Itron Announces First Quarter 2016 Financial Results
LIBERTY LAKE, Wash. — Aug. 11, 2016 — 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:
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:
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.
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.
Related Documents
Itron Q1 2016 Earnings Statement.
- 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.
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 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.
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.
Related Documents
Itron Q1 2016 Earnings Statement.
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.