Segment Information

We operate under the Itron brand worldwide and manage and report under four operating segments: Electricity, Gas, Water, and Networks. Our Water operating segment includes our global water, and heat and allocation solutions. Networks became a new operating segment with the acquisition of SSNI. This structure allows each segment to develop its own go-to-market strategy, prioritize its marketing and product development requirements, and focus on its strategic investments. Our sales and marketing function is managed under each segment. Our product development, service delivery, and manufacturing operations are managed on a worldwide basis to promote a global perspective in our operations and processes and yet still maintain alignment with the segments.

We have three GAAP measures of segment performance: revenue, gross profit (margin), and operating income (margin). Intersegment revenues are minimal. Certain operating expenses are allocated to our Electricity, Gas, and Water operating segments based upon internally established allocation methodologies. We will not allocate operating expenses to our Networks segment until it is fully integrated and managed centrally. Corporate operating expenses, interest income, interest expense, other income (expense), and income tax provision are not allocated to the segments, nor are included in the measure of segment profit or loss. 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



Electricity	Standard electricity (electromechanical and electronic) meters; smart network and data platform solutions that include one or several of the following: smart electricity meters; smart electricity communication modules; prepayment systems, including smart key, keypad, and smart card communication technologies; smart systems including handheld, mobile, and fixed network collection technologies; smart network technologies; meter data management software; knowledge application solutions; installation; implementation; and professional services including consulting and analysis.

Gas	Standard gas meters; smart network and data platform solutions that include one or several of the following: smart gas meters; smart gas communication modules; prepayment systems, including smart key, keypad, and smart card communication technologies; smart systems, including handheld, mobile, and fixed network collection technologies; smart network technologies; meter data management software; knowledge application solutions installation; implementation; and professional services including consulting and analysis.

Water	Standard water and heat meters; smart network and data platform solutions that include one or several of the following: smart water meters and communication modules; smart heat meters; smart systems including handheld, mobile, and fixed network collection technologies; meter data management software; knowledge application solutions; installation; implementation; and professional services including consulting and analysis.

Networks	Smart network and data platform solutions for electricity, gas, water and smart cities including advanced metering, distribution automation, demand-side management, and street lights. Solutions include one or several of the following: communications modules, access points, relays and bridges; network operating software, grid management, security and grid analytics managed services and SaaS; installation; implementation; and professional services including consulting and analysis.

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



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Product revenues
Electricity	$	213,877		$	205,903
Gas	130,243			117,127
Water	125,587			109,335
Networks	67,403			—
Total Company	$	537,110		$	432,365

Service revenues
Electricity	$	38,528		$	32,848
Gas	7,496			7,084
Water	5,607			5,295
Networks	18,480			—
Total Company	$	70,111		$	45,227

Total revenues
Electricity	$	252,405		$	238,751
Gas	137,739			124,211
Water	131,194			114,630
Networks	85,883			—
Total Company	$	607,221		$	477,592

Gross profit
Electricity	$	69,975		$	67,250
Gas	43,471			50,815
Water	37,805			39,572
Networks	28,604			—
Total Company	$	179,855		$	157,637

Operating income (loss)
Electricity	$	(2,768	)	$	17,084
Gas	(28,348		)	21,731
Water	(11,710		)	8,804
Networks	(75,510		)	—
Corporate unallocated	(22,112		)	(16,792		)
Total Company	(140,448		)	30,827
Total other income (expense)	(16,010		)	(5,766		)
Income (loss) before income taxes	$	(156,458	)	$	25,061

For the three months ended March 31, 2018, one customer represented 22% and another customer represented 16%, respectively, of total Electricity segment revenues. For the three months ended March 31, 2018, one customer represented 11% of total Gas segment revenues, and one customer represented 11% of Networks segment revenues. For the three months ended March 31, 2018, no single customer represented more than 10% of the Water segment or total company revenues.

For the three months ended March 31, 2017, one customer represented 18% of total Electricity segment revenues. For the three months ended March 31, 2017, no single customer represented more than 10% of the Gas or Water segment or total company revenues.

We currently buy a majority of our integrated circuit boards, an important component in our products, from two suppliers. Management believes that other suppliers could provide similar circuit boards, 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,
	2018		2017
	(in thousands)
United States and Canada	$	355,932	$	269,096
Europe, Middle East, and Africa	202,074		162,815
Other⁽¹⁾	49,215		45,681
Total revenues	$	607,221	$	477,592


⁽¹⁾	The Other region includes our operations in Latin America and Asia Pacific.

Depreciation and amortization expense associated with our segments was as follows:



	Three Months Ended March 31,
	2018		2017
	(in thousands)
Electricity	$	6,525	$	5,311
Gas	4,202		4,244
Water	4,109		3,959
Networks	15,012		—
Corporate unallocated	1,224		864
Total Company	$	31,072	$	14,378