Itron Announces Second Quarter 2022 Financial Results and Updated Full-Year 2022 Guidance

LIBERTY LAKE, Wash.—(BUSINESS WIRE)—Aug. 4, 2022—Itron, Inc. (NASDAQ:ITRI) announced today financial results for its second quarter ended June 30, 2022. Key results for the quarter include (compared with the second quarter of 2021):

• Revenue of $432 million, compared with $489 million;
• Gross margin of 29.2%; compared with 30.6%;
• GAAP net loss of $(37) million, compared with $(33) million;
• GAAP loss per share (EPS) of $(0.82), compared with $(0.73);
• Non-GAAP diluted EPS of $0.07, compared with $0.28;
• Adjusted EBITDA of $17 million, compared with $36 million;
• Free cash flow of $10 million, compared with $64 million; and
• Total backlog of $4.1 billion, compared with $3.5 billion.

"In the second quarter of 2022, we continued to be impacted operationally by supply constraints and manufacturing inefficiencies. Meanwhile demand for our solutions remained strong with a healthy book-to- bill ratio and another record set for total ending backlog as well as 12-month backlog," said Tom Deitrich, Itron's president and chief executive officer.

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

Revenue
Total second quarter revenue decreased 12% to $432 million, or 8%, excluding the impact of changes in foreign currency exchange rates. The decrease was due to the continued impact of component constraints limiting our ability to meet customer demand.

Device Solutions revenue declined 36%, Networked Solutions revenue increased 2%, and Outcomes revenue decreased 6%.

Gross Margin
Consolidated company gross margin of 29.2% decreased 140 basis points from the prior year, primarily due to inflationary pressures and inefficiencies driven by component shortages.

Operating Expenses and Operating Income (Loss)
GAAP operating expenses of $160 million increased $3 million from the prior year. Non-GAAP operating expenses of $117 million decreased $6 million from the prior year primarily due to lower product development expenses.

GAAP operating loss of $(34) million was $27 million higher than the prior year. GAAP operating loss includes goodwill impairment of $38.5 million related to our Device Solutions segment. Non-GAAP operating income of $9 million was $18 million lower than last year. The decreases were primarily due to lower gross profit.

Net Income (Loss) and Earnings (Loss) per Share
Net loss attributable to Itron, Inc. for the quarter was $(37) million, or $(0.82) per share, compared with $(33) million, or $(0.73) per share in 2021. The greater net loss was driven by a larger GAAP operating loss, partially offset by lower interest expense.

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, strategic initiatives, acquisition and integration, goodwill impairment, and the income tax effect of those adjustments, was $3 million, or $0.07 per diluted share, compared with $13 million, or $0.28 per diluted share, in 2021. The lower year-over-year results were due to lower non-GAAP operating income and a higher effective tax rate.

Cash Flow
Net cash provided by operating activities was $15 million in the second quarter compared with $73 million in the same quarter of 2021. Free cash flow was $10 million in the second quarter compared with $64 million in the prior year. The year-over-year decrease in cash flow was driven by reduced non-GAAP EBITDA and timing of working capital.

Other Measures
Total backlog was $4.1 billion and 12-month backlog was $1.7 billion, compared with $3.5 billion and $1.4 billion, respectively, in the prior year. Bookings in the quarter totaled $612 million.

Financial Guidance Update
Itron's guidance for the full year 2022 has been updated as follows:

• Revenue between $1.85 to $1.9 billion vs. previous guidance of $2.0 to $2.1 billion
• Non-GAAP diluted EPS between $0.70 to $0.90 vs. previous guidance of $1.25 to $1.75

The guidance assumes a Euro to U.S. dollar foreign currency exchange rate of 1.06 on average in the second half of 2022, average fully diluted shares outstanding of approximately 45.3 million for the full year, non-GAAP effective tax rate for the full year of approximately 30%.

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 Aug. 4, 2022. 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 Aug. 9, 2022 at 1:30 p.m. EDT. To access the telephone replay, dial 888-203-1112 or 719-457- 0820 and enter passcode 5692928.

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 such as the COVID-19 pandemic and other factors that are more fully described in Part I, Item 1A: Risk Factors included in our 2021 Annual Report and other reports on file with the Securities and Exchange Commission (SEC). We undertake no obligation to update or revise any forward-looking statement, whether written or oral.

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.

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Itron Q2 2022 Earnings Statement