Itron Announces First Quarter 2021 Financial Results

Rhea-AI Summary

Itron, Inc. (NASDAQ:ITRI) reported first quarter 2021 results, showing a 13% decline in revenue to $520 million compared to $598 million in 2020. Gross margin improved to 32.2% from 28.7%, and GAAP net income rose to $13 million or $0.30 EPS, up from $9 million or $0.21 EPS a year earlier. Non-GAAP diluted EPS declined to $0.52 from $0.57. Free cash flow significantly increased to $39 million from $6 million. The total backlog rose to $3.4 billion.

Positive

• Gross margin increased to 32.2%, up 350 basis points.
• GAAP net income rose to $13 million, marking an increase from $9 million.
• Free cash flow improved significantly to $39 million from $6 million.
• Total backlog increased to $3.4 billion, up from $3.0 billion.

Negative

• Revenue decreased by 13% to $520 million, significantly affected by COVID-19.
• Non-GAAP diluted EPS fell to $0.52 from $0.57 due to a higher effective tax rate.

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		)

FAQ

What were Itron's first quarter 2021 revenue results?

Itron reported first quarter 2021 revenue of $520 million, down 13% compared to $598 million in the same period last year.

How did Itron's gross margin perform in the first quarter of 2021?

Itron's gross margin increased to 32.2% in the first quarter of 2021, up from 28.7% a year earlier.

What was Itron's non-GAAP EPS for the first quarter of 2021?

Itron's non-GAAP diluted EPS for the first quarter of 2021 was $0.52, a decline from $0.57 in the previous year.

What is Itron's total backlog as of March 31, 2021?

As of March 31, 2021, Itron's total backlog was $3.4 billion, compared to $3.0 billion a year prior.

What adjustments were made to Itron's 2021 EPS guidance?

Itron adjusted its 2021 non-GAAP EPS guidance to a range of $2.30 to $2.70, up from the previous midpoint of $2.35.