Itron(ITRI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $572 million, with adjusted EBITDA of $99 million and non-GAAP EPS of $2.46, reflecting strong execution and demand for Grid Edge Intelligence [5][11] - Free cash flow reached $112 million in Q4, up from $70 million a year ago, indicating improved earnings growth and working capital management [12] - GAAP net income was $102 million, or $2.21 per diluted share, compared to $58 million, or $1.26 in the prior year, driven by higher operating income and lower tax expense [11][12] Business Line Data and Key Metrics Changes - Device Solutions revenue decreased by 7% year-over-year, primarily due to a decline in legacy electricity products in EMEA [13] - Network Solutions revenue decreased by 15% year-over-year, mainly due to the timing of project deployments [13] - Outcomes revenue increased by 22% year-over-year, driven by growth in delivery services and recurring revenue [14] - The new Resiliency Solutions segment contributed $3 million in revenue since its acquisition of Urbint [14] Market Data and Key Metrics Changes - Fourth quarter bookings were $737 million, with a total backlog of $4.5 billion, indicating strong demand for Grid Edge solutions [7] - Outcomes backlog grew by 58% year-over-year, surpassing $1 billion, reflecting a positive trend in market demand [29] Company Strategy and Development Direction - The company is focused on enhancing utility resiliency through strategic acquisitions, including Urbint and Locusview, which will support customers throughout the asset lifecycle [9][10] - Itron aims to leverage its heritage in hardware and networks while expanding into high-growth areas driven by data, AI, software, and services [24] - The company emphasizes the importance of trusted data and operational intelligence in the ongoing grid transformation [24] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment for utilities is evolving rapidly, creating both opportunities and challenges [23] - The company anticipates 2026 revenue to be in the range of $2.35 billion to $2.45 billion, representing a slight growth compared to 2025 [19] - Non-GAAP EPS for 2026 is expected to be between $5.75 and $6.25, with a dilutive impact from recent acquisitions [20] Other Important Information - The company ended 2025 with approximately $368 million in annual recurring revenue (ARR), up 20% year-over-year [30] - Total debt was $1.265 billion, with cash and equivalents at $1.02 billion, reflecting a decrease in cash balance due to acquisitions and stock buybacks [18] Q&A Session Summary Question: Update on utility demand and behavior trends - Management reported strong fourth quarter bookings of $737 million, indicating a constructive market environment [28] Question: Clarification on ARR metric - The ARR run rate at the end of Q4 was $368 million, with expectations of mid-teens to 20% growth for 2026 [31][35] Question: Barriers to entry in resiliency solutions - The company highlighted the stickiness of its solutions due to extensive field service usage, which enhances customer value [44][46] Question: Trends in utility ordering patterns - Management noted that ordering patterns have normalized, with no significant cancellations, and the Book and Ship business remains strong [52] Question: Expectations for bookings and revenue growth - The company expects bookings to continue to grow, supported by a strong pipeline and increasing Outcomes backlog [81]