BusinessWire

Itron Announces Fourth Quarter and Full Year 2019 Financial Results and 2020 Guidance

LIBERTY LAKE, Wash.--(BUSINESS WIRE)--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, 2019. Highlights for the quarter and full year include:


  • Quarterly and full year revenue of $628 million and $2.5 billion;
  • Quarterly and full year gross margin of 28.2% and 30.1%;
  • Quarterly and full year GAAP net income of $15 million and $49 million;
  • Quarterly and full year GAAP diluted earnings per share of $0.36 and $1.23;
  • Quarterly and full year non-GAAP diluted earnings per share of $0.72 and $3.32;
  • Quarterly and full year adjusted EBITDA of $57 million and $270 million; and
  • Record backlog of $3.2 billion and 12-month backlog of $1.5 billion.

"We ended 2019 with aggregate results in line with expectations," said Tom Deitrich, Itron's president and chief executive officer. "For the full year 2019, we achieved strong revenue growth of over 5%, non-GAAP earnings per share growth of over 25%, and have made solid strides in our operational performance."

"We ended the year with a record backlog and see an active pipeline to support the 2020 guidance," continued Deitrich.

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

Revenue
Total revenue of $628 million increased 7%, or 8% excluding the impact of changes in foreign currency exchange rates, compared with the fourth quarter of 2018, driven by growth in the Networked Solutions segment.

By segment, Networked Solutions revenue increased 21% driven by continued strong North America deployments. Outcomes revenue decreased 1%, and Device Solutions revenue decreased 9%.

Gross Margin
Consolidated gross margin of 28.2% decreased 190 basis points compared with the fourth quarter of 2018 driven primarily by product mix.

Operating Income, Net Income and Earnings per Share (EPS)
GAAP operating income was flat at $29 million compared with the fourth quarter of 2018. Non-GAAP operating income decreased to $46 million compared with $49 million in 2018 due to an increase in product development investment.

GAAP net income attributable to Itron, Inc. for the quarter was $15 million, or $0.36 per diluted share, compared with net income of $24 million, or $0.60 per diluted share, in 2018. The lower GAAP net income and EPS was primarily due to a higher GAAP effective tax rate reflecting unusually high discrete tax benefits in 2018.

Non-GAAP net income of $29 million, or $0.72 per diluted share, decreased compared with $35 million, or $0.88 per diluted share, in 2018. The decrease in non-GAAP net income was primarily due to a higher non-GAAP effective tax rate in 2019.

Cash Flow
In the fourth quarter, cash provided by operating activities of $45 million and free cash flow of $29 million increased compared with the fourth quarter of 2018. The increase in cash flow was primarily driven by less cash outflows for restructuring and acquisition-related expenses.

Other Measures

Bookings were $767 million in the fourth quarter. This is a book to bill ratio of 1.2 to 1 for the quarter and 1 to 1 for the full year. Total backlog was $3.2 billion and 12-month backlog was $1.5 billion at the end of the quarter.

Financial Guidance

Itron’s guidance for the full year 2020 is as follows:

  • Revenue between $2.475 and $2.575 billion
  • Non-GAAP diluted EPS between $3.35 and $3.85

Guidance assumes an average euro to U.S. dollar foreign currency exchange rate of $1.12 in 2020, diluted weighted average shares outstanding of approximately 40.7 million for the year and a non-GAAP effective tax rate for the year of approximately 25 to 27%.

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. EST on Feb. 24, 2020. 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 http://investors.itron.com/events.cfm. A replay of the audio webcast will be made available at http://investors.itron.com/events.cfm. A telephone replay of the conference call will be available through Feb. 29, 2020. To access the telephone replay, dial (888) 203-1112 (domestic) or (719) 457-0820 (international) and enter passcode 1233599.

About Itron

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.

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, 2018 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 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, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2019

2018

 

 

2019

 

2018

Revenues

 

 

 

 

 

 

Product revenues

$

 

556,601

 

 

$

 

516,718

 

 

 

$

 

2,220,395

 

 

$

 

2,095,458

 

 

 

Service revenues

 

71,782

 

 

 

70,326

 

 

 

 

282,075

 

 

 

280,659

 

 

 

 

Total revenues

 

628,383

 

 

 

587,044

 

 

 

 

2,502,470

 

 

 

2,376,117

 

 

Cost of revenues

 

 

 

 

 

 

Product cost of revenues

 

410,797

 

 

 

369,912

 

 

 

 

1,587,710

 

 

 

1,476,498

 

 

 

Services cost of revenues

 

40,148

 

 

 

40,342

 

 

 

 

162,441

 

 

 

169,300

 

 

 

 

Total cost of revenues

 

450,945

 

 

 

410,254

 

 

 

 

1,750,151

 

 

 

1,645,798

 

 

 

 

 

 

 

 

 

 

Gross profit

 

177,438

 

 

 

176,790

 

 

 

 

752,319

 

 

 

730,319

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

Sales, general and administrative

 

82,232

 

 

 

90,377

 

 

 

 

346,872

 

 

 

423,210

 

 

 

Research and development

 

51,649

 

 

 

45,607

 

 

 

 

202,200

 

 

 

207,905

 

 

 

Amortization of intangible assets

 

16,101

 

 

 

18,014

 

 

 

 

64,286

 

 

 

71,713

 

 

 

Restructuring

 

(1,407

)

 

 

(5,725

)

 

 

 

6,278

 

 

 

77,183

 

 

 

 

Total operating expenses

 

148,575

 

 

 

148,273

 

 

 

 

619,636

 

 

 

780,011

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

28,863

 

 

 

28,517

 

 

 

 

132,683

 

 

 

(49,692

)

 

Other income (expense)

 

 

 

 

 

 

Interest income

 

470

 

 

 

428

 

 

 

 

1,849

 

 

 

2,153

 

 

 

Interest expense

 

(12,554

)

 

 

(13,883

)

 

 

 

(52,453

)

 

 

(58,203

)

 

 

Other income (expense), net

 

(2,584

)

 

 

(811

)

 

 

 

(9,047

)

 

 

(3,409

)

 

 

 

Total other income (expense)

 

(14,668

)

 

 

(14,266

)

 

 

 

(59,651

)

 

 

(59,459

)

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

14,195

 

 

 

14,251

 

 

 

 

73,032

 

 

 

(109,151

)

 

Income tax benefit (provision)

 

75

 

 

 

10,878

 

 

 

 

(20,617

)

 

 

12,570

 

 

Net income (loss)

 

14,270

 

 

 

25,129

 

 

 

 

52,415

 

 

 

(96,581

)

 

 

Net income (loss) attributable to noncontrolling interests

 

(350

)

 

 

1,252

 

 

 

 

3,409

 

 

 

2,669

 

 

Net income (loss) attributable to Itron, Inc.

$

 

14,620

 

 

$

 

23,877

 

 

 

$

 

49,006

 

 

$

 

(99,250

)

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - Basic

$

 

0.37

 

 

$

 

0.61

 

 

 

$

 

1.24

 

 

$

 

(2.53

)

 

Earnings (loss) per common share - Diluted

$

 

0.36

 

 

$

 

0.60

 

 

 

$

 

1.23

 

 

$

 

(2.53

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic

 

39,699

 

 

 

39,444

 

 

 

 

39,556

 

 

 

39,244

 

 

Weighted average common shares outstanding - Diluted

 

40,267

 

 

 

39,885

 

 

 

 

39,980

 

 

 

39,244

 

 

ITRON, INC.

SEGMENT INFORMATION

 

 

 

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2019

 

2018

 

 

2019

 

2018

 

Product Revenues

 

 

 

 

 

 

Device Solutions

$

 

203,326

 

 

$

 

223,265

 

 

 

$

 

847,580

 

 

$

 

916,809

 

 

 

Networked Solutions

 

344,123

 

 

 

281,100

 

 

 

 

1,322,382

 

 

 

1,133,919

 

 

 

Outcomes

 

9,152

 

 

 

12,353

 

 

 

 

50,433

 

 

 

44,730

 

 

 

 

Total Company

$

 

556,601

 

 

$

 

516,718

 

 

 

$

 

2,220,395

 

 

$

 

2,095,458

 

 

 

 

 

 

 

 

 

 

Service Revenues

 

 

 

 

 

 

Device Solutions

$

 

2,728

 

 

$

 

4,337

 

 

 

$

 

11,301

 

 

$

 

16,556

 

 

 

Networked Solutions

 

24,567

 

 

 

24,032

 

 

 

 

94,872

 

 

 

90,225

 

 

 

Outcomes

 

44,487

 

 

 

41,957

 

 

 

 

175,902

 

 

 

173,878

 

 

 

 

Total Company

$

 

71,782

 

 

$

 

70,326

 

 

 

$

 

282,075

 

 

$

 

280,659

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Device Solutions

$

 

206,054

 

 

$

 

227,602

 

 

 

$

 

858,881

 

 

$

 

933,365

 

 

 

Networked Solutions

 

368,690

 

 

 

305,132

 

 

 

 

1,417,254

 

 

 

1,224,144

 

 

 

Outcomes

 

53,639

 

 

 

54,310

 

 

 

 

226,335

 

 

 

218,608

 

 

 

 

Total Company

$

 

628,383

 

 

$

 

587,044

 

 

 

$

 

2,502,470

 

 

$

 

2,376,117

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

Device Solutions

$

 

30,111

 

 

$

 

38,423

 

 

 

$

 

152,562

 

 

$

 

187,254

 

 

 

Networked Solutions

 

130,032

 

 

 

122,883

 

 

 

 

518,749

 

 

 

482,471

 

 

 

Outcomes

 

17,295

 

 

 

15,484

 

 

 

 

81,008

 

 

 

60,594

 

 

 

 

Total Company

$

 

177,438

 

 

$

 

176,790

 

 

 

$

 

752,319

 

 

$

 

730,319

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

Device Solutions

$

 

16,036

 

 

$

 

25,267

 

 

 

$

 

97,753

 

 

$

 

130,988

 

 

 

Networked Solutions

 

98,331

 

 

 

94,897

 

 

 

 

397,325

 

 

 

360,779

 

 

 

Outcomes

 

8,183

 

 

 

6,668

 

 

 

 

43,803

 

 

 

16,634

 

 

 

Corporate unallocated

 

(93,687

)

 

 

(98,315

)

 

 

 

(406,198

)

 

 

(558,093

)

 

 

 

Total Company

$

 

28,863

 

 

$

 

28,517

 

 

 

$

 

132,683

 

 

$

 

(49,692

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITRON, INC.

METER AND MODULE SUMMARY

 

 

 

 

 

 

 

 

(Unaudited, Units in thousands)

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2019

2018

 

2019

2018

Itron Endpoints

 

 

 

 

 

 

Standard endpoints (1)

5,340

 

5,890

 

 

21,800

 

23,290

 

 

Networked endpoints (1)

3,890

 

3,420

 

 

16,070

 

14,610

 

 

 

Total endpoints

9,230

 

9,310

 

 

37,870

 

37,900

 

 

 

 

 

 

 

 

 

(1) As of the second quarter of 2019, we have refined the definition of a standard and a networked endpoint to more closely align to the segment performance of Device Solutions and Networked Solutions as reported in the Operating Segment Results section above. The quantities presented for the year ended December 31, 2018 and for the three months ended March 31, 2019, as included in the year ended December 31, 2019, have been recast to align with the refined definitions of standard and networked endpoints. The total endpoints shipped for each period is unchanged

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

December 31, 2019

December 31, 2018

ASSETS

 

 

Current assets

 

 

 

Cash and cash equivalents

$

 

149,904

 

 

$

 

120,221

 

 

 

Accounts receivable, net

 

472,925

 

 

 

437,161

 

 

 

Inventories

 

227,896

 

 

 

220,674

 

 

 

Other current assets

 

146,526

 

 

 

118,085

 

 

 

 

Total current assets

 

997,251

 

 

 

896,141

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

233,228

 

 

 

226,551

 

 

Deferred tax assets, net

 

63,899

 

 

 

64,830

 

 

Restricted cash

 

 

2,056

 

 

Other long-term assets

 

44,686

 

 

 

45,288

 

 

Operating lease right-of-use assets, net

 

79,773

 

 

 

Intangible assets, net

 

185,097

 

 

 

257,583

 

 

Goodwill

 

1,103,907

 

 

 

1,116,533

 

 

 

 

Total assets

$

 

2,707,841

 

 

$

 

2,608,982

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

Current liabilities

 

 

 

Accounts payable

$

 

328,128

 

 

$

 

309,951

 

 

 

Other current liabilities

 

63,785

 

 

 

70,136

 

 

 

Wages and benefits payable

 

119,220

 

 

 

88,603

 

 

 

Taxes payable

 

22,193

 

 

 

14,753

 

 

 

Current portion of debt

 

 

28,438

 

 

 

Current portion of warranty

 

38,509

 

 

 

47,205

 

 

 

Unearned revenue

 

99,556

 

 

 

93,621

 

 

 

 

Total current liabilities

 

671,391

 

 

 

652,707

 

 

 

 

 

 

 

Long-term debt, net

 

932,482

 

 

 

988,185

 

 

Long-term warranty

 

14,732

 

 

 

13,238

 

 

Pension benefit obligation

 

98,712

 

 

 

91,522

 

 

Deferred tax liabilities, net

 

1,809

 

 

 

1,543

 

 

Operating lease liabilities

 

68,919

 

 

 

Other long-term obligations

 

118,981

 

 

 

127,739

 

 

 

 

Total liabilities

 

1,907,026

 

 

 

1,874,934

 

 

 

 

 

 

 

Equity

 

 

 

Common stock

 

1,357,600

 

 

 

1,334,364

 

 

 

Accumulated other comprehensive loss, net

 

(204,672

)

 

 

(196,305

)

 

 

Accumulated deficit

 

(376,390

)

 

 

(425,396

)

 

 

 

Total Itron, Inc. shareholders' equity

 

776,538

 

 

 

712,663

 

 

 

Non-controlling interests

 

24,277

 

 

 

21,385

 

 

 

 

Total equity

 

800,815

 

 

 

734,048

 

 

 

 

Total liabilities and equity

$

 

2,707,841

 

 

$

 

2,608,982

 

 

 

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

(Unaudited, in thousands)

Year Ended
December 31,

 

 

 

2019

 

2018

Operating activities

 

 

 

Net income (loss)

$

 

52,415

 

 

$

 

(96,581

)

 

 

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

 

 

 

 

Depreciation and amortization of intangible assets

 

114,400

 

 

 

122,497

 

 

 

 

Non-cash operating lease expense

 

18,958

 

 

 

 

 

Stock-based compensation

 

26,960

 

 

 

31,263

 

 

 

 

Amortization of prepaid debt fees

 

5,631

 

 

 

7,046

 

 

 

 

Deferred taxes, net

 

(192

)

 

 

(19,130

)

 

 

 

Restructuring, non-cash

 

(1,785

)

 

 

859

 

 

 

 

Other adjustments, net

 

(4,295

)

 

 

1,452

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(39,467

)

 

 

15,524

 

 

 

Inventories

 

(9,389

)

 

 

(25,613

)

 

 

Other current assets

 

(31,128

)

 

 

(23,589

)

 

 

Other long-term assets

 

7,053

 

 

 

3,020

 

 

 

Accounts payable, other current liabilities, and taxes payable

 

9,177

 

 

 

20,101

 

 

 

Wages and benefits payable

 

30,835

 

 

 

(9,565

)

 

 

Unearned revenue

 

8,905

 

 

 

27,584

 

 

 

Warranty

 

(6,637

)

 

 

20,815

 

 

 

Other operating, net

 

(8,601

)

 

 

34,072

 

 

 

 

Net cash provided by operating activities

 

172,840

 

 

 

109,755

 

 

 

 

 

 

 

Investing activities

 

 

 

Acquisitions of property, plant, and equipment

 

(60,749

)

 

 

(59,952

)

 

 

Business acquisitions, net of cash equivalents acquired

 

 

(803,075

)

 

 

Other investing, net

 

12,569

 

 

 

369

 

 

 

 

Net cash used in investing activities

 

(48,180

)

 

 

(862,658

)

 

 

 

 

 

 

Financing activities

 

 

 

Proceeds from borrowings

 

50,000

 

 

 

778,938

 

 

 

Payments on debt

 

(137,657

)

 

 

(363,359

)

 

 

Issuance of common stock

 

24,390

 

 

 

9,171

 

 

 

Prepaid debt fees

 

(1,560

)

 

 

(24,042

)

 

 

Repurchase of common stock

 

(25,000

)

 

 

 

Other financing, net

 

(7,692

)

 

 

(4,887

)

 

 

 

Net cash provided by (used in) financing activities

 

(97,519

)

 

 

395,821

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

435

 

 

 

(7,925

)

 

Increase (decrease) in cash, cash equivalents, and restricted cash

 

27,576

 

 

 

(365,007

)

 

Cash, cash equivalents, and restricted cash at beginning of period

 

122,328

 

 

 

487,335

 

 

Cash, cash equivalents, and restricted cash at end of period

$

 

149,904

 

 

$

 

122,328

 

 

 

About Non-GAAP Financial Measures

The accompanying schedule contains 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 more information on these non-GAAP financial measures 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 operational 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 acquisition and integration related expenses, restructuring charges or goodwill impairment charges. 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, corporate transition costs, acquisition and integration, and goodwill impairment. We define non-GAAP operating income as operating income excluding the expenses related to the amortization of intangible assets, restructuring, corporate transition costs, acquisition and integration, and goodwill impairment. 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 related to acquisitions and restructuring projects. 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 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.

Non-GAAP net income and non-GAAP diluted EPS - We define non-GAAP net income as net income attributable to Itron, Inc. excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, restructuring, corporate transition costs, acquisition and integration, goodwill impairment, and the tax effect of excluding these expenses. We define non-GAAP diluted EPS as non-GAAP net income divided by the weighted average shares, on a diluted basis, outstanding during each period. 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 attributable to Itron, Inc. and GAAP diluted EPS.

For interim periods, beginning the first quarter of 2019, the budgeted annual effective tax rate (AETR) is used, adjusted for any discrete items, as defined in ASC 740 - Income Taxes.


Contacts

Itron, Inc.
Kenneth P. Gianella
Vice President, Investor Relations
(669) 770-4643

Rebecca Hussey
Manager, Investor Relations
(509) 891-3574


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