Itron, Inc. (ITRI)

Investor Day 2021

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Oct 4, 2021

Hello, and welcome to Itron's 2021 Investor Day. My name is Ken Gianella. I'm the Vice President of Investor Relations. I'd like to welcome you to this year's Investor Day. Next slide, please. So as we begin here, I'd like to begin to remind everyone of our forward looking statements. For what we're going to say today, Itron undertakes no obligation to update or revise any of our forward looking statements in this presentation after the date it is made. We caution that all forward looking statements are subject to a number of risks and uncertainties and could cause the company's actual results in the future to differ from what we're saying today. So with that, next slide please, I would like to introduce the speakers that we're going to have today. This is virtual today. And so out of the Austin office, we're going to have our President and CEO, Tom Dietrich our Senior Vice President and CFO, Joan Hooper as well as our Senior Vice President of Device Solutions, Justin Patrick, along with John Margolini, our Senior VP of Network Solutions. Joining me here in our San Jose Innovation Center is going to be Don Reeves, our Senior Vice President of Outcomes. Next slide, please. Conference call. So with that, what I'd like to do is just give a quick overview. It's going to be a quick Investor Day today. We have slated about an hour and a half, including Q and A. We're going to we're going to start with the strategic overview by Mr. Dietrich, followed by the financial overview by Ms. Hooper, and then we'll go on to our Technology and Operations Business segment. And then we're going to take a brief break. And then after that break, we're going to come back with Q and A. But we would ask everyone who would like to submit a question, please submit your questions at any time during this presentation to investorsitron.com. So with that, I'd like to start today off by introducing our President and CEO, Mr. Tom Dietrich. Tom? Thanks very much, Ken. I am delighted to be here with everyone today. Of course, we wish we were doing this in person, but stage. We have the entire management team with us today. So you get a broader view of the company and our strategy and where we're heading as a company. I'll start off with really a very high level statement. Our company really revolves around this idea of resourcefulness, doing more to manage energy and water in a much more efficient manner. This fundamental concept drives everything about our company. It drives our employees. It's why they come to work in the morning. It certainly drives a benefit for the planet with reductions customers more efficient as they strive to provide ever more resilient and reliable services to their customers around the globe. Now the job of our customers Isn't easy. They're up against some pretty challenging situations. There are major challenges that fall into, in my definition, 3 different buckets. The first one that I'll talk about is infrastructure. Infrastructure challenges come in many forms, but the idea of aging structure that is constantly under attack, both physically and in cyberspace. How do you keep it Fresh, how do you make sure you can provide resilient and reliable services when you're up against these things, but also the idea of the world is changing around you. You've got to integrate more and more renewables. You've got these roving loads, the equivalent of a house that just sort of plugs 2nd idea is environmental. There are more and more environmental disasters that happen on a regular basis. Every year, there's more and more storms, whether we're talking about floods or hurricanes or wildfires. These disruptions from climate perspective are happening more and more often and they're happening more and more often to more assets, more people, more dwellings, people are moving into coastal regions. More and more people move into fire plagued regions around the globe. And that means the impact that is felt from environmental disasters on human society is ever increasing as well as the overall climate disruption, Which continues to move in the wrong direction for us. The 3rd major challenge I'll put into a bucket loosely named social. This is the idea of a, I'll call it a service imbalance. The level of service that you can get from many other things that you do in your life is much higher than the way you interact with the city that you live in or the utility that you work with today. How can utilities improve their level of service, be able to give consumers what they want when they want it, But do that in a reliable and efficient way and do it in a very cost effective way as they this work that they do forms basis of society overall. Some pretty daunting challenges that are up against our customers and continue to increase year by year. Every year Itron does some market research. It's the annual resourcefulness index port. We release it every year right around the time of our Itron Inspire event, which is going on this week where we gather up community of our ecosystem partners, our customers, our suppliers, analyst community and really talk about where the industry is going. But that report is out on our website now. You can certainly go and download it. This year's report really focuses on this idea of grid resiliency and reliability. And we ask number of questions. The first one is in the graph that's on the left hand side of your screen. And that is really getting our customers to talk to us about what are the greatest challenges that they see towards grid resiliency and reliability. And what is it today and what do they expect to be in 5 years. So the top two answers for today really is integrating renewables and dealing with this notion of an aging infrastructure, very well aligned to the strategy or the strategy of the company, but certainly the challenges that I have outlined on the prior slide. That is where our customers are focused on today, which means that our strategy is on point to help them solve their problems. Looking out into the future, the top two answers 5 years from now is increased EV penetration and dealing with carbon mandates, the idea of being more sustainable. So as we adapt our strategy and the investments that we're making today view. What gets in the way of that? That's the second graph on this slide. And that is the barriers to maintaining a resilient and reliable grid. Number one answer here by far was delayed investment because of the pandemic over the last year. We talked about this in A number of different forums, earnings calls and in other industry events. The idea that Certainly projects had to be slowed down in terms of pace of deployment during the height of the pandemic. And new projects were slow to get started as customers didn't want to have to stop and start and wanted to be able to make firm commitments to their regulatory commissions or their customers, their communities as to how rollouts would happen. This also has a silver lining in it. It talks to a little bit of pent up demand in terms of where investment will go to really fight that major challenge from a resiliency and reliability point of view. The second two answers tied for number 2 really has to do with the need for a proven technology as well as a partner to help them understand what to do first and how to prioritize all of the investment opportunities that are in front of us. And again, that I look at as a very positive perspective From an Itron point of view, as we do have the proven technology that we can scale today and have demonstrated that we can continue to do so, as well as being trusted partner and a long time participant in the industry. So the research findings that we had well on point to where our investments have been and very, very aligned to the long term strategy of the company. This picture is one that you've seen before. It is the visual metaphor as to how we think about our company. This notion of a pyramid with a thin edge of the wedge or the top of the pyramid, if you will, being when you can have information to make a real decision and The outcome of your business. When do you have the billing determinants to be able to send out a bill? Where do you know how do you know where an outage is so you can take action on it And put the power back on quickly. How do you know where pipes are leaking so you can solve the problem and save water? That is really the essence of what an outcome That is reliant on being able to communicate that information, network solutions and the foundation of all of that is being able to measure and understand what's going on at The Source. That's why all three of these layers of the pyramid, if you will, work together to solve number's problem and create value and create real sustainability for our business and for the planet. That said, each one of these layers in the pyramid have very different focus and a very different business dynamic. When it comes to device solutions, it really is about quality and we manage our business there profitability rather than top line revenue. On the network side of things, it is about more applications and more coverage, more footprint, so that you have the ability to aggregate data from a variety of different sources over a larger and larger population. And third, on the outcome side, it is about growing the ability to make intelligent business decisions, equip our customers with ways to solve these problems. And when we do that, it accrues to us largely as a service, software as a service, network as a service type of revenue. That's why we are organized the way we are to get the proper focus in each one of these layers of the pyramid, if you will, but also why all three layers of the pyramid work together to help our customers be more efficient and more reliable. If the prior slide was the what we do, this slide gets to that how we do it and why We Do It perspective. The left side of the slide is really that notion of how. So our go to market, our strategy is revolving around expanding that footprint, increasing the applications, increasing the coverage, so you've got a richer set of data to work with. Once you've got that data, how do you expand the value, empower our customers to do more and more with it. And third is add more and more things at the very base of this and I don't think we have to do it all ourselves, enable an ecosystem to have more and more sensors, more endpoints, more applications enabled on our platform to only reinforce the ability to increase applications and draw inferences from the data to take real actions. Strategic priorities remain unchanged and serve us well. If I look at it from why would we do that, what does that deliver for us from a financial point review. Certainly, it grows the value proposition, makes us extremely sticky with customers. So think top line growth. When we do that effectively, 2 things happen. 1 is we increase the size of the company that gives us operating leverage from a profitability point of view. It gives us the ability to have self help cash flow. So all of this fits together with the notion of a pyramid from the how to the what to the why. If I jump over then and talk about the market itself, market perspective, lots of numbers on this slide, but I draw your attention to our market opportunities is approximately a $26,000,000,000 market on a global total available market basis. It grows nicely. You can see the breakout from the Americas to Europe, Middle East and Africa as well as Asia Pacific. It grows on a global basis. That growth clearly skewed more towards the top half of the pyramid where outgrows the lower segments of the marketplace. On the device side of things, that device segmentation in our world really has more and more communicating capability and communicating network devices are housed within our network solutions portfolio. So where we are investing really meets the growth in the marketplace itself. That market is very large, 26,000,000,000 and it grows, but there's also room for further penetration. In North America, we're really around 70% penetrated in terms of smart endpoints on a global basis. It's down around 30%. So plenty of room to grow as we look forward. That said, the last year and a half, two years have been impacted from a total market perspective by the pandemic. And this slide really takes that 26,000,000,000 and looks at it from a growth rate or deceleration rate in some segments of the marketplace on a regional level and by our business units. You see Our 2 bigger segments in terms of where our revenue lives, networks in North America and devices in Europe. Those were places in the marketplace that were very impacted by the pandemic. Certainly, you could see from previous slide, there is a growth and return as things start to normalize on other side of the pandemic, but 2020, we did take a hit. Our network business was down maybe 9% or so on a year over year basis where the total market in the Americas was down more than twice that. So certainly impacted by the market conditions and it isn't a straight line to through the pandemic in terms of growth, but things do normalize and begin to grow nicely as the entire world emerges from COVID-nineteen. By focusing a little bit more on the U. S. Market, which is clearly one of our larger and more profitable market disease. It's a very, very active market. Markets are moving. Our customers are very interested in advanced network solutions. They know the problems they're up against. They're ready to invest in gaining more and more insight, leveraging the data that comes out of the very rich capability that they invest in from a network standpoint. And we see a lot of add on business. A lot of what we do with our customers today is start with one application and start to add multiple layers to it, which helps them and helps us. That's really a change in the market dynamics. It isn't a capability any longer where you buy a fixed capability, you put it in the ground, network solutions segment and into our outcome segment over time. Going hand in glove with that change in the business model really has to be a change in the regulatory model. We do see good movement in this direction. The little color coded map on the right hand side The screen shows about 37 out of the 50 states within the United States, all regulated at the state Some states, the more advanced, are allowing direct SaaS capitalization, others do it more indirectly through performance based rates or alternative rate based mechanisms. We have seen a pretty steady migration in this direction, would continue to see more colors on this map going forward. The model is moving in lockstep with our strategy and certainly in lockstep with the needs of the customers. Certainly, we're going to continue to work to accelerate that in conjunction with our customers, in conjunction with regulatory bodies, making that the technology we provide is understood in terms of the benefits that it provides and make sure that we're managing the risks appropriately. Last bullet on this slide that I do want to give a brief mention of. There's plenty of talk in the news about potential infrastructure spending. I would note that All the numbers that we're showing you today, the way we've laid out our strategy is not dependent on a stimulus bill coming to pass. Should it happen, clearly, it could be a tailwind. There's a lot of good things inside of that $1,100,000,000,000 infrastructure package out there from grid and water and EV penetration that would help, but we don't count on that. And if it were to come to pass, we think the investments we're making today are very well aligned to take advantage of it. With that, I'm going to pass over to Joan to talk a little bit about our financial model. Overview, Jill. Thank you, Tom. Before I get into the specifics of the targets, I'd like to just reiterate the value proposition of Itron. So as Tom indicated, our strategy really hasn't changed. It's really focused on expanding our reach and our footprint and the value proposition we bring to our customers. Obviously, we have had some near term headwinds with COVID and some of the supply constraints we're dealing with today. But we firmly believe the long term value proposition of Itron is very, very strong. As Tom indicated, we have the ability to continue to invest in our technology and grow our solutions that can really expand our solutions offerings. The customers we're serving have a myriad of issues as Tom went through and we think we're well positioned with our strong relationships and our strong technology to help solve those problems. So we see the continuation of top line growth. In addition, as we naturally rotate the business to the higher margin segments You'll see our profitability improve. You'll see our cash flow curve. And that coupled with the operating initiatives that we continue to focus on, We see increased earnings power for Itron. The best example of this, if you look at the metric at the bottom of the right hand side, last quarter, we ended So we feel very good about our strategic position in the industry. Now let's focus on the targets that we've set. So just to orient you to the slide, the first column is our last fiscal year 2020. The second column is our estimates for 2024. So let me start with the top line. We're estimating 2024 revenue between $2,500,000,000 $2,700,000,000 We're estimating gross margins between 34% and 36%. This is 6 to 8 points higher than we ended 2020. From an adjusted EBITDA target, we're looking at 14% to 16% of revenue. This is nearly double what we delivered in 2020. From a free cash flow perspective, we're targeting 8% to 10% of revenue compared to 3% in 2020. So aggressive targets to get us to a much more profitable place in 2024 and delivering much more free cash flow. Now let me drill down on these targets by segment. As Tom indicated with the pyramid at the bottom, our strategy has been to continue to migrate up the pyramid And get to that rotation of the business as outcomes and networks is growing much faster both in the industry and our business with higher margins, it does yield higher profitability. But every segment is important and plays their role. So if you look at devices, as Tom indicated, the focus is really profitability. And frankly, we've made some tough decisions over last couple of years, exiting geographies, exiting products, really pruning back, not focused on top line, but focused on how do we position the business to be more profitable. And I'm happy to say that despite the fact that we're continuing to project some negative revenue growth for a couple of years, we are showing the ability to generate gross margins in the 23% to 25% time range for 2024. Compare that with about 13% 2020, so literally nearly a doubling of the gross margin percent for our device segment. For network solutions, we're expecting revenue growth of 5% to 7% gross margins in the 38% to 40% range compared to 35% in 2020. And for outcomes, we're expecting the highest growth 11% to 15% compounded annual growth with margins between 40% 42% compared to 36% In 2020. Another way to look at the segment contribution. And I wanted to go through another way to look at that natural rotation of our business. On this slide, what we're showing is dollar contribution of revenue and gross profit going from 2020 to 2024 by segment. So again, let me start with the punch line. If you look at the mid point of the revenue guidance. It's a 5% compounded annual growth in revenue between 2020 24. If you look at the gross profit dollar side, it is more than double that of growth rate for 11%. You can see in the color coded bars the relative percent contribution from each of our segments. So if I start top line. In 2020, our Networks and Outcomes segment represented about 68% of our revenue. In 2024, that'll be closer to 26%. Each of the segments as I showed with the earlier targets are actually improving their gross margin. So they're all growing their gross margin dollars. Even devices, which is shrinking the top line, you could see on the right hand side is actually growing its gross profit contribution to Itron. So this is clearly demonstrating the power of the rotation of our model as we move up the pyramid. We're confident in our ability to hit this target model and I want to go through some of the levers. Let me first orient you to the slide. On the left hand side, there's a number of categories, revenue, supply chain and operational leverage. On the very right hand side is a barometer of what we believe is remaining opportunity. So let me start with the top line of revenue. I show revenue is that there's a lot more opportunity to come. So think of that as we're in the early innings. Why do we say that? We say that because we're just really starting that migration of the pyramid. If I take outcomes, for example, outcomes was 11% of revenue in 2020. By 2024, it will still only be 14% of revenue. We clearly think there's a lot of opportunity to grow there. And that is where the industry is growing as well. We're continuing to invest in R and D and more and more of our R and D dollars are going toward networks and outcomes And really fueling new products introduction. So we feel really good about our ability to continue to grow the top line. If you look at supply chain, I also showed a lot of opportunity or Again, we're in the early innings. We have done a lot in the last few years, everything from reverse engineering and really making sure we've got the right We'll continue to do those things. We think we have the ability to improve our margin profile beyond just the rotation of the business to actually Through the operational efficiency and resiliency of our supply chain. Operating leverage, we'll continue to look at opportunities to go asset light. If I think again about the outcomes business, there's a fixed cost structure there. And as Don grows that business, our margins should crew because as we hit scale and again 14% of the business in 24% isn't really scale. It's got a lot more opportunity to grow. OpEx, I'll show a little less opportunity. That's not Say we won't continue to be very, very prudent in managing OpEx, but we have done a lot of things in the last several years. If you look at all of that combined, it gives us a great confidence in our ability to not only hit the 24 targets, but to continue to grow beyond those targets. Now let me talk about the balance sheet. We had an opportunity earlier this year to recapitalize the balance sheet and allowed us to really speed up our delevering. On the right on the left hand side of the chart is the net debt situation and the leverage situation at the end of 2020. So we ended the year with a little over 700,000,000,000 net debt. We ended the 2nd quarter with a little under $300,000,000 So we took our net leverage from 4.1 times at the end of 20 to 1.6 times at the end of the Q2 of this year. So we are very, very strong balance sheet. We have an untapped revolver of about 500 $1,000,000 So we have a lot of liquidity and it really gives us strategic flexibility, something that we didn't have for the last couple of years. So obviously, as I mentioned, we're expected to continue to not only have cash, but to continue to grow the contribution from free cash flow. So what do we do with that cash? Ultimately, we're looking for the right opportunities to increase long shareholder value. So we want to be flexible to make sure we capture value in whatever form it takes. The near term priorities are continuing with organic investment. We spend about 8% to 9% of revenue on R and D. And as I mentioned, we're going to continue to rotate that R and D more towards networks and outcomes To fuel the innovation that we talked about to solve our customer problems. But now we're well positioned to do some M and A. The M and A will most likely be in the outcome space. We've got to find the space. We got to find the right solution that speeds our time to market, gives us technology we might be lacking today, and importantly, scale and leverage the platform that But I think you'll always see us looking for what is the right long term shareholder value decision. So So let me sum it up with investment thesis. We believe Itron is a compelling investment opportunity. We are in a industry that is poised for growth. Tom mentioned all of the issues our customers are dealing with. We have strong customer relationships. They are looking to partner with Itron technology to continue to solve their problems. So we feel very good about our ability to generate top line growth. The natural short rotation of the business as well as the operational initiatives we've been working on. We feel very confident we will grow our earnings power, Faster than Devices, continue that rotation, continue to really accelerate our growth in both earnings and in cash flow. And importantly, I'll end with the ESG notion. John mentioned this very well. If you think about our purpose as a company, it's to really help with resourcefulness, make our customers more sustainable. That's also the DNA of our company. We are a purpose driven culture. And I think it's very powerful that when we show up for work every day, all of So with that, let me turn that over to Tom. Thanks very much, Joan. I want to spend just a few minutes talking about technology and operations before I introduce each of the business unit leaders. The notion of our platform, this is a cartoon on the left hand side of the slide that really gives you a sense of how we think about our total value proposition from a platform point of view. You've got an endpoint that gathers up some amount of data information capable of taking an action to turn something on or off, transporting that information up and downstream and creating a total solution. This entire platform is built In an open way, we're very active in bringing in more and more partners into our ecosystem. It is resilient The very nature of the design and security built in from the ground. It is backward compatible in terms of our largest offering And that is very, very strong because it allows a customer to grow as they need and pay as they go and invest in where their communities require improved performance or resiliency or coverage. And all of that is proven at scale That trusted partner that we've been around for many decades and we will continue to be is a very, very important part of managing the relationships with our customers. As a utility, you want to be the referee, the umpire in The baseball game or the basketball game, you don't want to be noticed for having an outage. The best you can do is make sure it just works the way it's supposed So being a trusted partner and helping them deliver that level of service is fundamentally important. The two bullets on the top side of this slide recall back that market research that we've done. Customers really want to make sure they've got proven technology. We've got it. They want to make sure that they've got an advisor that performance of their infrastructure and upgrade. This idea of agility and future proofing that the investments they are making is fundamentally important to the value proposition that we provide our customers. So what does all that mean in terms of the offering. It starts with the notion of a multi purpose, multi application, multi service, multi tenant platform. It is a network that you can build it once and use it platform. It is a network that you can build it once and use it multiple times, whether you are a customer like Los Angeles Department of Water and Power. Hey, let's do water and then let's do electricity. Or if you're an Exelon, where you say, hey, we can do AMI, but we could also do distribution automation. Can you even share across sister utilities like we do with San Antonio with CPS Energy on the electricity side and saws on the water side where you're using a common asset, but you're supporting different entities in a multi tenant kind of platform. That is an unparalleled capability that we offer in the marketplace today. The second point is export agnostic. You've got to use the right course for the right course. Not all technologies are equally adept at dealing With a certain capability, certain circumstance, certain spectrum, certain environment of our customers, let's make sure we can offer a platform which is agnostic in terms of the connectivity that makes it seamless at the application level and hides all that complexity so the utility can just get it done And make sure things just work for their communities. The 3rd fundamental game changing idea on this slide is the idea of edge compute. It is distributed intelligence. Think of it as almost the smartphone model brought to the utility sector, downloadable applications into the endpoint level so that the endpoint can take action, can be looking for data, can be providing data, can be talking to its peers to understand what's happening in a local environment so that you have a much, much better feel and a fine grain sense of what is going on. Here we've got a case where we've got 3,000,000 capable distributed intelligence capable endpoints already in the field today And that grows every day as we add more and more capability to the network and roll out more and more new technology. So 3 truly differentiating capabilities in our operating environment and our offering to project could look like. You're a utility or a city and you've got to be able to cover a variety of different services. Of course, you want to do that in a way that is environmentally sound. You want to do that in a way that is resilient and reliable and secure. You want to do it in a way that is cost effective. So how do you do that? You invest in a single backbone technology and be able to hang a lot of different applications on top of that. So if you start with electricity AMI or gas AMI application and then add water and then add street lights or you can start with distribution automation kinds of applications and then applications to it in a very cost effective manner. That's how our customers use our product offering and that is the very thesis behind the design methodology built underneath it. This relies on real time information. Think about the progression of our industry over the years. You originally had meter reading, which was done once a month with some guy that visited your backyard with a clipboard, then it turned into drive to make it more efficient. Then it turned into 2 way operation where once a month or once every 2 weeks, you would have a reading from the meter In a drive by sense to every few minutes in an AMI environment. The applications that we're working on today really are real time applications. You see a number on this list. Think about a distributed energy resource management kind of environment. An ice storm hits the state of Texas, so you've got to make very, very fast decisions within minutes to balance supply and demand A distributed energy resource management platform allows you to do that in a much fine grained way In terms of crisis, but also in terms of balancing supply and demand on an ongoing day to day basis, so that you have a much more cost effective and environmentally solution. That real time application nature from the network, from the processing at the endpoint level and the analytics platform. It's the basis of our offering across a variety of applications. We're only continuing to grow. This is the focus of investment for us in the years ahead. That's what it looks like in terms of what it What does it mean in terms of economics for our customer? This is a picture of what the business case for our customer would look like. Picture on the left hand side is a typical electricity use case for an AMI 2 way meter reading kind of investment. Hey, you build out the network and the capability and put the smart metering endpoints in the ground And you've got a certain cost and you've got a return on that investment. And that benefit to cost ratio So on top of your AMI, let's add distribution automation or demand response or street lights or downloadable applications into the network to enable more and more capability. Now suddenly that ratio of benefit to cost, that return on your investment starts to grow dramatically And it becomes very, very interesting for the customer. Why lower cost of entry, lower integration costs because designed to work that way from the very beginning. But now you've got real benefits to offer back to your community in terms of resiliency or reliability or the ability to engage with your consumer much more closely and help that consumer understand how he or she is using your product, using your service and can do it much more efficiently. You're giving them choice as to how they use the service that you provide them rather than just a one way push. That is the calculus that our customers do and we help them do from a business case point of view. Flip it around, look at it from the Itron point view. Every time you add another application on top of this on the right hand picture, now from our standpoint, there's some incremental sales that Certainly from a hardware point of view as you're equipping the gear to be able to provide that application and that service. But now you also have an increasing level of long term software as a service monitoring or management that goes along with it. So this model accrues to that outcomes based revenue growth pyramid that I talked about earlier on. That's what the business case looks like for customer as well as Itron. If I think about Beyond the direct return on investment from a purely financial point of view and think about the indirect benefits of it. This is a view that starts talk about the benefits in terms of environmental sustainability of using our products and services. Clearly, Itron because of our very nature, our purpose is committed to reducing our greenhouse gas emissions, our water usage, our ability to manage waste is fundamentally part of our culture and you can see that in our sustainability report that we publish every springtime. But I thought it might be interesting to look at it from a customer point of view. And I've taken just 3 customers on this slide. ComEd in Chicago implementing an AMI system, the same for CenterPoint Energy in Houston and BGE in Baltimore. You can see some of the environmental benefits that our customers get out of deploying this technology. ComEd gets to reduce 2 gigawatt hours approximately 1.8 or 1.9 on this slide On a annualized basis just by accounting for and reducing the amount of energy that is being deployed in inactive households inactive leaders, real savings. CenterPoint has avoided 17,000,000 truck rolls. That's 15 tonnes of carbon dioxide that is avoided and the same as BGE by just triggering 2 demand response events to balance supply and demand. If you look at this, this is just 3 customer projects, just 3. In what we've done over the last year is you can take the benefits in terms of greenhouse gases that are saved or reduced from the part of our customers In just those three projects over a period of 10 years, that's very nearly approaching the amount of greenhouse gases that our company on a 1 year basis. So if we do this for tens of customers, hundreds of customers, 8,000 customers around the globe that we work with imagine the total benefits in a multiplier effect that you get in terms of environmental sustainability and downstream effects for what we do every day technology that we provide our customers. The areas of growth that you should expect us to operating in and you'll This more from the business units as John, Justin and Don speak in a moment, but areas for strategic growth. Clearly is grid reliability and management. How do we avoid waste? How do we improve resiliency and reliability? A lot of our technology investment is around that fundamental idea. And you can see that our customers are really challenged with it. So they're hungry for the types technology we can deploy at scale within their networks. The second is distributed energy resource management, more and more EVs, more rooftop solar, more batteries behind the meter itself. How do you help a utility cope with that changing environment, but also how do you help them balance supply and demand as the amount of renewables on the generation side continue to increase. This is a massive balancing act that the utility has to be able to participate in and do it in a cost effective way, but also do it in a fail safe way because somebody's rooftop solar breaks down, their power can't go out and you've got to be able to manage that even when you don't know exactly What those assets look like on the other side. You don't know where the next EV is going to plug in. The next fleet of EVs that gets deployed. They may be on the edge of your grid. How do you provide resilient power supply to them so that you could charge up that fleet of school buses events, so they're ready to go out the next day. The second or the last area that I talk about on this slide has to do with smart cities and the industrial Internet of Things idea, building that canopy network, perhaps starting with something like a streetlight automation, clearly helps you save energy in terms of the streetlight application. Now that that canopy is built, you can automate so many other things to save greenhouse gas emissions, to save money, to create a better community for your citizens to live in as a city manager, smart parking, digital signage, the ability to understand if there are disruptions in your city with acoustic detection of perhaps things like gunshots. You blockage and be able to use this network to be able to automate and improve the quality of living across the entire city. These are areas of true growth tours and you'll continue to see us invest in these areas and you'll hear that from the business units in just a few minutes. We don't do this Without the help of many others, we've got a robust ecosystem that we work with some 250 partners on a global basis and increasing every day. We do things where we find a company to work with that's got a very special set of skills, perhaps company like New Cosmos. They've got a very, very effective methane detection sensor. We can hook up our mesh technology to do that, put it on to an AMI network and start installing those methane detectors in basements all over at the Northeast with Con Ed and now you can start to be proactive about managing low level weeks So that you could roll a truck, you can take action, you can prevent a safety incident from ever even being a possibility by doing this in a much more automated way 20 to expand our reach in the total marketplace. How do we go to market? This is A high level picture of what our go to market presence looks like in each one of the regions. The Americas clearly is our biggest market. Roughly 2 thirds of our revenue, as Joan showed, comes from the Americas with the U. S. Being the largest marketplace. Full portfolio offering. So leading with the network solution, expanding that coverage, making sure that we are working with our customers to create value and monetize the data that comes through that outlook on the outcome side of things and being able to add more and more automation and resiliency C and L liability into the utilities and cities across the Americas. APAC is about 10% of our company revenue today and growing rapidly. Here we don't play in every country in an area as large as APAC, but it's a bit more targeted where we are using largely the same types of technologies that I talked about on the Americas side, but adding real value to our customers using that platform from a very broad based utility and city services point of view. In the EMEA space, There's 2 fundamental thrusts to this. 1 is the value on the devices side that Justin will talk about in a moment. And the second is really using our smart city technology to expand the network performance across the market opportunity for us overall. Before Before I turn it over, I want to spend one last minute on the supply chain itself. Joan referenced this. Over the last 5, 6 years We've worked really hard in terms of shifting our manufacturing footprint much more towards an asset light kind of model. We want to be able to deploy our capital to manufacture the things that are truly differentiated for us and add value to our customers And we use contract manufacturers to have access to their scale and the benefit they can provide in the less differentiating parts of portfolio. From 2016, we had about 2% of our manufacturing outsourced to where we are today, which is touch above 40% in terms of the total cost of manufacturing on a global level and that migration will continue into the years to come. So that gray and blue bar, if you will, will probably move more towards a sixty-forty versus a forty-sixty by the time we get to the 2024 timeframe that we're using for the anchor point for this Investor Day. The number of sites that 23 manufacturing sites, many smaller sites to or around 10 today. And we'll look to continue to optimize that footprint on an ongoing basis so that We can truly be efficient and much more resilient and agile in terms of our manufacturing strategy as the market may ebb and flow based on macroeconomic events. With that, I do want to, pardon me, switch it over to the product business units to talk about each one of their activities. And I couldn't be more proud of the 3 folks that are going to talk to you in the next couple of minutes here. John and Don came from our Silver Spring acquisition back in 2017. Justin is a relatively new hire in the last couple of years from the outside, but a very, very well rounded team and somebody that I'm proud to work with every day. Justin, over to you. I'm responsible for the products that measure consumption of resources like water, gas and electricity. Now the data that we get from those products are the first step in supporting Itron's resourcefulness as well as the overall end to end solution. Now the device solutions segment consists of products primarily that do not have Itron communications on them, but it does include communicating products in markets where we don't have a full end to end solution like EMEA. We're the number one provider of devices in North America and the number 2 in EMEA. If we take a look at the market growth and opportunities, it's clear That water at 4% is the biggest driver of devices and it's about an overall 1% growth due to the transition from mechanical to communicating devices. Now as Joan mentioned earlier, The device solutions business is growing less than the overall market during this time period, a negative 4% to negative 2% combined annual growth rate. Now that shift is actually intentional and it's based on us driving and focusing for more margin in business and exiting non profitable business. In 2020, our gross margins were at 13 Twilio over that same time period, leveraging our products against our geographies and targeting markets for some margin enhancement. Devices gross margin grows to 23% to 25% by 20 24. Now there's also margin expansion and growth opportunities and our new product introductions. One example of this is with water meters in North America, Where we're the number one communications provider, but we're only opportunistically participating in the market. So for the next slide, I'd like to talk about sorry about that, The evolution of our global devices platform. And for me, this is about shifting from market specific mechanical meters to global static platforms that allow us to simplify our portfolio and support the Itron end to solution. It allows us to solve our customers' issues and optimize our design, supply, manufacturing and delivery, which improves our efficiency and our predictability. So if I think about the device's success and the keys to our strategy, the first is continuing to reevaluate the business, exiting non strategic low margin products and markets. It's about that shift from mechanical devices to global static platforms that create value and solve our customers' challenges and increased benefits for them. And it's about driving operational performance, accelerating our new product introductions and achieving even higher margins Yes. Thank you, Justin. And thanks, Tom and Joan for giving us this opportunity to present today. So first and foremost, John Marcolini. So I run the Network Solutions business unit. As Tom mentioned, I did come into the company back in 2018 with the Silver Spring acquisition. And some of the core fundamentals that we had established back then was around this platform and we've spoke about the platform quite a bit today. But what's important about that platform is it really does give us the tool we need and the tool for our customers to go ahead and expand that initial investment beyond just the AMI platform that Tom spoke of. So from a network solutions perspective, we're So you can see on the top hand side of the slide, the top right hand side that we've established a leadership position across all three verticals here in the U. S. Market. But again, as Tom mentioned, when we look at the global market, Our focus really on the go forward is diversifying that business, making sure that we're in a good position to grow, not only here in North America, but take advantage of some of the higher growth markets That we see internationally and that ties very well and very nicely to our overall growth projections that you see down in the bottom top hand side, which is 5% to 7% revenue growth, adding 300 to 500 basis points of gross margin from now through 2024. A core to that strategy and I think, again, you've heard that a few times today is distributed intelligence. When I look at the capabilities that we're introducing to the market today and I look at the trajectory of that growth, we're expecting to see 6x the number of endpoints. We spoke of about 3,000,000 today that are installed in the field. We're continuing to evolve that platform to add new capabilities and really create a strong foundation of growth for our outcomes business unit that Don will speak to here in a minute. So if I dissect that market a little deeper And I dissect our priorities a little deeper from a growth perspective. You can see these 3 segments and the 3 top priorities for each. So advanced metering, number 1, I would say, we shipped about 75,000,000 gas modules into the gas industry over the last several years. We've generated some very strong customer relationships along the way. And what I'm excited about is now introducing some of those new capabilities that we spoke of, both organically through our Intellus Gas platform, but also through our ecosystem of partners. Tom mentioned NewCosmos. So we have a great program going today with Con Edison in New York, deploying methane detection. So when we think of our priorities over the next few years, we're really going to focus a lot on the transition from the diaphragm gas metering to static, but also adding new use cases around safety. We also spoke a lot about the platform and its capabilities to evolve over time. One very important piece of this, again, which Tom touched on was our ability to add new use cases to that platform. So not only giving our customers the opportunity To grow their use cases, but also giving us the ability to monetize that platform over time. And finally, international expansion. So again, when you dissect our markets that we serve and when you look at the overall growth, North America isn't in a leading position from a growth perspective. We talked about saturation, where the opportunity for us resides now is really how do we expand this platform internationally and how do we take investment that we've made for our domestic customers and get them the tools that we have to grow their business. So moving to the center, looking at grid utilization or grid management. It's expanding distributed intelligence. We've done a great job building out our distributed intelligence platform in the electricity meter, Now it's time to become more relevant as we move into the low to medium voltage grid. This is going to come through a combination of both organic developments with our Edge Gateway product and also through partnerships that we've established through our ecosystem. Also important is that we don't just rely solely on one network capability. I'm sure as many of you are aware, there's lots of noise in the industry around where the cellular folks are headed, where the 3 gsPP roadmap is headed And how do we make sure that we're well positioned for that? So from a network diversification perspective, embracing technologies like private LTE to ensure that we are in lockstep with our customers as progress forward in their strategies for communications integration. And finally, distributed energy resource management. One of the things we do in networks is we focus on communication. So looking at industry standards such as IEEE 2030.5 And making sure that we're in a place to allow for seamless integration of distributed energy resource into our platform, making that seamless again to help drive the outcomes business and what Don will speak to you about shortly. And last but not least, smart cities. So first and foremost, our growth is really centered around smart lighting and that application expansion into our utility and our city customers. We are also looking both organically and inorganically to grow the content that we offer in the smart city space. So portfolio expansion through partnerships is extremely key. And finally, just realizing the nature of the smart city business, how many cities and municipalities there are around the planet, We couldn't expect to attack all of those organically. So through our Itron Engage channel partnership program, we've been able to establish our global partnerships and go to market partners to help us expand our reach for specifically the Smart Cities business. So turning to my last slide, executing our strategy, I'd say I'd focus 3 main points. Number 1 is really capitalizing on our number one position on distributed intelligence. We are far ahead of the competition. We have 3,000,000 distributed intelligence endpoints deployed. We need to build on that, not only just for the AMI space, but also reaching now into the low and medium voltage grid, Which points to the second part of my strategy, which is how do we extend these capabilities? How do we give our customers the tools that they need to manage the aging structure that they're dealing with every day. How do they manage the inflow of power and electricity coming from things like solar or battery? We need to give them the tools that they need to manage this effectively. And finally, on smart cities, I touched on this, but really it's about leveraging our ecosystem to grow our content in this space. It's about growing our sales channels across the globe to become more relevant as it relates to our customer base around the world. And it's really about How do we take all of these pieces of this puzzle and this platform to bring them together to try to drive additional value, not only for our customers, but for Itron and for our shareholders. So with that, Don, I'll go ahead and hand it over to you. Great. Thank you, John. So coming to you here from Itron's office here in San Jose. So again, my name is Don Reeves. I've been with Itron since early 2018 coming in as part of the Silver Spring acquisition. And I've been at Silver Spring for about 13 years prior to that. So let me take you through the outcome of the segment. So if you look at the base of business we have today, as you heard from Justin and John and Tom and Joan, we've got a very significant existing footprint. We've got over 200,000,000 communicating endpoints in the field today. And we've got more importantly, 78,000,000 of those under our management. So this is the ability for Itron to provide services to our utility and city customers to manage those endpoints, manage the software, manage the end to end solution. And then as you've heard, we've got about 3,000,000 distributed intelligence ready endpoints that have been delivered to customers and those will serve as the foundation for delivering advanced applications that I'll talk with you about in just a moment. So So we're going to take that base of business and use that to drive growth within the outcome segment. If we look at the market, 3 major areas, operations, analytics, control. They're all growing significantly. You see control growing faster than the other 2. This is primarily for the reasons that Tom already referenced. We've got challenges within the industry related to expanding renewables And the challenges around adding more electric vehicles into the fleet, adding more fixed storage into the grid. And so that's all going to be driving a set of changes within the utility as the grid becomes even more two way, even more dynamic to provide control type capabilities to manage all that change, manage all that two way power flow. And so this is where we want to be focusing our solutions and capabilities. This is going to be driving growth within outcomes from the low to mid teens over the next 4 years. It's going to be driving our profitability up as well as we focus on moving from existing solutions into ones that are more advanced, more differentiated and more capable. So our broader strategy here is to be expanding our footprint, getting in, providing that base managed service capability to our customers, then delivering advanced solutions, whether those be in the form of distributed intelligence applications that can take advantage of getting just a much more granular data and doing that in real time and being able to move not just the analytics, but also the control to the edge. We can also go ahead and provide this through additional software that we'll be providing that connects to those devices, connects to those DI apps and provides additional capability to our customers, again, primarily focused on analytics and control. And then finally, I would be remiss in not mentioning the need for continuing to focus on expanding our ecosystem. Itron is certainly not capable of providing all the broad set of solutions that our customers require. And so we will focus in a very specific set of areas where we've got the domain expertise, But then we actively look for partners across a broad swath of the solution space to bring in their unique domain expertise and have them become part of our system. And then what we focus on within the outcomes group is integrating those solutions, proving those out and then delivering those to customers in a robust and rapid fashion, because ultimately we recognize that time to value is one of the most critical elements that can allow us to be competitive in the market. So now let's look a little bit more deeply at the what comprises the outcomes portfolio and we'll work our way up the stack. So manage the set of devices, manage the networks, manage all the software, manage all the third parties that are involved in actually making these solutions work every day. So we operate a 20 fourseven NOC and SOC. We are joined at the hip with our customers in providing these mission critical systems. Then above this is managing all the data coming out of these systems. So we today are hosting tens of terabytes of data for our customers, in aggregate well above that. And really, we only see this trend increasing over time as the need for the grid and for smart cities moves to wanting more granular data and more real time access to that data. That drives significant opportunity for us. And we're already a very significant player around managing all that data from electric, water, gas and smart city devices. Then we move up another layer into what do we do with all that data? How do we make sense of that and providing analytics? This comes in a variety of forms. We're moving rapidly from more of a batch oriented analytics type of offering into more of a real time analytics. There'll be room for both. But ultimately again, since everything is moving at a faster and faster pace, the drive for more real time becomes ever more important. And here we're also really excited to be partnering with partners such as Microsoft, leveraging their Azure TORM and being able to take advantage of the capabilities of their cloud. Itron operates a hybrid cloud and we believe we deliver best in breed capabilities to our customers. Then sitting above analytics comes control. And really it's what does one do with all this data? How does one actually drive actual decision making and taking action within the grid. Today, we operate one of the largest demand response networks in aggregate across our customer base in primarily North America, expanding out from there. And we see the trend here only increasing. Again, these utilities are looking for more flexible ways of managing their systems. Tom mentioned storms in Austin and the resulting impact on the grid and on end consumers. And so we're actively working with our customers to find more ways of providing more granular and precise control to allow grid operators to react more rapidly and more effectively to those sorts And then finally, as we look at distributed intelligence, again, as I mentioned, what this gives and analytics that actually have not been available today in math. So essentially, we're taking every smart meter, we're turning this into a very high precision sensor device. And again, thanks to Justin for giving us the ability to go do that. Thanks to John for giving us the way to go ahead and connect to those devices. And then what my team is working on doing is delivering the actual solutions take advantage of all that data, deliver insights to our customers. And we're still in the early days here. But again, we've been investing in this area now for over 5 years. We've seen very significant positive results to date with our customers that have been leveraging this capability. And frankly, we A very, very bright future for this in the months, quarters and years to come. There we go. So in summary, how are we going to be driving our strategy and how should you think about measuring our success here? First, we want to continue to be growing our endpoints under management. That's our base foundation upon which we will be able to know how we are satisfying our customers and gives us the ability to go add more capability easily over time. Next again, we'll be delivering innovative advanced solutions, leveraging distributed intelligence. And then we'll also be delivering additional solutions focused at control. And whether that's within distributed energy management, grid management, the middle voltage space or electric vehicle management, these are all areas we're actively investing in, and you should see some exciting results from Itron here in the months to come. All right. With that, I will turn it back over to Tom. Thank you, Don. As we rounded the final turn here before we jump into Q and A, I wanted to finish off with just a couple of final comments. The first is each one of our businesses devices, networks and It's built to optimize their business results, but we go to market holistically and make sure that our customers see the full picture of the offering that we That's the power of the model and how we think about our entire business. A couple of points I'd leave you with relative to our value proposition. First, it is the growth. The network business continues to expand through greater footprint as well as more applications that creates a richer set of data for our outcomes growth over time. That fundamental business rotation, top line growth and rotation higher value segments is concept 1. Concept 2 is the self help that is improving our internal operations, continuing that shift to an asset light model and pruning our product portfolio for profitability at the bottom line. That's what Justin talked about in idea number 2. And the third is we absolutely fundamentally believe we have the best mousetrap. We have leading technology when it comes to networks. We have brand permission as we've been a long time partner to access that data and work closely with our customers to provide true business insights and outcomes across the Board and we will continue to work to invest in new technologies, things like distributed intelligence to make it easier and faster for our customers To gain value from the technology we provide for the benefit of their communities. Four points I would leave you with. The first one is around ESG. We talked about the benefits that our products provide our customers and our continued commitment to reducing Our emissions, point 1. Point 2 has to do with the strength of the balance sheet. We do have and we're continuing to look for ways we can accelerate our strategy that we've outlined here and ways we can continue to grow business. $3,500,000,000 of backlog in a growing market gives us opportunity to expand the top line and all of the internal activities and that business Expiration creates earnings leverage and earnings power, which should outsize the market. That's the thesis of what Itron is all about And why we believe very, very confidently in our strategy and our ability to create a more resourceful world. With that, I think we are to the end of our prepared remarks and we are ready to head into Q and A. So Ken, I don't know if you want to take a break or you're ready to jump straight in. No, we'll jump straight into it, Tom. Thank you. So just a reminder for everyone out there, please go to investors. Itron.com if you want to submit a question. We're very pleased to have all of our covering analysts with us today. We're going to begin first on the line, Tom, with Noah Kaye from Oppenheimer. Noah, are you there? Yes. Good morning. Thanks, Ken, and thanks To the team for the presentation and we have some questions this morning. So maybe I'd start just where Don left off with outcome. Talking about the growth rates, it's actually a question we get a lot. Looking at this 20% industry CAGR, obviously growth in the outcomes segment for the company has been shy of that talking about 11%, 15% Going forward, so still maybe a bit below the market. I guess, what do you kind of attribute this to? How do we think about your offerings, your Your mix and how do you see M and A and potentially bringing you to or above the market growth rate going forward? John, you want to jump in? Sure, absolutely. So I guess a few things there to unpack. So first off, you're right, we look at the numbers From a TAM perspective, but then we have to look at what is our ability to service that market with the products we in place today versus what we'll be having and making available over time. So that really is the driver of the difference. We're working very actively to be evolving from the portfolio and set of services available to customers at this moment The ones that are focusing more on the higher growth segments, so including control, electric vehicles and such. So that really is what explains the difference between those two numbers. From the perspective of M and A, I think first off, The numbers we're presenting here are all driven by organic growth. So there's no dependency here upon M and A to go ahead and The plan that you just heard us discuss. At the same time, as you heard from Joan, we Are thankful to have a balance sheet that enables us to be looking at additional opportunities for growth. And certainly Yes, areas are being assessed at this moment, but nothing further there that we can discuss. Okay. Thanks for the color. And maybe to ask a follow-up and then I'll yield to others. This is maybe for John and Tom. Obviously, this record backlog is pointing towards the future revenue growth. But just trying to assess what kind of new awards activity is being baked to achieve the 2024 targets given the assumption of net growth in devices. What should we be thinking about in terms of book to build rates over the next year and a half to achieve this growth and what kind of visibility and confidence do you have into that awards pipeline to get you there? Sure. Great question. Clearly that $3,500,000 backlog gives us great comfort in terms of What that growth trajectory for our business certainly can be, that 3,500,000,000 plays out over roughly a 3 to 4 year period. So clearly there is a book and ship business and new awards to come in. I would look for us to continue to target book bill ratios of 1:1 or slightly higher. We do see a very robust set of activities and discussions going on with our customers today. Keenly interested in new technologies and how they can take advantage of the things that we have. As our business moves much more into the latest generation of technology. You will not only see the big oftentimes lumpy awards that we get from customers where you would win a big $300,000,000 $400,000,000 $500,000,000 deal, but also the notion of pay as you go and add as you need, that ability to add applications in a low cost of entry is what we see with our customers and what we expect to have baked into the growth portfolio that We have so robust customer discussion, strong backlog book to bill, 1 to 1 or a bit above gets us to the growth numbers that talking about for 2024. Thank you, Noah. And we ask all analysts after you ask your question, please drop for the line for the next analyst Next on the list, we have Pavel from Raymond James. Pavel. Thank you very much. Let me start with hardware. We are starting to see Several countries in Europe, perhaps beginning with Italy, get into a replacement Of smart meters that they had deployed 10 to 20 years ago. For the second wave project. What are your intentions in terms of bidding and your capabilities winning business of Absolut in Europe. Very good. Thank you, Pavel. Good question. I'll make a comment or 2 and Perhaps Justin wants to add on a bit more from his perspective. But the notion of the platform methodology that Justin talked about the idea on his slide when he said, hey, let's build a global platform and be able to add capability to it. So drop in different comms modules, make sure that the ability to have edge compute is added in there, but continue to move our portfolio on the electricity side fully integration of comms on the gas and water side, it would be static metering technology would be the basis To play in that space. Whether we've been in various geographies around the world, it very much is based on a profitability relationship and our ability to scale and grow that marketplace on the devices side, but certainly in the networks and outcome space, we want to grow aggressively with the marketplace. So plenty of refresh activity out there in Europe as well as in North America, which is part of that robust customer pipeline opportunity that I talked about with Noah's question. So Justin, maybe you'd like to add Yes. So thanks, Tom. The other thing I would add to that is our teams are working very closely with a lot of these municipalities or countries that are increasing and looking at these refreshes. And so we're in there trying to inform and drive the way that we're going to help them produce these products and To put the network infrastructure in together with them. So it's about setting the specs, helping to define where we go rather than reacting to a set of defined specs already. And the idea, Pavel, would be very much to add more capability to the base platform, have integrated safety in a gas Have integrated safety in a gas metering example where you have shut off that you could access remotely again to add value to the metering, the metrology piece of it as well as value added comps and the processing goes on top. Following up, talking about software, are there any specific apps or functionalities Or solutions that you do not currently possess in your in house software portfolio that you would like to have to better serve customer needs. So I'll start and then John and Don I would invite you to comment as well. So the reason we work closely with ecosystem partners We want to get the broadest net that we possibly can. We know we won't have every good idea out there. We will continue to work closely ecosystem partners to integrate that into the platform offering so that we can provide a greater set of applications and choices for our customers, but enabling that on the system is something that is fundamentally important. From a business model point of view, I would say It would very much be based on the notion of a scalable platform and that the volume of it has got to be worthwhile. If It is something which is a bit more specialized and niche oriented. We probably partner with someone to be able to do that. Even in a partnership kind of situation, the business model when look at it from a distributed intelligence point of view, certainly gives us opportunity to participate in that in a revenue sharing model with a 3rd party application as well as fees that go along with the hosting as part of that application source center. So that would be the philosophy behind it. But John and Don, maybe you would like to talk a little bit deeper on the specifics. Sure. Maybe I'll start Don and then I'll hand it to you just because I wanted to speak to you from a networks perspective where we're really focusing is on I spoke a little bit about that, well, network diversification. In my world, what we're really focusing in on is how do we make sure that we have a seamless way Right. As the industry is evolving, as new standards are evolving, we need to make sure that we're staying boxed up with that industry. And again, being able to address a broad set of endpoints to bring that data, that high value data into our platform such that the new applications that Don spoke of earlier Can be created. So Don, I don't know if you want to kind of build off of that and talk about applications in your world. Yes, I I think there's probably 3 layers of really interesting types of software packages where we're looking to partner. 1 is related to kind of the low level plumbing. And as we talk about this more granular data and moving more towards real time, really there's a need for that kind of capability for how We integrate in with utility systems that today maybe are not being touched directly by AMI and those types of systems. I think a second layer is really around the sort of adapters and such for talking to all the sorts of devices that can be controlled. There's a variety of companies that provide those sorts of capabilities, whether that's coming in through the Internet or through IEEE 2030.5 and other types of standards, wireless modbus, etcetera. And then finally, it will be analytics. And I think On the analytics side, I guess I use the example that Tom cited earlier of what we did with Con Ed around methane sensing, where we went in together with that customer to say, here's a business problem that we need to solve. Itron, what can you bring to the table and then what can we look rest of Industry 4. And I think we're going to see that pattern repeated with many of our customers as we go after their specific problems and we'll bring in technology, we'll bring in some experience. We're going to look for the broader utility domain to bring in additional experts who can bring their sensors, bring their algorithms bring their AI and machine learning into play with the sort of data that we can make available. Thank you, Pavel. Before we move on to the next question, I'm just going to one came in over the e mail that I just want to add on to this, was when you look the multiples that we're looking at from an M and A perspective. It would definitely be towards the higher rotation of the networks and outcomes. Any M and A that we would look at would be to add that value and increase those multiples. So we'd be looking more for the software outcomes based type of opportunities, network based opportunities that would deliver the higher multiple than what the current Itron total multiple is. And for those of you, it will be a great lead in for our next analyst, Jeff Osborne, who looks at us as a sum of the parts, right, looking at devices, networks, outcomes. So as we go to do these M and As, it will be weighted more towards these higher multiple Network and Outcomes segments. So with that, Jeff Osborne from Cowen, are you on the line? Hi there, Ken. Thanks so much. A couple of questions on my end. 1 on the outcome side, I was wondering if you could just give us a sense of attach rate. You mentioned 200,000,000 endpoints and 78,000,000 are managed. But with all the other features, is there a way that you could report a metric as As to the adoption of those, like you have so many meters in the field and on average 2.5 services per endpoint are being adopted. Is that something that you might have At this point, it's a little early for us to lock in on the right metric. It is something that Continue to think about, we see it growing, but finding that the right way to give you a metric that will really be a good predictor The future is an area that we are hesitating a bit to lay out at the moment. Right now, I would say that the best way to think about it is total communicating endpoints greater than 200,000,000, the seventy to know that are under management today, the greater than 3,000,000 on the DI high capable side of things. The next layer in that Pareto, if you will, is going to be that the number of services, the number of applications that we have running. The DI platform allows multiple applications to be running. Our customers when they are In their cycles to make their decision and the procurement cycles, how the pricing is often working is they are pre pricing in a number of applications per endpoint and that will be the catalyst for us to think about what the right metric would be as we grow in the future. So a little early to lock in on the exact metric, but all of the right precursors are in place. That's good to hear. Then maybe just switching gears to the present You didn't touch much on 2021. I assume the semiconductor issues in the guidance that you had provided previously, is that still intact? It didn't seem like there was an update. I just Yes, certainly we're kind of at the wrong time in the quarter for us to comment too specifically on that. Certainly, I'd refer you back to the comments that we made at the time of our prior earnings release, where we talked about supply constraints were expected through the back half of the year. Got it. Maybe then just looking forward as it relates to Jones guidance and this is my last question. As we think about that 4% to 6 percent CAGR through 'twenty four. How do we think about the cadence of that? Is there a catch up spend in 'twenty two? And then you've got And then growth accelerates through 'twenty four or is 'twenty three maybe down year in terms of the rate of growth, but obviously still a positive growth metric. I'm just trying to think of sort of the rhythm of the numbers especially coming out of COVID and pent up demand that might be there for next year. Yes, great question. Unfortunately, you probably won't I won't be able to give you a great answer. I would say as we look forward to the 2024 targets, our near term challenges with the headwinds from COVID Really actually irrelevant because the assumption is they go away. Now when do they go away? I would need to know exactly to answer your question of what does it look Going into 'twenty two and 'twenty three. Certainly, on the last earnings call, we actually said we expect some of the supply constraints to extend into 'twenty two. So 22 at this point is still too soon to call and we'll do that at the appropriate time. But for 2024, We're pretty confident on our ability to hit those numbers. And obviously, the assumption is all this near term headwinds for both COVID and the knock on effect of the supply constraints star solved clearly by then. Thanks so much. Let's go ahead. Thank you, Jeff. Moving on now to I believe Benjamin is covering for Pierce for Piper Sandler. Benjamin, are you there? Yes, I'm here. So I was also going to ask More regarding 2022, I know you kind of answered it there a little bit, but it's a pretty wide guidance range. You have $1 on the low end and you have 1 point On the high end, is there any way that you could kind of lead us towards one half of that guidance range a little bit more right now considering the semiconductor shortage. I think the quote that you gave us on the last earnings call, on Q2's call was that you were hoping by time Q3 comes around that the worst will be behind us. Given that we're much closer to Q3 right now than we previously were, Is there anything you could say that Q3 still looks like it might be the worst quarter for Itron and then it will sequentially improve from there? And then I follow-up. Thank you. Well, yes, as Tom indicated, we're obviously just in the process starting to close our Q3. So way too premature to be talking Q3. So unfortunately, I'm not going to really be able to answer your question. We have our earnings call for Q3 in early part of November and we'll be able to talk more then about our view of the supply chain at Sogut. So relative to the beginning of your question in terms of 'twenty two, we really haven't provided any guidance for 'twenty two. So I think you were referring To the back half of the year. And again, we'll be able to take more questions and be more open about our current media supply chain. Okay, that's helpful. And then I was hoping you could talk a little bit about how much that consolidation of your manufacturing footprint to shifting that towards contract manufacturing, how much of that actually impacts your margin profile? So of that margin expansion that's expected in the device solutions segment, how much of that is And spinning those off or discontinuing those and then embracing your higher margin products? Thank you. Yes, I don't have a precise attribution of How do you get to 23% to 25% versus the 13%. I would say as Justin pointed out, the 13% was abnormally low in 2020 because it did have almost a half of a quarter of Europe factor is being shut down. But I would venture to say most of it is probably being more disciplined around product platforms and exiting geographies and exiting products where we just can't make money, but certainly there'll be some benefit from the continuing move to outsourced. I would say that if I think about the levers in terms of that margin expansion, the first one happens to be around the part that John It is the product portfolio. It is trimming the parts of the portfolio that are less profitable and transitioning towards a higher profitable segments. So that's lever number 1 and is the largest. The second is the part about self help, if you Which is fewer manufacturing sites, but larger sites with some economies of scale. So you get some leverage out of that. And part B of that, if you will, The contract manufacturing piece. And the third is just revenue growth where you get leverage out of the model and you're advertising the fixed costs. But Those are the 3 main ingredients that I would talk about from a margin expansion point of view by rank order. Thank you, Ben. Switching now to Tommy Moll from Stephens. Tommy, are you there? I appreciate you taking my questions. Tom, I wanted to start, you commented early in the presentation around the growth opportunity from distributed energy management. And specifically, I was interested in household level applications where you have, say, a battery storage system or maybe an EV in the garage. It seems to me, and correct me if I'm wrong, that the most valuable data and control in these kind of contexts is going to be behind the meter. So is that fair? And do you currently have revenue opportunities in that space and to what extent might that be an M and A priority? Sure. So distributed energy resource management is a major opportunity for us and it's honestly a bit of a headache and an opportunity for our customers as well. And no matter what form it takes, if it's the vehicle itself, whether it is battery behind the meter, whether it is rooftop solar at the residential level, but also it is at the grander level with enterprise wide level storage or solar or other types of applications. If I focus my comments, I think where you were going, which primarily on the residential side of things. The biggest value for the utility at this moment is just understanding where these things are, knowing that it's there or not. So it'll start With just being able to map your space to say here's where EVs are and here's where you would have some type of rooftop solar, so you can truly try to understand what's out there. So just a gross level of almost on or off present or not present. So you can begin to plan your supply and demand And balance it out. The second piece of it and I think John and Don both loosely touched on it, but the ability to communicate from the meter to those assets inside of the house. Our latest generation of endpoint product does have a 2030.5 Wi Fi equivalent capability inside the meter, so you can have that local communication. So you have the ability to understand what's going on and be able to have those 2 types of devices and assets work in concert with each other. So from a consumer standpoint, you could look at it from the perspective of a low disaggregation kind of scenario, understand what inside of your house is being used. You could use it to optimize time of use charging kinds of applications. You can also use it to truly understand from the utility standpoint how to control and you can take some of the hardware that's required in a current Doctor implementation demand response to help those extra switches to turn off the pool pump, If you will, you could have now have that integrated into the devices themselves. So those are some very clear examples that are already you You can see the building blocks built in our products today where we continue to monetize. It will primarily show up in that distributed intelligence revenue bucket for Don's outcomes based business and in John's business as he launches his latest generation network technology. Thank you, Tom. That's really helpful and appreciate it. Shifting gears a little bit to your backlog and the potential for input cost inflation there. Can you characterize maybe for some of the larger deals you've won that are in backlog or just the average deal if you prefer. To what extent is pricing agreed upfront sticky and not able to be adjusted over time as you potentially have some of these input cost inflation that hit your cost of goods line. Are most of your deals such that to the extent there are these inflationary pressures, you can reopen the mechanism with customers to try to hold to your pre agreed margin or try to at least avoid deflationary pressures. Thanks, Tommy. Super question. So I'll start at the high level and then drill deeper and deeper. So at the high level, I think Our business runs maybe 30% or thereabouts on a turns based business. So 30% to 40% in Any particular quarter really tends to come from revenue inside the quarter, which is a place that you have a bit more pricing flexibility. On that backlog base, on that revenue base that is the part that is that large chunk of $3,500,000,000 that's out there. Their pricing is agreed with the customer and is generally agreed over a certain time period. There are provisions in contracts that allow you to modify that price specifically on an ongoing basis for the price of services, for example, as wage deflation could go up. We do have price escalators built into it. We do have certain contracts, which is large long term fixed pricing kinds of contracts where we have less freedom and flexibility. So if I think about that, the total revenue picture you have, you've got 30% or something like that, which is turns based, which you've got more pricing flexibility on inside the big backlog. You've got piece thing where you have pricing flexibility and a piece that you do not. We work very hard in contracting today. We'll continue to do so to increase the portion of it where we do have pricing flexibility to be a larger and larger piece Of that backlog portfolio, certainly as we see ourselves heading into an environment where there could be some more cost escalation on the input cost side of things. The last point I would make though is our guidance that we've laid out. It does have our assumptions built into it and we try to be very thoughtful about making sure we're thinking about productivity actions that we have underway today to fight those price adders on the input cost side of it as well as inevitable piece where we will see some cost escalation. Both of those are built into the margin targets that we've laid out for 2020 Thanks, Tom. I appreciate it. And then I'll turn it back. Great. Thank you, Tommy. Next on the list is Connor from Morgan Stanley. Connor, are you there? Thanks for having me out here. So Tom, I just wanted to clarify one point that you were making earlier. I believe you're answering in relation to device in particular. But basically the question is the sort of high level drivers of margin expansion that you were pointing to. Was that a device specific answer? And if not, Would you maybe sort of provide us a similar sort of framework to think about the big drivers of margin expansion across the business? Certainly my answer number 1 being product portfolio, number 2 being self help and cost leverage to devices, but it applies to the company overall. So it is 1 in the same. Obviously, the ratios, if you will, that number one clearly has a bigger outsized effect in the devices business than it does in the network space where we largely have the portfolio that we want. There's some stuff around the edges that we'll continue to work with, but the portfolio surgery, if you will, is more on the devices side today, what you've seen us work on over the last couple of years. So that Pareto applies clearly to devices, but it's the same list for the broader corporation. Got it. That's helpful. And then just thinking through network solutions in particular. So if I look at the sort of market level growth potential that you guys laid out, certainly in that sort of mid to high single digits range, And I think you got a question this earlier, but the growth is really international in scope and you guys are a bit overweight North America and your portfolio. So I'm curious, do you feel that there is enough mix and price opportunity in North America that you can sort of grow That portion of the business at a sort of a mid to high single digit level, do you think that most of that growth is going to be international in scope? Tax. Yes. So what I'd say is, I think it's a combination of both. I think we have a very, very solid opportunity here in North America to drive Some of the conversion I spoke about earlier. So a very strong list of customers in the gas market where they're converting from what I'd say is the legacy diaphragm gas metering to our Intellus platform that presents a great opportunity not only for top line So, but for margin expansion, as Tom spoke of. And then from an international perspective, what I'd say is, and I think, Tom, you touched on A bit during your portion was very specifically going after opportunity where from a gross margin perspective is meeting our objectives for growth and expansion, But also looking at leveraging the capabilities that we've built in this platform, which again brings this multi application, multi transport solution to our international customers. We've got a very strong customer base in Australia and New Zealand. And if you know the history of what we have done back in Silver Spring, those customers are now coming back around and looking at these AMI 2.0 use cases, which gives us a great opportunity to expand. We're also customers within Singapore, In Thailand, starting to make some ground. So from my perspective, it's a mix of both domestic and international that will help us meet our growth targets. Yes. I would only add, it's thinking about it in a percentage growth, Asia Pacific percentage because it's growing smaller base. The percentage growth there is pretty nice as it grows to John's business. In North America, the dollar amount, if you will, is very large, but growing off a pretty significant base there. In North America, it is the refresh. It is taking share in some specific areas in the portfolio that we Because of the strength of the technology in the portfolio we have, we'll be able to grow both. So it's a combination of the 2. Thanks very much. I'll pass you back here. Appreciate it, Connor. Next on the list is Jed Dorsheimer from Canaccord. Jed, you there? Hey, can you hear me? Yes, we can hear you now. Thank you. Hey, sorry. I didn't want to be that guy, and I turned out to be that guy, so sorry. Hi. I guess, Tom, maybe just high level question. If I look back at the device side of the business, In early days of adoption, there was a decent struggle until the carrot appeared rather clear to the utilities, which then led to that acceleration. And as we kind of look at the carrot versus stick approach with network and outcomes. I'm just wondering, there seems to be some movement on FERC appearing to Be More Open to Legislation for Aggregation, which should actually accelerate growth of Doctor and benefit your network and outcomes. But it's rather recent. I think in the August timeframe, there's been some movement. Curious what your thoughts on from a North American perspective, what this means to network and outcome from your perspective. But I see a very big difference in the philosophical sense when it comes to this characteristic thing that you mentioned between Doctor and distributed energy resource management. Okay. Yes, they're both load balancing things and you got to be able to account for what is out in the network. But Doctor very much was demand response was a bit more of the stick, if you will, where it got mandated in a bunch of places and customers did it because they utilities did it because they kind of got pushed down path. They were pleased with results with what they had, but it was more of a push. On the distributed energy resource management side, that was way more of a pull kind of situation. The The utilities absolutely see this as critical to being able to provide resilient and reliable service that You don't need more wildfires. You don't need more outages to know that you've got a problem on your hand From a delivering reliable service. So there I see much more of a pull from customers rather than a push from the regulatory environment. Clearly, you can have a mix of both. The regulatory model moves in concert. We see the regulatory model absolutely making it easier for customers to adopt the technology and built it into how their rate case applies. There's proper governance to make sure that people are getting a fair deal, but that regulatory model is continuing to move. So again, same fundamental idea of load balancing between Doctor and distributed energy resource management, but I see way more pull on the derm side of things, which Is that carrot, if you will, and it plays through the model accordingly. So I don't know, Don, if you'd like to add something on top of that. I think you captured it, Tom. I think there's a very strong interest in the DER side. I think on the DER side, there's certainly an opportunity for some replacement of the capacity that's there and some of those technologies are aging out. And certainly, we see there, but PER I think is where things are much more predominantly headed looking forward. Thanks. That's helpful. I guess just as a follow-up here to either one of you, what happened with ERCOT and the understanding of grid following versus grid forming inverters is a function of renewables increasing the percentage of the portfolio. Has that fundamentally shifted DER and the need for that in the marketplace. And then I have a follow-up. Yes. Doug, John, maybe you want to give a comment on it, but from where I Since today, I would say that we're still in the stage of too soon to tell if it makes a lasting change in terms of what happened with the ice storm that we had in Texas that took down parts of the grid. There's a need to make it resilient and reliable and some steps are happening, but we're not all together just yet in terms of really making it move as fast as anyone would like that there's more politics and more views there that we still have to bring together. Good and positive discussions to be able to do that, but I would say that there's an opportunity ahead of us there for the solution to still come together. And Tom, just to clarify, what I meant by that is, is you increase your percentage of renewables on a grid, the rate of collapse if you have an issue, works like a flywheel because You're going to be able to spin up and spin down much quicker. And therefore timing starts to become a greater issue in terms of your ability to address these weather anomalies. Is that becoming more understood by the utilities and globally actually, is a function of renewables or is it still sort of the kinetically driven generation mindset there. Level of understanding varies. Certainly, I think those closest Absolutely understand it. You can't get it started unless you have the flywheel and you got to be able to manage it, which is that notion of stability. But exactly how to do that within the current constraints that are out there is the nut that has not yet Correct. So I would say that it's less about the understanding that it's a problem and more about, okay, now We know it's a problem. How do we want to go deal with it? Hope isn't a strategy. We've got all these other constraints that we're still working crew and that discussion is still very much ongoing. Great. Thank you, Jed. Next up, Mark from JPMorgan. Mark, are you there? Within outcomes. You're still targeting expansion from where you are, but I believe earlier this year you were talking about 40% to 45%, now it's 40% to 42%. Just talk about the nuances that kind of drove that revised outlook. Thank you. Yes, it's really around putting the timeframe So you're correct. As we talk about an aspirational model, 40 to 45 is probably more appropriate. But when we put a line in the sand for 24, we thought 40 to 42 made more sense. Do we think there's upside beyond 42? Absolutely. As I mentioned in my opening remarks, scale for outcomes is really important. Don has a fixed cost structure and as he grows the revenue, he can leverage that. But even at the in the 'twenty four timeframe, if you look at kind of the midpoint of his revenue targets. He's at $375,000,000 that's just not big enough scale to take advantage of that. So net is yes, there's upside beyond 42% beyond 2024. Okay, great. Next on the list, we have Marty Malloy from Johnson Rice. Marty, are you there? The first question I had specifically around energy storage. And could you discuss Itron's ability to grow revenues from integrating and managing energy storage assets and including utility scale longer duration assets going forward. And when we hear About BPP, how should we think about Itron's potential role? Sir, can you ask the second part again? I lost you midway through it. When we hear about VPP, How should we think about Itron's potential role? Very good. Very good. So I We'll start and again ask Don to comment. So from a storage point of view or from virtual power plant point of view. Think of us not as the maker of the battery, if you will, that's not our space. But being able to help the utility understand what's out there, what's available and how they might be able to bring it to bear, being that matchmaker, if you well between supply and demand and being able to understand where assets are and provide that overall visibility. That's the sweet spot for us and that's certainly where Don and his team are very focused on bringing their portfolio together. So it is software as a service at Don's level, But it is enabled by networks and John's business to understand how to connect up those assets and understand the relative assets that are available In the network across the utilities space. So Don, maybe you want to talk a little bit more about the monetization of it. Yes. So I think another key element there is the notion of real time and getting access to the data about not only where it is, but kind of how big those assets How they're currently performing, their historical patterns and what's expected going forward. So those are all areas which we plan to play. And then we do see from a monetization perspective, both an opportunity from a software, but as well as from a managed service perspective, basically bundling those together into the broader offering. So today, it is not a significant piece of our business, because I think about where we are heading, kind of with all the trends we talked about earlier in this session, kind of those areas are very aligned with our strategy. Thank you. My second question utility customer spending that would impact Itron related to these higher fuel costs. Certainly from a fuel cost perspective there, it's part of that input cost escalation that we covered earlier in the Q and A section Where logistics costs are definitely going up and that's baked into the numbers that we're talking about. I know that wasn't exactly what you asked, but that's probably the most direct piece of the puzzle in terms of affecting our financials. When you look at it from the perspective of the utility Their fuel costs increase on the fossil fuel side, let's say, it certainly creates an incentive for them to find lower cost ways to provide the generation piece of it and moving to renewables. Clearly, that is part of the push not only sustainability, but from a cost point of view. We've seen the price of solar drop like a rock and that has enabled a much for a larger scale solar. That creates a business opportunity for us as the ability on the distribution side of it to be able to be as nimble as need be as the sources of generation change. So I think about it from a customer point of view, It pushes them down the direction of more renewables. When that happens, that creates a distribution need, which directly benefits business. The other side of it though clearly is that there's an input cost piece of it. It's a near term piece that's baked into our guidance. But Tom, I would add to that too from the ESG side is finding ways. It can't just be about the fuel costs or generating more electricity as we start to electrify the grid. Our customers are also looking for more ways to shed load and that ultimately takes you and I to find ways to do that. Nitron tools, as Tom talked about during the Investor Day presentation, we bring tools to bear that can help the utility shed load during peak times to avoid bringing up and using fossil fuels to fill those gaps. So Itron benefits from both sides, not only managing and looking at it, but also from the tools and technology to help you and I listen to the utility signals and find ways to shed loads during peak events. Thank you for taking my question, Mark. Great. Thank you, Marty. Just real quick, I saw before I go to the last two, IC is Ben Kallo from Baird on? Ben, did you make it back on? Okay, I don't think Ben made it back. And then we'll end today with Michael McGinn from Wells Fargo. Michael, are you there? I'm here. Can you hear me? Yes, sir. Please go ahead. Great. So apologies if this was already addressed, but can you talk about the onboarding process Of the outcomes ecosystem and what the push pull nature is from voice of customer and maybe the differentiators when you look at a VIE versus a partner model. And on the partnering aspect of the equation, is this something where they're sharing with your variable outcomes revenue model or more fixed costs in nature with licensing rights. John, how are you? Okay. Yes, I'd say the relationship is primarily a well, I won't say primarily. I think we certainly have examples of partners coming to us and wanting to join the platform and make their solutions available. And that is that's been tapping now for quite a while on the software and DI side and I only see that accelerating, but also accelerating is the pull of our customers coming in and identifying problems that they want to coming in and identifying problems that they want solved and looking for our help in identifying whether or not Itron provided alone or if we need to bring in 3rd parties to help assist. So I think both of those are very active today. From a revenue model perspective, it is a road share approach in general. And specifics can vary by the specific commercial approach, but in general, it's a revenue share. Great. And switching to the network side, I think the sense I got was the opportunity for international expansion is vast and the sales force investment is key here. Can you maybe touch on what heavy lifting has done in other has been done in other regions than the level of shared services or the learning that makes that next international sale more incremental to your overall margin profile? Yes, sure. I'll take that one and Tom you can fill in anything that I missed. I guess what I'd say is critical to that expansion is really leveraging the capabilities that we've built Because there's a know how, right, there's an understanding, there's very solid concrete deployment plans, right. We've worked through what I'd say is the evolution of this platform since we came together as one company back in 2018 and we've built on that know how and that knowledge As we've expanded internationally. So what I'd say is that the benefit I think that we have today is that we're not producing something new, right? This is leveraging a platform that we've been evolving over the years and there's a very solid know how behind it from all the way to the folks doing the field installation to the team that works actually in Don's organization around the global managed services side. So managing the software as a service or network as a service platform. So from my perspective, it's really about the final piece is just really the internationalization, right? So there may be specific regulatory as it relates to getting an FCC equivalent certification for the region. But we really are leveraging the platform that we've built for this Tom, I mean. Yes, I think you touched it there, John. The only point that I would draw on a little bit from what you said is the notion of sales, the field service capability. We have a network deployment in EMEA and as well as in Asia Pacific, if you will. You definitely had to invest a bit ahead of the curve to get those initial deployments in place to create those opportunities of learning that time over target to If you will, for the learning to happen, that has happened. And once you've done that, you can start to step, repeat and grow, giving a known technology solution. And That accounts for a lot of the growth that is built into the numbers in Asia Pacific, for example, as that flywheel starts to benefit from the investment. Great. If I could sneak one more in, curious, you clearly mentioned infrastructure was not in the was not in your financial projections, but there are some companies out there like Antares that are aggressively pushing commercial grade utility LTE. Just curious, commercial grade utility LTE. Just curious what how do you factor that into your long term guidance And the level of AMI investment that could be accelerated stemming from that. Sure. I don't look At cellular broadly or LTE, private LTE, an Antares type of solution that you mentioned As something adversarial, the very nature of transport agnostic that I talked about is let's deploy the right course for the right course. Just Because you can connect to Wi Fi doesn't mean you can read your email. So there's way more to this than the transport when it comes utility. You've got to get the whole solution together and that's really where we specialize. Put it like we're fiercely proud of the RF mesh technology that we have that is the basis for a lot of our deployments. It works well in our kind of environment where you do have the need for resiliency and reliability, but different types of transport to apply equally well and that's why cellular clearly can be part of that solution and that notion of transport agnostic That play plays well. So I don't look at it as adversarial. I look at it as absolutely part of the solution and it's something that we will integrate in No matter what the transport really needs to be to create the right level of service capability that our customers need. Thank you, Michael. With that, that is the end of our presentation and Q and A today. On behalf of the Itron management team, I'd like thank everybody for joining us today. And we look forward to talking with you in the future. Thank you very much and have a great day. Thanks all.

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