Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Itron Inc (ITRI, Financial) reported a 13% year-over-year revenue growth, marking the seventh consecutive quarter of growth.
- Record quarterly revenue was achieved in the Network Solutions and Outcomes segments.
- Gross margin improved by 250 basis points to 34.6% due to favorable product mix and operational efficiencies.
- Non-GAAP operating income increased by 67% year-over-year, and adjusted EBITDA grew by 56%.
- The company raised its full-year 2024 revenue guidance, reflecting strong customer demand and operational execution.
Negative Points
- The book-to-bill ratio for the second quarter was below the full-year target of one to one.
- Outcomes segment margins were negatively impacted by a lower margin revenue mix and increased services costs.
- The timing of bookings is skewed to the latter part of the year, potentially impacting 2025 revenue.
- Higher tax expenses had a negative year-over-year impact on earnings per share.
- The company still has 30% of its backlog with pre-inflation pricing, which could affect future margins.
Q & A Highlights
Highlights from Itron Inc (ITRI) Q2 2024 Earnings Call
Q: Can you discuss the growth trajectory for the Outcomes segment and when margins might improve?
A: (Thomas Deitrich, CEO) The Outcomes segment showed record revenue growth, driven by project deployments. However, margins were impacted by higher service costs. We expect margins to improve as the business scales and more SaaS revenue is realized.
Q: How does Itron's technology help with natural disaster response, such as Hurricane Beryl?
A: (Thomas Deitrich, CEO) Our Grid Edge Intelligence platform enhances grid resiliency and outage management. It allows utilities to quickly identify and address outages, manage vegetation proactively, and optimize grid operations, making it a significant opportunity for us.
Q: What is the status of the older backlog that was not inflation-indexed?
A: (Thomas Deitrich, CEO) Approximately 30% of the backlog remains from pre-inflation indexed contracts. This is expected to flow through by 2024-2025, with the majority converting in 2024.
Q: Can you elaborate on the impact of government funding on your business?
A: (Thomas Deitrich, CEO) Government funding, such as IIJA, is starting to flow through, but the process is slow. We expect it to accelerate and positively impact our business, although the exact timing is uncertain.
Q: How are your partnerships with GE Vernova and Schneider progressing?
A: (Thomas Deitrich, CEO) These partnerships are progressing well, focusing on pre-integration to save customers time and enhance technology deployment. We are engaged in pilot projects and technology demonstrations with these partners.
Q: What are the drivers behind the increased revenue expectations for this year?
A: (Joan Hooper, CFO) Unexpected growth in European water sales and faster network deployments have driven the increased revenue expectations. Outcomes are performing as expected.
Q: How does the recent PJM auction impact your business?
A: (Thomas Deitrich, CEO) The auction highlights the need for grid efficiency and upgrades. Our technology helps utilities manage load growth and optimize grid operations, making it a significant opportunity for us.
Q: What is the outlook for 2025 given the current bookings and regulatory environment?
A: (Joan Hooper, CFO) Bookings are expected to skew towards the latter part of 2024, impacting 2025 revenue. The typical lag from booking to revenue is 6-12 months. We expect growth to normalize after accounting for the 2024 catch-up revenue.
Q: Can you provide more details on the $1 billion of pending bookings?
A: (Thomas Deitrich, CEO) The pending bookings are primarily for our Grid Edge Intelligence platform, which includes connectivity, visibility, and control of grid assets. This platform addresses various utility challenges and is a significant growth driver.
Q: How are you managing incremental margins across different segments?
A: (Joan Hooper, CFO) Device Solutions have improved margins due to portfolio pruning and operational efficiencies. Network Solutions benefited from favorable product mix and higher factory utilization. Outcomes margins are impacted by service costs but are expected to improve with scale.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
