Core Thesis - Itron, Inc. is positioned to benefit from a generational replacement cycle in metering solutions, with a strong market share in electricity, gas, and water utilities [3][4]. Company Overview - Itron generates approximately 60% of its revenue from electricity utilities, 20% from gas, and 20% from water utilities, operating through Device Solutions, Networked Solutions, and Outcomes segments [3]. - The Networked Solutions segment is the largest revenue contributor, providing Advanced Metering Infrastructure (AMI) and Automated Meter Reading (AMR) endpoints, enhancing utility management through two-way communication [3]. Market Dynamics - A replacement cycle is anticipated due to high deployments from 2010 to 2012 and delays caused by COVID-19, expected to drive industry growth at around 5% through 2029 [4]. - Itron is expected to increase its market share from 48% in 2024 to potentially 60% by 2029, capitalizing on the challenges faced by competitor Landis+Gyr [5]. Competitive Advantage - Itron's superior Distributed Intelligence (DI) technology and operational execution position it well to capture market share, especially with Landis+Gyr facing organizational challenges [4][5]. - Control over the network layer enhances customer retention and positions Itron favorably for meter replacements, including approximately 12.5 million Landis meters on third-party networks [5]. Financial Projections - Itron is projected to achieve growth of 7–7.5% through 2027, with EBITDA margins expanding to 16% and EPS reaching $7.5, indicating a potential 30% upside to a target price of $160 by the end of 2026 [6]. - Key catalysts for stock rerating include visibility into the replacement cycle by late 2025 and the impact of network access restrictions in 2026 [6].

Financial Data and Key Metrics Changes - Revenue for the first quarter was $607 million, a 1% increase year over year, with adjusted EBITDA of $88 million and non-GAAP earnings per share of $1.52 [5][12] - Free cash flow improved to $67 million from $34 million a year ago, reflecting strong operational earnings growth [14] - GAAP net income was $65 million or $1.42 per diluted share, compared to $52 million or $1.12 per share in the prior year [13] Business Segment Data and Key Metrics Changes - Device Solutions revenue decreased by 1% year over year to $126 million, but increased by 2% on a constant currency basis, with gross margin at 30% and operating margin at 24.2% [14][16] - Network Solutions revenue was $403 million, with a gross margin of 36.9% and operating margin of 28.8%, showing a slight decrease in gross margin due to product mix [16] - Outcomes revenue grew by 14% year over year to $79 million, with gross margin at 39.2% and operating margin at 18.2% [17] Market Data and Key Metrics Changes - Bookings for the quarter resulted in a book-to-bill ratio of 0.9, with a backlog of $4.7 billion, remaining near record levels [6][7] - Customer demand is driven by the adoption of Itron's Great Edge Intelligence platform, enhancing distribution capacity and infrastructure agility [5][6] Company Strategy and Development Direction - The company is focused on optimizing its factory footprint, strengthening supply chain resilience, and growing recurring revenue to capitalize on future opportunities [19][20] - Itron aims to maintain its industry leadership through the deployment of innovative solutions, positioning itself as a partner of choice for utilities and cities [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased macroeconomic and trade policy uncertainty but expressed confidence in navigating near-term challenges [19] - The company expects Q2 revenue to be in the range of $605 million to $615 million, with non-GAAP earnings per share anticipated to grow approximately 12% year over year [18] Other Important Information - The estimated EBITDA impact from tariffs for the year is approximately $15 million, net of mitigation measures [10][42] - The regulatory environment remains constructive for customers, with various mechanisms allowing software purchases to be included in rate bases [38] Q&A Session Summary Question: Impact of tariffs on full year guidance - Management stated it is premature to update full year guidance but noted strong performance in Q1 and expectations for Q2 [24][26] Question: Device Solutions segment margins - Management expressed satisfaction with current margins but indicated variability may occur due to seasonal factors [28][29] Question: Twelve-month backlog removal - Management clarified that the removal was to avoid confusion and stated that the demand environment remains positive [32][33] Question: Regulatory environment for software capitalization - Management noted that the regulatory environment is supportive, with various mechanisms in place for software purchases [36][38] Question: Tariff mitigation efforts - Management explained that the $15 million estimate includes current tariffs and mitigation measures, with most impacts expected in the latter half of the year [62] Question: M&A activity and capital deployment - The priority remains finding acquisitions that enhance software content, with ongoing activity in the M&A space [71][72] Question: Recurring revenue mix in Outcomes segment - Management reported approximately 70% recurring revenue in Q1, with a goal of reaching closer to 80% in the future [75]