Itron(US:ITRI)2024-10-31 16:40PART I: FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements for the three and nine months ended September 30, 2024, detailing significant year-over-year growth in revenue and net income, a strengthened balance sheet, and positive operating cash flow Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the three and nine months ended September 30, 2024 It includes the Consolidated Statements of Operations, Comprehensive Income, Balance Sheets, Equity, and Cash Flows, which collectively show significant year-over-year growth in revenue and net income, a strengthened balance sheet with increased cash from financing activities, and positive operating cash flow Consolidated Statements of Operations | Financial Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $615.5M | $560.8M | $1.83B | $1.60B | | Gross Profit | $209.6M | $187.2M | $625.4M | $517.5M | | Operating Income | $73.9M | $54.9M | $201.4M | $79.6M | | Net Income Attributable to Itron, Inc. | $78.0M | $40.2M | $181.0M | $52.5M | | Diluted EPS | $1.70 | $0.87 | $3.91 | $1.15 | Consolidated Statements of Comprehensive Income (Loss) - Total comprehensive income attributable to Itron, Inc. for the nine months ended September 30, 2024, was $184.0 million, a significant increase from $46.4 million in the same period of 2023, driven by higher net income and favorable foreign currency translation adjustments6 Consolidated Balance Sheets | Balance Sheet Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $982.5M | $302.0M | | Total current assets | $1.75B | $1.05B | | Total assets | $3.37B | $2.60B | | Long-term debt, net | $1.24B | $454.8M | | Total liabilities | $2.00B | $1.27B | | Total Itron, Inc. shareholders' equity | $1.35B | $1.31B | Consolidated Statements of Cash Flows | Cash Flow Activity (Nine Months Ended Sep 30) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $158.3M | $77.1M | | Net cash used in investing activities | ($54.4M) | ($19.0M) | | Net cash provided by (used in) financing activities | $576.1M | ($2.6M) | | Increase in cash and cash equivalents | $680.5M | $52.8M | Notes to Consolidated Financial Statements - On March 1, 2024, Itron acquired Elpis Squared for $34.1 million, resulting in the recognition of $19.7 million in goodwill allocated to the Outcomes segment and $15.0 million in intangible assets3943136 - In June 2024, the company issued $805 million of 1.375% convertible notes due 2030, significantly increasing its long-term debt from $460 million at year-end 2023 to $1.265 billion4455 - The effective tax rate for the nine months ended September 30, 2024 was 15% The rate was favorably impacted by a discrete tax benefit of approximately $14 million related to the resolution of a foreign tax audit during the third quarter7884 - In conjunction with the June 2024 convertible note issuance, the company completed a $100 million share repurchase under its 2023 program A new $100 million share repurchase program was authorized in September 2024104105 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 10% revenue increase in Q3 2024 to $615.5 million and a 15% increase for the first nine months Gross margin expanded to 34.1% in Q3, and net income grew significantly The analysis covers segment performance, noting growth across all three segments, and details changes in liquidity, with cash increasing to $982.5 million primarily due to a new $805 million convertible note issuance The discussion also addresses ongoing restructuring efforts and global supply chain risks Results of Operations Revenue and Gross Margin Performance | Period | Total Revenue | YoY Change | Gross Margin | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Q3 2024 | $615.5M | +10% | 34.1% | +70 bps | | 9M 2024 | $1.8B | +15% | 34.2% | +180 bps | - For the nine months ended Sep 30, 2024, operating expenses decreased by $13.9 million (3%) year-over-year, primarily due to a $37.5 million reduction in restructuring costs, partially offset by a $22.8 million increase in SG&A expenses176 - The income tax provision for Q3 2024 was $3.5 million on pre-tax income of $82.4 million, resulting in a low effective tax rate of 4%, largely due to a $14 million discrete tax benefit from a favorable foreign tax audit resolution181 Operating Segment Results Q3 2024 Segment Revenue Performance (vs. Q3 2023) | Segment | Q3 2024 Revenue | YoY Change | | :--- | :--- | :--- | | Device Solutions | $122.7M | +11% | | Networked Solutions | $416.7M | +8% | | Outcomes | $76.0M | +17% | - Networked Solutions segment gross margin improved to 35.9% in Q3 2024 from 35.1% in Q3 2023, driven by favorable product volumes and improved operational efficiencies189201 - Outcomes segment gross margin decreased to 35.0% in Q3 2024 from 38.6% in the prior year, primarily due to increased services costs189209 Bookings and Backlog of Orders | Metric (as of Sep 30, 2024) | Value (in millions) | | :--- | :--- | | Quarterly Bookings | $487.0M | | Ending Total Backlog | $3.97B | | Ending 12-Month Backlog | $1.72B | Financial Condition, Liquidity and Capital Resources - Cash and cash equivalents increased by $680.5 million during the first nine months of 2024 to $982.5 million, primarily due to net proceeds from the new convertible notes issuance217 - Net cash provided by operating activities for the first nine months of 2024 was $158.3 million, more than double the $77.1 million generated in the same period of 2023, driven by increased earnings and working capital conversion218 - Financing activities provided $576.1 million in cash, mainly from the $805 million convertible note issuance, partially offset by a $109.0 million capped call purchase and a $100.0 million common stock repurchase220 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency exchange rate fluctuations As of September 30, 2024, there was no outstanding variable rate debt, mitigating interest rate risk Foreign currency risk persists, with 22% of Q3 2024 revenues denominated in non-U.S. dollars The company uses foreign exchange forward contracts to hedge these exposures and reduce earnings volatility - The company is exposed to foreign currency risk, with revenues in non-U.S. dollar currencies accounting for 22% of total revenues in Q3 2024 The most significant exposure is to the euro262 - To manage currency risk, the company utilizes foreign exchange forward contracts As of September 30, 2024, 35 such contracts were in place to offset exposures to various currencies263 - Interest rate risk is currently low as the company had no outstanding variable rate debt as of September 30, 2024261 Controls and Procedures Based on an evaluation involving the CEO and CFO, management concluded that the company's disclosure controls and procedures were effective as of September 30, 2024 There were no material changes in internal control over financial reporting during the third quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter265 - No changes in internal control over financial reporting occurred during Q3 2024 that have materially affected, or are reasonably likely to materially affect, these controls266 PART II: OTHER INFORMATION This section addresses other required disclosures Other Information (Items 1, 1A, 2, 5, 6) This section addresses other required disclosures It confirms that information on legal proceedings is available in Note 11 of the financial statements and refers to the 2023 Form 10-K for a complete list of risk factors It also details the company's stock repurchase activities, noting a new $100 million program was authorized in September 2024 - For information on legal proceedings, the report refers to Note 11: Commitments and Contingencies in the financial statements268 - A new share repurchase program of up to $100 million was authorized by the Board of Directors on September 19, 2024, for an 18-month period270