year period unless otherwise noted)

Revenue

Total revenue of $525 million decreased 16%, or 18% excluding the impact of changes in foreign currency exchange rates, compared with the fourth quarter of 2019.

By segment, Outcomes revenue increased 14%, driven by higher software license revenue. Networked Solutions revenue decreased 25% and Device Solutions revenue decreased 10%.

Gross Margin

Consolidated gross margin of 28.3% increased 10 basis points compared with the fourth quarter of 2019, driven primarily by higher-margin software license revenue, partially offset by increased inventory reserves.

Operating Income, Net Income and Earnings per Share (EPS)

GAAP operating income increased to $33 million from $29 million in 2019. The increase was due to lower GAAP operating expenses.

Non-GAAP operating income decreased to $44 million from $46 million in 2019. The decrease was due to lower gross profit, partially offset by lower non-GAAP operating expenses, including lower variable compensation.

GAAP net income attributable to Itron, Inc. for the quarter was $22 million, or $0.53 per diluted share, compared with net income of $15 million, or $0.36 per diluted share, in 2019. The higher GAAP net income and EPS was primarily due to higher GAAP operating income.

Non-GAAP net income was $26 million, or $0.65 per diluted share, compared with $29 million, or $0.72 per diluted share in 2019. The decrease was due to lower non-GAAP operating income and a higher non-GAAP effective tax rate due to the mix of taxable income by jurisdiction and fewer discrete tax benefits.

Cash Flow

In the fourth quarter, cash provided by operating activities was $39 million compared with $45 million in 2019. Free cash flow of $29 million increased slightly year over year with a reduction in capital expenditures offsetting the lower operating cash flow.

Other Measures

Bookings were $973 million in the fourth quarter. This is a book to bill ratio of 1.9 to 1 for the quarter. Total backlog was $3.3 billion and 12-month backlog was $1.2 billion at the end of the quarter.

Financial Guidance

Itron’s guidance for the full year 2021 is as follows:

  • Revenue between $2.23 and $2.33 billion
  • Non-GAAP diluted EPS between $2.15 and $2.55

Guidance assumes an average euro to U.S. dollar foreign currency exchange rate of $1.20 in 2021, diluted weighted average shares outstanding of approximately 41 million for the year, non-GAAP interest expense of $36 million and a non-GAAP effective tax rate for the year of approximately 30%.

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. EST on Feb. 24, 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 March 1, 2021. To access the telephone replay, dial (888) 203-1112 (domestic) or (719) 457-0820 (international) and enter passcode 3823454.

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 Annual Report on Form 10-K for the year ended Dec. 31, 2019 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.

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 any vaccine, 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 Itron’s updated risk in Part II, Item 1A: Risk Factors of our latest 10-Q filing with the SEC.

Non-GAAP Financial Information

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, 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. The company believes 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

December 31,

 

Twelve Months Ended

December 31,

 

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Revenues

 

 

 

 

 

 

 

Product revenues

 

$

451,393

 

 

$

556,601

 

 

 

$

1,889,173

 

 

$

2,220,395

 

 

 

Service revenues

 

73,764

 

 

71,782

 

 

 

284,177

 

 

282,075

 

 

 

 

Total revenues

 

525,157

 

 

628,383

 

 

 

2,173,350

 

 

2,502,470

 

 

Cost of revenues

 

 

 

 

 

 

 

Product cost of revenues

 

336,344

 

 

410,797

 

 

 

1,408,615

 

 

1,587,710

 

 

 

Services cost of revenues

 

39,980

 

 

40,148

 

 

 

162,568

 

 

162,441

 

 

 

 

Total cost of revenues

 

376,324

 

 

450,945

 

 

 

1,571,183

 

 

1,750,151

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

148,833

 

 

177,438

 

 

 

602,167

 

 

752,319

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Sales, general and administrative

 

61,902

 

 

82,232

 

 

 

276,920

 

 

346,872

 

 

 

Research and development

 

45,102

 

 

51,649

 

 

 

194,101

 

 

202,200

 

 

 

Amortization of intangible assets

 

11,223

 

 

16,101

 

 

 

44,711

 

 

64,286

 

 

 

Restructuring

 

(4,518

)

 

(1,407

)

 

 

37,013

 

 

6,278

 

 

 

Loss on sale of business

 

2,522

 

 

 

 

 

59,817

 

 

 

 

 

 

Total operating expenses

 

116,231

 

 

148,575

 

 

 

612,562

 

 

619,636

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

32,602

 

 

28,863

 

 

 

(10,395

)

 

132,683

 

 

Other income (expense)

 

 

 

 

 

 

 

Interest income

 

833

 

 

470

 

 

 

2,998

 

 

1,849

 

 

 

Interest expense

 

(10,230

)

 

(12,554

)

 

 

(44,001

)

 

(52,453

)

 

 

Other income (expense), net

 

(1,827

)

 

(2,584

)

 

 

(5,241

)

 

(9,047

)

 

 

 

Total other income (expense)

 

(11,224

)

 

(14,668

)

 

 

(46,244

)

 

(59,651

)

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

21,378

 

 

14,195

 

 

 

(56,639

)

 

73,032

 

 

Income tax benefit (provision)

 

128

 

 

75

 

 

 

(238

)

 

(20,617

)

 

Net income (loss)

 

21,506

 

 

14,270

 

 

 

(56,877

)

 

52,415

 

 

 

Net income (loss) attributable to noncontrolling interests

 

(14

)

 

(350

)

 

 

1,078

 

 

3,409

 

 

Net income (loss) attributable to Itron, Inc.

 

$

21,520

 

 

$

14,620

 

 

 

$

(57,955

)

 

$

49,006

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share – Basic

 

$

0.53

 

 

$

0.37

 

 

 

$

(1.44

)

 

$

1.24

 

 

Net income (loss) per common share – Diluted

 

$

0.53

 

 

$

0.36

 

 

 

$

(1.44

)

 

$

1.23

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

40,412

 

 

39,699

 

 

 

40,253

 

 

39,556

 

 

Weighted average common shares outstanding – Diluted

40,762

40,267

 

40,253

 

39,980

 

 

ITRON, INC.

SEGMENT INFORMATION

 

 

 

 

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Product Revenues

 

 

 

 

 

 

 

Device Solutions

 

$

183,360

 

 

$

203,326

 

 

 

$

684,517

 

 

$

847,580

 

 

 

Networked Solutions

 

250,233

 

 

344,123

 

 

 

1,148,698

 

 

1,322,382

 

 

 

Outcomes

 

17,800

 

 

9,152

 

 

 

55,958

 

 

50,433

 

 

 

 

Total Company

 

$

451,393

 

 

$

556,601

 

 

 

$

1,889,173

 

 

$

2,220,395

 

 

 

 

 

 

 

 

 

 

 

Service Revenues

 

 

 

 

 

 

 

Device Solutions

 

$

3,063

 

 

$

2,728

 

 

 

$

9,478

 

 

$

11,301

 

 

 

Networked Solutions

 

27,185

 

 

24,567

 

 

 

100,704

 

 

94,872

 

 

 

Outcomes

 

43,516

 

 

44,487

 

 

 

173,995

 

 

175,902

 

 

 

 

Total Company

 

$

73,764

 

 

$

71,782

 

 

 

$

284,177

 

 

$

282,075

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

 

 

 

 

 

Device Solutions

 

$

186,423

 

 

$

206,054

 

 

 

$

693,995

 

 

$

858,881

 

 

 

Networked Solutions

 

277,418

 

 

368,690

 

 

 

1,249,402

 

 

1,417,254

 

 

 

Outcomes

 

61,316

 

 

53,639

 

 

 

229,953

 

 

226,335

 

 

 

 

Total Company

 

$

525,157

 

 

$

628,383

 

 

 

$

2,173,350

 

 

$

2,502,470

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

Device Solutions

 

$

22,016

 

 

$

30,111

 

 

 

$

86,859

 

 

$

152,562

 

 

 

Networked Solutions

 

100,538

 

 

130,032

 

 

 

432,906

 

 

518,749

 

 

 

Outcomes

 

26,279

 

 

17,295

 

 

 

82,402

 

 

81,008

 

 

 

 

Total Company

 

$

148,833

 

 

$

177,438

 

 

 

$

602,167

 

 

$

752,319

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

Device Solutions

 

$

12,674

 

 

$

16,036

 

 

 

$

40,769

 

 

$

97,753

 

 

 

Networked Solutions

 

70,633

 

 

98,331

 

 

 

308,099

 

 

397,325

 

 

 

Outcomes

 

18,151

 

 

8,183

 

 

 

47,619

 

 

43,803

 

 

 

Corporate unallocated

 

(68,856

)

 

(93,687

)

 

 

(406,882

)

 

(406,198

)

 

 

 

Total Company

 

$

32,602

 

 

$

28,863

 

 

 

$

(10,395

)

 

$

132,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

December 31, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

206,933

 

 

 

$

149,904

 

 

 

Accounts receivable, net

 

369,828

 

 

 

472,925

 

 

 

Inventories

 

182,377

 

 

 

227,896

 

 

 

Other current assets

 

171,124

 

 

 

146,526

 

 

 

 

Total current assets

 

930,262

 

 

 

997,251

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

207,816

 

 

 

233,228

 

 

Deferred tax assets, net

 

76,142

 

 

 

63,899

 

 

Other long-term assets

 

51,656

 

 

 

44,686

 

 

Operating lease right-of-use assets, net

 

76,276

 

 

 

79,773

 

 

Intangible assets, net

 

132,955

 

 

 

185,097

 

 

Goodwill

 

1,131,916

 

 

 

1,103,907

 

 

 

 

Total assets

 

$

2,607,023

 

 

 

$

2,707,841

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

215,639

 

 

 

$

328,128

 

 

 

Other current liabilities

 

72,591

 

 

 

63,785

 

 

 

Wages and benefits payable

 

86,249

 

 

 

119,220

 

 

 

Taxes payable

 

15,804

 

 

 

22,193

 

 

 

Current portion of debt

 

18,359

 

 

 

 

 

 

Current portion of warranty

 

28,329

 

 

 

38,509

 

 

 

Unearned revenue

 

112,928

 

 

 

99,556

 

 

 

 

Total current liabilities

 

549,899

 

 

 

671,391

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

902,577

 

 

 

932,482

 

 

Long-term warranty

 

13,061

 

 

 

14,732

 

 

Pension benefit obligation

 

119,457

 

 

 

98,712

 

 

Deferred tax liabilities, net

 

1,921

 

 

 

1,809

 

 

Operating lease liabilities

 

66,823

 

 

 

68,919

 

 

Other long-term obligations

 

113,012

 

 

 

118,981

 

 

 

 

Total liabilities

 

1,766,750

 

 

 

1,907,026

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Common stock

 

1,389,419

 

 

 

1,357,600

 

 

 

Accumulated other comprehensive loss, net

 

(138,526

)

 

 

(204,672

)

 

 

Accumulated deficit

 

(434,345

)

 

 

(376,390

)

 

 

 

Total Itron, Inc. shareholders’ equity

 

816,548

 

 

 

776,538

 

 

 

Noncontrolling interests

 

23,725

 

 

 

24,277

 

 

 

 

Total equity

 

840,273

 

 

 

800,815

 

 

Total liabilities and equity

$

2,607,023

 

$

2,707,841

 

 

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

(Unaudited, in thousands)

 

Year Ended

December 31,

 

 

 

 

2020

 

2019

 

Operating activities

 

 

 

 

Net income (loss)

 

$

(56,877

)

 

$

52,415

 

 

 

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

 

 

 

 

 

Depreciation and amortization of intangible assets

 

97,290

 

 

114,400

 

 

 

 

Non-cash operating lease expense

 

18,178

 

 

18,958

 

 

 

 

Stock-based compensation

 

25,053

 

 

26,960

 

 

 

 

Amortization of prepaid debt fees

 

4,130

 

 

5,631

 

 

 

 

Deferred taxes, net

 

(12,939

)

 

(192

)

 

 

 

Loss on sale of business

 

59,817

 

 

 

 

 

 

Restructuring, non-cash

 

5,888

 

 

(1,785

)

 

 

 

Other adjustments, net

 

10,392

 

 

(4,295

)

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

108,256

 

 

(39,467

)

 

 

Inventories

 

35,403

 

 

(9,389

)

 

 

Other current assets

 

(11,832

)

 

(31,128

)

 

 

Other long-term assets

 

(11,391

)

 

7,053

 

 

 

Accounts payable, other current liabilities, and taxes payable

 

(111,724

)

 

9,177

 

 

 

Wages and benefits payable

 

(34,664

)

 

30,835

 

 

 

Unearned revenue

 

8,212

 

 

8,905

 

 

 

Warranty

 

(13,538

)

 

(6,637

)

 

 

Other operating, net

 

(10,140

)

 

(8,601

)

 

 

 

Net cash provided by operating activities

 

109,514

 

 

172,840

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

Net proceeds related to the sale of business

 

1,133

 

 

 

 

 

Acquisitions of property, plant, and equipment

 

(46,208

)

 

(60,749

)

 

 

Other investing, net

 

4,039

 

 

12,569

 

 

 

 

Net cash used in investing activities

 

(41,036

)

 

(48,180

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from borrowings

 

400,000

 

 

50,000

 

 

 

Payments on debt

 

(414,063

)

 

(137,657

)

 

 

Issuance of common stock

 

8,886

 

 

24,390

 

 

 

Repurchase of common stock

 

 

 

(25,000

)

 

 

Prepaid debt fees

 

(1,571

)

 

(1,560

)

 

 

Other financing, net

 

(4,828

)

 

(7,692

)

 

 

 

Net cash used in financing activities

 

(11,576

)

 

(97,519

)

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

127

 

 

435

 

 

Increase in cash, cash equivalents, and restricted cash

 

57,029

 

 

27,576

 

 

Cash, cash equivalents, and restricted cash at beginning of period

 

149,904

 

 

122,328

 

 

Cash, cash equivalents, and restricted cash at end of period

$

206,933

$

149,904

 

  

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, 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 the weighted average shares, on a diluted basis, outstanding during each period. 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.

Adjusted EBITDA – We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation and amortization of intangible assets, 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 accompanying tables have more detail on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures and the related reconciliations between these 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 December 31,

 

Twelve Months Ended December 31,

 

 

 

 

2020

 

2019

 

 

2020

 

2019

 

 

NON-GAAP OPERATING EXPENSES

 

 

 

 

 

 

 

GAAP operating expenses

$

116,231

 

 

$

148,575

 

 

 

$

612,562

 

 

$

619,636

 

 

 

 

 

Amortization of intangible assets

(11,223

)

 

(16,101

)

 

 

(44,711

)

 

(64,286

)

 

 

 

 

Restructuring

4,518

 

 

1,407

 

 

 

(37,013

)

 

(6,278

)

 

 

 

 

Loss on sale of business

(2,522

)

 

 

 

 

(59,817

)

 

 

 

 

 

 

Corporate transition cost

 

 

(907

)

 

 

33

 

 

(2,520

)

 

 

 

 

Acquisition and integration related expense

(1,764

)

 

(2,005

)

 

 

(1,026

)

 

(26,598

)

 

 

 

Non-GAAP operating expenses

$

105,240

 

 

$

130,969

 

 

 

$

470,028

 

 

$

519,954

 

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP OPERATING INCOME

 

 

 

 

 

 

 

GAAP operating income (loss)

$

32,602

 

 

$

28,863

 

 

 

$

(10,395

)

 

$

132,683

 

 

 

 

 

Amortization of intangible assets

11,223

 

 

16,101

 

 

 

44,711

 

 

64,286

 

 

 

 

 

Restructuring

(4,518

)

 

(1,407

)

 

 

37,013

 

 

6,278

 

 

 

 

 

Loss on sale of business

2,522

 

 

 

 

 

59,817

 

 

 

 

 

 

 

Corporate transition cost

 

 

907

 

 

 

(33

)

 

2,520

 

 

 

 

 

Acquisition and integration related expense

1,764

 

 

2,005

 

 

 

1,026

 

 

26,598

 

 

 

 

Non-GAAP operating income

$

43,593

 

 

$

46,469

 

 

 

$

132,139

 

 

$

232,365

 

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP NET INCOME & DILUTED EPS

 

 

 

 

 

 

 

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

$

21,520

 

 

$

14,620

 

 

 

$

(57,955

)

 

$

49,006

 

 

 

 

 

Amortization of intangible assets

11,223

 

 

16,101

 

 

 

44,711

 

 

64,286

 

 

 

 

 

Amortization of debt placement fees

1,056

 

 

1,900

 

 

 

3,954

 

 

5,455

 

 

 

 

 

Restructuring

(4,518

)

 

(1,407

)

 

 

37,013

 

 

6,278

 

 

 

 

 

Loss on sale of business

2,522

 

 

 

 

 

59,817

 

 

 

 

 

 

 

Corporate transition cost

 

 

907

 

 

 

(33

)

 

2,520

 

 

 

 

 

Acquisition and integration related expense

1,764

 

 

2,005

 

 

 

1,026

 

 

26,598

 

 

 

 

 

Income tax effect of non-GAAP adjustments

(7,243

)

 

(5,217

)

 

 

(13,280

)

 

(21,348

)

 

 

 

Non-GAAP net income attributable to Itron, Inc.

$

26,324

 

 

$

28,909

 

 

 

$

75,253

 

 

$

132,795

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted EPS

$

0.65

 

 

$

0.72

 

 

 

$

1.85

 

 

$

3.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Diluted

40,762

 

 

40,267

 

 

 

40,571

 

 

39,980

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED EBITDA

 

 

 

 

 

 

 

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

$

21,520

 

 

$

14,620

 

 

 

$

(57,955

)

 

$

49,006

 

 

 

 

 

Interest income

(833

)

 

(470

)

 

 

(2,998

)

 

(1,849

)

 

 

 

 

Interest expense

10,230

 

 

12,554

 

 

 

44,001

 

 

52,453

 

 

 

 

 

Income tax (benefit) provision

(128

)

 

(75

)

 

 

238

 

 

20,617

 

 

 

 

 

Depreciation and amortization

24,984

 

 

28,709

 

 

 

97,290

 

 

114,400

 

 

 

 

 

Restructuring

(4,518

)

 

(1,407

)

 

 

37,013

 

 

6,278

 

 

 

 

 

Loss on sale of business

2,522

 

 

 

 

 

59,817

 

 

 

 

 

 

 

Corporate transition cost

 

 

907

 

 

 

(33

)

 

2,520

 

 

 

 

 

Acquisition and integration related expense

1,764

 

 

2,005

 

 

 

1,026

 

 

26,598

 

 

 

 

Adjusted EBITDA

$

55,541

 

 

$

56,843

 

 

 

$

178,399

 

 

$

270,023

 

 

 

 

 

 

 

 

 

 

 

 

FREE CASH FLOW

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

38,943

 

 

$

44,740

 

 

 

$

109,514

 

 

$

172,840

 

 

 

 

 

Acquisitions of property, plant, and equipment

(9,911

)

 

(16,179

)

 

 

(46,208

)

 

(60,749

)

 

 

 

Free Cash Flow

$

29,032

 

 

$

28,561

 

 

 

$

63,306

 

 

$

112,091