itri-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-22418

Itron, Inc.

(Exact name of registrant as specified in its charter)


Washington						91-1011792
(State of Incorporation)						(I.R.S. Employer Identification No.)

2111 N Molter Road, Liberty Lake, Washington 99019

(509) 924-9900

(Address and telephone number of registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, no par value

ITRI

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 29, 2024, there were outstanding 44,962,799 shares of the registrant's common stock, no par value, which is the only class of common stock of the registrant.

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Itron, Inc.

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			Page
PART I: FINANCIAL INFORMATION

Item 1: Financial Statements (Unaudited)

Consolidated Statements of Operations			1

Consolidated Statements of Comprehensive Income (Loss)			2

Consolidated Balance Sheets			3

Consolidated Statements of Equity			4

Consolidated Statements of Cash Flows			5

Notes to Consolidated Financial Statements			6

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations			27

Item 3: Quantitative and Qualitative Disclosures About Market Risk			47

Item 4: Controls and Procedures			48


PART II: OTHER INFORMATION

Item 1: Legal Proceedings			49

Item 1A: Risk Factors			49

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			49

Item 5: Other Information			49

Item 6: Exhibits			50


SIGNATURE			51

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PART I: FINANCIAL INFORMATION

Item 1: Financial Statements (Unaudited)

ITRON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per share data	2024		2023		2024		2023
Revenues
Product revenues	$	532,907	$	464,803	$	1,060,729	$	881,127
Service revenues	76,162		76,267		151,782		154,561
Total revenues	609,069		541,070		1,212,511		1,035,688
Cost of revenues
Product cost of revenues	356,747		322,288		713,454		619,631
Service cost of revenues	41,862		44,835		83,218		85,742
Total cost of revenues	398,609		367,123		796,672		705,373
Gross profit	210,460		173,947		415,839		330,315

Operating expenses
Sales, general and administrative	88,413		79,079		174,384		154,600
Research and development	53,053		53,560		105,454		103,125
Amortization of intangible assets	4,511		4,722		8,497		9,770
Restructuring	(99)		874		99		37,483
(Gain) loss on sale of business	(65)		612		(42)		630

Total operating expenses	145,813		138,847		288,392		305,608

Operating income	64,647		35,100		127,447		24,707
Other income (expense)
Interest income	5,128		1,508		8,974		3,326
Interest expense	(2,290)		(1,977)		(4,183)		(4,034)
Other income (expense), net	(445)		(333)		18		(1,808)
Total other income (expense)	2,393		(802)		4,809		(2,516)

Income before income taxes	67,040		34,298		132,256		22,191
Income tax provision	(15,180)		(9,195)		(28,609)		(9,125)
Net income	51,860		25,103		103,647		13,066
Net income attributable to noncontrolling interests	542		902		608		701
Net income attributable to Itron, Inc.	$	51,318	$	24,201	$	103,039	$	12,365

Net income per common share - Basic	$	1.12	$	0.53	$	2.25	$	0.27
Net income per common share - Diluted	$	1.10	$	0.53	$	2.22	$	0.27

Weighted average common shares outstanding - Basic	45,745		45,435		45,698		45,358
Weighted average common shares outstanding - Diluted	46,526		45,781		46,441		45,677

The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Net income	$	51,860	$	25,103	$	103,647	$	13,066

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(5,418)		1,940		(16,269)		9,165


Pension benefit obligation adjustment	(516)		(107)		(573)		(213)
Total other comprehensive income (loss), net of tax	(5,934)		1,833		(16,842)		8,952

Total comprehensive income (loss), net of tax	45,926		26,936		86,805		22,018

Comprehensive income (loss) attributable to noncontrolling interests, net of tax	542		902		608		701

Comprehensive income (loss) attributable to Itron, Inc.	$	45,384	$	26,034	$	86,197	$	21,317

The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


In thousands	June 30, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	920,639	$	302,049
Accounts receivable, net	316,742		303,821
Inventories	291,781		283,686
Other current assets	160,293		159,882
Total current assets	1,689,455		1,049,438

Property, plant, and equipment, net	122,026		128,806
Deferred tax assets, net	283,697		247,211

Other long-term assets	38,506		38,836
Operating lease right-of-use assets, net	37,619		41,186
Intangible assets, net	52,544		46,282
Goodwill	1,060,093		1,052,504
Total assets	$	3,283,940	$	2,604,263

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	184,783	$	199,520
Other current liabilities	57,491		54,407
Wages and benefits payable	105,884		135,803
Taxes payable	12,792		8,636

Current portion of warranty	14,612		14,663
Unearned revenue	159,625		124,207
Total current liabilities	535,187		537,236

Long-term debt, net	1,239,772		454,827
Long-term warranty	8,227		7,501
Pension benefit obligation	62,024		63,887
Deferred tax liabilities, net	670		697
Operating lease liabilities	28,468		32,656
Other long-term obligations	148,901		176,028
Total liabilities	2,023,249		1,272,832



Equity
Preferred stock, no par value, 10,000 shares authorized, no shares issued or outstanding	—		—
Common stock, no par value, 75,000 shares authorized, 44,952 and 45,512 shares issued and outstanding	1,662,965		1,820,510
Accumulated other comprehensive loss, net	(98,032)		(81,190)
Accumulated deficit	(325,370)		(428,409)
Total Itron, Inc. shareholders' equity	1,239,563		1,310,911
Noncontrolling interests	21,128		20,520
Total equity	1,260,691		1,331,431
Total liabilities and equity	$	3,283,940	$	2,604,263

The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	Common Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Itron, Inc. Shareholders' Equity		Noncontrolling Interests		Total Equity
In thousands	Shares	Amount
Balances at January 1, 2024	45,512	$	1,820,510	$	(81,190)	$	(428,409)	$	1,310,911	$	20,520	$	1,331,431
Net income						51,721		51,721		66		51,787
Other comprehensive income (loss), net of tax				(10,908)				(10,908)				(10,908)

Net stock issued and repurchased	338	1,560						1,560				1,560




Stock-based compensation expense		11,429						11,429				11,429




Registration fee		11						11				11
Balances at March 31, 2024	45,850	1,833,510		(92,098)		(376,688)		1,364,724		20,586		1,385,310
Net income						51,318		51,318		542		51,860
Other comprehensive income (loss), net of tax				(5,934)				(5,934)				(5,934)

Net stock issued and repurchased	74	1,408						1,408				1,408




Stock-based compensation expense		10,416						10,416				10,416
Payments on call spread for convertible offering, net of tax		(82,304)						(82,304)				(82,304)
Stock repurchased	(972)	(100,000)						(100,000)				(100,000)
Registration fee		(65)						(65)				(65)
Balances at June 30, 2024	44,952	$	1,662,965	$	(98,032)	$	(325,370)	$	1,239,563	$	21,128	$	1,260,691


	Common Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Itron, Inc. Shareholders' Equity		Noncontrolling Interests		Total Equity
In thousands	Shares	Amount
Balances at January 1, 2023	45,186	$	1,788,479	$	(94,674)	$	(525,332)	$	1,168,473	$	23,083	$	1,191,556
Net loss						(11,836)		(11,836)		(201)		(12,037)

Other comprehensive income (loss), net of tax				7,119				7,119				7,119
Distributions to noncontrolling interests										(21)		(21)
Net stock issued and repurchased	219	607						607				607




Stock-based compensation expense		6,919						6,919				6,919





Balances at March 31, 2023	45,405	1,796,005		(87,555)		(537,168)		1,171,282		22,861		1,194,143
Net income						24,201		24,201		902		25,103

Other comprehensive income (loss), net of tax				1,833				1,833				1,833

Net stock issued and repurchased	43	1,033						1,033				1,033




Stock-based compensation expense		6,775						6,775				6,775


Balances at June 30, 2023	45,448	$	1,803,813	$	(85,722)	$	(512,967)	$	1,205,124	$	23,763	$	1,228,887

The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended June 30,
In thousands	2024		2023
Operating activities
Net income	$	103,647	$	13,066
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets	26,263		28,368
Non-cash operating lease expense	7,634		8,141
Stock-based compensation	21,845		13,694
Amortization of prepaid debt fees	1,867		1,820
Deferred taxes, net	(8,725)		(2,509)
(Gain) loss on sale of business	(42)		630


Restructuring, non-cash	(171)		922
Other adjustments, net	(591)		(199)
Changes in operating assets and liabilities, net of acquisition and sale of business:
Accounts receivable	(13,557)		(34,681)
Inventories	(13,216)		(36,466)
Other current assets	(510)		(33,554)
Other long-term assets	(1,885)		5,595
Accounts payable, other current liabilities, and taxes payable	(7,128)		4,670
Wages and benefits payable	(28,700)		9,040
Unearned revenue	39,039		42,919
Warranty	810		(440)
Restructuring	(14,628)		31,181
Other operating, net	(18,927)		(9,208)
Net cash provided by operating activities	93,025		42,989

Investing activities
Net proceeds (payments) related to the sale of business	405		(772)
Acquisitions of property, plant, and equipment	(14,255)		(12,498)
Business acquisitions, net of cash and cash equivalents acquired	(34,126)		—
Other investing, net	156		50
Net cash used in investing activities	(47,820)		(13,220)

Financing activities
Proceeds from borrowings	805,000		—

Issuance of common stock	2,972		1,641


Payments on call spread for convertible offering	(108,997)		—
Repurchase of common stock	(100,000)		—
Prepaid debt fees	(21,495)		(517)
Other financing, net	(641)		(354)
Net cash provided by financing activities	576,839		770

Effect of foreign exchange rate changes on cash and cash equivalents	(3,454)		241
Increase in cash and cash equivalents	618,590		30,780
Cash and cash equivalents at beginning of period	302,049		202,007
Cash and cash equivalents at end of period	$	920,639	$	232,787




Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes, net	$	40,006	$	20,653
Interest	958		785

The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(UNAUDITED)

In this Quarterly Report on Form 10-Q, the terms "we", "us", "our", "Itron", and the "Company" refer to Itron, Inc. and its subsidiaries.

Note 1: Summary of Significant Accounting Policies

Financial Statement Preparation

The consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited and reflect entries necessary for the fair presentation of the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and 2023, Consolidated Statements of Equity for the three months ended June 30, 2024 and 2023 and March 31, 2024 and 2023, the Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023, and the Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023, of Itron, Inc. and its subsidiaries. All entries required for the fair presentation of the financial statements are of a normal recurring nature, except as disclosed. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results expected for the full year or for any other period.

Certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been partially or completely omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim results. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2023 filed with the SEC in our Annual Report on Form 10-K on February 26, 2024 (2023 Annual Report). There have been no significant changes in financial statement preparation or significant accounting policies since December 31, 2023.

Restricted Cash and Cash Equivalents

Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents. We had $1.8 million pledged for standby letters of credit as of June 30, 2024 and December 31, 2023.

Risks and Uncertainties

Global economic impacts, such as pandemics and various ongoing conflicts around the world, may create disruption in customer demand and global supply chains, resulting in market volatility, which our management continues to monitor. In the aftermath of these types of events, global supply chains, including labor, may struggle to keep pace with rapidly changing demand. Temporary imbalance in supply and demand may create business uncertainties that include costs and availability. Efforts continue with suppliers to improve supply resiliency, including the approval of alternate sources. Additionally, inflation in our raw materials and component costs, freight charges, and labor costs may increase above historical levels due to, among other things, the continuing impacts of an uncertain economic environment. We may or may not be able to fully recover these increased costs through pricing actions with our customers. Currently, we have not identified any significant decrease in long-term customer demand for our products and services.

While we have limited direct business exposure in areas with current conflict, such as Ukraine and Israel, military actions globally and any resulting sanctions could adversely affect the global economy, as well as further disrupt the supply chain. A major disruption in the global economy and supply chain could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows. The extent and duration of the military action, sanctions, and resulting market and/or supply disruptions are impossible to predict but could be substantial, and our management continues to monitor these events closely.

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Recent Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which amends the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual financial reporting in 2024 and interim financial reports for the first quarter of 2025, with early adoption permitted. These amendments are to be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures for our reportable segment information.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends Income Taxes (Topic 740). The FASB issued this update to improve annual basis income tax disclosures related to (1) rate reconciliation, (2) income taxes paid, and (3) other disclosures related to pretax income (or loss) and income tax expense (or benefit) from continuing operations. The effective date for this amendment is January 1, 2025, with early adoption permitted. These amendments are to be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

Note 2: Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (EPS):


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per share data	2024		2023		2024		2023
Net income available to common shareholders	$	51,318	$	24,201	$	103,039	$	12,365

Weighted average common shares outstanding - Basic	45,745		45,435		45,698		45,358
Dilutive effect of stock-based awards	781		346		743		319
Dilutive effect of convertible notes	—		—		—		—
Weighted average common shares outstanding - Diluted	46,526		45,781		46,441		45,677
Net income per common share - Basic	$	1.12	$	0.53	$	2.25	$	0.27
Net income per common share - Diluted	$	1.10	$	0.53	$	2.22	$	0.27

Stock-based Awards

For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase our common stock at the average market price during the period. Related proceeds include the amount the employee must pay upon exercise and the future compensation cost associated with the stock award. Approximately 10,000 and 33,000 stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2024 because they were anti-dilutive. Approximately 0.4 million stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2023 because they were anti-dilutive. These stock-based awards could be dilutive in future periods.

Convertible Notes and Share Hedges

2021 Notes, Warrants and Call Option Transactions

For our convertible notes issued in March 2021 (the 2021 Notes), the dilutive effect is calculated using the if-converted method. We are required, pursuant to the indenture governing the notes, to settle the principal amount in cash and may elect to settle the remaining conversion obligation (stock price in excess of conversion price) in cash, shares, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the remaining conversion obligation, assuming all the notes were converted. The average closing prices of our common stock for the quarter ended June 30, 2024 were used as the basis for determining the dilutive effect on EPS. The quarterly average closing prices for our common stock did not exceed the conversion price of $126.00, and therefore all associated shares were anti-dilutive.

In conjunction with the issuance of the 2021 Notes, we sold warrants to purchase 3.7 million shares of Itron common stock. The warrants have a strike price of $180.00 per share. For calculating the dilutive effect of the warrants, we use the treasury stock method. With this method, we assume exercise of the warrants at the beginning of the period, or at time of issuance if later, and the issuance of common stock upon exercise. Proceeds from the exercise of the warrants are assumed to be used to repurchase shares of our stock at the average market price during the period. The incremental shares, representing the number of shares

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assumed to be exercised with the warrants less the number of shares repurchased, are included in diluted weighted average common shares outstanding. For periods where the warrants strike price of $180.00 per share is greater than the average share price of Itron stock for the period, the warrants would be anti-dilutive. For the three and six months ended June 30, 2024, the quarterly average closing prices of our common stock did not exceed the warrant strike price and therefore 3.7 million shares were considered anti-dilutive.

In connection with the issuance of the 2021 Notes, we entered into privately negotiated call option contracts on our common stock (the 2021 call option transactions) with certain commercial banks. The 2021 call option transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2021 Notes, approximately 3.7 million shares of our common stock, the same number of shares initially underlying the notes, at a strike price of approximately $126.00, subject to customary adjustments. The 2021 call option transactions will expire upon the maturity of the 2021 Notes, subject to earlier exercise or termination. Exercise of the 2021 call option transactions would reduce the number of shares of our common stock outstanding and therefore would be anti-dilutive.

2024 Notes and Capped Call Transactions

For our convertible notes issued in June 2024 (the 2024 Notes), the dilutive effect is calculated using the if-converted method. We are required, pursuant to the indenture governing our convertible notes, to settle the principal amount of the convertible notes in cash and may elect to settle the remaining conversion obligation (stock price in excess of conversion price) in cash, shares, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the remaining conversion obligation, assuming all the convertible notes were converted. The average closing prices of our common stock for the quarter ended June 30, 2024 were used as the basis for determining the dilutive effect on EPS. The quarterly average closing prices for our common stock did not exceed the conversion price of $131.24, and therefore all associated shares were anti-dilutive.

In connection with the issuance of the 2024 Notes, we entered into privately negotiated capped call transactions (the 2024 capped call transactions) on our common stock with certain commercial banks. The 2024 capped call transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2024 Notes, approximately 6.1 million shares of our common stock, the same number of shares initially underlying the convertible notes, at a strike price of approximately $131.2353, subject to customary adjustments. The cap price of the 2024 capped call transactions will initially be $205.86 per share, which represents a premium of 100% over the last reported stock price per share of the Company's common stock on June 17, 2024, and is subject to certain adjustments under the terms of the 2024 capped call transactions. The 2024 capped call transactions will expire upon the maturity of the 2024 Notes, subject to earlier exercise or termination. Exercise of the 2024 capped call transactions would reduce the number of shares of our common stock outstanding and therefore would be anti-dilutive.

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Note 3: Certain Balance Sheet Components

A summary of accounts receivable from contracts with customers is as follows:


Accounts receivable, net
In thousands	June 30, 2024		December 31, 2023
Trade receivables (net of allowance of $603 and $738)	$	288,568	$	272,890
Unbilled receivables	28,174		30,931
Total accounts receivable, net	$	316,742	$	303,821


Allowance for credit losses account activity	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Beginning balance	$	722	$	4,782	$	738	$	4,863
Provision for (release of) doubtful accounts, net	(100)		52		(78)		(39)
Accounts written-off, net	(17)		(178)		(43)		(244)
Effect of change in exchange rates	(2)		38		(14)		114
Ending balance	$	603	$	4,694	$	603	$	4,694


Inventories
In thousands	June 30, 2024		December 31, 2023
Raw materials	$	201,690	$	213,303
Work in process	14,620		17,849
Finished goods	75,471		52,534
Total inventories	$	291,781	$	283,686


Property, plant, and equipment, net
In thousands	June 30, 2024		December 31, 2023
Machinery and equipment	$	315,068	$	318,546
Computers and software	127,653		126,149
Buildings, furniture, and improvements	124,040		126,041
Land	8,223		7,846
Construction in progress, including purchased equipment	22,053		24,316
Total cost	597,037		602,898
Accumulated depreciation	(475,011)		(474,092)
Property, plant, and equipment, net	$	122,026	$	128,806


Depreciation expense	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Depreciation expense	$	9,008	$	9,183	$	17,766	$	18,598

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Note 4: Intangible Assets and Liabilities

The gross carrying amount and accumulated amortization (accretion) of our intangible assets and liabilities, other than goodwill, were as follows:


	June 30, 2024						December 31, 2023
In thousands	Gross		Accumulated (Amortization) Accretion		Net		Gross		Accumulated (Amortization) Accretion		Net
Intangible Assets
Core-developed technology	$	512,185	$	(498,767)	$	13,418	$	502,010	$	(499,571)	$	2,439
Customer contracts and relationships	327,053		(289,556)		37,497		329,688		(287,653)		42,035
Trademarks and trade names	72,495		(70,925)		1,570		73,461		(71,740)		1,721
Other	12,019		(11,960)		59		12,019		(11,932)		87


Total intangible assets	$	923,752	$	(871,208)	$	52,544	$	917,178	$	(870,896)	$	46,282

Intangible Liabilities
Customer contracts and relationships	$	(23,900)	$	23,900	$	—	$	(23,900)	$	23,900	$	—

A summary of intangible assets and liabilities activity is as follows:


	Six Months Ended June 30,
In thousands	2024		2023
Intangible assets, gross beginning balance	$	917,178	$	905,134
Intangible assets acquired (1)	15,000		—


Effect of change in exchange rates	(8,426)		7,202
Intangible assets, gross ending balance	$	923,752	$	912,336

Intangible liabilities, gross beginning balance	$	(23,900)	$	(23,900)

Effect of change in exchange rates	—		—
Intangible liabilities, gross ending balance	$	(23,900)	$	(23,900)

(1) On March 1, 2024, we completed the acquisition of 100% of the shares Elpis2, Inc. (Elpis Squared), a privately held software and services company. The purchase resulted in the addition of intangible assets of $15.0 million including $12.5 million identified core-developed technology and $2.5 million of customer contracts and relationships. The core-developed technology and customer contract and relationships will be amortized over the weighted-average five-year and three-year useful lives, respectively, using the straight-line method. Refer to Note 5: Goodwill and Note 17: Business Combination for additional information.

Assumed intangible liabilities reflect the present value of the projected cash outflows for an existing contract where remaining costs were expected to exceed projected revenues.

Estimated future annual amortization is as follows:


Year Ending December 31,	Estimated Annual Amortization
In thousands
2024 (amount remaining at June 30, 2024)	$	9,334
2025	17,660
2026	13,652
2027	8,275
2028	2,681
Thereafter	942
Total intangible assets subject to amortization	$	52,544

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Note 5: Goodwill

The following table reflects changes in the carrying amount of goodwill for the six months ended June 30, 2024:


In thousands	Device Solutions		Networked Solutions		Outcomes		Total Company
Goodwill balance at January 1, 2024	$	—	$	911,847	$	140,657	$	1,052,504


Goodwill acquired (1)	—		—		19,661		19,661
Effect of change in exchange rates	—		(10,475)		(1,597)		(12,072)
Goodwill balance at June 30, 2024	$	—	$	901,372	$	158,721	$	1,060,093

(1) On March 1, 2024, we acquired Elpis Squared. The purchase resulted in the recognition of $19.7 million in goodwill allocated to our Outcomes operating segment and reporting unit. Refer to Note 4: Intangible Assets and Liabilities and Note 17: Business Combination for additional information on the transaction.

Note 6: Debt

The components of our borrowings were as follows:


In thousands	June 30, 2024		December 31, 2023
Credit facility

Multicurrency revolving line of credit	$	—	$	—

Convertible notes	1,265,000		460,000
Total debt	1,265,000		460,000



Less: unamortized prepaid debt fees - convertible notes	25,228		5,173
Long-term debt, net	$	1,239,772	$	454,827

Credit Facility

Our current credit facility, entered on January 5, 2018 (as amended, the 2018 credit facility), originally provided for committed credit facilities in the amount of $1.2 billion U.S. dollars. This facility now consists of a multicurrency revolving line of credit (the revolver) with a principal amount of up to $500 million. The revolver also contains a $300 million standby letter of credit sub-facility and a $50 million swingline sub-facility. The $650 million U.S. dollar term loan (the term loan) included in the original facility was fully repaid in August 2021.

The 2018 credit facility permits us and certain of our foreign subsidiaries to borrow in U.S. dollars, euros, or, with lender approval, other currencies readily convertible into U.S. dollars. All obligations under the 2018 credit facility are guaranteed by Itron, Inc. and material U.S. domestic subsidiaries and are secured by a pledge of substantially all of the assets of Itron, Inc. and material U.S. domestic subsidiaries. This includes a pledge of 100% of the capital stock of material U.S. domestic subsidiaries and up to 66% of the voting stock (100% of the non-voting stock) of first-tier foreign subsidiaries. In addition, the obligations of any foreign subsidiary who is a foreign borrower, as defined by the 2018 credit facility, are guaranteed by the foreign subsidiary and by its direct and indirect foreign parents. The 2018 credit facility includes debt covenants, which contain certain financial thresholds and place certain restrictions on the incurrence of debt, investments, and the issuance of dividends. We were in compliance with the debt covenants under the 2018 credit facility at June 30, 2024.

Under the 2018 credit facility, we elect applicable market interest rates for both the term loan and any outstanding revolving loans. We also pay an applicable margin, which is based on our total net leverage ratio as defined in the credit agreement. The applicable rates per annum may be based on either: (1) the LIBOR rate or EURIBOR rate (subject to a floor of 0%), plus an applicable margin, or (2) the Alternate Base Rate, plus an applicable margin. The Alternate Base Rate election is equal to the greatest of three rates: (i) the prime rate, (ii) the Federal Reserve effective rate plus 0.50%, or (iii) one-month LIBOR plus 1.00%. The cessation of LIBOR occurred in June 2023. On November 23, 2022, we amended the 2018 credit facility to replace the LIBOR rate with the Term Secured Overnight Financing Rate (SOFR) as the base interest rate. On February 21, 2023, we entered into a sixth amendment to the 2018 credit facility. This amendment modified debt covenant provisions to allow for the addback of non-recurring cash expenses related to restructuring charges incurred during the quarter ended March 31, 2023. On October 13, 2023, we entered into a seventh amendment to extend the maturity date to October 18, 2026. However, that date may be advanced to December 14, 2025 if Itron does not settle or extend a sufficient portion of outstanding convertible notes detailed in the amendment. In addition, the amendment revises the interest cost, as follows:

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Total Net Leverage Ratio

Interest Cost

Commitment Fee

Greater than 4.00

SOFR + 250 bps

40 bps

3.51 to 4.00

SOFR + 225 bps

35 bps

2.51 to 3.50

SOFR + 200 bps

30 bps

Less than or equal to 2.50

SOFR + 175 bps

25 bps

On June 14, 2024, we entered into an eighth amendment of the 2018 credit facility. In contemplation of the issuance of the 2024 convertible notes, this amendment to the Credit Agreement removed the $500 million maximum amount of convertible notes we could offer.

At June 30, 2024, there were no outstanding loan balances under the credit facility, and $46.8 million was utilized by outstanding standby letters of credit, resulting in $453.2 million available for additional borrowings or standby letters of credit within the revolver. At June 30, 2024, $253.2 million was available for additional standby letters of credit under the letter of credit sub-facility, and no amounts were outstanding under the swingline sub-facility.

Convertible Notes

2021 Notes

On March 12, 2021, we closed the sale of $460 million of convertible notes in a private placement to qualified institutional buyers, resulting in net proceeds to us of $448.5 million after deducting initial purchasers' discounts of the offering. The 2021 Notes do not bear regular interest, and the principal amount does not accrete. The 2021 Notes will mature on March 15, 2026, unless earlier repurchased, redeemed, or converted in accordance with their terms. No sinking fund is provided for the 2021 Notes.

The initial conversion rate of the 2021 Notes is 7.9365 shares of our common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $126.00 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the indenture governing the 2021 Notes) or upon a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its convertible notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.

Prior to the close of business on the business day immediately preceding December 15, 2025, the 2021 Notes are convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business-day period after any five consecutive trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (3) upon the occurrence of specified corporate events; or (4) upon redemption by us. On or after December 15, 2025, until the close of business on the second scheduled trading day immediately preceding March 15, 2026, holders of the 2021 Notes may convert all or a portion of their notes at any time. Upon conversion, we will pay cash up to the aggregate principal amount to be converted and pay and/or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted.

Subsequent to March 20, 2024 and prior to December 15, 2025, we may redeem for cash all or part of the 2021 Notes, at our option, if the last reported sales price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related notice of the redemption. The redemption price of each convertible note to be redeemed will be the principal amount of such note, plus accrued and unpaid special interest, if any. Upon the occurrence of a fundamental change (as defined in the indenture governing the convertible notes), subject to a limited exception described in the indenture governing the convertible notes, holders may require us to repurchase all or a portion of their notes for cash at a price equal to plus accrued and unpaid special interest to, but not including, the fundamental change repurchase date (as defined in the indenture governing the convertible notes).

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The 2021 Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsubordinated debt and senior in right of payment to any future debt that is expressly subordinated in right of payment to the convertible notes. The convertible notes will be effectively subordinated to any of our existing and future secured debt to the extent of the assets securing such indebtedness. The convertible notes will be structurally subordinated to all existing debt and any future debt and any other liabilities of our subsidiaries.

2024 Notes

On June 21, 2024, we closed the sale of $805 million of convertible notes in a private placement to qualified institutional buyers, resulting in net proceeds to us of $784 million after deducting initial purchasers' discounts of the offering. The 2024 Notes will accrue interest at a rate of 1.375% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2025. The 2024 Notes will mature on July 15, 2030, unless earlier repurchased, redeemed, or converted in accordance with their terms.

The initial conversion rate of the 2024 Notes is 7.6199 shares of our common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $131.24 per share. The conversion rate of the notes is subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the indenture governing the convertible notes) or upon a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.

Prior to the close of business on the business day immediately preceding April 15, 2030, the 2024 Notes are convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business-day period after any five consecutive trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (3) upon the occurrence of specified corporate events; or (4) upon redemption by us. On or after April 15, 2030, until the close of business on the second scheduled trading day immediately preceding July 15, 2030, holders of the notes may convert all or a portion of their notes at any time. Upon conversion, we will pay cash up to the aggregate principal amount of the notes to be converted and pay and/or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted.

Subsequent to July 20, 2028 and prior to April 15, 2030, we may redeem for cash all or part of the 2024 Notes, at our option, if the last reported sales price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related notice of the redemption. However, we may not redeem less than all of the outstanding notes unless at least $100.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time we send related redemption notices. The redemption price of each note to be redeemed will be the principal amount of such note, plus accrued and unpaid special interest, if any. Upon the occurrence of a fundamental change (as defined in the indenture governing the 2024 Notes), subject to a limited exception described in the indenture governing the notes, holders may require us to repurchase all or a portion of their notes for cash at a price equal to plus accrued and unpaid special interest to, but not including, the fundamental change repurchase date (as defined in the indenture governing the 2024 Notes).

The 2024 Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsubordinated debt and senior in right of payment to any future debt that is expressly subordinated in right of payment to the notes. The notes will be effectively subordinated to any of our existing and future secured debt to the extent of the assets securing such indebtedness. The notes will be structurally subordinated to all existing debt and any future debt and any other liabilities of our subsidiaries.

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Debt Maturities

The amount of required minimum principal payments on our long-term debt in aggregate over the next five years is as follows:


Year Ending December 31,	Minimum Payments
In thousands
2024 (amount remaining at June 30, 2024)	$	—
2025	—
2026	460,000
2027	—
2028	—
Thereafter	805,000
Total minimum payments on debt	$	1,265,000

Note 7: Derivative Financial Instruments

As part of our risk management strategy, we use derivative instruments to hedge certain foreign currency and interest rate exposures. Refer to Note 13: Shareholders' Equity and Note 14: Fair Value of Financial Instruments for additional disclosures on our derivative instruments.

Derivatives Not Designated as Hedging Relationships

We are exposed to foreign exchange risk when we enter into non-functional currency transactions, both intercompany and third party. At each period-end, non-functional currency monetary assets and liabilities are revalued with the change recognized within other income (expense) in our Consolidated Statements of Operations. We enter into monthly foreign exchange forward contracts, which are not designated for hedge accounting, with the intent to reduce earnings volatility associated with currency exposures. As of June 30, 2024, a total of 41 contracts were offsetting our exposures from the euro, pound sterling, Indonesian rupiah, Canadian dollar, Australian dollar, and various other currencies, with notional amounts ranging from $103,000 to $39.1 million.

We will continue to monitor and assess our interest rate and foreign exchange risk and may institute additional derivative instruments to manage such risk in the future.

Note 8: Defined Benefit Pension Plans

We sponsor both funded and unfunded defined benefit pension plans offering death and disability, retirement, and special termination benefits for certain of our international employees, primarily in Germany, France, India, and Indonesia. The defined benefit obligation is calculated annually by using the projected unit credit method. The measurement date for the pension plans was December 31, 2023.

Amounts recognized on the Consolidated Balance Sheets consist of:


In thousands	June 30, 2024		December 31, 2023
Assets
Plan assets in other long-term assets	$	66	$	80

Liabilities
Current portion of pension benefit obligation in wages and benefits payable	$	3,793	$	3,623
Long-term portion of pension benefit obligation	62,024		63,887

Pension benefit obligation, net	$	65,751	$	67,430

Our asset investment strategy focuses on maintaining a portfolio using primarily insurance funds, which are accounted for as investments and measured at fair value, in order to achieve our long-term investment objectives on a risk adjusted basis. Our general funding policy for these qualified pension plans is to contribute amounts sufficient to satisfy regulatory funding standards of the respective countries for each plan.

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Net periodic pension benefit cost for our plans include the following components:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Service cost	$	659	$	636	$	1,294	$	1,240
Interest cost	676		721		1,357		1,433
Expected return on plan assets	(73)		(89)		(146)		(176)
Amortization of prior service costs	33		15		67		30
Amortization of actuarial net loss	(85)		(122)		(170)		(243)
Curtailment	(585)		—		(585)		—

Net periodic benefit cost	$	625	$	1,161	$	1,817	$	2,284

The components of net periodic benefit cost, other than the service cost component, are included in total other income (expense) on the Consolidated Statements of Operations.

Note 9: Stock-Based Compensation

We grant stock-based compensation awards, including restricted stock units, phantom stock, and unrestricted stock units, under the Second Amended and Restated 2010 Stock Incentive Plan (Stock Incentive Plan). Prior to December 31, 2020, stock options were also granted as part of the stock-based compensation awards. In the Stock Incentive Plan, we have 13,991,273 shares of common stock authorized for issuance subject to stock splits, dividends, and other similar events, and at June 30, 2024, 4,591,679 shares were available for grant. We issue new shares of common stock upon the exercise of stock options or when vesting conditions on restricted stock units are fully satisfied. These shares are subject to a fungible share provision such that the authorized share available for grant is reduced by (i) one share for every one share subject to a stock option or share appreciation right granted under the Plan and (ii) 1.7 shares for every one share of common stock that was subject to an award other than an option or share appreciation right.

We also award phantom stock units, which are settled in cash upon vesting and accounted for as liability-based awards, with no impact to the shares available for grant.

In addition, we maintain the Employee Stock Purchase Plan (ESPP), for which 494,176 shares of common stock were available for future issuance at June 30, 2024.

ESPP activity and stock-based grants other than stock options and restricted stock units were not significant for the three and six months ended June 30, 2024 and 2023.

Stock-Based Compensation Expense

Total stock-based compensation expense and the related tax benefit were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Stock options	$	—	$	20	$	—	$	80
Restricted stock units	10,080		6,516		21,173		13,099
Unrestricted stock awards	336		239		672		515
Phantom stock units	1,312		1,147		2,761		1,924
Total stock-based compensation	$	11,728	$	7,922	$	24,606	$	15,618

Related tax benefit	$	2,551	$	1,670	$	5,350	$	3,373

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Stock Options

A summary of our stock option activity is as follows:


	Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value		Weighted Average Grant Date Fair Value
	In thousands			Years	In thousands
Outstanding, January 1, 2023	381	$	60.63	4.8	$	1,892

Granted	—	—					$	—
Exercised	(5)	55.49			73
Forfeited	—	—
Canceled	—	—
Outstanding, June 30, 2023	376	$	60.70	4.4	$	5,494

Outstanding, January 1, 2024	363	$	61.36	4.0	$	5,886
Granted	—	—					$	—
Exercised	(19)	44.74			779

Forfeited	—	—
Canceled	—	—
Outstanding, June 30, 2024	344	$	62.27	3.5	$	12,626

Exercisable, June 30, 2024	344	$	62.27	3.5	$	12,626

At June 30, 2024, all stock-based compensation expense related to nonvested stock options has been recognized.

Restricted Stock Units

The following table summarizes restricted stock unit activity:


In thousands, except fair value	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding, January 1, 2023	528

Granted	442	$	56.37
Released (1)	(222)			$	1,236
Forfeited	(19)
Outstanding, June 30, 2023	729

Outstanding, January 1, 2024	751	$	58.89
Granted	410	75.89
Released (1)	(360)	63.22		$	28,739
Forfeited	(10)	60.84
Outstanding, June 30, 2024	791	66.31

Vested but not released, June 30, 2024	17			$	1,669

(1) Shares released is presented as gross shares and does not reflect shares withheld by us for employee payroll tax obligations.

At June 30, 2024, total unrecognized compensation expense on restricted stock units was $62.0 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.

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The weighted average assumptions used to estimate the fair value of performance-based restricted stock units granted with a service and market condition and the resulting weighted average fair value are as follows:


	Six Months Ended June 30,
		2024			2023

Expected volatility		45.7		%	50.0		%
Risk-free interest rate		4.4		%	4.6		%
Expected term (years)		2.9			2.2

Weighted average fair value		$	83.26		$	59.52

Note 10: Income Taxes

We determine the interim tax benefit (provision) by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusting for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized, as well as significant unusual or infrequently occurring items that are separately reported, are excluded from the annual effective tax rate.

Our tax rate for the three and six months ended June 30, 2024 of 23% and 22%, respectively, differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, U.S. taxation of foreign earnings including GILTI (Global Intangible Low Taxed Income) tax, net of Section 250 deduction (largely driven by research and development capitalization), Subpart F income, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions.

Our tax rate for the three and six months ended June 30, 2023 of 27% and 41%, respectively, differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, U.S. taxation of foreign earnings including GILTI (Global Intangible Low Taxed Income) tax, net of Section 250 deduction (largely driven by research and development capitalization), Subpart F income, an expense related to stock-based compensation, tax credits, and uncertain tax positions.

Beginning January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years, dependent upon the geography in which the expenditures are incurred. Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, as of quarter end no such deferral has been passed. The income tax provision has been prepared according to currently enacted tax legislation, including the effect of guidance issued in December 2023 that provided clarity regarding research providers and recipients.

In August 2022, the Inflation Reduction Act was signed into law, which made a number of changes to the Internal Revenue Code, including adding a 1% excise tax on stock buybacks by publicly traded corporations and a 15% minimum tax on adjusted financial statement income of certain large companies. We are subject to the new 1% excise tax beginning January 1, 2023, but the amount will vary depending upon various factors. The 15% minimum tax only applies to corporations with average book income in excess of $1 billion, therefore it is not currently applicable.

The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. Legislation is in various stages of adoption, from formal legislative proposals to passage into law, in most countries where Itron has significant operations, and is expected to take effect for calendar year 2024. The OECD continues to release more guidance on these rules and framework and we are evaluating the impact to our financial position. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Based upon forecast calculations for calendar year 2024, the Company expects to meet the safe harbors in most jurisdictions, and the remaining top-up tax is forecasted to be immaterial.

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We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense amounts recognized were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Net interest and penalties expense	$	1,015	$	556	$	1,489	$	806

Accrued interest and penalties recognized were as follows:


In thousands	June 30, 2024		December 31, 2023
Accrued interest	$	11,082	$	9,794
Accrued penalties	359		466

Unrecognized tax benefits related to uncertain tax positions and the amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate were as follows:


In thousands	June 30, 2024		December 31, 2023
Unrecognized tax benefits related to uncertain tax positions	$	129,514	$	130,067
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate	129,056		129,591

At June 30, 2024, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows.

Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.

We file income tax returns in various jurisdictions. The material jurisdictions where we are subject to examination include, among others, the United States, France, Germany, India, Italy, Indonesia, and the United Kingdom.

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Note 11: Commitments and Contingencies

Guarantees and Indemnifications

We are often required to obtain standby letters of credit (LOCs) or bonds in support of our obligations for customer contracts. These standby LOCs or bonds typically provide a guarantee to the customer for our future performance, which usually covers the installation phase of a contract and may, on occasion, cover the operations and maintenance phase of outsourcing contracts.

Our available lines of credit, outstanding standby LOCs, and bonds were as follows:


In thousands	June 30, 2024		December 31, 2023
Credit facility
Multicurrency revolving line of credit	$	500,000	$	500,000

Standby LOCs issued and outstanding	(46,763)		(59,059)
Net available for additional borrowings under the multicurrency revolving line of credit	$	453,237	$	440,941

Net available for additional standby LOCs under sub-facility	$	253,237	$	240,941

Unsecured multicurrency revolving lines of credit with various financial institutions
Multicurrency revolving lines of credit	$	89,856	$	84,318
Standby LOCs issued and outstanding	(20,221)		(21,853)
Short-term borrowings	—		—
Net available for additional borrowings and LOCs	$	69,635	$	62,465

Unsecured surety bonds in force	$	263,331	$	271,164

In the event any such standby LOC or bond were called, we would be obligated to reimburse the issuer of the standby LOC or bond. As of August 1, 2024, we are not aware of any valid claims against our outstanding standby LOCs or bonds.

We generally provide an indemnification related to the infringement of any patent, copyright, trademark, or other intellectual property right on software or equipment within our sales contracts, which indemnifies the customer from, and pays the resulting costs, damages, and attorney's fees awarded against a customer with respect to, such a claim provided that (a) the customer promptly notifies us in writing of the claim and (b) we have the sole control of the defense and all related settlement negotiations. We may also provide an indemnification to our customers for third-party claims resulting from damages caused by the negligence or willful misconduct of our employees/agents in connection with the performance of certain contracts. The terms of our indemnifications generally do not limit the maximum potential payments. It is not possible to predict the maximum potential amount of future payments under these or similar agreements.

Legal Matters

We are subject to various legal proceedings and claims of which the outcomes are subject to significant uncertainty. Our policy is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. A determination of the amount of the liability required, if any, for these contingencies is made after an analysis of each known issue. A liability would be recognized and charged to operating expense when we determine that a loss is probable and the amount can be reasonably estimated. Additionally, we disclose contingencies for which a material loss is reasonably possible, but not probable.

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Warranty

A summary of the warranty accrual account activity is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Beginning balance	$	23,575	$	24,831	$	22,164	$	25,698

New product warranties	1,529		1,817		3,227		3,447
Other adjustments and expirations, net	(552)		723		928		34
Claims activity	(1,653)		(1,943)		(3,343)		(3,930)
Effect of change in exchange rates	(60)		58		(137)		237
Ending balance	22,839		25,486		22,839		25,486
Less: current portion of warranty	14,612		17,847		14,612		17,847
Long-term warranty	$	8,227	$	7,639	$	8,227	$	7,639

Total warranty expense is classified within cost of revenues and consists of new product warranties issued, costs related to insurance and supplier recoveries, other changes and adjustments to warranties, and customer claims. Warranty expense was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Total warranty expense	$	977	$	2,540	$	4,155	$	3,481

Note 12: Restructuring

2023 Projects

On February 23, 2023, our Board of Directors approved a restructuring plan (the 2023 Projects). The 2023 Projects include activities that continue Itron's efforts to optimize its global supply chain and manufacturing operations, sales and marketing organizations, and other overhead. These projects are expected to be substantially complete by early 2025.

The total expected restructuring costs, the restructuring costs recognized, and the remaining expected restructuring costs related to the 2023 Projects were as follows:


In thousands	Total Expected Costs at June 30, 2024		Costs Recognized in Prior Periods		Adjustments Recognized During the Six Months Ended June 30, 2024		Expected Remaining Costs to be Recognized at June 30, 2024
Employee severance costs	$	42,167	$	43,347	$	(1,180)	$	—
Asset impairments & net loss (gain) on sale or disposal	1,169		1,130		39		—
Other restructuring costs	7,543		4,051		1,792		1,700
Total	$	50,879	$	48,528	$	651	$	1,700

2021 Projects

On October 29, 2021, our Board of Directors approved a restructuring plan (the 2021 Projects), which in conjunction with the announcement of the sale of certain Gas product lines from our Device Solutions manufacturing and business operations in Europe and North America to Dresser Utility Solutions, includes activities to drive reductions in certain locations and functional support areas. These projects are expected to be substantially complete by the end of 2024.

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The total expected restructuring costs, the restructuring costs recognized, and the remaining expected restructuring costs related to the 2021 Projects were as follows:


In thousands	Total Expected Costs at June 30, 2024		Costs Recognized in Prior Periods		Adjustments Recognized During the Six Months Ended June 30, 2024		Expected Remaining Costs to be Recognized at June 30, 2024
Employee severance costs	$	34,947	$	34,821	$	126	$	—
Asset impairments & net loss (gain) on sale or disposal	8,169		8,379		(210)		—
Other restructuring costs	4,861		3,729		(468)		1,600
Total	$	47,977	$	46,929	$	(552)	$	1,600

The following table summarizes the activity within the restructuring related balance sheet accounts for the 2023 Projects and the 2021 Projects during the six months ended June 30, 2024:


In thousands	Accrued Employee Severance		Asset Impairments & Net Loss (Gain) on Sale or Disposal		Other Accrued Costs		Total
Beginning balance, January 1, 2024	$	68,698	$	—	$	3,678	$	72,376
Costs charged to expense	(1,054)		(171)		1,324		99
Cash payments	(10,987)		(13)		(2,482)		(13,482)
Net assets disposed and impaired	—		184		—		184
Effect of change in exchange rates	(1,917)		—		460		(1,457)
Ending balance, June 30, 2024	$	54,740	$	—	$	2,980	$	57,720

Asset impairments are determined at the asset group level. Revenues and net operating income from the activities we have exited or will exit under the restructuring projects are not material to our operating segments or consolidated results.

Certain of Itron's employees are represented by unions or works councils, which requires consultation, and potential restructuring projects may be subject to regulatory approval, both of which could impact the timing of planned savings in certain jurisdictions.

Other restructuring costs include expenses for employee relocation, professional fees associated with employee severance, costs to exit the facilities once the operations in those facilities have ceased, and other costs associated with the liquidation of any affected legal entities. Costs associated with restructuring activities are generally presented in the Consolidated Statements of Operations as restructuring, except for certain costs associated with inventory write-downs, which are classified within cost of revenues, and accelerated depreciation expense, which is recognized according to the use of the asset. Restructuring expense is recognized within the Corporate unallocated segment and does not impact the results of our operating segments.

The current portions of restructuring liabilities were $25.0 million and $21.0 million as of June 30, 2024 and December 31, 2023 and are classified within other current liabilities on the Consolidated Balance Sheets. The long-term portions of restructuring liabilities were $32.7 million and $51.4 million as of June 30, 2024 and December 31, 2023. The long-term portions of restructuring liabilities are classified within other long-term obligations on the Consolidated Balance Sheets and include severance accruals and facility exit costs.

Note 13: Shareholders' Equity

Preferred Stock

We have authorized the issuance of 10 million shares of preferred stock with no par value. In the event of a liquidation, dissolution, or winding up of the affairs of the corporation, whether voluntary or involuntary, the holders of any outstanding preferred stock would be entitled to be paid a preferential amount per share to be determined by the Board of Directors prior to any payment to holders of common stock. There was no preferred stock issued or outstanding at June 30, 2024 or December 31, 2023.

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Stock Repurchase Program

Effective May 11, 2023, Itron's Board of Directors authorized a share repurchase up to $100 million of our common stock over an 18-month period (the 2023 Stock Repurchase Program). The repurchase program is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. In June 2024, we repurchased 971,534 shares under the 2023 Stock Repurchase Program at an average price of $102.93 (excluding commissions) for a total of $100.0 million. This repurchase was completed in conjunction with the issuance of the convertible notes.

2021 Call Option Transactions

We paid an aggregate amount of $84.1 million for the 2021 call option transactions. The 2021 call option transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2021 Notes, approximately 3.7 million shares of our common stock, the same number of shares initially underlying the 2021 Notes, at a strike price of approximately $126.00, subject to customary adjustments. The 2021 call option transactions will expire upon the maturity of the 2021 Notes, subject to earlier exercise or termination. The 2021 call option transactions are expected generally to reduce the potential dilutive effect of the conversion of our 2021 Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted notes, as the case may be, in the event that the market price per share of our common stock, as measured under the terms of the 2021 call option transactions, is greater than the strike price of the 2021 call option transactions. The 2021 call option transactions meet the criteria in Accounting Standards Codification (ASC) 815-40 to be classified within Stockholders' Equity, and therefore they are not revalued after their issuance.

We made a tax election to integrate the 2021 Notes and the 2021 call option transactions. We are retaining the identification statements in our books and records, together with a schedule providing the accruals on the synthetic debt instruments. The accounting impact of this tax election makes the call options deductible as original issue discount for tax purposes over the term of the 2021 Notes, and results in a $20.6 million deferred tax asset recognized through equity.

Warrant Transactions

In addition, concurrently with entering into the 2021 call option transactions, we separately entered into privately-negotiated warrant transactions (the warrant transactions), whereby we sold to the counterparties warrants to acquire, collectively, subject to anti-dilution adjustments, 3.7 million shares of our common stock at an initial strike price of $180.00 per share, which represents a premium of 100% over the public offering price in the common stock issuance. We received aggregate proceeds of $45.3 million from the warrant transactions with the counterparties, with such proceeds partially offsetting the costs of entering into the convertible note hedge transactions. The warrants expire in June 2026. If the market value per share of our common stock, as measured under the warrant transactions, exceeds the strike price of the warrants, the warrants will have a dilutive effect on our earnings per share, unless we elect, subject to certain conditions, to settle the warrants in cash. The warrants meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore the warrants are not revalued after issuance.

2024 Capped Call Transactions

In connection with the issuance of the 2024 Notes, we entered into privately negotiated capped call transactions on our common stock with certain commercial banks. The 2024 capped call transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2024 Notes, approximately 6.1 million shares of our common stock, the same number of shares initially underlying the convertible notes, at a strike price of approximately $131.2353, subject to customary adjustments. The cap price of the 2024 capped call transactions will initially be $205.86 per share, which represents a premium of 100% over the last reported stock price per share of the Company's common stock on June 17, 2024, and is subject to certain adjustments under the terms of the 2024 capped call transactions. The 2024 capped call transactions will expire upon the maturity of the 2024 Notes, subject to earlier exercise or termination.

We made a tax election to integrate the 2024 Notes and the 2024 capped call transactions. We are retaining the identification statements in our books and records, together with a schedule providing the accruals on the synthetic debt instruments. The accounting impact of this tax election makes the capped call transactions deductible as original issue discount for tax purposes over the term of the 2024 Notes, and results in a $26.7 million deferred tax asset recognized through equity.

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Accumulated Other Comprehensive Income (Loss) (AOCI)

The changes in the components of AOCI, net of tax, were as follows:


In thousands	Foreign Currency Translation Adjustments		Net Unrealized Gain (Loss) on Derivative Instruments		Net Unrealized Gain (Loss) on Nonderivative Instruments		Pension Benefit Obligation Adjustments		Accumulated Other Comprehensive Income (Loss)
Balances at January 1, 2023	$	(83,193)	$	(210)	$	(14,380)	$	3,109	$	(94,674)
OCI before reclassifications	9,165		—		—		—		9,165
Amounts reclassified from AOCI	—		—		—		(213)		(213)
Total other comprehensive income (loss)	9,165		—		—		(213)		8,952
Balances at June 30, 2023	$	(74,028)	$	(210)	$	(14,380)	$	2,896	$	(85,722)

Balances at January 1, 2024	$	(67,643)	$	(210)	$	(14,380)	$	1,043	$	(81,190)
OCI before reclassifications	(16,269)		—		—		—		(16,269)
Amounts reclassified from AOCI	—		—		—		(573)		(573)
Total other comprehensive income (loss)	(16,269)		—		—		(573)		(16,842)
Balances at June 30, 2024	$	(83,912)	$	(210)	$	(14,380)	$	470	$	(98,032)

The before-tax, income tax (provision) benefit, and net-of-tax amounts related to each component of other comprehensive income (OCI) were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Before-tax amount
Foreign currency translation adjustment	$	(5,453)	$	2,033	$	(16,361)	$	9,260





Net defined benefit plan gain reclassified to net income	(637)		(107)		(688)		(213)
Total other comprehensive income (loss), before tax	$	(6,090)	$	1,926	$	(17,049)	$	9,047

Tax (provision) benefit
Foreign currency translation adjustment	$	35	$	(93)	$	92	$	(95)




Net defined benefit plan loss reclassified to net income	121		—		115		—
Total other comprehensive income (loss) tax (provision) benefit	$	156	$	(93)	$	207	$	(95)

Net-of-tax amount
Foreign currency translation adjustment	$	(5,418)	$	1,940	$	(16,269)	$	9,165




Net defined benefit plan gain reclassified to net income	(516)		(107)		(573)		(213)
Total other comprehensive income (loss), net of tax	$	(5,934)	$	1,833	$	(16,842)	$	8,952

Note 14: Fair Value of Financial Instruments

The fair values at June 30, 2024 and December 31, 2023 do not reflect subsequent changes in the economy, interest rates, tax rates, and other variables that may affect the determination of fair value.


	June 30, 2024				December 31, 2023
In thousands	Carrying Amount		Fair Value		Carrying Amount		Fair Value










Credit facility

Multicurrency revolving line of credit	$	—	$	—	$	—	$	—

Convertible notes	1,239,772		1,262,373		454,827		423,476

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The following methods and assumptions were used in estimating fair values:

Cash and cash equivalents: Due to the liquid nature of these instruments, the carrying amount approximates fair value (Level 1).

Credit facility - multicurrency revolving line of credit: The revolver is not traded publicly. The fair values, which are determined based upon a hypothetical market participant, are calculated using a discounted cash flow model with Level 2 inputs, including estimates of incremental borrowing rates for debt with similar terms, maturities, and credit profiles. Refer to Note 6: Debt for a further discussion of our debt.

Convertible notes: The convertible notes are not listed on any securities exchange but may be actively traded. The fair value is estimated using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.

Derivatives: Each derivative asset and liability has a carrying value equal to fair value. The fair values of our derivative instruments are determined using the income approach and significant other observable inputs (and are classified as Level 2 in the fair value hierarchy). We have used observable market inputs based on the type of derivative and the nature of the underlying instrument. The key inputs include foreign exchange spot and forward rates, all of which are available in an active market. We have utilized the mid-market pricing convention for these inputs.

Note 15: Segment Information

We operate under the Itron brand worldwide and manage and report under three operating segments: Device Solutions, Networked Solutions, and Outcomes.

We have three GAAP measures of segment performance: revenues, gross profit (gross margin), and operating income (operating margin). Intersegment revenues are minimal. Certain operating expenses are allocated to the operating segments based upon internally established allocation methodologies. Corporate operating expenses, interest income, interest expense, other income (expense), and the income tax provision (benefit) are neither allocated to the segments, nor are they included in the measure of segment performance. Goodwill impairment charges are recognized in Corporate unallocated. In addition, we allocate only certain production assets and intangible assets to our operating segments. We do not manage the performance of the segments on a balance sheet basis.

Segment Products

Device Solutions – This segment primarily includes hardware products used for measurement, control, or sensing. These products generally do not have communications capability or may be designed for use with non-Itron systems. Examples from the Device Solutions portfolio include: standard endpoints that are shipped without Itron communications, such as our standard gas, electricity, and water meters for a variety of global markets and adhering to regulations and standards within those markets, as well as our heat and allocation products; communicating meters that are not a part of an Itron end-to-end solution and designed to meet market requirements; and the implementation and installation of said hardware products.

Networked Solutions – This segment primarily includes a combination of communicating devices (e.g., smart meters, modules, endpoints, and sensors), network infrastructure, and associated head-end management and application software designed and sold as a complete solution for acquiring and transporting robust application-specific data. Networked Solutions includes products and software for the implementation, installation, and management of communicating devices and data networks. The Industrial Internet of Things (IIoT) solutions supported by this segment include automated meter reading (AMR); advanced metering infrastructure (AMI) for electricity, water and gas; distributed energy resource management (DERMs); smart grid and distribution automation; smart street lighting; and leak detection and applications for both gas and water systems. Our IIoT platform allows utility and smart city applications to be run and managed on a flexible multi-purpose network.

Outcomes – This segment primarily includes our value-added, enhanced software and services, artificial intelligence, and machine learning in which we enable grid edge intelligence and manage, organize, analyze, and interpret raw, anonymized data to improve decision making, maximize operational profitability, enhance resource efficiency, improve grid analytics, and deliver results for consumers, utilities, and smart cities. Outcomes supports high-value use cases, such as data management, grid operations, distributed intelligence, AMI operations, gas distribution and safety, water operations management, revenue assurance, DERMs, energy forecasting, consumer engagement, smart payment, and fleet energy resource management. Utilities leverage these outcomes to unlock the capabilities of their networks and devices, improve the productivity of their workforce, increase the reliability of their operations, manage and optimize the proliferation of distributed energy resources (DERs), address grid complexity, and enhance the customer experience. Revenue from these offerings are primarily recurring in nature

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and would include any direct management of Device Solutions, Networked Solutions, and other third-parties' products on behalf of our end customers.

Revenues, gross profit, and operating income associated with our operating segments were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Product revenues
Device Solutions	$	117,929	$	112,509	$	243,837	$	229,960
Networked Solutions	387,351		330,668		768,656		612,138
Outcomes	27,627		21,626		48,236		39,029
Total Company	$	532,907	$	464,803	$	1,060,729	$	881,127

Service revenues
Device Solutions	$	621	$	651	$	1,465	$	1,454
Networked Solutions	25,353		30,262		51,564		62,260
Outcomes	50,188		45,354		98,753		90,847
Total Company	$	76,162	$	76,267	$	151,782	$	154,561

Total revenues
Device Solutions	$	118,550	$	113,160	$	245,302	$	231,414
Networked Solutions	412,704		360,930		820,220		674,398
Outcomes	77,815		66,980		146,989		129,876
Total Company	$	609,069	$	541,070	$	1,212,511	$	1,035,688

Gross profit
Device Solutions	$	31,231	$	24,719	$	61,295	$	48,432
Networked Solutions	152,157		121,873		303,182		227,649
Outcomes	27,072		27,355		51,362		54,234
Total Company	$	210,460	$	173,947	$	415,839	$	330,315

Operating income
Device Solutions	$	23,725	$	14,084	$	45,428	$	28,162
Networked Solutions	117,444		88,593		234,122		163,549
Outcomes	10,651		12,676		19,742		25,587
Corporate unallocated	(87,173)		(80,253)		(171,845)		(192,591)
Total Company	64,647		35,100		127,447		24,707
Total other income (expense)	2,393		(802)		4,809		(2,516)
Income before income taxes	$	67,040	$	34,298	$	132,256	$	22,191

For the three and six months ended June 30, 2024 and 2023, no single customer represented more than 10% of total company revenue.

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Revenues by region were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
United States and Canada	$	498,388	$	430,617	$	980,484	$	803,459
Europe, Middle East, and Africa	86,781		85,676		185,437		184,420
Asia Pacific	23,900		24,777		46,590		47,809
Total Company	$	609,069	$	541,070	$	1,212,511	$	1,035,688

Depreciation expense is allocated to the operating segments based upon each segment's use of the assets. All amortization expense is recognized within Corporate unallocated. Depreciation and amortization of intangible assets expense associated with our operating segments was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023
Device Solutions	$	2,832	$	3,229	$	5,430	$	6,491
Networked Solutions	3,997		4,068		8,015		8,199
Outcomes	1,504		1,224		2,960		2,478
Corporate unallocated	5,186		5,384		9,858		11,200
Total Company	$	13,519	$	13,905	$	26,263	$	28,368

Note 16: Revenues

A summary of significant net changes in the contract assets and the contract liabilities balances during the period is as follows:


In thousands	Contract Liabilities, Less Contract Assets
Beginning balance, January 1, 2024	$	82,885

Revenues recognized from beginning contract liability	(59,846)
Cumulative catch-up adjustments	3,279
Increases due to amounts collected or due	187,812
Revenues recognized from current period increases	(93,924)
Other	(717)
Ending balance, June 30, 2024	$	119,489

On January 1, 2024, total contract assets were $80.1 million and total contract liabilities were $163.0 million. On June 30, 2024, total contract assets were $84.4 million and total contract liabilities were $203.9 million. The contract assets primarily relate to contracts that include a retention clause and allocations related to contracts with multiple performance obligations. The contract liabilities primarily relate to deferred revenue, such as extended warranty and maintenance agreements. The cumulative catch-up adjustments relate to contract modifications, measure-of-progress changes, and changes in the estimate of the transaction price.

Transaction price allocated to the remaining performance obligations

Total transaction price allocated to remaining performance obligations represents committed but undelivered products and services for contracts and purchase orders at period end. Twelve-month remaining performance obligations represent the portion of total transaction price allocated to remaining performance obligations that we estimate will be recognized as revenue over the next 12 months. Total transaction price allocated to remaining performance obligations is not a complete measure of our future revenues as we also receive orders where the customer may have legal termination rights but are not likely to terminate.

Total transaction price allocated to remaining performance obligations related to contracts is approximately $1.6 billion for the next 12 months and approximately $1.7 billion for periods longer than 12 months. The total remaining performance obligations consist of product and service components. The service component relates primarily to maintenance agreements for which customers pay a full year's maintenance in advance, and service revenues are generally recognized over the service period. Total transaction price allocated to remaining performance obligations also includes our extended warranty contracts, for which

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revenue is recognized over the extended warranty period, and hardware, which is recognized as units are delivered. The estimate of when remaining performance obligations will be recognized requires significant judgment.

Cost to obtain a contract and cost to fulfill a contract with a customer

Cost to obtain a contract and costs to fulfill a contract were capitalized and amortized using a systematic rational approach to align with the transfer of control of underlying contracts with customers. While amounts were capitalized, they are not material.

Disaggregation of revenue

Refer to Note 15: Segment Information and the Consolidated Statements of Operations for disclosure regarding the disaggregation of revenue into categories, which depict how revenue and cash flows are affected by economic factors. Specifically, our operating segments and geographical regions as disclosed, and categories for products, which include hardware and software and services, are presented.

Note 17: Business Combination

Elpis2, Inc.

The purchase price for this acquisition is $34.1 million. The purchase price was allocated to assets acquired and liabilities assumed, primarily $15.0 million in finite-lived intangible assets and $19.7 million in goodwill. Since this was a stock acquisition, none of the goodwill is deductible for tax purposes. The purchase was funded through cash on hand. Refer to Note 4: Intangible Assets and Liabilities and Note 5: Goodwill for additional information.

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes included in this report and with the consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (SEC) in our Annual Report on Form 10-K on February 26, 2024 (2023 Annual Report).

The objective of Management's Discussion and Analysis is to provide our assessment of the financial condition and results of operations, including an evaluation of our liquidity and capital resources along with material events occurring during the year. The discussion and analysis focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition. In addition, we address matters that are reasonably likely, based on management's assessment, to have a material impact on future operations. We expect the analysis will enhance a reader's understanding of our financial condition, cash flows, and other changes in financial condition and results of operations.

Documents we provide to the SEC are available free of charge under the Investors section of our website at https://www.itron.com as soon as practicable after they are filed with or furnished to the SEC. In addition, these documents are available at the SEC's website (https://www.sec.gov).

Certain Forward-Looking Statements

This report contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements are based on our expectations about, among others, revenues, operations, financial performance, earnings, liquidity, earnings per share, cash flows and restructuring activities including headcount reductions and other cost savings initiatives. This document reflects our current strategy, plans and expectations and is based on information currently available as of the date of this Quarterly Report on Form 10-Q. When we use words such as "expect", "intend", "anticipate", "believe", "plan", "goal", "seek", "project", "estimate", "future", "strategy", "objective", "may", "likely", "should", "will", "will continue", and similar expressions, including related to future periods, they are intended to identify forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and

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uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to execute on our restructuring plans, our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks, uncertainties caused by adverse economic conditions, including without limitation those resulting from extraordinary events or circumstances and other factors that are more fully described in Part I, Item 1A: Risk Factors included in our 2023 Annual Report and other reports on file with the SEC. We undertake no obligation to update or revise any forward-looking statement, whether written or oral.

Overview

We are a technology, solutions, and service company, and we are a leader in the Industrial Internet of Things (IIoT). We offer solutions that enable utilities and municipalities to safely, securely, and reliably operate their critical infrastructure. Our solutions include the deployment of smart networks, software, services, devices, sensors, and data analytics that allow our customers to manage assets, secure revenue, lower operational costs, improve customer service, improve safety, and enable efficient management of valuable resources. Our comprehensive solutions and data analytics address the unique challenges facing the energy, water, and municipality sectors, including increasing demand on resources, non-technical loss, leak detection, environmental and regulatory compliance, and improved operational reliability.

We operate under the Itron brand worldwide and manage and report under three operating segments: Device Solutions, Networked Solutions, and Outcomes. The product and operating definitions of the three segments are as follows:

Networked Solutions – This segment primarily includes a combination of communicating devices (e.g., smart meters, modules, endpoints, and sensors), network infrastructure, and associated head-end management and application software designed and sold as a complete solution for acquiring and transporting robust application-specific data. Networked Solutions includes products and software for the implementation, installation, and management of communicating devices and data networks. The IIoT solutions supported by this segment include automated meter reading (AMR); advanced metering infrastructure (AMI) for electricity, water and gas; distributed energy resource management (DERMs); smart grid and distribution automation; smart street lighting; and leak detection and applications for both gas and water systems. Our IIoT platform allows utility and smart city applications to be run and managed on a flexible multi-purpose network.

We have three measures of segment performance: revenues, gross profit (margin), and operating income (margin). Intersegment revenues are minimal. Certain operating expenses are allocated to the operating segments based upon internally established allocation methodologies. Interest income, interest expense, other income (expense), the income tax provision (benefit), and certain corporate operating expenses are neither allocated to the segments nor included in the measures of segment performance.

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Non-GAAP Measures

To supplement our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (GAAP), we use certain adjusted or non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share (EPS), adjusted EBITDA, free cash flow, and constant currency. We provide these non-GAAP financial measures because we believe they provide greater transparency and represent supplemental information used by management in its financial and operational decision making. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies.

In our discussions of the operating results below, we may refer to the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert operating results from local currencies into U.S. dollars for reporting purposes. We also use the term "constant currency", which represents results adjusted to exclude foreign currency exchange rate impacts. We calculate the constant currency change as the difference between the current period results translated using the current period currency exchange rates and the comparable prior period's results restated using current period currency exchange rates. We believe the reconciliations of changes in constant currency provide useful supplementary information to investors in light of fluctuations in foreign currency exchange rates.

Refer to the Non-GAAP Measures section below on pages 44-47 for information about these non-GAAP measures and the detailed reconciliation of items that impacted non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, adjusted EBITDA, and free cash flow in the periods presented.

Total Company Highlights

Highlights and significant developments for the three months ended June 30, 2024 compared with the three months ended June 30, 2023

•Revenues were $609.1 million compared with $541.1 million in 2023, an increase of 13%

•Gross margin was 34.6%, compared with 32.1% in 2023

•Operating expenses increased $7.0 million, or 5%, compared with 2023

•Net income attributable to Itron, Inc. was $51.3 million compared with net income of $24.2 million in 2023

•GAAP diluted EPS increased by $0.57 to a diluted income per share of $1.10 in 2024

•Non-GAAP net income attributable to Itron, Inc. was $56.1 million compared with $29.8 million in 2023

•Non-GAAP diluted EPS was $1.21, an increase of $0.56 compared with 2023

•Adjusted EBITDA was $77.1 million compared with $49.3 million in 2023

•Total backlog was $4.1 billion and twelve-month backlog was $1.8 billion at June 30, 2024, compared with $4.4 billion and $2.0 billion at June 30, 2023

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Highlights and significant developments for the six months ended June 30, 2024 compared with the six months ended June 30, 2023

•Revenues were $1.2 billion compared with $1.0 billion in 2023, an increase of $176.8 million, or 17%

•Gross margin was 34.3% compared with 31.9% in 2023

•Operating expenses decreased $17.2 million, or 6%, compared with 2023

•Net income attributable to Itron, Inc. was $103.0 million compared with net income of $12.4 million in 2023

•GAAP diluted EPS increased by $1.95 to a diluted income per share of $2.22 in 2024

•Non-GAAP net income attributable to Itron, Inc. was $113.4 million compared with $52.2 million in 2023

•Non-GAAP diluted EPS was $2.44, an increase of $1.30 compared with 2023

•Adjusted EBITDA was $153.6 million compared with $88.8 million in 2023

Amendment to 2018 credit facility

Convertible Notes

On June 21, 2024, we closed the sale of $805 million of convertible notes (the 2024 Notes) in a private placement to qualified institutional buyers, resulting in net proceeds to us of $784 million. The 2024 Notes will accrue interest at a rate of 1.375% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2025. The 2024 Notes will mature on July 15, 2030, unless earlier repurchased, redeemed, or converted in accordance with their terms. Refer to Item 1: Financial Statements (Unaudited), Note 6: Debt, and Note 13: Shareholders' Equity included in this Quarterly Report on Form 10-Q for additional information.

Stock Repurchase Program

In June 2024, we repurchased 971,534 shares under the 2023 Stock Repurchase Program at an average price of $102.93 (excluding commissions) for a total of $100.0 million. This repurchase was completed in conjunction with the issuance of the convertible notes.

Business Acquisition

On March 1, 2024, we completed the acquisition of 100% of the shares of Elpis2, Inc. (Elpis Squared), a privately held software and services company. This acquisition provides value to Itron through the leverage of Elpis Squared's utility grid analytics, services, and operational software platforms to enhance Itron's Outcomes offerings. The acquisition was deemed a business acquisition. The sales, results of operations, and acquisition-related costs associated with the acquisition were not material. The purchase price for this acquisition is $34.1 million. The purchase price was allocated to assets acquired and liabilities assumed, primarily $15.0 million in finite-lived intangible assets and $19.7 million in goodwill. Since this was a stock acquisition, none of the goodwill is deductible for tax purposes. The purchase was funded through cash on hand.

Global Geopolitical and Economic Supply Chain Risk

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market and/or supply disruptions are impossible to predict but could be substantial, and our management continues to monitor these events closely.

Total Company GAAP and Non-GAAP Highlights and Endpoints Under Management:


	Three Months Ended June 30,							Six Months Ended June 30,
In thousands, except margin and per share data	2024			2023			% Change	2024			2023			% Change
GAAP
Revenues
Product revenues	$	532,907		$	464,803		15%	$	1,060,729		$	881,127		20%


Service revenues	76,162			76,267			—%	151,782			154,561			(2)%


Total revenues	609,069			541,070			13%	1,212,511			1,035,688			17%

Gross profit	210,460			173,947			21%	415,839			330,315			26%
Operating expenses	145,813			138,847			5%	288,392			305,608			(6)%
Operating income	64,647			35,100			84%	127,447			24,707			416%
Other income (expense)	2,393			(802)			NM	4,809			(2,516)			NM
Income tax provision	(15,180)			(9,195)			65%	(28,609)			(9,125)			214%
Net income attributable to Itron, Inc.	51,318			24,201			112%	103,039			12,365			733%

Non-GAAP(1)
Non-GAAP operating expenses	$	141,376		$	132,595		7%	$	279,430		$	257,636		8%
Non-GAAP operating income	69,084			41,352			67%	136,409			72,679			88%
Non-GAAP net income attributable to Itron, Inc.	56,102			29,824			88%	113,393			52,206			117%
Adjusted EBITDA	77,105			49,300			56%	153,585			88,768			73%


GAAP Margins and Earnings Per Share
Gross margin
Product gross margin	33.1		%	30.7		%		32.7		%	29.7		%
Service gross margin	45.0		%	41.2		%		45.2		%	44.5		%
Total gross margin	34.6		%	32.1		%		34.3		%	31.9		%

Operating margin	10.6		%	6.5		%		10.5		%	2.4		%
Net income per common share - Basic	$	1.12		$	0.53			$	2.25		$	0.27
Net income per common share - Diluted	$	1.10		$	0.53			$	2.22		$	0.27

Non-GAAP Earnings Per Share(1)
Non-GAAP diluted EPS	$	1.21		$	0.65			$	2.44		$	1.14

(1)These measures exclude certain expenses that we do not believe are indicative of our core operating results. See pages 44-47 for information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.

Definition of an Endpoint Under Management

An "endpoint under management" is a unique endpoint, or data from that endpoint, which Itron manages via our networked platform or a third party's platform that is connected to one or multiple types of endpoints. Itron's management of an endpoint occurs when on behalf of our client, we manage one or more of the physical endpoints, operating system, data, application, data analytics, and/or outcome deriving from this unique endpoint. Itron has the ability to monitor and/or manage endpoints or the data from the endpoints via Network-as-a-Service (NaaS), Software-as-a-Service (SaaS), and/or a licensed offering at a remote location designated by our client. Our offerings typically, but not exclusively, provide an Itron product or Itron certified partner product to our clients that has the capability of one-way communication or two-way communication of data that may include remote product configuration and upgradability. Examples of these offerings include our Temetra, OpenWay®, OpenWay® Riva and Gen X.

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This metric primarily includes Itron or third-party endpoints deployed within the electricity, water, and gas utility industries, as well as within cities and municipalities around the globe. Endpoints under management also include smart communication modules and network interface cards (NICs) within Itron's platforms. At times, these NICs are communicating modules that were sold separately from an Itron product directly to our customers or to third party manufacturers for use in endpoints such as electric, water, and gas meters; streetlights and other types of IIoT sensors and actuators; sensors and other capabilities that the end customer would like Itron to connect and manage on its behalf.

The endpoints under management metric only accounts for the specific, unique endpoint itself, though that endpoint may have multiple applications, services, outcomes, and higher margin recurring offerings associated with it. This metric does not reflect the multi-application value that can be derived from the individual endpoint itself. Additionally, this metric excludes those endpoints that are non-communicating, non-Itron system hardware component sales or licensed applications for which Itron does not manage the unit or the data from that unit directly.

While the one-time sale of the platform and endpoints is primarily delivered via our Networked Solutions segment, our enhanced solutions, on-going monitoring, maintenance, software, analytics, and distributed intelligent applications are predominantly recognized in our Outcomes segment. We anticipate the opportunity to increase our penetration of Outcomes applications, software, and managed applications will increase as our endpoints under management increases. Management believes using the endpoints under management metric enhances insight of the strategic and operational direction of our Networked Solutions and Outcomes segments to serve clients for years following their one-time installation of an endpoint.

A summary of our endpoints under management is as follows:


	As of June 30,
Units in thousands	2024	2023
Endpoints under management	100,946	94,458

Results of Operations

Revenues and Gross Margin

The actual results of and effects of changes in foreign currency exchange rates on revenues and gross profit were as follows:


						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Three Months Ended June 30,
In thousands		2024		2023
Total Company
	Revenues	$	609,069	$	541,070	$	(1,658)	$	69,657	$	67,999
	Gross profit	210,460		173,947		(521)		37,034		36,513

						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Six Months Ended June 30,
In thousands		2024		2023
Total Company
	Revenues	$	1,212,511	$	1,035,688	$	(458)	$	177,281	$	176,823
	Gross profit	415,839		330,315		(294)		85,818		85,524

Revenues - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Total revenues increased $68.0 million, or 13%, in the current 2024 quarter, compared with the same period in 2023. Product revenues increased by $68.1 million, and service revenues decreased $0.1 million. Device Solutions increased by $5.4 million; Networked Solutions increased by $51.8 million; and Outcomes increased by $10.8 million when compared with the same period last year. Changes in exchange rates unfavorably impacted total revenues by $1.7 million, of which $1.1 million impacted Device Solutions.

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Revenues - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Total revenues increased $176.8 million, or 17%, compared with the same period in 2023. Product revenues increased by $179.6 million, and service revenues decreased by $2.8 million. Device Solutions increased by $13.9 million; Networked Solutions increased by $145.8 million; and Outcomes increased by $17.1 million when compared with the same period last year. Changes in exchange rates unfavorably impacted total revenues by $0.5 million, all of which impacted Networked Solutions.

Gross Margin - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Gross margin in the 2024 period was 34.6%, compared with 32.1% in 2023. Product sales gross margin increased to 33.1% for the quarter in 2024, compared with 30.7% in 2023. Gross margin on service revenues increased to 45.0% in 2024, compared with 41.2% in 2023.

Gross Margin - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Gross margin was 34.3%, compared with 31.9% in 2023. Product sales gross margin increased to 32.7%, compared with 29.7% in 2023, and gross margin on service revenues increased to 45.2%, compared with 44.5% in 2023.

Refer to Operating Segment Results section below for further detail on total company revenues and gross margin.

Operating Expenses

The actual results of and effects of changes in foreign currency exchange rates on operating expenses were as follows:


						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Three Months Ended June 30,
In thousands		2024		2023
Total Company
	Sales, general and administrative	$	88,413	$	79,079	$	(139)	$	9,473	$	9,334
	Research and development	53,053		53,560		64		(571)		(507)
	Amortization of intangible assets	4,511		4,722		(8)		(203)		(211)
	Restructuring	(99)		874		(11)		(962)		(973)
	(Gain) loss on sale of business	(65)		612		(7)		(670)		(677)

	Total operating expenses	$	145,813	$	138,847	$	(101)	$	7,067	$	6,966

						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Six Months Ended June 30,
In thousands		2024		2023
Total Company
	Sales, general and administrative	$	174,384	$	154,600	$	4	$	19,780	$	19,784
	Research and development	105,454		103,125		138		2,191		2,329
	Amortization of intangible assets	8,497		9,770		8		(1,281)		(1,273)
	Restructuring	99		37,483		12		(37,396)		(37,384)
	(Gain) loss on sale of business	(42)		630		(7)		(665)		(672)

	Total operating expenses	$	288,392	$	305,608	$	155	$	(17,371)	$	(17,216)

Operating expenses increased $7.0 million for the second quarter of 2024 as compared with the same period in 2023. This was primarily the result of an increase of $9.3 million in sales, general and administrative expenses, primarily driven by increased labor costs and professional services.

Operating expenses decreased $17.2 million for the six months ended June 30, 2024 as compared with the same period in 2023. This was primarily the result of a $37.4 million decrease in restructuring costs and a $1.3 million decrease in amortization of intangible assets. The decrease was partially offset by an increase of $19.8 million in sales, general and administrative expenses and a $2.3 million increase in research and development expenses, both driven by increased labor costs and professional

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services. For additional details, refer to Item 1: Financial Statements (Unaudited), Note 12: Restructuring included in this Quarterly Report on Form 10-Q.

Other Income (Expense)

The following table shows the components of other income (expense):


	Three Months Ended June 30,				% Change	Six Months Ended June 30,				% Change
In thousands	2024		2023			2024		2023
Interest income	$	5,128	$	1,508	240%	$	8,974	$	3,326	170%
Amortization of prepaid debt fees	(979)		(931)		5%	(1,867)		(1,820)		3%
Other interest expense	(1,311)		(1,046)		25%	(2,316)		(2,214)		5%
Interest expense	(2,290)		(1,977)		16%	(4,183)		(4,034)		4%
Other income (expense), net	(445)		(333)		34%	18		(1,808)		NM
Total other income (expense)	$	2,393	$	(802)	NM	$	4,809	$	(2,516)	NM

Total other income (expense) for the three and six months ended June 30, 2024 was income of $2.4 million and $4.8 million, compared with net expense of $0.8 million and $2.5 million in the same period in 2023.

The net other income for the three months ended June 30, 2024, as compared with the same period in 2023, was primarily driven by the $3.6 million increase in interest income.

The net other income for the six months ended June 30, 2024, as compared with the same period in 2023, was primarily driven by the $5.6 million increase in interest income as well as increased other income driven by a $1.7 million foreign currency loss recognized in the six months ended June 30, 2023.

Income Tax Provision

For the three and six months ended June 30, 2024, our income tax expense was $15.2 million and $28.6 million, compared with income tax expense of $9.2 million and $9.1 million for the same periods in 2023. Our tax rate for the three and six months ended June 30, 2024 of 23% and 22% differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, U.S. taxation of foreign earnings including GILTI (Global Intangible Low-Taxed Income), net of Section 250 deduction, Subpart F income, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions. Our tax rate for the three and six months ended June 30, 2023 of 27% and 41%, differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, U.S. taxation of foreign earnings including GILTI (Global Intangible Low Taxed Income), net of Section 250 deduction, Subpart F income, an expense related to stock-based compensation, tax credits, and uncertain tax positions.

Beginning January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years, dependent upon the geography in which the expenditures are incurred. Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, as of year-end no such deferral has been passed. The income tax provision has been prepared according to currently enacted tax legislation, including the effect of guidance issued in December 2023 that provided clarity regarding research providers and recipients.

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evaluating the impact to our financial position. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Based upon forecast calculations for calendar year 2024, the Company expects to meet the safe harbors in most jurisdictions, and the remaining top-up tax is forecasted to be immaterial.

For additional discussion related to income taxes, see Item 1: Financial Statements (Unaudited), Note 10: Income Taxes included in this Quarterly Report on Form 10-Q.

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Operating Segment Results

For a description of our operating segments, refer to Item 1: Financial Statements (Unaudited), Note 15: Segment Information included in this Quarterly Report on Form 10-Q. The following tables and discussion highlight significant changes in trends or components of each operating segment:


	Three Months Ended June 30,							Six Months Ended June 30,
In thousands	2024		2023		% Change			2024		2023		% Change
Segment revenues
Device Solutions	$	118,550	$	113,160	5%			$	245,302	$	231,414	6%
Networked Solutions	412,704		360,930		14%			820,220		674,398		22%
Outcomes	77,815		66,980		16%			146,989		129,876		13%
Total revenues	$	609,069	$	541,070	13%			$	1,212,511	$	1,035,688	17%

	Three Months Ended June 30,							Six Months Ended June 30,
	2024				2023			2024				2023
In thousands	Gross Profit		Gross Margin		Gross Profit		Gross Margin	Gross Profit		Gross Margin		Gross Profit		Gross Margin
Segment gross profit and margin
Device Solutions	$	31,231	26.3%		$	24,719	21.8%	$	61,295	25.0%		$	48,432	20.9%
Networked Solutions	152,157		36.9%		121,873		33.8%	303,182		37.0%		227,649		33.8%
Outcomes	27,072		34.8%		27,355		40.8%	51,362		34.9%		54,234		41.8%
Total gross profit and margin	$	210,460	34.6%		$	173,947	32.1%	$	415,839	34.3%		$	330,315	31.9%

	Three Months Ended June 30,							Six Months Ended June 30,
In thousands	2024		2023		% Change			2024		2023		% Change
Segment operating expenses
Device Solutions	$	7,506	$	10,635	(29)%			$	15,867	$	20,270	(22)%
Networked Solutions	34,713		33,280		4%			69,060		64,100		8%
Outcomes	16,421		14,679		12%			31,620		28,647		10%
Corporate unallocated	87,173		80,253		9%			171,845		192,591		(11)%
Total operating expenses	$	145,813	$	138,847	5%			$	288,392	$	305,608	(6)%

	Three Months Ended June 30,							Six Months Ended June 30,
	2024				2023			2024				2023
In thousands	Operating Income		Operating Margin		Operating Income		Operating Margin	Operating Income		Operating Margin		Operating Income		Operating Margin
Segment operating income and operating margin
Device Solutions	$	23,725	20.0%		$	14,084	12.4%	$	45,428	18.5%		$	28,162	12.2%
Networked Solutions	117,444		28.5%		88,593		24.5%	234,122		28.5%		163,549		24.3%
Outcomes	10,651		13.7%		12,676		18.9%	19,742		13.4%		25,587		19.7%
Corporate unallocated	(87,173)		NM		(80,253)		NM	(171,845)		NM		(192,591)		NM
Total operating income and operating margin	$	64,647	10.6%		$	35,100	6.5%	$	127,447	10.5%		$	24,707	2.4%

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Device Solutions

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Device Solutions segment financial results were as follows:


						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Three Months Ended June 30,
In thousands		2024		2023
Device Solutions Segment
	Revenues	$	118,550	$	113,160	$	(1,080)	$	6,470	$	5,390
	Gross profit	31,231		24,719		(411)		6,923		6,512
	Operating expenses	7,506		10,635		(21)		(3,108)		(3,129)

						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Six Months Ended June 30,
In thousands		2024		2023
Device Solutions Segment
	Revenues	$	245,302	$	231,414	$	(78)	$	13,966	$	13,888
	Gross profit	61,295		48,432		(304)		13,167		12,863
	Operating expenses	15,867		20,270		—		(4,403)		(4,403)

Revenues - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Revenues increased $5.4 million, or 5%. Changes in foreign currency exchange rates unfavorably impacted revenues by $1.1 million. The 2024 increase in revenues was driven primarily by increased smart water and electric product sales.

Revenues - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Revenues increased $13.9 million, or 6%. Changes in foreign currency exchange rates unfavorably impacted revenues by $0.1 million. The 2024 increase in revenues was driven primarily by increased smart water and electric product sales.

Gross Margin - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

For the three months ended June 30, 2024, gross margin was 26.3%, compared with 21.8% for the same period in 2023. The 450 basis point increase over the prior year was primarily due to an improved product mix.

Gross Margin - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

For the six months ended June 30, 2024, gross margin was 25.0%, compared with 20.9% for the same period in 2023. The 410 basis point increase over the prior year was primarily due to an improved product mix.

Operating Expenses - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Operating expenses decreased $3.1 million, or 29%, compared with 2023. The decrease was primarily due to lower product development costs.

Operating Expenses - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Operating expenses decreased $4.4 million, or 22%, for the first six months of 2024, compared with the same period in 2023. The decrease was primarily due to lower product development costs.

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Networked Solutions

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Networked Solutions segment financial results were as follows:


						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Three Months Ended June 30,
In thousands		2024		2023
Networked Solutions Segment
	Revenues	$	412,704	$	360,930	$	(493)	$	52,267	$	51,774
	Gross profit	152,157		121,873		(77)		30,361		30,284
	Operating expenses	34,713		33,280		(6)		1,439		1,433

						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Six Months Ended June 30,
In thousands		2024		2023
Networked Solutions Segment
	Revenues	$	820,220	$	674,398	$	(524)	$	146,346	$	145,822
	Gross profit	303,182		227,649		(140)		75,673		75,533
	Operating expenses	69,060		64,100		(5)		4,965		4,960

Revenues - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Revenues increased $51.8 million, or 14%, in 2024 compared with 2023. The increase was primarily from product revenues due to the ramp of ongoing and new project deployments and improved component supply enabling us to fulfill the previously constrained customer demand.

Revenues - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Revenues increased $145.8 million, or 22%, for the first six months of 2024 compared with the same period in 2023. The increase was primarily from product revenues due to the ramp of ongoing and new project deployments and improved component supply enabling us to fulfill the previously constrained customer demand.

Gross Margin - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Gross margin was 36.9% for the period ending June 30, 2024, compared with 33.8% in 2023. The 310 basis point increase was primarily related to favorable product and solutions volumes and mix.

Gross Margin - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Gross margin was 37.0% for the 2024 period, compared with 33.8% in 2023. The 320 basis point increase was primarily related to favorable product and solutions volumes and mix as well as improved operational efficiencies.

Operating Expenses - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Operating expenses increased $1.4 million, or 4%, for the quarter in 2024, compared with the same period in 2023. The increase was primarily related to higher product development costs.

Operating Expenses - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Operating expenses increased $5.0 million, or 8%, for the first six months of 2024, compared with the same period in 2023. The increase was primarily related to higher product development costs.

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Outcomes

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Outcomes segment financial results were as follows:


						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Three Months Ended June 30,
In thousands		2024		2023
Outcomes Segment
	Revenues	$	77,815	$	66,980	$	(85)	$	10,920	$	10,835
	Gross profit	27,072		27,355		(33)		(250)		(283)
	Operating expenses	16,421		14,679		(2)		1,744		1,742

						Effect of Changes in Foreign Currency Exchange Rates		Constant Currency Change		Total Change
		Six Months Ended June 30,
In thousands		2024		2023
Outcomes Segment
	Revenues	$	146,989	$	129,876	$	144	$	16,969	$	17,113
	Gross profit	51,362		54,234		150		(3,022)		(2,872)
	Operating expenses	31,620		28,647		8		2,965		2,973

Revenues - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

For the 2024 period, revenues increased $10.8 million, or 16%, compared with the 2023 period. This increase was driven by growth in recurring managed services, delivery services, distributed energy management, and revenue for grid planning solutions from the recent acquisition of Elpis2, Inc (Elpis Squared).

Revenues - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Revenues increased $17.1 million, or 13%, for the first six months of 2024, compared with 2023. This increase was driven by growth in recurring managed services, delivery services, distributed energy management, and revenue for grid planning solutions from the Elpis Squared acquisition.

Gross Margin - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Gross margin decreased to 34.8% for the second quarter of 2024, compared with 40.8% for the same period last year. The 600 basis point decrease was driven by increased services cost and lower software sales in the current period.

Gross Margin - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Gross margin decreased to 34.9% for the period ending in 2024, compared with 41.8% for last year. The 690 basis point decrease was driven by increased services cost and lower software sales in the current period.

Operating Expenses - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Operating expenses for the 2024 period increased $1.7 million, or 12%, compared with the same period last year. This was primarily related to increased product development investment.

Operating Expenses - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

Operating expenses for the first six months of 2024 increased $3.0 million, or 10%, compared with the same period last year. This was primarily related to increased product development investment.

Corporate Unallocated

Corporate Unallocated Expenses - Three months ended June 30, 2024 vs. Three months ended June 30, 2023

Operating expenses not directly associated with an operating segment are classified as Corporate unallocated. These expenses increased $6.9 million, or 9%, for the three months ended June 30, 2024 compared with the same period in 2023. This increase was primarily the result of $8.9 million increase in sales, general and administrative expenses, driven by increased labor costs and professional services. This increase was partially offset by a $1.0 million decrease in restructuring costs.

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Corporate Unallocated Expenses - Six months ended June 30, 2024 vs. Six months ended June 30, 2023

For the first six months of 2024, Corporate unallocated expenses decreased $20.7 million, or 11%, compared with the 2023 period. This was primarily the result of a $37.4 million decrease in restructuring costs, as well as a $1.3 million decrease in amortization of intangible assets. The decreases were offset by a $18.4 million increase in sales, general and administrative expenses, primarily driven by increased labor costs and professional services.

Bookings and Backlog of Orders

Bookings for a reported period represent customer contracts and purchase orders received during the period for hardware, software, and services that have met certain conditions, such as regulatory and/or contractual approval. Total backlog represents committed but undelivered products and services for contracts and purchase orders at period-end. Twelve-month backlog represents the portion of total backlog that reflects our understanding of customer's desired deployment over the next 12 months. The actual revenue recognized and timing of revenue earned from backlog may vary based on actual currency rates at the time of shipment, availability of critical supply components, and adjusted customer project timing. Backlog is not a complete measure of our future revenues as we also receive book-and-ship orders and frame contracts. Bookings and backlog vary from period to period primarily due to the timing of large project awards. In addition, annual or multi-year contracts are subject to rescheduling due to the long-term nature of the contracts. Certain of our customers have the right to cancel contracts, but we do not have a history of any significant cancellations. Beginning total backlog, plus bookings, minus revenues, will not equal ending total backlog due to miscellaneous contract adjustments, foreign currency fluctuations, and other factors. Total bookings and backlog include certain contracts with a termination for convenience clause, which will not agree to the total transaction price allocated to the remaining performance obligations disclosed in Item 1: Financial Statements (Unaudited), Note 16: Revenues included in this Quarterly Report on Form 10-Q.


Quarter Ended	Quarterly Bookings		Ending Total Backlog		Ending 12-Month Backlog
In millions
June 30, 2024	$	447	$	4,093	$	1,809
March 31, 2024	361		4,272		1,927
December 31, 2023	839		4,511		2,032
September 30, 2023	413		4,241		2,022
June 30, 2023	475		4,397		2,008

Financial Condition

Cash Flow Information


	Six Months Ended June 30,
In thousands	2024		2023
Net cash provided by operating activities	$	93,025	$	42,989
Net cash used in investing activities	(47,820)		(13,220)
Net cash provided by financing activities	576,839		770
Effect of foreign exchange rate changes on cash and cash equivalents	(3,454)		241
Increase in cash and cash equivalents	$	618,590	$	30,780

Cash and cash equivalents were $920.6 million at June 30, 2024, compared with $302.0 million at December 31, 2023. The $618.6 million increase in cash and cash equivalents in the 2024 period was primarily the net proceeds provided by the convertible notes issuance and cash provided by operations as a result of higher earnings, partially offset by cash used in investing activities for the acquisition of Elpis Squared.

Operating activities

Cash provided by operating activities during the six months in 2024 was $93.0 million compared with $43.0 million during the same period in 2023. The increase was primarily due to increased earnings and working capital conversion, partially offset by higher restructuring and variable compensation payouts in 2024.

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Investing activities

During the six months ended June 30, 2024, net cash used in investing activities was $47.8 million compared with $13.2 million in 2023, resulting in a change of $34.6 million. The increase in cash used was primarily the result of the acquisition of Elpis Squared for $34.1 million in 2024 and increase in property, plant, and equipment purchased of $1.8 million in 2024 compared with the same period in 2023.

Financing activities

Net cash provided by financing activities during the six months in 2024 was $576.8 million, compared with net cash provided of $0.8 million for the same period in 2023. The increase is due primarily to the issuance of convertible notes, net of total debt issuance cost, totaling $784 million, partially offset by the purchase of the capped call for the convertible offering of $109.0 million and common stock repurchase of $100.0 million.

Effect of exchange rates on cash and cash equivalents

The effect of exchange rates on the cash balances of currencies held in foreign denominations at June 30, 2024 was a decrease of $3.5 million, compared with an increase of $0.2 million for the same period in 2023. Our foreign currency exposure relates to non-U.S. dollar denominated balances in our international subsidiary operations.

Free cash flow (Non-GAAP)

To supplement our Consolidated Statements of Cash Flows presented on a GAAP basis, we use the non-GAAP measure of free cash flow to analyze cash flows generated from our operations. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flows, using amounts from our Consolidated Statements of Cash Flows, as follows:


	Six Months Ended June 30,
In thousands	2024		2023
Net cash provided by operating activities	$	93,025	$	42,989
Acquisitions of property, plant, and equipment	(14,255)		(12,498)
Free cash flow	$	78,770	$	30,491

Free cash flow fluctuated primarily as a result of changes in cash provided by increased earnings. See the cash flow discussion of operating activities above.

Off-balance sheet arrangements

We have no off-balance sheet financing agreements or guarantees as defined by Item 303 of Regulation S-K at June 30, 2024 and December 31, 2023 that we believe could reasonably likely have a current or future effect on our financial condition, results of operations, or cash flows.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, borrowings, and the sale of our common stock. Cash flows may fluctuate and are sensitive to many factors including changes in working capital and the timing and magnitude of capital expenditures and payments of debt. Working capital, which represents current assets less current liabilities, continues to be in a net favorable position. We expect existing cash, cash flows from operations, and access to capital markets to continue to be sufficient to fund our operating activities and cash commitments, such as material capital expenditures and debt obligations, for at least the next 12 months and into the foreseeable future.

Borrowings

We originally entered into our credit facility on January 5, 2018 (together with the subsequent eight amendments, the 2018 credit facility). The 2018 credit facility provides a multicurrency revolving line of credit (the revolver) with a principal amount of up to $500 million. The revolver also contains a $300 million standby letter of credit sub-facility and a $50 million swingline sub-facility. At June 30, 2024, no amount was outstanding under the 2018 credit facility, and $46.8 million was utilized by outstanding standby letters of credit, resulting in $453.2 million available for borrowing or standby letters of credit under the revolver. At June 30, 2024, $253.2 million was available for additional standby letters of credit under the letter of credit sub-facility, and no amounts were outstanding under the swingline sub-facility. Amounts borrowed under the revolver may be repaid and reborrowed until the revolver's maturity on October 18, 2026, at which time all outstanding loans together with all

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accrued and unpaid interest must be repaid. However, that date may be advanced to December 14, 2025 if Itron does not settle or extend a sufficient portion of the outstanding 2021 convertible notes, as detailed in the seventh amendment.

On March 12, 2021, we closed the sale of $460 million in convertible notes in a private placement to qualified institutional buyers. The convertible notes do not bear regular interest, and the principal amount does not accrete. The convertible notes will mature on March 15, 2026, unless earlier repurchased, redeemed, or converted in accordance with their terms.

On June 21, 2024, we closed the sale of $805 million in convertible notes in a private placement to qualified institutional buyers. The convertible notes accrue interest at a rate of 1.375% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2025. The notes will mature on July 15, 2030, unless earlier repurchased, redeemed, or converted in accordance with their terms.

For further description of our borrowings, refer to Item 1: Financial Statements (Unaudited), Note 6: Debt included in this Quarterly Report on Form 10-Q.

For a description of our letters of credit and performance bonds, and the amounts available for additional borrowings or letters of credit under our lines of credit, including the revolver that is part of our credit facility, refer to Item 1: Financial Statements (Unaudited), Note 11: Commitments and Contingencies included in this Quarterly Report on Form 10-Q.

Restructuring

For the six months ended June 30, 2024, we paid out $13.5 million related to all our restructuring projects. As of June 30, 2024, $57.7 million was accrued for these restructuring projects, of which $25.0 million is expected to be paid within the next 12 months.

For further details regarding our restructuring activities, refer to Item 1: Financial Statements (Unaudited), Note 12: Restructuring included in this Quarterly Report on Form 10-Q.

Other Liquidity Considerations

We have tax credits and net operating loss carryforwards in various jurisdictions that are available to reduce cash taxes. However, utilization of tax credits and net operating losses are limited in certain jurisdictions. Based on current projections, we expect to pay, net of refunds, approximately $47 million in U.S federal taxes, $9 million in state taxes, and $27 million in local and foreign taxes during 2024. For a discussion of our tax provision and unrecognized tax benefits, see Item 1: Financial Statements (Unaudited), Note 10: Income Taxes included in this Quarterly Report on Form 10-Q.

As of June 30, 2024, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or liquidity.

As of June 30, 2024, there was $52.2 million of cash and short-term investments held by certain foreign subsidiaries in which we are permanently reinvested for tax purposes. As a result of recent changes in U.S. tax legislation, any repatriation in the future would not result in U.S. federal income tax. Accordingly, there is no provision for U.S. deferred taxes on this cash. If this cash were repatriated to fund U.S. operations, additional withholding tax costs may be incurred. Tax is only one of the many factors that we consider in the management of global cash. Accordingly, the amount of taxes that we would need to accrue and pay to repatriate foreign cash could vary significantly.

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In certain of our consolidated international subsidiaries, we have joint venture partners who are minority shareholders. Although these entities are not wholly-owned by Itron, Inc., we consolidate them because we have a greater than 50% ownership interest and/or because we exercise control over the operations. The noncontrolling interest balance in our Consolidated Balance Sheets represents the proportional share of the equity of the joint venture entities, which is attributable to the minority shareholders. At June 30, 2024, $3.7 million of our consolidated cash balance was held in our joint venture entities. As a result, the minority shareholders of these entities have rights to their proportional share of this cash balance, and there may be limitations on our ability to repatriate cash to the United States from these entities.

General Liquidity Overview

We expect to grow through a combination of internal new research and development, licensing technology from and to others, distribution agreements, partnering arrangements, and acquisitions of technology or other companies. We expect these activities to be funded with existing cash, cash flow from operations, borrowings, or the sale of our common stock or other securities. We believe existing sources of liquidity will be sufficient to fund our existing operations and obligations for the next 12 months and into the foreseeable future, but offer no assurances. Our liquidity could be affected by the stability of the electricity, gas, and water utility industries, competitive pressures, our dependence on certain key vendors and components, changes in estimated liabilities for product warranties and/or litigation, supply constraints, future business combinations, capital market fluctuations, international risks, and other factors described under Part I, Item 1A: Risk Factors of our 2023 Annual Report, as well as Part I, Item 3: Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q.

Contingencies

Refer to Item 1: Financial Statements (Unaudited), Note 11: Commitments and Contingencies included in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates and Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by management's application of accounting policies. Our critical accounting policies that require the use of estimates and assumptions were discussed in detail in the 2023 Annual Report and have not changed materially.

Refer to Item 1: Financial Statements (Unaudited), Note 1: Summary of Significant Accounting Policies included in this Quarterly Report on Form 10-Q for further disclosures regarding new accounting pronouncements.

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Non-GAAP Measures

To supplement our consolidated financial statements, which are prepared in accordance with GAAP, we use certain non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, adjusted EBITDA, free cash flow, and constant currency. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and other companies may define such measures differently. For a reconciliation of each non-GAAP measure to the most comparable financial measure prepared and presented in accordance with GAAP, please see the table captioned Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures.

We use these non-GAAP financial measures for financial and operational decision making and/or as a means for determining executive compensation. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and ability to service debt by excluding certain expenses that may not be indicative of our recurring core operating results. These non-GAAP financial measures facilitate management's internal comparisons to our historical performance, as well as comparisons to our competitors' operating results. Our executive compensation plans exclude non-cash charges related to amortization of intangibles and certain discrete cash and non-cash charges, such as restructuring, (gain) loss on sale of business, or acquisition and integration related expenses. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they provide greater transparency with respect to key metrics used by management in its financial and operational decision making and because they are used by our institutional investors and the analyst community to analyze the health of our business.

Non-GAAP operating expenses and non-GAAP operating income – We define non-GAAP operating expenses as operating expenses excluding certain expenses related to the amortization of intangible assets, restructuring, (gain) loss on sale of business, and acquisition and integration related expenses. We define non-GAAP operating income as operating income excluding the expenses related to the amortization of intangible assets, restructuring, (gain) loss on sale of business, and acquisition and integration related expenses. Acquisition and integration related expenses include costs, which are incurred to affect and integrate business combinations, such as professional fees, certain employee retention and salaries related to integration, severances, contract terminations, travel costs related to knowledge transfer, system conversion costs, and asset impairment charges. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of expenses that are not related to our core operating results. By excluding these expenses, we believe that it is easier for management and investors to compare our financial results over multiple periods and analyze trends in our operations. For example, in certain periods, expenses related to amortization of intangible assets may decrease, which would improve GAAP operating margins, yet the improvement in GAAP operating margins due to this lower expense is not necessarily reflective of an improvement in our core business. There are some limitations related to the use of non-GAAP operating expenses and non-GAAP operating income versus operating expenses and operating income calculated in accordance with GAAP. We compensate for these limitations by providing specific information about the GAAP amounts excluded from non-GAAP operating expense and non-GAAP operating income and evaluating non-GAAP operating expense and non-GAAP operating income together with GAAP operating expense and operating income.

Non-GAAP net income and non-GAAP diluted EPS – We define non-GAAP net income as net income attributable to Itron, Inc. excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, restructuring, (gain) loss on sale of business, acquisition and integration related expenses, and the tax effect of excluding these expenses. We define non-GAAP diluted EPS as non-GAAP net income divided by diluted weighted-average shares outstanding during the period calculated on a GAAP basis and then reduced to reflect the anti-dilutive impact of the convertible note hedge transactions entered into in connection with the 0% convertible notes due 2026 issued in March 2021. We consider these financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income. The same limitations described above regarding our use of non-GAAP operating income apply to our use of non-GAAP net income and non-GAAP diluted EPS. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP measures and evaluating non-GAAP net income and non-GAAP diluted EPS together with GAAP net income attributable to Itron, Inc. and GAAP diluted EPS.

For interim periods the budgeted annual effective tax rate (AETR) is used, adjusted for any discrete items, as defined in Accounting Standards Codification (ASC) 740 - Income Taxes. The budgeted AETR is determined at the beginning of the fiscal year. The AETR is revised throughout the year based on changes to our full-year forecast. If the revised AETR increases or decreases by 200 basis points or more from the budgeted AETR due to changes in the full-year forecast during the year, the revised AETR is used in place of the budgeted AETR beginning with the quarter the 200 basis point threshold is exceeded and going forward for all subsequent interim quarters in the year. We continue to assess the AETR based on latest forecast

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throughout the year and use the most recent AETR anytime it increases or decreases by 200 basis points or more from the prior interim period.

Adjusted EBITDA – We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation and amortization, restructuring, (gain) loss on sale of business, acquisition and integration related expenses, and (c) excluding income tax provision or benefit. Management uses adjusted EBITDA as a performance measure for executive compensation. A limitation to using adjusted EBITDA is that it does not represent the total increase or decrease in the cash balance for the period and the measure includes some non-cash items and excludes other non-cash items. Additionally, the items that we exclude in our calculation of adjusted EBITDA may differ from the items that our peer companies exclude when they report their results. We compensate for these limitations by providing a reconciliation of this measure to GAAP net income.

Free cash flow – We define free cash flow as net cash provided by operating activities less cash used for acquisitions of property, plant and equipment. We believe free cash flow provides investors with a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt. The same limitations described above regarding our use of adjusted EBITDA apply to our use of free cash flow. We compensate for these limitations by providing specific information regarding the GAAP amounts in the reconciliation.

Constant currency – We refer to the impact of foreign currency exchange rate fluctuations in our discussions of financial results, which references the differences between the foreign currency exchange rates used to translate operating results from the entity's functional currency into U.S. dollars for financial reporting purposes. We also use the term "constant currency", which represents financial results adjusted to exclude changes in foreign currency exchange rates as compared with the rates in the comparable prior year period. We calculate the constant currency change as the difference between the current period results and the comparable prior period's results restated using current period foreign currency exchange rates.

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Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

The tables below reconcile the non-GAAP financial measures of operating expenses, operating income, net income, diluted EPS, adjusted EBITDA, and free cash flow with the most directly comparable GAAP financial measures.


TOTAL COMPANY RECONCILIATIONS				Three Months Ended June 30,				Six Months Ended June 30,
	In thousands, except per share data			2024		2023		2024		2023
	NON-GAAP OPERATING EXPENSES
		GAAP operating expenses		$	145,813	$	138,847	$	288,392	$	305,608
			Amortization of intangible assets	(4,511)		(4,722)		(8,497)		(9,770)
			Restructuring	99		(874)		(99)		(37,483)
			(Gain) loss on sale of business	65		(612)		42		(630)




			Acquisition and integration	(90)		(44)		(408)		(89)
		Non-GAAP operating expenses		$	141,376	$	132,595	$	279,430	$	257,636

	NON-GAAP OPERATING INCOME
		GAAP operating income		$	64,647	$	35,100	$	127,447	$	24,707
			Amortization of intangible assets	4,511		4,722		8,497		9,770
			Restructuring	(99)		874		99		37,483
			(Gain) loss on sale of business	(65)		612		(42)		630




			Acquisition and integration	90		44		408		89
		Non-GAAP operating income		$	69,084	$	41,352	$	136,409	$	72,679

	NON-GAAP NET INCOME & DILUTED EPS
		GAAP net income attributable to Itron, Inc.		$	51,318	$	24,201	$	103,039	$	12,365
			Amortization of intangible assets	4,511		4,722		8,497		9,770
			Amortization of debt placement fees	935		887		1,779		1,732
			Restructuring	(99)		874		99		37,483
			(Gain) loss on sale of business	(65)		612		(42)		630




			Acquisition and integration	90		44		408		89
			Income tax effect of non-GAAP adjustments	(588)		(1,516)		(387)		(9,863)
		Non-GAAP net income attributable to Itron, Inc.		$	56,102	$	29,824	$	113,393	$	52,206

		Non-GAAP diluted EPS		$	1.21	$	0.65	$	2.44	$	1.14

		Non-GAAP weighted average common shares outstanding - Diluted		46,526		45,781		46,441		45,677

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TOTAL COMPANY RECONCILIATIONS				Three Months Ended June 30,				Six Months Ended June 30,
	In thousands, except per share data			2024		2023		2024		2023
	ADJUSTED EBITDA
		GAAP net income attributable to Itron, Inc.		$	51,318	$	24,201	$	103,039	$	12,365
			Interest income	(5,128)		(1,508)		(8,974)		(3,326)
			Interest expense	2,290		1,977		4,183		4,034
			Income tax provision	15,180		9,195		28,609		9,125
			Depreciation and amortization	13,519		13,905		26,263		28,368
			Restructuring	(99)		874		99		37,483
			(Gain) loss on sale of business	(65)		612		(42)		630




			Acquisition and integration	90		44		408		89
		Adjusted EBITDA		$	77,105	$	49,300	$	153,585	$	88,768

	FREE CASH FLOW
		Net cash provided by operating activities		$	51,717	$	41,560	$	93,025	$	42,989
			Acquisitions of property, plant, and equipment	(7,110)		(5,596)		(14,255)		(12,498)
		Free Cash Flow		$	44,607	$	35,964	$	78,770	$	30,491

Item 3: Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to interest rate and foreign currency exchange rate risks that could impact our financial position and results of operations. As part of our risk management strategy, we may use derivative financial instruments to hedge certain foreign currency and interest rate exposures. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, therefore reducing the impact of volatility on earnings or protecting the fair values of assets and liabilities. We use derivative contracts only to manage existing underlying exposures. Accordingly, we do not use derivative contracts for trading or speculative purposes.

Interest Rate Risk

We may be exposed to interest rate risk through our variable rate debt instruments, namely the multicurrency revolving line of credit. At June 30, 2024, we had no outstanding variable rate debt.

We continually monitor and assess our interest rate risk and may institute additional interest rate swaps or other derivative instruments to manage such risk in the future if we were to have variable rate debt outstanding.

Foreign Currency Exchange Rate Risk

We conduct business in a number of countries. Revenues denominated in functional currencies other than the U.S. dollar were 24% of total revenues for the three and six months ended June 30, 2024 compared with 24% and 25% for the same respective periods in 2023. These transactions expose our account balances to movements in foreign currency exchange rates that could have a material effect on our financial results. Our primary foreign currency exposure relates to non-U.S. dollar denominated transactions in our international subsidiary operations, the most significant of which is the euro.

We are also exposed to foreign exchange risk when we enter into non-functional currency transactions, both intercompany and third party. At each period-end, non-functional currency monetary assets and liabilities are revalued with the change recognized within other income (expense) in our Consolidated Statements of Operations. We enter into monthly foreign exchange forward contracts, which are not designated for hedge accounting, with the intent to reduce earnings volatility associated with currency exposures. As of June 30, 2024, a total of 41 contracts were offsetting our exposures from the euro, pound sterling, Indonesian rupiah, Canadian dollar, Australian dollar, and various other currencies, with notional amounts ranging from $103,000 to $39.1 million.

In future periods, we may use additional derivative contracts to protect against foreign currency exchange rate risks.

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Item 4: Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of our Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934 as amended. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that as of June 30, 2024, the Company's disclosure controls and procedures were effective to ensure the information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Changes in internal controls over financial reporting

There have been no changes in our internal control over financial reporting during the three months ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1: Legal Proceedings

Refer to Item 1: Financial Statements (Unaudited), Note 11: Commitments and Contingencies included in this Quarterly Report on Form 10-Q.

Item 1A: Risk Factors

For a complete list of Risk Factors, refer to Part I, Item 1A: Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 26, 2024.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

(a)Not applicable.

(b)Not applicable.

(c)Issuer Repurchase of Equity Securities.


Period	Total Number of Shares Purchased (1) (3)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					In thousands
April 1, 2024 through April 30, 2024	—	$	—	—	$	100,000
May 1, 2024 through May 31, 2024	—	—		—	100,000
June 1, 2024 through June 30, 2024	971,534	102.93		971,534	—
Total	971,534			971,534

(1)Effective May 11, 2023, Itron's Board of Directors authorized a share repurchase program of up to $100 million of Itron's common stock over an 18-month period.

(2)Excludes commissions.

(3)Shares purchased may include shares transferred to us by certain employees who vested in restricted stock units and used shares to pay all, or a portion of, the related taxes.

Item 5: Other Information

(a)No information was required to be disclosed in a report on Form 8-K during the second quarter of 2024 that was not reported.

(b)Not applicable.

(c)Insider Trading Arrangements

During the quarter ended June 30, 2024, the following Section 16 officers and directors, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934 (the Exchange Act), adopted, modified, or terminated Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K of the Exchange Act):

•On May 6, 2024, Thomas L. Deitrich, President and Chief Executive Officer, adopted a new written trading plan to sell up to 75,241 shares of Itron, Inc. common stock over a period ending on May 6, 2025, subject to certain conditions.

•On May 14, 2024, Donald L. Reeves, Senior Vice President, Outcomes, adopted a new written trading plan to sell up to 7,510 shares of Itron, Inc. common stock over a period ending on May 9, 2025, subject to certain conditions.

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Item 6: Exhibits



Exhibit Number						Description of Exhibits
4.1						Indenture, dated as of June 21, 2024, by and between Itron, Inc. and U.S. Bank Trust Company, National Association, as trustee (Filed as Exhibit 4.1 to Itron, Inc.'s Current Report on Form 8-K, filed on June 21, 2024)

4.2						Form of 1.375% Convertible Senior Note due 2030 (included in Exhibit 4.1) (Filed as Exhibit 4.2 to Itron, Inc.'s Current Report on Form 8-K, filed on June 21, 2024)

10.1						Form of Capped Call Confirmation (Filed as Exhibit 10.1 to Itron, Inc.'s Current Report on Form 8-K, filed on June 21, 2024)

10.2						F orm of Amendment to Warrant C onfirmation (Filed with this report)

10.3						Amendment No. 8, dated June 14, 2024, to the Credit Agreement, dated January 5, 2018 among Itron, Inc. and certain foreign borrowers, guarantors, lenders and issuing parties thereto, and Wells Fargo Bank, National Association, as administrative agent (Filed as Exhibit 10 .2 to Itron, Inc.'s Current Report on Form 8-K, filed on June 21, 2024)

10.4						Third Amended and Restated 2010 Stock Incentive Plan. (Filed with this report)

10.5						Third Amendment to the Executive Deferred Compensation Plan. (Filed with this report)

31.1						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						The following financial information from Itron, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ITRON, INC.

August 1, 2024	By:	/s/ JOAN S. HOOPER
Date		Joan S. Hooper
		Senior Vice President and Chief Financial Officer