Itron(ITRI) - 2025 Q1 - Earnings Call Transcript

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]