Itron, Inc.

Good day, everyone, and welcome to the IATRON Inc. Q4 2021 Earnings Conference Call. Today's call is being recorded. For opening remarks, I would like to turn the call over to Ken Gianella. Please go ahead.

Thank you, Operator. Good morning, and welcome to IATRON's fourth quarter 2021 Earnings Conference Call. We issued a press release earlier today announcing our results. The press release includes replay information about today's call. A presentation to accompany our remarks on this call is also available through the webcast and on our corporate website under the Investor Relations tab. On the call today, we have Tom Dietrich, ITRON's President and Chief Executive Officer, and Joan Hooper, Senior Vice President and Chief Financial Officer. Following our prepared remarks, we'll open the call to take questions using the process the operator described. Before I turn the call over to Tom, let me remind you of our non-GAAP financial presentation and our safe harbor statement. Our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our investor relations website. We'll be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and the comments made during this conference call, and in the risk factor section of our Form 10-K and other reports and filings with the Securities and Exchange Commission. In addition, due to the fluid nature of the COVID-19 pandemic and global supply chain constraints, company estimates regarding the impact of these events on current or forward-looking statements are made in a good-faith attempt provide appropriate insight to our current and future operating and financial environment. Materials discussed today, February 28, 2022, may materially change and we do not undertake any duty to update any of our forward-looking statements. Now, please turn to page four in the presentation and I'll turn the call over to our CEO, Tom Dietrich.

Thank you, Ken. Good morning and thank you for joining us. Turning to slide four, market demand for ITRON Solutions has reached new heights, resulting in record bookings and backlog for the fourth quarter. Bookings in Q4 were $1.1 billion, which is our largest quarter on record. This pushed 2021 to be a record year with over $2.8 billion in bookings. Due to the strength of our portfolio and domain expertise, we are accelerating our leadership position with utilities and cities around the globe. Our bookings performance drove fourth quarter book to bill ratio to 2.2 and 1.4 for full year 2021. This was well above our full year target of a one to one ratio. Record bookings led to a total backlog exiting the fourth quarter of over $4 billion. This eclipsed our previous record of $3.5 billion. Additionally, we were pleased to see our 12-month backlog increase to approximately $1.5 billion. This is a key metric used to gauge the strength of near-term demand. Based on the rich pipeline of visible opportunities, we anticipate the strong demand environment will continue into 2022, and we are again targeting a full-year book-to-bill ratio of at least one-to-one. Noting that the vast majority of our Q4 bookings support our network solutions and outcomes segments, I would like to quickly highlight some examples of our customer wins this quarter. The first is an example of our ability to combine technology and business model innovation to benefit our customers. We are pleased to announce that San Antonio Water System will leverage the existing ITRON network technology in San Antonio to deploy their new water AMI solution proving our build it once and use it multiple times axiom. ITRON will also manage the SAS-based data management solution, ensuring data is safe and secure while lowering the total cost of ownership for both SAWS and CPS Energy. Next, I would like to highlight ITRON's commitment to safety in the gas solutions market. CenterPoint Energy Service Company, one of the leaders in the utility industry, will deploy our Intellis gas solution across their service territories. Our Intellis solution not only enables CenterPoint with two-way communications for monitoring and billing their gas assets, but will push intelligence to the edge of the network. Our Intellis gas meter offers self-monitoring capabilities so that the smart meter can shut itself off without utility intervention in the event of a high flow or high temperature event. Simultaneously, alarms can be sent via the ITRON network, alerting both the utility and local authorities of potential concerns, thus minimizing the risk of gas safety incidents. Finally, our outcomes business signed a 15-year agreement with Sarawak Energy in Malaysia to deploy ITRON's Network as a Service solution, including the monitoring and maintenance of the communication network. The NAS solution, for Sarawak Energy includes 180,000 advanced metering infrastructure endpoints, as well as the deployment of our operations optimizer and utility UIQ software as a service offerings. ITRON's open standards-based network enables Sarawak Energy to improve customer service, safety, and operational efficiency by providing valuable insights for daily operations. These are just a few examples of how ITRON solutions are driving our bookings and backlog performance. As these projects are executed over the next few years, they will add to our 3.8 million cumulatively deployed distributed intelligence capable endpoints and our 82 million customer endpoints that are under ITRON's management. Both metrics are important leading indicators of our outcomes growth. Turning to slide five, I will now provide some operational insights to the prior quarter and 2022. While demand for ITRON Solutions is at record levels, the supply chain constraints and inflationary pressures continued in Q4. Strong customer demand was more than offset by semiconductor component constraints. For the full year 2021, component supply constraints gated our revenue by approximately $225 million. Additionally, We anticipate our revenue will be impacted by semiconductor constraints through the first half of 2022 at similar levels experienced in the second half of 2021. We continue to manage through these macro constraints. We are grateful for the support and collaboration of our customers on project profiles and emphasize that we have not seen any cancellation of backlog. The long-term nature of our business, particularly in the network solutions and outcomes areas, serves us well in this regard. Turning next to our efforts around price-cost actions, we are actively working to protect our margins from cost pressures that stem from the pandemic and resulting inflation that we saw last year and is continuing into 2022. We are aggressively moving to lower cost, secure supply, and adjust pricing with customers to adapt to the new market realities. As component constraints ease, We anticipate increased factory utilization combined with our continued efforts to move to a more asset-light model will improve our margins. Finally, today we anticipate the completion of the sale of our non-communicating mechanical gas businesses that were announced last fall. Since 2019, we have divested or exited over $300 million of annualized revenue from non-core, non-strategic assets, including an annualized approximately $100 million of revenue in this most recent transaction. While this revenue was highly concentrated in our devices solutions segment, it has allowed us to focus our efforts and develop innovative product offerings for our network solutions and outcome segments which has led to our record bookings in 2021. The close of this transaction with Dresser Utility Solutions is another milestone on our journey towards more advanced networks, distributed intelligent endpoints, and data-driven outcomes to better serve our customers for the next decade and beyond. Now please turn to slide seven as a handoff to Joan to cover our fourth quarter results and our 2022 outlook.