Itron(US:ITRI)2020-11-02 19:38Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $540 million, a decrease of 13% year-over-year but an increase of 6% sequentially from Q2 2020 [22] - Adjusted EBITDA was $40 million, representing 7% of revenue [24] - Non-GAAP earnings per share (EPS) was $0.61, down from $1.04 in the prior year [26] - Free cash flow was positive at $38 million [30] - GAAP net loss was $25 million, or negative $0.63 per share, compared to net income of $17 million, or $0.42 per diluted share in the prior year [23] Business Segment Data and Key Metrics Changes - Device Solutions revenue was $176 million, a 20% year-over-year decline but up 36% from Q2 2020 [25] - Networked Solutions revenue was $307 million, a 14% decrease year-over-year [25] - Outcomes segment revenue was $57 million, a 4% increase in constant currency from 2019 [25] - Gross margin for Device Solutions was 12%, down 750 basis points year-over-year [28] - Gross margin for Networked Solutions was 33%, down 460 basis points year-over-year [29] - Gross margin for Outcomes was 36%, a decrease of 90 basis points from the prior year [29] Market Data and Key Metrics Changes - Bookings in Q3 were approximately $432 million, bringing total backlog to approximately $2.8 billion [10] - The 12-month backlog was approximately $1.1 billion [10] - The company continues to target a full-year book-to-bill ratio of approximately one-to-one [10] Company Strategy and Development Direction - The company is focusing on an asset-light operating model and has initiated a cost savings project expected to yield $20 to $25 million in savings [17][18] - The strategy includes increasing focus on higher value solutions and optimizing the supply chain [18] - The company is seeing robust interest in its Riva distributed intelligence platform and automation solutions, indicating positive secular trends [9] Management's Comments on Operating Environment and Future Outlook - Management noted that while the pandemic has slowed near-term bookings, there have been no contract cancellations and collections have continued as expected [9] - The company is confident in emerging from the pandemic well-positioned to take advantage of increasing customer demand for technology solutions [36] - Management expects the full-year non-GAAP tax rate to be approximately 20%, a significant reduction from previous estimates [35] Other Important Information - The company has maintained stable supply chain and logistics networks, with all factories operational [16] - Cash and equivalents at the end of Q3 were $586 million, with total debt at $1.35 billion [30] - The company has begun to repay the draw from the revolving credit facility, repaying $100 million in October [32] Q&A Session Summary Question: What is driving the discrete tax benefits? - The largest discrete tax benefit was related to the ability to take advantage of tax attributes acquired from the Silver Spring acquisition, requiring the re-filing of historical tax returns [47] Question: What is the outlook for bookings and the book-to-bill ratio? - Management has visibility to achieve a one-to-one book-to-bill ratio, depending on regulatory decisions and contract completions [50] Question: How is the company seeing awards and sales tracking for North American water meter products? - While still a small part of the overall business, there is excitement around the growth potential of water meter products [51] Question: What is the impact of recent lockdowns in Europe? - Factories remain open, and there has not been a significant change in customer behavior, but the situation is being monitored closely [57] Question: What is the target financial model for the company? - The target model aims for mid-teens EBITDA levels and gross margins of 33% to 35%, but COVID-19 has pushed the timeline for achieving these targets [62] Question: Are there any pricing pressures in the networking segment? - The competitive market exists, but the company feels confident in its technology and does not see significant pricing pressure [64]