ITRI - Earnings call transcript Q4 2017

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Operator

Please standby. Good day, everyone and welcome to the Itron Incorporated Yearend and Q4 2017 Earnings Conference Call. Today's call is being recorded. And for opening remarks, I would like to turn the call over to Barbara Doyle. Please go ahead.

Barbara J. Doyle

Sofie. you, Thank welcome call. and fourth XXXX quarter Good to conference earnings afternoon Itron's We announcing earlier our release issued press a today for financial XXXX. our guidance and results about The call. replay release information press includes today's our remarks webcast Relations the our tab. A presentation on to on call available and the is under website this corporate through also Investor accompany

As Itron transaction the on completed a Networks XXXX. X, to January reminder, acquire Silver Spring

company Our results the including XXXX the from for guidance consolidated acquisition. is contribution for

and have Officer; we Operating Officer; Philip Executive today, Chief call President President Financial Executive Hooper, Itron Chief Vice the and Vice Senior On Officer. Chief Joan Mezey, Deitrich, President and and Tom

Following process our call the that the the up operator we prepared will will open using to take questions describe. remarks,

please non-GAAP of I me let Before to remind financial Harbor statement. and turn our our Safe the call Philip, presentation you over

and we that on available current differences Relations release measures non-GAAP financial earnings of believe website. our future financial enhances financial between performance, presentation non-GAAP our release overall and reconciliations our of earnings understanding and and include information Investor Our GAAP in the are

Commission. Form Exchange release and and other statements. this made the filings to do conference our the this materially be because factors update during that that risks will section issued uncertainties. any and duty Securities to today's are during could and are call current of XX-K, expectations statements making forward-looking statements comments Risk reports the subject are forward-looking. call, assumptions not results and Actual earnings and from based Factors on these any in with undertake We differ These and expectations We in of

to call Mezey. CEO, and turn to please page Now Philip presentation, in the our I'll the turn over X

Philip C. Mezey

record endpoints and QX, Itron's very increased line $XXX XX%. EPS revenue In XXXX. were quarter we nearly with We performance. new a new we non-GAAP fourth OpenWay demand by an revenues year, and of million pleased XX% reach by significantly in Riva smart and Barbara. not were in top attain X.X satisfied level products driven with our systems as the chain gross of from over higher continue transformation. $X.XX a There's efficiency supply strong on greater by margin shipped and operations, and results last our you, margin for increased Thank quarter. maturity for processes of million increased opportunity Quarterly solutions. We business the the

to announced restructure focus to continue we predictability, and our that our including We on of additional today. goals profitability operations growth steps

replenishing sales in execution quarter and business, The million activity ratio. QX year-end regions. geographic to with new The billion ratio exceeded demonstrated of compared by book-to-bill million all segment backlog $X.XX strong XX%. terms customer teams in grew in Itron's good across X XXXX. year-end X.X total all to businesses. of bookings more of the our In robust X X% of the a bookings backlog in each was with at book-to-bill backlog $XXX by increased XX-month X than $XXX with of

revenue and a provides increased Our foundation backlog predictability organic solid for growth.

years, five slide increased can basis our a annual backlog total presentation, by XX%. has by compounded backlog last you XX-month over see on on in the XX% grown As X has and

and of backlog, Grid, new reflected in Public million electricity, is our others. not Including gas we was reflect adopters strong has Our expanding across of $XXX year-end trends awarded endpoints The and we demand group million growth compared Vectren, technologies Electricity the OpenWay at backlog water business business OpenWay These an been time. up significantly Riva XXXX. $X.X Mexico backlog that over New Riva and year-end Avista, billion expanded X of Electricity have customers National yet have with and Service including industry committed exceeded for X% utilities. that by of

We an new with today. X jurisdictions Riva our Additionally, for customer quarter. Energy additional AVANGRID million Electricity, in Duke the contracts several two project notable installing In additional and into expanded are OpenWay smart booked we Eletrobras meters.

territories With OpenWay these electric will connected network. new be commitments across service smart Duke's Itron under than X.X the more million endpoints

partner to We grid Duke on delighted projects. work with are as their smart a strategic

signed management than extension with the manage response a DR devices also to of XXX,XXX This its Pepco with We Holdings four-year demand programs energy in distributed program. largest one is deployed. country contract the more

utility's addition, agricultural new Australia NV Nevada. Corporation and Gas, the significant North and booked with in Council is first Energy contracts program Itron Roseville, America. in Questar to manage segment, we with new outside project booked we five-year In America, the to water contracts in Regional contract In with the we are of demand Natural Energy, a Gas In signed excited implement U.S. IntelliSOURCE Gas response Consumers the Cairns Cascade Riva California. in North Riva network we very which about. Water with Cairns the City

and as SUEZ a Networks territory. top We France. Xcel's than the service Intelligence of automation million and in Energy we devices electric significant Advanced Brazil On be The connect Itron's in from initiative. business contract new distribution billion Colorado its Sanepar Xcel includes Security Grid smart Gen-X will acquisition. network $X.XX Itron's billion X.X with Veolia backlog also will as adding in part won meters as more new platform a Spring well of Silver $X.X and backlog, backlog in with of in

total more after the for in the completed a provide refined call quarter backlog our substantially will estimate on of we transaction. the of May first accounting XX We acquired amounts have XXXX months and

let Now, turn to over review the to Joan me call financials. our

Joan Schweikart Hooper

results slide X. X are slide results Philip. are you, Thank GAAP and non-GAAP on Consolidated on shown shown

and a results basis XXXX million assumptions signed million Itron financial related Act guidance anticipates and The metrics, of the quarter. margin Gas to points may transition higher high the and as XX.X%. beneficial on $XX reform effective to or mix legislation nearly margins. was tax non-GAAP of year-over-year in all reduced tax charge income the diluted solution law will to The we $X.X to Inclusive improved additional on from deferred company's Jobs diluted per $XX charge notwithstanding due of a in per December. GAAP and XX%. quarter. Tax the cost be chain as estimated million of in U.S. the U.S. expect approximately $X.XX was offset Electricity drove XX adjusted key may our Cut basis factory year-over-year on volumes gross margin impact issued. and The be course interpretations, from million currently volume Strong in net XXXX supply share tax tax a this impacts Gross well in be recognize tax lower that amount smart XX% rate to the improved non-cash shipments assets. the into $X.XX changes from or charge, share quarter charge Water fourth $XX the over Our and increased

$XX we early which While as will increased We year-over-year increased increased quarter chain operating debt cost stages financial realizing non-GAAP yet year. in non-GAAP million and revenue in and these working to of XX% XXXX. last elevated we highlights continue first margin continue include XX.X% last EBITDA was anticipate a in benefits. XX% the operating diluted improvements in in half $XX.X quarter million share. percentage through versus the XX%. our increased to X.X% million to EBITDA $XXX Silver Adjusted for quarter, Operating year-end which driven in included to to the increasing Networks million $XX year, million free was net Cash not cash to to proceeds of up $XX XXXX free $XXX XX.X% the were compared $XXX million costs cash debt Fourth of of million net totaled EPS flow proceeds flow which make escrow transformation, full-year quarter. increased Total the capital. are adjusted supply nearly the cash in quarter $XX transitions January the margin by cash the X.X Other Non-GAAP progress $XXX in full $X.XX GAAP million to related profitability and equivalents per the income used by from Full operations and $XXX fourth as this year-end cash. finance versus XX% escrow, quarter year held of on flow $XX X, million with year. from Spring in times of quarter $XXX in of the classified from Adjusting fourth of of closed XXXX. end last at of financing flow the and leverage These doubled. million restricted and and fourth million, increased transaction million, the XXXX.

shipments continue grew in Electricity's in continue strong OpenWay a company to North slide XX% Riva revenue Electricity our solution total year-over-year basis, Linky on smart America increased driven segment. revenue constant quarter and bridge by by growth ramp U.S. the deployments X, the Now reflects X% business EMEA. in to to turning fourth accelerate year-over-year and on France. currency

up increased revenues partially offset by in Water EMEA year compared In regulator economic strong year-over-year in Asia-Pacific. total, the Electricity from quarter large consecutive regions by increased America throughout growth is revenues In revenues seen metering in funding U.S. currency. in residential X% growth revenue by last were in projects and with Gas, This were and revenues lower driven year. have year. EMEA X% Latin quarter last Lower project. and in X% compared of all by for the in by and We offset the full-year the in solution Brazil project higher of following in the with sales meter a fifth smart delays with completion the declined fourth revenue recovery Riva U.S. OpenWay and those America growth constant Gas of water region. also declined Latin

down Gas cost by communication with with associated year. XXX increased and year-over-year Itron's XX.X%, and product with another for higher grid gross strong non-GAAP margin gross new by last margin share, XX.X% valuation mix non-GAAP in favorable The compared million modules $X.XX last to and income margin to had lower bridge than year, sales by volumes. gross revenue sales business $XXX The of through mix was in by a partially the results the transitions. by of smart year-over-year compared segment of with a for revenue impacts marketing expenses support was driven Now, high quarter jurisdiction lower positive favorable a impact additional increase EPS result development, the net allowances. XX% product a I'll were volume Lower on settlement to X. and also offset non-GAAP performance due the discrete XX Itron's Slides driven segment of taxes meters mix of These solutions. decreased tax was solutions. manufacturing quarter more a items earnings. versus and The last quarter. turn per show business EPS driven the by XX.X% points to basis year, of compared and up and including to on of higher Electricity catalyst EPS XX EPS Water fourth slide strong audit delivered

backlog the quarters However, with segment XXXX. U.S. last the yearend compared more Steady driven over starting should Brazil the Africa, projects water is growth Australia, XXXX. by six backlog and up Water predictable to our in that view in return support the increases XX%

to would we like drive that even profitability Now, initiatives discuss and predictability, growth. I key underway greater have will

$XX to expense acquisition our of achieving XXXX, savings the on end Networks Turning approximately which our operating cost the by million the impact of update slide XXXX, ramp estimated we in million on of Spring efforts, year. of the in announced of we rate basis an will a second XXXX. acquisition anticipate the when of These will I'll rate up begin by realized million confirmed of integration half XX, business. the the in with which run savings the end $XX run We $XX drive September. Through have we of synergies Silver

reporting million and costs one-time related half cost will our We be These $XX severance, excluded will Most in Networks the billings and costs and acquisition Spring non-GAAP will their costs GAAP cash XXXX. of flow will excluding facility converted these our practice achieve in combined historical of accrued former of fee from from stock-based XXXX, cash decrease the versus results. compensation however, be for be their first quarter. approximately to report these non-GAAP particularly the are of to P&L; incur and Silver synergies. majority will results professional the first When integrated we

interest primarily deal from expense three seen financing. of incremental quarters we will the factors addition, will benefits XXXX first dilution contribute have will before synergies to ramp lower The from deal These all the be in the EPS. for the In up.

marketing operations, me also sales let charges in our We which XX, approved efforts be and million product $XX million made to complete, slide we manufacturing XX, On the anticipate an organizations. to plan will and This benefits. end Turning estimated development, that announcement for supply new the February a board severance restructuring global XXXX. our million by continues termination in primarily cover one-time $XXX we annualized restructuring pre-tax expect restructuring to result and today. plan, chain will our optimize this of of when for $XX $XXX million savings to of plan other

mid-teens to the next impact savings timing XXXX We this our phase beyond target. of our first result goals company's unions in is of estimated the it expect represented The of subject projects charge transformation quarter both restructuring to employees and of majority planned be require consultation are regulatory certain XX% could drive Of to our of XXXX. total will which charge, restructuring near-term the Many approval, by councils, expenditures. approximately cash in the of record may the the and profitability or EBITDA supports which operational plan potential jurisdictions. works in

our all with slide I'll this XXXX Now, XX. guidance on pull together

full the $X.XX to the will will non-GAAP revenues be share. of For be per of $X.XX XXXX, range EPS billion range $X.XX we anticipate and year $X.XX in to in the billion

rate effective tax to guidance assumptions: U.S. XX dollar exchange of XX%. outstanding, on an A is Our million of rate the shares based and $X.XX, following euro

help This the year. total related results unique guidance the and provide of quarter, to affecting Adding related expense approximately million to financing incremental cost $XX I'll factors the interest some this other XXXX. to impacts in interest additional better acquisition, investors understand in acquisition

our the years, We the weighted similar between half be to second anticipate the slope first business recent year. more to of the of As will half revenue in second half and of be the linearity very will XXXX.

However, in and will loaded. margins part initiatives, second year the earnings the in half from be supply more higher Improved higher from latter XXXX. more product chain mix, synergies margins the restructuring acquisition will and back-end margin benefits contribution plans profitable our of our drive of EPS and

purchase first We anticipate to million $XXX share. other quarter quarter and we to also between profitability results $X.XX of a expect to Our accounting related will be will and range first quarter impacts EPS year. All-in, be the per $XXX non-GAAP include for acquisition. lowest our this adjustments will and one-time be the first in million, quarter revenues $X.XX

expense additional quarter, acquisition one-time expect operations flow we from cash cost, This be lower increased restructuring In for the is cash for items. We Silver full due upfront cash operations, million $XXX will anticipate flow year. above XXXX integration. interest driven to these than first Networks negative and and cost the Spring from primarily by

impacts, the if to Our for our includes and accordingly. accounting they guidance which resulting recognition we revenue legislation. current XXX, financial our XXXX, impacts materially, estimates U.S. estimates and will the update evolve are XXXX is These guidance new purchase that continue from current will standard ASC change tax through

back call the Philip. turn I'll Now, to

Philip C. Mezey

Thank you, Joan.

the since Our has benefits data of validated customer in financial Sharing going this activities Spring customers in Silver deeper transaction more strategic integration combination. discussions closing well. very Networks between the teams January engaging and the with are and

growth the anticipated. we cost sight synergies a have to good line and revenue We of that

range revenue of XXXX temporal exit and combined in and with while XXXX supported growth Our guidance by guidance be the of from first will nearly there the high end to line company rate. noise our billion. with a earnings is total year The XX% the quarter, between last compared year, And the expectations. mid-teens our XX% $X acquisition at reflects is EBITDA reflects backlog opportunity a dilution in in run some and

has their after drive mesh plans platform. a profitability build evidenced our to the The to bookings XXXX. XXXX, EPS supports restructuring plan beyond profitability to plan backlog. are expect goal restructuring non-GAAP margin continued from are network today been mid-teens to the we end underscores about and strong the business upbeat XXXX. will in with to announced synergies growing in with assets Customer EBITDA of strategy predictability, and accretive commitment be our converged Itron's response and acquisition projects completed at positive, transaction metering the growth. by to together and our accretive on to our continue EBITDA We smart gross Customers also The

innovation delivering with of industry Our is message of broad value our more by accelerating resonating standards a ecosystem and partners enabled built customers. on

innovation, base more smart lighting, management, to increase distribution the sales scale than of energy backlog millions distributed sense other and added million value analytics endpoints provides more XX team Our cities. I and accelerate of mission as customer services water for in to automation, with how choice non-revenue of such value smart utilities smart and very with a and shared am great in our pleased our industry. collaborating is well our

XXXX, optimistic and to now and synergy are very we future. profitability in up clear some our let's the Operator, We executing for goals open call on plans the questions. deliver about are

Operator

first And from you. Chip with take we'll Thank question Genuity. Moore Canaccord our

Chip Moore

can integration on a only maybe by platforms right you so a you and giving the closing see is what now? Thanks in, detail Philip, and here, converging more efforts taking little deal. the us two how congratulations but how start on you're month or going

Philip C. Mezey

Thanks, Chip.

said, I number with As proceeding the meetings of which of extremely is I all mean had meetings, have gone integration We've very a technical customers, well. productively.

months is, expectation really go we're be and that detailed that here we'll through develops. in planning providing going as more Our first a the technology is details cycle of year, the six to

is of view. customers gone with in technology meetings well Our up it a have that terms to from extremely understanding of we're what point

of companies come an really we're I think very the going together, importantly has structure well. basis more how ongoing to common things of a on getting process joining the understanding very, along

our and and being technically both systems terms of very and base, good is made. progress customer in integrating culturally So

Chip Moore

restructuring do to new the de-levering the sounds times the in years? ramping, could and plan two next of That's How And Thanks I two under goal see that guys. in ambitious. more, impact there you great. maybe if any sneak one pretty

Joan Schweikart Hooper

I'll to Tom of No take and goal plan the de-levering piece. bit this the little about because wants first to the of plan. change a maybe talk restructuring

Thomas L. Deitrich

my Tom, a of would are Chip. In I that and it here. half towards would amount savings here. There mind, involved year. you different of the back are XXXX. number of XXXX, geographies Thanks, through Most of Sure. touch maybe say that a would recognize minimal in XXXX into the ramp

the into Some sure sort the will that geographies, up takes that bound we some probably with us are but more be of and for to local time XXXX. to with across comply rules them XXXX and through,

Chip Moore

Thanks. Understood.

Operator

And Oppenheimer. Noah question from next Kaye comes with our

Noah Kaye

Maybe could of start to a just (XX:XX)? for parts obviously so for taking questions. Spring for the Silver we Thanks you What revenues with, the assuming the much GAAP network XXXX for lot moving are integration.

Joan Schweikart Hooper

as our basis is really always Yeah, guidance has combined a been. it on

So, and models have a and with go report guidance a as be we segment providing as process that will to your guidance. report the separate segment aren't we've we of segments. of on to call, we but that, GAAP, provide you'll a they QX reported converted how aren't to in through did we them billings we historically each see but to obviously position the and for mentioned I Obviously, when going

Noah Kaye

kind and there's always there's pretty just a whether of business. been any year be But revenue this revenue Sure. that billings more Historically, trajectory convergence the billings and new going of because big the in to standard? the of GAAP discrepancy the the recognition between GAAP sense

Joan Schweikart Hooper

Yes.

convert really in it's two-step actual in going obviously, our them and we so, think and forward, a I guidance our so as process.

has but Typically, defer right, absolutely to them there be what end going been. a XXX, to having there to up XXX had will you're to though and margins. then higher ASC you're convergence what converting versus You're

general, margins impact end billings. a up showing you GAAP versus having in would depressed on So from

Noah Kaye

out a thinking out very business and That's which be and Comverge And we year-over-year? take how organic kind helpful. we we looks take FX, of like if about in tailwind, we Thanks. growth out that should Okay. the take

Joan Schweikart Hooper

Philip of aggregate is Well, XX%, be so of being the Springs, legacy amount mentioned going will but we're a a that portion our range segments The pretty bullish Silver in really Itron of again, in the call, to really position about looking segment-specific kind we're XX% not backlog a growth. XXXX, certainly provide all the we significant size on and participate in of for to a guidance. Electricity, to portion is backlog, the that into mentioned Water

Noah Kaye

about that Great. forward is Okay. The of jurisdictions, you sort all start or reason just guidance-related from And your rate, question. trend maybe there why of going constitute effective tax it does to where XX% it is rate then right the a one might as think up (XX:XX)?

Joan Schweikart Hooper

estimate. is current of Obviously, taxes. federal Well, then state but yeah, XX%, it's are portion there U.S. our the that

the that mix the is because So than probably higher then and jurisdictional rate more blended of XX% of like overall U.S. income. some it's of

our jurisdictional So move of now. best it to can continue income, but for year the estimate right on mix that's based

Noah Kaye

Okay. back Thanks very queue. much. in I'll jump

Philip C. Mezey

Thanks, Noah.

Operator

to And go next with we'll Joseph Osha Securities. JMP

Joseph Osha

from couple A questions you. thank and Hello me.

been Electric new reporting margin, existing see the for gross see breakout Can networks basis. you've we that expect a First, your QX? operating to kind we margin revenue, on Gas, Water, of business once

Joan Schweikart Hooper

Yeah. – segments, and four four we'll report for three the instead We'll same segments. metrics report it'll segments the be all of

Joseph Osha

expect also all unit sort of report that can unit Spring wrapped to that shipped to thing. we about see used meter see historically volumes? nodes So Silver some have we Might data into of of number provided? sort type And the a you information of Okay.

Joan Schweikart Hooper

trying understand a combined report to the all company. metrics in to still really of the we want how forward process as We're going

be more... too say and So we'll say studying be to we're I'd a to but the in exact probably certainly metric, early it's talk that, it'll position

Philip C. Mezey

did Joe, in as that unit-related some of provide we for, are information, the we discussing. frankly, of topics today's of that – asking aggregate we units by visibility comments were the because some the like current represented kind today you're

Joseph Osha

of about sort these about getting X%, (XX:XX) additive QX. model an sort we last that to that Okay. talked the and about Itron, being you're can think you operating X% savings And got Great. But to X%, in legacy for almost Philip, talking now? cost cost one me. there for continue in you've model of to past then operating one as

Philip C. Mezey

going incorporating model, to seen OpEx On higher, basis. as numbers historical through some us these it's the development basis, number. synergy obviously which those may you've combined take to somewhat tame was of we see Silver on a First time going-forward research costs higher and some significantly of a Spring all, a

As levels and this would higher, we somewhat that in towards done is networks see software very space model, and this investment may we a be increasingly bit services, our are strategically outcome rotating of aggressively to where upon little driving model. out to But an along that way. adjustment the going Safe in very say that interim, synergy based you after update we the though, are the we'll numbers duplicative cost. the

Joseph Osha

Okay. I'll back Thank queue. jump in you.

Philip C. Mezey

Thanks, Joe.

Operator

comes And Pavel Raymond our Molchanov next James. question with from

Pavel S. Molchanov

Thanks EPS rate I at so to $X for question, breakeven taking at implies the then plus, look starting run the getting and guys. that When your about guidance, year of for a just over well we that modeling? Is anticipating? rate of profitability, three sequence there last you're a year. should Is an the there for be of for example, quarters that $X the certain exit

Joan Schweikart Hooper

the second Well, in is obviously, of than half first half terms much earnings. the stronger

it backend guidance quarter the is mix. more of the to $X.XX say, loaded, We chain some XXXX benefits from of $X.XX will $X.XX, supply levers which of described is product first the the manufacturing, then and synergies, that of help the backend restructuring so that, deliver range you the loaded. $X.XX to as So plan, efficiencies even are some

these will give numbers. you but a we're can't I So we achieve quarter-by-quarter, comfortable precise

the math do you if half. so just a that, have you pretty second on strong And

Philip C. Mezey

guidance aiming of the out end opportunity target mid-teens the time. some And XXXX EBITDA getting as this end at for comment at to I'll high that the got made at the that we've point we to we start have of that been the

Pavel S. Molchanov

the expense, merger anticipating as on guess a a I And is head Okay. modeling post your post getting SG&A synergies to normalized there and that basis particular we're you're the R&D and restructuring? count

Joan Schweikart Hooper

No, not really.

the we're between the it's said, not manufacturing the certainly working head structure, plans, a count overhead necessarily restructuring acquisition but on well the we're synergies target. and as attacking even as Philip structure As additional cost

focused it's So really on dollars.

Pavel S. Molchanov

Appreciate All right. it.

Operator

David from with Katter comes R.W. question next Baird. Our

Benjamin Joseph Kallo

Hey guys. This Congratulations Kallo. everything. on is Ben

Philip C. Mezey

Hello, Ben.

Benjamin Joseph Kallo

Hey.

million first us then Spring. next remind you and with when know I $XX Silver was plate wondering just So could million have about the And $XX restructuring your you started? the full I restructuring,

before So company? you integrate why announce now whole the this

Thomas L. Deitrich

Yeah.

So Tom Ben. here,

that. Let me at crack take a

We So XXXX. roughly was million XXXX, in so planned that That of straight and XXXX. by I'm savings, restructuring back the to end trying $XX separate be complete by everything of the to annualized program here. keep of program that's announced a part end of due

Benjamin Joseph Kallo

there too, right? sorry before interrupt, Tom, but that, I to think one was

Joan Schweikart Hooper

XXXX.

Thomas L. Deitrich

Yeah. Certainly, yes.

we're XXXX done complete. dusted midway XXXX So it. say and through I'll and is

So what is less get of to that, much XXXX the $XX rate little to by than you saw XXXX. on track in end still run half million through of very the the

For through to announced one million That XXXX plan. the time we we roughly by the today, call exit it, to plan that savings run XXXX the annualized will get $XX in XXXX.

layout So is. that's what the

So through, XXXX XXXX starting. obviously done, XXXX halfway just

about think how you that's So it.

Benjamin Joseph Kallo

I my started so is, guess question haven't you integrating Silver Spring.

bigger probably it's So than $XX million, right?

Thomas L. Deitrich

getting... synergy, separate in very again, your Well, what keep is mind Spring said for Silver them we

Benjamin Joseph Kallo

No.

the one. other For

Thomas L. Deitrich

yeah. Synergy number,

Benjamin Joseph Kallo

Not Silver Spring.

Thomas L. Deitrich

recall optimize really primarily Please model chain, chain contract continue our we Spring still we we've chain. we to supply cost sure it, driven that manufacturing, activities continue but that mind, mix ongoing an go external Silver our It's by how synergies push want. – flexibility sorry, activities. to supply of $XX Spring external need together. as different mostly the to in our keep part with reductions structure for got synergies In of and million make optimize of to million supply terms Silver to have was associated restructuring, things the different in separate manufacturing, to so the $XX the got them internal and in a want So and cost you've and

company more optimize in dependent for some that revenue. overall our changes on to chain. outcome think we piece making our we target the EBITDA how about market of R&D has side the to supply about So we sure the into Part incremental the of there'll that are this, some continue is and side while getting outsourcing supply the business also be reoccurring a we the activities towards of thinking grow reapportion how as can that happens on as of that mid-teens talked our about chain to

drives that's of what restructuring it So side things. on the

Benjamin Joseph Kallo

What about... it. Got

Philip C. Mezey

your of our as assessing Silver service plan risk Ben, is the it related really to of activities bandwidth the focused you've been restructuring the supply we we of significant is level part And the question, core we've heard, a together. the technology consider delivery. Spring be plan about careful and in this convergence, number put chain, how very on of to the integration to and that

increasing. And so are that largely people the aspects velocity different absolutely the these is different of focused of is but plan, this groups on

Benjamin Joseph Kallo

that What NIC to about it. Silver cards? sales just Got had Spring on the contracts selling synergies, meters

Philip C. Mezey

about synergies, acquisition as So, And not analysis, synergy Electric, is Ben, out, that provided Water, services automation, logic distribution cross-selling networks, our Silver million and of Spring point cross-sell Itron are and there here our as there and does we've former very software and Silver endpoints base, Itron cross-selling the under customer data by other and is are that deal opportunities opportunity of across of are ultimately portfolio. analytics for Spring former existing the lighting technology managed underneath there opportunities. part opportunities and in Gas for a you street strong is It significant cost synergy. talked revenue count that overall $XX target

side. discussed the cost revenue opportunities pursuing we've actively here So we that the are are numbers synergy beyond that on

Benjamin Joseph Kallo

Got Congrats, guys. it. Thanks.

Philip C. Mezey

Ben. Thanks,

Operator

next Jeffrey Osborne comes Co. & Cowen question Our with from

Jeffrey Osborne

Most of guys. been just afternoon, good questions. one Hey, had have answered, I two questions clarification, my but

then... the modeling networking just segment, or of will first and fourth the it purposes it what's of be all, name On for called

Joan Schweikart Hooper

Network.

Jeffrey Osborne

network? Okay. it Is

Philip C. Mezey

network yes. segment, Itron

Jeffrey Osborne

both what just to the you're or cards and software Itron Gas, going past? SSNI-related include is was going reader it Electric, that perfect. is revenue, that in cards out and from to parse NIC in network, then And Water exclusively

Philip C. Mezey

and No. Spring in XXXX is be This we Silver legacy services. product will exclusively segment that reporting

Jeffrey Osborne

it. Got

Okay. can you charges moving I and non-GAAP a that. to I'm but on $X.XX? it of is pieces just as go then And relates understand was guidance what $X.XX and lot wanted there the... clarify to just QX whatnot, of where in just to the trying over earnings to GAAP

Joan Schweikart Hooper

Yeah.

Jeffrey Osborne

anticipating? much for number a revenue one it ...where are rate the I lower because for was that run that charges a including you're non-GAAP that million $XXX seems

Joan Schweikart Hooper

Yeah.

purchase the we accounting So we just quantified. are on impacts and let and guidance through have still working don't me focus those give all GAAP QX because didn't obviously

So year-over-year about year big of $X.XX at be it's would associated think a interest. of from Itron to If EPS. a $X.XX the with range of EPS it a looking guidance I reductions perspective ago, a non-GAAP

through $XX with So I roughly quite to it $XX we have million dilutive QX. for annually last would are P&L. for in for QX. things certainly is million us but year but to higher dilutive interest. mentioned been year that's run debt the couple year, of associated actually That's non-GAAP Silver We type of the Spring that on. There the to $XX accounting significantly not than took purchase for mentioned a incremental year, the have million the they're

interest of and really there expense synergies and the incremental OpEx the so quite aren't us Spring bringing in the yet, really with to QX. Silver in QX, dilutive So, nature. segment I of it's But in of in million-ish QX in aggregate, one-time that we couple in it's adjustments in book – think need that the not be to combination that XX will just

Jeffrey Osborne

company, their backlog Spring, revenue a And similar up lag standalone $X of there XXXX, with if in it was GAAP Silver historically, in the for and a new to recognition. question, upcoming great on visibility Noah's billion-plus years. But the customers ramping a lot was had

in of maybe just the thinking? that were the much There's revenue that part is segment piece GAAP So as at than particular? people network look lower just we for a issue

Joan Schweikart Hooper

but than the It's ramp, your that's probably is significant structure... would has not to subscale of a of and a OpEx the to they company used and it how models a there revenue portion yes, issue. in relative and bringing GAAP at guide, the billings, still of little typically be issue the Well, lower bit

Philip C. Mezey

as think under quarter will is, different there a it results, so ASC-XXX our under to report will be first revenue be I we and accounting referring you're Jeff, and which recognition regimen.

Jeffrey Osborne

COGS we the XX% to I wanted it. of to of highlighted understand Tom or plan be about just attributable from it coming that of savings is so that you to it just would And you you quick based described of XXXX on kind this the it is of maybe Most try or Got where earnings cost as think rest OpEx. the to related, and points were power? the that the goods but restructuring that clarification $XX safe then on just announced say way week, million the but a XXXX did, to

Thomas L. Deitrich

think the Yeah. what as bit out OpEx say in. we oriented. things sales is and and would of business the line cost moving truly be that are chain of actually the towards of ought kind balance. ramping I it. a the I costs of for supply are of so of very of half. to between as would well of the on That's outcomes-based cash you half up traditional a savings charges, that side, inside as and The happening an the bunch but side cash thee charge split it's maybe where lines that more XX/XX something line, that would of more Most ready on come course, expecting be are There on a get

Jeffrey Osborne

just Got maybe quick one. it. And other then one

confirm just about if awards that close then the some or plan question, think in we flowing year us to are on half, as they maybe in facilities I your at that quarters? upcoming this is memory, restructuring they but Two-part already two you On closing France. remind second can your about June, through could were are the program and with any a those the as that. benefits My thought one, XXXX you closed, earnings how Linky think point think drag yet? there were there, they the risk just we And do closed the I

Thomas L. Deitrich

Yeah. Good question there.

the Both the of during phases there that really of the was ramp-down plan, facilities were that Those big in first one one France. the of two year. do actually largest. in this part now, North So are half really those America restructuring exit were so XXXX we those in and

terms that's the actual, P&L the into that's to some In the roll of yet of savings yeah, XXXX. during

is that to In Linky. making terms programs forward we opportunities project. that on in pleased of will the we business don't our Linky the look that. any we're jeopardize on that obviously We question Linky that have with XXXX continue not It the carry are would something to moves any specifically, with future France in still and the way the XXXX around jeopardize nor really in the

Jeffrey Osborne

Tom. hear. to Good Thanks,

Philip C. Mezey

Thanks, Jeff.

Operator

comes Next Securities. from Guggenheim Sophie question Karp with

Sophie Karp

taking and evening, question. for you my thank Good Hi.

beyond quick real Spring, Silver the street lighting on things straightforward so acquisition, of plans and applications had prior they expand product. metering Just other the to like into solutions, verticals into to

Thank So new what does the future under look ownership? like initiatives these you. the for

Philip C. Mezey

beyond Sure, on fashioning the are found a able opportunity where company there, we partner preparation take I footprint even in the a really far, attractive has how potential of where sell The take look synergy that additional at side. with for Itron a have And the vertical do market. very markets, Itron's street of opportunity a with the water Sophie. order this are very and in in that revenue and The as really strong ecosystem footprint, consider traditional we and immediate to smart of we've historically we vertical in city we'll lighting historically very and that continue it at likely elements mentioned outside We municipal us future can at our had level, in analysis very what opportunities pleased but front strong we area with of being activity street in partners kits is to looking lighting enable so the opportunity to the look is to development look one at forward. markets done expand moving had work its there. and good

Sophie Karp

Thank you.

Philip C. Mezey

welcome. You're

Operator

comes next Company. with from Sean question Our & Hannan Needham

Sean K. F. Hannan

me lot squeezing in Q&A a here for certainly tonight. Thanks of here, Yeah.

a a perhaps question theoretical observations. bit and of little Just

think you environment two I have each and you've more terms there terms this the aversion going that working the competitively so potential you risk be had more bidding new are got suspect always pie the seeing really be have really isn't I would Silver bid acknowledged hood, under you in different in to Now of part. some in cases of new with Spring the with, other. entities discussing today folks of the of the competitive past, where necessarily environment, would or what Theoretically customers? against will sum

observing to terms here? your of and just you thus want where guess might to think I ability what your this So, far, be get of sense competitive in you're head to Thanks. conceptually

Philip C. Mezey

Sure, Sean.

has far So want the customers been very that certainly the in comments positive, our customer I made, response to...

Sean K. F. Hannan

sorry be wouldn't to I'm understand... here, trying though? I'm interrupt that existing customers to Phil,

Philip C. Mezey

(XX:XX), Yeah. going I'm say but... to

Sean K. F. Hannan

Yeah.

Philip C. Mezey

Yes. response Prospect, prospect as say I well. would

Sean K. F. Hannan

Okay.

Philip C. Mezey

of but our a our in network standards, the an us to space, to at that ability that support value only the faster choice committed data the will and scale part as Because message. ecosystem. increased invest also overall to other of we looking we we've network investments that a allowing that multiple supporting to broad are is tenets the are open talked about are drive out of providers, meter drive networking a the open the not And of and that in developing the we logic are more committed company that example analytics the that of in are in marketplace, the customers software can strong nature innovation

dynamic? value, accelerated really the to innovation. feel competitive we're list, Yes, we're a strong for combined we've in and offering really pleased opportunity that also customers that backlog choice is the offer space And and very has company the got So, change that there and the prospect very with our obviously pursuing. combined a

Sean K. F. Hannan

That's great color, for to much Phil. so hear. the Thanks

in there. for all Sorry of Appreciate tonight. and jumping context the the interruption here

Philip C. Mezey

at Thank you, Sean. problem And all. no

Operator

question with comes from our And Kaye Noah Oppenheimer. next

Noah Kaye

kind Hey, across basically is to would environment. guess sort just RFP levels, still general at ended letting one, the whether that on question to how close you follow-up. supporting thanks me Thanks. the end growth, sneak for Philip, I in of that about see the book-to-bill a business low up year the break of general off the where and being out pretty segments? Coming year activity but could of, comment you single-digit mid maybe one

Philip C. Mezey

we objectives street I that market combined of automation of the But backlog things see and in lighting XXXX. do in strong we've a The strong States. on business, activity to with seen return as with distribution, in we I wins, opening in out Water pleased the technology for to add of supporting about The of This Water automation and business. technologies initial of fact the that in so on strong we some in would the the and would your EMEA good really – penetration XX% increased and European in and support that increase couple other that segment in side, and for for specifically activity brightening the international provided the growth this months yes, say and about bookings historical a XX that and Germany, a level and increased America Water on see ability, And really indicators there. continued like where continued level Gas XXXX certainly the provides And growth in see Itron the wins backlog the we're see though we Latin question color smart UK predictability Linky we outlook activity, activity. up Noah. noted level Sure, our activity to of see again, market we opportunity a and will side, the investing recovery XXXX start of business. Water level generation We United we're in. next opportunity

of overall support are outlook years over the very pleased for revenue couple growth. here to it the about we So, next

Noah Kaye

you so Thank Great. much.

Philip C. Mezey

welcome. You're

Operator

And Osha with we'll Securities. Joseph to JMP go next

Joseph Osha

I it around. Tom, you. It's back. Thank – keep think, might made one you this for I coming be it's Okay. extraordinary. like on

Joan Schweikart Hooper

Joe. okay, That's Okay.

Joseph Osha

chain, early were efforts how be might wrapped place. that improvement, about they much there? their some The Tom. potential been concerns, legacy low-hanging supply a put for of saved they've might (XX:XX) chain five to into questions, be be a may very attempting one that's ability money maybe existing nearly supply this Any about got, to lot Spring Silver business the into and your even of thoughts how and This, thoughts for challenging there's to monetize fruit,

Thomas L. Deitrich

so of platform obviously contract ours which are there. or was Joe. today, at hopefully power It time know, lot taking with obviously thinking out their bigger looking a it was, I $X that spending and with one, is a $XXX manufacturers that better we're million combining which about buying us and the billion, business Good some gives something don't

I we're our us ways, out components The side we it common the chains, out we'll year forward. that as and year probably guidance we're also play think and some the in we move an pricing in on one it years. increasingly of overall. leverage where two the making look already certainly scale our to combining but that's is supply over actual, factories secure is of world use using very So, want that next have for that in game constrained helps get that baked to to and scale is, the that and will leverage and we The sure obviously to we early into continue improve is

Joseph Osha

just on you starting of And folks? obviously QX taking EPS confirming Okay. lots from guide homework ongoing basis GAAP an we out a but now, of will place get right

Joan Schweikart Hooper

Barbara, I'm sorry.

Barbara J. Doyle

No, with non-GAAP Yeah. EPS guide though.

Joan Schweikart Hooper

Non-GAAP EPS, yeah.

Joseph Osha

a quarter No, able guidance? no, homework, no, done us you I mean, give your will once all you've of to starting be next kind QX, GAAP

Joan Schweikart Hooper

we'll be I now. will convinced that even not to in evolve. can't That continue all right I'm the to QX. purchase through commit Yeah, accounting

right continuing EPS with guidance. non-GAAP the So, now focus is And... our

Joseph Osha

Thanks Okay. and...

Joan Schweikart Hooper

We there's there go just much continue. have provided to guys not did to understand quarterly because a would just QX help we I plan – was year, really on. Sorry, moving something quarterly we of say, this parts. that's the guidance going so want you to on, is going lot

anticipate we the combining we full kind year get continuing guidance, of two this after So through our wouldn't with of first quarter companies.

Joseph Osha

sure. I'm accountants, busy Okay. of Thanks. Lots

Joan Schweikart Hooper

Yes, very.

Barbara J. Doyle

to the Okay, Sofie, end I of think, the we're coming hour. up

wrap the Philip should now. So call else if the I don't in think there's I we queue, up anyone but know

Philip C. Mezey

continue although Yeah. opportunity There have about that is Okay. drive we quite the everybody energized on we a your going to both to lot you are operational see to the extremely XXXX. largely Thank to go-to-market opportunity for is, visibility, synergy that accelerating steps to. on tremendous very really under that the identification I found now basis, there the largely We of numbers that with Itron continued achieve to are note control and have are that combination improvement, confirms increased And plans is see we improvement a the Spring really drive approach what our and to order restructuring think, our committed in an elements strong these need there. common and continue we've a we and here about of combined backlog this Silver of and opportunity pleased with thesis questions. the in

much thank So, be all very and I'll soon. you you talking to

Operator

And there available will afternoon. conference audio today's be this replay of an

or We access today's you of by the the can You website, passcode X-XXX-XXX-XXXX This dialing for with replay company's the to thank your go conclude X-XXX-XXX-XXXX XXXXXXX you participation. www.itron.com. can or audio does call.

disconnect. now may You

Itron (ITRI) 28 Feb 182017 Q4 Earnings call transcript