Q3 2024 Itron Inc Earnings Call

October 31, 2024

The

Good day, thank you for spending by. Welcome to I Trans3rd Quarter, 2024 earnings release conference call.

At this time, Op. Dispense Honel is an only mode.

After this presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message by saying your hand is raised.

Please note that today's conference is being recorded. I will now hand a conference of a few speaker hosts, Paul Vincent, Vice President of the Investorations, please go ahead.

Good morning and welcome to I-Trons 3rd quarter 2024, burning conference call. Tom Deitrich, I-Trons President and Chief Executive Officer and Joan Hooper, Senior Vice President and Chief Financial Officer, will review I-Trons 3rd quarter results and provide a general business update and outlook.

Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call and webcast replay information.

A company today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab.

Following prepared remarks, the call will open for questions using the process the operator described.

Before Tom begins a reminder that our earnings release and financial presentation include non-gap financial information that we believe enhances the overall understanding of our current and future performance.

Reconciliation's differences between gap and non-gap financial measures are available in our earnings release and on our investor relations website.

We will be making statements during this call that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and comments made during this conference call as well as those presented in the risk factor section of our form 10K and other reports and filings with the securities and exchange commission.

Paul Company comments, estimates, or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating in financial environment.

and materials discussed today October 31, 2024, may materialy change and we do not undertake any duty to update any of our forward-looking statements. Now, please turn to page four of our presentation as our CEO Tom Deitrich begins his remarks.

Thank you, Paul. Good morning to everyone and thank you for joining our call.

I trumped third quarter results for ahead of our expectations and reflect another four of solid execution delivered by our team. The continued market demand fueled by growth and energy and water needs supports our substantial pipeline of opportunities for the future.

Financial highlights for the third quarter are shown on slide five and include revenue of $615 million. Adjusted to deduct of $89 million, non-gap earnings per share of $1.84 cents.

Free Cash Flow of $59 million.

Turning to slide six, our backlog at the end of third quarter was $4 billion, and booking during the quarter were $487 million.

Note where the bookings in the third quarter include Arkansas Valley Electric Cooperative selected I-Troms Gen X Technology Platform through our distribution partner NRTC.

Arkansas Valley was one of the first department of energy smart grid program awardees to complete negotiations with the DOE receiving a grant for their great intelligence and distribution automation project.

Additionally, centerpoint energies working with IXO until offer the additional safety features of Inteleth Gas and points to commercial and industrial users.

The enhanced safety capabilities, including an integrated shutoff valve and pressure sensing.

with Edge Intelligence. This expansion further demonstrates centerpoints commitment to the safety of their users.

Finally, we've expanded our support of Duke Energy to include our latest great-edge and distributed intelligence capabilities for Durham's control.

In our prior quarterly call, we commented that regulatory and funding processes can extend the time from project to work to booking recognition due to our disciplined approach to register an award as backlog.

This can increase the quarter-to-quarter variability in bookings for any given period and calendar 2020 for work is no exception.

We are pleased with the pace of the various regulatory and funding processes within the first month of this quarter of 4th order 24.

As a result, we've been came conviction for a book to build ratio of 1 to 1 are greater for the full year.

Speaker Change: Now, Joan will provide details of our third quarter results and our fourth quarter outlook.

Joan: Thank you, Tom.

Joan: Please turn this slide seven for some reconstallidated gap results.

Third quarter revenue is 615 million and increased 10% year of year and will stronger than expected.

The higher revenue was given by solid operational performance, as well as shipments of customer orders initially anticipated in the fourth quarter and early 2025.

Gross margin of 34.1% with 70 basis points higher than last year due to operational efficiencies.

Joan: Gatsman income of $78 million for a dollar-70 per dollar-ditcher compares to $40 million or 87 cents per dollar-ditcher in the prior year.

The improvement was driven by higher levels of operating and interesting from endless tax expense.

Both our gap and non-gap netting come and earnings per share benefited from a favorable resolution of a foreign tax audit. This resulted in an increase in netting come with approximately 14 million or 30 cents per share.

Regarding non-get metric home flight A.

9GAP operating income of 79 million increased 34% year over year.

A just a debut of 89 million was a record and increased 29% here over year.

Non-Gap netting come to the quarter was $84 million or $1.84 per diluted chair versus $98 a year ago.

Free cash flow was 59 million in Q3 versus 28 million in a year ago. The improvement reflects strong year over year on each group.

Joan: You're over your revenue growth by business segment as on Slyg9.

The Vice Solutions revenue increased 10% of the constant currency basis, primarily driven by growth and smart water sales and elective demand.

Network Solutions revenue group 8% year over year, driven by increased volume associated with new projects and ongoing deployments.

I'm coming to revenue increase 16% on a constant currency basis. Primarily do the higher recurring revenue services and software.

Movings of the non-gap U of EUR EPS, Brazil, so I'd tell you. Part two, three, non-gap, earnings per share of a dollar E for per deleted share was a

Joan: Pre-TAPS operating performance contributed 61 cents per share of year over year improvement, driven by the fall through a higher revenue and growth profit, personally offset by higher operating expenses.

Joan: Third-quarter tax expense was reduced by 14 million due to favorable resolution of a foreign tax audit resulting in higher net income and at 30 cent earnings per share increase.

Turning to Florida's 11th through 13, I'll review 2-3 segment results compared with the fire year.

Joan: Divide solutions revenue was 123 million gross margin was 27.2% and operating margin was a record 21.6%.

Joan: Gross margin was up 290 basis points year over year and operating margin was up 560 basis points

Reflecting volume and operational efficiencies and effective cost management.

Network Solutions revenue was 417 million with gross margin of 35.9% and operating margin of 27.7%.

This quarter was another record level of revenue for this segment.

Gross margin increased 80 basis points year over year and operating module was up 110 basis points driven by volume and operational efficiencies.

I'll come to revenue with 76 million with gross margin of 35% of operating margin of 14.7%.

Gross margin decreased 360 basis points year of year and operating margin was down 110 basis points due to a lower margin revenue mix and increased services cost.

Joan: Turning to slide 14, I'll review liquidity and dead at the end of the third quarter.

Told that was 1.265 billion and net debt was 282 million.

Joan: As of September 30, NetLivers was 0.9 times in cash into globalized $983 million.

Now, please turn this slide 15 for our fourth quarter outlook.

We anticipate force quarter revenue to be between 600 to 610 million dollars. The midpoint of this ratings represents growth of 28 million or 5% year over year.

Joan: For non-gap earnings per share, we expect a range of $1 to $1 to $1.10 for the wheelchair, which assumes an effective tax rate of approximately 25%. At the midpoint, disimplied the decrease of 18 cents versus 24 last year.

But Q4 of 2023 had an effective tax rate of just 8%. When normalizing Q4 of last year to a 25% effective tax rate, this Q4 of 2024 outlook is an increase of 6 cents for 6% year of year.

Now, please turn this slide 16 for an update to our annual 2024 outlook incorporating this Q4 update. We now anticipate 2024 full-year revenue to be within a range of 2.4 to 8 billion to 2.438 billion.

Joan: At the midpoint this represents an increase of 12% versus 2023 and 1% from our prior 2024 annual guides.

Contended customer demand, strong operational execution, and the time-medicure submissive is driving our higher 20-24 revenue expectations.

Bernie's will also be positively impacted by the false root higher revenue.

Our non-gap earnings for sure full year out with range is $5.28 to $5.38 per diluted share. At the midpoint, the updated non-gap EPS estimate is up 59% versus 2023 and 17% versus prior guidance.

Although we are not ready to provide formal 2025 financial guidance at this time, the combination of 2024 performance being consistently ahead of expectations, a normalizing operating environment and very back in loaded 2024 bookings.

Make it reasonable to assume a lower revenue growth profile for 2025.

We remain committed to the 2027 financial targets provided at this year's March Investor Day.

Now we'll turn the call back to Tom.

Tom: Thank you, Joan.

Operational momentum and efficiency games continue to accrue during the third quarter, and while we expect growth rates to normalize in the coming quarters, the larger trends are clear. Customer demand is growing.

I will broadcast the product and services that are strategic direction as well placed and the 2027 financial targets remain appropriate.

Before opening the line for Q&A, there are a few non-financial highlights with no. We recently held I-Trots Annual Inspire Customer Event, where the power of data and great-edged intelligence was on full display.

It is clear from the depth of interaction with utility executives, ecosystem partners and other influential industry leaders that we have the necessary motivation and thought leadership across our industry to resolve the most complex and pressing energy and want to resource challenges facing us today.

Significantly, the nature of the discussions has shifted from what to do to how to get it done. This is encouraging and will serve to accelerate the pace of the industry.

Tom: During the conference, we announced our grid-edge essentials offering. Grid-edge essential solution dramatically simplifies the process for our utility customers to adopt new advanced technologies, accelerating the time to value.

Also in conjunction with Inspire, we released our resourcefulness report which explored artificial intelligence and machine learning trends within the utility industry.

Tom: The key findings of the research include that 82% of the utility executives report active AI projects.

AI and ML already helping utilities optimize asset utilization, advancing sustainability progress, and enhancing consumer engagement.

and perhaps unsurprisingly, reflective of broader considerations related to AI adoption. 43% of utilities cited the lack of expertise as a current barrier to greater AI adoption.

Tom: AI and ML are focused areas for the utility industry.

Tom: which places even greater value on thoughtful approaches to data capture, analytics and agile infrastructure. The report is available for download at itron.com and I encourage everyone to review the findings.

Thank you for joining our Paul today. Operator, please open the line for some questions.

Speaker Change: Thank you. Please enjoy all of us as a question you made the best star one one on your telephone and wait for your name to be announced. So enjoy your questions simply press star one one again. Please then by while we compile the canner roster.

Speaker Change: and the

Speaker Change: A first question coming from the line of Van Kalle with Derek you'll on his novel.

Van Kalle: Hey guys, congratulations to the corner. Joan, I just want to clarify what you talked about next year. There will be growth next year, it's just not the same level of growth.

We are obviously not in a position to give 25 guys yet, but I wanted to make sure people remember a couple of things one is

We had 125 million of ketchup revenue in 24 so it'll be careful that you...

You grow on a normalized 2024 and the fact that the bookings are so back and low due to another factor. So really no different than what I've said on previous calls.

If you look at the compounding growth from the current 24 estimates to get to the 27 targets, it's only two and a half to five percent growth.

because 24 was so much higher than we expected. So, you know, just be careful with the growth rates. We never expected a linear from 23 to 27.

Thank you for that. The next question is just kind of behind the bookings that you expected in this quarter.

and you know, Geals out there, but you know, to continue kind of the strength that you guys have, you know, go on for the less, you know, a couple quarters or years.

Van Kalle: Thank you.

Thanks Ben Tom here.

Speaker Change: B.M.

Tom: Market remains extremely constructive that needs of utilities.

of Deal with things like climate disruption or increasing demand or doing a better job managing water, gas safety, all of those trends are alive and well and I think we're well positioned to be able to take advantage of that.

Speaker Change: We are definitely seeing progress on the regulatory and funding front. Last quarter I referenced something like a billion dollars of pending awards.

that we're in process. We definitely have seen progress. I would say well over 50% probably closer to 75% of that.

Regulatory Process is now behind us and that's really what is underlying the one to one for the full year on a book to build basis that I referenced in the prepared remarks.

Speaker Change: So feeling good about the overall market on a global level, the commentary I just gave was largely around the Americas, but Europe has at least through two, three continued to perform a little bit ahead of the expectations and you saw that in our third quarter results.

Speaker Change: Thank you guys.

Thank you.

Now next question coming from the line up. Check off when with TDC on here on his novel.

Thank you. Maybe just to follow up on that last point, Tom. If I heard you write, you mentioned bookings were strong in October and then you said 50 to 75% of the billion came in after the quarter. Is that the way you're trying to...

Speaker Change: Couch that for fourth quarter. Will.

Not quite, you're close, but the Billy and that I referenced last time, we've seen progress on the regulatory front. It's quite too much to the point that we registered as a booking yet, but certainly we expect to achieve the one to one for the year on a book to Bill ratio. So, Bill and good about the progress, and I wanted to give that color just to give people a little bit of context as to what we see behind the curtain and why we remain pretty excited about the market opportunity ahead.

It's just to be clear, is the regulatory front you're referring to both federal and state if it's requires both, just given that there was federal warranty in the grip program.

Speaker Change: Yes, it's a combination of the two. And again, those bookings are primarily the Americas, but there's some international things that have government funding activities associated with it, and it's lumped into the commentary we gave.

Speaker Change: Perfect and then just two other quick ones. Can you just how in retrospect would you frame the strength and water all year and do you expect that to continue? Next year for the device's segment and then what's the M&A pipeline in light of the recent debt offering that you've done? How is that evolved in the past few months?

Speaker Change: So let me start with water. Water has certainly been performing above our expectations thus far in the year.

The terms have been really good. We set expectations for maybe a hundred million to a hundred million plus on the device's run rate. And you can look at the last three quarters. We're kind of running a bit above that.

I don't know that I would expect it to continue with that level as we get into the fourth quarter and for next year what we see is lead times are starting to normalize again after some extended period of constraints and supply channels on a supply chain's rather on a global basis.

Speaker Change: and as we start to reduce across the industry, that means that the amount of inventory that our customers are holding tends to pull back a little bit. So I do think the terms rate probably slows down over the coming quarters. But that doesn't mean the market is any way going backwards. It's more just the accordion effect that you get in the supply chain itself.

On the M&A front, I would say that very similar commentary to what we have mentioned in the past, where we're pleased with the position of our balance sheet that puts us in a...

and a good place to move when those opportunities present themselves. We're very active in the market, looking for those opportunities, what we are really...

and Seeking is something that will accelerate our outcomes growth rate. It's growing a bit faster than some of the other segments in the company, but we're really looking for ways to accelerate that even more, and that's where a lot of that acquisition attention is placed on our side. We want something that we'll add to our grid edge intelligence platform and something that really would be scalable across many, many customers. That's what we are looking for, and as those opportunities present themselves will obviously be sharing it with the market.

Perfect, that's all I have, thank you.

Speaker Change: Thanks to you.

Speaker Change: Thank you. Our next question coming from Delano, no, okay? No, okay, we're stopping. Hi, Markey, on this not open.

Speaker Change: All right, thanks very much for staying with questions. Tommy, you mentioned the launch of Great Edges Ventures.

You know, really a bundled, you know, solution, you know, for managing, you know, range of outcomes for the utilities. You know, we understand that that is not actually, kind of, commercially available broadly until December, but can you talk?

Speaker Change: and early stage about

the adoption of, you know, whether it's this solution or just more usage of.

Speaker Change: the DI network that is now kind of growing pretty rapidly. And what does that mean for how the mix within outcomes?

Speaker Change: in terms of revenue composition should evolve over, let's say, the next, you know, 12 to 18 months. Are we going to see, you know, more recurring revenue higher margin and just what is your visibility to that in collection?

Speaker Change: So, three different concepts that I think are important to pull out of the question that you ask. First and foremost, a great-edged intelligence as an offering.

Speaker Change: That is a very full-featured platform that allows you as the utility to have a lot of agility in your infrastructure. When you buy something, you put it in the ground, you can...

Use it as you need and perform a lot of different grid efficiency or consumer engagement kinds of applications through things like

Distributed Intelligence. At this point we've got more than 12 million grid-edge or DI capable and points that are in the field millions more and back-log millions of applications that are out there running for things like safety or things like distributed energy resource management out of the edge.

Speaker Change: That said, a lot of that fuel that equipment and much of what's in backlog is for larger utilities. Think large IOUs where they have a pretty robust capability inside to be able to take advantage of that. As we broaden that grid-edge intelligence capability and take it towards more mid-sized or meaningful kinds of customers,

The ability to say DI in a box is what great energy essentials is really all about. It packages up and points the network to head in software, the analytics, the DI capability, and it really makes it easy for you to living that doesn't have a massive IT department to be able to integrate into that overall offering. So it brought us out the opportunity for us as we think about serving more customers with this important capability. So that's what great energy essentials is really all about. Relative to market adoption. Again, we're super excited about what we see our customers doing, the pace of innovation.

He is there the idea of the spark in someone's eye about what they might be able to do to being able to prototype and put some applications out in the field is something measured in months rather than in quarters or years which is the typical innovation cycle. If you look in the years past for you tell me so, passive innovation grows and this becomes something that is a very robust part of our business in the years ahead. So I hope that sort of impacts and pulls together with three threads that you mentioned in your question.

It does come, but in the follow-up was really around the implications for mix, right? And the growth of recurring revenues within the outcome segment. How should we think about that?

and I'm going to talk about the next. I miss that one last quarter and what you saw in the second quarter was revenue that was a bit more tilted towards services and one time services. We definitely think that outcomes will bounce back and those targets we laid out for.

2027 to put the gross margin into the 40s kind of range is what we would expect to see. I still think it'll be a little bit lumpy-quartered, depending on the mix until the business gets a little bit more scale to it and a little bit more heft.

Speaker Change: But certainly we see it swing and back, more towards some of that sass and licensee types of revenue in the quarters ahead.

Great, just one quick poll for Joan, you know, Texas, again a good guy this quarter, not sure that relates to more release evaluation allowances, but can you help us frame out which is sort of be the normalized tax rate for the business going forward?

Yeah, I'd say probably about 25% would be a normalized rate. So yeah, this quarter, the 14 million or the 30 cents per share I alluded to, was the favorable, basically, a settlement in the farm tax, that pertain to many, many years ago, 2014 to 17. So yeah, we had some...

Some reserves on our books and once we settled the audit we were able to release those, so that was really an anomaly. But if you ignored the screech, which are hard to predict, I would say about 25%.

Speaker Change: Thanks very much.

Speaker Change: Thank you.

And our next question coming from the lineup Joseph O'Show with Goodtime Partners, you'll on his knelpin

Thank you for following on Noah's question a little bit. I'm wondering if you can.

Trying to give us a sense is to how, you know, discorders bookings and you know, this sort of full list of you know, additional billion dollars coming in at the end of the year. What the mix for that round the bookings looks like relative to the revenue that you're realizing now.

The booking themselves will be very heavily skewed towards networks and outcomes to be honest, that's similar to our backlog position that is as it is today, so that

4 billion of existing backlog is 90% plus networks and outcomes. And I would suspect that 4 quarter bookings looks a lot like that in terms of the mix.

Speaker Change: The outcomes portion of that portfolio is growing a little bit faster than that works in terms of third quarter revenue as an example that's also true in the bookings themselves. So, bookings rate for outcomes is quite a bit higher today than it was a year or two ago within the mix itself.

Speaker Change: What's underneath that is all the great-age intelligence platform and the associated software and services that go along with that. So it all flows from the types of offering discussion that I outlined earlier.

Now with that in mind, there's a possible as we actually get to 2026 and 2027 that.

Yeah, there's some kind of shorter term, you know, book and ship business and devices. You know, obviously can tell what I'm trying to figure out here in terms of what the revenue mix looks like or should we think of that?

Speaker Change: and the backwag is being represented more of the actual revenue. It's like look like in 2006.

Speaker Change: Yeah, I think that our devices business probably that, you know, hundreds million feel a bit above that on a run rate basis is the right zip code to begin, whereas the networks and the outcome side probably continues to grow more like they are the rates that we've talked about in our prepared remarks.

So I think that that would be a good way to think about the business itself. Devices tend to be a bit more turns-based than the other portions of our business. So a lot of that doesn't truly throw flow through the long-term backlog trends that we're talking about.

Speaker Change: and I would say you looked at the segment level targets that we provided for 2027 in the best of days. Those are still appropriate.

Okay, and then just quickly as a follow-up given, you've spoken, Joan, very clearly about the fact that you've stopped hitting bookings now, is not going to show up in 2025 revenue.

What would you say is the window for booking showing up in 2026 revenue? Can we think about traps anything that chose up by the first half of 25? Maybe making it to 26 revenue, I'm just trying to understand a little bit how to roll this booking string forward into 2627.

Yeah, I mean, obviously each deal a little bit different, but I think that what we've been assuming is sort of a nine to twelve month lag from the time you close the booking till when revenue starts to flow.

Speaker Change: Okay, thank you.

Thank you. Our next question coming from the line-up, Lafamocnaf with Raymond James Hill and his now open.

Yes, thanks for taking the question. If we look at outcomes, year over year growth, past two quarters is double-dentious, which is meaningfully...

You know, higher than probably the last kind of two straight years.

Are these one-off, or is there some kind of structural change in that segment that explains the double-dissued growth all of a sudden?

Speaker Change: Well, there's a number of factors inside of there. Remember that a lot of the outcomes revenue tends to be tilted towards recurring revenue. So it takes a little bit of time to show up and every time we do a booking, it adds a small slice on top of that. So as

We've mentioned on previous polls, but when networks got started to catch up on some of that.

Constrained Revenue due to components shortages in years going by. The outcomes revenue was going to follow. It's usually a bit of time from Fort Custivers to get the network up and running and then some of that outcomes revenue starts to flow in on top of it. And it's just following that normal trend that we've seen.

Speaker Change: So, it's maybe that 12 month lag between networks growing which yield is a dealphan scroll. That's what you see showing through in terms of outcomes.

Speaker Change: but it is largely tilted towards recurring revenue and we are excited about the quarters ahead in terms of where we think continue to grow that business, which is why in our 27 targets we've outweighed it as one of the faster growing segments.

Right. Follow up on outcomes as well. In the context of the kind of AI, euphoria, a lot of headlines recently about virtual power plants.

Can you talk about the role that I promised playing in virtual power plant development, which I guess would be within outcomes?

Correct. There are a lot of assets that are out at the edge of the grid, whether it is a battery, it's the thing you're garage or whether it is.

A rooftop solar, we're adding low control capabilities to existing assets, maybe something as simple as a pull-up.

Speaker Change: So, outcomes really has a lot of the software capability housed within it to be able to control the assets for the good of the grid and the optimization of what is going on. So, a DI app.

Speaker Change: to be able to pull charge out of the battery to be able to supply to the house and pull up some of the load of that house off the grid is a perfect example of a VPP, such a power plant kind of application that's going on in the...

Speaker Change: in the outcome segment.

Speaker Change: and several quarters ago we announced something called great edge optimizer which is really all about being able to utilize those edge assets to be able to balance applying demand out at the edge.

and those are very bright and growing opportunities for us as more and more local hotspots and constraints are showing up in our customers' grids.

and the way they're doing it is because of TV growth or whether it is.

and just more data centers in the area. You've got to figure out a way to balance supply and demand, where you don't quite have everything that you need and you can't afford to up-sized everything. You've got to make the assets you have in the field a bit more agile, which is exactly where outcomes comes to the scene and can help our customers.

Speaker Change: Got a thing for us.

Speaker Change: Thank you.

Thank you. Now next question coming from the line of us and Muller with Canada Continuity, you'll find us an open.

Hi, good morning, congrats on the quarter. Just my first question here, given the water demand needed for data centers, do you expect the increase in demand for electricity meters on the grid to a mirror water meters due to the data center demand for coal?

I think that electricity probably outpaces water growth on a global level. Water will continue to grow as an entire segment for us in the years ahead, but I think electricity outpaces that as there is a lot more that needs to be done on the electrical infrastructure side. So I think our growth aspirations are in both segments, but probably a bit more tilted towards.

Speaker Change: and the other water.

Okay, and just a follow-up, how much of the non-inflation index inventory still remains and did we get a significant reduction in that this quarter just in the reflection on the gross margin?

Yeah, I'll go back long today is a bit over 75% that is either reprised or indexed for the new environment we are operating in, that less than 25% is still left to flow through as at the end of Q3. Most of that remaining, call it 25% is, it will flow through within the next.

Speaker Change: 12 months. So we're almost through that.

through that period. As new backlog starts to come in and, certainly, we noted that we expect to be a bit more of a heavy booking score than that will add to the right side of that quagy equation for the quarters ahead. But call 7525 today.

Speaker Change: Thanks for the details.

Thank you. And as soon as I need to ask a question please press star one one. Our next question coming from the lineup, Scott Graham with C. Ford Research Partners, he won is now open.

Hey, good morning. Thanks for taking my questions.

I kind of wanted to go back to your mask on the, you know.

The soon or implied I should say, Kagger for revenue between 24 and 27, 2.5 to 5. I get it, I come up with that same number of course. What I'm wondering is, I thought I heard you say...

Speaker Change: 25 Down.

Did you mean growth down or revenue down?

I didn't say either, I don't believe. So what I was glad to first comment would be 2027 tournaments are still appropriate and that was...

A revenue range of 2.6 to 2.8 billion and we had the even a range of 15 to 17%. So at the time we did investor day, we anchored the charts off 23 actuals.

So to get to the 23 from the 23 actual to the 27 targets it was a revenue caver, 5 to 7%.

However, 24 is a lot stronger than 23 so if you take the updated annual guidance at the midpoint, you get the call it 2.5% is what's required going forward to get to the 27 targets.

and again all we were said is we don't expect that to be a straight line. So at this point it's too, it's premature to talk about 25, but I would expect some growth, but again I would caution people, you got to do the growth of a normalized 24 and you got to take 125 million out of our full year estimate, which was catch up one time in nature that won't recur.

Good. Yeah, that's thanks for that clarification. Very much appreciated. The other question I want to ask was kind of more for both you and Tom. So.

You know, when you provided your...

Speaker Change: Target's

Speaker Change: earlier this year.

I believe this moving billion dollar pipeline was only kind of thought of as let's say a couple maybe several hundred million and that has graduated greatly to this billion dollar number so it would suggest that your guidance did not contemplate that could you comment on that?

Yeah, I don't think that's the case. So what we're talking about with the billion is a delay in getting it through the funnel to call it a booking. It's not saying it's a billion higher than what we would have expected. So I don't think we see any change in terms of the market demand that would get us to the 27 targets that we laid out. The billion is a...

Speaker Change: Timing issue.

Speaker Change: in terms of regulatory approvals.

We started the years, they have booked a bill of one-to-one or greater that's still our belief today, but we know that okay with the first three quarters of this year, or whatever, point eight, point nine, something like that well, the level one to one, which means that there is a bit of a catch-up on the booking side in two form, which is what Joan referenced.

So it's more timing within the year on the bookings themselves rather than some fundamental shift or change in the marketplace.

Speaker Change: I understood, thank you for that clarification. If I could just sneak this one more in.

Speaker Change: John the non-gap.

Speaker Change: Incramental Operating Margin.

has been fairly steady in like the last six quarters in this sort of...

32, 35, last quarter, 41 rain, just in this sort of...

5 to 10% range. Are you comfortable with that on a GoFoad basis in the low 30s type thing?

Speaker Change: Yes, again, that's not in the position to talk 25 guys. What I would anchor you to is the 27 targets that we gave, which again, more operating income, but you can figure that out.

EBITDA, percentage of revenue of 15 to 17%. So from quarter to quarter, you're going to get some variability as an example. OPEX for us will kind of go up in Q4. We just did our customer and that made a lot of marketing spend in the one travel outside services. So it'll very quarter to quarter, but I think the targets we laid out for 27 are still appropriate.

Speaker Change: Thank you.

Thank you.

Speaker Change: And again, it's a reminder, if you'd like to ask a question, please press star 1 1.

Speaker Change: Now next question coming from the lineup tip more with what capital partners you want is not open.

Speaker Change: Good morning. Hey, thanks for taking the question.

Speaker Change: I guess I just wanted to do a clarification. I think you referenced Joan some poll for where it was some of that coming from 25, which would be a...

and Criminal Headwind. I think we understand the growth dynamics there, but maybe just expand on that.

Yeah, I mean, if you look at the revenue range we provided for two, three, if the midpointing was about $595 million, so we ended up $20 million higher than that. We did not.

Speaker Change: [inaudible]

Yeah, the dynamic there is as projects start to move generally they can accelerate a little bit once the installation crew is really hit their stride and things go a little faster and that's kind of what you saw in in two to three years It was nothing particularly overt. It was just the market to move it in the right direction for us

Perfect, yes, in that particular material. And maybe just by follow-up.

Speaker Change: on the outlook for Q4. I think that implies maybe that margins stepped down a bit, anything on product mix, or I think you just referenced some of the year endopics maybe Joan. But anything there to keep in mind and then.

So the Martin's trajectory, I guess next year with some of the growth dynamics, with what you're seeing in back blood. Thanks.

Yeah, so if I start on the top line, I would say, you know, again, the midpoint of our range is slightly down from Q3, called 10 million or so. Most of that is a really strong Q3 performance for devices. So as Tom mentioned, we typically think about devices is, well, maybe a little over 100 million a quarter, they were 120, 3 million in Q3. So really quite high.

on an EPS standpoint. You've got, obviously, to factor in.

The Pat Spendifit that was booked in Q3 so that's not going to recur in Q4 that's got to be 30 cents or so Just right there and then higher optics from a gross margin perspective, you know, maybe flat to slightly down We don't typically guide to gross margin but nothing in particular there. It is the

Speaker Change: Last quarter that were in the process of closing our two factories. So you have to get a little bit of lack of productivity as you're ramping from one factory to another and we factor that as well.

Perfect, very helpful, appreciate it.

Thank you.

and I'm showing you for the questions in the Q&A queue at this time. I will not end the call back over to Mr. Tom Deitrich by Nicholas and remarks.

Thank you, Olivia. We are pleased with our progress and certainly the performance of the team. You start to see the proof points and the strategy we play out and we are excited about the future and where the market has had. So look forward to updating everyone next quarter. Thank you for joining today.

Please find your own man that doesn't go on conference for today. Thank you for your participation, you may now disconnect.

Speaker Change: The

The National Anthem of the World.

Speaker Change: Music

Good day, thank you for spending by. Welcome to I-Trans 3rd Quarter, 2024 earnings release conference call. At this time, I'll be dispensed on in this annulimate.

After this biggest presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message by saying you're in a space.

Please note that today's conference is being recorded. I will now hand a conference of a two speaker host, Paul Vincent, Vice President of the Investorations, please go ahead.

Good morning and welcome to I-Trones 3rd Quarter 2024, Irvings Conference Call. Tom Deitrich, I-Trones President and Chief Executive Officer and Joan Hooper, Senior Vice President and Chief Financial Officer, will review I-Trones 3rd Quarter results and provide a general business update and outlook.

Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call and webcast replay information.

Speaker Change: A company today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab.

Following prepared remarks, the call will open for questions using the process the operator described.

Speaker Change: Before Tom begins a reminder that our earnings release and financial presentation include non-gap financial information that we believe enhances the overall understanding of our current and future performance.

Reconciliation to differences between gap and non-gap financial measures are available in our earnings release and on our investor relations website.

We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Speaker Change: Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and comments made during this conference call, as well as those presented in the risk factor section of our form 10k and other reports and highlights with the securities and exchange commission.

Paul Company comments, estimates, or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating in financial environment.

and materials discussed today October 31, 2020, may materialy change and we do not undertake any duty to update any of our forward-looking statements. Now, please turn to page four of our presentation as our CEO Tom Beatrich begins as remarks.

Tom Beatrich: Thank you, Paul. Good morning to everyone and thank you for joining our call.

Tom Beatrich: By Trump's third quarter results were ahead of our expectations and reflect another four of solid execution delivered by our team. The continued market demand fueled by growth and energy and water needs supports our substantial pipeline of opportunities for the future.

Financial highlights for the third quarter are shown on slide five and include revenue of $615 million. Adjusted to deduct of $89 million, non-gap earnings per share of $1.84 cents, pre-cast flow of $59 million.

Turning to slide six, our backlog at the end of third quarter was $4 billion, and booking during the quarter were $487 million.

Note where the bookings in the third quarter include Arkansas Valley Electric Cooperative selected I-Tron's Gen X Technology Platform through our distribution partner NRTC.

Arkansas Valley was one of the first Department of Energy's smart grid program awardees to complete negotiations with the DOE receiving a grant for their great intelligence and distribution automation project.

Tom Beatrich: Additionally, centerpoint energies working with IXON to offer the additional safety features of intelligence gas and points to commercial and industrial users.

Tom Beatrich: The enhanced safety capabilities include an integrated shut-off valve and pressure sensing.

with Edge Intelligence. This expansion further demonstrates centerpoints commitment to the safety of their users.

Finally, we've expanded our support of Duke Energy to include our latest great-edge and distributed intelligence capabilities for Durham's control.

This can increase the quarter-dairy ability in booking, spreading a given period. And calendar 2024 is no exception.

Tom Beatrich: We are pleased with the pace of the various regulatory and funding processes within the first month of this quarter of 424.

Tom Beatrich: As a result, we've been came conviction for a book to build ratio of 1 to 1 are greater for the full year.

Now, Joan, we'll provide details of our third quarter results and our fourth quarter outlook.

Joan: Thank you, Tom.

Please turn this slide seven for some reconstallidated gap results.

Third quarter revenue was 615 million increased 10% year of year and was stronger than expected.

The higher revenue was given by solid operational performance, as well as shipments of customer orders initially anticipated in the fourth quarter and early 2025.

Gross margin of 34.1% with 70 basis points higher than last year due to operational efficiencies.

Gatsman income of $78 million for a dollar-70 per dollar-to-chair prepares to $40 million, or $87 per dollar-to-lutature in the prior year.

Joan: The advancement was driven by higher levels of operating and interesting, from endless tax expense.

Joan: We're guarding non-get metric funs flighting.

9GAP operating income of 79 million increased 34% year a year.

A Jocity Buddha of 89 million was a record and increased 29% here over year.

Now I'm Gap, netting come for the quarter was $84 million or $84 per balloon to cheer versus $98 a year ago

Free cash flow was 59 million in Q3 versus 28 million in a year ago. The improvement reflects strong year over year earnings growth.

You're over your revenue growth by business segment as I'm flagged on.

The Vice Solutions revenue increased 10% out of constant currency bases, primarily driven by growth and smart water sales and elective demand.

Networks Solutions Revenue Group 8% year over year, driven by increased volume associated with new projects and ongoing deployments.

House comes revenue increase 16% on a constant currency basis. Primarily do the higher recurring revenue services and software.

Moving to the non-gap U of EUR EPS Bridge on slide 10, our Q3 non-gap U of EUR EAS for share of a dollar EAS for a per-deluted share was an all-time quarterly record and increased 86 cents year over year.

Pre-TAPS operating performance contributed 61 cents per share of your overyear improvement, driven by the fall through a higher revenue and growth profit, personally offset by higher operating expenses.

Third quarter tax expanse was reduced by 14 million due to the favorable resolution of a foreign tax audit resulting in higher net income and a 30 cent earnings per share increase.

Joan: Turning to Florida's 11th or 13, now review 2-3 segment results compared with the prior year.

Deitrich Solutions revenue was 123 million gross margin was 27.2% and operating margin was a record 21.6%.

Gross margin was up 290 basis points year over year and operating marginal was up 560 basis points.

Joan: Reflecting volume and operational efficiencies and effective cost management.

Network Solutions revenue was 417 million with gross margin of 35.9% and operating margin of 27.7%.

This quarter was another record level of revenue for this segment.

Joan: Gross margin increased 80 basis points year every year and operating margin was up 110 basis points driven by volume and operational efficiencies.

Outcomes revenue with 76 million with gross margin of 35% in operating margin of 14.7%.

Joan: Gloves margin decreased 360 basis points year of year and operating margin was down 110 basis points due to a lower margin revenue mix and increased services cost.

Turning to slide 14, I'll review liquidity and dead at the end of the third quarter.

told that was 1.265 billion and net debt was 282 million.

Joan: As of September 30, NetLeverage was 0.9 times in cash into equivalents for $983 million.

Now, please turn this slide 15 for our fourth quarter outlook.

We anticipate force quarter revenue to be between 600 to 610 million dollars. The midpoint of this ratings represents growth of 28 million or 5% year over year.

For non-gap on his brochure, we expect a range of $1 to $1 to $1 to the list chair, which assumes an effective tax rate of approximately 25%. At the midpoint, disemplay the decrease of 18 cents versus 2.4 last year.

24 of 2023 had an effective tax rate of just 8%.

When normalizing Q4 of last year to a 25% effective tax rate, this Q4 of 2024 outlook is an increase of 6 cents for 6% year or a year.

Now please turn this slide 16 for an update to our annual 2020 4-hour outlook incorporating this Q4 update. We now anticipate 2024 full-year revenue to be within a range of 2.4 to 8 billion to 2.438 billion.

At the midpoint, this represents an increase of 12% versus 2023 and 1% from our prior 2024 annual guides.

Contended customer demand, strong operational execution, and the time-meat of customer shipment is driving our higher 2021 revenue expectations.

Joan: Bernie's will also be positively impacted by the false real-time and higher revenue.

Our non-gap earnings per share of full-year outland grain is $5.28 to $5.38 per diluted share. At the midpoint, the updated non-gap EPS estimate is up 59% versus 2023 and 17% versus prior guidance.

Joan: Although we are not ready to provide formal 2025 financial guidance at this time, the combination of 2024 performance being consistently ahead of expectations, a normalizing operating environment and very back in loaded 2024 bookings.

Joan: Make it reasonable to assume a lower revenue growth profile for 2025.

We remain committed to the 2027 financial targets provided at this year's March Investor Day. Now, we'll turn the call back to Tom.

Thank you, Joan.

Operational momentum and efficiency games continue to accrue during the third quarter and while we expect growth rates to normalize in the coming quarters, the larger trends are clear.

Customer demand is growing. Our broad portfolio of innovative products and services gives us confidence that our strategic direction is well placed and the twenty twenty seven financial targets remain appropriate.

Before opening the line for Q&A, there are a few non-financial highlights of no. We recently held ITRO's annual Inspire Customer Event with a power of data and great-edged intelligence with unfolded display.

Joan: It is clear from the depth of interaction with utility executives, ecosystem partners, and other influential industry leaders that we have the necessary motivation and thought leadership across our industry to resolve the most complex and pressing energy and want to resource challenges facing us today.

Significantly, the nature of the discussions has shifted from what to do to how to get it done. This is encouraging and will serve to accelerate the pace of the industry.

During the conference, we announced our grid-edge essentials offering. Grid-edge essential solution dramatically simplifies the process for our utility customers to adopt new advanced technologies, accelerating the time to value.

Joan: Also in conjunction with Inspire, we released our Resource Wellness Report, which explored artificial intelligence and machine learning trends within the utility industry.

The key findings of the research include that 82% of the utility executives report active AI projects.

AI and ML already helping utilities optimize asset utilization, advancing sustainability progress, and enhancing consumer engagement.

and perhaps, unsurprisingly, reflective of broader considerations related to AI adoption. 43% of utilities cited the lack of expertise as a current barrier to greater AI adoption.

AI and ML are focused areas for the utility industry.

which places even greater value on thoughtful approaches to data capture, analytics and agile infrastructure. The report is available for download at iTron.com and I encourage everyone to review the findings.

Thank you for joining our call today. Operator, please open the line for some questions.

Thank you. Please enjoy them and ask a question you made the best star one one on your telephone and wait for your name to be announced. To enjoy a question simply for a star one one again. Please then I will be compiled a can of Oscar.

of First Question Coming From The Line of Van Kalle with Daredevil on his novel.

Hey guys, congratulations for the corner. Joe, I just want to clarify what you talked about next year. There will be growth next year, it's just not the same level of growth.

We are obviously not in a position to give 25 guys yet but I wanted to make sure people remember a couple of things one is

Joan: We had 125 million of ketchup revenue in 24 so it'd be careful that you grow on a normalized 2024 and the fact that the bookings are so back and loaded is another factor so really no different than what I've said on previous calls

Joan: If you look at the compounding growth from the current 24 estimates to get to the 27 targets, it's only two and a half to five percent growth.

because 24 was so much higher than we expected. So, you know, just be careful with the growth rates we never expected a linear from 23 to 27.

Thank you for that. The next question is just kind of behind the bookings that you expected in this quarter.

and you know, Geals out there, but you know, to continue to kind of strengthen that you guys have, you know, going on for the last, you know, a couple quarters or years.

Joan: Thank you.

Tom Beatrich: Thanks Ben Tom here.

Tom Beatrich: V-M.

Markett remains extremely constructive that needs of utilities to deal with things like climate disruption or increasing demand or doing a better job managing water, gas safety, all of those trends are alive and well and I think we're well positioned to be able to take advantage of that.

We are definitely seeing progress on the regulatory and funding front. Last quarter I referenced something like a billion dollars of pending awards.

Joan: that were in process. We definitely have seen progress. I would say well over 50% probably closer to 75% of that regulatory process is now behind us and that's really what is underlying the under one for the full year on a book to build basis that I referenced in the prepare remarks.

So feeling good about the overall market on a global level, the commentary I just gave was largely around the Americas, but Europe has at least through two, three continued to perform a little bit ahead of the expectations and you saw that in our third quarter results.

Speaker Change: Thank you guys.

Speaker Change: Thank you.

My next question coming from the liner, Jack Ospon with T-Dico and here on his novel.

Speaker Change: Thank you. Maybe just to follow up on that last point, Tom. If I heard you write, you mentioned bookings were strong in October and then you said 50 to 75% of the billion came in after the quarter. Is that the way you were trying to...

Couch that for fourth quarter. Well...

Not quite your close, but the Billy and that I referenced last time, we've seen progress on the regulatory front. It's quite too much to the point that we registered as a booking yet, but certainly we expect to achieve the one to one for the year on a boat to bill ratio. So feeling good about the progress and I wanted to give that color just to give people

I'm a little bit of context as to what we see behind the curtain and why we remain pretty excited about the market opportunity ahead.

And just to be clear, is the regulatory front you're referring to both federal and state if it's requires both, just given that there was federal awards from the group program.

Yes, it's the combination of the two. Again, those bookings are primarily the Americas, but there's some international things that have government funding activities associated with it, and it's lumped into the commentary we gave.

and then just you other quick ones. Can you just how in retrospect would you frame the strength and water all year and you expect that to continue next year for the device's segment. And then what's the M&A pipeline in light of the recent debt offering that you've done and how is that evolved in the past few months?

So let me start with water. Water has certainly been performing above our expectations thus far in the year that the turns have been really good. We set expectations for maybe a hundred million to a hundred million plus on the devices run rate and you can look at the last three quarters. We're kind of running a bit above that.

Speaker Change: I do know that I would expect to continue with that level.

Speaker Change: at as we get into the fourth quarter and for next year. What we see is lead times are starting to normalize again after some extended period of constraints in supply channels on a supply chain's rather on a global basis.

and as we start to reduce across the industry, that means that the amount of inventory that our customers are holding tends to pull back a little bit. So I do think the terms rate probably slows down over the coming quarters. But that doesn't mean the market is any way going backwards. It's more just the accordion effect that you get in the supply chain itself.

On the M&A front, I would say that very similar commentary to what we have mentioned in the past, where we're pleased with the position of our balance sheet that puts us in a...

Speaker Change: and a good place to move when those opportunities present themselves. We're very active in the market, looking for those opportunities, what we are really seeking is something that will accelerate our outcomes growth rate. It's growing a bit faster than some of the other segments in the company, but we're really looking for ways to accelerate that even more, and that's where a lot of that

Speaker Change: Acquisition attention is placed on our side. We want something that will add to our grid-edge intelligence platform and something that really would be scalable across many, many customers. That's what we are looking for. And as those opportunities present themselves will obviously be sharing it with the market.

Speaker Change: Perfect, that's all I have, thank you.

Speaker Change: Thanks, Joe.

Speaker Change: Thank you. Our next question coming from Delina, no, okay, no, okay, we're stopping. Hi, Marihuana is not open.

Alright, thanks very much for taking the questions. You know, Tommy, you mentioned that the launch of grid edge essentials...

You know, really a bundled solution for managing, you know, range of outcomes for the utilities. You know, we understand that that is not actually kind of commercially available broadly until December but can you talk?

and early stage about the adoption of, you know, whether it's this solution or just more usage of.

The DI network that is now kind of growing pretty rapidly. And what does that mean for how the mix within outcomes, in terms of revenue composition should evolve over, let's say, the next 12 to 18 months? Are we going to see more recurring revenue?

Speaker Change: Higher March and just what is your visibility to that in collection.

So, three different concepts that I think are important to pull out of the question that you ask. First and foremost, a great-edged intelligence as an offering.

That is a very full-featured platform that allows you to have a lot of agility in your infrastructure. When you buy something, you put it in the ground, you can...

Use it as you need and perform a lot of different grid efficiency or consumer engagement kinds of applications through things like.

Distributed Intelligence. At this point, we've got more than 12 million grid-edge or DI capable at an endpoints that are in the field millions more and back-long millions of applications that are out there running for things like safety or things like distributed energy resource management out of the edge.

That said, a lot of that field is equipment and much of what's in backlog is for larger utilities Think large IO use where they have a pretty robust capability inside to be able to take advantage of that As we broaden that great-engined intelligence capability and take it towards more mid-sized or meaningful out kinds of customers

The ability to say DI in a box is what create any essentials is really all about. It packages up to endpoints, and that we're the head-end software, the analytics, the DI capability, and it really makes it easy for utility that doesn't have a massive IT department to be able to integrate into that overall offering. So it brought us the opportunity for us as we think about serving more customers with this important capability. So that's what great-injust essentials is really all about. Relative to market adoption, again, we're super excited about what we see our customers doing, the pace of innovation.

is there the idea of the spark in someone's eye about what they might be able to do to being able to prototype and put some applications out in the field is something measured in months rather than in quarters or years which is the typical innovation cycle. If you look in the years past for your tell-in-ease, so pace of innovation grows and this becomes something that is a very robust part of our business in the years ahead. So I hope that sort of impacts and pulls together with three threads that you mentioned in your question.

Speaker Change: It does come, but in the follow-up was really around the implications for mix, right? And the growth of recurring revenues within the outcome segment. How should we think about that?

and I miss that one. I miss that one. I'll come certainly last quarter in what you saw in even in second quarter was revenue that was a bit more tilted towards services and one time services. We definitely think that outcomes will bounce back and those targets we laid out for.

2020, seven to put the gross margin into the four of these kind of ranges is what we would expect to see. I still think it'll be a little bit lumpy-quarter to quarter depending on the mix until the business gets a little bit more.

Scale to it and a little bit more heft. But certainly we see it swing and back more towards some of that sass and licensee types of revenue in the quarters ahead.

Speaker Change: Great, just one quick follow-up for Joan, you know, Texas, again a good guy this quarter, not sure that relates to more release of evaluation allowances, but can you help us frame out which is sort of be the normalized tax rate for the business going forward?

Speaker Change: Yeah, I'd say probably about 25% would be a normalized rate. So yeah, this quarter, the 14 million or the 30 cents per share I alluded to, was the favorable, basically, a settlement in the farm tax, that pertain to many, many years ago, 2014 to 17. So yeah, we had some,

Speaker Change: Some reserves on our books and once we settled the audit we were able to release those, so that was really an anomaly. But if you ignored the screens, which are hard to predict, I would say about 25%.

Thanks very much.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the lineup Joseph O'Show with Gukutheim partners, Elon is now open.

Thank you for following on Noah's question a little bit. I'm wondering if you can try and give us a sense as to how this quarter's bookings and this sort of bowless of additional $1 billion coming in at the end of the year. What the mix for that round of bookings looks like relative to the revenue that you're realizing now?

The booking themselves will be very heavily skewed towards networks and outcomes to be honest. That's similar to our backlog position that is as it is today so that...

4 billion of existing backlog is 90% plus networks and outcomes and I would suspect that fourth quarter bookings looks a lot like that in terms of the next.

The outcomes portion of that portfolio is growing a little bit faster than that works in terms of third quarter revenue as an example that's also true in the bookings themselves. So, bookings rate for outcomes is quite a bit higher today than it was a year or two ago within the mix itself.

Now, with that in mind, as it possible as we actually get to 2026 and 2027 that...

Yeah, there's some kind of shorter term, you know, book and ship business and devices, you know, obviously can tell what I'm trying to figure out here in terms of what the revenue mix looks like or should we take of that backlog is being represented more of, you know, the actual, you know, what the actual revenue mix might look like in 2006.

Yeah, I think that our devices business probably that, you know, 100 million people bit above that on a run rate basis is the right zip code to be in Where as the networks in the outcome side, probably continues to grow more like they are the rates that we've talked about in our prepared remarks.

and I would say you looked at the segment level targets that we provided for 2027 in New Vester Day. Those are still appropriate.

Speaker Change: Okay, and then just quickly as a follow-up given, you've spoken, Joan, very clear about the fact that you've stuffed hitting bookings now is not going to show up in 2025 revenue.

What would you say in the window for booking showing up in 2026 revenue? Can we think about perhaps anything that shows up by the first half of 25? Maybe making it to 26 revenue, I'm just trying to understand a little bit how to roll this booking string forward into 2627.

Speaker Change: Yeah, I mean, obviously each deal a little bit different, but I think that what we've been assuming is sort of a nine to twelve month lag From the time you close a booking till when revenue starts to flow

Speaker Change: Okay, thank you.

Thank you. Our next question coming from the line-up, Laformocnaf with Raymond James Hill on his novel.

Yes, thanks for taking the question. If we look at outcomes, your over-year growth past two quarters is double digits, which is meaningfully...

The higher than probably the last kind of two straight years.

Are these one-off or is there some kind of structural change in that segment that explains the double-dissued growth all of a sudden?

Well, I mean, there's a number of factors inside of there. Remember that a lot of the outcomes revenue tends to be tilted towards recurring revenues. So it takes a little bit of time to show up and every time we do a booking, it adds a small slice on top of that. So as you know, as you know.

We've mentioned on previous polls, but when networks got started to catch up on some of that.

Constrained revenue due to components shortages in years going by, the Outcomes Revenue was going to follow. It's usually a bit of time from Fort Custivers to get the network up and running and then some of that Outcomes Revenue starts to flow in on top of it. And it's just following that normal trend that we've seen.

So, it's maybe that 12 month lag between networks growing, which yield is the help and scope. That's what you see showing through in terms of outcomes.

but it is largely tilted towards recurring revenue and we are excited about the quarters ahead in terms of where we think continued to grow that business which is why in our 27 targets we've outlined it as one of the faster growing segments.

right, follow up on outcomes as well. In the context of the kind of AI, euphoria, a lot of headlines recently about virtual power plants.

Speaker Change: Can you talk about the role that I promised playing in virtual power plant development, which I guess would be within outcomes?

Correct. There are a lot of assets that are out at the edge of the grid, whether it is a battery that's the senior garage or whether it is.

A rooftop solar, or adding low control capabilities to existing assets, maybe something as simple as a pull pump.

So, the outcomes really has a lot of the software capability housed within it to be able to control the datasets for the good of the grid and the optimization of what is going on. So, a DI app.

to be able to pull charge out of the battery to be able to supply to the house and pull on some of the load of that house off the grid. Is there perfect example of a VPP virtual power plant kind of application that's going on in the...

in the outcome segment. Several quarters ago we announced something called great edge optimizer, which is really all about being able to utilize those edge assets to be able to balance applying demand out at the edge.

Speaker Change: and those are very great in growing opportunities for us as more and more local hotspots and constraints are showing up in our customers' grids.

and the way there is because of TV growth or whether it is.

and just more data centers in the area. You've got to figure out a way to balance supply and demand, what you don't quite have everything that you need and you can't afford to upsize everything. You've got to make the assets you have in the field a bit more agile, which is exactly where outcomes comes to the scene and can help our customers.

Got a thing for us.

Speaker Change: Thank you.

Thank you. Now next question coming from the line of Asson Muller with Santa Cocheneo, the E-Line is now open.

Hi, good morning, congrats on the quarter. Just my first question here, given the water demand needed for data centers, do you expect to increase in demand for electricity meters on the grid to a mirror water meters due to the data center demand for coal?

I think that electricity probably outpaces water growth on a global level water will continue to grow as an entire segment for us in the years ahead, but I think electricity outpaces that.

Speaker Change: as there is a lot more that needs to be done on the electrical infrastructure side. So I think our growth aspirations are in both segments that probably have been more tilted towards electricity over water.

Okay, and just to follow up, how much of the non-inflation index inventory still remains and did we get a significant reduction in that this quarter just in the reflection on the gross margin?

12 months. So we're almost through that period. As new backlog starts to come in and certainly we noted that we expect to be more of a heavy booking score than that. That'll add to the right set of that quaged equation for the quarters ahead. But call 7525 today.

Speaker Change: Thanks for the details

Thank you.

and as so, my new to ask a question please rest are one one. Our next question coming from the lineup Scott Graham with C. Ford research partners he on is now open.

Hey, good morning. Thanks for taking my questions.

I kind of wanted to go back to your mask on the, you know.

Assumed or implied, I should say, Kagger for revenue between 24 and 27, 2.5 to 5. I get, I come up with that same number, of course. What I'm wondering is, I thought I heard you say...

Speaker Change: 25 down.

because you mean growth down or revenue down.

I didn't say either I don't believe so what I was debating to is first comment would be 2027 tournaments are still appropriate and that was...

Speaker Change: A revenue range of 2.6 to 2.8 billion and we had the even a range of 15 to 17%. So at the time we did investor day, we anchored the charts off 23 actualals.

Speaker Change: So to get to the 23, from the 23, actually to the 27 targets, it was a revenue caver, a 5 to 7%.

However, 24 is a lot stronger than 23 so if you take the updated annual guidance at the midpoint you get the call it two and a half to five percent is what's required going forward to get to the 27 targets.

and again all we were said is we don't expect that to be a straight line. So at this point it's too, it's premature to talk about 25, but I would expect some growth. But again I would caution people, you got to do the growth of a normalized 24. You got to take 125 million out of our full year estimate, which was ketchup one time in nature that won't recur.

Thank you for that clarification, very much appreciated. The other question I want to ask is kind of more for both you and Tom.

You know when you provided your...

Speaker Change: Target's

Speaker Change: For earlier this year.

I believe this moving billion dollar pipeline was only kind of thought of as let's say a couple maybe several hundred million and that has graduated greatly to this billion dollar number. So it would suggest that your guidance did not contemplate that could you comment on that?

Speaker Change: Yeah, I don't think that's the case. So what we're talking about with the billion is a delay in getting it through the funnel to call it a booking. It's not saying it's a billion higher than what we would have expected. So I don't think we see any change in terms of the market demand that would get us to the 27 targets that we laid out. The billion is a...

timing to shoot.

in terms of regulatory approval.

We started the years thing, and both of them one to one are greater, that's still our belief today. But we know that, okay, with the first three quarters of this year, or whatever, point eight point nine, something like that, well, the level one to one, which means that there is a bit of a catch-up on the booking side in two form, which is what Joan referenced.

So it's more timing within the year on the bookings themselves rather than some fundamental shift or change in the marketplace.

I understood, thank you for that clarification. If I could just sneak this one more in.

John the non-gap.

Speaker Change: Incramental Operating Margin.

has been fairly steady in like the last six quarters in this sort of...

32, 35, last quarter, 41, rain, just in this sort of...

Speaker Change: 5 to 10% range. Are you comfortable with that on a GoFoad basis in the low 30s type thing?

Speaker Change: Again, not in the position to talk 25 guys. What I would anchor you to is the 27 targets that we gave, which again, more operating income, but you can figure that out. Even a percentage of revenue of 15 to 17%. So from quarter to quarter, you're going to get some variability. As an example, optics for us will kind of go up in Q4, we just did our customer and that we had a lot of marketing spend in the one travel outside services. So it'll vary quarter to quarter, but I think the targets we laid out for 27 are still appropriate.

Speaker Change: Thank you.

And again, a thorough minor. If you'd like to ask a question, please press star 1 1.

Now next question coming from the lineup to more with what capital partners you'll have to listen to this often.

Speaker Change: Good morning. Hey, thanks for taking the question.

I guess I just wanted to do a clarification. I think you referenced you own some pole forward with some of that coming from 25 which would be a...

and Criminal Headwind. I think we understand the growth and annex there, but maybe just expand on that.

Yeah, I mean, if you look at the revenue range, we provided for 2,3, if the midpointing was about 595 million, so we ended up 20 million higher than that. We did not try to lowball our guidance when we gave you that number. So obviously we work with customers in terms of one main launch of shipment and some shipments that we would have expected to be Q4 or early 25, actually occurred in Q3, so that's all you're trying to point out.

Speaker Change: Yeah, what the dynamic there is as as project start to move generally they can they can accelerate a little bit once an installation cruise really hit their stride and things go a little faster and that kind of what you saw in in two to three years it was nothing particularly overt it was just the market to move in the right direction for us.

Perfect, yes, and not particularly material. And maybe just by follow up.

Speaker Change: on the outlook for Q4. I think that implies maybe that margins stepped down a bit, anything on product mix, or I think you just referenced some of the year endothacks maybe Joan. But anything there to keep in mind and then.

Speaker Change: So the Martin's trajectory, I guess next year with some of the growth dynamics, with what you're seeing in back blood. Thanks.

Yes, so if I start on the top line, I would say, you know, again, the midpoint of our range is slightly down from Q3, called 10 million or so. Most of that is a really strong Q3 performance for devices. So, as Tom mentioned, we typically think about devices is, well, maybe a little over 100 million a quarter, they were 120, 3 million in Q3, so really quite high.

on an EPS standpoint you've got obviously to factor in.

The Pat Spentified that was booked in Q3 so that's not going to recur in Q4 that's got to be 30 cents or so Just right there and then higher optics from a gross margin perspective, you know, maybe flat to slightly down. We don't typically guy and the gross margin but nothing in particular there. It is the

Perfect, very helpful, appreciate it.

Speaker Change: Thank you.

and I'm showing you over the questions in the Q&A queue at this time. I will now attend a call back over to Mr. Tom Deitrich by Nikolay Singh remarks.

Thank you, Lydia. We are pleased with our progress and certainly the performance of the team. You start to see the proof points and the strategy we play out and we are excited about the future and where the market has had. So look forward to updating everyone next quarter. Thank you for joining today.

Please sign your own and our thoughts on the conference for today. Thank you for your participation, you may now disconnect.

Speaker Change: [inaudible]

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