Itron, Inc. (ITRI) Earnings

Management highlights

### Overall Q2 2026 Performance - Delivered record gross margin, strong free cash flow, and earnings above expectations on in-line revenue, reflecting structural improvements to ITRON's operating model that have increased earnings power. - Consolidated Q2 revenue: $563 million; annual recurring revenue (ARR): $417 million; adjusted EBITDA: $97 million; non-GAAP EPS: $1.59; free cash flow: $81 million; total backlog: $4.4 billion at quarter end; bookings: $550 million (in line with expectations). ### Market Demand and Strategic Position - Long-term demand for ITRON's solutions is driven by durable macro pressures: utilities face rising reliability/resiliency requirements, new demand patterns (including AI-driven and industrial load growth), distributed energy resources, and weather volatility, pushing adoption of visibility, automation, and network intelligence solutions. - Demand is strong across segments: electricity (non-wires alternatives, time-to-power, resiliency), gas (safety and modernization, above historical demand levels), and water (positive demand in Europe for scarcity and network efficiency solutions). Regulatory alignment on affordability, reliability, and resiliency supports sustained demand. - ITRON is gaining market share in the mid-market utility segment, with recent notable wins including 1789 Lux partners, multiple municipalities, Los Angeles Department of Water and Power (LADWP), and Sacramento Municipal Utility District (SMUD). - Utilities increasingly use continuous modernization programs (alongside traditional full-scale upgrades) to manage affordability and risk, which drives steady recurring revenue growth for ITRON. ARR grew 21% year-over-year, reflecting growing adoption of higher-value offerings. ### Operations - Supply chain remains stable overall; the company is proactively managing isolated tightness (specifically memory pricing) with no broad labor or material constraints impacting deployment plans. - Integration of the Resiliency Solutions segment (from recent acquisitions) is tracking to plan, expanding ITRON's ability to deliver mission-critical utility network intelligence.

Guidance

- **Q3 2026 Guidance**: Revenue is expected in the range of $590 million to $600 million (2% year-over-year growth at the midpoint, 6% sequential growth from Q2 2026). Non-GAAP EPS is expected in the range of $1.50 to $1.60 (1% year-over-year growth at the midpoint). - **Full Year 2026 Guidance**: The full-year revenue range has been narrowed to $2.37 billion to $2.41 billion (similar to the prior February 2026 range, 1% year-over-year growth at the midpoint), with implied 8% year-over-year and sequential growth in the second half, consistent with prior expectations of back-end loaded 2026 revenue. - Full-year 2026 non-GAAP EPS guidance has been upwardly revised to $6.30 to $6.50, representing a 7% increase at the midpoint compared to the prior February 2026 outlook. After normalizing for tax rate and interest income impacts, the midpoint of the new range is ~7% higher than 2025 as-reported EPS. - 2027 full-year guidance will be provided on the February 2027 earnings call, with updated long-range segment targets to follow after integration of Resiliency Solutions is complete.

Segment performance

1. Device Solutions: Q2 2026 revenue of $111 million, a 3% constant currency year-over-year decrease. Adjusted gross margin was 34.8% (up 500 basis points YoY), operating margin was 28.3% (up 570 basis points YoY). Revenue contribution: ~19.7% of total Q2 revenue. 2. Network Solutions: Q2 2026 revenue of $339 million, a 17% year-over-year decrease driven by project deployment timing. Adjusted gross margin was 42.8% (up 430 basis points YoY), operating margin was 33% (up 340 basis points YoY). Revenue contribution: ~60.2% of total Q2 revenue. 3. Outcomes: Q2 2026 revenue of $96 million, a 13% year-over-year increase driven by higher services revenue. Adjusted gross margin was 38.8% (up 30 basis points YoY), operating margin was 21.3% (up 290 basis points YoY). Revenue contribution: ~17.1% of total Q2 revenue. 4. Resiliency Solutions (new segment including Urban and Locust View acquisitions): Q2 2026 revenue of $16 million. Adjusted gross margin was 75%, operating margin was 28%. Revenue contribution: ~2.8% of total Q2 revenue.

Risks & headwinds

- Project deployment timing and quarterly bookings are uneven due to reliance on regulatory approval processes for large utility projects, which can create volatility in quarterly results. - Supply chain pockets of tightness (notably memory pricing) require active management, though no broad constraints have materialized to date. - Utility affordability pressures and capital constraints create pushback in rate cases, though management notes approved returns remain constructive and ITRON's efficiency solutions help address these pressures. - Actual future results may differ materially from forward-looking statements due to unforeseen changes in market and regulatory conditions, consistent with risks disclosed in ITRON's SEC filings.

Analyst Q&A

• Q: Where will the second half 2026 sequential revenue growth come from, and what is the margin outlook for the back half? What drives the network solutions revenue inflection? /

  A: The main driver of second half sequential growth is increased deployment activity in Network Solutions, with continued double-digit growth in Outcomes. The underlying demand drivers for network solutions growth are grid expansion, resiliency investment, and grid efficiency investment (such as non-wires alternatives and time-to-power solutions). Full-year 2026 gross margin will be close to 40%, slightly down from Q2's above-target level due to mix, but remains structurally improved year-over-year.

• Q: Does increased utility investment in generation and transmission crowd out distribution capital spending, which ITRON relies on? What is the regional demand outlook across the U.S. and verticals? /

  A: The narrative that distribution capex is crowded out is false: distribution capex continues to grow, and two-thirds of U.S. utilities are distribution-only, so no trade-off exists. All new generation and transmission load lands on existing distribution systems, requiring additional distribution investment to handle new capacity. ITRON sees strong pipeline growth across all U.S. regions, with gas modernization opportunity well above historical norms, and European water demand remaining constructive.

• Q: Can you share examples of utilities using ITRON's grid edge solutions to defer large capital projects, and what is the outlook for rate case approvals for these projects? /

  A: A large West Coast utility used ITRON's coordinated EV charging management to defer or avoid over $1 billion in transformer upsizing costs. A Southeastern utility used ITRON's distributed intelligence to reduce outage duration by 12-15%, cutting outage costs and improving performance-based rate outcomes. Rate cases remain constructive: approved returns are generally in the 9-10% range, and projects with clear articulated benefits continue to gain regulatory approval.

• Q: What is the update on the Urban and Locust View acquisitions, including integration progress and cross-selling opportunities? /

  A: The acquisitions are on track to hit full-year 2026 targets of $65-70 million in revenue and ~70% gross margin. Integration of the larger Locust View business (including ERP migration) is on track to complete by end of 2026. Early cross-selling activity is underway, with new AI-powered construction compliance automation functionality already generating customer interest, and no labor market constraints have impacted the new segment's growth pipeline.