ITRON, INC. Q4 FY2024 earnings call

The Itron team executed well during the fourth quarter with results above expectations. Fourth quarter revenue was $613 million, adjusted EBITDA was $81 million, non-GAAP earnings per share was $1.35, and free cash flow was $70 million. Record quarterly bookings of $1.4 billion were achieved, resulting in a new record total backlog of $4.7 billion. Market demand remained stable with opportunities related to grid resiliency, capacity, safety, and automation. Highlights included partnerships with Potomac Electric Power Company for a demand response program and a long-standing gas customer for Intelis technology.

Device solutions revenue was $109 million, down 5% on a constant currency basis, driven primarily by an expected decline in legacy electric meter sales. Network solutions revenue grew 6% year over year, driven by increased new project deployments and strong operational execution. Outcomes revenue grew 25% year over year, primarily due to increased software licenses and services. Device solutions had a gross margin of 26.6% and operating margin of 19.9%. Network solutions had a gross margin of 35.1% and operating margin of 26%. Outcomes had a record revenue of $91 million with a gross margin of 44% and operating margin of 22.8%.

Anticipates 2025 revenue to be within $2.4 billion to $2.5 billion range, flat year-over-year when normalizing 2024 to exclude $125 million catch-up revenue with approximately 6% year-over-year growth. 2025 non-GAAP EPS expected to be in $5.20 to $5.60 per diluted share range, assuming 25% effective tax rate. Q1 2025 revenue expected to be in $610 million to $620 million range, a 2% year-over-year increase at midpoint.

Uncertainty related to trade policies which could materially affect results. Supply chain risks, particularly with components from Mexico.

Q: Good morning. Thanks for taking the questions. Well, I'd like to get in a bit into the demand environment, but I gotta start with cash generation, the balance sheet here. You know, Joan, maybe first after the strong free cash flow performance in 2024, maybe you can give us some broad indications of what you're thinking about for 2025 on free cash flow conversion.

A: I would expect continued improvement and continued free cash flow fall through improvement as we go from 2024 to 2025. So if you recall for Investor Day, we talked about 10% to 12% of revenue for free cash flow. In 2024, that was about 8.5%. I would expect that percent to continue to go up and get us toward the targets for 2027.

Q: Hey, guys. Thanks for taking my questions. Just following up on Noah there. Just on the demand environment. Could you just talk about demand as maybe by region, North America and kind of big deals? And then just if you could tie in, if there's any kind of pushback from public utility commissions just because electricity rates have increased so much.

A: Sure. So start with the pipeline of opportunities. It remains very strong as I commented in prior quarters so that the customers need to invest in resiliency and capacity increases, safety, automation. So the opportunity funnel has never been better on a global basis. North America clearly continues to lead the pack. And we would expect those opportunities to remain in view on a global basis. There are certain places around the globe in Asia Pacific, which also remain very strong, Australia, New Zealand being probably the top of that list. Europe, I would say, is flat. We're taking a bit more of a cautious approach on Europe as the water market there has definitely punched a little bit above its weight in 2024. That probably doesn't continue forever. So we'll watch that as that is a bit more of a short-term turns business in terms of how it flows through the bookings and backlog and the revenue overall. So that's how I would characterize it. On the big deal front, as always, there are large deals and there's small deals. Our fourth quarter bookings had more than 680 individual deals in it with well over 280 customers. So it is a very wide market swap that we continue to operate on. Still 90% plus networks and outcomes overall. So the parts of our business that we're starting to grow or targeting to grow rather continue to do so. Relative to the regulatory environment, it's still very constructive. So clearly, the interest rates are a little bit higher than people were hoping. Higher for longer perhaps is a decent way to think about it, but utility commissions are absolutely still approving deals, and we see it as a very constructive environment on a global basis.