Itron, Inc. (NASDAQ:ITRI) today announced financial results for
its first quarter ended March 31, 2016. A supplemental presentation
summarizing the results for the first quarter is also available on
the company’s website at www.itron.com. Financial highlights for
the quarter include:
- Revenues of $498 million, an increase
of 11 percent from first quarter 2015, and 15.5 percent excluding
foreign exchange impact;
- Gross margin of 32.8 percent, an
increase of 180 basis points;
- GAAP diluted earnings per share of 26
cents, an increase of 85 percent; and
- Non-GAAP diluted earnings per share of
44 cents, an increase of 100 percent.
“Itron’s first quarter results reflect the strong performance
that we highlighted in our preliminary business update in May,”
said Philip Mezey, Itron’s president and chief executive
officer. “We delivered significant financial improvement in
the quarter while also making investments in product development to
support continued organic growth. Smart grid momentum continues to
accelerate, creating more opportunity for Itron’s innovative
solutions. I am pleased with the solid execution of our strategic
initiatives and our steady operational improvements across all
segments, including the benefits we are realizing from our 2014
restructuring projects.”
Summary of First Quarter Consolidated Financial
Results(All comparisons made are against the prior year period
unless otherwise noted)
Revenue
Total revenue for the quarter grew 11 percent to $498 million
compared with $447 million in 2015. Changes in foreign currency
exchange rates unfavorably impacted revenue by approximately $16
million for the quarter. Excluding the impact of foreign currency,
revenues increased $67 million, or 15.5 percent, with double-digit
growth in each business segment driven by a significant increase in
product volumes in the U.S. and EMEA regions. Total advanced and
smart meter and module shipments increased 28 percent compared with
the first quarter of 2015, including:
- The highest volume of electric smart
meters shipped in the prior 14 quarters,
- A record level of gas smart meter
shipments, and
- A 16.5 percent increase in smart water
meter and module shipments compared with the first quarter of
2015
Gross Margin
Gross margin for the quarter increased to 32.8 percent compared
with the prior year period margin of 31.0 percent. The improvement
in gross margin was driven by increased volumes, favorable product
mix, manufacturing efficiencies and lower special warranty costs in
the Water segment.
Operating Expenses
Operating expenses for the quarter were $140 million compared
with $125 million in 2015. The increase was primarily driven by
increased investments in product development and higher general and
administrative (G&A) costs. G&A increased due to the
settlement of a litigation matter and additional professional fees
associated with the company’s review of software related revenue
recognition and revision of previously issued financial statements
in the 2015 Annual Report on Form 10-K. In addition, restructuring
costs were lower in the prior year period as a result of an expense
reversal. Non-GAAP operating expenses were $131 million, an
increase of $11 million compared with 2015, primarily due to higher
general and administrative and product development costs.
GAAP Operating Income, Net Income,
Earnings per Share
GAAP operating income improved to $24 million for the quarter
compared with $13 million in 2015. Net income for the quarter was
$10 million, or 26 cents per diluted share, compared with $5
million, or 14 cents per diluted share in the prior year period.
The increases in operating income and net income for the quarter
reflected the strong performance in revenue and gross margin.
Non-GAAP Operating Income, Net Income,
Earnings per Share
Non-GAAP operating income improved to $32 million for the
quarter compared with $19 million in 2015. Non-GAAP net income for
the quarter was $17 million, or 44 cents per diluted share,
compared with $9 million, or 22 cents per diluted share in the
prior year period. The increases in non-GAAP operating and net
income for the quarter reflected the strong performance in revenue
and gross margin.
Cash Flow
Net cash provided by operating activities was $34 million in the
first quarter of 2016 compared to a use of $4 million in 2015. Free
cash flow for the quarter increased to $25 million compared with
negative $13 million in the prior year quarter. The increase from
the prior year was driven by lower cash payments related to taxes,
a legal matter settled in the prior year and lower variable
compensation disbursements in 2016.
Other Measures
Total backlog was $1.5 billion and twelve-month backlog was $785
million at the end of the quarter. Bookings in the quarter totaled
$394 million, reflecting a number of diverse bookings in all
segments across many customers.
Update on Forms 10-Q Filings and Second Quarter 2016 Earnings
Conference Call
On Aug. 4, 2016 Itron filed a Form 12b-25, Notification of Late
Filing, with the SEC related to the company’s Form 10-Q for the
second quarter. The company expects to file its Forms 10-Q for the
first and second quarters and host a conference call to discuss
financial results, financial guidance for the full year and provide
an operational update no later than Sept. 12, 2016.
About Itron
Itron is a world-leading technology and services company
dedicated to the resourceful use of energy and water. We provide
comprehensive solutions that measure, manage and analyze energy and
water. Our broad product portfolio includes electricity, gas, water
and thermal energy measurement devices and control technology;
communications systems; software; as well as managed and consulting
services. With thousands of employees supporting nearly 8,000
customers in more than 100 countries, Itron applies knowledge and
technology to better manage energy and water resources. Together,
we can create a more resourceful world. Join us: www.itron.com.
Itron® is a registered trademark of Itron, Inc.
Forward Looking Statements
This release contains forward-looking statements within in the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements relate to the timing of our second quarter Form
10-Q filing, business update and conference call as well as our
expectations about operations, financial performance, sales,
earnings and cash flows. 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. Some of the factors that we believe could
affect our results include the timing and ability to regain
compliance with the reporting obligations of the Securities and
Exchange Commission within any exemption period granted by NASDAQ,
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
and other factors that are more fully described in our Annual
Report on Form 10-K for the year ended December 31, 2015 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 presented 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 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. Specifically, these non-GAAP financial
measures are provided to enhance investors’ overall understanding
of our current financial performance and our future anticipated
performance by excluding infrequent or non-cash costs, particularly
those associated with restructuring and acquisitions. We exclude
certain costs in our non-GAAP financial measures as we believe the
net result is a measure of our core business. Non-GAAP performance
measures should be considered in addition to, and not as a
substitute for, results prepared in accordance with GAAP. 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.
Statements of operations, segment information, balance sheets,
cash flow statements and reconciliations of non-GAAP financial
measures to the most directly comparable GAAP financial measures
follow.
ITRON, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited, in thousands,
except per share data)
Three Months Ended March 31,
2016 2015 Revenues $ 497,590 $
446,746 Cost of revenues 334,387 308,324
Gross profit 163,203 138,422 Operating expenses Sales
and marketing 40,767 41,027 Product development 45,346 41,522
General and administrative 45,069 39,585 Amortization of intangible
assets 6,210 7,973 Restructuring 2,237 (5,181
) Total operating expenses 139,629 124,926
Operating income 23,574 13,496 Other income (expense)
Interest income 271 48 Interest expense (2,918 ) (2,682 ) Other
income (expense), net (1,517 ) 21 Total other
income (expense) (4,164 ) (2,613 ) Income
before income taxes 19,410 10,883 Income tax provision
(8,626 ) (5,030 ) Net income 10,784 5,853 Net income
attributable to non-controlling interests 695
455 Net income attributable to Itron, Inc. $ 10,089 $
5,398 Earnings per common share - Basic $ 0.27
$ 0.14 Earnings per common share - Diluted $ 0.26 $
0.14 Weighted average common shares outstanding -
Basic 38,059 38,442 Weighted average common shares outstanding -
Diluted 38,376 38,758
ITRON, INC. SEGMENT
INFORMATION (Unaudited, in thousands)
Three Months
Ended March 31, 2016 2015
Revenues Electricity $ 217,295 $ 191,840 Gas 139,256
125,081 Water 141,039 129,825 Total
Company $ 497,590 $ 446,746
Gross
profit Electricity $ 64,586 $ 54,204 Gas 48,577 44,037 Water
50,040 40,181 Total Company $ 163,203
$ 138,422
Operating income (loss)
Electricity $ 10,632 $ 1,114 Gas 16,299 14,491 Water 18,076 8,715
Corporate unallocated (21,433 ) (10,824 ) Total
Company $ 23,574 $ 13,496
METER AND MODULE
SUMMARY (Units in thousands)
Three Months Ended March
31, 2016 2015
Meters Standard 4,370 4,740 Advanced and Smart 2,190
1,540 Total meters 6,560
6,280
Stand-alone communication modules
Advanced and Smart 1,460 1,310
ITRON, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
March 31, 2016
December 31, 2015 ASSETS Current assets Cash
and cash equivalents $ 132,615 $ 131,018 Accounts receivable, net
368,432 330,895 Inventories 189,010 190,465 Other current assets
110,996 106,562 Total current
assets 801,053 758,940 Property, plant, and equipment, net
190,004 190,256 Deferred tax assets noncurrent, net 108,161 109,387
Other long-term assets 48,201 51,679 Intangible assets, net 96,386
101,932 Goodwill 475,872 468,122
Total assets $ 1,719,677 $ 1,680,316
LIABILITIES AND EQUITY Current liabilities Accounts payable
$ 201,001 $ 185,827 Other current liabilities 73,753 78,630 Wages
and benefits payable 86,827 76,980 Taxes payable 15,877 14,859
Current portion of debt 11,250 11,250 Current portion of warranty
32,244 36,927 Unearned revenue 96,808
73,301 Total current liabilities 517,760 477,774
Long-term debt 336,908 358,915 Long-term warranty 18,498 17,585
Pension benefit obligation 88,312 85,971 Deferred tax liabilities
noncurrent, net 1,729 1,723 Other long-term obligations
111,242 115,645 Total liabilities
1,074,449 1,057,613 Equity Common stock 1,251,231 1,246,671
Accumulated other comprehensive loss, net (193,425 ) (200,607 )
Accumulated deficit (431,217 ) (441,306 )
Total Itron, Inc. shareholders' equity 626,589 604,758
Non-controlling interests 18,639 17,945
Total equity 645,228 622,703
Total liabilities and equity $ 1,719,677 $
1,680,316
ITRON, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited, in
thousands)
Three Months Ended March 31, 2016
2015 Operating activities Net income $
10,784 $ 5,853 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
16,674 19,355 Stock-based compensation 3,900 4,108 Amortization of
prepaid debt fees 276 390 Deferred taxes, net 4,507 (4,932 )
Restructuring, non-cash 1,114 (110 ) Other adjustments, net 66 337
Changes in operating assets and liabilities: Accounts receivable
(33,308 ) 237 Inventories 3,244 (23,732 ) Other current assets
(5,457 ) (7,888 ) Other long-term assets 2,945 (3,081 ) Accounts
payable, other current liabilities, and taxes payable 10,161 3,760
Wages and benefits payable 9,349 (9,913 ) Unearned revenue 14,343
14,582 Warranty (4,045 ) 2,384 Other operating, net (748 )
(5,305 ) Net cash provided by (used in) operating activities
33,805 (3,955 ) Investing activities Acquisitions of
property, plant, and equipment (8,791 ) (9,472 ) Other investing,
net 558 (118 ) Net cash used in investing
activities (8,233 ) (9,590 ) Financing activities Proceeds
from borrowings - 63,000 Payments on debt (23,406 ) (22,373 )
Issuance of common stock 661 451 Repurchase of common stock -
(16,341 ) Other financing, net (2,290 ) 1,186
Net cash provided by (used in) financing activities (25,035 )
25,923 Effect of foreign exchange rate changes on cash and
cash equivalents 1,060 (6,665 ) Increase in
cash and cash equivalents 1,597 5,713 Cash and cash equivalents at
beginning of period 131,018 112,371
Cash and cash equivalents at end of period $ 132,615 $
118,084
Itron, Inc.
About Non-GAAP Financial Measures
The accompanying press release contains non-GAAP financial
measures. To supplement our consolidated financial statements,
which are prepared and presented 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 and free cash flow. 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. For
more information on these non-GAAP financial measures please see
the table captioned “Reconciliations of Non-GAAP Financial Measures
to Most Directly Comparable GAAP Financial Measures.”
We use these non-GAAP financial measures for financial and
operational decision making and 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. In
addition, management analyzes revenue growth and operational
results on a constant currency basis to assess how our business
performed excluding the effect of foreign currency rate
fluctuations. Our executive compensation plans exclude non-cash
charges related to amortization of intangibles acquired through a
business acquisition and non-recurring discrete cash and non-cash
charges that are infrequent in nature such as purchase accounting
adjustments, restructuring charges or goodwill impairment 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 expense and non-GAAP operating income – We
define non-GAAP operating expense as operating expense excluding
certain expenses related to the amortization of intangible assets
acquired through a business acquisition, restructuring,
acquisitions and goodwill impairment. We define non-GAAP operating
income as operating income excluding the expenses related to the
amortization of intangible assets acquired through a business
acquisition, restructuring, acquisitions and goodwill impairment.
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 previous acquisitions and
restructurings. 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 expense and non-GAAP operating income versus
operating expense and operating income calculated in accordance
with GAAP. Non-GAAP operating expense and non-GAAP operating income
exclude some costs that are recurring. Additionally, the expenses
that we exclude in our calculation of non-GAAP operating expense
and non-GAAP operating income may differ from the expenses that our
peer companies exclude when they report the results of their
operations. We compensate for these limitations by providing
specific information about the GAAP amounts we have excluded from
our 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 GAAP operating income.
Non-GAAP net income and non-GAAP diluted EPS – We define
non-GAAP net income as net income excluding the expenses associated
with amortization of intangible assets acquired through a business
acquisition, restructuring, acquisitions, goodwill impairment and
amortization of debt placement fees. 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 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 business acquisition related intangible asset
expenses, restructuring expense, acquisition related expense,
goodwill impairment and (c) exclude the tax expense or benefit. We
believe that providing this financial measure is important for
management and investors to understand our ability to service our
debt as it is a measure of the cash generated by our core business.
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.
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 may 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
local currencies 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
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 March 31, 2016
2015 NON-GAAP NET INCOME & DILUTED
EPS GAAP net income attributable to Itron, Inc. $ 10,089 $
5,398 Amortization of intangible assets 6,210 7,973 Amortization of
debt placement fees 247 365 Restructuring 2,237 (5,181 )
Acquisition related expenses 3 2,324 Income tax effect of non-GAAP
adjustments (1,955 ) (2,330 ) Non-GAAP net income
attributable to Itron, Inc. $ 16,831 $ 8,549
Non-GAAP diluted EPS $ 0.44 $ 0.22
Weighted average common shares outstanding - Diluted 38,376
38,758
ADJUSTED EBITDA GAAP net
income attributable to Itron, Inc. $ 10,089 $ 5,398 Interest income
(271 ) (48 ) Interest expense 2,918 2,682 Income tax provision
8,626 5,030 Depreciation and amortization 16,674 19,355
Restructuring 2,237 (5,181 ) Acquisition related expenses 3
2,324 Adjusted EBITDA $ 40,276 $ 29,560
FREE CASH FLOW Net cash provided by operating
activities $ 33,805 $ (3,955 ) Acquisitions of property, plant, and
equipment (8,791 ) (9,472 ) Free Cash Flow $ 25,014
$ (13,427 )
NON-GAAP OPERATING INCOME GAAP
operating income $ 23,574 $ 13,496 Amortization of intangible
assets 6,210 7,973 Restructuring 2,237 (5,181 ) Acquisition related
expenses 3 2,324 Non-GAAP operating
income $ 32,024 $ 18,612
NON-GAAP OPERATING
EXPENSE GAAP operating expense $ 139,629 $ 124,926 Amortization
of intangible assets (6,210 ) (7,973 ) Restructuring (2,237 ) 5,181
Acquisition related expenses (3 ) (2,324 ) Non-GAAP
operating expense $ 131,179 $ 119,810
SEGMENT RECONCILIATIONS Three Months Ended March
31, 2016 2015
NON-GAAP OPERATING INCOME - ELECTRICITY Electricity - GAAP
operating income $ 10,632 $ 1,114 Amortization of intangible assets
3,250 4,455 Restructuring 528 (2,762 ) Acquisition related expenses
3 2,324 Electricity - Non-GAAP
operating income $ 14,413 $ 5,131
NON-GAAP
OPERATING INCOME - GAS Gas - GAAP operating income $ 16,299 $
14,491 Amortization of intangible assets 1,619 1,970 Restructuring
1,264 125 Gas - Non-GAAP operating
income $ 19,182 $ 16,586
NON-GAAP OPERATING
INCOME - WATER Water - GAAP operating income $ 18,076 $ 8,715
Amortization of intangible assets 1,341 1,548 Restructuring
(64 ) 117 Water - Non-GAAP operating income $ 19,353
$ 10,380
NON-GAAP OPERATING INCOME -
CORPORATE UNALLOCATED Corporate unallocated - GAAP operating
loss $ (21,433 ) $ (10,824 ) Restructuring 509
(2,661 ) Corporate unallocated - Non-GAAP operating loss $ (20,924
) $ (13,485 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160811006125/en/
Itron, Inc.Barbara Doyle, 509-891-3443Vice President,
Investor RelationsorMarni Pilcher, 509-891-3847Director, Investor
Relations
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