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Segment Information | 3 Months Ended
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Mar. 31, 2019
Segment Reporting [Abstract] |
Segment Information | 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. 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 that do not have communications capability embedded for use with our broader Itron systems, i.e., hardware-based products not part of a complete "end-to-end" solution. Examples from 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 Smart Spec meters; and the implementation and installation of non-communicating devices, such as gas regulators. Networked Solutions – This segment primarily 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 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 operating segment. Examples from the Networked Solutions portfolio include: 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. The IIoT 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 – This segment primarily includes our value-added, enhanced software and services 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 from the Outcomes portfolio 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 March 31, |  |
In thousands |  |  |  |  | 2020 |  | 2019
Product revenues |  |  |  |  |  |  |
Device Solutions |  |  |  |  | $ | 200,168 |  |  | $ | 218,569 |
Networked Solutions |  |  |  |  | 315,437 |  |  | 314,350 |
Outcomes |  |  |  |  | 12,532 |  |  | 11,931 |
Total Company |  |  |  |  | $ | 528,137 |  |  | $ | 544,850 |
Service revenues |  |  |  |  |  |  |
Device Solutions |  |  |  |  | $ | 2,111 |  |  | $ | 3,186 |
Networked Solutions |  |  |  |  | 25,408 |  |  | 22,077 |
Outcomes |  |  |  |  | 42,759 |  |  | 44,463 |
Total Company |  |  |  |  | $ | 70,278 |  |  | $ | 69,726 |
Total revenues |  |  |  |  |  |  |
Device Solutions |  |  |  |  | $ | 202,279 |  |  | $ | 221,755 |
Networked Solutions |  |  |  |  | 340,845 |  |  | 336,427 |
Outcomes |  |  |  |  | 55,291 |  |  | 56,394 |
Total Company |  |  |  |  | $ | 598,415 |  |  | $ | 614,576 |
Gross profit |  |  |  |  |  |  |
Device Solutions |  |  |  |  | $ | 32,367 |  |  | $ | 39,916 |
Networked Solutions |  |  |  |  | 121,750 |  |  | 127,068 |
Outcomes |  |  |  |  | 17,449 |  |  | 20,279 |
Total Company |  |  |  |  | $ | 171,566 |  |  | $ | 187,263 |
Operating income (loss) |  |  |  |  |  |  |
Device Solutions |  |  |  |  | $ | 18,198 |  |  | $ | 25,457 |
Networked Solutions |  |  |  |  | 88,680 |  |  | 95,322 |
Outcomes |  |  |  |  | 8,198 |  |  | 10,410 |
Corporate unallocated |  |  |  |  | (88,706) |  |  | (110,366) |
Total Company |  |  |  |  | 26,370 |  |  | 20,823 |
Total other income (expense) |  |  |  |  | (9,658) |  |  | (14,851) |
Income (loss) before income taxes |  |  |  |  | $ | 16,712 |  |  | $ | 5,972 |
For the three months ended March 31, 2020 and 2019, one customer represented 11% 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 March 31, |  |
In thousands |  |  |  |  | 2020 |  | 2019
United States and Canada |  |  |  |  | $ | 385,325 |  |  | $ | 397,566 |
Europe, Middle East, and Africa (EMEA) |  |  |  |  | 166,984 |  |  | 171,242 |
Latin America and Asia Pacific |  |  |  |  | 46,106 |  |  | 45,768 |
Total Company |  |  |  |  | $ | 598,415 |  |  | $ | 614,576 |
Depreciation expense is allocated to the operating segments based upon each segments 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 March 31, |  |
In thousands |  |  |  |  | 2020 |  | 2019
Device Solutions |  |  |  |  | $ | 6,435 |  |  | $ | 6,436 |
Networked Solutions |  |  |  |  | 3,737 |  |  | 3,248 |
Outcomes |  |  |  |  | 1,393 |  |  | 1,302 |
Corporate unallocated |  |  |  |  | 12,466 |  |  | 17,441 |
Total Company |  |  |  |  | $ | 24,031 |  |  | $ | 28,427 |

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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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