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Itron: Q2 Results
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LIBERTY LAKE, Washington - Itron, Inc. (ITRI) announced financial results for its second quarter and six months ended June 30, 2014. Highlights for the quarter include:
• Quarterly revenues of $489 million, an increase of 1.5 percent over the prior year;
• Quarterly GAAP diluted earnings per share of 49 cents, an increase of 18 cents over the prior year;
• Quarterly non-GAAP diluted earnings per share of 54 cents, a decrease of 4 cents from the prior year;
• Quarterly adjusted EBITDA of $47 million, an increase of 6 percent over the prior year;
• Twelve-month backlog of $675 million and total backlog of $1.3 billion; and
• Quarterly bookings of $478 million.
“Our strong second quarter results were driven by double-digit revenue growth and solid execution in our gas and water segments,” said Philip Mezey, Itron’s president and chief executive office. “This was our third consecutive quarter of year over year growth in both revenue and adjusted EBITDA, reflecting our continued focus on delivering innovative technology and services to our customers while streamlining our operations. I am encouraged by our performance in the first half of 2014 and we have increased our financial guidance for the full year. In addition, we are making progress on the performance improvement plans for the electricity segment which will be a key driver of long-term company profitability.”
Financial Results
Revenues were $489 million for the quarter and $964 million for the first six months of 2014 compared with $482 million and $930 million for the same periods in 2013. Changes in foreign currency exchange rates favorably impacted revenues by approximately $1 million for the quarter and unfavorably impacted the first six months by $3 million. Excluding the impact from foreign currency, revenues increased $6 million, or 1.3 percent, for the quarter and $38 million, or 4 percent, for the six month period compared with the same periods in 2013. The increases for the quarter and six month period were driven by growth in the Water and Gas segments, which more than offset a decrease in the Electricity segment.
Gross margin for the quarter was 33.3 percent compared with the prior year period margin of 33.1 percent. For the first six months of 2014, gross margin was 32.9 percent compared with 32.2 percent in the prior year period. The improved gross margin for both the quarter and six month period was driven by the higher relative contribution from the Water and Gas segments, which have higher gross margins than the Electricity segment.
GAAP operating expenses were $131 million in the quarter compared with $142 million in the same period last year. The decrease was driven by lower restructuring expenses and reduced headcount, offset by increased variable compensation and intangible asset amortization. GAAP operating expenses for the first six months of 2014 were $281 million compared with $279 million in the 2013 period. The increase in operating expenses for the six month period was driven by increased intangible asset amortization expense, and higher general and administrative costs related to professional fees and compensation, partially offset by lower restructuring expenses and the impact of reduced headcount.
GAAP operating income for the quarter was $32 million compared with $18 million in the same period last year. The increase was driven by higher revenues and lower operating expenses. GAAP net income and diluted EPS for the quarter were $19.3 million, or 49 cents per share, compared with $12 million, or 31 cents per share, in the same period in 2013. The increase in GAAP net income for the quarter was driven by higher operating income, partially offset by a higher effective tax rate. Both the GAAP and non-GAAP estimated tax rate for full year 2014 has increased compared with 2013 due to the expiration of a research and development credit in the U.S. that has not yet been reinstated for the year, and the need for a valuation allowance on certain deferred tax assets.
GAAP operating income for the first six months of 2014 was $36 million compared with $20 million in the prior year period. The increase was driven by higher revenues and gross profit. GAAP net income and diluted earnings per share for the six month period were $19.0 million, or 48 cents per share, compared with net income of $15 million, or 38 cents per share, in the same period last year. The increase in GAAP net income was driven by higher operating income, partially offset by higher net interest expense, higher foreign exchange losses due to the devaluation of currencies in certain markets and a higher effective tax rate.
Non-GAAP operating expenses for the quarter, which excludes amortization of intangibles, restructuring charges, acquisition related expenses and goodwill impairment, were $128 million which is consistent with the prior year period. Increased variable compensation expense in the quarter was offset by the impact of reduced headcount and lower professional fees, litigation and other reserves. For the first six months of 2014, non-GAAP operating expenses were $260 million compared with $253 million in the prior year period. The increase was driven by higher general and administrative costs associated with professional fees and compensation, which were partially offset by the impact of lower headcount.
Non-GAAP operating income for the quarter was $35 million compared with $32 million in the same period last year. The increase in non-GAAP operating income was driven by higher revenue. Non-GAAP net income and diluted earnings per share for the quarter were $21 million, or 54 cents per share, compared with $23 million, or 58 cents per share, in the same period in 2013. The decrease in non-GAAP net income and earnings per share was attributable to higher operating income offset by a higher effective tax rate.
Non-GAAP operating income for the first six months of 2014 was $58 million compared with $47 million in the same period in 2013. The increase in non-GAAP operating income was driven by higher revenue and gross profit. Non-GAAP net income and diluted earnings per share for the first six months of 2014 were $34 million, or 85 cents per share, compared with $35 million, or 89 cents per share, in the same period in 2013. Non-GAAP net income was impacted by higher net interest expense, higher foreign exchange losses due to the devaluation of currencies in certain markets and a higher effective tax rate in 2014.
Free cash flow for the quarter was negative $10 million compared with positive $4 million in the second quarter of 2013. Free cash flow in the quarter was impacted by increased working capital primarily related to the timing of accounts receivable and accounts payable transactions, offsetting lower capital expenditures. During the first six months of 2014, free cash flow was $47.8 million, an improvement of nearly $58 million over 2013 due to higher profits, better relative working capital metrics and lower levels of capital expenditures.
The company repurchased 107,477 shares of common stock during the quarter at an average price of $39.23 per share pursuant to Board authorization to repurchase up to $50 million of Itron common stock over a 12- month period beginning March 2014.
Financial Guidance
Itron’s guidance for the full-year 2014 is as follows:
• Revenue between $1.9 and $1.975 billion
• Non-GAAP diluted earnings per share between $1.50 and $1.80
The company’s guidance for the year assumes a gross margin of approximately 31 to 32 percent, a non-GAAP effective tax rate of approximately 33 to 34 percent, average shares outstanding of approximately 39.5 million, and an average Euro to U.S. dollar exchange rate of $1.36.
About Itron
Itron is a world-leading technology and services company dedicated to the resourceful use of energy and water. We provide comprehensive solutions that measure, manage and analyze energy and water. Our broad product portfolio includes electricity, gas, water and thermal energy measurement devices and control technology; communications systems; software; as well as managed and consulting services. With thousands of employees supporting nearly 8,000 customers in more than 100 countries, Itron applies knowledge and technology to better manage energy and water resources. Together, we can create a more resourceful world. Join us: www.itron.com.
LIBERTY LAKE, Washington - Itron, Inc. (ITRI) announced financial results for its second quarter and six months ended June 30, 2014. Highlights for the quarter include:
• Quarterly revenues of $489 million, an increase of 1.5 percent over the prior year;
• Quarterly GAAP diluted earnings per share of 49 cents, an increase of 18 cents over the prior year;
• Quarterly non-GAAP diluted earnings per share of 54 cents, a decrease of 4 cents from the prior year;
• Quarterly adjusted EBITDA of $47 million, an increase of 6 percent over the prior year;
• Twelve-month backlog of $675 million and total backlog of $1.3 billion; and
• Quarterly bookings of $478 million.
“Our strong second quarter results were driven by double-digit revenue growth and solid execution in our gas and water segments,” said Philip Mezey, Itron’s president and chief executive office. “This was our third consecutive quarter of year over year growth in both revenue and adjusted EBITDA, reflecting our continued focus on delivering innovative technology and services to our customers while streamlining our operations. I am encouraged by our performance in the first half of 2014 and we have increased our financial guidance for the full year. In addition, we are making progress on the performance improvement plans for the electricity segment which will be a key driver of long-term company profitability.”
Financial Results
Revenues were $489 million for the quarter and $964 million for the first six months of 2014 compared with $482 million and $930 million for the same periods in 2013. Changes in foreign currency exchange rates favorably impacted revenues by approximately $1 million for the quarter and unfavorably impacted the first six months by $3 million. Excluding the impact from foreign currency, revenues increased $6 million, or 1.3 percent, for the quarter and $38 million, or 4 percent, for the six month period compared with the same periods in 2013. The increases for the quarter and six month period were driven by growth in the Water and Gas segments, which more than offset a decrease in the Electricity segment.
Gross margin for the quarter was 33.3 percent compared with the prior year period margin of 33.1 percent. For the first six months of 2014, gross margin was 32.9 percent compared with 32.2 percent in the prior year period. The improved gross margin for both the quarter and six month period was driven by the higher relative contribution from the Water and Gas segments, which have higher gross margins than the Electricity segment.
GAAP operating expenses were $131 million in the quarter compared with $142 million in the same period last year. The decrease was driven by lower restructuring expenses and reduced headcount, offset by increased variable compensation and intangible asset amortization. GAAP operating expenses for the first six months of 2014 were $281 million compared with $279 million in the 2013 period. The increase in operating expenses for the six month period was driven by increased intangible asset amortization expense, and higher general and administrative costs related to professional fees and compensation, partially offset by lower restructuring expenses and the impact of reduced headcount.
GAAP operating income for the quarter was $32 million compared with $18 million in the same period last year. The increase was driven by higher revenues and lower operating expenses. GAAP net income and diluted EPS for the quarter were $19.3 million, or 49 cents per share, compared with $12 million, or 31 cents per share, in the same period in 2013. The increase in GAAP net income for the quarter was driven by higher operating income, partially offset by a higher effective tax rate. Both the GAAP and non-GAAP estimated tax rate for full year 2014 has increased compared with 2013 due to the expiration of a research and development credit in the U.S. that has not yet been reinstated for the year, and the need for a valuation allowance on certain deferred tax assets.
GAAP operating income for the first six months of 2014 was $36 million compared with $20 million in the prior year period. The increase was driven by higher revenues and gross profit. GAAP net income and diluted earnings per share for the six month period were $19.0 million, or 48 cents per share, compared with net income of $15 million, or 38 cents per share, in the same period last year. The increase in GAAP net income was driven by higher operating income, partially offset by higher net interest expense, higher foreign exchange losses due to the devaluation of currencies in certain markets and a higher effective tax rate.
Non-GAAP operating expenses for the quarter, which excludes amortization of intangibles, restructuring charges, acquisition related expenses and goodwill impairment, were $128 million which is consistent with the prior year period. Increased variable compensation expense in the quarter was offset by the impact of reduced headcount and lower professional fees, litigation and other reserves. For the first six months of 2014, non-GAAP operating expenses were $260 million compared with $253 million in the prior year period. The increase was driven by higher general and administrative costs associated with professional fees and compensation, which were partially offset by the impact of lower headcount.
Non-GAAP operating income for the quarter was $35 million compared with $32 million in the same period last year. The increase in non-GAAP operating income was driven by higher revenue. Non-GAAP net income and diluted earnings per share for the quarter were $21 million, or 54 cents per share, compared with $23 million, or 58 cents per share, in the same period in 2013. The decrease in non-GAAP net income and earnings per share was attributable to higher operating income offset by a higher effective tax rate.
Non-GAAP operating income for the first six months of 2014 was $58 million compared with $47 million in the same period in 2013. The increase in non-GAAP operating income was driven by higher revenue and gross profit. Non-GAAP net income and diluted earnings per share for the first six months of 2014 were $34 million, or 85 cents per share, compared with $35 million, or 89 cents per share, in the same period in 2013. Non-GAAP net income was impacted by higher net interest expense, higher foreign exchange losses due to the devaluation of currencies in certain markets and a higher effective tax rate in 2014.
Free cash flow for the quarter was negative $10 million compared with positive $4 million in the second quarter of 2013. Free cash flow in the quarter was impacted by increased working capital primarily related to the timing of accounts receivable and accounts payable transactions, offsetting lower capital expenditures. During the first six months of 2014, free cash flow was $47.8 million, an improvement of nearly $58 million over 2013 due to higher profits, better relative working capital metrics and lower levels of capital expenditures.
The company repurchased 107,477 shares of common stock during the quarter at an average price of $39.23 per share pursuant to Board authorization to repurchase up to $50 million of Itron common stock over a 12- month period beginning March 2014.
Financial Guidance
Itron’s guidance for the full-year 2014 is as follows:
• Revenue between $1.9 and $1.975 billion
• Non-GAAP diluted earnings per share between $1.50 and $1.80
The company’s guidance for the year assumes a gross margin of approximately 31 to 32 percent, a non-GAAP effective tax rate of approximately 33 to 34 percent, average shares outstanding of approximately 39.5 million, and an average Euro to U.S. dollar exchange rate of $1.36.
About Itron
Itron is a world-leading technology and services company dedicated to the resourceful use of energy and water. We provide comprehensive solutions that measure, manage and analyze energy and water. Our broad product portfolio includes electricity, gas, water and thermal energy measurement devices and control technology; communications systems; software; as well as managed and consulting services. With thousands of employees supporting nearly 8,000 customers in more than 100 countries, Itron applies knowledge and technology to better manage energy and water resources. Together, we can create a more resourceful world. Join us: www.itron.com.