Itron Announces Second Quarter 2017 Financial Results
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LIBERTY LAKE, Wash.-- Itron, Inc. (ITRI) announced today financial results for its second quarter ended June 30, 2017. Key financial metrics for the quarter include:
- Revenue of $503 million, compared with $513 million in the second quarter of 2016;
- Gross margin of 35.4 percent, compared with 33.1 percent in the second quarter of 2016;
- GAAP diluted earnings per share of 36 cents, compared with 52 cents in the second quarter of 2016; and
- Non-GAAP diluted earnings per share of 71 cents, compared with 65 cents in the second quarter of 2016.
- Results include the impact of the Comverge acquisition as of the transaction close date of June 1, 2017. The acquisition contributed $5 million of distributed energy management (DEM) revenue reported in the Electricity segment and a net loss of $2 million, including acquisition and integration-related expenses and amortization of intangibles.
“The second quarter was Itron’s eighth consecutive quarter of year-over-year increases in non-GAAP earnings per share, demonstrating our commitment to greater predictability and profitability in our business results,” said Philip Mezey, Itron’s president and chief executive officer. "We were also very pleased to close the Comverge transaction during the quarter, adding distributed energy management to Itron’s industry-leading AMI and smart grid solutions. The acquisition emphasizes our focus on delivering more value to our customers and supports our strategy to increase the contribution of outcome-based solutions in our business."
Mezey continued, "We are raising our revenue and non-GAAP earnings guidance for full-year 2017 to reflect our strong core business performance and the addition of distributed energy management solutions to our platform."
Summary of Second Quarter Consolidated Financial Results
(All comparisons made are against the prior year period unless otherwise noted)
Total revenue of $503 million declined $10 million compared with the second quarter of 2016, with growth in the Electricity segment offset by lower Water and Gas revenues. Changes in foreign currency exchange rates unfavorably impacted revenue by approximately $6 million for the quarter.
Electricity revenue increased 8 percent, driven by smart projects in North America and Asia-Pacific regions and the addition of distributed energy management revenues. Gas revenue decreased 8 percent, driven by lower meter volumes partially offset by strong communication module shipments in North America. Water revenue decreased 12 percent primarily due to lower product revenues in North America and EMEA and the timing of new tenders and customer orders in 2017, partially offset by increased sales in Latin America.
Consolidated company gross margin of 35.4 percent increased 230 basis points compared with the second quarter of 2016 with improvements in all three business segments. Gross margin includes an $8 million insurance recovery in the Water segment related to warranty costs incurred for a product replacement announced in 2015. Excluding the recovery, gross margin improved by 70 basis points compared with the prior year.
Operating expenses for the quarter were $141 million compared with $134 million in the second quarter of 2016. Higher restructuring, sales and marketing, and acquisition and integration-related expenses were partially offset by lower legal and professional services fees, reduced headcount in general and administrative areas and lower amortization of intangible assets.
Non-GAAP operating expenses were $125 million compared with $128 million in 2016. The reduction was driven by lower legal and professional services fees and reduced general and administrative headcount.
Operating Income, Net Income and Earnings per Share
GAAP operating income increased to $37 million compared with $35 million in the second quarter of 2016. Non-GAAP operating income also improved to $53 million compared with $42 million in 2016.
The increase in GAAP operating income was driven by improved gross margins offsetting higher operating expenses. The greater increase in non-GAAP operating income was driven by improved gross margins and lower non-GAAP operating expenses, which exclude acquisition and integration-related costs, restructuring, and amortization of intangible assets.
Net income for the quarter was $14 million, or 36 cents per diluted share, compared with net income of $20 million, or 52 cents per diluted share, in 2016. Non-GAAP net income for the quarter was $28 million, or 71 cents per diluted share, compared with $25 million, or 65 cents per diluted share, in 2016.
GAAP earnings per diluted share reflect the company's higher operating income offset by an increase in other expenses, a higher effective tax rate driven by the timing and mix of taxable income by jurisdiction, and increased diluted shares outstanding. Non-GAAP earnings per diluted share increased compared with the prior year due to the company's higher non-GAAP operating income which offset an increase in other expenses, a higher effective tax rate and increased diluted shares outstanding.