Earnings call transcript Q3 2022

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Operator

Good day and welcome to the Itron, Incorporate Quarter Three 2022 Earnings Call. Today's call is being recorded.

At this time I'd like to turn the conference over to Vice President Investor Relation, Ken Gianella. Please go ahead, sir.

Ken Gianella

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

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

call to operator Following take using our open prepared the remarks, the described. the we'll process questions

over to of call please let presentation Before our you the I statement. Tom, me remind our and turn financial non-GAAP safe harbor

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

We forward-looking. with are from and risks call differ results will These Commission. current during factors that today's could statements and XX-K this are Risk making Securities earnings be during the expectations this made of on to in comments and and call, Exchange conference expectations because section in subject Actual assumptions were reports filings other of based and that statements uncertainties. these our Factors presented are materially and release Form and that the the

discussed to financial forward-looking Materials provide undertake any attempt company not to All environment. of in change update made November our operating comments, and any our estimates may or appropriate materially insight to and do and are good faith XX, forward-looking duty statements. a we statements current XXXX future today,

our Tom the in the Deitrich. call Page to over and presentation, turn four I'll please turn CEO, to Now

Tom Deitrich

us. morning you for you, Ken. and thank Thank Good joining

share Revenue $XX quarter cash details per $XXX shortly, Joan million, was $X.XX, of will million, quarter. the but and here's million. hear non-GAAP flow up EBITDA earnings adjusted was a was $XX free brief overview was You coming third from

water we $XXX This electric had robust our for bookings crosswinds, of another discussions market demand ongoing actively evident in more partners remain never technology. technology distributed X, our total reflected and quarter reaching our to $X.X by Itron suppliers September. for need of extremely energy our has and customers Slide their their is some continue energy assets. our This We desire driven of Inspire insight demand strong The and needs in million, vehicles, to to Conference our and was our with customers record the billion. through utilities of engage for third we consumers. the been and as alignment with stronger, of resource proliferation require Turning the anticipate macroeconomic with management, control despite the new over backlog our see the to offerings customers, our the in

our key quarter onto Some our how distributed bookings with and of Itron solution. the optimizer, energy technologies highlight the energy management enables this distributed renewable integration of grid

allow and Holdings and to distributed energy more efficiently. control Company Tampa our resources their customers them to Pepco solution optimizer Our analyze chose Electric

Corporation in endpoints Utilities grid. the GenX our including at newest a utility Network as were visibility in one leader edge Canada, distributed Riva Alectra logos. Next, announce distribution intelligence and innovation refresh control enhance leveraging of of their we're for proud to technology generation selected enabled and the our next we Already to their

a Now that at regulatory market the for and some robust operational turning like see environment healthy pace. pipeline quarter. that remains insights to plentiful updates Slide provide and continues X, with We a would a to demand I

in automotive the hampered industrial possible inefficiencies inbound in chain used While components global visibility our analog, applications. revenue. our to backlog delays Unexpected slowdown, remain quarter within our critical non-linear and signal commonly macroeconomic industry are a experience expectations. above constraints resulting within into shipment is the environment These deliveries factories the in that shortages, and market of constraints supply quarterly continue backlog macro revenue mixed convert ability positive is resilient our created and other and slowing semiconductors focused of constraints in our to RF we and case

remain which partially in offset actions. by We pricing an environment, inflationary was

cost segment deferred the we Indirectly, Network the well. plateaued While performance have recent forward. as quarters. segment our in quarter the volatility during may the the carry growth impacted the of still Solution has recognize particularly headwinds been during directly Outcomes of These near-term company,

growth our direction, intelligence added our particularly the software involving Outcomes distributed projects growth the delays value near-term solutions, supply new our managed have remains services impacting trajectory. While strategic of those of and at constraints forefront driven applications

the stabilizes track. supply confident and at pace, are on get will Outcomes we resume back our As project business schedules deployment

to footprint While introduction are maintaining of the be improving our and more moving agile disappointing, not with customers taking and continue course do conversion, for to to innovative plan allowing us on forward, delayed macro work new controls engagement our strategy the get of situation. We through we proactively improved in deployments. improvement difficult asset-light headwinds driven new these back headwinds idle this anticipate and to products sit our these to operational track. inventory backlog the with finding market, over close discretionary on do in spend, ways Concluding more macro maintaining

tailwinds enhance advantage current we technology the and long-term the remain allow our will performance. on our secular that with market us Looking out combined situation, constructive beyond to

cover detail fourth third our results will and now to update an our off in Joan on quarter outlook. to more quarter I hand

Joan Hooper

Thank you, Tom.

to a Slide for turn X of consolidated summary GAAP results. Please

currency. our X% strategic versus million margin compared or device net solutions due of to $X.XX certain QX last of higher ability share of semiconductor supply revenue $X.XX due the shortages down or in mix, by and a quarter with net product partially basis was or $X prior the $X than year. was last diluted GAAP product cost in million favorable continuing lines approximately pressures points share along Third to of limiting per year inefficiencies was shortages. customer loss XX exit fulfill $XXX offset was inflationary decline demand. which million constant XX.X%, the to per The related component year-over-year income to XX% with gross year

operating diluted was or Regarding non-GAAP $XX EBITDA metrics income the Slide $XX million share. net per for $X.XX X, non-GAAP million. Non-GAAP $XX income was was million. on quarter Adjusted

decrease Looking combined component of on non-communicating by due including decrease at shipments. year-over-year primary as strategic shortages million component significantly primarily million, shortages business basis. in segment revenue the $XX constant The million currency Solutions Segment million, constant on with Device versus continued million Network $XX or impact the EMEA constant declining X, was year was sale decline in this product segment. million limiting Slide $XX revenue driver. to decline $X of $X revenue currency last the was currency X% the Revenue with $XXX or prepaid lines, gas business mechanical was as XX% Outcome to exit in certain C&I X% a business a year-over-year our or Solutions or a the in

currency $XX prior million foreign resulted the versus lower in year. revenue Lastly, changes

operating performance A impact was versus non-GAAP our component per the by lower FX driven up shortages had prior rate Bridge the the and from to per by share due a positive tax Moving to per and the year. partially lower Net EPS share profit gross and each year-over-year impact year. revenue expenses. cost offset $X.XX XX, prior $X.XX inflation EPS lower $X.XX a $X.XX negative had operating on QX share diluted Slide non-GAAP

X.X%. cost Turning year. of margin up XX compared and pressures. margin $XX results discuss lower revenue. Gross year-over-year, basis margin to prior operating due was mix XX XX.X% Slides I'll points margin primarily by through Operating XX million decreased was product segment to the due through gross to offset QX basis improved inflationary by fall points Solutions with partially the on of XX, business revenue the Device with

of related inflationary fall lower partially gross the due Solutions points points the cost the margin than XX.X%. to with was XX XX%, higher gross Gross fall inefficiencies through year increase XXX partially gross by to through last was is operating gross the higher million margin of revenue operating XX.X% margin margin unfavorable was declined revenue The the component points Operating R&D improvement of Network Outcomes realization an margin services, investment. efficiencies. XX.X%, of decreased Outcomes profit, $XXX lower XXX pressures of gross profit, due due managed to to XXX points and basis expenses. offset increased of $XX year million basis year-over-year. from was offset prior which with shortages. basis due of operational to margin basis mix, by

was period last the the debt flow Turning I'll year. as $XXX last the end was were million. Gross of end same cover remained million $XXX in the a the at X.X similar and times same QX, Cash third debt was at the liquidity Net approximately Cash and and Slide quarter equivalence $XX to level quarter. free. XX, million million. leverage net $XXX flat third of as at debt quarter,

XX. Slide to turn please Now

third during hampered As below were the Tom deliveries quarter, components de-commitments, our supplier and arriving key timing our non-linear mentioned at of expectations, component by we factories. unanticipated

improving did key signals supply company results. promised were performance cautiously expected time. their meet suppliers, deliveries lower availability we not more While with in about receiving than over discussions positive the resulted us optimistic from suppliers Recent leave

environment supply this anticipate continue fourth we will However, the into volatile quarter.

QX result, revenue and XXXX a providing earnings we As are outlook.

cents per quarter the and $XXX in share $XXX per million Our of our expectations fourth million to for the zero earnings range non-GAAP share. XXXX $X.XX revenue of and between

Now turn call I'll Tom. back to the

Tom Deitrich

Joan. you Thank

us joining today. for everyone you Thank

the please open some line for Operator, questions.

Operator

will you, Oppenheimer. sir. Noah We Instructions] [Operator take Kaye the Thank question from from first

open. ahead. Your line go Please is

Noah Kaye

we I low-end improvement XQ the maybe taking chain no Good through situation. it peers thanks the I morning the kind go the the of know for chain half the early automotive in and guide, the XQ improving to look XQ. rev as grid of of imply at questions. XQ the folks in seems back year basically to and supply into have here sequentially just smart If commented and to some of the industry supply some

as touched could I you'll on have a entering comment XXXX? in bit you quarter, visibility here of sit the if also in just kind the visibility So your fourth on but the you guess can maybe of about some quarter, the surprises little talk we you now,

Tom Deitrich

time chunks with can to starts breaking supply for so. is think to river has break-up, ice big some period chain I that it's of up do it The accordingly. Sure. Happy end frozen as and in the way would you and jams pretty up a long about been

saw of in So we lot shipments. of the volatility quarter was timing third in what the a

third with even quarter. components higher end inventory the You up quarter can the we the inventory see with in of quarter at at of the as end ended that in the popping

goods finished still improved golden last are that supply screw cautiously what on. optimistic component into suppliers are a The cautious lumpiness some is out today what predominant us move you've but to remains telling level the of and got on sure a based situation bit in we for a supply, making something

that would fourth to looks even ice So That's improving. what be to say bit a expect like. during tried a convey it is but that quarter. the may the the outlook I we situation The visual is lumpy understand melting, to and you help it little

Noah Kaye

I I Does next some you to just basis as Yes. enter rate of XQ clarify bit of you're and a quarter. as in That's that dynamics And a a kind higher month-to-month on late guess Tom. XQ getting that, imply even XQ of we run exit similar more if the see that year? just maybe little helpful, mean, inventory in where

Tom Deitrich

Yes.

components is again it's cautiously do draw inferences Demand in lot of door. we're and expect there, to to it continue canceling course to a draw better. optimistic as quickly to it No of through anything get line customers remains on to it. We difficult are for strong. of we've off it we'll turn eager the Well, as be eager I to the difficult make the to it very needed capability product It's sure terms that backing still we improvement. the linear work to or a think got hard volatile. turn getting and probably in

Noah Kaye

to cost Yes. here. a And little then as starting bit kind of mentioned convert, plateau you backlog does

price at now products also pricing initiatives. You us recoveries on to terms catch of where and up for cost of you're kind kind in pricing some then dynamics you're you even the and what potentially to get Can of able referred backlog? new

Tom Deitrich

Sure.

pricing say quarters crossed that for still that up prior as the bit and and ago. there hard so I we've would would agreements been gain based in that quarters several working quarter-on-quarter. to about pricing the new we we still pricing would happen building a for indexed, us that from traction of that before size been now we things and in the quite caught is that decent But some protection of the putting As more fully look on that quarters quarter I are side have But caught It some haven't continues us another in fully time it two that give is or place have saw program volatility threshold. probably design wins haven't of it to that for quarters. in coming improves mention we ahead,. backlog the few against was still inflation the talked on does over up and traction.

Noah Kaye

Okay.

that Is that it? just fair inked maybe some backlog So reply at as the obviously improves through then to we to I'm the prior what that can medium was in way in margin if least hearing set and agreements, headwinds positive terms indexing characterize maybe these XXXX. inflect but look XXXX near-term costs neutral to back I a into or of still price and to some

Tom Deitrich

Yes.

definitely you've right see and backlog That absolutely inflation there and think length. not our think Remember the that on years about have as is through. the robust against last something in year have there on we got us there time in ago went what right that. how dynamic stuff things volatility of The itself. the the four that we three, three, that backlog or is rolling I in years probably the gone it that four side was so put

that part through is So the it that system. working still of

Noah Kaye

thank helpful, you. Very Okay.

Tom Deitrich

Thank you.

Operator

& We Osborne will Cowen next the Jeff question take from from Company.

Your open. ahead. go is Please line

Jeff Osborne

third had was questions I just have end. or may on and the Tom from you the in I but component that Joan, for my couple you something curious morning think missed the calls it, it's Ken. if revenue quarter? worse? A Is highlighted good shortages. impact prior getting I Yes, quantified better

Joan Hooper

it first quantify We the we quarters. was say levels third didn't it couple to I the for of experienced would what really similar quarter; in

year. definitely the middle in So worse of expected we when it was we the than guidance our set

Jeff Osborne

response variability it. or shoots coming be look – getting and things those to maybe but green that? as of higher, getting product curious you Got would And drops with the Is narrowing trying for less, just I'm a relates to your peak given seems of say it things like in, bit around it then for the components variability are I'd that coming it that in, to inventories better, the sort your on of are Tom, is volatility? trough peaks better worse,

Tom Deitrich

Yes.

if severely I we of the areas of think the couple severely when as of components terms green predict, the get constrained the it on to we about. cautious things of there's that optimistic by that getting that is QX. through absolute shoot those little makes dropping and euphemism better. green use golden the seen The a is we haven't are definitely is number shoot to that have those number visibility will, making while that components outlook constrained and dropping sure constrained which are is that yet is to that number that still you breaking bit difficult us for we what how hard bit set volatility would to a screws in of things creates Working on into we that's last those are

Jeff Osborne

still memory Got have and analog it. screw that like no? I being things other some and towards micro issue that is an companies think then your the are Is gold pointing gotten industrial And and or better. how auto more controllers proverbial

Tom Deitrich

the categories pretty the The little good places general quite has shape in vein. all of are The shape of RF, signal, mechanical been in digital bit some good that we for side time. kinds and side Yes. is constrained in that Absolutely. analog, side, memory mixed are but semi a

but way is problem So optimistic transportation the off number semi is the constraints It does those something for the cautiously maybe the days, terms and through better all in it yet. the today. but also by to dropping that associated analog down getting us of list, not in measured material. freight volatile space, just Again, in is of the really components not come which components

Jeff Osborne

selling around see the particular [ph] there's already I when lag base optimizer funnel that be depressed that in being for no on outcomes My SESCO last solution. to that about running. question customers? the versus versus for on when there announcement and to and be Pepco dynamics you because narrative could have Can having that new talk network to things to install implemented canopy like built. up to just the wait assume new I'm networks great just your of you is understand trying Yes. and the the customers the

Tom Deitrich

performance doesn't top. products. depend cases operate underneath our better some in gets to of top customers And but nicely there. network quite a data pipeline opportunities even Yes. competitive on on, particular of better over obviously see oftentimes it across portfolio do and there we network operates with The rich our with optimizer over It the existing in

is happening strong are it a and analytics marketplace balance, and to customers working So demand. understand demand as actually better hard in what's the strong package, supply

use cases in with management there to outreach to visibility initial obviously the that's control for a it distributed of the it over The but enroll EV resources. and proactive wide are from owners, energy iceberg the tip variety and programs grows and of using

the of opportunities that are spot wins rolling a terms but backlog coming in and recent of bright rich So – beyond a is certainly that through, to into that. pipeline

Jeff Osborne

I Thank all That's hear. you. to Great have.

Tom Deitrich

you. Thank

Operator

is The Molchanov next from from question Pavel Raymond James.

Please ahead. go is line open. Your

Pavel Molchanov

question. for Thanks the

we loosening around dramatic the that blinking of Could recession the reporting literally the case? the market, Is glut seems of supply is in recent that pretty in supplier some in world? your the but cusp on days in there of presumably reflected conversations. of all As suppliers a semiconductor as chain kind a forming fact have the be are be to red we

Tom Deitrich

can what glut even some marketplace. writing and where from tends are the be semi other down of in portions of is there least I At of the a inventory guys see inventory to

in where for see we is stand very weak. for a of Consumer also than automotive is surface, today. away PCs, PC world the where different are segment industrial I little the part which processors it market is meaning tight. like pretty reasonably Scraping still You consumers still think ours, is the and market weak, example, the space beneath a bit that in further supply that the from some pockets that's there the semi

capacity is evidence So that our views see that more which see cautiously I believe online. do optimistic capacity us that moving in existing direction, that. do We coming of good We we gives have. the

As it I of which will pick when like. up what predict the behind It's is think free, it to and begin that look little happen, outlook. supply breaks in acceleration a to will been our difficult traction terms would bit exactly

get tops a you those it revenue; into I last details of The try we trees, again, the in So across if look think is come, the backlog bits will timing bill-of-materials convert to to question. the it of the improving. [indiscernible] as it's

Pavel Molchanov

the Okay. most though it's And resilient more than still certainly and outcome then device, is follow-up network even year-over-year, of software is and it but segment, down on my services.

So what's that the reason for decline?

Tom Deitrich

Probably year-over-year prepaid in sector. the it decline of component really the has been biggest

prevalent true light in has specifically you the if us energy space since. in been For will the that pricing is prepaid in actually given in Europe the been year-over-year a That's Europe. decline usage the pretty

actual flat. piece reasonably recurring the has portion revenue that's the it, SaaS absolute been numbers. The So of in

the those the is So on up networks that to new growth is what of endpoint That to forward in as of as factor. downloadable starts looking deployments happen. are board into the we come distribute start terms intelligence what growth and ramp notion to though agents to

quarters that convert pent that little the growth the it's waiting terms a of in ahead. bit So in up we're to side been

Pavel Molchanov

right. All it. Appreciate

Tom Deitrich

Sure.

Operator

the Instructions] from Hutton. from will [Operator question EF take Chip We next Moore

is Your open. Please name ahead. go

Chip Moore

the Right. taking XX-month those and deployments it year? components Good much coming that of Thanks just of about we billion back wanted for likely handicap, maybe the you work out over trended of get has recent that some If to sense I question. look lack there ask how how $X.X can morning. that's in that history a really to backlog. more pushed is to is trying how through

Tom Deitrich

about I think the there. is in the way is think to shifting full timeline. around it the backlog There's normal

we the to the snow what which customers We're backlog pushed size to now the As us they plowed do we of capacity look we've trying on and ahead understand in that of is constraints. with to make based their want various at order component territories. work or sure

say of a some of rolling terms what flow through normal that would And ebb and XX-month you see is backlog. as the in I

you overall good of Number then profiling with X It's in in really of capacity that macroeconomic feel and are us. about plan resilient far with of concern It the very driven sort terms conversion a We that the any has of deployments for a the out ebbs and is very installation less XX-month. out of in us timing of to deployment very backlog. the timing. our that against and customers, Honestly, Customers closely that's supply working been see planning by strength flows. manner the in terms collaborative those very

Chip Moore

are to what's That's good holding the up, just Maybe guess and components, Can those for help. inventory on helpful follow outlook I you there? those more more of Tom. about how the expand here particularly stocks efforts to maybe critical you some and Yes. and some talked my hear

Tom Deitrich

to that sorry, those of and the inventory The need allows about to to deliveries is pieces good we as We our making conversion due to the most bill-of-material inventory happy It's the supply components in on-board of feel expect convert the quarter. it of certainly we to obsolescence lumpy in us inventory of risk. will bit component little but the that ahead. unlock have is the constrained a faster board terms it good full What quarters work to into excess the strength coming be the actually continue the do no demand, We're a a have the conversion. inventory, that. anxious all that get or end to through we on at from sure unlock concerns last

Chip Moore

Thanks very much. helpful. That's it. All right. Got

Operator

will Mr. Please It there any now for I this no further hand moment. question is at sir. Deitrich over back to ahead, CEO, that call Tom go the our appears closing remark.

Tom Deitrich

good. Thank much. for all us forward look next we to you today. Very you, everyone quarter. operator, updating Thanks Thank joining and

Operator

event. your participation. you today's concludes Thank for That

You may now disconnect.

Itron (ITRI) 3 Nov 222022 Q3 Earnings call transcript