Itron, Inc. (NASDAQ:ITRI), which is innovating new ways for utilities and cities to manage energy and water, announced financial results for its fourth quarter and full year ended Dec. 31, 2023. Key results for the quarter and full year include (compared with the fourth quarter and full year of 2022):

  • Revenue of $577 million and $2.2 billion, increased 23% and 21%;
  • Gross profit of $196 million and $714 million, increased 39% and 37%;
  • GAAP net income attributable to Itron, Inc. of $44 million and $97 million, increased $22 million and $107 million;
  • GAAP diluted earnings per share of $0.96 and $2.11, increased $0.47 and $2.33;
  • Non-GAAP diluted EPS of $1.23 and $3.36, increased $0.52 and $2.23;
  • Adjusted EBITDA of $68 million and $226 million, increased 99% and 137%; and
  • Free cash flow of $39 million and $98 million, increased $57 million and $93 million

“Itron’s fourth quarter results were very strong, and we concluded 2023 with good operational momentum.” said Tom Deitrich, Itron’s president and CEO. “Our operations remained efficient and critical supply availability continued to improve resulting in record quarterly revenue levels for our Networked Solutions and Outcomes segments.

“We have entered a new era of complexity for the responsible, reliable management of energy and water resources, and Itron’s leadership in providing grid edge intelligence, data insights, analytics and automation are essential to our customers' success. Our solutions address this complexity head on and support our customers' efforts to modernize critical infrastructure.”

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

Revenue

Total fourth quarter revenue increased 23%, to $577 million. The increase was due to strong operational execution and improved supply chain conditions, which enabled higher customer deliveries.

Device Solutions revenue increased 13%, or 9% in constant currency, due primarily to increased demand for smart water meters and communication modules.

Networked Solutions revenue increased 30%, due to higher activity levels associated with ongoing and new deployments enabled by improved supply chain conditions.

Outcomes revenue increased 10%, or 9% in constant currency, due primarily to increased recurring and one-time services, partially offset by decreased software license activity during the quarter.

Gross Margin

Total company gross margin of 34.0% increased 390 basis points due to cost efficiencies and a higher margin product mix.

Operating Expenses and Operating Income

GAAP operating expenses of $147 million increased $19 million from the prior year, and Non-GAAP operating expenses of $135 million increased $20 million from the prior year.

GAAP operating income of $49 million was $37 million higher than the prior year, and Non-GAAP operating income of $61 million was $36 million higher than the prior year. Both GAAP and Non-GAAP increases were due primarily to higher gross profit, partially offset by higher operating expenses.

Net Income and Earnings per Share (EPS)

Net income attributable to Itron, Inc. for the quarter was $44 million, or $0.96 per diluted share, compared with a net income of $22 million, or $0.49 per diluted share in 2022. The increase was driven by higher GAAP operating income, partially offset by higher tax expense.

Non-GAAP net income, which excludes the expenses associated with amortization of intangible assets, amortization of debt placement fees, restructuring, loss on sale of businesses, strategic initiative expenses, currency translation write-off, goodwill impairment, acquisition and integration, and the tax effect of excluding these expenses, was $57 million, or $1.23 per diluted share, compared with $32 million, or $0.71 per diluted share in 2022. The increase was due to higher non-GAAP operating income, partially offset by higher tax expense.

Cash Flow

Net cash provided by operating activities was $48 million in the fourth quarter compared with $(13) million in the prior year. Free cash flow was $39 million in the fourth quarter compared with $(18) million in the prior year. The increase in cash flow was due primarily to higher earnings, partially offset by increased cash taxes paid.

Other Measures

After bookings of $839 million during the fourth quarter, total backlog at quarter end was $4.5 billion.

Q1 2024 Outlook and Full Year 2024 Guidance Update

First quarter 2024 financial outlook:

  • Revenue between $575 and $585 million
  • Non-GAAP diluted EPS between $0.80 and $0.90

Full year 2024 financial guidance:

  • Revenue between $2.275 to $2.375 billion
  • Non-GAAP diluted EPS between $3.40 to $3.80

Earnings Conference Call

Itron will host a conference call to discuss the financial results contained in this release at 10 a.m. EST on February 26, 2024. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the company’s website at https://investors.itron.com/events.cfm. Participants should access the webcast 10 minutes prior to the start of the call. A webcast replay of the conference call will be available through March 5, 2024 and may be accessed on the company's website at http://investors.itron.com/events.cfm.

About Itron

Itron is a proven global leader in energy, water, smart city, IIoT and intelligent infrastructure services. For utilities, cities and society, we build innovative systems, create new efficiencies, connect communities, encourage conservation and increase resourcefulness. By safeguarding our invaluable natural resources today and tomorrow, we improve the quality of life for people around the world. Join us: www.itron.com.

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

Cautionary Note Regarding Forward Looking Statements

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

Non-GAAP Financial Information

To supplement our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (GAAP), we use certain adjusted or non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share (EPS), adjusted EBITDA, free cash flow, and constant currency. We provide these non-GAAP financial measures because we believe they provide greater transparency and represent supplemental information used by management in its financial and operational decision making. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies. When providing future outlooks and/or earnings guidance, 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 related expenses and their related tax effects without unreasonable effort. These costs are uncertain, depend on various factors and could have a material impact on GAAP results for the guidance period. 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.

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ITRON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

 

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

Product revenues

$

502,007

 

$

392,744

 

 

$

1,863,489

 

$

1,500,243

 

 

Service revenues

 

75,166

 

 

74,747

 

 

 

310,144

 

 

295,321

 

 

 

Total revenues

 

577,173

 

 

467,491

 

 

 

2,173,633

 

 

1,795,564

 

Cost of revenues

 

 

 

 

 

 

Product cost of revenues

 

340,504

 

 

283,836

 

 

 

1,292,170

 

 

1,102,475

 

 

Services cost of revenues

 

40,279

 

 

42,857

 

 

 

167,555

 

 

170,900

 

 

 

Total cost of revenues

 

380,783

 

 

326,693

 

 

 

1,459,725

 

 

1,273,375

 

 

 

 

 

 

 

 

 

Gross profit

 

196,390

 

 

140,798

 

 

 

713,908

 

 

522,189

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

Sales, general and administrative

 

81,603

 

 

77,729

 

 

 

312,779

 

 

290,453

 

 

Research and development

 

53,919

 

 

46,627

 

 

 

208,688

 

 

185,098

 

 

Amortization of intangible assets

 

4,485

 

 

6,266

 

 

 

18,918

 

 

25,717

 

 

Restructuring

 

7,121

 

 

(2,528

)

 

 

43,989

 

 

(13,625

)

 

Loss on sale of businesses

 

(8

)

 

323

 

 

 

667

 

 

3,505

 

 

Goodwill impairment

 

 

 

 

 

 

 

 

38,480

 

 

 

Total operating expenses

 

147,120

 

 

128,417

 

 

 

585,041

 

 

529,628

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

49,270

 

 

12,381

 

 

 

128,867

 

 

(7,439

)

Other income (expense)

 

 

 

 

 

 

Interest income

 

3,346

 

 

1,266

 

 

 

9,314

 

 

2,633

 

 

Interest expense

 

(1,870

)

 

(1,793

)

 

 

(8,349

)

 

(6,724

)

 

Other income (expense), net

 

(1,284

)

 

(1,073

)

 

 

(2,446

)

 

(4,213

)

 

 

Total other income (expense)

 

192

 

 

(1,600

)

 

 

(1,481

)

 

(8,304

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

49,462

 

 

10,781

 

 

 

127,386

 

 

(15,743

)

Income tax benefit (provision)

 

(4,555

)

 

11,169

 

 

 

(29,068

)

 

6,196

 

Net income (loss)

 

44,907

 

 

21,950

 

 

 

98,318

 

 

(9,547

)

 

Net income (loss) attributable to noncontrolling interests

 

521

 

 

(262

)

 

 

1,395

 

 

185

 

Net income (loss) attributable to Itron, Inc.

$

44,386

 

$

22,212

 

 

$

96,923

 

$

(9,732

)

 

 

 

 

 

 

 

 

Net income (loss) per common share - Basic

$

0.98

 

$

0.49

 

 

$

2.13

 

$

(0.22

)

Net income (loss) per common share - Diluted

$

0.96

 

$

0.49

 

 

$

2.11

 

$

(0.22

)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic

 

45,501

 

 

45,179

 

 

 

45,421

 

 

45,101

 

Weighted average common shares outstanding - Diluted

 

46,039

 

 

45,419

 

 

 

45,836

 

 

45,101

 

ITRON, INC.

SEGMENT INFORMATION

 

 

 

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

 

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

Product revenues

 

 

 

 

 

 

Device Solutions

$

112,620

 

$

99,142

 

 

$

452,718

 

$

433,354

 

 

Networked Solutions

 

366,637

 

 

270,798

 

 

 

1,331,546

 

 

1,002,156

 

 

Outcomes

 

22,750

 

 

22,804

 

 

 

79,225

 

 

64,733

 

 

 

Total Company

$

502,007

 

$

392,744

 

 

$

1,863,489

 

$

1,500,243

 

 

 

 

 

 

 

 

 

Service revenues

 

 

 

 

 

 

Device Solutions

$

923

 

$

1,190

 

 

$

3,008

 

$

5,356

 

 

Networked Solutions

 

24,285

 

 

30,316

 

 

 

118,745

 

 

117,112

 

 

Outcomes

 

49,958

 

 

43,241

 

 

 

188,391

 

 

172,853

 

 

 

Total Company

$

75,166

 

$

74,747

 

 

$

310,144

 

$

295,321

 

 

 

 

 

 

 

 

 

Total revenues

 

 

 

 

 

 

Device Solutions

$

113,543

 

$

100,332

 

 

$

455,726

 

$

438,710

 

 

Networked Solutions

 

390,922

 

 

301,114

 

 

 

1,450,291

 

 

1,119,268

 

 

Outcomes

 

72,708

 

 

66,045

 

 

 

267,616

 

 

237,586

 

 

 

Total Company

$

577,173

 

$

467,491

 

 

$

2,173,633

 

$

1,795,564

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

Device Solutions

$

30,566

 

$

11,289

 

 

$

105,917

 

$

61,778

 

 

Networked Solutions

 

136,873

 

 

98,820

 

 

 

499,725

 

 

361,975

 

 

Outcomes

 

28,951

 

 

30,689

 

 

 

108,266

 

 

98,436

 

 

 

Total Company

$

196,390

 

$

140,798

 

 

$

713,908

 

$

522,189

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

Device Solutions

$

19,853

 

$

2,600

 

 

$

65,690

 

$

26,703

 

 

Networked Solutions

 

102,869

 

 

70,339

 

 

 

368,921

 

 

248,268

 

 

Outcomes

 

14,479

 

 

17,458

 

 

 

50,346

 

 

46,247

 

 

Corporate unallocated

 

(87,931

)

 

(78,016

)

 

 

(356,090

)

 

(328,657

)

 

 

Total Company

$

49,270

 

$

12,381

 

 

$

128,867

 

$

(7,439

)

 

 

 

 

 

 

 

 

Total Gross Margin

 

34.0

%

 

30.1

%

 

 

32.8

%

 

29.1

%

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

December 31, 2023

December 31, 2022

ASSETS

 

 

Current assets

 

 

 

Cash and cash equivalents

$

302,049

 

$

202,007

 

 

Accounts receivable, net

 

303,821

 

 

280,435

 

 

Inventories

 

283,686

 

 

228,701

 

 

Other current assets

 

159,882

 

 

118,441

 

 

 

Total current assets

 

1,049,438

 

 

829,584

 

 

 

 

 

 

Property, plant, and equipment, net

 

128,806

 

 

140,123

 

Deferred tax assets, net

 

247,211

 

 

211,982

 

Other long-term assets

 

38,836

 

 

39,901

 

Operating lease right-of-use assets, net

 

41,186

 

 

52,826

 

Intangible assets, net

 

46,282

 

 

64,941

 

Goodwill

 

1,052,504

 

 

1,038,721

 

 

 

Total assets

$

2,604,263

 

$

2,378,078

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

Current liabilities

 

 

 

Accounts payable

$

199,520

 

$

237,178

 

 

Other current liabilities

 

54,407

 

 

42,869

 

 

Wages and benefits payable

 

135,803

 

 

89,431

 

 

Taxes payable

 

8,636

 

 

15,324

 

 

Current portion of warranty

 

14,663

 

 

18,203

 

 

Unearned revenue

 

124,207

 

 

95,567

 

 

 

Total current liabilities

 

537,236

 

 

498,572

 

 

 

 

 

 

Long-term debt, net

 

454,827

 

 

452,526

 

Long-term warranty

 

7,501

 

 

7,495

 

Pension benefit obligation

 

63,887

 

 

57,839

 

Deferred tax liabilities, net

 

697

 

 

833

 

Operating lease liabilities

 

32,656

 

 

44,370

 

Other long-term obligations

 

176,028

 

 

124,887

 

 

 

Total liabilities

 

1,272,832

 

 

1,186,522

 

 

 

 

 

 

Equity

 

 

 

Common stock

 

1,820,510

 

 

1,788,479

 

 

Accumulated other comprehensive loss, net

 

(81,190

)

 

(94,674

)

 

Accumulated deficit

 

(428,409

)

 

(525,332

)

 

 

Total Itron, Inc. shareholders' equity

 

1,310,911

 

 

1,168,473

 

 

Noncontrolling interests

 

20,520

 

 

23,083

 

 

 

Total equity

 

1,331,431

 

 

1,191,556

 

 

 

Total liabilities and equity

$

2,604,263

 

$

2,378,078

 

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

(Unaudited, in thousands)

Year Ended

December 31,

 

 

 

 

2023

 

 

2022

 

Operating activities

 

 

 

Net income (loss)

$

98,318

 

$

(9,547

)

 

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

 

 

 

 

Depreciation and amortization of intangible assets

 

55,763

 

 

66,763

 

 

 

Non-cash operating lease expense

 

16,454

 

 

16,257

 

 

 

Stock-based compensation

 

28,357

 

 

21,881

 

 

 

Amortization of prepaid debt fees

 

3,664

 

 

3,499

 

 

 

Deferred taxes, net

 

(34,646

)

 

(32,635

)

 

 

Loss on sale of businesses

 

667

 

 

3,505

 

 

 

Goodwill impairment

 

 

 

38,480

 

 

 

Restructuring, non-cash

 

385

 

 

(624

)

 

 

Other adjustments, net

 

(169

)

 

11,678

 

Changes in operating assets and liabilities, net of acquisitions and sale of businesses:

 

 

 

Accounts receivable

 

(19,494

)

 

5,064

 

 

Inventories

 

(52,118

)

 

(68,124

)

 

Other current assets

 

(42,410

)

 

(16,695

)

 

Other long-term assets

 

2,317

 

 

(5,436

)

 

Accounts payable, other current liabilities, and taxes payable

 

(43,657

)

 

45,085

 

 

Wages and benefits payable

 

44,700

 

 

(21,749

)

 

Unearned revenue

 

28,329

 

 

18,466

 

 

Warranty

 

(3,778

)

 

(5,497

)

 

Restructuring

 

29,866

 

 

(40,981

)

 

Other operating, net

 

12,423

 

 

(4,890

)

 

 

Net cash provided by operating activities

 

124,971

 

 

24,500

 

 

 

 

 

 

Investing activities

 

 

 

Net proceeds (payments) related to the sale of businesses

 

(772

)

 

55,933

 

 

Acquisitions of property, plant, and equipment

 

(26,884

)

 

(19,747

)

 

Business acquisitions, net of cash and cash equivalents acquired

 

 

 

23

 

 

Other investing, net

 

4,348

 

 

4,307

 

 

 

Net cash provided by (used in) investing activities

 

(23,308

)

 

40,516

 

 

 

 

 

 

Financing activities

 

 

 

Issuance of common stock

 

3,674

 

 

3,452

 

 

Repurchase of common stock

 

 

 

(16,972

)

 

Prepaid debt fees

 

(2,471

)

 

(697

)

 

Other financing, net

 

(4,711

)

 

(4,520

)

 

 

Net cash used in financing activities

 

(3,508

)

 

(18,737

)

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

1,887

 

 

(6,851

)

Increase in cash and cash equivalents

 

100,042

 

 

39,428

 

Cash and cash equivalents at beginning of period

 

202,007

 

 

162,579

 

Cash and cash equivalents at end of period

$

302,049

 

$

202,007

 

About Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

ITRON, INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES

 

 

 

 

 

 

 

 

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL COMPANY RECONCILIATIONS

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

 

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

NON-GAAP OPERATING EXPENSES

 

 

 

 

 

 

 

GAAP operating expenses

$

147,120

 

$

128,417

 

 

$

585,041

 

$

529,628

 

 

 

 

Amortization of intangible assets

 

(4,485

)

 

(6,266

)

 

 

(18,918

)

 

(25,717

)

 

 

 

Restructuring

 

(7,121

)

 

2,528

 

 

 

(43,989

)

 

13,625

 

 

 

 

Loss on sale of businesses

 

8

 

 

(323

)

 

 

(667

)

 

(3,505

)

 

 

 

Strategic initiative

 

 

 

 

 

 

5

 

 

(675

)

 

 

 

Software project impairment

 

 

 

(8,719

)

 

 

 

 

(8,719

)

 

 

 

Russian currency translation write-off

 

 

 

 

 

 

 

 

(1,885

)

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

 

(38,480

)

 

 

 

Acquisition and integration

 

(27

)

 

(136

)

 

 

(144

)

 

(506

)

 

 

Non-GAAP operating expenses

$

135,495

 

$

115,501

 

 

$

521,328

 

$

463,766

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP OPERATING INCOME

 

 

 

 

 

 

 

GAAP operating income (loss)

$

49,270

 

$

12,381

 

 

$

128,867

 

$

(7,439

)

 

 

 

Amortization of intangible assets

 

4,485

 

 

6,266

 

 

 

18,918

 

 

25,717

 

 

 

 

Restructuring

 

7,121

 

 

(2,528

)

 

 

43,989

 

 

(13,625

)

 

 

 

Loss on sale of businesses

 

(8

)

 

323

 

 

 

667

 

 

3,505

 

 

 

 

Strategic initiative

 

 

 

 

 

 

(5

)

 

675

 

 

 

 

Software project impairment

 

 

 

8,719

 

 

 

 

 

8,719

 

 

 

 

Russian currency translation write-off

 

 

 

 

 

 

 

 

1,885

 

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

 

38,480

 

 

 

 

Acquisition and integration

 

27

 

 

136

 

 

 

144

 

 

506

 

 

 

Non-GAAP operating income

$

60,895

 

$

25,297

 

 

$

192,580

 

$

58,423

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP NET INCOME & DILUTED EPS

 

 

 

 

 

 

 

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

$

44,386

 

$

22,212

 

 

$

96,923

 

$

(9,732

)

 

 

 

Amortization of intangible assets

 

4,485

 

 

6,266

 

 

 

18,918

 

 

25,717

 

 

 

 

Amortization of debt placement fees

 

860

 

 

845

 

 

 

3,489

 

 

3,323

 

 

 

 

Restructuring

 

7,121

 

 

(2,528

)

 

 

43,989

 

 

(13,625

)

 

 

 

Loss on sale of businesses

 

(8

)

 

323

 

 

 

667

 

 

3,505

 

 

 

 

Strategic initiative

 

 

 

 

 

 

(5

)

 

675

 

 

 

 

Software project impairment

 

 

 

8,719

 

 

 

 

 

8,719

 

 

 

 

Russian currency translation write-off

 

 

 

 

 

 

 

 

1,885

 

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

 

38,480

 

 

 

 

Acquisition and integration

 

27

 

 

136

 

 

 

144

 

 

506

 

 

 

 

Income tax effect of non-GAAP adjustments

 

(183

)

 

(3,803

)

 

 

(10,339

)

 

(8,466

)

 

 

Non-GAAP net income attributable to Itron, Inc.

$

56,688

 

$

32,170

 

 

$

153,786

 

$

50,987

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted EPS

$

1.23

 

$

0.71

 

 

$

3.36

 

$

1.13

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted average common shares outstanding - Diluted

 

46,039

 

 

45,419

 

 

 

45,836

 

 

45,305

 

 

 

 

 

 

 

 

 

 

TOTAL COMPANY RECONCILIATIONS

Three Months Ended December 31,

 

Twelve Months Ended December 31,

(Unaudited, in thousands, except per share data)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

ADJUSTED EBITDA

 

 

 

 

 

 

 

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

$

44,386

 

$

22,212

 

 

$

96,923

 

$

(9,732

)

 

 

 

Interest income

 

(3,346

)

 

(1,266

)

 

 

(9,314

)

 

(2,633

)

 

 

 

Interest expense

 

1,870

 

 

1,793

 

 

 

8,349

 

 

6,724

 

 

 

 

Income tax (benefit) provision

 

4,555

 

 

(11,169

)

 

 

29,068

 

 

(6,196

)

 

 

 

Depreciation and amortization

 

13,750

 

 

16,151

 

 

 

55,763

 

 

66,763

 

 

 

 

Restructuring

 

7,121

 

 

(2,528

)

 

 

43,989

 

 

(13,625

)

 

 

 

Loss on sale of businesses

 

(8

)

 

323

 

 

 

667

 

 

3,505

 

 

 

 

Strategic initiative

 

 

 

 

 

 

(5

)

 

675

 

 

 

 

Software project impairment

 

 

 

8,719

 

 

 

 

 

8,719

 

 

 

 

Russian currency translation write-off

 

 

 

 

 

 

 

 

1,885

 

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

 

38,480

 

 

 

 

Acquisition and integration

 

27

 

 

136

 

 

 

144

 

 

506

 

 

 

Adjusted EBITDA

$

68,355

 

$

34,371

 

 

$

225,584

 

$

95,071

 

 

 

 

 

 

 

 

 

 

 

FREE CASH FLOW

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

$

47,895

 

$

(13,030

)

 

$

124,971

 

$

24,500

 

 

 

 

Acquisitions of property, plant, and equipment

 

(8,580

)

 

(4,861

)

 

 

(26,884

)

 

(19,747

)

 

 

Free Cash Flow

$

39,315

 

$

(17,891

)

 

$

98,087

 

$

4,753

 

 

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

David Means Director, Investor Relations (737) 242-8448 Investors@itron.com

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