Q1 2025 Itron Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to ITRON's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.
Good day, and thank you for standing by.
Speaker Change: <unk> first quarter 2025 earnings conference call at this time, all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded.
Speaker Change: The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising you Hannah suite.
Speaker Change: Note that today's conference is being recorded.
Paul Vincent: I will now hand the conference over to your speaker host, Paul Vincent, Vice President of Mass Relations. Please go ahead.
Paul Vincent: I'll now hand, the conference over to your Speaker host Paul Vincent Vice President of Gratulation. Please go ahead.
Tom Dietrich: Good morning, and welcome to ITRON's first quarter 2025 earnings conference call.
Speaker Change: Good morning, and welcome to <unk> first quarter 2025 earnings Conference call.
Tom Dietrich: Tom Dietrich, ITRON's President and Chief Executive Officer, and Joan Hooper, Senior Vice President and Chief Financial Officer, will review ITRON's first quarter results and provide a general business update and outline. Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call and webcast replay. Accompanying 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: Tom Roderick icons, President and Chief Executive Officer, Joan Hooper, Senior Vice President and Chief Financial Officer will review <unk> first quarter results and provide a general business update and outlook.
Speaker Change: Earlier today, the company issued a press release announcing its results.
Speaker Change: <unk> also includes details relating to the conference call and webcast replay information.
Speaker Change: Accompanying today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab.
Speaker Change: Following prepared remarks, the call will open for questions using the process. The operator described.
Tom Dietrich: Before Tom begins, a reminder that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of Differences Between Gap and Non-Gap Nature. are available in our earnings release and on our investor relations website. We will be making statements during this call that are forward. These statements are based on current expectations and assumptions that are subject to risks and uncertainty. 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 10-K and other reports and filings with the securities and exchange .
Speaker Change: Before Tom begins a reminder, that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance.
Speaker Change: Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our Investor Relations website.
Speaker Change: We will be making statements. During this call that are forward looking.
Speaker Change: 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 factors section of our Form 10-K, and other reports and filings with the Securities and Exchange Commission.
Tom Dietrich: All company comments, estimates, or forward-looking statements are made in a good-faith attempt to provide appropriate insight to our current and future operating and financial environment.
Speaker Change: All company comments estimates or forward looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating and financial environment.
Tom Dietrich: Materials discussed today, May 1st, 2025, may materially change, and we do not undertake any duty to update any of our forward-looking statements.
Speaker Change: Materials discussed today.
Speaker Change: May one 2025 may materially change and we do not undertake any duty to update any of our forward looking statements.
Tom Dietrich: Now please turn to page 4 of our presentation as our CEO, Tom Dietrich, begins his remarks. Thank you, Paul. Good morning, and thank you for joining our call. Itron performed well during the first quarter, a favorable product mix and continued strong execution supported margin expansion and earnings growth ahead of expectation. The team is focused on the execution of our strategy, and the results from the past quarter further demonstrate its effectiveness. Financial highlights for the first quarter are detailed on slide four and include Revenue of $607 million. Adjusted EBITDA of $88 million. Non-GAAP earnings per share of $1.52.
Speaker Change: Now please turn to page four of our presentation as our CEO, Tom Dietrich begins his remarks.
Tom Dietrich: Thank you Paul Good morning, and thank you for joining our call.
Tom Dietrich: <unk> performed well during the first quarter and favorable product mix and continued strong execution supported margin expansion and earnings growth ahead of expectations.
Tom Dietrich: <unk> is focused on the execution of our strategy and the results from the past quarter further demonstrate its effectiveness.
Tom Dietrich: Financial highlights for the first quarter are detailed on slide four and include.
Tom Dietrich: Revenue of $607 million adjusted EBITDA of $88 million.
Tom Dietrich: non-GAAP earnings per share of $1 52.
Tom Dietrich: free cash flow of $67 million. Turning to slide five, the record gross margin and strong earnings growth were driven by our disciplined manufacturing and the ability to meet our customers' core needs for robust solutions for their mission-critical operating challenge. Customer demand for our solutions is driven by the breadth of our offerings, particularly customer adoption of ITRON's great edge intelligence platform. Our customers are benefiting from increased distribution capacity, improved infrastructure agility, and enhanced reliability of successful scale deployment. Turning to slide six, bookings in the first quarter of $530 million were in line with our expectations and equate to a book-to-bill of 0.921 for the quarter.
Tom Dietrich: Free cash flow of $57 million.
Tom Dietrich: Turning to slide five the record gross margin and strong earnings growth were driven by our disciplined manufacturing and the ability to meet our customers' core needs for robust solutions for their mission critical operating challenges.
Tom Dietrich: Customer demand for our solutions is driven by the breadth of our offerings, particularly customer adoption of iphones grid edge intelligence platform.
Tom Dietrich: Our customers are benefiting from increased distribution capacity improved infrastructure agility and enhanced reliability of successful scale deployments.
Tom Dietrich: Turning to slide six bookings in the first quarter of $530 million were in line with our expectations and equates to a book to Bill of <unk> nine to one for the quarter.
Tom Dietrich: This is an increase of $169 million when compared to last year, and as a result, our $4.7 billion backlog at quarter end remained near record level. The network solutions and outcome segments continue to dominate our bookings, representing over 95% of our total backlog. Deployment of distributed intelligence solutions also continued during the quarter, and by quarter end, we have shipped 14.4 million distributed intelligence-capable endpoints, with another 10-plus million in backlog. Some of the key bookings for the quarter include a major project with longtime customer First Energy, which will expand infrastructure to detect and locate outages more quickly and enhance data management solutions.
Tom Dietrich: This is an increase of $169 million when compared to last year and as a result, our $4 $7 billion backlog at quarter end remained near record levels.
Tom Dietrich: The network solutions and outcomes segments continue to dominate our bookings representing over 95% of our total backlog.
Tom Dietrich: Deployment of distributed intelligence solutions also continued during the quarter and by quarter end, we have shipped $14 4 million distributed intelligence capable endpoints with another 10 plus million in backlog.
Tom Dietrich: Some of the key bookings for the quarter include a major project with longtime customer Firstenergy, which will expand infrastructure to detect and locate outages more quickly and enhanced data management solutions.
Tom Dietrich: These improvements will provide consumers with more detailed information, enabling them to better understand and control their energy usage. Itron will support a great modernization project for Public Service Company of New Mexico, the state's largest electricity provider. This project will deliver several benefits, including distributed intelligence capabilities to enhance efficiency, reliability, resilience, and security of P&M's operations. It will also enable real-time energy usage information for consumers and improve the integration of distributed energy resources.
Tom Dietrich: These improvements will provide consumers with more detailed information, enabling them to better understand and control their energy usage.
Tom Dietrich: <unk> will support a grid modernization project for public service company of New Mexico, the state's largest electricity provider.
Tom Dietrich: This project will deliver several benefits, including distributed intelligence capabilities to enhance efficiency reliability resiliency and security of Pnm's operation.
Tom Dietrich: It will also enable real time energy usage information for consumers and improve the integration of distributed energy resources.
Tom Dietrich: Before I turn the call over to Joan to cover the financials, I want to briefly discuss the tariff landscape from both a demand and bottom line perspective. For demand, we have not seen a change in customer behavior to this point. While we are mindful that prolonged uncertainty could ultimately impact demand, our customers currently remain focused on addressing the critical needs in the management of energy and water. With respect to the bottom line, our regional supply strategy is serving us well. A great majority of our global manufacturing is done regionally, for instance, in South Carolina for the United States.
Speaker Change: Before I turn the call over to Joe to cover the financials I want to briefly discuss the tariff landscape from both a demand and bottom line perspective.
Speaker Change: For demand, we have not seen a change in customer behavior to this point.
Speaker Change: While we are mindful that prolonged uncertainty could ultimately impact demand our customers currently remain focused on addressing the critical needs in the management of energy and water.
Speaker Change: With respect to the bottom line, our regional supply strategy is serving us well the great majority of our global manufacturing is done regionally for instance, in South Carolina for the United States.
Tom Dietrich: However, we do import components from global sources, with Mexico being the largest country of origin for components used in U.S. products. Our Mexico imports are generally USMCA compliant and currently not subject to tariff. The EBITDA impact for the year under the current tariff protocol is estimated to be approximately $15 million net of mitigation measures such as alternate sourcing and pricing adjustments. It is important to note that the tariff environment is extremely dynamic, and the current estimate may change. Despite this fluid environment, we remain balanced and well positioned to drive our business forward.
Speaker Change: However, we do import components from global sources with Mexico being the largest country of origin for components used in U S products are.
Speaker Change: Our Mexico imports are generally U S MCA complaint and currently not subject to tariffs the.
Speaker Change: The EBITDA impact for the year under the current tariff protocol is estimated to be approximately $15 million net of mitigation measures such as alternate sourcing and pricing adjustments.
Speaker Change: It is important to note that the tariff environment is extremely dynamic and the current estimates may change.
Speaker Change: Spite this fluid environment, we remain balanced and well positioned to drive our business forward.
Joan Hooper: Now Joan will provide details for our first quarter and our outlook for the second quarter.
Speaker Change: Now John will provide details for our first quarter and our outlook for the second quarter.
Joan Hooper: Thank you, Tom.
Joan Hooper: Please turn to slide 7 for a summary of consolidated GAP results. First quarter revenue of $607 million increased 1% year over year. Recall that Q1 of 2024 included a significant amount of previously supply-constrained revenue. Gross margin of 35.8% was a quarterly record and was 180 basis points higher than last year due to a favorable product mix and operational efficiency. gap net income of $65 million or $1.42 per diluted share compared to $52 million or $1.12 per share in the prior year. The improvement was driven by higher levels of operating and interest income, partially offset by higher taxes.
John: Thank you Tom Please turn to slide seven for a summary of consolidated GAAP results.
John: First quarter revenue of $607 million increased 1% year over year.
John: Recall that Q1 of 2024 included a significant amount of previously supply constrained revenue.
John: Gross margin of 35, 8% was a quarterly record and was 180 basis points higher than last year due to a favorable product mix and operational efficiencies.
John: GAAP net income of $65 million or $1 42 per diluted share compared to $52 million or $1 12 per share in the prior year.
John: The improvement was driven by higher levels of operating and interest income, partially offset by higher tax expense.
Joan Hooper: Regarding non-GAAP metrics on slide eight, non-GAAP operating income of $80 million increased 19% year over year. adjusted EBITDA of $88 million increased 15% and our EBITDA margin of 14.5% was a company record. Non-GAAP net income for the quarter was $70 million or $1.52 per diluted share versus $1.24 a year ago. The pre-cash flow was $67 million in Q1 versus $34 million a year ago. This improvement reflects strong year-over-year operational earnings growth, increased interest income, and improved working cap.
John: Regarding non-GAAP metrics on slide eight non-GAAP operating income of $80 million increased 19% year over year adjusted.
John: Adjusted EBITDA of $88 million increased 15% and our EBITDA margin of 14, 5% was a company record.
John: non-GAAP net income for the quarter was $70 million or $1 52 per diluted share versus $1 24, a year ago.
John: Free cash flow was $67 million in Q1 versus $34 million a year ago. This improvement reflects strong year over year operational earnings growth increased interest income and improved working capital.
Joan Hooper: Year-over-year revenue growth by business segment is on slide nine. Device solutions revenue was down 1% year-over-year, but up 2% on a constant currency basis. Network solutions revenue decreased 1% year-over-year, primarily due to a higher-than-normal Q1 2024 level, which included the catch-up of previously constrained revenue. Outcomes revenue grew 14% year-over-year, driven by increased recurring revenue and software licensing.
John: Year over year revenue growth by business segment on slide nine device solutions revenue was down 1% year over year, but up 2% on a constant currency basis network solutions revenue decreased 1% year over year, primarily due to a higher than normal Q1, 2024 level, which included the catch up of previously.
John: Constrained revenue.
John: Outcomes revenue grew 14% year over year, driven by increased recurring revenue and software licenses.
Joan Hooper: Moving to the non-GAAP year-over-year EPS bridge on slide 10. Our Q1 non-GAAP EPS of $1.52 per diluted share increased $0.28 year-over-year. Pre-tax operating performance contributed a $0.40 per share increase, primarily driven by the fall through of higher gross profit. Higher tax expense had a negative year-over-year impact of $0.11 per share, and FX on share count had a negative impact of $0.01 per share.
John: Moving to the non-GAAP year over year EPS bridge on slide 10.
Our Q1, non-GAAP EPS of $1 52 per diluted share increased 28 year over year.
John: Pre tax operating performance contributed <unk> 40 per share increase primarily driven by the fall through of higher gross profit.
John: Higher tax expense had a negative year over year impact of <unk> 11 per share.
John: And FX and share count had a negative impact of <unk> <unk> per share.
Joan Hooper: Turning to slides 11 through 13, I'll review Q1 segment results compared with the prior year. Device Solutions revenue was $126 million. This segment's product portfolio continues to shift away from legacy electric products towards smart water sales, which help drive gross margin of 30% and operating margin of 24.2%, which are both segment records. Gross margin increased 630 basis points year-over-year, and operating margin was up 710 basis points due to favorable product mix and lower operating expenses. Network Solutions revenue is $403 million with gross margin of 36.9% and operating margin of 28.8%. Gross margin decreased 20 basis points year over year due to product mix, but operating margin increased 20 basis points due to lower operating expenses.
John: Turning to slides 11 through 13, I'll review Q1 segment results compared with the prior year.
John: Device solutions revenue was $126 million. This segments product portfolio continues to shift away from legacy electric products towards smart water sales, which helped drive gross margin of 30% and operating margin of 24, 2%, which are both segment records.
John: Gross margin increased 630 basis points year over year, and operating margin was up 710 basis points due to favorable product mix and lower operating expenses.
John: Network solutions revenue was $403 million with gross margin of 36, 9% and operating margin of 28, 8%.
John: Gross margin decreased 20 basis points year over year due to product mix, but operating margin increased 20 basis points due to lower operating expenses.
Joan Hooper: Outcomes Revenue was $79 million, Gross Margin was 39.2%, and Operating Margin was 18.2%. Gross Margin increased 410 basis points year-on-year, and Operating Margin was up 510 basis points due to a higher margin revenue mix and operating leverage.
John: Outcomes revenue was 79 million gross margin was 39, 2% and operating margin was 18, 2% gross margin increased 410 basis points year on year and operating margin was up 510 basis points due to a higher margin revenue mix and operating leverage.
Joan Hooper: Turn to slide 14. I'll review liquidity and debt at the end of the first quarter. Total debt was $1.265 billion and net debt was $142 million. As of March 31st, net leverage was 0.4 times and cash and equivalents were $1.1 billion.
Turning to slide 14, I'll review liquidity and debt at the end of the first quarter.
John: Total debt was $1 $2 65 billion and net debt was $142 million.
John: As of March 31, net leverage was 0.4 times and cash and equivalents were $1 $1 billion now.
Joan Hooper: Now please turn to slide 15 for our second quarter outline. We anticipate Q2 revenue to be within a range of $605 to $615 million, which at the midpoint is flat versus last year. We anticipate second quarter non-GAAP earnings per share to be within a range of $1.30 to $1.40 per diluted share, which at the midpoint is approximately 12% year-over-year growth.
John: Now please turn to slide 15 for our second quarter outlook.
John: We anticipate Q2 revenue to be within a range of $605 million to $615 million, which at the midpoint is flat versus last year.
John: We anticipate second quarter non-GAAP earnings per share to be within a range of $1 30 to $1 40 per diluted share, which at the midpoint is approximately 12% year over year growth now.
Tom Dietrich: Now I'll turn the call back to Tom. Thank you, gentlemen. Although macroeconomic and trade policy uncertainty has increased over the past quarter, ITRN is well positioned to navigate near-term uncertainty. Our results over the past two plus years clearly demonstrate that our strategic focus and operational execution aligns with the needs of our customers. Our portfolio provides clear value to utilities and cities facing numerous environmental, operational, and consumer challenges. Periods of uncertainty and disruption favor the well-prepared. Our multi-year efforts to optimize our factory footprint and portfolio, strengthen our supply chain resilience, and grow recurring revenue have positioned us to capitalize on future opportunities.
Tom Dietrich: Now I will turn the call back to Tom.
Tom: Thank you Joe.
Tom: Although macroeconomic and trade policy uncertainty has increased over the past quarter <unk> is well positioned to navigate near term uncertainty our results over the past two plus years, clearly demonstrates that our strategic focus and operational execution aligns with the needs of our customers.
Tom: Our portfolio provides clear value to utilities and cities facing numerous environmental operational and consumer challenges.
Tom: Periods of uncertainty and disruption favor the well prepared our multiyear efforts to optimize our factory footprint and portfolio strengthen our supply chain resilience and grow recurring revenue have positioned us to capitalize on future opportunities.
Tom Dietrich: We expect to strengthen our industry leadership through continued deployment of innovative solutions, ensuring that Itron remains a partner of choice for utilities and cities well into the future.
Tom: We expect to strengthen our industry leadership through continued deployment of innovative solutions, ensuring that <unk> remains a partner of choice for utilities and cities well into the future.
Operator: Thank you for joining our call today. Operator, please open the line for some questions. Thank you. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again. Please stand by while we compile the Q&A roster.
Thank you for joining our call today operator, please open the line for some questions.
Speaker Change: Thank you, ladies and gentlemen ask Amanda to ask a question you will need to press star one on your telephone and wait plan name to be announced.
Tom: A question simply press Star one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Tom: Yes.
Noah Kaye: And our first question, coming from the line of Noah Kaye with Oppenheimer, your line is now open. Hey, good morning. Thanks for taking the questions.
Speaker Change: First question coming from the line of Noah Kaye with Oppenheimer. Your line is now open.
Noah Kaye: Hey, good morning, Thanks for taking the questions.
Tom Dietrich: You know, it's obviously the topic in focus this learning season, so we do have to start with tariffs. You know, Tom, I appreciate you dimensioning the expected EBITDA impact of the tariffs for this year. If my math is right, I kind of call that maybe 25 cents impact, the bottom line. I know you don't typically update for your guidance until Q, but just given the strength of one Q and what you're expecting for two Q, you know, are you messaging here that the sites or these net impacts of the tariffs, you still feel comfortable with the full year guide?
Speaker Change: Sure.
Speaker Change: It's obviously the topic.
Speaker Change: Focus this earnings season, so we do have to start with tariffs.
Speaker Change: Tom Appreciate you dimension the expected EBITDA impact of the tariffs for this year.
Speaker Change: My math is right kind of call that <unk> 25 impact to the bottom line.
Speaker Change: I know you don't typically update full year guidance until Q, but just given the strength of <unk>.
<unk> and what Youre expecting for <unk>.
Speaker Change: Are you messaging here that the sites are these net impacts of the tariffs.
Speaker Change: We feel comfortable with the full year guide you are already going to be over halfway to meeting the midpoint as we get through Q2.
Tom Dietrich: You're already, you know, going to be over halfway to meeting the midpoint as we get through.
Joan Hooper: Thanks, Noah. I would say that it's probably premature to update our full year of guidance. Our normal practice is to do it after we announce second quarter earnings. I would put it in context, though, and say that first quarter ahead of expectations on the bottom line, and so is the second. We are cognizant that tariffs are out there, and I suppose they could change from what we see today, but it's all in the mix of where we are. So I would say it's a little premature to update the full year at this point. Yeah, the only thing I would add is if you look at where the EPS consensus sat prior to us announcing today, and then look at our Q2 guidance, for the first half of the year, the EPS for Q1 plus the midpoint of the guidance we just gave for Q2 is up 10% versus where the consensus had been.
Noah Kaye: Thanks Noah.
Speaker Change: I would say that it's probably premature to update our full year guidance. Our normal practice is to do it after we announced second quarter earnings.
Speaker Change: I would put it in context, though and say that first quarter ahead of expectations on the bottom line and so is the second we are cognizant that the tariffs are out there and I suppose they could change from from what we see today, but.
Speaker Change: It's all in the mix of where we are so.
Speaker Change: Would say, it's a little premature to update the full year at this point the only thing I would add is if you look at.
Speaker Change: Where the EPS consensus set prior to.
Speaker Change: US announcing today and then look at our Q2 guidance for the first half of the year. The EPS for Q1, plus the midpoint of the guidance. We just gave for Q2 is up 10% versus where the consensus had been so there's puts and takes obviously as we go through the year.
Joan Hooper: So there's puts and takes, obviously, as we go through the year.
Speaker Change: Yeah.
Noah Kaye: Thanks, thank you both.
Speaker Change: Thanks, Thank you both.
Joan Hooper: Maybe I could ask about devices. I think you called out, Joan, that those record margins, you know, for the segment and, you know, certainly makes shift as a factor. We're now, I think, meaningfully above kind of the long-term gross margin target for the segment. How should we think about kind of the right level for segment margins going forward?
Speaker Change: I could ask about devices.
Speaker Change: I think you called out Joan that those record margins.
Speaker Change: For the segments and certainly mix shift is a factor.
Speaker Change: We're now I think meaningfully above kind of a long term gross margin target for this segment, how should we think about kind of the right level for segment margins going forward.
Joan Hooper: Yeah, I mean, again, it's a little premature to update the targets we had for 27. But we're very pleased they they are absolutely ahead of where we expected them to be and have done a great job kind of pruning the portfolio and shifting the mix. So, you know, premature to say is that always going to be 30 years, you're still going to get variability from quarter to quarter. We have a heat and allocation business that tends to have its highest seasonal quarter in Q1 that has better margins than average. So it's going to bump around a little bit.
Speaker Change: Yeah, I mean again, it's a little premature to update the targets we have for 'twenty seven but we're very pleased.
Speaker Change: Sure absolutely ahead of where we expected them to be and have done a great job kind of pruning the portfolio and shifting the mix. So.
Speaker Change: Premature to say is that always going to be 30, youre still going to get variability from quarter to quarter, we have a heat and allocation business that tends to have its highest seasonal quarter in Q1 that has better margins than average so it's going to bump around a little bit, but I would say, yes, we're very pleased with the progress of the devices business.
Joan Hooper: But But I would say yes, we're very pleased with the progress of the devices.
Joan Hooper: All right.
Joan Hooper: Thank you.
Joan Hooper: I'll turn it over.
Speaker Change: Alright, Thank you I'll turn it over.
Speaker Change: Okay.
Joan Hooper: Thank you.
Ben Callum: Our next question, coming from the line of... Ben Callum with R.W. Barrett, Yolanda Snelson Hey, good morning, guys.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line.
Speaker Change: And kill them with R. W. Baird. Your line is now open.
Speaker Change: Hey, good morning, guys.
Tom Dietrich: My first question was just on the 12-month backlog that you took out of there. Is there anything to read into, or how should we think about coverage for the next four quarters or the rest of the year, however you want to frame it? Yeah, I wouldn't read anything into it at all. We took it out of the investor presentation, as we didn't think it was adding all that much. It was probably confusing people more often than not, because it does bounce around quite a bit. More broadly, though, getting to your real question, the outlook that we have in front of us still looks good.
Speaker Change: My first question was just on the 12 months backlog.
Speaker Change: You took out of there or is there anything to read into or how should we think about.
Speaker Change: Coverage for the next four quarters.
Speaker Change: The euro reward framework.
Speaker Change: Yes, I wouldn't read anything into it at all.
Speaker Change: We took it out of the Investor presentation is we didn't think it was abnormal that much it was probably confusing people more often than not because it does bounce around quite a bit.
Speaker Change: More broadly, though getting to what to your real question.
Speaker Change: The outlook that we have in front of us still looks good the demand environment has not changed over the last 90 days opportunities are still there and we feel good about the track that we're on our customers are very much focused on <unk>.
Tom Dietrich: The demand environment has not changed over the last 90 days. Opportunities are still there, and we feel good about the track that we're on. Our customers are very much focused on dealing with the urgency of the issues that are in front of them.
Speaker Change: Dealing with the urgency of the issues that are in front of them.
Tom Dietrich: The only caveat I would put on that is, I suppose the macro environment could drag things down later on in the year, and that's the uncertainty that we and probably every other faces. But I like the zip code we're in, and the trajectory looks good. Great.
The only caveat I would put on that is I suppose the macro environment could drag things down later on in the year and Thats the uncertainty that we and probably every other company faces but.
Speaker Change: I like the ZIP code, we're in and the trajectory looks good.
Tom Dietrich: My follow-up, and I get this question a lot, is just on, you know, the regulatory environment, you know, state by state in the United States, you know, allowing software to be capitalized or put in the rate base, and just how, you know, anything you could talk about that or other ways that utilities are, you know, moving forward with buying software from you guys, because in the past it seemed like that was the harder sell as opposed to the network. So anything you could talk about, you know, if it's region specific, that would be helpful as well.
Speaker Change: Great.
Speaker Change: My follow up if I get this question a lot.
Speaker Change: On.
Speaker Change: The regulatory environment.
Speaker Change: State by state in the United States.
Speaker Change: Wow.
Speaker Change: Software to be.
Speaker Change: Capitalized.
Speaker Change: For the rate base.
Speaker Change: Okay.
Speaker Change: Anything you could talk about that or other.
Speaker Change: <unk> utilities or or Youre moving forward with buying software from you guys. Because the past is similar to that was harder so.
Speaker Change: As opposed to the network. So anything you could you could talk about.
Speaker Change: Thats reason specific that'd be helpful as well thank you.
Tom Dietrich: Thank you.
Tom Dietrich: Sure. So outcomes growth for us was up 14% year-over-year. That's, I think, our fourth quarter row of double-digit year-over-year growth, probably seven on the last eight quarters, double-digit. So it's absolutely happening, and we're obviously anxious to keep that trajectory going, if not accelerate it. When it comes to the regulatory environment, we've got to structure the deals in the right way to make sure that it works for our customers' business plan, as well as ours. There are ways to have those purchases be included in rate bases most of the time, and indeed, that's what you see flowing through our P&L.
Speaker Change: Sure.
Speaker Change: Outcomes growth for us was up 14% year over year, that's I think our fourth quarter in a row of double digit year over year growth of at least seven out of the last eight quarters double digits. So it's absolutely.
Speaker Change: Happening and we're obviously anxious to keep that trajectory going if not accelerated.
Speaker Change: When it comes to the regulatory environment.
Speaker Change: We've got a structure of the deals in the right way to make sure that it works for our customers business plan as well as ours.
Speaker Change: There are ways to.
Speaker Change: Have those purchases be included in rate basis, most of the time and indeed thats, what you see flowing through our P&L, there's different mechanisms it depends on the state.
Tom Dietrich: There's different mechanisms. It depends on the state and the plumbing that they've got to work through on their side. Oftentimes, it is in the form of term licenses over a certain period of time, a certain capability is available. It could be performance-based rates, where I think we're creeping up on 40 states out of the 50 now allow some sort of performance-based rate. So again, the mechanism can vary state-to-state or customer-to-customer, but the trajectory that we've seen over the last couple of years has been good. The regulatory environment remains constructive for our customers, and we'll look to continue to support them as they advance on their needs.
Speaker Change: That's the plumbing that they've got to work through on their side.
Speaker Change: Oftentimes it is in the form of term licenses over a certain period of time, a certain capability is available it could be performance based rates, where I think we're creeping up on 40 states out of the 50 now allows some sort of performance based rate. So again the mechanism can vary state to state our customer to customer but.
Speaker Change: The trajectory that we've seen over the last couple of years has been good the regulatory environment remains constructive for our customers.
Speaker Change: And we'll we'll look to continue to support them as they advance on their needs.
Ben Callum: Thanks guys. Nice quarter. Thank you.
Speaker Change: Thanks, guys and nice quarter.
Thank you.
Speaker Change: Thank you.
Jeff Osborne: Our next question coming from the lineup, Jeff Osborne with TD Cowen, your line is now open. Great, thank you. Good morning.
Speaker Change: Our next question coming from the line of Jeff Osborne with Cowen. Your line is now open.
Jeff Osborne: Great. Thank you and good morning, just maybe two quick ones on the <unk>.
Tom Dietrich: Just maybe two quick ones on the tariff environment. Again, what you said was very helpful, but just to be clear, Tom, the $15 million, is that incorporating just the current 10% tariff, or does that contemplate any potential changes on July 9 to the reciprocal environment? That $15 million net of mitigation measures includes what we do in terms of changing our country of origin on sourcing. It includes what we do on pricing. But when it comes to the tariff protocol itself, it is what is in effect today is what's assumed in that. So it does include the USMCA exemption, meaning you don't pay on that.
Speaker Change: Tariff environment again, what you said was very helpful, but just to be clear Tom the $15 million.
Jeff Osborne: <unk> just the current.
Jeff Osborne: 10% tariff or does that contemplate any potential changes on July nine to the reciprocal environment.
Jeff Osborne: Got it.
Jeff Osborne: That.
Jeff Osborne: $16 million net of mitigation measures.
Jeff Osborne: It includes what we do in terms of change in our country of origin on sourcing. It includes what we do on pricing, but when it comes to the tariff protocol itself.
Jeff Osborne: It is.
Jeff Osborne: <unk> is in effect two day is what's assumed in that so it does include the U S. MCA exemption, meaning you don't pay on that the 10% baseline tariffs contribute and then the the China tariffs.
Tom Dietrich: The 10% baseline tariffs contribute. And then the China tariffs that are pretty high on a percentage basis, not that our imports from China are huge, but it doesn't take a lot to have that contribute to the cost basis itself. So it is the Section 301, Section 232, and the emergency power tariffs that are in effect today.
Jeff Osborne: Are pretty high on a percentage basis, not that our imports from China are huge but it doesn't take a lot too.
Jeff Osborne: Have that contribute to the cost basis itself. So it is the section 301 section three or 232 with the emergency power tariffs that are in effect today.
Tom Dietrich: Maybe just one follow-up. I think years ago, you used to make your own printed circuit board assemblies in South Carolina and then move that to Mexico. I know you're not updating guidance, but is there, you know, with the mitigation measures, is there any increase in CapEx that we should be contemplating? Now, no, I wouldn't expect any difference. Our capex load is is pretty stable, and it'll ride along based on new product introductions and things of that sort. But I wouldn't look for any material change. Got it.
Speaker Change: Maybe just one follow up I think years ago used to make your own printed circuit board assemblies in South Carolina, and then move that to Mexico.
Speaker Change: I know youre not updating guidance, but is there with the mitigation measures is there any increase in capex that we should be contemplating.
Speaker Change: No no.
Speaker Change: Wouldn't expect any difference our capex load is pretty stable.
Speaker Change: It will ride along based on.
Speaker Change: New product introductions and things of that sort, but I wouldn't look for any material change.
Tom Dietrich: And then you alluded to price, you know, in terms of one of the mitigation factors. Is that something that you on a state by state basis have to, you know, appeal to regulators for or utility does on your behalf? Maybe just walk us through the mechanics there and the risks to that. The pricing that we have in place is really where we have flexibility, and some of those tough lessons that we learned back during COVID in terms of how to increase the amount of flexibility we have in terms of the pricing changes we can make along the way.
Speaker Change: Got it and then you alluded to price.
Speaker Change: In terms of one of the mitigation factors is that something that you on a state by state basis, how to appeal to regulators for utility does on your behalf, maybe just walk us through the mechanics, there and the risk to the.
Speaker Change: The pricing that we have in place.
Speaker Change: Really where we have flexibility in some of those tough lessons that we learned doctor in total did in terms of how to increase the amount of flexibility. We have in terms of the pricing changes, we can make along the way so.
Tom Dietrich: So, no change in terms of how we have been operating for the last couple of years, but obviously as the macro environment changes, we'll make some pricing adjustments accordingly. I'm not aware of any time that customers are going back to their regulators based on that in terms of what has happened to date. Got it.
Speaker Change: So no change in terms of how we have been operating for the last couple of years, but obviously as the macro environment changes.
Speaker Change: Make some pricing adjustments accordingly.
Speaker Change: Not aware of any time that customers are going back to the regulators based on that in terms of what has happened to date.
Speaker Change: Yes.
Jeff Osborne: That's all I have. Thank you. Appreciate it. Thanks, Jeff. Thank you.
Speaker Change: Got it that's all I have thank you appreciate it.
Jeff Osborne: Thanks, Jeff.
Speaker Change: Thank you.
Joe: Our next question coming from the line of Hilary Cully with Guggenheim. Your line is now open. Hey, it's actually Joe, if you can hear me okay. We can. Good morning, Joe. Good morning.
Speaker Change: And our next question coming from the line.
Speaker Change: Sorry, Colin with Guggenheim. Your line is now open.
Yeah.
Josh: Hi, It's actually Josh you can you hear me okay.
Speaker Change: We can morning, Joe.
Joe: I don't sound like Hillary. Two questions.
Speaker Change: Hey, good morning.
Speaker Change: Two questions first.
Joe: First, looking at this revenue push-up that you had last year, I'm trying to recall how much of that was in Q2 and whether you might be able to help us understand what an organic year on your comp might look like adjusting for that. And then the second question, I have a really impressive outcome here in terms of the gross and the operating margin for your outcome segment. Obviously, some of that's trimming the portfolio and so forth, but how should we think about revenue fall-through in that part of the business going forward? Thank you.
Speaker Change: Looking at.
Speaker Change: Revenue pushed out that you had last year.
Speaker Change: Trying to recall how much of that was in Q2.
Speaker Change: Whether you might be able to to help us understand what.
Speaker Change: Organic year on year comp might look like adjusting for that and then the second question I have really impressive outcome here in terms of the gross and the operating margin for your outcomes segment.
Speaker Change: And some of Thats trimming the portfolio and so forth, but how should we think about revenue fall through in that part of the business going forward. Thank you.
Joan Hooper: So let me start with, I think the first question was, how did the constrained revenue flow through in 2024? We had about $85 million in Q1, and about $40 million in Q2. And then essentially, we were caught up by the first half. In terms of, you mentioned portfolio trimming, so that would have been devices more than outcomes. So just to clarify which one you're looking at. But on devices, again, as I mentioned, we're really ahead of where we expected to be. Really can't promise that we're going to be at 30% gross margins every quarter, but I think certainly high 20s is our expectation.
Speaker Change: So let me start with I think the first question was how did the constrained revenue flow through in 2024, we had about $85 million in Q1 and about $40 million in Q2, and then essentially we were caught up by the first half.
Speaker Change: In terms of you mentioned portfolio trimming, so that would've been devices more than outcomes. So just to clarify, which one youre looking at but on devices.
Speaker Change: Again as I mentioned, we're really ahead of where we expect it to be.
Speaker Change: Can't promise that we're going to be at 30% gross margins every quarter, but I think certainly high twenty's is our expectation and it flowed through nicely because they've been trimming their opex as well from an outcome standpoint, we're still looking for that segment to be in the kind of the mid <unk> gross margin. So.
Joan Hooper: And it flows through nicely because they've been trimming their OPEX as well. From an outcome standpoint, we're still looking for that segment to be in the kind of the mid 40s gross margin. So we're not quite there. And as we've talked about quarter to quarter, you'll get some variability in that based on the software mix in the quarter.
Speaker Change: So we're not quite there and as we've talked about quarter to quarter, you'll get some variability in that based on the software mix in the quarter.
Joan Hooper: If I may, and thank you for clarifying on the year-on-year comps, if you look at your whole year numbers, they don't quite imply that you're going to be at that mid-40s gross margins on the outcome segment, and you've just posted a very impressive result. So I guess my question is, can we expect to see this level of improvement in the margins going forward? Or I guess I should rephrase this, this level of revenue fall-through going forward, which would imply, in fact, that you could be at the mid-40s gross margin in outcomes by the end of this year.
Speaker Change: But if I may and thank you for clarifying on the year on year comps.
Speaker Change: Yes.
Speaker Change: If you look at your whole year numbers.
Speaker Change: They don't quite imply that youre going to be at that mid Forty's gross margins on the outcomes segment and you've just posted a very impressive result.
Speaker Change: I guess my question can we can we expect to see this level of improvement in the margins going forward.
Speaker Change: Or I guess I should rephrase.
Speaker Change: What revenue fall through.
Speaker Change: Going forward, which would imply back that you could be at the mid <unk> gross margin at outcomes by the end of this year.
Joan Hooper: Yeah, again, we don't really guide by segment. But certainly, the year over year improvement this year was heavily driven also by how low last year was. So we were, you know, we were in the 40s or so this, this quarter, but we were like mid 30s last quarter. So you get that software mix that distorts things. So certainly we're, we're looking for the outcome segment to continue to grow margins year on year. And, and I think they will continue to do that.
Speaker Change: Yeah again, we don't really guide by segment, but certainly the year over year improvement. This year was heavily driven also by how low last year was so we were we.
Speaker Change: We're in the 40% or so.
Speaker Change: This quarter, but we were like mid <unk> last quarter. So you get that software mix that distorts things. So certainly we are we're looking for them outcome segment to continue to grow margins year on year end.
Speaker Change: And I think they will continue to do that.
Joe: All right, thanks. That's your point. Thank you.
Speaker Change: Alright, thank but to your point thank you John.
Speaker Change: Thank you.
Mark Charles: Our next question coming from the line of Mark Charles with J.P. Morgan. You're on his now. Yes, good morning. Thank you for taking our questions. Why don't you go back to the tariffs?
Speaker Change: Our next question coming from the line of Mark Charles with Jpmorgan. Your line is now open.
Mark Charles: Yes. Good morning, Thank you for taking my questions.
Mark Charles: You go back to the tariffs can you just talk about kind of the timing of some of your mitigation efforts, whether thats price increases are kind of moving moving around components of those sources.
Tom Dietrich: Can you just talk about kind of the timing of some of your mitigation efforts, whether that's price increases or kind of moving, moving around components, sources, just trying to get a feel for, I mean, obviously, tariffs could change this afternoon, but to the extent that the current tariffs remain in place indefinitely, just trying to get a sense of how we can think about annualizing that figure going forward. Thank you. Sure. So the $15 million net number that we talked about, if I were building a model for the three quarters ahead of us for this year, I would put most of that in the back half of the year from a cost perspective.
Mark Charles: Just trying to get a feel for I mean, obviously tariffs could change this afternoon, but to the extent that the current tariffs remain in place indefinitely, just trying to get a sense of how we can think about annualized that figure going forward. Thank you.
Speaker Change: Sure so.
Speaker Change: $15 million net number that we talked about.
Speaker Change: If I were building a model for the three quarters ahead of US for this year I would put most of that in the back half of the year from a cost perspective, and Thats really based on when various pricing mechanisms kick in when various.
Tom Dietrich: And that's really based on when various pricing mechanisms kick in, when various country of origin changes are made on the sourcing side, and the amount of inventory on hand. Remember, a certain amount of inventory was already in our hands when the protocol started. Your point about, yes, it could change immediately, but there's usually a little bit of a lag effect before the costs start to come in. So we didn't see much in Q1. There's a bit in Q2, but more of it is in the back half of the year. Thank you.
Speaker Change: Our country of origin changes are made on the sourcing side and the amount of inventory on hand, remember with certain amount of inventory was already in our hands when.
Speaker Change: When the protocol has started.
Speaker Change: About yes, it could change immediately but there is usually a little bit of a lag effect before the the costs start to come in so we didn't see much in Q1, there is a bit in Q2, but more of it is in the back half of the year.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Chip Moore: Our next question coming from the line of Chip Moore with Rot Capital Partners. You're on his mail. Hey, everybody, thanks for taking the question.
Speaker Change: And our next question coming from the line of Chip Moore with Roth Capital Partners. Your line is now open.
Chip Moore: Hey, everybody. Thanks for taking the question.
Tom Dietrich: Maybe just a high level one. I was in Europe earlier this week, and there was obviously a pretty high profile blackout. And I'm sure there'll be a lot of postmortem to come on that. But Tom, I'd be curious to maybe get your perspectives on if you think that's the type of thing that can help shine a light on the need for some of these grid edge solutions. Well, certainly, I think that changing the topology of the grid to try to give you better resiliency and reliability is an important part of the value proposition we give to our customers.
Speaker Change: Maybe just a high level one I was in Europe earlier, this week and there was obviously a pretty high profile blackout and I'm sure there'll be a lot of postmortem to come on that but Tom I'd be curious to maybe get your perspective on if you think thats the type of thing that.
Chip Moore: Can help shine a light on the need for some of these grid edge solutions.
Tom: Well, certainly I think that.
Tom: Changing the topology of the grid to try to give you a better resiliency and reliability is an important part of the value proposition, we give to our customers.
Tom Dietrich: It takes more than just our piece of it, but we certainly can help give you visibility and control out at the edge of the grid, and that is helpful. So segmentation of the grid, microgrid solutions, virtual power plants, peak shaving, demand response, energy efficiency, all of these things are what's wrapped up inside of the platform that we provide. And it's very helpful when it comes to those kinds of situations. That said, I don't know that I've got perfect insight, nor does anyone at this moment as to exactly what happened in Spain and Portugal. That appeared to be much more transmission related rather than distribution related.
Tom: It takes more than just our piece of it but we certainly can help give you visibility and control out of the edge of the grid and.
Tom: That is helpful.
Tom: So segmentation of the grid Microgrid solutions virtual power plants peak shaving demand response energy efficiency. All of these things are what's wrapped up inside of the platform that we provide and it's very helpful. When it comes to those kinds of situations that said I don't know that Ive got perfect insight.
Tom: Nor does anyone at this moment as to exactly what happened in Spain, and Portugal that appeared to be much more transmission related rather than distribution related but even in those particular cases, you can certainly limit to the amount of damage and get it back online faster when and if something like that should happen by.
Tom Dietrich: But even in those particular cases, you can certainly limit the amount of damage and get it back online faster when and if something like that should happen by further deployment of grid edge intelligence technology. Thanks, appreciate that.
Tom: Their deployment of grid edge intelligence technologies.
Tom: Okay.
Joan Hooper: I appreciate that and maybe one more for you Joan.
Joan Hooper: And maybe one more for you, Joan. You know, in the balance sheet at this rate, it looks like you're going to be in a net cash position in the not too distant future.
Speaker Change: On the balance sheet at this rate it looks like youre going to be in a net cash position in the not too distant future. So maybe an update on M&A funnel and just capital deployment more broadly and buyback et cetera. Thanks.
Joan Hooper: So maybe an update on M&A funnel and just capital deployment more broadly and buyback, etc. Thanks. Yeah, I would say the priority for us is still finding that right acquisition that helps us get more software content and help drive the outcomes growth. So there's a lot of activity going on. I would say, you know, the PEs, in particular, a lot of them are sitting on assets that are now four or five years. Some of the valuations, I think, have come down. There's some that don't necessarily want to accept a down valuation from maybe the peak from several years ago.
Speaker Change: Yes, I would say the priority for US is still finding the right acquisition that helps us get more software content and helped drive the outcomes growth. So.
Speaker Change: There is a lot of activity going on I would say the P. Knees in particular, a lot of them are sitting on assets that are now four five years.
Speaker Change: Some of the valuations I think have come down there are some that don't necessarily want to accept a down valuation from maybe the peak from several years ago. There is some medium sized assets out there as well. So we continue to be very active in that would be our first priority from a capital allocation standpoint.
Joan Hooper: There's some medium-sized assets out there as well. So we continue to be very active and that would be our first priority from a capital allocation standpoint. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Austin Moeller: Our next question coming from the lineup, Austin Moeller with Canaccord, your line is now open. Hi, good morning. Can you, are you able to talk about the mix between setup and engineering revenues within outcomes at customer sites versus the recurring subscription licensing revenue that you indicated was substantial in the quarter? Yeah, if I look at it on a year-over-year basis, in Q1 last year compared to this year, we had a lot more, I will say, the better kind of revenue where margins were substantially higher. So the amount of recurring revenue on a quarterly basis bounces around a little bit depending on the exact mix of business, but we were right around 70% recurring revenue in Q1 which that's maybe on the lower side of where we want to be ultimately is probably closer to 80% is the ultimate trajectory.
Speaker Change: And our next question coming from the line of Austin <unk> with Canaccord. Your line is now open.
Speaker Change: Hi, good morning can you.
Speaker Change: Are you able to talk about the mix between set up an engineering revenues within outcomes at customer sites versus the recurring subscription licensing revenue that you indicated was substantial in the quarter.
Speaker Change: Yes, if I look at it on a year over year basis.
Speaker Change: Q1 last year compared to this year, we had a lot more.
Speaker Change: I will say that.
Speaker Change: Better kind of revenue, where we where margins were substantially higher.
Speaker Change: So the amount of recurring revenue on a quarterly basis bounces around a little bit depending on the.
Speaker Change: The exact mix of business, but we were right around 70% recurring revenue in Q1.
Speaker Change: Sure.
Speaker Change: On the lower side of where we want to be ultimately is probably closer to 80% is the ultimate trajectory, but again, it will bounce around a little bit quarter to quarter.
Austin Moeller: But again, it will bounce around a little bit quarter to quarter.
Tom Dietrich: Okay, and can you talk about how your grid edge intelligence solutions and networked endpoints products could assist in a blackout situation like we saw in Spain and Portugal? Yeah, again, the Spain and Portugal situation, I don't know that I would want to try to comment too directly on what exactly happened there until the details are out. But a pretty clear example is some of the things that we do already today, which allows utilities to reroute power through distribution automation. So if you do have a particular transformer that gets struck by lightning and the power goes out, you can reroute power using the mechanisms that we provide and when we work with partners to be able to do that.
Speaker Change: Okay and can you talk about how your grid edge intelligence solutions and networked endpoints products could assist in a blackout situation like we saw in Spain and Portugal.
Speaker Change: Yes, again, Spain, and Portugal situation I don't know that I would want to try to comment.
Speaker Change: Comment too directly on.
Speaker Change: What exactly happened there until the details are out but.
Speaker Change: Pretty clear example is some of the things that we do already today.
Speaker Change: Allows utilities to reroute power through distribution automation. So if you do have a particular transformer that gets struck by lightning and the power goes out you can reroute power.
Speaker Change: Using the mechanisms that we provide and when we work with partners to be able to do that so youre minimizing the the area. If you will that's out the same could be true when a wildfire mitigation kind of scenarios that rather than turning off of Marine County, when the wind kicks up.
Tom Dietrich: So you're minimizing the area, if you will, that's out. The same could be true in a wildfire mitigation kind of scenario. So rather than turning off all of Marin County when the wind kicks up, you can target that quite a bit more closely by having that fine-tooth control out at the edge of the grid. Those are the types of solutions that we offer our customers at the distribution edge.
Speaker Change: Can target that quite a bit more closely by having that fine tooth control out at the edge of the grid. Those are the types of solutions that we offer our customers at the distribution edge.
Austin Moeller: Great, that's very helpful. Thank you.
Speaker Change: Great. That's very helpful. Thank you.
Speaker Change: Thank you.
Operator: And as a reminder, to ask a question, please press star 11 on your touch-tone telephone.
Speaker Change: And as a reminder to ask a question. Please press star one on you touched on the telephone.
Operator: Our next question, coming from the line of Scott Graham with Seaport Research Partners, you want to smell. Yeah, hi. Good morning. Thanks for taking the question. Could you, is there any way you could tell us a little bit more about the 15 million? I mean, I know that's a net number, but is it sort of like 30, 15 mitigation? Is it 50? 35 mitigate just give us an idea of maybe closer to what the gross is Oh, again, the mix of our product portfolio will change. And that probably means that any number that I would hazard a guess on today would be wrong by tomorrow.
Speaker Change: Our next question coming from the line of Scott Graham with Cleveland Research Partners. Your line is now open.
Scott Graham: Yes, hi, good morning, Thanks for taking the question.
Scott Graham: Could you is there any way you could tell us a little bit more about the $15 million I mean, I know that thats, a net number but is it sort of like.
Scott Graham: 30.
Scott Graham: 15 mitigation is at 50.
Scott Graham: 35, mitigating can you just give us an idea of may be closer to what the grosses.
Scott Graham: So again the mix of our product portfolio will change and.
Scott Graham: That probably means that any number that I would hazard a guess on today would be both be wrong by tomorrow, so it'll ebb and flow a little bit depending on how the mix changes and what deliveries on individuals' look like so I think that the right way to think about it is is the net number and thats what.
Scott Graham: So it'll ebb and flow a little bit depending on how the mix changes and what deliveries on individuals look like. So I think that the right way to think about it is the net number and that's what would be the impact from gross margin standpoint. Okay, thank you. Then the other question I had was on networking, the The organic there, I know, really set back by last year's catch ups, was the gross margin down because of The comp, the catch-up comp, or was that something else? It was really just mix and it was not down materially.
Scott Graham: Would be the the impact from a gross margin standpoint.
Speaker Change: Okay. Thank you then.
Scott Graham: Other question I had was on net working.
Speaker Change: The organics, there I know really.
Speaker Change: Set back by last year's catch ups was the gross margin down because of the comp catch up comp or was that something else.
Speaker Change: It was really just mix and it was not down materially I think it was down maybe 20 basis points. So that's noise in the scheme of things. It's just it's just mix.
Joan Hooper: I think it was down, you know, maybe 20 basis points. So that's noise in the in the scheme of things. It's just, it's just Okay, it makes very good.
Speaker Change: Okay.
Joan Hooper: Thank you. That's all I had. Appreciate it. Thank you.
Speaker Change: Thanks, Craig. Thank you that's all I had appreciate it.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Operator: And I'm showing no further questions in the Q&A queue at this time.
Speaker Change: And I'm showing no further questions in mechanic you at this time I will now turn the call back over to Mr. Tom Deitrich for any closing remarks.
Tom Dietrich: I will now turn the call back over to Mr. Tom Dietrich for any closing remarks. Very good. Thank you all for joining our call today. We look forward to updating you again in another three months.
Speaker Change: Very good. Thank you all for joining our call today, we look forward to updating you again in another three months.
Speaker Change: Okay.
Operator: This concludes today's conference call. Thank you for your participation and you may now disconnect. Thank you, Libya.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Thank you Olivia.
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