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Segment Information | 9 Months Ended
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Sep. 30, 2019
Segment Reporting [Abstract] |
Segment Information | Segment Information Effective October 1, 2018, we reorganized our operational reporting segmentation from Electricity, Gas, Water, and Networks to Device Solutions, Networked Solutions, and Outcomes. Prior period segment results have been recast to conform to the new segment structure. As part of our reorganization, we actively integrated our recent acquisitions and are making investment decisions and implementing an organizational structure that aligns with these new segments. In conjunction with the rollout of our new operating segments, we unified our go-to-market strategy with a single, global, sales force that sells the full portfolio of Itron solutions, products and services. We continue to manage our research and development, service delivery, supply chain, and manufacturing operations on a worldwide basis to promote global, integrated oversight of our operations and to ensure consistency and interoperability between our operating segments. With this reorganization, we continue to operate under the Itron brand worldwide and manage and report under the 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. 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 | Device Solutions - includes hardware products used for measurement, control, or sensing that do not have communications capability embedded for use with our broader Itron systems, i.e., products where Itron is not offering the complete "end-to-end" solution, but only the hardware elements. Examples of the Device Solutions portfolio include standard endpoints that are shipped without Itron communications, such as our standard gas meters, electricity IEC meters, and water meters, in addition to our heat and allocation products; communicating meters that are not a part of an Itron solution such as the Linky meter; and the implementation and installation of non-communicating devices, such as gas regulators.
Networked Solutions | Networked Solutions - includes a combination of communicating devices (smart meters, modules, endpoints, and sensors), network infrastructure, and associated application software designed and sold as a complete solution for acquiring and transporting robust application-specific data. Networked Solutions combines, into one operating segment, the majority of the assets from the recently acquired SSNI organization with our legacy Itron networking products and software and the implementation and installation of communicating devices into one segment. This includes: communicating measurement, control, or sensing endpoints such as our Itron® and OpenWay® Riva meters, Itron traditional ERT® technology, Intelis smart gas or water meters, 500G gas communication modules, 500W water communication modules; GenX networking products, network modules and interface cards; and specific network control and management software applications. Solutions supported by this segment include automated meter reading (AMR), advanced metering infrastructure (AMI), smart grid and distribution automation (DA), and smart street lighting and smart city solutions.
Outcomes | Outcomes - includes our value-added, enhanced software and services operating segment in which we manage, organize, analyze, and interpret data to improve decision making, maximize operational profitability, drive resource efficiency, and deliver results for consumers, utilities, and smart cities. Outcomes places an emphasis on delivering to Itron customers high-value, turn-key, digital experiences by leveraging the footprint of our Device Solutions and Networked Solutions segments. The revenues from these offerings are primarily recurring in nature and would include any direct management of Device Solutions, Networked Solutions, and other products on behalf of our end customers. Examples of these offerings include our meter data management and analytics offerings; our managed service solutions including network-as-a-service and platform-as-a-service, forecasting software and services; and any consulting-based engagement. Within the Outcomes segment, we also identify new business models, including performance-based contracting, to drive broader portfolio offerings across utilities and cities.
Revenues, gross profit, and operating income associated with our operating segments were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
In thousands | 2019 |  | 2018 |  | 2019 |  | 2018
Product revenues |  |  |  |  |  |  |
Device Solutions | $ | 211,096 |  |  | $ | 216,371 |  |  | $ | 644,254 |  |  | $ | 693,544 |
Networked Solutions | 330,487 |  |  | 297,726 |  |  | 978,259 |  |  | 852,819 |
Outcomes | 11,314 |  |  | 11,619 |  |  | 41,281 |  |  | 32,377 |
Total Company | $ | 552,897 |  |  | $ | 525,716 |  |  | $ | 1,663,794 |  |  | $ | 1,578,740 |
Service revenues |  |  |  |  |  |  |
Device Solutions | $ | 2,253 |  |  | $ | 3,879 |  |  | $ | 8,573 |  |  | $ | 12,219 |
Networked Solutions | 25,734 |  |  | 22,782 |  |  | 70,305 |  |  | 66,193 |
Outcomes | 43,590 |  |  | 43,585 |  |  | 131,415 |  |  | 131,921 |
Total Company | $ | 71,577 |  |  | $ | 70,246 |  |  | $ | 210,293 |  |  | $ | 210,333 |
Total revenues |  |  |  |  |  |  |
Device Solutions | $ | 213,349 |  |  | $ | 220,250 |  |  | $ | 652,827 |  |  | $ | 705,763 |
Networked Solutions | 356,221 |  |  | 320,508 |  |  | 1,048,564 |  |  | 919,012 |
Outcomes | 54,904 |  |  | 55,204 |  |  | 172,696 |  |  | 164,298 |
Total Company | $ | 624,474 |  |  | $ | 595,962 |  |  | $ | 1,874,087 |  |  | $ | 1,789,073 |
Gross profit |  |  |  |  |  |  |
Device Solutions | $ | 40,945 |  |  | $ | 46,484 |  |  | $ | 122,451 |  |  | $ | 148,831 |
Networked Solutions | 135,406 |  |  | 133,057 |  |  | 388,717 |  |  | 359,588 |
Outcomes | 20,053 |  |  | 17,556 |  |  | 63,713 |  |  | 45,110 |
Total Company | $ | 196,404 |  |  | $ | 197,097 |  |  | $ | 574,881 |  |  | $ | 553,529 |
Operating income (loss) |  |  |  |  |  |  |
Device Solutions | $ | 27,905 |  |  | $ | 33,019 |  |  | $ | 81,717 |  |  | $ | 105,721 |
Networked Solutions | 105,637 |  |  | 103,998 |  |  | 298,994 |  |  | 265,882 |
Outcomes | 10,843 |  |  | 6,372 |  |  | 35,620 |  |  | 9,966 |
Corporate unallocated | (104,946 | ) |  | (101,713 | ) |  | (312,511 | ) |  | (459,778 | )
Total Company | 39,439 |  |  | 41,676 |  |  | 103,820 |  |  | (78,209 | )
Total other income (expense) | (15,110 | ) |  | (16,174 | ) |  | (44,983 | ) |  | (45,193 | )
Income (loss) before income taxes | $ | 24,329 |  |  | $ | 25,502 |  |  | $ | 58,837 |  |  | $ | (123,402 | )
For the three months ended September 30, 2019, one customer represented 10% of total company revenues. For the nine months ended September 30, 2019, the same customer represented 11% of total company revenues. For the three and nine months ended September 30, 2018, no customer represented more than 10% of total company revenues. We currently buy a majority of our integrated circuit board assemblies from three suppliers. Management believes that other suppliers could provide similar products, but a change in suppliers, disputes with our suppliers, or unexpected constraints on the suppliers' production capacity could adversely affect operating results. Revenues by region were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
In thousands | 2019 |  | 2018 |  | 2019 |  | 2018
United States and Canada | $ | 405,973 |  |  | $ | 376,676 |  |  | $ | 1,221,448 |  |  | $ | 1,080,709 |
Europe, Middle East, and Africa | 157,159 |  |  | 177,356 |  |  | 495,715 |  |  | 564,178 |
Other(1) | 61,342 |  |  | 41,930 |  |  | 156,924 |  |  | 144,186 |
Total revenues | $ | 624,474 |  |  | $ | 595,962 |  |  | $ | 1,874,087 |  |  | $ | 1,789,073 |
(1) | Other includes our operations in Latin America and Asia Pacific.
Depreciation and amortization of intangible assets expense associated with our operating segments was as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
In thousands | 2019 |  | 2018 |  | 2019 |  | 2018
Device Solutions | $ | 6,373 |  |  | $ | 6,127 |  |  | $ | 19,155 |  |  | $ | 19,043 |
Networked Solutions | 3,077 |  |  | 3,152 |  |  | 9,530 |  |  | 9,467 |
Outcomes | 1,408 |  |  | 1,621 |  |  | 3,995 |  |  | 4,968 |
Corporate unallocated | 17,765 |  |  | 19,549 |  |  | 53,011 |  |  | 58,950 |
Total Company | $ | 28,623 |  |  | $ | 30,449 |  |  | $ | 85,691 |  |  | $ | 92,428 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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