Itron and Landis+Gyr, the world’s two biggest publicly traded smart metering and grid networking providers, both reported financial results on Monday — Landis+Gyr for its fiscal year 2018 ending in March, and Itron for the first quarter of 2019.
While the two reports aren’t directly comparable, they offer a glimpse into how the rivals have been growing revenue, managing supply constraints and market challenges across different regions of the globe, and expanding into more lucrative software, services and networking business lines.
Itron reported Q1 revenue of $615 million, up from $607 million in the first quarter of 2018. GAAP net loss for the Liberty Lake, Wash.-based company was $2 million, or 5 cents per share, compared to a $146 million loss, or $3.74 per share.
This represents a continuation of the losses Itron reported for fiscal year 2018, driven by industrywide constraints and shortages of key electronics components for its devices, as well as acquisition and integration costs of absorbing its chief U.S. smart metering rival, Silver Spring Networks, for $830 million.
In non-GAAP terms, net income was $28 million for the quarter, or 70 cents per share, compared with $5 million, or 13 cents per share, in the comparable quarter. This beat Wall Street expectations of about $585 million in revenue and 44 cents non-GAAP EPS, with a particularly strong showing in its Outcomes and Networked Solutions lines of business.
Outcomes encompasses software and services, including those of Itron acquisition and demand response provider Comverge, and Networked Solutions contains its distributed intelligence, IOT-enabled wireless and wire-line networking technologies. They're distinct from Itron's Devices business — the smart meters, network nodes and other hardware that have made up its core business for decades.
But adding software and services to existing deployments, and expanding its networking technology to new verticals such as networked street lights or smart city applications, offers opportunities for ongoing revenue and platform growth — a strategy that both Itron and Silver Spring had been following for years before their merger.
The differences are reflected in Itron’s first-quarter figures by segment, compared to the same quarter last year:
- Device Solutions saw revenue fall 11 percent, or 5 percent in constant currency terms, to $222 million. Gross margin was 18 percent and operating margin was 11.5 percent.
- Networked Solutions' revenue grew 11 percent to $336 million. Gross margin was 37.8 percent, and operating margin was 28.3 percent, with year-over-year improvement based on “lower opex, including the benefits of integration synergies,” Itron CFO Joan Hooper said on a Monday conference call.
- Outcomes revenue grew a modest 2 percent from the same quarter last year to $56 million, but with a gross margin of 36 percent that rose 14 percentage points year-over-year.
CEO Philip Mezey highlighted one big deal for Itron’s Outcomes business with Exelon, owner of Chicago utility Com Ed and mid-Atlantic utility Pepco, which have deployed smart meters from Silver Spring.
The new deal with Exelon's Utility Analytics team will “analyze the terabytes of data that is delivered monthly over their Itron network" to “create predictive models that will assist with the prevention of outages, recovering from storms faster and in improving the overall grid reliability,” he said.
Switzerland-based Landis+Gyr has a long and complicated past, culminating in its 2017 initial public offering on the Swiss NEX exchange that separated it from its current corporate parent, Japan’s Toshiba.
For fiscal year 2018, which ended on March 30, Landis+Gyr reported net revenue of $1.77 billion, up 3.1 percent in constant currency terms compared to 2017.
North and South America — primarily the U.S. — were responsible for $986 million of this revenue, while Europe, Middle East and Africa — mostly France and the U.K. — provided $632.5 million, and Asia-Pacific provided $146.7 million.
Landis+Gyr’s 2018 net income of $122.2 million, up from last year’s $46.5 million, was driven by operating income improvements, as well as a non-cash gain of $14.6 million related to contribution of assets to IntelliHUB. That's the joint venture Landis+Gyr formed with Pacific Equity Partners last year to acquire Acumen, the smart metering arm of Australian energy retailer Origin Energy.
IntelliHUB now operates an existing 170,000-meter network that could expand to include most of Origin’s 4.2 million electricity customers, and in December announced plans to acquire Metrix, a New Zealand smart meter provider
Landis+Gyr has been landing some large-scale AMI contracts in recent months, including a 508,000-meter rollout with We Energies in Wisconsin, a 1.27-million meter deployment, plus 130,000 gas meters for Ameren Missouri, an extension of its smart metering and communications contract with Hong Kong utility CLP Power, and more than 800,000 meters deployed since December in the U.K.
It also revealed that it invested $2 million in U.S. energy disaggregation startup Sense, most likely as part of an $18 million Series B round in October.
The competitive landscape
Landis+Gyr reported a committed backlog of $2.6 billion as of March 30, up 9 percent from the prior year — a figure that compares with Itron’s first-quarter backlog of $3 billion, down slightly from $3.1 billion at the end of the same quarter in 2018.
Landis+Gyr CEO Richard Mora offered guidance for fiscal year 2019, including FY 2019 net revenue growth of approximately 2 percent to 5 percent in constant currency terms, and group-adjusted EBITDA between $240 million and $255 million.
However, Mora’s prepared statement also noted that “project timing in some of our key markets gives us a few revenue headwinds to deal with,” notably in the first half of fiscal year 2019, that is, the next six months. “Accordingly, we expect our FY 2019 results to be significantly skewed to the second half.”
Itron's first-quarter earnings report did not alter its previous full-year 2019 guidance of revenue between $2.35 billion and $2.45 billion, and non-GAAP diluted earnings per share between $2.35 and $2.75.
Itron and Landis+Gyr face competition from privately held metering players such Germany's Elster, which was acquired by Honeywell for $5 billion in 2015, and U.S.-based Sensus, which was bought by water treatment company Xylem for $1.7 billion in 2016.
Other major contenders in the field include U.S.-based Aclara, which acquired General Electric’s metering business in 2015, Denmark-based Kamstrup, Slovenia-based Iskraemeco, and China's Wasion Group and Zhejiang Holley Liyuan Metering.