Itron Announces First Quarter 2021 Financial Results

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

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

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

Summary of Fourth 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 investors.itron.com. A replay of the audio webcast will be made available at investors.itron.com. 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.

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.

Related Documents
Itron Q1 2021 Earnings Statement.