Itron, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Itron provides smart-network, device, software, and services solutions for utilities and municipalities in energy, water, and smart-city markets.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $1.796 billion | $1.982 billion |
| Gross profit / margin | $522.2 million / 29.1% | $573.2 million / 28.9% |
| Operating income (loss) | $(7.4) million | $(79.3) million |
| Net loss attributable to Itron | $(9.7) million | $(81.3) million |
| GAAP diluted loss per share | $(0.22) | $(1.83) |
| Non-GAAP net income / diluted EPS | $51.0 million / $1.13 | $78.1 million / $1.75 |
| Adjusted EBITDA | $95.1 million | $115.2 million |
| Cash from operating activities | $24.5 million | $154.8 million |
| Free cash flow (non-GAAP) | $4.8 million | $120.1 million |
Revenue fell 9%; product revenue declined 11% and service revenue declined 3%. Gross margin edged up 0.2 percentage points, but operating results remained loss-making. Non-GAAP results exclude selected costs and should be considered alongside GAAP measures.
- Segments: Device Solutions revenue was $438.7 million, down 32%; Networked Solutions was $1.119 billion, up 2%; Outcomes was $237.6 million, down 3%. Outcomes gross margin improved to 41.4%, while Device and Networked Solutions margins declined.
- Liquidity: Cash and cash equivalents were $202.0 million at year-end, up from $162.6 million. Current assets were $829.6 million and current liabilities $498.6 million. Management said existing cash, operating cash flow, and capital-market access should fund operations and commitments for at least 12 months and into the foreseeable future, while noting this is not assured.
- Debt: $460.0 million of 0% convertible notes due March 2026; carrying value net of fees was $452.5 million. No revolver loans were outstanding; $444.0 million remained available under the $500 million revolving facility after letters of credit. Itron reported covenant compliance at year-end. The revolver matures October 2024.
- Backlog: Total backlog was $4.619 billion and 12-month backlog $2.052 billion, versus $4.017 billion and $1.539 billion, respectively, at year-end 2021. The filing cautions that backlog is not a complete measure of future revenue and can be affected by supply constraints, customer rescheduling, currency, and contract adjustments.
Material changes and unusual items
- Component shortages, delayed customer deployments, inflation in materials, freight and labor, and unfavorable currency movements contributed to lower revenue. Currency reduced reported revenue by $70.8 million.
- Device Solutions revenue also reflected the February 2022 sale of certain gas product lines to Dresser. Cash proceeds were $55.9 million; Itron recorded a $3.5 million loss related to the sale in 2022, following larger sale-related charges in 2021.
- Itron recorded a $38.5 million goodwill impairment in 2022 after higher costs and lower forecast revenue in Device Solutions. Annual impairment testing in October required no further adjustment.
- Operating expenses decreased 19%, principally because 2021 included greater restructuring and business-sale charges and because of cost reductions. The 2022 total also included goodwill impairment and other discrete costs.
- Cash from operations fell by $130.3 million, primarily due to working-capital changes and higher variable-compensation payments. Inventory increased to $228.7 million from $165.8 million, including higher raw-material balances.
- Endpoints under management increased to 93.9 million from 82.4 million.
Outlook, risks, and contingencies
- The filing does not provide a clear numeric revenue or earnings forecast for 2023. Management reported no identified significant decrease in long-term customer demand, but said some customer projects had been delayed and revenue shifted to future periods.
- In February 2023, the board approved a restructuring plan expected to be substantially complete by early 2025. Estimated pretax charges are $40–45 million, approximately 95% cash, with anticipated annualized savings of $14–17 million after completion. Consultation with unions or works councils and regulatory approvals may affect timing.
- Principal risks include supply-chain and semiconductor availability, inability to recover cost inflation through pricing, customer project delays and long sales cycles, vendor concentration, product defects and warranty exposure, competition, foreign exchange, cyber and technology security, and execution of restructuring. Itron also cites geopolitical and pandemic-related uncertainty.
- Environmental matters include a remediation proposal for a South Carolina site estimated at $3.7 million, disputed by Itron, and a $1.9 million remediation plan for a site in Italy that Schlumberger is expected to reimburse fully. The filing does not state a clear quantified expected loss for the South Carolina matter.
- Deferred tax assets were $686.4 million before a $427.4 million valuation allowance; their realization depends on future taxable income. Itron also disclosed $130.1 million of unrecognized tax benefits and an expected German tax assessment, while stating it did not anticipate a material adverse effect from examinations.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition and deferred-tax-asset realizability were identified as critical audit matters.
Important facts for investors to verify
- Whether semiconductor and other component availability improves enough to convert the elevated backlog into shipments and revenue, and whether customer schedules remain intact.
- Whether inventory levels, operating cash flow, and free cash flow recover after the 2022 working-capital outflow.
- Whether the 2023 restructuring charges, cash requirements, and projected savings track management’s estimates and do not impair delivery or customer service.
- Debt repayment and refinancing plans for the $460 million convertible notes due in 2026 and the revolving facility due in 2024.
- Updates on the disputed South Carolina remediation, German tax examination, warranty estimates, and any changes in the deferred-tax valuation allowance.