Itron(ITRI) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section details Itron's unaudited financial statements, management's analysis, market risk disclosures, and internal controls Item 1: Financial Statements (Unaudited) This section presents Itron's unaudited consolidated financial statements, including operations, balance sheets, cash flows, and notes Consolidated Statements of Operations Q2 2025 revenues were $606.8 million, with gross profit at $223.6 million and net income attributable to Itron at $68.3 million Q2 & YTD 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $606,761 | $609,069 | -0.4% | $1,213,912 | $1,212,511 | +0.1% | | Gross Profit | $223,618 | $210,460 | +6.2% | $440,837 | $415,839 | +6.0% | | Operating Income | $76,413 | $64,647 | +18.2% | $152,626 | $127,447 | +19.8% | | Net Income (to Itron) | $68,340 | $51,318 | +33.2% | $133,814 | $103,039 | +29.9% | | Diluted EPS | $1.47 | $1.10 | +33.6% | $2.89 | $2.22 | +30.2% | Consolidated Balance Sheets As of June 30, 2025, total assets reached $3.62 billion, with cash and equivalents at $1.22 billion and total equity at $1.63 billion Balance Sheet Summary (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,988,873 | $1,815,892 | | Cash and cash equivalents | $1,224,257 | $1,051,237 | | Total Assets | $3,623,768 | $3,407,623 | | Total Current Liabilities | $973,059 | $528,265 | | Total Liabilities | $1,989,344 | $1,996,195 | | Total Equity | $1,634,424 | $1,411,428 | Consolidated Statements of Cash Flows Net cash from operating activities for the six months ended June 30, 2025, was $168.8 million, a significant improvement from $93.0 million in the prior year Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $168,802 | $93,025 | | Net cash used in investing activities | ($10,651) | ($47,820) | | Net cash provided by financing activities | $4,751 | $576,839 | | Effect of foreign exchange rate changes | $10,118 | ($3,454) | | Increase in cash and cash equivalents | $173,020 | $618,590 | Notes to Consolidated Financial Statements Detailed notes cover accounting policies, debt structure, segment information, and revenue recognition, including $2.2 billion in remaining performance obligations - The company's debt is primarily composed of two convertible note issuances: $460 million due in 2026 and $805 million due in 2030[43][49][54] - The company operates and reports under three segments: Device Solutions (hardware), Networked Solutions (communicating devices and network infrastructure), and Outcomes (software and services)[109][110][111] - Total transaction price allocated to remaining performance obligations is approximately $2.2 billion, with $1.1 billion expected to be recognized as revenue in the next 12 months[123] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial results, highlighting improved gross margin, segment performance, and strong liquidity with $1.22 billion in cash and $4.5 billion in backlog Total Company Highlights Q2 2025 highlights include revenues of $606.8 million, gross margin of 36.9%, GAAP diluted EPS of $1.47, and total backlog of $4.5 billion Q2 2025 Financial Highlights vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $606.8M | $609.1M | | Gross Margin | 36.9% | 34.6% | | GAAP Diluted EPS | $1.47 | $1.10 | | Non-GAAP Diluted EPS | $1.62 | $1.21 | | Adjusted EBITDA | $89.8M | $77.1M | | Total Backlog | $4.5B | $4.1B | Results of Operations Q2 2025 revenues slightly decreased by $2.3 million, while gross margin improved to 36.9% and other income significantly increased to $7.1 million - Q2 2025 total revenues decreased by $2.3 million YoY, with a decline in product revenues offset by growth in service revenues[148] - Gross margin for Q2 2025 improved to 36.9% from 34.6% in Q2 2024, driven by favorable product mix and increased service revenue margins[151] - Other income rose to $7.1 million in Q2 2025, up from $2.4 million in Q2 2024, largely due to a $7.2 million increase in interest income from invested proceeds of the 2024 Notes[156] Operating Segment Results Device Solutions revenue declined 5% to $112.8 million, Networked Solutions decreased 1% to $408.9 million, and Outcomes revenue grew 9% to $85.1 million Q2 2025 Segment Performance (in thousands) | Segment | Revenues | YoY Change | Gross Profit | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Device Solutions | $112,760 | -5% | $33,591 | 29.8% | | Networked Solutions | $408,934 | -1% | $157,243 | 38.5% | | Outcomes | $85,067 | +9% | $32,784 | 38.5% | - Device Solutions revenue decreased due to a planned decline in electric meter sales, but gross margin improved due to a better product mix[163][165] - Outcomes segment revenue growth was driven by recurring revenue and software licenses, leading to a 370 basis point increase in gross margin[174][176] Bookings and Backlog of Orders Quarterly bookings for Q2 2025 were $454 million, resulting in an ending total backlog of $4.51 billion and a 12-month backlog of $1.54 billion Bookings and Backlog Trend (in millions) | Quarter Ended | Quarterly Bookings | Ending Total Backlog | Ending 12-Month Backlog | | :--- | :--- | :--- | :--- | | June 30, 2025 | $454 | $4,514 | $1,544 | | March 31, 2025 | $530 | $4,659 | $1,593 | | December 31, 2024 | $1,403 | $4,734 | $1,767 | | June 30, 2024 | $447 | $4,093 | $1,809 | Financial Condition, Liquidity and Capital Resources Cash and cash equivalents increased by $173.0 million to $1.22 billion, driven by strong operating cash flow of $168.8 million, with free cash flow at $158.1 million - Cash and cash equivalents increased by $173.0 million during the first half of 2025, reaching $1.22 billion[184] - Net cash from operating activities for the first six months of 2025 was $168.8 million, up from $93.0 million in the same period of 2024, due to higher earnings and improved working capital conversion[185] Free Cash Flow (Non-GAAP, in thousands) | Component | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $168,802 | $93,025 | | Acquisitions of property, plant, and equipment | ($10,656) | ($14,255) | | Free cash flow | $158,146 | $78,770 | Item 3: Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency exchange rate risks, with 25% of Q2 2025 revenues in non-U.S. dollar currencies, primarily the euro, mitigated by forward contracts - The company had no outstanding variable rate debt as of June 30, 2025, limiting its exposure to interest rate risk[222] - Foreign currency risk is significant, with 25% of Q2 2025 revenues denominated in non-U.S. dollar currencies, primarily the euro[223] - Itron utilizes foreign exchange forward contracts, not designated for hedge accounting, to reduce earnings volatility from currency fluctuations[224] Item 4: Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during Q2 2025 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[226] - No material changes were made to the company's internal control over financial reporting during the three months ended June 30, 2025[227] PART II: OTHER INFORMATION This section covers other important information, including legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report Item 1: Legal Proceedings This section refers to Note 11 of the financial statements for detailed information regarding legal proceedings - Information on legal proceedings is provided in Note 11: Commitments and Contingencies in Part I of this report[230] Item 1A: Risk Factors There are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - The company directs investors to its 2024 Annual Report on Form 10-K for a complete list of risk factors[231] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds Details on the stock repurchase program are provided, noting 58 shares repurchased during the quarter and $100 million remaining under the authorized plan - A new stock repurchase program for up to $100 million was authorized effective September 19, 2024[235] Issuer Repurchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | April 2025 | 0 | $— | $100,000 | | May 2025 | 58 | $112.63 | $100,000 | | June 2025 | 0 | $— | $100,000 | | Total | 58 | | $100,000 | Item 6: Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in Inline XBRL format - Exhibits filed include Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1) and financial data in Inline XBRL format (101)[236]