Well, good afternoon, everyone. Thanks for joining us as we continue today here at Oppenheimer's, Technology Summit, our 26th such conference. I've lost count of how many times we've had the pleasure of hosting Itron, but every year it is indeed a pleasure, and we're just very happy to welcome back to the conference CEO Tom Deitrich, CFO Joan Hooper. Thank you both for joining us.
Thanks, Noah.
Thanks very much, Noah. We appreciate the opportunity.
Absolutely. I should have mentioned my name, Noah Kaye, and I'm the Managing Director, in the Sustainable Growth and Resource Optimization practice. Actually, Itron was one of the first companies I ever started, really following, when I joined the sell side. It's, it's been really interesting to see the evolution of the story over the years, and that continues today. Being that this is the tech conference, I actually want to start with the evolution of the technology platform. You know, Itron has a relatively high R&D investment rate, if you're looking at it as an industrial company, perhaps not as a tech company, but it's 8%-10% of sales. Just help us understand, how have you been allocating that spend in recent years?
What have been your top priorities for innovation, and why have you focused there?
Great. Happy to take that one, and then, Joan, maybe you want to fill in some details that I may miss. As you pointed out, Noah, we're probably 8% or 9% of revenue, and we think that's about the right zip code for us to be in from a targeting standpoint. We go to market with three major segments. Think of it as Devices, a non-communicating device, a Network, which grabs all of the data, and that does have communicating devices inside of it in terms of how we count it. Then Outcomes, which is doing something intelligent with the data as you put your hands on it.
We, we serve utilities and cities all around the globe with, with, with that basic construct and that way to go to market. Our R&D spend and the targeting that we have varies within those three segments, and, and really has something to do with the, the growth potential and the margin potential of, of, of the segment. Outcomes being the highest growth and the, the highest gross margin, meaning the opportunity to, to get a return on that investment, that has got the highest R&D as a percent of sales, so that's a bit above the corporate average. Devices, on the other hand, which is a flat to down market opportunity, it is legacy products clearly there, that the R&D as a percent of sales within that segment is much, much lower. That's how we, we target.
Networks being our largest segment, it kind of rides along in that, that corporate average. We very much strive to make sure that we are providing our customers with a full-service solution, and we want to capitalize on the real problems that our customers have. They've got to figure out how to deal with more environmental disasters, floods, and fires. They've got to deal with more sustainability, renewables, on, on the generation side that creates a supply and demand imbalance. How do you deal with that from a utility standpoint? That's really where we invest, and that's where we see growth potential, and thus, the return on that R&D investment over time.
Yeah, you know, I think we can see, for example, with the Distributed Intelligence platform, that you've developed, just increasing focus on, on the edge of the grid, and enabling all these different applications and, you know, different, distributed energy resources coming online. I, I guess, give us your view of how you see adoption rates and use cases for Distributed Intelligence trending, 'cause it's been a big focus for the company?
Absolutely, it is, and we have been pleased with the reception we're getting with customers. We've got about 7 million capable endpoints already in the field that have that ability. We've got 9 million applications running, so it is starting to grow, and those numbers of 7 million, 9 million are up substantially over the last years. The adoption is starting to happen, and really, what's behind it and why is it happening? It has to do with the need of our customers to have a much more agile set of assets in the field. Gone are the days when a utility could buy a fixed capability and stick it in the ground and amortize it over 10 years and expect something very predictable to happen over the next decade.
The world is changing much, much faster. How do you still enable that regulatory model, which is you've, you've got to figure out how to get a return on that cost of capital if you are a utility out there, but do that in an agile way? That's what Distributed Intelligence is, is really all about. It is the same idea that you have in, in your pocket with the smartphone. When you bought your first iPhone, you didn't know what applications you were going to use. A day doesn't go by today where you aren't using 10 or 20 applications. That's the world that utilities will increasingly live in in the future. They've got to get a lot more agile capability out of this, and that's exactly what Distributed Intelligence, that notion of downloading an application into the endpoint, enables.
At the very early stages of this today, it clearly doesn't happen as fast as the, the consumer cycle. You know, we are dealing with utility infrastructure here, but we do see tremendous growth over the years ahead from the relatively low start that we have today of 7 million and 9 million, which are still substantially more than any of our competition. There isn't a competitor out there that has the same capability as we. We've got a lead, and we expect that to continue to intensify and grow over the years ahead.
And, and just-
I'm sorry, Noah, the only thing I was gonna say is, in addition to the over 7 million out there, there's over 10 million sitting in backlog-
Mm-hmm.
of DI-enabled endpoints.
That, that's a great data point. Thank you. I, I, I would love some color on, on where those first applications tend to be, like what use cases we're really talking about here. You know, where, where do the utilities tend to go first? when they're tapping into the DI platform.
Right. The most of that, those 9 million applications that are in the field today are on grid side efficiency measures. How do I understand if there is a safety issue? Is the meter or the endpoint getting hot? Has someone bypassed the endpoint, they're stealing electricity. Is there a dramatic change in what the power is like at the location? Can you detect where there is an EV or where there's PV rooftop solar, so you can start to map what's going on in your environment? How is that endpoint connected to a distribution transformer, and that distribution transformer connected to a feeder?
That very notion of, okay, it's pretty easy to understand, but once these assets are in the field, utilities really have very little understanding of what's out there, so helping them map their grid. Those applications that I just rattled off are where utilities have started to deploy it. There's plenty more to come on the consumer side, helping a consumer understand how they are using the, the, the product. Understanding what's going on inside of your house is something you can do with, with this capability. That, that's yet to come and future growth for us in terms of what DI does today.
You know, it is sort of a follow-up question that is, it's not very mathematical, but it is about how, you know, demand evolves and grows. You know, we've had some pretty clear events that triggered customers, moving towards AMI in the past. I mean, I lived through some of them here, like Superstorm Sandy in New York, right? You know, a tragedy around a natural gas explosion, creating a need for Methane Detection. Have there been events, like, you know, transformer blowouts or the like, that has really catalyzed a change in utility thinking around some of these Distributed Intelligence applications? Is there a possibility for some sort of cataclysmic event to happen? It's not something we want to root for, but-.
Right.
Just curious to know how you think about that demand evolving.
Right. I, I, I certainly, I think just that any number of floods and fires and hurricanes and things like that, so the, the, the increasing rate of natural disasters around the globe, and no matter where the utility is, they, they all have a different pressure point, wildfires versus floods, depending on which coast you're on, as an example, that certainly is driving the, the behavior. Growth in EVs is, is absolutely something that's on utilities minds increasingly. How, how do they make sure that they can get the power to where it is needed? It's, it's one thing to say, "Hey, look, I've got enough generation capability to handle this," but putting it to exactly where you need it, when you need it, think about electrifying a fleet.
That is a very, very different problem, that, that depot for, for the school buses may or may not be near a substation.
Right.
How, how does that actually happen? But helping the utility cope with that is, is the second major trend that, that I see. The, and the third is trying to cope with the, the service imbalance that exists between other services in your life as a consumer and how you deal with your utility. Perhaps the last time you dealt with them is when the lights were off, and you were ringing them up, complaining about, "When are the lights coming back on?" They may or may not even know. That service imbalance, compare it to when you order your dinner from Uber Eats, you knew exactly in real time where it was, and when it was coming, and how much it cost, the driver's name, and, and so on and so on.
How do utilities get closer to their consumers to be able to deal with the, the new world? Those are the types of, of events, sometimes positive, sometimes negative, that, that, that drive the, the utilities thinking and, and, and their longer term trends of where they need to invest.
Hmm, interesting. I guess in a similar vein, I would love to understand where we're at in the adoption and the utilization of multipurpose smart networks. That's been a potential benefit of, you know, the canopy network, right? That you go to market with. Would love to hear some discussion of the trends in the utility side first, and then would really love to understand how Smart Cities are evolving in terms of, you know, multipurpose networks.
Sure. Let, let me start with, we have a large percentage of our customers today that are multi-commodity utilities. I think, what's a good example? LADWP, Electricity and Water, for example, and that, that notion of being able to build it once and use it multiple times within a utility, is quite prevalent. A lot of Electricity and Gas, co-combo utilities that use a common backbone and use a common capability, that-that's a material percentage of the business. What is something that's relatively new i-is where you have two, I'll call them, sister utilities that live in the same geography, being able to share the infrastructure. San Antonio being a perfect example.
CPS, Electricity, SAWS, Water, using a common capability, a common network. CPS originally built a network for reading Electricity Meters, and then SAWS started to be able to rely on that same network to be able to automate Water Meter reading types of things. That's an example where it's multi-tenant in our world. That is something that's relatively new. We've done it with CPS and SAWS, we've done it with AEP and Washington County as another example. What I do see quite often, though, is we will start with a utility on a particular application.
A basic use case for AMI, that once that network is in place, you start to have Distribution Automation, you have Streetlight automation, you have reading other types of meters, you have Methane Detection. Like, you can use that common network to be able to harness it for a lot of different good. Happens within the utility space, and also happens in the Smart Cities space, which was the second part of your question. Streetlight automation is an area that we've seen double-digit percent of growth for the last couple of years, and we would expect it to continue to carry forward. Small piece of the business today, but growing very, very rapidly, where the city will want to automate the Streetlights.
If you're gonna be running the bucket truck to change out the sodium bulb to an LED bulb for all of the benefit that you're gonna get for, for lower cost, why not have a communication network that is enabled at the same time? That's a lovely canopy network that is 25 ft off the ground, which gives you great RF coverage for automating parking, and automating the street furniture, and the bus schedules on the side of the, of the little stands that are around cities, doing connected flowerpots as to when it's time to water the, the, the flowers that are around the city itself. We've seen a lot of growth in other applications once that canopy network has been in place.
Yeah.
A lot of that growth is in Europe, but in major cities in the U.S. as well. Sorry to interrupt.
No, not at all. You know, if I, if I'm right, the, the actual bandwidth usage on... I mean, even some of your, you know, most demanding customers, you know, still leaves an awful lot of cushion for additional tenants to come in. The TAM of non-co-owned commodity networks is a lot bigger than the co-owned, right? I guess-
So-
This opportunity has been out here for a while. What is the hard part about bringing them together, if you will?
The hard part is really the, it's not the technology. It really is not. You correctly pointed out that this isn't a technology capability problem. It is a commercial and human nature capability problem. Can I trust the other partner in all of this, that when push comes to shove, I'm really going to get my data? I do not want to end up on the front page of the local newspaper for not being able to do something. The economics of doing it clearly would work out, would rather than rebuilding something from scratch, use that capability and build that service level agreement in between the two.
It's good for the customer, it's good for the community, and it's clearly good for, for Itron and our investors, as that's long-term, high-margin, SaaS-oriented revenue for, for us.
You know, I guess to take it to a more basic level, actually, we, we, we often get asked, right, just where the North American and global markets are in, in the adoption of, of Smart Metering. Maybe you can level set where we sit today and the growth rates you foresee for the industry.
Sure. I think that if we're still focused on adoption rates of Smart Metering, we're really missing the fundamental element that's going on. North American smart meter electricity penetration is very, very high, but the growth rate of what's going to still happen in electricity is very, very high as well by comparison. The need to be able to detect EVs and cope with batteries, and cope with rooftop solar, and balance supply and demand is the next generation. It's not really about just doing meter to cash any longer, it's about enabling these other applications.
Coming to your question, growth rate-wise, certainly I think we, as Itron, are going to experience some, some, some good growth, this year, as, as a lot of that deferred revenue from supply chain constraints are, is starting to roll through the, the P&L. Our networks business will continue to grow pretty rapidly in, into next year, as well. Longer term, it is that outcomes growth that fuels that it is built on top of the basic network capability what's in the field, which will continue to grow. Mid-single digits in terms of putting it all together, but outcomes the highest, and and networks, maybe getting to that mid-single digits CAGR after a couple of outsized years, this year, next year.
You know, to your, to your point, the, the nature and needs of the, the customer have really evolved a lot from the initial wave of Smart Metering investments. That was a decade plus ago and had stimulus money to, to benefit. We've seen a lot of industry evolution and consolidation, I would say, over time. I just love your framing of the competitive environment today versus, you know, maybe going back a decade plus. You know, how has your competitive moat evolved? Has it increased?
I, I think certainly our competitive moat when it comes to, I'll, I'll call it our home turf, which is largely North America, much more on the Electricity and, and Gas side of things. That competitive moat has, has absolutely probably expanded and, and increased for us, given the, the things like Distributed Intelligence, things like that multipurpose multi-application network that, that we, we talked about earlier. That's something that I think Itron is uniquely positioned.... we certainly see a lot of startups in the outcomes space, which is difficult road to, to travel as a startup as, as the utility sector moves at a certain speed.
We, we obviously would love to see higher growth sooner, but it, it takes a while for these things to to roll through the the the utility space and, and roll forward. I, I think on the devices side, lots and lots of competitors out there. The U.S. market is kind of a walled garden, as you don't get a lot of low-cost Asian competitors in in that space. Network's a very, very strong moat for us and getting stronger as the, as the days go by.
Right. So just pulling this together around the demand environment, you know, you talked about kind of mid-single digits growth. I, I think investors look at, you know, obviously, you have a record backlog, but just book-to-bill and, and total bookings, declining over the last few years. I think you were clear on the call, this doesn't reflect the underlying demand issues. Help us understand to what extent these bookings rates are just post-COVID normalization. You know, how do we think about a baseline for bookings? How long before we return to that baseline?
Right. Good, good question. It, it, it's this is a, a tricky one to try to get your, your, your hands on. Certainly, the last few years have been, been abnormal. 2020, the regulatory market really kind of slowed down or, or ground to a halt, given commissions not meeting in the early days of COVID and, and decisions being delayed. 2021 was a bit of a catch-up year, so if you looked at our bookings, they kind of shot up during that year. They're still working their way through that, that accordions effect. We see a very strong demand outlook and, and pipeline of, of opportunities that are out there. In order for us to put something into bookings, we require a, an awarded contract, a signed agreement with the customer, and regulatory approval.
As, you know, deals can tend to be a little bit lumpy as to when bookings may come in, it's hard to exactly pick and rely on a particular quarter when something will happen, depending on what the, the actual regulatory cycle would look like. Again, I... it is lumpy, and that's the nature of, of the, the business that we are in, so I, I wouldn't pay too much attention to any particular quarter.
That said, we would expect book-to-bill, as a general rule, to be above one. You sort of even out towards that mid, mid-single digit kind of, of growth rate that shows up in the bookings. That, that probably starts to level out in, in the years ahead with this sort of lumpiness that, that, that I talked through as to why it exists, overall.
I can't totally get you to commit to calling this year the trough on bookings, but I get your point.
Yeah
Mid-single digits being directionally the right over time. Is that correct?
Correct.
All right. You had mentioned actually, IIJA being a stimulus effect on industry, and would just love if you can dimension that out a little bit in terms of what you think it means for Smart Grid investments and how you see the timing. I mean, it's not unusual for timing on big government programs to take longer, but maybe where you sit today, how does that look?
Right. I, I do believe absolutely there is direct business that our, our, or grants that our customers get, which leads to direct business for, for, for us, and indirect benefits. If, if you are going to build a lot of transmission lines using IIJA money, for, for example, you've got to get it from the edge of the city to, to the, the location where, where power is needed and, and measured. That distribution network comes along. Whether it's direct IIJA money or, or indirect investment, the Distribution Grid has got to be upgraded. We do see IIJA, and to a certain extent, ARRA, those two big pieces of legislation being a long-term catalyst for demand in, in our sector, direct and indirect. It is, as you correctly called, moving pretty slowly.
The IIJA is 375 individual programs on the part of the U.S. government, and comes through several agencies, and an agency got to give money to a state, and a state's got to give it to a utility, and the utility has to buy something. It takes a while for that rat to move through the snake to give you the visual. I wouldn't expect it, it is a huge amount of money that starts to flow into our P&L until probably 2025, and it lasts five or eight years from thereafter, is what I would expect it to look like. It is moving pretty slow today, although, I do believe it is a catalyst for the industry in the years to come.
I guess on the results, and the guide, you know, just the stronger revenue, you indicated, a lot of that's, you know, easing supply chain constraints. Some of it's a pull forward of revenue. Maybe just take us through what actually happened in the supply environment to enable that, and then I think it would be helpful for our clients if we can level set on how elevated lead times are currently, versus pre-pandemic, and how long before you think they normalize?
Yeah. Joan, you want to do?
Yeah, the revenue piece.
The guide. Yeah, the revenue piece.
If you recall back in February when we did our initial guidance, which had a midpoint of about $1.9 billion, we actually expected the supply constraint to continue to get worse through a minimum the first half of the year, kind of start to improve in the second half, but really not materially until Q4 in 2024. That's how we built the guidance. We started to see a little bit in the first quarter, and then for sure in the second quarter. We could rely more on what the suppliers said they had, and they were able to give us more predictability in terms of when it would arrive, so we could prepare our factories to be able to turn that incremental component supply into revenue. That's really what happened.
If you look at the midpoint of the updated guidance, it's $225 million higher than what we thought in February, and I'd say virtually all that is the improved component supply. So it's, we're not out of the woods. You know, we often get asked, "When is it normal?" I'm gonna let Tom take that, both in terms of lead times and then probably caution you a little bit. I'm not sure it's ever going back to what it looked like pre-COVID.
I don't know, maybe you wanna talk about that?
Sure. On, on the component side, Joan nailed it. We were able to get components earlier and more reliably, and the team did a fantastic job of turning that into revenue all the way through getting it installed with our customers. That $225 million pull ahead is good news, and the amount of deferred revenue that is still in front of us didn't grow much in the second quarter, if at all. Now we get to catching up and being able to pull that backlog through the P&L in the quarters ahead. Lead times today are still elevated.
They're still very long. If you take the average semiconductor component, it's still 20+ weeks on average. Okay, there are plenty that are, you know, they're on the shelf today, so, you know, one week to just get it transported in. There are some that are still very, very constrained, but the average itself has not materially improved over the period, where we still have golden screws that are missing, our power and analog, where we haven't really been able to catch up. At least now we are staying flush with the demands that customers are promising. I do believe that the industry will start to catch up through a combination of things: lower demand in other parts of the industry and repurposing some of that capacity.
Some very small, incremental investments in some of those legacy nodes helps, as well. It, it will, based on everything we can say, see today, continue to get a little bit better, but we haven't seen lead times start to materially retract just yet.
I wanna spend some time here on margins, 'cause that's a huge part of the story. I think there's really two things we need to better understand here. One is to better unpack the drivers of gross margin improvements. You know, you can look at it for the full year if you want, but the drivers being conversion versus mix, versus the lower input costs, to the extent that you see lower input costs. Maybe longer term, walk us through how you get to the 34%-36% gross margin targets you've previously laid out.
Sure. The, the targets we've laid out, well, the timeline clearly has shifted out in terms of when they are achievable through, through COVID. Those are still the right targets. I'll, I'll build it up through, through our three segments that we go to market with. On the devices side of things, from the teens or, or, you know, 10% kind of numbers last year to 20 this year, is, is a good step forward and starting to get towards that low 20s kinda number that we had laid out. What's left to be done there, it really is some of the portfolio transitions that, that are starting to roll through the P&L and the factory consolidation.
Earlier in the year, we, we announced another factory that we would be able to consolidate together, and that happens through, through this year and, and next year, which is, is really the difference to allow us to, to achieve the, the, the target gross margin for, for what we've laid out, on the devices side. On the network side of things, there, there's a couple of pieces to this. There is the, the next piece of this, as we would roll into some of these, newer product portfolio, pieces, things like Distributed Intelligence and the communication infrastructure tends to be a bit better gross margin, and it is rolling through some of the pre-inflation, backlog.
A lot of the backlog that is still left to, left to roll through on the network side of things was priced before some of the elevated inflation that, that we've seen. We've got a, a little more than a year to go to work through that. Think of it as, as mix and, and the pricing actions. We've been pleased with the pricing actions over the last quarter or so, so we're, we're no longer losing ground on, on inflation through inflation coming down and the, the pricing work the team has done. The indexing on contracts going forward gives us the ability to ride along should inflation move upward again, so we feel better about that. Those are the medicine that is needed. One more factory.
One more factory to go. Three more on, on the network side as well. Joan is correct. On the outcome side of things, it really is scaling the, the, the business up. Today, it tends to be a bit lumpy to achieve that targeted gross margin, depending on h- how the mix is rolling through, if it's high licensing or, or, or some of the, the services side of things, which rolls through. Getting that business to be a, a bit better scale, takes us to the targeted margins on, on the outcome side. Pretty clear in our mind exactly what steps need to happen.
They tend to be a little different by, by the, the, the segment that we're talking about, but we still feel those targeted gross margins are the right place for us to drive to as an interim target before we go higher.
I guess, where do you have most conviction in your ability to control the trajectory, and what is sort of, to some extent, a little bit more up to the market or up to external forces?
Yeah, I, I would say that it, it, it's firmly in our hands to, to be able to, to do all three. I, I, I very much think that the commanding lead that we have on the, the networking side of things in terms of the power of that portfolio, we're, we're gonna see growth there based on what's in backlog and, and what we know that has been awarded and, and yet to come. On the outcome side, it is the speed to get adoption through. It's, it's going to happen, but how quickly can we roll through and move utilities forward to, to be able to capture the value that's associated with the outcome side. Those are the, the keys for us to, to work our way through.
It's not a question of if, it's, it's how quickly we can roll it through the P&L.
Yeah. That's a great overview of the long term. I, I wanna return and augment my question around, kind of the near-term gross margin improvement that we've seen, just how you would sort of unpack that. Then I think specifically, the impact of actual components' prices, and maybe you can help level set, you know, the percentage of COGS that's components typically, and how much inflation they saw?
Right. Make sure I try to get to all the pieces that you talked about there, but if I miss, please redirect, Noah. Near term, what you saw was some of our highest gross margin in probably couple of years, rolling through in the second quarter. That was the benefit on the devices side of those portfolio actions of better factory utilization. What's the next tranche for the networks or sorry, for the devices business? It is getting rid of and consolidating out that other factory. We're probably right along in the current level in terms of where we are. For the networks business, it very much is the mix of products.
We're probably on the flattish side on gross margin, based on the mix that we would expect to ship from current levels through the back half of this year before you get to a phase of a project when you'll get elevated backlog. Each project, there's many, many projects that are going in parallel, but important to understand that when you're in the front end or the back end of an individual project on the network side, you probably get a slightly higher gross margin. When you're in the middle of it, you're probably shipping some of the higher volume pieces of it, and gross margin on average is probably a little bit lower. Depending on where you are and the mix of projects you're doing, you'll get some variation associated with it.
We got some of the, the higher mix stuff in Q2, which led to the margin performance you saw on the network side. The other half of your question, if I jump over to that, on the component side, components are the majority of our, our COGS. It's, it's probably something like 70% of the COGS side really tends to be on the material piece of what we buy, trying to assemble into products and carry forward. It varies a bit, but that, that's probably not a bad place to think about it. We saw substantial increases in those bill of materials over the last two years or so, when everything was very, very tight.
What we see mitigating, certainly are things like freight costs, some of the expedite fees, as the supply chain starts to normalize. There are some selected places where you get some cost reductions, but those are few and far between. Inflation is still out there, driving it up in other places, but, the, the pricing work that has been done has, has really started to, to neutralize that, that impact. As we roll forward, obviously, we'll, we'll do our best to reduce the, the costs and, and, improve that margin further.
Interesting, but no real significant retracing of the materials costs?
Not to this point. Not to this point. I would say they, they remain pretty elevated. again, puts and takes within individual components, but we, we haven't seen a huge retracing on the material side just yet. There, there's, there's good work to be done to make that happen in the future.
To what extent do you have margin headwinds, just on the input side from any long lead time commitments? I mean, it was, it was difficult for anyone to get components. I think, you have the benefit of this highly visible backlog, but just helping us understand what kind of lag there might be between, you know, real-time, components, cost reduction, and, you know, what you can actually recognize in your P&L.
Yeah. The, the, the only thing that I would look at that was a, a, you know, forward commitment to, to that extent, that, that is, is material, is the amount that's in inventory today. That there isn't built-in increases that aren't accounted for in the guidance that we have today. Rolling through some of that backlog, which we bought at. Sorry, that inventory that we bought at higher prices, and we're waiting on for the golden screw to unlock it. There's a little bit of that in the near term, but it's much more future and what will happen on price and cost, where we feel better about our ability to protect it on indexed contracts, going forward, should inflation continue to ride along.
Right. Right. So just to make sure I understand and reflect back, a lot of this is just WIP.
Or your component inventory. Not only the, the WIP, but yes, it's, it's stuff that's on the balance sheet today.
Okay. Just in closing, I want to bring this full circle back to, you know, technology. It's, as you mentioned on the call, it's always good to have the cash generation faster than you initially guide. I think, you know, just given the improved leverage and the cash generation, you indicated M&A as a potential use of cash, and I'm just curious what technology needs or opportunities you're, you're finding attractive or seeking to address?
Well, certainly, one, one of the key initiatives for us as a company and what we are still hungry to do is scale that outcomes based business. We, we think that there's real, real benefit for, for our customers, for their communities, for Itron and thus for, for our investors. Scaling outcomes is clearly the focus for us, where we have an under-scale business and what we'd like to do. The key, of course, in terms of what we would want to acquire, is something that is scalable technology. There's an awful lot of very bespoke kinds of solutions that are out there with homegrown or one-off items that are built. We want something that's scalable, that we can apply to, to multiple customers in the outcome space.
We have certainly more to do in that area, where, taking advantage of more intelligence, doing more with the data, more machine learning, more artificial intelligence types of algorithms, more analytics, more of those DI applications. That's where we would, would, look to, to prioritize our, investments for, for the future. Finding that scalable asset that you can apply to many customers is, has been the, the tricky part, and, there, there's always multiple opportunities that we're taking a look at. When we find the right one, I think we've got the, the, the capital capability to, to go and, and bring it on board.
Absolutely. Well, I think with that, we're gonna bring this conversation to a close, but again, wanna thank you for being present and having it with us, and helping us understand where you are on the trajectory. Great to see the progress. Thanks, everyone, for joining. Of course, if you wanna do more work on the company, please don't hesitate to reach out to us. With that, I wanna thank you, and I wish everyone have a great day.
Thanks, Noah. Thanks, everyone. We appreciate it.