Itron (ITRI) 3 Aug 232023 Q2 Earnings call transcript

Good day and welcome to the Itron Second Quarter 2023 Earnings release. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Instructions will be given at that time.

As reminder, this call is being recorded.

turn of over Investor to Senior Paul like President Vice Relations. would the to call Vincent, I

You may begin.

President Officer Good and business morning, President second conference Itron's quarter earnings quarter and outlook. of Chief and welcome will provide to call. Itron Chief Financial results Tom review Senior and Joan update Hooper, and second Officer XXXX and Vice Executive Itron Deitrich, general a

release conference announcing details today, and its on This the the Earlier a tab. under the Accompanying includes the issued webcast Investor website release a is information. related replay press to is presentation call, company webcast also and call available corporate Relations results. today's our that through

describe. remarks, will Following the questions be call using for the prepared open operator the process

reminder earnings our available our of between of Investor presentation Relations begins, that GAAP our website. financial information financial and Tom Reconciliations and are and non-GAAP and believe release enhances in overall Before we non-GAAP differences earnings our future release, performance. include a on the financial current understanding that measures

section Materials will could of we expectations that appropriate as may this August forward-looking presented risks are our today, Commission. presented conference XXXX uncertainties. undertake good are materially and are in a XX-K insight company duty results form our earnings those statements. well made and These to statements comments subject from of materially forward-looking not reports expectations or provide any factor financial call X, change on operating factors with in our that any and current attempt and during and and update other statements to be to current and environment. making forward-looking. based future faith All Securities do to and discussed filings comments, estimates, the Exchange in as and release made Actual that because assumptions We of the these call, differ statements are the today's were risk during

to Dietrich turn X as CEO presentation, Tom please Now our remarks. his Page begins our of

I Paul. will our you, Thank provide joining. results quarter second financial for Joan for an discuss well update outlook our and review as as results Thanks Good morning, on the XXXX. everyone. will

quarter second And XXX%. $XXX Adjusted sequentially was was earnings free $XX $X.XX, per flow million, million. increase was EBITDA and a year-over-year year-over-year improvement to increased X% a year-over-year. cash Our quarter Non-GAAP over second improvement million $XX a XX% XXXX. of revenue of $XX million, share the $X.XX

expectations. and utilities the our technology the and profitability of multi-tenant our and ability breadth a consecutive market opportunity and for multi-commodity, operations most project challenges mix cities for digitalization facing the pressing supported to margins that pace utilities ahead quarters, established that We The of the solutions has three provides accelerates our and and the Grid. technology at intelligence multi-application, customers believe of provider cities. results the activity efficiently, Edge deployment Itron is as leading accelerated many for agile with address clearly demonstrate from scale the the and of urgency

and executed record of Outcomes our that growth second year-over-year segments which segment notable asset the improved performed propelled a segment, offerings of intelligence to new set adoption team revenue. the of The well. quarter, each Networked operating The our distributed During quarterly supported our utilization growth. for

water its adjustments. the vertical by Our demand portfolio since XXXX, with Device strong achieved buoyed accretive margin underpinning Solution gross from segment highest the in

in to million bookings were Slide our $XXX line X, expectations. Turning with

approval when such, registered booked. require customer the but expect could bookings for only And is continue the process a includes an approval. all finalized regulatory impact customer year. award, a We not the bookings billion period signed that $X to contract approximately as of regulatory We award and

awards pleased pace the are year-to-date. with of We

with $X.X Outcomes our billion, continues Our record segments. backlog projects at primarily levels Networked is and of total near and comprised

nearly the are endpoints, a multipurpose After a decade This consisting few the During that successful worthy operations Itron for for Consolidated of mention. highlights commercial creation Edison Itron utilize and SAS the come. analytics continue of network for deployment of recurring quarter, million second New will the and long X York agreement to to there value a demonstrates are customer. of term

We are operational vertical the in bookings pleased improved to the we safety. with recent have increase and targeted gas seen efficiency

endpoints strong seeing next Networked incorporate generation verticals. traction are We based that for in Solutions transport cellular bookings

from business. will results the improved improved I the and A insights business. across turning operating availability execution cover some Now component coupled to environment facilitated stabilized around X, strong Slide operational with

quality to pressure sustained increase under through value which to demand and technology capabilities, operational productivity for digital they are offer sustainability. improve breadth in services an the customers of and Our enhanced to create acceleration

why demand remains This macroeconomic offerings strong. uncertainty, is for some despite our

customers Our a assets. of agility their Edge reliability, Grid, address they as challenges enhance range of must capabilities and resiliency wide impacting

While next generation modernizing innovation behavior of reduce costs, will quality their ultimately greater the utility assets generate is developing commitment and the a that returns. solutions our and daunting supports to challenge, improve customer services, our

continues and point, proof a to high are offerings Intelligence As our deployment accelerate. in Distributed demand

end quarter, endpoints, XXXX. growth a approximately end X.X and As the XX% the delivered is of sequentially we at growth of XXX% which the capable million since DI

the million, a of Our first increase XX% the commercially of DI exceeds licensed applications roughly number now operating year. over quarter X.X

evolving expands. the prospective competitors, existing customers Intelligence and capabilities focus and a and Distributed each differentiate opportunity With from market are rapidly our volatile increasingly for passing of world. DI Itron facing a month,

ask for provide the a second financial Now XXXX. update and quarter to full-year I Joan

Slide of the Tom. the turn you, and for GAAP quarter a consolidated outlook provide will to quarter Thank Please summary and I results. second our third for latest results cover X then full-year. the

year-over-year higher increased availability strong operational The XX%, conditions than across Second three all of anticipated segments. million to and execution, $XXX components better due shipments. improving quarter was revenue of supply enabling

XXX operational to Gross due and higher points mix basis margin for XX.X%, last than the was favorable quarter efficiencies. year

to $X.XX $XX income. share the net $XX diluted due The share, or per or higher prior of loss in a operating compared million income GAAP net year. Our million per $X.XX increase was to of

Slide was million. $XX $XX on from $XX operating $X.XX per of Non-GAAP prior income or for was net compares $XX million share. income metrics the was up non-GAAP $XX X, to year. year the also million up non-GAAP the $X.XX diluted ago. EBITDA quarter Adjusted million, Regarding This million

increase main the on Solutions Year-over-year component shipments. constant segments Growth to basis. revenue $XXX The Solutions X was XX% are year-over-year revenue was was currency a X. availability comparisons last the driver. $XXX million vertical by Device water improving million, year. which on growth $XX Slide enabled or business was due Networked or a million, revenue million year-over-year X% versus increase in higher

currency quarterly record. The a XX% higher to services. primarily Outcomes new revenue growth and was of $XX was Distributed million, sales Intelligence or constant license increased $XX recurring million and in due software

EPS partially QX impact our $X.XX year-over-year the Moving to year-over-year EPS the share, up on gross had positive profit per by was operating Slide Tax $X.XX diluted per the a $X.XX per to of impact higher a share. bridge non-GAAP foster had prior OpEx. year. from of share XX, non-GAAP and due had share performance of a share. impact count offset negative higher $X.XX negative per FX $X.XX Pretax

margin with Solutions in with Gross the very profitability up QX QX XX, XXX improve I'll $XXX Slide level since with XX.X%. the of efforts basis at was points, XX gross XX.X% was year. results compared was of segment revenue XXXX. operating pleased the and ongoing the through margin We're segment. this to it prior to Device million margin review highest Turning

XXX Devices basis XX.X%. $XXX due partially of basis gross Networked fall was year-over-year higher points due the operating margin Operating basis XX mix and points to Solutions OpEx. operating improved to higher was increased profit due margin margin points and to profit by efficiencies. increased XXX operational million the Gross XX.X% gross higher through favorable of gross increased and offset product leverage. revenue margin

XX.X% gross due mix. XXX $XX increased and gross higher basis with million Gross due margin revenue leverage. favorable points XX.X%. higher margin increased and software XXX was basis points Operating profit services license of to operating Outcomes to sales margin of

Turning from at Net quarter. of at the net to $XX by up $XX year profitability. higher in debt driven and of at the QX, at liquidity quarter million end remained million. million. end was ago. I'll Total was debt $XXX $XXX equivalents XX, X.X times $XXX million of the flat second million leverage Slide year-over-year, was second Free debt cover QX, and X.X was times the end flow and down a Cash the cash

outlook. midpoint Now quarter please to third between We quarter turn XX% third revenue this growth. of $XXX for The to be anticipate represents million. year-over-year our XX Slide and $XXX range million

of versus QX diluted range non-GAAP For of is up we $X.XX per the midpoint, XXX% last share. be expect $X.XX a year. to QX, to in this in EPS At

this recovery from midpoint, a represents will faster billion versus be the XX% X annual increase Now to to the is higher impacted shortages $XXX year $X.XX or an XXXX the range to full driving the billion of Slide $X.XX billion by positively A also component provided to from now the anticipate At Earnings revenue prior expectations. for in XXXX be update billion through outlook. fall higher please our million $X.XX we to XX revenue. in a turn revenue guidance. $X.X February. the our We

a share. estimate share is non-GAAP and midpoint of versus $X.XX versus strong Our non-GAAP be previous XX% and XXXX guidance. low per and high year respectively. of comparison, to the the faster anticipated midpoint, share, the EPS per $X.XX very year-over-year EPS prior rates earnings full At guidance approximately up execution. the The than $X.XX revenue updated At XXX% to improvement outlook $X.XX operational growth per environment, annual ranges chain the reflect supply the or diluted the guidance, in will XX% a growth $X.XX

back Tom. I'll to Now call the turn

Thank you, Joan.

of appreciate of effort day put our growth revenue, Second payment a in customers, am potential. the our margin, quarter and trust our and profitability cash quarter which proud down was gross every I the forth a flow. teams in strong and towards resulted execution of

the We for just surface. have performance high scratching are expectations and

the and we clean, and belief financial Additional and energy foundation that access core to objectives the society. safe form hold a to operational reliable water thriving a of fundamentals,

the cities less goals to resources preserve we've waste. more water, which ESG these we published measures and and to utilities enable XXXX and energy and Report, and During manage quarter, our details with efficiently taken our to

communities follow emissions in Itron strategy the X.X over utilities solutions, four operating million centered contributed company's supporting with alone. objectives, sustainable of meeting year to knowing improving around on including and gas pride and last impact, solutions integrity, our of people tons takes Our avoiding focus to cities customers that providing is commitments. our similar greenhouse that and environmental our our pillars

the joining us open for line today. you for please Thank questions. some Operator,

Our Thank from Marty Instructions] with Johnson you. Rice. [Operator first Malloy question comes

open. Your is line

regarding on segment expectations maybe the outcomes in that know, capable you forward talk of and nice about and was I the growth and, in quarter the margins? terms that you Outcomes here. strong if Good wondering remarkable to outlook in morning, to increase of congratulations the terms DI going could see about and pretty talk you how your revenue Could relates endpoints. the

the Marty. thanks, that This in over based applications is DI Sure, seen more growth Tom. last on was quarter getting we've into The the field. Outcomes

quoted of applications. remarks, types prepared Those I we targeted towards in applications up are the efficiency So nicely. numbers really grid my jumped

for growth reliability the think to or large come. a applications and side continue in type right the they of part the see We impacts, of hardware expand more and So customer from we to over endpoints of in hardware capable Greenfield a a create. to of safety, of customers number whether new value have gives actually more left whether that perspective converting us it absolutely very that is still so their it's bookings, DI existing breadth adoption, that fleet certainly us grid backlog

We've for or EVs like capability rooftop recently things launched of detection a solar.

is optimization a help transformer back transformer utility to also to application location gives for distribution management, the a of outage the type performance, a awareness a understanding what's to We map, for meter happening system, very, the which reliability. distribution a good very and that of and feeder a in of resiliency capability have utility helpful

benefits So a and benefits lot are grid to as side of well in as yet come. side pipeline consumer the

out maybe solutions talk for of talk see of have up additional solutions? related and in as at to area your that bit maybe some there a some last about companies your the demand just to and customers and manage Could outlook you those to EV event and gets my you helping got for customer question, you deploying little that rolled about utility infrastructure fall, that it I EVs. more follow conversations wanted And Great.

and on house is pressure certainly Sure, EV to. around lot the really in EVs, utilities happy turns roams the growth the The have of in a them that of and equivalent plugs randomly on. almost town a and occasionally from small

it's difficult plan and is and more manage, understanding So supply much to just to as the how load unpredictable demand. well as your

capabilities the to analytics at understand endpoint for whether that detection, are allows where launched located. the EV level or level EVs it's the we’ve at So utility

is, eventually, enroll to least to a And application, understand all connected charging, the use the the why to optimize the that would some do same to you And the and able of reliability all where are more the providing can you resources sorry, time in to perhaps energy control you're itself. way from to want of, clearly -- I'm grid to to the or type grid how charging vehicle owner perspective. back way at distribution and effectively to distributed get up starting point resiliency much transformer being capability many

I applications. about, we're lot what growth of lot DI of growth us. the on for bullish It very in good a the us question of Outcomes a really segment potential This So just segment first your where future. around is gives potential talked one

it Thank turn you. back. I'll

Thank you.

Our from Cowen. next Jeff question Osborne with comes

Your line is open.

and, questions Tom my side. morning, Joan, couple on Good

prior I roughly you crisis in to and million $XXX year to think sales calls, over past due of shortage. the had so semiconductor $XXX or lost million mentioned

or plaguing that trying linger in that of lost still had to lost inefficiencies into give half? guidance. prior are some first the half, to of second take there past sales shortages next relative I'm Is then revenue So some so you upside still Or, will or and that the raised $XXX year? the of you the are seeing million reconcile the,

well. as Jeff, I one that take can Sure,

note ahead was but So to still yet it view didn't it's first, lost that truly get in come. important -- that to the it. originally deferred. was it's of It us, I revenue we absolutely haven't period planned was it that really We

that I still into of upside accounts components of the come I the are to we that year. guidance. better think think of for had we this in the year, we us. still in indeed, the originally spill majority of will and first saw deferred have earlier the And terms half revenue the yet than we of beyond in anticipated of in revenue front of that part some supply and amount where to

coming. still it's So

it. we lost anxious We it We're as deploy haven't to quickly can. as

broader there anything side? can That's maybe then one then that helpful. quoting too? two out is And budgets you activity was would Is or the strength And the attribute characterize how came large improving ones, just the quick on there electric contract there you water municipal it, through?

Sure.

strong. and of is in up. the So customers types more with resources we're more of distributed energy complexity pace showing Pacific, bids and America, with Asia is driven quotes the out there, of and North in very grid around The is having discussions really

the the was couple Water it is is better will electricity were years. So strength very about that and customer And large could was really somewhat very, pace of strengths broad think in need it's own very through really we're side, quoting across segment strong it that small not the left towns, it where utilities, the and to little I anticipated utilities, optimistic last That head. devices over been the Water small year. to based. their we bit the had one the of could a of be board. something, It systems is those be it the first on again, upgrade half than

the reduce effective entire the seen a basic up a and of we've in more systems Europe, community make served. automate for in investment practices Specifically the losses operation little lot shoring water to cost to of bit business to the

I all you. That's have. Thank Perfect.

you. Thank

Thank you.

Harrison with Our Sandler. next Kashy question Piper comes from

line Your open. is

taking and my thank questions. you for Good morning

is revenues? me, XQ in and EPS XQ XQ one EPS first maybe for despite from EPS housekeeping item, Joan. than line implied lower just Why a So

One in Yeah, better mix a of QX. it's function two really things. is the than expected

Some is just timing. that of

and across So first between we all we half. the and half second had to don't in segments incremental a very the strong also really the repeat second OpEx product mix that half, there's the expect some

is we're some it is variable investments it some making. of related, of Some compensation

mentioned you. believe wrong, bookings in down That's $X be anticipate think you I'm the this year, that correct you year-over-year. but remarks, billion I which Tom, would if I And helpful, thank prepared of then me

you if was can so bookings me if the and if walk would And why just Solutions that, be is backlog also Networked some Device you remind maybe at know, I Solutions well? wondering includes then down? Outcomes you us basically And through the this or point, just it as

Sure.

loaded, expectations. of So just first half on we to of have bookings that second really really playing half think it's so pace land for towards very year, was contracts The thoughtful look out, the very to be leads with this down is year-to-date on year, And track to a about we back-end us the that's that timing. through. and and the And in for signed based so getting line exactly regulatory promising. of much always coming what comes indeed, see timing awards customers will we year. approval be the from It the the where bookings

it bit tends more of lot to but term long a can the is backlog that The a on see. of majority Devices Networked revenue that think, detect or XX% through operating basis, more which There's around right backlog, in discussions I the fact, as that months today, record very And concern around new of is strong place applications, with we to have do not of any marketplace. in in be of And based flowing the leads indeed, a the turns a rather picks sort go there, backlog let's in backlog. and you level. up of the XX%, that of pace Outcomes customers slowdown Devices the by. than very, little

up Marty's for earlier. little up And it, one just then bit a more question that's -- me, following helpful. follow question maybe maybe Got on

the now of should forward? to situation just outpacing it we to moving growth has, the supply think about you. I as Solution that think component Networked trying grow in would Thank seems the about, meaningfully know, segment how improved? about Should Or Outcomes trajectory Outcomes like the Network it's the expect you segment Outcomes, know, you faster growth than think business? You

we Sure. way about does -- The still term terms things Networked, model you think long term in as next pacing fair year, out, set outpacing is this half the of on eventually for the right say long still it targets long to have Outcomes, let's growth, which out side. deployments seeing new of amount the When a are you the into Networked for, is term. look what that of maybe and we back year,

So Networked I before eventually that neck on growth the eventually, that and new you outpace and Outcomes do are over of effective probably will get the shorter think it. there enough infrastructure out neck term outcomes layered

So term, short couple the the and Networked entire next say is side. of for and plus, meaning neck quarters neck the growth the very on company let's much Outcomes

from comes question next Pavel Our Molchanov Raymond with Instructions] [Operator James.

is Your open. line

Thanks for taking the question.

guys flow, on generating You in a cash sheet. have bit free are the -- back quite cash balance of

what In kind terms ranked the priorities of are of point? deploying at cash this the pile, that

our the now And would I levels to is we say, that in generating looking about certainly opportunity. you enough for balance and Yeah, talked potential the of last becoming debt right manageable. asset, Outcomes, recognize the of free very are, Outcomes. Particularly are last one in very companies sheet scale say, in been year's move at are going has we've really strategic platform and is -- the needle. more I our the found as it's to open would are Haven't a we that real flow. cash or busy M&A Pavel, as yet, say, the technology know software you expand But it that basically we right we've terms call, still

outcomes look well in in grow continue as to we'll as both So organic R&D investments, particular M&A opportunities. at to

zooming in chain, going incremental product geographies, be maybe there on loosen going And this the going those to meters are given additional year, to? that you're to the sales that supply are have particular

lot that much demand earlier, of market. that very sense, terms certainly would in in deferred we that when a is our pent a It largest true business North large American of led but in North expect. total up size mentioned of revenue the I is the That's America, normal

Got it, thanks much. very

Sure.

Thank you.

may comes from is open. muted. question Noah, with next Our your Noah line you be Kaye Oppenheimer,

now? Can me sorry. you Oh, hear

Yes.

renewables. the of Great. sounds and know, of up I really for environment? now, evolving lot development Or interest, and focusing scope primarily kind of around, Edge curious in Thanks new first rollout and I'm bidding so basic really mean, broader you're question EV that much. taking focused to know, optimization. is revenue certainly are and it I about is the And right? sort on still demand more response you like Yeah, substantial it your the the projects I mean, Grid, up that just intermittent part much really mean, of how certainly a metering takes of integration on these project? management? terms on, the revenue advanced managing of stack the a

It is, system the thanks, Noah. It that is fully integrated sell. we into

we stay a utilities me reason break So that it kind is the future technology us future, come? current that selecting sort struggling the with the network Certainly, allow provide, do Who where for you're to with are the who as see fundamental value a of How there? our me base that storm will next can that's sense. and the hit? buying out times that or to agility will knows and endpoint out to you penetration how capabilities are buy that lot that changing that EV is the add great that network of assets in interest of uncertainty proofing customers And assets customers. adapt of you knows to when my of that the are difficult a the separated I

is and capability. you deploy kind a of you it multi-commodity, add multi-purpose, multi-application you network, and grow it need network, as use can So and as when a we it need

that see customers that though, revenue all difficult So Outcomes is minds. or as that assure the reason Networked is growth you, from out to can it of it business. and it's it's a that the kind we a our dollar the of parse for And I such, on standpoint.

think congratulations out I anticipating into see margins margins second was that operating mean, efficiencies. the sequentially And in it off were prior this there Tom. Thanks, we go step that I is, the a back to better helpful. QX, I we to That's then and on of But of end want half. commentary were for results. the based we'd down turned mix --

what actually was here? down What and So doesn't help was drives in that exactly of it and do to the XQ favorable, that step repeat kind XQ sequentially, where about mix in so XQ? that to understand. Just we us go

Yeah, so so and Outcomes, virtually remarks of that sales a expect and be in places. at the In that don't but the those some we couple one-time, in both I margin tend repeat mentioned strength and margin to XXX% to the software that was. license prepared in weighting in it revenue was

the margin on side, deployment, the we're the whether different doing or or addition, beginning In Networked profiles. deployment not end of of has a the

through will this issue, margins based is lifecycle a on deployment. and primarily are that the different networks I So in mix deployment, of again be talk when you the the where

a particular. And so is, we our the our expectations did pretty networks QX for be than was recover faster because relative And high expectations, what looks Networked more point supply quarter at in anticipated. to of our expectation availability margin to QX for normal this

the than very would the be second first of my half. margins a half So view now, that as slightly result in lower margins will right QX, be strong

understand, increase? just supply I -- components that Right. Supporting allocations that of did year And full so

Yeah.

right, all Okay,

Yeah.

the and start get February, and expectation in continue get year which was remember, would So got into the back half, would it the recovery in really through XXXX, more our and primarily anticipated. meaning if year, components we we worse, quarter first have third revenue that you we benefit more would deferred to that more faster would QX we that than of late the the then even

annual first not by if million. midpoint brought our the higher, we result, ’XX up you at look a guidance, $XXX only as So was of half

be, we was faster think is component ’XX would of ahead I to of going what are have availability. so pull a thought a that seeing we recovery really

we how component Do we And just, of year? normalizing? we as back always your sort and your exit your think times again, product you own I with caught ball, guess up difficult the but crystal times are lead are close here, products, of kind lead to

caught or I up. some times buy there will are longer much are others, don't absolutely constrained pre-supply those can think where still be but long. are we them There you lead long, chain still very the very components Lead than constrained components pre-pandemic are times components on for readily are those a environment. very, that

still overall. will based deferred be XXXX expectations our enter We revenue as but we will on have

deferred and the you into think out but we spill certainly I to is cutting So should be that going revenue future. as of year absolutely of progress it forward, some this into

Very you. helpful. Nice quarter, thank

you. Thank

are questions. There no Thank you. turn remarks. closing like to I'd further to the call over Tom Dietrich for

next you thank we forward updating quarter. look I and to Michelle. you, joining everyone Thank for

your program, disconnect. Everyone, may a day. does conclude great the have you you This participation. Thank for now