LIBERTY LAKE, Wash.—(BUSINESS WIRE)—Feb. 27, 2019—Itron, Inc. (NASDAQ:ITRI), which is innovating the way utilities and cities manage energy and water, announced today financial results for its fourth quarter and full year ended Dec. 31, 2018. Highlights for the quarter and full year include:
- Quarterly and full year revenue of $587 million and $2.4 billion;
- Quarterly and full year gross margin of 30.1 percent and 30.7 percent;
- Quarterly GAAP net income of $24 million and full year GAAP loss of $99 million;
- Quarterly GAAP diluted earnings per share of $0.60 and full year GAAP loss per share of $2.53;
- Quarterly and full year non-GAAP diluted earnings per share of $0.88 and $2.65; and
- Quarterly and full year Adjusted EBITDA of $59 million and $236 million.
"Looking ahead to 2019, we continue to execute on our strategy as we optimize our operations and drive progress on the technology roadmap," continued Mezey. "We remain focused on delivering our financial and customer commitments as an energy, water and smart city leader."
Summary of Fourth Quarter Consolidated Financial Results
(All comparisons made are against the prior year period unless otherwise noted)
Total revenue of $587 million increased 7 percent, or 9 percent excluding the impact of changes in foreign currency exchange rates, compared with the fourth quarter of 2017, driven by growth in the Networked Solutions segment.
By segment, Networked Solutions revenue increased 20 percent driven by strong North America deployments. Device Solutions revenue decreased 5 percent driven by lower shipments in EMEA, and Outcomes decreased 8 percent on an unfavorable year over year comparison as several large software projects were completed in the prior year.
Consolidated gross margin of 30.1 percent decreased 170 basis points compared with the fourth quarter of 2017 driven primarily by higher special warranty costs.
Operating Income, Net Income and Earnings per Share (EPS)
GAAP operating income decreased to $29 million compared with $48 million in the fourth quarter of 2017 primarily driven by higher operating expenses from the acquisition of Silver Spring Networks. Non-GAAP operating income decreased to $49 million compared with $56 million in 2017 due to higher operating expenses from the acquisition of Silver Spring Networks in 2018.
GAAP net income attributable to Itron, Inc. for the quarter was $24 million, or $0.60 per diluted share, compared with net income of $2 million, or $0.05 per diluted share, in 2017. The higher GAAP net income and EPS were primarily driven by a GAAP tax benefit due to favorable discrete tax items.
Non-GAAP net income of $35 million, or $0.88 per diluted share, decreased compared with $40 million, or $1.01 per diluted share, in 2017. The decrease reflects lower non-GAAP operating income, partially offset by a Non-GAAP tax benefit driven by favorable discrete tax items.
In the fourth quarter, cash provided by operating activities of $42 million and free cash flow of $25 million decreased compared with the fourth quarter of 2017. The decrease in cash flow was primarily driven by the timing of working capital.
Bookings were $786 million in the fourth quarter. This is a book to bill ratio of 1.3 for the quarter and over 1 to 1 for the full year. Total backlog was $3.2 billion and 12-month backlog was $1.3 billion at the end of the quarter, a year-over-year increase of 81 percent and 45 percent, respectively.
Itron's guidance for the full year 2019 is as follows:
- Revenue between $2.35 and $2.45 billion
- Non-GAAP diluted EPS between $2.35 and $2.75
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 5:00 p.m. EDT on Feb. 27, 2019. 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 Mar. 4, 2019. To access the telephone replay, dial (888) 203-1112 (domestic) or (719) 457-0820 (international) and enter passcode 9539336.
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 our expectations about revenues, operations, financial performance, earnings, earnings per share 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 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 and other factors that are more fully described in our Annual Report on Form 10-K for the year ended Dec. 31, 2017 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, 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. The company believes 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. 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.
Itron Q4 2018 Earnings Statement.
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® and OpenWay® are registered trademarks 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.
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Vice President, Investor Relations
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